Aurizon Network Pty Ltd v Queensland Competition Authority & Anor [2023] QSC 167 [2023] 32 QLR

SUPREME COURT OF QUEENSLAND CITATION: Aurizon Network Pty Ltd v Queensland Competition Authority & Anor [2023] QSC 167 PARTIES: AURIZON NETWORK PTY LTD ACN 132 181 116 (applicant) v QUEENSLAND COMPETITION AUTHORITY (first respondent) QUEENSLAND RESOURCES COUNCIL LTD ACN 050 486 952 (second respondent) FILE NO/S: SC No 837 of 2023 DIVISION: Trial Division PROCEEDING: Hearing ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 28 July 2023 DELIVERED AT: Brisbane HEARING DATE: 14 June 2023 JUDGE: Kelly J ORDERS: 1. The originating application filed 20 January 2023 is dismissed. 2. I will hear the parties as to costs. CATCHWORDS: INTERPRETATION – GENERAL RULES OF CONSTRUCTION OF INSTRUMENTS – GENERAL MATTERS – where the applicant operates the Central Queensland Coal Network (‘the Network’) under long term leases granted by the State of Queensland – where an access undertaking for the Network was approved by the first respondent under s 138 of the Queensland Competition Authority Act 1997 (Qld) – where the applicant seeks a declaration as to the meaning of the term ‘Report Date’ contained in clause 12.1 of the access undertaking – where the first respondent determined the Report Date to be 14 March 2022 – where the applicant contends that the proper construction of the Report Date is 12 November 2021 – where the application is resisted by the first and second respondents – whether the Report Date, properly construed, is 14 March 2022 or 12 November 2021 -- 1 of 49 -- 2 INTERPRETATION – GENERAL RULES OF CONSTRUCTION OF INSTRUMENTS – GENERAL MATTERS – where the applicant also seeks declaratory relief to the effect that the first respondent erred in law by adopting 14 March 2022, rather than 12 November 2021, as the Report Date for the purpose of calculating the ‘Revenue Adjustment Amount’ in the context of the annual review of ‘Reference Tariffs’ under the access undertaking – where the application is resisted by the first and second respondents – whether the first respondent erred in adopting 14 March 2022 as the Report Date for this purpose Acts Interpretation Act 1954 (Qld), s 14A, s 148 Queensland Competition Authority Act 1997 (Qld), 69E, 99, 100, 133, 134, 136, 136, 138, 142, 150A, 158A, 250 Statutory Instruments Act 1992 (Qld), s 7, s 15 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41, cited LCA Marrickville Pty Ltd v Swiss Re International SE (2022) 290 FCR 435; [2022] FCAFC 17, cited COUNSEL: S A McLeod KC, with M R Wilkinson, for the applicant J M Horton KC, with E L Hoiberg, for the first respondent J C Sheahan KC, with C Schneider, for the second respondent SOLICITORS: Quinn Emanuel Urquhart & Sullivan for the applicant Clayton Utz Lawyers for the first respondent Herbert Smith Freehills for the second respondent TABLE OF CONTENTS An application for declaratory relief ................................................................................ 3 Background matters ........................................................................................................... 3 A declared service ............................................................................................................ 3 The access undertaking for the Network ........................................................................ 4 An overview of UT5 and its material clauses ................................................................... 5 Objects, Access and Capacity .......................................................................................... 5 “Report Date” .................................................................................................................. 6 Part 7A: Capacity ............................................................................................................ 7 Relevant events following the approval of UT5............................................................ 15 The real issues in dispute ................................................................................................. 15 Applicable interpretation principles ............................................................................... 16 Aurizon Network’s arguments ........................................................................................ 18 Consideration .................................................................................................................... 19 -- 2 of 49 -- 3 The pure question of construction ................................................................................ 19 Did the Preliminary Report provide the requisite notification? .................................. 25 Orders ................................................................................................................................ 28 An application for declaratory relief [1] This proceeding is concerned with the proper construction of an access undertaking (“UT5”)1 approved by the first respondent (“the QCA”) under the Queensland Competition Authority Act 1997 (Qld) (“the Act”).2 The applicant (“Aurizon Network”) has applied by way of originating application for declaratory relief. There are two aspects to the declaratory relief. The first declaration concerns the meaning of the term “Report Date” as contained in cl 12.1 of UT5. Aurizon Network contends that, according to its proper construction, the Report Date was 12 November 2021, not 14 March 2022 as determined by the QCA. The second declaration is to the effect that, in the context of the annual review of “Reference Tariffs” under UT5,3 on 15 December 2022, the QCA erred in law by adopting 14 March 2022, rather than 12 November 2021, as the Report Date for the purpose of calculating a sum known as the “Revenue Adjustment Amount”4. The application is resisted by the QCA and the second respondent (“QRC”). Background matters A declared service [2] Aurizon Network operates the Central Queensland Coal Network (“the Network”) which comprises five “Coal Systems”5 linking approximately 40 mines railing coal to five export terminals at three major ports. Aurizon Network operates the Network under long term leases granted by the State of Queensland. [3] The Coal Systems comprise: (a) the Moura system, which links the Moura mine to Gladstone; (b) the Blackwater system, which connects the Gregory and Rolleston mines to Gladstone; (c) the Goonyella system which connects the Gregory, North Goonyella and Blair Athol mines to the port of Hay Point; (d) the Newlands system which links the Newlands mine to the port of Abbot Point; and (e) the Goonyella to Abbot Point system. 1 UT5 is a reference to “Aurizon Network 2017 access undertaking (UT5)” dated 19 December 2019. 2 The approval of an access undertaking by the QCA is provided for by s 138 of the Act. 3 Exhibit 5, p 317. 4 Exhibit 5, pp 270, 321 and 361 (sch F, cl 4.3). 5 The term “Coal System” is referenced in the Act, s 250(1)(a). -- 3 of 49 -- 4 [4] The use of the Network for providing transportation by rail is a declared service under the Act.6 Access to declared services is the subject of Part 5 of the Act. The object of Part 5 is expressed as being to:7 “Promote the economically efficient operation of, and use of and investment in, significant infrastructure by which services are provided, with the effect of promoting effective competition in upstream and downstream markets.” [5] Two important mechanisms facilitate the regulation of access to a declared service, access undertakings and access agreements. [6] An access undertaking is a written undertaking setting out the terms on which the owner or operator of the service undertakes to provide access to the service.8 Access undertakings are dealt with in Div 7 of Pt 5 of the Act. The QCA may require an owner or operator of a declared service to give the QCA a draft access undertaking for the service.9 An owner or operator of a declared service may also voluntarily submit to the QCA a draft access undertaking or a draft amendment to an existing access undertaking.10 In either case, the QCA must consider the draft undertaking, or draft amendment, and must approve or refuse to approve the draft.11 If the QCA refuses to approve the draft, the QCA must give the owner or operator notice requiring the draft to be amended and resubmitted.12 Upon being approved by the QCA, an access undertaking binds the owner or operator of the declared service13 and is enforceable by either the QCA or any person who considers that their interests have been adversely affected by a breach of the undertaking.14 [7] An access agreement is relevantly an agreement between an access provider of a declared service and another person providing for access to the service by the other person.15 Access agreements are dealt with in Div 4 of Pt 5 of the Act. An owner or operator of a declared service must, if requested to do so, negotiate with an entity who seeks access to that service for the purpose of making an access agreement in relation to the service.16 Subject to some exceptions, in negotiating access agreements, the owner or operator of the declared service must not unfairly differentiate between access seekers.17 The access undertaking for the Network [8] On 30 November 2016, in response to an earlier notice issued by the QCA, Aurizon Network submitted to the QCA a draft access undertaking for the Network for the period commencing 1 July 2017 and ending 30 June 2021 (“the 2017 Draft Access Undertaking”). On 6 December 2018, the QCA did not approve, and requested the 6 Queensland Competition Authority Act 1997 (Qld), s 250 (‘the Act’). 7 Ibid, s 69E. 8 Ibid, sch 2 “access undertaking”. 9 Ibid, s 133. 10 Ibid, ss 136 and 142. 11 Ibid, ss 134(1), 136(4) and 142(2). 12 Ibid, ss 134(2), 136(5) and 142(3). 13 Ibid, s 150A; see also the definition of “responsible person” in sch 2. 14 Ibid, s 158A. 15 Ibid, sch 2. 16 Ibid, s 99. 17 Ibid, s 100. -- 4 of 49 -- 5 amendment of, the 2017 Draft Access Undertaking. On 18 February 2019, Aurizon Network submitted an amended version of the 2017 Draft Access Undertaking, which the QCA approved on 21 February 2019. Upon approval, that draft became UT5. [9] On 3 May 2019, Aurizon Network submitted to the QCA a draft voluntary amendment to UT5 (“the 2019 Draft Amendment”). On 25 November 2019, the QCA approved the 2019 Draft Amendment subject to certain amendments. On 4 December 2019, a revised version of the 2019 Draft Amendment was submitted to the QCA. On 19 December 2019, the QCA approved that version, which is the version of UT5 the subject of this proceeding. An overview of UT5 and its material clauses Objects, Access and Capacity [10] Clause 2.2 expresses the objective of UT5 as including to: (a) ensure that the declared service is provided in a manner that does not unfairly differentiate between access seekers or users in a way that has a material adverse effect on the ability of one or more of the access seekers or users to compete with other access seekers or users;18 (b) prevent Aurizon Network recovering through the price of access to the declared service, any costs that are not reasonably attributable to the provision of that service;19 (c) apply the provisions of the Act through the establishment of processes for “Access” negotiations and the utilisation of “Capacity” that are expeditious, efficient, timely, flexible, commercial and non-discriminatory;20 (d) apply the provisions of the Act through the establishment of processes and principles to provide guidance in relation to the pricing, and the terms and conditions, of Access;21 (e) provide that UT5, and actions taken under it, are consistent with the objectives and provisions of the Act.22 [11] The concepts of “Access” and “Capacity” are the subject of specific definitions within UT5. “Access” is, essentially, the non-exclusive utilisation of a specified section of the rail infrastructure for the purpose of operating train services.23 “Capacity” references a number of concepts24 but, fundamentally, is concerned with the number of “Train Paths” that can be provided within each system, including the mainline and branch line of each system.25 A “Train Path” is the occupation of a specified portion of the rail infrastructure.26 18 Exhibit 5, p 160, cl 2.2 (a) read with the Act, s 137(3). 19 Exhibit 5, p 160, cl 2.2(b). 20 Exhibit 5, p 160, cl 2.2(d). 21 Ibid. 22 Exhibit 5, p 160, cl 2(f). 23 Exhibit 5, p 263. 24 Exhibit 5, p 274 (Capacity), p 291 (Existing Capacity), p 391 (Planned Capacity), p 263 (Absolute Capacity). 25 Exhibit 5, p 263. 26 Exhibit 5, p 331. -- 5 of 49 -- 6 [12] Access to the Network is governed by the access agreements entered between Aurizon Network and third-party access seekers.27 UT5 regulates the price which an access seeker can be required to pay to Aurizon Network for access under an access agreement. Access charges are calculated in accordance with Reference Tariffs stipulated in UT5.28 The Reference Tariffs are adjusted annually29 by reference to, among other things, a “Revenue Adjustment Amount”. Each financial year, Aurizon Network is required to recover from, or return to, Access Holders the Revenue Adjustment Amount, which comprises the difference between revenue earned (referred to as “Total Actual Revenue”) and revenue allowed (referred to as “Adjusted Allowable Revenue”).30 The “Adjusted Allowable Revenue” sum is calculated by reference to, inter alia, the “Approved WACC” applicable during that year.31 The prevailing amount of the Approved WACC bears upon the amount of the access charges which Aurizon Network may levy upon current Access Holders and seek to impose on new access seekers. [13] The Approved WACC is defined as follows:32 “Approved WACC The post-tax nominal (vanilla) weighted average cost of capital calculated as follows: (a) from 1 July 2017 until the Initial Date 5.7% p.a.; (b) from the Initial Date until the Report Date, 5.9% p.a.; (c) from the Report Date (where occurring prior to the Reset Date), 6.3% p.a.; (d) from the Reset Date until the Terminating Date, the Reset WACC.” [14] An event which triggers a change in the value of the Approved WACC is the occurrence of the “Report Date”. Upon the occurrence of that event, the Approved WACC increases from 5.9% to 6.3%. “Report Date” [15] The expression “Report Date” is defined as:33 “The date on which the last of the following events has occurred: (a) the Independent Expert has provided the Initial Capacity Assessment Report to Aurizon Network and the Chair of the Rail Industry Group; and (b) Aurizon Network notifies the Chair of the Rail Industry Group of the proposed options for addressing any Existing Capacity Deficits identified in the Initial Capacity Assessment Report, provided that where the Initial Capacity Assessment Report does not identify any Existing Capacity Deficits, Aurizon Network will be deemed to have satisfied the notification requirement in this paragraph (b) on the date that the Initial 27 Exhibit 5, p 166, cl 4.1(a) and p 196, cl 5.1(a). 28 Exhibit 5, p 201, cll 6.2.2 and 6.2.3. 29 Exhibit 5, p 355, sch F, cl 4. 30 Exhibit 5, p 361, sch F, cl 4.3. 31 Exhibit 5, sch F, cl 4.3(c)(i). 32 Exhibit 5, p 270. 