Re Jewel Food Stores Pty Limited v Hall & Ors and Amalgamated Milk Vendors Association Inc [1989] FCA 25 (22 February 1989)

FEDERAL COURT OF AUSTRALIA

Re: JEWEL FOOD STORES PTY LIMITED
And: HALL & ORS and AMALGAMATED MILK VENDORS ASSOCIATION INC
No. G372 of 1987
Trade Practices Act, s.45D

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett J.(1)

CATCHWORDS

Trade Practices Act, s.45D - Construction of sub-s.(1) - Whether s.45D(1) only applies to secondary boycotts - Whether there is a requirement for the application of s.45D(1) of a "third person" distinct from the parties in concert - Whether milk vendors who withdrew supply from stores while the stores imported Victorian milk were in breach of s.45D - Whether a hindrance to supply of goods to a store can be treated, for the purposes of s.45D(1), as an indirect hindrance to the acquisition of goods from the store by customers - Whether s.45D(1A) applied on the basis of concerted conduct preventing or substantially hindering the applicant from engaging in interstate trade or commerce - Whether the defence in sub-s.(1B) was made out.

Trade Practices Act 1974, s.45D

HEARING

SYDNEY
22:2:1989

Counsel for the Applicant: Mr F.M. Douglas

Solicitors for the Applicant: Hunt & Hunt

Counsel for the sixth and Mr D.G. Williamson, QC
seventh Respondents: with Mr M.J.R. Huntington

Solicitors for the sixth and Sly & Russell

seventh Respondents:

ORDER

The application be dismissed.

The applicant pay the costs of the sixth and seventh respondents.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is an application under s.45D of the Trade Practices Act 1974, originally brought against a number of parties, which was ultimately pursued only against the sixth respondents and the seventh respondent. They are alleged to have concerted, in breach of s.45D, to prevent the supply of milk in New South Wales to the applicant. The applicant, which conducted a chain of supermarkets, had commenced selling cheap Victorian milk, and wished to continue to sell both Victorian and New South Wales milk.

2. The background to the dispute is the complicated support structure which has been built up about the dairy industry in Australia. One of the complexities (and difficulties) of that structure is the attempt to divide it into compartments at state boundaries, so far as concerns its impact upon "whole milk", i.e. milk supplied for human consumption as such, to be distinguished from "manufacturing milk", the balance of milk produced by dairy farmers. The court, of course, is not concerned with the merits or demerits of the system. The fact is, whether as a result of it, or despite it, the applicant has been able to purchase Victorian milk at a price well below what has to be paid for New South Wales milk. In the highly regulated milk industry, the sale of Victorian milk through Jewel stores (as I shall call the applicant's supermarkets) has an immediate impact on individual milk vendors in New South Wales. For, by virtue of a system of licensing, each store purchases its New South Wales milk from a particular vendor at a controlled price. That vendor operates only in a defined area, so that if a large quantity of other milk comes into that area through its Jewel store, the vendor's gross receipts must diminish while many of his overheads will remain the same. I do not accept what I regard as specious arguments to the contrary.

3. As a result of the situation I have described, a dispute has been smouldering for some years over the question of sale of Victorian milk in New South Wales outside border areas of the state. This dispute flared up into the present proceedings in 1987, when the applicant renewed previous attempts it had made to sell Victorian milk through its stores pursuant to an agreement dated 14 June 1985 entered into between it and Midland Milk Pty Limited, a Victorian milk supplier, together with Davids Holdings Pty Limited, described as a distribution agent. Under this agreement, as subsequently varied, the applicant did not buy the milk, but retailed it as an agent for Midland Milk Pty Limited at a commission of 10.25 cents per litre. The parties to the agreement were relying, so far as concerned the legality of the sale of the Victorian milk pursuant to an arrangement of that kind, upon an unreported decision of the Supreme Court of New South Wales delivered by Lee J. on 31 May 1984 in Jewel Food Stores v. NSW Dairy Corporation, in which attacks on the right of Midland Milk Pty Limited to sell to the applicant and the right of the applicant to sell milk obtained from Midland Milk Pty Limited, pursuant to their respective licences, were repelled, and upon the decision of Rogers J. in Midland Milk Pty Ltd v. NSW Dairy Corporation (1986) 6 NSWLR 200, in which it was held that s.92 of the Commonwealth of Australia Constitution Act 1900 was infringed by attempts to restrict the sale of milk by Midland Milk Pty Limited in New South Wales.

