7 April, 2016
The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [2016] WASCA 36
What you need to know
- The Western Australian Court of Appeal has dismissed The Pilbara Infrastructure Pty Ltd's appeals against the Supreme Court's decisions that found Brockman Iron Pty Ltd's access proposal was valid, and that the Economic Regulation Authority's decision to approve negotiations was within its power, under the Railway (Access) Code 2000 (the Code). This decision clarifies a number of aspects of the Code.
- Assessing the validity of a proposal made under the Code is an objective process, based on the terms of the written proposal. The motive or intention of the entity making the proposal is irrelevant.
- As long as the purpose of the proposal is to carry on rail operations, a proposal is not invalid merely because a proponent may have other motives for bringing it (for example, to simultaneously pursue other commercial arrangements, or to endeavour to negotiate an access agreement where there is an unrealistic possibility of access being made available on the dates specified).
- A proposal may be subject to conditions precedent and need not be unqualified.
- The requirement for a proposal to "indicate the times when access is required" will be satisfied if the proposal contains particulars that are "reasonably adequate", in all the circumstances, to allow the other provisions of the Code to operate (for example, to assess whether the proposed rail operations can be reasonably accommodated).
Introduction
On 15 May 2013, Brockman Iron Pty Ltd (Brockman) lodged a proposal under the Railway (Access) Code 2000 (WA) (Code) to access the Pilbara railway network managed and controlled by The Pilbara Infrastructure Pty Ltd (TPI). TPI responded by issuing a notice to the Economic Regulation Authority (ERA) under section 10 of the Code, on the basis that TPI considered the proposal would involve the provision of access to railway infrastructure to an extent that may in effect preclude other entities from access to the infrastructure. The notice meant that ERA approval would be required before negotiations on the proposal can begin. The ERA approved the start of negotiations. TPI sought both judicial review of that decision, and a declaration that Brockman's proposal was invalid and therefore did not enliven the Code. The Supreme Court dismissed both claims.
TPI appealed those decisions, substantially on the grounds that Brockman's proposal was not valid because:
- Brockman did not intend to conduct rail operations and was negotiating for an ulterior motive (that is, to secure a rail haulage agreement, rather than a track access agreement); and
- the proposal did not properly indicate the times when access would be required.
In The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [2016] WASCA 36, the Court of Appeal upheld the primary court's decision and dismissed the appeal. The case turned on applying the natural and ordinary meaning of the words used in the Code. TPI's case sought to put a "gloss" on those words.
Facts
TPI owns rail infrastructure situated in the Pilbara region of Western Australia (TPI's railway). Brockman holds a mining tenement over land containing iron ore in the Pilbara region and had plans for a project (the Marillana project). Brockman sought access to TPI's railway so that Brockman could operate rolling stock to transport iron ore to Port Hedland. The access sought was intended to commence in late 2016, and stated to be "subject to conditions precedent which are typical for a below rail access agreement".
At trial in 2014, the primary court found (with the benefit of hindsight) and Brockman accepted that, a number of factors meant that it could not realistically commence transporting ore in 2016. The factors included:
- not obtaining required approvals and access rights to develop the Marillana project, including port infrastructure;
- not obtaining finance for the multi-billion dollar project;
- not obtaining a bank feasibility study for the project which would cost $50 million and take around 3-4 years to prepare;
- not obtaining a port solution – it was estimated that port access would only be available in 2019;
- having no buyer for iron ore which it might mine; and
- having no final investment decision to develop the project, which would take 2-4 years after the bank feasibility study was conducted.
Nonetheless, Brockman maintained that it did want to have negotiations about securing access to the network.
The proceedings at first instance
TPI commenced two related actions against Brockman and the ERA (respectively) on the following issues.
- CIV 2512 of 2013: Whether Brockman's proposal was valid under and for the purposes of the Code and whether it attracts or enlivens the operation of any of the Code provisions.
- CIV 2511 of 2013: Whether the ERA's decision to approve negotiations under section 10 of the Code on Brockman's proposal was "in excess of [the ERA's] jurisdiction and power and by reason of error of law" because there was no valid proposal for access to TPI's railway.
At first instance, Edelman J held that the proposal was valid and accordingly the ERA's decision to approve negotiations under section 10 of the Code was valid. TPI appealed against these findings.
Court of Appeal's findings
The key issue considered by the Court of Appeal was whether Brockman's proposal for access to TPI's railway was valid under the Code.
The Court of Appeal held that Brockman's proposal for access to TPI's railway was valid and dismissed TPI's arguments. The Court found that TPI's arguments were not consistent with the text of, or concepts in, section 8 of the Code, or the language of the Code as a whole. The Court held that TPI's arguments, if accepted, would without justification, materially alter the ordinary and natural meaning of the language of the Code and the coherent scheme it has established.
