Australian Competition and Consumer Commission v Pacific National Pty Limited

THE COURT: 1 On 6 May 2020, the Court delivered judgment in this appeal. In summary, the Court upheld the cross-appeals on the ground that the primary judge erred in finding that the proposed acquisition of the Acacia Ridge Terminal (ART) by entities within the Pacific National group of companies (Pacific National) would contravene s 50 of the Competition and Consumer Act 2010 (Cth) (Act). The Court rejected two other principal grounds of cross-appeal: the first concerning market definition and the second concerning the meaning of the word "likely" in s 50. Upholding the cross-appeals required the dismissal of the ACCC's appeal and rendered the ACCC's grounds of appeal moot. 2 Although it was not strictly necessary, the Court considered it appropriate to address the ACCC's grounds of appeal on the assumption (contrary to the Court's conclusion) that the proposed acquisition would contravene s 50. In summary, the Court upheld the ACCC's contention that the primary judge erred in taking the Undertaking proffered by Pacific National (and ultimately accepted by the primary judge) into account as part of the relevant factual matrix in assessing whether the proposed acquisition of the ART by Pacific National would contravene s 50 and, on the basis of the Undertaking, reaching a conclusion that the acquisition would not contravene s 50. However, while the Court accepted that the primary judge erred in the manner contended by the ACCC, Middleton and O'Bryan JJ concluded that that error would not have led to any change to the primary judge's orders and, therefore, the ACCC's appeal would have been dismissed (see at [367]). Perram J would have acceded to the ACCC's submission that the Court should not have accepted the Undertaking in the exercise of its discretion and, therefore, would have upheld the ACCC's appeal on that basis (see at [388]). 3 In accordance with the orders of the Court made on 6 May 2020, each of the parties has filed proposed orders to give effect to the conclusions of the Court and written submissions in support of their proposed orders. The form of orders are largely agreed and include orders upholding the cross-appeals, dismissing the appeal and releasing Pacific National from the Undertaking. The only area of disagreement between the parties concerns the costs of the appeal and cross-appeals and the costs of the trial. The respondents/cross-appellants seek orders for the whole of their costs of the appeal and cross-appeals and of the trial, while the ACCC seeks orders that it pay 50% of the respondents/cross-appellants' costs of the appeal and cross-appeals and 70% of the respondents/cross-appellants' costs of the trial. The ACCC's proposed orders are based on the contention that the respondents/cross-appellants were unsuccessful on a number of issues, both at trial and on the appeal/cross-appeals, and it would not be just to award costs in favour of the respondents/cross-appellants in respect of those issues. 4 The Court's discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is broad and is not bound by rigid or inflexible rules. The discretion must be exercised judicially, consistently with the purpose of the power and taking account of relevant facts and circumstances of the litigation: Kazar v Kargarian (2011) 197 FCR 113 at [4] per Greenwood and Rares JJ. The purpose of an order is to compensate the successful party, not to punish the unsuccessful: Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ, 563 per Toohey J and 567 per McHugh J. 5 While not a rigid rule, usually the discretion to award costs is exercised in favour of a successful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at [35] per Gaudron and Gummow JJ, [66]-[67] per McHugh J and [134] per Kirby J; Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 at [25] per Gleeson CJ, Gummow, Hayne and Crennan JJ. Again, without stating rigid rules, a successful party may be deprived of a proportion of its costs, or even required to pay costs to the other party, if the successful party succeeded only upon a portion of its claim, or failed on issues that were not reasonably pursued, or where the result of the litigation might be described as mixed: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]ff per Black CJ and French J; Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370 at [11] per Dowsett, Middleton and Gilmour JJ. However, the mere fact that a court does not accept all of a successful party's arguments does not make it appropriate to apportion costs on an issue by issue basis: Australian Trade Commission v Disktravel [2000] FCA 62 at [3]-[4] per French, Kiefel and Mansfield JJ; The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8] per Emmett, Kenny and Middleton JJ; Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192 at [6] per French CJ, Kiefel, Nettle and Gordon JJ. 6 In respect of the costs of the appeal and cross-appeals, the ACCC submitted that it was largely successful in respect of its appeal. It argued that the principal issue was whether the primary judge erred in accepting the Undertaking and taking it into account in assessing whether s 50 had been contravened, and the ACCC succeeded on that issue. The ACCC further submitted that it was successful on significant issues raised on the cross-appeals, particularly market definition and the meaning of the word "likely" in s 50. 7 In our view, the respondents/cross-appellants should be awarded their party-party costs of the appeal and cross-appeals without discount. They were wholly successful on their cross-appeals. While they were not successful on each ground of cross-appeal, the grounds on which they failed related to, and were integers of, the ultimate issue that was in contest on the cross-appeals: whether the proposed acquisition would contravene s 50. They succeeded on that ultimate issue. We consider that the grounds on which they failed were reasonably pursued and it would not be appropriate to reduce the costs to be awarded by reason of their failure on those issues. Their success on the cross-appeals also resulted in their success on the ACCC's appeal. While the ACCC succeeded on its contention that the primary judge erred in taking the Undertaking into account in assessing whether s 50 had been contravened, we reject the ACCC's submission that that should lead to a reduction of the costs to be awarded in favour of the respondents/cross-appellants. The ACCC's success on that contention did not result in any overall success on its appeal. Further, a majority of the Court concluded that, even if the cross-appeals had not been successful, the ACCC's appeal would have been dismissed. 