33 Exhibit 5, p 319. -- 6 of 49 -- 7 Capacity Assessment Report has been provided in accordance with paragraph (a).” [16] The definition of Report Date includes several defined terms, namely: (a) “Independent Expert” is defined as “The Independent Expert appointed under clause 7A.3.1.” (b) “Initial Capacity Assessment Report” has “the meaning given to that term in clause 7A.4.1(g).” (c) “Rail Industry Group” is a “forum of End Users” with its membership being open to “all End Users, Access Seekers and Railway Operators” (c) “Chair of the Rail Industry Group” is defined as “Such person as may (sic) appointed as the chair of the Rail Industry Group from time to time and advised to Aurizon Network and the QCA in writing.” (d) “Existing Capacity Deficit” has “the meaning given to that term in clause 7A.5(a).” Part 7A: Capacity [17] Part 7A of UT5 is entitled “Capacity”. The purpose of the part is to provide for the independent and realistic assessment of “the Deliverable Network Capacity” of the rail infrastructure in each of the Coal Systems and, separately, “the System Capacity” of each of the Coal Systems. The Deliverable Network Capacity of the Rail Infrastructure is defined by reference to the maximum number of “Train Paths” that can be utilised in each Coal System and the mainline and each branch line of that Coal System.34 System Capacity is defined by reference to the capacity of “the Supply Chain” in its entirety, including the maximum number of Train Paths that can be utilised in each Coal System, and the mainline and each branch line of that Coal System.35 The expression “Supply Chain” is defined to mean all aspects that affect the transportation of coal from a mine to the end customer, including loading facilities, Rail Infrastructure, Railway Operators, load out facilities and coal export terminal facilities.36 [18] Clause 7A.3 contemplates the appointment of an Independent Expert. The provisions of cl 7A.3 are set out in their entirety in Annexure A to these Reasons. The contemplated appointment is a joint appointment by Aurizon Network and a group of “End Users”.37 The Independent Expert is to be independent and impartial and supported by suitably qualified and experienced personnel. Once appointed, the Independent Expert is responsible for conducting various Capacity Assessments under cl 7A.4 and determining rebates payable under cl 7A.6. The Independent Expert’s costs are recoverable as a component of the Reference Tariff. [19] Clause 7A.4 describes the procedures by which the Independent Expert is to conduct the various Capacity Assessments and report on those assessments to the QCA and 34 Exhibit 5, p 205, cl 7A.2(a). 35 Exhibit 5, p 206, cl 7A.2(b). 36 Exhibit 5, p 326. 37 Exhibit 5, p 288 “End User” is defined as “Each Access Holder (other than an Access Holder that holds Access Rights for the purpose of providing Train Services for a Customer) and each Customer. -- 7 of 49 -- 8 stakeholders. The provisions of cl 7A.4 are set out in their entirety in Annexure A to these Reasons. By way of broad overview, cl 7A.4 contemplates three types of Capacity Assessments namely an IE Initial Capacity Assessment, Annual Capacity Assessment and System Capacity Assessment. [20] UT5 acknowledges that the Independent Expert will use its best endeavours, supported by the good faith actions of Aurizon Network and the members of the Rail Industry Group, to undertake the IE Initial Capacity Assessment as quickly as is reasonably possible having regard to the nature of the assessment and the need to undertake an assessment that is both realistic and accurate.38 Within 10 business days of its appointment, the Independent Expert is to commence an “Initial Assessment of the Deliverable Network Capacity of each Coal System for the Capacity Assessment Period” (“IE Initial Capacity Assessment”).39 The Independent Expert is to develop System Operating Parameters for each Coal System having regard to the way each Coal System operates in practice and must ensure that those parameters consider the Deliverable Network Capacity and not place Aurizon Network in breach of UT5 or any Access Agreement.40 [21] Certain obligations are imposed on various parties in relation to the preparation of the IE Initial Capacity Assessment. The Independent Expert is obliged to consult with and seek submissions from Aurizon Network, Access Holders and Access Seekers (and their Customers and Train Operators) and all Supply Chain Participants for each Coal System. Aurizon Network is obliged to promptly do everything reasonably requested by the Independent Expert to assist it in carrying out the IE Initial Capacity Assessment, including providing or making available all information and materials relevant to the Deliverable Network Capacity. The members of the Rail Industry Group are also obliged to provide to the Independent Expert, information in relation to the Deliverable Network Capacity. [22] The IE Initial Capacity Assessment must include: (a) a dynamic model reflecting how each Coal System operates in practice; (b) the System Operating Parameters for each Coal System; (c) consideration of the outcomes of any consultation, or information received, by the Independent Expert; (d) a report which: (i) identifies the Independent Expert’s assumptions affecting the Deliverable Network Capacity; (ii) describes any constraints which have reduced or are likely to reduce the Deliverable Network Capacity of each Coal System; and (iii) where the Independent Expert has identified an “Existing Capacity Deficit” with respect to a Coal System, specifies the Coal System and location of the Existing Capacity Deficit, the quantum of the Existing Capacity Deficit and, if a specific cause or cause of the Existing Capacity Deficit has been identified, the Access Holders affected by the Existing 38 Exhibit 5, p 214, cl 7A.4.1(g). 39 Exhibit 5, p 210-11, cl 7A.4.1(a). 40 Exhibit 5, p 211, cl 7A.4.1(b). -- 8 of 49 -- 9 Capacity Deficit with “reasonable detail” about “solutions which could effectively and efficiently address the Existing Capacity Deficit”.41 [23] An “Existing Capacity Deficit” arises where the IE Initial Capacity Assessment reveals a “Deliverable Network Capacity Shortfall” in a relevant Coal System.42 A “Deliverable Network Capacity Shortfall” is “a circumstance where the Deliverable Network Capacity of a Coal System within the relevant Capacity Assessment Period is less than the number of Train Paths required to meet train service entitlements (without regard to exclusions and access agreements for the non- provision of train service entitlements)”.43 [24] The Independent Expert is required to make available to Aurizon Network and the QCA44 and to the Chair of the Rail Industry Group,45 the outcomes of the IE Initial Capacity Assessment including its assumptions affecting Deliverable Network Capacity relied upon for the IE Initial Capacity Assessment (“the Initial Capacity Assessment Report”) and the System Operating Parameters.46 The QCA has an obligation to promptly publish on its website the Initial Capacity Assessment Report47 and the System Operating Parameters of each Coal System. [25] Clause 7A.5 addresses the situation where the IE Initial Capacity Assessment reveals an Existing Capacity Deficit and describes a structured process in response to that revelation. The provisions of cl 7A.5 are set out in their entirety in Annexure A to these Reasons. [26] The structured process may be broadly outlined as follows. [27] As the first step, within 20 business days after the Initial Capacity Assessment Report is published on the QCA website, Aurizon Network is required to: “ … submit a preliminary report to the QCA (and publish such preliminary report … on the Website) setting out: (A) Aurizon Network’s consultation plan (which, when followed, must satisfy the requirements of clause 7A.5(a)(ii)); and (B) Aurizon Network’s preliminary views on: (1) the cause or causes of the Existing Capacity Deficit (including a response, in reasonable detail, to the cause or causes identified by the Independent Expert); and (2) solutions which could most effectively (including cost effectively) and efficiently address the Existing Capacity Deficit (including a response, in reasonable detail, to the solutions identified by the Independent Expert); and 41 Exhibit 5, pp 212-214, cl 7A.4.1(f). 42 Exhibit 5, p 218, cl 7A.5. 43 Exhibit 5, p 286. 44 On an unredacted basis. 45 On a redacted basis. 46 Exhibit 5, p 214, cl 7A.4.1(g). 47 Exhibit 5, p 214, cl 7A.4.1(h) and (i); the publication on the website may be redacted to protect confidential information of an Access Holder, Customer or Train Operator. -- 9 of 49 -- 10 (3) the indicative timeframe within which it considers each of the solutions could reasonably be implemented”.48 [28] As the second step, Aurizon Network is required to: “… consult with End Users, Customers and Access Holders of the relevant Coal System and Train Operators, to identify and consider: (A) whether changes can be made to: (1) the operation and maintenance practices for the Rail Infrastructure; (2) the operations of Rollingstock by Railway Operators; (3) the operation and maintenance practices in respect of load-out facilities, including in relation to interfaces with all facilities forming part of the relevant Supply Chains (as set out in the assumptions affecting Deliverable Network Capacity and included in the Initial Capacity Assessment Report) in order to increase the Deliverable Network Capacity of the relevant Coal System, provided that such changes would be consistent with the System Operating Parameters included in the IE Initial Capacity Assessment (and would not require an Access Holder to revert to the requirements in an Access Agreement where that Access Agreement has not been modified to make it consistent with the new System Operating Parameters); (B) whether an Access Holder wishes to voluntarily relinquish any of its Access Rights if it is entitled to do so under, and in accordance with, a relinquishment provision in its Access Agreement (without being required to pay a Relinquishment Fee to Aurizon Network) with the Access Holder to specify the maximum and minimum number of Access Rights that the Access Holder would be willing to relinquish; and (C) options for Expansions, (collectively, the Transitional Arrangements), which could effectively and efficiently address the Existing Capacity Deficit or whether affected Access Holders and Customers would prefer not to do anything to address the Existing Capacity Deficit.”49 48 Exhibit 5, p 219, cl 7A.5(a)(i). 49 Exhibit 5, p 219, cl 7A.5(a)(ii). -- 10 of 49 -- 11 [29] As the third step,50 within three months after the Initial Capacity Assessment Report has been published by the QCA on its website, Aurizon Network is required to: “…submit a detailed report to the QCA, the Chair of the Rail Industry Group and the Independent Expert showing the outcome of Aurizon Network’s analysis and consultation on the Existing Capacity Deficit and the Transitional Arrangements which it considers would most effectively and efficiently address the Existing Capacity Deficit, including: (A) whether any Access Holder is willing to, within 30 days, voluntarily relinquish any of its Access Rights if it is entitled to do so under, and in accordance with, a relinquishment provision in its Access Agreement (without being required to pay a Relinquishment Fee that would otherwise be payable as a result of such relinquishment under its Access Agreement) and the extent to which any voluntary relinquishment will address (up to a maximum of) the Existing Capacity Deficit in that Coal System). If multiple Access Holders wish to relinquish Access Rights, then the voluntary relinquishment will be apportioned pro rata up to a maximum of the Existing Capacity Deficit in that Coal System; (B) whether changes could be made to: (1) the operation and maintenance practices for the Rail Infrastructure; (2) the operations of Rollingstock by Railway Operators; (3) the operation and maintenance practices in respect of load-out facilities, including in relation to interfaces with all facilities forming part of the relevant Supply Chains (as set out in the assumptions affecting Deliverable Network Capacity and included in the Initial Capacity Assessment Report) that could increase the Deliverable Network Capacity of the relevant Coal System, provided that such changes would be consistent with the System Operating Parameters included in the IE Initial Capacity Assessment (and would not require an Access Holder to revert to the requirements in an Access Agreement where that Access Agreement has not been modified to make it consistent with the new System Operating Parameters), including: (4) the extent to which the proposed operational changes will address the Existing Capacity Deficit; (5) a reasonable estimate of the cost of such operational changes to Aurizon Network and/or Customers and Access Holders; and 50 Exhibit 5, p 220, cl 7A.5(a)(iii). -- 11 of 49 -- 12 (6) if relevant, evidence of Aurizon Network’s consultation under clause 7A.5(a)(ii) that explains why such changes cannot address the Existing Capacity Deficit; (C) if relevant, a shortlist of Expansions considered by Aurizon Network and through the consultation under clause 7A.5(a)(ii) (including reasonable estimates of costs to undertake each Expansion); and (D) subject to clause 7A.5(c), any proposed Expansion which Aurizon Network and the affected Access Holders or Access Seekers have agreed will address the Existing Capacity Deficit.”51 [30] One of the Transitional Arrangements involves “options for Expansions”.52 If Aurizon Network and affected End Users agree that an Expansion is the most effective and efficient option to address the Existing Capacity Deficit and End Users wish to rectify the Existing Capacity Deficit, or if the QCA otherwise determines that an Expansion is the most effective and efficient option to address the Existing Capacity Deficit, it is left to the Independent Expert to review and approve the efficiency and prudence of the proposed Expansion.53 [31] If Aurizon Network and affected End Users do not reach agreement as to “which of the Transitional Arrangements should be implemented,”54 the Independent Expert must review the detailed report provided by Aurizon Network under cl 7A.5(a)(iii) and promptly make “a recommendation to the QCA with respect to which of the Transitional Arrangements of the type referred to in clause 7A.5(a)(iii)(A) – clause 7A.5(a)(iii)(C) it considers will most effectively and efficiently resolve the Existing Capacity Deficit ….”55 Within 15 days (or such longer period as may be required by the QCA) of receiving the Independent Expert’s recommendation, the QCA must “make a determination as to which of the Transitional Arrangements of the type referred to in clause 7A.5(a)(iii)(A) – clause 7A.5(a)(iii)(D) will most efficiently and effectively resolve the Existing Capacity Deficit …”.56 Aurizon Network must comply with any determination made by the QCA including by doing “everything reasonably necessary to implement the type of Transitional Arrangements determined by the QCA in a prudent and diligent manner so as to resolve the Existing Capacity Deficit as soon as reasonably practicable, having regard to the nature and type of Transitional Arrangements required”.57 [32] Clause 7A.6 applies from the Report Date and describes a process by which payments, described as Rebates, may be made to affected End Users. The provisions of cl 7A.6 are set out in their entirety in Annexure A to these Reasons. The process by which Rebates are determined may be outlined as follows. From the Report Date, the Independent Expert is required to identify if there has been “an AN Performance 51 Exhibit 5, pp 220-221, cl 7A.5(a)(iii). 52 Exhibit 5, p 220, cl 7A.5(a)(ii)(C). 53 Exhibit 5, pp 221-223, cll 7A.5(c)(i)-(ii) and (i)(ii). 54 Exhibit 5, p 222, cl 7A.5(d). 55 Ibid. 56 Exhibit 5, p 222, cl 7A.5(e). 