Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd

Index: Introduction [1] The reasons [11] The reasons: The factual background [11] The industry and participants, container terminals and ports [11] Transactions and events [20] PON's business case [83] The reasons: Consideration of the factual background [90] The reasons: The evidence of NSW Ports' witnesses [110] The reasons: The purpose of the compensation provisions [114] The reasons: The effect or likely effect of the impugned provisions [137] The question of the Port Kembla PCD [140] Key conclusions [145] The structure of these reasons [150] The appeal on purpose [153] The ACCC's submissions on purpose [155] Grounds 4 and 5: compensation provisions [155] Grounds 6 and 7: reimbursement provisions and codification of State policy [164] PON's submissions on purpose [167] Ground 5: compensation provisions [167] Grounds 4, 6 and 7: reimbursement provisions and codification of State policy [171] NSW Ports' submissions on purpose [174] Grounds 4 and 5: compensation provisions [174] Grounds 6 and 7: reimbursement provisions and codification of State policy [178] The State's submissions on purpose [183] Grounds 4 and 5: compensation provisions [183] Grounds 6 and 7: reimbursement provisions and codification of State policy [184] Purpose: consideration and disposition [186] The appeal on effects [211] The ACCC's and PON's submissions on likely effect [215] NSW Ports' and the State's submissions on likely effect [223] Likely effect: consideration and disposition [228] The claim as pleaded in the Amended Statement of Claim (ASC) [236] The reasons of the primary judge on likely effect [257] The resolution of grounds of appeal 8, 9, 10 and 11 [285] Ground 8 [285] Ground 9 [289] Ground 10 [296] Ground 11 [298] The appeal on "direct" Crown immunity of the State [303] The reasons of the primary judge [303] The grounds of appeal on Crown immunity [314] The submissions of the ACCC on Crown immunity [315] The submissions of PON on Crown immunity [322] The first asserted error [323] The second asserted error [327] Consideration and disposition of the Crown immunity question: Grounds 1 and 3.1 [334] The appeal on "derivative" Crown immunity for the benefit of NSW Ports: grounds 2 and 3.2 [344] The reasons of the primary judge [344] Question 1 posed in J[380]: was there a divestiture of a legal right? [356] Question 2 posed in J[380]: does the Act evince a contrary intention to apply its provisions to conduct of NSW Ports even if there were a divesting of a legal right? [364] The ACCC's submissions on derivative Crown immunity [370] PON's submissions on derivative Crown immunity [376] NSW Ports' submissions on derivative Crown immunity [379] The State's submissions on derivative Crown immunity [383] Consideration and disposition of derivative Crown immunity [386] The submissions on behalf of the intervenor [416] Derivative Crown immunity [417] The question of purpose [420] The Cross-Appeal by NSW Ports and the Notice of Contention by PON [422] Orders [425]

The industry and participants, container terminals and ports 11 The place of shipping container ports in the global and Australian commercial supply chain and relevant aspects of world shipping were described by her Honour at J[14]-[29]. 12 Ports handling the import and export (in particular in Australia, import) of cargo by container carriage are a vital part of the economy. The transport, storage and logistic infrastructure for the operation of such a port require vast capital investment by government and private parties, including commercial owners or operators of such facilities: roads, railway lines, intermodal transport and storage facilities, and port infrastructure. 13 The importance of ports, including container terminals, and the efficient movement of goods to the economic well-being of the State was recognised by Transport for NSW in the 2012-2017 Transport for NSW Corporate Plan as quoted by the primary judge at J[76]: The efficient movement of goods is an essential driver of economic prosperity and quality of life in our metropolitan and regional communities. The NSW freight and logistics industry contributes more than $50 billion to our Gross State Product. NSW roads, rail network, intermodal terminals and ports are some of the most important pieces of infrastructure to enable domestic and international freight movements and support economic development. 14 No port could possibly operate without vast public and private capital infrastructure investment; nor could a port be developed or operate without approvals from both the relevant State and the Commonwealth departments and agencies: see J[30]. 15 Supply chain costs are divided between blue water costs of shipping port to port, quayside costs (wharfage, and handling and stevedoring charges) of movement of cargo from ship to land transport, and landside costs of delivery from port to a distribution centre. The largest component is landside costs. The wharfage charges payable to the port are charged on a per container basis: J[27]-[28]. 16 There are, and were at all relevant times, three major ports in New South Wales that handle and handled cargo whether bulk, general or container: Port Botany, Port Kembla and the Port of Newcastle. They were described at J[36]-[48]. No other ports in New South Wales are suitable for a container terminal: J[49]. 17 Other Australian container ports are Brisbane, Melbourne, Adelaide and Fremantle: J[50]. Shipping services along the east coast typically call at Brisbane, Botany and Melbourne. They are not substitutes for each other due to high landside costs: J[51]. 18 If a container terminal were developed at Newcastle a ship would not call at both Botany and Newcastle. It would call in at only one port in New South Wales in the course of an east coast trip that included Brisbane and Melbourne: J[52]. 19 By far the most important container port in New South Wales is, and has always been, Port Botany. After the phasing out of the handling of general cargo at Port Jackson with the development of containerisation of cargo in the 1970s and 1980s, Port Botany became the State's primary container port.

Transactions and events 20 In 2001, the Broken Hill Proprietary Company Limited (BHP) the owner of the site of the former steelworks at Mayfield at the Port of Newcastle, obtained development consent to build a container terminal at the Mayfield site capable of handling 350,000 containers of a standard twenty foot length (referred to as TEUs or Twenty-foot Equivalent Units) per annum. This development involved associated road, rail and wharf infrastructure and dredging: J[53]. 21 In October 2003, the New South Wales Labor government announced a NSW Ports Growth Plan. The plan envisaged that Port Botany be developed to its full capacity. After Port Botany reached its full capacity it was proposed that the State would acquire BHP's site at Mayfield for development as a container terminal. The Growth Plan was envisaged as providing for strategic direction to allow both private and public planning for the growth of container trade through ports in New South Wales. At this time the sequence of such growth of container trade was to be Port Botany and then Port of Newcastle: J[54]. 22 In 2007, the State acquired the Mayfield site and transferred it to a State owned corporation, the Newcastle Ports Corporation (NPC), which operated the existing Port of Newcastle under the Ports and Maritime Administration Act 1995 (NSW) (PAMA Act). By this time, the New South Wales Government had decided that the next major container port in New South Wales after the exhaustion of capacity at Port Botany would be Newcastle, which was envisioned then to be within 10 years: J[57]-[60]. 23 By 2009, NPC had begun work for the development of a container terminal, seeking expressions of interest for developing the port including a container terminal. In 2010, NPC selected its preferred developer, Newcastle Stevedores Consortium (NSC), described at J[63]. Also in 2010, NPC published a container terminal analysis envisaging the development of the Newcastle container terminal after Botany's exhaustion at 3.2 million TEUs per annum: J[61]-[64]). 24 It is important to appreciate two things at this point. First, there had never been any suggestion that it was intended that any container terminal at Newcastle would be developed before Port Botany exhausted its capacity. As her Honour found, and as will be discussed, the public and private infrastructure costs of a container port were such as to require the staged or sequenced development of container port capacity. 25 Secondly, Botany's limit of 3.2 million TEUs per annum imposed in 2005, even with the development of a third terminal, was influenced by community concerns about traffic pressures resulting from the port development and was a development limitation condition. The natural capacity of Port Botany and its infrastructure was much greater. 26 In 2010, the political decisions that had been made by the then Labor Government were that the Port of Newcastle was the next container port in sequence after the exhaustion of capacity at Port Botany. 27 The need to develop such critical and valuable infrastructure as ports to drive supply chain efficiency was not limited to the New South Wales Government. In 2011, the Commonwealth Government published its National Ports Strategy: J[65]. 28 March 2011 saw a change of Government in New South Wales with a Liberal/National Coalition replacing Labor. 29 Shortly thereafter, there was a change of emphasis and momentum in the strategic direction of the new Government concerning port development. Whilst in June 2011, the Treasury approved NPC beginning commercial negotiations with NSC for the development of the Mayfield site, including a container terminal, in September 2011 the Government announced that it would privatise Port Botany by way of a 99 year lease: J[67]-[68]. 30 By November 2011, NPC and NSC had agreed upon terms for the development of the Mayfield site. On 18 November 2011, however, the Treasurer informed NPC that permission to contract with NSC would have to await the outcome of a "scoping study" into the intended long term lease of Port Botany and "the State's longer term port infrastructure need and the roles of Newcastle and Port Kembla": J[71], emphasis added. The State also informed NSC of its intention to pause NSC's development proposal for Newcastle until the scoping and strategy study for Botany was completed: J[74] and [77]. 31 In December 2011, Morgan Stanley was engaged as a consultant to prepare the scoping and strategy study: J[72]. At about the same time, two State agencies, Transport for NSW and Infrastructure NSW commenced a review of ports policy for New South Wales. The Treasury also established a Port Botany project advisory group, which included Infrastructure NSW and the Department of Planning and Infrastructure. 32 By March 2012, Transport for NSW expressed doubts about the economics of transporting containers to Sydney from Newcastle given most were destined for delivery within 40 kilometres of Sydney. The view was developing that the logistic economics favoured Port Kembla over Newcastle: J[78]. 33 After the announcement of the proposal to privatise Port Botany, the NSW Ports Consortium was formed to bid for the lease of Port Botany. From early in its considerations, the NSW Ports Consortium received advice that a key consideration for the negotiations of any long term lease of Port Botany was "competing terminals". This advice, to which the primary judge first referred at J[73] and [79], was based on possible competition between Port Botany and the Port of Newcastle or Port Kembla. The preliminary advice saw the risk as mitigated by (see J[73]): [o]btaining a guarantee from the NSW Government that it will not allow the development of a second container terminal (… considered to be highly unlikely) or [o]btaining a first right of refusal in relation to the acquisition of any container terminal operations at Newcastle Port or Port Kembla. 34 By March 2012 the concern of at least one bidder with the question of another container terminal at Newcastle had been communicated to Morgan Stanley who was preparing the scoping study: J[80]. This concern was, of course, critical to any valuation of Port Botany. This was especially if, as was the case at the time, the other port (whether Newcastle or Kembla) was owned and run by the State (the announced privatisation at this point being only that of Port Botany). 35 In early April 2012, Morgan Stanley gave Treasury an indicative valuation. Five important points were made. First, the existing 3.2 million TEU cap on operations at Botany should be removed. Secondly, the concern as to the possible development of a container terminal at Newcastle was a possible loss of value to the State in achievable price of a very large sum of money in lowered, more conservative bids, being estimated at a significant, material amount of money the sum of which is confidential and need not be specified for the purposes of this judgment. Thirdly, because of this, it was recommended that the State not support the container terminal element of the Newcastle port proposal which was the result of the negotiations between NPC and NSC. Fourthly, Morgan Stanley advised that Port Kembla should be the next container port in sequence after Port Botany for three reasons: it served the same hinterland as Botany; both ports would service the Moorebank intermodal terminal; and Port Kembla was the next logical container terminal after Botany. Fifthly, Morgan Stanley advised the State to seek combined bids for Botany and Kembla, and that the Port of Newcastle transaction be staged after the transaction for the other two ports: see J[81]-[85]. 36 These views were accepted by the Treasury transaction team (which included Infrastructure NSW, the Department of Planning and Infrastructure and Morgan Stanley) and were passed on to the Treasurer on 12 April 2012: J[86]-[87]. 37 The terms of the advice of Treasury to the Treasurer were set out relevantly in full by the primary judge at J[86]-[89]. That advice highlighted a number of important contextual considerations against which the commercial and competition considerations in the matter are to be judged. First, an early development of a container terminal at Newcastle would undermine both the rationale to remove the cap at Botany and the combining of Botany and Kembla as a package to enable the container port sequence of Botany and Kembla. Secondly, an early development of Newcastle would have no relationship with the development of the intermodal terminal at Moorebank which would service Botany and Kembla. Thirdly, and consequentially, early development of a container terminal at Newcastle would require additional transport infrastructure from Sydney to Newcastle. Fourthly, shipping lines favoured Kembla over Newcastle when Botany exhausted it capacity. Fifthly, 20-year strategic plans of Infrastructure NSW and Transport for NSW did not support a container port at Newcastle. 38 Central to the advice of Treasury was the removal of the cap at Botany in order to fulfil the potential of the highly valuable assets there. For instance, the development of the third container terminal was estimated to have required $1 billion of State investment by the time of its coming into operation in 2013. It was essential to allow these assets and this capital investment to achieve their full capacity and produce their full value for the State. Without the removal of the cap it was feared that bids would be discounted by a significant, material percentage, which is confidential and need not be specified for the purposes of this judgment. 39 The advice based on the economics, logistics and investment criteria expressed in terms of the long term interests of the State was that Botany should be allowed to reach and exhaust its full capacity potential without any cap, with Port Kembla as the next container port in sequence as part of a combined transaction, with a Newcastle privatisation transaction immediately after the Botany and Kembla transaction. Plainly that advice concerning the Newcastle transaction occurring immediately after a packaged Botany and Kembla transaction was premised on the privatisation of the Port of Newcastle not including any approval for a container terminal. 40 By early May 2012, the Treasurer also received advice in a letter from the NSW Ports Consortium. The letter (see J[90]) was plain: the obtaining of the greatest possible proceeds for Port Botany would be achieved by bundling Botany and Kembla. This would allow the acquirer to manage and co-ordinate the future port and trade demands for New South Wales. If this packaging of Botany and Kembla was not possible it was stated that bidders would want as much certainty as possible about potentially competing ports. The letter stated: The container market serviced by Port Botany is the same as that which could be serviced by container terminals in either Newcastle or Kembla. The creation of additional container terminal capacity at either Newcastle or Kembla, prior to Port Botany reaching its maximum potential capacity, will have the negative consequences of bringing forward the investment required by the Government in both road and rail infrastructure which is required to cater for the same level of container imports and exports into and out of Sydney. We therefore suggest that until such time as Port Botany is approaching its maximum physical container capacity, it will be more efficient for the NSW economy and the Government's budget for container exports and imports to be serviced at the existing facilities at Port Botany. The risk of substitution from a second container terminal in NSW before it is economically warranted is also very material for potential bidders. We believe potential Transaction proceeds for Port Botany will be optimised, and the risk of substitution best addressed, by including Port Kembla with Port Botany under the Transaction. This will ensure that the acquirer will be better able to manage and co-ordinate an integrated solution and response to NSW's future trade demands. Should the inclusion of Port Kembla in the Transaction not be feasible, we would expect bidders will require as much certainty as possible around the prerequisites and timing for development of potential competing container ports. We would expect that this would include a requirement for a clear undertaking from the NSW Government not to approve, or subsidise, the development of container terminal capacity in Newcastle or Port Kembla until such time as Botany is unable to service the demand. (Original emphasis.) 41 In May 2012, Morgan Stanley submitted its scoping study, which was summarised by the primary judge at J[92]-[95]. The first recommendation (of the highest materiality) was the removal of the cap of 3.2 million TEUs per annum to allow Botany to reach its potential of 6-8 million TEUs per annum. The costs of construction of a new container port with associated infrastructure with latent unused capacity at Botany of up to 5 million TEUs per annum could not be justified. This would likely extend Botany's capacity from about 2018 to 2030. 42 The second recommendation (of medium-high materiality) related to the possible development of a competing container terminal at Newcastle. The recommendation was to deny approval to a container terminal in the Newcastle proposal (see J[92(3)]): [w]ere the NPC container development to proceed in the short term, it would have a material financial impact on the Port Botany Transaction, reinforce the inefficiencies in capping Port Botany below its full utilisation, and impose higher landside transport costs onto the economy. It would also be on the same timeframe as the Commonwealth's recently announced intermodal development at Moorebank, but would not have any real relationship to that facility (unlike Port Botany or Port Kembla). … a container terminal at Newcastle is likely to confuse bidders as to the long-term State policy for container facilities in NSW, and likely lead to a lower Transaction Value to the State as bidders discount future growth at Port Botany, and factor in the risk of competing with the State-owned Newcastle Port Corporation. Recommendation: Consistent with our preliminary recommendation to the Treasurer in the Interim Report, the Project Team recommends that the State denies the concept approval for dedicated container facilities at the Port of Newcastle (i.e., only that part of the Mayfield proposal that relates to containers) as such an action would deliver the overall best policy and financial outcome for the State. 43 The report noted that bidder perceptions regarding competing with a State-sponsored container terminal would lead to conservative assumptions in the bids. 44 The report recommended that if there were to be a second container terminal outside Botany, it should be Kembla. 45 During 2012, Transport for NSW with the assistance of consultants, considered the future needs of the State for container ports. Current road, rail and quayside network capacity were seen as insufficient for forecast volumes in 2031. Port Kembla was seen as the most cost effective location for expansion of container handling facilities, though further research was necessary for that decision to be made. The report entitled "Options for Container Ports in NSW" including the supporting consultant's report was expressed to be a "guiding principles" document which set out some fundamental considerations about the choice of the next container port as between Kembla and Newcastle, which was recommended to be Kembla. The primary judge recorded those at J[99]. They included the significantly higher project investment costs for Newcastle to develop as the next container terminal to Kembla: $12.1 billion compared to $4.1 billion under one cost allocation method or $6.1 billion compared to $4.1 billion under another; and the higher cost of moving each container from Newcastle to the Moorebank intermodal terminal by road or rail than from Port Kembla. 46 On 27 July 2012, the Treasurer and the Minister for Roads and Ports announced that Botany and Kembla would be privatised together and that Kembla would be developed after Botany for the State's long term container capacity: J[100]. 47 Shortly thereafter, the Treasurer wrote to NPC indicating its support for the development of a multi-use cargo facility at Mayfield, but excluding the proposed container terminal. The reasons given reflected the advice that had been received by the Treasurer: J[102]. 48 The view of the Government was made known to NSC: J[104]-[105]. 49 NPC was authorised to continue negotiations with NSC only on the basis of the port handling existing container traffic plus "organic growth" without the proposed container terminal: J[106]. In October 2012, the State wrote to NPC making clear that there was no opposition to a container terminal at Newcastle, after full utilisation of Botany and Kembla: J[111]. 50 In October 2012, Infrastructure NSW published its "State Infrastructure Strategy 2012-2032", which included detailed reasons for preferring the development of Kembla before Newcastle as the next container terminal: see J[107]. The document indicated that Botany would nearly quadruple its container throughput by 2031, reaching over 7 million TEUs per annum. 51 Also in October 2012, the New South Wales Parliament passed the Ports Assets (Authorised Transactions) Act 2012 (NSW) (PAAT Act), relevant aspects of which are set out at J[108] and J[110], including: the authorisation to lease (but not sell) land, up to 99 years; the requirement to place proceeds into a statutory fund; the authorisation to the Treasurer to exercise all necessary or convenient functions for the authorised transaction; the provision that an authorised transaction is to be effected as directed by the Treasurer in any manner considered appropriate by the Treasurer; and the removal of Botany's 3.2 million TEU cap. 52 In November 2012 a Draft NSW Freight and Ports Strategy was developed and provided to bidders: J[112]-[113]. It identified Kembla as the next container terminal after Botany. 53 In December 2012, the NSW Long Term Transport Master Plan was published by the Government. 54 By that time, there were four final bidders for the Port Botany and Port Kembla leases, including NSW Ports Consortium: J[116]. 55 In December 2012, Morgan Stanley, on behalf of the Treasurer informed all four bidders of the State's attitude to variations to the Bid Version Transaction Documents (making clear that the State preferred no changes), as follows (see J[117]): Any mark-ups you make to the Bid Version Transaction Documents should reflect the minimum changes that you require to undertake the Transactions based on the cash consideration outlined by you in Section 4.3 above. The mark-ups you make to each of the Bid Version Transaction Documents will form part of the State's Preferred Bidder evaluation considerations. NSW Treasury reiterates that the Bid Version Transaction Documents together with the Day 1 Transaction Documents represent the State's preferred position with regard to the risk allocation regime, terms and other elements of the Transactions. The selection of the Preferred Bidder will be based to a significant degree on any proposed changes to the Bid Version Transaction Documents. In particular, any changes to the liability and risk allocation regime set out in the Bid Version Transaction Documents will be viewed unfavourably. 56 In February and March 2013 one bidder raised the question of risk of change of Government policy as to the second container terminal, from Kembla to Newcastle, including the risk of the State competing by operating a container terminal in Newcastle. This was discussed within Treasury as were the ongoing talks with NPC. Foremost in the discussion was the potential impact on the bids of a significant, material amount of money the sum of which is confidential and need not be specified for the purposes of this judgment: J[120]-[123]. In early-mid March 2013, Morgan Stanley advised Treasury on the transaction: J[124]-[130]. The essence of Morgan Stanley's advice was that whilst Government policy was clear, it had changed in the past and that the issue should be dealt with if the likely significant affectation of value of a significant, material amount of money the sum of which is confidential and need not be specified for the purposes of this judgment was to be avoided. Morgan Stanley described the issue as a "new strawman". The options put forward (see J[125] and [129]-[130]) included some compensation of Botany and Kembla lessees if Newcastle container volumes "exceeded 200,000 TEUs … within the first 50 years" (J[127]) or exceeded a reasonable projection of "organic growth" (J[129]). 57 As the primary judge made clear at J[120] and J[955] the issue of the need for the compensation provisions arose when a bidder raised the question of the possible change of Government policy about the second port, after Port Botany. The bidder did not suggest any prospect of the State changing its policy of exhausting Botany's capacity before the second container terminal was established. 58 By early March 2013, it was recognised by Morgan Stanley that the issue of compensation by the State would be dealt with in any privatisation of Newcastle: that is by some form of reimbursement provision: J[128]. 59 In mid-March 2013, the Treasurer was briefed by the Steering Committee and he accepted their recommendations: J[131]-[134]. These were: to disclose the status of negotiations regarding Newcastle, but reiterate Government policy regarding Kembla after Botany in preference to Newcastle; to provide a regime to mitigate any impacts of State-sanctioned development in Newcastle "inconsistent with the current policy which Bidders are 'buying' today" and to draft contractual provisions for compensation for impacts of any change in policy. Given the debate on the appeal about this document, it is appropriate to set out the recommendations in full from J[132]. It was said in argument by the ACCC that there was no better example, than this document, of the impugned purpose of substantially lessening competition. The recommendations were in the following terms: • Must disclose current status of Newcastle and reiterate Government policy (draft Transaction Memo attached). This will make it clear that the State has the ability to call for container developments at Newcastle under the proposed lease • Provide regime to Bidders to mitigate impacts of State-sanctioned Newcastle developments that are inconsistent with current policy which Bidders are "buying" today • Refer over for preliminary drafting of a "Port Development Sequencing Agreement" which essentially provides contractual support for current Government policy as understood by the Transaction Team, and compensation for impacts of a change in policy • The risk for the State in this approach is that (i) it subsequently changes its policies and supports container developments at Newcastle, after having transacted leases at Botany and Kembla on a different basis and (ii) it then has to compensate Botany/Kembla Lessees for this change. (We note that Government could require a Newcastle developer to make a financial contribution to mitigate the costs to Government of such compensation). 60 The briefing document set out "key concepts" in the "Port Development Sequencing Agreement". Under "Outline/Recitals/Acknowledgments" there appeared three points, as follows: - The current policies of the State are to develop Botany to the fullest extent for containers, then Kembla, and only then develop dedicated container capacity at Newcastle - Private sector investors are investing in Botany and Kembla under this policy framework - Private sector investors in ports are seeking certainty as regards the application of State port development policies, and the prospect of competing with state-owned port developments in relation to container developments 61 Though in one sense it is plain from these facts, one matter deserves mention at this point. The aim of these "mitigation" or "compensation" provisions was to ensure the maximum bid price on the current policy framework. If a price were bid on such a hypothesis, any change of Government policy that changed that hypothesis would transform the bid price into a commercial over-payment, after-the-fact. Such overpayment was to be offset by compensation provisions providing for the financial effects of the change of policy. Looked at that way, the provision can be seen as providing for financial risk consequent upon hypothesised future change of Government policy: as a form of insurance or price adjustment for the successful bidder. 62 Whilst one (and those in the position of the bidders) could never be certain about future political and economic policy, two things were and are clear: first, at the least from the then current Government position the advice and economics of the sequencing of a container terminal at Kembla after Botany and Newcastle after Kembla were clear and demonstrable; and, secondly, and despite this first point, the magnitude of the investment recognised by the bid required a very conservative approach by the bidders if there were no financial compensation in the arrangements should Government policy change, even if, as was the case with IFM, the bidders saw the strength of the economic considerations underpinning the sequencing in current Government policy: J[135]-[136]. 63 Importantly, in mid-March 2013, Morgan Stanley modelled possible compensation payable based on NSC's Newcastle proposal and estimated a present value of $44.5 million to be payable by the State to the operatives of Botany and Kembla: J[137]. This, of course, was to be compared to the anticipated (or feared) loss of up to a significant, material amount of money the sum of which is confidential and need not be specified for the purposes of this judgment in the bid values. The asymmetrical nature of these values was emphasised by NSW Ports in its submissions as revealing the true character of the compensation provisions. In its submissions, in particular on likely effects, the ACCC sought to ascribe a different meaning to the use of the word "asymmetry" by the primary judge. 64 The draft PCDs were made available to bidders on 15 March 2013. A covering memorandum expressed Government policy of full development of Botany and Kembla and stated (J[139]): Government recognises that the potential NPC development intersects with the Transactions. Accordingly and in support of the policy position the Government is providing Bidders with a codified regime (including a compensation formula) if container volumes at the Port of Newcastle exceed an organic growth path prior to Port Botany/Port Kembla being fully developed for containers. Bidders should have regard to the draft Port Commitment Deed which is being placed in the data room on 15 March 2013. 65 In mid-April 2013, the NSW Ports Consortium was announced as the successful bidder for Port Botany and Port Kembla. On 31 May 2013, the Port Botany and Port Kembla PCDs were executed. The relevant extracts of the compensation provisions in the Port Botany PCD and Port Kembla PCD are in schedule 1 to the primary judgment. The primary judge summarised them at J[146]. Neither of the State Owned Corporations (Sydney Ports Corporation (SPC), Port Kembla Port Corporation (PKPC)) that had been involved in the operation of Port Botany and Port Kembla was a party to the PCDs or had any role in their preparation. 66 On 18 June 2013, the Government announced the intended privatisation of the Port of Newcastle, subject to completion of a scoping study: J[148]. Morgan Stanley was retained to prepare the study. The negotiations between NPC and NSC were ongoing. 67 In July 2013, Morgan Stanley advised the Treasurer as to Newcastle: J[150]-[155]. Morgan Stanley advised that negotiations only be permitted to proceed without a container terminal (at berths 5 & 6). This was "Stage 1", which, however, had within it possible effects on Botany and Kembla and exposure under the compensation provisions since NSC's forecasts for Stage 1 were up to 200,000 TEUs per annum (the compensation provisions contained a threshold of 30,000 TEUs per annum plus material growth). It was recommended that there be a "satisfactory mechanism to ensure any compensation liability under the [PCD] is passed back to NSC". 68 On 26 July 2013, the Treasurer, having accepted this advice, informed NSC by letter that the Government would not support NSC's proposal, but would agree to a revised proposal of Stage 1 only: J[157]. 69 On 6 August 2013 at a meeting between Treasury, NPC and NSC, NSC was told of the proposed reimbursement of State liability to the operator of Port Botany and Port Kembla: J[159]. 70 By mid-September 2013, negotiations between NPC and NSC were complete. NSC became known as the Mayfield Development Corporation (NSC/MDC). 71 In October 2013, NSC/MDC objected to acceptance of any liability of the State under the PCDs and proposed an alternative which was unacceptable to the Treasurer and he issued a direction under the PAAT Act for negotiations with NSC/MDC to cease: J[164]-[166]. 72 In November 2013, the final NSW Freight and Ports Strategy was published and reiterated what had appeared in the draft (see [52] above), especially about sequencing of certain ports: see J[167]-[173]. 73 Also in November 2013, having received Morgan Stanley's final scoping study for the privatisation of the Port of Newcastle, the State announced the proposal to privatise the port by long term lease. Expressions of interest were invited: J[175]. It needs to be appreciated that the throughput of cargo (as to 95%) and revenue (as to 70%) of the port was and was derived from the export of coal. It was forecast that coal exports would increase up to 2043. Newcastle is the largest coal exporting port in the world. In contrast it handled only 15,000 TEUs per annum. It did not have a dedicated container terminal: J[175]. Containers were handled by geared vessels: J[190]. 74 The information memorandum to potential bidders for the Port of Newcastle privatisation made clear the sequencing of container ports with Port Kembla after Port Botany, and identified the development of a container terminal at Newcastle in 30 to 40 years, after 2040. Though it stressed the development opportunity thereafter with the available land. The information memorandum disclosed the compensation provisions in the PCDs. It dealt with their required reimbursement as follows J[179]: The financial obligations of the State under this arrangement will be passed to the Newcastle Port Lessee under the Port Commitment Deed ("PCD"). The Acquirer is not prevented from developing container facilities at the Port; however, the Acquirer will be required to compensate the State for any costs under the Botany/Kembla Port Commitment Deed that result from container developments at the Port of Newcastle. Based on current forecasts, container volumes are not expected to trigger any liability under the PCD for the Port Lessee/Acquirer, and the State sees the risk of costs arising under the PCD as being within the control of the Acquirer. Notwithstanding the PCD, the Acquirer may choose to further develop container trade at the Port and seek to attract container volumes above the PCD Threshold. The Acquirer will need to determine commercially whether the incremental value of revenues derived from land rental and port charges from all container movements sufficiently offsets any PCD payments prior to the end of the arrangements. Thus, the proposal was not to prevent any development, but to cast the burden of the compensation provisions upon the acquirer. 75 To interpose: The ACCC made no case that the reimbursement provision envisaged by the information memorandum or the privatisation of the Port of Newcastle was, of itself, contrary to the Act as having the purpose or the effect of substantially lessening competition. 76 In April 2014, the State agreed to lease the Port of Newcastle to a consortium which became PON for $1.75 billion. On 30 May 2014, the Newcastle PCD was executed. Clause 3 was a reimbursement provision summarised by the primary judge at J[188] and set out in the schedule to the primary judgment. 77 Later in 2014, PON's development plan said there were no plans for a container terminal: J[190]. 78 It is appropriate to interpose here by way of emphasis that PON acquired its rights to the Port of Newcastle and paid the relevant consideration on the clear understanding, and in the context, of the explicit explanation of the Government's policy as to sequencing container ports in New South Wales and of the existence of the compensation and reimbursement provisions. 79 In March and May 2016, PON received two unsolicited proposals to develop a container terminal on the Mayfield site: from Anglo Ports and DP World Australia (the latter the operator of one terminal at Port Botany). They were considered by PON's board which entered a memorandum of understanding with DP World Australia to undertake a due diligence and feasibility analysis to develop a container terminal. The memorandum expired. The primary judge recorded the following at J[193]: DP World Australia maintained that the PCDs made the project unviable for it and was unwilling to take on any obligation under the Newcastle PCD. DP World Australia's CEO said subsequently that a container terminal at Newcastle would be attractive but for the PCDs, and that it was hard to see "it working with that handbrake". 80 By 2018 the State policy for the sequencing of container ports was renewed. The NSW Freight and Ports Plan 2018-2023 was relevantly summarised by the primary judge at J[194], and highlighted the importance of efficiently developing freight capacity in the State and the large cost of necessary infrastructure. In relation to an asserted issue as to the need for containerised freight at the Port of Newcastle, the Plan stated: The Plan recognises the interest of the Port of Newcastle in diversifying and expanding the port's trade base. An initiative has been included in the Plan to support the Port of Newcastle as the commercial operator of the port, to explore other trade opportunities as they deliver their masterplan, such as examining landside capacity constraints that may need to be addressed beyond the timeframe of this Plan. The NSW Government policy position is that Port Kembla has been identified as the location for the development of a future container terminal to augment capacity of Port Botany when required. Current arrangements do not prohibit the development of a container terminal at the Port of Newcastle but rather allow for the growth of container volumes through Newcastle that service the region. 81 By 2018, the ACCC had begun to investigate the privatisation of Port Botany and Kembla and in particular the compensation provisions. 82 At J[200] the primary judge described the substantial Commonwealth and State infrastructure investment to facilitate the efficient use of Port Botany and Port Kembla. The financial, social and economic scale of such investment and activity necessitates setting out these matters: (1) the development of the Port Botany Rail Line Duplication project, supported by $400 million from the Commonwealth government. This project involves a dedicated freight only rail track from Port Botany to near Marrickville. This project was added to the Infrastructure Australia priority list and was made on the assumption that containers moving through Port Botany were expected to increase by 4.5 million TEUs over the coming decades. The project was designed to provide the capacity to meet forecast rail demand generated by the Moorebank Intermodal Terminal, Enfield Intermodal Terminal, St Marys Intermodal Terminal and future terminals; (2) the Sydney Gateway Project, which had a project value of $2.4 billion. This project involved various road connections and upgrades to provide a high capacity connection from Sydney Airport and Port Botany to the WestConnex. The purpose of the project included to reduce congestion on existing roads to Port Botany and to support the efficient distribution of freight between Port Botany and logistic centres in western Sydney; (3) the reservation of land for the western Sydney Freight Line. This is a future transport link that will provide a dedicated freight link between Port Botany and the Western Parkland City; (4) the rezoning of land for the Mamre Road precinct in western Sydney to protect it for use as a future intermodal terminal. This precinct will have an area of 999 hectares. This terminal will have dedicated access to Port Botany via the western Sydney Freight Line and is anticipated to have a cost of $2.6 billion; (5) the Moorebank Intermodal terminal, which is a 241 hectare precinct on Commonwealth land, and which is designed to deal with up to 1.05 million TEU of international containerised freight per year. The terminal is designed to deal directly with freight from Port Botany. It is the largest intermodal logistics precinct in Australia. There has also been private sector investment in the precinct, including the development of distribution centres by Woolworths across 26 hectares at a cost of $700-$780 million to Woolworths and $420-$460 million to Qube; (6) the St Marys Intermodal Freight Hub, which it is anticipated will deal with up to five 600m trains per day from Port Botany and with an annual throughput of 301,000 TEU; (7) the M1 Princess Motorway Improvements for Picton Road to Bulli Tops. The objectives of these improvements include to "increase the reliability of access into and out of Port Kembla, including for general freight, larger restricted access vehicles and high performance freight vehicles"; and (8) the M1 Princess Motorway Mount Ousley Interchange. This involves road upgrades on the M1 motorway. The objectives of the proposal include to "provide for the growing freight task including supporting the expanding port at Port Kembla". This proposal was expressly developed in the context of the State's policy that Port Kembla would become the State's second container port.

PON's business case 83 As a separate part of the basic or background facts at J[205]-[255] the primary judge dealt with PON's business case for a container terminal at Newcastle. The subject was of some significance to the primary judge in her views on the lack of realistic foundation of the effects case. That discussion began with the fact that since October 2016 PON was in contact with the ACCC about the compensation and reimbursement provisions (upon the basis of the knowledge of the existence of which it had successfully bid for the Port of Newcastle). The ACCC encouraged PON to develop that business case: see J[205]. It is unnecessary to consider the propriety of the circumstances there discussed by the primary judge. 84 Against this background of the interest of the ACCC, CM Ports, one of the two equal investors in PON, was keen in 2018 to develop a container terminal. Consultants were engaged and a preliminary business case was presented to the PON board in February 2019. The primary judge described the steps taken at J[214]-[231]. 85 After considering the preliminary business case, the board of PON approved the preparation of a "Detailed Business Case" at a cost of about $3.4 million: J[232]. PON continued the project for a container terminal, which work involved assisting the ACCC to present its case against NSW Ports: see J[233]-[238]. 86 In November 2019, PON board approved a budget for further work on the project estimated by the primary judge to be about $7.74 million: J[239]. Part of the project was working (with the ACCC) to resolve favourably the compensation and reimbursement issues. 87 In February 2020, the PON board considered a so-called "PCD Resolution Strategy" which identified political involvement to facilitate the elimination of the reimbursement provision to accelerate a project for a "multi-purpose deep-water terminal project": J[240]. In April 2020, the PON board received a recommendation to approve a budget of $3.8 million to develop a business case for a multi-purpose deep-water terminal to support the ACCC's case against NSW Ports: J[242]. In April 2020 PON wrote to the Prime Minister seeking Commonwealth funding assistance and legislative assistance to over-ride the reimbursement provision: J[244]. 88 Thereafter McKinsey & Co was engaged to develop an "investment grade" business case, including financial analysis: J[245]. At least six other consultants' reports were commissioned: J[246]. At J[247]-[255] the primary judge set out aspects of these reports. No "investment grade" business case was ever produced in discovery or tendered. A market analysis by shipping consultants was to the effect that whilstsoever Port Botany had capacity Newcastle would need a subsidy: J[247]. The McKinsey report of August 2020 showed Newcastle to be uncompetitive on landside road costs to Western Sydney, but possibly competitive in rail, which depended on the development of rail and intermodal networks for Newcastle (which necessarily requires considerable investment, whether public or private or both): J[249]. 89 Thus, after four years of analysis, after the incentive of a case to be begun (and later begun) by the ACCC, after the use of political pressure and the expenditure of millions of dollars on consultants' reports, no "investment grade" business case was or apparently could be developed or propounded for a container terminal at Newcastle while Port Botany had capacity.

The reasons: Consideration of the factual background 90 In section 2.7 of the reasons (J[256]-[286]) the primary judge dealt with the ACCC's ten key contentions from these background facts. Evidence of witnesses was relevant to one of these contentions. It is helpful to examine these ten key contentions, before completing a discussion of the background facts, because her Honour's clear exposition and conclusions assist later analysis. 91 The first contention was that: [T]he State's policy, from around 2003 to 2012 was that the Port of Newcastle would be the next location at which a container terminal would be developed after Port Botany. 92 In response, the primary judge put the short contention into its proper context, finding at J[258]-[261]: [258] The State policy from 2003 to 2012 was that after Port Botany reached its full capacity as a container terminal, the next container terminal to be developed would be at Port of Newcastle. [259] This policy, insofar as it identified Port of Newcastle as the next container terminal to be developed after Port Botany reached full capacity, was under question from late 2011 when the State announced it would privatise Port Botany and Transport for NSW and Infrastructure NSW commenced a review of ports policy for NSW. From March 2012 it was apparent that there were serious issues of concern within the State and its advisers about the Port of Newcastle being the next container terminal to be developed after Port Botany reached full capacity. On 27 July 2012 the Treasurer and Minister for Roads and Ports announced that the State would seek to develop Port Kembla as the logical next long term tranche of container capacity after Port Botany. This policy decision was reflected in the State Infrastructure Strategy 2012-2032 published by Infrastructure NSW in October 2012. It was also reflected in the State's draft NSW Freight and Ports Strategy published in November 2012. This draft also identified that the expectation was that Port Botany might approach its natural capacity between 2030 and 2040, after which new port infrastructure at Port Botany or Port Kembla might be needed. [260] This policy was also reflected in the NSW Long Term Transport Master Plan was [sic] published in December 2012. The policy remained unchanged in the final NSW Freight and Ports Strategy published in November 2013. It remains unchanged to date. The State has implemented a number of significant infrastructure decisions subsequently reflecting this policy. [261] Accordingly, at the time the compensation provisions were made on 31 May 2013 the policy of the State was that: (a) Port Botany would be developed to full capacity first, (b) it was anticipated that Port Botany may approach its natural capacity between 2030 and 2040, after which new port infrastructure at Port Botany and Port Kembla may be required, (c) after Port Botany and Port Kembla had reached their full capacity, the next container terminal in NSW would be developed at the Port of Newcastle. 93 The second contention was that: [I]n at least the period from 2010 to 2013, a private sector consortium was interested in developing a container terminal at the Port of Newcastle. 94 The response of the primary judge to this is found at J[263]-[264] and demonstrates the oversimplified nature of the contention: [263] NSC/MDC was selected by NPC as the preferred developer of a container terminal at the Port of Newcastle by May 2010. NPC was permitted to negotiate with NSC/MDC in June 2011 on the basis that it could not bind the State and that State approval to any commercial deal would be required. By October 2011 NPC and NSC/MDC agreed a term sheet and draft contracts for the proposed development. When NSC/MDC sought approval to enter into the agreements the State informed it that development of a container terminal at the Port of Newcastle would be considered in the context of an overarching strategy for port infrastructure in NSW. As a result, the State would not agree to the development of a container terminal at Port of Newcastle. It would agree only to the development of a multi-use cargo facility. NPC was permitted to negotiate with NSC/MDC on this basis only. By that time, in July 2013, the State was also contemplating the privatisation of the Port of Newcastle. Negotiations between NPC and NSC/MDC continued on the limited basis approved by the State. By November 2013 the Treasurer had directed NPC to cease negotiations altogether. [264] The NSC/MDC proposal for a container terminal at the Port of Newcastle never moved beyond a concept phase. Even in concept, the proposed container terminal was phase 2 of the proposed development with no timing commitment. It may be inferred that NSC/MDC did not have funding in place for the development. The advisers to the State also considered that there was no commercial justification for the inclusion of phase 2 in the development proposal. NSC/MDC said that it was ready to develop a container terminal "at a time decided by the government in the future" which it acknowledged may not be for 20 years. In other words, NSC/MDC did not propose to develop a container terminal contrary to the State policy that Port Botany's capacity should be used first. 95 The third contention was that: [T]here was a link between the change in the State's policy with respect to Newcastle being the location for NSW's next container terminal, and the work done for the State by Treasury and Morgan Stanley, regarding the Port Botany privatisation, in late 2011 and 2012. 96 The contention was over-simplified and as such lacked clarity. The primary judge, discerning, however, its intended meaning, disagreed, finding at J[266]-[267]: [266] If by this, the ACCC means that the State changed its policy because it proposed to privatise Port Botany, I disagree. The State decided to privatise Port Botany first, it may be inferred, because such a privatisation was the policy of the NSW Liberal/National Coalition government elected in March 2011 and, secondly, because Port Botany is NSW's only dedicated container terminal and the State policy was always that Port Botany would be developed to its full capacity before any other container terminal would be developed. At the same time as the privatisation of Port Botany, the State was reviewing its port development strategy through the work of Transport for NSW and Infrastructure NSW. The interim outcomes of that review informed with the conclusions reached by the Treasury and Morgan Stanley, that Port Botany should be developed to capacity as a container terminal, then Port Kembla, and only then the Port of Newcastle. The conclusions reached by the Treasury and Morgan Stanley did not drive the conclusions reached by Transport for NSW and Infrastructure NSW. Rather, the Treasury and Morgan Stanley considered the interim conclusions and recommendations of Transport for NSW and Infrastructure NSW which informed their own conclusions. [267] Accordingly, the privatisation of Port Botany did not cause the State's change of policy. It coincided with the State's change of policy but the change of policy was not driven by the fact of the privatisation of Port Botany. The change in the State policy was an outcome only of the consideration of efficient and cost-effective infrastructure development for NSW. 97 The fourth contention was that: [T]he State was told in 2012 and early 2013 that the Port of Newcastle could compete with Botany and that bidders for Botany and Kembla would consider that risk of competition to be material. 98 This misrepresented what in fact occurred. The primary judge made the following findings at J[269]: It is correct that the State was told that if a container terminal was developed at the Port of Newcastle it would compete with Port Botany. It is apparent from the course of the communications as a whole that by "compete" what was meant was that if a container terminal was developed at the Port of Newcastle it would divert some container trade away from Port Botany and that, despite the State policy to the contrary, this perceived risk had a not immaterial value to the Port Botany privatisation because bidders would make conservative assumptions about the perceived risk. 99 As will be discussed, and as was found, there was a huge difference between the likelihood or feasibility (or lack thereof) of a container port operating at Newcastle whilst there was capacity at Port Botany, and the perception of risk of change in Government policy as to sequencing of ports in New South Wales. 100 The fifth contention was that: [B]efore the privatisation of Port Botany in 2013, the State was told that bidders for Port Botany and Port Kembla would want protection from that risk of potential competition from Newcastle. 101 This contention was over simplistic and included two propositions similar in apparent expression, but importantly different in meaning. The bidders were paying for a monopoly, one that was the product of circumstance, geography and the huge necessary infrastructure for a container port and the overwhelming public interest in the rational deployment of public (and private) funds for investment for such infrastructure. The protection that was wanted was not against competition but assuming competition (because of a change of Government policy) against the financial effects of competition: of a competitive, as opposed to a sequenced monopolistic, market. The bidder, having paid for a monopoly, and if changed Government policy was to impair or affect the monopoly, was to have the benefit of a provision that provided for financial mitigation - whether characterised as compensation or price adjustment or insurance - to ensure that there was no basis not to bid at the highest level to win the asset and thereby provide the State with the most funds to deploy otherwise for the benefit of the State. 102 The primary judge found (correctly and reflecting the essence of the above) at J[271]: Subject to the observation above in relation to the fourth point, it is correct that the State's focus was to protect bidders from the financial effects of the perceived risk that the State policy might change in the future, as a result of which a container terminal may be developed while Port Botany has capacity or while a container terminal at Port Kembla has capacity. 103 The sixth contention was that: [T]he Compensation Provisions were directed to providing that protection, and the Treasurer himself signed off on the Compensation Provisions on that basis in March 2013. 104 Subject to the proper understanding of the fifth contention, her Honour accepted this: J[273]. 105 The seventh contention was that: [T]he State contemplated the effects of the Compensation Provisions, including the State withholding approval for a container development at the Port of Newcastle and/or requiring investors in a privatised the Port of Newcastle to reimburse or indemnify the State for its liability under the Compensation Provisions. 106 This too was not accurate, the primary judge finding at J[275]-[278]: [275] The State did not contemplate that withholding approval for a container development at the Port of Newcastle would be an effect of the compensation provisions. Rather, it contemplated that it had four options which included doing nothing, allowing the development of a container terminal at the Port of Newcastle and providing comfort to bidders, blocking the development of a container terminal at the Port of Newcastle, and blocking the development of a container terminal at the Port of Newcastle and providing comfort to bidders anyway. [276] In this regard, it is also necessary to recall that the development of a container terminal at the Port of Newcastle meant the NSC/MDC development proposal as described above, which NPC had been pursuing (with the State's approval until 2012) from a time when that pursuit was consistent with the policy of the State, at least to the extent of the next container terminal, after Port Botany had reached capacity, being at the Port of Newcastle. [277] It is also necessary to recall that the State's policy at the time was that Port Botany be developed to full capacity first, then Port Kembla, and only then Port of Newcastle. For this reason the advisers to the State considered the risk of development of a container terminal at Port of Newcastle contrary to the State policy to be a "straw man" that, nevertheless, had to be dealt with given its potential impact on the value bidders would attribute to Port Botany and Port Kembla. [278] The State did contemplate that if the compensation provisions were included as part of the privatisation of Port Botany and Port Kembla, the State could offset any potential liability under those provisions in the transactions effecting the privatisation of the Port of Newcastle. 107 The eighth and ninth contentions which were accepted by the primary judge were that: [T]he Treasurer himself contemplated a reimbursement obligation as a consequence of the Compensation Provisions before he executed the Port Botany and Port Kembla PCDs containing the Compensation Provisions on behalf of the State. … [T]he Reimbursement Provision was in fact imposed as a consequence of the Compensation Provisions. 108 The tenth contention was that: [S]ince becoming the owner of Port Botany and Port Kembla, the NSW Ports Respondents have held the view that a Newcastle Terminal would compete with Port Botany if the Botany and Kembla PCDs were not in place, and have been concerned about that prospect. 109 This was not accepted by the primary judge, who found the following at J[284]-[286]: [284] As discussed below, this submission needs to be unpicked. On the evidence, NSW Ports considers that the compensation provisions provide it with financial protection if the State policy changes and a container terminal is developed at the Port of Newcastle and diverts containers away from Port Botany before Port Botany reaches capacity. [285] On the evidence, the reimbursement provisions are irrelevant to NSW Ports other than to the extent that they argue that, if anything has an anti-competitive effect, it is the reimbursement provisions alone and not the compensation provisions. [286] NSW Ports also does not accept that there is a credible threat of entry by a container terminal at the Port of Newcastle in the reasonably foreseeable future and has not done so since the State policy changed, the cap on Port Botany was removed, and Port Kembla was privatised with Port Botany.