4. The conflict produced by the resumption of the sale of Victorian milk through Jewel stores was immediate. It led to an arrangement for the suspension of supply during attempts to resolve the matter; but when, these attempts having failed, sale of the milk recommenced on 4 August 1987, some reaction from New South Wales milk vendors became inevitable.

5. On 5 August 1987, at 12 noon, there was a meeting of the councillors of the seventh respondent, Amalgamated Milk Vendors Association Inc. (which is incorporated under the Associations Incorporation Act 1984 (NSW)), called especially to discuss the resumption of sale of Victorian milk by the applicant. The meeting lasted for one and a half to two hours. Present at the meeting were the President, Mr. Weingott, the Executive Director, Mr. Grey, Assistant Secretary, Mr. Lester, and eleven other councillors. It is stated in the minutes that Mr. Grey "advised that because of the provisions of the Trade Practices Act, the Association should not organise and should advise against vendor action directed at Jewel's stores." The only decisions recorded were "to communicate with the working party set up by the Federal Minister for Primary Industry and to impress upon them the absolute urgency of this matter", and "to seek every avenue available to obtain a subsidy for 2 Litre and 600 ml containers."

6. The picture which emerges from the evidence is not of such sterile bareness. There was much discussion of measures which might be open to the milk vendors. Industrial action had in fact been taken in 1984, and senior counsel's advice had been obtained earlier in 1987 on the restrictions imposed by the Trade Practices Act. Mr. Grey told the meeting:

"The Association cannot be involved, nor can
it support, any industrial action, pickets,
bans or the like, as this would be contrary
to the Trade Practices Act."

A number of councillors made clear their views that supply of New South Wales milk to Jewel stores should be terminated, while those stores were selling Victorian milk. It must have been obvious that action of this kind could only be effective if it was concerted; but, if it was concerted, it could have a severe impact upon the applicant, both because some of the applicant's customers would be likely to prefer to continue to buy New South Wales milk, and also because the applicant could not obtain enough Victorian milk to meet all its requirements. If a supermarket cannot supply the milk a customer desires, the possibility that it will lose the customer altogether, or for a period, though difficult to translate precisely into figures, must be added to the lost sales of milk, when considering the impact upon the store.

7. The evidence of Mr. Grey is that "I gained the impression that each of the councillors present who supply the applicant intended to cease supply to it." In my opinion, he gained this impression because of quite forceful statements on the matter. If to the evidence of what transpired at the meeting is added the evidence of what occurred afterwards, I do not think there is any doubt that the councillors understood themselves to be unanimously in favour of a concerted termination by milk vendors of the supply of New South Wales milk to Jewel stores. That unanimity was not translated into a resolution only because of Mr. Grey's warning; it was nonetheless real. At the same time, there was a decision to emphasize the individual choice of every member whether or not to join in the contemplated action. That decision was taken on the advice of Mr. Grey, who told the meeting:

"If individuals of their own volition decide
they want to do things, they can do so, but
we cannot support them."

He also said, after the formal meeting had concluded and during further informal discussions:

"The Association cannot be involved, nor give
any support, nor appear to give any support,
to any such action. However, if the
individual acting as an individual makes a
decision, and provided the Association does
not provoke him, or support him, or sustain
him, that is a matter between him and his
conscience."

8. Although in one sense Mr. Grey's statements, and other statements echoing them made by various councillors to members, represent a wall of unreality erected to shelter the real actions of the Amalgamated Milk Vendors Association, in another sense I am satisfied they were perfectly real. Insofar as they were intended to suggest that the Association was not a party to, much less the organizer of, the concerted action which ensued, they represented either a mere straw of technicality, or even a blatant pretense. But insofar as the technicality or camouflage, by its very nature, required emphasis to be placed on the individual decision of each milk vendor to be or not to be a party to the joint action contemplated, the words of Mr. Grey were real. Milk vendors were being invited, not coerced, to join in taking action; the very terms in which the matter was put to them, though adopted for an ulterior reason, ensured that. They were told it was for them to decide.

