Re Trade Practices Commission v Gorenje Pacific Pty Limited [1983] FCA 359; (1983) 74 FLR 276 (22 December 1983)

FEDERAL COURT OF AUSTRALIA

Re: TRADE PRACTICES COMMISSION
And: GORENJE PACIFIC PTY. LIMITED [1983] FCA 359; (1983) 74 FLR 276
No. WAG 38 of 1983
Trade Practices - Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Beaumont J.(1)

CATCHWORDS

Trade Practices - Resale price maintenance - Attempting to induce retailer not to advertise and/or sell goods supplied at less than "agreed" price - Claim not defended - Question of penalty - No evidence of any other contravention- Respondent acted promptly to prevent repetition of contravention.

Trade Practices Act, 1974 s.48

Practice - Merger - Leave to discontinue - Principles relevant to the exercise of discretion - Undertakings given as condition for leave to discontinue - Trade Practices Act 1974 (Cth), s. 50 - Federal Court Rules, O. 22, r. 2(1)(d). S.C.I. Packaging Pty Ltd, being the applicant in related proceedings and A.P.M. Investments Pty Ltd (A.P.M.) the first-named respondent in these proceedings were bound by interlocking undertakings sought by the applicant by which each undertook not to acquire shares in Fibre Containers Ltd (F.C.L.). Previous proceedings had been unsuccessful in releasing the parties from these undertakings. The applicant had sought the undertakings to prevent A.P.M. from acquiring all the shares in F.C.L. which the applicant alleged involved a contravention of s. 50 Trade Practices Act 1974. During the course of previous proceedings it became clear that the major shareholder in F.C.L. would not sell its shares to A.P.M. which would therefore prevent A.P.M. from acquiring the shares in F.C.L. Accordingly, the applicant, by notice of motion, sought leave to discontinue the action pursuant to O. 22, r. 2(1)(d) of the Federal Court Rules. A.P.M. opposed the granting of the application on the basis that the applicant had been severely damaged in the market-place as a result of the proceedings and that the applicant should not be permitted to discontinue its proceedings unless the applicant could be restored to the same position it occupied before proceedings were commenced.

Held: (1) In the exercise of the court's discretion to grant leave to discontinue the proceedings, the following considerations should be taken into account in favour of the applicant:

(a) it should not be compelled to litigate, against its will, at great length, and with considerable expenditure of public money, an action which it believes, on reasonable grounds, to be pointless;

(b) the circumstances which have arisen, and which appear to make further litigation by it unnecessary, were not designed by it; nor could they readily have been foreseen when the litigation was instituted;

(c) the merits of the action have not been entered into; there is nothing to suggest that the applicant's case is lacking in good faith or in merit;

(d) the applicant is prepared to surrender any right to pursue the remedy which it is presently seeking, namely an injunction to prevent the acquisition of certain shares or assets; (however, it reserves the right, if it ever becomes appropriate, to bring an action which would probably be based on substantially the same material, seeking a divestiture of shares or assets so acquired); and

(e) the applicant is prepared to submit to an order for those costs which it would be obliged to pay if its application were dismissed on its merits at this stage.

Covell Matthews v. French Wools Ltd (1977) 1 WLR 876, considered.

(2) The applicant should not be ordered to pay A.P.M.'s costs on the basis of solicitor-and-client costs as a condition for leave to discontinue being granted, as these would be substantially higher than A.P.M. could achieve if the action against it was dismissed.

(3) Similarly, a requirement that the applicant, as a condition for leave to discontinue being granted, undertake not to seek divestiture of any shares in F.C.L. which A.P.M. might succeed in acquiring would go further than a dismissal of the present action and, due to the applicant's statutory function, it would be contrary to the public interest for it to bind itself in such a manner.

(4) The application for leave to discontinue the proceedings should be granted on terms that the applicant pay A.P.M.'s taxed costs and undertake not to institute any further proceedings for injunctions, or otherwise seek, to prevent the purchase of shares in F.C.L. by A.P.M.

HEARING

Melbourne, 1983, December 22. 22:12:1983
NOTICE OF MOTION.

The applicant by notice of motion sought leave to discontinue proceedings pursuant to O. 22, r. 2(1)(d) of the Federal Court Rules.

