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Federal Court of Australia |
Last Updated: 31 January 2005
FEDERAL COURT OF AUSTRALIA
Australian
Competition & Consumer Commission v Anglo Estates Pty Ltd
(ACN 008
700 696) [2005] FCA 20
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v ANGLO ESTATES
PTY LTD (ACN 008 700 696), KENNETH GEORGE WILLIAMSON and ROSS KENNETH
WILLIAMSON
WAD64 OF 2004
FRENCH
J
21 JANUARY 2005 (Corrigendum dated 28 January
2005)
PERTH
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IN THE FEDERAL COURT OF AUSTRALIA
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WESTERN AUSTRALIA DISTRICT REGISTRY
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WAD64 OF 2004
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BETWEEN:
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AUSTRALIAN COMPETITION AND CONSUMER
COMMISSIONER
APPLICANT |
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AND:
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ANGLO ESTATES PTY LTD (ACN 008 700 696)
FIRST RESPONDENT KENNETH GEORGE WILLIAMSON SECOND RESPONDENT ROSS KENNETH WILLIAMSON THIRD RESPONDENT |
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JUDGE:
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FRENCH J
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DATE:
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21 JANUARY 2005 (Corrigendum 28 January 2005)
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PLACE:
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PERTH
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In the reasons for judgment delivered on 21 January 2005, under
‘Pecuniary Penalty’ on page 3 of the Orders at 4(a) and
(b) delete
‘$7,5000’ and insert ‘$7,500’.
Acting
Associate:
Dated: 28 January 2005
Federal COURT OF AUSTRALIA
Australian
Competition & Consumer Commission v Anglo Estates Pty Ltd
(ACN 008
700 696) [2005] FCA 20
TRADE PRACTICES – price fixing – exclusionary provisions – attempt by land developer to induce competing local authority to maintain minimum prices on vacant residential lots for sale or to defer sales – contraventions admitted – consent orders – declarations – injunctions – proposed compliance program – whether compliance program appropriate to small family company – pecuniary penalty – criteria – dispensing power – s 85(6) Trade Practices Act 1974 (Cth) – whether honest and reasonable conduct – whether ignorance of the law may attract dispensing power – construction of s 85(6)
Trade Practices Act 1974 (Cth) s 45(2), s 45A(1), s 4D, s 76, s 80,
s 85(6), s 86C
Australian Competition and Consumer Commission
v Real Estate Institute (WA) Inc [1999] FCA 1387; (1999) 95 FCR 114 applied
Universal
Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193;
(2003) 131 FCR 529 cited
Ostrowski v Palmer [2004] HCA 30; (2004) 206 ALR 422
cited
Blackpool Corporation v Locker [1948] 1 KB 349
cited
Heydon, Trade Practices Law, (The Law Book Company) Vol 2
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v ANGLO ESTATES
PTY LTD (ACN 008 700 696), KENNETH GEORGE WILLIAMSON and ROSS KENNETH
WILLIAMSON
WAD64 OF 2004
FRENCH
J
21 JANUARY 2005
PERTH
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AUSTRALIAN COMPETITION AND CONSUMER
COMMISSIONER
APPLICANT |
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AND:
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ANGLO ESTATES PTY LTD (ACN 008 700 696)
FIRST RESPONDENT KENNETH GEORGE WILLIAMSON SECOND RESPONDENT ROSS KENNETH WILLIAMSON THIRD RESPONDENT |
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DATE OF ORDER:
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WHERE MADE:
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THE COURT ORDERS THAT:
AGAINST THE FIRST
RESPONDENT
Declarations
1. It is hereby declared that on 11 September 2002, the first respondent by means of correspondence with the Shire of Esperance (the Shire): (a) attempted to contravene s 45(2)(a)(ii) of the Trade Practices Act 1974 (Cth) (the Act) by seeking to make an arrangement or arrive at an understanding with the Shire containing a provision or proposed provision fixing or controlling the minimum price at which the Shire would sell vacant residential lots within a portion of its Flinders Estate in Esperance to the public in competition with the first respondent; (b) in respect of the attempt referred to in sub-par (a), engaged in conduct of the kind referred to in ss 76(1)(b) and 80(1)(b) of the Act. 2. It is hereby declared that, from 17 September 2002 to 21 February 2003, the first respondent, by engaging in a series of meetings and a course of correspondence with the Shire: (a) attempted to contravene s 45(2)(a)(i) of the Act by seeking to make an arrangement or arrive at an understanding with the Shire containing a provision or proposed provision that the Shire would not develop and sell vacant residential lots within a portion of its Flinders Estate in Esperance to the public before the end of 2010, such a provision or proposed provision having the purpose of limiting the supply by the Shire of vacant residential land to a particular class of persons, namely persons who were potential purchasers of vacant residential land in Esperance, in competition with the first respondent; (b) in respect of the attempt referred to in sub-par (a), engaged in conduct of the kind referred to in ss 76(1)(b) and 80(1)(b) of the Act.
Injunction
3. The first respondent is hereby restrained for a period of 3 years, whether by itself or by its officers, employees, members, agents or otherwise howsoever, from: (a) making or arriving at; (b) giving effect to; (c) attempting to make, arrive at or give effect to; (d) inducing, or attempting to induce, a corporation to make, arrive at or give effect to; or (e) being in any way, directly or indirectly, knowingly concerned in, or party to, the making or arriving at, or the giving effect to, by any person, of:
any contract, arrangement or understanding which contains a provision that:
(f) has the purpose, or has or is likely to have the effect, of: (i) fixing, controlling or maintaining; or (ii) providing for the fixing, controlling or maintaining of,
the prices for, or a discount, allowance, rebate or credit in relation to, vacant residential lots in Western Australia supplied, or to be supplied, to the public by all or any of the parties to the contract, arrangement or understanding in competition with each other; or
(g) has the purpose of preventing, restricting or limiting the supply of vacant residential lots in Western Australia to potential purchasers of vacant residential land in Western Australia by all or any of the parties to the contract, arrangement or understanding in competition with each other.
