Woodman Beenleigh Pty Ltd v Bunnings Group Limited (FCA)
Federal Court of Australia
Justice Bromwich
Woodman Beenleigh Pty Ltd v Bunnings Group Limited (no adverse costs order) [2026] FCA 1231
(27 August 2026)
Focus: application for no adverse cost order (NACO)
Catchwords
COMPETITION – application for a no adverse costs order (NACO) under s 82(3) of the Competition and Consumer Act 2010 (Cth) – whether the Court is satisfied of the criteria in s 82(5) – interpretation of criteria under s 82(5) – application of criteria to the present proceeding – whether order should be made in exercise of discretion under s 82(4) – HELD: each criterion under s 82(5) satisfied – NACO made under s 82(4)
About (the misuse of market power claim)
Woodman, the owner of two Mitre 10 stores, alleges Bunnings has or will engage in conduct in anti-competitive conduct in contravention of s 46 (misuse of market power). Justice Bromwich described the MMP case as novel:
[7] The case brought by Woodman is novel, as it freely acknowledges. That is in part because it relies upon the amended form of s 46, introduced by the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Cth). The amended form of s 46 prohibits conduct which has an anticompetitive effect, in addition to the longstanding prohibition on conduct engaged in with an anticompetitive purpose. Those changes are particularly significant to the present proceeding because, as noted above, Woodman does not, by its concise statement, make any allegation at all as to the purpose behind Bunnings’ conduct.
[8] The expanded version of s 46 has only received limited judicial consideration despite being in force for almost nine years, with only one set of proceedings, all heard and determined by Beach J, resulting in contested findings as to liability on the basis of the “effects” test: Epic Games Inc vApple Inc [2025] FCA 900; 189 IPR 1; Epic Games Inc v Google LLC [2025] FCA 901; and Anthony v Apple Inc [2025] FCA 902. This proceeding is also novel in that s 46 has apparently not, in either current or its previous form, been applied in any circumstances akin to those relied upon by Woodman, being the expansion of a competitor.
[9] Bunnings in substance contends that Woodman’s case is, at best, very weak, and that it is misconceived. There is a substantial dispute about the application of s 46 to the circumstances of this case. The determination of this application does not properly call for an adjudication of that dispute. However, the nature of that dispute is relevant to whether the proceeding raises any reasonable issues for trial, one of the three criteria which must be satisfied for a NACO to be granted.
Finding
Justice Bromwich discussed in detail each of the requirements in s 82(4) that needed to be established in order to enliven a discretion to order a NACO and found in favour of Woodman on each. His Honour then examined the considerations relevant to the exercise of a discretion and again found in favour of Woodman:
[10] … I am satisfied the NACO sought by Woodman should be made under s 82(4), including because I am satisfied as to the three mandatory criteria contained in s 82(5), and that the exercise of the discretion to make the NACO is appropriate in all the circumstances. That does not entail underestimating the challenges that Woodman faces in bringing this proceeding. But in my view, a case such as this is precisely what the NACO regime was intended to facilitate.
Key extracts
About NACO
Justice Bromwich set out the history of the NACO regime from para 41:
[41] The NACO regime contained in s 82(3)-(7) of the CCA was inserted by the Commonwealth Parliament with effect from 13 March 2019: Sch 5, item 7, Treasury Laws Amendment (2018 Measures No. 5) Act 2019 (Cth) (Amending Act). An earlier proposed form of the NACO regime had originally been introduced to parliament by the Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017 (Original Bill). … In relation to the NACO regime, the version that was ultimately legislated had undergone confined, but important, changes from what was originally contemplated. In particular, the mandatory criterion contained in s 82(5)(a) was substantially amended, with those amendments having particular significance for present purposes, as explained below.
[42] The Explanatory Memorandum for the Original Bill makes it clear that this was part of a proposed legislative package directed to small business … The Explanatory Memorandum described the proposed legislation as allowing “judges in the Federal Court to waive liability for adverse costs to small business private litigants in cases related to the misuse of market power” …
Justice Bromwich observed that the criteria in s 82(5) for making a NACO have not been the subject of detailed judicial scrutiny (para 6). In summary the criteria are (para 6):
‘(a) the action raises a reasonable issue for trial: s 82(5)(a);
(b) the action raises an issue which may be significant for others: s 82(5)(b); and
(c) the disparity between the financial position of the applicant and the respondent is such that the applicant might be deterred by the possibility of an adverse costs order: s 82(5)(c).’
His Honour then considered the requirements in the context of this application [emphasis added):
[46] … Woodman alleges a misuse of market power having the effect of substantially lessening competition, contrary to s 46 of the CCA, and seeks, inter alia, damages. As such, there is no doubt that this proceeding falls within the description of being an action under s 82(1) in relation to a contravention of a provision of Pt IV of the CCA, so as to enliven the jurisdiction to entertain this NACO application.
[47] … the original form of the NACO provisions were introduced to parliament with s 46 proceedings expressly in mind, notwithstanding their availability in other actions brought under s 82(1). The relevant context is that when a misuse of market power proceeding is contemplated being brought by someone other than the ACCC as the competition regulator, it is all but inevitable that they are going to be brought by a lesser player in a given market rather than by a greater player, irrespective of whether or not they meet any particular definition of being a small business. At least some degree of disparity of resources is going to be commonplace, if not invariable and inevitable. That is ordinarily going to be evident in the resources that can be brought to bear in the conduct of litigation itself, including the legal costs which the respondent is able to incur. The present case is an example of this.
[48] … on the evidence before me, the disparity of available resources as between Woodman and Bunnings is undeniably enormous, notwithstanding the support that Woodman has apparently received from the Mitre 10 umbrella organisation. Bunnings does not dispute that evidence, but rather relies upon a particular interpretation of the criterion in s 82(5)(c), as will be explained.
