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Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Trade Practices - Agreement or understanding by carrier of goods not to deal with broker or consultant - Whether agreement or understanding made - Whether within restraint of trade and commerce provisions before 1 July 1977 - Whether agreement or understanding given effect to before or after 1 July 1977 - Exclusionary provision - Substantial lessening of competition in a market - The role of economic evidence - Whether Trade Practices Commission can commence action after 1 July 1977 for contravention before that Act.Trade Practices Act 1974 - s. 45.
Trade Practices Amendment Act 1977 - ss. 8, 25.
Trade Practices - Restrictive trade practices - Restraint of trade - Conduct substantially lessening competition - Market - Arrangement or understanding - Effect on competition - Giving effect to antecedent arrangement or understanding - Trade Practices Act 1974 (Cth), ss 45(2), (3), (4), 84(2).
Trade Practices - Exclusionary provisions - "Particular persons" - Trade Practices Act 1974 (Cth), s 4D.
Trade Practices - Conduct of employee "on behalf of" corporation - Meaning and validity of statutory provision deeming conduct engaged in by corporation - Trade Practices Act 1974 (Cth), s 84(2).
Evidence - Admissions - Who may make - Agents and servants - Admissions as to past events - Trade Practices Act 1974 (Cth), s 84(2).
Statutes - Interpretation - Construction of penal statutes - Ambiguity - Trade Practices Act (Cth), s 45(4). Held: (1) A contract, arrangement or understanding could properly be described as in restraint of trade and commerce for the purpose of the Act prior to 1 July 1977 only if the contract were in restraint of trade according to the common law rules and, in addition, satisfied the test provided in s 45(4) (as it then stood).
Quadramain Pty Ltd v. Sevastapol Investments Pty Ltd [1976] HCA 10; (1976) 133 CLR 390, considered.
TPC v. Allied Mills Industries Pty Ltd (No 4) [1981] FCA 133; (1981) 60 FLR 1; 3 ATPR 40-237; Hollywood Premiere Sales Pty Ltd v. Faberge (Aust) Pty Ltd (1976) 28 FLR 167; TPC v. Email Ltd [1980] FCA 86; (1980) 43 FLR 383; 3 ATPR 40-172, not followed.
(2) The words "is likely to have" in s 45(4) (as it stood prior to July 1977) in connection with the words "significant effect on competition" meant that the probability must be something not very far short of "more probably than not", except in unusual circumstances.
Tillmanns Butcheries Pty Ltd v. Australian Meat Industry Employees' Union [1979] FCA 84; (1979) 42 FLR 331; (1979) 2 ATPR 40-138, approved.
(3) The minutes of a meeting of freight carriers, in which it was noted that "previous experience showed that it was better for the client and (carrier) to deal direct" rather than through transport brokerage agencies, evidenced an understanding entered into by the persons present not to deal other than directly with a client.
FCT v. Lutovi Investments Pty Ltd [1978] HCA 55; (1978) 140 CLR 434; Commissioner of Taxation v. Cooper Brookes (Wollongong) Pty Ltd [1979] FCA 45; (1979) 41 FLR 277; L Grollo & Co Pty Ltd v. Nu-Statt Decorating Pty Ltd [1978] FCA 33; (1978) 34 FLR 81; 2 ATPR 40-086, per Smithers J at 89; Morphett Arms Hotel Pty Ltd v. TPC (1980) 3 ATPR 40-157; TPC v. Email Ltd [1980] FCA 86; (1980) 43 FLR 383 per Lockhart J at 395-397, applied.
(4) The arrangement or understanding between the defendants, which carried on business as freight carriers, not to acquire the services of a certain transport broking company did not have, nor was it likely to have, a significant effect on competition between the defendants to acquire those services, because there was no demand by any relevant defendant to acquire those services and it was unlikely that there would be any competition between the relevant defendants to acquire them.
(5) The competition between the defendants did not change during the period following the entry into the arrangement or understanding, and therefore the allegation that before 1 July 1977 effect was given to an arrangement or understanding in contravention of s 45(2)(b) (as it then stood) had not been established.
(6) The allegations that after 1 July 1977 the defendants gave effect to an arrangement or understanding in contravention of s 45(2)(b), as amended from 1 July 1977, in relation to the broking services said to be offered by the same transport broking company, had not been established, because the company ceased to operate as a broker before that date.
(7) The purpose referred to in s 4D(1)(b) is objective.
(8) An arrangement not to deal with a class or category of persons is not an arrangement not to deal with "particular persons" and is therefore not within s 4D.
(9) The Trade Practices Commission constituted by the 1974 amendments was entitled to take and pursue proceedings for breach of the 1974 Act, notwithstanding the terms of the Trade Practices Amendment Act 1977 (No 81 of 1977).
TPC v. Milreis [1978] FCA 20; (1978) 32 FLR 234, followed.
(10) Section 84(2) did not extend to admissions made by a servant as to past events.
TPC v. Nicholas Enterprises Pty Ltd (1978) 40 FLR 83; (1979) 2 ATPR 40-126 at 18,345 per Fisher J at 94, followed.
(11) Conduct engaged in by a servant of a company may have been "on behalf of" the company, within the meaning of s 84(2), notwithstanding that such conduct was not specifically authorised by the company or may even have been prohibited by it.
Re Ross; Ex parte Attorney-General for Northern Territory [1980] HCA 2; (1980) 54 ALJR 145 at 149, referred to.
(12) Officers of a company may have authority to make admissions about past events by virtue of their general authority or having been deputed to answer inquiries of a particular nature.
Fraser Henleins Pty Ltd v. Cody [1945] HCA 49; (1945) 70 CLR 100, followed.
TPC v. Allied Mills Industries Pty Ltd (No 3) [1981] FCA 103; (1981) 55 FLR 174, per Sheppard J at 178; TPC v. Queensland Aggregates Pty Ltd (No 3) (1982) 61 FLR 52; 4 ATPR 40-297 at 43,693 & 43,696 per Morling J at 58-59 and 63, referred to.
(13) Where an agent, acting in the ordinary course of his employment, makes a statement which contains an admission which is strictly part of the res gestae, the statement may be admitted in evidence against the principal.
NSW Country Press Co-Operative Co Ltd v. Stewart [1911] HCA 12; (1911) 12 CLR 481 per Griffith CJ at 491-492; Fraser Henleins Pty Ltd v. Cody (1945) 70 CLR 101 per Latham CJ at 113 and Williams J at 134; Ex parte Gerard & Co Pty Ltd; Re Craig (1944) 44 SR (NSW) 370 at 377; Barrett v. Steel Products Distributing Co Pty Ltd (1962) NSWR 981 per Walsh J at 986; Victorian Railways Commissioners v. Lord (1968) 2 NSWR 327 per Wallace P at 334 and Walker JA at 338, followed.
(14) Section 84(2) is within the constitutional power of the Commonwealth Parliament.
Fencott v. Muller (1983) 57 ALJR 317 per Gibbs CJ at 320-321, followed.
Actors and Announcers Equity Association of Australia v. Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169, distinguished.
(15) If the language of the Act after the ordinary rules of construction have been applied remains ambiguous or doubtful, it is appropriate to remove or resolve that ambiguity or doubt in favour of a defendant, at least, where the proceedings are for a penalty.
TPC v. Legion Cabs (Trading) Co-operative Society Ltd [1978] FCA 47; (1978) 35 FLR 372, followed.
Beckwith v. The Queen [1976] HCA 55; (1976) 135 CLR 569 per Gibbs J at 576, applied.
(16) Observations on the meaning of "market" in s 45(3) and on the role of economic evidence in assessing the likely effect of an arrangement or understanding on competition in a market.
HEARING
Sydney, 1983, June 28; 1984, November 12; 1985, February 12. 12:2:1985Proceedings for recovery of pecuniary penalties and injunctions in respect of contraventions of Pt IV of the Trade Practices Act 1974.
K Mason QC, B W Rayment QC and S D Robb, for the plaintiff.
T R H Cole QC, P R Capelin QC, L D S Waddy and G Farrell, for the first, fifth and seventh defendants.
D E Horton QC, C A Sweeney and D Ryan, for the second defendant.
R P Meagher QC and N A Cotman, for the third defendant.
R D Giles QC, for the sixth defendant.
T M Jucovic, for the eighth and ninth defendants.Waldron.
Cur adv vultSolicitor for the plaintiff: Australian Government Solicitor.
Solicitors for the first, third, fifth and seventh defendants: Dawson
Solicitors for the second defendant: Freehill, Hollingdale & Page.
Solicitors for the sixth, eighth and ninth defendants: Allen Allen &
Hemsley.
FPC
ORDER
1. The proceedings be dismissed.2. The question of costs is reserved.
Orders accordingly
DECISION
On 25 May 1978 a Statement of Claim was filed by the Trade Practices Commission ("the Commission") in this matter. There are nine defendants, namely:First Defendant : T.N.T. Management Pty. Limited2. Part 1 PRELIMINARY
("T.N.T.")
Second Defendant : Brambles Holdings Limited
("Brambles")
Third Defendant : Mayne Nickless Limited ("Mayne
Nickless")
Fourth Defendant : Youngs Transport Pty. Limited
("Youngs")
Fifth Defendant : Ansett Transport Industries
(Operations) Pty. Limited
("Ansett")
Sixth Defendant : Express Freight Pty. Limited
("Express Freight")
Seventh Defendant : Associated Steamships Pty.
Limited ("A.S.P.")
Eighth Defendant : Eslea Holdings Limited,
formerly Ipec Holdings Limited
("Ipec")
Ninth defendant : Roadswift Transport Pty.
Limited, formerly Interstate
Parcel Express Co. Pty. Limited
("Interstate PARCEL")
INDEX TO JUDGMENT
(A) General3. Part 2 WAS ANY ARRANGEMENT MADE OR UNDERSTANDING ENTERED
(B) Proceedings commenced by Tradestock in 1976
INTO AT THE NATIONAL FREIGHT FORWARDERS'4. Part 3 WAS ANY ARRANGEMENT MADE OR UNDERSTANDING ENTERED
ASSOCIATION MEETING HELD ON 12 FEBRUARY 1976?
(A) The minutes of the meeting of 12 February
1976
(i) General
(ii) Were the relevant defendants
members of the National Freight
Forwarders' Association?
(iii)The relationship of persons
attending the meeting to the
relevant defendant and their
ability to commit it
(B) Oral evidence of what took place at
the meeting of 12 February 1976
(C) Admissions
(D) Circumstantial evidence
(i) Motive
(a) Rejection by the Trade
Practices Commission of the
National Freight Forwarders'
application for authorisation
to continue its price fixing
role
(b) Client disadvantage, the
effect of intermediaries and
the defendants' perception of
this
(c) The actual and perceived
impact of Tradestock
(d) The defendants' awareness
of any ineffectiveness of
individual action by a
defendant
(ii) Inference of concert from any
parallel changes in behaviour of
the defendants
(E) The requirements for making an
arrangement or entering into an
understanding
(F) conclusion
INTO AT THE NATIONAL FREIGHT FORWARDERS'5. Part 4 WAS ANY ARRANGEMENT MADE OR UNDERSTANDING ENTERED
ASSOCIATION MEETING HELD ON 20 MAY 1976?
(A) The minutes of the meeting of 20 May
1976
(i) General
(ii) Were the relevant defendants
members of the National Freight
Forwarders' Association?
(iii)The relationship of persons
attending the meeting to the
relevant defendant and their
ability to commit it
(B) Oral evidence of what took place at
the meeting of 20 May 1976
(C) Admissions
(D) Circumstantial evidence
(E) Conclusion
INTO AT THE NATIONAL FREIGHT FORWARDERS'6. Part 5 ADMISSIONS IN RELATION TO THE THREE NATIONAL
ASSOCIATION MEETING HELD ON 4 AUGUST 1976?
(A) The minutes of the meeting of 4 August
1976
(B) Oral evidence of what took place at the
meeting of 4 August 1976
(C) Admissions
(D) Circumstantial evidence
(E) Conclusion
FREIGHT FORWARDERS' ASSOCIATION MEETINGS7. Part 6 THE CONSTRUCTION OF S.45(2)(a) PRIOR TO 1 JULY
19778. Part 7 DID ANY RESTRAINT IN THE ARRANGEMENT MADE OR THE
UNDERSTANDING ENTERED INTO AT ANY OF THE MEETINGS9. Part 8 WAS EFFECT GIVEN TO ANY OF THE THREE ARRANGEMENTS
HAVE OR WAS IT LIKELY TO HAVE A SIGNIFICANT EFFECT
ON COMPETITION BETWEEN THE DEFENDANTS?
(A) General
(B) The four periods of operations of
Tradestock
(i) The consulting period
(ii) The commission period
(iii)The freight forwarding period
(iv) The period when Tradestock would
not deal with the defendants
(C) The degree of competition between the
defendants
(D) The submission in relation to any broker
market
(E) Conclusion
OR UNDERSTANDINGS AND THE CONSTRUCTION OF10. Part 9 WAS EFFECT GIVEN TO ANY OF THE THREE ARRANGEMENTS
S.45(2)(b) BEFORE 1 JULY 1977?
(A) The construction of s.45(2)(b) before
1 July 1977
(B) General
OR UNDERSTANDINGS AND THE CONSTRUCTION OF11. Part 10 MISCELLANEOUS
S.45(2)(b) and (3) AFTER 1 JULY 1977?
(A) The construction of s.45(2)(b) and (3)
(B) The issue of substantially lessening
competition in any market
(i) General
(ii) Economic evidence
(a) General
(b) Economic evidence based on
assumed facts
(c) The role of economic evidence
(d) The meaning of "competition"
in s.45(2)(b)(ii) and (3)
(C) Services for the transportation of goods
in Australia
(A) The amended defences12. Part 11 SUMMARY OF CONCLUSIONS AND THE ORDERS
(B) The effect of the Trade Practices Amendment
Act (1977) upon the proceedings
(C) What instructions, if any, did officers of
the defendants receive about Tradestock?
(D) Would the defendants deal with transport
consultants who did not seek commission?
(E) The Tripodi principle
(F) Certain evidentiary principles
(G) Undertakings
PART 1(A) General
PRELIMINARY
13. The proceedings were brought by the Commission pursuant to s.77 of the Trade Practices Act 1974 ("the Act") for the recovery of pecuniary penalties referred to in s.76 of the Act and pursuant to s.80 of the Act for the grant of injunctions.
14. The defendants carried on freight forwarding activities. The first three defendants appear to be as large or larger than any other freight forwarders in Australia. In general, the defendants offered to carry goods to all or most States, often by a variety of means, for example, road, rail or air.
15. Tradestock Pty. Limited ("Tradestock") was incorporated in 1975 and commenced shortly thereafter to carry on what can be described broadly as the business of transport consultants seeking a fee from the client for its advice. Later its business changed to one in which it sought its remuneration by way of commission from the freight forwarder with whom it placed its business. In the early stages of its history Tradestock operated under the name T.I.C. Management Consultants. A Mr Frewen, who was in the witness box for 49 days, was the managing director of Tradestock and a Mr Stock, who played a significant part in the operations of Tradestock, was a director.
16. In substance, it is alleged by the Commission that the defendants were parties to one or more of three arrangements or understandings, each in breach of s.45(2)(a) of the Act. It is alleged that arrangements were made or understandings were entered into by various defendants that they would not negotiate with, furnish quotations to, enter into contracts with, or otherwise deal with Tradestock, or any other agent and/or broker, in respect of the carrying or forwarding of freight, or the arranging for the carrying or forwarding of freight, proposed or sought by Tradestock or any other agent and/or broker, for or on behalf of persons seeking the services of such defendants or any of them for the carrying or forwarding of freight or the arranging for the carrying or forwarding of freight through Tradestock or any other agent and/or broker. It is alleged that the arrangements were made or the understandings entered into at meetings held on 12 February, 20 May, and 4 August 1976 of a body called the National Freight Forwarders' Association. ("N.F.F.A.")
17. The precise nature of the allegations will be dealt with more fully later. It is also alleged that the arrangements or understandings were given effect to in breach of s.45(2)(b) of the Act. The Act was amended in a way which falls for consideration by Act No. 81 of 1977 which came into operation on 1 July 1977.
18. The case was fought with extreme determination. Interlocutory proceedings occupied some 60 days before a single Judge of this Court and some 20 separate judgments were given in respect of these interlocutory applications. Five appeals were brought to the Full Court of this Court from certain of these judgments. Three applications were made for special leave to appeal to the High Court from the judgments of the Full Court. Of these one was refused, one apparently was not proceeded with and the third was granted although the appeal was unsuccessful. No appeal was brought by the Commission. At the time these interlocutory appeals were instituted, an appeal lay as a right to the Full Court but the Federal Court of Australia Act 1976 has been amended since by adding a s.24(1A) which provides that an appeal should not be brought from an interlocutory judgment unless the Court or Judge gives leave to appeal.
19. When these proceedings were instituted, this Court was operating under Statutory Rules 20 and 220 of 1977. These rules, in substance, applied the rules of the High Court. An interlocutory application was made by the second defendant that the matter proceed under the Federal Court Rules, which came into operation on 1 August 1979 (Statutory Rules 140 of 1979). This application was made pursuant to order 64 rule (1) of those rules. All defendants other than the second defendant opposed the application arguing that the proceedings were of a quasi-criminal nature and they anticipated suffering some disadvantage if the order was made. On 8 May 1981 I decided that, because of the nature of the proceedings, I would not change the rules under which the proceedings were to be heard.
20. Although I suggested on a number of occasions that use should be made of the provision in order 31 of the High Court Rules for a summons for directions, neither the plaintiff nor any defendant accepted my suggestion. This was unfortunate because I feel that, had some of the problems received attention as a result of a summons for directions, at least some reduction in the hearing time could have been expected.
21. The evidence occupied 173 days and the addresses 32 days. In addition, the parties gave me certain written submissions. The submissions for the Commission extended over about 700 pages, those for the first defendant over about 1400, those for the second defendant over about 800, those for the third defendant over about 500, those for the sixth defendant over about 200, those for the seventh defendant over about 15, and those for the eighth and ninth defendants over about 50. In addition, the first defendant sought to tender a further 600 pages in relation to facts which two expert economists had been asked to assume. I declined to accept this further material upon the basis that the mere obligation to read or to decide whether or not to read such a mass of material in addition to the material already tendered by the first defendant was an unreasonable burden to impose on a Judge. Thereafter, senior counsel for the first defendant provided me with a list of page references to the transcript in relation to the assumed facts which apparently had been dealt with in the last mentioned 600 pages.
22. Every point which could possibly be raised concerning the admissibility of evidence appears to me to have been taken and I provided some 40 rulings on the admissibility of evidence during the hearing. The majority of these were in writing, copies of which were given to the parties. Some of these rulings have now been published ((1984) A.T.P.R. 40-483 at pp.45,531 to 45,586). Four senior counsel and seven junior counsel were in Court most of the time and from time to time other counsel appeared. 105 witnesses were called. The interlocutory applications extended over more than 2000 pages of transcript and the hearing over 16,000 pages. In addition, about 1000 exhibits were tendered.
23. Extensive amendments were allowed without serious opposition, to the defences after the hearing had proceeded for about 70 days. On the 203rd day of the hearing the Commission sought to amend para. 32 of its Statement of Claim but I rejected the application.
24. It is hardly an exaggeration to say, in general, that every possible argument that the ingenuity of counsel could devise was put to me.
25. It will be seen from the extent of the evidence and submissions that it would be ridiculous to do other than deal with the evidence and submissions which have been made in what I regard as a practical way. If I have not directed attention to any particular evidence it is because I regard it as of minor importance. Likewise, if I have not dealt with a particular submission, it is because I do not regard it as being of overall significance. I have adopted the practice of referring to submissions by defendants generally without identifying the particular defendant, except where necessary, because, in general, the defendants adopted the submissions of those who addressed before them. In some instances reference will be made to a corporation by a short name and not by its full name.
26. The first issue for determination is whether the arrangements or any of them were made or the understandings or any of them were entered into by the defendants in contravention of s.45(2)(a) and (4) of the Act.
27. The next issue is whether any arrangement or understanding proved to have
been made or entered into was given effect to before
1 July 1977 in breach of
s.45(2)(b) or after 1 July 1977 in breach of s.45(2)(b)(i) or (ii) of the Act
which was amended with effect from 1 July 1977.
(B) Proceedings commenced by Tradestock in 1976
28. It is desirable to refer at this stage to proceedings commenced by Tradestock in 1976. On 17 December 1976 proceedings seeking, inter alia, damages were started in the Victorian Registry of this Court by Tradestock against a number of companies including certain of the defendants in the present proceedings.
29. On 2 May 1977 Smithers J. gave judgment in an application by certain defendants in that action for an order that the proceedings be stayed pending provision by the plaintiff for security for costs of the defendants making the application. An order was granted staying the action against the applicants until security for costs was provided was granted. (Tradestock Pty. Ltd. v. T.N.T. Management Pty. Ltd. [1977] FCA 1; (1977) 30 FLR 343; (1977) 1 ATPR 40-046).
30. On 27 January 1978 Smithers J. gave judgment on an application by Tradestock, which had been unable to provide the security for costs required by the stay granted on 2 May 1977, in which it sought a removal of the stay based on fresh evidence ((1978) [1978] FCA 1; 32 F.L.R. 420; (1978) 1 A.T.P.R. 40-056). The fresh evidence included minutes of N.F.F.A. meetings of 4 March 1969, 12 February 1976, 20 May 1976, and 4 August 1976 and evidence of telephone conversations including conversations of 26 July 1976 by Frewen or Stock of Tradestock with a Mr Gardiner identified in the judgment as of Interstate Parcels Express Co. Pty. Limited, a telephone conversation with a Mr Shortell identified as of T.N.T. Management Pty. Ltd. and a third telephone conversation with a Mr Wilkins identified as of Youngs Transport Pty. Limited. His Honour ultimately removed the stay in relation to all but certain defendants.
31. In deciding the case now before me in which the evidence is undoubtedly
much more extensive than that before Smithers J., I have
had the benefit of
his Honour's judgments which were referred to quite extensively by various
parties. Inevitably, because of the
difference in the material before me to
that before Smithers J. and in the arguments presented, differences in the
conclusions reached
must be expected.
PART 2WAS ANY ARRANGEMENT MADE OR UNDERSTANDING ENTERED INTO AT THE
32. Para. 21(1) of the Statement of Claim is as follows:
"21.(1) On or about 12 February 1976 the33. Para. 21(2) sets out item 11 of the minutes of 12 February 1976 (infra).
first, second, third, fourth and fifth-named
Defendants and each of them made an
arrangement and/or entered into an
understanding whereby they and each of them
agreed and/or decided:-
(a) that such Defendants and each of
them would not negotiate with,
furnish quotations to, enter into
contracts with, or otherwise deal
with, T.I.C. Management Consultants
or any other agent and/or broker, in
respect of the carrying or
forwarding of freight, or the
arranging for the carrying or
forwarding of freight, proposed or
sought by T.I.C. Management
Consultants or any other agent
and/or broker for or on behalf of
persons seeking the services of such
Defendants or any of them for the
carrying or forwarding of freight or
the arranging for the carrying or
forwarding of freight through T.I.C.
Management Consultants or any other
agent and/or broker; and/or
(b) that such Defendants and each of
them would only negotiate with,
furnish quotations to, enter into
contracts with, or otherwise deal
with, persons seeking the services
of such Defendants or any of them
for the carrying or forwarding of
freight or the arranging for the
carrying or forwarding of freight,
direct, and would not negotiate
with, furnish quotations to, enter
into contracts with, or otherwise
deal with, such persons or any of
them through T.I.C. Management
Consultants or any other agent
and/or broker."
34. The choice of the words "and each of them" in the Statement of Claim is, in my opinion, for more abundant caution so that the Commission would not fail if the allegation is only established against certain of the defendants referred to in the relevant paragraph.
35. The Commission relied upon:
(A) The minutes of the meeting and their confirmation at36. It was also submitted by the Commission that the principles in Tripodi v. The Queen [1961] HCA 22; (1961) 104 CLR 1 were applicable and a number of other principles supported an inference that the arrangements were made or the undertakings were entered into.
a subsequent meeting.
(B) Oral evidence of witnesses who were called of what took
place at the meeting.
(C) Admissions of the making of the arrangement or entering
into the understanding.
(D) Circumstantial evidence -
(i) Motive
(a) Rejection of the N.F.F.A. application for
authorisation to continue its price fixing
role.
(b) Client disadvantage, the effect of
intermediaries and the defendants' perception
of this.
(c) The actual and perceived impact of Tradestock.
(d) The awareness of ineffectiveness of individual
action.
(ii)Inference of concert from parallel changes in
behaviour.
37. In addition to the persons recorded in the minutes, a Mr W.A. Levitt, now
working with the Department of Motor Transport, attended.
In 1976 and for
many years previously, Levitt as the executive director of a road transport
federation of which the N.F.F.A. was
a division had prepared the minutes of
the meetings of the N.F.F.A.. Of those who attended the meeting of 12
February 1976 the Commission
called only Levitt. The first defendant called a
Mr Prebble, the third defendant a Mr Uniacke and a Mr Price and the fifth
defendant
a Mr Wise. No explanation was provided for the absence of any of the
other persons attending the meeting.
(A) The minutes of the meeting of 12 February 1976
(i) General
38. The relevant parts of the minutes of the meeting of 12 February 1976,
which were admitted on one basis or another, are:
"NATIONAL FREIGHT FORWARDERS' ASSOCIATION39. The minutes were confirmed at the meeting of 23 March 1976 at which the first five defendants, inter alia, were represented.
Minutes of the Meeting held in the Boardroom,
Wynyard House, Sydney, at 10.30 a.m.
on Thursday, 12th February 1976.
PRESENT:
Chairman - Mr G.C. Uniacke
Mr J. Wise - Ansett Freight Express
Mr J. Linfoot - Brambles Long Distance
Transport.
Mr M.G. Davies ) - Mayne Nickless Ltd.
Mr J. Price )
Mr R.E. Heasman )
Mr J. Gouldstone) - T.N.T./Altrans Ltd.
Mr T. Prebble )
Mr N. O'Brien - Youngs Transport
APOLOGIES:
A.U.T. Holdings Ltd.
I.P.E.C. Australia Ltd.
Tradex Transport.
The Chairman welcomed Members to this the
first Meeting of the New Year and reminded
Members that it had long been customary for
the Chairman to maintain an impartial role and
the organisation he represented to nominate a
person to represent the Company. The Chairman
advised that Mr. M.G. Davies would be the
Mayne Nickless representative.
...
11. T.I.C. MANAGEMENT CONSULTANTS.
It was noted that the above Organisation
had made approaches to several Transport
Companies for quotes for freight movement
for various other organisations.
Similar 'Transport Brokerage Agencies'
had appeared in the Industry at various
times in the past and previous experience
showed that it was better for the Client
and Operator to deal direct."
40. I consider that the minutes are the best evidence of what took place. There was extensive argument about whether the minutes were admissible. There was a considerable amount of evidence concerning the weight to be given to what was recorded in the minutes. A Mr Shortell, a director of T.N.T., said in relation to an event in December 1974, "If it is in the minutes I presume it did take place ... if it is in the minutes I presume it is a true record". A Mr Prebble, who about 1975 became the Australian General Manager of T.N.T. Transport System, said that, apart from entries concerning Tradestock in the minutes of the February and May meetings, he could not recollect any specific incidents of inaccuracy that particularly worried or concerned him and that he did not intend to suggest that the minutes were normally inaccurate. Mr Redpath, the chairman of Mayne Nickless, who was also chairman of the N.F.F.A. for several years before 1971, said of certain of the minutes in 1979, "I have no reason to think these minutes are not an accurate record".
41. I dealt with the admissibility of the minutes in rulings I gave on 14 and
23 November 1983 and, so far as concerns the minutes
of the February meeting,
I admitted those against all the five defendants on the following grounds:
(a) Against all persons as business records42. There is evidence which I accept that the minutes of the February meeting were confirmed at a meeting on 23 March 1976 at which Heasman, Linfoot, a Mr Robinson, Uniacke, M.G. Davies, N. O'Brien and Wise attended. I am also satisfied that there is some evidence that the minutes were circulated and received by the defendants.
to the extent to which they contained
statements of fact ("the business record
ground"); and
(b) Against each defendant that was a member
of the N.F.F.A. by virtue of the
chairman's signature at the succeeding
meeting of the minutes as a true record
of the previous meeting ("the membership
ground"); and
(c) Against each defendant present at a
subsequent meeting at which the minutes
of the prior meeting were confirmed
whether or not the defendant was
represented at the earlier meeting and
whether or not the defendant is shown to
be a member of the N.F.F.A. ("the
confirmation ground").
43. Evidence was given by Levitt about the manner in which he prepared the minutes. He said that during the currency of the meeting he would take notes of the decisions reached, agreements made or consensus arrived at and that he normally translated his notes into something more formal (meaning the minutes) and sent a copy to the chairman seeking his approval and thereafter he would duplicate the minutes and send a copy to each member. He said it was his practice to record every matter that was discussed at the meeting. He said, "I thought that the correct way to keep the minutes was to record the resolutions, rather than the reasons, or the synopsis". He also agreed that he did not draw a distinction between things that were resolved on the one hand and things that were discussed or agreed and that he did not note verbal statements made by any particular person. He also said that meetings were quite informal. He said that minutes which he prepared and recorded in the minute book were, to the best of his knowledge and belief, correct, that at no time had anybody indicated to him that the minutes in the year 1976 were not a correct record and that he could never recall anyone seeking to correct any minute during the time he prepared them. He said that if anything in the minutes was in brackets that indicated that it happened not during but after the meeting. He said that it was not the practice to count votes at a meeting but normally the chairman asked if anybody disagreed with whatever was the subject of the vote.
44. I will next consider the following matters:
. Whether the relevant defendants were members of the(ii) Were the relevant defendants members of the National Freight Forwarders' Association?
N.F.F.A.
. The relationship of the persons attending the meeting
and the relevant defendant.
. Whether the persons attending the meeting were able
to commit the relevant defendants.
45. Exhibits KD and KN are the rules of N.F.F.A. adopted in 1973. KD was
admitted against the first, fifth, seventh, eighth and
ninth defendants and I
am satisfied that KN was established to be the rules of the N.F.F.A. at that
date. There is no suggestion
that there was any relevant alteration in the
rules between the date of adoption and 1976. Rule 3(b) provides:
"The following Companies together withThe following names appear, inter alia, in the list of members:
subsidiaries under their control shall at the
establishment of the Association be members:"
Ansett Freight Express46. Rule 5 is entitled "representation" and provides:
A.U.T. Holdings Limited
Brambles Holdings Limited
Ipec Australia Limited
Mayne Nickless Limited
Thomas Nationwide Transport Limited
Youngs Transport Agency.