Pecuniary Penalty
4. The first respondent is to pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76(1) of the Act as follows:
(a) in respect of the contravention of s 45(2)(a)(ii) on 11 September 2002 - $7,5000;
(b) in respect of the attempted contravention of s 45(2)(a)(i) of the Act between 17 September 2002 and 21 February 2003 - $7,5000.
AGAINST THE SECOND RESPONDENT
Declarations
5. It is hereby declared that, from 17 September 2002 to 20 November 2002, the second respondent, by engaging in a series of meetings and a course of correspondence with the Shire on behalf of the first respondent: (a) attempted to induce the Shire to, in contravention of s 45(2)(a)(ii) of the Act, make an arrangement or arrive at an understanding with the first respondent containing a provision or proposed provision fixing or controlling the minimum price at which the Shire would sell vacant residential lots within a portion of its Flinders Estate in Esperance to the public in competition with the first respondent; and thereby (b) engaged in conduct of the kind referred to in ss 76(1)(d) and 80(1)(d) of the Act. 6. It is hereby declared that, from 17 September 2002 to 21 February 2003, the second respondent, by engaging in a series of meetings and a course of correspondence with the Shire on behalf of the first respondent: (a) attempted to induce the Shire to, in contravention of s 45(2)(a)(i) of the Act, make an arrangement or arrive at an understanding with the first respondent containing a provision or proposed provision that the Shire would not develop and sell vacant residential lots within a portion of its Flinders Estate in Esperance to the public before the end of 2010, such a provision or proposed provision having the purpose of limiting the supply by the Shire of vacant residential land to a particular class of persons, namely persons who were potential purchasers of vacant residential land in Esperance, in competition with the first respondent; and thereby (b) engaged in conduct of the kind referred to in ss 76(1)(d) and 80(1)(d) of the Act.
Injunction
7. The second respondent is restrained for a period of 3 years, from inducing, or attempting to induce, a corporation to make or arrive at any contract, arrangement or understanding which contains a provision that: (a) has the purpose, or has or is likely to have the effect, of: (i) fixing, controlling or maintaining; or (ii) providing for the fixing, controlling or maintaining of,
the prices for, or a discount, allowance, rebate or credit in relation to, vacant residential lots in Western Australia supplied, or to be supplied, to the public by all or any of the parties to the contract, arrangement or understanding in competition with each other; or
(b) has the purpose of preventing, restricting or limiting the supply of vacant residential lots in Western Australia to potential purchasers of vacant residential land in Western Australia by all or any of the parties to the contract, arrangement or understanding in competition with each other.
AGAINST THE THIRD RESPONDENT
Declaration
8. It is hereby declared that, on 11 September 2002, the third respondent, by engaging in correspondence with the Shire on behalf of the first respondent
(a) attempted to induce the Shire to, in contravention of s 45(2)(a)(ii) of the Act, make an arrangement or arrive at an understanding with the first respondent containing a provision or proposed provision fixing or controlling the minimum price at which the Shire would sell vacant residential lots within a portion of its Flinders Estate in Esperance to the public in competition with the first respondent; and thereby
(b) engaged in conduct of the kind referred to in ss 76(1)(d) and 80(1)(d) of the Act.
Injunction
9. The third respondent is restrained for a period of 3 years, from inducing, or attempting to induce, a corporation to make or arrive at any contract, arrangement or understanding which contains a provision that has the purpose, or has or is likely to have the effect, of: (a) fixing, controlling or maintaining; or (b) providing for the fixing, controlling or maintaining of,
the prices for, or a discount, allowance, rebate or credit in relation to, vacant residential lots in Western Australia supplied, or to be supplied, to the public by all or any of the parties to the contract, arrangement or understanding in competition with each other.
Pecuniary Penalty
10. The third respondent is to pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76(1) of the Act in respect of his attempt to induce the Shire to contravene s 45(2)(a)(ii) on 11 September 2002 - $5,000.
Costs
11. The respondents are to pay the applicant’s costs of and incidental to the proceeding to be taxed if not agreed.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court
Rules.
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AND:
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REASONS FOR JUDGMENT
1 Anglo Estates Pty Ltd (Anglo Estates) is a small family company which has undertaken property subdivision and development in Esperance. Its directors are Kenneth Williamson, his wife, from whom he is separated, and their son, Ross Williamson, who is a legal practitioner specialising in criminal law.
2 In 2001, the company commenced the subdivision and development of land which it owned in Esperance with a view to selling vacant residential lots to the public. It did so, on the understanding, said to be based upon a representation by officers of the Shire of Esperance (the Shire), that the Shire did not intend to undertake any similar development of land which it held in the area.
3 When, contrary to the company’s understanding, the Shire began to develop a residential subdivision of its own, the company and the Williamsons made representations to the Shire and threatened it with litigation. They engaged in a number of meetings with Shire officers to try to resolve the matter. They proposed variously that the Shire should only sell its lots at a price not less than a certain minimum price and alternatively, that the Shire should defer releasing its land until 2010.
4 Before considering the latter proposition the Shire required the company to obtain advice that it would not contravene the Trade Practices Act 1974 (Cth) (the Act). The company did receive such advice in February 2003. The Shire did not accept the company’s legal advice and took its own which was to the contrary.