57 Exhibit 5, p 222, cl 7A.5(f). -- 12 of 49 -- 13 Shortfall” resulting from an “AN Performance Breach in that Relevant Year”. If there has been, the Independent Expert must determine the “Performance Rebate Amount” that Aurizon Network must58 pay an affected End User. [33] To understand that process, it is necessary to have regard to the following definitions: (a) “AN Performance Shortfall” is defined to mean: “(a) In respect of the period between the Report Date and the implementation of any Transitional Arrangements to address any Existing Capacity Deficit, in respect of each origin and destination combination specified in an Access Holder’s Access Agreement and for that period: (i) the aggregate number of Train Service Entitlements for the relevant origin and destination combination for that period that the Independent Expert determines could have been utilised by the Access Holder having regard to the IE Initial Capacity Assessment and any other Access Holders affected by the Existing Capacity Deficit (if any); less (ii) the number of Train Service Entitlements for the relevant origin and destination combination that the Independent Expert determines were utilised by the Access Holder during the relevant period. (b) For all Years following the implementation of the Transitional Arrangements, in respect of each origin and destination combination specified in an Access Holder’s Access Agreement and each Relevant Year: (i) the aggregate number of Train Service Entitlements specified in the relevant Access Agreement for the relevant origin and destination combination for the Relevant Year; less (ii) the number of Train Service Entitlements for the relevant origin and destination combination that the Independent Expert determines were utilised by the Access Holder during the Relevant Year.”59 (b) “AN Performance Breach” is defined to mean: “(a) any breach by Aurizon Network of an obligation under the Undertaking or any Access Agreement; 58 Subject to cll 7A.6(c) and (e). 59 Exhibit 5, p 268. -- 13 of 49 -- 14 (b) Aurizon Network acting inconsistently with the Approved Maintenance Strategy and Budget, Approved Renewals Strategy and Budget or Approved Maintenance Approach other than where permitted by clause 7A.11.3(q); or (c) any failure by Aurizon Network (including by any Aurizon Network Personnel) to comply with a System Operating Parameter under its control, except to the extent that any act or omission of Aurizon Network under paragraphs (a) – (c) is directly attributable to the proper performance, completion and/or implementation of any Transitional Arrangements agreed to or determined under clause 7A.5.”60 (c) “Performance Rebate Amount” is defined to mean: “…. an amount calculated as follows: PRA = A x R Where: PRA means Performance Rebate Amount (expressed in dollars); A means the AN Performance Shortfall for a Relevant Year (expressed as a number of Train Service Entitlements) to the extent attributable to an AN Performance Breach; and R means the revenue from the Relevant Components of Access Charges that Aurizon Network would have been entitled to earn for the applicable Train Service Entitlement.”61 [34] Aurizon Network’s liability to pay a Rebate is not unqualified. Relevantly, the liability is subject to and conditional upon the Access Holder and the End User: (a) undertaking that the payment of the Rebate to the End User is, subject to certain exceptions, “the sole right to compensation” and Aurizon Network is not otherwise liable for any claim (whether based in contract or tort, under common law or in equity or under statute), for any other loss or damage suffered or incurred in respect of the Train Service Entitlements which were not provided as a result of an AN Performance Breach;62 (b) in respect of the relevant Train Service Entitlement, not having commenced any claim that would be in breach of such undertaking if the undertaking had been given at the time the claim was commenced;63 60 Exhibit 5, p 267-268. 61 Exhibit 5, p 311. 62 Exhibit 5, p 225, cl 7A.6(c)(ii). 63 Exhibit 5, p 225, cl 7A.6(c)(iii). -- 14 of 49 -- 15 (c) agreeing as part of the undertaking not to set off any amounts due and payable by the Access Holder or End User to Aurizon Network against the Rebate payable by Aurizon Network to the Access Holder or End User.64 Relevant events following the approval of UT5 [35] On 27 October 2021, the Independent Expert made its Initial Capacity Assessment Report (“the ICAR”) available to Aurizon Network, the QCA and the Chair of the Rail Industry Group. The ICAR identified Existing Capacity Deficits in each of the five Coal Systems within the Network. [36] On 12 November 2021, Aurizon Network provided to the QCA and the Chair of the Rail Industry Group, a report entitled “Aurizon Network’s Preliminary Report in response to the Initial Capacity Assessment Report” (“the Preliminary Report”). The Preliminary Report was the preliminary report contemplated by cl 7A.5(a)(i) of UT5, save that, on the facts, it was submitted to the QCA and the Chair of the Rail Industry Group, rather than just the QCA as contemplated by cl 7A.5(a)(i). Later in these Reasons, I have dealt with some of the relevant content of the Preliminary Report. [37] Following its delivery of the Preliminary Report, Aurizon Network conducted the consultation process contemplated by cl 7A.5(a)(ii). On 14 March 2022, following that consultation process, Aurizon Network submitted a detailed report as required by cl 7A.5(a)(iii) (“the Detailed Report”). [38] On 4 November 2022, Aurizon Network submitted its proposal for the Revenue Adjustment Amount for the financial year 2022 which adopted a Report Date of 12 November 2021 (“the Revenue Adjustment Proposal”). [39] In November and December 2022, Aurizon Network and the QRC made submissions to the QCA about when the “Report Date” had occurred. In those submissions, Aurizon Network contended that the Report Date was 12 November 2021 and QRC contended that it was 14 March 2022. [40] On 15 December 2022, the QCA issued a decision notice in response to the Revenue Adjustment Proposal (“the QCA decision”).65 The relevant effect of the QCA decision was that the QCA refused to approve the Revenue Adjustment Proposal and required that the adjustment be calculated on the basis that the Approved WACC increased from 5.9% to 6.3% on 14 March 2022. The real issues in dispute [41] This proceeding involves two principal issues. [42] The first issue concerns what might be described as a pure question of construction. That question may be framed as, is the “Report Date”, properly construed, a reference to the date on which Aurizon Network submits the detailed report described by cl 7A.5(a)(iii) of UT5 or is it a reference to the date of any communication from Aurizon Network to the Chair of the Rail Industry Group by which Aurizon Network notifies the proposed options for addressing any Existing Capacity Deficits identified in the Initial Capacity Assessment Report? 64 Exhibit 5, p 225, cl 7A.6(c)(iv). 65 The QCA decision was made by the QCA under cl 4.3(s) of sch F to UT5. -- 15 of 49 -- 16 [43] The second issue arises if the construction question is answered so that the Report Date is a reference to the date of any such communication as distinct from the date of submission of the detailed report. In that event, there is a factual issue as to whether the Preliminary Report was a communication from Aurizon Network to the Chair of the Rail Industry Group by which Aurizon Network notified “the proposed options for addressing the Existing Capacity Deficits identified in the Initial Capacity Assessment Report”. Applicable interpretation principles [44] UT5 is a statutory instrument within the meaning of s 7 of the Statutory Instruments Act 1992 (Qld) (“the Statutory Instruments Act”).66 The interpretation of UT5 is governed by the Acts Interpretation Act 1954 (Qld) (“the Interpretation Act”), as modified by the provisions of Pt 4 of the Statutory Instruments Act. [45] The public character of an approved undertaking such as UT5 can be discerned from the following circumstances: (a) an approved access undertaking derives its legal force from the QCA’s approval which is made pursuant to the Act; (b) the matters to which the QCA must have regard in deciding whether to approve an access undertaking, which include the public interest;67 (c) the Act obliges an owner or operator of a service to comply with an approved access undertaking; (d) an approved access undertaking may only be withdrawn with the approval of the QCA; (e) the purpose of an access undertaking is to serve as a charter of rights for access seekers, current and future; (f) the Act does not contemplate an approved access undertaking operating as a contract but rather makes separate provision for an “access agreement” to be negotiated between an access provider and an individual access seeker. [46] Two matters are worth noting about the approach to the interpretation of UT5. [47] First, it is not appropriate to have regard to extrinsic material such as the antecedent negotiations or dealings about the instrument or the background facts known to certain parties.68 [48] Secondly, the interpretation of UT5 which best achieves its purpose is to be preferred to any other interpretation.69 66 Relevantly, UT5 is “made under” the Act because it derives its binding legal force from QCA’s approval under the Act and it is a notification of a public nature or another instrument of a public nature by which the entity making the instrument unilaterally affects a right or liability of another entity. 67 The Act, s 138(2)(d). 68 Acts Interpretation Act 1954 (Qld) (‘the Interpretation Act’), s 148 (as modified by s 15 of the Statutory Instruments Act 1992 (Qld) (‘the Statutory Instruments Act’)); Aurizon did not press its initial submission that UT5 fell to be interpreted by reference to background facts known to the parties involved in its negotiations: T1-5.45-T1-5.46. 69 The Interpretation Act, s 14A. -- 16 of 49 -- 17 [49] In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue,70 the plurality observed: “... the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.”71 (footnotes omitted). [50] It is uncontroversial that the text of UT5 is the starting point for the construction task. Ultimately, the construction of the expression “Report Date” requires careful regard to the text, in order to ascertain the meaning of the words used. In this regard, it is necessary for the court to consider both the language of the clause, as well as the commercial purpose and objects of the instrument as can be discerned from the text of the instrument itself, read as a whole and in its statutory context. [51] As to the requirement to read the instrument as a whole, in LCA Marrickville Pty Ltd v Swiss Re International SE,72 Derrington and Colvin JJ (with whom Moshinsky J agreed) relevantly said: “[57] It is often identified as ‘trite law’ that the duty of a court when construing a document is to discover its meaning by considering it ‘as a whole’: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 per Gibbs J. The rationale is, as Gibbs J observed, that “the meaning of any one part of it may be revealed by other parts” and, as a corollary, “the words of every clause must if possible be construed so as to render them all harmonious one with another”. In Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; (Wilkie v Gordian Runoff ), a majority of the High Court observed that in construing a policy of insurance, as with other instruments, ‘preference is given to a construction supplying a congruent operation to the various components of the whole’: at [16] citing Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]–[71]. Necessarily, the identification of that construction can only be achieved by ascertaining how a contract or policy might operate as affected by each of the competing interpretations. This ‘iterative process’, involving ‘checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences’, ‘enables a court to assess whether either party’s preferred legal meaning gives rise to a result that is more or less internally consistent and avoids commercial absurdity’: HP Mercantile 70 (2009) 239 CLR 27. 71 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [47]. 72 (2022) 290 FCR 435. -- 17 of 49 -- 18 Pty Ltd v Hartnett [2016] NSWCA 342 at [134] quoting Re Sigma Finance [2010] BCC 40 at [12]. [58] In the interpretive process, the concept of reading a document as a whole involves more than merely acquiring an awareness of the surrounding and related provisions. It requires a substantive intellectual process of evaluating the degree of operative coherence and consistency between a proffered construction and the instrument’s other terms…”73 Aurizon Network’s arguments [52] Aurizon Network’s substantive submissions may be outlined as follows. The text of UT5 is to be “construed commercially, having regard to the fact that it’s a public document.”74 Adopting that approach, having regard to context and purpose, the Report Date was 12 November 2021. The key question involved the meaning to be given to the expression within the definition of Report Date, “Aurizon Network notifies the Chair of the Rail Industry Group of the proposed options for addressing any Existing Capacity Deficits identified in the Initial Capacity Assessment Report…”. That expression was not tied to the preliminary report referred to in cl 7A.5(a)(i) or the detailed report referred to in cl 7A.5(a)(iii). The inquiry was as to when the Chair of the Rail Industry Group was notified of the proposed options. In this case, notification was provided by the provision of the Preliminary Report, which was objectively intended to notify preliminary views on “solutions which could most effectively … and efficiently address the Existing Capacity Deficit”. The notification of the preliminary views occurred in a context where the ICAR had identified “in reasonable detail, solutions which could effectively and efficiently address the Existing Capacity Deficit”75 and the Preliminary Report was required to respond, in reasonable detail, to those solutions.76 The Preliminary Report as a matter of fact, notified the proposed options that could most effectively and efficiently address the Existing Capacity Deficits. [53] The Report Date was said to not contemplate the notification being provided by the detailed report referred to in cl 7A.5(a)(iii) for six reasons. First, cl 12.1 did not specifically state that the Report Date was the date of submission of the detailed report referred to in cl 7A.5(a)(iii).77 Secondly, “submitting” a detailed report was quite different to “notifying” proposed options. Further, the detailed report contemplated matters beyond “proposed options”. In this regard, “the proposed options” contemplated by UT5 were not to be equated with “the Transitional Arrangements”.78 Thirdly, the purpose of “notifying” the Chair of the Rail Industry Group was to provide the basis for the consultation required under cl 7A.5(a)(ii) which was to precede the submission of the detailed report.79 Fourthly, treating the submission of the detailed report as the Report Date would give rise to perverse incentives inconsistent with the consultation obligation imposed by cl 7A.5(a)(ii). Rather than undertaking that consultation in a considered and complete manner, Aurizon Network 73 LCA Marrickville Pty Ltd v Swiss Re International SE (2022) 290 FCR 435 at [57]-[58]. 74 T1-5.46-48. 75 UT5, cl 7A.4.1(f)(v). 76 UT5, cl 7A.5(a)(i)(B)(2). 77 Applicant’s Outline of Submissions, [103]. 78 Ibid, [104] to [111]. 79 Ibid, [112]. -- 18 of 49 -- 19 would be incentivised to complete the consultation and prepare a detailed report in “a hurried or perfunctory fashion” so as to trigger the uplift in the WACC. It was commercially sensible for the parties to have agreed on a mechanism that incentivised Aurizon Network to propose “preliminary consultation options” with an onus then falling on Aurizon Network “to perform in light of those new circumstances”.80 Fifthly, treating the date of the submission of the detailed report as the Report Date was inconsistent with the terms and object of the Rebates in that it would hinder, rather than promote, the timely and effective provision of Rebates to End Users.81 Finally, the commercial purpose of Pt 7A was relevantly said to be “to make [Aurizon] Network’s entitlement to an increase in WACC dependent upon the completion by [Aurizon] Network of an investigation that identified proposed options to remedy any deficit (and which options were to be the subject of formal, consultation, analysis and implementation), with any later poor performance by [Aurizon] Network after that time subject to the payment by it of a penalty in the form of the [Rebates].”82 Consideration [54] I have dealt with the issues in turn. The pure question of construction [55] The critical language within the definition of “Report Date” is “Aurizon Network notifies the Chair of the Rail Industry Group of the proposed options for addressing any Existing Capacity Deficits identified in the Initial Capacity Assessment Report ...”