[49] … a market participant considering litigation as an option to address what they consider to be a misuse of market power by a larger competitor faces the critical risk of not only having to pay the legal costs they will themselves incur in bringing and running such litigation, but also the legal costs of the opposing party that they may be required to meet if the proceeding fails. Those costs may be significant relative to their own legal costs, especially when the resources of the respondent are borne in mind. That risk alone can be enough for it to simply not be worth bringing even an ostensibly strong case in an area of settled law. It will be even more so when the case in contemplation carries with it a measure of uncertainty in terms of the reach of the s 46 proscription, the evidence might emerge, and what is required to be established.
[50] Relatively few misuse of market power cases have been brought by anyone other than the ACCC, and the success rate has not been high. The purpose test under the previous iteration of s 46 was very difficult to establish. Indeed, that is part of the historic background leading to the introduction of an additional and alternative effects test rather than just a purpose test. If bringing misuse of market power cases remains almost exclusively the domain of the ACCC, the law in relation to misuse of market power will likely develop much more slowly, and in a narrower range of cases. The problem of misuse of market power will likely be less constrained. The interests of consumers in the benefits of true, lasting, and sustainable competitive processes will likely be more slowly and less effectively advanced.
[51] By a rough illustrative analogy, it is difficult to imagine that the misleading or deceptive conduct jurisprudence, brought about by the introduction of s 52 in the Trade Practices Act 1974 (Cth), now s 18 of the Australian Consumer Law, would have been as thoroughly developed if it had turned out to be confined to the relatively few cases brought by the ACCC, including under its former name of the Trade Practices Commission, rather than the widely used statutory cause of action that it became from the outset.
[52] The NACO regime was apparently introduced to address some of these difficulties faced by certain private litigants considering an allegation of a contravention of s 46. Even so, s 46 will still probably remain at the relative fringe of competition law. The most that the NACO regime might accomplish in its application to s 46 litigation is that it becomes a more viable option for smaller market participants attempting to remedy instances of anticompetitive conduct. But the difficulty invoking s 46 does not detract from its importance, and the importance of the development of the jurisprudence concerning that section.
[53] These matters continue to ring true notwithstanding the relatively recent amendments to the misuse of market power provisions, which included expanding the proscription from only conduct with an anticompetitive purpose to also encompass conduct with an anticompetitive effect or likely effect, a wider and generally easier threshold to establish. But easier does not mean easy. As Beach J observed shortly after these amendments took effect in Australian Competition and Consumer Commission v Pacific National Pty Limited (No 2) [2019] FCA 669 at [836], when considering the potential deterrent effect of s 46 on market participants contemplating conduct which might offend the prohibition:
True it is that s 46 and the potential for substantial penalties may operate as a potential discipline on behaviour. But it would be appreciated that a s 46 case, even with its recent amendments, is difficult and expensive to get up, let alone in a timely timeframe. Moreover, in any event it may not be an answer to some of the behaviour under discussion. I do not see this potential deterrent effect as sufficiently ameliorating or removing the relevant ability to discriminate.
[54[ The prospects of an applicant successfully bringing litigation under the amended s 46 are further complicated by the fact that jurisprudence in relation to that relatively new test is still at an embryonic stage. As mentioned above, the only contested liability decisions under the provision as amended were those delivered by Beach J in relation to the Epic Games v Apple and related proceedings. The jurisprudence as to the metes and bounds of the generally broader effects proscription remain in their relative infancy, and substantial questions remain as to what the provision now covers ….
[55] It was in this general context that the Parliament decided to enact a regime which deliberately and expressly empowers the Court to depart from the ordinary rule that an unsuccessful party in civil litigation compensates for costs incurred by the successful party, often referred to as costs following the event: … Parliament has deliberately enacted laws which provide that, in certain situations, a successful respondent may not be able to obtain a costs order in its favour. In those circumstances, that deviation from the ordinary rule does not involve some injustice to the respondent, any more than it does in other areas of law in which parliament has legislated a no-costs regime: …
[56] If the state of satisfaction necessary for the grant of a NACO set out in s 82(5) is reached, the Court is then asked to exercise the discretion in s 82(4) and make that order. That is undoubtedly a major and fundamental departure from longstanding and otherwise hallowed legal costs principles. However, that departure is not in itself a reason not to make a NACO in an appropriate case, because it would be no more than giving effect to what the Parliament has legislated to take place when the statutory threshold is met and the discretion is exercised.
Consideration of the NACO requirements in this case
His Honour then went on to consider the ‘state of satisfaction’ required under section 82(5). He first discussed the rules of statutory construction, then re-stated (with his own emphasis) the mandatory criteria:
[61] It is worth repeating the three mandatory criteria in s 82(5) for ease of reference, to maintain a sense of context between the three as part of a coherent and consistent regime, and to emphasis the key phrases that must be read together as well as individually (emphasis added):
The court may only make an order under subsection (4) if the court is satisfied that:
(a) the action raisesa reasonableissue for trial; and
(b) the action raises an issue that is not only significant for the applicant, but may also be significant for other persons or groups of persons; and
(c) the disparity between the financial position of the applicant and the financial position of the respondent or respondents is such that the possibility of a costs order that does not favour the applicant mightdeterthe applicant from pursuing the action.