"Each member shall appoint a representative47. Membership was admitted on the pleadings. In addition, I am satisfied that this was so because the first defendant was a wholly owned subsidiary of Thomas Nationwide Transport Limited.
who will be the Chief Executive of the Company
or an appointee who will be authorised to
speak for and to commit his Company."
The First Defendant:
48. It is also relevant to note that there is evidence that the first
defendant received circulars from the N.F.F.A. and minutes
of its meetings.
The Second Defendant:49. Although strenuous efforts were made to object to questions directed to establishing that the second defendant was a member, the rules show it was a foundation member in 1973 and I accept from that that it was a member in 1978. In addition, at one stage of the addresses, senior counsel for the second defendant offered a concession, namely that he was prepared to admit that the Commission had proved that Brambles Holdings was a member of the N.F.F.A. at the relevant times if some admission was made by the Commission about the number of subsidiaries of certain defendants. This further admission was not forthcoming so the offer lapsed.
50. I am satisfied that the second defendant was a member.
The Third Defendant:51. Mayne Nickless Limited was named as a foundation member in the 1973 rules and, although not admitted in the pleadings, membership was subsequently conceded by senior counsel for the third defendant. I am satisfied that it was a member.
The Fourth Defendant:52. Membership was admitted in the pleadings. However, some question arises because apparently the fourth defendant was not incorporated until 1 March 1976.
53. The rules show Youngs Transport Agency as a foundation member. The business name Youngs Transport Agency was owned by two individuals named Wilkins and Beasley between 17 July 1973 and 2 March 1976. The fourth defendant took over the business formerly conducted by Wilkins and Beasley and continued to conduct it as Youngs Transport Agency with no change in operations until it was taken over by the third defendant as from 21 February 1977.
54. Because of the admission in the pleadings I treat it as being a member
for the purposes of the proceedings against it, but membership
has not been
proved so far as that issue may affect any other defendant.
The Fifth Defendant:55. Membership was not admitted in the pleadings but Ansett Freight Express was an original member and this was the business name of the defendant in 1973 and thereafter. I am satisfied it was a member.
(iii) The relationship of persons attending the meeting to the
relevant defendant and their ability to commit it.
The First Defendant:56. Heasman held the position of Executive Director, T.N.T. Transport System Freight Division, and was Prebble's immediate superior and immediately below Shortell. On 7 January 1975 he signed a letter to the Trade Practices Commission on behalf of T.N.T. as Executive Director, General Freight Services.
57. Prebble, as I have said, was the Australian General Manager of T.N.T.
Transport System at the relevant time.
The Second Defendant:58. Brambles' counsel adopted the policy of raising and arguing every question of law and objecting to and, so far as I would allow, arguing the admissibility of every question remotely concerning the second defendant.
59. It chose to call no witness other than a lady, Marilyn Sloane. She said that in 1974 she had been employed with Brambles Sea Cargo which she said was one of the divisions of Brambles Holdings. However, there seemed to be some doubt whether this was the position in 1976.
60. "Brambles" and "Brambles Long Distance Transport" had both been registered for years before 1976 as business names of the second defendant. These registrations continued at all relevant times. In 1981 Linfoot signed an application for the registration of the business name Brambles Long Distance Transport as General Manager of the second defendant. Linfoot had attended N.F.F.A. meetings in 1974 and 1975 and and it seems to me a reasonable inference that N.F.F.A. circulars had been sent to an organisation called Brambles Long Distance Transport.
61. A Mr Ian Wood had had business relationships with Linfoot. They were
clearly employed in the same organisation. Linfoot was
superior to Wood. Wood
first met Linfoot at Linfoot's office in Acacia Ridge, Brisbane, in 1973.
That office had the name "Brambles
Long Distance Transport, Acacia Ridge"
outside it and it was the largest in the building. Wood attended a conference
with Linfoot
and a Mr Williams in Brisbane at which various job positions were
discussed. From about the middle of 1974 onwards Wood said he met
Linfoot
approximately once every two months. He said that Linfoot had an office at
Nudgee Road, Brisbane, in a building which bore
the notation outside "Brambles
Transport and Plant Hire Division" or very similar words. From time to time
he got instructions from
Linfoot at Goldfields House, Sydney, which bore
outside the notation "Brambles Industries Limited", together with the words
"Head
Office" or "Registered Office". It appears that in July 1974 Linfoot was
working with a firm which he described as G.W. Chaplin and
Company, a division
of Brambles Holdings Limited.
The Third Defendant:62. Uniacke had acted as the chairman of meetings of the N.F.F.A. and a representative of Mayne Nickless where need arose for a number of years prior to 1976 and was a very senior executive. He said that he was the chief representative of Mayne Nickless for the N.F.F.A. M.G. Davies and John Price also attended the meetings. Davies was a senior executive and when Uniacke went to New Zealand in 1976 he handed over his representative role to Davies.
The Fourth Defendant:63. There is not much evidence in relation to N. O'Brien but, because of the admission in the pleadings, the name Young Transport Agency appearing as a foundation member in the N.F.F.A. rules and O'Brien's name appearing in the minutes with Young Transport against it, I am satisfied of his authority to speak for and commit the fourth defendant but only as against the fourth defendant.
The Fifth Defendant:64. Wise was General Manager of Ansett Freight Express in 1976 and responsible for all its operations. He attended the N.F.F.A. meetings at least during 1974, 1975 and 1976.
65. It was suggested by the second defendant that, since it had not been shown that the persons attending the meeting were specifically authorised to make any arrangement or enter into any understanding, they could not bind the companies whom they represented. The second defendant did not shrink from the submission that, if a board of directors passed a resolution and circulated it to the senior executives, to the effect that under no account must any breach of the Trade Practices Act take place, the company would be adequately protected and could not be in breach of the Act for any conduct of an employee. One has only to state this proposition to realise that it must be rejected immediately. However, because of the extensive argument that was presented on this issue, I do not feel that course is open to me.
66. I deal with several authorities elsewhere on the question of the capacity of a servant or agent to bind a company. Fraser Henleins Pty. Ltd. v. Cody (1945) 70 CLR 101 is a good example. That case went even further than is necessary for the determination of whether the persons attending the meeting had sufficient authority to bind the relevant defendants because it dealt with an admission by the manager of a company who had the general authority to act in and in relation to the business of the company. It was said by Latham C.J. at p.113 that, since he was the manager of the whole business of the company, "if he could not bind the company by an admission, no one else could do so". I will deal further with the question of admissions.
67. The Commission also relied on s.84(2) of the Act. This section
provides:
"Any conduct engaged in on behalf of a body68. This section has been considered on a number of occasions, most recently by Toohey J. in T.P.C. v. Mobil Oil Australia Ltd. [1984] FCA 238; (1984) ATPR 40-482 at p 45,520. It was also discussed by Toohey J. in T.P.C. v, Tubemakers of Australia Ltd. (1983) 5 A.T.P.R. 40-358 at pp.44,326-44,328 where an analysis of the earlier cases was made and reference was made to the judgment of Morling J. in T.P.C. v. Queensland Aggregates Pty. Ltd. (1982) 61 FLR 52 at p 66; (1982) 4 ATPR 40-297 at p 43,698 where his Honour said that it "... appears to disclose a legislative intention to extend, rather than limit, the liability of corporatiions for the actions of others". It seems clear that s.84(2) is not intended to be an exhaustive statement of corporate responsibility under the Act.
corporate by a director, agent or servant of
the body corporate or by any other person at
the direction or with the consent or agreement
(whether express or implied) of a director,
agent or servant of the body corporate shall
be deemed, for the purposes of this Act, to
have been engaged in also by the body
corporate."
69. It would not be possible, in my opinion, to conclude that each person I
have mentioned was present at the meeting other than
as a servant of the
relevant defendant or that his conduct was other than clearly engaged in on
behalf of that defendant. I note
the definition of "conduct" in s.4(1) at the
relevant time provided that when it was used as a noun, it included "...
making a contract or arrangement or entering into
an understanding". It seems
to me that it is unnecessary to labour what was said in Re Ross Ex. P. A-G for
the Northern Territory
[1980] HCA 2; (1979) 54 ALJR 145 at 149 in the judgment of Stephen,
Mason, Murphy and Aickin JJ. where they said at p 149, in relation to the
phrase "on behalf of",
that:
"Context will always determine to which of theI consider it would be hard to imagine a more clear case where what was done at a meeting was done on behalf of the defendant which I have held the relevant person was representing.
many possible relationships the phrase 'on
behalf of' is in a particular case being
applied".
70. The second defendant also raised the question of the constitutional validity of s.84(2) and referred to Actors and Announcers Equity Association of Australia v. Fontana Films Pty. Ltd. [1982] HCA 23; (1982) 150 CLR 169 and to Fencott v. Muller (1983) 57 ALJR 317. The first of these cases seems to me to have dealt with the question of whether s.45D(5) was a law relating to trade unions or to corporations. I can see a great deal of difference between legislation making a trade union responsible for the act of a member or officer of it for certain of his conduct, and legislation making a company liable for an act done on its behalf by a servant when the corporation power in the Constitution is under consideration. In any event in Fencott v. Muller, supra, although in a joint judgment, Murphy, Mason, Brennan and Deane JJ at p.328 and Dawson J. at p.336 said that it was unnecessary to consider the validity of the section because the case could be determined without regard to it, Gibbs C.J. at pp.320-321 held that s.84(2) was within constitutional power.
71. I propose to pay regard to the concluded view expressed by Gibbs C.J. and treat the section as within constitutional power.
72. I consider it to be impossible to come to any conclusion other than that
Heasman and Prebble were authorised to speak on behalf
of and to commit the
first defendant at the meeting and likewise Linfoot the second defendant,
Uniacke and M.G. Davies the third
defendant, O'Brien the fourth defendant and
Wise the fifth defendant. I also consider it to have been established that
each was
properly attending the meeting on behalf of the relevant defendants.
(B) Oral evidence of what took place at the meeting of 12 February 1976
73. About seven years elapsed after the meeting took place before the oral evidence of witnesses was given.
74. Of those witnesses who were called, Prebble, who was the Australian Manager of T.N.T. Transport System in 1975, said that he was asked by Heasman to attend the meeting. Prebble said that he was not keen to do this because he felt most of these meetings were a waste of time. Nevertheless, he purported to give a fairly detailed description of a number of events at the meeting. He conceded that some few days before he gave evidence he had refreshed his recollection from a document which included a list of persons who were present. He conceded that the document which he used to refresh his recollection included copies of the minutes both of February and of May but he said that he only saw that part relating to names. He said that after he attended the meeting he forgot all about it until he was told about two years thereafter that he had been at the meeting and that he then "put my thinking cap on". At that time he was informed that the proceedings had been commenced by the Commission and he realised that he was at some personal risk. He also said that when he was first asked about the February meeting he did not recollect having any involvement with T.I.C. However, he then said that his recollection of the February meeting was vivid.
75. I am not prepared to place any significant reliance on Prebble's evidence which I consider is a reconstruction of events. However, this is not a finding that his evidence was deliberately false.
76. However, I will deal with what Prebble said. It was broadly as follows:
He recollected Levitt taking notes. He did not know who T.I.C. was but a man sitting on the opposite side of the table said they were a firm of freight brokers and when he asked who paid them a man said they were paid by "the carrier or the customer or both". Prebble said "If they come near me I will chuck the schedule at them". By this, he said that he meant he would quote schedule rates. He said he was concerned about the rate of commission. This was the first time he had been told of a request for commission. There was a lot of side talk at the meeting. The subject of T.I.C. "just threw up". The remarks were not always directed to the chair. Uniacke was chairman and the others he remembered who attended were Levitt, Wise, Linfoot, Davies, Heasman and Gouldstone. He did not recall O'Brien or Price. Somebody said "What are we going to do about T.I.C.". Prebble said he did not recall anything said by any person present as to the manner in which he or his company would act in relation to brokers or consultants.
77. Wise said that in the 1970's he represented Ansett Freight Express in relation to the N.F.F.A. meetings. He said that he did not have any actual recollection of the meeting of 12 February 1976, that he was very hazy about the thing and "I did not recall anything at all until I saw those minutes". In my opinion, this clearly and honestly sets out this witness' position and I do not place any reliance on his recollection of anything that was said. At best, Wise's evidence in relation to the meeting can only be regarded as a reconstruction.
78. R.J. Price said he attended the meeting and he remembered Uniacke, Davies and Wise being present. He said that, in the 1970's, he had not been asked to recall what took place at the meeting and that he did not prepare a proof of evidence nor had a proof been prepared for him. He was asked by counsel, "I have shown you a certain document in my chambers but apart from that document can you tell from your unaided recollection when that meeting was?" Answer: "Not specifically". He was also asked "Now, again, try and put out of your mind what you read in the document. Can you remember what anybody said about anything at that meeting?" Answer: "No".
79. Uniacke was asked in relation to the meeting, "Have you any recollection of who said what at that meeting?" Answer: "None whatsoever". I consider that Uniacke gave no evidence of any significance in relation to this meeting.
80. Levitt said that he recalled a meeting at which there was discussion concerning Tradestock or T.I.C. He said, "I remember them mainly because I had been given copies of the three meetings at which the matter arose and from those minutes I am basing my memory". He was asked whether looking at the minute book, he was able to recollect who was present at those meetings and he replied that he could not. What evidence he could give about the meetings was really no more than reading from the minute book. He said, when asked whether the question of T.I.C. was on the agenda or not, that he really could not trust his memory that much. He was asked, "Are you able to recollect the substance of what any specific person said at that meeting?" Answer: "Not of any specific person. I can generalise on what happened at the meeting". I consider that what he said about his recollection of the meeting was no more than a reconstruction of what appeared in the minutes.
81. I regard Levitt as a witness who was somewhat ready to agree with questions put in cross-examination. He was certainly not unfavourably disposed to the defendants. I think his evidence must be looked at against his statement that he could really do no more than read the minutes from the minute book.
82. I do not regard the oral evidence as being of any real significance.
(C) Admissions
83. I will set out the general principles which apply to admissions by an officer of a company.
84. The Commission argued that admissions could be made based upon the
following propositions:
(i) The principle that certain officers of a company hadProposition (i)
authority to make admissions about past events by virtue
of their general authority or having been deputed to
answer enquiries of a particular nature.
(ii) The principle that, where an agent in the course of
performing the business which was entrusted to him, made
a statement which contains an admission constituting
part of the res gestae, then that admission goes in
against the principal.
(iii)Section 84(2) of the Act.
85. I agree with this proposition. This is supported by Fraser Henleins Pty.
Ltd. v. Cody, supra, at pp 113 and 134-135. At p 134
Williams J. said:
"But there are some agents who derive fromSee also T.PC v. Allied Mills Industries Pty. Ltd. [1981] FCA 103; (1981) 55 FLR 174, Sheppard J., at p 178 and T.P.C. v. Queensland Aggregates Pty. Ltd. supra, Morling J., at pp 58-59 and 63; pp 43,693 and 43,696.
their employment an implied authority of a
sufficiently wide nature to make their
admissions admissible against the principal
even with respect to past transactions,
provided that, at the time the admissions are
made, they are still in the employment of
their principal. This is because their
employment is such that they must be presumed
to have authority to give information with
respect to such transactions, so that it is
given in the course of an act they are
authorized to do."
Proposition (ii)
86. This proposition has to be limited to a situation where the admission is
strictly part of the res gestae. Consider, for example,
a case where a bald
headed man is seeking to make a purchase from a department store. If the shop
assistant, who has implied authority
to deal with the customer, has
instructions not to deal with bald headed men, in my opinion a statement by
the shop assistant to
a customer, as a reason for refusing to deal with the
customer, that he would not serve him because the store keeper did not serve
bald headed men would be admissible. A further statement by the shop
assistant that bald headed men have never been served by his
employer in this
shop would not be admissible. It is necessary to draw a distinction between
the authority to make representations
which are in the ordinary course of the
servant's employment and the authority to make admissions about past events.
See generally:
N.S.W. Country Press Co-Operative Co. Ltd. v. Stewart [1911] HCA 12; (1911) 12 CLR 481,
Griffith C.J., at pp 491-492;
Fraser Henleins Pty. Ltd. v. Cody, supra, Latham C.J. at p 113 and Williams J.
at p 134 in the passage I have already cited.
Ex parte Gerard & Co. Pty. Ltd.; Re Craig (1944) 44 SR 370 at 377, where the
authority of one Lipman to make admissions was considered.
He was a director
of a company with no special authority to make admissions but he also managed
its cellar business. Jordan C.J.
at p.377 said:
"The most, therefore, that could be impliedBarrett v. Steel Products Distributing Co. Pty. Ltd. (1962) NSWR 981, Walsh J. at p 986.
against the company was that Lipman had
authority to make such admissions about the
liquor part of its business as were incidental
to the carrying on of that part of its
business in the ordinary way."
Victorian Railways Commissioners v. Lord (1968) 2 NSWR 327, Wallace P. at p
334 and Walsh J.A. at p 338.
Bowstead on Agency, 14th Ed., Article 105.
Proposition (iii)
87. I agree with what Fisher J. said in T.P.C. v. Nicholas Enterprises Pty. Ltd. (1978) 40 FLR 83 at p 94; (1979) 2 A.T.P.R. 40-126 at p.18,345 that s.84(2) of the Act did not extend to admissions. It extends to conduct and conduct when used as a noun was defined in s.4(1) as including "doing, refusing to do, or refraining from doing, any act, including making a contract or arrangement or entering into an understanding". However, I do not think this takes the matter any further than does proposition (ii) and I consider that an admission as to past events is not admissible against a corporation under s.84(2) of the Act.
88. No admission is relied on by the Commission prior to a conversation which
took place between Shortell, Heasman, Frewen, Locke
and Stock on 10 March
1976. I deal with admissions in relation to the three arrangements or
understandings in Part 5.
(D) Circumstantial evidence
89. The Commission relied upon a number of matters of circumstantial evidence in support of proof of the making of the arrangements or entering into the understandings. I propose to deal with these arguments only briefly because I consider that the making of the arrangement and entering into the understanding of 12 February 1976 is clearly established without reference to any question of circumstantial evidence.
90. The Commission referred to The King and the Attorney- General of the Commonwealth v. The Associated Northern Collieries [1911] HCA 73; (1912) 14 CLR 387 at pp 400-401 (Isaacs J.).
91. I will deal with the questions of circumstancial evidence under the
various headings advanced by the Commission.
(i) Motive(a) Rejection by the Trade Practices Commission of the National Freight Forwarders' application for authorisation to continue its price fixing role
92. The evidence shows that, prior to the Act coming into force in 1974, the N.F.F.A. had operated a system called the "Blue Book" system. This was a system implemented by the N.F.F.A., before the Act was passed, which, according to some defendants' witnesses, was a method of introducing some measure of price fixing in the industry. I find that it did have some stabilising effect on the industry and provided a list of recommended rates for particular types of carriage on particular routes. However, the evidence shows that, in practice, very frequently, indeed maybe more frequently than not, lower rates were charged by members of the N.F.F.A. Redpath said that the "price scheduling" function of the N.F.F.A. was of paramount importance.
93. When the Act came into operation on 1 October 1974, an N.F.F.A. meeting was called on 10 December 1974. At that meeting it was moved by Shortell and seconded by Wilkins and agreed that the N.F.F.A. would approach the Commission with a view to obtaining common freight schedules on all services.
94. On l7 December 1974 an Application for Authorisation was submitted to the
Commission signed by Heasman. At the N.F.F.A. meeting
on 15 April 1975
Heasman recapitulated the situation with regard to the N.F.F.A. submission and
on 7 May 1975 the N.F.F.A. delivered
a submission to the Commission pointing
out the importance of stability in the industry in relation to the interest of
particular
carriers. Shortell agreed that the major activity of the N.F.F.A.
was rate fixing when that was legal. The N.F.F.A. was advised
by the
Commission in July 1975 that its application for authorisation had been
refused.
(b) Client disadvantage, the effect of intermediaries and defendants'
perception of this
95. It was alleged that the "search cost" and the inability of some smaller
people to effectively deal with carriers themselves was
a relevant factor.
Whilst this argument may have a measure of attractiveness in relation to
consultants paid by the client, I am
not attracted by it in relation to the
situation of a broker requiring payment from the carrier. It is also quite
clear from the
major effort made by Tradestock to obtain clients who would pay
a consulting fee that certainly the clients did not see any advantage
through
using Tradestock on that basis.
(c) The actual and perceived impact of Tradestock
96. The Commission submitted there was evidence that senior representatives of the defendants believed that, apart from commission, Tradestock's activities "complicated" the relationship between forwarder and client and lowered rates through playing off one carrier against another. It referred to the evidence of Shortell, Wise, Prebble, Redpath and a Mr Bennett, the State Manager of a T.N.T. division in Queensland.
97. In 1974 Shortell was the Group General Manager of T.N.T. Australia and as such he was responsible for all operations of the T.N.T. Group in Australia. He remained in that position until 1983.
98. Shortell said he first heard of Tradestock about mid-1976 and, although he had known of transport brokers in Canada, he had not heard of them in Australia. He regarded Tradestock as of "absolutely minor importance". He said he had no prior dealings in Australia with brokers or consultants personally nor was he consciously aware of their existence before Tradestock.
99. He said that in 1976 he had a view as to what brokers might do. A summary of the problems he saw with brokers is that they could introduce a wider range of carriers to clients; could offer bargaining skills; could advise of actual rates being charged; could assist in resisting increases; could shop around for quotes; could try to get the cheapest rates and force rates down; more than one broker might come in; brokers create a third party in the field. I will deal with this question elsewhere but Shortell gave evidence of the competitive way in which T.N.T. sought clients.
100. He said that, "T.N.T. took the decision not to pay commission to brokers". He said he communicated with the executive directors and gave instructions not to have any dealings with a broker who sought commission from the carrier. He also said these instructions had never been withdrawn. Shortell perceived the possibility that T.N.T.'s rates might be forced down.
101. Wise, who was the General Manager of the total operations of Ansett Freight Express from 1973 until 1982, had some experience in the late 1960's with a Mr Nossbaum. He had approached Wise with a list of clients for some of whom Ansett was already carrying and he had sought commission. Wise said that he refused to pay the commission feeling that Nossbaum's activities would result in the lowering of the company's remuneration not only because of a reduction in freight costs to the client but also the obligation to pay Nossbaum commission. Since that date, so far as Wise was aware, he said that Ansett Freight Express had never paid commission.
102. Wise was cross-examined extensively on this evidence but, in substance,
he did not deviate to any significant extent. He said
that in 1976 he had the
same view and he had the impression that Tradestock posed only a small risk.
He conceded that he wished to
keep brokers out of the industry generally. He
pointed out that many clients were what he described as "priced very close to
cost"
and he said:
"Well, as soon as he started mentioning he was103. He also said that he thought intermediaries tended to destabilise the relationship between the carrier and the client. He said that all his "management life" he had been of the view that any sort of commission was unacceptable to him.
in business to make a commission or to sell
our clients, if you like, my first objection
to the fact was that I do not believe that
there is enough margin in the industry for a
third person to be in it. I was sort of
shocked at the fact he was another element
trying to come into the industry to take
something out of it. We are lessening our
profit, I suppose would be the best way of
describing it to you, or margin."
104. It appears that Wise's objection was to paying commission. He agreed that he did not want to deal with brokers and he alone decided not to deal with Tradestock. It is clear that Wise had a view extending back for many years before 1976 and that he was dealing, in substance, with a situation where commission was demanded.
105. In 1975 Prebble was the Australian General Manager of what was then called "T.N.T. Transport Systems". It encompassed the general freight arm of T.N.T.'s operations within Australia and New Zealand but did not include the overnight companies.
106. Prebble said that he had not heard of brokers in the transport industry prior to 1976 but that he had had experience with certain consultants paid by the client. He thought these were about four in number. He said that, at least prior to the meeting in February 1976, he had had no objection to dealing with such consultants and that he would have had no objection to dealing with Tradestock prior to the meeting on a consultancy basis but, "I would not have paid commission, that was my only objection". He said that he was reluctant to quote the particulars to someone unless he knew who his client was and unless he knew who was carrying for that client and preferably the price that was being paid. One of the reasons for this was that he had to bear in mind the possibility of starting a price war. This was particularly so if the consultant was acting for an existing client of T.N.T. He said he also appreciated the risk that the consultant might take the client to one of his competitors.
107. When Prebble left the meeting of 12 February 1976 he said he had the general view that he would be happy to deal with anyone provided he did not have to pay commission. Prebble said he would have been prepared to quote Tradestock had they mentioned a rate of commission that was acceptable.
108. Redpath is now Chairman of Mayne Nickless and between 1971 and 1982 he held the position of Managing Director. He said that he had heard of freight brokers for overseas shipping but that he was not aware of any other brokers. He had in mind the margin for interstate carriage of goods and said that he did not think the broker was likely to succeed. He did not think that at any time there was evidence of much impact of brokers on the market place and that he would not have expected anybody like Tradestock to survive very long. He thought it was a logical conclusion that a broker or middle man could have the effect of depressing rates which were earned by the freight forwarders where there was a market price which had to be shared with the broker.
109. Bennett has been the State Manager of T.N.T. Roadfast in Queensland since July 1981. For two or three years prior to March 1976, he was the Sales Manager in South Australia for Comet, a section of T.N.T., and between March 1976 and June 1977 he was Victorian Manager for North Queensland Express, also a section of T.N.T.
110. In early March he received a telephone call from Stock who said he was setting up what he described as a transport broking business. Bennett subsequently met Stock and Frewen at a hotel in Melbourne. Frewen said that he was in the freight broking business and that he hoped to introduce the broking element into the transport industry and that would mean that the transport companies would need less, if any, sales force and the money thus saved could be used to pay for the brokerage. Bennett said that he thought the idea was very unusual and that he could not see the transport companies abrogating their sales function and allowing a third party to gain control of the allocation of the business to whatever transport company they felt like giving it to. Bennett also said at the meeting that there was nothing to stop the transport company ultimately dealing in future direct with the customer and cutting out the middle man. He agreed that the sales staff was one of the means whereby a transport company retained some control of the allocation of business in the market.
111. The actual and perceived impact of Tradestock is certainly a matter for
consideration and is relevant in relation to the question
of motive. There is
no doubt that several experienced executives of certain of the defendants
perceived a significant problem with
the introduction of intermediaries in the
dealing between the defendant and clients. However, I think that the main
objection was
to paying commission and I am not satisfied that any objection,
at least prior to the meeting of 12 February 1976, has been shown
to have
existed in relation to intermediaries not seeking to be paid a commission by
the freight forwarder.
(d) The defendants' awareness of any ineffectiveness of individual
action by a defendant
112. The evidence does not support this submission apart from some support
which may be derived from the fact that Tradestock's activities
were dealt
with at three meetings.
(ii) Inference of concert from any parallel changes in behaviour
of the defendants113. A full examination of this issue would involve a substantial addition to the length of this judgment. I do not consider this would be justified in view of my clear finding of the arrangements or understandings.
114. I now proceed to consider what is involved in making an arrangement or
entering into an understanding.
(E) The requirements for making an arrangement or entering into an
understanding
115. In my opinion it is very difficult to attempt to set out satisfactorily
the requirements which establish whether or not an arrangement
has been
entered into or an understanding reached. There is a lot to be said for a view
that it is unwise to attempt to place a precise
limitation on the meaning of
these words. Their meaning has been considered in a number of cases arising
under the Act of which the following are examples:
T.P.C. v. Tubemakers Ltd., supra, at pp 44,323-4 (Toohey J.) T.P.C. v. Allied Mills Industries Pty. Ltd., [1981] FCA 133; (1981) 60 FLR 1 at p 1243; (1981) 3 ATPR 40-237 at pp 43,151-2 (Sheppard J.) T.P.C. v. Nicholas Enterprises Pty. Ltd., supra, at pp 87-90; pp 18,341-3 (Fisher J.), and the appeal therefrom to the Full Court of this Court reported in (1980) 3 ATPR 40-157 at p.42,234 (Bowen C.J., Brennan and Deane JJ.) T.P.C. v. Email Ltd. [1980] FCA 86; (1980) 43 FLR 383 at p 397; [1980] FCA 86; (1980) 3 ATPR 40-172 at p 42,377 (Lockhart J.) L. Grollo & Co. Pty. Ltd. v. Nu-Statt Decorating Pty. Ltd. [1978] FCA 33; (1978) 34 FLR 81 at p 89; [1978] FCA 33; (1978) 2 ATPR 40-086 at p 17,842 (Smithers J.).
116. Section 45(2) prohibits a corporation from making an arrangement or entering into an understanding in restraint of trade. Some sections of the Income Tax Assessment Act 1936, particularly s.44(2D)(b), s.80B(5)(b) and s.260 contain somewhat similar words.
117. Section 44(2D)(b) was considered in Federal Commissioner of Taxation v. Lutovi Investments Pty. Ltd. [1978] HCA 55; (1978) 140 CLR 434. The law being applied was the Income Tax Assessment Act as it existed in 1971-72.
118. Section 44(2D)(b) dealt with:
The issue of shares "in pursuance of, or as119. Section 45(2)(a) of the Act does not include the words "purpose" or "enabling" but adds the word "understanding".
part of an agreement or arrangement, whether
oral or in writing
...
entered into
...
that had the purpose, or purposes
...
of enabling
..." .
120. Section 80B(5) dealt, inter alia, with:
A "contract, agreement or arrangement" entered121. Section 260 dealt with:
into
...
for the purpose or for purposes that include
...".
A "contract, agreement, or arrangement made or122. The joint judgment in Lutovi of Gibbs (as he then was) and Mason JJ., with which Murphy J. agreed, allowed the appeal but Stephen and Aickin JJ. expressed a contrary view. At p.443 Gibbs and Mason JJ. said in relation to s.44(2D)(b):
entered into, orally or in writing
...
so far as it has or purports to have the
purpose or effect of
...".
"The arrangement postulated by this123. Their Honours continued that the arrangement could be one implied or inferred from the circumstances and that the words "oral or written" were words of extension and not of limitation. At p.444 the joint judgment continued:
sub-section is one to which there are two or
more parties. The sub-section speaks of an
'agreement or arrangement' which is 'oral or
in writing' and which has been 'entered into'.