5 In the event, the Australian Competition and Consumer Commission (ACCC) commenced proceedings against the company and Kenneth Williamson and Ross Williamson for attempting to induce the Shire to enter arrangements or understandings which involved price fixing and, alternatively, containing an exclusionary provision. The company and the Williamsons have accepted that they acted in contravention of the Act. They have agreed to consent to various orders sought by the ACCC. The Williamsons have argued however, in reliance upon s 85(6) of the Act, that they should be relieved from liability for pecuniary penalties on the basis that they acted honestly and reasonably and that they should fairly be excused. In my opinion the dispensing discretion which is conferred by s 85(6) in the case of natural persons who have contravened the Act, can properly be applied to Mr Williamson Snr but not to his son. In addition therefore to the declarations and injunctions which have been agreed I will impose penalties totalling $15,000 on the company and a penalty of $5,000 on Ross Williamson. I decline to order a compliance program. It is not appropriate for a small family company in the circumstances of this case.
Factual and Procedural Background
6 Kenneth Williamson, who was born on 7 October 1930, until recently engaged in the subdivision and development of land in the Esperance area. He has carried on business for many years through two companies which he and his family control, namely Anglo Estates Pty Ltd and Anglo Properties Pty Ltd. Anglo Estates was incorporated in Western Australia on 28 October 1966 and Mr Williamson has been a director of that company since 3 November 1966. His wife, Joan, who was born in 1927, was appointed a director of the company on 14 September 1999. Their son, Ross Kenneth Williamson, was also appointed as a director on 14 September 1999. Ross Williamson is a legal practitioner who practices under the name ‘Williamson & Co, Barristers and Solicitors’.
7 Mr and Mrs Williamson and their two sons, Ross and Bradley, each hold one fully paid share in Anglo Estates. They are its only shareholders. The company is the trustee of a discretionary trust known as the ‘Ken Williamson Family Trust’. The other company, Anglo Properties, is trustee of another family discretionary trust known as the ‘Anglo Trust’. It has one issued share which is held by Anglo Estates.
8 In May 1998, Anglo Estates purchased a 33.7 hectare block in the Esperance area at Lot 2 Goldfields Road. The intention of the Williamsons at the time of the purchase was to create a rural residential subdivision out of the land with lots of approximately 5,000 square metres each. It secured the necessary approval for the subdivision from the Western Australian Planning Commission in or about June or July 2000. Before proceeding with the development Kenneth Williamson made inquiries about the intentions of the Shire of Esperance with respect to the development of other land of which it was the registered proprietor. That land comprises 98 hectares and is known as the ‘Flinders Estate’. These inquiries were part of what Mr Williamson described as his ‘due diligence process’. If he had thought that the Shire might release comparable lots in the Flinders Estate he would not have proceeded to develop Lot 2. According to a memorandum attached to a subsequent letter to his solicitors and exhibited to his affidavit, Mr Williamson was reassured by the Shire. At a meeting with officers of the Shire in July 2000 he was told by one of them that:
‘... provided that private developers satisfied the local market demand then the Shire would certainly not compete by bringing their land onto the market.’
The company proceeded to subdivide a portion of Lot 2 over the period February 2001 to November 2001.
9 On 8 August 2001, Kenneth Williamson was informed, at a meeting with Michael Archer, the Chief Executive Officer of the Shire, that the Shire proposed to subdivide part of the Flinders Estate for the purpose of supplying vacant residential lots for sale to the public. According to Mr Williamson’s memorandum to his solicitors, Mr Archer told him that the Shire had decided to create about 20 lots fronting Ormonde Street in Esperance. However, as these would be at the ocean end of the street their value would be in the order of $80,000 and they would not compete with the Anglo Estates’ lots. At that time Anglo Estates had commenced a small first stage of its subdivision.
10 From about October 2001, Anglo Estates began offering its subdivided lots within Lot 2 for sale to the public. They were marketed under the name ‘Le Grande Estate’.
11 On or about 11 June 2002, Anglo Estates was provided with a copy of the Shire’s proposed subdivision plan for the Flinders Estate. According to Kenneth Williamson’s memorandum to his solicitors he was informed that the Shire had made application for subdivision approval for 46 lots fronting the entire length of Ormonde Street and extending into Goldfields Road. He said, in that memorandum, that Mr Archer had advised that the Shire was having discussions with LandCorp for the purpose of creating a joint venture to develop the balance of the land over a period of years. The proposal envisaged a canal development and conventional residential subdivision. At that time a decision from LandCorp was not expected for six months.
12 Mr Williamson consulted the company’s then solicitors Hardy Bowen and in a letter dated 15 July 2002 enclosed the memorandum outlining the events leading up to his ‘impeding (sic) dispute’ with the Shire. He said in the letter:
‘I feel we should at least have a game plan in place to activate at short notice. Let me know what you think.’
Hardy Bowen wrote back to him on 22 July 2002 advising that it would be counter-productive to threaten or commence proceedings given that the implementation of the subdivision process had only just commenced and that there was no certainty as to when the Shire’s lots would be put on the market competing against Anglo Estates’ staged development. Mr Hardy, in whose name the letter was sent, recommended that ‘the pressure in the short term’ be upon production, advertising and commentary on the business plan required to be implemented by the Shire with respect to the proposed subdivision under the provisions of the Local Government Act 1995 (WA). The advice also recommended that as a ‘second preference’ Mr Williamson lobby councillors advising them of the undertakings given to him by the Shire, the level of demand and the extent to which Anglo Estates was meeting it, the prejudicial outcome should there be competitive lots and the likely losses that he would suffer should that competition eventuate. His solicitors advised that it would be prudent to ‘hint gently’ of the possibility of proceedings being instituted.