9. The conclusions I have just expressed may be illustrated by some references to the evidence. Affidavits were read from which the picture emerges that each of the councillors (or at any rate most of them) telephoned milk vendors in his own general area, who supplied milk to Jewel stores, to let them know what was proposed. It is clear Mr. Grey's warning and advice were taken to heart. An example is Mr. Weingott, who telephoned several vendors, including a Mr. Ross French to whom I shall make further reference later. Mr. Weingott told each of them about the resumption of deliveries of Victorian milk to Jewel stores and, I am satisfied, conveyed the message that they were being requested to join in withholding supply of New South Wales milk. But he also said:

"I must stress that any such decision is your
own decision and the Association will not be
party to any such decision. In fact the
advice of the Association is not to withdraw
your services. Again I stress that this is a
decision that must be made by yourself."

In the case of a Mr. Dunnacliff, Mr. Weingott was asked:

"Will the Association give us a guarantee?"

He replied:

"The Association cannot give you a guarantee.
If you are looking for a guarantee then it is
not your own personal decision. If you want
a guarantee from the Association then you are
not acting individually."

In one case, Mr. Weingott spoke to the wife of a vendor, who told him she would have to "discuss this with my husband and let you know what our decision is." That indeed Mr. Weingott left it to his own decision, and did not coerce him, is confirmed by Mr. Brinsmead, one of the vendors, who gave evidence that he himself asked what was the attitude of everybody else, and was told:

"I feel that they won't deliver."

He then said he would not either. A Mr. Rodgers also confirmed that Mr. Weingott made it clear it was a decision for him to make whether to withhold supply from the Jewel store he was supplying.

10. Numerous vendors spoke to store managers, saying that the decision to withhold supply was a personal decision. This strongly confirms, not only that there was concert in the matter, but also that they had been told by the councillors who had contacted them, or by other representatives of the Association, that the matter was one for their own decision. The affidavits of numbers of vendors emphasize that that is how the matter was put to them.

11. Against this body of evidence, there are a few indications to the contrary. One of the store managers, a Mr. Enrico Caruso, swore that the vendor to his store, when challenged about his refusal of supply, said:

"I'm not allowed to say anything."

However, I think this statement relates to the concern of the milk vendors to attempt to hide their concert, and not to any confession of compulsion. The vendor in question gave evidence to the effect it had been put to him that it was "up to (him) whether or not (he) wish(ed) to withdraw supply. It's up to each individual." Another vendor, a Mr. Warwick Hall, swore an affidavit in which he stated that Mr. Lester said to him:

"All of the other vendors are ceasing supply
from 6 August 1987 and you are not to supply
them as well."

He says he replied:

"Righto, if that's how it's going to be, I'll
be in."

Whatever the precise significance of this conversation, it is noteworthy that the applicant's witness, to whom Mr. Hall spoke, says he attributed his refusal to deliver milk to "the Milk Board"] It may be that he was confused, or that he was not desirous of giving offence to the individual with whom he was speaking; if so, it does not necessarily follow that he was actually coerced or even pressured to join with the other milk vendors. At the least, I do not find his version of what occurred reliable when contrasted with the accounts of so many others. There is also evidence that Mr. Ross French, one of the milk vendors to whom Mr. Weingott had spoken, told the manager of a Jewel store:

"I cannot make a delivery. They won't let me
supply you."

Mr. French agrees that he used these words, but also says that Mr. Weingott had expressly told him:

"This decision is solely your own and the
Association will not be party to any such
decision."

His evidence is to the effect that in fact it was his own decision.

