In a landmark decision last week, the High Court (Gageler CJ and Gordon, Edelman, Gleeson and Beech-Jones JJ) unanimously held that private companies were not immune from the competition law prohibitions under the Competition and Consumer Act 2010 (Cth) (CCA) where the other contracting party, being the NSW State Government, attracted Crown immunity.
The case upholds the position that private parties should not presume that Crown immunity from competition laws in favour of the Government extends to their agreement by reason that the Government is a counterparty to that agreement.
Facts of the case
Port Botany, Port Kembla and the Port of Newcastle are ports in NSW. Port Botany operates a container terminal whereas Port Kembla and the Port of Newcastle do not have facilities for container shipping. Newcastle is a major coal port and mostly handles unpackaged bulk cargo.
In 2013, the NSW government granted a long-term lease over Port Botany and Port Kembla to “NSW Ports”, which was a private company backed by a consortium of investors. As part of the privatisation process, the State of NSW entered into documents known as “Port Commitment Deeds” (PCDs) with various private companies associated with NSW Ports (together, the NSW Port Operators).
During the negotiation process, the NSW Port Operators expressed concerns that container shipping traffic may be diverted to the Port of Newcastle, making Port Botany and Port Kembla less profitable. To alleviate those concerns and ensure that it received a high price for the assets being privatised, the State of NSW agreed pursuant to the PCDs to pay compensation to the NSW Port Operators whenever container traffic at the Port of Newcastle went above a minimal specified cap. In 2014, a subsequent deed required the private operator of the Port of Newcastle to reimburse the State of NSW for any compensation it had to pay under the PCDs, a cost which was passed on to port users, making it uneconomical to develop alternative container facilities at the Port of Newcastle.
The ACCC’s unsuccessful Federal Court Proceedings
The ACCC brought proceedings against the NSW Port Operators claiming that the compensation provisions in the PCDs had the purpose and likely effect of substantially lessening competition in the market for the supply of port services for container cargo in NSW, in contravention of section 45 of the CCA.
The ACCC was unsuccessful at first instance and on appeal as the NSW Port Operators argued that the Crown had immunity from the CCA and that they enjoyed derivate Crown immunity.
This argument relies upon the general principle that laws are interpreted not to bind the Crown (meaning the Commonwealth, a State or Territory and government agencies) unless it is clear from the express wording of the law, or by necessary implication, that Parliament intended to bind the Crown when it made the law.
It also relies upon sections 2A and 2B of the CCA that expressly provide that the Crown is only bound by the CCA insofar as it is “carrying on a business”. In essence, the Government will be found to be “carrying on a business” where it undertakes activities in a commercial enterprise or as a going concern. Repetition, systems and regularity are indicia of carrying on a business whereas regulatory or governmental functions and statutory duties are unlikely to be a business.
At first instance, Jagot J found that the prohibition in s 45 of the CCA did not apply to:
the State of NSW when it entered into the PCDs because the State had the benefit of Crown immunity under the CCA on the basis it was not carrying on a business in entering the PCDs; andthe NSW Port Operators in relation to the PCDs because if that were not the case, the legal and contractual rights afforded to the State of NSW would be void and the State’s Crown immunity would be ineffective. As a result, the NSW Port Operators were held to benefit from “derivative crown immunity” under the CCA.
Jagot J also found in obiter that the compensation provisions did not have the requisite anti-competitive purpose or effect to constitute a contravention of s 45 of the CCA.
An appeal by the ACCC to the Full Federal Court was dismissed in 2023.
High Court Appeal by MayfieldBackground
While the ACCC did not appeal to the High Court, Mayfield Development Corporation Pty Ltd (Mayfield), a would-be developer of a container facility at the Port of Newcastle, did appeal to the High Court on the issue of derivative Crown immunity. Mayfield also considered that the compensation provisions of the PCDs were a breach of competition law and so it had commenced private action for damages in parallel to the ACCC proceeding. That proceeding however was stayed until the determination of the ACCC’s Full Court appeal.