13 On 22 August 2002, Ross Williamson wrote to Hardy Bowen indicating that his father was inclined to get him to tell the Shire that if they went ahead with ‘their apparent intention to compete’ Anglo Estates would sue. Ross Williamson wanted to be ‘absolutely clear’ about the causes of action potentially available. He referred in his letter to the cause of action in misleading or deceptive conduct under s 52 of the Act and s 10 of the Fair Trading Act 1987 (WA). He also said:
‘Given that the Trade Practices Act is about promoting competition, not lessening it, is there a problem with the Shire’s representation being motivated by a desire not to compete with Anglo Estates (or indeed any private developer)?’
He asked whether Hardy Bowen had in mind any other causes of action.
14 On 28 August 2002, Hardy Bowen sent a letter to Ross Williamson. Mr Hardy reiterated that he had cautioned Kenneth Williamson against launching into litigation because of the lack of any real certainty as to the appropriate causes of action and the prospect of success. Subject to that caveat he referred to equitable estoppel on the basis of the oral representations made by the Shire. This was preferable to any claim in ‘contract’ or a statutory claim. He made no reference to the proposition, implied in Ross Williamson’s letter, that Anglo Estates might be trying to hold the Shire to an anti-competitive promise.
15 Kenneth Williamson said in his affidavit of 16 December 2004, that having read the letter from Mr Hardy he understood that pursuing any suggested legal remedies would not give rise to any issues under the Act as Hardy Bowen had not advised of any such problems. Thereafter the discussions he had with the Shire focussed on achieving what he regarded as a commercial resolution of the dispute. He said in his affidavit that he was ignorant of the fact that such negotiations were problematic under the Act. Had he known of such problems he would never have pursued the course of action that he subsequently followed and which has led to these proceedings.
16 Between June 2002 and February 2003, a series of meetings took place between representatives of Anglo Estates and the Shire of Esperance and correspondence was exchanged in relation to the Shire’s proposed development of the Flinders Estate. In a letter dated 11 September 2002 and sent to the Chief Executive Officer of the Shire, Ross Williamson referred to the representation said to have been made on behalf of the Shire in July 2000 that the Shire would not compete with private developers by bringing conventional residential lots onto the market provided the private developers satisfied local demand. In his letter Ross Williamson alleged that Anglo Estates had decided to proceed with the development of Le Grande Estate in reliance upon the representation and spent a substantial amount of money on the development. He claimed that if Anglo Estates were to institute proceedings against the Shire, it would obtain an injunction preventing the Shire from departing from the terms of the alleged representation. Action was also threatened under ss 46 and 52 of the Trade Practices Act and s 10 of the Fair Trading Act. The letter from Ross Williamson also said:
‘Therefore our advice to our client is that, unless the Shire gives a written undertaking confirming that it will not offer for sale any of the land in the Flinders Estate for less than, in 2002, $80,000 (and, in subsequent years, that sum as adjusted by the CPI) then it must apply to the Court for an injunction against the Shire.’
At a meeting with representatives of the Shire on 17 September 2002, the latter demand was reflected in a proposal, put by Kenneth and Ross Williamson, that the Shire set a floor price for the sale of its Flinders Estate lots with a CPI based formula to increase the floor price annually.
17 At a meeting held on 20 November 2002, the Williamsons again made statements to the effect that they wanted the Shire to set a floor price below which it would not sell its vacant residential lots in Flinders Estate. It is common ground that their conduct in this respect was engaged in on behalf of Anglo Estates and was conduct within the scope of their actual or apparent authorities as directors, servants or agents of Anglo Estates. It is also common ground that their conduct was deemed to be the conduct of Anglo Estates under s 84(2) of the Act.
18 An alternative proposal for deferment of development in the area on the part of the Shire was pursued by Kenneth Williamson. At the meeting of 17 September 2002 he made statements to Shire representatives to the effect that, if the Shire would not agree to a minimum price below which it would not sell its vacant residential lots in Flinders Estate, then Anglo Estates wanted an agreement with the Shire that it would not sell any lots in Flinders Estate for a period of ten years. At the meeting of 20 November 2002, Mr Williamson made statements to the effect that Anglo Estates wanted, and would provide, a proposal for the establishment of a demarcation line in Flinders Estate creating a portion of land in the Flinders Estate area in which the Shire would agree that it would not develop vacant residential lots for sale to the public before the end of 2010.
19 In a letter dated 25 November 2002, and addressed to the Chief Executive Officer of the Shire, Kenneth Williamson made the following submission:
‘Being a land owner and developer of nearby land we are vitally interested in this proposed land release and although there is a claim that the development will have minimal effect on the adjoining Le Grande development we submit that it is not interlay (sic) accurate. Appendix 4 identifies the land to be developed and we submit that the 10 most northern lots will have an adverse impact on the Le Grande development. Although the price of these lots may be slightly higher than those currently prevailing in Le Grande they will nevertheless be priced close enough to destabilize our normally potential purchasers.
We submit that the proposed lot release should terminate at the intersection of the proposed road as shown on the plan.’
20 In a further letter dated 5 December 2002, Mr Williamson proposed a revised demarcation line in Flinders Estate, attached a plan that showed the line marked on it and requested that the plan be distributed to a subcommittee of the Shire for their consideration. He sought a further meeting with representatives of the Shire to finalise the issue of the position of the demarcation line. In that letter he said:
‘In view of the redefined sewer catchment boundary this line has lost any significance in establishing a deferred development line which will afford us any level of comfront (sic). Accordingly we have redrawn a line that has regard to lot boundaries and one which would not have any adverse impact on the Shire’s stated development program of firstly developing the high value lots on the southern end of the estate. We request that you distribute this plan to the subcommittee for their consideration with the view of again meeting with us to finalizing the issue (sic).’