Justice Bromwich then analysed each:
The action raises a reasonable issue for trail (s 85(5)(a))
There was extensive discussion of what this meant (the parties being in ‘sharp disagreement’ (para 61)) and application in this case (underline is my emphasis):
[64] … Bunnings contends that the phrase “raises a reasonable issue for trial” necessitates, at the least, a prima facie case, or serious question to be tried, akin to what is required for the grant of an interlocutory injunction. This is said in turn to entail a sufficient likelihood of success at trial to justify the order sought …
[65] Having proper regard to the text of s 82(5)(a) in its context, as required by the authorities cited above, it is clear that Bunnings’ submission must be rejected. The drafting of the criterion as it appeared in the Original Bill required that the action “has a reasonable prospect of success”: … This was then changed to require that the action raise “a reasonable issue for trial” in the final version …
[66] The change in drafting from referring to the “prospect of success” of an action to instead refer to whether it raises a “reasonable issue for trial” was a substantial amendment … This is a significant contextual factor when it comes to interpreting and understanding this aspect of the mandatory criteria. It suggests a deliberate intention to move away from an assessment of the strength of the case being brought overall, or its likelihood of success, to an assessment of the reasonableness of an underlying issue sought to be litigated and determined.
[67] What, then, is meant by the reference to the “issue” raised by a case, which replaced the previous reference to the “prospect of success”? [his Honour went on to consider dictionary definitions to aid interpretation and continued] …
[70] Each of those dictionary definitions, as illustrative of the ordinary or natural meaning of the word “issue” as used by parliament, tends to confirm that the focus of the test in s 82(5)(a) is upon whether the case raises at least one reasonable dispute or point of contention between the parties, as opposed to an assessment of the likelihood of the applicant succeeding in that dispute.
[Justice Bromwich then considered other features of the NACO regime supporting this interpretation]
[73] … I reject Bunnings’ submission that satisfaction of s 82(5)(a) requires me to undertake an assessment of the likelihood that Woodman will ultimately be successful in its action as part of an assessment of whether it has a prima facie case or whether its prospects are sufficient to justify the making of a NACO. That submission has the effect of clinging to the framing of the threshold which was proposed in the Original Bill but ultimately not enacted. All that I consider is required is that the action raises a “reasonable issue for trial” as specifically enacted, as opposed to forming a view as to whether Woodman has a prima facie case or sufficient likelihood of success. If the replacement threshold of “a reasonable issue for trial” has any connection to the prospects of success of the action at all, it can only be so far as that informs the reasonableness of the underlying issue at stake in the proceeding.
[74] … the “issue” in question must be one which goes, at least, to liability. … It does not seem to be in dispute that questions about whether Bunnings’ conduct has or is likely to substantially lessen competition, or whether it has substantial market power, were capable of being issues for the purpose of s 82(5)(a).
[Justice Bromwich then considered what was meant by this requirement and continued:]
[85] Based on the text of the provision in its context and having regard to its purpose, an issue raised by a case is a reasonable issue for trial under s 82(5)(a) if it is capable of being reasonably argued or contested at trial. For the reasons outlined above, this does not require a conclusion to be reached that a case has a reasonable or sufficient likelihood of success. As outlined above, it is a test focussed on the point of contention between the parties, rather than the likelihood of the applicant succeeding on that point. However, that does not mean that prospects of success are entirely irrelevant. A NACO should not be made if it does no more than support the maintenance of a plainly misconceived or otherwise hopeless case. If a case is in that way doomed to fail, it is difficult to see how it could “raise a reasonable issue for trial”. A difficult case with identifiable problems and perhaps uncertain prospects is not necessarily hopeless, and such a case could certainly raise a reasonable issue for trial notwithstanding those difficulties. To read the provision in that way accords with the text of the provision and with its context within the NACO regime and the CCA more broadly, and within the broader policy and legislative history of the regime as outlined above.
Application of s 82(5)(a) to the present case
[87] … Bunnings attacks various aspects of the action brought by Woodman, in support of its submission that the case lacks a reasonable prospect of success and hence does not raise any reasonable issue for trial. It submits, for example, that the case brought by Woodman or aspects thereof are variously “decidedly weak” or “strange”, are characterised as a “novel claim for which there is no existing authority”, and rest on “weak foundations”. On that basis, it contends that the threshold in s 82(5)(a) is not met.
[88] ,,, that submission misconceives of the inquiry under s 82(5)(a) as requiring me to decide whether the action has sufficient prospects of success to warrant making a NACO.
[89] Nonetheless, it remains appropriate to consider Bunnings’ criticisms insofar as they may be capable of addressing the reasonableness of the issues advanced for trial, remembering once again the early stage at which this arises for consideration. Bunnings also contends that the prospects of success are generally relevant beyond s 82(5)(a) to the exercise of the Court’s discretion to make the order once the mandatory criteria are satisfied …
[His Honour then described Bunnings’ contentions and continued]
[93] … Woodman seeks declarations of contravention, an injunction preventing Bunnings from opening its planned store in Jimboomba, and damages to compensate it for the profit it contends that it has foregone as a result of the abandonment of the planned expansion of Mitre 10 Jimboomba, and for the diminution in the value of that store by reference to the expectation it will exit after Bunnings Jimboomba begins trading. Bunnings first attacks the case advanced by Woodman in support of that relief, if a contravention is shown. I do not consider that is helpful for the present inquiry, especially at this very early stage of this proceeding. In that regard, it should be noted that although Bunnings contends that Woodman’s case as to damages was weak, it did not submit that it had no case for showing at least some loss, such that there would be no cause of action at all under s 82(1) … If Woodman succeeds on liability, it may, as Bunnings argues, be difficult for it to obtain injunctive relief to restrain Bunnings from opening its proposed new warehouse, and damages may be difficult to quantify beyond the existence of at least some loss or damage sufficient engage liability under s 82(1). But those are largely evidentiary issues which are difficult, if not impossible, to assess, either way, at this stage.