The reasons: The evidence of NSW Ports' witnesses 110 Before dealing with the ultimate findings of the primary judge on the question of the purpose, effect, or likely effect of the compensation provisions it is helpful to examine the findings of the primary judge on the evidence given. This is so because of the emphasis placed on these findings by the ACCC and because it is necessary to help explain why the case of the ACCC (as to both purpose and effect) was based on an asserted proposition which was not made out. This proposition was adverted to in the discussion of the ACCC's fifth proposition (see [100]-[102] above). 111 Mr Julio Garcia was a director of NSW Ports and the head of infrastructure for the North American region for IFM. His evidence was accepted. The primary judge recounted his evidence at J[553]: (1) early in 2012, he considered that a potential container terminal at Newcastle could be a competitive threat to Port Botany; (2) substitution by a container terminal at the Port of Newcastle was a perceived material risk for bidders in the Port Botany privatisation process; (3) while this became less of a concern during the privatisation process, he continues to hold the view that there is potential for competition for Port Botany from a container terminal at the Port of Newcastle at some time in the future; (4) the compensation provisions were directed at ameliorating the risk of competition from the Port of Newcastle if it were developed with a container terminal in the future (noting that by this stage in the privatisation process Mr Garcia did not consider the compensation provisions to be important but accepted they were favourable to bidders); and (5) NSW Ports agreed to the compensation provisions so as to enjoy the potential protection they gave from competition by a future container terminal at the Port of Newcastle (noting that Mr Garcia stressed that the provisions gave financial protection to NSW Ports if container volumes at the Port of Newcastle exceeded a certain threshold). 112 Mr Ari Droga was also a director of NSW Ports and a partner of the Australian business of GIP. His evidence was accepted. The primary judge recounted his evidence at J[554]: (1) before the PCDs were executed, Mr Droga was conscious of the risk that a competing container terminal could be developed at the Port of Newcastle at some time in the future (noting, however that he considered the risk had been substantially ameliorated by the State announcing its port policy sequencing policy in July 2012 and including Port Kembla with Port Botany into the proposed privatisation. By the time these events had occurred, NSW Ports was comfortable with the risk profile presented by the Port of Newcastle); (2) if the Port of Newcastle was to be developed with a container terminal ahead of time it may then provide a competitive force to or could potentially compete with Port Botany; (3) under certain conditions being satisfied, specifically that a fully functioning container terminal was developed at the Port of Newcastle, it could compete with Port Botany for some of the addressable market being serviced by Port Botany or in certain areas currently or in the future; (4) if a container terminal was developed at the Port of Newcastle, it would not be good for Port Botany. It would be fair to describe that as in the top handful of long-term strategic risks for Port Botany (a risk which had become the subject of more focus as a result of this proceeding); and (5) the compensation provisions provided NSW Ports with protection if the State changed its mind about its port sequencing policy. NSW Ports was happy to receive that protection. It could provide economic compensation in the event that competitive capacity was developed and exercised over time at Newcastle. He appreciated at the time the compensation provisions were made that their effect was to provide compensation "in the event that there was proof that the terms of the indemnity were activated and within that involved a substitution of a box that otherwise would have gone to Botany going to Newcastle". He accepted that competition would very likely be a reason for that substitution. 113 Ms Marika Calfas, the CEO of NSW Ports, gave evidence which was relevantly set out at length at J[555]-[557]. I will deal with Ms Calfas' evidence to the extent necessary in dealing with the ACCC's submissions.

The reasons: The purpose of the compensation provisions 114 After setting out the relevant principles governing "substantially lessening competition" and "purpose" at J[894]-[914], about which no complaint was made on appeal, the primary judge dealt with purpose at J[926]-[980]. 115 The complaints made about the approach of the primary judge as to purpose were not as to any errors in findings of primary facts, but rather were as to the proper characterisation of the facts as found. 116 The primary judge found (at J[927], [928], [930] and [937]): (1) that the State's motive was profit maximisation: to sell to a bidder at a price to reflect the monopoly being sold. The State's purpose was to ensure that bidders did not discount their bids because of any risk of establishment of a container port at Newcastle (before Botany and Kembla reached capacity) to ensure the State received full value for the sale of an existing monopoly by indemnifying the bidder for the risk that the monopoly might be reduced: J[927]. (2) that NSW Ports' motive was also profit maximisation: it did not want the profitability of the existing monopoly for which it was paying reduced by a competing container terminal at Newcastle. NSW Ports' purpose was to ensure that it retained what it paid for - the full extent of the existing monopoly: J[928]. (3) that it was not the purpose of either the State or NSW Ports to prevent or hinder the establishment and operation of a container terminal at Newcastle: J[930]. (4) that the ACCC's and PON's submission should be rejected that the purpose of the compensation provisions was: (a) to prevent or hinder the development of a container terminal at Newcastle; or (b) to make Port Botany or Port Kembla immune from competition from the Port of Newcastle; or (c) to enable NSW Ports to act without any constraint from competition that Newcastle might provide: J[937]. 117 The primary judge's consideration of purpose involved the rejection of two confusions within the ACCC's case. First (as discussed at J[931]) purpose was not to be confused with effect. That it might be possible (though it was later rejected) that the provision may hinder or prevent a container port being developed at Newcastle, that was not its purpose. Its purpose was financial: for the State to obtain the highest bid; for NSW Ports to have a financial adjustment should the underlying assumption of the bid price be changed. This first confusion revealed the second confusion: A purpose to protect or indemnify against the financial effect of competition, if it occurred, was not the same as a purpose to prevent or hinder the establishment and operation of a container port at Newcastle and thereby to substantially lessen competition. 118 The policy of the State, reached after considerable consideration, was to sequence the development of container ports in New South Wales: Botany, Kembla, then Newcastle. The first two were to be privatised as a package. Given the recency of an earlier Government's placement of Newcastle as second in the sequencing of container ports, the possibility of a change of Government policy could not be ruled out. This possibility was seen to have the capacity to depress the bids for hugely valuable State assets that would, subject to any price regulation, involve the purchase of a sequenced monopoly. If competition did eventuate from Newcastle, contrary to existing Government policy and contrary to the underlying assumption of the transaction, more would have been paid for the asset than it was worth. The compensation provisions addressed and ameliorated that future possibility of overpayment by an entitlement to compensation. It can also be characterised as a price adjustment or insurance mechanism. Its purpose was to remove a financial risk should competition be introduced, in order to obtain full value in the bid. 119 At J[933], the primary judge found: The text and context of the compensation provisions shows that the substantial purposes of the State and NSW Ports were as described above: for the State, to ensure that bidders did not discount their bids because of the risk of the establishment of a container terminal at the Port of Newcastle and, for NSW Ports, to ensure that it would retain what it would pay for - the full extent of the existing monopoly of Port Botany in respect of container port services in NSW. These purposes are the two sides of the same coin. Neither involve the purpose of preventing or hindering the development or operation of a container terminal at the Port of Newcastle. 120 The consideration of the matter elaborated by the primary judge at J[934]-[980] supports the conclusions her Honour drew. 121 At J[934], the primary judge rejected the notion that NSW Ports would have relied on the compensation provisions not to compete with a port at Newcastle. The primary judge found at J[934]: …The idea that NSW Ports considered that it could "give less and charge more" (QCMA at 517) because of the compensation provisions is far-fetched. NSW Ports would still have an incentive to maximise its profits. To do that, it would need to ensure that it maintained or enhanced the price-quality package that customers and ships would receive in using Port Botany. If it did not, the risks are obvious. 122 At J[935]-[936], the primary judge took from the compensation provisions themselves that the parties never intended that NSW Ports would not do everything it reasonably could to prevent container volumes being diverted from Botany or Kembla to Newcastle. 123 At J[937], the primary judge rejected the submissions of the ACCC and PON that the purpose of the compensation provisions was threefold, being to: …(a) prevent or hinder the development of a container terminal at the Port of Newcastle, (b) make Port Botany and/or Port Kembla immune from competition (by the threat of or actual entry into the market for Container Port Services) from the Port of Newcastle, or (c) enable NSW Ports to act without any constraint from competition that the Port of Newcastle would otherwise provide. 124 At J[938], the primary judge set out the essence of the submission of PON (that was repeated on appeal), which, her Honour said, conflated purpose and effect: Under normal circumstances, the successful bidder faced with threatened or actual loss of its customers to a new entrant or potential new entrant would engage in rivalrous behaviour to limit those losses. That is the competitive pressure brought to bear by the new entrant or potential entrant. The inoculation of one market participant from the economic effects of the substitution will inevitably reduce the competitive pressure on that market participant, because it will no longer face the same incentive to engage in the competitive conduct to protect its revenue from the risk that its customers would substitute suppliers. It reduces and distorts the ordinary commercial incentives to engage in rivalrous behaviour. … This distortion of incentives would apply well before entry in fact occurred. The mere possibility of entry, under normal commercial circumstances, would act as a significant competitive constraint: see … [QCMA] at … [512] per Woodward J. The significant reduction in the incentive to act in a competitive manner to discourage potential new entry is a substantial lessening of competition. … A purpose to enable the incumbent to behave in a manner substantially less constrained by the threat or reality of new entry is a purpose of reducing competition in a manner that is meaningful to the competitive process. 125 The primary judge drew the distinction between purpose and effect with clarity, stating at J[939] that there may be proscribed effect without proscribed purpose, and proscribed purpose without proscribed effect. The relevant purpose of the State and NSW Ports was then set out in J[939], as follows: …The subjective understanding of the compensation provisions by the State and NSW Ports is clear - they did not intend that NSW Ports would be inoculated against the threat of entry into the market for Container Port Services by the Port of Newcastle. They intended that if that threat materialised NSW Ports would be compensated for the loss of containers over and above a specified natural growth rate of container volumes at the Port of Newcastle if it had continued without a container terminal. This intention is specifically identified in advice from the Treasury transaction team to NSC, "Mayfield Development Negotiation Parameters", about disclosure of the compensation provisions to bidders for the Port of Newcastle. The advice in August 2013 was that: The State requires that the financial obligations under this arrangement [the compensation provisions] be mirrored by the developer of any container capacity at Newcastle. Ultimately these arrangements do not prevent container volume growth at Newcastle, but the costs of doing so will need to be borne by the container developer (i.e. by making payments to the State). 126 As will be seen, the ACCC and PON submitted that there is embedded error in these conclusions, and that a proper appreciation of competition principles requires the recognition that the purpose as found by her Honour should be characterised as a purpose to (substantially) lessen competition. 127 From J[941]-[947], the primary judge summarised the development of State policy about ports from 2003. From 2003 the policy (for both Labor and Liberal/National governments) was that container ports would be developed in sequence, with Newcastle not being developed until after Botany had reached capacity (albeit with a cap): J[941]. The changes of policy in 2012 were only as to sequence: Kembla was to be second; and that the cap on Botany would be removed. The decision to change policy was preceded by, and based on, detailed economic considerations: J[946]-[947]. Against this background, the primary judge rejected the ACCC's submission that the policy (that is the policy change) was a consequence of a desire to protect the successful bidder from competition from Newcastle: J[948]-[956]. There was no appeal against this conclusion. The documentary record is overwhelmingly in support of the finding. 128 At J[959], the primary judge referred to the "asymmetric" risk: the risk of a container terminal at Newcastle was perceived as low by both the State and NSW Ports, at the time of privatisation, but it could produce a disproportionate discount to the bids because of the potential to reduce profitability of the long lease of Botany and Kembla. At J[960], the primary judge summarised the nature of that asymmetry and the nature of the risk being addressed - the risk of a change of Government policy that could not be seen as trivial or so remote as to be described as irrational or irrelevant: This is why Mr Garcia agreed that he perceived the risk to bidders for Port Botany and Port Kembla to be material in 2012. The evolution of the State policy and NSW Ports' own due diligence throughout 2012, as well as the inclusion of Port Kembla in the privatisation, explains why he became "less and less" concerned about this risk. A risk may be material, even if it is very unlikely to eventuate, because of the magnitude of the consequences if the risk does eventuate. If a sufficiently functional container terminal was operating at the Port of Newcastle, it may be able to take a significant share of container volumes from Port Botany. The magnitude of the potential harm to Port Botany was thus high. Even a small risk of that occurring would have been, and was, highly relevant to NSW Ports. The State appreciated this because it realised that the asymmetry of the risk might well cause a significant loss of value to the asset it was selling. This is why the State accepted that it had to disclose the risk and do something to ameliorate it. This does not necessarily mean that NSW Ports or the State, at the time the compensation provisions were made, considered the likelihood of the risk occurring to be high, probable, or even real. What the State must have accepted, however, was that the risk was not so trivial or so remote that bidders could be relied upon to dismiss it as irrational and irrelevant to their bid price. In this regard, it is relevant to note that the risk being addressed was the risk of a change of the State policy in the future. It was not the risk that a container terminal might be developed at the Port of Newcastle contrary to the State policy; that possibility was never contemplated. 129 At J[961]-[962], the primary judge clearly explained the proper understanding of "protection from competition" in the evidence of Mr Garcia and Mr Droga as "financial protection from the loss resulting from competition, not the prevention or hindering of competition": J[962]. 130 From J[963] the primary judge dealt with (but did not accept) a submission of the State and NSW Ports that the purpose of the compensation provisions was to codify the State's policy as it existed from July 2012. The ACCC (not the State or NSW Ports) grounds an aspect of its appeal on this rejection (see ground 7 below). The primary judge recognised the self-defeating nature of the submission made by the State and NSW Ports at J[963]-[964] as follows: [963] The submission of NSW Ports and the State that the purpose of the compensation provisions was to codify the State's policy as it existed from July 2012 onwards is problematic. As PON submitted, it is clear that the purpose of the State policy was (and is) to prevent the development of a container terminal at the Port of Newcastle until container capacity is used at Port Botany and Port Kembla. If the compensation provisions codified the State policy then their purpose would be to prevent the development of a container terminal at the Port of Newcastle for three or more decades. The submissions, accordingly, are in fact contrary to the interests of NSW Ports and the State in this case. If the substantial purpose of the State and/or NSW Ports had been to prevent or hinder entry of the Port of Newcastle into the market for Container Port Services in NSW then, depending on the likelihood of entry into the market by PON, that may involve the proscribed purpose. It would not matter that no container terminal exists at the Port of Newcastle. As s 4G of the CCA makes clear, if competition is prevented or hindered, it is lessened. [964] However, I do not accept that in making the impugned provisions NSW Ports or the State had the purpose of preventing or hindering the development of a container terminal at the Port of Newcastle. The "codified regime" referred to in the bid documents issued in March 2013 is the regime established by the compensation provisions. The compensation provisions are engaged only if a container terminal is in fact established and operating at the Port of Newcastle within the 50 year term of the Port Botany and Port Kembla PCDs and if Port Botany and Port Kembla have not reached Full Capacity. That is, the compensation provisions do not codify the State's policy to prevent a container terminal at the Port of Newcastle until Port Botany (and Port Kembla) have reached capacity, but rather assume the State policy has changed to enable the development of a container terminal at the Port of Newcastle while Port Botany (or Port Kembla) has not reached Full Capacity. The fact that a Morgan Stanley representative inaccurately described the compensation provisions as "documenting" the State policy does not mean that this represents the purpose of either the State or NSW Ports in including the compensation provisions in the PCDs. 131 The primary judge restated clearly the purpose and the factors that supported it at J[965]-[966] and J[968]-[971]: [965] Consider the circumstances from the perspective of the State. In effect, it was selling an existing monopoly of Port Botany for Container Port Services that extended over a large part of NSW. The State wanted to get full value for that monopoly. It could only get full value by giving financial protection to bidders from the risk of the monopoly being reduced by a container terminal being developed at the Port of Newcastle because the risk that the State policy might change could never be eliminated. It knew that it could get indemnified for liability as a result of providing that financial protection by requiring an indemnity as part of the privatisation of the Port of Newcastle. [966] From the State's perspective, with the impugned provisions: (a) the successful bidder for Port Botany would have paid full value for the existing monopoly, (b) any future successful bidder for the Port of Newcastle would not have paid anything for the existing monopoly, and (c) if the future successful bidder for the Port of Newcastle wanted a part of the existing monopoly it, rather than the State, should pay for it. … [968] There is also evidence that PON appreciated these facts at all times. On 16 April 2020 PON assessed the success fee which it should pay to its employees if the reimbursement provisions were set aside should reflect the "low probability ascribed to container terminal operations [at the Port of Newcastle] buy [sic] bidders in 2014". This reinforces my view that PON did not pay the State for any right to construct a container terminal while Port Botany has capacity or before a container terminal is constructed at Port Kembla. [969] From this perspective, as at May 2013, the compensation provisions (and contemplated reimbursement provisions) were not intended to prevent or hinder a container terminal at the Port of Newcastle. They were intended to allocate financial costs and benefits appropriately if the State policy changed in the future and a container terminal was permitted to be constructed at the Port of Newcastle before Port Botany and Port Kembla had reached Full Capacity. After all, from the perspective of the State and NSW Ports, NSW Ports paid for what it received and PON paid for what it received. The question which would arise for the State is, why should PON now get more than it received for nothing? I note that this posited perspective of the State is reflected in evidence that the current Treasurer of NSW said to Mr Carmody at a meeting about PON's plans in November 2018 that "PON knew what it bought, including the PCD". This question, however, concerns the likely effect of the impugned provisions discussed below. [970] There is no suggestion at all in the detailed documentary record that the State (or NSW Ports) considered that the compensation provisions would prevent or hinder a container terminal at the Port of Newcastle. This is telling given the detailed documentary record. [971] The purpose which the State identified in its submissions - to maximise the amount that it received on privatisation of Port Botany and Port Kembla - does confuse purpose and motive, but that does not assist this aspect of the case of the ACCC and PON. As noted, the State's motive was profit maximisation. The end or purpose sought to be achieved by the State was to ensure bidders did not discount their bids because of the risk of a container terminal at the Port of Newcastle taking container volumes away from Port Botany. The end or purpose sought to be achieved by NSW Ports as the successful bidder was to ensure that it retained the value of the rights it was acquiring if the risk of a container terminal at the Port of Newcastle taking container volumes away from Port Botany eventuated. 132 The position of PON referred to at J[968] and its reimbursement obligations lies at the heart of the proper characterisation and understanding of the compensation provisions. The State policy was in place. Any privatisation of the three ports was to take place in the framework of that policy. Future policy change that introduced container terminal competition could not be eliminated as a future possibility. The successful bidder for Botany and Kembla was expected to bid and pay for a monopoly; the successful bidder for Newcastle was expected to bid and pay for a port subject to a State policy against supporting and building infrastructure for a container port at Newcastle until Botany and Kembla were exhausted in capacity. A price adjustment was provided for if policy did change: amelioration for NSW Ports from the higher price it paid, and funding of that amelioration by PON given the price it paid was premised on not having a container terminal before exhaustion of Botany and Kembla capacity. 133 At J[969], the primary judge exposed with clarity the underlying considerations as to her Honour's findings as to purpose. As will be seen, the ACCC and PON criticised the paragraph as disclosing a distinction without a difference. The error, it was submitted, flowed from too little or no weight being given to underlying principles of competition: see the discussion of those submissions at paragraphs [157]-[159], [168] and [172] below. However, for the reasons given at [186]-[208] below, no error is discernible. 134 At J[976], the primary judge addressed a further elision or confusion within the submissions of the ACCC between the two different considerations: the perception of risk of Government policy changing that could never be eliminated; and the reality of the chance or possibility. As her Honour later found the former was real in the perception of bidders potentially capable of a large affectation of bids; the latter was wholly unrealistic in fact. At J[976]-[977], in rejecting one way of putting the matter pressed by the State that the compensation provisions were a "sidewind", the primary judge said the following: [976] I also consider that the submission of NSW Ports and the State that the State "cannot have had a subjective purpose of suppressing competition that it did not consider would exist in the future" fails to recognise that the issue was one of risk. The State appreciated that bidders would perceive a risk that the State policy might change and that as a result a container terminal might be established at the Port of Newcastle. The State appreciated that its policy could not eliminate that perceived risk because governments can change and governments can change their minds. The compensation provisions do not answer the question whether there was a real chance or a real possibility of the risk eventuating in the foreseeable future because the risk, as I have said, was asymmetrical - provided the risk of a change in the State policy was not so trivial that bidders would dismiss it as irrational (which was plainly not the case) it had to be addressed. [977] The same conclusion applies to the State's submissions that the compensation provisions "ought properly be described as arising through a sidewind, in response to the concern raised by bidders (and the advice that the transaction team gave about the need to manage equivalent concerns among other bidders)" and that bidders might hold a "false perception" of the risk of a competing container terminal at the Port of Newcastle and "irrationally devalue the price that the State would receive as part of the privatisation for no good reason". The compensation provisions were not a sidewind. One or other bidder was bound to raise the issue at some time because of the nature of the risk. The perception of risk was not false because an asymmetrical risk is always relevant. Further, the devaluing of a bid to reflect the risk would not have been irrational, given the asymmetrical nature of the risk. The State considered the issue a "straw man" because it assessed the risk to be exceedingly small, but it also knew that the risk existed and the perception of it could not be eliminated. The State thus was not dealing with a "red herring". The issue was real, even if the State and NSW Ports considered that the risk itself was not. 135 This clarity of the importance of the provisions did not, however, convert the purpose of them to be the hindrance of competition or as being part of, or support for, the policy of the State to sequence the development of container terminals Botany, Kembla then Newcastle. As explained in J[978]: The State submitted that the key issue is that from the State's perspective its policy settled that a container terminal would not be established at the Port of Newcastle until capacity at Port Botany and Port Kembla had been used; the consequence is that no additional step of resolving the policy and securing its implementation through the device of the compensation provisions was required or understood to be an outcome achieved through those provisions. I agree, but still consider that the compensation provisions did something the State's policy could not do. They enabled the State to obtain full value for the existing monopoly it was selling. 136 At J[979] the primary judge expressed agreement with the following submissions of the State and can be taken as findings: (1) the question for the bidders would be whether they were purchasing a market covering a large part of New South Wales, or whether they were purchasing a market covering only the southern half of New South Wales; (2) the protection obtained by the compensation provisions was "financial" or "economic" in the event of diversion of containers from Port Botany to the Port of Newcastle, rather than protection against such diversion occurring; (3) a purpose of financial protection is not necessarily the same as a purpose of protection from competitive constraint, even if the financial protection might have the effect of operating as a competitive constraint; (4) the decision-making processes of the State are formal and involve the recording in detail each step in the privatisation process and the thoughts of the participants as they went through it. Despite that record, the ACCC and PON have been unable to point to any document in which either of the contractual parties, or any of the responsible individuals, expressed their desire to use the compensation provisions as a means to prevent or hinder competition with or from the Port of Newcastle; (5) the absence of any expression of a purpose to prevent or hinder competition between Port Botany and the Port of Newcastle amongst the vast array of material recording the State's decision making is demonstrative of the fact that no such purpose existed; and (6) the PCDs addressed the perception of sovereign risk by creating a scheme for financial compensation that was wholly reactive to events that might transpire.

The reasons: The effect or likely effect of the impugned provisions 137 Before turning to the effects case of the ACCC, it is appropriate to say something of the relevant market. There was considerable debate about a number of features of the relevant market. These were dealt with by the primary judge in section 5 of the judgment, between J[446] and J[893]. No appeal is brought against her Honour's conclusions as to the nature of the market. Her Honour found that the appropriate approach was to consider the potential operation of a container terminal at Newcastle as within the existing market for container port services in New South Wales. In doing so, the primary judge rejected the proposition that if a container terminal was operating in Newcastle there would be two separate monopolistic markets in New South Wales one serviced by Botany and one by Newcastle. 138 One issue, however, relevant to the market remained central to this appeal. It was as described by the primary judge at J[472], as follows: At the risk of over-simplification, a key dispute between the parties about the market issue may be summarised as follows. The parties all accepted that the relevant potential effect of the impugned provisions related to the likelihood a [sic] container terminal being established and profitably operating at the Port of Newcastle. The ACCC and PON contended that without the impugned provisions there was and is a real chance and real possibility that a container terminal would be established and profitably operate at the Port of Newcastle. NSW Ports and the State contended that without the impugned provisions there was and is no real chance or real possibility that a container terminal would be established and profitably operate at the Port of Newcastle. 139 The primary judge dealt with the effects case at J[981]-[1633]. That treatment involved a comprehensive and detailed examination of all relevant considerations and the evidence led by the parties. It would be a work of supererogation to seek to summarise the contents of sections 8.1-8.7.10 of the primary judgment at J[981]-[1581]. To the extent necessary such will be addressed in dealing with ACCC's and PON's arguments on appeal. For present introductory and explanatory purposes, it is helpful to discuss the key conclusions and further issues addressed by the primary judge at sub-sections 8.7.11 and 8.7.12 at J[1582]-[1633]. Only one finding therein (at J[1599]) was subject to challenge in the Amended Notice of Appeal and the Further Amended Notice of Appeal (see ground 10.1).

The question of the Port Kembla PCD 140 It will be necessary to resolve a question as to the breadth of the appeal by the ACCC and the complaint by NSW Ports that a case not run below was being propounded on appeal. The complaint arises from the findings of the primary judge concerning Port Kembla. At J[480]-[482] and J[484]-[490], the primary judge said: [480] It follows that the only hypothetical container terminal at the Port of Newcastle which is relevant to the operation of the impugned provisions is one which is capable of handling diverted container volumes from Port Botany (or Port Kembla), and is operating before Port Botany (or Port Kembla) has reached Full Capacity as defined in the Port Botany and Port Kembla PCDs. [481] The focus of the evidence and submissions in this case, however, was the relationship between a (hypothetical) container terminal at the Port of Newcastle and the actual container terminals at Port Botany while Port Botany has capacity. None of the submissions or expert evidence focused on the relationship between a (hypothetical) container terminal at the Port of Newcastle and a (hypothetical) container terminal at Port Kembla. That potential dynamic thus remains in the realm of speculation. The assumption underlying the expert evidence was that Port Botany has continuing capacity, but that its capacity was finite and would be reached sooner (according to the ACCC and PON) or later (according to NSW Ports and the State). [482] There is insufficient evidence enabling rational inferences to be drawn and conclusions reached about the relationship between a (hypothetical) container terminal at the Port of Newcastle and a (hypothetical) container terminal at Port Kembla assuming Port Botany has reached Full Capacity. This latter assumption would be necessary if that relationship were to be analysed, because NSW Ports holds the long-term lease over both Port Botany and Port Kembla. NSW Ports, it is also clear on the evidence, would not develop a container terminal at Port Kembla while Port Botany has capacity. … [484] The point is that the PCDs cannot operate in respect of Port Kembla unless a container terminal has been constructed and is operating at Port Kembla. This appears from: (a) aspects of the definition of Full Capacity in cl 3.1, in particular cl 3.1(h) and (i), (b) cl 3.3(d) which refers to the number of containers imported or exported by Port Kembla in the Relevant Support Period, (c) cl 3.3(e) which refers to the number of containers imported or exported by Port Kembla in the Previous Support Period, and (d) cl 3.4 which calculates the NSupport which will necessarily be zero if Port Kembla does not have a container terminal. [485] This means that the only potentially relevant hypotheses are the operation of a container terminal at the Port of Newcastle: (a) while Port Botany has capacity, or (b) while Port Kembla has capacity, which necessarily means after a container terminal is constructed and operating at Port Kembla. That is, the compensation provisions (and thus the reimbursement provisions) would not operate at all if Port Botany has reached Full Capacity and Port Kembla has no container terminal. [486] Assume Port Botany has reached or will soon reach Full Capacity. The choice for the NSW government would be between implementing the State policy, for the next container terminal to be developed at Port Kembla, or to change the State policy and support the next container terminal being developed at the Port of Newcastle. One thing is clear - it is that the NSW government would not support the development of container terminals at both ports. The impugned provisions cannot be relevant to this future choice by the State. The impugned provisions cannot operate because Port Botany will be at Full Capacity before the next container terminal is operating and there will be no container terminal at Port Kembla. [487] As a result, it cannot be said that the impugned provisions make it any less likely that the NSW government will change the State policy to enable a container terminal to be constructed at the Port of Newcastle after Port Botany has reached Full Capacity but before any container terminal is constructed at Port Kembla. The impugned provisions simply do not speak to the making of that choice in those circumstances. Other circumstances will be relevant to that choice, including the State policy, but not the impugned provisions. [488] In theory, it is possible that within the term of the impugned provisions a container terminal might be constructed and operating at Port Kembla, Port Kembla might not be at Full Capacity, and PON might wish to construct a container terminal at the Port of Newcastle. The problem for the ACCC and PON is that this theoretical possibility is completely in the realm of speculation. No evidence addresses this possibility. [489] These considerations lead to the conclusion that the only hypothesis relevant to the potential operation of the impugned provisions, and in any event the only one which has a proper evidentiary foundation enabling the drawing of rational inferences and conclusions, is the operation of a container terminal at the Port of Newcastle while Port Botany has capacity. The evidence adduced only permits an assessment of whether there is a real chance or real possibility of a substantial lessening of competition by the making or giving effect to the impugned provisions within the context of this hypotheses [sic]. [490] For these reasons, when I refer to a container terminal at the Port of Newcastle below, I mean a container terminal at the Port of Newcastle while Port Botany has capacity. (Emphasis in original.) 141 For these reasons, at J[1580]-[1581], the primary judge accepted the submission of NSW Ports that the ACCC had failed to prove a case in relation to the Kembla PCD: [1580] NSW Ports made this submission: The ACCC has sued in relation to two distinct contracts: the Botany PCD and the Kembla PCD. It has failed to prove any case in relation to the Kembla PCD. Whether Port Kembla would supply container port services in the same market as Port of Newcastle is wholly unexplored in the evidence. Further, there is no evidence that the Kembla PCD has any effect or likely effect on the prospect of entry by PON and the inference is that it has no effect or likely effect. Given the ACCC's reliance on the effect of the clause to infer the purpose of the clause, the purpose case in relation to the Kembla PCD is also incomplete. On no view should relief be granted in respect of the Kembla PCD. (Original emphasis). [1581] For the reasons already given, I agree. There is insufficient evidence to establish that the Port Kembla PCD has affected or might affect any real chance or real possibility involving the development of a container terminal at the Port of Newcastle. It follows that this aspect of the ACCC's case must fail. 142 There was no appeal against the conclusion by the primary judge that the only relevant hypothesis about a container terminal at the Port of Newcastle was its operation while Port Botany had capacity or against the dismissal of the case in respect of the Port Kembla PCD. 143 The importance of this to the appeal lies in the proper appreciation of the relevant aspect of Government policy to the likely effects case. Central to the likely effects case, is the existence of some reasonable possibility of there being a fully functional operating container terminal in Newcastle. This in turn depended upon the likely prospect of a future change of Government policy. But what aspect of policy? The policy that was changed by the recently elected Liberal/ National Government was the sequencing of port development after Port Botany reached full capacity: Before 2012-2013, Newcastle had been favoured as next; from 2012-2013 Kembla was to be next, with Newcastle third. But the case that might be built on that aspect of the policy suffered the (unappealed) fate found at J[1580]-[1581]. The only relevant hypothesis described by the primary judge at J[489] required a change of policy that had been the consistent policy of all Governments (Labor or Liberal/National) that there be no new container terminal until capacity at Port Botany was exhausted, albeit until 2013, there was a cap on Botany of 3.2 million TEUs per annum: see the finding about policy between 2003 and 2012 at J[941], J[1003(1)], J[1586] and J[1589]. As her Honour found in the key conclusions discussed below, there was no real chance of any change in that policy: see J[1586]-[1589] discussed at [145(5)-(9)] below. 144 It is not the change of policy to sequence Kembla before Newcastle that is critical to the effects case. It is the possibility of the change of long held policy not to permit the development of a second container terminal in the State before Botany reaches full capacity. The contemporaneous documents and evidence must be examined in that light. Two aspects of Government policy can be seen as possibly contemporaneously relevant to the actors involved: a change to the sequencing after Botany reaches capacity, and any change to the policy of not having competing capacity with Port Botany.

Key conclusions 145 The first body of key conclusions were premised on the relevant time for assessment being May 2013 or May 2014 without reference to any information brought into existence after these dates. The key conclusions on that hypothesis were as follows, taken from the reasons of her Honour's findings at the paragraphs identified, and sometimes paraphrased: (1) No private operator of the Port of Newcastle, acting rationally, could have satisfied itself that in the reasonably foreseeable future a container terminal at the Port of Newcastle would be viable for so long as Port Botany had capacity. No private operator of the Port of Newcastle, acting rationally, could have satisfied itself that it could mount an apparently sound case to the NSW Government to change the State policy so as to enable a container terminal to be developed at the Port of Newcastle while Port Botany has capacity. This is the position without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1582]. (2) The Port of Newcastle was not privatised on the basis that it could accommodate a container terminal while Port Botany had capacity (or before a container terminal is developed at Port Kembla). It was privatised on the basis that a container terminal would not be required (or, by implication, permitted by the State) at Newcastle until Port Botany and Port Kembla had reached capacity which may be after 40 years. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1583]. (3) PON knew what the State's policy was before it acquired its interest in the Port of Newcastle. PON did not pay for its rights at the Port of Newcastle on any assumption other than the State policy: see J[1584]. (4) PON's board and shareholders would not commit to constructing a container terminal at the Port of Newcastle while Port Botany had capacity unless they were able to be satisfied that the terminal would be viable. Nor would any financier provide funding to construct a container terminal at the Port of Newcastle while Port Botany had capacity unless they were able to be satisfied that the terminal would be viable. The mere chance or possibility of future viability would not be sufficient. The decision-makers would want a demonstrably sound case for future viability. There was no such case either existing or reasonably foreseeable as at May 2013 or May 2014. There was no such case at the time of the hearing. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1585]. (5) There has never been a State policy to the effect that any new container terminal may be developed before Port Botany's capacity is exhausted. This fact has always reflected the vast public and private investment in and around Port Botany which is uniquely well placed to benefit from the population concentration in and around Sydney. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1586]. (6) The notion that having adopted its new policy in July 2012, and having partly implemented that policy by removing the cap on Port Botany and privatising Port Kembla with Port Botany, there was a real chance that the NSW Government would change the State policy to enable a container terminal to be developed at the Port of Newcastle while Port Botany had capacity was fanciful. As at May 2013 and May 2014 there was no chance at all of that occurring in the reasonably foreseeable future, at least not without a change in the New South Wales Government: see J[1587]. (7) Relying on a potential change in the New South Wales Government, without any supporting evidence (psephological or otherwise), is inherently speculative. What PON had as at May 2013 and May 2014 was a mere hope that the New South Wales Government might change in future and a mere hope that a New South Wales Government might change the State policy. Such hopes do not involve a real chance or real possibility of the relevant circumstance occurring - a change of the State policy to enable a container terminal to be developed at the Port of Newcastle while Port Botany had capacity. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1587]. This last group of findings at (7) can be seen to be caught up in the challenge in grounds 8.1 and 8.2 to the finding at J[1003], (set out at [265] below) in the light of J[976] (set out at [134] above). (8) Irrespective of the New South Wales Government of the day, the potential benefits from a container terminal at the Port of Newcastle (economic and employment opportunities for the Hunter region) which might be weighed against an evaluation of the system-wide costs of the overall New South Wales container freight task, depend on the container terminal being viable. As at May 2013 and May 2014, the clear weight of the evidence was that the viability of a container terminal at the Port of Newcastle while Port Botany has capacity was highly questionable. That remains the weight of the evidence today. In these circumstances also, it could not be said that there was a real chance or real possibility of a change in the State policy to facilitate the development of a container terminal at the Port of Newcastle while Port Botany has capacity. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1588]. (9) To the contrary, there has never been any chance at all of the New South Wales Government permitting or supporting the development of a container terminal at the Port of Newcastle before Port Botany approaches its capacity. Such a chance as at May 2013/May 2014 was fanciful, far-fetched, infinitesimal or trivial and not a real chance or real possibility. Barring the possibility of a change in the New South Wales Government at the next election, which in the context of this case cannot rise above mere speculation, this remains the position today. And as noted, even if there is a change in the New South Wales Government, there would be many complex issues which would have to be weighed by the NSW Government before the State policy might be changed. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1589]. (10) By reference to real and not theoretical or speculative chances and possibilities and with the cap on Botany removed meaning that the earliest expectation of Port Botany reaching capacity was 2030, in May 2013/May 2014, PON could not demonstrate that the posited economic and employment opportunities for the Hunter region would be realised by a container terminal at the Port of Newcastle while Port Botany had capacity, because it could not demonstrate the viability of the container terminal on a reasonable basis, irrespective of the impugned provisions. PON remains in that position today. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1590]. 146 The primary judge then made key conclusions, premised on the relevant time for assessment being May 2013 or May 2014, but with reference to the information brought into existence after those dates or as at the date of the hearing, as follows taken from her Honour's findings at J[1591]-[1611], again sometimes paraphrased: (1) Assuming the impugned provisions do not exist (or the compensation provisions alone do not exist), the overwhelming weight of the evidence is also clear and to the same effect as discussed above for May 2013/May 2014. While PON now may perceive a greater need to diversify than in May 2013/May 2014, it is now also the case that Port Botany's perceived capacity has increased (in the sense that Port Botany will be able to deal with all of New South Wale's container handling needs for longer than previously believed), and public and private infrastructure investments have continued to be made on the basis of the State policy. In addition, PON had spent three years actively trying to formulate its business case, without that case coming to fruition in the form of an optimal plan to put to its board, its shareholders or the New South Wales Government. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1591]. (2) PON has not managed to bring information into existence which demonstrates the viability of the container terminal on a reasonable basis. To the contrary, the subsequent information, on analysis, reinforces the apparent soundness of the view the State reached in 2012 and 2013 that it would not be in the public interest for a container terminal to be developed at the Port of Newcastle while Port Botany has capacity because its viability is highly doubtful. On this basis also, the current prospect of PON in fact in the reasonably foreseeable future developing a container terminal at the Port of Newcastle while Port Botany has capacity is fanciful, far-fetched, infinitesimal or trivial. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1592]. (3) The primary judge described the following as "telling": PON has done what any rational commercial entity would do. It has investigated and developed options to see if it can persuade its board, its shareholders and the New South Wales Government that a container terminal at the Port of Newcastle while Port Botany has capacity should proceed. But in nearly seven years since May 2014, PON has not formulated a definitive or cogent proposal capable of being put to its own board, its shareholders or the New South Wales Government on the assumption (as all PON's investigations have been) that the compensation provisions do not exist. It is not the impugned provisions which have had this result. It is the reality of the location of the Port of Newcastle relative to the population centre of New South Wales and existing supply chains to and from that population centre compared to the location of Port Botany. This reality also underlies the content of the State policy: see J[1593]. (4) This reality and the State policy has also resulted in further substantial public (New South Wales and Commonwealth) and private investment in the existing supply chains servicing the Sydney region. It is apparent that this enormous investment since 2013 has taken place to support the maximisation of Port Botany's capacity and the facilitation of Port Kembla's efficient transport linkage to the Sydney metropolitan areas. In other words, over the past seven or so years, the New South Wales and Commonwealth Governments, as well as the private sector, have focused investments into supporting Port Botany as New South Wales' existing container port and Port Kembla as its next container port as provided for by the State policy. This would have been the case without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist): see J[1594]. (5) PON would have to grapple not only with all of the above issues, but also the public interest in maximising the value from investments already made and providing consistency and predictability in government decision-making. While, in theory, any government policy can change at any time, the relevant questions to be dealt with were not mere theoretical possibilities; the relevant enquiry was the dealing with real chances and real possibilities. With so much already invested in maximising the capacity and efficiency of Port Botany (and Port Kembla's capacity to rely on those existing supply chains), whilst it is not impossible for the State policy to change, such a change could never be said to be a real chance or real possibility in the current circumstances: see J[1595]. (6) At J[1596] the primary judge drew the conclusion from these findings and agreed with the submission of NSW Ports as follows: If the court is not satisfied that there is a real chance that there would be developed at the Port of Newcastle, before Port Botany and Port Kembla reach their respective capacity, a container terminal capable of exerting any constraint on Port Botany or Port Kembla, it follows that the allegation that the PCDs substantially lessened competition cannot be made out. That is, if the Court is not satisfied that there is a "real chance" that a container terminal could be built at Newcastle, in a world without the PCD, the question whether the PCDs have had or could have the effect of substantially lessening competition does not arise, and the ACCC's claim must fail. (7) At J[1597] the primary judge further agreed with the submission of NSW Ports about the onus of proof: It is not for NSW Ports to negate the possibility that a viable container terminal at PON could be built at some point over a 50 year period. A positive finding that there is a real chance of entry by a Newcastle container terminal is an integer of the ACCC's case. A negative finding that entry by a PON terminal cannot be ruled out is not necessary for NSW Ports to defeat the ACCC's claim. (Original emphasis). (8) Her Honour said that on the evidence she was unable to be reasonably satisfied that, without the impugned provisions (or without the compensation provisions alone), as at May 2013 or May 2014 there was a real chance that a container terminal would be developed at the Port of Newcastle while Port Botany has capacity. On the evidence, such a possibility was in the realm of mere speculation. The same conclusion applies to the circumstances considered prospectively from today: see J[1598]. (9) In dealing with a submission of the ACCC (made also on appeal) that the matter and the evidence had to be looked at in the context of the decades long time horizon of the PCDs the primary judge agreed with NSW Ports that this approach, if adopted, would be incorrect. Her Honour dealt with it as a matter of logic and a matter of evidence. As a matter of logic, a speculative possibility looking forward from May 2013/May 2014 or from today's date does not become more probable by the prospective passage of 50 years. As a matter of evidence, there was nothing in the evidence that the considerations that make the construction of a container terminal at the Port of Newcastle while Port Botany has capacity (or before Port Kembla is developed with a container terminal) a mere speculative possibility are amenable to change. On the evidence, the population centre of New South Wales will remain Sydney and its surrounds, particularly western Sydney. And the Port of Newcastle will remain where it is: see J[1599]. (10) The primary judge then agreed with a submission of NSW Ports that s 45 of the Act accommodates uncertainty. The provision provides four kinds of contraventions - "a purpose of making and a likely effect of making; and a purpose of giving effect to and a likely effect of giving effect to". Her Honour said that she was dealing at this point with the likely effect of making and the likely effect of giving effect to the impugned provisions. Her Honour's conclusions about the likely effect of making the impugned provisions are determinative. Her Honour's conclusions about the likely effect of giving effect to the impugned provisions were necessarily based on circumstances as they have existed and as they currently exist. If there is a material change of circumstances over the term of the PCDs, then, her Honour said, it was possible that likely effect of giving effect to the impugned provisions itself may change. But that too is currently mere speculation: see J[1600]. (11) Her Honour concluded that the likely effects (in the sense of a real chance or real possibility) of the making of the impugned provisions as at May 2013/May 2014 have not impinged in any way upon the potential construction of a container terminal at the Port of Newcastle. Further, the likely effect (in the sense of a real chance or real possibility) of giving effect to the impugned provisions in the future, in the circumstances disclosed by the evidence, would also not impinge in any way upon the potential construction of a container terminal at the Port of Newcastle. That potential was and is no more than mere speculation. That is, there was (as at May 2013/May 2014) and is (currently) no credible threat of entry by the Port of Newcastle into the market for Container Port Services in New South Wales: see J[1601]. (12) From these findings, the primary judge concluded: that neither the compensation provisions nor the reimbursement provisions (whether considered together or in isolation from one another) either as made or as provisions which may be given effect in the future, have a likely effect (in the sense of a real chance or real possibility) of substantially lessening competition. They do not do so because, on the evidence, as at May 2013/May 2014 and as at the date of the hearing there was and is no real chance or real possibility of any of numerous contingencies being satisfied, including: (a) PON persuading the State to change the State policy; (b) the New South Wales Government otherwise deciding to change the State policy and/or support a container terminal at the Port of Newcastle while Port Botany has capacity; (c) PON's board or shareholders trying to construct a container terminal contrary to the State policy; (d) PON obtaining the necessary planning approvals from the State to construct a container terminal contrary to the State policy; (e) PON's board or shareholders being satisfied that a container terminal contrary to the State policy and without the support of the New South Wales Government would be viable; (f) PON persuading any financier that either a container terminal should be constructed contrary to the State policy and without the support of the New South Wales Government or that such a container terminal would be viable; or (g) PON persuading the New South Wales Government that a container terminal contrary to the State policy would be viable and/or in the public interest. (See J[1602].) (13) These contingencies remain the same with and without the compensation provisions and the reimbursement provisions (whether considered together or in isolation from one another). In particular, the State policy had nothing to do with the impugned provisions and the impugned provisions are irrelevant to any consideration of changing the State policy in the future. There was and is no real chance of the New South Wales Government changing the State policy to enable the development of a container terminal at the Port of Newcastle while Port Botany has capacity. To the extent that there might be a chance of the New South Wales Government changing the State policy to enable the development of a container terminal at the Port of Newcastle after Port Botany has reached its capacity (which was and remains a mere speculative chance on the basis that the New South Wales Government might change or might change its mind in the future, and not a real chance), it is clear that there is no real chance that the New South Wales Government would permit the development of two new container terminals. The impugned provisions would be irrelevant to any such assessment by the New South Wales Government of the location of the next container terminal because the provisions are not engaged if Port Botany has reached full capacity and Port Kembla has no container terminal: see J[1603]. (14) Without there being any real chance or real possibility of satisfaction of these numerous contingencies (which there was and is not), the notion of competition between the Port of Newcastle and Port Botany in the market for Container Port Services in New South Wales remains a mere intellectual exercise, unconnected to reality: see J[1604]. (15) The primary judge also concluded that even if she were still incorrect about a number of these contingencies she would have reached the same conclusions. In particular, her Honour said that if she had concluded that PON did not require planning approvals for a container terminal at the Port of Newcastle and/or that PON, its board and shareholders and financiers would be willing to and could construct a container terminal without the support of the New South Wales Government and/or a consequential change in the State policy, the fact remains that the evidence does not support an inference that there was as at May 2013/May 2014 or is a real chance of PON, its board and shareholders and financiers being able to satisfy themselves that a container terminal at the Port of Newcastle while Port Botany has capacity would be viable: see J[1605]. (16) It follows that, contrary to the submissions of the ACCC and PON, neither of the impugned provisions had any impact on the incentives of the State or a private operator or PON to develop a container terminal at the Port of Newcastle as at May 2013/May 2014 or today's date. As such, they also had and have no impact on the incentives of NSW Ports. The only effect of the compensation provisions which her Honour accepted was that they made the imposition of the reimbursement provisions highly likely. However, and for the reasons given, the reimbursement provisions had no impact on any real chance or real possibility of development of a container terminal at the Port of Newcastle as at May 2013/May 2014 or today's date: see J[1606]. (17) Contrary to the ACCC's submissions, it is not the case that "[w]hile PON (like its predecessors) perceives there to be a meaningful commercial opportunity to develop a container terminal at the Port of Newcastle, the effect of the compensation provisions is to impose a material obstacle to such a development". The compensation provisions did not lock in "a substantial financial disincentive to the State building or approving the development of a container terminal" at the Port of Newcastle. The compensation provisions did not and do not create an anti-competitive incentive for any person because there was and is no real chance, without the compensation provisions, of a container terminal being constructed at the Port of Newcastle while Port Botany has capacity. NSW Ports is doing what any rational monopolist would do in advocating against the development of a container terminal at the Port of Newcastle (in response to the advocacy of PON in favour of that development), but this does not mean that NSW Ports considers that there is a credible threat of entry. Nor, for the reasons given, does it mean PON considers that it will or could develop a container terminal at the Port of Newcastle while Port Botany has capacity. As such, the compensation provisions had and have no likely effect on competition by way of any disincentive, "softening" or otherwise: see J[1608]. (18) Further, informed industry participants do not, as the ACCC suggested, regard as "obvious the proposition that, if it developed a container terminal, the Port of Newcastle, would compete with Port Botany for some meaningful volume of cargo". They only regard that as likely if there is a sufficiently functional container terminal at the Port of Newcastle, an assumption which depends on numerous contingencies none of which have been satisfied and none of which involve a real chance of being satisfied in the reasonably foreseeable future: see J[1609]. (19) On analysis, there are no materially different incentives and outcomes for the State, any public authority, any proposed private operator of the Port of Newcastle, PON, or NSW Ports with and without either of the compensation provisions or the reimbursement provisions. Perceptions of PON or otherwise to that effect are unrealistic and based on numerous unjustifiable assumptions to suggest that, without either of the compensation provisions or the reimbursement provisions, there would have been or would be a real chance or real possibility of a container terminal being developed at the Port of Newcastle while Port Botany has capacity, when the evidence does not support the existence at any time of any such real chance or real possibility: see J[1610]. (20) Contrary to PON's submissions, the fact that the current views of the PON representatives are genuinely held does not mean that they are likely to be acted upon given the nature and number of the contingencies which must be satisfied before PON could or would act on those views (even assuming in PON's favour that those views will continue to be held once the McKinsey & Co investment grade business case is finalised). Nor does the evidence support the conclusion that "the support (including financial support) thus far provided by PON's shareholders, informed by their board nominees, makes it likely that a container terminal will be developed at the Port of Newcastle, in the absence of the impugned PCD provisions". The only real chance or real possibility at this time and into the reasonably foreseeable future is that PON will exhaust its investigations of the prospect of a viable container terminal at the Port of Newcastle while Port Botany has capacity and will also advocate for the Port of Newcastle to take precedence over Port Kembla for a container terminal development once Port Botany has reached capacity: see J[1611]. 147 The primary judge then dealt with some further issues that reflected the weakness of the case theories of ACCC and PON. After referring (at J[1613]) to Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 1381; (2000) ATPR 41-783 and the importance of credible threat of entry as the source of competitive forces in a natural monopoly market, her Honour made the following points: (1) One problem with the case theory of the ACCC and PON is that, leaving everything else aside, it does not confront the reality that NSW Ports, as the incumbent, is in a position to resist entry by the Port of Newcastle and PON would have to be willing to incur heavy costs and losses if it wished to enter the market while Port Botany has capacity. This is so irrespective of the impugned provisions. NSW Ports is also not making monopoly profits (for reasons her Honour discussed). Even these circumstances alone indicate that, irrespective of the impugned provisions, there is no credible threat of actual entry into the market by PON: see J[1614]. (2) The primary judge agreed with the State's submission that Mr Patrick Smith's evidence to the effect that that entry itself "is a substantial act of competition", and that "the very act of entry in that market is one of the most significant competitive acts that that market will ever have experienced" (which assumes a credible threat of entry) involves a fallacy that mere entry necessarily means that competitive processes will be affected in a meaningful and relevant way. This, the State submitted, explained why Mr Jason Ockerby's evidence considered not just the prospect of entry into the market by the Port of Newcastle, but the effect of that entry on Port Botany's market power. Her Honour so agreed based on the evidence. The primary judge said that the problem in the present case is that the same evidence which requires the conclusion that a container terminal at the Port of Newcastle while Port Botany has capacity would not be viable is the evidence relevant to the question of the impact of the impugned provisions on competitive processes between Port Botany and the Port of Newcastle. On that evidence, the container terminal at the Port of Newcastle could not operate profitably and thus its capacity to continue operating would be in serious doubt: see J[1615] and [1616]. 148 At [1617]-[1632] the primary judge undertook an examination of the potential rivalry of Newcastle and Botany making assumptions contrary to her findings and dealing with aspects of the evidence of Mr Ockerby, Mr Smith and Dr Christopher Pleatsikas, with which it is unnecessary at this point to deal. 149 The above findings on purpose and effect were a sufficient basis for the orders dismissing the application. However, the primary judge only came to these issues should she be wrong on the question of Crown immunity. In section 3 of her Honour's reasons (at J[287]-J[423]) the primary judge dealt with Crown immunity. The State, of course, was not sued by the ACCC, only NSW Ports. But NSW Ports sought protection under so-called derivative Crown immunity. For this to succeed, there were two matters to be demonstrated by NSW Ports: first, that the State was not bound by Part IV of the Act because it was not relevantly carrying on a business for the purpose of s 2B of the Act; and, secondly, NSW Ports was entitled to the derivative benefit of that immunity of the State (through non-application of the Act to it) because to subject NSW Ports to s 45 would be to affect the State in such a way as to adversely affect some interest in the State in a manner and to a degree identified in the authorities. The primary judge answered both questions in favour of NSW Ports. I will deal with the primary judge's reasoning in relation to Crown immunity, direct and derivative, in dealing with the grounds of appeal concerning those matters.