21 On 17 December 2002, the Shire resolved to authorise a subcommittee to continue negotiations with Anglo Estates concerning the possible creation of a deferred development area. It also resolved that any agreement with Anglo Estates was to be supported by a legal opinion that such an agreement would not be in contravention of the Act.
22 On 19 December 2002, Mr Archer wrote to Kenneth Williamson referring to the resolutions and said:
‘Also given that Anglo Estates Pty Ltd are proposing the deferred development zone, the legal aspect as to whether the arrangement is lawful needs to be considered, and your attention to gaining an opinion would be appreciated for this matter to go forward.’
23 In a letter dated 4 February 2003, Kenneth Williamson proposed a further meeting with the subcommittee of the Shire with a view to finalising the terms of an agreement regarding the deferred development area. In that letter Mr Williamson said:
‘Clearly we are both heading in the same direction and we like you are keen to have the matter resolved both amicably and expediently.’
He also said that he expected the legal opinion regarding the Trade Practices Act to be available shortly.
24 On 21 February 2003, Mr Williamson again wrote to the Chief Executive of the Shire attaching a copy of an opinion from Granich Partners. Granich Partners advised that an agreement between the Shire and Anglo Estates of the kind proposed by Anglo Estates would not be in breach of the Act. Their advice stated, inter alia:
‘For all of the abovementioned reasons we feel that the compromise agreement between Angelo (sic) Estates and the Shire of Esperance does not constitute a breach of the Trade Practices Act or any other law.’
At a meeting held on 25 February 2003, representatives of the Shire told Kenneth Williamson that they disagreed with a number of aspects of the legal opinion he had obtained. They said they were not prepared to accept its conclusions. The Shire and Mr Kenneth Williamson did not reach any agreement about the deferred development area at that meeting.
25 On 11 April 2003, Watts Woodhouse Solicitors wrote to the Shire attaching an opinion from senior counsel that the agreement proposed by Anglo Estates to resolve its dispute with the Shire would be in contravention of the Act.
26 In October 2003, Anglo Estates commenced proceedings in the Supreme Court of Western Australia against the Shire and against Mr Archer. It claimed damages for negligent misrepresentation and misleading or deceptive conduct in trade or commerce arising out of the oral representations said to have been made to Anglo Estates by Mr Archer on behalf of the Shire on or about 5 July 2000. It seems that the proceedings were initially commenced by way of originating summons, which was replaced by a writ of summons on 18 November 2003. The action was dismissed by consent in the Supreme Court on 11 August 2004.
27 On 24 March 2004, the ACCC instituted the present proceedings against Anglo Estates and Messrs Kenneth and Ross Williamson. Following discussions between officers of the ACCC and the respondents, an agreement was reached that the respondents would consent to declarations that they had attempted to contravene s 45 of the Act, injunctions restraining them from repetition of like conduct for a period of three years and a compliance program for Anglo Estates. On the question of penalty the Williamsons say they should be excused from liability for any penalty pursuant to s 85(6) of the Act on the basis that they acted honestly and reasonably.
28 The questions for determination by the Court are as follows:
1. Whether the proposed agreed orders are within power and appropriate.
2. Whether any, and if so what, penalty should be imposed on Anglo Estates.
3. Whether either or both of Kenneth and Ross Williamson ought to be excused from liability for penalty by operation of s 85(6) of the Act.
4. If either or both of the Williamsons ought not to be excused from liability for any penalty, what penalty should be imposed on him?
The
factual circumstances already outlined reflect the agreed statement of facts
filed in Court, supplemented by references to an
agreed bundle of documents and
non-contentious aspects of an affidavit sworn by Mr Kenneth Williamson on 16
December 2004.
Statutory Framework
29 Section 45(2) of the Act provides, inter alia:
‘A corporation shall not:
(a) make a contract or arrangement, or arrive at an understanding, if:
(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or
(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition...’
30 Section 45(2)(a)(ii) is to be read with s 45A(1) which provides:
‘Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.’
31 Section 45(2)(a)(i) is to be read with s 4D which provides, inter alia:
‘A provision of a contract, arrangement or 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 2 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 classes of persons; or
(ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of 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.’
32 Section 76 provides for penalties and accessorial liability as follows:
‘If the Court is satisfied that a person:
(a) has contravened any of the following provisions:
(i) a provision of Part IV:
(ii) section 75AU or 74AYA;
(b) has attempted to contravene such a provision;
...
the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.
(1A) The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed:
(a) for each act or omission to which this section applies that relates to section 45D, 45DB, 45E or 45EA - $750,000; and
(b) for each other act or omission to which this section applies - $10,000,000.
(1B) The pecuniary penalty payable under subsection (1) by a person other than a body corporate is not to exceed $500,000 for each act or omission to which this section applies.’
33 In relation to injunctive relief, s 80 of the Act provides, inter alia:
‘(1) Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:
(a) a contravention of any of the following provisions:
(i) a provision of Part IV, IVA, IVB, V or VC;
(ii) section 75AU or 75AYA;
(b) attempting to contravene such a provision;
...
the Court may grant an injunction in such terms as the Court deems to be appropriate.
...
(4) The power of the Court to grant an injunction restraining any person from engaging in conduct may be exercised:
(a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;
(b) whether or not the person has previously engaged in conduct of that kind; and
(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.’