Both characteristics point to an arrangement
which is bilateral or multilateral. The words
are similar to those contained in s.80B(5)
though that sub-section also contains a
reference to 'contract' as well as to
'agreement or arrangement'. They are also
similar to the language of s.260, though there
the words 'made or entered into' appear. And
it has been decided that an arrangement in
order to fall within s.260 must be between two
or more persons (Newton v. Federal
Commissioner of Taxation [1958] UKPCHCA 1; (1958) 98 CLR 1 at
p 7; (1958) AC 450 at p 465)."
"In the context of s.260 an arrangement isStephen J. at p.451 said:
something less than a binding contract or
agreement, something in the nature of an
understanding which may not be enforceable at
law (Newton v. Federal Commissioner of
Taxation). A similar view has been taken of
an arrangement falling within s.80B(5) (see K.
Porter & Co. Pty. Ltd. v. Federal Commissioner
of Taxation (1974) 1 NSWLR 536 at
pp 542-544; Federal Commissioner of Taxation
v. Students World (Australia) Pty. Ltd. [1978] HCA 1; (1978)
138 CLR 251). It is, however, necessary
that an arrangement should be consensual, and
that there should be some adoption of it. But
in our view it is not essential that the
parties are committed to it or are bound to
support it. An arrangement may be informal as
well as unenforceable and the parties may be
free to withdraw from it or to act
inconsistently with it, notwithstanding their
adoption of it."
"In seeking an 'arrangement' in the present124. Section 260 had been considered previously by the Privy Council in Newton v. Federal Commissioner of Taxation [1958] UKPCHCA 1; (1958) 98 CLR 1 at pp 7-9. At p 7 the Privy Council advised:
case, and there can here be no question of an
'agreement', the meaning that has been given
to that term in other sections of the Act, in
quite different contexts, is no sure guide."
"Their Lordships are of opinion that the word125. Leaving aside any possible difference between "arrangement" and "understanding", it is clear I am not required to consider the purpose of any arrangement.
'arrangement' is apt to describe something
less than a binding contract or agreement,
something in the nature of an understanding
between two or more persons - a plan arranged
between them which may not be enforceable at
law."
126. The meaning of the word "arrangement" in s.80B(5)(b) was considered
after the judgment in Lutovi in Federal Commissioner of Taxation v. Cooper
Brookes (Wollongong) Pty. Ltd. [1979] FCA 45; (1979) 41 FLR 277. The main judgment is that
of Fisher J. but Brennan and Deane JJ. at p.280 agreed with Fisher J. At
p.301 Fisher J. cited the passage
of the joint judgment in Lutovi which I have
last set out and said:
"As to the term 'arrangement' in s.80B(5)(b)127. It seems that judicial consideration of these words has tended to equate "arrangement" with "understanding". The case before me also proceeded upon the basis that no distinction was to be drawn. I will proceed upon this basis although I would not necessarily reject a proposition that the requirements for entering into an understanding may be somewhat different and more easily satisfied than the requirements for making an arrangement. Having all these considerations in mind, I will deal with certain cases decided under the Act.
both parties referred without dissent to the
reasoning of Mahoney J. in Federal
Commissioner of Taxation v. K. Porter & Co.
Pty. Ltd. ((1974) 22 FLR 344) cited in the
preceding quotation from the Lutovi case.
There his Honour discussed the possibility
that an arrangement may follow from express
statements or actual representations. He went
on: 'In the absence of such a statement or
actual representation, the element of
commitment to the course of conduct may be
inferred or implied from the dealings between
the parties'. This, I think, is the manner in
which the drawing of an inference or an
arrangement is open in the present case."
128. I lean with respect to the views expressed by Smithers J. in L. Grollo &
Co. Pty. Ltd. v. Nu-Statt Decorating Pty. Ltd. & Ors,
supra, at p 89; p 17,842
where he said:
"I have to remember that the concept of an129. In T.P.C. v. Nicholas Enterprises Pty. Ltd., supra, Fisher J. examined the question of what was required to establish an arrangement in s.45 as it existed after the 1977 amendment and he dealt at pp.18,341-18343 with various cases including Lutovi and Re British Basic Slag Limited's Agreements (1963) 2 All ER 807. At p 89; p 18,342 his Honour said:
understanding is broad and flexible. It may
arise merely where the minds of the parties
are at one that a proposed transaction
proceeds on the basis of the maintenance of a
particular state of affairs or the adoption of
a particular course of conduct."
"A significant feature of each of the aboveHis Honour then stressed that a meeting of the minds is an essential feature of s.45 of the Act and that this was the view expressed by Smithers J. in Top Performance Motors Pty. Ltd. v. Ira Berk (Queensland) Pty. Ltd. (1975) 24 FLR 286; (1975) 1 A.T.P.R. 40-004.
passages is the emphasis placed upon the
necessity for each of the parties to have
communicated with the other, for each to have
raised an expectation in the mind of the
other, and for each to have accepted an
obligation qua the other. These are in my
opinion the essential elements of the
requisite meeting of minds."
130. This case went on appeal and is reported under the title Morphett Arms
Hotel Pty. Ltd. v. T.P.C. (1980) 3 ATPR 40-157. Bowen C.J. delivered the
judgment of the Court, the other members of which were Brennan and Deane JJ.
At p.42,234 his Honour said:
"I wish to add one qualification to my general131. In T.P.C. v. Allied Mills Industries Pty. Ltd., supra, Sheppard J. at p 13; p 43,152 cited, with approval, the passage which I have already cited from the judgment of Fisher J.
statement of agreement with his Honour's
reasons and findings insofar as they relate to
the appellant. That qualification is in
respect of the nature of an 'understanding'
for the purposes of s.45 of the Act. Fisher
J. reached the conclusion that it is a
necessary ingredient of such an
'understanding' that there be an element of
mutual commitment between two or more parties
in the sense that each must have accepted an
obligation qua the other or others. As at
present advised, it seems to me that one could
have an understanding between two or more
persons restricted to the conduct which one of
them will pursue without any element of mutual
obligation, insofar as the other party or
parties to the understanding are concerned.
It is not, however, necessary that I reach or
express any final view on this question since
Mr Justice Fisher's view that such an element
of mutual commitment was required plainly
imposed a heavier burden on the respondent
Commission, and thereby favoured the
appellant."
132. Lockhart J. dealt with the question in T.P.C. v. Email Ltd., supra, at
pp 395-397; pp 42,376-42,377. After considering a great
number of cases
including the judgment of Fisher J. and the judgment in the appeal therefrom
of the Full Court of this Court to which
I have referred, his Honour said at
p. 397; p.42,377:
"...I incline to the view that there is no(F) Conclusion
necessity for an element of mutual commitment
between the parties to an arrangement or
understanding such that each accepts an
obligation qua the other; although in
practice such cases would be rare."
133. I note that the precise wording of the minute of the meeting of 12 February 1976 is not that the parties would not deal but that "... it was better for the client and the operator to deal direct". Nevertheless, I consider that the parties raised the matter, the matter was minuted, the minutes were confirmed and not corrected, and at least certain of the defendants acted in a way which gave effect to what was, in substance, a refusal to deal other than directly. This aspect will be dealt with in detail later.
134. Accepting that the minutes are established as a record of what took place, in my opinion the only reasonable conclusion to be drawn is that the persons present at the meeting had at least entered into an understanding that it was better to deal direct with the client and that this was to be interpreted that each would not enter into arrangements other than with the client direct. There is no doubt that there was communication between the parties. There is no doubt that at least I should infer that an expectation was raised in the mind of each of the persons present and infer that there had been an acceptance of a mutual obligation that it was better only to deal with the client direct. In my opinion, the only realistic way the events of this meeting can be interpreted is that the persons present decided not to deal other than directly with a client and that the allegations pleaded in para. 21 of the Statement of Claim have been established.
135. I will consider in Parts 6 and 7 whether the arrangement or
understanding of 12 February 1976 was in restraint of trade or commerce to the
extent that it was a contravention
of s.45(2)(a) and (4) of the Act.
PART 3WAS ANY ARRANGEMENT MADE OR UNDERSTANDING ENTERED INTO AT THE NATIONAL FREIGHT FORWARDERS' ASSOCIATION MEETING HELD ON 20 MAY 1976?
The Commission advanced arguments under the same heading as with the meeting
of 12 February 1976. I will deal with these in the same
order.
(A) The minutes of the meeting of 20 May 1976
(i) General
136. The relevant parts of the minutes of the meeting of 20 May 1976, which
were admitted on one basis or another, are as follows.
Only the first and
last paragraphs of the minute numbered 5 were admitted on the business record
ground.
"NATIONAL FREIGHT FORWARDERS' ASSOCIATION137. Paragraph 27(1) of the Statement of Claim repeats precisely para. 21(1) except that it substitutes the name Tradestock where T.I.C. Management Consultants appeared before and substitutes for the defendants referred to in para. 21 the first, second, third, fourth, sixth, eighth and ninth defendants.
Minutes of the Meeting held in the Boardroom,
Wynyard House, 291 George Street, Sydney,
at 4-00 p.m. on Thursday, 20th May 1976.
PRESENT:
Chairman - Mr R.E. Heasman, T.N.T.
Mr E. Prebble - T.N.T.
Mr N. Robinson - Brambles Limited
Mr W. Roots - A.U.T. Holdings Ltd.
Mr P. Chase - A.U.T. Holdings Ltd.
Mr N. O'Brien - Youngs Transport
Mr M.G. Davies - Mayne Nickless Ltd.
Mr F. Gardiner - IPEC Australia Ltd.
Mr R. Bass - IPEC Australia Ltd.
1. CONFIRMATION OF MINUTES
The Minutes of the Meeting held on 23rd
March 1976, as circulated, were
confirmed.
...
5. TRANSPORT CONSULTANTS
A letter from Tradestock Pty. Ltd.
incorporating T.I.C. Management
Consultants, to a Member Company was
tabled.
The letter outlined a proposal with
regard to the Member's existing clients
1. Future requirements with regard to
freight transportation services.
2. Negotiation of future rates and
charges for services offered by the
Company.
3. Tradestock's remuneration.
Point three was based on a percentage
of charges earned.
In discussion it was agreed that this
type of operation could only increase
charges to the extent of the brokerage
payable, that similar 'Transport
Brokerage Agencies' had appeared in the
industry at various times in the past and
that experience showed that it was better
for the Client and Operator to deal
directly with each other."
138. The minutes were confirmed at the meeting of 4 August 1976 at which the first, second, third, fourth, fifth and seventh defendants, together with Ipec Australia Limited, were represented.
139. The minutes are admitted as against the first, second, third, fourth and
fifth defendants on all three grounds previously mentioned.
(ii) Were the relevant defendants members of the National Freight
Forwarders' Association?
140. I have already dealt with the membership of the first five defendants.
141. I am satisfied each of them was a member of the N.F.F.A. and that each was present at the subsequent meeting at which the minutes were confirmed.
142. These minutes are admitted against the sixth defendant on the two grounds which I have called "the business record ground" and "the membership ground".
143. Counsel for Express Freight argued that it was not a member of the N.F.F.A. but the member was A.U.T. Holdings Limited. This submission depended on the submission that it had not been proved that either Ex. KD or KN were the minutes of the N.F.F.A. I have considered this matter previously and found that Ex. KN was established to be the rules. The sixth defendant provided an appendix to its written submissions on the question of membership of the N.F.F.A. by Express Freight extending over 36 pages. It was conceded that A.U.T. Holdings Pty. Ltd. was the same as A.U.T. Holdings Limited and that Australian United Transport Pty. Ltd. changed its name in 1969 to A.U.T. Holdings Pty. Limited which in turn changed its name in January 1975 to United Transport Holdings Australia Pty. Limited.
144. A.U.T. Holdings Limited is shown as a foundation member of the N.F.F.A. in rule 3(b) of the rules which also included as a member, subsidiaries under the control of A.U.T. Holdings Limited.
145. It is common ground that the sixth defendant, Express Freight, at all relevant times was a wholly owned subsidiary of United Transport Holdings Australia Pty. Limited.
146. Counsel for Express Freight argued that membership of the N.F.F.A., an unincorporated association, depended on its having entered into a contract to become a member. He cited authority for this proposition. The evidence of Mr Roots was that the then chief executive of the United Group of Companies had decided that the parent company would become the member and a contribution towards membership would be made by each of the subsidiary companies. There is evidence that at the meeting of 23 August 1973 a Mr Coxon represented A.U.T. Holdings Ltd. There was also evidence that Coxon was first accountant, then general manager, and about 1974-1975 joined the Head Office staff of United Transport Holdings. In these circumstances I am satisfied that A.U.T. Holdings Limited (since January 1975 United Transport Holdings Australia Pty. Ltd.) became a member of the N.F.F.A. together with subsidiaries under its control including the sixth defendant. I include in these circumstances such evidence as there is of attendance at meetings, receipt of circulars and the payment of subscriptions.
147. I am satisfied that it was a member of the N.F.F.A. but the minutes are not admitted against it on "the confirmation ground" because it was not present at the meeting at which the minutes were confirmed on 4 August 1976.
148. These minutes are admitted against the eighth and ninth defendants on "the business record ground" but not on "the membership ground" because I am not satisfied that membership of the N.F.F.A. was established nor are they admitted against the eighth and ninth defendants on "the confirmation ground" because they were not present at the meeting of 4 August 1976.
149. I deal now with the question of membership of the N.F.F.A. by the eighth and ninth defendants.
150. I can see nothing in the evidence to satisfy me that the eighth and ninth defendants were members of the N.F.F.A. The rules of the N.F.F.A. show that Ipec Australia Limited was a foundation member but I find nothing to establish that the eighth and ninth defendants were subsidiaries of that company. There is no evidence that I am prepared to accept that the eighth and ninth defendants were admitted as members of the N.F.F.A. in accordance with its rules.
151. The only evidence concerning Ipec Australia Limited is in its annual returns. In the return made up to 31 December 1974 the list of directors shows that three of the directors were also directors of "Ipec Insurance Ltd. (Group)" and a fourth director was also a director of Ipec Insurance Ltd. The directors' report includes the statement that, "The company ceased trading as an interstate operator during the year and now operates as an investment company".
152. There is a certificate of change of name from Ipec Australia Limited to Tarlee Investments Limited on 12 November 1976 in evidence.
153. In the directors' report section of the annual return of Ipec Australia Limited made up to 30 December 1975 and in the same sections of the returns of Tarlee Investments Limited made up to 23 December 1976 and 30 April 1978, the company is also shown as an investment company.
154. The annual return made up to 23 December 1976 shows three of the directors as also being directors of "Ipec Insurance Ltd. (Group)" and another director as being a director of Ipec Insurance Ltd. The annual return made up to 30 April 1978 also shows that three of the directors were also directors of "Ipec Holdings Ltd. (Group)".
155. From January 1976 at the latest the ninth defendant and Ipec Insurance Limited were registered under the Business Names Act in the various States as the proprietor of the business name "Ipec". It was admitted that the eighth defendant before its name was changed to Eslea Holdings Limited was incorporated in 1963 under the name Ipec Insurance Pty. Limited and that it was converted to a public company known as Ipec Insurance Limited and changed its name to Ipec Holdings Limited on 12 January 1978. The title of the proceedings was amended at the request of counsel for the eighth and ninth defendants to Eslea Holdings Limited in respect of the eighth defendant and to Roadswift Transport Pty. Limited. in respect of the ninth defendant. The writ in this case was issued on 25 May 1978 so that the name of the eighth defendant was correctly described at the time of the writ. I find therefore that the business name Ipec at all relevant times was the registered business name of the eighth and ninth defendants.
156. The minutes are therefore only evidence against the eighth and ninth defendants in so far as they contain statements of fact admitted under the provisions relating to the admissibility of business records. On this basis the name Ipec Australia Limited appearing after the names of Gardiner and Bass was not admitted.
157. Counsel for the sixth defendant strenuously argued that there was no relevant statement of fact in the minutes of 4 August 1976 admissible as a statement of fact in a business record and also that the admissibility on the second of the two grounds depended upon proof that the sixth defendant was a member of the N.F.F.A.
158. I deal first with the question of whether the last paragraph of item 5
of the minutes contains statements of fact. The submission
was put by the
sixth defendant that the word "agreed" recorded in the minutes was not a
statement of fact. I considered and held
admissible the words "we accepted
your quotation in part" in the ruling I gave on 18 July 1983. Having regard
to s.7B(2)(d) of the
Evidence Act 1905, I consider that the last paragraph of
item 5 contains statements of fact providing evidence of what happened at
the
meeting although not evidence of the truth of the matters recorded as having
been agreed. In any event the allegation that an
arrangement was made or an
understanding entered into does not require proof of an "agreement" or
contract.
(iii) The relationship of persons attending the meeting to the
relevant defendant and their ability to comit it
The First Defendant:
159. I have already held that Heasman and Prebble could speak for and commit
the first defendant at the February meeting and I consider
that the position
was the same at the May meeting.
The Second Defendant:
160. Robinson attended a number of N.F.F.A. meetings in 1974. He was known
very well to Levitt and Levitt talked to him at his place
of business which
was Brambles office, Pacific Highway, North Sydney. He was also present at
the dinner after the meeting of May
1976. I consider that the only reasonable
inference is that N. Robinson was properly present at the meeting of 20 May
1976 on behalf
of the second defendant and was authorised to speak on behalf
of and to commit it at that meeting.
The Third Defendant:
161. I have already held that M.G. Davies could speak on behalf of and commit
the third defendant at the February meeting and I consider
the position was
the same at the May meeting.
The Fourth Defendant:
162. I have already held that O'Brien was authorised to speak on behalf of
and to commit the fourth defendant at the February meeting
and I consider the
position was the same at the May meeting.
The Sixth Defendant:
163. Roots was chairman and a director of the sixth defendant in 1975-1977. He was also Chief Executive of A.U.T. Holdings Limited, the holding company of the sixth defendant, and chairman of and responsible for the entire operation of the subsidiaries of A.U.T. Holdings Ltd.
164. Roots said that Chase was the general manager of Express Freight and that he was the United Transport representative for the N.F.F.A. Roots explained that the holding company did not do any forwarding itself but operated through a number of subsidiaries of which the sixth defendant was one. Roots said he attended the meeting at Chase's request so that he could attend the dinner afterwards and because of some suggestion that he might become involved himself in N.F.F.A. affairs. Roots said Chase was the main representative of the company at the meeting.
165. I am satisfied that Roots and Chase were authorised to speak on behalf
of and commit the sixth defendant at the May meeting.
The Eighth and Ninth Defendants:
166. In a letter (Ex. GG) sent to customers, F.A. Gardiner signed himself as General Manager of the ninth defendant. Shortell said that in May 1976 he knew Fred Gardiner as the General Manager of Ipec and that he had dealings with Gardiner in relation to Ipec. There was also evidence from Uniacke that in 1975/76 on occasions he had dialled the number he had for Gardiner and the person answering had said "This is Ipec".
167. A Mr R.C. Howard, who was called by the third defendant, said in evidence that he had been the Administration Manager of Ipec from 1973 to 1976 and later he formed the international division of Ipec and that Fred Gardiner was his direct boss as General Manager. Howard also recalled Robert Bass whom he saw daily at Ipec. In 1976 Bass became State Manager when Gardiner became General Manager. He said Bass became General Manager of Ipec in 1979 when he was promoted from the position of State Manager when Gardiner became World General Manager.
168. A journal called "The Express" and calling itself the "House Journal of the Ipec Holding Group Limited" at p.6 of the September 1980 issue, referred to Gardiner as the Group General Manager of Australian Transport Operations in 1980 and as the General Manager in 1975. This was admitted only in relation to the eighth and ninth defendants. Counsel for the eighth and ninth defendants argued that "Ipec" was a partnership between those two companies and, as such, admissions on its behalf must satisfy the provisions of s.15 of the Partnership Act, 1892 (N.S.W.). Whether or not this was so, I am satisfied that Gardiner could speak for and commit the eighth and ninth defendants at the May meeting.
169. I consider it impossible to come to any conclusion other than that
Heasman and Prebble were authorised to speak on behalf of
and to commit the
first defendant at the May meeting, and likewise Robinson the second
defendant, M.G. Davies the third defendant,
O'Brien the fourth defendant,
Roots and Chase the sixth defendant, and Gardiner the eighth and ninth
defendants.
(B) Oral Evidence of what took place at the meeting of 20 May 1976
170. Of the ten persons present at this meeting only three were called. The Commission called Levitt, the first defendant called Prebble and the sixth defendant called Roots. Whilst the obligation to establish what took place at the meeting was upon the Commission, in my opinion it was entitled to rely upon the minutes and call Levitt. The conclusion I draw from the limited oral evidence is that the evidence of the other persons present would not have supported the case of the relevant defendant. I reach this conclusion because all persons present other than Levitt were employees of one or other of the defendants and it can hardly be thought reasonable that the Commission would call such persons in its case.
171. I have discussed Prebble's evidence in relation to the meeting of 12 February 1976 and I express the same view in relation to the meeting of May 1976. The only difference is that I accept the substance of the evidence he gave in chief in relation to the meeting.
172. Prebble said that he recalled the names of those present but that he could not remember where they sat. He remembered there was a discussion about transport consultants and he recalled a letter being "passed around the table, and it was from either T.I.C. or Tradestock and it was an approach to one of the companies and it detailed their terms of business". He only recalled one particular section of that letter, that was where it set out that Tradestock would require a 7 1/2 per cent commission on freight that exceeded $50,000 per annum in revenue. He remembered his reaction vividly. He said that he burst out laughing and said words to the effect 'They haven't got a show in hell as I'm not making 3% at the moment'.
173. Prebble was then shown Ex. CY, a letter from Tradestock to the Victorian Manager of Alltrans, which he identified as the letter which he saw at the meeting. He said he did not recall seeing the minutes of the meeting nor did he recall anybody else saying anything. He also said that subsequent to this meeting he did not give any instructions to any of his managers in relation to dealing with Tradestock, that he did not recall attending a dinner after this meeting, that he was not given any instructions by Shortell or Heasman not to deal with Tradestock or brokers or consultants and that neither Tradestock nor any other freight broker had ever approached him since the meeting. This was all the evidence of any significance which Prebble said in examination in chief.
174. In cross-examination he said that he took the letter as an example of a general approach and that he expected a later approach from Tradestock. He also said that he did not mind Tradestock getting some commission as long as his company ended up with a profit. He said he saw the possibility of having to pay a commission to clients for whom his company was already carrying or run the risk of losing them. He also said that paragraph 5 of the minutes was not an entirely accurate statement of what occurred at the meeting and that he would have remembered the words "in discussion it was agreed" and that that he did not remember that. He also said that side talking was normal at the meetings but that he was not particularly concerned with what took place at the May meeting as he was not interested.
175. Senior counsel for the first defendant submitted that it was clear that the letter that was tabled was Ex. CY and that it had been received by the Victorian Manager of Alltrans Express who, at Shortell's request, forwarded it to him after he had complained that Tradestock was seeking commission from Alltrans in respect of one of its own clients. Shortell gave the letter to his secretary for filing in the normal way. His secretary would have passed it to Heasman. Heasman tabled it at the meeting. I did not find any satisfactory explanation of the reason why this letter came directly from the Victorian Manager of Alltrans Express to Shortell when that Manager was not directly responsible to Shortell.
176. Prebble also said in cross-examination that the letter was passed around very quickly and that he did not remember any discussion about the letter other than what he had said himself. No explanation was offered for Prebble's lack of knowledge of the letter prior to his seeing the letter when it was tabled by Heasman at the meeting.
177. Prebble also said that he had not been told about a meeting between Frewen, Stock, Locke, Shortell and Heasman which took place on 10 March 1976.
178. The written submissions of the sixth defendant in relation to Roots' evidence on various matters extended over 70 pages.
179. Roots said that he had no idea of what was on the agenda for the meeting since he and Chase went separately to the meeting and he arrived after the meeting had started. He related the seating position of the persons he knew. He said that he had no recollection of what took place until Heasman, who was the chairman, referred to the Tradestock letter. Roots said he gathered that Heasman was upset. Roots said he wondered why Heasman raised the question of the letter. He said he remembered a statement, "Everyone will please themselves what they do". He believed there was no formal discussion.
180. He said that he asked Prebble who Tradestock was because he was interested to know. He said Prebble said that they were two people who used to work for T.N.T. as salesmen. He said that Chase read the letter and said that T.N.T. already serviced that client. He said Prebble said, "An in-house thing should not have been discussed". He said that he never considered that Tradestock might approach his company and that he did not discuss the matter with Chase after the meeting. He said that somebody said that it could be illegal but that at the time he did not regard the discussion about Tradestock as being of any importance. He said that no one said how his company would act regarding Tradestock or brokers or consultants. He thought Tradestock was trying to enter the industry as a third party. He said that he did not understand that any agreement, understanding or arrangement was made not to deal with brokers or consultants and he heard nothing said at the meeting to the effect that the Tradestock type of operation could only increase charges to the extent of the brokerage payable.
181. Roots expressed very specific recall on a number of matters of detail. As was put by the Commission, this contrasted starkly with his total absence of recollection upon other more significant matters and rests strangely with Roots' claim of general indifference about the discussion and Tradestock. He said that he had no recollection of the proceedings at the meeting before the chairman referred to the letter.
182. I am not prepared to accept Roots' evidence in relation to the meeting of May 1976. I have reached this conclusion for a number of reasons including my observation of Roots in the witness box. There are a number of matters which I consider are of particular importance in examining Roots' evidence. There were of course many other matters too numerous to deal with specifically.
183. Roots said that Chase was the main representative for the company at the meeting, that he did not regard a discussion about Tradestock as being of any importance and that it had no significance for him at the time. He said it did not achieve any significance until he received a communication from solicitors at a time that he had some difficulty in fixing. He nominated two dates, 1976 or 1978. He said that he discussed this letter with the company's Finance Controller, a Mr Andrews, but that he did not consider it serious. He also said he did not discuss the letter with Chase and that he gave no instructions to gather any documents to investigate the accuracy of what was in the letter. He remembers a writ being served shortly after the solicitor's letter upon his company. He said that, at least prior to going to see solicitors in Sydney in late 1983, he had not told anybody his version of what took place at the May N.F.F.A. meeting. He also said that he had not written down his version in any way. He said that, prior to giving his evidence in this case, he had not looked at any documents relating to the events of 1976 to jog his recollection. He also said that he was not involved at all in any steps for preparation of the defence of the proceedings which Tradestock commenced and that he did not see any solicitors in that regard. He said that at no time had he prepared a statement in the form of a written summary of his recollection about the events of 1976.
184. Levitt could not remember the name of those who attended this meeting without reference to the minute book. He said in relation to the relevant minute that he had no recollection of the precise words used by any person at the meeting or of the substance of what was said by any specific person.
185. In cross-examination he said that he remembered the name Shovelton Storey, he did not remember who tabled the letter but he remembered it was passed down the table. He said he did not remember Prebble bursting out laughing but he did recall a discussion about 3 per cent and the rate of remuneration at such a meeting as this. He was asked about whether he remembered words to the effect, "We are dealing with them" and somebody else's words to the effect, "Well, everyone will please themselves what they do, they always do anyway". He said that was correct but in re-examination he said that, when answering a question in cross-examination, he was agreeing that the phrase "everyone will please themselves what they do" was customarily accepted at N.F.F.A. meetings on different subjects and that the expression was used before the Trade Practices Act came into force but a lot more after it came into force. He was further asked about a statement he made in cross-examination about companies dealing with Tradestock and he said he could not say anything further in relation to that meeting. In cross-examination he had agreed that a person whom he could not identify had said words to the effect, "We are dealing with them".
186. In cross-examination Levitt was asked about words in the minute "in discussion it was agreed". Levitt said that, "there was no actual agreement. There was no disagreement on what was being said and it is a journalistic lie to state it was agreed". It is of importance to note that Levitt agreed that there was "no disagreement on what was being said". This is important bearing in mind that the allegation is one of making an arrangement or entering into an understanding.
187. I express the same view in relation to Levitt's evidence as I did in relation to his evidence concerning the meeting of 12 February 1976.
188. As with the meeting of 12 February 1976 I do not regard the oral
evidence as being of any real significance.
(C) Admissions
189. I have already dealt with the principles to be followed and I deal in
Part 5 with particular alleged admissions.
(D) Circumstantial evidence
190. I have the same views on this question as I have expressed in relation
to the meeting of 12 Febreuary 1976.
(E) Conclusion
191. For the same reasons as I expressed in relation to the meeting of 12
February 1976, I consider that the only realistic inference
to draw about the
meeting of 20 May 1976 is that the persons present, whom I have held were
authorised to speak for and commit a
relevant defendant, made an arrangement
or entered into an understanding not to deal other than directly with the
client. I am satisfied
that the Commission has established the allegations in
para. 27 of the Statement of Claim.
PART 4WAS ANY ARRANGEMENT MADE OR UNDERSTANDING ENTERED INTO AT THE NATIONAL FREIGHT FORWARDERS' ASSOCIATION MEETING HELD ON 4 AUGUST 1976?
(A) The Minutes of the meeting of 4 August 1976
192. The relevant parts of the minutes of the ordinary meeting of 4 August
1976 which were admitted on one basis or another are as
follows:
"NATIONAL FREIGHT FORWARDERS' ASSOCIATION193. The minutes were confirmed at the meeting of 11 November 1976 at which the first, second, third, fourth and fifth defendants only were represented.
Minutes of the Meeting held in the A.R.T.F.
Boardroom, 291 George Street, Sydney,
at 10.30 a.m. on Wednesday, 4th August 1976.
PRESENT:
Chairman - Mr R.E. Heasman - T.N.T./Alltrans
Executive - Mr J. Wise - Ansett Freight
Express
Executive - Mr J.W. Linfoot - Brambles Ltd.
Mr R. Banks - IPEC Australia
Ltd.
Mr R.C. Wilkins - Youngs Transport
Mr G.E. Lincoln - A.S.P. Container
Express
Mr M.G. Davies - Mayne Nickless
Ltd.
APOLOGIES:
Mr F. Gardiner -IPEC Australia
Ltd.
1. CONFIRMATION OF MINUTES
The Minutes of the Meeting held on
Thursday, 20th May 1976, as circulated,
were confirmed.
...
4. TRANSPORT BROKERAGE SERVICES
A letter from Tradestock Pty. Ltd. was
tabled and noted. The Meeting reaffirmed
it's opinion that it is in each Company's
best interests to deal directly with it's
own clients."