The structure of these reasons 150 The four key sections of the primary judge's reasons and, necessarily, the four key sections of these reasons were and are: (1) Whether the State was entitled to Crown immunity in relation to the impugned conduct. This is not related to any asserted liability of the State of New South Wales. The State was not sued by the ACCC. NSW Ports, however, claims the benefit of the immunity of the State in what is referred to as derivative Crown immunity. A necessary pre-condition for successfully invoking derivative Crown immunity by NSW Ports is that Crown immunity is and would be available to the State, if sued. (2) If yes to (1), whether NSW Ports is entitled to the benefit of Crown immunity by reference to derivative Crown immunity. (3) If no to (1) or (2), whether the compensation provisions had the purpose of substantially lessening competition. (4) If no to (1) or (2) and irrespective of the answer to (3), whether the compensation provisions had the likely effect of substantially lessening competition. 151 I have come to the view that the ACCC's appeal in relation to issues in sections (3) and (4) above should be dismissed. Logically, those matters need not be reached if NSW Ports is not amenable to complaint about the compensation provisions because of its immunity from the operations of the Act. Notwithstanding this logical progression, given my views on purpose and likely effects, I will deal with those matters before Crown immunity and derivative Crown immunity. 152 Thereafter, I deal with sections (1) and (2) and have concluded that the ACCC's appeal should be dismissed in regard to those matters also.

The appeal on purpose 153 Grounds 4 to 7 of the Further Amended Notice of Appeal were as follows: 4. The primary judge erred in concluding that it was not a substantial purpose of the Compensation Provisions to prevent or hinder the establishment and operation of a container terminal at the Port of Newcastle (J[930], [935]-[937], [939], [940], [969], [973]). 5. In circumstances where the primary judge found that: 5.1 a substantial purpose of the State in including the Compensation Provisions in the Port Botany and Port Kembla Port Commitment Deeds was to ensure that the State could get full value for the sale of the existing monopoly of Port Botany by agreeing to indemnify the successful bidder for the risk that the extent of the existing monopoly might be reduced because of a container terminal at the Port of Newcastle (J[927], [933], [957], [965], [971]); and 5.2 a substantial purpose of NSW Ports in agreeing to the inclusion of the Compensation Provisions was to ensure that NSW Ports retained the full extent of the existing monopoly of Port Botany in respect of container port services in NSW (J[928], [933], [957]); the primary judge erred in concluding that the Compensation Provisions did not have the purpose of substantially lessening competition (J[927]-[930], [933], [937], [939], [957], [961]-[962], [971]-[973], [979]-[980]). 6. In circumstances where the primary judge found that, at the time the Compensation Provisions were made, the State intended to make the successful bidder for the Port of Newcastle liable for any payments required under the Compensation Provisions (J[278]-[280], [940], [1099]), and that the imposition of such an obligation on the successful bidder for the Port of Newcastle was an obvious and highly probable consequence of the Compensation Provisions that reflected commercial common sense (J[1011], [1013], [1049]), the primary judge: 6.1 erred in analysing the State's purpose as to the ends sought to be achieved by the Compensation Provisions without regard to the State's intention to impose any payment obligation arising under those provisions on the successful bidder for the Port of Newcastle (J[927], [932], [971]); and 6.2 should have found that, in assessing the State's purpose in including the Compensation Provisions, the ends sought to be achieved by the State included the imposition of any payment obligation arising under the Compensation Provisions on the successful bidder for the Port of Newcastle. 7. In circumstances where: 7.1 each of NSW Ports and the State contended below that a substantial, subjective purpose of the State in including the Compensation Provisions was to "codify" the State's policy (J[963]); 7.2 there was contemporaneous documentary evidence consistent with the proposition that the subjective purpose of the State in including the Compensation Provisions was to "codify" the State's policy; 7.3 the State called no witnesses to give evidence as to its subjective purpose in including the Compensation Provisions; and 7.4 the primary judge found that the relevant State policy was to prevent the development of a container terminal at the Port of Newcastle until container capacity is used at Port Botany and Port Kembla (J[963]); the primary judge erred in: 7.5 finding that the subjective purpose of the State in including the Compensation Provisions was not to codify the State policy of preventing the development of a container terminal at the Port of Newcastle (J[964]); and 7.6 concluding that the Compensation Provisions did not have the purpose of substantially lessening competition. 154 In essence, grounds 4 and 5 were to the effect that the purpose found by the primary judge was a proscribed purpose; and grounds 6 and 7 were to the effect that the competition provisions, intended as they were to be passed on in the reimbursement provisions, were intended to raise and were for the purpose of raising barriers to entry and thereby to substantially lessen competition.

Grounds 4 and 5: compensation provisions 155 Grounds 4 and 5 focused upon the compensation provisions. The ACCC accepted that the compensation provisions were motivated by the State's desire to maximise the proceeds of the sale of its monopoly asset but, on the ACCC's submission, this did not prevent the object of preserving the full value and extent of the monopoly from constituting a contravention of the Act. The ACCC stressed in oral argument that when assessing the purpose of the compensation provisions the focus is upon the substance of what the parties sought to achieve, rather than upon the manner in which they described their intentions. Commercial actors do not necessarily consider economic concepts precisely in the language of the Act (see ACCC v Liquorland (Australia) Pty Ltd [2006] FCA 826 at [826]-[827]) and it is not necessary to show that the parties explicitly expressed their desire to use the compensation provisions as a means to prevent or hinder competition from an operator such as PON. 156 Although the ACCC's argument as to purpose did not depend on the compensation provisions being linked to the reimbursement provisions, the ACCC submitted that the compensation provisions should be viewed in the context of the reimbursement provisions. The ACCC contended that the primary judge made a finding that the reimbursement provisions were an intended consequence of the compensation provisions at the time the compensation provisions were made in 2013. That being so, the ACCC submitted that the compensation provisions were the means by which the State promised to protect NSW Ports, a monopolist, private owner of ports, from the effects of competition from a potential new entrant, that is, PON, with that protection to be funded by the would-be new entrant. 157 The error said to arise from the primary judge's reasoning on the compensation provisions was that the distinction drawn by her Honour between a purpose of preserving the full value of an asset in the context of the sale by the State of an existing container port monopoly and a purpose of substantially lessening competition in the market for container port services was illusory. Part of the value of the existing container port monopoly was the absence of constraint it faced from competition from the Port of Newcastle. Competition from a container port terminal at the Port of Newcastle would necessarily decrease NSW Ports' margins and profitability. Based on the primary judge's finding at J[573] that NSW Ports would do "everything in its power to retain or capture containers from the Port of Newcastle", the ACCC submitted that even a credible threat of entry into the relevant market would contribute to efficiency and therefore competition in that market, citing Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36; 246 CLR 379 at 419 [100]. 158 As such, the ACCC submitted that the State's and NSW Ports' purpose of preserving the full value and extent of the existing container port monopoly required it to remove the threat of entry into the container port market by the Port of Newcastle. This was a purpose of ensuring that NSW Ports need not engage in ordinary competitor behaviour, and therefore a purpose of substantially lessening competition. 159 The ACCC acknowledged that the compensation provisions sought to protect against the sovereign risk of a change in State policy as to the development of a container port terminal at the Port of Newcastle before Port Botany reached full capacity. But the ACCC submitted that the primary judge drew a false dichotomy between that risk and a risk of competition, which were said to be two sides of the same coin. The very reason there was value to NSW Ports in having the protection of the compensation provisions was the risk of competition from the Port of Newcastle. The purpose of the financial protection from sovereign risk was to protect against the risk of competition. Making financial or economic adjustments to protect NSW Ports from competition or compensate for competition necessarily affects, and was intended to affect, the incentives and competitive dynamics in the market. 160 As to the primary judge's finding that the State and NSW Ports considered the prospect of a competing container terminal to be, respectively, "exceedingly small" (J[977]) and "low" (J[959]), this was said to be irrelevant for two reasons. First, the fact that a purpose is conditional on an event occurring does not change the outcome sought to be achieved: it is still a purpose of lessening competition as long as the parties (or one of them) believe that the event giving rise to future competition could occur: Seven Network Ltd v News Ltd [2009] FCAFC 166; 182 FCR 160 at 364 [900]. The ACCC submitted that the notion of competition in the Act "includes not only actual competition but also potential competition", citing Rural Press Ltd v ACCC [2002] FCAFC 213; 118 FCR 236 at 274 [129]. A purpose of substantially limiting actual or potential competition is therefore proscribed by s 45 of the Act. 161 Secondly, when considering the effect of potential entry on an incumbent, it is necessary to have regard not only to the likelihood of entry, but also its significance to the incumbent's business if it eventuates. The combination of those considerations determines the materiality of the threat and the magnitude of its constraint on the incumbent's behaviour. At J[960], the primary judge accepted that the "magnitude of the potential harm to Port Botany" was "high" and even "a small risk of [entry] occurring would have been, and was, highly relevant to NSW Ports". Thus, the State considered that bidders would want protection from the risk and expected them to reduce their bid by up to a significant, material amount of money the sum of which is confidential and need not be specified for the purposes of this judgment if no protection was provided: J[126]. The respondents' contention that State policy concerning the sequencing of container port development meant that the development of a container terminal at the Port of Newcastle was merely "theoretical" and therefore that the parties to the compensation provisions could not have had an anticompetitive purpose is therefore inapposite: the risk of such a development was plainly a material risk (see J[976]). 162 The ACCC also cavilled with the primary judge's characterisation of its submissions at trial as supporting the proposition that the purpose of the compensation provisions was to make NSW Ports free from all constraints, so it could "sit back, relax and watch the money roll in": J[934]. The ACCC submitted that it accepted that NSW Ports was always likely to face some degree of constraint, including from other Australian container port terminals and the threat of price regulation. It was the additional and meaningful constraint of the development, or threat of development, of a container terminal at the Port of Newcastle that the compensation provisions sought to remove. 163 Finally, the ACCC submitted that the distinction drawn by the primary judge between NSW Ports having a purpose of obtaining "financial protection" from competition from the Port of Newcastle and substantially lessening competition was artificial. On any commercially realistic view, the compensation provisions were directed to ensuring that NSW Ports need never engage in ordinary competitive behaviour vis-à-vis the Port of Newcastle. This conclusion is not contradicted by the existence of clause 3.3 of the compensation provisions because this clause does not, contrary to the primary judge's finding, mean that NSW Ports was required to exercise its best efforts to compete just as it would in a world without the benefit of the compensation provisions. The ACCC further developed this contention about the construction of clause 3.3 in the context of its submissions on the likely effect of the compensation provisions, to which I will turn shortly.

Grounds 6 and 7: reimbursement provisions and codification of State policy 164 In respect of grounds 6 and 7, the ACCC adopted the submissions of PON. In short, the ACCC submitted that the primary judge should have found that, by the compensation provisions, the State intended to raise barriers to entry and thereby substantially lessen competition. At the time the compensation provisions were made, the State intended to enter the reimbursement provisions in order to transfer its potential liability under the compensation provisions to the successful bidder for the Port of Newcastle, a would-be competitor of NSW Ports: J[278]-[280], [940]. The reimbursement provisions substantially increased the cost of developing a container terminal at the Port of Newcastle and raised barriers to entry into the New South Wales market for container port services. Hence, the primary judge should have found that the compensation provisions in light of the reimbursement provisions had a purpose of substantially hindering development of a container terminal at the Port of Newcastle, and therefore of substantially lessening competition. It is sufficient that only one party to the agreement containing the compensation provisions had this purpose for it to constitute a purpose of substantially lessening competition. 165 The conclusion that the compensation provisions viewed together with the reimbursement provisions had a proscribed purpose is reinforced by the fact that NSW Ports and the State accepted that a substantial, subjective purpose of the State in including the compensation provisions was to "codify" the existing State policy in relation to the sequencing of container port capacity in New South Wales. If accepted, this submission effectively amounted to an admission by NSW Ports and the State that they had a purpose of preventing development of a container terminal at the Port of Newcastle, which is a purpose of substantially lessening competition: J[963]. That admission was supported by the weight of evidence and the primary judge erred in disregarding it. 166 The ACCC rejected NSW Ports' contention that the ACCC's arguments with respect to the reimbursement provisions departed from the case the ACCC ran below. The ACCC submitted that the link between the purpose and likely effect of the compensation provisions on the one hand and the reimbursement provisions on the other was squarely within the ACCC's case.

Ground 5: compensation provisions 167 PON addressed ground 5 separately. PON submitted that the primary judge ought to have found that the compensation provisions had the purpose of substantially lessening competition because the State could only "get full value" for the existing monopoly and NSW Ports could only retain "the full extent of" the existing monopoly if NSW Ports was protected against the economic consequences to it of competition from the Port of Newcastle. The purpose found by the primary judge necessarily entailed a purpose of protecting NSW Ports against the economic consequences of competition: J[965]. 168 If a container terminal were established at the Port of Newcastle this "could significantly reduce the profitability of Port Botany" (J[959]) and may result in a significant share of container volumes being diverted to Newcastle, which was "highly relevant to NSW Ports". Accordingly, the State "accepted that it had to disclose the risk and do something to ameliorate it": J[960]. The distinction the primary judge drew between protection from competition and financial protection from the loss resulting from competition (see J[962]) was said to be "a distinction without difference." An intention to ensure that NSW Ports is no worse off financially if a competitor enters the market is a purpose of substantially lessening competition. This was achieved, it was submitted, by the form of the compensation provisions: the payment being the weighted average of the lost wharfage fees. Such fees were the only charge NSW Ports was permitted to levy. Thus it was all of its revenue. The purpose of the provisions was to protect NSW Ports against injury from the competition that would ensue from any change in Government policy, by ensuring that it received the revenue lost by that competition. Such a purpose was submitted to be necessarily characterised as a purpose of (substantially) lessening competition. The intention and purpose was to preserve the same economic result for NSW Ports as would occur if PON never entered the market. Thus, in point of law, the purpose was proscribed as one which enabled NSW Ports to act without the constraint of competition that Newcastle would otherwise provide. 169 It was submitted that it is precisely the threat of being worse off financially that drives competition in the market. The very existence of a threat of entry would ordinarily contribute to the efficiency of the market for container port services: see Pilbara Infrastructure at [100]. If, when the compensation provisions were made, the threat of the Port of Newcastle entering the market was not meaningful or relevant to the competitive process, the State would not have considered that NSW Ports would materially discount its bid or perceived a need for the State to promise to compensate NSW Ports if that threat eventuated. 170 PON also submitted that there is no evidence that the State or NSW Ports understood that payment under the compensation provisions was conditional upon NSW Ports proving it had done everything it reasonably could to compete with the Port of Newcastle. Nor do the terms, read objectively, convey that requirement. The obligation in clause 6 to use "reasonable endeavours" cannot be read as an obligation to behave as if the compensation provisions in the same contract did not exist: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at 659 [41]; Transfield v Arlo International [1980] HCA 15; 144 CLR 83 at 101.

Grounds 4, 6 and 7: reimbursement provisions and codification of State policy 171 PON submitted that when the compensation provisions are properly analysed in light of the reimbursement provisions (the creation of such provisions being intended at the time the compensation provisions were made), the State's purpose included the imposition of a barrier to entry. An intention to "allocate" financial costs "appropriately" is a finding of purpose: J[969]. Where conduct is, as here, part of a wider strategy, the purpose of that strategy can be relevant to determining the purpose of the provision: ACCC v Cascade Coal Pty Ltd [2019] FCAFC 154; 374 ALR 90 at 120 [167]; News Limited v South Sydney District Rugby League Football Club [2003] HCA 45; 215 CLR 563 at 638 [216]. 172 PON did not deny that the State had the purpose found by the primary judge of ensuring that bidders did not discount their bids because of the risk of the establishment of a container terminal at the Port of Newcastle: J[927], [933], [957], [971], [973]. Rather, PON contended that a contractual provision may be included for multiple purposes and all that is necessary is that a proscribed purpose be a "substantial purpose", citing Seven Network v News Ltd at [854]; Cascade Coal at [169]. The compensation provisions had a substantial purpose of preventing or hindering the establishment of a container terminal at the Port of Newcastle because, through those provisions, the State promised to compensate NSW Ports if a competitor entered the market. The corollary of that promise was an intention that a new owner of the Port of Newcastle be required to pay that compensation, as a price for entering the container port services market and challenging Port Botany's monopoly. To plan to impose a financial cost on a new entrant to the market was to intend to impose a barrier to entry. It was, therefore, a purpose of substantially lessening competition: ACCC v Liquorland at [807]; Australian Wool Innovation v Newkirk [2005] FCA 290; ATPR 42-053 at [34]. Thus, the distinction made by the primary judge (for example at J[969]) between an intention (a purpose) to prevent or hinder a container terminal at Newcastle and an intention (a purpose) to allocate financial costs and benefits appropriately if State policy changed in the future was one without a difference. 173 As to ground 7, PON submitted that the State had an admitted purpose of codifying State policy. The relevant State policy was "to prevent the development of a container terminal at the Port of Newcastle until container capacity is used at Port Botany and Port Kembla": J[261], [963]. The primary judge accepted that if the compensation provisions "codified the State policy then their purpose would be to prevent the development of a container terminal at the Port of Newcastle" and further said, "depending on the likelihood of entry into the market by PON, that may involve the proscribed purpose": J[963]. PON submitted that the primary judge's latter caveat was in error because it confused the purpose of the compensation provisions with their likely effect: Seven Network Ltd v News Ltd at [894], [897]; Universal Music Australia Pty Ltd v ACCC (2003) 131 FCR 529 at [249]. The correct question is whether the admitted subjective purpose of codifying the relevant State policy was one of substantially lessening competition. That question, according to PON, must be answered in the affirmative given the primary judge's finding that, at the time the compensation provisions were agreed, there was a low but material risk of a container terminal being established at Newcastle that may be able to take a significant share of container volumes from Port Botany: J[269], [959]-[960], [972]. Therefore, the primary judge ought to have accepted the State's admitted purpose and found that it was a proscribed purpose.

Grounds 4 and 5: compensation provisions 174 NSW Ports contended that the ACCC failed to address ground 4 as its submissions went only to ground 5. In relation to ground 5, NSW Ports submitted that the State's purpose in entering into the compensation provisions was "to ensure that bidders did not discount their bids because of the risk of the establishment of a container terminal at the Port of Newcastle": J[927]. The means by which this purpose was achieved was to indemnify the successful bidder against the risk that the size of the existing monopoly might be reduced because of a container terminal at PON: [927]. NSW Ports' purpose was "to ensure that it retained what it would pay for - the full extent of the existing monopoly of Port Botany in respect of container port services in NSW": J[928]. NSW Ports submitted that the "full extent of the existing monopoly" means the full value of, not the full trade within, that monopoly: J[930], [932], [933], [939], [957], [961], [962], [973]. The relevant purpose is the end subjectively sought to be achieved, and the ends of the State and NSW Ports, as found, are consistent with no lessening of competition. 175 Contrary to the ACCC's submissions, it cannot be said that a seller's purpose of ensuring undiscounted bids, or a buyer's purpose of retaining full value of an asset paid for, or even a purpose of receiving financial compensation in the event of a future reduction in the value of the asset, is necessarily a purpose of substantially lessening competition. The assessment of purpose must depend on the facts and context. The State proposed the compensation provisions to ensure that bidders did not discount their bids on account of sovereign risk about port sequencing policy: J[960]. NSW Ports submitted that the ACCC failed to identify "a single piece of oral or documentary evidence" to support its case that the true, subjective purpose of the compensation provisions was a proscribed purpose of substantially lessening competition. 176 NSW Ports submitted that, in any event, the ACCC's argument that the parties to the compensation provisions sought to relieve NSW Ports from a meaningful competitive constraint cannot succeed. A purpose of allowing NSW Ports to behave otherwise than competitively is inconsistent with the objective effect of the compensation provision: ordinary competitive behaviour is "assumed and required": J[1111] (see also J[934], [1105]-[1129]). Nor is there any evidence that the parties to the compensation provision subjectively understood this to be an effect of the provisions: J[931]-[937], J[979(4), (5)]. 177 Further, NSW Ports submitted that the ACCC overlooked the fact that the compensation provisions are directed to circumstances in which volumes of containers are diverted from Botany to Newcastle on account, not of ordinary competitive processes, but of a change of State policy.

Grounds 6 and 7: reimbursement provisions and codification of State policy 178 NSW Ports submitted that, at trial, the ACCC did not contend that the State, through the compensation provisions when combined with the reimbursement provisions, intended to raise barriers to entry at Newcastle and therefore had a proscribed purpose. In any event, NSW Ports submitted that it is "inconceivable" that the State would set out to raise barriers to entry when the State itself controlled and controls, through policy and planning settings, whether and when entry at Newcastle can occur. 179 The ACCC's case on this point was characterised as strained. The purpose of a provision is a substantial purpose for which the provision was included in the contract, which directs attention to the subjective ends of the parties. It is difficult to maintain that the State's foresight of an end sought to be achieved in the future in a different contract with a different counterparty is a substantial purpose for including a provision in the first contract. As Callinan J said in News Ltd v South Sydney 215 CLR 563 at [216], a provision that may help to achieve, or is even designed to accommodate, some "foreseeable happening" does not necessarily have the occurrence of the happening as its purpose. 180 Moreover, nothing in the documentary record suggests that the compensation provisions would prevent or hinder a container terminal at the Port of Newcastle: J[970]. The State deliberately did not adopt "non-compete type restrictions" (J[115]) and contemplated that change of policy was a precondition to the development of a container terminal at Newcastle prior to Port Botany reaching capacity: J[989]. There has never been any chance at all of the State supporting such a change in policy: J[1589]. NSW Ports submitted that the impugned provisions themselves do not inhibit the prospect of a change of policy to allow for a terminal at Newcastle and do not apply any rational disincentive to the construction of such a terminal in the event that State policy does change: J[1139]. 181 NSW Ports submitted that even if the State were found to have a proscribed purpose, if the State was not carrying on business then the State's purpose cannot be attributed to the impugned provision because to do so would involve application of the Act to the State contrary to s 2B. NSW Ports also submitted that that the State's unilateral purpose is in any event insufficient for the purpose of claiming relief against NSW Ports: J[914]. 182 In relation to the purported codification of State policy, NSW Ports submitted that it never intended to submit that the State included the compensation provision to document or codify its policy in the sense that the provision enacted the policy or inhibited the policy's revision. In any event, the primary judge correctly rejected this proposition. The compensation provision "reflected the current policy settings but did not hinder them from being changed." The provision "gave bidders compensation, in certain circumstances, if policy changed." The State's capacity to change its policy with respect to the sequencing of container terminals was uninhibited: J[1095].

Grounds 4 and 5: compensation provisions 183 The State submitted that the "crux of the inquiry" as to purpose is assessing the subjective purpose for which the State and NSW Ports acted. In other words, the focus is on the end sought to be achieved by the inclusion of the compensation provision in the contract (see News Ltd v South Sydney 215 CLR 563 at [18] (Gleeson CJ), [63] (Gummow J)). The State submitted that the contemporaneous evidence supports the primary judge's findings that the State's purpose was to ensure that bidders for the ports did not discount their bids because of the perception of risk of the establishment of a container terminal at Newcastle arising from a change in policy (J[927]) and that NSW Ports' purpose was to ensure that it retained the value of the asset that it paid for (J[928]). Neither party sought to prevent or hinder the Port of Newcastle from entering the relevant market nor did either seek to alleviate the need for NSW Ports to compete with the Port of Newcastle: J[930]. The relevant perceived risk was a risk of radical change in Government policy, not the risk of competition, as there was no existing threat of entry absent a change in policy. As entry could not occur without Government support, it is artificial in these circumstances to compare the situation facing bidders for the Port Botany assets with commercial players facing the threat of a new entrant into their market

Grounds 6 and 7: reimbursement provisions and codification of State policy 184 The State submitted that the ACCC's position that a purpose of the compensation provisions, in light of the reimbursement provisions, was to substantially lessen competition is not supported by contemporaneous evidence. Although the State had in contemplation the possibility that its liability under the compensation provisions could be passed on if the Port of Newcastle assets were later privatised, it does not follow that this was one of the substantial purposes of the compensation provisions. The reimbursement provisions, like the compensation provisions, reflected the notion that a potential purchaser of port assets should receive what it paid for - in the context of the Port of Newcastle, a port where, because of State policy, there was no realistic prospect of the development of a container terminal before the capacity of Port Botany and Port Kembla was exhausted: J[968]-[969], [993]-[995], [1582]-[1584]. If that position changed, the operator of the Port of Newcastle would be required to make a payment that reflected the increased value of the asset it had received. The reimbursement provisions were not a mechanism to hinder or prevent the development of a container terminal. 185 The State also submitted that it did not contend that the PCDs served to "codify" State policy in the sense of putting it in place and giving it effect. From the State's perspective, the State's policy with respect to the sequencing of container ports was already settled. There was accordingly nothing in the nature of an "admission" by the State that the purpose of the compensation provisions was to prevent the development of a container terminal at the Port of Newcastle.

Purpose: consideration and disposition 186 For the reasons that follow, I do not consider that the primary judge's reasoning or conclusions disclose any error. 187 Her Honour's expression of guiding legal principles at J[894]-[914] as to substantially lessening competition and purpose were not challenged. It is unnecessary to repeat what her Honour there said. The following is consistent with it. 188 It is the subjective purpose or purposes of the State and NSW Ports that is the issue. In considering those matters, the distinction between purpose and effects is, as Gleeson CJ said in News Ltd v South Sydney at 573 [18], significant. The enquiry to be undertaken, as a factual enquiry in the context of the making of the agreement, is as to the end sought to be accomplished by the inclusion of the provision. The enquiry as to the effect or likely effect of the provision is another, and entirely distinct, factual enquiry, to which competition principles, market behaviour, the likely behaviour of market participants and the economic structure of and forces within the market and of commerce will be relevant. 189 As the primary judge said, and as is manifest from the different character of the relevant enquiries, there may be a proscribed purpose in including a term in a contract, but no proven proscribed effect, and vice versa. How manifestly or obviously a term may be likely to have an effect in lessening competition may be a relevant factor in the drawing of inferences as to what the actual subjective purpose or purposes of the parties was or were: that is, the end or ends sought to be accomplished by the term. The purpose of the term may be clear from the words used. But, ultimately, it is a factual enquiry about the subjective purpose of the parties. 190 The case of the ACCC at trial, and its and PON's submissions on appeal was and were that the purpose of the compensation provisions, whether examined alone or recognising that the reimbursement provision would be included in any privatisation of the Port of Newcastle, was as set out at [116(4)(a)-(c)] above. That case and those arguments sought to infuse the primary judge's clear findings of the subjective purposes of the State and NSW Ports with conceptions and considerations relevant to the effect or likely effect of the provisions. 191 The State did not call any witnesses. NSW Ports did. They included the decision makers, Mr Garcia and Mr Droga. At no point in their cross-examination was any proposition put to either of them that he had as a purpose, as an end to be accomplished by the term, to prevent or hinder the development of a container terminal at Newcastle, to make Botany or Kembla immune from competition from Newcastle, or to enable NSW Ports to act without or with reduced constraint from competition that Newcastle might provide. The cross-examination was and was only to the effect that the purpose was to protect against the financial consequences of competition. This purpose was put in cross-examination as a purpose of protecting against competition, but the acceptance of the witnesses to such of what was put to them, was that the inclusion of the provisions gave them financial protection from the consequences of any competition that any future change of Government policy might bring about, and thereby retain the value of what had been paid for. To propound the purpose case further with them required cross-examination about what the ACCC and PON said was a distinction without a difference: that protection against the financial effects of competition was in their own minds no different to protection against competition itself. 192 The purpose found, and the State's purpose: to ensure that bidders did not discount their bids because of the risk of a future change of Government policy, were not put in terms directed to any end or purpose of preventing or hindering competition. Competition between the parties was the hypothesis or assumption of the operations of the provisions. 193 Whether or not the provisions would be likely to have an effect on any competition is a different question. In the context of purpose, it was not put to either Mr Garcia or Mr Droga that his purpose or the end he intended to be achieved by the term was to lessen competition because that must have been the effect of the provisions. 194 What is, and was, sought to be done was to re-characterise a plain finding of fact as to purpose by pointing to considerations of the nature of the competitive process and considerations of barriers to entry (both relevant to effect or likely effect) and then asserting that a purpose (of the State) of ensuring that bidders did not discount their bids because of sovereign risk as to future Government policy change or a purpose (of NSW Ports) to receive financial protection if future Government policy changed to ensure it retained the value of what it paid for, and was in point of fact, another and differently expressed, subjective purpose or purposes, being those set out at [116(3)and(4)(a)-(c)] above. The subjective purposes of the State and NSW Ports found by the primary judge were founded in the context of the real word. They are not abstract propositions to be decontextualized from the circumstances in which they arose, and then coloured and given characterisation by economic theory or competition principles. It is not the case that a subjective purpose to ensure bidders do not crimp or qualify their bids or to ensure the retention of the value of that for which payment was made, is necessarily to be characterised as a subjective purpose of preventing or hindering or constraining competition because the operation of such provisions could, in some circumstances, act as a constraint on the competitive process or could, in some circumstances, act as a barrier to entry. 195 The circumstances out of which these provisions arose and from which the contractual and commercial purpose is manifest, were lucidly and thoroughly described by the primary judge. I have sought to summarise them above, especially at [11]-[82]. 196 The operation of container port facilities in New South Wales is of immense importance to the economic well-being of the State. It is a subject of policy consideration for any State Government, and also for the Commonwealth Government. No container terminal could be set up or could operate in Newcastle or Kembla without State Government approval and without the provision by the State of transport and logistic infrastructure, requiring huge sums of public and private investment. 197 There had never been any policy by any Government of New South Wales that any new container terminal would be developed before Port Botany's capacity was exhausted or was approaching that state: see the key conclusions at J[1586] and J[1589] at [145(5)-(9)] above. That would have required the development of competing and duplicative transport and logistic infrastructure. It had always been the policy of Government that container ports would be developed in sequence, with Port Botany first. Prior to the change of Government in 2011, the publicly understood policy of the New South Wales Government was to develop the Port of Newcastle after Port Botany had exhausted its capped capacity of 3.2 million TEUs per annum. From March 2012, that policy was re-assessed. The re-assessment was one that was undertaken in great detail. It was integral to the effectuation of the privatisation of Port Botany. By April 2012, the considerations and thinking of Morgan Stanley, Infrastructure NSW and the Department of Planning and Infrastructure formed the basis and content of the advice of Treasury to the Treasurer: see [3736]-[41] above. 198 The policy that remained unchanged was to exhaust Port Botany before the development of the second container terminal. What changed was the decision to remove the cap on, and quadruple, Botany's capacity, and to sequence Kembla after Botany instead of Newcastle. 199 In the privatisation process, the State was making available highly valuable land and assets, developed with surrounding infrastructure at great public cost, which was an effective monopoly of infrastructure vital for the well-being of the State. It was of singular importance to the State to obtain the highest bids possible to be able to maximise the prices in the interests of the economy and the people of New South Wales. The compensation provisions were necessary to maximise bids. There were powerful and indeed, as time went on, overwhelming reasons why it was extremely unlikely that a future Government would change policy to sequence Newcastle as an operating container terminal before the capacities of Botany and Kembla were exhausted. Nevertheless, how a future Government would act could not be controlled. 200 There was no evidence and no rational basis for any conclusion that a purpose of the compensation provisions was to hinder any change of policy by a future Government. The State Government was in full control of the means to prevent a container terminal from being developed where it did not want it; or to promote one where it did want it. If it changed its policy to allow Newcastle to develop a container terminal, the modelled costs of the compensation provisions (see [63] above) were hardly likely to be material to the finances of the State. Further, taken together, the compensation provisions and the reimbursement provision, alleviated or removed any consideration as to State liability that might be seen as an inhibition on the State changing its policy. 201 Whilst there had never been any suggestion in the past of a policy of any Government to have two container terminals operating with unused capacity, the bundling of the privatisation of Botany and Kembla as a package permitted, to some degree, the winning bidder, as operator of the two ports, to manage that issue. Thus, as the ACCC pointed out, the compensation provisions provided in the pre-conditions for operation (in (a)) that "at least one of Port Botany nor [sic] Port Kembla was not at full capacity". Having privatised both Botany and Kembla to the one bidder, any hypothesised change in Government policy that brought a fully operational container terminal to Newcastle might be such as to see Botany or Kembla with less than full capacity. 202 I reject the argument of the ACCC and PON that the proper construction of the compensation provisions, in particular clauses 3.3(a) and 6(d) somehow is indicative of anticipated less than full competitive conduct by NSW Ports if it faced a competitor. It is unhelpful merely to point to different possible wording such as "best efforts" or "best endeavours" in another commercial context such as agency or distribution arrangements (cf Transfield v Arlo International (1980) 144 CLR 83 at 101, Hospital Products v United States Surgical Corps [1984] HCA 64; 156 CLR 41 at 91-92 and Electricity Generation v Woodside 251 CLR 659 [41]). The context here is a provision for payment by the State to the successful bidder who has paid for an effective monopoly, but a future change in policy of the State brought about a competitive operating container terminal. The hypothesis for the need for the clause and for its possible future engagement was effective competition. It is entirely consistent with the State being required to pay NSW Ports in such circumstances that NSW Ports behave competitively in that new hypothesised environment. That is plainly consistent with "reasonable endeavours": that is to act in its own interests. Nothing from the construction of the provisions bespeaks an intention or assumption that NSW Ports can feel less constrained than it otherwise might to behave competitively. 203 Indeed, it would be inconsistent with clauses 3(d) and 6(d) to behave less than competitively, because it would be unreasonable to expect payment from the State when the purpose was to provide for the financial effects of a movement from an anticipated monopoly environment to a competitive environment. The premise was competition. Reasonable endeavours in this context includes proper and vigorous competition. 204 The purposes of the compensation provisions and indeed the reimbursement provision are best assessed or evaluated (as the primary judge did) from the landscape of the real word circumstances. The State was disposing of valuable monopoly assets. It wanted the best price in the interests of the economy and people of New South Wales. Bidding would produce the best price only if there was a provision which provided for future compensation should an unlikely change of Government policy lead to a competing container terminal. In commercial conception, it could be seen as a price adjustment clause or as an insurance clause, should the underlying commercial assumption of the transaction be radically varied. On that varied assumption, the subject property and assets were worth less than that which had been paid. 205 Likewise, the successful bidder for the Port of Newcastle (PON) knew that it was paying for the world's largest coal terminal and a general cargo terminal with limited capacity to deal with containers, and being subject to an economically rational Government policy not to permit a competing terminal in Newcastle with duplicative transport and logistic infrastructure, until both Botany and Kembla were at full capacity. It paid for the assets on that basis and knowingly so. It would have been a far more valuable (and so, far more expensive) transaction had the bidder been favoured by Government policy, which permitted and supported transport and logistic infrastructure for the development of a full container terminal at Newcastle to compete with Botany and Kembla still with unused capacity. The price paid for the successful bid by PON must have been significantly less than would have been the case on the hypothesis of permission for competitive container terminals. 206 Thus, from the hypothesised future change of Government policy, one bidder has paid too much for what it acquired, the other has paid too little. There is an adjustment of payment intended by reference to a consideration related to the hypothesised change. The subjective purposes found by the primary judge are rational and entirely consistent with the commercial and Government policy context. It is, or they are, a purpose or purposes inconsistent with a purpose of lessening competition. Competition is the hypothesis upon which the provisions work. 207 If the arrangements and if the compensation provisions affect competition, that is something to be assessed by reference to the effects or likely effects of the provisions. 208 For these reasons, which substantially reflect her Honour's reasons on purpose, grounds 4, 5 and 6 should be rejected. 209 Ground 7 can be dealt with shortly. The primary judge at J[963]-[964] (see [130] above) took a submission of NSW Ports that the purpose of the compensation provisions was to codify State policy was one to underpin or help bring about current policy or to prevent any change of policy. So understood, her Honour was plainly correct to say that such a submission would have been self-defeating for NSW Ports. There was, however, an ambiguity in the submission: the provisions reflected Government policy settings, but did not inhibit their change. I do not consider that such submission which in a sense, was self-evident, took the matter any further. The provisions reflected current policy settings. They did not however prevent any change of policy. Rather, they compensated for an overpayment in circumstances of later change of policy. The capacity to change policy remained: J[1095] and, if anything, the impugned provisions facilitated that: J[1099] (such findings being unchallenged). 210 PON accepted that there was no admission in the light of the submission on appeal by the State and NSW Ports that the construction of the submissions in the way made by the primary judge was not intended or was an error by her Honour. There was no admission.

The appeal on effects 211 The Amended Notice of Appeal contained four grounds of appeal on the issue of competitive effect: grounds 8-10. A new ground 11 was sought to be introduced by a proposed Further Amended Notice of Appeal, which was exhibit JM-5 to the Affidavit of Ms Jody Marshall. Leave was granted on 14 December 2021 to file and serve the Further Amended Notice of Appeal. 212 At the hearing of the appeal, ground 10.2 was abandoned and ground 10.1 was pressed only in so far as the ACCC contended that the primary judge erred in concluding that the 50-year term of the PCDs was not relevant to the assessment of the likely effect of the compensation provisions (for the reasons advanced in respect of ground 9 and ground 11 in the Further Amended Notice of Appeal). 213 Ground 8 was said also to be pressed, but only as to the point that it was not incumbent on the ACCC to establish that a future change in State policy was anything more than a non-trivial possibility (as the primary judge found at J[976]) to make out its case that the compensation provisions had a proscribed likely effect (for the reasons advanced in respect of ground 9 and in ground 11 in the Further Amended Notice of Appeal). 214 Grounds 8-10 of the Amended Notice of Appeal together with the new ground 11 from the Further Amended Notice of Appeal can be set out and re-expressed as follows: 8. The primary judge: 8.1 erred in: 8.1.1. placing weight on the fact that the prospect of a future change in State policy was unknowable or "speculative" at the time the Compensation Provisions were made (J[1003]), notwithstanding the primary judge's earlier finding that such a change in policy was a realistic possibility at that time (J[976]); and 8.1.2. reasoning that, because any possible future change in State Government and State policy was uncertain or unknowable at the time the Compensation Provisions were made, that was a matter that tended against the conclusion that the likely effect of the Compensation Provisions was substantially to lessen competition; and 8.2. should have found that, at the time the Compensation Provisions were made, there was a meaningful prospect that State policy would change in the future to favour the development of a container terminal at the Port of Newcastle (consistently with the primary judge's finding at (J[976]). Grounds 8.1 and 8.2 are pressed, however, only as to the point that it was not incumbent on the ACCC to establish that a future change in State policy was anything more than a non-trivial possibility (as the primary judge found at J[976]) to make out its case that the Compensation Provisions had a proscribed likely effect (for the reasons advanced in respect of grounds 9 and 11). 9. The primary judge: 9.1. erred in finding that the cost impost of the Compensation Provisions and the reimbursement provision in the Port of Newcastle Port Commitment Deed (Reimbursement Provision) would not deter, dissuade or act as a disincentive to the successful bidder for the Port of Newcastle developing a container terminal at that port because that bidder would have taken the operation of those provisions into account in the price paid to the State to acquire the long term lease over the Port of Newcastle (J[1138]-[1139]); and 9.2. should have found that the Compensation Provisions and Reimbursement Provision would be likely to have the effect of substantially lessening competition in circumstances where the Compensation Provisions and Reimbursement Provision: 9.2.1 raised barriers to entry by: 9.2.1.1. creating an additional cost burden, or the significant risk of an additional cost burden, on the operator of the Port of Newcastle in developing a container terminal at the Port of Newcastle and a commensurate revenue advantage to the operator of Port Botany and/or Port Kembla; and/or 9.2.1.2. deterring, dissuading or preventing the operator of the Port of Newcastle from incurring some or all of the substantial costs of developing the detailed design and business plans necessary to develop a container terminal at the Port of Newcastle; and/or 9.2.1.3. deterring, dissuading or preventing the operator of the Port of Newcastle from developing a container terminal in the future at a time when Port Botany was at or nearing capacity or Port Kembla was not at full capacity; 9.2.2. thereby hindered or prevented the development of a container terminal at the Port of Newcastle. 10. The primary judge: 10.1. erred in concluding that the development of a container terminal at the Port of Newcastle was only a "speculative possibility" as at May 2013 only insofar as her Honour erred in concluding that the 50 year term of the Port Commitment Deeds was not relevant to the assessment of the likely effect of the Compensation Provisions for the reasons advanced in respect of grounds 9 and 11(J[1599]): and 10.2. should have found that: 10.2.1. there was a meaningful possibility at May 2013 that, at some time over the next 50 years, a container terminal would be developed at the Port of Newcastle in the future without the Compensation Provisions; 10.2.2. that possibility could not be dismissed as far-fetched or fanciful as at May 2013, including because of the 50 year time horizon; 10.2.3. the Compensation Provisions hinder or prevent that possibility from coming to pass by increasing the barriers to the development of such a terminal; and 10.2.4. in those circumstances, the Compensation Provisions would be likely to have the effect of substantially lessening competition. 11. The primary judge: 11.1. erred in finding that the Compensation Provisions did not change the competitive incentives of NSW Ports relating to Port Botany/Port Kembla in response to a threatened or actual container terminal at the Port of Newcastle: J[1105]-[1129]; and 11.2. should have found that: 11.2.1. in the counterfactual, there would be, and would be perceived to be, a threat of entry from a container terminal at the Port of Newcastle that would be sufficiently material, given its consequences for NSW Ports if it were realised, to act a meaningful competitive constraint on NSW Ports; and 11.2.2. in the factual, the Compensation Provisions were likely to substantially reduce that threat (or perceived threat) and the competitive constraint that it imposed; and, as a consequence, the Compensation Provisions were likely to have the effect of substantially lessening competition in the market for container port services.