12. The evidence, to which I have already referred, concerning the meeting of councillors, indicates there was not a single dissentient voice raised against the proposed joint action. Apart from the secretary and perhaps the assistant secretary, the council appears to have consisted of milk vendors, and there is no reason to think it did not truly represent a cross-section of their views. The overwhelming evidence of the milk vendors who have made affidavits indicates there was no need of pressure to persuade them to join in the decision of their councillors; on the contrary it coincided with their own spontaneous reaction. In these circumstances, I am not persuaded that the councillors did more than make known the opinion they all shared as to what ought to be decided by themselves and by the other affected milk vendors. I think the remaining sixth respondents took the same attitude, not because of any pressure, but because it accorded with their own view of the appropriate response to the sale of Victorian milk in the applicant's stores. If, contrary to my view of the evidence, any particular councillor or other individual did tell a milk vendor that he was required to join in boycotting Jewel stores, or did apply any pressure in any other way in order to secure a favourable answer, I am satisfied that he was not authorized by the understanding at which I have held the councillors had arrived to make any such statement, or to apply any such pressure. The understanding, though for technical reasons which may have been misguided, was that the choice belonged to the individual, who was to be asked to make up his own mind.

13. In the result, delivery of New South Wales milk stopped entirely, between 6 August and 13 August 1987, to all Jewel stores other than the stores at Wagga Wagga and Queanbeyan. Supplies resumed only after the making of an interlocutory application which accompanied the launching of these proceedings.

14. I have made findings as to the nature of the concert which it seems to me the evidence has established. However, to the extent that it needs to do so, the applicant is able to rely, in order to show the fact of concert, on concessions made by the majority of the third respondents, and by the seventh respondent, in the following terms:

"In the event that any one or more of the
Sixth Respondents, for whom Sly & Russell
act, is found to have engaged in conduct that
would, if it had been engaged in in concert
with a second person, have been in breach of
Section 45D of the Trade Practices Act, each
such Sixth Respondent admits that such
conduct was engaged in in concert with the
Seventh Respondent and all of the Sixth
Respondents for whom Sly & Russell act will,
without further admissions, give undertakings
to the Court, in such form as the Court
considers appropriate, to refrain, by
themselves, their servants and agents, from
engaging in conduct that would constitute a
further breach of Section 45D of the Trade
Practices Act.
The Seventh Respondent admits that it acted
in concert with such sixth respondents (if
any) as is or are found to have engaged in
conduct that would, if it had been engaged in
in concert with a second person, have been in
breach of section 45D of the Trade Practices
Act."

15. The applicant seeks injunctive relief pursuant to s.45D (1) and (1A) of the Trade Practices Act. Those provisions read as follows:

"(1) Subject to this section, a person shall
not, in concert with a second person, engage
in conduct that hinders or prevents the
supply of goods or services by a third person
to a fourth person (not being an employer of
the first-mentioned person), or the
acquisition of goods or services by a third
person from a fourth person (not being an
employer of the first-mentioned person),
where -
(a) the third person is, and the fourth
person is not, a corporation and -
(i) the conduct would have or be likely
to have the effect of causing -
(A) substantial loss or damage to
the business of the third
person or of a body corporate
that is related to that
person; or
(B) a substantial lessening of
competition in any market in
which the third person or a
body corporate that is related
to that person supplies or
acquires goods or services;
and
(ii) the conduct is engaged in for the
purpose, and would have or be
likely to have the effect, of
causing -
(A) substantial loss or damage to
the business of the fourth
person; or
(B) a substantial lessening of
competition in any market in
which the fourth person
acquires goods or services; or
(b) the fourth person is a corporation and
the conduct is engaged in for the
purpose, and would have or be likely to
have the effect, of causing -
(i) substantial loss or damage to the
business of the fourth person or of
a body corporate that is related to
that person; or
(ii) a substantial lessening of
competition in any market in which
the fourth person or a body
corporate that is related to that
person supplies or acquires goods
or services.
(1A) Subject to this section, a person shall
not, in concert with another person, engage
in conduct for the purpose, and having or
likely to have the effect, of preventing or
substantially hindering a third person (not
being an employer of the first-mentioned
person) from engaging in trade or commerce -
(a) between Australia and places outside
Australia;
(b) among the States; or
(c) within a Territory, between a State and
a Territory or between two Territories."
An alternative count under s.47 was abandoned.

