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Federal Court of Australia - Full Court Decisions |
Last Updated: 5 August 2003
Jones v Australian Competition and Consumer Commission [2003] FCAFC 164
TRADE PRACTICES - authorisation under s 88 of the Trade Practices Act 1974 - authorisation sought by x for y to act as contemplated by pars 88(1)(a) and (b) - not authorised by s 88.
Trade Practices Act 1974 (Cth) Part IV, ss 45, 88, 90
Broiler Chicken Industry Act 1978 (Vic)
Broiler Chicken Regulations 1992 (Vic)
Re John Dee (Export) Pty Limited (1989) 87 ALR 321 referred to
Re Applications by Australian Performing Rights Association (1999) ATPR 41-701 referred to
ACCC v SIP Australia Pty Limited [2002] FCA 824 referred to
South Sydney District Rugby League Football Club Ltd v News Ltd [1999] FCA 1710; (1999) 169 ALR 120; (2000) 177 ALR 611; (2001) 111 FCR 456 referred to
ACCC v Visy Paper Pty Limited [2000] FCA 1640; (2000) 186 ALR 731 referred to
ACCC v Visy Paper Pty Limited [2001] FCA 1075; (2001) 112 FCR 37 referred to
Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597 referred to
Plaintiff S157/2002 v Commonwealth of Australia [2003] HCA 2; (2003) 195 ALR 24 referred to
CHRISTOPHER JAMES JONES v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION AND ANOR
V 598 of 2002
WILCOX, COOPER & ALLSOP JJ
5 AUGUST 2003
SYDNEY (Heard in Melbourne)
IN THE FEDERAL COURT OF AUSTRALIA |
|
NEW SOUTH WALES DISTRICT REGISTRY |
V 598 of 2002 |
1. The appeal be allowed.
2. The orders of the Court made on 27 August 2002 be set aside.
3. In lieu of the orders made on 27 August 2002:
(a) the determination made on 28 June 2001 on the application A90750 be set aside as and from a day 30 days after the date of the making of these orders; and
(b) the costs of the proceedings below be reserved for further argument.
4. The first respondent pay the appellant's costs of the appeal.
5. Within seven (7) days the parties file written submissions as to the proper order for costs in respect of the proceedings below.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
|
NEW SOUTH WALES DISTRICT REGISTRY |
V 598 of 2002 |
JUDGES: |
WILCOX, COOPER & ALLSOP JJ |
DATE: |
5 AUGUST 2003 |
PLACE: |
SYDNEY (Heard in Melbourne) |
THE COURT:
1 The appellant appeals from orders of a Judge of this Court dismissing, with costs, his application for judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) in which he challenged the validity of an authorisation granted by the first respondent (the ACCC) under s 88 of the Trade Practices Act 1974 (Cth) (the Act) and the Competition Code.
2 The appellant submitted that there was no statutory foundation under subs 88(1) of the Act for the ACCC to grant the authorisation that was in fact granted. Whether or not some other, similar or equivalent, authorisation could have been granted was discussed in argument. The appellant's only point on appeal was that whatever else might have been done, that which was done was not authorised by the Act, when one had regard to the terms of the application, the authorisation and subs 88(1). In substance, we agree with that submission.
3 A little background is necessary. In Australia, the domestic chicken meat industry produces approximately $2bn of chicken meat annually (calculated by reference to retail sales). Victoria accounts for approximately 27% of the total production of chicken meat. The Victorian market is supplied by six processing companies: A & G Marven Pty Limited (Marven) and five other companies. Marven, for itself and on behalf of the other five processors, was the applicant for the authorisation under s 88. Marven was the second respondent to the application for judicial review and to the appeal. Marven did not appear below, or on the appeal.
4 Most of the chickens grown are supplied by the processors to contracted "growers" in the form of day old hatchlings. These growers then raise the chickens from hatchlings to the broiler stage. This growth takes seven to eight weeks. The broilers are then redelivered to the respective processors for slaughter and processing. At the relevant time, the six Victorian processors had over 200 grower contract farms.