The ACCC's and PON's submissions on likely effect 215 The ACCC's submissions on likely effect were adopted by PON. 216 The ACCC submitted that in determining whether the compensation provisions were likely to have the effect of substantially lessening competition, it was necessary to consider their likely effect on the behaviour of NSW Ports: J[1038] and [1039]. This was necessary because if there was a threat of development of a container terminal at the Port of Newcastle in the counterfactual, that threat of entry would likely impose a substantial constraint upon the behaviour of NSW Ports. If the compensation provisions materially reduced that threat, or the effect of the new entry on NSW Ports' business, the constraint on NSW Ports would also be substantially reduced and the compensation provisions would thus have the likely effect of substantially lessening competition. 217 The ACCC submitted that the primary judge's reasoning on the issue of the likely effect of the compensation provisions involved two errors. The first error was said to be an overly reductive view of the question driving the inquiry. The primary judge should not have reduced the question of likely effect to whether the development of a container terminal at the Port of Newcastle was, as a matter of objective fact, likely to occur and result in competition between NSW Ports and the Port of Newcastle. The perception of a risk of entry by the Port of Newcastle, which was not a trivial or irrational risk, was a relevant matter. Further, the primary judge should not have conducted the inquiry with the benefit of hindsight as such an approach ignores the dynamics of competition, which occurs in reality in the context of imperfect knowledge and uncertainty. The primary judge thus failed to address the central question of whether the threat of entry of the Port of Newcastle was sufficiently credible and significant, based on the information then available, to make it competitively meaningful. The duration of the compensation provisions - 50 years - was also relevant in this respect as a contingent event is more likely over a longer than a shorter time period. 218 The primary judge should have found that NSW Ports was likely to perceive that there was a meaningful threat of entry, which in turn would likely have imposed a substantial constraint upon the behaviour of NSW Ports. Commercial behaviour in a counterfactual is based not only on the likelihood of an event but also on its impact were it to occur. NSW Ports considered that State policy concerning the sequencing of container port development could change at any time. Although it considered the prospect of development of a container terminal at the Port of Newcastle to be low, the magnitude of potential harm to it from such a development was high, which made it highly relevant: J[960]. The significance of the risk ensured that NSW Ports would do whatever it could to ensure that a container terminal would not be developed at the Port of Newcastle. 219 The second error was said to be the primary judge's finding that the compensation provisions require NSW Ports to do everything it reasonably can to minimise any loss of containers to the Port of Newcastle (J[1106]) and, as a result, do not remove or affect NSW Ports' incentive to reduce prices, improve quality or otherwise innovate (J[1116]). The ACCC submitted that this finding was erroneous because clause 3.3(d) of the compensation provisions does not in fact impose this requirement on NSW Ports. Clause 3.3(d) provides that the relevant port manager must demonstrate to the reasonable satisfaction of the State a reasonable and material causal connection and correlation between the amount of containers the Port of Newcastle gained over a specified rate of annual increase and the amount of containers lost by Port Botany or Port Kembla, as relevant. A failure by NSW Ports to do everything it reasonably can to minimise the loss of volume to the Port of Newcastle need not and would not be the only cause of loss of volume. Another cause would always be the establishment and operation of a container terminal at the Port of Newcastle. Clause 3.3(d) contemplates that there may be multiple causes of a loss of volume and requires only one such cause - "a" causal connection - to be shown. 220 Moreover, a requirement that NSW Ports do everything it reasonably can to minimise loss of container volume to the Port of Newcastle would be practically unworkable and makes no commercial sense, rendering it unlikely that the parties intended for clause 3.3(d) to be construed in that way. The formula used for calculating the compensation to be paid to NSW Ports suggests that the true purpose of clause 3.3(d) is simply to ensure that NSW Ports only receives compensation for volumes it actually loses to the Port of Newcastle as opposed to other ports. Clause 6(d) provides that NSW Ports must use "reasonable endeavours" to minimise any loss of revenue that may be the subject of a claim by it under the PCDs. The primary judge found that this required NSW Ports to do all it reasonably can to minimise its claims under the PCDs and act as if it did not have the benefit of the compensation provisions: J[1110], [1111]. However, it is unlikely that a reasonable business person would understand the term "reasonable endeavours" as imposing that obligation on NSW Ports. Such an obligation would require NSW Ports to take steps that would necessarily decrease its margins and profitability and deny it the benefits of its monopoly thereby defeating the commercial object of the PCDs, which was to preserve the full value and extent of the existing container port monopoly: J[927], [928]. Given that commercial object, "reasonable endeavours" in this context means engaging in the behaviour that NSW Ports would have engaged in had there been no container terminal at the Port of Newcastle and no threat of one being developed. This construction is consistent with and supported by the quantum of the compensation that NSW Ports is to receive under the compensation provisions. 221 In addition, the compensation provisions were likely to raise barriers to entry. It was obvious that the State would transfer its potential liability to the successful bidder for the Port of Newcastle by way of the reimbursement provisions (J[1011]-[1013]) and that the potential liability was substantial. The primary judge's reasoning that the acquirer of the Port of Newcastle would have lowered its bid to offset the cost of payments required by the reimbursement provision overlooks the fact that the purchase price for the port would have been a sunk cost. In reality, a later decision to invest in a container terminal at the Port of Newcastle would be wholly uninfluenced by the amounts originally paid by the acquirer and would focus instead on the anticipated future cash flows of the venture, and such cash flows would be directly impacted by the reimbursement provisions. Accordingly, the compensation provisions substantially reduced the prospect of entry occurring and therefore the constraint of potential entry on NSW Ports was also substantially reduced. 222 The ACCC therefore concluded that giving a monopolist the comfort that it will remain a monopolist and not face entry by potential competitors of which it is aware "necessarily interferes with the competitive process" and reduces the monopolist's incentives to innovate, "the likely effect of which is to substantially lessen competition."

NSW Ports' and the State's submissions on likely effect 223 NSW Ports' submissions on likely effect were adopted by the State. 224 NSW Ports accepted that the appeal should be determined on the basis that "likely" means "real chance": J[922]. NSW Ports submitted that the ACCC's arguments with respect to likely effect went only to grounds 9 and 11 of the Further Amended Notice of Appeal and NSW Ports' submissions accordingly focused on those grounds. 225 NSW Ports submitted that a case based on the effect of the compensation provision on NSW Ports' perceptions of a credible threat of entry is outside the case pleaded and run at trial. The Amended Statement of Claim described a case based only on an objective prospect of entry and that was the case dealt with by the primary judge, as demonstrated by the debate concerning the significance of the discredited Port of Newcastle preliminary business case and the parties' treatment of post-May 2013 evidence as temporally relevant: see J[1032] and [1226]-[1236]. As such, an effects case based on perceptions ought not be permitted to be run on appeal. 226 Even if that case were permitted to be run, it could not succeed. Entry must be viable, and the threat of entry must be credible, in order to constitute a cognisable constraint, the relaxation of which could constitute a substantial lessening of competition. There was objectively no credible threat of entry by a private operator at Newcastle and thus any perception on NSW Ports' part of a threat of entry by PON "would not have been reasonable." The evidence cannot support a finding that NSW Ports perceived, or was likely in the counterfactual to perceive, PON as a threat. The relevant risk to NSW Ports was the risk of a change of State policy in the future, not the risk that a container terminal might be developed at Newcastle contrary to State policy (J[960]) and there is no evidence to show that NSW Ports perceived any real chance that the State would permit Newcastle to be developed before Botany reached capacity. That is consistent with the unchallenged fact that there is no real chance of that policy changing. 227 Moreover, even if NSW Ports had perceived a risk of entry at Newcastle, the compensation provisions did not have the effect of relieving any such constraint. Clauses 3 and 6(d) of the compensation provisions independently operate to deny compensation to NSW Ports for volumes that are lost to Newcastle where NSW Ports fails to engage in ordinary competitive behaviour to retain volumes. In particular, per clause 3.3(d), in order to demonstrate that the cause of the loss of containers to a new entrant at Newcastle was the fact of entry, NSW Ports would have to satisfy the State that it was entry rather than any lapse or default on NSW Ports' part that prompted the diversion. NSW Ports could only satisfy the State by engaging in the fullest ordinary competitive behaviour, as though the compensation entitlement did not exist. Therefore, compensation would only be paid for volumes lost to Newcastle because there is a terminal at Newcastle, not because of NSW Ports' indifference. Contrary to the ACCC's preferred construction, NSW Ports' preferred construction of the relevant clauses was said to be a more commercial, businesslike construction which preserves the validity of the contract. Finally, NSW Ports submitted that the reimbursement provision could not have heightened barriers to entry because there was no real commercial chance of entry in any event. A container terminal at Newcastle while Botany has capacity is "a mere mirage": J[1561]. The ACCC, with the cooperation of PON, did not prove that viability and even if such viability could be shown, the State would then have to be persuaded to change its policy. The prospect of such change is "fanciful, far-fetched, infinitesimal or trivial and not a real chance or possibility": J[941]-[943], [1003], [1586]-[1589], [1595], [1603]. Absent any challenge to these findings of the primary judge, any identified error in the primary judge's conclusion that the impugned provisions did not raise any additional barrier to entry would be "inconsequential" since a nominally "additional" barrier to entry could not substantially lessen competition.

Likely effect: consideration and disposition 228 In addition to the question of the Port Kembla PCD discussed at [140]-[144] above, NSW Ports also submitted that the ACCC was running a new case on appeal that NSW Ports subjectively perceived that there was a meaningful threat of entry by PON in circumstances where the only case run below was one of objective likelihood of such a threat of entry. 229 Before turning to whether the new ground 11 is a new case being run on appeal, the question of the Port Kembla PCD should be finalised. It is clear that there was no ground of appeal challenging the primary judge's findings as to the Port Kembla PCD at J[1580]-[1581] or to her Honour's approach as to the only hypothesis relevant to the potential operation of the impugned provisions being the operation of a container terminal at Newcastle while Port Botany has capacity: J[478]-[490]. The ACCC in its reply submissions said that the Notice of Appeal defines the compensation provisions as the relevant provisions in both the Botany and Kembla PCDs and so every ground of appeal was directed to both. That comment, however, does not either identify a ground of appeal against any of J[487]-[490] or J[1580]-[1581]; nor does it assist in understanding the scope of the appeal, or why the primary judge was wrong on the evidence led before her to confine the judicial task to the only hypothesis effectively placed before her Honour. 230 The support clause in the Port Kembla PCD (Clause 3.3) has a condition (a) as follows: 3.3 Support Subject to clause 3.8, if all of the conditions in paragraphs (a) to (e) are satisfied in respect of a Support Period (Relevant Support Period): a) The Kembla Port Manager demonstrates to the reasonable satisfaction of the State that at least one of Port Kembla nor Port Botany was not at Full Capacity during the whole of the Relevant Support Period; 231 The form of cl 3.3(a) was the same in the Port Botany PCD, save that the person that has to demonstrate the relevant matters is the "Botany Port Manager". Both clauses say: "… at least one of [Port Botany nor (sic) Port Kembla] was not at Full Capacity…" 232 However, the case as run and as decided, posited, as the only relevant hypothesis, that Botany was not at full capacity. 233 This is how this appeal should therefore be approached. 234 Turning to the case on ground 11, the ACCC submitted that the case as there described was run and that the first error made by the primary judge was that her Honour failed to address it as a central question in the case: "namely whether the threat of entry was sufficiently credible and significant, based on the information then available, to make it competitively meaningful" (see the ACCC's written submissions dated 10 December 2021 at [61]). This error was compounded, it was submitted, by the failure to recognise that the 50-year duration of the compensation provisions was relevant to the prospect of new entry. 235 It is therefore necessary to examine the record of the proceeding below.

The claim as pleaded in the Amended Statement of Claim (ASC) 236 The case made in the ASC (filed two weeks before the trial) was said by NSW Ports to be restricted to a "case based only on an objective prospect of entry": NSW Ports' written submissions dated 3 February 2022 at [61]. 237 The ASC was divided into five parts: Part I: paras 1-5 on parties; Part II: paras 6-48 on primary factual allegations; Part III: paras 49-56 on substantially lessening competition in the relevant market; Part IV: paras 57-58 on contraventions; and Part V: para 59 on relief. 238 Relevantly, Part II, primary factual allegations, included ports in New South Wales used for containerised cargo: paras 6-13; services provided in relation to handling of containerised cargo: paras 14-15; facilities used to provide container services (where the notion of a container terminal having specialised infrastructure and equipment purpose-built for loading and unloading container ships was dealt with): paras 16-19; potential to develop a container terminal at Newcastle: paras 20-23; privatisation of Port Botany and Port Kembla: paras 24-35; privatisation of the Port of Newcastle: paras 36-46; and development of a new container terminal: paras 47-48. 239 Relevantly, Part III, substantially lessening competition in the relevant market, contained the following sections: the relevant market: paras 49-52; the likely effect of the compensation provisions: paras 53-55; and the purpose of the competition provisions: para 56. 240 NSW Ports' submission that the ACCC's case was based only upon an objective prospect of entry relied on a proper understanding of the pleaded case at paras 47-48 (under the heading "Development of a new Container Terminal"); paragraph 52 (under the heading "Relevant market"); and paragraphs 53-55 (under the heading "Likely effect of the Compensation Provisions"). These paragraphs including their particulars were as follows: PART II: PRIMARY FACTUAL ALLEGATIONS Development of a new Container Terminal 47. If the Compensation Provisions remain in place and are legally enforceable, PON Operations will likely not develop a Container Terminal at the Port of Newcastle. Particulars If the Compensation Provisions remain in place and are legally enforceable, the liability of PON Operations to make payments under the Reimbursement Provision will likely make it uneconomical for PON Operations to develop a Container Terminal at the Port of Newcastle. 48. If the Compensation Provisions were not in place, or were found not to be legally enforceable, it is likely that PON Operations would: 48.1. continue to pursue plans to develop a Container Terminal at the Port of Newcastle; 48.2. develop a Container Terminal at the Port of Newcastle; and/or 48.3. increase its supply of Container Port Services. Particulars (a) PON Operations is considering a proposal to develop a Container Terminal at the Port of Newcastle (Proposed Terminal). (b) The Proposed Terminal would be developed using the planning approval referred to in paragraph (b) of the particulars to paragraph 21 above, which remains in force. (c) Development of the Proposed Terminal would be economical if the Compensation Provisions were not in place or were found not to be legally enforceable. Further particulars may be provided before trial. PART III: SUBSTANTIAL LESSENING OF COMPETITION IN THE RELEVANT MARKET Relevant market …. 52. At all relevant times prior to 31 May 2013, the operator of Port Botany faced competitive constraint from the prospect that the operator of Port Kembla and/or the Port of Newcastle could materially increase supply of Container Port Services in the Relevant Market, including by the development and use of a Container Terminal at Port Kembla and/or the Port of Newcastle. Likely effect of the Compensation Provisions 53. On 31 May 2013, when the Port Botany and Port Kembla PCDs were entered into, it was likely that in the future with either or both of the Compensation Provisions: 53.1. the Botany and/or Kembla Operators would, if the conditions identified in paragraph 33.2 [being the conditions in clause 3 of the PCDs] were satisfied, be entitled to receive payments in accordance with the terms of the Compensation Provisions, with the effect that the Botany and/or Kembla Operators would face a reduced incentive to compete with the operator of the Port of Newcastle to supply Container Port Services; 53.2. the State would procure that the Port of Newcastle operator would not materially increase its ability or capacity to compete in the supply of Container Port Services (including by developing a Container Terminal) for so long as the Port of Newcastle was owned directly or indirectly by the State; 53.3. the State would procure that the transaction documents for any privatisation of the Port of Newcastle would include an obligation on the operator of the Port of Newcastle to reimburse the State for any liability incurred by the State under either or both of the Compensation Provisions; 53.4. the operator of the Port of Newcastle would not, at any time following privatisation of the Port of Newcastle: 53.4.1. have the capacity to materially increase supply of Container Port Services; or 53.4.2. progress plans to develop, or develop, a Container Terminal; and as a result of the matters in paragraphs 53.4.1 and 53.4.2, the Port of Newcastle: 53.4.3. would continue to handle small volumes of containerised cargo imported into or exported from NSW; and 53.4.4. would not be able to achieve efficiencies in handling containerised cargo comparable to those able to be achieved by Port Botany as described in paragraph 19 above; and/or 53.5. in the alternative to paragraphs 47 and 53.4, if the operator of the Port of Newcastle progressed plans to develop, or developed, a Container Terminal at the Port of Newcastle: 53.5.1. the Port of Newcastle operator would have a reduced ability and/or incentive to compete with the Botany and/or Kembla Operators to supply Container Port Services; and 53.5.2. the Botany and/or Kembla Operators would have a reduced incentive to compete with the Port of Newcastle operator to supply Container Port Services. 54. On 31 May 2013, when the Port Botany and Port Kembla PCDs were entered into, it was likely that in the future without either or both of the Compensation Provisions: 54.1. the Botany and/or Kembla Operators would not be entitled to receive any form of compensation equivalent to that which they may be entitled to receive under the Compensation Provisions; 54.2. the State would not procure that the Port of Newcastle operator would not materially increase its ability or capacity to compete in the supply of Container Port Services; 54.3. the State would not procure that the transaction documents for the privatisation of the Port of Newcastle would include an obligation on the operator of the Port of Newcastle to reimburse the State for any liability incurred by the State under either or both of the Compensation Provisions, or any equivalent form of compensation; 54.4. the operator of the Port of Newcastle would, following privatisation of the Port of Newcastle: 54.4.1. have the capacity to increase materially its supply of Container Port Services; 54.4.2. progress plans to develop, or alternatively develop, a Container Terminal; 54.4.3. begin to supply a larger volume of Container Port Services for containerised cargo being transported by sea into or from NSW; and/or 54.4.4. be able to achieve efficiencies in the handling of containerised cargo of the nature identified in paragraph 19 above that would improve its ability to compete with Port Botany in relation to the handling of containerised cargo; and/or 54.5. there would not be the reductions in ability and/or incentives described in paragraph 53.5 above. 55. As a result of the matters identified in paragraphs 53 and 54, on 31 May 2013, when the Port Botany and Port Kembla PCDs were entered into, it was the case that the Compensation Provisions individually or cumulatively would have, and/or would be likely to have, the effect of: 55.1. substantially lessening the competitive constraint on Botany Operator and/or Kembla Operator arising from the potential for the operator of the Port of Newcastle to increase materially its supply of Container Port Services, by reason of their rights to compensation for loss of container traffic under the Compensation Provisions; 55.2. causing the State to procure that the Port of Newcastle would not materially increase its ability or capacity to compete in the supply of Container Port Services (including by developing a Container Terminal) for so long as the Port of Newcastle was owned directly or indirectly by the State; 55.3. in connection with the privatisation of the Port of Newcastle (then in contemplation) causing the State to impose on any acquirer of the Port of Newcastle an obligation to reimburse the State for any payments the State was required to make under either or both of the Compensation Provisions, consequently preventing or hindering the owner or operator of the Port of Newcastle developing a Container Terminal and thereby substantially lessening the competitive constraint on Botany Operator and/or Kembla Operator; and/or 55.4. reducing the incentive of the Botany and/or Kembla Operators, and the ability and/or incentive of the operator of the Port of Newcastle, to compete for the supply of Container Port Services. (Emphasis in original.) 241 It is to be noted that the pleading contained no allegation that in 2013, NSW Ports perceived that there was a meaningful threat of entry by PON. 242 The pleading was framed as one based on objective facts and objective likelihood of entry by PON. 243 If a case, being one seeking penalties as relief for contravention of the Act, was to be founded upon the subjective appreciation or belief of officers of NSW Ports beyond what was objectively reasonable or objectively likely, it should have been pleaded or clearly raised in the running of the case. 244 NSW Ports pointed to various paragraphs of the ACCC's opening written submissions dated 21 September 2020, in particular paragraphs 13, 152 and 173-178, which were as follows: 13. The ACCC contends that the likely effect of the Compensation Provisions was to reduce the competitive constraint that Botany Operator and Kembla Operator faced from the potential or actual development of container handling facilities at Port of Newcastle. Further, once the Compensation Provisions were agreed with the NSW Ports Respondents, it was rational for the State to seek to protect itself from the risk associated with the Compensation Provisions, either by refusing to allow development of container handling facilities at Port of Newcastle, or passing the risk on to any operator of the Port of Newcastle by way of obligations such as the Reimbursement Provision. The State contemplated this course even before the PCDs were executed. Insofar as the Reimbursement Provision prevents or hinders PON from developing a container terminal at the Port of Newcastle, that is an effect or likely effect of the Compensation Provisions. … 152. In summary, the ACCC will submit that in May 2013 it was likely that, in the future without the Compensation Provisions: a) the State would have had an incentive to itself develop a Newcastle Terminal or to permit such development, and would not have any financial interest in limiting or minimising competition from the Port of Newcastle with Port Botany or Port Kembla, or any incentive to impose the Reimbursement Provision or any equivalent provision on any public or private operator of the Port of Newcastle (Newcastle Operator); b) any (public or private) Newcastle Operator would likewise have had substantial incentive to pursue the development of a Newcastle Terminal, such that there was a significant prospect that the Newcastle Operator would develop (or procure the development of) a container terminal in the future; c) Port Botany and Port Kembla would also have an incentive to innovate so as to deter entry by the Port of Newcastle; and d) if a Newcastle Terminal was in fact developed, there would be meaningful competition between Port Botany and the Port of Newcastle for container volumes. … 173. The likelihood, as at May 2013, that the operator of the Port of Newcastle would investigate, and develop, a container terminal in the future without the Compensation Provisions is demonstrated by subsequent events. Given that, even with the Compensation Provisions in place, PON and others have been willing to incur substantial costs to advance the development of a container terminal at the Port of Newcastle, the Court can readily infer that at least those efforts would likely have been undertaken absent the Compensation Provisions 174. As noted above, from 2009 until 2013, the NPC investigated, and made well developed plans to pursue, the development of a project, including a container terminal, at the Port of Newcastle. NPC did this with the endorsement of [Confidential to PON] the NSW Budget Committee of the NSW Cabinet (in 2009) and the NSW Treasury (in June 2011). As explained above, NPC did not abandon that project willingly. It did so only at the direction of the State which was made in connection with the privatisation of Port Botany and Port Kembla. 175. As noted above, between about March and June 2016, Anglo Ports and DP World Australia made separate unsolicited proposals to develop and operate a Newcastle Terminal. 176. Then, from 2018, PON has invested heavily in pursuing the opportunity to develop a container terminal at the Port of Newcastle. Its efforts in this regard are summarised in paragraphs 99 to 103 above. 177. PON's pursuit of the container terminal project is rational and reasonable. Peter van Duijn, a Maritime Logistics Expert and Industry Researcher at the Centre for Supply Chain and Logistics at Deakin University, considers that [External Only Confidential to PON] PON's preliminary business case for the development of a container terminal presents a realistic basis on which a container terminal could be developed at the Port of Newcastle. Mr van Duijn observes that the [External Only Confidential to PON] market and supply chain analysis underpinning the Preliminary Business Case appears reasonable, and that the terminal design appears reasonable (subject to Mr van Duijn's view that PON should develop [a particular design feature over which a confidentiality claim is made to preserve PON's commercial interests and which is unnecessary to specify for the purposes of this judgment]). Mr van Duijn further observes that the assumptions underpinning the financial analysis in the Preliminary Business Case, and the forecast volumes, revenue, expenses, EBITDA and capital expenditure set out in that analysis, are likewise reasonable. 178. In light of the steps actually taken by NPC and by PON to progress the development of a Newcastle Terminal over the past twenty years, the Court can readily conclude that the project was always one that a rational operator of the Port of Newcastle was likely to explore and possibly pursue. The fact that such investigations have occurred even with the Compensation Provisions in place is confirmatory of that conclusion. (Emphasis in original.) 245 As with the pleading, this opening was based on the objective facts and the objective likelihood. 246 NSW Ports also pointed to senior counsel's opening on the point at T p24 lines 11-19 on the first day of the hearing before the primary judge: Our case will be that the compensation provisions sought to record and make enforceable a promise by the State to pay financial support to the new private operators of Port Botany or Port Kembla, if the Port of Newcastle attracted material volumes of container traffic from either of those ports. In other words, the vendor of a business which owned and controlled another business in the same industry and the same state promised to compensate the purchaser if the other business won material volumes from the acquirers subsequent to the sale. We will submit that when one steps back from some of the detail and complexity, the compensation provisions can be seen plainly as brazenly anti-competitive provisions. 247 Again, the case propounded gave no hint of a case based other than upon objective likelihood. 248 The ACCC relied on ASC paras 53 and 55.1 as encompassing a case on subjective appreciation by NSW Ports of the lessening of the competitive constraint on it from the prospect (wide enough to be subjectively perceived prospect) that the operator of the Port of Newcastle would increase supply of container services and that an effect or likely effect of the compensation provisions was to substantially lessen that capacity and so the constraint on NSW Ports. With respect, a case for penal relief that is to be founded on the perception of individuals, as distinct from what was objectively likely, should be expressed with clarity. It was not in these paragraphs. 249 The ACCC also relied on paras 172 and 216 of its opening written submissions which were as follows: 172. In a world without the Compensation Provisions, Port Botany and Port Kembla would also have an incentive to innovate so as to deter entry by the Port of Newcastle. That is because the NSW Ports Respondents could not safely assume that a container terminal would not be developed at the Port of Newcastle, and the cost of wrongly making that assumption would be to lose its near-monopoly on NSW container volumes. …. 216. First, they afford greater protection from the threat of entry and thereby reduce the competitive constraint on the NSW Ports Respondents, diminishing any incentive to reduce prices, improve quality or otherwise innovate. 250 These are paragraphs directed to objective likelihood only. It is also to be noted that the substantiation of para 216 in the footnotes was the expert evidence of Mr Smith (Smith 1 [19.1] and [339]). The caution with which the primary judge approached the consideration of his evidence was explained by her Honour at J[441]-[442]. 251 The ACCC also relied on its closing written submissions filed on 16 December 2020 at paras 359, 391(d) and 426, said to have been made without objection. These paragraphs were: 359. In a world without the Compensation Provisions, Port Botany and Port Kembla would also have an incentive to innovate so as to deter entry by the Port of Newcastle. That is because the NSW Ports Respondents could not safely assume that a container terminal would not be developed at the Port of Newcastle, and the cost of wrongly making that assumption would be to lose its near-monopoly on NSW container volumes. … 391. In summary, the ACCC submits that in May 2013 it was likely that, in the future with the Compensation Provisions: …. d) the NSW Ports Respondents would, as a result of the Compensation Provisions, face greater protection from the threat of entry by the Port of Newcastle, have a reduced incentive to price competitively and to innovate, and be afforded a measure or protection from any increased competition from the Port of Newcastle in the event that it did develop a Newcastle Terminal. … 426. First, they [the compensation provisions] afford greater protection from the threat of entry by a Newcastle Terminal and the competitive consequences of that entry. The fact that they confer this protection is acknowledged in NSW Ports' internal documents, and by Mr Droga's and Ms Calfas' oral evidence. The effect of this protection is to reduce the competitive constraint on the NSW Ports Respondents, diminishing any incentive to reduce prices, improve quality or otherwise innovate. 252 The first sentence of paragraph 426 once again referenced the expert evidence of Mr Smith at 1[19.1] and [339]. The second sentence of paragraph 426 does, however, refer to the internal documents and the evidence of Mr Droga and Ms Calfas. However, all the submissions were as to the objective likelihood which was said to be supported by NSW Ports' appreciation of the circumstances. That does not elevate a case beyond that of objective likelihood of substantially lessening competition. 253 On appeal, reference was made by the ACCC to the affidavits of Messrs Garcia and Droga and Ms Calfas, to the cross examination of Mr Garcia, and to various internal documents. In those affidavits the witnesses, dealing with purpose, dealt with a question of constraints on Newcastle and its lack of feasibility as a container terminal as well as denying any purpose of lessening competition. 254 When one examines the cross-examination, one sees that there was no attempt to put the framework of this case to Mr Garcia or Mr Droga. If a case was to be run that NSW Ports had a perception of a risk of change of Government policy about supporting a container terminal at Newcastle while there was still capacity at Port Botany (irrespective of its objective likelihood) one would have expected cross-examination as to what would or would not have been done based on their perceptions in a world with and without the PCDs. No such cross-examination took place. 255 The pleading and the submissions demonstrated that the case run was as to the objective likelihood of a competing container terminal in Newcastle while Botany had capacity and the objective likelihood of a change in Government policy, not about sequencing, but about supporting competing container terminals with the early duplicative infrastructure involved in such change of policy. As is revealed below, the primary judge, in a comprehensive and meticulous judgment did not appreciate that a case based not just on objective likelihood, but also a case on NSW Ports' subjective perceptions, was being run. That is because it was not being run. 256 In circumstances where such a case was not run or put, there is plainly the possibility that there would have been further evidence to be led on the subject. Ground 11, insofar as it is based on NSW Ports' subjective perceptions and separate from objective likelihood, should not be allowed to be run on appeal. In any event, for the reasons stated below as to the proper construction of the PCDs the case should, on the ACCC's acceptance in submissions, fail.

The reasons of the primary judge on likely effect 257 The factual background at [11]-[89] above, the primary judge's dealing with the ACCC's key contentions from those background facts at [90]-[109] above, the primary judge's dealing with NSW Ports' witnesses' evidence at [110]-[113] above, the introduction to the effects case at [137]-[139] above, the question of the Port Kembla PCD at [140]-[144] above, and the key conclusions set out at [145]-[147] above form the background to this discussion of the reasons of the primary judge as to the effects case. 258 At J[981]-[1030], the primary judge set out some facts and considerations relevant to the likely effect of the compensation provisions and the reimbursement provision. The following are some of those matters that are relevant to note for the resolution of the appeal. 259 State policy about sequencing of container ports and the development of container terminals had nothing to do with the impugned provisions. The effects of the policy are not to be confused with the likely effects of the provisions: J[983]. 260 The differences in Government policy had been about sequencing (Newcastle or Kembla after Botany), not about developing a container terminal in competition with Botany: J[984]. 261 There was no rational basis to consider that the provisions would have any effect at all on a future government changing its policy: J[985] and J[1603]. 262 The size and expense of planning and developing a container terminal meant that Port Botany had to be sufficiently approaching capacity before the State would support the development of the next terminal: J[986]. 263 No industry participant considered developing a container terminal without the support of the State. Nor did the State contemplate the possibility of a container terminal being developed contrary to State policy: J[988]-[991]. 264 There was no real chance or real possibility of PON or any private operator developing a container terminal at Newcastle while Botany had capacity or before a container terminal at Port Kembla, unless there was a change in Government policy: J[994]. 265 The primary judge discussed the question of changes of Government and policy at J[1002] and [1003]. Debate took place at the appeal on the importance of these paragraphs and whether or not her Honour was finding in them that there was no real chance of Government policy changing. At J[1002]-[1003] the primary judge said: [1002] There is no evidence about the likely political landscape of NSW from 2013 onwards (that is, whether a change in the NSW government was or is likely or not after 2013). There is no evidence about the political landscape of NSW as at today's date. As a result, the prospects of a change of NSW government potentially resulting in a change of the State policy were and are in the realm of speculation. Such a change is always possible given our democratic system of cyclical elections but, without evidence, I consider that it would be wrong to conclude that because the NSW government might change in the reasonably foreseeable future assessed from May 2013/May 2014 or from today, it would follow that there is a real chance or real possibility of a change in the State policy. This approach would involve two levels of speculation: (a) as to a change in government, and (b) as to a resulting change in the State policy. [1003] I can say nothing about speculation (a), as there is no evidence one way or another. As to speculation (b), there is some evidence but conclusions would remain speculative. Even if PON is right that its case for a container terminal would be considered more favourably by a NSW Labor government, there are some inescapable facts: (1) it has been State policy since 2003, under both NSW Labor and NSW Liberal governments, that container terminal development should be in sequence, using up existing capacity at Port Botany first, and substantial public and private investments in the container supply chain in NSW have been made on that basis; (2) the State policy since July 2012 (Port Botany first, and then Port Kembla, and then the Port of Newcastle) has been implemented in part with associated substantial public and private expenditure - the cap on Port Botany has been removed, Port Kembla was privatised with Port Botany, the Port of Newcastle was privatised on the basis it would be third in line for a container terminal, and road and rail and intermodal and other public and private infrastructure funded by the Commonwealth and the State has continued to be constructed on the basis of the State policy; (3) any potential benefits to the Hunter region (PON's main selling point for its case) would depend upon the NSW government being satisfied that a container terminal at the Port of Newcastle while Port Botany has capacity would be viable; and (4) it must be inferred that any NSW government would have to consider the whole of system cost and efficiency of supporting a container terminal at the Port of Newcastle while Port Botany has capacity. 266 But this introductory discussion (see J[981]) must be set against her Honour's findings at J[1587]-[1589] (especially J[1589], discussed at [145(6)-(9)] above, and J[1588], discussed at [145(8)] above). 267 In section 8.2 of the judgment (J[1031]-[1044]), the primary judge surveyed the task before her: a comparison of the likelihoods in the sense of real chances or real possibilities, and not mere speculation, in respect of the market and circumstances existing and prospective at the time of making or potentially giving effect to the compensation provisions or reimbursement provision with and without the provisions in place. If such a counterfactual comparison exposed the likely effect of substantially lessening competition, the Act was engaged: J[1031]. No complaint was made of that structure of analysis. 268 First, the primary judge identified the likely effect on the State as owner/operator of the port of Newcastle in May 2013 and as seller of a long term lease in 2014. 269 Secondly, her Honour identified the effect on NSW Ports as owner of the long term lease and operator of Botany and Kembla as at and from May 2013/2014. This was analysed as follows at J[1039]: …[G]iven the cases as put by the parties, this issue involves three questions: (a) what is the proper construction of the compensation provisions, (b) on the basis of that proper construction, as at and from May 2013 would the compensation provisions have any likely effect on NSW Ports in respect of Port Botany/Port Kembla, and (c) if so, does that involve a real chance or real possibility of a substantial lessening of competition in the market for Container Port Services in NSW. 270 Thirdly, her Honour identified the likely effect on a prospective private operator of the Port of Newcastle as at and from May 2013 and PON as the owner and operator as at and from May 2014, as well as the likely effect on the State as the relevant decision-maker on State policy. The primary judge described the task for this third element as follows at J[1041]-[1042]: [1041] Given the cases as put by the parties, this involves two questions: (a) as at and from May 2013 and May 2014, was the likely effect of either (or both), as may be relevant, of the impugned provisions to prevent or hinder the development of a container terminal at the Port of Newcastle, and (b) if so, does that involve a real chance or real possibility of substantial lessening of competition in the market for Container Port Services in NSW? The second question is necessary because NSW Ports and the State do not accept that a container terminal at the Port of Newcastle involves any real chance or real possibility of increasing competition in the market for Container Port Services in NSW. [1042] The first question, (a), involves sub-questions including: (i) was there in fact a good case to be made to change the State policy to enable the development of a container terminal at the Port of Newcastle before Port Botany reaches capacity, (ii) if so, what was (and is) the likelihood of the State changing its policy and supporting that development, and (iii) if so, what was (and is) the likelihood of that development being undertaken. 271 In section 8.4 (J[1070]-[1104]) the primary judge rejected any case that the State had an incentive to develop a container terminal at Newcastle, and that the compensation provisions had any such effects saying at [1071] and [1099]: [1071] The State did not have, and without the compensation provisions would not have had, the proposed incentive as at May 2013 for two fundamental reasons: (a) it had recently adopted and partly implemented its policy that the Port of Newcastle should only be developed with a container terminal after Port Botany and Port Kembla had reached capacity, and (b) it planned to privatise the Port of Newcastle as soon as reasonably practicable in any event on the basis of its policy that the Port of Newcastle was to be developed as a container terminal third, after Port Botany and Port Kembla had reached capacity. …. [1099] In reality, the effect of the compensation and reimbursement provisions is to enable a change in the State policy in the future on the basis that the person who receives the benefit of the change (which would be PON) would also have to pay for the value of that change, and the person who bears the burden of that change (which would be NSW Ports which had paid for the full existing monopoly rights) would receive that payment in recompense. There was and is no disincentive to the NSW government in respect of changing the State policy by reason of the compensation or reimbursement provisions. Those provisions, considered together as they should be, ensure that the State policy can be changed in the future without, from the State's perspective, an unfair gain to PON and an unfair loss to NSW Ports or the State. (Emphasis in original.) 272 In section 8.5 (J[1105]-[1129]) the primary judge dealt with the effect on NSW Ports. These paragraphs were said to have contained the error set out in ground 11. 273 It is first necessary to understand her Honour's approach before considering whether she made any error on the way the case was put to her. 274 At J[1105], the primary judge recognised the centrality of the threat of entry by the Port of Newcastle, as at and from May 2013 and the present into the future which would depend on: …(a) the ability of PON to make a good case for a container terminal at Port of Newcastle contrary to the State policy, (b) the prospect of the State changing its policy in response, (c) the prospect of container terminal in fact being constructed at the Port of Newcastle, and (d) the effect of the container terminal, if constructed, on competition in the market for Container Port Services in NSW. 275 At J[1106]-[1107], the primary judge directed herself to the ACCC's case as to the compensation provisions relieving NSW Ports of constraint from the threat of entry. This led her Honour to the important question of the construction of the provisions and whether or not they required NSW Ports to behave competitively: J[1108]-[1124]. 276 The ACCC attacks her Honour's conclusions as to the question of construction as part of ground 11. The ACCC accepted (see appeal transcript p109 lines 21-28) that ground 11 depended upon demonstrating error in the primary judge's construction of the compensation provisions. For the reasons that I have already given in the context of purpose (see [202]-[206] above) the primary judge's construction of the clauses was correct. The clauses, properly construed, are entirely consistent with a hypothesis of effective competition. Nor is the commercial object of the PCDs undercut by the premise of competition: on the contrary, the purpose of the clauses was to provide for the financial effects of altered circumstances should Government policy change and result in movement from an anticipated monopoly environment (the circumstance that prevailed at the time of purchase of the port assets and which was reflected in the bid price) to a competitive environment. 277 The above deals with the likely effects case insofar as it looks at the likely effects on the State and NSW Ports and with the appeal on ground 11. 278 The balance of the appeal (grounds 8, 9 and 10) concerns the likely effects on a private operator of the Port of Newcastle and PON. This was dealt with in sections 8.6 and 8.7 of the judgment. 279 At J[1130], the primary judge recognised the questions involved as: (1) as at and from May 2013 and May 2014 and today's date, was or is the likely effect of either (or both), as may be relevant, of the impugned provisions to prevent or hinder the development of a container terminal at the Port of Newcastle, taking into account: (a) whether there was or is in fact a good case to be made to change State policy to enable the development of a container terminal at the Port of Newcastle before Port Botany reaches capacity; (b) if so, what was or is the likelihood of the NSW government changing the State policy and supporting that development; and (c) what was or is the likelihood of that development being undertaken; and (2) if so, would this involve a real chance or real possibility of a substantial lessening of competition in the market for Container Port Services in NSW? 280 The central and critical finding in the primary judge's rejection of this aspect of the likely effects case was the finding that there was no real chance of a container terminal being built at Newcastle while Botany had capacity. This was based on two considerations. The first was her Honour's finding that there was no real chance of underlying Government policy changing to permit that to occur. The second was her Honour's findings that it had not been shown that there was a viable business case to develop a container terminal at Newcastle while there was capacity at Port Botany (even if Government policy did change). 281 The findings as to Government policy (being the "one port" policy not the "sequencing" policy) were at J[1003] and J[1586]-[1589]. (See [145]-[146] above). 282 The finding as to a lack of a business case for a container terminal at Newcastle while Botany has capacity is at J[1582]-[1585]. (See [145]-[146] above). 283 As to the potential cost impost of the reimbursement provision acting as a disincentive or barrier to entry the primary judge said the following at J[1137]-[1139]: [1137] The ACCC further submitted that one likely effect of the compensation provisions was the reimbursement provisions which would increase the cost to PON of every container handled above the relevant threshold when NSW Ports would not face any such equivalent cost in respect of containers handles at Port Botany or Port Kembla. This is correct. But it does not mean that a likely effect of the compensation (or reimbursement) provisions was or is a substantial lessening of competition. Unless, without the impugned provisions, there was or is any real chance or real possibility of a container terminal being constructed at the Port of Newcastle while Port Botany has capacity, then the cost impost on PON for every container handled above the relevant threshold is a mere theoretical cost that there would be no real chance or real possibility of PON ever incurring. [1138] To the extent the ACCC suggested that the cost impost of the impugned provisions would dissuade or act as a disincentive to PON from investigating the prospects of a container terminal at the Port of Newcastle, the evidence is to the contrary. PON has investigated a container terminal development and continues to do so irrespective of the impugned provisions because it must consider it worthwhile to do so. As I have said, having not paid for the capacity to develop a container terminal at the Port of Newcastle before Port Botany reaches capacity or before Port Kembla is developed with a container terminal, it clearly would be worth it for PON to ascertain, even at significant expense, if such a container terminal would be viable and if PON could make a good case to achieve a change in the State policy (even if the change was confined to taking precedence for the next container terminal from Port Kembla). [1139] The fact that it may be inferred that bidders for the Port of Newcastle did not pay the State for the rights to develop a container terminal before Port Botany reaches capacity or before Port Kembla is developed with a container terminal is an effect of the State policy, not the impugned provisions. As Dr Pleatsikas said, if any bidder for the Port of Newcastle considered that a container terminal development would be viable and that they could persuade the NSW government to change the State policy to enable such a development, that bidder would rationally have paid for the net present value of those rights discounted to take into account the effect of the impugned provisions. Having done so it would not be rational to infer that the impugned provisions could have any likely effect on the future incentives of that bidder. Either way (no payment for rights to develop a container terminal or a payment for rights to develop a container terminal discounted to take into account the effect of the impugned provisions), the result is the same - there can be no rational disincentive to the bidder trying to establish that a container terminal would be viable and to persuade the NSW government to change the State policy and, if it succeeds on both fronts, to construct a container terminal. 284 Ultimately, as the primary judge said at J[1598] she could not be reasonably satisfied that without the impugned provisions as at May 2013 or May 2014 or from the time of the hearing, there was any real chance that a container terminal would be developed at Newcastle while Botany had capacity. Such policy was in the realm of mere speculation. The time horizon (50 years) of the PCDs made no difference to that conclusion for the reason her Honour gave at J[1599].

The resolution of grounds of appeal 8, 9, 10 and 11

Ground 8 285 Ground 8 is restricted in the manner identified at [213] above. Before dealing with grounds 9 and 11, it is necessary to correct an implicit assumption in ground 8. The finding as to the speculative nature of the prospect of future change in relevant State policy (that is the one port policy) was the subject of discussion and implicit finding at J[1003] and of clear finding at J[1589]. The fact that a change of Government was possible did not affect the complex and powerful issues that had underpinned the policy that both sides of politics had always adopted. The ACCC bore the onus of proof. It was speculation as to whether there might be a change of Government (although common human experience in a democratic polity is that this will happen at some time), and also as to whether, and if so why, a new Government would alter an economically rational and powerful policy that had been common to both sides of politics that there be no development of another container terminal until Port Botany was reaching capacity. 286 The ACCC sought to use the findings in J[976] to undercut these findings. 287 This paragraph (J[976]) does not assist the ACCC. The context of the findings in J[976] was the behaviour of bidders investing very large sums of money for the purchase of a monopoly. The asymmetry discussed by the primary judge was a change in policy (undifferentiated between the one port policy and the sequencing policy) which could not be dismissed as irrational. That context or question is entirely different to a context or question of proving that there was a real (as opposed to speculative) chance of future Government policy not to approve a second container terminal while Port Botany had capacity changing. 288 That a risk (which could be speculative to a "conservative bidder": J[269]) might bring about a large and disproportionate discount in the bid price, tells one nothing of the likelihood or reality of the chance or prospect of such a change of policy occurring.

Ground 9 289 There are a number of reasons why ground 9 fails. First, unless there was a real chance of a container terminal being developed at Newcastle while Botany had capacity, then any additional impost on PON was theoretical only: J[1137]. 290 There was no such prospect of entry at Newcastle while Botany had capacity: J[1561], [1589], and [1598]. This was buttressed by the inability by the ACCC and PON to prove the existence of a viable business case to develop a container terminal at Newcastle while Botany had capacity. 291 To the above can be added the lack of evidence that there was a real chance of future Government policy (as a necessary pre-condition to the development of a container terminal) as to one container port changing: see J[941]-[943], J[1003], [1586]-[1589], [1595] and [1603]. 292 The primary judge's conclusion at J[1139] set out at [283] above was founded on Mr Pleatsikas' (unchallenged) evidence. The submissions of the ACCC as to "sunk costs" do not engage with the expert evidence. No error has been demonstrated. 293 Further, as NSW Ports submitted, there is a shift from the pleaded case in the argument. The pleaded case (see ASC paras 53-55 at [240] above) was based on an assessment of future likelihood at the date that the provisions were entered into. The argument put is that a future shareholder of PON would view past costs as sunk costs and only the effects of the reimbursement provision would be examined. It was not a case put to Mr Pleatsikas or the primary judge. 294 The approach of Mr Pleatsikas and the primary judge as to the position from the perspective of the bidder at May 2013 and 2014 is rational. No error has been shown. 295 To the extent that the ACCC's argument about barriers to entry may now be founded on perceptions of NSW Ports of barriers to entry, for the reasons earlier given that case was not run below and should not be allowed to be run on appeal. In any event, the evidence (directed to the issue of purpose of the provisions and thus subject to a different focus) was that there was no such perception that the reimbursement provision would raise barriers to entry: Mr Droga did not have any expectation or aforethought of a "pass through" provision: paras 39, 44 and 45 of his Affidavit (unchallenged); Mr Garcia likewise at paras 73, 79 and 80 of his Affidavit (also unchallenged).