D.G. Williamson Q.C. and D. Shavin, for the applicant.

B.J. Shaw Q.C., and K.M. Hayne and R.L. Dean, for the first-named respondent.

W.R. McComas, for the second to ninth-named respondents.

P.G. O'Callaghan Q.C., A.H. Goldberg Q.C. and A.J. Myers, for the tenth-named respondent.

Cur. adv. vult.

Solicitor for the applicant: T. A. Sherman, Acting Commonwealth Crown

Solicitor.

Solicitors first respondent: Hedderwick, Fookes & Alston.

Solicitors for the second to ninth respondents: Freehill, Hollingdale & Page.

Solicitors for the tenth respondent: Barker, Harty & Co.
J.J.I.

ORDER

1. A penalty of $3,000 be imposed upon the respondent in respect of the offence referred to in these proceedings.

2. The respondent pay the applicant's costs including reserved costs.

Orders accordingly.

DECISION

By its statement of claim in this matter, the Commission alleged that in or about October, 1981 the respondent engaged in the practice of resale price maintenance in contravention of s.48 of the Trade Practices Act, 1974 ("the Act"). The Commission claimed a pecuniary penalty and injunctive relief.

The respondent did not seek to defend the claim but proferred an undertaking to the Court in the terms of the injunction sought, and consented to an order that it pay the Commission's costs. The Commission having accepted the undertaking, the only remaining question is that of penalty.

The facts are agreed and may be briefly stated. The respondent, a Sydney based company, is an importer and distributor of home appliances including household refrigerators, carrying on its business in all mainland States. The impugned conduct arose out of a conversation in October 1981 between the respondent's then manager for the State of Western Australia and a representative of a partnership carrying on business of retailers of white goods and electrical goods, including refrigerators. In the conversation, the advertised price of three models of the respondent's refrigerators was discussed and agreed. It was further agreed that the respondent would make a contribution of $800 towards the cost of promoting these products.

In November 1981, the retailers advertised one of the respondent's refrigerators at a price of $225 which was $4 less than the "agreed" price. On 26 November, 1981, the respondent's Western Australian State manager wrote to the retailers:
"I bring to your attention that our company will not provide support for the type of advertising that occured on our refrigerators in the West Australian on Thursday 26th. (sic)

Our policy is quite clear. We want each and every one of our prefered dealers to obtain maximum profit from our units. We don't need dealers promoting our product solely on price for obvious reasons. Our main objective, daily, is to outline to our customers that Pacific represents value. Thursday's advertising makes that task that much harder. (sic)

I make it quite clear that the minimum advertised price we would agree to support you on was as follows:
715 AB $229
715 ABC $239
717 B $299

I hope that you give more consideration in the future to this in the interest of both parties."

In September 1982, the manager again wrote to the retailers referring again to the breach of the previous "agreement" and declining to honour the commitment to contribute $800 towards, inter alia, the advertising in the press. However, he offered the sum of $200 towards the cost of advertisement within the retailers' store.

In November 1982, the matter was investigated by officers of the Commission. In December 1982, the respondent, by its managing director, wrote to the retailers explaining that there had been a "misunderstanding" and that it was not and never had been, the respondent's policy to engage in resale price maintenance. There is no evidence of any specific refusal by the respondent to supply goods to the retailers.

There is no evidence of any other contravention of the Act on the part of the respondent. It is one of the smaller operators in the wholesale white goods field: the gross value, inclusive of sales tax and service of its range of goods in the year ended 31 December, 1982 was approximately $13.3 million whereas the total sales of all companies, involved in the white goods industry, in the year ended 31 December, 1982 amounted to something in excess of $1,500 million of which sales of white goods alone amounted to approximately $900 million.

I also take into account, on the question of penalty, that, once alerted to the problem, senior management acted promptly to prevent any repetition of the contravention (cf. Trade Practices Commission v. Malleys Ltd. (1979) 25 A.L.R. 250 at p.255). On the other hand, the respondent must accept responsibility, not merely for the actions of the State manager at the time but also for its failure to ensure that its executives understood and implemented the provisions of the Act.

In all the circumstances, I am of the opinion that an appropriate penalty is the sum of $3,000.