[94] This application does not properly require me to engage in what I regard as amounting to little more than speculation as to relief this early in the proceeding. That is especially so as it is common, if not invariable, for questions of liability and remedies to be heard separately in competition cases, and for the relief sought to change according to the basis upon which a finding of liability is reached. The focus at this stage must, at least as a practical and reasonably assessable matter in the early stages of a proceeding, be on whether the issues in dispute as to liability are reasonable to take to trial.
[95] Turning now to the main criticisms outlined by Bunnings as to the case brought for a contravention of s 46, its primary contention seems to be that, having regard to the authorities as to the nature of the concept of competition which underpins the CCA, Woodman’s claim will fail to show that its conduct has or is likely to effect a substantially lessening of competition.
[His Honour then discussed the nature of the SLC test and the misuse of market power prohibition and continued:]
[103] Bunnings relies on the above authority to submit that any effect of its conduct on Mitre 10 Jimboomba cannot establish a contravention of s 46 because it is nothing more than the ordinary workings of the dynamic process of competition which, by its very nature, is often bound to damage competitors, including by putting them out of business. It characterises any exit by Woodman from Jimboomba as a result of increased competition, not any lessening of competition. …
[104] As Woodman submits, one problem with Bunnings’ reasoning is that characterising its conduct as bearing the hallmarks of competition on the merits does not necessarily foreclose a finding that it substantially lessens competition under s 46. Competition law in general, and the concept of misuse or market power specifically, acknowledge that sometimes conduct which might otherwise be part of the ordinary competitive process can ultimately result in damage to that process. To that end, one of the important features of s 46 is that the conduct by one competitor without substantial market power may be viewed differently from like conduct engaged in by a competitor who does have substantial market power. The expansion of s 46 from a prohibition based only on the purpose of conduct to one which might be established based on its effect enables a more holistic assessment of the interaction of impugned conduct with the competitive process, beyond its mere characterisation as pro-competitive or anti-competitive, especially at a single point in time. The process of competition is generally more complex than that. That may readily include consideration of the effects or likely effects of conduct over a longer period of time than Bunnings’ argument seems to contemplate.
[105] Woodman submits that the relevant question is thus not whether Bunnings’ conduct can be described as “competition on the merits”. Similarly, it rejects the suggestion that it needs to establish a theory of harm to demonstrate that that is not the case (implicitly at least leaving open the possibility that it might advance an evidentiary case that includes proof of this). Instead, Woodman contends that the relevant question is what effect the conduct will have on the competitive process, and whether that effect amounts to a substantial lessening of competition. On that view, Bunnings’ suggestion that the introduction of additional competition by the opening of a new Bunnings Warehouse next door to Mitre 10 Jimboomba cannot contravene s 46 because it is nothing more than competition in action begs the relevant question rather than answering it.
[106] Woodman submits that in this case, Bunnings’ expansion and the likely resultant exit of Mitre 10 Jimboomba will bring about a change in the structure of the market, marked by increased concentration and fewer independent competitors. It submits that this change would amount to a substantial lessening of competition, relying on the opinion of Mr Houston to that effect, and the Tribunal’s comments in QCMA as to the importance of market structure for the competitive process (at 189):
Competition is a process rather than a situation. Nevertheless, whether firms compete is very much a matter of the structure of the markets in which they operate. The elements of market structure which we would stress as needing to be scanned in any case are these: (1) the number and size distribution of independent sellers, especially the degree of market concentration; (2) the height of barriers to entry, that is the ease with which new firms may enter and secure a viable market; (3) the extent to which the products of the industry are characterized by extreme product differentiation and sales promotion; (4) the character of “vertical relationships” with customers and with suppliers and the extent of vertical integration; and (5) the nature of any formal, stable and fundamental arrangements between firms which restrict their ability to function as independent entities.
(Emphasis added)
[107] To that end, Bunnings’ criticism of Woodman’s submission that the relevant conduct here is “akin to a predatory capacity expansion that has the effect of forcing a rival to exit the market” is not to the point. Bunnings contends that this submission was a belated attempt by Woodman to address what is otherwise a hole in its case, by adding a theory of harm which was not alleged in the concise statement and for which no evidence has been adduced, being that Bunnings’ conduct deviates from ordinary competition because it would only be profitable if, and when, Mitre 10 Jimboomba exits. However, Woodman expressly disclaims any allegation of a predatory intent or anticompetitive purpose on behalf of Bunnings.
[108] … I regard Woodman’s submission as more of an exercise in characterising the effect of Bunnings’ conduct, than an attempt to bring an allegation of a predatory capacity expansion in the sense referred to above. At this stage, Woodman alleges in the concise statement only that Bunnings will deprive Mitre 10 Jimboomba of sufficient sales volume to remain viable, which would usually imply that some excess capacity will be created in the relevant market. It does not go beyond this to allege explicitly that the creation of this excess capacity is predatory or represents a deviation from competition, and on its submissions in relation to the present application, it contends that it does not need to do so. In any case, Bunnings’ reliance on what has or has not been pleaded to date must be treated with some caution for the purpose of this application …
[109] Regardless of whether that correctly characterises Woodman’s position, the arguments outlined above as to whether Bunnings’ conduct might be found to substantially lessen competition clearly indicate the existence of a reasonable issue for trial. That ultimate issue is not necessarily or appropriately decided in determining the present NACO application, noting yet again that this proceeding is at a very early stage. While I have read the competing expert witness reports, I do not think I should attempt at this stage to adjudicate between them, or even endeavour to assess their various strengths and weaknesses. No such inquiry is required by s 82(5)(a). Bunnings’ submissions do little more than highlight the live and complex debate to be had as to how s 46 is to be applied to the circumstances presently before the Court, especially in relation to anticompetitive effects. Ultimately, given the reasonable and live debate between the parties on these issues, I am comfortably satisfied that they amount to one or more reasonable issues for trial.