Ground 10 296 The length of the operation of the compensation provisions was 50 years, but the relevant hypothesis was Botany not having exhausted its capacity, which had a timeframe of 2037 to 2045. 297 In any event, it is unhelpful to posit a timeframe without an appreciation of context. Here the timeframe (even if 50 years) is that in which a long term infrastructure policy might be changed. As time proceeds it is likely that more and more investment will be made upon the basis of the policy which will make it less, rather than more, amenable to rational change: see J[1594]-[1595]. Further, the factors that made the policy bipartisan and cogent in the first place: geography, demographics and the huge associated infrastructure costs of duplicating ports were not of a character to change over time.

Ground 11 298 For the reasons already given, the ACCC should not be allowed to run a new case based on the subjective perceptions of NSW Ports. 299 Nevertheless some points should be made about the reliance the ACCC placed on J[960] in the development of the argument. First, the risk discussed was about the risk of a future change in State policy, relevantly the bipartisan policy of one container terminal with capacity. The relevant exploration in cross-examination was as to the sequencing policy about which there was a political difference. There was no evidence that NSW Ports perceived a real chance that the State would, in the future, develop Newcastle as a container terminal before Botany had exhausted its capacity. 300 Secondly, as discussed earlier in relation to J[976] a perceived risk as to a question of the extent of the bid or investment is a different question to the perception of likelihood of an event occurring, being a change in Government policy occurring. A speculative (but not irrational) risk related to billions of dollars in investment says nothing as to the perception of a real chance of a change in policy. The finding at J[960] was only that bidders would not consider the risk irrational or irrelevant to pricing. One would need to explore in cross-examination what this meant for perception of likelihood in order to assess perception of importance and how the compensation provisions loosened or alleviated that concern. That did not take place, because the case was not put that way before the primary judge. 301 Thirdly, at least Ms Calfas (NSW Ports' CEO) considered a container terminal at Newcastle infeasible: J[1278]-[1280]. 302 For these reasons the appeal on likely effects must fail.

The reasons of the primary judge 303 At J[339]-[341], the primary judge correctly stated that s 20F of the State Owned Corporations Act 1989 (NSW) (SOC Act), which provides that SOCs such as SPC, PKPC and NPC do not represent the State unless the SOC Act or another (New South Wales) Act so provides, cannot prevent the operation of s 2B of the Act, that (relevantly) Pt IV of the Act binds the Crown "so far as the Crown carries on business, either directly or by an authority of the State"; and, further, that it followed from s 2B of the Act that the Crown (that is the State as Executive) was carrying on businesses that SPC, PKPC and NPC were each carrying on. 304 The relevant question was, however, (as her Honour put at J[341]) whether the impugned conduct, the State entering into or giving effect to the impugned compensation provisions, was in the course of carrying on the business or another relevant business: see NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48; 219 CLR 90 at 116-117 [67]. 305 The primary judge rejected the submission that the decision to privatise, and deal with, Botany and Kembla was made in the course of business being conducted by the State through SPC, PKPC or NPC. At J[342] the primary judge said: Contrary to the ACCC's submissions, the State did not decide to privatise the two ports in carrying on the businesses of operating those ports or the Port of Newcastle. It decided to privatise the ports as a matter of government policy. The compensation provisions did not serve the purpose of the carrying on of those businesses, that is, the businesses of the State operating the two ports through the SOCs. The provisions had nothing to do with those businesses. The compensation provisions served the purpose of ensuring that bidders did not discount their bids on account of the risk that the State policy might change so that the State could maximise the value it obtained from the privatisation. This is not to confine the impugned conduct to the businesses engaged in, but is to focus on the question whether the conduct is in the course of carrying on the businesses. As the State submitted: (1) the decision to privatise the port assets was not a decision made by SPC or PKPC, or a decision in which they had any involvement; (2) the decision was made by the executive government to implement NSW government policy; (3) the privatisations could not be effected under the SOC Act or PAMA Act, which regulated the SOCs in their conduct of the business of operating the ports; (4) the privatisations could only be effected under the provisions of the PAAT Act, which had nothing to do with the SOCs in their conduct of the business of each in operating their ports; (5) to the extent that the SOCs were involved in any of the privatisation transactions, it was only because they held relevant assets that were to be dealt with pursuant to the directions given by the Treasurer; and (6) the SOCs, responsible for the business of operating their respective ports, were not parties to the Port Botany or Port Kembla PCDs. 306 At J[343], the primary judge saw the statutory prohibition on SOCs disposing of their fixed assets or main undertakings by ss 20X and 20Y of the SOC Act as highlighting the distinction, here, between the carrying on of the business of operating the ports and the disposition of the ports for public policy and political reasons. That the SOCs were subject to some political control in how they (and so the State) operated the ports as businesses, did not mean that any political decision about the ports was in the course of the business: J[344]. 307 The businesses were structured separately: by the SOC Act and by ss 6-8 of the PAMA Act as three separate businesses: J[345]. The decision to privatise had nothing to do with SPC, PKPC and NPC; they had no role to play other than any necessary part in divestment, being a separate entity for each port: J[345]. 308 The reality of the separate structure of the businesses was reflected in the late inclusion, or bundling, of Kembla with Botany in the privatisation of both: J[345]. 309 SPC and PKPC were dissolved by proclamation in 2016 and the compensation provisions when made were directed to circumstances that may arise in the future when the State and SPC and PKPC would not be carrying on port operations at Botany and Kembla: J[345]. 310 The issue was not, the primary judge said, whether the PCDs and compensation provisions concerned the operation of the ports, but whether the entering into the PCDs and compensation provisions or giving effect to them was or would be in the course of the State carrying on the businesses of operating the ports of Botany or Kembla: J[346], or Newcastle through NPC: J[347]. 311 At J[348], the primary judge took as a further indication that the privatising of Kembla and Botany and entering into the PCDs and compensation provisions was not conduct in the course of carrying on the business of operating these ports, the one-off nature of the event, albeit through various steps. 312 At J[350], the primary judge made clear that the question was one of fact, saying: It is not that the sale of a business can never be in the course of carrying on that business. Whether that is so or not must depend on the facts concerning the business and the sale. On the facts of the present case, I consider that the State was carrying on businesses of operating the ports through the SOCs. The privatisation of Port Botany and Port Kembla, however, had nothing to do with the course of those or any other businesses. It was a decision of NSW government policy implemented outside the context of the operation of any business. 313 At J[351]-[353] the primary judge dealt with PON's separate submissions. It is convenient to set out her Honour's rejection of these submissions: [351] To the extent it is necessary to deal with PON's submissions separately, the following responses may be given: (1) PON incorrectly assumes that the State, by the SOCs, was carrying on a single business of operating ports in NSW so that, when Port Botany and Port Kembla were privatised, the State continued to operate Port of Newcastle through NPC. The assumption is not self-evidently correct. From the provisions of the PAMA Act and the SOC Act, as summarised above, a more obvious and natural conclusion is that the State was carrying on three separate business - the operation of Port Botany through SPC, Port Kembla through PKPC, and Port of Newcastle through NPC. If that is so, the operation of each business of Port Botany and Port Kembla, respectively, ceased on privatisation. Those businesses did not continue as PON posits (2) in any event, if it is the case that the State was carrying on a single business of operating the three ports, then the fact that the State continued to carry on that business in respect of the Port of Newcastle does not mean that the privatisation of Port Botany and Port Kembla was in the course of carrying on the business of operating the three ports. Rather, the privatisation of two of the ports, in the circumstances (which includes the statutory context described above), was a step separate and distinct from the operation of the (assumed single) business; (3) the terms of the PCDs did concern the operation of the Port of Newcastle either by the State though NPC or by a private entity on privatisation. Again, however, that fact does not mean the conduct of privatisation of Port Botany and Port Kembla was in the course of the carrying on the business of operating the ports, let alone the course of each business of operating each port. The PCDs were merely an obligation to the private entity operating Port Botany and Port Kembla contingent on the nature of the operation of the Port of Newcastle; (4) the dual role of the Treasurer, as the person effecting the privatisation and as a voting shareholder on the SOCs, does not mean that every or any action of the Treasurer should be taken to have been performed in the exercise of his functions in this second capacity. The statutory scheme regulating the SOCs and the privatisation makes this clear. The Treasurer was not acting as a voting shareholder in SPC or PKPC in effecting the privatisation. He was acting in a designated role under the PAAT Act having nothing to do with his role as a voting shareholder in the SOCs when effecting the privatisation; and (5) it is correct that in JS McMillan the persons responsible for effecting the tender had nothing to do with the operation of AGPS: see at 356-357. It is difficult to accept, however, that this fact was determinative. If it were, the application of the statutory scheme to the Crown would depend on the coincidence of the identity of the personnel the Crown used to effect its objective. The key point in JS McMillan was that the conduct of the tender for the sale of the AGPS business was "quite divorced from the carrying on of that business": at 357. In the present case, as noted, the Treasurer was vested with various functions. But there cannot be any doubt that, under the statutory scheme, those functions were separate and distinct. In exercising his functions under the PAAT Act, the Treasurer was not acting as a voting shareholder of any SOC. He was involved in conduct separate and distinct from the operation of each SOC. Accordingly, JS McMillan is not irrelevant. It discloses the importance of identifying the business or businesses the Crown is carrying on either directly or through an authority of the Crown. The conduct must be in the course of carrying on such a business before ss 2A or 2B are engaged. [352] PON's alternative submission that the State made and would give effect to the compensation provisions in carrying on a business of leasing land suitable for port operations is also unpersuasive. There was no such business (or businesses) when the ports were vested in the respective SOCs responsible for their operation. The argument is that the State entered into such a business at the time it granted each long-term lease of the port. The PCDs, however, were separate and distinct from any such business. The Treasurer is the State party to the Port Botany and Port Kembla PCDs. The parties to the PCDs do not include the landlords, PB Lessor or PK Lessor. The PCDs operate for a term of 50 years and not the term of the leases of the ports (which are for 99 years). The obligations of the State under the PCDs are separate and distinct from the State's rights and obligations as landlord through PB Lessor and PK Lessor. The SOCs and PB Lessor or PK Lessor are only in the PCDs to the extent that they are the subject of releases by the relevant private entities. It cannot be said that the Treasurer entered into the PCDs in any function as landlord. His entry into the PCDs was not in the course of carrying on the business of leasing ports. The entry was in the course of ensuring the State received maximum value for money in privatising the ports. The fact that the privatisation was effected in part by the entry into leases of land by the State, through the relevant authorities of the State, does not mean that the privatisation itself was in the course of carrying on the business of being a landlord of the ports. Rather, the carrying on of that business (assuming it to be such) was a consequence of the privatisation. [353] Contrary to PON's further submissions, the fact that the State retains an active role in the operations of Port Botany and Port Kembla under the leases of those ports (by requiring the ports to be used and developed effectively for port purposes) does not mean that the State is continuing to conduct the business or businesses of operating the ports. It is obvious that the State has an interest in ensuring that the ports are effectively used and developed as ports. That is part of its governmental functions. Equally, the privatisation of the ports was part of its governmental functions. Neither the fact of its ongoing role in the operation of the ports, nor its role as port landlord, mean that it entered into or would give effect to the compensation provisions in the PCDs in the course of carrying on any business.

The grounds of appeal on Crown immunity 314 It is convenient to set out the grounds of appeal on Crown immunity and derivative Crown immunity in one place. They are in grounds 1 to 3 of the Amended Notice of Appeal and Further Amended Notice of Appeal as follows: 1. The primary judge erred in concluding that the State did not enter into the compensation provisions in the Port Botany and Port Kembla Port Commitment Deeds (Compensation Provisions) in the course of carrying on a business within the meaning of s 2B of the Competition and Consumer Act 2010 (Cth) (CCA): J[348], [350], [354]. 2. The primary judge erred in: 2.1. construing the Port Assets (Authorised Transactions) Act 2012 (NSW) as conferring a power on the Treasurer to require the counterparty to an authorised transaction to engage in conduct that would otherwise contravene the CCA: J[402], [405]-[406]; and 2.2. concluding that the divestment of that power was a divestment of legal rights sufficient to engage the principle of crown and derivative crown immunity: J[406]. 3. The primary judge erred in: 3.1. failing to find that s 45 of the CCA applied to the conduct of the State in making the Compensation Provisions; and 3.2. construing s 45 of the CCA as not applying to NSW Ports when it made and/or to the extent it may give effect to the Compensation Provisions in the future: J[423].

The submissions of the ACCC on Crown immunity 315 The ACCC submitted that the primary judge erred in concluding that the Act did not apply to the State when it made the compensation provisions because when it did so the State was not carrying on a business within the meaning of s 2B of the Act. 316 According to the ACCC, at the time the compensation provisions were made, the State was carrying on a business of operating ports in New South Wales and was therefore subject to the Act. The ACCC acknowledged that the business of operating ports in New South Wales had component parts, namely the operation of Port Botany, Port Kembla and the Port of Newcastle, but preferred to characterise the business as a whole as the operation of ports. By way of analogy, the ACCC likened the business carried on by the State to that of a private company engaged in operating a business with various divisions. The primary judge, in contrast, characterised the nature of the State's operation of the relevant ports as carrying on three separate businesses through statutory corporations. 317 According to the ACCC, the primary judge fell into error on the issue of Crown immunity for essentially two reasons. First, the primary judge drew a distinction between, on the one hand, operating the ports through State owned corporations and, on the other, the Treasurer privatising the ports in such a way as to maximise the value for the State (at J[342], [346]). That distinction, and attributing significance to it, were said to be erroneous on the basis that in the context of s 2B of the Act, both statutory corporations and Crown agents should be regarded as part of the executive government, that is, part of the Crown itself: NT Power Generation v PAWA [2002] FCAFC 302; 122 FCR 399 (NT Power Full Court) at 441-442 [160]-[161] (Finkelstein J). The primary judge was wrong to treat statutory instrumentalities as independent manifestations of the Crown: all conduct engaged in by persons or entities acting on behalf of the Crown is conduct of the Crown. In oral argument, the ACCC stressed that the Crown was continuously carrying on a business of operating ports in New South Wales at the time the privatisation decision was made with respect to Port Botany and Port Kembla and the compensation provisions were entered into because at that time the Crown, via a State owned corporation, continued to operate the Port of Newcastle. 318 Moreover, the mere fact that a decision can be characterised as a policy decision does not exclude the possibility that it could also be characterised as a decision made in the course of carrying on a business. The ACCC contended that it was particularly erroneous for the primary judge to exclude decisions made by Ministers from the application of s 2B of the Act in circumstances where the SOC Act, the PAMA Act and the PAAT Act each provided for Ministers to give directions to, and exercise control over, the State owned corporations that were operating the ports. 319 Secondly, the primary judge erred in confining the s 2B analysis by asking whether the impugned conduct - the making of the compensation provisions - served the purpose of the business carried on by the State owned corporations and concluding that because it did not, it could not be characterised as conduct engaged in by the State in the course of carrying on a business. Impugned conduct need not constitute day-to-day business in order to be conduct engaged in in the course of carrying on a business and, by extension, impugned conduct need not serve a purpose related to the day-to-day business engaged in. The ACCC submitted that the purpose of s 2B is to ensure that governments and their instrumentalities, when engaged in commercial activities, are prohibited from engaging in anti-competitive conduct to the same extent as private corporations. Where the Crown engages in conduct that directly facilitates or affects the relevant business, that conduct will be conduct "so far as the Crown carries on" that business and therefore will be conduct within the ambit of s 2B. A more prescriptive reading of s 2B was said to be inconsistent with the purpose of the provision, of the Act as a whole, and the observations of a majority of the High Court in NT Power 219 CLR 90 at 116-117 [66]-[68] (McHugh ACJ, Gummow, Callinan and Heydon JJ). 320 The ACCC contended that its approach was not inconsistent with JS McMillan v Commonwealth [1997] FCA 169; 77 FCR 337. The ACCC submitted that JS McMillan can be distinguished because in that case the impugned conduct was not referable to the carrying on of the relevant business whereas, in the present case, the making of the compensation provisions related directly to the business of operating ports in New South Wales and did have, or was likely to have, an effect on competition concerning that business. If JS McMillan cannot be distinguished, the ACCC submitted that it should not be followed because its effect would be to construe s 2B too narrowly, inconsistent with the objects of the Act. In addition, in reply to the submissions of NSW Ports and the State, the ACCC submitted that JS McMillan cannot stand for the proposition that the scope of s 2B is confined to conduct that constitutes day-to-day conduct in the course of carrying on the business because it must give way to the findings of the High Court in NT Power. In that case, McHugh ACJ, Gummow, Callinan and Heydon JJ expressly stated in the context of s 2B that "the conduct need not be the actual business engaged in". 321 The ACCC submitted that where the executive government carries on a business, a decision to sell that business on particular terms is plainly conduct that occurs "in the course of carrying on that business", especially where a relevant term was designed to continue operating after the sale of only components of the business. In any event, at the time that the State made the compensation provisions, the State was continuing to conduct the business of the Port of Newcastle and entry into the compensation provisions "can therefore readily be characterised as conduct so far as the Crown carried on the business" of the Port of Newcastle.

The submissions of PON on Crown immunity 322 PON submitted that the reasons of the primary judge contained two errors: the first was an "illusory distinction" between State policy and "carrying on a business" at J[338], [342] and [350]. The second was the "insistence" that the State was carrying on three separate businesses through SPC, PKPC and NPC: J[340], [343] and [351(1)].

The first asserted error 323 As to the first asserted error, PON submitted that the policy was no more than a decision to sell an asset. The carrying on of the business is also a policy and an implementation of a policy. State policy, as reflected in the PAMA Act and the SOC Act was that each port corporation would be established and vested with certain assets, and would be a successful business and maximise the State's investment: ss 6-9 of the PAMA Act. To characterise the divestment of the ports as policy did not, in these circumstances, explain why s 2B of the Act was not engaged. 324 To distinguish between "State policy" or "government policy" and carrying on business is to impose a restriction on Bropho v Western Australia [1990] HCA 24; 171 CLR 1 (see especially at 19: "the activities of the executive government reach into almost all aspects of commercial… endeavour"). 325 The negotiation and sale or lease of commercial assets for the maximum possible price is a prototypical commercial activity. 326 A similar difficulty in distinction was said to attend the "dual role" of the Treasurer (at J[351(4)]) as a "voting shareholder" of the SOCs and as "the person effecting the privatisation" or his "designated role under the PAAT Act". The distinction was submitted to be artificial: the Treasurer was one person holding one office.

The second asserted error 327 PON sought to put aside the separate statutory business structure of the three ports, by reference to s 2B of the Act. It was actual control of the business, not its legal form that was submitted to be relevant to s 2B. The State was carrying on one business of operating three ports. This conclusion was, it was submitted, strengthened by the fact that the Treasurer and the Minister for Finance were the only holding voting shareholders in SPC, PKPC and NPC, with power to recommend that the Governor appoint or remove directors: SOC Act, ss 20J and 20K and Sch 8 cll 2, 7(2) and concerning the CEO, Sch 9 cll 2 and 6. Also, the Treasurer had power to give directions to each SOC, with which the SOC was obliged to comply: J[315] and [316] and see the PAMA Act, ss 10A, 16, 17, 21; and the SOC Act, ss 20H, 20N-20P, 20X-20Y. The State controlled the group of SOCs and was carrying on a business comprised of the group business. That each SOC operated its own port business did not prevent a conclusion that the State owned and controlled all of them: a business encompassing all three ports. 328 This conclusion was said to be supported by the nature and course of the privatisation transaction. To obtain the best price for two ports, they were bundled together on terms that there would be financial compensation if the third port became competitive with the first two and with the new owner to pay the compensation if called upon. This would not have happened, it was submitted, if they were separate businesses. 329 It was submitted that once one recognises that the State was carrying on one business encompassing three ports the question is whether the conduct of entering into the PCDs and the compensation provisions was in the course of that business, recognising that the conduct need not itself be the actual business engaged in: NT Power at [67] and [70]. 330 The answer to that question, it was submitted, was plain if one were (to use the words used in NT Power at [67]-[68]) to cease "anatomizing, filleting and dissecting" the events and actors: Two subsidiaries out of three were being sold with a clause to compensate the buyer if the as yet unsold third began to compete with the two first sold. 331 It was submitted that the compensation provisions did not just "touch on" or "mention" the operations at Newcastle (J[347]), they created a State liability if the business at Newcastle expanded its container port services. The conduct of the State was making two of three ports it controlled more attractive for sale at a cost to the third, which would pay the compensation. This was conduct in the course of the one business of the three ports. 332 That the privatisation was a singular event does not matter, it was submitted. That it was not systematic or regular business is to require the impugned conduct to be the business engaged in, contrary to NT Power at [67]. 333 To the extent that JS McMillan cannot be distinguished and stands in the way of these conclusions, it was submitted that the case should not be followed.

Consideration and disposition of the Crown immunity question: Grounds 1 and 3.1 334 The characterisation made by the primary judge that the State was carrying on three businesses in the running of these ports is in no way denied by the terms of s 2B of the Act. That characterisation was supported by the statutory structure and operation of the ports. They were separate business entities: a large coal and general cargo port (Newcastle); a container terminal (Botany); and a wheat, coal and general cargo port (Kembla), respectively. The proper construction of s 2B does not require that three separate businesses carried on by three separate authorities, be viewed as one business carried on by the Crown, rather than three businesses being carried on by the Crown. Nothing in NT Power Full Court at 441-442 requires that conclusion. 335 As a matter of characterisation, the primary judge's conclusion that there were three businesses being carried on was not only not shown to be in error, but is consistent with the facts and the legislative structures. 336 Section 2B made s 45 applicable to the State if the impugned conduct, the entry into the PCDs and the compensation provisions, was engaged in in the course of the State carrying on a business: NT Power at 116 [67]; though the conduct need not be the actual business engaged in: NT Power at 116-117 [67]. 337 For the reasons given by the primary judge, especially at J[342], the privatisation of Botany and Kembla, and the entry into the PCDs and compensation provisions was plainly not in the course of the port businesses carried on by SPC and PKPC and through them (for s 2B) by the Crown. 338 The relevance of true governmental policy as distinct from operating a business was valid. It is not to the point to say that policy can be business policy. The policy to privatise and the contractual arrangements to effect it had nothing to with the Botany and Kembla businesses. The PCDs and the compensation provisions were directed to the maximisation of price not the operations of the businesses by the Crown through SPC and PKPC. 339 It, of course, must be accepted, as stated by McHugh ACJ, Gummow, Callinan and Heydon JJ in NT Power at 116 [66] that "[o]ne of the goals of the [Act after the Hilmer Report] was to ensure that the legislation applied to businesses conducted by the governments of the States and Territories to the same extent as it did to those conducted by the Commonwealth" and that "the Commonwealth Government should, in its commercial activities, be subject to the same regime as corporations". That, however, does not mean that if a corporation (the factum on which s 45 operates) should be liable for conduct of entering into provisions such as the PCDs and the compensation provisions, the State must also be potentially liable irrespective of whether the State entered into the contracts and provisions in the course of a business. The statutory intention in s 2B is that the conduct be engaged in in the course of carrying on a business. This was the approach of the primary judge. It was not contrary to anything said in NT Power at 116-117 [66]-[68]. 340 The broad purpose of equating "commercial activities" referred to by their Honours in NT Power at 110 [66], is to be achieved by the statute properly construed and characterisation sensibly undertaken in a business-like fashion, without anatomising, filleting and dissecting. That does not justify concluding that because a corporation is liable for conduct (whether or not it was undertaken in the course of a business) a State must be liable for such conduct when not engaged in in the course of a business. 341 It was not that the impugned conduct did not constitute the day-to-day conduct of the relevant business that led her Honour to conclude as she did. Rather, it lacked any connection to the business as carried on, related as it was to the effectuation of the (non-business) privatisation decision of a governmental character and the attempt to effect that to the maximum value. 342 There is, however, the business carried on by the Crown, through NPC, in Newcastle. The compensation provisions were anticipated to be reimbursed by any private entity taking on Newcastle. That would occur by the State privatising Newcastle. That privatisation was intended to take place in the near future. Whilst the compensation provisions may have had a possible effect on the future business of the private entity running the Newcastle port, by the anticipated reimbursement provision, they had nothing to do with the business of the port of Newcastle, run by NPC and through it the Crown, pending that privatisation, save that should privatisation of Newcastle not proceed the State under the compensation provisions may be liable for a sum referable to its conduct of the port of Newcastle. Were the compensation provisions, because of the contingency that the intended privatisation might not proceed, entered into by the State in the course of operating the business of the port of Newcastle? In my view, no, for the reasons given by the primary judge at J[351(3)]. Just as those reasons defeat the argument based on the one business proposition; so they meet the argument based on the separate conduct by NPC (and so the Crown) of the business of the port of Newcastle which was to be privatised. 343 For completeness, I note that the ACCC was unable to distil, with clarity, any legal error or error of principle in the approach of Emmett J in JS McMillan, or any relevant tension between what was said in JS McMillan and NT Power. What both JS McMillan and NT Power reinforce is that the conduct complained of must be in the course of the carrying on of a business by the Crown for s 2B to be engaged (see [339] above). Fundamentally, the question of whether or not conduct occurred in the course of the Crown carrying on a business is a factual one intimately linked with the particular circumstances of a case. In coming to the conclusion that the making of the compensation provisions was not in the course of the carrying on of a business I have not found it necessary to deal fulsomely with the ACCC's submissions on the correctness of JS McMillan. That said, nothing in these reasons should be taken as casting any doubt upon the correctness of the decision. The primary judge was entitled to rely upon it.

The appeal on "derivative" Crown immunity for the benefit of NSW Ports: grounds 2 and 3.2

The reasons of the primary judge 344 The primary judge's consideration of derivative Crown immunity is found at J[355]-[423]. 345 At J[355]-[356], her Honour isolated the relevant question by reference to the second category of derivative Crown immunity as expressed by Kitto J in Wynyard Investments Pty Ltd v Commissioner for Railways (NSW) [1955] HCA 72; 93 CLR 376 at 394, that the application of s 45 to NSW Ports would "adversely affect some proprietary right or interest of the Crown, legal, equitable or statutory" (applying Wirral Estates Ltd v Shaw [1932] 2 KB 247). 346 At J[356], the primary judge rejected the submission that this category of case was confined by later cases to a divestment of the relevant right in the sense of destroyed or removed absolutely, saying: ….Justice Kitto referred to "adversely affect" and "interference" for a legal reason in Wynyard Investments. In NT Power at [170] the High Court did not suggest that Kitto J's formulation was too broad, but noted that it had been said in Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 at [42] that the required "interference" was a divesting of the legal right. I do not consider that, by this, the High Court meant that the legal right had to be destroyed or removed absolutely. A legal right may be divested in whole or part. A partial divestment is nevertheless a divestment. Whether an interference for a legal reason with a legal right amounts to a divestment of the legal right must depend on the nature of the right and of the nature and extent of the interference with it. 347 The primary judge rejected a submission by the State that the fact that the conduct was not unilateral by NSW Ports was somehow determinative: J[357]. Her Honour rejected (at J[358]-[359]) the submission of the State that the impugned provision was somehow protected as the outworking of State policy. Her Honour also rejected (at J[361]) the submission by the State that because s 2B protects non-business related interests of the Crown, that derivative immunity necessarily followed, referring to ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; 232 CLR 1. 348 The primary judge focused on the PAAT Act. Central to that consideration were ss 6 and 7 of the PAAT Act: 6 Treasurer's functions The Treasurer has and may exercise all such functions as are necessary or convenient for the purposes of an authorised transaction. The functions conferred on the Treasurer by any other provision of this Act do not limit the Treasurer's functions under this section. 7 Manner of effecting authorised transaction (1) An authorised transaction is to be effected as directed by the Treasurer and can be effected in any manner considered appropriate by the Treasurer. (2) There are no limitations as to the nature of the transactions or arrangements that can be entered into or used for the purposes of an authorised transaction. Note: For example, an ownership structure involving a unit trust could be used for the purposes of an authorised transaction. (3) The provisions of this Act for the establishment of various kinds of transaction entity do not limit the nature of the legal entities or arrangements that can be used for the purposes of an authorised transaction. 349 After referring to these provisions, the primary judge at J[363] restated the context and purpose of the compensation provisions: In the present case, it is apparent that in giving effect to the authorised transactions under the PAAT Act to transfer the assets of Port Botany and Port Kembla to NSW Ports, the Treasurer considered that in order to maximise the value the State could obtain for the assets it was necessary or convenient to enter into the compensation provisions. In summary, if the compensation provisions were not included in the authorised transactions the Treasurer considered that entities bidding for the port assets would discount their bids to account for the perceived risk that State policy as to the sequencing of container development (both the fact and the order of sequencing) might change. If this occurred, the State would not be obtaining what it perceived to be maximum value for its assets. As the State put it, the compensation provisions were a form of insurance for the other party to the authorised transactions to deal with an issue of sovereign risk. 350 Her Honour recognised (at J[364]-[368]) that in Baxter the freedom of the Executive to contract was not a "right" but a mere freedom or capacity; and that there is no general legal right of the Crown to make any contract it wishes. There is no general preservation of the unfettered contractual capacities of the Crown: see Baxter at 35-39 [62]-[74], referred to at J[368]. 351 That recognised, the primary judge considered (see J[369]) that if s 45 applied to NSW Ports so that the compensation provisions were unlawful: … there is no doubt that the State would be divested of its capacity under the PAAT Act, at least in part, to enter into the authorised transactions as the Treasurer considered necessary or convenient (a capacity which included the giving of various directions to the SOCs to enable the transactions to be carried out). 352 The compensation provisions were necessary or convenient to enable the authorised transactions to be effected: For ss 6 and 7(2) and (3) of the PAAT Act, they were provisions "for the purposes of an authorised transaction": J[370]. It was not to the point that the provisions created a liability (not a right) in the State. The proper focus was the PAAT Act provisions and the vesting of the Treasurer with statutory authority to do what was necessary or convenient to effect the authorised transactions, being the transfer of ports assets: J[371]. It is the statutory authority (the right) vested by the Parliament in the Treasurer that is divested, not some legal right to deal with assets to maximise their value: J[372]. 353 But, at J[375], the primary judge accepted that the fact that the provision was or was considered by the Treasurer to be in the interests of the State did not distinguish the case from Baxter. Like the bilateral conduct of the Crown and a third party, and the outworking of policy, that the provisions were in the interests of the State was not relevant to relieving the third party of liability under the Act. Rather, at J[376]-[380], the primary judge identified four considerations that led to the conclusion that Baxter could be distinguished and ultimately that NSW Ports was entitled to immunity by reason of a relevant divestiture of right of the Crown: (a) First, the Treasurer's effecting of the authorised transaction was specifically enabled by the PAAT Act. It was no general or amorphous "right" or "freedom" to enter into contracts of supply; rather it was a specific statutory capacity of the Treasurer: J[376]. (b) Secondly, the PAAT Act vests the Treasurer, as Minister of the Crown, with the function, not the Executive at large; with s 33 of the PAAT Act circumscribing narrowly and specifically any delegation: J[377]. (c) Thirdly, the context was not the general supply of goods in which the Crown had no rights but the transfer of a specific class of assets: the three ports: J[378]. (d) Fourthly, from the SOC Act and the PAAT Act the relevant class of assets were of high policy and economic significance to the State: s 5 of the PAAT Act and the Restart NSW Fund Act 2011 (NSW) and in particular s 6 thereof: J[379]. 354 From this her Honour said at J[380]: In these circumstances, it is difficult to avoid the conclusion that the PAAT Act vested specific statutory rights in the Treasurer as a Minister representing the Crown. It is equally difficult to avoid the conclusion that applying Pt IV of the CCA to the conduct of NSW Ports, as the other contracting party, would apply the legal incidence of the CCA to the Treasurer who was not otherwise so bound. That reality should be directly confronted. But would applying s 45 of the CCA to NSW Ports divest the Crown of a legal right? And does the CCA evince a contrary intention to apply its provisions to the conduct of NSW Ports even if that does involve divesting the State of a legal right? 355 These two questions posed at the end of J[380] were then addressed at J[381]-[406] and J[407]-[423], respectively.

Question 1 posed in J[380]: was there a divestiture of a legal right? 356 I have already set out ss 6 and 7 of the PAAT Act. Sections 34 and 35 of the PAAT Act are as follows. 34 Act to bind State and other jurisdictions (1) This Act binds the State and, in so far as the legislative power of the Parliament of New South Wales permits, the other States, the Territories and the Commonwealth. (2) Without limiting subsection (1), this Act has effect despite any privilege or immunity of the Crown in any of its capacities. (3) This Act does not make any State or Territory, the Commonwealth, or the Crown in any of its capacities, liable to be prosecuted for an offence. (4) A reference in this section to a State, Territory or the Commonwealth includes a reference to the Government of the State, Territory or Commonwealth. 35 Extraterritorial operation of Act (1) It is the intention of the Parliament of New South Wales that the operation of this Act should, as far as possible, include operation in relation to the following: (a) things situated in or outside the territorial limits of the State, (b) acts, transactions and matters done, entered into or occurring in or outside the territorial limits of the State, (c) things, acts, transactions and matters (wherever situated, done, entered into or occurring) that would, apart from this Act, be governed or otherwise affected by the law of another State, a Territory, the Commonwealth or a foreign country. (2) Without limiting subsection (1), it is the intention of the Parliament of New South Wales that the provisions of this Act have an operation in relation to the things, acts, transactions and matters referred to in that subsection even if the rules of private international law (whether at general law or as provided by legislation) would require the application of a law other than this Act instead of the provisions of this Act. 357 The primary judge concluded at J[387] from these four provisions, as follows: When ss 34(1) and 35(1)(c) are read with ss 6 and 7 of the PAAT Act, it is not difficult to infer a legislative intention of the NSW Parliament that the statutory rights vested in the Treasurer by the PAAT Act should not be circumscribed by the operation of any law of the Commonwealth to the extent such a law would be inconsistent with the Treasurer effecting an authorised transaction as necessary or convenient. 358 Section 51 of the Act contains various exceptions to the operation of the Act. It includes ss 51(1)(b), 51(1A) 51(1C)(a) and (e). The PAAT Act did not authorise the making of the compensation provisions for the purpose of s 51. Nevertheless, as the primary judge said at J[393]: Finally, as NSW Ports submitted, s 51 permits States to authorise conduct which would otherwise be contravening conduct, but does not answer the question of what conduct would be contravening conduct requiring authorisation. In other words, s 51 of the CCA presupposes the existence of contravening conduct. If the conduct is not contravening because the State is not carrying on a business and thus s 2B of the CCA is not engaged, or because the CCA does not contain a contrary intention to the application of the presumption that a statute is not to be construed as divesting the Crown of a legal right, then amendment of the Competition Policy Reform (New South Wales) Act to exempt conduct for the purpose of an authorised transaction from the operation of Pt IV was unnecessary. Lack of such amendment cannot thereby be taken as indicative of any intention of the NSW Parliament that the CCA Act was to apply to authorised transactions under the PAAT Act. 359 At J[394] the primary judge said that it was not the intention of the PAAT Act to exempt private entities from complying with the Act. Rather, her Honour's view of the relevant question as to the PAAT Act was set out at J[395]-[396]: [395] This latter proposition [that it was not the intention of the PAAT Act to exempt private entities from complying with the Act], however, is not an answer to the relevant question in the present case. The PAAT Act may evince one intention with respect to the conduct of the Treasurer in respect of the effecting of an authorised transaction and another intention with respect to a private entity in respect of an authorised transaction. If the identification of the relevant right is determined by the provisions of the PAAT Act, as I consider it must be, then I conclude from the scope, purpose and language of the PAAT Act that the NSW Parliament intended that the Treasurer be empowered to effect an authorised transaction as necessary or convenient and unaffected by the provisions of the CCA. Such an intention is unsurprising given: (a) the Treasurer was not carrying on any business in exercising functions under the PAAT Act, and (b) accordingly, the Treasurer was not bound by the CCA in exercising functions under the PAAT Act given the terms of s 2B of the CCA. [396] It must follow from this that the relevant statutory rights vested in the Treasurer by the PAAT Act include the right for the Treasurer to negotiate and contract on terms which would involve the other party to the authorised transaction, if a corporation, contravening the CCA. This is necessary because of the bilateral character of any authorised transaction. I do not accept that this construction of the PAAT Act is precluded by the principle of legality. It is not apparent how the principle that legislation is not to be construed so as to interfere with fundamental rights is engaged in the circumstances of the present case. 360 The proper understanding of these paragraphs was debated on appeal. (See T p179-181.) 361 It was the characterisation of any rights under the PAAT Act that her Honour saw as important: J[400]: that is rights of the Treasurer, who, ex hypothesi was not bound by the Act. At J[401]-[402], the primary judge said: [401] By s 6 of the PAAT Act the Treasurer has and may exercise all such functions as are necessary or convenient for the purpose of an authorised transaction. By s 7(1), an authorised transaction is to be effected as directed by the Treasurer and can be effected in any manner considered appropriate by the Treasurer. By s 9(1), for the purposes of an authorised transaction, the Treasurer may establish or direct the establishment of a transaction company. By s 11, each port SOC and transaction entity is subject to the direction and control of the Treasurer. By s 19, the Treasurer may make vesting orders under Sch 4 for the purposes of an authorised transaction. By s 20(1), the Treasurer may make severance orders in relation to fixtures for the purposes of an authorised transaction. By s 21, the Treasurer may direct a public sector agency to grant any relevant authorisation relating to port assets to a new operator. [402] The scheme of the PAAT Act thus enables the Treasurer to do what is required to be done for the purposes of an authorised transaction. On this basis, the legislative intention of the NSW Parliament in enacting the PAAT Act may be discerned. The NSW Parliament intended that the statutory rights vested in the Treasurer by the PAAT Act included the Treasurer, for the purposes of an authorised transaction, requiring the other party to the transaction to engage in conduct that would otherwise contravene the CCA. 362 The relevant factual context was set out at J[404]: In the present case, on the evidence, the Treasurer required NSW Ports to agree to the compensation provisions. Morgan Stanley, on behalf of the Treasurer, informed bidders on 20 December 2012 that changes to the transaction documents should be minimised as they represented the State's preferred position and that any changes to the liability and risk allocation regime would be viewed unfavourably. The Treasurer proposed the compensation provisions to bidders on 15 March 2013 as part of the risk allocation regime. In doing so, the compensation provisions were described as a "codified regime" if container volumes at the Port of Newcastle exceeded an organic growth path before Port Botany and Port Kembla were fully developed. NSW Ports did not request any change to the compensation provisions. It accepted the provisions as proposed by the Treasurer. 363 Her Honour concluded at J[405]-[406]: [405] Against this background, the question whether the application of s 45 to NSW Ports in respect of the compensation provisions would divest the State of a legal right may be answered. The answer to that question is "yes". If s 45 of the CCA applies to the other party to the authorised transactions involving Port Botany and Port Kembla, NSW Ports, then the CCA would operate to divest the Crown of part of the statutory right it vested in the Treasurer, being the statutory right to transfer part of the proprietary rights of the State in the three identified ports to NSW Ports by contract and as part of that transaction to require NSW Ports to engage in conduct that might otherwise contravene provisions of the CCA (noting that s 4(1) of the PAAT Act prevented the Treasurer from transferring ownership of the land comprised in the port assets). [406] It is true that s 45 would not operate to divest the Treasurer of the whole of the statutory rights vested by the PAAT Act or the whole of the State's proprietary rights in the three port assets or the whole of the contractual rights in respect of effecting the authorised transactions. But it must be concluded that it would operate to divest the Treasurer of an important aspect of those rights - the right of the Treasurer to require the other party to the authorised transaction to engage in conduct, including making and giving effect to contractual provisions, that would otherwise contravene s 45 of the CCA, being a provision which does not apply to the Treasurer in exercising functions under the PAAT Act. This is a sufficient divestment of legal rights (statutory, proprietary and contractual) to engage the relevant principle of statutory construction. That is, it is presumed that the CCA Act does not have this operation unless, "from the language of the Act, and its objects and subject matter as emerging from that language" (Baxter at [62]), that intention may be discerned.

Question 2 posed in J[380]: does the Act evince a contrary intention to apply its provisions to conduct of NSW Ports even if there were a divesting of a legal right? 364 At J[409], the primary judge posed the difficulty for NSW Ports and the State: To the extent that the relevant rights vested in the Treasurer by the PAAT Act might be characterised as a statutory enabling of a mere freedom to contract as appears necessary or convenient to the Treasurer, the result in Baxter weighs in favour of concluding that the relevant contrary intention of the CCA Act exists. 365 The circumstances were thus required to be distinguished from Baxter. At J[410], her Honour summarised four distinguishing features already discussed: In contrast to Baxter, however, are the four distinguishing features already noted: (a) the existence of the PAAT Act as the source of the statutory rights in respect of the transfer by the State of a class of assets owned by the State (rather than the existence of a general concept of freedom enjoyed by all competent persons and bodies to contract to acquire goods in which the Crown had no pre-existing proprietary rights), (b) the fact that the class of assets is confined to three identified ports owned by the State (rather than goods sought to be acquired by the Crown in respect of which the Crown has no legal rights), (c) the fact that the PAAT Act vests the statutory right in a Minister of the Crown specifically, subject only to a confined power of delegation in s 33 of the PAAT Act (rather than the right being exercisable by members of the executive), and (d) the context of dealing with the three ports, which may be inferred to be of high significance to the State's policy and economic objectives, as confirmed by the provisions of the SOC Act and the PAAT Act, and the fact of payment of the proceeds of sale into the Restart NSW Fund (rather than a contract for supply, albeit of an important medical product, in Baxter). 366 To these matters, her Honour added the following at J[411]: Further, we are not dealing with statutory rights alone, let alone statutory rights which might be described as a mere freedom to contract. The statutory rights relate to the transfer of the State's proprietary rights in the three ports by the making of contracts with, relevantly, private entities. 367 At J[414], the primary judge recognised factors that weighed in favour of a contrary intention: This brings me back to the scope, purpose and language of the CCA as the determinant of legislative intention. Each of the features of the CCA to which the ACCC and PON referred is relevant to the existence or otherwise of the relevant contrary intention. Section 45 of the CCA applies to all trading corporations. By s 2, the object of the CCA is to promote competition to enhance the welfare of Australians. States can specifically exclude conduct from the application of Pt IV by enacting legislation of the relevant kind under s 51. In negotiating and contracting the authorised transactions, NSW Ports was a trading corporation acting in the course of carrying on its business. Had the State also been effecting the authorised transactions in the carrying on of a business, s 45 of the CCA would have applied to it by operation of s 2B. These features of the CCA also all weigh in favour of the existence of the relevant contrary intention. 368 Nevertheless, her Honour concluded at J[417]-[419]: [417] The nature of the legal rights of the Crown in question (statutory, contractual and proprietary rights in respect of a specific and confined class of assets of high policy importance to the State), the circumstances in which those rights may be exercised (by the Treasurer or a confined class of delegates only), and the effect of the application of s 45 of the CCA to NSW Ports (to divest the State of an important aspect of those statutory, contractual and proprietary rights) are all important factors in determining whether the CCA contains an intention contrary to the presumption that legislation is not to be construed so as to divest the Crown of legal rights. [418] I consider that the CCA does not evince a statutory intention that s 45 should operate to divest the State of its statutory, proprietary and contractual rights to effect an authorised transaction under the PAAT Act, including the right of the Treasurer to require the counterparty to engage in conduct that contravenes s 45 of the CCA for the purpose of the authorised transaction. [419] The object of the CCA in s 2 is to be read in the context of the provisions of that Act as a whole. Those provisions include s 2B which applies Pt IV of the CCA to the State so far (but only so far) as it is carrying on a business. The exercise of functions under the PAAT Act do not involve the State carrying on a business. The rights vested in the Treasurer under the PAAT Act to give effect to an authorised transaction require a counterparty to which the port assets may be transferred and the PAAT Act expressly contemplates that such a counterparty may be a private entity (which might otherwise be subject to the CCA). Applying s 45 of the CCA to the counterparty necessarily involves applying that provision to the Crown and thereby divesting it of those rights. In the context of s 2B, s 2 of the CCA is not determinative. That is, the object of enhancing the welfare of Australians through the promotion of competition is not pursued by the CCA at any cost. Insofar as the Crown is concerned, the object is pursued only so far as the Crown is carrying on a business. 369 The position in Baxter was contrasted at J[421]: In contrast to the present case, in Baxter the application of ss 46 and 47 of the Trade Practices Act to the corporation did not involve applying those provisions to South Australia. The conduct in issue was proposed to and not required by South Australia. The application of the provisions to the corporation did not divest South Australia of any legal right. It merely potentially qualified a future capacity of members of the South Australian executive to acquire goods in which South Australia enjoyed no pre-existing rights on any basis those members saw fit. The capacity to acquire goods is not unique to the State. It is a capacity shared by all persons. The acquisition of goods by members of the executive does not necessarily involve any high governmental function or policy, and in Baxter it was not suggested the goods in question involved any such consideration. As such, there were no criteria by which the goods in Baxter could be distinguished from any other goods. If ss 46 and 47 did not apply to the corporation in those circumstances, a vast swathe of commercial activity in Australia (purchasing of any goods by any level of government) would be exempt from the operation of those provisions of the CCA. In the circumstances in Baxter the question of how far the CCA went to achieve its object in s 2 could be answered without great difficulty - nothing indicated that the relevant provisions of the CCA were not to apply to a corporation dealing with the Crown in the course of the carrying on of the business of the corporation where the application of those provisions to the corporation would not divest the Crown of any legal right (in that there was neither a legal right of the Crown nor its divestment) and the non-application of those provisions would remove such a large area of commercial activity (supply of goods generally to a government) from the purview of the Act.