. The text does not make specific reference to the detailed report referred to in cl 7A.5(a)(iii). Aurizon Network emphasised that, had the contemplated notification been intended to reference that detailed report, it would have been a simple thing for the text to have made that clear. It was also noted that the definition of Report Date utilised defined terms but did not make specific reference to the detailed report. [56] It can be accepted that, as a matter of syntax, the critical language is not expressed in terms of notification by “the detailed report referred to in cl 7A.5(a)(iii)”. However, nor is that language expressed in terms of notification by “the preliminary report referred to in cl 7A.5(a)(i)”, “the detailed report referred to in cl 7A.5(a)(iii) or the preliminary report referred to in cl 7A.5(a)(i)” or “the detailed report referred to in cl 7A.5(a)(iii), the preliminary report referred to in cl 7A.5(a)(i) or any other report”. Language of that kind may have achieved perfect clarity. As it was not used, the Court is left to ascertain the meaning of the words actually used, having regard to their context and the purpose of the instrument. [57] The text describes an event by which Aurizon Network notifies the Chair of the Rail Industry Group “of the proposed options for addressing any Existing Capacity Deficits identified in the Initial Capacity Assessment Report”. That event is contemplated to occur in circumstances involving an unresolved Existing Capacity Deficit. Aurizon Network disavowed any suggestion that the event was not contemplated by cl 7A.5.83 That concession was correctly made. Reading UT5 as a 80 Ibid, [117]-[118]. 81 Ibid, [119]-[120]. 82 Ibid, [121]. 83 Applicant’s Reply, [10] read with Outline of Submissions on behalf of QCA, [52(a)]. -- 19 of 49 -- 20 whole, the definition of Report Date contemplates an event of notification occurring in circumstances involving an unresolved Existing Capacity Deficit, which event must have been within the contemplation of cl 7A.5 as that clause concerned the structured process for resolving Existing Capacity Deficits. This is a matter of some significance because cl 7A.5 did not contemplate the preliminary report being provided by Aurizon Network to the Chair of the Rail Industry Group. Rather, cl 7A.5 contemplated one event of notification by Aurizon Network to the Chair of the Rail Industry Group, namely the submission of the detailed report. [58] The notification event described by the definition of Report Date, was not contemplated to occur in a contextual vacuum. Rather, it was contemplated as occurring in the context of a mandatory structured process described by cl 7A.5. That process was structured as follows: (a) Aurizon Network was required to submit a preliminary report to the QCA but, as has been observed, there was no obligation to submit such a report to the Chair of the Rail Industry Group or the Independent Expert; (b) there was to be analysis and consultation as described by cl 7A.5(a)(ii); (c) the analysis and consultation were to “identify and consider” the Transitional Arrangements which “could effectively and efficiently” address the Existing Capacity Deficit; (d) it was only after the consultation and analysis, that Aurizon Network was required to submit a detailed report to the QCA, the Chair of the Rail Industry Group and the Independent Expert; (e) the detailed report was to be a report “showing the outcome of Aurizon Network’s analysis and consultations on the Existing Capacity Deficit and the Transitional Arrangements which it considers would most effectively and efficiently address” the Existing Capacity Deficit;84 (f) only one step in the structured process contemplated Aurizon Network providing any kind of notification to the Chair of the Rail Industry Group, that step being the submission of the detailed report; (g) if Aurizon Network and affected End Users had not reached agreement about which of the Transitional Agreements should be implemented, the Independent Expert was required to review the detailed report and promptly make a recommendation to the QCA with respect to “which of the Transitional Arrangements of the type referred to in clause 7A.5(a)(iii)(A) – cl 7A.5(a)(iii)(C)”85 it considered would most effectively and efficiently resolve the Existing Capacity Deficit; (h) the “Transitional Arrangements of the type referred to in clause 7A.5(a)(iii)(A) – clause 7A.5(a)(iii)(C)”86 were the Transitional Arrangements which Aurizon Network considered “would most effectively and efficiently address the Existing Capacity Deficit” as shown by the detailed report but excluding any proposed Expansion which Aurizon Network and affected Access Holders or Access Seekers agreed would address the Existing Capacity Deficit; 84 Exhibit 5, p 220, cl 7A.5(a)(iii). 85 Exhibit 5, p 222, cl 7A.5(d). 86 Ibid. -- 20 of 49 -- 21 (i) within 15 days of receiving a recommendation from the Independent Expert, the QCA was required to determine “which of the Transitional Arrangements of the type referred to in clause 7A.5(a)(iii)(A) – clause 7A.5(a)(iii)(D)”87 would most efficiently and effectively resolve the Existing Capacity Deficit; (j) the “Transitional Arrangements of the type referred to in clause 7A.5(a)(iii)(A) – clause 7A.5(a)(iii)(D)”88 were all of the Transitional Arrangements which Aurizon Network considered “would most effectively and efficiently address the Existing Capacity Deficit”89 as shown by the detailed report; (k) any proposed Expansion, whether agreed between Aurizon Network and affected End Users or determined by the QCA, was to be reviewed by the Independent Expert with a view to its approving “the efficiency and prudency” of the proposed Expansion. [59] The structured process contemplated that an Existing Capacity Deficit would be resolved by Aurizon Network submitting a detailed report to the QCA, the Independent Expert and the Chair of the Rail Industry Group which showed the outcome of its analysis and consultation and the Transitional Arrangements which Aurizon Network considered would most effectively and efficiently address the Existing Capacity Deficit. It was contemplated that, absent agreement between the affected End Users and Aurizon Network, the resolution of an Existing Capacity Deficit would be a matter for recommendation by the Independent Expert and determination by the QCA by reference to the Transitional Arrangements shown in the detailed report. In those circumstances, the Transitional Arrangements of the type referred to in cl 7A.5(a)(iii)(A) – cl 7A.5(a)(iii)(D) were to provide the parameters for resolution of the Existing Capacity Deficit. [60] Some matters can be noted about the expression “Transitional Arrangements”. Aurizon Network was required to consult with End Users, Customers and Access Holders of the relevant Coal System and Train Operators to identify and consider matters which were collectively referred to as “the Transitional Arrangements”. The matters to be identified and considered through that consultation process were set out in cl 7A.5(a)(ii).90 The Transitional Arrangements the subject of cl 7A.5(a)(ii) were yet to be identified or considered. However, the Transitional Arrangements referred to in cl 7A.5(a)(iii) are of a different character. They are Transitional Arrangements which had been identified and considered during the consultation process and which Aurizon Network considered would most effectively and efficiently address the Existing Capacity Deficit.91 It is objectively apparent that UT5 contemplated “the Transitional Arrangements” as an evolving, rather than static, concept. [61] Clause 7A.5 makes clear that, at the time of the preliminary report, the Transitional Arrangements are yet to be identified and considered. Further, it is only Transitional Arrangements put forward in the detailed report which: (a) are the product of identification and consideration during the consultation process; 87 Exhibit 5, p 222, cl 7A.5(e). 88 Ibid. 89 Ibid. 90 Exhibit 5, p 219, cl 7A.5(a)(ii)(A)-(C). 91 Exhibit 5, p 220, cl 7A.5(a)(iii)(A)-(D). -- 21 of 49 -- 22 (b) Aurizon Network considers would most effectively and efficiently address the Existing Capacity Deficit; and (c) are to be considered by the Independent Expert and the QCA in the process of resolving an Existing Capacity Deficit. [62] QRC emphasised the use of the definite article in the expression “the proposed options for addressing any Existing Capacity Deficits”. In my consideration, it is appropriate to attach significance to the use of the definite article because of the context of the structured process in which that use occurs. By the time the structured process reaches the point of the detailed report, Aurizon Network’s reporting has progressed from its preliminary views on “solutions which could most effectively … and efficiently address the Existing Capacity Deficit” to identifying the Transitional Arrangements which it considers “would most effectively and efficiently address the Existing Capacity Deficit”. The notification of those Transitional Arrangements is properly characterised as being the notification of the proposed options for addressing an Existing Capacity Deficit because only those Transitional Arrangements are put forward by Aurizon Network as the most effective and efficient options to address the Existing Capacity Deficit and fall to be considered by the Independent Expert and the QCA in the resolution of the Existing Capacity Deficit. To the extent that the detailed report shows “the Transitional Arrangements which Aurizon Network considers would most effectively and efficiently address the Existing Capacity Deficit”, it is providing the notification of “the proposed options for addressing any Existing Capacity Deficits”. [63] Aurizon Network submitted that it was inapt to describe the detailed report as containing “proposed options” because some recommendations in a detailed report might be self-executing if they were agreed.92 This submission seemed to assume that cl 7A.5(e) only applied where Aurizon Network and affected End Users “have not reached an agreement as to which of the Transitional Arrangements should be implemented”.93 [64] This assumption was not the subject of any detailed submissions. In my consideration, the better view is that, whilst the Independent Expert is not required to review a detailed report if affected End Users and Aurizon Network have reached an agreement about which of the Transitional Arrangements “should be implemented”, in those circumstances, the QCA must still determine which of the Transitional Arrangements will most effectively and efficiently resolve the Existing Capacity Deficit. Although cl 7A.5(e) speaks in terms of the QCA making its determination “within 15 days … of receiving a recommendation from the Independent Expert”, I am not satisfied that those words mean that a determination by the QCA is not required in circumstances of an agreement between the affected End Users and Aurizon Network. In those circumstances, the QCA will have received a detailed report revealing the Transitional Arrangements agreed, as between Aurizon Network and the affected End Users, as being the Transitional Arrangements which “would most effectively and efficiently address the Existing Capacity Deficit” (to adopt the language of cl 7A.5(a)(iii)) or which “should be implemented” (to adopt the language cl 7A.5(d)). It remains for the QCA to determine whether those agreed Transitional Arrangements will most efficiently and effectively resolve the Existing Capacity Deficit. That the 92 Applicant’s Reply, [17]. 93 See opening words of cl 7A.5(d). -- 22 of 49 -- 23 QCA retains a power of determination in these circumstances is more consistent with the object of Part 5 of the Act, the object in cl 2.2 (f) of UT5 and the QCA’s function as described by s 10(o) of the Act. [65] Further, if I am wrong about that interpretation and, in circumstances of an agreement between affected End Users and Aurizon Network, some recommendations in a detailed report are properly described as self-executing, as at the time of the submission of the detailed report, those recommendations are yet to be implemented. It is also clear that, absent such an agreement and in cases of proposed expansion, the Transitional Arrangements in a detailed report are put forward for review by the Independent Expert and consideration by the QCA. Having regard to these matters, as a matter of substance, it is not inapt to refer to the content of the detailed report as containing “proposed options”. [66] Aurizon Network noted that the preliminary report submitted under cl 7A.5(a)(i) was to provide Aurizon Network’s preliminary views on the cause or causes of the Existing Capacity Deficit and solutions which could most effectively and efficiently address the Existing Capacity Deficit, including a response in reasonable detail to the solutions identified by the Independent Expert. The expression of those preliminary views is not properly characterised as Aurizon Network putting forward the options proposed for resolving the Existing Capacity Deficit. At the time of the preliminary report, the Transitional Arrangements are not yet identified, let alone considered. The preliminary report is submitted at a point in time prior to consultations with End Users, Customers and Access Holders of the relevant Coal System and Train Operators. The preliminary report is not required to be submitted to the Independent Expert. The preliminary report is not required to be considered by the Independent Expert when it makes its recommendation in relation to the resolution of an Existing Capacity Deficit. The preliminary report is not required to be considered by the QCA when it makes its determination as to which of the Transitional Arrangements of the type referred to in cl 7A.5(a)(iii)(A) – cl 7A.5(a)(iii)(D) would most effectively and efficiently resolve the Existing Capacity Deficit. The QCA’s determination could not be made by reference to the preliminary report because it was not contemplated as identifying, considering or recommending any Transitional Arrangements. [67] Aurizon Network submitted that UT5 contained a defined expression “Transitional Arrangements” which was not used in the definition of Report Date. That matter was relied upon to contend that “the proposed options” were intended to be something other than “the Transitional Arrangements”.94 It was contended that the respondents’ arguments equated “the Transitional Arrangements” with “the proposed options”. Although UT5 contains a defined expression “the Transitional Arrangements,”95 the defined expression is directed to the spectrum of arrangements yet to be identified and considered during the consultation process. The UT5 does not contemplate that all “the Transitional Arrangements” would be put forward by Aurizon Network as options to address the Existing Capacity Deficit. Rather, cl 7A.5(a)(iii) contemplates that only those arrangements which Aurizon Network considered would most effectively and efficiently address the Existing Capacity Deficit would be put forward or proposed in any detailed report. The defined expression “the Transitional Arrangements” did not neatly encapsulate what was in contemplation as being ultimately put forward in any detailed report. The construction advanced by the 94 Applicant’s Reply, [21]. 