194. Paragraph 33(1) of the Statement of Claim repeats precisely para. 21(1) except that it substitutes the name Tradestock where T.I.C. Management Consultants appears in para. 21(1) and substitutes for the defendants referred to in para. 21(1) the first, second, third, fourth, fifth, seventh, eighth and ninth defendants.
195. The Commission relied upon the same matters as it had done in relation to previous meetings and I will deal with them in a similar way.
196. The Commission submitted, inter alia, that:
(i) The agenda for the meeting included as one of the eightExhibit P was a letter from Tradestock to the N.F.F.A. seeking a meeting to discuss the provision of transport services to client companies.
items: "Transport Brokerage Services - Correspondence
from Tradestock Pty. Ltd.".
(ii) The minutes of the immediately preceding meeting of
20 May 1976 were confirmed.
(iii)It was the third time the matter had been raised within
six months.
(iv) The letter that was tabled was obviously Ex. P, the
letter to the N.F.F.A. from Tradestock.
(v) Of those present, Linfoot (Brambles), Wilkins (Youngs)
and Wise (Ansett) had been involved in direct approaches
by Frewen and Stock before the meeting.
197. I have already dealt in general terms with the reliability of the minutes in relation to the meetings of 12 February 1976 and 20 May 1976. In the same way, I consider the minutes the best evidence of what took place at the ordinary meeting of 4 August 1976.
198. There is evidence, which I accept, that the minutes were confirmed at the meeting held on 11 November 1976 at which Heasman, Linfoot, Davies, O'Brien and Wise were present. As I have previously said, I consider that these gentlemen were authorised to commit the first, second, third, fourth and fifth defendants respectively. No one represented the seventh, eighth and ninth defendants so the minutes are not evidence against them on "the confirmation ground".
199. The minutes are admissible against the first five defendants on all grounds and against the seventh defendant on "the business record ground" and "the membership ground". Membership was admitted by the seventh defendant in the pleadings and I consider there is also other evidence sufficient to establish membership. The minutes are also admissible against the seventh defendant on "the business record ground" because I am satisfied that Lincoln, as its manager, had authority to commit the seventh defendant. Wilkins was the Managing Director of the fourth defendant.
200. The minutes can only be admissible against the eighth and ninth
defendants on "the business record ground" but the description
of Banks in the
minutes was not admitted on that ground. There is no satisfactory evidence
that Banks was an officer of the eighth
and ninth defendants so the minutes
are not admissible against the eighth and ninth defendants.
(B) Oral Evidence of what took place at the meeting of 4 August 1976
201. Of those who attended the meeting, the Commission called only Levitt and only Wise was called by any defendant. I make similar comments about the failure to call evidence as I made about the meeting of 12 February 1976.
202. Wise had no recollection of what occurred at the meeting without reference to the minutes. He said that after reading the minutes he had a recollection that Heasman was probably the only person he remembers being there. After reading the minutes he recalled a letter being tabled but he did not recall to whom it was addressed or who spoke at the meeting. He was asked in chief, "To your understanding, did you ever reach any agreement or arrangement or enter into any understanding with any other person from the N.F.F.A. not to deal with Tradestock?". He answered, "Never, I certainly did not". He said that he did not recall anything said by any person present at the meeting as to the manner in which he or his company would act in relation to Tradestock and he had no recollection when he left the meeting of having any expectation that anybody else would act in a particular way about Tradestock. I consider the significance of his evidence was his lack of recollection.
203. As I said with regard to the February meeting, I regard Wise's evidence concerning the August meeting as no more than a reconstruction.
204. I formed the same view about Levitt's evidence in relation to this meeting as I formed about his evidence in relation to the February and May meetings of the N.F.F.A.
205. Levitt was not able to give his evidence other than by looking at the minutes. He was asked in chief, "Apart from any belief based on what was customary and apart from any assistance you would derive from looking at the document in front of you, do you have any actual recollection of what was said or done at the meeting of 4 August 1976?". The document referred to was the minutes of the meeting. The witness answered "No". Notwithstanding one or two things said in cross-examination to which I will refer, I consider this statement represented the true position of the witness' recollection. In cross-examination the witness was asked, "At the meeting, I suggest to you, you tabled the letter, brought it forward; correct?". Levitt answered "Yes". He was further asked, "And I suggest to you that there was no discussion about the matter at all, except somebody said words to you to the effect: 'This has arisen before, you deal with it in the minutes'". Levitt answered, "Words along those lines, words along those lines generally. I tabled a letter for instructions, and my recollection was I was told N.F.F.A. did no trading, and that the members would deal with it in what they thought to be in their best interests individually". The witness was further asked, "Somebody said it had nothing to do with N.F.F.A, did they not?". Levitt answered "Yes". Levitt also answered "Yes" to the question "But it was very brief, almost a passing reference?". He also said that at the meeting two companies said they were dealing with Tradestock and that he recollected that the companies were Mayne Nickless and Brambles.
206. As with the meetings of February and May 1976, I do not regard the oral
evidence as being of any real significance.
(C) Admissions
207. I have dealt with the principles to be followed and I will deal later
with particular alleged admissions.
(D) Circumstantial evidence
208. I have the same view on this question as I have expressed in relation to
the meeting of 12 February 1976.
Conclusion
209. For the same reasons as I expressed in relation to the meeting of 12
February 1976 I consider that the only realistic inference
to draw about the
meeting of 4 August 1976 is that the persons present, whom I have held were
authorised to speak and commit a relevant
defendant, made an arrangement or
entered into an understanding not to deal otherwise than directly with the
client. I am satisfied
that the Commission has established the allegations in
paragraph 33 of the Statement of Claim except in relation to the eighth and
ninth defendants.
PART 5ADMISSIONS IN RELATION TO THE THREE NATIONAL FREIGHT FORWARDERS' ASSOCIATION MEETINGS
210. I doubt whether it is necessary to trouble about the admissions upon
which the Commission relied in relation to proving the
alleged arrangements or
understandings. I am satisfied the arrangements or understandings were made
from the inferences which I
am prepared to draw from what took place at the
meetings. However, a great deal of time was spent in cross-examination about
certain
conversations and they have been dealt with in some detail in
counsels' submissions. I will deal with certain of the alleged admissions
in
relation to particular defendants.
T.N.T.:
211. The plaintiff relies first upon the meeting of 10 March 1976 between Shortell, Heasman, Stock, Frewen and Locke. I do not propose to go into details of the evidence of what was said at this meeting but it was clear that there was a discussion about broking and I accept that Shortell showed a general disinclination to deal with intermediaries and in particular to pay commission to any intermediary. I accept that he suggested that some dealings might take place between Tradestock and T.N.T. However, contrary to the usual practice, Shortell directed that all proposals should be submitted to the executive directors for general freight (Heasman), for express freight (Pedlow) and for specialist services (Jacobs). I doubt whether Shortell had any intention of dealing with Tradestock as a broker or consultant.
212. The next alleged admission took place in a letter from a Mr Peter Bruce, the Victorian Manager of Hawthorn Taxi Trucks, a division of T.N.T., of 14 July 1976 containing a passage, "it is not the policy of Hawthorn Taxi Trucks to negotiate with agents and besides that, all discussions pertaining to our dealings were made with yourself". In my opinion, this statement was made in the course of negotiations involving Tradestock and was one receivable against T.N.T.
213. The next alleged admission was in a telephone conversation of 26 July
1976 between Stock and Shortell. I accept that Stock
told Shortell that
Gardiner had told him that there had been a meeting and that the N.F.F.A. had
decided not to do business with
Tradestock and there were forty people at it.
I accept that Shortell said that he had received the client profiles from
Tradestock
(see Part 8), that he was not going to reply, that T.N.T. was not
dealing with brokers and that he thought he had made that quite clear to
Tradestock
on a number of occasions. Shortell did not complain about the
adequacy of the profiles. The Commission tendered notes of this conversation
prepared very shortly after the conversation. As with the minutes of the
meeting, I place more reliance on any written record than
on the oral
evidence.
Brambles:
214. Reliance was placed on a telephone conversation between Linfoot and
Frewen on 27 July 1976. I accept that, although Linfoot
said he only
represented one division of Brambles, he said, in substance, that Brambles was
not prepared to deal with brokers or
agents but only wanted to deal direct
with clients but that it would deal with Tradestock if a client so directed. I
also find that
this statement was within his authority. No complaint was made
about the adequacy of the client profiles. Again a written record
of the
conversation was in evidence and Linfoot did not give evidence.
Mayne Nickless:
215. Exhibit S, which was a letter from Redpath of Mayne Nickless of 1 July
1976, clearly states that the policy of Mayne Nickless
was to deal directly
with clients and not through a middleman or broker. Senior counsel for Mayne
Nickless argued that this only
represented Redpath's personal view. However,
at the time, Redpath was Managing Director of Mayne Nickless and I consider
that this
letter can only be read in any sensible way as a statement made with
the authority of and on behalf of Mayne Nickless of the company's
policy and
that it is admissible against Mayne Nickless.
Youngs:
216. Reliance was placed on a telephone conversation between Frewen and
Wilkins, the Managing Director, which took place apparently
in early August
1976 and appears to have been after Youngs received client profiles from
Tradestock for Tomasetti, Sylon and Shovelton
Storey. Wilkins did not give
evidence. In general I do not regard Frewen as a satisfactory witness and I
hold a somewhat similar
view about Stock. I am disinclined to rely on their
oral evidence alone about anything that might be critical. However, I am
prepared
to accept Frewen to the extent of finding that in this conversation
there was some mention by Frewen that Tradestock was going to
the Trade
Practices Commission and that Wilkins said that Youngs was not going to do
business with them and that it did not want
to do business with consultants or
brokers. I do not accept that there was any statement which I am prepared to
accept, even if
admissible, that Wilkins said that members of the N.F.F.A.
would not do business with Tradestock.
Ansett:
217. Reliance was placed upon a telephone conversation between Stock and Wise
of 26 July 1976 after Tradestock had sent client profiles
(see Part 8) for
Mindrill, Tomasetti and Shovelton Storey to Ansett. I am satisfied that in
this conversation Wise said in relation to the client
profiles that he had
chosen not to reply and that he also said, "We do not want to do business with
consultants and brokers ... we
want to do business direct with clients". I
also accept that Wise said that Ansett did not want to pay commission and that
Stock
said that the commission rates were negotiable. There was apparently
some discussion about salesmen. I am not able to make any
finding about what
was said about the N.F.F.A. Again notes of the conversation were prepared by
Tradestock shortly after it took
place.
Ipec:
218. I accept that in a telephone conversation between Gardiner and Frewen on
26 July 1976, Gardiner said that he just wanted to
do business direct with his
clients and would not do business with consultants or brokers. I also accept
that Gardiner said that
T.N.T. and Ipec had agreed that they would not pay
commission and would not deal with agents or brokers. It was put by Ipec that
Gardiner was speaking for himself but I find that he was speaking about Ipec
in a situation where admissions could be and were made.
This would support an
arrangement or understanding at least as against Ipec. There was also some
conversation about the N.F.F.A.
and a dinner after the meeting of 20 May 1976.
Gardiner did not give evidence.
(E) Conclusion
219. I accept that all these conversations provide admissions against the
defendant employing the person concerned. However, with
the exception of
Ipec, I am not prepared to hold that of themselves the conversations were
admissions of any arrangement or understanding.
However, they do show that
these defendants were acting substantially in accord with the arrangements or
understandings that I have
found to have been made or entered into.
PART 6CONSTRUCTION OF S.45(2)(a) PRIOR TO 1 JULY 1977
220. Sections 45(2)(a) and (4) were in the following terms:
"(2) A corporation shall not -221. The arrangements or understandings pleaded in paras. 21, 27 and 33 of the Statement of Claim are alleged in paras. 22, 28 and 34 to have been in restraint of trade or commerce. Certain paragraphs of the pleadings are set out later.
(a) make a contract or arrangement, or enter
into an understanding, in restraint of
trade or commerce
(3) ...
(4) A contract, arrangement or understanding
that is not of the kind referred to in
sub-section (3) is not in restraint of
trade or commerce for the purposes of
this Act unless the restraint has or is
likely to have a significant effect on
competition between the parties to the
contract, arrangement or understanding
or on competition between those parties
or any of them and other persons."
222. The onus is clearly upon the Commission to establish that a prohibited arrangement was made or a prohibited understanding was entered into. That is apart from the question which arises under s.45(4) which has the effect of excluding from an arrangement or understanding in restraint of trade or commerce, for the purposes of the Act, an arrangement or understanding which does not have a significant effect upon competition as therein provided. It is also apart from the question of who bears the onus of proving any issue arising under s.45(4).
223. There is a considerable body of authority in support of the proposition that the onus of establishing the likely effect on competition for the purpose of s.45(4) lies on the defendants. The Commission so submitted. It referred to T.P.C. v. Guests' Garage Pty. Ltd. (1976) 26 FLR 433 at pp 437-8; (1976) 1 ATPR 40-016 at p 17,291; T.P.C. v. Email Ltd., supra, p 402; p 42,380; T.P.C. v. George Weston Foods Pty. Ltd. [1979] FCA 26; (1979) 39 FLR 182 at p 188; (1979) 2 ATPR 40-114 at p 18,248 and T.P.C. v. Allied Mills Industries Pty. Ltd., supra, at p 10; p 43,150.
224. If this is so, it is difficult to see to what the exculpatory facts in s.45(4) refer unless it be to the words "restraint of trade". To hold otherwise would appear to leave the Commission without the need to prove the making of an arrangement in restraint of trade or the entry into an understanding in restraint of trade. I would find it very difficult to reach this conclusion.
225. In my opinion, the first task is to ascertain whether an arrangement or understanding in restraint of trade or commerce has been established without regard to the provisions of s.45(4). The Commission submitted that the common law doctrine of restraint of trade was not important in the case before me. The defendants argued that the common law in relation to contracts in restraint of trade or commerce was directly applicable to the law in relation to s.45(2)(a) of the Act. The defendants dealt with the common law requirements of a contract in restraint of trade. The second defendant provided me with 53 pages of written submissions on that question. It was put correctly that, in general, such a contract is one which is unreasonable both between the parties and contrary to the public interest. Broadly, the submission was that the onus lay on the plaintiff to establish at least the requirement of being contrary to public interest. It was also argued for a number of reasons that the defendants were acting reasonably in their own interests and that any arrangement or understanding was not contrary to the interests of the public. It was also argued that, if proved, any arrangement or understanding was to continue business as it had been in the past by approaching clients directly and that this was not giving up any right which any of the defendants had previously possessed.
226. In my opinion, there is some ground for taking the view that an arrangement or understanding in restraint of trade or commerce in the Act has different elements to those distinguishing a contract in restraint of trade or commerce. An arrangement or understanding in restraint of trade or commerce presumably would, in many cases, be terminable at will and the period of time embraced in a contract in restraint of trade or commerce is always a significant factor in determining whether the contract is reasonable as between the parties and not unreasonable in the public interest.
227. I bear in mind that at common law a contract in restraint of trade or commerce is not, in general, illegal or prohibited by law but is simply one which cannot be enforced. The parties are free to have regard to it if they wish.
228. In his address-in-reply senior counsel for the Commission embraced the proposition which I had raised that there may well be a difference between the requirements for a contract in restraint of trade or commerce and an arrangement or understanding in restraint of trade or commerce. However, there is authority which would support the view that the law of contract in restraint of trade would be applicable to arrangements or understandings. See generally Buckley v. Tutty [1971] HCA 71; (1971) 125 CLR 353 and, in particular, Quadramain Pty. Ltd. v. Sevastapol Investments Pty. Ltd. [1976] HCA 10; (1976) 133 CLR 390 at p 401. In substance the case has been argued on that footing and that is the basis upon which which I will proceed.
229. The first question I have to decide is the extent, if any, to which the judgment of the High Court in Quadramain Pty. Ltd. v. Sevastapol Investments Pty. Ltd., supra, is applicable to the question now under consideration. The matter directly at issue in that case arose under s.45(1) of the Act.
230. I propose to express my own views first having in mind, pursuant to
s.15AB of the Acts Interpretation Act 1901, the second reading speech in the
Senate of the Minister in charge of the Bill on 30 July 1974. My attention
was drawn to this speech
and a number of other speeches in Parliament by
senior counsel for the first, fifth and seventh defendants. At pp.3-4 of the
speech
the Minister said:
"I now refer to some features of the drafting231. In so far as I have found the speech applicable, pursuant to s.15AB of the Acts Interpretation Act 1901, I have had regard to the reference to "economic considerations" and to the statement that the Bill has been drafted using, wherever possible, "well understood expressions" and the words "apply the law in a realistic manner". Many of the provisions of the Act are "ambiguous or obscure" within s.15AB(1)(b)(i) as is the section now under consideration.
of the Bill. Legislation of this kind is
concerned with economic considerations. There
is a limit to the extent to which such
considerations can be treated in legislation
as legal concepts capable of being expressed
with absolute precision. Such an approach
leads to provisions which are complex in the
extreme and give rise to more problems than
they remove.
The present Bill recognises the futility of
such drafting. Many matters have, of course,
had to be stated in detail. But other
provisions, particularly those describing the
prohibited restrictive trade practices, have
been drafted along general lines using,
wherever possible, well understood
expressions. I am confident that this will be
more satisfactory. The Courts will be
afforded an opportunity to apply the law in a
realistic manner in the exercise of their
traditional judicial role." (Emphasis added)
232. In my opinion, a well understood expression in relation to the subject matter of the Bill was the expression "contract in restraint of trade" to which it appears I should have regard.
233. Quadramain, supra, and certain other cases to which I have been referred were decided before s.15AB was enacted. Quadramain was a case where an application was made to enforce a covenant that land would not be the subject of an application for a liquor licence. The original parties to the contract were no longer concerned and the owner of the land benefited by the covenant sought to enforce the covenant against the occupier for the time being of the land to which the covenant applied. The defendant by way of defence asserted that the covenant was in unreasonable restraint of trade and void and also unenforceable by reason of s.45 of the Act. The Court was divided. Barwick C.J., McTiernan, Gibbs, Stephen and Mason JJ., with Jacobs and Murphy JJ. dissenting, held that the covenant was enforceable. The majority took the view that the doctrine of restraint of trade did not apply.
234. It will be evident that two issues arose, first whether the covenant was in unreasonable restraint of trade and unenforceable at common law and, secondly, unenforceable because of s.45 of the Act.
235. The position under s.45 would certainly involve s.45(1). It would also involve s.45(2) if giving effect to a contract embraced seeking to enforce rights under the contract.
236. Barwick C.J., at p.394, reached his decision for the single reason that no restraint of trade was involved, as between the parties to this case, in the restrictive covenant noted in the relevant certificate of title. He expressed no view on the applicability or otherwise of s.45.
237. McTiernan J., at pp.395-399, took the view that the covenant in question
was a Tulk v. Moxhay type of covenant and was not invalid
by reason of the
doctrine of restraint of trade. This view was based on the fact that the
purchaser of the land had not given up
any freedom which he otherwise would
have had but that he had taken possession of the land subject to a negative
restrictive covenant.
At p.399 the provisions of s.45(1) of the Act were set
out and his Honour said:
"Since the covenant in question cannot beIt would appear that his Honour was only referring specifically to s.45(1) and indeed the whole question before the Court was whether the covenant, which was made before the Act came into operation, could be enforced and the provisions of s.45(1) specifically dealt with the enforceability of such a contract. His Honour did not discuss s.45(2).
described as one in restraint of trade, this
section has no application."
238. Gibbs J., as he then was, after setting out s.45(1) and (4) as material
provisions, said at p.401:
"I consider that the rules relating toAt p.403 his Honour considered s.45 of the Act and said:
restraints of trade have no application to the
present case. Of course it is now settled
that those rules are not limited to particular
kinds of restraint. 'The categories of
restraint of trade are not closed': Petrofina
(Gt Britain) Ltd. v. Martin (1966) Ch 146 at
p 169. Indeed, the rules are not confined to
contractual arrangements but apply to all
restraints of trade, howsoever imposed:
Dickson v. Pharmaceutical Society of Great
Britain (1970) AC 403 at p 440; Buckley v.
Tutty [1971] HCA 71; (1971) 125 CLR 353 at pp 375-376. It
is also settled that the rules apply to a
restraint which extends only to the use of a
particular piece of land: Esso Petroleum Co.
Ltd. v. Harper's Garage (Stourport) Ltd.
[1967] UKHL 1; (1968) AC 269; Amoco Australia Pty. Ltd. v.
Rocca Bros. Motor Engineering Co. Pty. Ltd.,
Ante, p.288. Nevertheless, in Esso Petroleum
Co. Ltd. v. Harper's Garage (Stourport) Ltd.
[1967] UKHL 1; (1968) AC 269, all the members of the House
of Lords who took part in that decision agreed
that the rules do not apply to a covenant
given by a purchaser or lessee restricting the
use to which the land purchased or leased may
be put: see per Lord Reid (1968) A.C. at
p.298; Lord Morris of Borth-y-Gest (1968)
A.C. at pp.308-309; Lord Hodson (1968) A.C.
at pp. 316-317; Lord Pearce (1968) A.C. at
p.325; Lord Wilberforce (1968) A.C. at
pp.332-335. In such a case the covenantee is
not required to establish that the covenant is
reasonable; the covenant is not subject to
the doctrine."
"In support of the second defence advanced itAt p.404 his Honour said:
was submitted that s.45 of the Act applies to
any covenant in restraint of trade, even to a
reasonable restraint. If that is so, the
section, if valid, would have the drastic
result that a contract to which the section
applies will be invalid even though it is
demonstrably reasonable both in the interests
of the parties and in the interests of the
public. However, I find it unnecessary to
consider whether that is the proper
construction of the section, for I have
reached the clear conclusion, for a number of
different reasons, that the section has no
application whatever to the present case. In
the first place, for the reasons already
given, in my opinion the covenant in question
cannot properly be described as one in
restraint of trade or commerce. Secondly,
s.45(1) has the effect of rendering
unenforceable only contracts in restraint of
trade or commerce; it has no effect on
restraints which are not contractual."
"Section 45(1) does not have any effect on239. The views which his Honour expressed in relation to s.45(2) appear to me to be dicta. Whilst his Honour refers to s.45(4) and s.45(2), it was only necessary to consider the effect of s.45(1) unless it be said that the attempt to enforce the covenant fell within s.45(2)(b) as giving effect to such a covenant. However, his Honour said that sub-s.(1) did not refer to arrangements or undertakings: "they are dealt with by sub-s.(2) which has no relevance to the present case".
equitable or other proprietary rights and has
no application to the present proceedings.
Thirdly, the effect of s.45(4) is that if,
apart from that subsection, it could properly
be said (contrary to my opinion) that
Quadramain was seeking to enforce a contract
in restraint of trade, the covenant is not a
contract in restraint of trade or commerce for
the purposes of the Act. The 'contract' is
not of the kind referred to in sub-s.(3).
Sub-section (1) does not refer to arrangements
or undertakings; they are dealt with by
sub-s.(2) which has no relevance to the
present case. The effect of sub-s.(4) is that
a contract will not be in restraint of trade
or commerce for the purposes of the Act unless
the restraint has, or is likely to have, a
significant effect on competition between the
parties to the contract, or on competition
between those parties or any of them and other
persons."
240. Stephen J. said the doctrine of restraint of trade had no application
and then, at pp.405-406, dealt with the defence under
s.45(1) again by way of
obiter and said that it was wholly inapplicable to the covenant under
consideration. His Honour said:
"I consider that the effect of sub-s.(4),241. Mason J., at p.406, said he did not find it necessary to consider the position under s.45(1).
which is set out in the reasons for judgment
of Gibbs J., is to exclude from the scope of
sub-s.(1), if ever otherwise within it (as to
which I say nothing), a contract which imposes
no restraint having or being likely to have a
significant effect on competition betweeen
those whom the sub-section identifies, namely
'parties to the contract' or one such party
and third parties.
Sub-section (4) operates so as to deprive
contracts of the character of being in
restraint of trade or commerce, the character
which they must possess if sub-s.(1) is to
apply to them, unless the restraint imposed is
of a particular kind, namely one that produces
a significant effect on competition between
two or more persons, at least one of whom must
have been a party to the contract."
242. It was clearly a material factor in the judgments of Barwick C.J., Gibbs and Mason JJ. that a covenant and not a situation where there was privity of contract was under consideration.
243. Jacobs J., in dissent, held at p.420 that the covenant was invalid as
being in restraint of trade and then said that in reaching
that conclusion he
had not needed to rely on s.45 of the Act. He continued:
"However, I should express my view that,244. Murphy J., at p.421, agreed with the judgment of Jacobs J.
whether or not I am correct in my opinion that
the common law doctrine relating to restraint
of trade falls to be applied to the present
covenant, it is a contract in restraint of
trade within s.45(1) unless it is excepted
under s.45(4). The covenantor agreed not to
engage in certain trade or commerce on the
land in question and that agreement restrains
that trade and commerce. It would be a
question of fact whether or not it was likely
to have a significant effect on competition
between the parties to the agreement, or on
competition between those parties or any of
them and other persons. Though it is the
contract between the original parties which
needs to be examined in the application of
s.45, if on that examination it were found
that it was unenforceable between the parties
neither any rule of equity such as that in
Tulk v. Moxhay (1848) 2 Ph 774 (41 E.R. 1143)
nor s.88 of the Conveyancing Act, 1919
(N.S.W.) could operate to make the contract
binding upon successors in title."
245. In my opinion, the judgments in this case are not binding authorities on anything other than the construction of s.45(1). However, the plaintiff has to establish that any arrangement or understanding proved is in restraint of trade or commerce within s.45(2). A contract, arrangement or understanding can be properly described as in restraint of trade or commerce for the purposes of the Act only if the test provided in s.45(4) is established. I leave aside the question of who bears the onus of establishing this. In a situation where the contract, arrangement or understanding is clearly reasonable as between the parties, I do not consider that the authorisation and clearance provisions place the question of public interest outside matters for consideration in s.45(2)(a). Likewise, the question whether a contract, arrangement or understanding has been made or entered into contrary to s.45(2)(a) must ultimately be determined by the Court and cannot depend upon any determination of the Commission or Tribunal in an application, if made, for an authorisation under s.88 of the Act or a clearance under s.92 of the Act.
246. I consider that it must be established that the contract is first one in restraint of trade according to the common law rules before the question of s.45(4) arises.
247. I regret that the views I have expressed are not in accordance with the views expressed "with some doubt" by Sheppard J. in T.P.C. v. Allied Mills Industries Pty. Ltd. (1981) supra, at p 9; p 43,149 or with those expressed by Wootten J. in Hollywood Premier Sales Pty. Ltd. v. Faberge (Australia) Pty. Ltd. (1976) 2 NSWLR 144 or with those expressed by Lockhart J. in T.P.C. v. Email Ltd. supra, at p 402; p 42,380. However, I base my views principally on two matters, namely the provisions of s.15AB of the Acts Interpretation Act, 1901, and my difficulty in deciding what is a contract, arrangement or understanding in restraint of trade or commerce by only having regard to the effect upon competition set out in s.45(4). Section 45(4) does not appear to me to pay any specific regard to the interests of the public unless it be thought that if a contract, arrangement or understanding does not have a significant effect on the relevant competition between the parties then the public, in addition to the parties, are adequately protected.
248. Later I will deal with the amendments of 1977 which removed the
expression "restraint of trade or commerce" but I note with
interest the
statement made in the report of the Swanson Committee of August 1976 where, in
para. 4.112, the committee wrote as follows:
"The Committee has already stated that it249. I have reached the conclusions that the Commission has to show that the relevant defendants made an arrangement or entered into an understanding in restraint of trade or commerce in the common law sense to establish a contravention of s.45(2)(a). The question of the application of s.45(4) is a secondary question. I do not consider that it is necessary to decide on whom the onus lies to establish the position under s.45(4) because of the conclusion I express later upon the question of the effect on competition.
agrees with the submissions put to it that
sec. 45 and 47 together are unnecessarily
uncertain and complex. The notion of
'restraint of trade or commerce' has given
rise to major uncertainty, due both to its
unfamiliarity to the business community and to
the legal difficulties raised by the
Quadramain decision. The Committee has
already expressed its view that the phrase
'restraint of trade or commerce' should be
deleted from the Act."
250. As I have said, the Commission must show that the relevant defendants made an arrangement or entered into an understanding in restraint of trade in the common law sense to establish a contravention of s.45(2)(a). Although I doubt whether this has been established, and the Commission hardly dealt with this question at all, I will proceed to consider the questions which arise under s.45(4).
251. Senior counsel for the Commission has made it quite clear that it only relies on the effect of competition between the parties to the alleged arrangement or understanding and not on competition between those parties or any of them and any other person or persons including Tradestock.
252. However, he argued that the defendants against whom the allegations in para. 21 and corresponding sections of the Statement of Claim are made were engaged not only in competing in the supply of services of freight forwarding but also in the acquisition of the services provided by Tradestock and any other persons falling within the phrase "or any other agent and/or broker".
253. The following questions arise:
(1) Did the arrangements or understandings have any effect254. A threshold question arises, namely, whether it is necessary to ascertain the market or markets in which the named defendants are supplying or are likely to supply freight forwarding services or in which the defendants acquire or are likely to acquire the services of "any other agent and/or broker" who is relevant.
on competition between the defendants referred to in
para. 21 and corresponding sections?
(2) If the answer to question (1) is "yes", did that
restraint have a significant effect on competition
between the named defendants?
(3) Was any arrangement or understanding likely to have an
effect on competition between the named defendants?
(4) If the answer to question (3) is "yes", was that effect
on competition likely to be significant?
255. Section 45(4) specifically used the words "competition between the parties to the arrangement or understanding" and it did not specifically refer to competition in a market. I will deal more fully in Part 9 with the question of competition in a market but I consider that the fact that the legislature has chosen the words "competition between the parties to the arrangement or understanding" suggests that that is the competition the legislature had in mind and that no ambiguity arises if the words are given their ordinary meaning. In my opinion, one can probably have rivalrous behaviour between the parties to an arrangement or understanding without looking to the particular market in which they operate since it is the competition between the parties which is significant and not the extent of the competition in any market.
256. In any event, this question does not really arise because there seems no doubt that all the defendants named in para. 21 and corresponding paragraphs carried on at least some operations within one market, whether it be the Australian market for the carriage of goods or what the plaintiff called the Australian national freight forwarding market.