34 Section 85 sets out defences to prosecutions for contraventions of various Parts of the Act. Section 85(6) provides:
‘Where, in any proceedings under this Part against a person other than a body corporate, it appears to the Court that the person has or may have engaged in conduct in contravention of a provision of Part IV or in conduct referred to in paragraph 76(1)(b), (c), (d), (e) or (f) but that the person acted honestly and reasonably and, having regard to all the circumstances of the case, ought fairly to be excused, the Court may relieve the person either wholly or partly from liability to any penalty or damages on such terms as the Court thinks fit.’
35 Section 86C provides for non-punitive orders including probation orders:
‘(1) The Court may, on application by the Commission, make one or more of the orders mentioned in subsection (2) in relation to a person who has engaged in contravening conduct.
(2) The orders that the Court may make in relation to the person are:
...
(b) a probation order for a period of no longer than 3 years; ...’
Section 86C(4) defines a number of terms including ‘probation order’. That term is defined as follows:
‘probation order, in relation to a person who has engaged in contravening conduct, means an order that is made by the Court for the purpose of ensuring that the person does not engage in the contravening conduct, similar conduct or related conduct during the period of the order, and includes:
(a) an order directing the person to establish a compliance program for employees or other persons involved in the person’s business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and
(b) an order directing the person to establish an education and training program for employees or other persons involved in the person’s business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and
(c) an order directing the person to revise the internal operations of the person’s business which lead to the person engaging in the contravening conduct.’
The Proposed Consent Orders
36 The ACCC and the respondents have agreed upon declarations and injunctions to which both parties are prepared to consent.
37 The declarations sought against Anglo Estates relate to the minimum price proposal of 11 September 2002 and the deferred development proposal advanced between 17 September 2002 and 21 February 2003. The first proposal is said to have been an attempt to contravene s 45(2)(a)(ii) and the second an attempt to contravene s 45(2)(a)(i) of the Act.
38 The declarations against Kenneth Williamson relate to the same attempts by him to induce the Shire to contravene those provisions by way of the minimum price and deferred development proposals.
39 A declaration is sought against Ross Williamson in respect of the minimum pricing proposal only.
40 The injunctions sought broadly relate to the classes of conduct identified in the declarations. They are each for a period of three years.
41 As the parties have pointed out in their joint submissions, the Court will make orders by consent if they are within the power of the Court and are appropriate. This reflects the public nature of the Court’s function in making orders even if they are proposed on the basis of an agreement. However the criterion of appropriateness does not involve the Court in merely substituting its own view of what is appropriate for that of the parties. The Court will not impede settlements reached between parties legally represented and able to give informed consent to the orders proposed – Australian Competition and Consumer Commission v Real Estate Institute (WA) Inc [1999] FCA 1387; (1999) 95 FCR 114 at 131.
42 The minimum price proposal is said in the ACCC’s statement of claim to have had the purpose or likely effect of substantially lessening competition for the supply of vacant residential lots in the Esperance Area by reason of s 45A of the Act and of the Competition Code. That is to say, being a proposed price fixing arrangement, it was deemed to be of that character. It was illegal per se.
43 The attempted deferred development proposal is said to be a proposed arrangement or understanding containing an exclusionary provision within the meaning of s 45(2)(a)(i) and s 4D of the Act and the Code. It is described in the statement of claim as a provision which:
‘41.1 had the purpose of, or purposes that included the substantial purpose of, preventing, restricting or limiting the supply by way of sale by the Shire of vacant residential land to a particular class of persons, namely persons who were potential purchasers of vacant residential land in the Esperance Area.’
44 The conduct which is the subject of the proposed declarations appears to be properly identified and described by reference to the evidence from the agreed statement of facts and the agreed documents. In my opinion the declarations and the injunctions sought are within power and appropriate and should be made.
45 It is also proposed that the Court order Anglo Estates to ‘implement a Trade Practices Compliance Program in such terms as the Court thinks appropriate’. The compliance program order proposed by the ACCC is set out in more detail in a minute filed on 14 December 2004.
46 Section 86C of the Act provides for mandatory compliance programs under the general heading of ‘Probation Orders’. The definition of ‘probation order’ in s 86C makes clear that in so far as it relates to compliance programs it is directed to ensure a company-wide awareness of responsibilities and obligations in relation to the contravening conduct or similar or related conduct. Such orders are not, in my opinion, appropriate or intended for a small family company of the kind involved with this case where the company is essentially the alter ego of the persons who are responsible for its contravening conduct.
47 I have no doubt that both Kenneth and Ross Williamson have had a recent significant intensive and painful education in the scope of the prohibitions against price fixing and exclusionary arrangements. There is no point in requiring them to establish now a compliance program for themselves. Kenneth Williamson’s career as a property developer appears to be over having regard to his present circumstances and in particular that he is suffering an ongoing and serious illness. His son practices as a criminal lawyer. His involvement in this case was ancillary to his father’s activities and not indicative of any ongoing involvement in areas likely to expose him to the provisions of Pt IV of the Act. I decline to make any order for a compliance program.
Pecuniary Penalties
48 Before turning to any, and if so what, penalties should be imposed in this case it is necessary to have regard to evidence about the circumstances of Anglo Estates and the Williamsons.
49 Anglo Estates was the vehicle for the small family property development business operated by Kenneth Williamson. According to figures set out in his affidavit and balance sheets and trading profit and loss accounts exhibited to the affidavit, the Kenneth Williamson Family Trust operated by the company had net assets of minus $154,344 as at 30 June 2003. The associated Anglo Trust had net assets of minus $555,778. The figures for 30 June 2004 are not expected to be significantly different.
50 Over the period from 30 June 2000 to 30 April 2004 the two Trusts had made a net loss of approximately $70,000 annually. On the other hand it may be noted that the total income of the Kenneth Williamson Family Trust for the year ended 30 June 2001 was $357,548, for the year ended 30 June 2002 $945,136 and for the year ended 30 June 2003 $1,031,903. For the period 1 July 2003 to April 2004 it was $301,509. Whatever the net performance of the business it was not insubstantial in its local context.