16. The applicant originally put its case pursuant to s.45D(1) upon the basis of five propositions. But as only three were relied on at the hearing, I shall set them out without reference to the other two. They are:

"(a) Firstly, the respondents, have in
concert engaged in conduct that hinders
or prevents the supply of pasteurised
milk by the other sixth respondents
(the 'third persons') to Jewel Food
Stores ('Jewel') (the 'fourth person').
(c) Thirdly, it is alleged that the
respondents have in concert engaged in
conduct that hinders or prevents the
acquisition of pasteurised milk by
customers of Jewel (the third person)
from Jewel (the fourth person). In
this regard, the acquisition of
pasteurised milk which is hindered or
prevented includes the acquisition of
pasteurised milk supplied to Jewel by
the sixth respondents.
(e) Fifthly, it is alleged that the
respondents have in concert engaged in
conduct that hinders or prevents the
supply of pasteurised milk by Jewel
(the third person) to customers of
Jewel (the fourth persons). In this
regard the supply of pasteurised milk
which is hindered or prevented includes
the supply of pasteurised milk by Jewel
to its customers, which milk is
supplied to Jewel by the sixth respondents."

17. The first way the applicant's case is put, in reliance on s.45D(1)(b), raises a fundamental question about the meaning and operation of the section. The section speaks of concerted conduct, between a first and second person, that hinders or prevents supply by a third person to a fourth person or acquisition by a third person from a fourth person. There must be at least two persons who concert, and a third and fourth person between whom the process of supply or acquisition is hindered or prevented. But here the alleged third person is constituted by the body of milk vendors, who also form the second person with whom the first concerted. (And merely one or two of them will not do as third persons, because of the requirement in s.45D(1)(b)(i) of "substantial loss or damage" to the applicant's business - there was no reliance on s.45D(1)(b)(ii).) The Act cannot refer to people hindering or preventing themselves; it must proscribe hindrance or prevention of others. If the milk vendors are prevented from supplying, what is the conduct that hinders or prevents them, and who concerts to engage in it?

18. The applicant sought to meet the difficulty by submitting that individual councillors of the seventh respondent brought pressure to bear on some of the milk vendors, who thus became third persons prevented from supplying the applicant, as well as second persons. I do not doubt that the mere fact an unwilling participant has yielded to pressure, and agreed to join in a boycott, is no reason to deny him the description of a person hindered or prevented. To hold otherwise would approve hypocrisy and pretense. But there are at least two reasons why I cannot accede to the submission. First, for reasons I gave when recounting the circumstances, I do not accept its factual basis. The vendors did not prevent each other, or any of each other, from supplying milk to the applicant. They agreed to withhold supply. There was no need to coerce any third party since all were agreed, and every vendor was himself, by virtue of the New South Wales licensing system, the only lawful source of supply in his own area. Next, as I have already pointed out, it would not be enough to show coercion in a few cases, because cessation of the supply of milk for a short period to two or three stores would not cause or threaten substantial loss or damage to the applicant's business.

19. I agree with the submission of counsel for the respondents that the facts of this case cannot properly be analysed as revealing a third person within the meaning of s.45D(1)(b), and that it is essential to the establishment of a case under the provision to show there is such a third person, who is prevented or hindered from supplying to or acquiring from the applicant goods or services. If the section were ambiguous, as I think it is not, the respondents would be entitled to rely on the explanatory memorandum circulated by the Minister when the Trade Practices Amendment Bill 1977, which introduced the section, was before the House of Representatives. The memorandum stated:

"The Bill contains special provisions for the
prohibition of collective boycotts.
Collective primary boycotts (where the
boycott seeks to restrict the dealings of the
parties with the target person) are
prohibited as 'exclusionary provisions'
(defined in new section 4D (clause 6)) - new
section 45(2)(a)(i) and 45(2)(b)(i).
Collective secondary boycotts (where the
boycott seeks to restrict the dealings of
persons, other than the parties, with the
target person) are prohibited where they have
or are likely to have a prescribed effect -
new section 45D."

20. The other two ways in which the applicant's case is put under s.45D(1) depend on treating the interruption of supplies of New South Wales milk to Jewel stores as hindering or preventing: (1) the acquisition of milk by the stores' customers; or (2) the supply of milk by the stores to the customers. In the former case, the customers are the "third person", and the applicant is the "fourth person". But the second case requires the customers to be the "fourth person". That will not do under s.45D(1)(b), since the subsection requires the "fourth person" to be a corporation; nor will s.45D(1)(a) fill the breach, since it would require a purpose of causing substantial loss or damage to a business of the customers (s.45D(1)(a)(ii)(A) - (B) was not relied on).