257. Whilst it is necessary to consider only the effect of the arrangements or understandings, I consider that that effect must be determined in the light of the effect at the time or the effect likely to result at or about the time of the making of or entering into the arrangements or understandings. I do not think that what might happen years later is the test.
258. Although the minute of, for example, the meeting of 12 February 1976 is entitled "T.I.C. Management Consultants", I consider that, whatever arrangement or understanding was reached, it included what was described therein as "transport brokerage agencies" and provided "that it was better for the client and operator to deal direct". I accept that this means that the parties to any arrangement or understanding would not in fact deal with transport consultants or transport brokerage agencies, so it is necessary to examine the effect upon the competition between the parties. In addition, one has to look at the likely effect of such an arrangement or understanding.
259. Even isolating these questions indicates what I regard as the complexity of and the difficulty of applying the relevant legislation to established facts.
260. The question of the effect of brokers or consultants upon competition
between the defendants must not be looked at in an academic
way. It is clear
that the Minister in charge of the Bill in 1974 had this hope when he said:
"The Courts will be afforded an opportunity to261. As Bowen C.J. and Fisher J. said in relation to the matter then under consideration in Outboard Marine (Australia) Pty. Ltd. v. Hecar Investments (No. 6) Pty. Ltd. [1982] FCA 265; (1982) 66 FLR 120 at p 123; (1982) 4 ATPR 40-327 at p 43,983:
apply the law in a realistic manner in the
exercise of their traditional judicial role."
"The economic meaning must be applied in a262. In my opinion, it is necessary to examine the facts carefully and decide the question of the effect on competition in the light of the facts and not to apply a theoretical view of what might be the position if the facts were different or what might be the position at some time several years later.
practical way to accommodate the concern of
the Act with business and commerce."
263. I deal later in Part 9 with the economic evidence but I consider that the overriding consideration in the construction of s.45(4) is the choice in the legislation of the words "competition between the parties to the arrangement or understanding".
264. In addition to the provisions in s.15AA of the Acts Interpretation Act
1901 requiring me to prefer a construction that would promote the purpose or
object underlying the Act, I now have to consider the provisions
of s.15AB
dealing with the use of extrinsic material in the interpretation of an Act. I
have already mentioned s.15AB. Without
limiting the generality of the
material which I may consider, I am permitted to consider a number of matters
including, in certain
cases, the relevant reports of any committee of inquiry
(s.15AB(2)(b)); any explanatory memorandum relating to the Bill containing
the provision laid before or furnished to the members of either House of the
Parliament by a Minister before the time when the provision
was enacted
(s.15AB(2)(e)); the speech made to a House of the Parliament by a Minister on
the occasion of the moving by that Minister
of a motion that the Bill
containing the provision be read a second time in that House (s.15AB(2)(f));
any relevant material in the
Journals of the Senate, in the Votes and
Proceedings of the House of Representatives or in any official record of
debates in the
Parliament or either House of the Parliament (s.15AB(2)(h). I
am required also to consider the provisions of s.15AB(3) providing
that, in
determining whether consideration should be given to any material in
accordance with sub-section (1), or in considering
the weight to be given to
any such material, regard shall be had, in addition to all other relevant
matters, to -
(a) the desirability of persons being able to rely on the265. Senior counsel for the first, fifth and seventh defendants sought to rely upon a considerable amount of material under the provisions of s.15AB. I have done the best I can with this section, which I find extremely difficult to apply, especially in a case like this where at least some counsel are not easily deterred by the time required to argue a point fully.
ordinary meaning conveyed by the text of the provision
taking into account its context in the Act and the
purpose or object underlying the Act; and
(b) the need to avoid prolonging legal or other proceedings
without compensating advantage.
266. I consider that the views expressed by the Full Court of this Court in Outboard Marine (Australia) Pty. Ltd. supra, upon the construction of the Act are reinforced by use of s.15AB, which had not been passed at the time of the Full Court's judgments.
267. It is, in my opinion, now necessary to look at certain aspects of the
correct approach to be adopted in the construction of
a statute such as Part
IV of the Act. It is clear that, although the criminal onus of proof does not
have to be satisfied, it is
necessary to have regard to the penal nature of
the contravention alleged and the extent of the penalty both financial and
probably
to trade reputation which is involved in a finding of contravention.
I also have in mind that the legislation is of a highly penal
nature and in
T.P.C. v. Legion Cabs (Trading) Co-operative Society Ltd. [1978] FCA 47; (1978) 35 FLR 372 at
p.382; (1978) A.T.P.R. 40-092 at p.17,905 I said in relation to s.47 of the
Act:
"I consider that such a section should be268. The passage of Gibbs J., as he then was, to which I referred reads:
construed in a similar way to a section
imposing a criminal liability. As to the
interpretation of statutes creating offences,
see Beckwith v. The Queen, per Gibbs [1976] HCA 55; (1976)
135 CLR 569 at p 576."
"The rule formerly accepted, that statutes269. Although s.15AB had not been passed when this statement was made, I doubt whether it should be held to abrogate the principle to which reference has just been made.
creating offences are to be strictly
construed, has lost much of its importance in
modern times. In determining the meaning of a
penal statute the ordinary rules of
construction must be applied, but if the
language of the statute remains ambiguous or
doubtful the ambiguity or doubt may be
resolved in favour of the subject by refusing
to extend the category of criminal offences:
see R. v. Adams [1935] HCA 62; (1935) 53 CLR 563 at
pp 567-568; Craies on Statute Law, 7th Ed.
(1971), pp 529-534. The rule is perhaps one
of last resort."
270. In my opinion, if the language of the Act after the ordinary rules of
construction have been applied remains ambiguous or doubtful,
it is
appropriate to remove or resolve that ambiguity or doubt in favour of a
defendant, at least, where the proceedings are for
a penalty.
The meaning of "has or is likely to have" in s.45(4)
271. The words "is likely to have" are associated with "has or" and the words "a significant effect on competition". They are not associated with the word "purpose".
272. The words "likely to have" have been considered in relation to s.45D of the Act in Tillmanns Butcheries Pty. Ltd. v. Australasian Meat Industry Employees Union [1979] FCA 84; (1980) 42 FLR 331; (1979) 2 A.T.P.R. 40-138. At p.339; p.18,495 Bowen C.J. pointed out that the word "likely" is one which has various shades of meaning. His Honour discussed various cases including Australian Telecommunications Commission v. Kreig Enterprises Pty. Ltd. (1976) 14 SASR 303, T.P.C. v. Total Australia Ltd. (1975) 24 FLR 413; (1975) ATPR 40-014, and certain American cases. His Honour said that it was unnecessary to place a gloss on the section by preferring one meaning of likely than another for determination of the particular case then under consideration because the circumstances to which s.45D may apply were so various. His Honour further considered the established facts in the case and had regard to the ordinary course of human affairs.
273. His Honour referred to T.P.C. v. Total Australia Ltd. supra, where Joske J. considered the words "is likely to have the effect of" in s.47(5) of the Act. Joske J. took the phrase "is likely to have the effect of" as equivalent to calculated and said that it was a matter of inference as to whether the likely effect is to substantially lessen competition (at pp.416-417; 17,288). An application for special leave to the High Court in the last mentioned case was refused; [1975] HCA 48; (1976) 50 A.L.J.R. 333.
274. Deane J. at p.347; pp.18,499 and 18,500 said that he was unable to accept that "likely" is synonomous with "more likely than not" and that in s.45D(1)"the preferable view is that the word 'likely' is not synonomous with 'more likely than not' and that if relevant conduct is engaged in for the purposes of causing loss or damage to the business of the relevant corporation, it will suffice, for the purposes of the sub-section, if that conduct is, in the circumstances, such that there is a real chance or possibility that it will, if pursued, cause such loss or damage".
275. Deane J. considered that the purpose of persons engaging in the conduct was relevant but it must be borne in mind that the words of s.45D are "... conduct ... engaged in for the purpose, and would have or be likely to have the effect, of causing ...".
276. Deane J. at p.347; p.18,499 also said:
"On the other hand, if conduct had run its277. Bray C.J. in Australian Telecommunications Commission v. Kreig Enterprises Pty. Ltd., supra, examined the meaning of the words "is likely" in s.139B(1)(a) of the Post and Telegraph Act 1901. His Honour considered whether the word "likely" is synonomous with "probably" or whether it was satisfied where there was some possibility more than remote or "bare". At p.312 his Honour said that the ordinary and natural meaning of the word is synonomous with the ordinary and natural meaning of the word "probably" and both words mean "... that there is an odds on chance of the thing happening". His Honour also pointed out that the statute was a penal statute. His Honour said that he thought that the most natural and ordinary meaning should be given to the word "likely" and that in the section it means "probably" and that that means that there is a more than fifty percent chance of this thing happening.
ordinary course and had not had the specified
effect, it would be but rarely that a court
would feel justified in disregarding the
lesson of the event and finding that while the
conduct did not have the specified effect it
had been more likely than not that it would
have that effect."
278. In my opinion, it is desirable to note the warning given by Bowen C.J. in Tillmanns Butcheries Pty. Ltd. v. Australasian Meat Industry Employees Union, supra, and not to place a gloss on the section by preferring one meaning of "likely" rather than another if that is not necessary for the determination of a particular case. If, however, I am required to adopt a view, I consider that the word in s.45(2) now under consideration is to be read with due regard to the fact that it appears in a penal statute, that it is linked with the word "significant" and that this means that, whilst the meaning need not be restricted to a situation where the odds are greater rather than equally balanced or somewhat less than equally balanced, the probability must be something not very far short of "more probably than not", except in unusual circumstances as, for example, the situation mentioned by Deane J. of firing a rifle through drawn curtains into a quiet lane in a country village.
279. I consider that "is" differs somewhat from "would be" and that the
question must be answered by looking at the position at or
about the time of
the arrangements or understandings under consideration were made or entered
into. The Trade Practices Tribunal,
Deane J. presiding, said at p.17,453 in G.
& M. Stephens Carting Contractors Pty. Ltd. (1977) 1 A.T.P.R. 40-042 in
relation to s.45 after 1 July 1977:
"It is, in our view, to this direct andI consider this view equally applicable to the section before the 1977 amendment.
immediate effect that the provisions of s.45
refer."
280. The word "has" requires the question to be tested against the
established facts whereas the words "likely to have", while referring
to the
period at or about the time when the arrangement was made or the understanding
entered into, allows any reasonable inference
to be drawn.
The meaning of "significant"
281. The next question is whether, at the time of the alleged arrangement or understanding, the restraint had a significant effect on competition between the relevant defendants or whether it was "likely to have a significant effect on competition" between the relevant defendants.
282. In Hecar Investments No. 6 Pty. Ltd. v. Outboard Marine Australia Pty.
Ltd. (1982) 4 ATPR 40-298 at p 43,705, I considered the meaning of the word
"substantial" in s.47(10)(a) of the Act and came to the conclusion that that
word
refers to an effect on competition which is at least "real" or "of
substance" or "of significance". On appeal ((1982) [1982] FCA 265; 66 F.L.R. 120 at p.124;
(1982) 4 A.T.P.R. 40-327 at p.43,983) Bowen C.J. and Fisher J. pointed out
that Courts had been reluctant in the past to attempt to define
"substantially"
but it was not necessary to decide the meaning of the word to
determine the appeal but that it was difficult to say that the primary
Judge
erred in law in regard to the meaning he ascribed to "substantially".
Likewise, I think it is unnecessary to attempt to define
the word
"significant" in s.45(4) since I do not think it is necessary for the purpose
of determining this case, although it is clear
that it must mean, perhaps
except in extrordinary circumstances, at least "not unimportant" or "not
insignificant".
PART 7DID ANY RESTRAINT IN THE ARRANGEMENT MADE OR THE UNDERSTANDING ENTERED INTO AT ANY OF THE MEETINGS HAVE OR WAS IT LIKELY TO HAVE A SIGNIFICANT EFFECT ON COMPETITION BETWEEN THE DEFENDANTS?
(A) General
283. Having dealt with the construction of s.45(2)(a) and (4), I can proceed to consider whether any restraint in the three arrangements or understandings had or was likely to have a significant effect on competition between the defendants.
284. Since this question involves an examination of what was the effect of the arrangements or understandings upon competition between the defendants, it is necessary to examine the extent of that competition. I proceed upon the basis that there is no need to look at the question of market in relation to s.45(2)(a) and (4). However, my conclusion would be the same if I adopted a construction of s.45(4) which involved the consideration of competition in a market whether it be the "national freight forwarding market" as the Commission argued or the total market for the transport of goods in Australia.
285. Because of my conclusions there is no need to consider the arrangements or understandings separately.
286. I will deal later with the Commission's argument that I should have regard to the question of the acquisition of broking services.
287. I will consider first what was the effect of the arrangements or
understandings upon competition between the defendants.
(B) The four periods of operations of Tradestock
288. There were four periods in the operations of Tradestock:
(a) The consulting period when no commission was sought from(i)"The consulting period" - (about July 1975 to about early March 1976)
carriers - from about July 1975 to about early March
1976.
(b) The commission period when commission was sought from
carriers - from about March 1976 to about November 1976.
(c) The freight forwarding period when Tradestock was
operating as a freight forwarder and not as a consultant
or in any real sense as a broker - from about November
1976 until shortly before Tradestock went into
liquidation on 31 May 1978.
(d) The period not later than February 1977 when Tradestock
made a positive decision not to deal with the
defendants.
289. I will consider first the period when Tradestock was operating as a consultant seeking remuneration from clients and not from freight forwarders.
290. I will proceed upon the basis that the arrangement or understanding was not to deal with consultants or brokers whether or not commission was demanded from the carrier and during this period Tradestock was not demanding such commission.
291. The position was not one where a number of brokers or consultants were offering their services in the same way as Tradestock. Only Tradestock was in the field.
292. There was some evidence that several consultants or brokers had carried on business in the past. At a meeting of the N.F.F.A. on 11 February 1969 apparently attended by Redpath as chairman, Davies and Wilkins, it had been reported that a Mr Klint was operating as a freight broker and that he had made approaches to members of the forwarding industry and it was agreed that Klint's type of operation only succeeded in depressing freight rates and was to be deplored. At a meeting of the N.F.F.A. on 4 March 1969 at which Redpath, Wilkins and Davies were again present, the minutes of the previous meeting were confirmed. It appears that the activities of freight brokers were discussed and it was agreed that the N.F.F.A. policy regarding freight brokers was that quotations would not be submitted to other than general (sic - genuine) shippers or authentic members of the transport industry, i.e. no quotations to freight brokers, consultants or other variations of go-between type operators.
293. Tradestock commenced business about mid-1975 as "Transport Information Service" and "T.I.C. Management Consultants". At least during the period between mid-1975 and early March 1976 it was conducted by Frewen and Stock with some typing assistance from Mrs Frewen. In general, Tradestock sought to advise clients about competitive quotes, about little known or unpublished discounts and rates, and about entering into long term fixed price agreements. It also offered its negotiating services to seek competitive quotes leading to a client switching from one freight forwarder to another in order to acquire transport services at better prices and/or to get better services, in making representations to transport companies designed to stop them putting up rates, in stipulating on behalf of clients for certain minimum standards of service, and in checking invoices and consignment notes. So far as is relevant, I doubt whether it achieved any of these objectives. It also purported to offer certain other consulting services in respect of which it appeared to have no particular expertise. Its expertise in the fields which I have mentioned was also considerably limited although Frewen and Stock had had some experience in the transport industry, both having previously worked for the first defendant.
294. Whatever view one might take about the efficiency of Tradestock, there was no doubt that, prior to the end of 1975, it made very extensive and determined efforts to obtain clients for its services on a consulting basis. It appears that Frewen and Stock made use of any personal contacts which they had and that they made a major effort to obtain clients who would pay Tradestock a fee. The submission of the second defendant that Tradestock carried out what was in reality a market survey in this regard appears justified. Tradestock, through its advertising agents, approached an organisation called Dunn and Bradstreet and sought the names and addresses of prospective clients requiring transport services particularly in the Melbourne region. Frewen said that Tradestock was given a list of about 3,000 names. In July or August 1975 Tradestock had circularised 1,965 prospective clients offering all kinds of services including the opportunity to attend a transport seminar. It received only very few inquiries for its consulting services (the response was "miniscule") and not one application to attend the seminar which it had offered in the circular. In addition Tradestock telephoned a large number of companies seeking work. In late January 1976 both Frewen and Stock visited Sydney and apparently approached approximately 30 prospective clients. The total result of Tradestock's extensive, apparently efficient and very determined efforts to attract clients resulted in Tradestock having four clients at the end of January 1976 and having done some work for two or three others who had ceased to be clients by that date. Its clients, to use short name references, at the end of January were Sylon, Lane, New World-Cyclops and Mindrill. Lane and New World-Cyclops were clients for which Tradestock only wrote a report for which it was paid a fee. The only two clients for whom Tradestock had any continuing activity early in February 1976 were Sylon for whom it performed some activities until February 1977 and probably Mindrill for whom it performed some activities until mid-July 1976.
295. It is clear that Tradestock had been unable to establish itself as a
viable organisation by the end of February 1976 on the
basis that clients
would pay it a fee even where the fee was calculated as an agreed percentage
on what Tradestock claimed were savings
achieved for the client. I have
considerable doubt whether the savings claimed were made. In short, I am
satisfied that Tradestock
had no clients in any real sense on a consultancy
basis and was unable to operate in this way. So far as the evidence goes, I
see
no reason to conclude that any other person would have operated any more
successfully in obtaining clients at that time on the basis
of obtaining a fee
from the client.
(ii) "The Commission Period" - (about early March to about November 1976)
296. By February 1976 it was clear that Tradestock had to have a continual source of income to survive and that endeavours to get clients who would pay a consulting fee or a percentage of claimed savings had proved unsuccessful.
297. In early 1976 Tradestock formulated the idea of becoming a broker in the sense that it sought commission from the carrier. A Mr Locke, who at one time was a director of Tradestock in which he had a financial interest and for which he arranged certain finance, had discussions in late 1975 with Frewen and Stock. Locke was an insurance consultant and the general manager of an insurance underwriting agency, by name Carpenter Locke. Locke suggested that Tradestock start in the broking business in the transport of goods which he described as very akin to the insurance broking business with which Locke said he was familiar. Locke's concept was that the transport companies would pay commission. He invested an amount of $1500 in the business and on 20 February 1976 introduced Tradestock to the manager or deputy manager of the Bank of New Zealand in George and William Streets, Sydney. At this time Locke appreciated that the business in its original concept was clearly unsuccessful. Locke, in evidence, agreed that in establishing a new business it was desirable to have an arrangement with the client that the client would not go elsewhere before introducing the client to a carrier otherwise the transport company would be likely to try to go to the client and cut the broker out. There was evidence that at the meeting the bank official had been told that Tradestock was seeking to get its remuneration by brokerage and it appears that it was said that that would produce an income of about $10,000 per quarter. A portion of the diary of the bank official who conducted the interview recorded that he had been told at the meeting that it was expected that income would be erratic in the first stages but that the fees were expected to increase to $10,000 per quarter in a short period. Locke, through Carpenter Locke, provided a guarantee for the $10,000 overdraft which Tradestock had obtained.
298. On 5 February 1976 Stock met Shortell and Pedlow, who was in charge of Kwikasair, a division of T.N.T., to explain the nature of Tradestock's business. Stock said that Shortell mentioned the possibility of some commission being paid if T.N.T. was introduced to new clients. However, no commitment was reached at this meeting.
299. On 10 March 1976 there was a meeting at the Kwikasair depot between Shortell, Heasman, Locke, Frewen and Stock. It was at this meeting that the question of commission was specifically raised and that meeting has been discussed in Part 5.
300. By letter of 26 April 1976 Frewen wrote to the Supply Manager of
Shovelton Storey Pty. Limited ("Shovelton Storey") making a
number of
allegations of savings achieved, which I do not consider have been established
by the evidence, and proposed that Tradestock
undertake a survey of the
company's distribution and transport requirements. The letter included a
paragraph dealing with remuneration
in the following terms:
"Following the normal practice of our company,301. It was, of course, contrary to fact to say that Tradestock at that time had a normal practice of negotiating brokerage commission.
Tradestock will negotiate with the transport
operators concerned, brokerage commission,
which will be included in their submissions to
Shovelton Storey and no fee will be claimed
direct from you by Tradestock."
302. Similar letters were written during April 1976 to a number of companies seeking to obtain them as clients upon the basis that Tradestock's remuneration would come from the carrier.
303. On 3 May 1976 Tradestock arranged for the following entry in the Melbourne telephone directory: "Tradestock Pty. Limited - Transport Brokers".
304. By letter dated 12 May 1976 Tradestock acquired Shovelton Storey as a
client. The letter of appointment, a draft of which was
prepared by
Tradestock, was in the following form:
"It has been decided that this company will305. Certain defendants argued that this involved a breach of the Act.
review its freight transportation programme.
Following this decision we have engaged the
services of Tradestock Pty Ltd as our
transport broker and that firm will be
instrumental in preparing and producing
reports and proposals after investigation of
our current programme. This appointment is
effective from Wednesday 12th May, 1976.
Our arrangement with Tradestock Pty Ltd is
that our company will relinguish (sic) its
practice of direct dealing with transport
operators in matters relating to negotiation
of agreements for transportation services.
Tradestock Pty Ltd will, in consultation with
us, arrange all necessary services on our
behalf.
We are pleased that Tradestock Pty Ltd have
consented to act in this capacity and are
confident that suppliers of services will
co-operate with them to the fullest extent."
306. The following clients were obtained as a result of the approaches to
prospective clients on the basis that no payment by them
would be involved:
12 May 1976 Shovelton Storey. This company appeared to
be the first new client Tradestock had acquired7 June 1976 Kornblums Pty. Ltd. ("Kornblums")
for four months.
June 1976 I.C.S. C.A.R.S. Pty. Ltd. ("Cars")31 August 1976 Sheaffer Pen Company ("Sheaffer")
Spicer")25 October 1976 Clyde Master Pty. Ltd. ("Clyde Master")
Hanson")307. On 14 May 1976 Frewen sent a letter to the General Manager, Alltrans Express Vic-Tas., a division of T.N.T., (Ex. CY, see also Part 3(B)), the body of which read as follows:
"Effective from 12th May 1976, Tradestock Pty.308. This letter was referred to Shortell and produced a somewhat violent reaction. Shortell said that his reaction to the letter "was firstly one of outrage, one of absolute indignation". He said this was because he had told Stock that T.N.T. would not pay commission and also because of the rates of commission referred to in the letter. Shortell also said that, after reading the letter, he considered Ex. CY constituted a breach of the exclusive dealings provisions of the Act.
Ltd. has been appointed by Shovelton Storey
Pty. Ltd. as Consultant and Broker to that
firms 'Transportation and Distribution'
programme. A copy of our letter of
appointment is enclosed.
In order to prepare the necessary reports for
our client Tradestock will need to hold
discussions with a representative from your
organisation.
To avoid any misunderstanding as to the
purpose of our meeting we advise that the
areas of discussion will include:
(a) Our clients future requirements with
regard to freight transportation
services.
(b) Negotiation of future rates and charges
for services offered by your company.
(c) Tradestock's remuneration.
With regard to item (c) above we provide the
following information:
Tradestock Pty. Ltd. shall be remunerated by
the Carrier, as set out below, in connection
with Agreements for the carriage or transport
of articles, effected or renewed by Tradestock
Pty. Ltd., in regard to which Tradestock Pty.
Ltd. has produced written authority from the
Consignor to effect or renew Agreements.
Brokerage not exceeding the percentage shown
below, on Agreements where the Carrier's
charges earned are:
CARRIERS CHARGES EARNED BROKERAGE PERCENTAGE
Up to $50,000 7 1/2%
$50,001 to $100,000 5%
$100,001 to $150,000 4%
$150,001 to $250,000 3%
$250,001 and over 2 1/2%
It shall be competent for a Carrier by
Agreement with Tradestock Pty. Ltd. to fix
Broker's remuneration in respect of any
Business at lower rates of Brokerage than the
maximum rates prescribed above.
It will be necessary for our meeting to take
place in our offices at 422 Collins Street,
Melbourne on Wednesday 19th May 1976, at 9.00
am. The undersigned would appreciate it if
the representative nominated by your company
would contact him to confirm this appointment
as soon as possible."
309. On 19 May 1976 Shortell sent a telex to Gillespie, the General Manager
of Shovelton Storey. The telex set out the letter from
Tradestock and the
letter of appointment given to Tradestock by Shovelton Storey and concluded:
"We express our utmost concern at the contents310. Shortell agreed that implied in the telex was a wish to make it clear to Shovelton Storey that it would have to get rid of Tradestock if it wished to deal with T.N.T. and that the purpose of sending the telex was to try and separate Shovelton Storey from Tradestock.
of Tradestock's letter when viewed in the
light of the Trade Practices Act 1974.
Furthermore, it has never been customary for
carriers in Australia to pay commission to
third parties for the procuration of
interstate cartage as it has been proved in
other countries that the payment of such
commissions increases the national
transportation cost by the amount of such
commissions.
Your urgent advice appreciated.
Shortell
General Manager
TNT Australia."
311. Gillespie sent the following telex to T.N.T. on 20 May 1976:
"Shortell our letter of 12 May 1976 appointing312. Shortell said that he did not hand the original of Ex. CY to Heasman but he had given it to his secretary to file in the normal way. He thought that his secretary had given it to Heasman because a copy which Shortell had seen recently had the initials REH noted by his secretary in the margin together with the date which was either 19/5/76 or 20/5/76. It appears this is the way in which Heasman got Ex. CY, which was the letter tabled at the meeting of the N.F.F.A. on 20 May 1976.
Tradestock is a tangible expression of
dissatisfaction with the rates charged by your
organisation and other major transport
operators. As we see it you have the remedy
in your own hands.
Gillespie
Shovelton Storey".
313. On 2 June 1976, after Tradestock had acquired Shovelton Storey as a client on the basis it would be remunerated by the carrier, it wrote to a number of carriers other than the defendants seeking to have them carry for Tradestock's clients on a commission basis. Carriers that I will call shortly, Jetlink, Mulgrave Associated Transport, Pre-paid Express, Sartoris and later Toll Chadwick all agreed to pay commission as did Blue Circle.
314. All clients obtained by Tradestock between March and November 1976, with the exception of Cars, were obtained upon the basis of a letter of appointment whereby each client surrendered the right to negotiate with freight forwarders direct and agreed only to deal through Tradestock, the client having no responsibility to pay any monies to Tradestock. Tradestock was to receive its remuneration by way of commission from the carriers to whom it gave the client's business.
315. During the period March-November 1976 Tradestock received the following
income:
(a) consulting fees - $1,000 (Lane) and apparently GTV-9 $250.
This was in respect of work done or arranged before March.(b) "savings" $1,216.73 (Sylon).
appeared to have been more as a freight forwarder than as aBy the end of October 1976 Tradestock had a large negative cash flow.
broker.
316. I consider that it is established that at November 1976 it had only the
following clients:
Hardy Spicer317. Any claims made by Tradestock of its capacity to "bulk buy" transport, "use its clout" or of "having familiarity with actual rates in the market place gained from knowledge of its other clients" and the like have no real substance.
Lawrence & Hanson
CARS
Clyde Master
Tomasetti
Sheaffer
Sylon
Shovelton Storey.
318. All parties made detailed submissions concerning Tradestock's dealings with various clients. I do not propose to do more than summarise what I consider flows from the evidence relative to the "commission period". During this period Tradestock did some work for Shovelton Storey, Tomasetti, Kornblums, Clyde Master, Cars, Stanhome and Sheaffer Pen in addition to Mindrill and Sylon. This work produced very little income. Tradestock obtained some other letters of appointment in substantially the same terms as that from Shovelton Storey. However, in relation to certain of these clients, Tradestock did little or no work in respect of which it obtained commission from any carrier although it had no other income at the time.
319. The Commission submitted that Tradestock's failure in this period was
due to a refusal to deal by the defendants. The submission
presupposes that
the defendants would have paid commission if the arrangements or
understandings had not existed. Shortell clearly
said that T.N.T. would not
pay any commission. Wise, whilst not going quite as far, left me with the
conclusion that it would have
been very unlikely that Ansett would have paid
anything other than nominal commission. Mayne Nickless appears to have
adopted an
attitude consistent with a refusal to pay commission. Brambles,
A.S.P. and Youngs chose to call no evidence on this aspect or any
other aspect
which I regard of significance. There was evidence that Gardiner, the General
Manager of Ipec, said in the telephone
conversation with Frewen on 26 July
1976 that it would not pay commission. Certainly some of the other carriers
agreed to pay commission.
In my opinion, it was most unlikely that Tradestock
would have been able to carry on a business where it relied on commission from
carriers whether or not the arrangements or understandings existed.
(iii) and (iv) "The freight forwarding period" (about November 1976 until
shortly before the time when Tradestock went into liquidation
on 31 May 1978)
and the period when Tradestock would not deal with the defendants (not later
than February 1977)
320. In December 1976, Stock left the business. He said:
"At that stage I could not foresee my serviceThe real problem was the lack of clients. As Stock said:
was warranted - in other words, the business
was not there in its present form".
"Q: It was apparent at that time that the321. On 17 December 1976 Tradestock commenced the proceedings in the Victorian Registry against certain of the defendants in this case.
real problem that Tradestock had was with
its lack of clients, was it not?
A: It was one of them, yes, it was a vital
one."
322. During 1976 Tradestock introduced a system called "Freightcard". This was a system designed to operate by Tradestock undertaking the liability to the carrier to pay it for the carriage of a particular consignment for a customer and charging the customer an amount calculated according to a published rate schedule of Tradestock. This sytem was in reality the same as that of any freight forwarder who used sub-contractors to carry out the task of forwarding. Most freight forwarders used sub-contractors to a varying extent. In particular some used mainly sub-contractors with one or more trucks, some used the railways or air services for part of the transportation, and others used specialist carriers for local work or transportation to destinations other than those to which they normally operated.
323. In cross-examination Stock was shown a letter from Tradestock to Clyde Master dated 9 September 1976 which set out rates and which continued that these rates were "...available through Tradestock and when compared with your current charges will show excellent savings over Brambles-Ansett". He agreed that, if he had received that letter, his reaction would have been to say that the letter was no different to a submission of a quotation by Ansett or Brambles or any other carrier. I have the same reaction.