The ACCC's submissions on derivative Crown immunity 370 The ACCC submitted that the primary judge erred in concluding that the Act did not apply to NSW Ports when it made the PCDs or to the extent that it gave effect to the compensation provisions in the future because it had the benefit of derivative Crown immunity. The crux of the ACCC's submission on this point was that the primary judge did not approach the question of derivative Crown immunity in the proper manner. 371 Being a principle of statutory construction and the language of the Act accordingly being "decisive" per Baxter at 35 [60], the primary judge should have commenced with the construction of the Act rather than of the PAAT Act. Accordingly, absent a "clear and compelling" point of distinction, the primary judge should have turned first to the manner in which the Act was construed in Baxter. That case was said to be authority for the proposition that Pt IV of the Act, on its proper construction, applies to non-government contractual counterparties to the Crown, even where the Crown's conduct is not in the course of carrying on business. The application of the principles established in Baxter should have led the primary judge to conclude that the Act applied to the conduct of NSW Ports in negotiating or contracting with the Crown (cf J[407]-[423]). 372 The ACCC submitted that Baxter ought not have been distinguished. The fact that the contracts were of "high significance to the State's policy and economic objectives" is irrelevant to the construction of the Act, and the fact that the present contracts concerned the sale of State assets rather than the purchase of products has no relevant bearing on the question of whether the Act applies to NSW Ports. The primary judge's reliance on the fact that the contracts were made within the context of a larger statutory regime for the sale of State assets does not relevantly distinguish the present case from Baxter, nor does it provide a basis to conclude that in its application to third parties the Act would divest a legal right or interest of the State. It was erroneous to conclude that a contrary intention would not impose an extensive qualification on the Act's object of promoting competition and fair trading in the public interest because the privatisation of State infrastructure is a substantial commercial activity with significant impact on the State economy. The ACCC submitted that the Act clearly evinces a legislative intent to regulate the conduct impugned by the ACCC, excluding the operation of derivative Crown immunity. Had the primary judge applied Baxter, her Honour would have concluded that the Act was intended to apply to the impugned conduct and no further analysis would have been required. 373 On the ACCC's submission, the primary judge fell further into error in concluding that the PAAT Act impliedly authorised the State Treasurer to require a counterparty to engage in a contravention of federal law. This conclusion was said to be Constitutionally invalid for two reasons. First, a State law which purported to empower the State Treasurer to authorise and require a person to contravene a federal law would be invalid by force of s 109 of the Constitution because it would alter, impair or detract from the federal law. Second, State Parliaments lack the legislative power to regulate the operation of federal law. In addition, that conclusion is not supported by the Act, properly construed. Section 51(1) of the Act allows State Parliaments to require conduct that is expressly and specifically authorised by State legislation to be disregarded by the Act. To construe the Act as being inapplicable whenever a State law purports to confer authority on the Minister to authorise such conduct otherwise than as provided for in s 51(1) of the Act would be to deprive s 51(1) of any necessary application. 374 Even if the above conclusion could be sustained, the primary judge erred in finding that the implied "authority" of the State Treasurer constituted a legal "right" that engaged the principle of derivative Crown immunity. Sections 6, 7, 9(1), 11, 19, 20(1), and 21 of the PAAT Act confer both general and highly specific functions and power on the Treasurer in relation to authorised transactions. They do not provide any basis to imply a "right" or power to authorise and require conduct to be engaged in free from the operation of federal law. The very nature of the finding of an "implied" authority in the absence of clear words is difficult to support noting that the principle of legality requires clear words where there is a departure from the "general system of law", which includes federal competition laws (cf J[396]). 375 Furthermore, even should such an implied "authority" be derived from the PAAT Act, such a capacity or power to act would not constitute a proprietary right, or legal, equitable or statutory interest of the Crown capable of engaging the principle of derivative Crown immunity. The ACCC contended that it is well settled that divestment of a legal right or interest, being a right or interest capable of enforcement, is required to engage the principle of derivative Crown immunity (citing Baxter at [62] and NT Power at [172]-[173]). The interest identified by the primary judge, a purported statutory power to immunise conduct from regulation by the law of another polity, is not a legal right or interest in the relevant sense. The purported power is not capable of being enforced against another person: if it exists, it is a statutory power relating to a contractual capacity, which is not relevantly different from the executive power to contract that was held not to engage the principle of derivative Crown immunity in Baxter. The primary judge therefore erred in concluding that there was a divestment of legal rights sufficient to engage the principle of derivative Crown immunity.

PON's submissions on derivative Crown immunity 376 As to the applicability of s 45 to NSW Ports, PON submitted that the PAAT did not vest in the Treasurer any "statutory right" to require NSW Ports to do anything and accordingly, the application of s 45 of the Act to NSW Ports would not divest the State of any rights. Sections 6 and 7 of the PAAT Act use general language empowering the Treasurer to effect an "authorised transaction", they do not say anything about compelling entities to accept a transfer on whatever terms the Treasurer sees fit or the power to sanction entities who decline to accept the Treasurer's terms. PON submitted that the correct construction of the PAAT Act is that it empowered the Treasurer to make any contract he considered expedient but conferred no "right" to require a counterparty to accept his terms, let alone required it to engage in conduct that might contravene a Commonwealth statute. 377 PON further submitted that s 45 of the Act applies to NSW Ports in any event. PON contended that the applicability of s 45 is a matter of statutory construction, and the answer is therefore not to be found in the doctrine of derivative Crown immunity. According to PON, a "contrary intention" per Baxter at [62] is manifest in s 45 of the Act to render it applicable to NSW Ports even if its application would entail the divesting of a proprietary, contractual or other legal right or interest of the Crown. The language of s 45 applies to any "corporation". Nothing in the text, objects or subject matter of the Act justifies a construction which grants NSW Ports an immunity that is wider in scope than that enjoyed by the State. As the majority in NT Power said at [71], the "legislative goal" was to secure "equivalent treatment of non-government and government businesses". The object of the Act, as expressed in s 2, of "enhance[ing] the welfare of Australians through the promoting of competition" would not be advanced by construing s 45 as inapplicable to NSW Ports. 378 A "contrary intention" is also found in s 51 of the Act. By s 51, the Commonwealth Parliament signified that, if State Parliaments wish to authorise conduct that may contravene the Act, they may do so, but only in the manner prescribed by that provision, thereby "accept[ing] the political responsibility" which comes with it: Baxter at [48]. The primary judge erred in reasoning that the PAAT Act has the same effect as a State law which satisfies s 51 of the Act despite not actually satisfying s 51. If the State wanted to protect its rights and interests by exempting counterparties from Pt IV of the Act, it only had to say so in the PAAT Act itself, as prescribed by s 51 of the Act. The State did not do so. It is not surprising that the State's freedom to make contracts with corporations is constrained by the obligation of those corporations to comply with the law: Baxter at [60], [68], [70], [73].

NSW Ports' submissions on derivative Crown immunity 379 NSW Ports submitted that the primary judge correctly held that s 45 of the Act does not apply to the conduct of the State or NSW Ports in making or giving effect to the compensation provisions because if it were to apply it would impinge upon the legal rights of the State otherwise than in the course of any business carried on by the State contrary to s 2B of the Act. The legal rights that would be adversely affected are the State's statutory, proprietary and contractual rights to effect the specific authorised transactions identified in the PAAT Act, which included the compensation provisions. The relevant rights were not statutory rights alone (J[411]), they also included proprietary and contractual rights involving the disposition of interest in land and other assets embodied in contracts to which the State was a party, which the relief claimed in this proceeding would adversely affect. 380 NSW Ports submitted that because the State enjoyed an area of Crown immunity from the application of s 45 by reason of s 2B, NSW Ports also enjoyed that immunity because to conclude otherwise would adversely affect the State's legal rights. The area of Crown immunity provided for by s 2B has the corollary that s 45 "must be denied an incidence upon a subject of the Crown [if] that incidence would be in legal effect upon the Crown" within that area of immunity: Wynyard Investments at 393-394, quoted in Baxter at [59] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). The primary judge correctly held that application of s 45 to the conduct of NSW Ports in making or giving effect to the compensation provisions would divest the State of its capacity under the PAAT Act to enter into the authorised transaction as the Treasurer considered necessary or convenient: J[369]. This specific statutory authorisation, conferred on a particular Minister in relation to particular assets, distinguished the case from any reliance on a generalised freedom to contract, as disapproved in Baxter: J[376]-[380]. 381 Contrary to the ACCC's submissions, NSW Ports contended that the primary judge did not hold that the PAAT Act confers a statutory power to legally compel NSW Ports to accept any and all contractual terms. Rather, her Honour identified a statutory right in the Treasurer to contract on any terms, which encompassed the possibility of factually requiring counterparties to accept terms desired by the Treasurer. Consequently, s 109 of the Constitution is not engaged. The PAAT Act does not purport to authorise contravention of the Act. Rather, it validly authorises the Treasurer, to whom the Act does not apply, to engage in contracts on terms which might involve the counterparty in a putative contravention. The non-application of the Act to that counterparty is then an operation of s 2B of the Act, not of the PAAT Act. Section 51(1) of the Act does not require a different answer: it does not speak to the reach of the Act in defining what conduct is contravening conduct requiring authorisation (see J[390]-[393]). 382 In concluding that NSW Ports enjoyed derivative Crown immunity, the primary judge relied not only on a divestment of the State's statutory rights, but also of its proprietary and contractual rights: J[405]-[406], [411]. The "need for concentration upon legal consequences" per Baxter (at [62]) includes consideration of the remedies available. Application of s 45 to NSW Ports in this case would engage s 4L of the Act and sever the compensation provisions, denying the State its contractual rights as well as the underlying proprietary rights involved in the disposition of the State's assets in a value-maximising way. Where the State sought inclusion of an impugned contractual provision, its severance should be held to be a divestment of the State's legal rights that is beyond the application of the Act. A contrary intention to adversely affect the State's legal rights cannot be discerned: s 2B carries with it an affirmative intention that the State not be divested of its rights outside of the contexts in which it carries on business.

The State's submissions on derivative Crown immunity 383 The State described the primary judge's reasoning with respect to the question of derivative Crown immunity as "comprehensive and orthodox." The State submitted that there is nothing of significance in the text or context of s 45 of the Act that excludes the operation of derivative Crown immunity. The majority in Baxter held at [62] that the Act will not be read so as to divest the Crown of proprietary, contractual, or other legal rights or interests "save to the extent to which a contrary intention appears." The reasoning of the majority was thus premised on the proposition that derivative Crown immunity was a feature of the Act, properly construed, subject to the possibility that a contrary intention might appear in particular aspects of the Act. 384 While Baxter contains relevant statements of principle, according to the State, it would be erroneous to seek directly to apply the outcome to the present case given the different circumstances of this case. In particular, it is highly relevant that this case was concerned with the State exercising a right in respect of specific assets pursuant to State legislation, as compared to Baxter, which concerned actions by third parties directed to the State. The primary judge recognised that if the Act applied so that NSW Ports could not make or give effect to the compensation provisions, the State would be divested of its legal rights - statutory, proprietary and contractual - to enter into the transactions authorised by the PAAT Act in the manner chosen by the State: J[369]-[406]. The relevant statutory right in question is the right, vested in the Treasurer by the PAAT Act, to transfer part of the proprietary rights of the State in the ports to NSW Ports by contract and as part of that transaction to require NSW Ports to engage in conduct that might otherwise contravene provisions of the Act: J[405]. 385 As to the ACCC's argument that the primary judge's construction of s 45 of the Act would deprive s 51(1) of any necessary application, the State submitted that this contention was not on point. Section 51 presupposes the existence of contravening conduct. However, derivative Crown immunity operates at an interior point to determine whether the conduct is contravening at all. Moreover, there is still a role for s 51(1): derivative Crown immunity will operate only in respect of particular defined circumstances and most conduct relating to the State will be outside its purview. It is to that contravening conduct that s 51 is addressed and in respect of which permits a State legislature to expressly authorise contravention.

Consideration and disposition of derivative Crown immunity 386 The proper principles of derivative Crown immunity are to be taken from an examination of five decisions of the High Court: the expression of principle of Kitto J (with whose reasons Fullagar J agreed, albeit in dissent) in Wynyard Investments at 393-396, Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd (1979) 145 CLR 107 at 124 (Gibbs ACJ), 129 (Stephen J), 137-138 (Mason and Jacobs JJ), Bass v Permanent Trustee [1999] HCA 9; 198 CLR 334 at 353-354 (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ), NT Power at 151-159 [166]-[190] (McHugh ACJ, Gummow, Hayne, Heydon and Crennan JJ), and Baxter at 30-39 [50]-[75] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). (The distillation of principle from these cases is unaffected by subsequent cases to which no reference was made by the parties: see, for example, Federal Commissioner of Taxation v Tomaras [2018] HCA 62; 265 CLR 434 and Copyright Agency Ltd v New South Wales [2008] HCA 35; 233 CLR 279.) 387 In Wynyard Investments at 393, Kitto J posed the relevant question or issue: "The cases in which a statutory provision not binding on the Crown must be denied an incidence upon a subject of the Crown because that incidence would be in legal effect upon the Crown…". Justice Kitto had already, at 393, described this as "whether the operation of the provision on the subject would mean some impairment of the existing legal situation of the Sovereign." Justice Kitto saw (at 394) these cases in three broad classes: The first class was a provision applying to the person that would affect the authority of the person as a servant or agent of the Crown to perform some function for the Crown. The third was an anomalous class of case concerning provisions that created a liability by reference to ownership or occupation of property which would impose a burden on performance of function, though not performed by a servant or agent of the Crown, but which were looked upon by the law as performed for the Crown. The second, being that relevant here, was where a provision, if applied to a person, would adversely affect some property right or interest of the Crown, legal, equitable or statutory. 388 Importantly, Kitto J at 394-395 made "one further general remark" that is relevant to the proper approach here: As I have said, in order that a case should be held to fall within any of these three classes, it must be found that the application of the relevant provision to the subject who invokes the Crown's immunity would be, in legal effect, an application of it to the Crown. But here again care is needed lest convenient short-hand expressions prove misleading. The question in such a case is not fully stated by asking, as often is asked, does the particular subject "represent" the Crown. The question is really not one of attributing to the subject the status of a representative of the Crown; for, even where "representative" is an apt word to use, representation of the Crown generally is not what such a contention must be understood as necessarily asserting. The question concerns only the relationship to the Crown in which the individual stands in respect of the particular matter in which the impact of the relevant provisions is incurred. Whatever features of a case are relied upon as bearing upon the claim to the benefit of the Crown's immunity, they must always be looked at, as the Full Court of Victoria pointed out in Victorian Railways Commissioners v Herbert "with due regard to the nature of the immunity or privilege of the Crown which is claimed, so that attention may be directed to what is relevant to the particular enquiry which is being made." (Emphasis added.) (The judgment of the Full Court in Victorian Railways Commissioners v Herbert (1949) VLR 211 quoted by Kitto J was of Herring CJ, Lowe and Fullagar JJ). 389 For the purposes of the matter here, it is important to appreciate the nature of the immunity of the State from the Act. That nature involves understanding the nature and character of the interference. As Kitto J then said at 396: The object in view is to ascertain whether the Crown has such an interest in that which would be interfered with if the provision in question were held to bind the corporation that the interference would be, for a legal reason, an interference with some right, interest, power, authority, privilege, immunity or purpose belonging or appertaining to the Crown. 390 In Bradken, Gibbs ACJ, Stephen J, and Mason and Jacobs JJ, all expressed the principle by reference to the various expressions of the principle of construction in In re Telephone Apparatus Manufacturers' Application [1963] 1 WLR 463, either generally or specifically those of Wilmer LJ (at 474-475), Harman LJ (at 477), and Upjohn LJ (at 482-483). Each of Gibbs ACJ and Stephen J expressed the matter as prejudicing the interests of the Crown when in contractual relationship with other parties to whom the Act applied or when otherwise interested in transactions affecting those parties: at 124 and 129. Justices Mason and Jacobs expressed the matter as exonerating from the application of the provision not intended to bind the Crown, not only direct application to the Crown, but also to the contracts, arrangements or understanding made by the Crown and the other parties thereto. 391 In Bass, Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ referred to Bradken and Telephone Apparatus, and stated the rule of construction at 198 CLR 354 [42] as follows: "that a statute is not to be construed as divesting the Crown of its property, rights, interests or prerogatives in the absence of express words or necessary implication to that effect", drawing upon Upjohn LJ's adoption in Telephone Apparatus at 483 of the expression of the rule by Wrottesley J in Attorney General v Hancock [1940] 1 KB 427 at 439 to that effect. 392 In NT Power, McHugh ACJ, Gummow, Hayne, Heydon and Crennan JJ drew together the above at 219 CLR 152 [170], as follows: A more accurate way of putting the issue which Gasgo raises accords with what was said by Kitto J in Wynyard Investments Pty Ltd v Commissioner for Railways (NSW). This is to ask whether s 46, in preventing enforcement of a clause in a contract between two parties, neither of whom is the Government, caused "some impairment of the existing legal situation of" the Northern Territory Government in this case [referring to Kitto J at 393 - see [387] above]. The object, to adapt what was said by Kitto J, is to ascertain whether the application of s 46 to Gasgo "would be, for a legal reason, an interference with some right, interest, power, authority, privilege, immunity or purpose belonging or appertaining" to the Government [referring to Kitto J at 396 - see [389] above]. More recently, [citing Bass at 354 [42]] this Court said that the interference to be looked for is a "divesting" of "property, rights, interests or prerogatives" belonging to the Government. The better view is that the principle applies to proprietary, contractual and other legal rights and interests and not otherwise, notwithstanding that it has been said to extend to "arrangements or understandings."… (Emphasis added and other citations omitted.) 393 The plurality in NT Power refused at 219 CLR 153-154 [173] to extend the operation of the principle to purely financial consequences upon the Crown when no legally enforceable interest of the Crown was prejudiced. 394 Then, at 219 CLR 154-158 [174]-[181], the plurality in NT Power considered whether there was a more extensive interpretation of Bradken taking the principle of construction beyond "prejudice to property rights, legal rights, legal interests or legal prerogatives" of the Crown; such being perhaps taken from the expression by Gibbs ACJ at 145 CLR 124 "prejudicial to the interests of the Crown" and "which would affect prejudicially the interests of the Crown". Their Honours also dealt with how the various bases for decision in Telephone Apparatus had been dealt with in Bradken. Whilst not restating in full the principle, their Honours rejected any extension of the principle as expressed in Bradken and Bass beyond property rights, including contractual rights, of the Crown. 395 The question of the proper extent of derivative Crown immunity, Wynyard Investments, and Bradken arose for consideration in Baxter. As Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ said at 232 CLR 34 [58], the overtaking of the principle of Crown immunity in Bradken by the decision in Bropho (1990) 171 CLR 1 required the reconsideration of the statement of the "corollary" of the proposition that the Act did not bind the Crown: that is reconsideration of the principle of statutory construction (see 232 CLR 34 [58]) of derivative Crown immunity. Thus, it is first to Baxter that one turns for the controlling statement of principle derived from the earlier cases. 396 The proposition of statutory construction that is the corollary of the principle in Bropho was framed in commencement (at 232 CLR 34-35 [59]) by reference to that which Kitto J had said in Wynyard Investments 93 CLR 393-394 (see [387]-[388] above). 397 At 232 CLR 35 [60]-[62], their Honours further developed the discussion by emphasising that the interference must be of legal, equitable or statutory rights and interests: [60] We are concerned with the second of these classes, bearing in mind that what is involved is the "incidence … in legal effect" upon the Crown. General references to unspecified forms of prejudice to interests of the Crown in a context such as this are unhelpful. There were references in the argument for the respondents to the "right" of States to enter into contracts, where what was in contemplation would be described more accurately as a freedom. There is also a risk of confusing governmental, commercial, or even political interests with legal, equitable or statutory rights and interests. From one point of view, it may be in the interests of a government for it, and anyone who deals with it, to have complete freedom to contract, but in reality no one has such freedom. There are many laws, some of which apply to governments and some of which do not, that constrain freedom of contract. Some of those laws that do not apply to governments have an indirect effect upon governments, in their application to people dealing with governments. Some of those laws operate for the protection of governments. A law to promote competition and fair trading may, in some of its aspects, operate in that way. For reasons already given, whether and to what extent it is to the advantage of executive governments, Commonwealth or State, for corporations dealing with them to be unfettered by laws which promote competition, is a question to which there is no simple answer. Because of its power to make laws with respect to trading corporations, it is a question on which the language of the federal Parliament's legislation is decisive, subject to s 51(1). [61] In Wynyard Investments [at 396], Kitto J said: "The object in view is to ascertain whether the Crown has such an interest in that which would be interfered with if the provision in question were held to bind the corporation that the interference would be, for a legal reason, an interference with some right, interest, power, authority, privilege, immunity or purpose belonging or appertaining to the Crown." [62] The need for concentration on legal consequences in this context has been stressed in recent times by this Court in NT Power Generation Pty Ltd v Power and Water Authority [at 152 [170]] The principle of construction to be applied is that, since the Act does not bind the Crown in right of a State or Territory when it is not carrying on a business, then, save to the extent to which a contrary intention appears, the Act will not be read so as to divest the Crown of proprietary, contractual or other legal rights or interests. Consistently with Bropho, such a contrary intention may appear from the language of the Act, and its objects and subject matter as emerging from that language. (Emphasis in original and other citations omitted.) 398 Thus, from Wynyard Investments at 396, Bass at 354 [42], NT Power at 152 [170] and Baxter at 35-36 [60]-[62], the relevant interference with the proprietary, contractual or other (including statutory) legal rights or interests is divestment of such. The expression of the type of legal rights involved can also be seen in the expression of the matter by Kitto J in Wynyard Investments at 396 set out in NT Power at 152 [170] (see [392] above) and integral to the expression of the "reconsideration of the statement of the corollary" in Baxter at 35-36 [60]- [62] by its placement in [61] (see [397] above). 399 In Baxter the majority then rejected (at 35 and 37 [60] and [68]) any expression of principle that protected, through derivative Crown immunity, a general freedom of the Crown to contract on any terms it liked. 400 As the primary judge said, the reasons in Baxter were not limited to imposition by the external party on the Crown. However, also as stated by the primary judge, Baxter was concerned with the buying and selling and supply in commerce of goods to public authorities which were not acting in the course of business. The holding of the Act as applicable to Baxter as the non-governmental party did not affect the legal rights of the Crown under the contracts in question, where s 4L of the Act applied as explained in SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; 225 CLR 516. The various governmental authorities bought and paid for sterile fluids in large quantities unaffected by the imposition of liability upon Baxter for any contravention of s 46 or s 47 of the then Act. 401 It is instructive and conducive to the avoidance of error in applying the rule of construction to recognise that the so-called derivative Crown immunity is not an immunity to which NSW Ports is entitled in the sense of a right inhering in it. Nor is it separate from Crown immunity; rather, it is part of the ascertainment of the proper extent of the State's immunity. Though NSW Ports can claim its benefit, it does so because the principle is the "corollary" of the proposition that the Act does not bind the Crown; as such it is part of, or an aspect of, the question as to the true extent of the Crown immunity of the State. That is how Kitto J expressed the matter at 93 CLR 394. (See the first emphasised passage at [388] above.) Would the application of the provision to the subject be, in legal effect, an application of it to the Crown. That question - the true extent of the immunity of the Crown - is to be answered by the expression of the principle as discussed in [392] above and earlier paragraphs. If one concludes in the affirmative, and thus there is an application of the provision to the Crown were the subject to be bound by the provision, and if the putatively applying statute can be seen as not intended to bind the Crown, the subject is not bound. 402 As submitted by the State and NSW Ports, this is the answer to the ACCC's and PON's reliance on s 51 of the Act as supporting a contrary intention to the proposition that the Act does not apply to the subject (NSW Ports) if the Crown is affected in the way described in Baxter, NT Power, Bass, and Wynyard Investments. Section 2B and its application when the conduct of the State is not engaged in in the course of a business means that the immunity of the State extends to prevent s 45 applying to NSW Ports if, for s 45 so to apply, proprietary, legal or equitable, or other, including statutory, rights of the State (understood as expressed by Kitto J in Wynyard Investments at 396) would be divested as described in the above cases. In such circumstances, there is nothing to authorise under s 51 of the Act. Section 51 is not, and cannot be, the basis of an intention in the Act contrary to the operation of the proposition drawn from Kitto J in Wynyard Investments and expressed in Bass, NT Power, and the "reconsideration of the statement of the corollary" in Baxter at 34-36 [58]-[62]. Section 51 operates assuming contravention, not assuming non-contravention by the proper ascertainment of the extent of Crown immunity. That proper ascertainment of the extent of Crown immunity takes place at an anterior stage to the possible relevance of s 51 of the Act. To construe s 51 as argued by the ACCC and PON is to find a statutory intention to reduce the proper extent of Crown immunity as developed in the cases culminating in Baxter. No such intention can be derived from the text of s 51. 403 Further, for completeness, the primary judge did not direct attention to any secondary materials or legislative history with respect to s 51. No doubt that was because no party directed her Honour to any such materials. No party referred us to any relevant secondary materials or legislative history on appeal. A review of the secondary materials and legislative history of this aspect of s 51, including explanatory memoranda and second reading speeches, renders the lack of any reference by the parties to any such material fully justified. There is nothing in the secondary materials or legislative history that would warrant a conclusion outside the text that there was any intention of the Parliament to confine Crown immunity so as to limit its proper reach and extent by removing the proposition contained in Kitto J's judgment in Wynyard Investments, as illuminated and explicated by the High Court in Bass, NT Power and Baxter as the appropriate approach to construction on this issue. 404 The questions must therefore be posed: What was or were the relevant proprietary, legal or equitable or statutory right or rights of the State? And was it, or were they, divested by applying s 45 to NSW Ports in respect of the compensation provisions? 405 The enquiry as to the nature of the rights of the State focuses upon the PAAT Act. That Act (especially ss 4, 5, 6, 7, 9, 11, 34, 35 and 36) is the source of the legal and statutory rights, interests, powers, authorities, privileges, immunity or purpose belonging or appertaining to the Treasurer, as a Minister of State. The New South Wales Parliament conferred this bundle of legal and statutory rights, interests, powers, authorities and immunity to the full extent within its Constitutional right so to do. The conferral was not some recognition of a mere capacity of the State, the Executive, or the Crown, to contract in the ordinary course of doing business or in the ordinary course of executing governmental activities if not in an engagement in the course of business. This was the conferral of such rights, interests, powers, authorities, privileges and immunity in the undertaking of the transfer of assets and functions involved in and attending large and extremely valuable State assets, the ports of Port Botany and Port Kembla. The contemplated transactions were of land, fixtures and associated infrastructure, valuable property and proprietary rights and interests, though not by way of sale. 406 These matters are not, as the ACCC and PON submitted, irrelevant considerations foreign to some proper task of abstract a-contextual analysis, or jurisprudential categorisation, of the legal and statutory rights created by the PAAT Act and conferred on the Treasurer to be equated with the general contractual capacity of the Crown or the State or the Executive to enter contracts in the ordinary course of business or the ordinary course of government, such as the purchase of sterile fluids for hospitals in Baxter. These matters are the necessary context, within which Parliament acted to confer rights, interests, powers, authorities and immunity upon the Treasurer. The statutory creation of Parliament in the form of the PAAT Act was for the purpose of the dealing by the Treasurer with extremely valuable assets and proprietary rights comprised in, and attending, two crucial pieces of public State infrastructure. The essential character of the purpose of the PAAT Act and the purpose of the creation of the rights, powers, authorities etc (vide Wynyard Investments at 396) in the Treasurer was the public good of the State and the people of New South Wales reflected in the statutory destination of the transaction proceeds: the "Restart NSW Fund", the purpose of which was stated in s 6(1) of the Restart NSW Fund Act 2011 (NSW), as follows: The purpose of the Fund is to improve economic growth and productivity in the State, and for that purpose: (a) to fund major infrastructure projects, and (b) to fund infrastructure projects that will improve: (i) public transport, and (ii) roads, and (iii) infrastructure required for the economic competitiveness of the State (including the movement of freight, inter-modal facilities and access to water), and (iv) local infrastructure in regional areas that are affected by mining operations, and (v) hospital and other health facilities and services, and (vi) workplaces for law and justice officers, teachers, nurses and other staff providing services to the public. 407 This reflects the importance of the "one further general remark" of Kitto J in Wynyard Investments at 394-395 (see [388] above) and the statement of approach by the Full Court of the Victorian Supreme Court (which at that time included Fullagar J) in Victorian Railways set out at [388] above. The enquiry as to the rights and immunity as described by Kitto J in Wynyard Investments at 396 takes place in its proper context. As the same learned justice of the High Court said in Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 at 448 for the purpose of solving concrete legal problems with respect to rights (in that case equitable rights) more hindrance than help is likely to come from an attempt to classify or categorise them, a priori, in Austinian terminology divorced from the context of the concrete legal problem. This is more especially so in an enquiry concerning, and in an assessment of, the operation of a stated proposition concerned with statutory construction designed to recognise the proper extent of the reach of a polity's statute into the affairs (that is, the rights, interests, powers, authorities, privileges, immunity or purpose) of itself or of another polity. The task is not one of labelling or mere legal categorisation. 408 It is the identification, in its proper context, of the nature and character of the rights and interests (in the relevant legal sense described by Kitto J in Wynyard Investments at 396 and recognised and adopted in NT Power and Baxter (see [392] and [397] above) of the Treasurer derived from the PAAT Act, focusing at all times on the legal effect of the relevant provision. The PAAT Act not only reveals that the authorised transactions were not undertaken and effected in the carrying on of a business for the purpose of s 2B of the Act and the operation of the so-called "direct" Crown immunity, but also that the rights and interests (in the relevant legal sense) were real, of substance, and of a character informed by the valuable proprietary interests and rights directed and controlled in the transaction by the Treasurer and were not to be categorised as somehow merely being equivalent to the general capacity or freedom of the Executive to contract. The nature of the rights and interests (in the relevant legal sense), with the focus or concentration on legal consequences (Baxter at 35 [62]), is to be drawn appreciating their context. This requires a proper focus on the nature of the undertaking involved. It is not determined by an inability to define, a-contextually, some theoretical jurisprudential distinction between the effect on a contract to buy sterile fluids for the conduct of treatment in a hospital in the ordinary course of governmental procurement operations and the effect on the terms of the transfer of land and port assets and the proprietary interests therein, comprising major and extremely valuable public infrastructure assets, into private hands for the purpose of freeing up the maximum possible value for the public purposes in s 6(1) of the Restart NSW Fund Act 2011 (NSW). Such a difference in nature and character of context in the central task of the focus or concentration on legal consequences (Baxter at 35 [63]) was the subject to which their Honours referred in Baxter at 39 [74]. 409 Broadly, the above was the approach of the primary judge at J[355]-[406]. Something should be said, however, about the language used by her Honour at J[395]-[396]. No judge in Australia, and certainly not her Honour, if I may respectfully say, would be taken to think that a State Parliament could pass a law to authorise a person to contravene a Commonwealth law, without the foundation for such State legislation being another law of the Commonwealth authorising it. Her Honour was here working on the (correct) assumption of the non-application of s 2B of the Act and of the "direct" application of Crown immunity to the State. Her Honour was answering the question whether there was a divestiture of some right and recognised from the nature of the rights and interests (in the relevant legal sense) conferred on the Treasurer that if the compensation provisions were or would be in contravention of s 45 (if applicable and engaged) such would affect both the State (if s 2B made the Act applicable to it) and NSW Ports (if s 2B made the Act applicable to the State or even if it did not, if derivative Crown immunity did not apply). Her Honour was introducing and leading up to the specific enquiry undertaken at J[405]-[406] (see [363] above) as to whether the application of s 45 to NSW Ports in respect of the compensation provisions would divest the State of a legal right or interest in the relevant legal sense. There was no operative legal error in the expressions used in J[395] and [396]. 410 Her Honour was correct to conclude that there would be a divestiture of such part of the rights and interests (in the relevant legal sense) of the Treasurer conferred on him by Parliament to effect the transaction as he had directed after he had concluded that the compensation provisions were necessary or convenient for the purposes of the authorised transactions, which purposes plainly included the raising of full value in funds from the proceeds of the authorised transactions for the purposes of the Restart NSW Fund Act 2011 (NSW). 411 Were s 45 to apply, ss 4L and 45 of the Act would sever and make of no effect the provisions which underpinned the demand by the Treasurer for the highest value for a monopoly asset operating and anticipated to operate under current government policies, both as to the exhaustion of Port Botany's capacity and port sequencing. The value of that demand for the highest value was estimated to be a significant, material amount of money the sum of which is confidential and need not be specified for the purposes of this judgment. 412 The PAAT Act, in terms, entitled the Treasurer to effect the transaction as he chose to direct. If the legal effect of the transaction was not as he directed because of the severance and unenforceability of the compensation provisions by way of ss 4L and 45 of the Act, there was or would have been a divestiture of that right, power, authority and privilege conferred by the PAAT Act and in that sense, s 45 in its operation on the subject (NSW Ports) would mean the impairment of the existing legal situation of the Executive or Crown and the incidence of the provision on the subject would be in legal effect upon the Crown: Kitto J in Wynyard Investments at 393. Any such change, through divestment of the legal rights of the parties (the State and NSW Ports), could lead to claims between them as to financial consequences of such a change to the underpinning of the bid structure of the authorised transactions. Such would not merely be financial; it would be a consequence of divestiture of the legal and statutory rights of the Treasurer to direct a framework of rights and obligations of the parties to underpin the maximum value to be obtained on the hypothesis of a monopoly: cf NT Power at 153-154 [173]. 413 The above is to be compared with the position in Baxter. There, the application of ss 46 and 47 to the conduct of Baxter imposed upon the State by the exercise of market power only invalidated parts of contracts entered into pursuant to the Crown's general freedom to contract. These contracts saw supplies received and paid for by the State at prices that may have been higher than would have been under unimpaired competitive conditions. There was no relevant divestiture of a relevant legal right. There was only the affectation of contracts entered into pursuant to a general power, which was of no substantive consequence to the legal position of the State authorities, and indeed no consequence to the financial position of them. 414 There was no intention in the Act contrary to the rule of statutory construction found in Baxter, NT Power, Bass and Wynyard Investments. Section 51 of the Act did not provide such for the reasons already expressed (see [402] above). 415 The application of s 45 of the Act to corporations (as a type of subject of the Crown to whom or to which the Act applied, by reference to a Constitutional foundation) did not evince an intention contrary to the principle of the availability and extent of Crown immunity discussed in the cases to which I have referred commencing with Kitto J in Wynyard Investments.

The submissions on behalf of the intervenor 416 Leave was given on 16 February 2022, for Mayfield Development Corporation Pty Ltd (MDC), previously known as NSC to intervene by written submissions only, subject to any question of costs. Those submissions require little additional consideration.

Derivative Crown immunity 417 MDC's submissions raised hypotheses said to come from the possible operation of ss 45(2) and 75B of the Act. They were, as submitted by NSW Ports, vague, unclear and unhelpful hypothetical scenarios that failed to direct themselves to the primary judge's expression and application of principle. 418 MDC submitted that the primary judge misconstrued s 2B of the Act and the operation of so-called derivative Crown immunity. Essentially, it submitted that s 2B(1) had no operation with respect to so-called derivative Crown immunity because of the place and operation of s 51 which was said to cover the field of operation of the subject of the application of the Act beyond the application of s 2B to the State alone or directly when not carrying on a business. I reject this construction of the Act and ss 2B, 45 and 51. Her Honour correctly applied Baxter and earlier cases and identified the relevant right which was or would be divested were s 45 to apply to NSW Ports. 419 MDC's submissions as to s 51 should be rejected for the reasons given for rejecting the argument of the ACCC and PON that that section of the Act manifests a contrary intention to the operation of the proposition drawn from Kitto J in Wynyard Investments and applied in Bass, NT Power and Baxter. Section 51 is predicated on contravention, not non-contravention of the Act.

The question of purpose 420 The primary judge did not, as MDC submitted, rely on some semantic distinction between purpose and motive. Her Honour addressed the relevant factual question of subjective purpose. 421 There was an assertion by MDC that NSW Ports had a purpose to restrict container trade at Newcastle in order to make its bid. No one was cross-examined to that effect. It was not part of the case run; and not for an intervenor to raise on appeal.

The Cross-Appeal by NSW Ports and the Notice of Contention by PON 422 The Cross-Appeal by NSW Ports arose only contingently if the ACCC succeeded on grounds 3, 8, 9, 10 and if NSW Ports failed in its Notice of Contention about ground 8 found within the Cross-Appeal document. 423 The appeal should fail for the reasons that I have expressed. Therefore there is no call to deal with the Cross-Appeal (or the Notice of Contention contained within it). 424 The Notice of Contention by PON was only said to arise if NSW Ports' Cross-Appeal arises. It does not. Thus there is no call to deal with the Notice of Contention of PON.

Orders 425 Subject to giving the parties an opportunity to consider these reasons, I would dismiss the appeal and cross-appeal and order the appellant (the ACCC) to pay the costs of the first to fourth respondents (NSW Ports and the State) of the appeal and cross-appeal. 426 The question of confidentiality needs to be addressed. I would restrict publication of the reasons to the parties until further order, but require any relevant party to justify within 7 days any continuing confidentiality of any aspect of these reasons. I certify that the preceding four hundred and twenty-six (426) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop.

YATES J: 427 I have had the considerable advantage of reading, in draft, the reasons for judgment prepared by Allsop CJ. I agree with those reasons and the orders proposed. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Yates.

BEACH J: 428 The privatisation of significant infrastructure such as a port can sometimes give rise to substantial competition questions. Does such a privatisation confer any enforceable monopoly right on the purchaser? Has privatisation merely transferred monopoly power from the public sector to the private sector? More relevantly to the present context, have the impugned provisions of the relevant privatisation agreements conferred or facilitated a de facto monopoly by affecting the sequencing of container terminal development? Have the impugned provisions preserved a market structure with limited or non-existent substitution possibilities for competing container terminals? After privatisation, was the purchaser's market power subject to competitive discipline? Was the potential for such competitive discipline in any way constrained or diminished by the impugned provisions? 429 Now these are large questions, but most of them did not need to be answered by the primary judge. Having said that, one could be forgiven for thinking that the ACCC brought the proceedings below partly influenced by its own consideration of these broader questions. But fortunately, the legal and forensic questions that her Honour had to determine, and which I am required to revisit given my views on derivative Crown immunity, are of more modest dimensions. 430 It has been necessary to write separately given that I have taken a different view to both the primary judge and the other members of the Full Court on the question of derivative Crown immunity to which I would give a narrower scope. I have also set out my own perspective on the competition questions although I agree in the result with the primary judge's conclusions on such aspects and much of her Honour's thorough reasons. 431 Let me begin with the appeal and some relevant background. I will address the cross-appeal later. 432 Now the majority of shipping cargo including bulk and container cargo originating from or bound for NSW passes through Port Botany, Port Kembla or the Port of Newcastle. 433 Port Botany is the primary container port in NSW having dedicated facilities with specialised infrastructure for the loading and unloading of container ships, as well as facilities for the transfer of containers to and from land transport. As a result, the vast majority of container cargo to and from NSW passes through Port Botany. 434 Port Kembla is primarily a bulk port which includes a large motor vehicle import hub, a grain export terminal and coal export facilities. 435 The Port of Newcastle is also primarily a bulk port exporting coal as well as other commodities. 436 The Port of Newcastle and Port Kembla do not have container terminals but are able to load and unload containers by using ships' cranes or general wharf cranes. The Port of Newcastle has a suitable harbour and available contiguous land for the construction of a container terminal. 437 Now the proceedings below concerned provisions in agreements entered into in May 2013 concerning the privatisation of Port Botany and Port Kembla, which provisions the ACCC asserted had the purpose or likely effect of substantially lessening competition in the market for the supply of port services for container cargo in New South Wales. 438 Port Botany and Port Kembla were acquired by a consortium including NSW Ports Pty Ltd and NSW Ports Operations Hold Co Pty Ltd (Hold Co). 439 The agreements the subject of the proceedings were Port Commitment Deeds (PCDs) made between the State of NSW, Hold Co and its wholly owned subsidiaries, Port Botany Operations Pty Ltd (the Port Botany operator) and Port Kembla Operations Pty Ltd (the Port Kembla operator). For convenience, in these reasons I will simply refer to the entities on the acquirer side as compendiously the NSW Ports consortium unless I need to distinguish between them. 440 Now immediately prior to their privatisation, Port Botany and Port Kembla were ultimately owned by statutory corporations, being Sydney Ports Corporation (SPC) and Port Kembla Ports Corporation (PKPC). These were corporations constituted by the Ports and Maritime Administration Act 1995 (NSW) (PAMA Act) as statutory state owned corporations (SOCs) under the State Owned Corporations Act 1989 (NSW) (SOC Act). Each carried on the business of operating its respective port. The same was the case for Newcastle Ports Corporation (NPC). 441 On 31 May 2013, SPC and PKPC entered into transactions with the NSW Ports consortium effecting the privatisation. As a result of those transactions the following occurred. First, the land on which each of the ports was situated was leased for 99 years to subsidiaries of NSW Ports Pty Ltd, with sub-leases to the Port Botany operator and the Port Kembla operator respectively to conduct the port operations. Second, the Port Botany operator and the Port Kembla operator became subsidiaries of Hold Co. Third, the State entered into a PCD with each of the Port Botany operator and the Port Kembla operator, with Hold Co being a party to both PCDs. 442 Clause 3 of each PCD contained a provision under which the State agreed for a term of 50 years to pay compensation to those port operators if container cargo through the Port of Newcastle exceeded a specified cap and diverted container cargo away from Port Botany or Port Kembla. In order to trigger this entitlement the following conditions needed to be satisfied for two consecutive financial years. First, Port Botany or Port Kembla were not at full capacity for the import and export of containers. Second, the volume of containers imported or exported through the Port of Newcastle exceeded a specified threshold number of TEUs per annum plus natural growth. Third, the Port Botany operator or the Port Kembla operator demonstrated to the reasonable satisfaction of the State that the container traffic through the Port of Newcastle exceeding the specified threshold had caused a reduction in containers imported or exported through Port Botany or Port Kembla (as applicable). In terms of the underlying methodology, the amount of compensation payable by the State under the compensation provisions was calculated as the weighted average wharfage charge per TEU imposed by the Port Botany operator or the Port Kembla operator (as the case may be) on port users multiplied by the volume of container traffic through the Port of Newcastle that exceeded the specified threshold. 443 Now the ACCC alleged below that the compensation provisions had one or more of the following purposes and had or were likely to have one or more of the following effects. 444 First, it was said that they had the purpose or effect of substantially lessening the competitive constraints on the Port Botany operator and the Port Kembla operator arising from the supply or potential supply of port services for container cargo by the Port of Newcastle by reason of their rights to compensation for loss of container traffic under the compensation provisions. 445 Second, it was said that they had the purpose or effect of causing the State to procure that the Port of Newcastle would not materially increase its ability or capacity to compete in the supply of port services for container cargo in NSW including by developing a container terminal, for so long as the Port of Newcastle was owned directly or indirectly by the State. 446 Third, it was said that they had the purpose or effect in connection with the privatisation of the Port of Newcastle then in contemplation of causing the State to impose on any acquirer of the Port of Newcastle an obligation to reimburse the State for any payments that the State was required to make under the compensation provisions, which would consequently prevent or hinder the owner of the Port of Newcastle from developing a container terminal and thereby to substantially lessen the competitive constraints on the Port Botany operator and the Port Kembla operator. 447 Let me at this point say something about the privatisation of the Port of Newcastle. 448 On 30 May 2014, the State entered into transactions to privatise the Port of Newcastle with, inter-alia, Port of Newcastle Investments (Property) Pty Ltd and Port of Newcastle Investments Pty Ltd. Again, it is convenient in these reasons to refer to the entities on the acquirer side simply as the PON consortium unless I need to distinguish between them. Now prior to its privatisation the Port of Newcastle was owned and operated by, inter-alia, NPC. As a result of those transactions, the land on which the port was situated was leased for 98 years to a subsidiary of the PON consortium, with sub-leases in favour of Port of Newcastle Operations Pty Ltd (PON Operations) to conduct the port operations. PON Operations was acquired by the PON consortium. 449 Now the State required the successful bidder in the Port of Newcastle privatisation to enter into a deed imposing an obligation on the successful bidder to reimburse the State for any payments the State was required to make under the compensation provisions in the PCDs with the NSW Ports consortium. As a result, on 30 May 2014 the State entered into a deed with the PON consortium including PON Operations. Under cl 3 of that deed, PON Operations was obliged to reimburse the State for any payments that the State was required to make under the compensation provisions in the PCDs with the NSW Ports consortium. 450 Now the ACCC alleged below that the likely effect of the reimbursement provision together with the compensation provisions was to make it uneconomical to develop a container terminal at the Port of Newcastle for the 50 year term of the deed. As such, it was said that the reimbursement provision in the context of the compensation provisions was a barrier to the expansion of the supply of port services for container cargo in NSW. 451 The ACCC alleged that but for the reimbursement provision, the PON consortium would be likely to build a container terminal at the Port of Newcastle to compete with Port Botany and, in the longer term, with Port Kembla in the supply of port services for container cargo in NSW. But in the absence of a competing container terminal at the Port of Newcastle, the NSW Ports consortium would remain the only major supplier of port services for container cargo in NSW. 452 Now the primary judge found against the ACCC on both Crown immunity and derivative Crown immunity. Further, the primary judge found that in any event the compensation provisions did not have the purpose or likely effect of substantially lessening competition. So, the NSW Ports consortium did not contravene s 45 of the Competition and Consumer Act 2010 (Cth) (CCA) as then in effect by making those provisions, and would not contravene s 45 (as now in effect) by giving effect to them. 453 I will turn to the issues concerning Crown immunity and derivative Crown immunity in a moment. But before proceeding further I should say something at this point concerning the State's policy. 454 Prior to the privatisation of Port Botany and Port Kembla the State had developed its policy that container capacity at the Port of Newcastle would be developed only after Port Botany and Port Kembla had reached their capacity. Now the content of the State's policy relevantly had two aspects. One aspect of the State's policy was that there should be no second container terminal before Port Botany reached capacity. A second aspect of the State's policy was that Port Kembla rather than the Port of Newcastle should be the second terminal. Now at an earlier time, being before the volume cap at Port Botany was lifted, the State's policy favoured the Port of Newcastle as the second location. But Port Kembla has since no later than July 2012 been preferred following economic infrastructure considerations. 455 Now before the primary judge, the question that arose for determination was whether the compensation provisions in the PCDs had an anti-competitive purpose or effect as it related to the possibility of a container terminal being developed at the Port of Newcastle whilst Port Botany had capacity. But as the primary judge found, there had never been any policy other than that Port Botany's capacity should be exhausted before the development of additional container terminal capacity in NSW in another port. 456 Now central to the ACCC's case on both purpose and effect was the idea that there was a real chance of the State supporting the duplication of container terminal infrastructure whilst there was unused capacity at Port Botany. But as the primary judge found, there was no real chance of a private operator of the Port of Newcastle developing a container terminal without the support of the NSW government and a change to its policy, which change in policy remained speculative. 457 Further, as her Honour found, the compensation provisions were not intended to forestall the development of a container terminal at the Port of Newcastle. Rather, the State had resolved that such a development would not be in the public interest until Port Botany and then Port Kembla had reached capacity. 458 As the primary judge found, the compensation provisions, which only arose after the policy position had been resolved, did not seek to forestall the development of a terminal. Instead they sought to regulate what would happen to the economic rights between the State and the NSW Ports consortium if a container terminal was developed at the Port of Newcastle and certain conditions arose. In the context of the privatisation, the compensation provisions dealt with what the State regarded to be as her Honour described it a "straw man", namely, that there was a risk of the State changing its policy to favour the development of a container terminal at the Port of Newcastle. The perception of that risk needed to be dealt with to avoid a material reduction in bid prices. 459 Further, as to the likely effect of the compensation provisions, it was the State's policy rather than the compensation provisions that made it unrealistic that there would be the development of a container terminal at the Port of Newcastle whilst there was capacity at Port Botany. And the primary judge found that as at May 2013 and again as at May 2014 there was no real chance of the State's policy changing to enable a container terminal to be developed at the Port of Newcastle whilst Port Botany had capacity. Moreover, her Honour found that to the extent that there was a possibility of the State changing its policy, the compensation provisions did not prevent that from occurring or even render it less likely. As the primary judge found, the compensation provisions were immaterial to the State when it came to a potential change in policy. 460 Finally as a preliminary observation I should note that the ACCC failed to prove any case in relation to the Port Kembla PCD. It did not adduce evidence about the dynamics of hypothetical terminals at Port Kembla and the Port of Newcastle. The appeal before us principally concerned the interaction between Port Botany and the Port of Newcastle, which could not impugn the Port Kembla PCD. 461 Let me turn then to the first issue concerning Crown immunity.