21. To treat the actions of the milk vendors as conduct that hindered or prevented the acquisition of milk by customers of Jewel stores is to look beyond the direct effect of those actions upon supply to the stores, and to take account of an indirect or ultimate effect upon the availability of milk to the customers of the stores. Counsel for the respondents submits that the section should be construed as concerned with direct effects, rather than indirect effects. He points out that Parliament, in enacting the Trade Practices Act, has repeatedly distinguished between direct and indirect effects. Where it has thought fit, it has provided by reference to both: see ss.47(2), (3), (6), (7), (8), (9) and (13), 50(1) and (1A). There is force in this submission. But, to my mind, there is even greater force in the further consideration that s.45D(1) deals separately with supply of goods or services to a "fourth person" and acquisition of goods or services from a "fourth person". It would be inconsistent with the structure and evident intent of the provision to treat an interference with supply to the applicant, not under that part of the provision which deals with supply to it, but as an indirect interference with acquisition from it. But it would be quite anomalous if such an approach could lead to liability for the indirect effect in a case (such as the present) where the terms of the legislation exclude liability for the direct effect. In my opinion, s.45D(1) contemplates two levels of activity, supply to a corporation of its requirements, and supply by it to its customers; and the subsection makes separate provision for interference by a secondary boycott at each of those levels. In neither case, does that provision extend to indirect consequences at the other level.

22. It follows that the applicant fails in each of its attacks under s.45D(1).

23. There remains for consideration s.45D(1A). The sixth and seventh respondents, in concert with each other, refused to supply milk to the applicant, refrained from doing so, and made it known that they would continue not to supply milk. By virtue of s.4(2)(a) and (c) of the Trade Practices Act, as applied to sub-s.(1A) of s.45D, they thereby engaged in conduct within the meaning of that subsection. It is clear the purpose was to prevent the applicant, who was not an employer of any of the respondents, from selling Victorian milk through its stores. That, in the circumstances, was the likely effect.

24. For the respondents, it was pointed out that the applicant's immediate reaction to the complete cutting off of supplies of New South Wales milk was to get all the Victorian milk it could, so that in the week during which it had no New South Wales milk interstate deliveries of milk to it actually increased. On this basis, without going so far as to suggest that the likely effect of the respondents' actions was to enhance interstate trade, counsel for the respondents submitted that the applicant was neither prevented nor substantially hindered, nor likely to be, from engaging in that trade. I am unable to accept this audacious submission. When respondents have pursued a course of action designed to produce a particular result, it is not hard to infer it was likely to have the effect they intended. (Cf. Gould v. Vaggelas (1985) 157 CLR 215 at 238, per Wilson J.) The fact that in this case one week was not long enough for it to do so, is no refutation of the applicant's case; what happened was that the conduct was cut short by the institution of proceedings. I think it is clear all the elements of subsection (1A) are made out. That what is involved is trade or commerce among the States, as well as that the applicant was engaging in it, is established by the principles discussed by Mason J. in The Australian Coarse Grains Pool Proprietary Limited v. The Barley Marketing Board [1985] HCA 38; (1985) 157 CLR 605 at 628-635.

25. But the respondents' real reliance was placed on subsection (1B), which relevantly reads as follows:

"In a proceeding under this Act in relation to
a contravention of sub-section (1A), it is a
defence if the defendant proves -
...
(c) that the dominant purpose for which
the defendant engaged in the conduct
concerned was to preserve or further a
business carried on by him."

26. I am satisfied, having regard to the evidence previously discussed in these reasons, that the dominant purpose for which each of the sixth respondents engaged in the conduct concerned was to preserve his business as a milk vendor. I do not think there is any doubt about this conclusion. So far as the seventh respondent is concerned, I think it also had a business, for "business", by virtue of s.4(1), "includes a business not carried on for profit". The seventh respondent was seeking to further its business as the association of milk vendors, and this was its dominant purpose. Accordingly, I hold that the defence given by subsection (1B) is made out.

27. For these reasons, the application must be dismissed. The parties entered into certain arrangements as to the costs orders to be sought; unless those arrangements provide a reason to the contrary, the application should be dismissed with costs.