324. A document headed "Freightcard Package Express", being part of
promotional material issued some time in 1977, describes Tradestock's
aims,
inter alia, as follows:
"OUR AIMS:325. Various documents setting out "schedule of rates" were in evidence operative from different dates at least after 1 December 1976. These documents set out Tradestock's schedules of rates to various cities and the terms including, for example, trading terms, insurance, C.O.D. collections, hazardous cargoes, delivery areas, pick-up and delivery charges, air express minimum charge.
Are to offer secure, reliable and highly
competitive services as a National Package
Carrier specialising in the carriage of small
consignments throughout Australia.
To offer highly competitive rates, combined
with a fast and reliable service.
...
We are a National company offering a
comprehensive service to senders of small
consignments, whilst maintaining highly
competitive rates."
326. Early in 1977 Tradestock placed an advertisement in the Melbourne Age
seeking a "Transport Executive - Salary Package to $20,000".
The
advertisement continued:
"Tradestock has introduced a new modern system327. A Mr Jack, who was then the Victorian State Manager for a truck and bus dealer, applied for and obtained the position. After a telephone conversation, Jack, who was called by the first defendant and who at the time when he gave evidence was the Managing Director of a computer software company, attended a meeting at the offices of Carpenter Locke with Frewen. At this meeting Jack's evidence was that Frewen said that a very large core of owner/drivers of interstate trucks existed and they were independent and without any co-ordination and that he believed that that core of owner/drivers could be marshalled together and turned into a viable transport system.
of freight transportation to Australia which
covers all modes: air, road, rail and sea and
has many features not currently available to
customers of most transport companies".
328. By letter dated 28 January 1977 Frewen engaged Jack as General Manager of the Freightcard Division of Tradestock at a salary package of $20,000 per annum. Jack joined Tradestock in February 1977 when he met a Mr Oxley and a Mr Beasley and also a Mr Murray. Jack said that Murray had also accepted the position as General Manager. Frewen met Jack, Murray and Oxley almost immediately after Jack started his employment with Tradestock. Jack's evidence was that Frewen said that the staff were really consultants but they could call themselves what they liked on their business cards and that their job was to gain freight from manufacturers.
329. At this meeting and on other occasions Frewen told Jack that he was not to approach the major transport companies. When this was first mentioned Frewen read from an article in the Financial Review published early in January 1977 dealing with the litigation to which I have referred between Tradestock and certain transport companies, including some of the defendants in the present case. Jack said Frewen gave instructions to have nothing to do with these companies in the placement of freight and that he named some of them. Jack said he recalled Frewen mentioning Mayne Nickless, Brambles, T.N.T., and Ansett Road Express in this regard, but he believed there were others. He said that Frewen read names from the article and that Frewen asked him to develop the Freightcard system and deal with small to medium transport companies and owner/drivers. At this meeting Oxley was told to develop existing clients and Murray to develop new clients in the air freight field.
330. Jack related a meeting which took place in a coffee shop, apparently the day before Frewen became ill early in 1977. Jack said that he had been concerned at the obvious lack of cash flow and the low rates which were being charged by Tradestock. Jack said that Frewen said, in substance, that he should endeavour to get as much freight as he possibly could irrespective of rates. This would enhance Tradestock's position with the transport companies and that any losses would be subsequently recovered by an action he was taking against the major transport companies. Jack also said Frewen said that he would undercut freight rates to whatever degree of loss was necessary to get freight.
331. Jack became dissatisfied with the position and left at the end of April 1977.
332. Jack was obviously very unfavourably disposed to Frewen and said that he had considered suing Frewen, but I accept the evidence which he gave about the instructions not to deal with the major transport companies.
333. There is evidence that in the last six months of 1977 what was shown in a Tradestock trading profit and loss statement under the heading "Freight Costs" was 10 per cent higher than the gross income from all sources. Whilst this is not very conclusive, it does support an argument that Tradestock was getting forwarding work in the latter half of 1977 at a rate which did not cover the direct payments to various carriers without taking account of items like salaries, printing and stationary, rent, telephone and the other miscellanous charges of conducting a business.
334. Although Tradestock, during its freight forwarding era when it operated under the description "Freightcard", purported to act as a broker, in my opinion this was no more than a disguise of its operations which were those of a freight forwarder. It was operating as a principal itself and assumed a principal's responsibility to its sub-contractors in freight movements.
335. Indeed, in his address, senior counsel for the Commission did not seriously contest the proposition that, during the Freightcard era, Tradestock was operating in substantially the same way as any carrier who sub-contracted all his work.
336. The Commission accepted that its case was not that any defendant refused to deal with Tradestock at any time when it was not a broker or consultant.
337. There can be no issue whether the arrangements or understandings had any
effect on competition in relation to other than a broker
or consultant, that
is during any period when Tradestock was only operating as a freight forwarder
in the same general way as the
defendants operated.
(C) The extent of competition between the defendants
338. Apart from advertising, there was a considerable amount of evidence given by various witnesses including officers of the defendants which, in my opinion, showed conclusively that the field for the transport of goods in Australia was highly competitive at all relevant times and the defendants competed actively, one with the other.
339. Officers of some of the defendants gave evidence which showed that they employed a considerable number of salesmen in the field. Indeed, one of the arguments which Tradestock put to carriers was that a carrier would be able to dismiss many salesmen if it dealt with Tradestock. The Commission argued that a salesman only represented the interests of his employer whilst a consultant or broker would represent the interests of his client. Whilst this is likely to be substantially the position in relation to a consultant, I am by no means satisfied that this is so, or is likely to be so, with a broker who relies for his existence on the commission which he can obtain from the carrier. This is particularly so where the commission a broker received from a carrier depended on the value of the work which the broker placed with that carrier.
340. There was substantial evidence that, although a person wishing to consign a parcel or a small quantity of goods would be charged by most of the defendants what was called schedule rates, this was by no means the usual position where the customer had a freight bill of a significant amount. Schedule rates were rates available to the public generally. The evidence showed that, at least with a number of defendants, the schedule rate for a substantial client was only a starting point and that discounts as high as 80 percent or more were obtained sometimes by a client with very large transport costs, for example, a client who spent half a million dollars a year on transport. I think that the casual or small customer would not bother to employ a consultant or broker.
341. There was evidence that salesmen continually visited existing and potential customers. Indeed, I got the impression from one or two witnesses that salesmen made their approaches with such determination that they often became quite a nuisance.
342. I am satisfied that any client with a substantial amount of business, who might be prepared to seek assistance from a consultant or broker, could readily obtain quotations from a number of potential carriers without any such assistance. Of course, the skill with which he could examine those quotations would depend, like everything else, on the ability of the client but, in general, I conclude that anybody with significant freight costs could get sufficient quotations to be able to choose a carrier who would perform the work in a satisfactory way and for a satisfactory cost. There was evidence that it was not unusual for a company to employ a number of different transport operators having chosen that operator which it thought was the most suitable for each of the particular tasks required.
343. I now turn to look at some of the evidence concerning the efforts made by some of the defendants to obtain work.
344. Shortell, the Chief Executive of Kwikasair Australia and a director of the first defendant, said that Kwikasair, a division of the first defendant, opened 5000 new accounts a week and that carriers lose and gain customers regularly. He indicated the way in which quotations were made, that senior executives had to make it part of their business to examine the activities of substantial competitors, that discounts up to 90 percent were sometimes given, and that, in addition to several hundred salesmen in 1976, the first defendant had between 30 and 50 people who were called national account executives who looked after major accounts. Shortell did agree that, in general, salesmen were asked to try and find out who were the existing carriers for prospective customers and that this was desirable so that the salesmen would not quote too far under the existing rate.
345. A Mr Lewis was the Victorian Sales Manager for Kwikasair Australia. He dealt with the question of discounts, quotations and various factors which could affect the rate quoted. For example, a lower rate might be quoted where trucks, not usually fully loaded, were regularly carrying goods over the route over which the prospective customer required transport. He pointed out that it made no sense to quote rates which would not result in a profit margin.
346. A Mr Collins, the National Sales Manager for all Australia for Kwikasair, discussed methods of quoting and pointed out the various matters which had to be considered. He said clients shopped around for quotations and that the final quote was a matter for negotiation which depended on many factors, for example, the volume of business that was being offered.
347. There was evidence from a number of witnesses, for example a Mr Bishop, who since 1981 had been the General Manager of Ansett Freight Express. He said that it was necessary to review rates being charged to clients for a number of reasons. Some clients did not accept the cheapest service. He said he always kept in mind such questions as back loading and the assistance which a client could give in enabling the company to provide a satisfactory service to the area.
348. Wise, who in 1973 was the General Manager of Ansett Freight Express, said that that company generally responded to requests for quotations and that it frequently gave very significant discounts off schedule rates. A number of factors determined the size of the discount, for example, the volume of business being offered, whether the business was profitable and the measure of profit available from it. He said he looked to quote a fair price, one which is going to give a return of some description, but one which is going to hold the client. Sometimes a better discount was allowed where a client said it was going elsewhere if it did not get a better price.
349. A Mr Jenkins in 1976 became the first General Manager of T.N.T. Darwin Express, a division of the first defendant. He was situated in Sydney. He said that clients actively sought quotations from competitors, that in Darwin he used to trade with approximately 1300 customers each week, and that, because customers sought competitive quotes continuously, it was necessary to do one's best to retain their business by providing the best service and ensuring that correct rates were offered. He said that he had found that companies with very large accounts had very qualified people deciding where their freight contracts would be placed. He also said that in Darwin, T.N.T. Darwin Express gained and lost customers weekly, partly on account of price and partly on account of service.
350. A Mr Hines, who in 1976 was the State Sales Manager for the T.N.T. Transport System in South Australia, dealt with the major accounts which had been lost and gained in 1980 and said that most rates were negotiated.
351. A Mr Fegan, National Sales and Marketing Manager of Jetspress Road Express, said that his organisation had 14 or 15 salesmen, that it was necessary in seeking and accepting work to make the operations profitable and to have the right type and right balance of freight, that salesmen look after the clients on a day to day basis and that he could not see brokers replacing salesmen.
352. A Mr Smith was the Sales Manager for Youngs, who employed two salesmen. Youngs did have a rate schedule but 80 percent of the sales were negotiated. He prepared quotations and he conceded that when he was giving them he might have quoted a lower price if a customer had applied pressure on him.
353. Like most commercial transactions the result depended on the individuals involved and the business situation existing but I see no reason to assume that the intervention of Tradestock would have resulted in less cost to the client. Tradestock would have been concerned to ensure that its own commission was adequately covered. In addition I would not expect any defendant to offer Tradestock a rate significantly, if at all, lower than it would offer a client in a direct dealing.
354. When Tradestock operated as it did in the Freightcard era, it was only another freight forwarder operating, if successful, as a competitor to other carriers including the defendants. It employed its own salesmen.
355. There was evidence that some users called for tenders for their freight forwarding.
356. A Mr Lindsell, the Administration Manager for the Edgell Birds Eye Division of Petersville Industries Ltd., gave detailed evidence of the manner in which it chose freight forwarders. Particular attention was given to a factory it operated at Bathurst. Whilst this evidence certainly is not typical of all companies with transport requirements, it is the way many may be expected to operate. Lindsell said that he felt no need for a transport consultant. His company did not use a "national" distributor but required carriers to submit prices and the terms and conditions of carriage and from this information priority schedules were prepared which determined the order in which work would be offered to carriers. The priority was fixed according to price and the service which was offered and the experience his company had had with the carrier. It used about 75 different carriers. Its requirements were rather specialised but the evidence showed a very competitive situation. Carriers of all sizes from the major ones to one truck operators were considered. The names of the first and second defendants appeared more than once on the priority schedules. Clearly they were competing for work not only with themselves but with many other carriers.
357. A Mr D. Dugan ran a business importing Asian handicrafts and woodware called D. Dugan Pty. Ltd. during 1977 and until January 1978. He gave evidence of the way he selected freight forwarders. He had four criteria - price, reliability, probability of damage to freight and the attitude of the forwarder's staff to complaints. He said that he had changed carriers eight or nine times, that he felt no need for a transport consultant, that he got approximately one visit a week from representatives of freight companies, and that "they are all after your business, and they would continually offer better rates than I was getting from other companies". Dugan said he gave some work to Beasley of Tradestock about the end of 1977 because Beasley quoted a lower rate than he was paying. This was clearly at a time when Tradestock was operating as a freight forwarder. Dugan knew Beasley who had approached him before when he was acting for other companies.
358. A Mr T.J. Gillespie, who had been the General Manager of Shovelton Storey during 1976-1977, said that he was dissatisfied with the costs that that company incurred in having its goods distributed to all States. It was spending about $60,000 a year on freight forwarding. Some of this company's work was done by the first and second defendants. Quotes were obtained from the first, second and third defendants and some other carriers. Gillespie met Frewen some time about April 1976 and in May 1976 gave Tradestock the letter of appointment to which I have referred. It seems that Gillespie believed that Tradestock had achieved savings. However, Shovelton Storey was lost as a client at least by early 1977. This witness is an example of somebody who felt that there was a need for a transport broker. However, it incurred no obligation to the forwarder and the continued activity of Tradestock depended on it being able to get sufficient commission from carriers to remain in business.
359. There is some evidence of different sections of at least T.N.T. offering competitive quotations in one or two cases.
360. A Mr Coulter, who for several years from August 1980 had been responsible for the distribution of products of a company called Stanhome and its successor Happy Home Pty. Limited, gave evidence about the methods he had used to choose an appropriate carrier. He said that that company's transport requirements then amounted to about $70,000 per annum and that he selected carriers, negotiated rates, handled complaints with some assistance and checked invoices. He had had experience with a number of carriers including the first and eighth defendants. He had not had satisfaction with Australia Post. His practice was to shop around and he said that he was constantly approached by sales people whom he described as "pretty persistent". He himself negotiated on price and obtained a discount of 60-70 percent off the schedule rate.
361. I formed the impression that Coulter was a witness who went about the task of selecting a suitable transport operator in a very practical way and apparently he had been able to satisfy his company's requirements.
362. A Mr Isaacs, who had been responsible for the transport of the products of a division of Repco Corporation Ltd. for a number of years, described how he had chosen the appropriate carriers. He said that in choosing a carrier he had regard to reliability including that of delivery times, price and the ability to provide the service he required, for example, being able to arrange for goods to be picked up from the factory after a call which had been made later than usual. He had made use of Express Freight, T.N.T. and, occasionally, Ansett. He said that he was regularly approached by salesmen of various transport companies, that he usually sought at least a couple of quotes which he sought to get in respect of a six month period and that his practice was to tell carriers that he was getting competitive quotes.
363. A Mr Armstrong, the Manager of the warehouse and distribution division of a section of T.N.T., said that between 1973 and 1980 he was the Divisional Manager for T.N.T. at Wollongong. Thereafter, he became the Gold Coast Manager. He described the position at Wollongong in 1973 to 1975 when he said the second, third, and eighth defendants and other T.N.T. divisions operated in the area together with a "lot of locally based medium sized operators". He named these. He also said that there were more than 300 persons operating one or two truck businesses. A number of operators of trucks started with one or two trucks and expanded fairly rapidly. He thought the T.N.T. operation had expanded from about one to forty trucks in about seven years in Wollongong. He described how the major users of transport in Wollongong had a system of calling for tenders. Others would test the market periodically when they would call for competitive quotations. Even the smaller operators with one or two trucks would tender for portion of certain work. He said that he was responsible for quoting rates which were negotiated and that clients were gained and lost from time to time both from and to small and large carriers. He also described the position at the Gold Coast. He pointed out that personal contact, which involved establishing a relationship with clients, was the most successful way he had found of obtaining work in Wollongong.
364. Bennett, who was a sales representative for Kwikasair, a division of T.N.T., in 1972 and for two years from July 1974 was Sales Manager in South Australia for Comet, another division of T.N.T., gave evidence. After July 1974 he became Victorian Manager for yet another division of T.N.T. called North Queensland Express. He described the method by which he had quoted. Salesmen were given certain parameters within which they were entitled to quote without reference to a more senior officer. These parameters were broadly defined. Some work was unprofitable. He said that some clients had shown him quotations they had received from other carriers and he had found that the cheapest quote was not always successful.
365. A Mr Robbins, the Branch Manager of T.N.T. Darwin Express since 1976, gave evidence in relation to the activities of T.N.T. in Darwin. He said that T.N.T. was continually gaining and losing customers and that it had a printed rate schedule but in fact all rates were negotiated. His evidence disclosed a very competitive position with regard to the transport of freight into Darwin that existed at the time he gave his evidence.
366. A Mr Neef of T.N.T. Transport System prepared a list of some accounts which had been lost by a particular division of T.N.T. in Victoria between 1977 and 1982. Whilst this list did not deal with Brambles because of certain objections to the inclusion of that material by Brambles, it did show that a significant number of clients were lost to other defendants. These defendants were other divisions of T.N.T., Ansett, Express Freight, Mayne Nickless and Ipec. He also gave evidence of losses by his organization to the Railways and carriers who were not defendants and also apparently were not members of the N.F.F.A.
367. The defendants sought to deal with clients directly. I am satisfied that
the defendants were in active competition one with
the other. Indeed any
defendant not competing actively and successfully would be likely be driven
out of business. Youngs ceased
interstate freight operations in February 1977
having sold its business in that area to Mayne Nickless.
(D) The submission in relation to any broker market
368. I have already expressed the view that market is not relevant in relation to s.45(2) as it existed prior to 1 July 1977. The basis of one of the Commission's arguments was that the arrangements or understandings not to acquire the broking services that Tradestock was offering them had, or was likely to have, a significant effect on competition between the defendants to acquire those services. The Commission made it clear that the only relevant competition in this argument was that in acquiring broking services.
369. The short answer to this submission is that the only broking services during the period under consideration were those offered by Tradestock. Whilst it may be that one or more of the relevant defendants might have been prepared to acquire some limited service from Tradestock at least where no commission was demanded, it seems pretty clear that in no real sense could it be said that there was any demand by any relevant defendant to acquire services from Tradestock even where no commission was sought. Whether commission was sought or not, I consider that it was unlikely that there would be any competition between the relevant defendants to acquire services from Tradestock irrespective of any arrangements or understandings. There was no evidence of any other consultant or broker operating at the relevant time nor can any reasonable inference be drawn that one was likely to operate at that time.
370. I reject the argument of the Commission based on competition between the
defendants to acquire the services of Tradestock or
any other transport
consultant or broker.
(E) Conclusion
371. I consider that the restraints in the arrangements or understandings did
not have nor were they likely to have a significant
effect on competition
between the defendants.
PART 8WAS EFFECT GIVEN TO ANY OF THE THREE ARRANGEMENTS OR UNDERSTANDINGS AND THE CONSTRUCTION OF S.45(2)(b) BEFORE 1 JULY 1977?
(A) The construction of s.45(2)(b) before 1 July 1977
Section 45(2)(b) provided:372. It is necessary in considering s.45(2)(b) before the 1977 amendment to determine first to what the word "it" refers. Does it refer to giving effect to an arrangement or understanding to the extent that the arrangement or understanding is in restraint of trade or to the word "effect"?
"A corporation shall not -
(a) ...
(b) give effect to a contract, arrangement or
understanding to the extent that it is in
restraint of trade or commerce, whether
the contract or arrangement was made or
the understanding was entered into before
or after the commencement of this
sub-section."
373. Section 45(4) deals only with the words "contract, arrangement or understanding" and "restraint of trade or commerce" for the purposes of the Act. I see no way of interpreting s.45(2)(b) so that due regard is paid to s.45(4) unless the word "it" is given its ordinary meaning as a reference to a contract, arrangement or understanding which is in restraint of trade or commerce within s.45(4).
374. The reference to a contract, arrangement or understanding falling within s.45(2)(b), whether or not made or entered into before or after the commencement of that sub-section, has to be considered.
375. If the arrangement or understanding was not in restraint of trade or commence within the common law principles and not within the test of s.45(4) when made or entered into, is it necessary to look at the same question at the date of giving effect when testing whether effect has been given in contravention of s.45(2)(b)?
376. There are two possible constructions. The first is that the test is made once only at the time the arrangement is made or the understanding entered into. The other is that the question whether or not the arrangement or understanding is in restraint of trade is to be tested according to common law principles and s.45(4) at the time effect is given to it.
377. I rather favour the view that the test is made once only at the time when the arrangement is made or the understanding entered into.
378. However, it is unnecessary for me to reach a concluded view on this
question because the answer would be the same whatever view
I took. This is
because I find that the competition between the defendants did not change
during the relevant period nor do I think
I need consider in this regard the
nature of Tradestock's activities. At all relevant times they were and were
likely to be so small
as to be negligible in relation to the competition
between the defendants.
(B) General
379. I will deal first with the allegations pleaded in relation to giving effect to the arrangements or understandings.
380. I have held that the arrangements or understandings proved were not in restraint of trade or commerce within s.45(2)(a) and (4). As a necessary consequence I find that any allegation that before 1 July 1977 effect was given to an arrangement or understanding in contravention of s.45(2)(b) has not been established. However, because of the history of this case, I consider that I should deal with certain matters.
381. Paragraphs 26, 32 and 38 allege giving effect to the arrangement and/or
understanding alleged in paras. 21, 27 and 33 respectively.
Paragraph 39
alleges:
"The first, second, third, fourth, fifth,382. Paragraph 32 is in similar terms to para. 26 but relates to giving effect to the agreement of 20 May 1976. The only difference is that the defendants named are the first, second, third, fourth, sixth, eighth and ninth defendants and Tradestock replaces T.I.C. Management Consultants.
sixth, seventh, eighth and ninth-named
Defendants and each of them threaten and
intend and will unless restrained by orders of
this Honourable Court continue to act as
alleged in paragraphs 26, 32 and 38 hereof."
Paragraph 26 is in the following terms:
"The first, second, third, fourth and
fifth-named Defendants and each of them gave
effect to the arrangement and/or understanding
alleged in paragraph 21 hereof by -
(a) refusing to negotiate with, furnish
quotations to, enter into contracts with,
or otherwise deal with, T.I.C. Management
Consultants, in respect of the carrying
or forwarding of freight, or the
arranging for the carrying or forwarding
of freight, proposed or sought by T.I.C.
Management Consultants for or on behalf
of persons seeking the services of such
Defendants or any of them for the
carrying or forwarding of freight or the
arranging for the carrying or forwarding
of freight through T.I.C. Management
Consultants; and/or
(b) only negotiating with, furnishing
quotations to, entering into contracts
with, or otherwise dealing with, persons
seeking the services of such Defendants
or any of them for the carrying or
forwarding of freight or the arranging
for the carrying or forwarding of
freight, direct, and refusing to
negotiate with, furnish quotations to,
enter into contracts with, or otherwise
deal with, such persons or any of them
through T.I.C. Management Consultants."
383. Paragraph 38 likewise is in similar terms to para. 32 except that the defendants named are the first, second, third, fourth, fifth, seventh, eighth and ninth defendants.
384. This case has been fought upon the basis that the defendants have taken all technical points open to them. In litigation of the likely complexity of many trade practices matters, unless the parties have chosen to fight the action on some basis other than the pleadings, I consider that it is particularly necessary to give the pleadings their ordinary meaning.
385. I take the same view with regard to the words "and each of them" as I took in regard to paras. 21, 27 and 33, that those words were chosen for more abundant caution so that the Commission would not fail if the allegation only succeeded against certain of the defendants named in paras. 26, 32 and 38.
386. The words "or", "and/or" and "and" appear to be carefully chosen where appearing. I am of the opinion that the word "and" in paras. 26(b), 32(b) and 38(b) between the words "direct" and "refusing" is to be read conjunctively and the effect alleged in (b) of these paragraphs is only satisfied if it is proved that there was a refusal in relation to T.I.C. Management Consultants or Tradestock.
387. The words "proposed or sought" in para. 26(a) and "seeking" in para. 26(b) introduce the requirement that the services must be proposed or sought by T.I.C. Management Consultants. The word "refusing" in both 26(a) and (b) appears to have been chosen deliberately.
388. The allegation extends to "refusing to negotiate with, furnish quotations to, enter into contracts with, or otherwise deal with in respect of the carrying or forwarding of freight or the arranging of the carrying or forwarding of freight". This allegation is established if any of these alternatives is proved.
389. It is unnecessary to deal with paragraphs 32 and 38 separately.
390. During the hearing I raised the question of paragraph 20 alleging the life of T.I.C. Management Consultants as being from about November 1975 to about February 1976 and the allegation in para. 26, in relation to giving effect to the arrangement or understanding of 12 February 1976, being only in relation to T.I.C. Management Consultants. However, it seemed that no defendant wished to worry about this matter and that all were prepared for me to consider a time extending at least somewhat after February 1976 with regard to T.I.C. Management Consultants.
391. As I have already said, I consider that there were four periods in the
operations of Tradestock:
(a) The consulting period where no commission was sought392. I consider that there is no allegation of giving effect to any arrangement or understanding after Tradestock went into liquidation because of the limitations in the pleadings to a refusal to deal with Tradestock. In any event, since the proceedings were commenced on 25 May 1978, paras. 26, 32 and 38 of the Statement of Claim do not allege giving effect to after that date. The period for consideration extends to a time after the July 1977 amendments were made to the Act. Section 4(1) provided the following definition before 1 July 1977:
from carriers - from about July 1975 to about early
March 1976.
(b) The commission period where commission was sought from
carriers - from about March 1976 to about November 1976.
(c) The freight forwarding period when Tradestock was
operating as a freight forwarder and not as a consultant
or in any real sense as a broker - from about November
1976 until shortly before Tradestock went into
liquidation on 31 May 1978.
(d) The period not later than February 1977 when Tradestock
made a positive decision not to deal with the
defendants.
"'Give effect to' in relation to a contract,The 1977 amendment added the words "provision of" before the words "a contract, arrangement or understanding".
arrangement or understanding, includes to do
an act or thing in pursuance of or in
accordance with or enforce or purport to
enforce."
393. It is clear that the allegation of "giving effect to" is not of a general nature but it is restricted by the pleadings to an act done in pursuance of or in accordance with the arrangement or understanding where it is a refusal to negotiate with, furnish quotations to, enter into contracts with, or otherwise deal with T.I.C. Management Consultants or Tradestock in respect of the carrying ... of freight ... proposed or sought by T.I.C. Management Consultants or Tradestock.
394. The words "in accordance with" in the definition of "give effect to" in s.4(1) of the Act have been interpreted by Smithers J. in Tradestock v. T.N.T. (Management) & Ors. [1978] FCA 1; (1978) 32 FLR 420 at pp 432-433; [1978] FCA 1; (1978) 1 ATPR 40-056 at p 17,571. His Honour held that a decision is made "in accordance with" an arrangement or understanding although it might have been made without the decision maker having the arrangement or understanding in his mind. His Honour pointed out that this view of the statute gives a natural meaning to the definition in s.4(1) and accords with the objectives of the statute. His Honour also said that, because of the presence of the words "in pursuance thereof" in s.4(1), the words "in accordance with" would be unnecessary if the words "in accordance with" were limited to acts by way of implementation of the arrangement of understanding. I respectfully agree with this view.
395. The question also arises how proximate a refusal must be to a proposal to deal or a seeking of services to satisfy the allegations in paras. 26, 32 or 38.
396. The Commission submitted that evidence relating to "giving effect" may
be conveniently divided into the following categories:
(a) Restatement of arrangements or understandings at later397. I consider that a proposal to deal or a request for services made to a defendant persists for a reasonable period after it is made. A change in the nature of Tradestock's activities, for example, when it entered the freight forwarding period of its activities, in my opinion would have the effect of bringing to an end any such request to deal on a commission basis. Clearer instances of the termination of any proposal are when Tradestock went into liquidation and when it took a positive decision not to deal with the defendants. I have already discussed this decision that Tradestock made.
meetings and dissemination and confirmation of minutes.
(b) Communication to Tradestock and its clients.
(c) Communication to employees of defendants.
(d) Failure to take steps to communicate any change of
attitude to Tradestock, the Commission or the public
after the boycott became known.
398. I consider that a refusal to deal might encompass a refusal which could be implied from the circumstances but that such refusal must be something more than a failure by a defendant to seek Tradestock as a client. The general comments I am making may not be applicable in all circumstances but it is necessary to lay down some general principles against which to test the arguments which have been put.
399. I consider that the restatement of arrangements or understandings at later meetings or the dissemination or confirmation of later minutes does not constitute a giving effect to any arrangement, at least where any such action does not come to the notice of Tradestock or the person seeking the services. I am of the opinion that any refusal to deal with Tradestock when it was seeking to obtain services as a broker or consultant or any refusal made to a client when the client was seeking to obtain services through Tradestock prima facie falls within the words "giving effect to". I will deal with particular instances later.
400. I regard as insufficient a communication by a defendant to one of its employees.
401. I think that a failure to take steps to communicate any change of attitude to the Commission or the public after the arrangement or understanding had become known is insufficient in relation to an allegation based on a refusal in relation to services sought. However, certain acts falling within this general category may very well constitute an element in a refusal to negotiate.
402. The first defendant submitted that to constitute a refusal as alleged in
the Statement of Claim there must be either:
"(a) a refusal after a proposal or request from Tradestock,403. I pass now to consider particular instances in relation to each of the defendants.
such refusal being communicated to Tradestock; or
(b) a refusal to deal with a client through Tradestock,
after a request from the client to deal through
Tradestock, communicated to the client or Tradestock."
T.N.T.:
404. (a) A letter dated 15 June 1976 was sent by Tradestock to T.N.T. addressed to Shortell and also to certain other defendants. This letter set out certain aims of and generally solicited business for Tradestock. It made clear that T.N.T. would be required to pay commission which was said to vary according to the business opportunities offered to the carrier. Rates of commission varying from 2 1/2 per cent of the freight charges earned by the carrier for work over $250,001 up to 7 1/2 per cent for work under $50,000 was suggested as the basis for commission. It was said that the commission would cover the cost of services by Tradestock to the client and the carrier and the proposal was said to be similar to that of a broker in the insurance industry. The letter suggested a discussion "regarding our clients' future transport requirements and the service which your company is able to offer". It concluded by asking that Tradestock be advised of a convenient time for it to call and discuss the matter. T.N.T. did not reply.
405. (b) A letter dated 29 June 1976 was sent by Tradestock to T.N.T. and
certain other defendants. It referred to the letter
of 15 June 1976 and said
that no reply had been received and that:
"... several of our clients have serious406. Attached to the letter were what have been called client profiles for three companies, Mindrill, Sylon and Kornblums. T.N.T. did not reply.
distribution problems and have appointed us as
their transport broker and have ceased their
previous practice of dealing directly with
transport operators.