95 Exhibit 5, p 220, cl 7A.5(a)(ii). -- 23 of 49 -- 24 respondents does not equate the proposed options with the defined expression “the Transitional Arrangements”. [68] Having regard to the text and the context in which it appears, I find that the date on which “Aurizon Network notifies the Chair of the Rail Industry Group of the proposed options for addressing any Existing Capacity Deficits identified in the Initial Capacity Assessment Report” was objectively intended to refer to the date on which Aurizon Network submits the detailed report contemplated by cl 7A.5(a)(iii). [69] The conclusion I have reached from the analysis of the text and its context, is consistent with the relevant objective commercial purpose of UT5 which I find to be to correlate the uplift in the WACC with the point in time when Aurizon Network has engaged in the requisite consultation and analysis and reported on the particular Transitional Arrangements which it considers will most effectively and efficiently address the Existing Capacity Deficit. From that point in time, UT5 contemplates that: (a) the Independent Expert will be able to promptly make a recommendation to the QCA with respect to which of the Transitional Arrangements referred to in cll 7A.5(a)(iii)(A)-(C) will most effectively and efficiently resolve the Existing Capacity Deficit; (b) the QCA will be able to determine which of the Transitional Arrangements referred to in cll 7A.5(a)(iii)(A)-(D) will most efficiently and effectively resolve the Existing Capacity Deficit; (c) nothing further is required from Aurizon Network to facilitate the resolution of the Existing Capacity Deficit, other than to comply with the ultimate determination made by the QCA. [70] Conferring the benefit of an uplift in WACC in circumstances where Aurizon Network has effectively done all that it can to facilitate the resolution of an Existing Capacity Deficit promotes the economically efficient operation and use of the Network and. is consistent with the objects of Part 5 of the Act. In the context of the structured process described by cl 7A.5, linking the uplift in WACC to the submission of the detailed report is reflective of an expeditious, efficient and commercial process ultimately concerned with the availability and utilisation of Capacity and is consistent with the object enshrined in cl 2.2(d) of UT5. There is also a discernible synergy in the requirements that the Initial Capacity Assessment Report and the detailed report be provided to the Chair of the Retail Industry Group. The Initial Capacity Assessment report notifies the Chair of the Rail Industry Group of the Existing Capacity Deficit. The submission of the detailed report effectively gives notice to the Chair of the Retail Industry Group that Aurizon Network has done all that it is required to do to facilitate the resolution of the Existing Capacity Deficit and that Rebates are from that point potentially available. [71] By way of contrast, to confer upon Aurizon Network the benefit of the uplift in WACC at any time prior to its submission of the detailed report would, from a commercial perspective, involve an arbitrary or haphazard outcome. The outcome would involve conferring a benefit upon Aurizon Network at a point in time when it was yet to undertake the required analysis and consultation and identify the most effective and efficient Transitional Arrangements for addressing the Existing Capacity Deficit. The Transitional Arrangements were not matters for private reflection by Aurizon Network but rather were intended to be identified and -- 24 of 49 -- 25 considered through consultation with End Users, Customers and Access Holders of the relevant Coal System and Train Operators. The contention that the uplift in WACC was triggered by the expression of Aurizon Network’s preliminary views when the Transitional Arrangements were yet to be identified and considered, casts the uplift in WACC as a fortuitous rather than commercial milestone. I discern no commercial reason as to why the uplift in WACC should apply to preliminary views not reflecting any consultation with other interested parties and which were not matters required to be considered by the Independent Expert and the QCA when resolving an Existing Capacity Deficit. [72] UT5 regulates the position by acknowledging, through the Rebate provision, an effective obligation on the part of Aurizon Network to maintain the capacity status quo as at the Report Date pending the resolution of the Existing Capacity Deficit. UT5 contemplates that, in the period between the Report Date and the implementation of any Transitional Arrangements remedying any Existing Capacity Deficit, affected End Users will be entitled to Rebates where there is a shortfall in the aggregate number of Train Service Entitlements that the Independent Expert determines could have been utilised by the Access Holder having regard to the IE Initial Capacity Assessment. To the extent that Aurizon Network does not maintain the status quo pending the resolution of the Existing Capacity Deficit, Rebates are payable. The calculation of the Rebate during this period references not the loss suffered by the User referable to the capacity shortfall but an amount which references the revenue Aurizon Network would have gained from the capacity shortfall had it been made available. In that sense, the Rebates are a payment reflective of a burden imposed upon Aurizon Network rather than true compensation for the affected End User. Further, at the time of submitting the detailed report, Aurizon Network is not just exposed to the prospect of Rebates but an imminent obligation to do “everything reasonably necessary to implement the type of Transitional Arrangements determined by the QCA in a prudent and diligent manner”. Those realities mean that there is a commercial imperative for Aurizon Network to put forward properly considered options in any detailed report. Did the Preliminary Report provide the requisite notification? [73] I have answered the pure question of construction in favour of the respondents. As a result, the second issue is not determinative of the outcome of this proceeding. I will however briefly express my reasoning in relation to the second issue. [74] The second issue proceeds on the assumption that the “Report Date”, properly construed, refers to the date of any communication from Aurizon Network to the Chair of the Rail Industry Group by which Aurizon Network notified the proposed options for addressing Existing Capacity Deficits identified in the Initial Capacity Assessment Report. If that were the proper construction of the “Report Date”, I find that the Preliminary Report did not notify the Chair of the Rail Industry Group of the proposed options for addressing Existing Capacity Deficits identified in the ICAR. [75] I make that finding by reference to the following matters: (a) the Preliminary Report was expressed as detailing “Aurizon Network’s preliminary review of the … ICAR”.96 96 Exhibit 5, p 566, overview. -- 25 of 49 -- 26 (b) That preliminary review was undertaken for a specific purpose which was identified as follows:97 “… in this preliminary response to the ICAR, Aurizon Network seeks to begin the consultation process by providing our Customers with Aurizon Network’s view as to the causes of the Existing Capacity Deficits identified in the ICAR for each of the … systems.” (c) This specific purpose was reinforced by the following defined terms: (i) “Preliminary Report” was the report which “… provides our Customers with our initial views on the causes of the Existing Capacity Deficits and potential Transitional Arrangements”;98 and (ii) “Detailed Report” was a report by which “Aurizon Network will consolidate customer feedback and finalise our recommendations on Transitional Arrangements in the Detailed Report and provide to the QCA, the Independent Expert and the Chair of the [Rail Industry Group]”.99 (d) According to its terms, the Preliminary Report was not proposing any Transitional Arrangements as the proposed options for addressing any Existing Capacity Deficit. (e) Rather, the Preliminary Report was intended to be used to commence a consultation process with Aurizon Network’s Customers and was to have utility for that process. (f) The Preliminary Report was not proposing any Transitional Arrangements to the QCA, the Independent Expert and the Chair of the Rail Industry Group. As much was made clear by the following statement:100 “Aurizon Network will engage with our Customers to discuss the outcomes of the ICAR and seek to agree on a plan that best addresses the Existing Capacity Deficits for the relevant Coal Systems. This Report provides the intended process for Aurizon Network’s engagement on Transitional Arrangements, and further information on the process once Transitional Arrangements have been either agreed or proposed to the QCA, the Independent Expert and the Chair of the [Rail Industry Group]”. (g) The Preliminary Report contemplated that the process of engagement with Customers would result in Transitional Arrangements being “either agreed or proposed to … the Chair of the [Rail Industry Group]”.101 (h) The Preliminary Report made clear that the Transitional Arrangements were a matter for future agreement or future proposal to the QCA, the Independent Expert and the Chair of the Rail Industry Group. 97 Ibid. 98 Exhibit 5, p 569. 99 Ibid. 100 Exhibit 5, p 567, Customer Engagement. 101 Exhibit 5, p 568. -- 26 of 49 -- 27 (i) In providing its “Preliminary Review” or “Preliminary Response” as to “potential solutions”,102 Aurizon Network had not had the benefit of the Independent Expert’s model and had relied upon its own internal modelling. As a result, the Preliminary Report acknowledged that a verification process was yet to be undertaken to develop final recommendations”.103 (j) The Preliminary Report went on to “propose”104 or “recommend”105 so called Transitional Arrangements106 to rectify the Existing Capacity Deficits in the various Rail Systems. On an objective reading of the Preliminary Report, insofar as “Transitional Arrangements” were being proposed or recommended, they were being put forward to Aurizon Network’s Customers as reflecting Aurizon Network’s “initial views” on “potential Transitional Arrangements”.107 (k) One of the first matters to be considered in the resolution of the Existing Capacity Deficits concerned whether any Customer wished to relinquish access rights in accordance with the terms of their access agreements.108 The Preliminary Report made clear that where a customer made a request to relinquish access rights, any such request would be “considered first in resolving an Existing Capacity Deficit”.109 It was accepted that any relinquishments would be likely to assist in resolving the Existing Capacity Deficit.110 (l) At the time of the Preliminary Report, Aurizon Network did not know the position in relation to whether there would be, and the extent of any, requests for relinquishment. The Preliminary Report relevantly noted: “Aurizon Network will be requesting customers to formally notify it whether they wish to relinquish access rights through the consultation process. Where requests for relinquishment are received, they will be factored into the final Transitional Arrangements recommendations”.111 (m) The potential Transitional Arrangements identified in the Preliminary Report, were the subject of heavy qualification.112 102 Exhibit 5, p 572, Assessment Process. 103 Exhibit 5, p 572, Results Verification. 104 Exhibit 5, p 579, Proposed Transitional Arrangements. 105 Exhibit 5, p 581, Recommended Transitional Arrangements. 106 Under UT5, a Transitional Arrangement was to be identified and considered during consultation with End Users, Customers and Access Holders of the relevant Coal Systems and Train Operators. To the extent that the Preliminary Report defined Transitional Arrangements as identified prior to the consultation process called for by cl 7A.5(a)(ii), it was using that expression differently to the sense in which it was used in UT5. 107 Exhibit 5, p 569, definition of ‘Preliminary Report’. 108 Exhibit 5, p 579, Overview. 109 Ibid. 110 Exhibit 5, p 580, Relinquishment. 111 Ibid. 112 For example, further investigations were required in relation to economic viability of potential arrangements (for example, refer to the Connor’s Range Headway Reduction, Exhibit 5, p 594) and some arrangements involved speculation about matters not under the control of Aurizon Network (for example see “mine and port delays”, Exhibit 5, pp 595-596). -- 27 of 49 -- 28 [76] My finding in relation to the intended purpose of the Preliminary Report, is further supported by Aurizon Network’s subsequent characterisation of the Preliminary Report. By a letter to the QCA dated 6 December 2021, Aurizon Network relevantly stated: “The purpose of this letter is to provide the Queensland Competition Authority (QCA) with an update on the consultation on the Existing Capacity Deficit (ECD) within the Initial Capacity Assessment Report (ICAR) under Clause 7A.5(a)(iii) of the 2017 Access Undertaking (UT5). UT5 requires that within 3 months after the ICAR has been published, Aurizon Network must submit a detailed report to the QCA, the Chair of the Rail Industry Group and the Independent Expert showing the outcome of Aurizon Network’s analysis and consultation of the ECD’s and the Transitional Arrangements which it considers would most effectively address those (detailed report). With the ICAR being published by the QCA on the 1 November 2021, the detailed report is due by 1 February 2022 (Due Date). The development of the detailed report is highly reliant upon consultation with Stakeholders to develop suitable options. Since the publication, Aurizon Network has been consulting with Stakeholders to understand the ICAR outputs and commence developing options to address any ECD’s within the relevant systems. …. Aurizon Network have asked Stakeholders to provide acknowledgement of support to the QCA for this new date and we will also include this as a timing breach on our monthly Breach Report to the QCA in March 2022.”113 [77] By this correspondence, Aurizon Network made clear that it had not yet developed options to address any of the Existing Capacity Deficits identified by the ICAR within the Coal Systems. The QRC submitted that this letter contained an admission against interest in relation to the purpose of the Preliminary Report. The letter contains clear and unambiguous language and was sent for a considered purpose of obtaining an extension of time to enable consultation for the purpose of developing suitable options.114 I find that the 6 December 2021 letter was a subsequent communication constituting an informal admission that the Preliminary Report did not as matter of fact provide notification of the proposed options for addressing the Existing Capacity Deficits identified by the ICAR. Orders [78] The orders I make are as follows: (a) The originating application filed 20 January 2023 is dismissed. (b) I will hear the parties as to costs. 113 Exhibit 6. 