Crown immunity 462 I should begin by explaining the context for discussing Crown immunity. The ACCC did not sue the State of NSW and so did not assert as against the State any liability for its conduct under the CCA. But the NSW Ports consortium claimed the benefit of derivative Crown immunity. But in order to successfully seek such refuge, the NSW Ports consortium had to first establish that Crown immunity would have been available to the State if sued. But even then, this was only a necessary but not sufficient condition for the NSW Ports consortium to establish derivative Crown immunity. 463 Now her Honour held that this necessary condition had been satisfied. But this has been challenged. Relevantly, the ACCC says that the primary judge erred in concluding that the State did not make the compensation provisions in the course of carrying on a business within the meaning of s 2B(1) of the CCA. But I would reject the ACCC's challenge on this aspect. 464 Now s 2B(1) relevantly provided that: [t]he following provisions of this Act bind the Crown in right of each of the States … so far as the Crown carries on a business, either directly or by an authority of the State or Territory: (a) Part IV… 465 "[A]uthority" was relevantly defined in s 4(1) to include a body corporate established for a purpose of the State by or under a law of the State or an incorporated company in which the State or such a body corporate had a controlling interest. 466 For completeness, s 2C sets out activities that are to be taken to not amount to carrying on a business, but this provision can be put to one side for present purposes. 467 Now the primary judge drew a line between the decisions and conduct of the State in carrying on the business of operating the ports through the SOCs, and the decisions and conduct of the State in privatising the ports. She held that the entry into of the compensation provisions occurred in the course of the privatisation of the ports, and so not in the course of the business conducted by the SOCs. 468 Now the ACCC says that the primary judge made an error in the drawing of, and attributing decisive significance to, a distinction between the conduct of the SOCs and the conduct of the executive government of the State in relation to the ports. 469 It is said that a reference to the Crown in s 2B(1) is a reference to the executive government of the particular polity. The executive government comprises ministers, officials, departments of state, statutory and non-statutory bodies and any other institutions or instrumentalities created for the business of government. The ACCC says that at least in the context of s 2B(1), a statutory corporation which answers the description of an emanation of the Crown or a Crown agent should be regarded as part of the executive government, that is, part of the Crown itself. And s 2B(1) makes clear that the CCA applies to any business conducted by the governments of the States and Territories and in terms identifies an authority of the State as part of the Crown in right of the State. The ACCC says that it was contrary to s 2B(1) to treat statutory instrumentalities as isolated and independent manifestations of the Crown. 470 Relatedly, the ACCC says that it was erroneous to conclude that because a decision can be characterised as a policy decision, it necessarily could not also be characterised as conduct in the course of carrying on a business. It says that where the Crown operates a business, a decision to make, and the terms of, a contract may frequently be characterised as a policy decision. 471 Further, the ACCC says that it was erroneous to exclude decisions made by Ministers from the application of s 2B(1) in circumstances where the SOC Act, the PAMA Act and the Port Assets (Authorised Transactions) Act 2012 (NSW) (PAAT Act) each provided for Ministers including in some cases the Treasurer to give directions to or exercise control over the SOCs that were operating the ports; see ss 20H, 20I, 20N to 20S, 20X and 20Y and schedules 5, 6, 8 and 9 of the SOC Act, ss 10A and 21(1) of the PAMA Act and s 11 of the PAAT Act. 472 The ACCC says that under these statutory provisions, members of the executive had important roles to play in the operation of the business of the ports. The ACCC says that approaching the s 2B(1) analysis by excluding decisions placed within the political control of Ministers was inconsistent with that statutory scheme. 473 Further, the ACCC says that the primary judge erred in her s 2B(1) analysis by asking whether the making of the compensation provisions served the purpose of the SOCs, and to conclude that because it did not serve the purpose of the SOCs, it could not be characterised as conduct engaged in the course of the business of operating the ports. 474 The ACCC says that the impugned conduct need not be the actual day to day business engaged in in order to be conduct engaged in the course of carrying on a business. Further, it says that it was not correct to hold that impugned conduct must serve a purpose related to the actual day to day business engaged in. 475 It says that where the Crown engages in conduct that directly facilitates or affects the relevant business, either because it serves a purpose relating to the actual business engaged in or because it serves a purpose relating to the business more generally, that conduct will be conduct "so far as the Crown carries on" that business, and therefore will be conduct within the ambit of s 2B(1). 476 The ACCC says that where the executive government carries on a business, a decision by that government to sell that business or components thereof, being Port Botany and Port Kembla, and the terms on which that business is sold, is conduct that occurs in the course of carrying on that business. And that is particularly so where the relevant term was designed to continue to operate after the sale of only components of the business. 477 Further, the ACCC says that at the time that the State made the compensation provisions, the State was continuing to conduct the business of the Port of Newcastle. So, the ACCC says that entry into of the compensation provisions can therefore be characterised as conduct so far as the Crown carried on the business of the Port of Newcastle, as well as Port Botany and Port Kembla. 478 Now it was said by the NSW Ports consortium that J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 held that the relevant statutory provision in that case captured conduct in the course of carrying on the business in the sense of the actual conduct of the business. In McMillan, Emmett J construed the expression "insofar as the Crown carries on a business" (at 356) as signifying that "the Commonwealth is to be bound only where the conduct complained of is engaged in, in the course of carrying on the business". 479 In NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 McHugh ACJ et al said (at [67]): …[i]t may be accepted that the conduct proscribed by the Act, if it is to fall within s 2B, must be engaged in in the course of PAWA carrying on a business. But the conduct need not be the actual business engaged in… 480 The ACCC says that the reasoning in NT Power is contrary to the reasoning in McMillan on which the NSW Ports consortium relies. Therefore, so the ACCC says, to the extent that McMillan once stood for the proposition relied on, it has now been trumped by NT Power. Further, the ACCC says that whilst McHugh ACJ et al cited McMillan without criticism, they only did so insofar as Emmett J required the conduct complained of to be engaged in in the course of carrying on the business. I am not sure what the ACCC is on about. I see no difficulty with Emmett J's observation that I quoted two paragraphs ago. In terms of the currency of his approach, it is, as it was. 481 The ACCC says that the NSW Ports consortium's erroneous construction of s 2B(1) underlies its contentions that the primary judge did not err in finding that any conduct, such as ministerial conduct and decisions made in the implementation of policy, which was not engaged in in the course of the day to day business of the ports, could not fall within the scope of s 2B(1). But the fact that such conduct was not part of the day to day business of the actual operation of the ports does not exclude it from the scope of s 2B(1). 482 Now the primary judge treated the fact that the entry into the compensation provisions could be characterised as an implementation of policy as an important factor in excluding that conduct from the scope of s 2B(1). The primary judge stated (at [338]) that "[i]n formulating the State policy, the NSW government was not carrying on a business. Accordingly, the implementation of the State policy is not subject to s 45 of the CCA". 483 It is said that those phrases contain an assertion that the formulation of policy may be treated differently to the implementation of policy, and overlook that conduct could be both an implementation of policy and conduct in the course of carrying on a business as in NT Power. In that case the issue of access to the infrastructure of PAWA, a statutory authority of the Northern Territory, had been the subject of a policy review. 484 Let me now say something about the PON consortium's arguments. 485 First, it is said that her Honour made an illusory distinction between State policy and carrying on a business. It is said that the State policy to which her Honour referred (at [338]) is the State's decision to privatise the ports (at [342]). But it is said that "privatise" is another word for sell or lease, the only difference being that the vendor or lessor is a government. Further, her Honour found that the State's motive for including the compensation provisions in the first privatisation transaction was profit maximisation and that its purpose was to ensure bidders did not discount their bids. It is said that these are indistinguishable from the motives and purposes which animate private corporations whilst carrying on a business. 486 Further, it is said that a decision by the State to carry on a business is also one of policy, and the carrying on of a business by the State is the implementation of that policy. Each of the SOCs was established by statute, with their objectives prescribed and their operations governed by the PAMA Act and the SOC Act. It was State policy that each SOC should be established, be vested with certain assets, be a successful business, and also maximise the net worth of the State's investment in the ports (ss 6 to 10 of the PAMA Act). Yet, so it is said, although the conduct of each SOC in carrying on a business as contemplated by s 9(a) of the PAMA Act constitutes the implementation of State policy, it cannot on that account be exempt from s 45 of the CCA. 487 Generally, the PON consortium says that to characterise conduct of the State as government policy or implementing government policy cannot explain why s 2B(1) is or is not engaged. Moreover, when the activities of the executive government reach into many aspects of commercial endeavour, it is said that to assert that the CCA does not apply wherever the executive is implementing State policy or making decisions as a matter of government policy, is to impose an extensive qualification upon the CCA's s 2 object of enhancing the welfare of Australians through inter-alia the promotion of competition. Indeed, it is said that to negotiate and complete the sale or lease of income generating assets with a motive of profit maximisation are prototypical commercial activities. 488 Second, it is said that a difficulty attends the primary judge's reasoning as to the dual role of the Treasurer. Her Honour distinguished his actions as a voting shareholder of the SOCs from his role as the person effecting the privatisation in a designated role under the PAAT Act and went so far as to say these two roles had nothing to do with one another. But it is said that this is an artificial distinction. The Treasurer was one person and he held one office. His powers derived from more than one source, but the Treasurer was only a voting shareholder of the SOCs and the PAAT Act only conferred powers upon him because and for so long as he held office as the Treasurer; see s 20H(5) and (6) of the SOC Act and s 6 of the PAAT Act. His only role was that of a Minister of the Crown. Moreover, the primary judge's conclusion that the Treasurer's conduct as a voting shareholder of the SOCs was separate and distinct from his involvement in the privatisation transactions is not consistent with events which show that the two intersected. 489 Third, the PON consortium says that the primary judge erred in her conclusion that the State was not carrying on a business, but rather each of the SOCs were each carrying on a separate business of operating their respective ports. 490 Now the primary judge acknowledged that the State could have structured the port undertakings as one business, but observed that it had decided to carry on the business of operating each port through a SOC. But the PON consortium says that it does not follow that for the purposes of s 2B(1) the State was not carrying on a business of operating three ports through the SOCs. 491 It was contended by analogy that the fact that a corporation may choose to conduct business through a multitude of wholly owned subsidiaries did not mean that the corporation did not carry on a business of its own that encompassed the activities of each subsidiary. Likewise, it was said that the fact that the State chose to conduct business through a particular corporate structure, entrusting operational responsibility for each port to a separate and wholly owned SOC, did not mean that the State was not carrying on its own business that encompassed all three ports. 492 It was said that s 2B(1) extends to a business carried on either directly or by an authority of the State. So, actual control rather than legal form was what was important. And by s 4(1) as I have said, an "authority" in relation to a State means a body corporate established for the purposes of a State by or under a law of the State or an incorporated company in which the State or such a body corporate has a controlling interest. 493 Moreover, the PON consortium said that the conclusion that the State was carrying on a business encompassing all three ports was fortified by other features of the statutory SOC regime, which ensured that control over all three SOCs was vested in the Treasurer and the Minister for Finance, who were the only voting shareholders in each of SPC, PKPC and NPC, with power to recommend that the Governor appoint or remove directors. Additionally, the Treasurer had power to give directions to each SOC, with which the SOCs were obliged to comply. It is said that were these features present in a group of private companies, there would be no question but that the State controlled the entire group and was carrying on a business comprised of operating three ports via its wholly owned SOCs. It is said that the fact that each SOC operated its own business would not prevent the conclusion that the State, which owns and controls them all, carried on a business encompassing all three. 494 Fourth, it is said that if it is accepted that the State was carrying on a business which encompassed all three ports, then the only question is whether its conduct in entering into the compensation provisions was engaged in during the course of that business. And that conduct need not itself be the actual business engaged in. 495 It was said that if a company wished to sell two of its operating subsidiaries, and in the course of negotiations agreed to compensate the buyer in the event that another of its operating subsidiaries were to compete with the subsidiaries being sold, there would be no doubt that the company's conduct would have been engaged in during the course of carrying on a business. And it says that s 2B(1) warrants no different conclusion with respect to the State. 496 Further, it is said that it is not to the point that the privatisation was a single event and not regular or systematic. It is said that this is to impermissibly require the impugned conduct to be the business engaged in. 497 Further, it is said that her Honour wrongly presumed that the only relevant businesses were those of SPC, PKPC and NPC, and relied upon the illusory distinction between government policy and the State's conduct as a business owner. 498 Fifth, it is said that the fact that carrying on a business ordinarily involves a succession of acts and not one solitary transaction is important for resolving whether any business at all is being carried on, but it is of little assistance in deciding whether impugned conduct was sufficiently connected to that business. 499 Sixth, it is said that for the purposes of s 2B(1) the impugned conduct must be engaged in in the course of the State carrying on a business, but the conduct need not itself be the actual business engaged in. In NT Power, the impugned conduct was PAWA's refusal to grant access to its infrastructure. Now PAWA was not in the business of providing access to its infrastructure. But despite this, its decision to refuse access was in the course of PAWA's business because it was aimed at protecting PAWA's electricity sales revenue and securing its commercial position. So, impugned conduct does not have to form part of the day-to-day business in order for s 2B(1) to be engaged. 500 Seventh and generally, it is said that if a private corporation carrying on a business decided to sell that business, then negotiated and executed a suite of contracts similar to that executed by the State and the SOCs to effect the sale of its business, and included the compensation provisions with a view to maximising its profit, its conduct would have been engaged in in the course of carrying on its business. It is said that no different conclusion should be reached because of the peculiar characteristics of government, or because it was the State that owned the business, or because Ministers were involved in negotiating and signing the contracts, or because they required statutory authorisation to do so.

Analysis 501 Let me begin with a few general propositions. 502 First, the concept of carrying on a business as embodied in the s 2B(1) criterion does not extend to all activities in trade or commerce. And it signifies a course of conduct involving the performance of a succession of acts and not just the effecting of one transaction. 503 Second, the statutory question is whether the impugned conduct was engaged in in the course of the actual conduct of a business, and not outside that course. 504 Third, there is no inchoate test of whether conduct affects the relevant business. Such a test is both opaque as to its content and ignores the text of s 2B(1). Much conduct affects business without being in the course of business. As was pointed out during the course of argument, an apparent public health measure taken at a high level by health officials that causes a government business to close to protect the health of employees is not necessarily conduct in the course of that business because it affects the business, and indeed serves purposes related to the business. 505 Now s 2B(1) expressly contemplates that a State may carry on a business either directly or by an authority, but different consequences are attached to each circumstance (see ss 2B(2) and (3)). That focuses attention on the identity of the entity carrying on the relevant business. 506 Her Honour was correct not to collapse the distinction between different manifestations of the Crown in right of the State. Of course s 2B(1) recognises that the State may carry on business "either directly or by an authority of the State", but it does not follow that no distinction is then to be drawn between acts performed by an authority of the State and acts performed by some other emanation of the State. 507 Her Honour properly drew distinctions between the different acts that different parts of the State undertook at different times in respect of the three ports. And her Honour rightly did not blur these distinctions so as to treat all acts of the State at any time and in any capacity as if they were in the course of carrying on a business because they merely had as their subject matter the ports. Moreover, the relevant question was whether the impugned conduct, being the entry into or giving effect to the compensation provisions, was in the course of the State carrying on the business of operating the ports. And the answer to that question depended on a proper understanding and characterisation of the conduct and the actors engaged in that conduct. 508 Her Honour rightly pointed to various factors indicating that this conduct was not part of the day to day business of the ports. 509 First, the decision to privatise the ports was not a decision made by the SOCs, or a decision in which they had any involvement, but was instead a decision made by the executive government to implement the State's policy. Her Honour analysed how decisions were made under each of the relevant Acts dealing with the subject matter of ports. In the case of decisions in relation to the privatisation of those ports, her Honour observed that the relevant decisions were made in a different way, and by different persons, from day to day business decisions about the ports. This analysis informed whether decisions in relation to privatisation were properly characterised as being in the course of the operation of the business of the ports through the SOCs. 510 Second, the privatisations could not be effected under the legislation regulating the SOCs in their conduct of each business operating each port and instead could only be effected under a separate legislative instrument, namely, the PAAT Act, which had nothing to do with the SOCs in each of their businesses of operating the ports. 511 Third, to the extent that the SOCs were involved in any of the privatisation transactions, it was only because they held assets that were to be dealt with pursuant to directions given by the Treasurer under the PAAT Act. 512 Fourth, the SOCs were not party to any of the PCDs containing the compensation provisions. 513 Fifth, the contention that giving effect to the compensation provisions could be in the course of the business of operating the ports through the SOCs was not commercially plausible as the SOCs, relevantly here, SPC and PKPC, were dissolved in 2016 by the Port Assets (Authorised Transactions) Dissolution of Port Corporations) Proclamation 2016 (NSW) as contemplated by s 3 of schedule 5 to the PAAT Act. Clearly, this was well before those provisions could have been given practical effect. 514 In my view, such matters readily supported her Honour's conclusion that the entry into, or giving effect to, the compensation provisions was not in the course of the State carrying on the business of operating the ports. Let me elaborate on some aspects of these matters. 515 First, the ports were not operated as part of a single business. Each of the ports was operated by a different corporate entity. At the time of the transactions there were separately constituted SOCs. The PAMA Act separately defined the business to be carried on by each SOC individually, and by reference to responsibility for its own port, not ports generally. Each of the ports was subject to direction by a separate board of directors and had separate corporate officers. Furthermore, each SOC had a separate statement of corporate intent, which defined its scope of operations by reference to its own port, rather than ports generally. Moreover, the SOCs behaved independently and by reference to their own interests, rather than for some general collective interest. 516 Moreover and in this context, it is incorrect to say that even if each SOC might be said to be carrying on the business of operating a port, the State should also be held to be carrying on a business of operating all three ports. The State is not a parent company. The State's decision to take an interest in a business is not necessarily a commercial decision akin to a parent company's decision, but may be affected by all manner of non-business, public interest considerations. Moreover, the fact that the State chose to create three distinct SOCs to conduct the businesses at each port is not to be treated as irrelevant. 517 Second, it is important to observe the boundaries and content of the Ministerial control, which was attenuated and directed to matters somewhat remote from the business activities of the SOCs, and which identified different Ministers for control of each business and control of the ownership of the port assets. 518 In certain cases, the PAMA Act and the SOC Act provided that "the Minister" or the "portfolio Minister" had the ability to give directions to the SOCs in relation to certain defined subject matter. "The Minister" was a reference to the Minister designated with authority for administering the relevant Act (s 15(2) of the Interpretation Act 1987 (NSW)). In the case of the PAMA Act that was the Minister for Roads and Ports (Allocation of the Administration of Acts [2001-338] (NSW) as it stood in 2013 (the Allocation Instrument)). Further, the portfolio Minister in respect of the SOCs was again a reference to the Minister for Roads and Ports (s 20I of the SOC Act, s 20 of the PAMA Act, s 15(2) of the Interpretation Act and the Allocation Instrument, each as they stood in 2013). 519 The Treasurer had the right to approve certain actions by the SOCs or portfolio Minister or to direct a SOC to not do certain things; see ss 20N to 20P, 20X and 20Y of the SOC Act. In each case, the relevant rights were conferred by legislation in relation to defined subject matter and to be exercised in accordance with the process set out in the legislation; see ss 10A, 16, 17 and 21 of the PAMA Act and ss 20H, 20N to 20P, 20X and 20Y of the SOC Act. But little comfort can be drawn from the assertion that the Treasurer had the power to give directions to the SOCs with which they were obliged to comply. 520 Let me elaborate further. 521 The principal objectives of each SOC, including to be a successful business, were those set out in s 9 of the PAMA Act consistently with s 20E of the SOC Act. A SOC was to have a constitution (s 20Q), a board of directors responsible for all decisions relating to the operation of the SOC, and a chief executive officer responsible for day to day management (ss 20J to 20L). The shareholders were Ministers (s 20H), relevantly, the Treasurer and Finance Minister. The SOC Act conferred only limited powers of direction on Ministers. Relevant powers were conferred on the "portfolio Minister", which was the Minister for Roads and Ports who was not a shareholder Minister. A SOC was subject to direction where the portfolio Minister, with the approval of the Treasurer, wished a statutory SOC to perform a non-commercial activity (s 20N), to apply public sector policies (s 20O), or where, because of exceptional circumstances, it was necessary to give a direction in the public interest (s 20P(1)). These are not business activities per se. 522 Section 10A(1) of the PAMA Act conferred an additional but confined power of direction "in relation to the exercise of any of the Corporation's functions in connection with its principal objectives under section 9(d) and (e)". Being tied to those specific principal objectives, the power was focused on the competitive commercial environment and the productivity and efficiency of the supply chain, not the particular business objectives of the SOC, such as to be a successful business (s 9(a)), or to promote and facilitate trade through its port facilities (s 9(b)). Moreover, this power was conferred on the Minister for Roads and Ports rather than the Treasurer, though with his approval under s 10A(7) in the event of a review leading to a confirmation. 523 So, the PAMA Act and the SOC Act contained limited executive control of the conduct of a SOC's business. The Minister for Roads and Ports could under s 10A of the PAMA Act give directions related to the general commercial environment for port operations or the productivity and efficiency of the supply chain, but not about how to conduct the business, or under the SOC Act in relation to non-business activities. Whilst the government, effectively as shareholder, retained power to appoint the board and chief executive, there was no general power on shareholder Ministers to involve themselves in the carrying on of the business of the port. Finally, a SOC did not represent the State for the purposes of NSW law as 20F of the SOC Act made clear. 524 Let me now address some other matters. 525 In my view, her Honour correctly regarded the fact that the privatisations were a once off act as relevant to whether entry into of the PCDs was part of the operational business of the ports. But it is not the case that her Honour regarded this factor as determinative. But self-evidently, had the relevant impugned actions been repeated over a prolonged period of time, that is plainly a matter that would have tended in favour of them being found to be part of the ongoing business of the ports. Conversely, the fact that these were one-off acts, together with the numerous other factors that separated them from the ongoing business conducted by the ports, supported a finding that those particular acts were not in the course of the business carried on by the SOCs operating the ports. 526 More generally, whether a sale of a business occurs in the course of the business is a question of fact that will depend on all the circumstances. But the fact that the dispositions of Port Botany and Port Kembla were effected by a specifically tailored statutory regime highlights that it was not in the course of any business. Let me elaborate. 527 First, ss 20X and 20Y of the SOC Act disabled the SOCs from disposing of their fixed assets or investments or main undertakings without approval of the voting shareholders, who were different Ministers from the portfolio Minister who had some power to direct the SOCs' functions. That indicates a legislative intention to remove from the purview of the business carried on by a SOC the sale or disposition of that business. And consistently, the compensation provisions were in fact proposed by the State and entered into by the State through the Treasurer. The SOCs were not involved, and nor was the portfolio Minister in any immediate sense. 528 Second, the privatisation transactions were a one-off and were given specific statutory backing by the PAAT Act, quite apart from the actual conduct of any business and only once a privatisation policy was being pursued by government. Section 4 authorised the transfer of ports assets to the private sector and provided in s 5 for the proceeds to be payable to the relevant fund established under the Restart NSW Fund Act 2011 (NSW), apparently (so it was said) to achieve the laudable objectives of improving economic growth and productivity and to fund other infrastructure in NSW as part of a budget strategy. Sections 6 and 7(1) conferred on the Treasurer "all such functions as are necessary or convenient for the purposes of an authorised transaction" and permitted a transaction "to be effected as directed by the Treasurer and can be effected in any manner considered appropriate by the Treasurer". And s 7(2) provided that there are "no limitations as to the nature of the transactions or arrangements that can be entered into or used for the purposes of an authorised transaction". 529 Finally on this part of the case, let me say something on the policy question. 530 First, it was not suggested by her Honour that in all cases, matters of policy are exclusive from matters of business. As to her references to the State's policy in the context of Crown immunity, her Honour made the observation that the decision to privatise the ports assets was a decision as to policy by the NSW executive government, rather than a decision of the SOCs. This was relevant to determining whether the impugned conduct was or was not in the course of the State carrying on business through the SOCs. 531 Second, of course there are circumstances where the formulation of policy may intersect with the carrying on a business. But in the present context the decision to privatise the ports was authorised by Parliament and implemented by the Minister specifically authorised by the PAAT Act, not by any person involved in the day-to-day business of the ports. Similarly, the fact that the State sought to maximise revenue through the privatisation, and that this is inherently like a business, does not advance matters. Tax policies involve maximising revenues but cannot be relevantly characterised as business decisions. 532 In summary, I reject the criticisms made concerning her Honour's reasoning and conclusions on the s 2B(1) criterion. Derivative Crown immunity 533 The ACCC has challenged her Honour's ruling on derivative Crown immunity. Perhaps unsurprisingly, the State has sought to embrace the ruling. 534 Her Honour observed that for derivative Crown immunity to apply, it was necessary to show that the application of s 45 of the CCA to the NSW Ports consortium would adversely affect some proprietary right or interest of the Crown, legal, equitable or statutory. 535 Her Honour recognised that ss 6 and 7(1) of the PAAT Act gave the Treasurer plenary power to effect the transfer of port assets over which the State had proprietary rights. 536 Her Honour held that if Pt IV of the CCA applied so that the NSW Ports consortium could not make or give effect to the compensation provisions, the State would be divested of its legal rights, being statutory, proprietary and contractual, to enter into the transactions authorised by the PAAT Act in the manner chosen by the State. 537 Further, her Honour considered whether s 45 evinced an intention to displace the presumption that a statute ought not operate to divest the State of a legal right, but held that s 45 did not displace that presumption. 538 It is appropriate at this point to summarise some of the parties' submissions. 539 The ACCC contends that s 45 is conclusive as to the non-application of derivative Crown immunity and refers to various principles said to be established in Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (2007) 232 CLR 1. But the State says that there is nothing of special significance in the text or context of s 45 that operates to exclude the operation of derivative Crown immunity. 540 The State referred to what was said in Baxter by Gleeson CJ et al (at [62]): …[t]he principle of construction to be applied is that, since the Act does not bind the Crown in right of a state or territory when it is not carrying on business, then, save to the extent to which a contrary intention appears, the Act will not be read so as to divest the Crown of proprietary, contractual or other legal rights or interests... (emphasis in original) 541 It was said that the reasoning of the majority was premised on the proposition that derivative Crown immunity was a feature of the CCA, subject to the possibility that a contrary intention might appear in particular aspects of the CCA. 542 Now the question with which Baxter was concerned was whether the "rights" that were said to be impinged by ss 46 and 47 were of such a nature that the principle of derivative Crown immunity was applicable. The State says that it is for this reason that Baxter observed (at [66]) that: [t]he real question is the extent to which the reach of ss 46 and 47 of the Act, and the provisions relating to remedies, in their potential application to the conduct of the first respondent, is modified by the operation of the principle of [derivative Crown immunity]. (emphasis in original) 543 The State says that the reasoning of the majority does not in any way suggest that the CCA and in particular s 45 excludes the operation of derivative Crown immunity. 544 Now the ACCC pointed to the emphatic terms of s 45 as referring to any corporation. But the State says that the generality of the words in s 45 does not signify a contrary intention of the relevant kind. The ACCC also posed the question that if s 45 applies to the State so far as it carries on a business, why does it not also apply to the NSW Ports consortium so far as it carries on a business? But the State says that this misses the point of derivative Crown immunity. 545 The State says that the immunity operates in circumstances where the Act does not apply to the State because it is not in that context carrying on a business. It says that derivative Crown immunity applies as a corollary of Crown immunity, which in the context of the CCA is explicitly given effect through s 2B(1). It is said that it is not a freestanding concept. Rather, derivative Crown immunity applies as an incident to the need to give full effect to the explicit intention of the Commonwealth legislature that the relevant provisions should only apply to a State in so far as it carries on a business. It is said that this is a contextual feature of the CCA of which s 45 is part. 546 The State says that where the application of a provision to a private citizen would interfere with the rights of the Crown, then there is a presumption that the provision was not intended so to apply to the private citizen. It is said that it is not to the point to ask whether in some different circumstance not involving Crown immunity the provision might have applied to the Crown. Nor does it assist the inquiry to observe that on the facts of the present case the NSW Ports consortium was carrying on a business. The State says that it is not a question of conferring on that consortium an immunity that is wider in scope than that enjoyed by the State. It is simply a question of giving full effect to the legislative choice that in respect of particular conduct involving the State the CCA should not apply. 547 Now the ACCC also contends that the primary judge's approach to s 45 would deprive s 51(1) of any necessary application. But the State says that s 51 presupposes the existence of contravening conduct. But it says that derivative Crown immunity operates at an anterior point to determine whether the conduct is contravening at all. As such, these matters deal with different subjects. 548 Further, as to the suggestion that s 51 covers the field in relation to conduct that does not fall within the purview of the CCA, such that there is no room left for notions of derivative Crown immunity, the State says that that contention has several difficulties. 549 First, the concept of covering the field carries with it the notion of overlap. But there is no overlap between principles of derivative Crown immunity and s 51. The principle of derivative Crown immunity concerns the proper construction of the legislation. It is therefore concerned with whether the legislation applies in a particular situation at all. By contrast, s 51 is concerned with a subsequent question, namely, assuming that the legislation is applicable to a particular situation, has the State Parliament acted so as to otherwise exclude it? 550 Second, the State says that there is no overlap between the principle of derivative Crown immunity and s 51. Moreover, there is ample room for both the principle of derivative Crown immunity and s 51 to operate. The principle of derivative Crown immunity is narrow in scope. By contrast, the power under s 51 is capable of application in a much wider range of circumstances. 551 Third, the State says that it is to read the CCA as a harmonious whole to construe s 45 consistently with principles of derivative Crown immunity applied in the light of s 2B(1), whilst also preserving a different mechanism that can be enlivened under s 51 in a wider range of circumstances and independently of s 2B(1). 552 Let me move to a different topic. 553 As to whether the primary judge erred by finding that the PAAT Act required the NSW Ports consortium to do anything, the State says that this mischaracterises her Honour's findings. It is said that her Honour's remarks as to the nature of the PAAT Act were made in the context of the State's entry into of a bilateral relationship with a contractual counterparty. 554 The State says that the PAAT Act gave it through the Treasurer the right to determine the terms on which it was willing to contract. Any transaction would be a consensual one, but if it proceeded it would be on the terms which, on the facts as found, were required by the State. It is said that her Honour did not proceed on the basis that the State had the power to require a counterparty to take a step, in the sense of compelling them to do something against their will. It is said that her Honour did not hold that the PAAT Act confers a statutory power to legally compel the NSW Ports consortium to accept any and all contractual terms. Rather, her Honour identified a statutory right in the Treasurer to contract on any terms, which encompassed the possibility of factually requiring counterparties to accept terms desired by the Treasurer. 555 Further, the State says that her Honour identified the relevant statutory right as being to transfer part of the proprietary rights of the State in the ports to the NSW Ports consortium by contract and as part of that transaction to require that consortium to engage in conduct in the form of the proposed contractual terms that might otherwise contravene provisions of the CCA. 556 The State says that this was a right specifically vested in the Treasurer through the PAAT Act. Section 6 provided that the Treasurer could exercise all such functions as were necessary or convenient for the purposes of the transfer of port assets to the private sector. Section 7(1) provided that the transfer of port assets to the private sector was to be effected as directed by the Treasurer and could be effected in any manner considered appropriate by the Treasurer. It also expressly provided that there were no limitations on the nature of the transactions or arrangements that could be entered into. The State says that the statutory language used was clear and unequivocal, and it was pursuant to those rights and powers that the Treasurer specifically authorised entry into of the PCDs in a form containing the compensation provisions. 557 The State says that the application of s 45 to the NSW Ports consortium or other potential counterparties would interfere for a legal reason with a right, interest or power belonging or appertaining to the Crown, namely those statutory, proprietary and contractual rights created by the PAAT Act and by the transactions authorised by it. 558 Further, the State says that what was being contemplated by the PAAT Act was transactions between the State and a third party, and that by depriving a third party of the ability to enter into transactions of a particular kind, s 45 would necessarily circumscribe transactions and arrangements that the State might require of a third party in order for the State to be willing to contract. 559 Now the ACCC contends that the rights created by the PAAT Act are indistinguishable from generalised notions of freedom of contract or general contractual capacity. But the State says that her Honour observed that the relevant rights were specific and arose by reason of direct statutory force, rather than mere notions of freedom of contract. Moreover, those rights relate to the transfer of the State's proprietary rights in the ports by making contracts with private entities. As such, so the State says, the rights that would be interfered with in the present case are not analogous with broad notions of contractual capacity or freedom to contract. 560 Further, the State says that it is misconceived to approach the question of derivative Crown immunity by reference to whether s 2B(1) expressly includes a form of derivative immunity or s 45 contains an exception based on the principle of derivative Crown immunity. 561 Further, as to whether the primary judge's conclusion was erroneous because the concept of derivative Crown immunity is applicable only where there is a divestment of a previously established State right, the State says that that is too narrow a formulation of the principle, which is not limited to divestment in the sense of a taking away. The principle also encompasses circumstances where a right or interest is adversely affected. 562 Further, as to whether the PAAT Act created only a "right to create rights", rather than a right in respect of which the principle of derivative Crown immunity was capable of application, the State says that that is not correct. The State says that the rights created under the PAAT Act are capable of being described as legal rights or interests. Further, the State says that the PAAT Act provided that there were no limitations on the nature of the transactions or arrangements that could be entered into or used. 563 Further, the State says that where an impugned contractual provision was sought by the State and not by the private party, the statutory severance of that provision would be a divestment of the State's legal rights that is beyond the application of the CCA limited by s 2B(1). 564 Further, the State says that to the extent that the CCA nonetheless applies to adversely affect the State's legal rights by reason of a contrary intention, such a requisite contrary intention cannot be discerned from statutory language applying the CCA to corporations. 565 Now on this aspect of the case, I largely agree with the ACCC's position including its identification of the central question. Let me elaborate.

Analysis - construction of the CCA 566 In my view, the appropriate starting point is the construction of the CCA, not the construction of the PAAT Act. And the CCA is to be construed harmoniously and as a whole, which necessitates an examination of how ss 2, 2B(1), 45 and 51 were intended to fit together. Only after that examination is one able to determine whether and to what extent the reach of s 45 is modified by the relevant principle of construction drawn from Bropho v Western Australia (1990) 171 CLR 1. 567 In that regard I would make the following points. 568 First, the s 2 object is relevant to the meaning and scope of ss 2B(1) and 45. In my view it is irreconcilable with the s 2 object to say that in carrying on dealings with the government in the course of its own business, a private corporation can enjoy a general immunity from the CCA not available to the government when carrying on a business itself. 569 Second, s 2B(1) stipulates that Part IV applies to a State so far as it carries on a business, but not otherwise. But it says nothing about the application of Part IV to private corporations. Now it does engage the principle of construction described in Baxter at [62], but that principle is liable to be displaced if and to the extent that the relevant contrary intention appears from the balance of the CCA. But of course the text of s 2B(1) itself cannot support a conclusion that the CCA does not apply to an entity that is carrying on a business. 570 Third, s 45 expressly prohibits a corporation from making an agreement with a provision which has the purpose or likely effect of substantially lessening competition. But such a prohibition is not expressed to be subject to any relevant exception, and it would not advance the s 2 object to find that exceptions are implied by s 2B(1). 571 Fourth, if a State wishes to exempt anti-competitive behaviour from the CCA, it can do so pursuant to s 51(1). But as the ACCC points out, the s 51(1) emphasis on the specificity with which it must do so draws attention to the importance attached to the s 2 object. 572 Fifth, in my view s 51 cannot be dismissed on the bases advanced by the primary judge. The presence and content of s 51 affects how the balance of the CCA is to be construed. And I agree with the ACCC that it is not consonant with the intention of the Commonwealth Parliament to hold that the NSW Ports consortium did not contravene s 45 of the CCA because its conduct was required by the Treasurer under the PAAT Act, which Act did not relevantly meet the requirements stipulated in s 51. 573 Moreover, the problem is not addressed by asserting that s 2B(1) poses a question logically anterior to s 51(1). The issue is how s 2B(1) itself ought to be construed. I agree with the ACCC that s 2B(1) should not be construed so as to preclude Part IV from applying to conduct required under State legislation if that legislation did not satisfy the detailed requirements of s 51. 574 Indeed, to assert that derivative Crown immunity operates at an anterior point to s 51 in my view manifests a failure to engage in properly construing the CCA to determine whether the CCA intends to exclude the operation of derivative Crown immunity in the first place. The CCA should be construed by reference to all relevant provisions to determine whether it excludes the operation of derivative Crown immunity. And s 2B(1) cannot be properly construed in isolation from the balance of the CCA, including s 51. 575 Moreover, it is no answer to say that s 51 is to be read in the context of s 2B(1). Section 2B concerns the application of the CCA to the States and Territories. It says nothing about private corporations. If a State wishes to exempt private corporations from Part IV of the CCA, the Commonwealth Parliament has stipulated that it may do so in accordance with s 51, and it has prescribed how to do so with real specificity. It follows that a State Parliament cannot do so otherwise. 576 Further, the PAAT Act authorised the Minister to make such arrangements as he thought fit. It did not specifically authorise inclusion of the "thing" that needs exception from the CCA, namely, a compensation provision. If it had, the NSW Ports consortium and the State would be excepted from liability directly by s 51(1)(b), unmediated by derivative Crown immunity. 577 Sixth, in my view the primary judge erred in the fashion in which she sought to distinguish Baxter. The fact that the contracts were of high significance to the State's policy and economic objectives is in my view a distraction if not an irrelevance to the legal question of the interpretation and operation of the CCA. Further, the fact that the contracts concerned the sale of State assets rather than the purchase of products had no relevant bearing on the question of whether the CCA applied to the NSW Ports consortium. The fact that the contracts were made within a larger statutory regime for the sale of State assets does not relevantly distinguish the present case from Baxter or provide a sufficient basis to conclude that the CCA in its application to third parties would divest a legal right or interest of the State. Further, the primary judge problematically concluded that a contrary intention would not impose an extensive qualification on the CCA's object. But privatisation of NSW State infrastructure was a substantial commercial activity with significant effects for the economy, whether for NSW or federally. 578 Seventh, her Honour said that the PAAT Act authorised the Crown in right of the State to require a counter party "to engage in conduct that would otherwise contravene the CCA". I should set out [402] which stated: The scheme of the PAAT Act thus enables the Treasurer to do what is required to be done for the purposes of an authorised transaction. On this basis, the legislative intention of the NSW Parliament in enacting the PAAT Act may be discerned. The NSW Parliament intended that the statutory rights vested in the Treasurer by the PAAT Act included the Treasurer, for the purposes of an authorised transaction, requiring the other party to the transaction to engage in conduct that would otherwise contravene the CCA. (emphasis in original) 579 Now the effect of that reasoning, and in particular the word "otherwise", was somehow on her Honour's approach to recognise that the CCA generally intended to regulate the impugned conduct, but whether it be upon the passage of the PAAT Act or upon the exercise of the Treasurer of the purported statutory power, the principle of derivative Crown immunity would cause the existing intended reach of the CCA to be rolled back to accommodate the terms of the PCDs and PAAT Act. But that approach did not involve any form of construction of the CCA. Indeed, from one perspective this seems to reflect the approach to Crown immunity that was rejected in Bropho. And it in essence treated derivative Crown immunity as a prerogative power of the Crown to somehow dispense with compliance, such that the CCA would simply cede to the purported State statutory power. But the task was to construe the CCA and to ascertain whether it evinced an intention to regulate the relevant conduct, which in my view it did. And there was no scope for a State law to be passed that impliedly purported to authorise the Treasurer to require a counterparty to engage in conduct that otherwise contravened a federal law, save under the mechanism contemplated by s 51. 580 Eighth, the majority in Baxter explained, the CCA should not be read so as to divest the Crown of proprietary, contractual or other legal rights or interests, but only save to the extent that a contrary intention appears from the language of the CCA and its objects and subject matter. But in the case of s 45, a contrary intention is manifest. The language of s 45 itself is pellucidly expressed. It applies to any corporation. 581 Now the primary judge identified particular features of the present case including the statutory capacity of the Treasurer and the high policy and economic significance to the State of the ports dealt with by the PAAT Act. And her Honour expressed reasons why, if s 45 did not apply to the NSW Ports consortium, the qualification upon the objects of the CCA would be confined. But as the ACCC pointed out, these features all concern the PAAT Act or the assets and rights with which it deals. None can influence the construction of the CCA. And the CCA's construction cannot possibly depend upon the terms of the later PAAT Act, the assets with which it deals or the apparent significance of the State's policies and economic objectives concerning privatisation. 582 The express words of s 45 and the object of the CCA signify that it did apply to the NSW Ports consortium. But rather than consider whether this language and this object evince an intention that s 45 applies to the consortium even if this would or may divest the State of a legal right, her Honour found that s 45 did not apply to the consortium because the effect of that would be to apply s 45 to the State so as to divest the State of legal rights. But such an approach does not consider whether a contrary intention appears, whereby the statute does apply to a third party in a way that divests the Crown of legal rights. 583 Ninth, the preferable construction of the provisions is that s 2B(1) has the limited effect that the State, when not carrying on any business, is not prevented by s 45 from anti-competitive contracts. But it does not have the effect that the State's anti-competitive conduct is positively facilitated by also excepting any entity whose participation is integral to the State's anti-competitive exercise of a right. Further, s 45 should not be construed, contrary to its clear language, as not applying to parties like the NSW Ports consortium, at least so far as it carries on business, when the effect of s 2B(1) is that s 45 does apply to the State so far as it carries on business. 584 Tenth, Baxter also emphasised (at [70]) that to preserve the immunity conferred on States by s 2B(1), "it is not necessary to deny that entering into or performing a contract could involve a contravention of [s 45 (in our case)] by a non-government party" which is negotiating or contracting with the Crown. 585 Let me now turn to the PAAT Act itself.