51 Kenneth Williamson is now 74 years of age. He lives alone having separated some seven years ago from his 77 year old wife. He suffers from multiple myeloma diagnosed as aggressive and terminal. He has undergone intensive chemotherapy and stem cell transplant and has suffered from severe and debilitating pain because of his condition. He owns no real estate, shares or securities. His only possessions are of a personal nature of a total value of less than $10,000. He does not receive any pension but relies on distributions from the Trusts. The evidence is not clear about the continuing availability of such distributions. I am prepared to infer however that Kenneth Williamson’s income is modest.
52 In my opinion, the imposition of a penalty on the company is appropriate. The conduct of the company, although small in scale, was calculated to have a significant impact on the pricing of vacant residential lots in Esperance. It was calculated to require consumers to pay more than they might have had to pay in a market in which both the Shire and the company were competing. That much having been said, I am prepared to infer from the conduct of Kenneth Williamson that in all probability he would not have proceeded with the development of Le Grande Estate had he known that the Shire intended to release vacant residential lots in the Flinders Estate. It is reasonable to suppose, having regard to his commercially informed reaction, that his development at best would have been a low profit exercise if the Shire were to release its land onto the market.
53 The company’s proposals to the Shire made through Mr Williamson and his son were made, I am satisfied, in the honest belief that they were within the law. That is not to say that the company is entitled to a discount for its ignorance of the law – Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193; (2003) 131 FCR 529 at 598 [309] – [310]. It is clear, however, that the company’s proposals were not made in deliberate defiance of, or reckless disregard, for the provisions of the Act. The company is a small business operation. The proposals it put to the Shire were maintained over a relatively short period of five months and were never implemented. Nobody suffered loss by them, nor did the company make any gain from the proposals. The company and its directors, properly advised, have accepted that what they did was in contravention of the Act and have cooperated in admitting the contraventions and consenting to orders proposed by the ACCC. There is no prospect that the contraventions will be repeated. Any penalty imposed on the company will impact directly upon the Williamsons and, in particular, it would seem upon Kenneth Williamson as it will reduce the amount (if any) available for distribution from the Kenneth Williamson Family Trust. While it seems likely that had either the minimum price or deferred development proposals been accepted there would have been some adverse impact on the prices of vacant land to purchasers of land in the Esperance area, it is nevertheless the case that most of the factors relevant to penalty in this case indicate that a modest penalty is appropriate.
54 The ACCC has proposed a penalty of $145,000. In my opinion that is out of proportion with the circumstances of the case. The penalty which I will impose on the company is $7,500 in respect of each contravention, a total of $15,000.
The Section 85(6) Defence
55 Kenneth and Ross Williamson both invoke s 85(6) in support of the proposition that they should be relieved from liability to any penalty.
56 The construction and application of s 85(6) has not been the subject of judicial exegesis. Nor have counsel been able to refer the Court to any extrinsic materials which might throw light upon its construction.
57 The subsection is available only to ‘a person other than a body corporate’. It applies ‘[w]here ... it appears to the Court that the person has or may have engaged in conduct in contravention of a provision of Part IV or in conduct referred to in paragraph 76(1)(b), (c), (d), (e) or (f)...’. There is no express statement of the operation of the subsection in the case where no more appears to the Court than that a person may have engaged in contravening conduct. Counsel for the ACCC suggested that that limb of the subsection may allow a court, at any point during a proceeding and before the proceeding is concluded, to make a determination that an alleged contravenor will be relieved from liability to any penalty or damages. The resolution of that constructional question does not arise in the present case and it is not necessary to express any concluded view on it.
58 The section does not operate as a defence to an allegation of a contravention. It is in terms a discretionary power to dispense with or relieve a contravening party from all or part of a penalty or damages where the person who engaged in the contravention acted ‘honestly and reasonably’. The exercise of the dispensing discretion requires that regard be had to ‘all the circumstances of the case’. The subsection also requires that, before a person is relieved in whole or in part from a penalty or award of damages, the Court must be of the view that the person ‘ought fairly to be excused’. The use of the word ‘fairly’ imports a notion of ‘fairness’ or equity and may require regard to be had to the interests of other parties particularly where a damages award is in issue. No more precise basis upon which an order might be made relieving a person in whole or in part from liability for damages is expressed. In Heydon, Trade Practices Law (Law Book Company) Vol 2 at 18.219, it is observed that:
‘In respect of damages, the discretion is novel and prompts the question: why should the honesty and reasonableness of the defendant deprive the injured plaintiff of its compensation?’
It may be that an occasion for an exercise of the discretion in relation to damages could arise where the injured party is somehow involved in the contravention or has contributed in some way to its own loss. Such matters might be ‘circumstances of the case’ to which a court could have regard under the subsection. But that is not this case and the application of the subsection to damages awards does not seem to offer any assistance in considering its application to pecuniary penalties.
59 The question arises whether the dispensing power conferred by subs 85(6) is available in the case in which a person has acted in ignorance of the law. Ordinarily, ignorance of the law will not result in mitigation of penalty – Universal Music at [308] – [310]. However the language of the subsection does not preclude its application to a natural person who has, although acting in contravention of the Act, acted honestly and reasonably in the belief that he or she was not acting in contravention of the law. A person who has taken legal advice in a genuine effort to ensure that his or her conduct was within the law may be found to have acted reasonably if acting upon that advice. I say ‘may be found’ for in some circumstances a person may be conscious of the risk of contravention and take legal advice as a matter of risk assessment rather than to ensure compliance with the law. A person who engages in contravening conduct in the face of legal advice that there is a ‘risk’ or a ‘possibility’ that the conduct might be found to contravene is unlikely to be found to have acted ‘reasonably’ for the purposes of s 85(6). Game playing in the shadow of the law is not to be rewarded by penalty discounts for the losers.