114 Phipson on Evidence, Sweet & Maxwell, 16th ed, [4-09] and [4-14]. -- 28 of 49 -- Annexure A 7A.3 Engagement of Independent Expert 7A.3.1 Appointment of Independent Expert (a) Aurizon Network and a Special Majority of End Users will use their best endeavours to jointly appoint an Independent Expert, which expert will be responsible for, amongst other things: (i) conducting Capacity Assessments in accordance with this Part 7A (which includes developing and amending the System Operating Parameters); (ii) reviewing performance information including source data received from Aurizon Network, Access Holders and other Supply Chain Participants for the purpose of the Independent Expert’s reporting obligations under clause 10.8.3; (iii) reporting on actual performance data and maintenance information to the QCA, Aurizon Network and relevant stakeholders for the purpose of the Independent Expert’s reporting obligations under clause 10.8.3; and (iv) determining any Rebate payable by Aurizon Network to End Users in accordance with clause 7A.6. (b) Subject to clause 7A.3.3, the Independent Expert’s appointment under this clause 7A.3.1 expires at the completion of the Term or such later time as may be specified in the contract of appointment. (c) If at any time during the Term, no Independent Expert is appointed (for example due to the resignation or termination of the Independent Expert), the members of the Rail Industry Group and Aurizon Network must consult with each other and Aurizon Network and a Special Majority of End Users must seek to agree on the appointment of a new independent expert on terms substantially similar in all material respects to the terms of the appointment of the previous independent expert (or such other terms agreed). (d) If a Special Majority of End Users and Aurizon Network cannot agree on: (i) the appointment of the Independent Expert by the date that is 30 days after the Approval Date; or (ii) a new independent expert under clause 7A.3.1(c) within within 30 days of the cessation of the previous appointment, -- 29 of 49 -- the appointment of the Independent Expert under this Part 7A must be referred for resolution as a Dispute under clause 11.1.1(a)(iii) of this Undertaking. (e) On the resolution of the dispute under clause (d) Aurizon Network and a Special Majority of End Users will use their best endeavours to jointly appoint an Independent Expert to fulfil the obligations as set out in this Undertaking and on the terms provided for in this Part 7A. (f) The Independent Expert appointed under clauses 7A.3.1(a) or, 7A.3.1(c) must: (i) be independent and impartial; (ii) engage personnel with appropriate qualifications and practical experience having regard to the nature of the appointment (including qualifications and experience in modelling the capacity of coal chain infrastructure) provided that if the Independent Expert is a new entity, this requirement will be satisfied where the employees and personnel of the new entity are appropriately qualified and experienced; (iii) have no interest or duty which conflicts or may conflict with their function as an Independent Expert, or where it believes it has such an interest or duty, the Independent Expert must fully disclose that interest or duty by notice to the members of the Rail Industry Group, Aurizon Network and the QCA prior to their appointment; and (iv) be required to manage the confidential nature of all information and matters coming to their knowledge by reason of their appointment and performance of their duties including in accordance with the terms of any confidentiality agreement in favour of Aurizon Network and if requested, any other entity providing information under this Part 7A. 7A.3.2 [Not used] 7A.3.3 Termination of engagement of Independent Expert (a) On the date that is four (4) years after the Approval Date, the QCA must review the appointment of the Independent Expert. (b) Following this review: (i) Aurizon Network and a Special Majority of End Users may agree; or (ii) the QCA may, in its absolute discretion, elect, to terminate the engagement of the Independent Expert and appoint a replacement independent expert in accordance with this Part 7A. -- 30 of 49 -- (c) The Independent Expert’s contract of appointment must include provisions enabling termination of the appointment of the Independent Expert as follows: (i) if, at any time, the Independent Expert is in default of its obligations under the contract of appointment, either the Chair of the Rail Industry Group (on behalf of the Special Majority of End Users) or Aurizon Network (as applicable) may provide a written termination notice to the Independent Expert (with a copy to the other party) in accordance with the terms of that contract; or (ii) if, at any time, the Chair of the Rail Industry Group (on behalf of the Special Majority of End Users) and Aurizon Network mutually agree to terminate the appointment of the Independent Expert, both the Chair of the Rail Industry Group (on behalf of the Special Majority of End Users) and Aurizon Network may provide a written termination notice to the Independent Expert in accordance with the terms of that contract. (iii) if the QCA elects to terminate the appointment under clause (b)(ii) or clause (e)(iii). Any party who issues a written notice of termination under this clause 7A.3.3(c) must also promptly provide a copy of that notice to the QCA. (d) If, at any time during the term of their appointment, the Independent Expert becomes aware of any circumstances that might reasonably be considered to adversely affect the Independent Expert’s ability to act independently or impartially, the Independent Expert must notify the QCA immediately in writing. (e) Upon receiving a notice under clause 7A.3.3(d), or if the QCA otherwise becomes aware of any circumstances that might be considered to adversely affect the Independent Expert’s ability to act independently and impartially (including if the QCA has received a notice from any stakeholders to this effect) the QCA must promptly: (i) notify the Chair of the Rail Industry Group and Aurizon Network of its receipt of any notice received under clause 7A.3.3(d); (ii) consider, on the basis of the notice and other information reasonably available to the QCA (including any information provided by the Chair of the Rail Industry Group or Aurizon Network), whether the circumstances would likely affect the ability of the Independent Expert to act independently or impartially; and (iii) terminate the engagement of the Independent Expert if it considers the ability of the Independent Expert to act independently or impartially has been, or is likely to be, affected (in its absolute discretion), in which case a new Independent Expert must be appointed in accordance with the procedure outlined in this clause 7A.3. -- 31 of 49 -- 7A.3.4 Costs (a) The Independent Expert’s costs of performing its role will be a pass through cost recoverable as a component of the Reference Tariff by which Access Charges are calculated (IE Pass Through Cost). (b) The IE Pass Through Cost will be based on the forecast provided by the Independent Expert under clause 7A.3.4(c) and will not be part of Aurizon Network’s Allowable Revenue. (c) With effect from 14 February 2020, by 14 February of each Year, the Independent Expert will notify Aurizon Network (in writing) of its forecast IE Pass Through Cost for the next Year (including details of any adjustments made by the Independent Expert in calculating the forecast as a result of any over or under recovery of the Independent Expert’s costs (if any) in the previous Year and an estimate in respect of the balance of the Year in which the forecast is being provided). (d) Any under recovery of the Independent Expert’s costs in respect of the Year ending 30 June 2020 will be the subject of an adjustment by the Independent Expert when advising the IE Pass Through Cost for 2021. (e) Aurizon Network will calculate the IE Fee component of Access Charges for each Access Holder on a $ per net tonne basis, which will be payable by Access Holders in their Monthly invoices. (f) With effect from 28 February 2020, by 28 February of each Year Aurizon Network will notify the QCA of the forecast IE Pass Through Cost advised by the Independent Expert under clause 7A.3.4(c) as part of its submission on the annual review of Reference Tariffs under clause 4.1 of Schedule F. (g) In the event that the Independent Expert has not advised Aurizon Network of the forecast IE Pass Through Cost for the Year ending 30 June 2021 by 14 February 2020, the Independent Expert will advise Aurizon Network of the forecast IE Pass Through Cost for 2021 as soon as it is known and Aurizon Network will notify the QCA of that forecast IE Pass Through Cost which will constitute an Endorsed Variation Event under clause Schedule F5.2(d) of Schedule F. 7A.3.5 Appointment of initial Independent Expert For the purpose of appointing the initial Independent Expert under clause 7A.3.1(a), a determination as to whether the thresholds in the definition of a “Special Majority of End Users” have been met will be made by Aurizon Network. 7A.4 Capacity Assessments by Independent Expert 7A.4.1 IE Initial Capacity Assessment (a) As soon as reasonably practicable and by no later than ten (10) Business Days after its appointment, the Independent Expert must commence its initial assessment of the Deliverable Network Capacity of each Coal System for the -- 32 of 49 -- Capacity Assessment Period in accordance with the procedure outlined in this clause 7A.4.1 (IE Initial Capacity Assessment). (b) As part of the IE Initial Capacity Assessment, the Independent Expert must develop the System Operating Parameters for each Coal System having regard to the way in which each Coal System operates in practice. The Independent Expert must seek to ensure that the System Operating Parameters: (i) include a consideration of the factors set out in the definition of Deliverable Network Capacity as such factors apply as at the date the System Operating Parameters are developed; and (ii) would not place Aurizon Network in breach of its obligations under this Undertaking or any Access Agreement (assuming that any Access Agreement could be amended to reflect the System Operating Parameters in accordance with clause 7A.12), having regard to (among other things) the information received from Aurizon Network and Access Holders and Access Seekers (and their Customers and Train Operators, as applicable). (c) The Independent Expert must seek to consult with, and seek submissions from, Aurizon Network, Access Holders and Access Seekers (and their Customers and Train Operators, as applicable) and all Supply Chain Participants for each Coal System on: (i) subject to any confidentiality restrictions, information that relates to the operation of Train Services in that Coal System and the actual performance of that Coal System for the purpose of the IE Initial Capacity Assessment (including the development of the dynamic model required to undertake the Deliverable Network Capacity Analysis); and (ii) the proposed System Operating Parameters, and the Independent Expert will seek to obtain such information from Supply Chain Participants by the date the earlier of the date that is 2 months after the appointment of the Independent Expert or the Approval Date. (d) Aurizon Network must promptly do everything reasonably requested by the Independent Expert to assist the Independent Expert in carrying out an IE Initial Capacity Assessment under this clause 7A.4.1, including providing or making available to the Independent Expert, as soon as reasonably practicable, all information and materials in its possession or control relevant to those matters listed in the definition of Deliverable Network Capacity and otherwise requested by the Independent Expert by the earlier of the date that is 2 months after the appointment of the Independent Expert or the Approval Date, which may include, subject to the relevant Access Holders and Customers providing consent to Aurizon Network disclosing information relevant to their Access Agreements: -- 33 of 49 -- (i) copies of any Access Agreements entered into by Aurizon Network; (ii) the System Rules; (iii) Possession Protocols; (iv) Rollingstock Interface Standard; (v) Approved Derogations; (vi) Aurizon Network’s internal modelling of the Capacity of each Coal System (including access to the relevant models); (vii) Aurizon Network’s Maintenance Strategy and Budget, Renewals Strategy and Budget and operational plans; and (viii) actual performance information (including all source and underlying information and data) for each Coal System for at least the previous three years, or such longer period as reasonably requested by the Independent Expert and in respect of which the information is readily available in the form requested. (e) The members of the Rail Industry Group must provide to the Independent Expert, and the Independent Expert must consider, any information it has in its possession or control in relation those matters listed in the definition of Deliverable Network Capacity by the earlier of the date that is 2 months after the appointment of the Independent Expert or the Approval Date and as otherwise requested by the Independent Expert. (f) The IE Initial Capacity Assessment must: (i) include a dynamic Deliverable Network Capacity Analysis based on a dynamic model developed by the Independent Expert (to be owned by the Independent Expert) that reflects how each Coal System operates in practice (having regard to the information received from Aurizon Network and Access Holders and Access Seekers (and their Customers and Train Operators, as applicable)) to determine the Deliverable Network Capacity for each Coal System. Subject to any confidentiality and intellectual property restrictions, the Independent Expert must provide a copy of the dynamic model developed by the Independent Expert to Aurizon Network and the QCA in a non-hard coded form for use by Aurizon Network and the QCA for internal purposes only; (ii) set out the System Operating Parameters for that Coal System as determined by the Independent Expert in accordance with clause 7A.4.1(b); (iii) include consideration of: (A) outcomes of any consultation by the Independent Expert with Aurizon Network, Access Holders and Access Seekers (and their Customers and Train Operators, as applicable) and any -- 34 of 49 -- other Supply Chain Participants for each Coal System in relation to that assessment; (B) any information received from Aurizon Network under clause 7A.4.1(d); and (C) any information received from the members of the Rail Industry Group under clause 7A.4.1(e). (iv) include a report that sets out: (A) the Independent Expert’s assumptions affecting Deliverable Network Capacity and relied upon for the IE Initial Capacity Assessment which: (1) must address each of the assumptions contained in the definition of Deliverable Network Capacity and the System Operating Parameters, and used to develop the model required to undertake the Deliverable Network Capacity Analysis; and (2) may include such other assumptions as are reasonably considered relevant by the Independent Expert to its assessment of Deliverable Network Capacity and relied upon for the IE Initial Capacity Assessment in its absolute discretion (including any assumptions regarding Rollingstock, section run times and loading and unloading times); (B) any constraints the Independent Expert has identified which have reduced or are likely to reduce the Deliverable Network Capacity of each Coal System, including; (1) any constraints identified within the Supply Chains operating within that Coal System (including in respect of loading facilities, load out facilities and coal export terminal facilities); and (2) any constraints identified within the whole of the Rail Infrastructure; and (C) if the Independent Expert identifies in the IE Initial Capacity Assessment that there is an Existing Capacity Deficit with respect to a Coal System: (1) specify the relevant Coal System and the location in that Coal System where the Existing Capacity Deficit arises; and (2) specify the quantum of the Existing Capacity Deficit; -- 35 of 49 -- (v) if the Independent Expert identifies a specific cause or causes of the Existing Capacity Deficit: (A) specify the Access Holders affected by the Existing Capacity Deficit; and (B) include in reasonable detail, solutions which could effectively and efficiently address the Existing Capacity Deficit. (g) As soon as reasonably practicable (it being acknowledged that the Independent Expert will be engaged on terms that require the Independent Expert to use its best endeavours and Aurizon Network and the members of the Rail Industry Group to act in good faith to enable the Independent Expert to undertake the IE Initial Capacity Assessment as quickly as is reasonably possible having regard to the nature of the assessment and the need to undertake an assessment that is both realistic and accurate), the Independent Expert must make: (i) the outcomes of the IE Initial Capacity Assessment, including its assumptions affecting Deliverable Network Capacity and relied upon for the IE Initial Capacity Assessment (Initial Capacity Assessment Report); and (ii) the System Operating Parameters, available to Aurizon Network, and the QCA on an unredacted basis and to the Chair of the Rail Industry Group on a redacted basis. (h) Subject to clause 7A.4.1(i), Aurizon Network and the QCA must promptly publish on the Website or its website (as applicable): (i) the Initial Capacity Assessment Report in a redacted form that does not disclose information that is confidential to an Access Holder, Customer or Train Operator and unable to be disclosed; and (ii) the System Operating Parameters of each Coal System. (i) An Access Holder, Customer or Train Operator may provide its prior written consent to Aurizon Network and the QCA for its confidential information to be disclosed in the Initial Capacity Assessment Report on an unredacted basis. 