We now submit for your consideration the
transport requirements of three companies and
would be pleased if you could supply us with
quotes for our clients within seven days of
the date hereof.
If you require any further information or have
any queries regarding this matter, please do
not hesitate to contact us."
407. (c) A letter dated 13 July 1976 was sent by Tradestock to T.N.T. and
certain other defendants. It referred to the letters
of 15 June and 29 June
1976 and said that no reply had been received. It continued:
"It is our wish to place our clients businessT.N.T. did not reply.
as soon as possible. Therefore, we would be
pleased if your reply could be forwarded to us
by return mail to reach us no later than
Tuesday, 20th July 1976.
Please do not hesitate to contact us if you
require further information."
408. Various defendants cross-examined Frewen at length about the letters and raised what was said to be the inadequacy of the description of the clients' business. However, had T.N.T. wished to pursue the matter, it would undoubtedly have communicated with Tradestock in an endeavour to ascertain any matters that prevented a quotation being given. Apart from the arrangements or understandings, I can understand a carrier not bothering to reply to letters of this nature because it was contrary to company policy or because the business was not thought to be worth worrying about or perhaps because it was not desired to deal with the person offering the business.
409. Considerable argument took place during the hearing about these letters and it was common ground that, some time prior to the time when they were sent, Tradestock obtained legal advice and I am satisfied that it sent the letters for two purposes, one to see whether T.N.T. would in fact deal with it and the other to provide evidence if it became necessary in any subsequent proceedings to establish that it would not.
410. Because of the interpretation I have placed upon the words "in accordance with", I consider that the lack of response to these communications does constitute giving effect to the arrangements or understandings both of 12 February 1976 and 20 May 1976.
411. (d) The meeting with Shortell on 10 March 1976. I have already dealt with this meeting but I am not prepared to hold that it constituted giving effect to the arrangement or understanding of 12 February 1976.
412. (e) Telephone conversation with Shortell on 26 July 1976. I have already dealt with this conversation in Part 5. I consider that it constitutes a giving effect to the arrangements or understandings of 12 February 1976 and 20 May 1976.
413. (f) The telex from Shortell to Shovelton Storey of 19 May 1976. I have already dealt with this telex in Part 7. I find that it constituted giving effect to the arrangement or understanding of 12 February 1976.
414. (g) I have already dealt in Part 5 with the letter of 14 July 1976 from Bruce, the Victorian Manager of Hawthorn Taxi Trucks, a division of T.N.T. I find that this was likewise a giving effect to these two arrangements or understandings.
415. (h) Because in any event there would be no breach of s.45(2)(b), I
will not deal with the positions in relation to Mindrill
or Kornblums.
Brambles:
(a), (b) and (c)
416. Brambles received copies of the letters from Tradestock of 15 and 29 June 1976 and 13 July 1976 which were sent to T.N.T. Attached to the letter of 29 June 1976 were client profiles for Mindrill, Sylon and Tomasetti. Again considerable attention was paid to an alleged inadequacy in the information provided in the client profiles but I hold the same view as I did in relation to T.N.T. on that question. Subject to the question of the effect on competition in respect of which I hold against the Commission, I find that these transactions constitute giving effect to the arrangements and understandings of February and May 1976.
417. (d) Telephone conversation between Linfoot and Frewen of 27 July
1976. I considered this conversation in Part 5. In substance,
Frewen referred
to the request to quote in the letters I have referred to in (a), (b) and (c).
Linfoot said that Brambles was not
interested in doing business with agents or
brokers, that it wanted to talk to and deal with clients direct and "...
unless the client
directs us to do so we will not deal with you". Whilst this
was an indication that Brambles would be prepared to deal with Tradestock
if
it had received the directions from the client, I find that it was an instance
where effect was given to the arrangements or understandings
of February and
May 1976. It was a refusal to negotiate except upon a condition which I
consider is sufficient to satisfy the requirements
in the pleadings.
Mayne Nickless:
(a), (b) and (c)
418. Tradestock sent Mayne Nickless copies of the letters of 15 and 29 June and probably 13 July 1976. Redpath referred the letter of 15 June 1976 to Egan with a note written on it "Bill, do you know this outfit". The only reply by Mayne Nickless was on 1 July 1976 when Redpath sent a letter to Tradestock (Ex. S) with which I have previously dealt in Part 5. I hold that the policy stated therein to deal directly with clients and not through a middleman or broker represented Mayne Nickless' policy as stated by its managing director.
419. There was no further evidence of a request to deal until after 1 July
1977. I hold that the letter of 1 July 1976 was a refusal
to deal and a
giving effect to the arrangements or understandings of February and May 1976.
Youngs:
420. I have dealt in Part 5 with the telephone conversation which took place
apparently early in August 1976. I accept that this
represented giving effect
to the arrangements or understandings of February and May 1976. It appears
that Youngs received a copy
of the letters of 12 and 29 June and 13 July
1976.
Ansett:
(a), (b) and (c)
421. The letters of 15 and 29 June and 13 July 1976 were sent to Ansett. The letter of 29 June 1976 included client profiles for Mindrill, Tomasetti and Shovelton Storey. No reply was received from Ansett.
422. (d) I have dealt in Part 5 with the telephone conversation between Stock and Wise of 26 July 1976. I am satisfied that this constituted giving effect to the arrangements or understandings of February and May 1976.
423. (e) There were also allegations in relation to matters which took
place in August 1976 in relation to Sylon. These negotiations
were somewhat
complicated and, in view of the finding I have made in relation to
competition, I do not think they warrant attention
in this judgment.
Express Freight:
424. There were no allegations against Express Freight in relation to the meeting of February 1976. A question arose whether the letter of 13 July 1976 with client profiles for Sylon, Tomasetti and Shovelton Storey had been sent to Express Freight. It is a question of considerable difficulty. The letter was in fact sent to the holding company, A.U.T. (Holdings) Pty. Limited at an address which was not the address of Express Freight. It had not been the address of the company to whom it was addressed for some time previously. Questions arose whether this letter was ever received by anybody on behalf of Express Freight and whether it was a request to Express Freight to deal. Again, in view of the findings which I have made concerning the effect on competition, I do not think it is appropriate to deal with this question.
425. There is evidence in relation to Sylon that Roots, who was a director of Express Freight, contrary to his normal practice, had a discussion with the then Sales Manager for Express Freight in Melbourne, a Mr Ermer, concerning a quotation which had been sent to Tradestock. Roots said that he had complained to Ermer that Ermer had not followed the general rule of obtaining a credit check before giving a quotation. Roots said that he instructed Ermer to withdraw the quotation but that he did not take any steps to see whether it was withdrawn. In this regard the evidence is that a quotation was in fact given and there is no evidence that it was withdrawn and, as I have said, I do not regard an instruction not to deal with Tradestock given to an employee of Tradestock as sufficient to constitute giving effect to an arrangement or understanding. I consider that this is not evidence supporting the allegation of giving effect to the arrangement or understanding of May 1976.
426. No question arises in relation to Express Freight with regard to the August meeting.
427. Quite apart from the question of the effect on competition, I am not
satisfied that the allegation of giving effect to has been
made out against
Express Freight.
A.S.P.:
428. I find that the allegations of giving effect to the arrangement or
understanding of 4 August 1976 are not made out against A.S.P.
Ipec and Interstate Parcel:
429. I have already dealt in Part 5 with the conversation between Gardiner
and Frewen on 26 July 1976. I find that Gardiner accepted
that he had
received "the recent letters" and that he (meaning Ipec and Interstate Parcel)
would not deal with brokers or consultants.
The reference to recent letters
must have been at least to those of 29 June and 13 July 1976. I find that
this constituted giving
effect to the arrangement or understanding of 20 May
1976. The allegation of giving effect to was not made out in respect to the
arrangement or understanding of 4 August 1976.
PART 9WAS EFFECT GIVEN TO ANY OF THE THREE ARRANGEMENTS OR UNDERSTANDINGS AND THE CONSTRUCTION OF S.45(2)(b) & (3) AFTER 1 JULY 1977?
430. No arrangement or understanding is alleged to have been made or entered
into after 1 July 1977 when the Act was amended.
(A) The construction of s.45(2)(b) and (3)
Section 45(2)(b) provides:431. It is also necessary to consider s.45(3) which provides:
"A corporation shall not -
(a) ...
(b) give effect to a provision of a contract,
arrangement or understanding, whether the
contract or arrangement was made, or the
understanding was arrived at, before or
after the commencement of this section,
if that provision -
(i) is an exclusionary provision; or
(ii)has the purpose, or has or is likely
to have the effect, of substantially
lessening competition."
"For the purposes of this section and section432. Sections 4G, 4D, 4E and 4F were all inserted by the amendments operative from 1 July 1977. Section 4G provides:
45A, 'competition', in relation to a provision
of a contract, arrangement or understanding or
of a proposed contract, arrangement or
understanding, means competition in any market
in which a corporation that is a party to the
contract, arrangement or understanding or
would be a party to the proposed contract,
arrangement or understanding, or any body
corporate related to such a corporation,
supplies or acquires, or is likely to supply
or acquire, goods or services or would, but
for the provision, supply or acquire, or be
likely to supply or acquire, goods or
services."
"For the purposes of this Act, references to433. Section 4D(1) defines an exclusionary provision and reads:
the lessening of competition shall be read as
including references to preventing or
hindering competition."
"A provision of a contract, arrangement or434. Section 4E defines "market" and provides "For the purposes of this Act, 'market' means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods on services." S.4F deals, inter alia, with the meaning of the word "purpose".
understanding, or of a proposed contract,
arrangement or understanding, shall be taken
to be an exclusionary provision for the
purposes of this Act if -
(a) the contract or arrangement was made, or
the understanding was arrived at, or the
proposed contract or arrangement is to be
made, or the proposed understanding is to
be arrived at, between persons any two or
more of whom are competitive with each
other; and
(b) the provision has the purpose of
preventing, restricting or limiting -
(i) the supply of goods or services to,
or the acquisition of goods or
services from, particular persons;
or
(ii)the supply of goods or services to,
or the acquisition of goods or
services from, particular persons in
particular circumstances or on
particular conditions,
by all or any of the parties to the
contract, arrangement or understanding or
of the proposed parties to the proposed
contract, arrangement or understanding
or, if a party or proposed party is a
body corporate, by a body corporate that
is related to the body corporate."
435. I have said that in my opinion Tradestock ceased to operate as a broker or consultant at a time well before 1 July 1977. I have also found that, at least from early 1977, Tradestock had a policy of not dealing with the major carriers at least in relation to the way it was operating during the Freightcard era.
436. After July 1977 it had no clients in its capacity as consultant or broker. Realistically, this is sufficient to establish that the Commission has failed to make out its case in relation to any period after 1 July 1977. However, because the case has been conducted at such length by the parties and because of the history of appeals during the interlocutory proceedings, I consider that it is prudent to deal with questions which were debated at length and upon which there was a great deal of evidence in case a court in any appeal may wish to have findings on any of these questions.
437. The amendments introduced the first reference in the Act to an
exclusionary provision.
The Exclusionary Provision Issue
438. I will first deal with the issue under s.45(2)(b)(i).
439. What I have said about Tradestock ceasing to operate as a broker or consultant at a time well before 1 July 1977 is sufficient to provide a defence to this part of the plaintiff's claim. However, for the reasons I have just mentioned, I will consider the question.
440. Section 4D(1) may be divided into the following elements each of which
must be established.
(1) There must be a provision of an arrangement or441. I consider that the time when the question of competition is to be determined is the time when the arrangement was made or the understanding was arrived at. I note that s.45 after the amendments used the words "arrive at an understanding" and not the words "enter into an understanding" which were used in s.45 before the amendments of 1 July 1977. I do not think it is necessary to look at market at that time because no mention is made of market in s.4D or in that part of s.45 in which reference is made to competition and s.45(3) does not relate to s.4D but is only applicable "For the purposes of this section ...", that is s.45. It is only necessary for the persons making the arrangement or entering into the understanding to be in competition with one another. I consider that defendants, parties to any of the arrangements or understandings pleaded, were in competition with one another.
understanding made between persons, any two or more
of whom are competitive with each other.
(2) The provision must be for the purpose of preventing,442. It is necessary first to examine whether the word "purpose" is used objectively or subjectively.
restricting or limiting one of the acts referred to
in s.4D(1)(b).
443. The Commission argued that the operative purpose in s.4D(1)(b) was objective. The defendants argued to the contrary.
444. It is always difficult to decide whether the word "purpose" is used
subjectively or objectively. In my opinion, in general,
where one is
concerned with the purpose of a provision in an arrangement or understanding,
it is the objective purpose which is relevant.
Where one is concerned with
the purpose of a person in the doing of an act, it is usually the subjective
purpose which is relevant.
However, the meaning of the word must depend on
the context. I cite the following passage of Deane J. in Tillmanns Butcheries
Pty.
Ltd. v. The Australasian Meat Industry Employees' Union & Ors, supra, at
p 18,500:
"The 'purpose' referred to in s.45D(1) is the445. The words in s.45D(1) under consideration were "engaging in conduct for the purpose...". In the case cited by Deane J., Kitto J. was considering the word "arrangement" in the sense of s.260 of the Income Tax Assessment Act 1936 and at p.469 he said that Newton's Case (1958) A.C. 450 at p.465 made clear that the question whether an arrangement has or purports to have the purpose or effect of avoiding a liability to tax under that Act is a question as to the purposes or effects of the arrangement itself, rather than of the purposes in the minds of the parties.
operative subjective purpose of those engaging
in the relevant conduct in concert. In this
regard, one may contrast the purpose referred
to in s.45D(1) with the objective purpose of
an arrangement under s.260 of the Income Tax
Assessment Act 1936 (see Peate v. Federal
Commissioner of Taxation [1964] HCA 84; (1964) 111 CLR 443
at p 468)."
446. Wilson J. considered the word "purpose" appearing in s.45(1) of the Act
in Transfield Pty. Ltd. v. Arlo International Ltd. [1980] HCA 15; (1980) 144 CLR 83 at p 108
and said:
"Its purpose must be gleaned from the wordsThe question is also dealt with in Federal Commissioner of Taxation v. Cooper Brookes (Wollongong) Pty. Ltd., supra.
used, and its context."
447. Section 4F may create a difficulty because it provides that a provision of an arrangement or understanding shall be deemed to have had a particular purpose if it was included in the arrangement or understanding "for that purpose or for purposes that included or include that purpose". That section also provides that a person shall be deemed to have engaged or to engage ...in conduct for a particular purpose... if the person engaged or engages in the conduct for purposes that included or include that purpose ...and that purpose... was a substantial purpose. This is another illustration of a provision of the Act that is difficult to interpret. I consider that the word "purpose" is used objectively in s.4D(1)(b).
448. However, I do not think it matters in this case because the result would
be the same whether "purpose" be read subjectively
or objectively.
(3) The requirement of s.4D(1)(b)(i) and (ii) that the449. It is necessary to have regard to the meaning of the words "particular persons". The arrangement or understanding proved is not limited to Tradestock but extends to a class of intermediaries although the Statement of Claim excludes all but Tradestock in the allegations of giving effect to. Further, the arrangements or understandings proved did not extend to the question of dealing with any "particular persons" in the category of those seeking freight forwarding services.
"purpose of" relates to the supply of services to or
the acquisition of services from particular persons or
the supply of services to or the acquisition of services
from particular persons in particular circumstances
or in particular conditions must be satisfied.
450. The question arises whether the arrangement or understanding proved is sufficient to satisfy the words "particular persons" in s.4D.
451. It is relevant to note that s.47, the exclusive dealing section of the Act, draws a distinction between "particular persons" and "classes of persons".
452. I accept the submissions of the defendants in this regard that an
arrangement or understanding not to deal with a class or category
of persons
does not satisfy the requirement of an arrangement or understanding not to
deal with "particular persons". However, the
word "persons" will also include
the singular. That conclusion is sufficient of itself to answer the claim
made of giving effect
to an exclusionary provision.
(B) The issue of substantially lessening competition in any
market(i) General
453. I now pass to the issue under s.45(2)(b)(ii) and (3).
454. The amendments introduced the reference in s.45(3) to "competition in any market" involving the necessity to consider market in testing whether or not an arrangement or understanding had the purpose or was likely to have the effect of substantially lessening competition for the purposes of ss.45 and 45A.
455. A great deal of time was spent during this case in dealing with the
question of market and competition in a market. A basic
question for
consideration is what is the market or what are the markets to which
consideration should be given. Senior counsel for
the Commission, in opening,
invited the Court to have regard to three suggested relevant markets. These
markets were what he described
as:
(1) The national freight forwarding market;456. Senior counsel for the Commission, in opening, said that the national freight forwarding market was distinguishable from the freight forwarding market because it includes only operators who offer themselves as willing and able to arrange the carriage of goods from virtually anywhere in Australia to anywhere else in Australia. He also submitted that the client had the benefit of only having to arrange any forwarding with a single entity.
(2) The freight forwarding market;
(3) The market for the provision of broking services in
relation to freight forwarding.
457. In relation to the freight forwarding market, the Commission, in opening, said that it would include operators who would arrange for transportation of goods from or between points in a particular State or part of Australia.
458. The Commission argued in favour of looking at the national freight forwarding market and the market for the provision of broking services in relation to freight forwarding rather than the freight forwarding market in general. The defendants, on the other hand, denied that either of these were relevant markets, if indeed they were markets at all, and that one should look to a market embracing the whole of the transport of goods within Australia.
459. It was common ground that it was an Australia-wide market which had to be considered. The real issue, apart from the question of market for the provision of broking services, was whether one tested the question of the effect on competition in a market limited to what might be described as the major national operators, as the Commission submitted, or whether one looked to a market consisting of all entities providing for the transport of goods of any nature and between any two points in Australia or to or from or in a particular area.
460. After many days hearing senior counsel for the Commission qualified what he wished to include in the national freight forwarding market by excluding from it the transportation of goods in a capital city or the intercity transport of goods where that intercity transport related only to transport from one identified city to another identified city.
461. It was common ground that I should look at the question of competition in the light of what was said by the Full Court in Outboard Marine v. Hecar, supra. This necessitated an examination of the economic meaning and the application of that meaning in a practical way to accommodate the concern of the Act with business and commerce.
462. I will pass to consider the economic evidence.
(ii) Economic Evidence
(a) General
463. Three economic experts were called. The second defendant objected to the admission of any economic evidence. The experts' evidence occupied 17 hearing days. The plaintiff called Professor Kolsen, Professor of Economics at the University of Queensland. The first, fifth and seventh defendants called Dr. Norman, Reader in Economics at the University of Melbourne, and the third defendant called Associate Professor Parry, an Associate Professor of Economics at the University of New South Wales. The evidence of these witnesses dealt, inter alia, with the question of determining any relevant market and the question of competition between relevant persons in such a market. It is impossible to deal fully with the evidence of these witnesses in this judgment but I think that it is desirable to set out the general views of each witness as I understood them, upon certain questions. No question of the general competency of these witnesses arises, it being apparently common ground that each was highly qualified in a field of economics.
464. It appears that, at least since about 1930, a specialised branch of economics has been developed which is known as industrial economics. Professor Kolsen said that this branch of economics is more concerned with empirical content than economic theory. Professor Kolsen, whilst obviously having considerable familiarity with the field of industrial economics, said that he did not regard himself as an expert in that area. He said that industrial economics concerns itself more with a process going on in the market at a particular time, which may be labelled as rivalrous behaviour, rather than with the structural characteristics of the market. Dr. Norman stated that industrial economics was one of his specialities and Professor Parry said that, although he did not specialise in the economic theory of industrial economics, he did not disclaim being conversant with that field.
465. It seemed common ground that, in economic theory, except in special circumstances, one should seek to identify the relevant market before one looked at the question of competition. Professor Kolsen said that if one was going to speak of competition it must be competition in a market and the first task in trying to make an assessment of competition is to either assume or define a market. Dr. Norman put it that it was impossible to undertake economic analysis of competition other than in the context of a market presumed, defined or specified. However, such a market is usually, as he put it, "fuzzy at the edges". Associate Professor Parry followed the same approach.
466. Professor Kolsen said that a market was defined or identified as being "where buyers and sellers meet in close relationship". He also accepted that, "within the bounds of a market there is substitution, substitution between one product and another and between one source of supply and another in response to change in prices". He also agreed with the proposition that, "a market is a field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive". Dr. Norman put it that a market was delineated by tests of substitution to delimit the field of rivalry that brings pressure to bear on buyers or sellers in the process of exchange. Associate Professor Parry defined a market as the field of activity in which buyers and sellers interact. He said that the boundaries of the market are the parameters of the interaction between buyers and sellers but that these parameters were not easy to find.
467. He said that a market can have four dimensions:
(1) A spatial dimension, i.e. the area of the market.He highlighted the importance he attached to the tests of substitution and substitutability. He said there were four tests, two of which concerned buyers and two of which concerned sellers. On the demand side, which concerns the buyers, he said one test was to ask whether, given a sufficient price incentive, did buyers in fact switch from one product to another in the long run? The second test on the demand side, one of substitutability, was whether, given sufficient price incentive, would buyers be expected to switch from one product to another? Two similar tests were to be applied on the supply side. These were whether, given sufficient long term incentive, suppliers did switch in fact from producing one product to another and whether, given sufficient price incentive, sellers would be expected to switch from one product to another.
(2) A temporal or time dimension, i.e. the time to achieve
long run substitution.
(3) A product dimension.
(4) A functional dimension, i.e. a dimension relating to
activity as distinct from product, e.g. a retail or
wholesale dimension.
468. Dr. Norman broadly embraced the concept of substitution and substitutability tests. He agreed that substitution involved a consideration of geographical and product questions and, as I understood him, that supply substitutability required the supplier's ability to "adapt his facilities" which excluded a total revision of his production facilities. The question of cost was important. It would exclude a situation where both new localities were involved and new production facilities were required. In considering questions of substitutability it is necessary to look at longer term considerations between genuine buyers and sellers so that the normal rate of return could be obtained.
469. Professor Kolsen clearly lent rather more to testing the question of market from the side of the buyers rather than from that of the sellers but he did agree that a market exists where there are actual and potential buyers and sellers of outputs which are good substitutes for one another so that small changes in price or in other relevant variables by any one firm, other things remaining unchanged, would have large effects on the quantity sold by that firm. He was inclined to add the word "sustained" before "small changes". He said that the geographical parameter may be a parameter of the market.
470. It seems to me common ground that one looks at substitution and substitutability from both the buyers' side and the sellers' side and, in general, if one gets a clear answer that the a test of substitution or substitutability is satisfied either on the buyers' or the sellers' side, it is appropriate to conclude that two products are in the same market although these tests do not show the limits of the market. It seems that the determination of the correct answer to these tests is a matter of judgment. Associate Professor Parry said that the answer could only be given by a skilled industrial economist who, at least in the case of substitutability on the supply side, might need the benefit of various studies of an economic nature. Dr. Norman did not limit the ability of a person not trained as an industrial economist to answer these questions but he said that economists must look to facts and opinions concerning demand and supply substitutability, that this may be a hypothetical exercise, and it was necessary to apply judgment to facts and likely facts. Professor Kolsen did not qualify the answering of any necessary tests as to substitution in this way but again he accepted that the determination of the market depended on the facts. Professor Kolsen drew a distinction between the meaning of competition to economists and its everyday meaning.
471. Having looked at the question of market it was apparently common ground with the economists that one then looked at the question of competition. Professor Kolsen drew a distinction between the historical meaning of that word in the micro-economic sense, i.e. structural sense, and what I perceive to be the sense in which the word is understood in the industrial economics world. This appeared in his view to be a process of rivalrous behaviour which is going on in the market. He used the expressions "workable competition" and "effective competition" as being terms used in industrial economics. He appeared to embrace these terms.
472. Dr. Norman mentioned that potential competition must also be considered in relation to those potential competitors who employed essentially similar skills and machinery in a situation where a sufficient profit lure would beckon them and there were no barriers preventing each group from entering the other's product lines. Dr. Norman said that to consider substitution or substitutability in the case of persons who did not exert any significant pressure was not helpful since it resulted in a too broad definition of market but he was prepared to take some account of what he called transmitted pressure. He seemed to embrace the concept of testing whether a market was a workably contestable market or not.
473. Associate Professor Parry dealt with the question of competition in considerable detail. He defined it as a process of independent rivalry in the market and said that competition in a market was not the equivalent of rivalry or competition between two firms in a market. He postulated tests which he accepted for determining the question of rivalry in a market of which he thought the most important was what he called contestability. He said he fully embraced this test. I will not go into the details which he discussed with regard to methods of determining the various relevant matters. He also referred to an alternative way of testing the rivalry in the market by using tests of an economist named Sosnick which had been adopted by another economist named Scherer as criteria for workable competition analysis. However, he preferred to embrace certain tests, one of which was the contestability theory which had been advanced by an economist named Baumol.
474. Each of the three economic experts dealt with the question of whether there can be what might be called a sub-market. This appears to be a concept relating to whether or not it is appropriate in some instances to separate various sections of a market and refer to separate sections as sub-markets. Professor Kolsen said that he did not embrace the concept of a sub-market and was not able to define it and that he had, as he said, "given the concept away". However, he embraced a concept which was apparently somewhat similar to it by recognising what he called particular and specialised markets. In general, it seems that the identification of such a market depended on finding a gap in the chain of substitutes. Dr. Norman appeared to agree with the concept of sub-markets although I formed the view that he still looked for competition in the market rather than for competition in a sub-market. Associate Professor Parry took the view that a sub-market was only part of a market and not a separate market although he said that the term "sub-market" was often used in a regional sense.
475. Another question which arose was whether or not there could be what
might be called a market for information. Associate Professor
Parry expressed
the view that information was a functional dimension of the product market to
which it related. He did, however,
agree that, for example, a magazine
providing information might be properly classified as being in the magazine or
publishing market
but the information in it about any particular topic was, in
his view, a dimension of the market for that product. Dr. Norman accepted
the
view that there could be a market for services. However, he expressed the
view that the question of information in a market
went rather to the
perfection of the market than to its bounds. None of the evidence of the
expert economists appeared to conflict
with the definition of market in s.4E.
(b) Economic evidence based on assumed facts
476. All three economists were asked to assume certain facts and asked to
express certain opinions based on economic theory in relation
to those facts.
Professor Kolsen
477. Senior counsel for the Commission asked Professor Kolsen to assume a number of facts which extended over about 10 pages of transcript. Based upon those assumptions, Professor Kolsen said, as a matter of economic theory, that the facts he had been asked to assume showed that there was not one market but a number of markets. The purpose of obtaining this evidence appeared to be that the assumptions were such as were thought to accord with the facts of this case and if Professor Kolsen had answered one market it would have supported the case for the defendants on this issue but his answer that there was a number of markets would support the case of the Commission. He was also asked to make some further assumptions and, when those further assumptions were added, to express a view as a matter of economic theory whether he could identify a market which had special characteristics different from other markets. He answered 'yes' and described this market as the national freight forwarders' market.
478. He was also asked what were the special characteristics in the
assumptions to which he had paid particular regard when formulating
his
opinion. Professor Kolsen identified:
(1) The carrier's ability to arrange transport from anywhereDr. Norman
to anywhere in Australia.
(2) The existence of depots in three or more States under
the control of the carrier.
(3) That carrier having access to more than one mode of
transport, i.e. air, rail and road.
(4) The carrier's ability to provide a comprehensive range
of services backed by a comprehensive infrastructure.
479. This witness was presented with a 12 page document (Ex. 606) of facts which he was asked to assume. There were 43 facts, a great number of which were of an extremely general nature. It seems that the facts were chosen to represent facts which were thought to have been established and which would be favourable to the case of the defendants calling Dr. Norman. Those defendants submitted, "that Ex. 606 is, on the evidence, an accurate generalised description of the transport market for the movement of freight within Australia and the competitive process operating in it (see back-up folder)". The back-up folder there referred to comprised the two volumes of about 600 pages of written submissions which I declined to receive but in respect of which an index of the page numbers in the transcript said to support these facts was received by me.
480. Dr. Norman was asked to express his opinion as to the market, if any, flowing from those facts on the basis of economic theories to which he had deposed in his evidence. Dr. Norman gave a very long answer which it is difficult to summarise but, in general, he said that, "these facts are suggestive of a broad product and geographical market. They are insufficient to give a coverage of every square mile of the Commonwealth of Australia, but give if proven a substitution coverage of the field of rivalry".
481. However, Dr. Norman was at least somewhat critical of the facts he had been asked to assume, as he was of those that Professor Kolsen had been asked to assume. One of his grounds of criticism was that they were, "insufficient to take me to the question I am asked". Dr. Norman also said, when he compared the assumed facts with the indicia he had previously said were relevant to competition, that, "the answer is that facts are given in relation to a large number, but not all of those indicia, and all of those that are given suggest a strongly workable competitive arrangement which I identify with a highly competitive arrangement and with a workably contestable market. But there are omissions and I have no facts in relation thereto."
482. Dr. Norman was then asked to assume four further facts (Ex. 606A). It
appears that those facts were designed to show broadly
the effect on
competition by assuming the existence of the arrangements or understandings
pleaded. Dr. Norman said that those facts
did not change the views he had
expressed in relation to the facts in Ex. 606 which he had been asked to
assume.
Associate Professor Parry
483. This witness was also asked to assume the facts in Exs. 606, 606A. It is fair to summarise his evidence that, assuming the facts set out in Ex. 606, his view was that they referred to the market for the transport of goods within Australia. He also said that, based on these assumptions, he considered that "the market is contestable and competitive". I had some difficulty with this evidence because a cornerstone of Associate Professor Parry's approach was his tests for substitution and substitutability and he agreed that he could not do this exercise in relation to the assumed facts because there were no figures.
484. When asked to assume the facts in Ex. 606A in addition to those in Ex. 606, Associate Professor Parry appeared to have some reservations but did express the view that he could make an, "... overall judgment which would sit in what could be called a workably competitive situation as used in the literature".
485. Dr. Norman and Associate Professor Parry expressed disagreement with a number of propositions accepted by Professor Kolsen. There was, of course, a measure of agreement between the economists on the economic principles that they espoused although they were by no means in agreement on a number of quite important matters.
486. One has to bear in mind that any economic evidence has to be applied in the way explained in Outboard Marine v. Hecar, supra. It is ultimately for the Court to decide whether giving effect to any provision in any of the arrangements or understandings had an effect on competition which was proscribed by s.45(2)(b)(ii).