60 It is also important to bear in mind the public policy considerations which preclude reliance upon mistake of law as a criminal defence albeit these are not criminal proceedings – see Ostrowski v Palmer [2004] HCA 30; (2004) 206 ALR 422 at 423 – [2] (Gleeson CJ and Kirby J). To paraphrase the words of Scott LJ in Blackpool Corporation v Locker [1948] 1 KB 349 at 361, approved by their Honours in Ostrowski, the rule that ignorance of the law is no excuse is the working hypothesis on which the rule of law rests in Australian democracy. The rule is not qualified or mitigated in the case in which a person has acted in good faith on erroneous advice – see Ostrowski at 436 – [54] (McHugh J). On the other hand, as Gleeson CJ and Kirby J said at 423 – [2]:
‘Ignorance of the legal consequences that flow from the existence of the facts that constitute an offence is ordinarily not a matter of exculpation, although it may be a matter of mitigation, and in some circumstances it may enliven a discretion not to prosecute. (emphasis added)
The language of s 85(6) is wide enough to accommodate a case in which a party has acted under an honest but mistaken belief about the law and has acted reasonably under that mistaken belief. To accept that application of the subsection does not undercut the rule that ignorance of the law is no excuse for the section does not excuse from liability for contravention. It relates only to whether a person may be relieved from the application of a penalty or damages in whole or in part. It is a broad discretion not to be confined by a rule which has been developed in a different context although the public policy underpinning that rule is a relevant consideration.
61 Section 85(6) was introduced into the Act in 1977 following the report of the Trade Practices Act Review Committee in August 1976 (the Swanston Committee). Unfortunately that report, while referring at pars 9.142 – 9.145 to other changes to s 85, did not refer to the change which was introduced by s 85(6).
62 The dispensing or excusing power conferred by s 85(6) differs in character from the discretion to take into account mitigating factors in imposing a penalty under s 76. Section 85(6) allows the Court to determine that no penalty should be imposed notwithstanding that absent the subsection, some penalty would have to be imposed under s 76. It allows for a partial remission of a penalty that would otherwise be imposed under s 76. It may be that some of the circumstances relevant to mitigation of penalty under s 76 are also relevant to the exercise of the dispensing discretion. That does not assimilate the two processes for determining penalty and relieving from the imposition of a penalty in whole or in part.
63 In the present case, I am of the opinion that Kenneth Williamson honestly believed that he had been wronged by the Shire and that his proposals, put to the Shire, were a reasonable and lawful means for remedying that wrong. He was obviously reliant for legal advice upon his son and such advice as his son obtained in communication with other legal practitioners.
64 Ross Williamson apprehended a possible difficulty with the proposal that the Shire should adhere to its alleged promise not to develop the Flinders Estate in competition with private developers. He referred, in this context, to the Trade Practices Act as an Act ‘promoting competition’ in his letter of 22 August 2002 to Hardy Bowen. Nothing in their response addressed that question, albeit it was not clearly formulated. The advice from Granich Partners in February 2003 was muddled. However the bottom line was clear enough and that was that ‘... the compromise agreement between Angelo (sic) Estates and the Shire of Esperance does not constitute a breach of the Trade Practices Act or any other law’. The inadequacies of the advice would not have been evident to Kenneth Williamson. They should have been evident to his son, or at least have raised a question in his mind about the reliability of the advice.
65 I am of the opinion that the dispensing power under s 85(6) can and should be exercised in favour of Kenneth Williamson who acted honestly and reasonably having regard to what he had been told, albeit he acted in ignorance of the law. He received no advice or warning that what he was proposing was against the law although the Shire raised its concerns at the latter stage of the negotiating process. I have regard to the circumstances that the penalty imposed on the company will impact on him personally and that he is a person of advanced age suffering from a serious cancer and has limited income. I do not propose therefore to impose any penalty on him.
66 I cannot be so lenient with Ross Williamson. It seems to me, on the facts of this case, that he had a sense that there might be a problem with the proposals put to the Shire. He could not reasonably have been reassured by the letter from Hardy Bowen as they did not address his concern. Being a legal practitioner he was in a position to exercise some critical judgment about the reasoning offered by Granich Partners in their advice. In my opinion, while I do not doubt that he acted honestly, I do not think he acted reasonably.
67 Mr Ross Williamson is a director of Anglo Estates. He is a legal practitioner who, it is said, practices almost exclusively in the area of criminal law. He was not ordinarily involved in the day-to-day management of the company although it is plain that he had been involved in communication with the Shire. He has not contravened the Act previously nor is he likely to contravene it again. His involvement was essentially a family involvement. He made no gain from the contravening conduct in which he engaged. In the circumstances I consider that a penalty of $5,000 is appropriate to be paid by him in respect of his contravention of the Act.
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I certify that the preceding sixty-seven (67) numbered paragraphs are a
true copy of the Reasons for Judgment herein of the Honourable
Justice
French.
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Associate:
Dated: 21 January 2005
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Counsel for the Applicant:
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Mr NW McKerracher QC and Mr NE Gvozdin
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Solicitor for the Applicant:
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Australian Government Solicitor
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Counsel for the Respondent:
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Mr PC Doherty
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Solicitor for the Respondent:
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Minter Ellison
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Date of Hearing:
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20 December 2004
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Date of Judgment:
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21 January 2005
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