[110] That is not necessarily to conclude that Woodman has a strong case on these issues, or indeed more generally. Rather, it is a reflection of the fact that different views may reasonably be advanced on these points, as has already been illustrated in the course of the hearing of the present application.
[111] The foregoing illustrates the largely misconceived approach by Bunnings to this application, which again, seemed to be largely based on its misapprehension as to what s 82(5)(a) requires. I do not propose to canvas in a similar way the other areas of Woodman’s case which Bunnings also impugns in an attempt to show the NACO should be refused. These criticisms include what it describes as weaknesses within Mr Houston’s approach to:
(a) defining the relevant wholesale market for the purpose of assessing Bunnings’ market power;
(b) assessing the extent of Bunnings’ market power within that market;
(c) analysing the change of constraints and effect on competition which would prevail in the local retail market after Woodman’s exit; and
(d) identifying a connection between the market in which it is said to have power and the impugned conduct.
[112] On each of these points, Bunnings in substance and perhaps in form as well submits that the opinion of its own expert, Mr Siolis, should be preferred to that of Mr Houston. That contention only needs to be stated for it to be apparent that this approach does not properly engage with s 82(5)(a). … for the purpose of this application, neither expert was required for cross-examination, to give concurrent oral evidence, or to engage in any of the other processes increasingly deployed in this Court in cases of contested expert opinion at the trial stage. It would be unusual for that to occur at this early and interlocutory stage.
[113] The Court is not at this stage tasked with adjudicating on the differences of opinion between the expert economists, or even their comparative weaknesses or strength, as that would revert the inquiry to a form of prospects assessment. Those differences of opinion raise what are clearly reasonable issues for trial. I do not need to be satisfied that Woodman’s case on these issues is likely to prevail, or even that it is particularly compelling, but rather the different although not entirely unrelated conclusion that these are reasonable issues for adjudication at a trial. There is more than sufficient material before me to reach that different state of satisfaction.
[114] I am satisfied that the case brought by Woodman raises one or more reasonable issues for trial as required by s 82(5)(a).
The action raises an issue that is not only significant for the applicant, but may also be significant for other persons or groups of persons (s 82(5)(b))
[115] Having regard to the drafting of s 82(5)(b) considered in its context and by reference to its purpose, the following may be observed. First, this criterion is evidently directed to whether the action raises an issue of significance for persons other than Woodman. Not every issue raised in this proceeding must reach that threshold, but I must be satisfied that at least one of them is not just significant for Woodman but potentially also for other persons or groups of persons. Second, the threshold is not that that an issue does bear significance for other persons or groups of person, but only that it may do so. I would take that to require that there is a realistic, or put another way, not fanciful, possibility that the issue raised is or will be significant for such third parties.
[116] Properly understood, s 82(5)(b) is not a demanding threshold to meet. It ensures that a NACO is not made in cases that the Court cannot be satisfied have wider significance beyond a given applicant. This analysis is an important prism through which to evaluate the competing arguments, with the parties again sharply divided on this topic.
[117] In its oral submissions, Woodman identifies two issues which it contends meet the relevant threshold. These are whether Bunnings has substantial market power in the national wholesale market, and whether its conduct is capable of substantially lessening competition in the Jimboomba retail market, to the extent that it forces Woodman to exit. Broadly, the persons for which it submits these issues may be significant are other independent hardware retailers facing similar circumstances involving the opening of a Bunnings Warehouse in their local area, and the possibility or probability of exit of the existing retailer as a result.
[118] As an example of persons within this cohort, Woodman … refers to the experiences of two other operators of independent hardware stores. Both these individuals had reportedly seen a decline in sales after Bunnings opened a store nearby or in the same region as their own locations. … [there is further discussion of possible persons within the cohort and Bunnings’ criticism of this evidence]:
[121] Although there are some limitations on the evidence relied upon by Woodman, these granular criticisms do not necessarily mean s 82(5)(b) cannot be satisfied, given its inherently low threshold, as addressed further below.
[122] More broadly, Bunnings submits that the significance of this proceeding for other independent hardware retailers who have had or are likely to have a Bunnings hardware store open nearby is limited by the inevitable differences between the local retail hardware market in Jimboomba and the markets in which other independent hardware stores are operating. … Accepting that proposition to be sound in principle, the problem for Bunnings is that it fails to engage with the statutory test. All that is required is that an issue raised may also be significant for other persons or groups of persons, not that it willbe in some way determinative.
[123] One of the central issues raised by this proceeding … is whether Bunnings’ conduct is nothing more than the ordinary workings of, and advancement of, competitive processes as it contends, or goes beyond that to constitute a misuse of market power likely to have the overall effect of substantially lessening competition as Woodman contends. I consider that, at the very least, the resolution of that question in relation to the Jimboomba retail market might well be significant to other independent hardware retailers operating in different local markets which are facing increased competition from a new Bunnings Warehouse store in their area, and resultant the threat of declining sales to the point of no longer remaining viable. The resolution of issues raised in one action can be significant for a person considering another action without the two cases being on all fours, or even substantially the same. It is enough that the resolution of this action will help to establish the metes and bounds of the application of s 46 for other market participants facing broadly similar challenges as a result of Bunnings’ expansion, albeit with inevitable differences in the precise conduct that is taking place and the relevant circumstances including the local market conditions.
[125] In addition, as Woodman points out … a further issue raised by this proceeding is whether Bunnings has substantial market power in the national wholesale market. Given that that is alleged to be a national market, the resolution of that question is likely to be significant for any hardware retailer in Australia facing adverse commercial outcomes as a result of Bunnings expanding in its area.