Analysis - the PAAT Act 586 Now the primary judge concluded that the PAAT Act vested in the Treasurer, for the purposes of an authorised transaction, a statutory right to require the NSW Ports consortium to engage in conduct that might otherwise contravene provisions of the CCA. But the PAAT Act did not empower the Treasurer to so require the NSW Ports consortium. 587 Her Honour apparently located the source of the Treasurer's statutory right to require the NSW Ports consortium to engage in conduct that would otherwise contravene the CCA within ss 6 and 7(1) of the PAAT Act. But both provisions use general language empowering the Treasurer to effect an "authorised transaction". An "authorised transaction" is defined by s 3 to mean "a transfer of ports assets authorised by Part 2". Part 2 includes s 4(1), which authorises "the transfer of ports assets to the private sector or to any public sector agency". These provisions empowered the Treasurer to make consensual arrangements with private sector entities. But they neither required such entities to accept a transfer on whatever terms the Treasurer saw fit nor empowered the Treasurer to sanction such entities who declined to accept his terms. 588 Now the NSW Ports consortium argued before us that what the primary judge described as a statutory right that was vested in the Treasurer by the PAAT Act to require the other party to the authorised transaction to engage in conduct, including making and giving effect to, contractual provisions, should not be understood as a legal right or power to require in the ordinary sense of ordering or obliging the other party to do anything. But I agree with the ACCC that such an assertion is difficult to reconcile with much of her Honour's language and reasoning. But in any event and irrespective of how her Honour expressed herself, there is still a problem. 589 If the Treasurer had no power under the PAAT Act to compel or oblige counterparties to accept his preferred terms, the Treasurer never had a statutory right to contract on those terms. Instead, the Treasurer had a right or power to propose terms to third parties, and to effect an authorised transaction only if terms could be agreed with one of them. 590 Now a counterparty may be unwilling or unable to accept the Treasurer's preferred terms for legal, commercial, rational or even capricious reasons. But no divestment of legal rights conferred on the Treasurer by the PAAT Act is entailed if, for example, s 45 of the CCA precludes the NSW Ports consortium from accepting the Treasurer's preferred terms. The Treasurer's statutory right to propose terms and to effect an authorised transaction if agreement is reached with a third party is one thing. But a third party's ability or willingness to accept terms is outside the scope of the right conferred by the PAAT Act. And importantly in the present context, such an ability or willingness is governed by s 45. 591 So whether the primary judge discerned in the PAAT Act a right or power to require a counterparty to contract on the Treasurer's preferred terms or discerned a right to propose contractual terms that a counterparty was free to reject, the former right is an illusion, and the latter right could not be adversely affected if s 45 precluded the NSW Ports consortium from accepting the Treasurer's preferred terms. 592 I agree with the ACCC that the correct construction of the PAAT Act is that it empowered the Treasurer to make any contract he considered expedient with a willing private sector party. But the PAAT Act conferred no right to require such a counterparty to accept his terms, let alone required it to engage in conduct that might contravene the CCA. 593 Further, even if the PAAT Act did confer on the Treasurer the power to require another party to engage in conduct that would otherwise contravene the CCA, such a capacity or power would not engage the principle of derivative Crown immunity. 594 What is relevantly required is the divestment of a legal right or interest being a legally enforceable interest. But it is evident from Baxter that the executive power to contract and the common law freedom to contract are not such rights or interests. 595 Now the interest that was identified by the primary judge as engaging the principle of derivative Crown immunity was a State statutory power. But that power was a statutory power relating to a contractual capacity. But such a power is not relevantly different from the contractual capacity that was held not to engage the principle of derivative Crown immunity in Baxter. Moreover, the fact that the present capacity was said to be conferred under a statute and was narrower than the capacity in issue in Baxter did not convert that power into a legal right or interest for the purposes of derivative Crown immunity. 596 Further, Baxter dealt only with the divestment of a previously established State right, not with the divestment of any right to create rights. The interpretative presumption against divesting the Crown is concerned with the divesting of legal rights or interests, not rights to create rights. 597 Now as both the State and the NSW Ports consortium resorted to the now rejected notion that interference with any general right, interest or power belonging or appertaining to the Crown will engage derivative Crown immunity, I should say a little more about the authorities. 598 Let me begin with Wynyard Investments Pty Ltd v Commissioner for Railways (NSW) (1955) 93 CLR 376. 599 Kitto J, in a passage cited with approval by the majority in Baxter, described the scope of derivative Crown immunity in the following terms (at 396): …The object in view is to ascertain whether the Crown has such an interest in that which would be interfered with if the provision in question were held to bind the corporation that the interference would be, for a legal reason, an interference with some right, interest, power, authority, privilege, immunity or purpose belonging or appertaining to the Crown… 600 Let me say something further concerning Kitto J's observations. 601 First, he was both in dissent in the result and as to his mode of reasoning. As was clear from the majority judgment, the case was disposed of on a point of statutory construction. The short point was whether the Commissioner for Railways could be said to be "the Crown in right of the State" under s 5(a) of the Landlord and Tenant (Amendment) Act 1948-1952 (NSW) so that that Act would not bind him. And on that question, Williams, Webb and Taylor JJ said that s 4(2) of the Transport (Division of Functions) Act 1932-1952 (NSW) was "decisive for present purposes" (at 385); s 4(2) specified that "for the purposes of any Act the Commissioner for Railways shall be deemed a statutory body representing the Crown". So, putting these provisions together, the Commissioner was not bound by s 62(1) of the Landlord and Tenant (Amendment) Act because he fell within s 5(a). Contrastingly, Kitto J, with whom Fullagar J agreed, took a different view as to the scope and construction of s 4(2) of the Transport (Division of Functions) Act (at 400 to 402). 602 Second, and as a consequence, Kitto J's discussion did not require him to address derivative Crown immunity at all. On his analysis of the statutory construction points one did not even get past first base of showing Crown immunity. Moreover, and in the context of the case that he was considering, if Crown immunity had been established (as it was for the majority), then derivative Crown immunity simply did not arise. 603 Third, Kitto J's discussion at 393 to 394 was merely describing a "few broad classes". He was not charting their metes and bounds, and nor were these classes said to be exhaustive. 604 Fourth, at 394, he stated: …Next there is the class of cases in which a provision, if applied to a particular individual or corporation, would adversely affect some proprietary right or interest of the Crown, legal, equitable or statutory: see Wirral Estates Ltd v Shaw… 605 Now as I have said, this statement was doubly removed from the issue that he had to address. But putting that to one side, the footnoted citation gave no specific page reference for that proposition from Wirral Estates Ltd v Shaw [1932] 2 KB 247. Moreover, I must say that for my part I have difficulty with respect in extracting the breadth of Kitto J's principle from Wirral Estates. In that case the Crown had leased land to Mr Shaw. By reason of Crown immunity it was not bound by the Increase of Rent and Mortgage Interest (Restrictions) Act, 1920 and Rent and Mortgage Interest Restrictions Act, 1923. The Crown then sold the land to Wirral Estates Ltd during the currency of the lease. The following year the lease came to an end and a new tenancy was created. Now before the lease came to an end "the immunity continue[d] even though the reversion had passed from the Crown" (per Lord Hanworth MR at 259). But once that lease had terminated, the immunity did not extend to the new lease. 606 In any event, I do not need to linger on these questions given that Kitto J's propositions have now been enshrined in later High Court authority (see, for example, Baxter at [59] to [61]). 607 Further, NT Power also dealt with derivative Crown immunity and referred (at [168] to [170]) to the observations of Kitto J in Wynyard Investments. McHugh ACJ et al said (at [170]): A more accurate way of putting the issue which Gasgo raises accords with what was said by Kitto J in Wynyard Investments Pty Ltd v Commissioner for Railways (NSW). This is to ask whether s 46, in preventing enforcement of a clause in a contract between two parties, neither of whom is the Government, caused "some impairment of the existing legal situation of" the Northern Territory Government in this case. The object, to adapt what was said by Kitto J, is to ascertain whether the application of s 46 to Gasgo "would be, for a legal reason, an interference with some right, interest, power, authority, privilege, immunity or purpose belonging or appertaining" to the Government. More recently, this Court said that the interference to be looked for is a "divesting" of "property, rights, interests or prerogatives" belonging to the Government. The better view is that the principle applies to proprietary, contractual and other legal rights and interests and not otherwise, notwithstanding that it has been said to extend to "arrangements or understandings". That phrase was used by Mason and Jacobs JJ in Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd but, as appears below, requires further consideration. 608 I also note that part of Kitto J's analysis was referred to in Bradken Consolidated Ltd v The Broken Hill Proprietary Company Ltd (1979) 145 CLR 107 at 137 and 138 per Mason and Jacobs JJ. 609 Further, Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at [41] and [42] summarised the holding in Bradken and what was said by Gibbs ACJ at 124 and by Mason and Jacobs JJ at 137 and 138. Of course, Bass did not decide the point and nor did it purport to give it considered analysis. Further, the cited passage concerned the interference with a pre-existing contractual relationship and rights rather than the potential creation of a new relationship, that is, a so-called "right to create a right" scenario. In the present context we are in the latter scenario rather than the former scenario. 610 The relevant passages from Bradken as well as what was said by Stephen J at 129 make it plain that the context in which derivative Crown immunity was being discussed was where the Act applied "to prejudice [the Crown's] interests when in contractual relationship with parties to whom the Act clearly applies or when otherwise interested in transactions affecting those parties" (my emphasis). 611 But in the present context, the so-called right to deal with the State's assets in a value maximising way was not a right capable of engaging the principle of derivative Crown immunity. Of course the State was free to maximise the value of its business assets, but subject to compliance with the requirements of the CCA by the potential buyer as a potential counter-party. 612 Further, the very proposition of the State, which is to the effect that by depriving a third party of the ability to enter into transactions of a particular kind, s 45 would necessarily circumscribe transactions and arrangements that the State might require of a third party in order for the State to be willing to contract, presupposes that the Treasurer had an absolute freedom to contract on whatever terms he required, regardless of federal law. Yet as the plurality said in Baxter, no one has such freedom. 613 Further, the very general language of the PAAT Act cannot simply be construed as empowering the Treasurer to sweep aside any legal obstacle that would otherwise prevent a third party from entering an authorised transaction on terms that the Treasurer considered value maximising or convenient. If such a power were intended, one would have expected to find it in the PAAT Act. But instead and more narrowly, ss 25 to 28 stipulated specific State Acts, statutory provisions and instruments which would not apply or operate to prevent, restrict or otherwise limit the carrying out of an authorised transaction. There was no such sweeping scope or privilege. 614 Further, there were many laws and obligations which constrained third parties with whom the Treasurer wished to contract. But the Treasurer took those third parties and their respective legal situations as he found them. 615 Moreover and as I have already said, the starting point is not the PAAT Act, but the CCA. If, on the proper construction of the CCA, the NSW Ports consortium was prohibited from making the compensation provisions, there never was a vested legal right in the Treasurer to make or impose the compensation provisions. And nor could the NSW Parliament invent or enshrine such a right, unless the mechanism under s 51 was sought to be invoked. 616 Now it was said by the State that the application of s 45 divested the Treasurer of a right under the PAAT Act. But this erroneously assumes that there was a time when the NSW Ports consortium's agreement to the compensation provisions was lawful and effective to create a right in the Treasurer, of which he could be divested by an application of the CCA. But there was no such right.

Summary 617 Let me draw the threads together concerning problems with applying or finding derivative Crown immunity in the present context. 618 First, the prohibition in s 45(2) concerning the making of a contract with an infringing provision applies at a time just before the contract was made ("shall not make"). So, the NSW Ports consortium was precluded from entering into the relevant contract with the State. Another way to express it is that the State was not divested of any right whatsoever. Such a right to contract with the NSW Ports consortium was an illusion, in the sense that the contract could not be consummated with the NSW Ports consortium as the latter was disabled from even entering into it with the infringing provision. 619 Second and relatedly, the prohibition was on the NSW Ports consortium and was on its conduct. It did not speak to the State whatsoever. Further, the State had to take the NSW Ports consortium as it found it, which was of course subject to the disabling consequence and prohibition applying to the consortium under federal law. Nothing under the PAAT Act altered or removed that reality. 620 Third, there was no justification in the text or context of s 45 to read it such that where the NSW Ports consortium sought to contract with the State, the consortium was somehow immunised from the prohibition applying directly to it. The State could not immunise the consortium under some so-called freedom to contract. Any such freedom was always subject to federal law. Further, there is nothing in the general empowering provisions of the PAAT Act which could create any such unlimited statutory freedom to contract. The PAAT Act was also subject to federal law. And as I have said, s 51 of the CCA had not been invoked. 621 Fourth, s 2B(1) cannot be used indirectly to give a defence to the NSW Ports consortium to any otherwise contravention under s 45(2). 622 Fifth, as for the suggestion that the State was selling an asset consisting inter-alia of a bundle of rights and that it was entitled to maximise the value of that asset by entering into the PCDs with the impugned provisions, to the extent that it was dealing with third parties it had to take them as it found them, that is, subject to s 45(2) or any other federal prohibition. 623 Sixth, it was said that somehow the State would lose a right or be prejudiced if the compensation provisions were invalidated. In that context, the scenarios of severance or non-severance and the consequences of the applicable scenario would need to be considered in terms of any adverse impact on the State. But this argument went nowhere. The State, assuming that the NSW Ports consortium could not agree to the compensation provisions by reason of the prohibition in s 45(2), never had a right to so contract with the consortium in the first place. Therefore, the State is the author of any consequences to it flowing from severance or otherwise. Moreover, the question of severance or otherwise only falls to be considered once you have first determined that s 45 applies to the NSW Ports consortium concerning the making of the compensation provisions. But if you have so first determined, then implicitly you have rejected derivative Crown immunity. As I say, the argument concerning invalidity and severance says nothing in support of derivative Crown immunity. The argument is only triggered once you have rejected derivative Crown immunity. 624 In summary, the ACCC has succeeded in establishing that derivative Crown immunity was not relevantly engaged. Accordingly, s 45 applied to the NSW Ports consortium concerning the relevant subject matter. 625 But does this conclusion only deliver a pyrrhic victory for the ACCC? It would seem so. Let me turn to the s 45 competition questions and explain why. I will deal with the purpose case first and the effects case second.

The purpose of SLC 626 The question is whether the compensation provisions had the purpose of substantially lessening competition, which is to be determined by the subjective purpose(s) of the relevant parties in making such provisions. And on that latter perspective, the relevant applicable principles are not in doubt. 627 Conveniently, a concise statement of the relevant concepts is contained in Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (2019) 374 ALR 90, where Jagot, Beach and Bromwich JJ said (at [166] to [169]): Purpose focuses on the end sought to be accomplished by the conduct, rather than the reason for seeking that end, that is, motive (News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563; 200 ALR 157; [2003] HCA 45 (News v South Sydney) at [18] per Gleeson CJ). The relevant purpose is that of the parties to the contract, arrangement or understanding and it is their subjective purpose. Further, it is not necessary that all of the parties to the understanding should have a common purpose. Now the "manifest effect of a provision in an agreement, in a given case, may be the clearest indication of its purpose" (News v South Sydney at [18] per Gleeson CJ). But to consider objective effect ought not be given undue significance. After all, one is considering the effect that the parties sought to achieve (News v South Sydney at [63] per Gummow J). But the text and effect of the provision and a consideration of the circumstances surrounding the relevant arrangement or understanding may inform the subjective purpose. Although purpose is subjective (ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (1990) 27 FCR 460 at 474; 97 ALR 513 at 525; 19 IPR 323 at 335 (ASX Operations v Pont Data) per Lockhart, Gummow and von Doussa JJ and News v South Sydney at [41] per McHugh J, and [62] to [63] per Gummow J), it can be identified using objective considerations and inferred from circumstantial evidence. Moreover, where conduct is part of a wider strategy, the purpose of that strategy can be relevant to determining the purpose of the provision (Australian Competition and Consumer Commission v Olex Australia Pty Ltd [2017] FCA 222 at [494] per Beach J). Further, it must be recognised that the application of a subjective test may have its difficulties where parties have different subjective purposes or have not turned their minds to the purpose of the relevant provision (cf McHugh J at [38]). But where multiple parties give rise to multiple subjective purposes, s 4F may have a role to play (News v South Sydney at [59] to [62] per Gummow J). Further, a provision of a relevant arrangement or understanding will be deemed to have had a particular purpose if it was included in the relevant arrangement or understanding for multiple purposes, provided that the proscribed purpose was a substantial one. To be "substantial" it must be "considerable or large" or a "real purpose for the inclusion of the provision" (Seven Network Ltd v News Ltd (2009) 182 FCR 160; 262 ALR 160; [2009] FCAFC 166 (Seven v News) at [858] per Dowsett and Lander JJ). 628 Now in forensically establishing purpose six points should be noted. 629 First, the manifest effect of a provision may be the clearest indication of its purpose (News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563 at [18] per Gleeson CJ). 630 Second and as Gleeson CJ went on to say, nevertheless in some cases it may be difficult if not impossible to determine the relevant purpose of a contractual provision merely by reading the document. 631 Third, if one is seeking to objectively determine subjective purpose by considering the terms and effect of the relevant provision, there is a danger that "undue emphasis will be given to the substantive effect of the provision rather than what the parties sought to achieve by it" (Cascade Coal at [209] referring to News at [63] per Gummow J). And clearly, s 45 distinguishes between purpose and effect. 632 Fourth, discovery of purpose should involve an examination of the provision in the context of the agreement as a whole. 633 Fifth, one can also seek to objectively determine subjective purpose by considering the surrounding circumstances as to the making of the agreement and inclusion of the relevant provision. So, the objective framework can assist to determine the subjective purpose (News at [44] per McHugh J). 634 Sixth, the objective matrix can be considered irrespective of any direct witness evidence or out of court statements by one of the negotiating individuals of subjective purpose. Indeed, the former can be used to test the probative value of the latter. 635 Now on the assumption that one is considering the subjective purpose of a party for the inclusion of a provision, what happens where there are multiple subjective but different purposes with different parties holding different purposes? 636 First, a proscribed purpose need not be the only purpose, as is reflected in s 4F(1)(a)(i). So long as one of the contracting parties has the proscribed purpose, that may be sufficient, even if the other parties did not have such a purpose. 637 Second, to be such a proscribed purpose though in terms of one of the contracting parties, it must be a substantial purpose in terms of considerable or large. 638 Now in the present context I need not linger further on such matters as her Honour correctly held in my view that none of the contracting parties had a subjective proscribed purpose, let alone a substantial purpose. It is convenient to elaborate further on her Honour's approach. 639 In terms of the purpose sought to be achieved by the compensation provisions, her Honour found that the object that the State sought to achieve was to ensure that bidders for the ports did not discount their bids because of the perception of risk concerning the possible establishment of a container terminal at the Port of Newcastle which might arise from a change in the State's policy. And the NSW Ports consortium's purpose, so her Honour held, was to ensure that it retained the financial value of the assets that it paid for. 640 But her Honour found that neither the State nor the NSW Ports consortium sought to prevent or hinder the Port of Newcastle from entering the relevant market, and nor did they seek to alleviate the need for the consortium to compete with the Port of Newcastle. 641 First, she said that if the State had wished to hinder or prevent a container terminal at the Port of Newcastle, it could have done so directly as its then owner and as an entity whose consent to the development of a major infrastructure project was required. Indeed, to use the compensation provisions to achieve such an object would have been decidedly odd to use her Honour's vernacular. 642 Second, she said that the compensation provisions could not have been understood to alleviate the need for Port Botany to compete in circumstances where it risked losing container traffic to the Port of Melbourne or the Port of Newcastle and damage to its commercial reputation. Moreover, as she pointed out, the text of the compensation provisions reflected the parties' contemplation and expectation that if a container terminal was developed at the Port of Newcastle, the NSW Ports consortium would do everything reasonable to compete with the Port of Newcastle. 643 Third, as her Honour pointed out, the assertion that the purpose of the compensation provisions was to ensure that the NSW Ports consortium need not engage in ordinary competitive behaviour was also at odds with the terms of the compensation provisions. The text of those provisions not only contemplated that the consortium would do what it could to compete with any container terminal that might be developed at the Port of Newcastle, but indeed required it to do so. I agree with her Honour that the compensation provisions could not reasonably have been understood by either the State or the consortium as giving the consortium any licence to refrain from engaging in ordinary competitive behaviour if the relevant contingency arose. 644 Fourth, as her Honour's reasons make plain, in the present case there was no existing threat of entry, which could only occur if there was a radical change in government policy. Rather, the perceived risk was that the State's policy might change such that a container terminal at the Port of Newcastle could then be developed, with the consequence that the asset that was the subject of the sale would no longer exist in the form that was being sold. And as so understood, it was artificial to compare the situation facing bidders for the Port Botany assets with commercial players facing the threat of a new entrant into their market. Here, there could be no entry without government support, which would entail a change in policy. 645 Fifth, the ACCC's case was premised on the proposition that the only way of ensuring that the NSW Ports consortium received the full value for what they paid for Port Botany and Port Kembla was to remove the prospect of any competition with the Port of Newcastle. But this premise was problematic. In any event, and as her Honour pointed out, there was no evidence that either the State or the consortium held this view or that it was a matter that was considered in the implementation of the compensation provisions.

Analysis 646 In my view her Honour was correct to find that neither the State nor the NSW Ports consortium had the purpose of substantially lessening competition in terms of making the compensation provisions. 647 First, from the State's perspective its policy had already been settled such that a container terminal would not be established at the Port of Newcastle until capacity at Port Botany and Port Kembla had been used. Moreover, no further step of resolving the policy or securing its implementation through the compensation provisions was required. I agree with her Honour that self-evidently, the State could not have had the substantial purpose of bringing about through the compensation provisions something which in the State's view it had already resolved. 648 Second, the protection obtained by the compensation provisions was a form of insurance in the event of the diversion of containers from Port Botany to the Port of Newcastle. But a purpose of such financial insurance is not the same as a purpose of protection from competitive constraint. Regrettably, the ACCC persisted in conflating the two before us. Indeed, the very heading of cl 3 in the PCDs referring to support reflected the provision of a form of financial insurance. Further, the very terms of cl 3.3(e) reflected such a purpose. Moreover, the existence of cl 3.9 reflects that the entirety of cl 3 had elements of benefit to all parties. Clauses 3.1 to 3.7 were to be read within the entirety of cl 3. And the relevant purpose of each contracting party was to be ascertained through this broader lens. 649 Third, the purpose of cl 6(d) was not to relieve the NSW Ports consortium of the obligation to take such steps as were reasonable and appropriate to maintain container throughput at Port Botany and Port Kembla. The obligation for the consortium to take reasonable steps to minimise any loss of revenue it might have to the Port of Newcastle necessarily included it competing in the ordinary way, to the extent such competition was possible, with the Port of Newcastle. It would not constitute reasonable endeavours for the purpose of cl 6(d) to abandon competition contrary to the role that the parties contemplated the NSW Ports consortium would carry out as the operator of Port Botany and Port Kembla. The consortium was not free to refuse to minimise any loss of revenue. Clause 6(d) is a strong indication that there was no subjective purpose on the part of the State or the consortium to substantially lessen competition. 650 Fourth, the compensation provisions were proposed and drafted by the State rather than the NSW Ports consortium. That rather diminishes any suggestion of an anti-competitive purpose held by the latter and rather strengthens the former's position that its purpose was to provide a form of financial insurance to remove the risk perceived by the latter concerning a change in the State's policy. 651 Fifth, the ACCC could not identify any document in which either the State or the NSW Ports consortium expressed their desire to use the compensation provisions as a means to prevent or hinder competition with or from the Port of Newcastle. Contrastingly and for example, a Treasury briefing document dated 13 March 2013 concerning "Key Botany / Kembla Risk Allocation Matters" makes it plain that there was no proscribed State purpose of the type alleged by the ACCC concerning a substantial lessening of competition including raising any barrier to entry at the Port of Newcastle. As its content reveals, one of the risks identified concerned a "Change in law - Newcastle Container Terminals" and the relevant risk allocation being considered. The impact addressed was potential bid price impact, and what was discussed was potential compensation for the impacts of a change in State policy. 652 Sixth, the NSW Ports consortium's purpose was to ensure that it retained what it would pay for, namely, the full extent of the existing monopoly of Port Botany in respect of container port services in NSW. Her Honour's reference to the full extent of the existing monopoly should be taken to mean the full value of, not the full trade within, that monopoly notwithstanding some infelicity in expression. The consortium's purpose was to retain value, not to prevent diversion of trade. 653 Now the NSW Ports consortium's purpose was the subject of oral evidence. And the primary judge had the advantage of assessing the relevant witnesses. As the primary judge found, compensation was identified as an issue in the bidding process by one of the bidders, in relation to the risk that Port Kembla might be subordinated to the Port of Newcastle as the second container port, not that the Port of Newcastle might be developed whilst Port Botany had capacity. The State proposed the compensation provisions to ensure that bidders did not discount their bids on account of sovereign risk about port sequencing policy. The NSW Ports consortium accepted the compensation provisions in a context where the State advised that proposed changes would be viewed unfavourably. The consortium did not consider that there was a realistic prospect of a container terminal being developed at the Port of Newcastle. This all weighs against the submission that either party intended to relieve the NSW Ports consortium from future constraint. 654 Seventh, although the ACCC contends that the primary judge erred in failing to find that the purpose of the compensation provisions was to substantially lessen competition in circumstances where the reimbursement provision was also contemplated, her Honour expressly referred to the reimbursement provision as part of her analysis of the purpose of the compensation provisions. And as her Honour no doubt considered, although the State had in contemplation the possibility that if the compensation provisions were agreed and the assets at the Port of Newcastle later came to be privatised, one option could be to pass on any liability of the State under the compensation provisions, it did not follow that one of the substantial purposes of the compensation provisions was to impose a liability on a future private operator of the Port of Newcastle. 655 Eighth, the ACCC contends that when viewed together, the compensation provisions and the reimbursement provision were intended to allocate the financial costs of market entry by the Port of Newcastle. It is said that this should have led the primary judge to conclude that the provisions were intended to prevent or hinder the establishment of a container terminal at the Port of Newcastle, because it forced the operator of the Port of Newcastle to pay to enter the market and thereby erected a barrier to entry. But there was no evidence which reflected any intention to prevent or hinder the establishment of a container terminal at the Port of Newcastle. Moreover, the reimbursement provision was contemplated in the context of a potential privatisation of the Port of Newcastle and similarly reflected the fact that a potential purchaser of the Port of Newcastle should receive what it paid for, namely, a port where, because of State policy, there was no realistic prospect of the development of a container terminal before the capacity of Port Botany and Port Kembla was exhausted. If that position changed, then the operator of the Port of Newcastle would by the reimbursement provision be required to make a payment that reflected the increased value of the asset it had received. But this was not a mechanism to hinder or prevent the development of a container terminal. 656 Further, it is problematic at the least to say that the State's foresight of an end sought to be achieved in the future in a later and different contract with a different counterparty is a substantial purpose for including a provision in an earlier contract. The prospect of the first provision may be the reason why the second provision is foreseen and even intended. But it is another thing to say that the second provision is the reason for the first and so a substantial purpose of the first. And the compensation provisions were the occasion for making the reimbursement provision, not the converse. And even if the reimbursement provision was found to have been contemplated at the time of the compensation provisions, that does not make the purpose of the later provision a purpose of the earlier provisions. 657 I agree with the primary judge that the reimbursement provision added nothing to the characterisation or purpose of the compensation provisions. Indeed, they served to reinforce that the purpose of those provisions was to ensure that bidders for the port assets paid a price that reflected the value of the assets that they received. 658 In summary, the ACCC's challenge concerning the purpose case fails. Let me turn to the other dimension to the ACCC's s 45 case concerning the alleged likely effect of the compensation provisions.

Likely effect of SLC 659 Let me say at the outset that I have not found it necessary to set out in any detail her Honour's comprehensive factual narrative. This is because once one has traversed her expansive desert of dry facts, one reaches an oasis at section 8.7.11 of her reasons headed "Key conclusions". I need only draw from this spring on the competition questions for the most part. 660 Now the ACCC's case is that the primary judge should have found, first, that the NSW Ports consortium perceived a credible threat of entry, second, that she should have construed the compensation provisions as making the NSW Ports consortium indifferent to lost volumes and, third, that she erred in finding that the reimbursement provision in the context of the compensation provisions did not raise barriers to entry. 661 Let me deal shortly with each of these assertions in turn, each of which I have rejected.

The perceptions case 662 There was a debate before us as to whether such a case was pleaded or run below by the ACCC. On a very generous view of the matter from the ACCC's perspective, in terms of how the case was run I could not say that it was outside the penumbra around its main themes. I am prepared to deal with its argument if only to dispose of it. 663 Now only reasonable perceptions constitute cognisable constraints. And in that context, entry must be viable, and the threat of entry must be credible, in order to constitute a cognisable constraint, the relaxation of which could constitute a substantial lessening of competition. 664 Now in a different context, I said in Australian Competition and Consumer Commission v Pacific National Pty Ltd (No 2) [2019] FCA 669 at [927] to [934]: Some further observations should be made concerning perception. First, it will be relevant to consider whether the view is based on detailed analysis and knowledge… Second, a widely-shared perception will tend to carry greater weight than an idiosyncratic one. In Stirling Harbour, French J said at [73] that "(d)espite the slender empirical foundation for Shortland's broad perspective it was supported by that of another tenderer, Brambles Ltd". Third, whether the perception as to likely future conduct arises from existing conduct within the industry may be relevant. So, for example, in testing whether conduct is likely to occur in the future, one should test whether it is occurring in the present. This is no more than plain vanilla reasoning by induction. Fourth, the genuineness and stability of the perception over time is relevant… Fifth, I agree with the respondents that it is incorrect as a matter of law to take an erroneous perception, if that be shown, of an incentive and ability to discriminate into account in determining whether conduct is likely to substantially lessen competition. The purpose of the CCA is to increase the welfare of Australians through the promotion of competition (s2). Competition enhances welfare because it leads to economic efficiency. Taking a demonstrably erroneous perception into account in assessing whether conduct is likely to substantially lessen competition would not increase economic efficiency. To the contrary, it would prevent assets from being acquired by entities that can operate them most efficiently and therefore place the most value on them. It would decrease productive efficiency ie the production of goods at the minimum possible cost under existing technology. And if potential investors know that the price that they will obtain from the future sale of assets may be reduced by potential bidders' erroneous perceptions, it would decrease the amount that they are willing to pay for those assets. This would then prevent capital flows from being directed to the places where they will be most effective, resulting in a reduction in allocative efficiency as well ie ensuring that resources are allocated, through price, to their highest-value use among all competing uses. Sixth, under ordinary market conditions, an entity's perceptions of its competitors' behaviour are informed by outward manifestations of their strategy through their conduct, and other market intelligence properly received through customers and the like... 665 Clearly, the corollary of such propositions is that only reasonable perceptions are relevant. 666 Now in terms of the evidence before her Honour, there was objectively no credible threat of entry by a private operator at the Port of Newcastle. So, any perception on the NSW Ports consortium's part of such a threat of entry would not have been reasonable. On that basis any alteration of that perception so as to loosen any constraint it applied to the consortium's behaviour could not constitute a substantial lessening of competition. 667 But in any event, the evidence did not support a finding that the NSW Ports consortium perceived or was likely in the counterfactual, that is, in the future world of no compensation provisions, to perceive the Port of Newcastle as a threat. 668 First, there were two different aspects of the State's policy of potential interest at the time of the bids for the Port Botany and Port Kembla assets being: (a) whether there could be any second container port whilst Port Botany had capacity; and (b) which port would be second after Port Botany reached capacity. The first aspect remained relevant to the issues before us, but the second aspect was not. The ACCC did not prove a case in relation to Port Kembla. Now there was no evidence that the NSW Ports consortium perceived any real chance that the State would permit the Port of Newcastle to be developed before Port Botany reached capacity. And nothing in the ACCC's cross-examination of the consortium's witnesses established otherwise. 669 Second, it is conceptually wrong to equate, on the one hand, a perceived risk that a bidder considers material to a decision whether to invest and at what price with, on the other hand, a perception that the investor may be competitively constrained in the carrying on of the business once it has been purchased. As the primary judge found, in the context of this particular investment decision the perceived risk would result in a disproportionate discount to the bid price. The evidence was that the bidders, unsurprisingly, were conservative about risk. That fact is relevant to why the risk involving a change to the State's policy was material to the investor. But that risk could not thereafter be assumed to operate as a similarly material competitive constraint going forward. I agree with the NSW Ports consortium that this conflates different conceptions of materiality. As the consortium put it, a conservative investor is not necessarily a conservative port operator. 670 Third, the NSW Ports consortium perceived the likelihood of a container terminal being established at the Port of Newcastle to be low, and as her Honour said not necessarily even real. I agree with the consortium that the ACCC cannot salvage from this finding a meaningful prospect of new entry by multiplying the unreal probability by large consequences to obtain a supposedly material risk. Section 45 requires proof of a real chance of a substantial lessening of competition. The magnitude of the consequences of entry for an incumbent do not lower the threshold at which a chance of a substantial lessening of competition becomes meaningful. 671 I will not linger further. I reject the perceptions case. Let me turn to the second strand of the ACCC's challenge.

Construction and effect of the compensation provisions in the world with those provisions 672 Now for the ACCC to succeed in establishing that the NSW Ports consortium was constrained by a perception of a threat of entry by the Port of Newcastle, it had to show that the compensation provisions relieved the consortium from any constraining effect of the alleged perception. But this argument went nowhere. 673 The compensation provisions did not have any effect of relieving any such constraint. Clauses 3 and 6(d) operated to deny compensation to the NSW Ports consortium for volumes that were lost to the Port of Newcastle where the consortium failed to engage in ordinary competitive behaviour to retain volumes. Let me elaborate by taking cl 3 first. 674 Now there are two causation pre-conditions in cl 3.3(d) and each performs separate work. I should also say that cl 3.3(e) is relevantly isomorphic although I do not need to discuss cl 3.3(e) further. 675 The first causal pre-condition being the requirement for a shortage, as defined by reference to the defined term concerning excess, ensures that Port Botany is not compensated for volumes that it loses to the Port of Melbourne or that the Port of Newcastle wins from the Port of Brisbane. This requirement achieves the purpose of ensuring that Port Botany is only compensated for volumes it loses to the Port of Newcastle. 676 The second causal pre-condition being the requirement to demonstrate both a reasonable and a material causal connection and correlation between the excess and the shortage plays an additional role. And it must be given work to do. 677 The second pre-condition directs attention to the NSW Ports consortium's own behaviour. As the consortium correctly submitted, this may be discerned from the purpose of the provisions. Getting full value for the asset sold and purchased required addressing the perceived risk that the State's policy might change so as to modify the extent of the monopoly for sale by permitting entry at the Port of Newcastle before Port Botany reached capacity. In that scenario, some traffic would inevitably be diverted from Port Botany to the Port of Newcastle. This was traffic that lay within what was described as the incontestable hinterland. If the State's policy changed and a functional terminal was constructed at the Port of Newcastle, such traffic would fall within the Port of Newcastle's hinterland. The purpose of the provisions was to stop bidders discounting their bids against this possible reduction in the size of Port Botany's hinterland and therefore container volumes. 678 So, such a purpose required discrimination between, on the one hand, containers which the mere fact of entry at the Port of Newcastle would divert from Port Botany's hinterland and, on the other hand, containers which Port Botany may lose to the Port of Newcastle for other reasons, not because their origins or destinations now lay beyond contest, but because Port Botany had dropped its service levels or increased its prices. 679 So, in order to demonstrate that the cause of the loss of containers to a new entrant at the Port of Newcastle was the fact of entry, the NSW Ports consortium would have had to satisfy the State that it was entry rather than any lapse or default on the consortium's part that prompted the diversion. 680 So, the second causal pre-condition in cl 3.3(d) performed that discriminating function. Compensation was only to be paid for volumes lost to the Port of Newcastle because there was a terminal at the Port of Newcastle, not because of deficiencies in the consortium's own conduct. 681 So, compensation being paid was dependent on the NSW Ports consortium demonstrating the requisite causal connection to the reasonable satisfaction of the State. The time at which that was to occur was one or two years after the volumes had been lost. And in order to satisfy the State that the preconditions were met, the consortium had to exclude the possibility that the lost volume was due to its own indifference. I agree with the consortium that it could only do that by engaging in ordinary competitive behaviour, and as though the compensation entitlement did not exist. 682 I should also note that cl 6(d) operated separately to similar effect. 683 Further and generally, I agree with the submission of the NSW Ports consortium that a reasonable operator of high fixed-cost infrastructure, not enjoying monopoly profits and subject to price constraints through regulation, when faced with a reduction in throughput, and in the absence of any other means of recovering its costs, would seek to maintain and extend its market and attract whatever volumes it could. That is, it would engage in ordinary competitive conduct. So by requiring the consortium to conduct itself in response to a container terminal at the Port of Newcastle as if it did not have the benefit of the compensation provisions, cll 3.3(d) and 6(d) ensure that the consortium will do just this. In other words, ordinary competitive conduct is not the antithesis of the object of the compensation provisions, but rather is both assumed and required. 684 In summary, the second matter raised by the ACCC goes nowhere. Let me turn to the final aspect of the ACCC's challenge on this part of the case.

Whether the reimbursement provision heightened barriers to entry 685 Now the primary judge found that unless there was a real chance of a container terminal being constructed at the Port of Newcastle whilst Port Botany had capacity, then the cost impost on the PON consortium for every container handled above the relevant threshold would be a mere theoretical cost. In other words, there would be no real chance of the PON consortium ever incurring this cost. Put another way, for the reimbursement provision to have any meaningful effect on the PON consortium's incentives, there would have had to have been a real commercial chance of entry in a future world without the reimbursement provision. 686 But there was no such prospect of entry. As the primary judge said, a container terminal at the Port of Newcastle whilst Port Botany had capacity was a mirage. Entry at the Port of Newcastle before Port Botany reached capacity presupposed that viability could be demonstrated, including as a necessary integer of persuading the State to change its policy. But the ACCC did not prove a real chance of this. But even if viability could be shown, the State would then have had to be persuaded to change policy. But as her Honour found, the prospect of the relevant policy changing was variously described as fanciful, far-fetched, infinitesimal or trivial. 687 Now part of the ACCC's case proceeded on the basis that likely effects should be assessed from the perspective of a future shareholder of the PON consortium evaluating the marginal costs of operating a terminal after the consortium's bid for the port had prevailed. But such a proposition was contradicted by expert evidence that was not rejected by her Honour. 688 Further, the ACCC's effects case was based on an assessment of future likelihoods at the date when the compensation provisions were entered into. Of course the likely effect of the compensation provisions on barriers to entry at the Port of Newcastle was to be assessed through the standard comparison of forward-looking factual and counterfactual hypotheses by reference to the effect of the compensation provisions upon prospective bidders for the Port of Newcastle, at the time of entry into of, relevantly, the Port Botany PCD. 689 Now on the primary judge's findings, the factual future hypothesis from May 2013 encompassed the reimbursement provision. In that factual future hypothesis, a rational prospective private operator of the Port of Newcastle, quantifying the present value of the future cash flows of the asset under sale to fix its bid price, would have brought future liabilities under the reimbursement provision to account. So, the price to be paid for the Port of Newcastle in the factual future hypothesis had to accordingly reflect any effect that the reimbursement provision was anticipated to have on the bidder's future cash flows. 690 Now as the NSW Ports consortium correctly submitted, to the extent that the impugned provisions operated to diminish anticipated cash flows, that diminution would rationally have been reflected in the prevailing bidder's price, which would have been discounted by the net present value of that anticipated liability, and so in the prospective costs as at May 2013 of developing a container terminal at the Port of Newcastle. 691 But in the counterfactual future hypothesis, where anticipated future cash flows from the Port of Newcastle did not require adjustment for future liabilities under the impugned provisions, bid prices would not have been reduced by the present value of those liabilities. But the corollary of those liabilities not being present in the counterfactual future hypothesis would have been that no discount would rationally have been applied to bid prices in the counterfactual. Bid prices would have increased in the counterfactual future hypothesis by the same amount of their reduction in the factual future hypothesis on account of the impugned provisions. 692 So, I agree with the NSW Ports consortium that in essence the relevant costs associated with developing a container terminal at the Port of Newcastle, assessed as it must be as at May 2013, was accordingly the same in the factual future hypothesis as in the counterfactual future hypothesis. 693 In summary, this part of the ACCC's challenge must also fail.

Cross-Appeal 694 Now the NSW Ports consortium also cross-appeals from the dismissal of their cross-claim. The cross-appeal, like the cross-claim below, arises only if the ACCC establishes a likely effect of substantially lessening competition in the circumstances of both the compensation provisions and the reimbursement provision. But the consortium says that if there is such a likely effect, that is not a likely effect of the compensation provisions, but of the reimbursement provision for which the consortium cannot be liable. 695 Now for the cross-appeal to have been enlivened, I would need to have concluded that the primary judge should have found that the relevant provisions of the CCA did apply to the State and the NSW Ports consortium and that the compensation provisions had the likely effect of substantially lessening competition. But as is apparent from what I have already said, I have not so concluded. 696 But let me assume for the moment that I had so concluded. Is there any substance in the NSW Ports consortium's cross-appeal? 697 The NSW Ports consortium points out that the primary judge found that as at May 2013 when the compensation provisions were made, a future reimbursement obligation attached to the sale of Newcastle was a highly probable prospect. Her Honour also said that a substantial lessening of competition occasioned by that likely reimbursement obligation was a likely effect of the compensation provisions within the meaning of s 45. The consortium says that that latter step involved error. 698 The NSW Ports consortium says that where impugned conduct makes future illegal conduct factually likely but not legally required, any illegal effects of that subsequent voluntary conduct ought not to be treated as effects of the prior conduct actionable under s 45. Two reasons are advanced for the consortium's contention. 699 First, it is said that on the necessary assumption that the future reimbursement provision will substantially lessen competition, s 4L of the CCA must be brought to account. The effect of s 4L is that the provision will be invalid and unenforceable and severed from the contract. The invalidity and unenforceability would apply from the point in time of the inclusion of the provision. Looked at prospectively from May 2013, the future reimbursement provision would be illegal and would therefore not be permitted by law to have the effect of substantially lessening competition. Therefore it is said that that effect cannot be an effect of the compensation provisions. 700 Now the NSW Ports consortium accepts that it would be absurd for a person who makes an illegal contract to avoid the legal consequences that attach to that illegality because of those very consequences. But they say that the analysis called for here is at a step removed. It is whether the compensation provisions contravene s 45 because a subsequent contract, made by different parties, albeit as a probable response to the compensation provisions, has an illegal effect. The consortium says that in analysing that future illegal effect, the primary judge ought not to have put aside the legal consequences that the CCA attaches to that future illegality. It says that those legal consequences, namely, severance, are as essential as the factual circumstances are when postulating the hypothetical future with the compensation provisions. 701 Second, the NSW Ports consortium says that s 45 does not operate to make a corporation responsible for a likely effect of its contract that involves independent illegal conduct of other parties. The consortium prayed in aid Smith v Leurs (1945) 70 CLR 256 where Dixon J said (at 262): …It is … exceptional to find in the law a duty to control another's actions to prevent harm to strangers. The general rule is that one man is under no duty of controlling another man to prevent his doing damage to a third… 702 The NSW Ports consortium says that the primary judge wrongly set aside this principle on the basis that the issue did not concern any duty on the consortium. That was said to be erroneous on at least two levels. It was said by the consortium that this case concerns an alleged duty, backed by penalties, on the NSW Ports consortium not to make the compensation provisions because, in the future, the PON consortium and the State were likely to make a different and illegal contract. Further, it was said by the consortium that this policy of the law extends beyond narrow conceptions of duty and is based upon considerations of practicality and fairness, and may have application in contexts where there is an inter-relationship between questions of legal responsibility and causation. 703 So the NSW Ports consortium says that just as assessments of legal causation involve value judgments about the appropriate scope of legal responsibility, so the concern of competition law with effects or likely effects, accompanied by penalties, may involve similar value judgments about the appropriate limits of legal responsibility. 704 And merely because a "but for" analysis may point to unlawful conduct by third parties being an effect of prior conduct, the NSW Ports consortium says that it does not follow that the illegal results of that conduct are to be treated under s 45 as effects or likely effects of the prior conduct. 705 Further, the NSW Ports consortium says that this policy of the law can be seen to have been implemented in various authorities recognising that hypothetical scenarios which must be assessed to determine likely effects should not be populated with illegal conduct. It is said that in constructing hypothetical states for legal comparison, it is not appropriate to assume that illegal conduct will be engaged in. 706 Now both futures to be posited in an effects analysis under s 45, namely, the "future with" and the "future without" the impugned provision, involve forward-looking hypothesis. It is a matter of comparing two hypothetical worlds. And the NSW Ports consortium says that once it is recognised that in a s 45 effects analysis both factual and counterfactual scenarios are hypothetical, neither scenario is exempt from the principle that positing unlawful conduct in hypothetical scenarios is impermissible. 707 The NSW Ports consortium says that the primary judge should therefore have excluded unlawful conduct by the PON consortium and the State from the posited hypothetical future with the compensation provisions. 708 Further, it is said that this approach is supported by common-sense notions of likely effect and avoids unjust and unreasonable outcomes. The NSW Ports consortium says that on the primary judge's approach, lawful agreements which are apt to elicit obvious commercial responses by others in contravention of s 45 are liable to be invalidated and their makers liable to penalty. It is said that even pro-competitive measures would be outlawed if a likely response was anti-competitive conduct. And it is said that these outcomes would eventuate even in circumstances where one or both parties to the initiating event did not participate in or even foresee the responsive contravention. 709 Further, the NSW Ports consortium says that the primary judge wrongly found that to penalise the consortium for any proven anti-competitive effect of the reimbursement provision would be to hold it responsible for the likely effects of its own conduct, when those effects could not be brought about without the independent, voluntary intervention of the State and the PON consortium in making the reimbursement provision.

Analysis 710 Now the NSW Ports consortium's cross-appeal does not challenge the primary judge's findings that the reimbursement provision was a natural and factual consequence of the compensation provisions. 711 Rather, the NSW Ports consortium contends that if it had been found that the compensation provisions were contrary to s 45 by reason of having the likely effect of substantially lessening competition, then the primary judge erred in considering that any substantial lessening of competition occasioned by the reimbursement provision was a likely effect of the compensation provisions. This error is said to arise because it is impermissible to have regard to the alleged illegal operation of the reimbursement provision, even if as a factual matter the reimbursement provision was the probable consequence of the compensation provisions and had the likely effect of substantially lessening competition. 712 But I would reject this contention for the following reasons. 713 First, it is a question of fact as to whether a particular provision was likely to have the effect of substantially lessening competition. As such, I agree with the ACCC that it would be wrong to impose on that factual inquiry unnecessary constraints by reason of a priori assumptions. The primary judge correctly noted that her task was to determine a question of objective fact. She found that in considering the effect of the compensation provisions it was not illegitimate to have regard to the fact that the reimbursement provision was the likely effect of the compensation provisions. In my view this correct outcome accords with her Honour's finding about the genesis of the reimbursement provision and with the point that if the compensation provisions did not exist, then the reimbursement provision would not exist. 714 Second, the NWS Ports consortium contends that the primary judge's approach to s 4L of the CCA involved error. In this connection, the consortium contends that the effect of s 4L is to render invalid an impugned provision from the time of its inclusion in the relevant contract. It further contends that as at the time of entry into of the compensation provisions, the reimbursement provision looked at in the future would be illegal and would not be permitted by law. Consequently, it is said that any anti-competitive effect of the reimbursement provision cannot be brought to account in respect of the compensation provisions. 715 But this contention ignores at a factual level the connection between the compensation provisions and the reimbursement provision, and treats legal norms as if they could automatically change facts including in hypothetical scenarios. 716 Further, s 4L does not require one to exclude from analysis the factual effects of particular actions. As the primary judge noted, such an interpretation and application of s 4L would eviscerate s 45. If one was to exclude from the purview of any effects analysis a likely consequence of a contractual provision, then many potential anti-competitive provisions would be excluded from the operation of s 45 provided that they were severable. Now although s 4L provides the legal rule which governs the consequences of a contravention of inter-alia s 45, it does not dictate that in assessing factual and counterfactual scenarios relevant to the operation of s 45 it is to be assumed that any contracts apply in the restricted manner described in s 4L, notwithstanding the factual finding as to the nature of those contracts. 717 Third, although the NSW Ports consortium has suggested a distinction between the immediate effect of a contract as substantially lessening competition and a consequential effect of substantially lessening competition by reason of a process involving intermediate steps, I agree with the ACCC that this distinction is illusory and finds no reflection in the statutory language. Indeed, the fact that the focus of the inquiry is on likely effect necessarily requires an assessment of the consequences of the provision, which mandates analysis of the factual consequences that flow from the provision. 718 Fourth, although the NSW Ports consortium contends that there is a policy of the law that a corporation should not be held responsible for a likely effect of its contract where that effect involves independent illegal conduct of other parties, to attempt to exclude from the operation of s 45 certain effects of conduct by reference to such a policy would be to create a gloss on the words of the statute that is neither justified in the text nor warranted by the policy underlying it. Moreover, the policy that was referred to by Dixon J in Smith was described in circumstances where what was being considered was whether there was a duty to control other persons or prevent them from causing harm. But that is an irrelevant scenario in the present context. The necessary statutory task under s 45 is to assess the likely effects of a particular contractual provision. A finding that one such effect involves the subsequent actions of other parties does not involve the imposition of a duty to control such other parties' actions. Further, and assuming for the sake of the argument that the ACCC had not failed on its appeal, this is not a situation where the consortium may have been held liable for the self-standing creation of the reimbursement provision. Nor would it have been a matter of making the consortium legally responsible for the actions of others. Rather, it would have been a case where the consortium would have been held liable for the effects of its own conduct. 719 In summary, although the NSW Ports consortium has sought to characterise the entry into of the reimbursement provision as independent illegal conduct of other parties, the reimbursement provision was not independent of the compensation provisions. It followed on from the compensation provisions. And the terms of the reimbursement provision depended for its operation on the compensation provisions. And in any event and contrary to what the consortium has asserted, there is no general principle that in assessing the effects of anti-competitive conduct it is necessary to exclude from consideration conduct that might itself be unlawful. 720 So, if the ACCC's appeal had been allowed on grounds 3, 8, 9 and 10, I would in any event have dismissed the cross-appeal.

Conclusion 721 For the foregoing reasons, both the appeal and the cross-appeal must be dismissed. I otherwise agree with the orders proposed by Allsop CJ. I certify that the preceding two hundred and ninety-four (294) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach.

SCHEDULE OF PARTIES NSD 751 of 2021 Respondents Fourth Respondent: STATE OF NEW SOUTH WALES Fifth Respondent: PORT OF NEWCASTLE OPERATIONS PTY LIMITED ACN 165 332 990 Sixth Respondent: PORT OF NEWCASTLE INVESTMENTS (PROPERTY) PTY LIMITED ACN 169 286 024 Seventh Respondent: PORT OF NEWCASTLE INVESTMENTS PTY LIMITED ACN 169 132 441 Cross-Appellants Second Cross-Appellant: PORT BOTANY OPERATIONS PTY LTD ACN 161 204 342 Third Cross-Appellant: PORT KEMBLA OPERATIONS PTY LTD ACN 161 246 582 Cross-Respondents Second Cross-Respondent PORT OF NEWCASTLE OPERATIONS PTY LIMITED ACN 165 332 990 Third Cross-Respondent PORT OF NEWCASTLE INVESTMENTS (PROPERTY) PTY LIMITED ACN 169 286 024 Fourth Cross-Respondent PORT OF NEWCASTLE INVESTMENTS PTY LIMITED ACN 169 132 441 Fifth Cross-Respondent STATE OF NEW SOUTH WALES