Like the ACCC, Mayfield was unsuccessful in the Federal Court and Full Court, however, unlike the ACCC, Mayfield opted to seek special leave to appeal to the High Court, which was granted.
The key issue before the High Court was whether the NSW Port Operators were shielded from the operation of the CCA by virtue of derivative Crown immunity.
Decision
In Mayfield’s appeal, it was accepted that the State of NSW was not carrying on a business when it entered into the PCDs, therefore it was entitled to Crown immunity from the operation of the CCA.
To the extent that the Crown enjoys immunity from certain laws, a person or corporation other than the Crown will also be immune if applying the relevant law to that person will adversely affect the Crown’s legal rights or interests. In ACCC v Baxter Healthcare Pty Ltd[1], the High Court held that Baxter Healthcare was not immune from the operation of the CCA even in circumstances where it was contracting with State governments who were themselves entitled to immunity, as applying the relevant laws to Baxter Healthcare would not deprive the Crown of any legal right or interest. It would merely deprive the Crown of freedom to contract in the way it wished to contract (which involve anti-competitive bundling in contravention of the predecessor to the CCA).[2]
The NSW Port Operators argued that the facts in Mayfield’s appeal were distinguishable as the State of NSW had a legal right or interest by virtue of the Ports Assets (Authorised Transactions) Act 2012 (NSW) (PAAT Act), which provided the statutory framework for the privatisation of the ports. Section 7 of the PAAT Act empowered the NSW Treasurer to effect the “authorised transaction”, namely the privatisation, in any manner considered appropriate.
The High Court did not accept this argument. Instead, the High Court overturned two separate decisions of the Full Federal Court and found that the NSW Port Operators were not shielded from the operation of the CCA by virtue of derivative Crown immunity via contracting with the Crown.[3]
In a joint judgment, Gordon, Gleeson and Beech-Jones JJ held that the application of the CCA to the NSW Port Operators would not divest the State of NSW of any legal right or interest, therefore the reasoning in Baxter should also be applied to the facts before the Court. The State had the capacity and freedom to contract with third parties to privatise the ports by virtue of the PAAT Act, and while applying competition laws to the NSW Port Operators may limit the extent of contractual freedom the State would otherwise enjoy, this did not amount to depriving the State of a legal right.[4]
Edelman J held that the presumption of “derivative Crown immunity” does not apply whenever the Crown and its property would be prejudicially affected by the application of a law to a person other than the Crown. Rather, it should only apply to laws which would adversely affect the rights, privileges, powers and immunities of the relevant government agency or impose legal duties or liabilities on it.[5] In the facts before the High Court in Mayfield, the application of competition laws to the NSW Port Operators would not impair the legal relations of the State of NSW, because the State itself remained at liberty to enter the PCDs.[6]
Gageler CJ held that the right conferred on the State of NSW by the PAAT Act to effect a transaction did not extend to the right to dispense with or exempt a non-State party to the transaction from compliance with the CCA, therefore requiring the NSW Port Operators to comply with those provisions involved no divestiture of the State’s legal rights or interests.[7]
The question of whether the compensation provisions in the PCDs had the purpose or likely effect of substantially lessening competition was remitted to the Federal Court.
Implications
When contracting with or tendering to a government agency, be mindful that compliance with the government’s proposed arrangements does not automatically shield you from liability if those arrangements breach competition or consumer laws. In other words, never assume that something is “above board” merely because the government has proposed it. “Derivative crown immunity” only applies in very narrow circumstances. If in doubt, seek legal advice.
[1] (2007) 232 CLR 1 (Baxter).
[2] Ibid at 35 [62].
[3] Mayfield Development Corporation Pty Ltd v NSW Port Operations Hold Co Pty Ltd [2026] HCA 12.
[4] Ibid at [100].
[5] Ibid at [130].
[6] Ibid at [132].
[7] Ibid at [25] – [28].