…
[127] … Woodman additionally contends that s 82(5)(b) was satisfied because the action raises novel questions of general importance concerning the application of the s 46 of the CCA and the “effects test” to circumstances where an existing market participant expands its capacity with the effect that one of its competitors may be forced to exit. It submits that this specific situation has not been addressed by existing authority and involves an element of public interest in the contested facts and application of economic principles. The action is thus said to be likely to raise issues of significance in the development of the s 46 jurisprudence following the introduction of the effects test. Woodman also contends that this jurisprudence may be significant in its application to other retail markets, referring as an example to the review application currently before the Australian Competition Tribunal concerning whether Coles’ expansion in a market in which it already operates may substantially lessen competition by inducing the exit of a competitor.
[128] It is unnecessary for me to decide whether this additional basis, which was only squarely advanced in written submissions, indeed provides an alternative path by which s 82(5)(b) may be satisfied, given my conclusion as to the basis advanced in oral submissions above. However, it is worth noting that there is some force in Bunnings’ submission that the criterion in s 82(5)(b) is not satisfied by appeals to the general importance of questions going to the proper construction of and application of Pt IV of the CCA, or novel issues raised in that regard, in the absence of the identification as to the persons for whom those issues may be significant.
[129] I am satisfied that, as Woodman contends, this proceeding raises issues that might well be significant for independent hardware retailers contending with Bunnings in a way that imperils their commercial viability. I am satisfied that they will have the benefit of a determination as to whether Bunnings has substantial market power in the national wholesale market, and some exposition as to how the effects test in s 46 can, or cannot, operate to constrain conduct of this kind. The criterion in s 82(5)(b) has therefore been met to my satisfaction.
The disparity between the financial position of the applicant and the financial position of the respondent or respondents is such that the possibility of a costs order that does not favour the applicant might deter the applicant from pursuing the action: s 82(5)(c)
[130] … the terms of this criterion need to be read and understood in light of the mischief sought to be addressed, namely that the prospect of an adverse costs order might deter an applicant from pursuing a proceeding against a better resourced respondent. Because a proceeding has to have been commenced for a NACO application to be made, the word “pursuing” should be understood as referring to continuing or maintaining the proceeding, but only in the sense that this might be deterred, not that it necessarily will be. The test does not require the outcome of deterring to be proven to be likely, let alone certain. I further consider that undue technicality in reading, understanding, interpreting, and applying this consideration is to be eschewed.
[131] This aspect of the statutory test can be broken down into two questions before being read as a whole. The first question is whether there is a financial disparity between Woodman and Bunnings. The revenue and profit figures … denies any serious doubt that this is so. This is not some marginal difference: the revenue and profit figures of Bunnings … are in the billions of dollars, and those of Woodman in the relatively low millions of dollars. It is chalk and cheese. Sensibly, Bunnings does not dispute that there is a large disparity between their financial positions. Instead, it focusses on whether the balance of the test is satisfied.
[132] The second question is whether the obvious and very substantial financial disparity described above is such that the possibility of an adverse costs order might deter Woodman from pursuing the action in the sense that I have identified above. This is the aspect of the threshold which was contested by Bunnings.
[133] Mr Daniel deposes to an estimate of its own costs as likely to be at least $3.94 million, and its estimated adverse costs exposure to Bunnings’ recoverable costs as likely to exceed this amount, applying a two-thirds rule of thumb to an estimate of Bunnings’ actual costs being in excess of $6 million.
[134] Having regard to these estimates, Woodman’s evidence via Mr Daniel, goes beyond the might deter test in s 82(5)(c), in that it indicates that Woodman will be deterred from pursuing the proceeding if there is even a possibility that it may be ordered to pay Bunnings’ recoverable costs, informed by the undeniable fact that Bunnings has the capacity to outspend Woodman significantly and that Bunnings’ total costs are estimated to be a substantial multiple of Mitre 10 Jimboomba’s annual profit.
[His Honour quotes further from Mr Daniel’s deposition]
[137] On the evidence and submissions advanced by Woodman, prima facie, there is a sound basis for satisfaction that the test in s 82(5)(c) has been met.
[His Honour then discusses Bunnings’ submissions that the financial disparity will not meaningfully deter Woodman]
[139] The ultimate point made by Bunnings is that there can be no rational apprehension that Woodman may lose this case because it was outspent, or that it risks being ordered to pay an adverse costs order that is beyond its means, and as a result the financial disparity could not “rationally exert any deterrent effect upon Woodman”. Instead, Bunnings contends that the risk of an adverse cost order may well discourage Woodman from bringing this action, but that was not an effect of the disparity between their financial positions, but rather the ordinary and expected effect of the exercise of the discretion to award costs against unsuccessful parties, regardless of their relative financial positions. …
[141] Much of Bunnings’ argument can be rejected because it so radically departs from the terms of the consideration set by parliament. The issue is not whether Woodman could, if forced to do so, pay an adverse costs order. It is whether it might be deterred from pursuing the proceeding because of that risk. However, the nexus required between that deterrence and the disparity of financial position of the parties contained in s 82(5)(c) is a problem for Woodman given the lack of clarity arising from how that provision has been drafted. Bunnings essentially contends that the disparity in the financial positions must be what creates the possibility that the applicant is deterred by the potential for an adverse cost order. Woodman, on the other hand, contends that it is enough if the disparity between the parties’ financial positions contributes to the possibility of deterrence. I am satisfied that, for the following reasons, this issue must be resolved in Woodman’s favour.
[142] First, … I eschew undue technicality in reading, understanding, interpreting, and applying this criterion. The threshold which must be met is, to repeat, that:
the disparity between the financial position of the applicant and the financial position of the respondent or respondents is such that the possibility of a costs order that does not favour the applicant might deter the applicant from pursuing the action.
