No Safe Harbour: High Court Limits Crown Immunity for Government Contracts
What you need to know
- The High Court of Australia has unanimously affirmed the narrow operation of derivative Crown immunity: the principle that a private corporation contracting with the government of the Commonwealth, or of a State or Territory, is not subject to the prohibitions on anti-competitive conduct in the Competition and Consumer Act 2010 (Cth) where that would divest the government of a relevant “legal right or interest”.
- The Crown's freedom, liberty or capacity to enter into contracts, even under enabling legislation, is not a "legal right or interest" capable of engaging derivative Crown immunity. Applying the Act to a private counterparty of the State does not divest the Crown of any such right or interest, unless the Crown has expressly legislated to exempt the counterparty from the Act.
What you need to do
- Businesses contracting with governments in Australia should not assume they will be immune from competition law even if the government counterparty is not bound. Legislation will apply to businesses in the ordinary way except in limited circumstances.
- State and Territory Parliaments may protect specific government transactions from the operation of the prohibitions on anti-competitive conduct in the Competition and Consumer Act, but must do so expressly in legislation or regulations and with specific reference to the Act.
- Parties involved in privatisations, infrastructure concessions, public-private partnerships and other major government transactions should ensure that the terms of any agreement with the State are assessed for compliance with competition law.
Background
The majority of shipping cargo to and from New South Wales passes through Port Botany, Port Kembla or the Port of Newcastle. In 2013, the State of New South Wales privatised Port Botany and Port Kembla, by way of long-term leases, pursuant to the Ports Assets (Authorised Transactions) Act 2012 (NSW) (Ports Act). The Port of Newcastle was later privatised in 2014.
NSW Ports, which successfully bid to acquire Port Botany and Port Kembla, entered into Port Commitment Deeds (PCDs) with the State. Under the PCDs, the State must compensate NSW Ports if container volumes through the Port of Newcastle exceed a defined cap and divert container cargo away from Port Botany or Port Kembla.
Mayfield Development Corporation sued NSW Ports for damages. Mayfield alleged that it lost the opportunity to develop land at the Port of Newcastle to support additional container capacity, due to NSW Ports' execution of the PCDs in respect of Port Botany and Port Kembla.
Legal arguments
Mayfield alleged that NSW Ports contravened the Competition and Consumer Act 2010 (Cth) as follows:
- (s 45) NSW Ports entered into the PCDs, which had the purpose or likely effect of substantially lessening competition in the market for container port services in New South Wales; and
- (s 45DA) NSW Ports acted in concert with the State by entering into the PCDs and thereby arriving at an understanding which hindered or prevented Mayfield from supplying container port services at the Port of Newcastle, and caused substantial damage to Mayfield's business.
NSW Ports argued that it could not be liable for the alleged contraventions, due to a presumption of statutory interpretation known as "derivative Crown immunity". As a starting point, Crown immunity is a presumption of statutory interpretation that a statute does not bind the Crown unless a contrary intention appears from the statute. Under the Act, the Crown has Crown immunity specifically where it is not carrying on a business, and Mayfield and NSW Ports accepted that the State was not carrying on a business in privatising the two ports. NSW Ports argued that it enjoyed derivative Crown immunity because, otherwise, the State would be divested of its statutory right under the Ports Act to give effect to the privatisation as it saw fit — including by way of PCDs.
NSW Ports had what appeared to be a strong basis for asserting derivative Crown immunity: previously, the Australian Competition and Consumer Commission (ACCC) had brought proceedings against NSW Ports for the same conduct the subject of Mayfield's case, and the Federal Court in 2021 had held that NSW Ports did have derivative Crown immunity, with the Full Federal Court upholding that conclusion in 2023 by a 2-1 majority. The ACCC did not seek special leave to appeal to the High Court against those decisions, so the High Court did not weigh in at the time.
NSW Ports also argued that Mayfield's case should fail on the following procedural grounds:
- (Estoppel and abuse of process) Mayfield had intervened in the ACCC’s prior proceedings. Therefore, Mayfield should not be entitled to re-litigate the relevant issues.
- (Deed of release) Parties including Mayfield and the State (though not NSW Ports) had entered into a deed of release, whereby Mayfield released the State from all of Mayfield's claims against the State in relation to the land which Mayfield wished to develop at the Port of Newcastle. NSW Ports argued that Mayfield's case against NSW Ports would entail scrutiny of the State's conduct (though not necessarily liability for the State) and would therefore entail a claim against the State, which was barred by the deed of release.
High Court decision
The High Court unanimously allowed Mayfield's appeal. The key aspects of the decision are set out below.
Limits on derivative Crown immunity
The Court affirmed the principles of derivative Crown immunity articulated by the plurality of the High Court in ACCC v Baxter Healthcare Pty Ltd (2007) 232 CLR 1. In particular, the Court affirmed that the presumption of derivative Crown immunity applies only if an Act (here, the Competition and Consumer Act) would divest the Crown (here, the State) of proprietary, contractual or other legal rights or interests. Divestiture of a legal right or interest does not require the complete loss of that right or interest: “diminution or material adverse alteration” will suffice. However, the Crown's capacity to contract is not a legal right or interest that engages the presumption. It is a freedom rather than a right. A mere financial impact on the Crown will not be sufficient either.
In this case, Gordon, Gleeson and Beech-Jones JJ (Gageler CJ and Edelman J agreeing) held that the Ports Act conferred on the State only an authority and capacity to contract for the purpose of transferring ports assets to the private sector. The Court emphasised that the Ports Act does not require a private sector counterparty like NSW Ports to accept a transfer on whatever terms the State chooses, let alone on terms that would contravene the Competition and Consumer Act. Therefore, no relevant right of the State would be divested by holding that the Competition and Consumer Act applies to NSW Ports in respect of their entry into, and giving effect to, the PCDs.