8 In relation to the costs of the trial, the ACCC submitted that the costs to be awarded in favour of the respondents/cross-appellants ought to be discounted to reflect the ACCC's success on two significant issues at trial, namely market definition and the meaning of the word "likely". The ACCC argued that, although market definition has a purposive role in assessing whether there is likely to be a substantial lessening of competition (the ultimate issue), as a practical matter the consideration of market at trial raised complex legal, economic and factual issues. The respondents/cross-appellants put in issue the entirety of the ACCC's case on market definition at trial, necessitating the parties and the Court "dissecting" evidence from 13 lay witnesses and 3 expert witnesses. 9 Again, in our view, the respondents/cross-appellants should be awarded their party-party costs of the trial without discount. In reaching that conclusion, we have taken into account the reasoning of the primary judge in awarding the respondents/cross-appellants 50% of their costs at trial. Relevantly, his Honour gave the following reasons for making that order (Australian Competition and Consumer Commission v Pacific National Pty Limited (No 3) [2019] FCA 866 at [24]-[29]): First, the ACCC won on market definition, which occupied a considerable amount of trial time. Second, the ACCC lost on the TSS question. Third, the parties had mixed success on the s 50 question. Let me elaborate. First, Pacific National made it clear at various stages through the trial that it would not offer an undertaking unconditionally, and would only offer an undertaking if I first concluded that the ART acquisition otherwise contravened s 50. Accordingly, the Pacific National parties put the ACCC to its proof about whether the ART acquisition would contravene s 50 without the unconditional undertaking until the last day of trial, when for the first time Pacific National offered the undertaking on an unconditional basis. Further, on my findings, the ACCC was justified in seeking to restrain Pacific National and the second respondent from completing the ART acquisition, and in seeking declarations against all the remaining respondents that the ART acquisition would breach s 50 of the CCA, at least until when the undertaking was given unconditionally. Moreover, the ACCC was entitled to seek to restrain the ART acquisition so as to protect the public interest at least until the last day of the hearing, by which time most of the costs of the proceeding had been incurred in any event. Further, I agree with the ACCC that the question of whether the costs of the trial would have been avoided had Pacific National proffered an unconditional undertaking to me earlier is beside the point. An unconditional undertaking was not proffered to me earlier. And without the unconditional undertaking, I would have found that Pacific National's proposed conduct in completing the ART BSA would have contravened s 50. 10 Having regard to our conclusions on the appeal, it can no longer be said that the parties had mixed success on the s 50 issue. We have concluded that the proposed acquisition would not contravene s 50 and, on the basis of that conclusion, it was unnecessary for Pacific National to offer the Undertaking. Accordingly, the respondents/cross-appellants have had complete success on the s 50 issue, removing one of the reasons that the primary judge reduced the costs awarded to the respondents/cross-appellants. The question then becomes whether it is appropriate to reduce the costs to be awarded to the respondents/cross-appellants by reason only that they were unsuccessful on two issues at trial: market definition and the meaning of "likely". We do not consider that the costs should be reduced. Having regard to the outcome of the appeal, the respondents/cross-appellants must now be regarded as having succeeded at trial on all causes of action: the claim relating to the "Principal Understanding" was withdrawn by the ACCC and the respondents/cross-appellants have succeeded in defending the s 45 claim relating to the Terminal Services Subcontract and the s 50 claim relating to the proposed acquisition. The issues on which the respondents/cross-appellants were unsuccessful at trial were related to, and were integers of, the issues that were ultimately in contest at the trial and on which the respondents/cross-appellants succeeded: whether entering into the TSS contravened s 45 and whether the proposed acquisition would contravene s 50. There is nothing before us to suggest that those subsidiary issues were unreasonably contested by the respondents/cross-appellants. 11 For the foregoing reasons, we consider that the respondents/cross-appellants should be awarded their party-party costs of the appeal and cross-appeals and the trial without reduction. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Middleton, Perram and O'Bryan.

SCHEDULE OF PARTIES VID 695 of 2019 Respondents Second Respondent: HV RAIL PTY LTD (ABN 26 615 302 111) Third Respondent: QUEENSLAND LH CO PTY LTD (ACN 620 979 768) Fourth Respondent: QUEENSLAND PUD CO PTY LTD (ACN 620 981 606) Fifth Respondent: AURIZON HOLDINGS LIMITED (ACN 146 335 622) Sixth Respondent: AURIZON OPERATIONS LTD (ACN 124 649 967) Seventh Respondent: AURIZON TERMINAL PTY LTD (ACN 145 991 555) Eighth Respondent: AURIZON PROPERTY PTY LTD (ACN 145 991 724) Cross-Appellants Second Cross-Appellant: HV RAIL PTY LTD (ABN 26 615 302 111) Third Cross-Appellant: QUEENSLAND LH CO PTY LTD (ACN 620 979 768) Fourth Cross-Appellant: QUEENSLAND PUD CO PTY LTD (ACN 620 981 606) Fifth Cross-Appellant: AURIZON HOLDINGS LIMITED (ACN 146 335 622) Sixth Cross-Appellant: AURIZON OPERATIONS LTD (ACN 124 649 967) Seventh Cross-Appellant: AURIZON TERMINAL PTY LTD (ACN 145 991 555) Eighth Cross-Appellant: AURIZON PROPERTY PTY LTD (ACN 145 991 724)