[143] That consideration makes little sense if it is read in the somewhat simplistic way that Bunnings advances, which attributes to the phrase a kind of exclusive causation: that the disparity in financial position is the reason why the applicant might be deterred by the possibility of an adverse costs order, such that the deterrent effect is solely attributable to that disparity, as opposed to any other contributing factors. That would seldom, if ever, be the case and I do not accept that is what is meant by the words enacted by parliament. …
[145] If necessary, I am prepared to pay parliament the not excessive compliment that it intended to enact sense and not nonsense. However, I do not think that compliment is necessary, although doubtless the drafting could be improved upon. The words used can readily be interpreted in a sensible, purposeful way, that is constructive rather than destructive, and in line with the evident purpose of the NACO regime. Section 82(5)(c) is to be read in the context and order of paragraphs (a) and (b), which should in turn be read as creating reasonable, but not insurmountable, considerations required to be met to the satisfaction of the Court before the power to make an NACO is enlivened.
[146] The key issue is the meaning to be given to the causal phrase – such that – which draws the connection between the financial disparity (which is in this case very substantial and not in dispute) and the rest of the text of this criterion, being that “the possibility of a costs order that does not favour the applicant might deter the applicant from pursuing the action”. The meaning of that connecting phrase is what needs to be interpreted having regard to text, context and purpose. One thing that is clear: such that does not require that the mere existence of a financial disparity, or the mere view that the applicant (Woodman) might have of that disparity as a bare circumstance, without anything more, is the basis on which the possibility of an adverse costs order might deter the applicant from pursing the action. That gives the phrase too much work to do, and certainly no sensible work to do. The term such that is evaluative and not prescriptive in nature. It calls for an examination of the nature and extent of the disparity, and its casual connection to the possibility of an adverse costs order which might deter the applicant from pursing the action. It accommodates a wide range of circumstances in which the disparity might arise, and various ways in which that disparity might bear upon the deterrent effect of an adverse costs order.
[147] To have anything to do with the overall objectives of the NACO regime, the phrase such that is necessarily concerned with such things as the magnitude of the disparity and what can potentially be done with it by a respondent, connected and contributing to the possibility of a deterrent effect arising from the potential for an adverse costs order. It should be understood to be directing attention to, amongst other things, the significance of that disparity to the realities of how costs can be incurred by a respondent who has greater financial resources to direct to the litigation in question and thereby incur costs that might be visited upon the applicant. The greater the disparity, the more scope there is for a respondent to deploy its ability to bear significant legal costs in a way that might deter the applicant from continuing the proceeding by reason of the risk and extent of a costs liability being created.
[148] The degree of disparity that exists in a given case can be seen to influence the ability, need or incentive for a respondent:
(a) to compromise on points of procedure, pleadings, and evidence;
(b) to take every available point, however marginal;
(c) to run marginal arguments and adduce expensive evidence of marginal probative value; and
(d) without necessarily any hint of impropriety, to run a Rolls Royce case in terms of legal representation and preparation;
and the magnitude of the effect that those choices may have on an the applicant.
[149] Those observations can readily apply to Bunnings’ approach to this application, not in the sense of any impropriety, but in the sense of testing somewhat exhaustively every aspect of the terms of the NACO regime. It is something of a harbinger of what is to come if this proceeding does continue. The phrase “deep pocket” is well-known and not necessarily pejorative, reflecting the inherent ability of a well-heeled litigant to engage in conduct which has the effect of deterring a case being brought against it, or being maintained, as a matter of outcome rather than necessarily of intent.
[150] It is no part of the test that a motive or purpose of deterring the applicant needs to be attributed to Bunnings. Bunnings did not seem to criticise the estimates of its likely costs provided by Woodman’s solicitor, but stated that there was no evidence that it would rely on its financial capacity to would incur costs beyond these reasonable estimates. However, those estimates already adequately reflect the connection between the disparity in financial positions and the size of Woodman’s potential adverse costs exposure. …
[151] These observations serve to illustrate how the financial disparity between an applicant and a respondent might bear upon the deterrent effect of the possibility of an adverse costs order. In my view, it will be a rare case indeed in which that is the only factor which creates the relevant deterrence. Generally, all the usual considerations will still be at play, including those emphasised by Bunnings in this case, being the prospects of success of the action and the magnitude of the commercial interests at stake. Indeed, if the applicant was certain of its prospects, then the potential size of any adverse cost order might be irrelevant. The relevant point is thus not whether the deterrent effect of an adverse costs order is entirely attributable to the financial disparity, but whether that financial disparity has some meaningful connection to its deterrent effect.
[152] In this case, if the financial disparity between Woodman and Bunnings was not so large, then Bunnings would not be as likely incur costs which are so large relative to Woodman’s own financial resources, and outspend Woodman such that its recoverable costs are likely to exceed Woodman’s actual costs. It would also not be as likely that the size of the potential adverse costs exposure to be visited upon Woodman would be so large in comparison to the financial interests it seeks to protect. In this way, the size of the potential costs order, and its significance relative to Woodman’s resources, are both at least partially attributable to the disparity in financial positions between the parties. In those circumstances, I am satisfied that substantial financial disparity between the parties contributes to the deterrent effect of the possibility of an adverse costs order, with the result that s 82(5)(c) is met.