As Brockman's proposal was found to be valid, the Court of Appeal dismissed the second appeal which disputed the ERA's decision to approve negotiations under section 10 of the Code. The key findings are summarised as follows.
No requirement for a "definite intention to use" or "definite promises for the use" of the railway infrastructure
TPI argued that the proposal was invalid because Brockman did not have a "definite intention to use", or "definite promises for the use" of the rail infrastructure. The Court rejected this. The Court found that there is nothing in the statutory scheme that requires the proponent to have a definite intention to use, or make definite promises for the use of the railway infrastructure.
The proponent's subjective intention is not relevant except under section 8(3)(d), which arguably requires the proponent to intend to enter into negotiations for an access agreement.
No requirement for a "real (or genuine or actual) need" for access or to carry on rail operations as part of the proposal
Similarly, TPI argued the proposal was invalid because Brockman did not have a "real (or genuine or actual need" for access to carry on rail operations. The Court found that the purpose of a proposal (as distinct from the purpose of the entity making the proposal) is what is relevant, and that this is to be ascertained objectively by reference to the terms of the written proposal and the nature of the proposed transaction within the context of the Code. Under section 8(2) of the Code, the proposal must be for the sole purpose of carrying on rail operations (ie carrying on the operation of rolling stock on a part of the railways network), and not any other purpose.
The Code does not require an assessment of whether the proponent has "a real (or genuine or actual) need" to carry on rail operations. To read that into section 8 would apply a gloss to the text of the statutory provisions within a coherent statutory structure, to attack the validity of a proposal.
A proposal may be for contingent future access
TPI also argued the proposal was invalid because it was subject to conditions precedent. Again, the Court rejected that argument, holding that the statutory provisions do not require the proposal to be unconditional or subject to any contingencies, and there is no requirement that a proponent must have a "real (or genuine or actual) need" to carry on rail operations at a particular time. Additionally, the sole purpose of a proposal does not need to be a purpose where the proponent is willing and able to carry on immediately, unconditionally and without regard to any contingencies.
Dominant motive vs purpose of a proposal
At trial, Edelman J concluded that "a dominant motive of [Brockman] in making the [proposal] was [Brockman's] desire to obtain commercial terms for a haulage agreement [with TPI's parent entity]", but also accepted that another motive was to "negotiate for the possibility of a favourable access agreement", and that this was consistent with the requirement of the Code to the extent the Code was concerned with Brockman's intention.
Importantly, a distinction may be drawn between "motive" and "purpose": purpose is an expressed consequence or end as revealed by the proposal; while motive is the reason for seeking that end. TPI argued that as Brockman had the dominant motive of obtaining leverage over TPI with a view to making a haulage agreement on commercial terms, Brockman did not have the sole purpose of carrying on rail operations. As explained above, the Court found that Brockman's motive was not relevant, as it was the objective purpose of the proposal that did matter, and that was for the sole purpose of carrying on rail operations.
The proposal must indicate the times when access is required but only to the extent of what is considered "reasonably adequate"
The Court rejected TPI's argument that the proposal did not identify with sufficient precision, the particular times when access was required.
Section 8(3)(b) merely requires a proposal to indicate the times when access is required. It could not be reasonably expected that there will be a precise, detailed and exhaustive statement of the times for using the railway infrastructure, over a period of more than 20 years. This statutory requirement would be satisfied so long as the proposal contained particulars of times for access which are reasonably adequate in all the circumstances so the provisions of the Code can operate as intended. It is likely that the Court may adopt a similar approach when considering the level of detail for submitting a proposal.
Conclusion – a purposive approach to statutory construction
This decision turned on applying the modern, and now well-established, purposive approach to statutory construction. This involves considering the statutory text in its context. That context includes the "general purpose and policy of the provision", the existing state of the law, the history of the legislative scheme, and the mischief to which it is directed. However, the "purpose" must be derived from the statutory text, and "not from any assumption about the desired or desirable reach or operation of the relevant provisions". These general principles apply to the Code because it is subsidiary legislation. Ultimately, the Court of
Appeal found that the plain words of the Code did not accommodate the "gloss" that TPI sought to put on them.
This decision also highlights the lengthy delays that can occur under the Code. Brockman lodged its proposal on 15 May 2013, but still has not reached the 90-day "negotiation" phase under the Code process. While it does not appear that Brockman's matter is urgent (given it does not have a present requirement for rail transport), the prospect for delay has been raised by other proponents, including most recently in the ERA's public consultation over its review of the Code. Shortly after the decisions were handed down, Fortescue Metals Group issued a media release stating that it was exploring potential avenues for appeal.
For further information, please contact:
Lucas Wilk, Partner, Ashurst
lucas.wilk@ashurst.com