7A.4.2 Annual Capacity Assessment (a) The Independent Expert must undertake an annual assessment of the Deliverable Network Capacity of each Coal System for the relevant Capacity Assessment Period (each being an Annual Capacity Assessment). The first Annual Capacity Assessment will be undertaken for the first Year after the Initial Capacity Assessment Report has been completed. (b) As part of each Annual Capacity Assessment, the Independent Expert must: (i) review the System Operating Parameters for that Coal System; and -- 36 of 49 -- (ii) consider whether any variation of the System Operating Parameters is required, provided that any amendments to the System Operating Parameters: (A) include a consideration of the factors set out in the definition of Deliverable Network Capacity; (B) would be consistent with the applicable Approved Maintenance Strategy and Budget and Renewals Strategy and Budget; and (C) would not place Aurizon Network in breach of its obligations under this Undertaking or any Access Agreement (assuming that any Access Agreement could be amended to reflect the System Operating Parameters in accordance with clause 7A.12). (c) The Independent Expert must seek to consult with, and seek submissions from, Aurizon Network, Access Holders and Access Seekers (and their Customers and Train Operators, as applicable) and all other Supply Chain Participants for each Coal System on: (i) any information that relates to the operation of Train Services in that Coal System for the purpose of the Annual Capacity Assessment; and (ii) the proposed, and any variation of, the System Operating Parameters (as applicable). (d) The Independent Expert must promptly make: (i) the outcomes of its Annual Capacity Assessment, including its assumptions affecting Deliverable Network Capacity and relied upon for the Annual Capacity Assessment (Annual Capacity Assessment Report); and (ii) the current System Operating Parameters, available to Aurizon Network and the QCA on an unredacted basis. (e) For the purpose of this clause 7A.4.2, each of the obligations listed in clauses 7A.4.1(d) – 7A.4.1(f) and clauses 7A.4.1(h) – 7A.4.1(i) apply as if they were duplicated here, except that: (i) each reference to an IE Initial Capacity Assessment will be a reference to an Annual Capacity Assessment; (ii) each reference to an Initial Capacity Assessment Report will be a reference to an Annual Capacity Assessment Report; and (iii) each reference to “the earlier of the date that is 2 months after the appointment of the Independent Expert or the Approval Date” will be -- 37 of 49 -- a reference to the “within the timeframe requested by the Independent Expert”. 7A.4.3 System Capacity Assessments (a) The Independent Expert must undertake a System Capacity Assessment for each Coal System as soon as reasonably practicable after the date that the Independent Expert publishes its Initial Capacity Assessment Report and thereafter on each anniversary thereof. It is acknowledged that the initial System Capacity Assessment should not delay the Independent Expert in undertaking the IE Initial Capacity Assessment in accordance with this Part 7A. (b) A System Capacity Assessment will be produced by the Independent Expert for information purposes only for the benefit of Aurizon Network, Access Holders and Access Seekers (and their respective Customers and Train Operators) for a Coal System and a copy of that report will be provided by the Independent Expert to Aurizon Network, the Chair of the Rail Industry Group and the members of the Rail Industry Group on a redacted basis. (c) Aurizon Network must promptly do everything reasonably requested by the Independent Expert to assist the Independent Expert in carrying out a System Capacity Assessment under this clause 7A.4.3, including providing or making available to the Independent Expert, as soon as reasonably practicable and subject to any confidentiality restrictions, all information and materials in its possession or control relevant to those matters listed in the definition of System Capacity and as otherwise requested by the Independent Expert, which may include, subject to the relevant Access Holders and Customers providing consent to Aurizon Network to disclose information relevant to their Access Agreements: (i) copies of any Access Agreements entered into by Aurizon Network; (ii) the System Rules; (iii) Possession Protocols; (iv) Rollingstock Interface Standard; (v) Approved Derogations; (vi) Aurizon Network’s internal modelling of the Capacity of each Coal System (including access to the relevant models); (vii) Aurizon Network’s Approved Maintenance Strategy and Budget, Renewals Strategy and Budget and operational plans; and (viii) actual performance information (including all source and underlying information and data) for each Coal System for at least the previous three years, or such longer period as reasonably requested by the Independent Expert and in respect of which the information is readily available in the form requested. -- 38 of 49 -- (d) Access Holders and Customers must provide to the Independent Expert, and the Independent Expert must consider, any information it has in its possession or control in relation those matters listed in the definition of System Capacity and as otherwise requested by the Independent Expert. (e) A System Capacity Assessment must include: (i) consideration of outcomes of any consultation by the Independent Expert with Aurizon Network, Access Holders and Access Seekers (and their Customer and Train Operator, as applicable) for Train Services operating in that Coal System; (ii) consideration of outcomes of any consultation with any Supply Chain Group for the relevant Coal System; (iii) consideration of outcomes of any consultation with port operators; and (iv) a report that sets out the Independent Expert’s assumptions affecting System Capacity and relied upon for the System Capacity Assessment which must be consistent with those assumptions listed in the definition of System Capacity and may include such other assumptions as are reasonably considered relevant by the Independent Expert to its assessment of System Capacity and relied upon or the System Capacity Assessment. (f) Nothing in this Undertaking: (i) obliges Aurizon Network to implement any changes to its provision of Access as a result of any System Capacity Assessment; or (ii) allows the Independent Expert to alter the IE Initial Capacity Assessment or any Annual Capacity Assessment as a result of the System Capacity Assessment. 7A.4.4 Capacity Assessments to be final and binding (a) In the absence of fraud or manifest error, the Independent Expert’s Capacity Assessment is final and binding. (b) If any person reasonably affected by the outcome of a Capacity Assessment believes that there has been a manifest error or fraud in the Capacity Assessment (or in its preparation), or that the Independent Expert has not complied with or satisfied the requirements of clause 7A.3.1(f), it may refer the matter to the QCA for a determination. (c) If the QCA determines that there has been a manifest error or fraud or that the Independent Expert has not complied with or satisfied the requirements of clause 7A.3.1(f), the Capacity Assessment is not final and binding and the Independent Expert must promptly commence a new Capacity Assessment in accordance with this Part 7A. -- 39 of 49 -- (d) Subject to clause 7A.4.4(f), at all times after the Initial Capacity Assessment Report is published by the QCA on its website as contemplated by clause 7A.4.1(h), where Aurizon Network is required to have regard to Capacity in performing any of its obligations under this Undertaking (including in relation to the provision of Access), Aurizon Network must only have regard to the most recent Capacity Assessment undertaken by the Independent Expert or other information provided by the Independent Expert as expressly contemplated in the Undertaking (other than in the case of an IE Initial Capacity Assessment) and must not, for the avoidance of doubt, have regard to any of Aurizon Network’s internal modelling of the Capacity of the relevant Coal System or any other form of Capacity modelling. (e) For the avoidance of doubt, any determination by the Independent Expert of the System Capacity is provided for information purposes only. (f) Aurizon Network and an Access Seeker (and Train Operator as applicable) may, acting reasonably and in good faith, negotiate Access Agreements and Train Operations Deeds for non-coal carrying Train Services that do not reflect the System Operating Parameters, and for the purposes of engaging in such negotiations Aurizon Network will not be bound by the System Operating Parameters which are developed by the Independent Expert as part of a Capacity Assessment referred to in clause 7A.4.4(d). 7A.5 Existing Capacity Deficit (a) if the IE Initial Capacity Assessment reveals a Deliverable Network Capacity Shortfall in a relevant Coal System (Existing Capacity Deficit), Aurizon Network must: (i) within twenty (20) Business Days after the Initial Capacity Assessment Report has been published by the QCA on its website, submit a preliminary report to the QCA (and publish such preliminary report in a prominent place on the Website) setting out: (A) Aurizon Network’s consultation plan (which, when followed, must satisfy the requirements of clause 7A.5(a)(ii)); and (B) Aurizon Network’s preliminary views on: (1) the cause or causes of the Existing Capacity Deficit (including a response, in reasonable detail, to the cause or causes identified by the Independent Expert); and (2) solutions which could most effectively (including cost effectively) and efficiently address the Existing Capacity Deficit (including a response, in reasonable detail, to the solutions identified by the Independent Expert); and (3) the indicative timeframe within which it considers each of the solutions could reasonably be implemented; -- 40 of 49 -- (ii) prior to publishing a detailed report under clause 7A.5(a)(iii), consult with End Users, Customers and Access Holders of the relevant Coal System and Train Operators, to identify and consider: (A) whether changes can be made to: (1) the operation and maintenance practices for the Rail Infrastructure; (2) the operations of Rollingstock by Railway Operators; (3) the operation and maintenance practices in respect of load-out facilities, including in relation to interfaces with all facilities forming part of the relevant Supply Chains (as set out in the assumptions affecting Deliverable Network Capacity and included in the Initial Capacity Assessment Report) in order to increase the Deliverable Network Capacity of the relevant Coal System, provided that such changes would be consistent with the System Operating Parameters included in the IE Initial Capacity Assessment (and would not require an Access Holder to revert to the requirements in an Access Agreement where that Access Agreement has not been modified to make it consistent with the new System Operating Parameters); (B) whether an Access Holder wishes to voluntarily relinquish any of its Access Rights if it is entitled to do so under, and in accordance with, a relinquishment provision in its Access Agreement (without being required to pay a Relinquishment Fee to Aurizon Network) with the Access Holder to specify the maximum and minimum number of Access Rights that the Access Holder would be willing to relinquish; and (C) options for Expansions, (collectively, the Transitional Arrangements), which could effectively and efficiently address the Existing Capacity Deficit or whether affected Access Holders and Customers would prefer not to do anything to address the Existing Capacity Deficit; and (iii) within three (3) Months after the Initial Capacity Assessment Report has been published by the QCA on its website, submit a detailed report to the QCA, the Chair of the Rail Industry Group and the Independent Expert showing the outcome of Aurizon Network’s analysis and consultation on the Existing Capacity Deficit and the Transitional Arrangements which it considers would most effectively and efficiently address the Existing Capacity Deficit, including: -- 41 of 49 -- (A) whether any Access Holder is willing to, within 30 days, voluntarily relinquish any of its Access Rights if it is entitled to do so under, and in accordance with, a relinquishment provision in its Access Agreement (without being required to pay a Relinquishment Fee that would otherwise be payable as a result of such relinquishment under its Access Agreement) and the extent to which any voluntary relinquishment will address (up to a maximum of) the Existing Capacity Deficit in that Coal System). If multiple Access Holders wish to relinquish Access Rights, then the voluntary relinquishment will be apportioned pro rata up to a maximum of the Existing Capacity Deficit in that Coal System; (B) whether changes could be made to: (1) the operation and maintenance practices for the Rail Infrastructure; (2) the operations of Rollingstock by Railway Operators; (3) the operation and maintenance practices in respect of load-out facilities, including in relation to interfaces with all facilities forming part of the relevant Supply Chains (as set out in the assumptions affecting Deliverable Network Capacity and included in the Initial Capacity Assessment Report) that could increase the Deliverable Network Capacity of the relevant Coal System, provided that such changes would be consistent with the System Operating Parameters included in the IE Initial Capacity Assessment (and would not require an Access Holder to revert to the requirements in an Access Agreement where that Access Agreement has not been modified to make it consistent with the new System Operating Parameters), including: (4) the extent to which the proposed operational changes will address the Existing Capacity Deficit; (5) a reasonable estimate of the cost of such operational changes to Aurizon Network and/or Customers and Access Holders; and (6) if relevant, evidence of Aurizon Network’s consultation under clause 7A.5(a)(ii) that explains why such changes cannot address the Existing Capacity Deficit; (C) if relevant, a shortlist of Expansions considered by Aurizon Network and through the consultation under clause 7A.5(a)(ii) (including reasonable estimates of costs