His Honour concluded that the mandatory thresholds in s 82(5) were all met, which enlivened the discretion to make a NACO in s 82(5) (see para 153)
Consideration of whether discretion in s 82(4) should be exercised
[154[ In relation to the exercise of the discretion, Bunnings relies upon the comments of Cheeseman J in Hamilton v Meta Platforms, Inc. (Costs) [2023] FCA 1496, in particular at [24]. In that case, her Honour … observed, with respect correctly in my view, at part of [24]:
The plain terms of s 82(4) make it clear that the power to make a NACO is discretionary. The discretion must be exercised by reference to the considerations in s 82(5)(a) to (c). An applicant for a NACO is not entitled as of right to a NACO even if the court is satisfied of the matters in s 82(5)(a) to (c). Absent the court being satisfied of those matters, a NACO cannot be made. It does not follow, however, … that where the matters in s 82(5)(a) to (c) are established, the court must make a NACO.
[155] Bunnings appears to rely upon those comments to submit that satisfaction of the criteria in s 82(5) for the grant of a NACO did no more than enliven the discretion to make the order sought. Bunnings submits that the residual discretion must be exercised judicially by reference to relevant considerations, including the effect that the order would have on Bunnings, and whether it is just that Bunnings be deprived of any prospect of recovering its costs of defending this proceeding that Woodman had chosen to commence.
[156] It is true that, upon being satisfied that the mandatory criteria in s 82(5) have been established, it remains for Woodman to satisfy me that the NACO should be made in the exercise of my discretion. But that does not mean that the fact that the criteria in s 82(5) are met are no longer relevant, or that I must take into account considerations that are in conflict with those criteria. To the contrary, the conclusion that each of the mandatory thresholds are satisfied, and potentially the ease or otherwise with which that conclusion is drawn, may be relevant to the exercise of the discretion. In the circumstances of this case, I consider that the conclusion I have reached about those criteria weigh heavily in favour of exercising my discretion to make a NACO.
[157] The reliance Bunnings places on the effect that the order would have on Bunnings, and whether it is just that Bunnings be deprived of any prospect of recovering its costs of defending this proceeding that Woodman had chosen to commence, seem to me to be in conflict with those mandatory criteria and indeed with the whole scheme of the NACO regime. The plain intention of the legislature was that a NACO can be made if the criteria in s 82(5) are met, and as such, any adverse effect on a respondent against whom the order is made, and the deprivation of any prospect of recovering their costs if the action fails, are both implicitly contemplated and authorised.
[158] Even if it is not correct to characterise these additional considerations as being in conflict either with any of the mandatory criteria or the legislative scheme as a whole, I am unable to give them any determinative weight when considered against the mandatory criteria that have been established to a reasonably high degree of satisfaction. In addition, I have considered the evidence before me regarding the substantial financial resources available to Bunnings. That financial capacity is a significant factor to which I have regard, independently of my satisfaction as to s 82(5)(c). Further, the evidence of Woodman’s solicitor that Woodman will be deterred from pursuing its action if a NACO is not made is relevant evidence going beyond the threshold in s 82(5)(c) on which I place some real weight, having regard to the overall context and purpose of the NACO regime.
[159] …. Bunnings made extensive submissions in support of the contention that the action does not raise a prima facie case, or have sufficient prospects of success to justify the order sought [and that these provide] a basis on which the Court should not exercise the discretion to make a NACO.
[160] I do not consider that a form of the abandoned threshold proposed in the Original Bill should be applied to the ultimate discretion to grant the relief of a NACO if the s 82(5) test as a whole is met, because that would entail thwarting the change made by parliament in what was ultimately legislated to focus on the issue sought to be litigated, rather than the overall prospects of success of the proceeding. That does not mean that prospects of success are entirely irrelevant to the exercise of the discretion. A case with evidently strong prospects may warrant the making of a NACO despite some countervailing discretionary factor, whereas a case which raises a reasonable issue for trial but which seems seriously at risk of failing on those issues, or is a generally poor vehicle for them to ventilated, may not. In this way, Bunnings’ contention that the action lacks substantial merit and is likely to fail may in principle be a factor which weighs against the making of a NACO in the Court’s discretion, but in circumstances quite different to those in this case.
[161] In the circumstances of this case, and having regard to the considerations referred to above, I do not consider that the difficulties and challenges that Woodman faces in bringing this proceeding, as identified in considerable detail by Bunnings, the main parts of which have been addressed in these reasons, constitute a compelling reason not to make the NACO sought by Woodman.
[162] … to impose an excessively burdensome requirement as to Woodman’s prospects of success at this stage as part of the exercise of discretion would risk undermining the purpose of the regime, given that a NACO only has any practical effect if an applicant is unsuccessful.
[163] In the course of addressing the s 82(5) criteria, Bunnings identifies a number of other factors which it submits weigh against the exercise of the discretion. These include:
(a) the relatively small value ($60,000) attributed to the goodwill associated with the business that is now Mitre 10 Jimboomba when it was purchased by Woodman in 2018;
(b) the fact that the evidence relied upon by Woodman shows that most Mitre 10 stores which have a Bunnings open nearby continue to trade for years after that occurring;
(c) the possibility that the fund administered by the National Advisory Council may again call on funds from its members to be provided to Woodman; and
(d) the fact that Metcash, a publicly listed company with an after-tax profit in the order of hundreds of millions of dollars and, through the Hardware Group, a competitor of Bunnings at multiple levels of the market, has an interest in the outcome of the action, and is represented at least indirectly on the National Advisory Council which operates the fund which has been assisting Woodman.
[164] I … do not consider that [these submissions] provide an adequate reason not to exercise the discretion as I am otherwise minded to do.
[165] Having reached the satisfaction required by s 82(5), I am satisfied in all the circumstances that it is appropriate to make the NACO under s 82(4). In doing so, I am aware that the effect of that order will be to deprive Bunnings from recovering its own costs regardless of the outcome of the litigation. That is expressly the outcome which parliament contemplated by the introduction of the NACO regime.
[166] The NACO will be made. Bunnings must pay Woodman’s costs of this application.