Future of derivative Crown immunity
While s 51 of the Competition and Consumer Act permits a State or Territory Parliament to legislate by express words to exempt conduct (eg NSW Ports' execution of the PCDs) from compliance with the Act, the State had not done so in the Ports Act. This leaves open the question of whether the Competition and Consumer Act excludes derivative Crown immunity entirely. The majority did not decide the point and Edelman J indicated that the Court may need to re-consider Crown immunity entirely.
Gageler CJ expressly rejected the argument that the Act excludes derivative Crown immunity. However, it is difficult to see what scope derivative Crown immunity has now, at least in the context of shielding private businesses from the operation of the prohibitions on, and liability for, anti-competitive conduct when they contract with a Government. Even where the Government is acquiring a proprietary right through a contract with a business, it is unclear how that right would be “divested” by the ACCC or a third party plaintiff seeking to hold the business liable for penalties or damages for anti-competitive conduct. It may be that the ACCC or third parties could not seek orders to unwind the transaction if the Government has Crown immunity, but that would not give much comfort to the business which still faces claims for penalties or damages.
Previous High Court decisions
Derivative Crown immunity and Crown immunity are principles of statutory construction, so whether either immunity exists will depend on the particular statute from which immunity is being sought. Recent High Court decisions have considered derivative Crown immunity as a shield from the competition provisions in the Competition and Consumer Act. That Act presents a particular obstacle for derivative Crown immunity. The Crown is bound by the Act so far as it carries on a business. The majority here referred to ACCC v Baxter Healthcare Pty Ltd, in which members of the High Court found that a broad immunity for private businesses dealing with the Crown would mean that those businesses enjoyed greater protection from the Act than the Crown itself when it carries on a business. This would be a “remarkable” result and "impossible to reconcile with the object of the Act”.
Procedural defences rejected
The Court also rejected procedural defences advanced by NSW Ports.
Deed of release
The deed of release between parties including Mayfield and the State (though not NSW Ports) barred claims brought by Mayfield against the State. It did not bar claims brought by Mayfield against NSW Ports. The fact that a claim brought by Mayfield against NSW Ports would entail scrutiny of the conduct of the State (being a counterparty of NSW Ports) did not transform the claim into a claim against the State.
Estoppel and abuse of process
Mayfield was not estopped from impugning NSW Ports' alleged derivative Crown immunity. While it had intervened in the ACCC's earlier proceedings against NSW Ports for the same conduct the subject of Mayfield's case, it did so on a limited basis which did not confer a fair and full opportunity to contest the issue. Mayfield's role was limited to assisting the Court in resolving the issues raised by the parties. It did not participate in the trial and its participation in the appeal was limited to filing 15 pages of written submissions. It also did not have an opportunity to control the presentation of evidence or the shaping of issues at trial.
Further, it was not an abuse of process for Mayfield to impugn NSW Ports' alleged derivative Crown immunity, in proceedings separate from those brought earlier by the ACCC. Mayfield was entitled to advance a reasonable case challenging the existing state of the law, which it was not entitled to do as intervener in the ACCC proceedings. There would also be no oppression of or unfairness to NSW Ports or the State, because they themselves had opposed an application for Mayfield's case to be heard concurrently with the ACCC case.
Implications for businesses and governments contracting with each other
This decision is of particular significance for businesses participating in privatisations, infrastructure concessions and public-private partnerships under government contracts. The effect of this decision is that, in the absence of clear statutory authorisation, a government’s acceptance of, or insistence on, terms that may be anti-competitive is unlikely to protect the third party business. Such businesses should proactively ensure that competitive implications of transaction terms (eg exclusivity, non-compete, volume guarantee or compensation arrangements) are carefully assessed against the competition law.
Under s 51 of the Act, State and Territory Parliaments may authorise certain conduct that would otherwise contravene the prohibitions on anti-competitive conduct in the Act, but must do so expressly by legislation or regulations and with reference to the Act. For governments to take advantage of this, then, the potential need to dispense with compliance with the Act for a particular contract needs to be identified very early in policy development, when legislation can be enacted to address that need.
The decision also illustrates the importance of ensuring that the scope of a deed of release is adequate. Where a business (eg NSW Ports) enters into a government transaction that burdens third parties (eg the operator of the Port of Newcastle and its potential business partners like Mayfield), it should ensure that it and/or the government mitigates the risk of claims brought by those third parties against the business, including by way of release and/or indemnity.
It remains to be seen whether Mayfield will succeed in its substantive claims against NSW Ports for alleged breaches of the competition law, which have been remitted to the primary judge for further determination. In the ACCC's separate case against NSW Ports, the Full Federal Court held in 2023 that the impugned clauses in the PCDs did not have the purpose or likely effect of substantially lessening competition – but now that will be re-tested. While the Full Federal Court in the ACCC's separate case considered liability only in relation to s 45 of the Act and not s 45DA (which relates to secondary boycotts and is part of Mayfield's case), Mayfield in its own proceedings will need to persuade the primary judge to find liability on the basis of the same facts which did not give rise to liability in the ACCC's separate case. The multiplicity of proceedings in this case emphasises the risks of failing to carefully test agreements, even with a Government acting in a governmental capacity, for compliance with the Act.
The High Court case is Mayfield Development Corporation Pty Ltd v NSW Port Operations Hold Co Pty Ltd [2026] HCA 12.
Other author: Oscar Han, Lawyer