to undertake each Expansion); and -- 42 of 49 -- (D) subject to clause 7A.5(c), any proposed Expansion which Aurizon Network and the affected Access Holders or Access Seekers have agreed will address the Existing Capacity Deficit. (b) The QCA may publish any report provided by Aurizon Network under clause 7A.5(a) on its website. (c) If: (i) Aurizon Network and the affected End Users jointly agree: (A) that an Expansion is the most effective and efficient option to address the Existing Capacity Deficit; and (B) on the terms of the Expansion proposal to be submitted to the Independent Expert, then clause 7A.5(i) will apply. (ii) Aurizon Network and the affected End Users jointly agree that an Expansion is the most effective and efficient option to address the Expansion Capacity Deficit but have not agreed on the terms of the Expansion proposal to be submitted to the Independent Expert by the date the Aurizon Network is due to submit the report under clause 7A.5(a)(iii) then Aurizon Network may, acting reasonably, determine the Expansion proposal to be submitted to the Independent Expert and clause 7A.5(i) will apply and Aurizon Network must submit the Expansion proposal to the Independent Expert for review under clause 7A.5(i)(i). (d) If affected End Users and Aurizon Network have not reached an agreement as to which of the Transitional Arrangements should be implemented, the Independent Expert must review any report provided by Aurizon Network under clause 7A.5(a)(iii) and promptly make a recommendation to the QCA with respect to which of the Transitional Arrangements of the type referred to in clause 7A.5(a)(iii)(A) – clause 7A.5(a)(iii)(C) it considers will most effectively and efficiently resolve the Existing Capacity Deficit, including with regard to which of the Transitional Arrangements will result in the lowest net present cost applying the Discount Rate to all Access Holders without prejudice to the reliability and performance (in the long and short term) of the Rail Infrastructure. (e) Within 15 days (or such longer period as may be required by the QCA) of receiving a recommendation from the Independent Expert, the QCA must make a determination as to which of the Transitional Arrangements of the type referred to in clause 7A.5(a)(iii)(A) – clause 7A.5(a)(iii)(D) will most efficiently and effectively resolve the Existing Capacity Deficit, including with regard to which of the Transitional Arrangements will result in the lowest net present cost applying the Discount Rate to all Access Holders without prejudice to the reliability and performance (in the long and short term) of the Rail Infrastructure provided that the QCA’s determination must be consistent with -- 43 of 49 -- the System Operating Parameters other than as is required to accommodate an operational change deemed prudent by the QCA for the purpose of rectifying the Existing Capacity Deficit. (f) Subject to clause 7A.5(h), Aurizon Network must comply with any determination made by the QCA under clause 7A.5(e) including by doing everything reasonably necessary to implement the type of Transitional Arrangements determined by the QCA in a prudent and diligent manner so as to resolve the Existing Capacity Deficit as soon as reasonably practicable, having regard to the nature and type of Transitional Arrangements required. (g) Aurizon Network’s obligation under clause 7A.5(f) to implement the Transitional Arrangements (other than Expansions) is limited to the extent that such Transitional Arrangements: (i) are within the control of Aurizon Network; (ii) would not place Aurizon Network in breach of any applicable Safeworking Procedures and Safety Standards; and (iii) would not place Aurizon Network in breach of its obligations under this Undertaking or any Access Agreement. In determining whether a Transitional Arrangement would put Aurizon Network in breach of an Access Agreement, that determination would be made on the basis that any change in a System Operating Parameter had been reflected in the relevant Access Agreement as contemplated by clause 7A.12. (h) To the extent Aurizon Network is required to implement operational changes and, in doing so, incurs costs that it would not otherwise be entitled to recover in accordance with this Undertaking, Aurizon Network will be entitled to recover such costs (provided those costs are reasonable and pre-approved by the QCA). (i) If Aurizon Network and affected End Users agree that an Expansion is the most effective and efficient option to address the Existing Capacity Deficit and End Users wish to rectify the Existing Capacity Deficit, or if the QCA otherwise determines that an Expansion is the most effective and efficient option to address the Existing Capacity Deficit, then: (i) the Independent Expert must review and approve the efficiency and prudency of the proposed Expansion prior to Aurizon Network incurring any construction expense in relation to the proposed Expansion. Where the Independent Expert does not approve the efficiency and prudency of the Expansion, Aurizon Network must submit an alternative proposal that: (A) Aurizon Network and the affected End Users have agreed will address the Existing Capacity Deficit for approval; or (B) (if Aurizon Network and the affected End Users have not agreed an alternative proposal within 20 Business Days after the -- 44 of 49 -- Independent Expert decides not to approve the efficiency and prudency of the Expansion), Aurizon Network (acting reasonably) determines will address the Existing Capacity Deficit; (ii) any alternative proposal required to be submitted by Aurizon Network in accordance with this clause 7A.5(i)(i) will be reviewed by the Independent Expert for efficiency and prudency. Unless and until the Independent Expert approves the efficiency and prudency of the proposed Expansion (as set out in any alternative proposal required to be submitted by Aurizon Network in accordance with this clause 7A.5(i)(i)), Aurizon Network must not incur any construction expenditure in relation to the proposed Expansion. Subject to clause 7A.5(i)(iv), Aurizon Network is obliged to promptly undertake and fund the Expansion at the Approved WACC applicable from time to time; (iii) the value of the Expansion will be included in the Regulatory Asset Base; (iv) Aurizon Network will only be obliged to undertake and fund an Expansion up to an amount of $300 million (in aggregate across all Expansions required in accordance with this clause); and (v) for clarity, the pricing principles to apply to an Expansion are set out in Part 6 and Schedule F. (j) Aurizon Network acknowledges that an Existing Capacity Deficit does not reduce an Access Holder’s entitlement to Access Rights under an existing Access Agreement, except to the extent an Access Holder elects to voluntarily relinquish its Access Rights under this Part 7A. (k) Nothing in this clause 7A.5 affects or limits Aurizon Network’s obligations or liabilities in respect of an Access Agreement or any other agreement entered into in accordance with this Undertaking. (l) Despite clause 2.4(f) and anything contrary in an Access Agreement, where this Part 7A specifies that a Relinquishment Fee is not payable, Aurizon Network will not collect, and will not be deemed to collect (for the purposes of the calculation of Total Allowable Revenue under Part 7A), any Relinquishment Fee. 7A.6 Rebate (a) This clause 7A.6 commences to apply from the Report Date. (b) From the Report Date, the Independent Expert must identify if there has been any AN Performance Shortfall resulting from an AN Performance Breach in that Relevant Year. If there has been an AN Performance Shortfall resulting from an AN Performance Breach, the Independent Expert must determine the Performance Rebate Amount that Aurizon Network must, subject to clause 7A.6(c) and clause 7A.6(e), pay an affected End User (Rebate). In determining -- 45 of 49 -- the Performance Rebate Amount for the Year in which the Report Date occurs, the Independent Expert will only have regard to any AN Performance Shortfall resulting from an AN Performance Breach that occurred between the Report Date and the end of that Year. In subsequent Years following the Year in which the Report Date occurs, the Independent Expert will have regard to AN Performance Shortfalls resulting from an AN Performance Breach for all of the Relevant Year. (c) Aurizon Network’s liability to pay an End User any Rebate under clause 7A.6(a) is conditional upon: (i) the Access Holder (where it is not the End User) or the End User advising Aurizon Network in writing of the identity of the End User to whom the Rebate is payable; (ii) the Access Holder and the End User first undertaking in writing in favour of Aurizon Network that: (A) the payment of the Rebate to the End User is the sole right to compensation; (B) for clarity, where the Access Holder and the End User are different entities, the Access Holder does not have a separate right of compensation from the End User; and (C) Aurizon Network is not otherwise liable to the Access Holder or End User for any claim (whether based in contract or tort, under common law or in equity or under statute) for any other loss or damage suffered or incurred, in respect of the Train Service Entitlements which were not provided as a result of an AN Performance Breach, subject only to any other rights available to the Access Holder or End User: (D) for a wilful breach by Aurizon Network of any Access Agreement or the Undertaking; (E) under the termination provisions of any Access Agreement; and (F) under the Act; (iii) prior to giving such undertaking, the Access Holder and End User in respect of the relevant Train Service Entitlement not having commenced any claim that would be in breach of such undertaking if such undertaking had been given at the time the claim was commenced; and (iv) the Access Holder and End User agreeing, as part of the undertaking referred to in clause 7A.6(c)(ii), that it will not set off any amounts which are due and payable by the Access Holder or End User (as applicable) to Aurizon Network against the Rebate payable by Aurizon Network to that Access Holder or End User. -- 46 of 49 -- (d) Aurizon Network must: (i) issue a recipient created tax invoice (RCTI) within 5 Business Days after the Independent Expert determines any Rebate that Aurizon Network must pay an affected End User; (ii) pay the affected End User the amount set out in an RCTI given under clause 7A.6(d)(i) within 20 Business Days after the RCTI is given to the affected End User; (iii) pay the Rebate: (A) in Australian currency; and (B) by direct deposit into one Australian bank account notified by the End User to Aurizon Network; and (iv) not set off the Rebate against any amounts which are due and payable by the affected Access Holder or End User (as applicable) to Aurizon Network. (e) Aurizon Network will not be liable to pay a Rebate to an End User where the AN Performance Shortfall resulted from an AN Performance Breach related to the breach of a System Operating Parameter that that End User did not agree to be reflected in the relevant Access Agreement for that End User following a request from Aurizon Network to amend the Access Agreement to incorporate that System Operating Parameter in accordance with clause 7A.12. (f) On 13 January 2023 (Review Point), if requested by an End User, at least 30 days prior to the Review Point, the QCA must consider whether the Rebate mechanism as described in this clause 7A.6 is achieving the Rebate Objectives (Review). (g) For the purposes of clauses 7A.6(f), 7A.6(h), 7A.6(i), 7A.6(j) and 7A.6(k), “Rebate Objectives” means: (i) provision of comprehensive and transparent information, and support by Aurizon Network for the Independent Expert’s work in relation to the determination of the Rebate; (ii) accurate, reliable and timely root cause analysis of the reasons why an End User’s Train Service Entitlements are unable to be ordered, are ordered but not provided, or are not utilised; and (iii) timely and effective provision of an individual Rebate to End Users calculated in accordance with clause 7A.6(b) in circumstances where an End User has received less than their Train Service Entitlements in a Year due to an AN Performance Breach. (h) In conducting a Review, the QCA must seek submissions from End Users, Aurizon Network, the Independent Expert and Train Operators on whether they -- 47 of 49 -- consider the Rebate Objectives, have been met in a material way, including supporting evidence. (i) The QCA must determine, on the basis of the information received under clause 7A.6(h) and any other information reasonably available to the QCA, whether the Rebate Objectives have been met in a material way. (j) If the QCA considers that the Rebate Objectives have not been met in a material way, the QCA must review the Rebate mechanism and: (i) determine whether amendments can be made to the Undertaking in order to ensure that the Rebate Objectives are achieved; (ii) publish any recommended amendments referred to in clause 7A.6(j)(i); (iii) provide End Users, Aurizon Network, the Independent Expert and Train Operators with a reasonable opportunity to make submissions on the QCA’s recommended amendments under clause 7A.6(j)(ii) within a time period specified by the QCA; and (iv) provide a final decision on recommendations for End Users and Aurizon Network to consider for inclusion in the Undertaking. (k) In the event that: (i) the QCA determines in the final decision referred to in clause 7A.6(j)(iv) that the Rebate Objectives have not been met in a material way; and (ii) within 90 days of the QCA’s final decision referred to in clause 7A.6(j)(iv) Aurizon Network has not submitted a draft amending access undertaking that either: (A) reflects the recommendations in the QCA’s final decision as to changes required to the Undertaking; or (B) is in a form that has been agreed by Aurizon Network and a Majority of End Users, which must include all End Users that requested the QCA undertake the Review, (each, a Reset WACC Reduction Event), the Undertaking will (without the need for any other action to be taken by Aurizon Network or the QCA) be deemed to have been amended so that the definition of ‘Reset WACC’ will, effective from the Reset Date, be amended such that: (iii) the reference to ‘6.3%’ in paragraph (a)(i) of the definition of ‘Reset WACC’ is replaced with ‘6.0%’; and (iv) the reference to ‘0.4%’ in paragraph (b) of the definition of ‘Reset WACC’ is replaced with ‘0.1%’. -- 48 of 49 -- (l) Aurizon Network must do all things reasonably required to give effect to a deemed amendment under clause 7A.6(k), including making any other necessary consequential amendments to this Undertaking. (m) The QCA will endeavour to make its determination under clause 7A.6(j) by the Reset Date. (n) If a Reset WACC Reduction Event occurs then: (i) clauses 7A.6(a) to 7A.6(e) will cease to apply with effect from the Reset Date provided however that those clauses will continue to apply, to the extent required, with respect to any Rebates that accrued during the period prior to the Reset Date; and (ii) Aurizon Network must do all things reasonably required to give effect to clause 7A.6(n)(i), including making any other necessary consequential amendments to this Undertaking. (o) To the extent that the Independent Expert determines that: (i) Aurizon Network is liable to pay a Rebate and Aurizon Network does not dispute that determination within 20 Business Days after the Independent Expert makes its determination but fails to pay the Rebate within the timeframe required by clause 7A.6(d); or (ii) Aurizon Network failed to provide the information required for the Independent Expert to make a decision as to whether a Rebate is payable or to determine the Performance Rebate Amount, the affected End User may raise a dispute under Part 11. -- 49 of 49 --