487. The plaintiff and also the defendants sought to place considerable
reliance on the opinions of their expert economists in relation
to market and
the defendants also relied strongly on the economists views on competition
when based on the assumed facts. The conclusion
as to market based on the
facts Professor Kolsen was asked to assume, was, in substance, the reverse of
that expressed by the other
two expert witnesses on the facts they were asked
to assume. Whilst, of course, expert economic evidence has a very important
place
in determining the issues before me, the Court cannot commit its task to
the opinion of experts where the question goes beyond a
matter merely of
expert economic considerations.
(c) The role of economic evidence
488. I now pass to consider the role of the economic evidence in the way in
which it should be regarded having in mind the relevant
provisions of the Act.
A Full Court of this Court considered the matter in Outboard Marine v. Hecar,
supra. The Court was there considering
the expression in s.47 "... engaging in
conduct where that conduct has the purpose of, or has, or is likely to have,
the effect of
substantially lessening competition". "Substantially lessening
competition" is of course defined in s.4G of the Act as "for the
purposes of
this Act, references to the lessening of competition shall be read as
including references to preventing or hindering
competition". Section 47(13)
provides that "competition" is to be read for the purposes of, inter alia,
sub-s.(10) as a reference
to competition in any market in which the
corporation engaging in the conduct supplies or acquires, or is likely to
supply or acquire
goods or services. The Court was therefore considering the
meaning of competition in a market as the words appear in s.47(10).
At p.123;
p.43,983 Bowen C.J. and Fisher J., in a joint judgment, said:
"The economic meaning must be applied in aFitzgerald J., in a separate judgment, set out a number of considerations which he regarded as important and at p.134; p.43,990 said:
practical way to accommodate the concern of
the Act with business and commerce.
More assistance can be gleaned from the
decision of the Trade Practices Tribunal, with
Woodward J. presiding, in Re Queensland
Co-operative Milling Association Ltd.; (1976)
25 FLR 169; ATPR 40-012. There an
economic concept of competition was adopted.
Five elements of market structure were noted
by the Tribunal as being relevant to the
determination of the state of competition in a
market. Of those, the most important factor
was said to be the height of barriers to
entry, that is, the ease with which new firms
might enter and secure a viable market. The
Tribunal's decision has been approved by the
Federal Court in Trade Practices Commission v.
Ansett Transport Industries (Operations) Pty.
Ltd. [1978] FCA 21; (1978) 32 F.L.R. 305; 2 A.T.P.R. 40-071;
and Adamson v. West Perth Football Club
Incorporated [1979] FCA 81; (1979) 39 FLR 199; 2 ATPR
40-134. Smithers J. recently considered this
question and concluded that 'competition in a
market' could be expressed as 'the sum of
activity engaged in by persons in promoting
the sale to potential buyers of the goods with
which that market is concerned'; Dandy Power
Equipment Pty. Ltd. v. Mercury Marine Pty.
Ltd. [1982] FCA 178; (1982) 64 FLR 238, at p 259; 4
ATPR 40-315.
It would seem that 'competition' for the
purposes of s.47(10) must be read as referring
to a process or state of affairs in the
market. In considering the state of
competition a detailed evaluation of the
market structure seems to be required. In the
Dandy Power case Smithers J. regarded as
necessary an assessment of the nature and
extent of the market, the probable nature and
extent of competition which would exist
therein but for the conduct in question, the
operation of the market and the extent of the
contemplated lessening."
"Indeed, in the end, the answer in this case489. The question of the convenience of customers was also considered in the majority judgment. At p.125; p.43,984 Bowen C.J. and Fisher J. said:
really depends on little more than one's own
instinctive impressions formed by weighing the
various considerations in this particular
market which favour one view or another."
"In none of the authorities cited above hasIn my opinion the convenience of persons seeking to arrange the transportation of goods to various destinations is not a significant factor in considering the question of competition in a market. They may have to choose several carriers and not one but, of itself, that only goes to convenience.
the convenience of consumers been an important
feature of the market structure for the
purposes of determining the state of
competition in a particular market."
(d) The meaning of "competition" in s.45(2)(b)(ii) and (3)
490. There was some discussion of sub-markets in the decision of the Trade
Practices Tribunal ("the Tribunal") in Re Queensland Co-operative
Milling
Association Limited; supra, referred to by the Full Court in Outboard Marine
Australia v. Hecar, supra. The Tribunal at pp
189-191; pp 17,246 to 17,252
dealt with the question of the identification of markets and expressed its
understanding of the relationship
between "markets" and "sub-markets". The
Tribunal said at pp.190-191; p.17,247:
"A market is the area of close competition491. The Tribunal then looked at the question of the geographic extent of relevant markets and the question of sub-markets. I have some doubt about the correct way to approach sub-markets but, on balance, I think it is correct to say that the word "market" in s.45(3) should be read as referring to a relevant market rather than a relevant sub-market although it may be very helpful to examine the degree of competition in a particular sub-market and then apply the conclusion to a consideration of the position in the whole market.
between firms or, putting it a little
differently, the field of rivalry between
them. (If there is no close competition there
is of course a monopolistic market). Within
the bounds of a market there is substitution -
substitution between one product and another,
and between one source of supply and another,
in response to changing prices. So a market
is the field of actual and potential
transactions between buyers and sellers
amongst whom there can be strong substitution,
at least in the long run, if given a
sufficient price incentive. Let us suppose
that the price of one supplier goes up. Then
on the demand side buyers may switch their
patronage from this firm's product to another,
or from this geographic source of supply to
another. As well, on the supply side, sellers
can adjust their production plans,
substituting one product for another in their
output mix, or substituting one geographic
source of supply for another. Whether such
substitution is feasible or likely depends
ultimately on customer attitudes, technology,
distance, and cost and price incentives.
It is the possibilities of such substitution
which set the limits upon a firm's ability to
'give less and charge more'. Accordingly, in
determining the outer boundaries of the market
we ask a quite simple but fundamental
question: If the firm were to 'give less and
charge more' would there be, to put the matter
colloquially, much of a reaction? And if so,
from whom? In the language of economics the
question is this: From which products and
which activities could we expect a relatively
high demand or supply response to price
change, i.e. a relatively high cross-
elasticity of demand or cross-elasticity of
supply?
The distinction between markets and
sub-markets can be merely one of degree.
Sub-markets are the more narrowly defined,
typically registering some discontinuity in
substitution possibilities. Where the
defining feature of a market is the existence
of close substitutes (whether in demand or
supply), the defining feature of a sub-market
is the existence of still closer and more
immediate substitutes. Sub-markets may be
especially useful in registering the short-run
effects of change; but they may be misleading
if used uncritically to assess long run
competitive effects.
The indicia of sub-markets listed in the
American case Brown Shoe Co. Inc., v. U.S.
(1962) 370 US 294 at p 325 are suggestive:
'The boundaries of such a submarket
may be determined by examining such
practical indicia as industry or
public recognition of the submarket
as a separate economic entity, the
product's peculiar characteristics
and uses, unique production
facilities, distinct customers,
distinct prices, sensitivity to
price changes, and specialized
vendors'.
But although it may be helpful to refer to
such a list, it does not follow that it is
exhaustive, nor that an area or product must
meet all or a large number of these tests to
be classified as a sub-market. And indeed the
precise content to be given to such phrases as
'the product's peculiar characteristics and
uses', 'unique production facilities',
'distinct prices' depends upon more
fundamental economic ideas."
492. In Re Tooth & Co. Ltd. and Tooheys Ltd. (1979) 39 FLR at pp 34-43;
(1979) 2 ATPR 40-113 at pp 18,193 to 18,199, the Tribunal, Keely J. presiding,
considered the problem of ascertaining the relevant market in regard to
the
sale of beer. It considered whether beer was a distinct product market within
the broader alcohol beverage market. Indeed, submissions
were made to it but
rejected on one hand that the product dimension of the market was that of a
leisure centre and on the other that
bulk and packaged beer were in separate
markets. At p.41; p.18,198 the Tribunal said:
"However, we have concluded that bulk andHowever, the Tribunal also said at p.38; p.18,196:
packaged beer properly belong within the one
market, with the better treatment to regard
bulk beer as falling within a significant
sub-market which repays close study."
"The market should comprehend the maximum493. In G. & M. Stephens Cartage Contractors Pty. Ltd. (1977) 1 A.T.P.R. 17,445 at p.17,460 the Tribunal, Deane J. presiding, said:
range of business activities and the widest
geographic area within which, if given a
sufficient economic incentive, buyers can
switch to a substantial extent from one source
of supply to another and sellers can switch to
a substantial extent from one production plan
to another."
"The identification of relevant markets mustThe Tribunal at p.17,462 considered the question of sub-markets.
be the essential first step in the assessment
both of present competition in existing
circumstances and likely competition in
postulated future circumstances. Competition
is an active process rather than a passive
situation. Nevertheless, the existence and
extent of competition or likely competition
between those competing within a market will
depend, to a large extent, upon the
distinctive, albeit evolving, structure of
that market (see, generally, Re: Queensland
Co-operative Milling Association Limited
(1976) A.T.P.R. 40-012)."
494. In Trade Practices Commission v. Ansett Transport Industries
(Operations) Pty. Ltd. [1978] FCA 21; (1978) 32 FLR 305; (1978) 2 A.T.P.R. 40-071, Northrop
J. in a judgment referred to by the Full Court in Outboard Marine v. Hecar,
supra, held that the relevant market in relation
to rental cars was the
Australia-wide market. At p 311; pp 17,708-17,709, Northrop J. set out with
approval most of the passage
which I have cited from the Queensland
Co-operative Milling Association Ltd. decision. His Honour also approved a
passage of a Tribunal
presided over by himself in Re Howard Smith Industries
Pty. Ltd. (1977) 28 FLR 385; (1977) 1 ATPR 40-023 where the question of the
market for tug boats fell for consideration. In that decision the Tribunal
said at p.396; p.17,337:
"It is our opinion that there is anAt pp.396-397; p.17,338 the Tribunal, in considering the nature of competition, said:
Australia-wide market for towage services,
which is directly relevant to the questions we
have to decide in this application. Given
this view, it will be apparent that each port
is regarded by us as a sub-market, in which
the towage services provided by the two
operators (if there is more than one) are very
close substitutes for one another."
"In discussing the nature and extent ofThe view which I have expressed concerning the way one deals with sub-markets accords with this view.
competition that now exists in the provision
of towage services by large harbour tugs, it
is necessary to distinguish between
competition in a single port (the sub-market)
and competition Australia-wide (the market as
a whole). The structure of these markets is
different, and this has an important bearing
on the degree of competition which can be
expected."
495. In general, in looking at competition in a market, it seems to me one must first examine the market by using the tests of substitution and substitutability both on the demand and supply side. This may require some consideration of the structure of the market and also of relevant features of the market.
496. The parties paid a great deal of attention to the question of the relevant market. For example, senior counsel for the first defendant provided 36 pages of written submissions under the title "The Definition of the Market", 187 pages under the title "Principles of Market Identification and Definition", 15 pages under the title "The Process of Competition", and more than 300 pages of analysis of the market in various districts including within it, for example, a 99 page analysis of the market in the Brisbane district. The whole of this analysis was described as a "Microscopic Study of the Market". In addition, the first defendant sought to have me receive the 600 pages of material to which I have already referred relating to the assumed facts in Ex. 606. The plaintiff also dealt extensively with the question of market as did the other defendants. In particular, the third defendant provided some 100 pages of submissions dealing with the economic evidence, the law and evidence relevant to market and competition.
497. I have cited certain decisions of the Tribunal because, although not binding on me, they illustrate a general uniformity of approach to the question of the identification of the relevant market. I accept that the appropriate market will at least embrace the maximum range of business activities and the widest geographical area within which, if given a sufficient economic incentive, the test of substitutability will be satisfied.
498. I find the relevant market in relation to consideration of the position after 1 July 1977 is not as narrow as that chosen by the Commission. I think it is wider than the national freight forwarding market but somewhat less than that relied upon by the defendants.
499. The defendants submitted that the provision of transportation of all goods in Australia is within the same market and an operator of one truck carrying, for example, soil around Perth and an operator of one tanker wagon moving liquids in and around Cairns are in the one market. This submission depended very largely upon the view embraced by Associate Professor Parry that one could link activities together by some sort of a chain thereby putting them in the same market by applying the tests of substitutability between the operator in Perth and other operators until one reached the operator in Cairns. In other words, one could link the carrier in Perth with a carrier perhaps somewhere adjacent to Perth and link that carrier to one in South Australia and so on until one got to the carrier in Cairns. It was submitted that this could be done even though the equipment used differed as much as, for example, a vehicle suitable for carting furniture or blue metal and a vehicle suitable for carrying liquid fuel. In addition, it was submitted that the question of the size of the carrier did not matter in establishing such a link. No economic writing was cited in support of this view.
500. I consider that acceptance of a principle of linking of this kind does not satisfy the test of substitutability. In my opinion, substitutability must be tested in relation to, for example, the carrier in Perth in relation to the carrier in Darwin and not with the addition of an indeterminate number of carriers somewhere in between to satisfy the test of substitutability.
501. Some consideration must also be given to barriers to entry.
502. Professor Kolsen referred to natural barriers, for example, any natural monopoly scale of the activity, for example, railways in New South Wales, and an absolute barrier, for example, a situation where, for example, a television licence was required before a business could be commenced. Dr. Norman referred to natural barriers to entry and discussed economies of scale. He also discussed barriers to mobility which he said were an impediment to movement within a market. Associate Professor Parry discussed barriers to entry in some detail. He referred, inter alia, to economies of scale in relation to the cost disadvantage that the potential entrant would have in relation to a firm already in the market and to the magnitude of absolute capital requirements.
503. I consider that the evidence concerning companies starting up and
growing into large organisations as did T.N.T., often in a
fairly short time,
shows that any barriers to entry are not of great importance in the industry
under consideration.
(C) Services for the transportation of goods in Australia
504. I have already dealt separately with the question of the methods by which the defendants sought to obtain work and their relevance to competition before 1 July 1977. I find that this aspect of the defendants' activities did not change in any appreciable way after 1 July 1977.
505. The evidence in relation to the availability of services providing for
the transportation of goods in Australia fell into a
number of categories
which I will outline.
. Evidence from persons including certain experienced506. It is not practicable to deal in detail with the evidence concerning the position with regard to the availability of services for the transportation of goods in Australia. However, I have reached a number of firm conclusions from the evidence. They are:
officers of certain defendants about the nature of the
defendants' activities.
. Evidence from officers of a number of corporations who
sought and used transport services for goods.
. Evidence to be gleaned from the Yellow Pages of the
telephone directories. It was agreed, in substance,
that those entries were evidence of the services which
firms were offering to perform and that they were
capable of providing and did provide these services.
. Evidence to be gleaned from a publication, the name
of which varied to some extent between certain States but
can be broadly described as "Who Goes Where". This
publication was not unlike that of the Yellow Pages
to which a person requiring transport could make reference
in an endeavour to ascertain what transport was
available in various areas. It was only admitted as
evidence of what carriers advertised that they did.
. That there is a vast number of persons each carrying507. A Mr Backman, who is now an Executive Director of Linfox Transport Group, was employed by Mayne Nickless between 1973 and 1978. From 1968 until 1973 he was employed by Blakistons Limited, which he described as a local carrier specialising in heavy industry carrying, for example, steel and aluminium ingots. It owned a total fleet in Australia of 300 vehicles of which about 100 or 120 were in Sydney. He described Linfox as a firm which had been in existence for 27 years and specialised in satisfying the distribution requirements of various companies and in particular taking over a fleet of company trucks with the driving staff and thereafter performing that company's distribution requirements. In 1983 Linfox had approximately 900 vehicles and about 1200 employees. It was unusual in that its drivers were employees and not sub-contractors and it owned its own vehicles.
on a business of transporting goods in Australia.
. These persons range from the owner/driver of one truck
to operators of hundreds of trucks and include railways,
airways and big and little firms.
. All sizes of carriers exist between the two extremes
of size.
. Some operators only operate in particular areas, for
example, around a capital city or for example, in North
Queensland, in a country town or on a particular route
or routes, for example between Sydney and Brisbane.
However, some operators are prepared to arrange for
goods to be carried outside the areas in which they
normally operate by people who are, in substance,
sub-contractors. Even the defendants used a large
number of sub-contractors who owned one or more trucks
sometimes painted in the colours of a defendant or in
some instances they used quite independent
sub-contractors.
. Some operators are what might be called specialist
operators, for example, an operator may deal only in
the transportion of liquid fuel, or of refrigerated
cargo or of furniture, or of very heavy large loads,
or of soil. Examples were given of the transport of almost
every conceivable type of goods. Some of the equipment
required is of a very specialised nature which, contrary
to some of the submissions put to me, I am satisfied was
not in any commercial way capable of being used for
anything other than the purpose for which it was
designed.
. The position is not static; some small firms grow to
large firms, others remain of the same size. Some small
firms get absorbed by larger firms. Some firms go out
of business. The industry seems an easy one in which to
start business. A single truck can often be obtained
under a leasing arrangement. Certainly a number of
carriers, including the first defendant, had built up
very large organisations from a humble start. My
impression is that the first defendant is the largest
freight forwarder in Australia and probably the second
and third defendants are the next largest. However,
other large firms exist. Several, about which there was
evidence, used over 100 trucks of their own or of
sub-contractors.
. The barriers to entry in respect of the relevant market
are not substantial.
508. A Mr Sartori gave evidence about Sartori's Transport, a company which had been used by Tradestock during the commission period. He said that that business had been commenced by his father some thirty or so years ago apparently with one truck. It was a carrier specialising in operations between Melbourne and Brisbane. It had depots in Melbourne, Sydney and Brisbane. It employed about thirty persons including a salesman and owned a number of trucks. It also used a number of sub-contractors, perhaps 12 or 15. In 1975 it arranged for the pick-up of interstate freight in Sydney, Melbourne and Brisbane and also the distribution of that freight at its destination. In 1976 its turnover was $2,000,000 per year which had grown to about $5,000,000 per year. Although it specialised in transport from Melbourne to Brisbane, it would not necessarily refuse other work. Sartori said that he had seen a great number of carriers start up with one truck and sometimes grow to own other trucks and in instances the carrier had developed a fleet of trucks. Sartoris at various times had used several of the defendants as sub-contractors. It provided both general road express and a 24-hour service.
509. A Mr Girdwood, now retired, had been a director of a company which conducted Chalmers Transport. Tradestock had had dealings with Chalmers Transport. Girdwood had been in the transport industry from 1963 until he retired in 1982. In 1963 Chalmers had approximately 40 vehicles and was engaged mostly in local transport in the Melbourne region. In the early 1970's it moved into interstate road transport. In 1979 its work consisted of about an equal amount of local and interstate transport work. It performed rather specialised work in that it was engaged mainly in dealing with heavy loads and it had only about forty or fifty customers, who might be described as loyal customers. Although they fell within this category, Chalmers had to adjust its rates from time to time when a customer had been offered a lower rate by a carrier who appeared to be able to perform the work satisfactorily.
510. A Mr Clements gave evidence about a business which he had started about 1970 from nothing other than $500 which he had saved. He was experienced in the industry. He built the business up until it had a turnover of $500,000 when he sold the goodwill and the trucks.
511. A Mr Gibbins, who left T.N.T. in 1974 aged 27 years to start his own business, called F.C.L. Transport, gave evidence. He saw an opportunity to start a business for what he called full container loads of cargo to be carried by the railways. He said he had no money but he had obtained a personal loan of $4,000 from a bank. He also had no equipment, no clients and no staff and used the office of a friend of his. He established a business carrying full container loads anywhere in Australia by rail. In Perth he had an agent, Skippers Transport, which was the largest local carrier in Perth and which had over 100 vehicles and which dealt with his local distribution there. He opened a depot in Sydney at the Sydney Haulage Terminal. Gibbons said his business now had a turnover of $8,000,000 per annum and that he added a margin for profit to his costs dependent very largely upon the rate the railways charged.
512. The Sydney Haulage Terminal was of a type which seemed to exist in other capital cities and evidence was given about it by a Mr James, its Managing Director. It was opened in 1955 on an area of about 30 acres on which a number of different sheds had been erected which were rented to carriers wishing to use them. It also contained service facilities such as those of tyre repairers, panel beaters, tarpaulin repairers, a licensed restaurant, a public weighbridge and sleeping accommodation for about twenty people. Some sheds were shared by groups of carriers and the terminal provided a point to which persons wanting goods taken to various areas could go and see, and, I think, very often find, a carrier who was prepared to perform the required transportation. Conversely, the terminal provided a place where carriers could set up a depot thereby obtaining a point at which to advertise their businesses and conduct any necessary loading and unloading activities and make use of the many other facilities the terminal provided. Terminals of this type were especially useful to small operators early in their business life.
513. The possession of specialised vehicles was not limited to small operators.
514. A Mr Doig, who was the General Manager of Alltrans Bulk Division, a division of T.N.T., described some specialised vehicles of that Division. These included what was called pneumatic vehicles of which they had about 40, trucks for the cartage of brick, trucks which were described as walk on floor bodies and a vehicle which was described as a tip over axle trailer.
515. A Mr Baxter, who since 1980 had been the Manager of T.N.T. Bulk
Division at Kempsey, gave evidence of a variety of vehicles
which included
floor trailers apparently used for the cartage of sawdust, vehicles described
as low loaders and others described
as step deck trailers and semi tippers.
PART 10516. A number of amendments to the defences of the defendants were allowed on terms offered by the Commission and without opposition. The amendments were first sought about 70 days after the hearing commenced and about five years after the proceedings had been instituted. Brambles' amendments were the most extensive, taking up over 36 pages. Other defendants pleaded defences which were fairly similar although not embracing certain of the more exotic defences pleaded by Brambles. The substance of a number of the defences was that the transactions being offered by Tradestock were illegal in one way or another.
MISCELLANEOUS
(A) The amended defences
517. In some cases reliance was placed upon s.47 of the Act which prohibited certain exclusive dealings, and in others, upon ss.45, 45D or 46. Another defence rested on the shipping provision in Part 10 of the Act and yet another upon s.61 dealing with pyramid selling. Lastly, reliance was placed on some sections of the Secret Commissions Acts of various States.
518. The second defendant argued these defences in detail and also submitted many pages of written submissions upon them. Other defendants relied mainly on the second defendant's submissions so far as they were relevant to their own client's defences. Although the defences were pleaded in relation to the whole of the Statement of Claim, I consider that it could hardly be argued that any of them were relevant in any realistic way to the making of the arrangements or understandings which had been pleaded.
519. In view of the findings I have made on the question of competition, I
have no need to consider any of these defences and it
is better that I do not
deal with them. It is sufficient to say that a great deal of imaginative
thought must have gone into many
of them and I can well understand that at
least some may not have been devised until the case had proceeded for some
considerable
time. A reasonable chance of establishing them was not
immediately evident to me. However, it is fair to say that many of them
did
highlight the complexity of the Act.
(B) The effect of the Trade Practices Amendment Act (1977)
upon the proceedings520. A defence based upon the effect of the Trade
Practices Amendment Act 1977(No. 81 of 1977) ("the amending
521. It was developed in detail by Brambles both orally and in 15 pages of written submissions. I will use certain abbreviations in relation only to this defence.
522. It raised for consideration the amendments made to the Act by the amending Act which was operative from 1 July 1977.
523. Section 8 of the amending Act repealed s.7 of the Trade Practices Act 1974 ("the principal Act") under which the Trade Practices Commission had been constituted. Section 8 of the amending Act enacted sub-s.s. 2, 3, 4 and 5 which were not introduced as amendments to the principal Act.
524. Section 8(3) and (4) of the amending Act provides:
"(3) Where, immediately before the commencement of525. The effect of s.8(3) is to deem the Trade Practices Commission constituted as a result of the amendments ("the new Commission") to be substituted for the Commission constituted under the original Act ("the old Commission") in any proceedings instituted before the introduction of the amending Act. The old Commission was to "cease to exist" under s.6A which was introduced into the Act by the amending Act. Section 8(4) empowers the Commission to institute proceedings in the Federal Court including proceedings for conduct engaged in before the commencement of the amending Act.
this section, the Commission established by the
Principal Act was a party to or intervener in a
proceeding in a court, the Trade Practices
Commission established by the Principal Act as
amended by this Act shall be deemed to be
substituted for the first-mentioned Commission as a
party to or intervener in that proceeding.
(4) The power of the Trade Practices Commission
established by the Principal Act as amended by this
Act to institute any proceeding in the Court extends
to the institution of a proceeding in respect of
conduct engaged in before the commencement of this
Act."
526. In T.P.C. v. Milreis [1978] FCA 20; (1978) 32 FLR 234 at pp 239-240; (1978) 2 ATPR 40-073 at pp 17, 743-17,744 I considered whether in 1978 the Court had power to grant an injunction based on an action commenced in 1975 under the Act before amendment. I held that the Court had such a power upon the ground that a right had been accrued and that right was preserved by s.8(c) of the Acts Interpretation Act 1901 and that s.8(3) of the amending Act proceeded upon the basis that existing proceedings would continue after the amending Act came into force and no contrary intention within s.8 of the Acts Interpretation Act was indicated. An appeal was heard by the Full Court of this Court (1979) 40 F.L.R. 257; (1979) 2 A.T.P.R. 40-133. At p.272; p.18,439 Deane and Fisher JJ. in a joint judgment agreed with my conclusions on this point. An appeal to the High Court [1981] HCA 48; (1981) 55 A.L.J.R. 614 did not involve a consideration of this question.
527. Milreis, supra, was based upon the acceptance of the following
propositions:
(1) Section 8(c) of the Acts Interpretation Act applied to528. The basis of the second defendant's argument was that the amending Act repealed ss.7 and 45 of the principal Act and therefore, those sections of the principal Act are obliterated as completely as if they had never been passed.
preserve an accrued right of the Commission based on a
contravention of s.45 of the Trade Practices Act 1974.
(2) Section 8(3) of the amending Act, which substituted
the new Commission, applied.
(3) The Commission's power to continue to seek relief
depended both on the existence of the Trade Practices
Act 1974 before the amending Act and s.8 of the Acts
Interpretation Act.
529. A distinction was drawn between proceedings instituted by the new Commission under sections of the old Act which had not been repealed and those instituted under sections that had been repealed. The argument proceeded that s.8 of the Acts Interpretation Act concluded that the words "...any legal proceeding...may be instituted...and any penalty...may be imposed as if the repealing Act had not been passed". It was then submitted that the new Commission, the plaintiff in the present case, depended for its existence upon the repealing Act.
530. Because I have found that no breach of the old Act has been established
it becomes strictly unnecessary for me to consider this
argument. Since the
argument goes to the validity of the whole proceedings I consider that I
should express my opinion upon it.
I would follow the reasoning of the Full
Court in Milreis, supra, which, in my opinion, would deny the validity of the
second defendant's
argument.
(C) What instructions, if any, did officers of the
defendants receive about Tradestock?531. Some defendants called officers who gave evidence that they had never been instructed not to deal with brokers or consultants. This evidence extended to the question of the absence of any instructions not to deal with Tradestock in particular. I have already said that I do not regard instructions to officers as relevant in relation to giving effect to an arrangement or understanding.
532. The evidence from certain officers of even a number of sections of a
large corporation is hardly sufficient to establish that
it was not a party to
an arrangement or understanding of refusing to deal with transport brokers
when considered against the evidence
of what took place at the three meetings
of the N.F.F.A. This is particularly true where the provisions of the Act may
reasonably
be expected to have been in the minds of senior officers of the
defendants.
(D) Would the defendants deal with transport consultants who
did not seek commission?533. Because of my other findings, this question does not arise. It would be a task of considerable magnitude to deal with it. However, I will touch upon the question. There is certainly no evidence of any significance that any defendant paid a commission at any time to any intermediary. There was some evidence of the position with customs agents where in some instances a commission would appear to have been paid.
534. The Commission submitted that the question under consideration was relevant at least because of its allegation that the defendants had changed their behaviour towards Tradestock co-incident with the defendants' involvement in a relevant meeting.
535. Mayne Nickless and, to a lesser extent, T.N.T. called detailed evidence relevant to this question. Brambles, a party to all three arrangements, chose not to deal with it.
536. Both Mayne Nickless and T.N.T. called a considerable amount of evidence
dealing with two transport consultants, T.F. Hendersons
and Associates Pty.
Ltd.. and Freight Brokers International Pty. Ltd. This evidence showed that
no commission was involved and that
a number of dealings had taken place
between certain defendants during the last two or three years and both these
companies when
they were acting for clients and placing contracts on a
client's behalf.
(E) The Tripodi Principle
537. The Commission relied upon the principles expressed by the High Court in Tripodi v. The Queen [1961] HCA 22; (1961) 104 CLR 1 and R. v. Ernst (1984) VR 593.
538. I did not find it necessary to deal with those principles because I was
satisfied to reach my decision without regard to them.
(F) Certain Evidentiary Principles
539. I do not find it necessary to deal specifically with the following
principles which received some attention and were raised
by the Commission.
(i) The failure to call various witnesses.(G) Undertakings
(ii) Browne v Dunn (1894) 6 R 67.
(iii) The so called "Scintilla Principle".
(iv) The alleged suppression of documents and witnesses,
lies and false issues as probative of guilt.
540. Certain undertakings were offered more than once by Mayne Nickless and certain other defendants, apparently with the hope of eliminating any argument about the form of any injunctions.
541. However, it was common ground that the Court had no power to grant other
than an interim injunction without a finding of a contravention
of the Act.
No defendant was prepared to admit contravention.
PART 11542. I find that the Commission has established its case to the extent that it has proved the arrangements or understandings alleged except the allegation that the eighth and ninth defendants were parties to the arrangement or understanding made at the meeting of 4 August 1976. However, no arrangement or understanding proved was proscribed by the provisions of the Act because the requirement in s.45 of it being in restraint of trade or commerce was not satisfied. The Commission has failed to establish any giving effect to any proscribed arrangement or understanding. The result is that the Commission has not succeeded.
SUMMARY OF CONCLUSIONS AND THE ORDERS
543. I will allow the parties to address me on the question of costs but I am only prepared to hear short submissions. I will now fix a date for hearing any such submissions. I propose to allow about a week between today and the date I fix.
544. The Order of the Court is:
(a) The proceedings be dismissed, and
(b) The question of costs is reserved.
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