5 The appellant is a chicken grower. He is the President of the Victorian Farmers Federation Chicken Meat Group (VFFCMG), which is a group of chicken growers.
6 The industry in Victoria has hitherto been regulated by the Broiler Chicken Industry Act 1978 (Vic) and the Broiler Chicken Regulations 1992 (Vic). Under this legislation, the relevant department of the Victorian government established a regulatory body called the Victorian Broiler Industry Negotiation Committee which comprised four processor representatives, four grower representatives, two independent members and an independent Chairperson. The powers of this committee included the powers to set a standard fee for the growing of broiler chickens and to recommend the terms and conditions of contracts between processors and growers. The practice of the committee in the setting of the standard growing fee was for the grower and processor representatives to confer separately, as groups, and bring forward their respective suggested fees, from which the three independent members would then set the fee.
7 In the late 1990s, this system came under review as part of the National Competition Policy Review. A study was commissioned which threw into doubt the lawfulness of this arrangement in the light of Part IV of the Act and the possible lack of specific authorisation under par 51(1)(b) of the Act, and the apparent lack of Crown immunity otherwise.
8 The concerns raised included the possible application of s 45 of the Act to growers who combine to engage in collective bargaining with the processors. A similar concern would also, of course, arise if processors were to combine in order to engage in collective bargaining. The former was the more pressing circumstance because, although some growers may be sufficiently proximate to more than one processor to supply more than one processor, generally, growers cluster proximately around a processor, thereby minimising transportation costs and hatchling loss. So, each processor tends to have its own growers clustered around it, which growers, generally, only grow that processor's chickens.
9 The authorisation sought was directed to the question of collective bargaining by the growers. One might have thought that the growers themselves would be the applicants for authorisation. They were not. Marven, for itself and on behalf of the other five processors, was the applicant. The growers, in particular through the VFFCMG, opposed the authorisation. It is unnecessary to understand the economics, or politics, of the taking of these positions.
10 We will turn shortly to the terms of the authorisation and application. The language of those documents is important. Before that is done, it is necessary to note some important features of the relevant provision of the Act. Subsection 88(1) provides, amongst other things, as follows:
(1) Subject to this Part, the Commission may, upon application by or on behalf of a corporation, grant an authorization to the corporation:(a) to make a contract or arrangement, or arrive at an understanding, where a provision of the proposed contract, arrangement or understanding would be, or might be, an exclusionary provision or would have the purpose, or would have or might have the effect, of substantially lessening competition within the meaning of section 45; or
(b) to give effect to a provision of a contract, arrangement or understanding where the provision is, or may be, an exclusionary provision or has the purpose, or has or may have the effect, of substantially lessening competition within the meaning of section 45;
...
[emphasis added]
11 This part of s 88 provides the statutory foundation for the ACCC to grant an authorisation. Absent circumstances contemplated by this part of subs 88(1), the ACCC has no power to grant an authorisation. The balance of subs 88(1) (pars (c), (d) and (e)) identifies the protections granted "while such an authorisation remains in force".
12 The introductory words of subs 88(1) are important: the ACCC may, upon application by or on behalf of a corporation (or a person, under the Competition Code) grant an authorisation to the corporation (or to the person) to make a contract or arrangement or arrive at an understanding or to give effect to a provision of a contract, arrangement or understanding, as respectively dealt with in pars 88(1)(a) and (b).
13 Here, therefore, the application being one made by Marven, for itself and on behalf of the other five processors, could, as a matter of the linguistic structure of sub 88(1), be either or both:
a) an application by Marven, for itself and on behalf of the processors for the grant of an authorisation to the processors to make a contract etc or to arrive at an understanding etc; and/or
b) an application, though made by Marven, for itself and on behalf of the processors, but also on behalf of the growers for the grant of an authorisation to the growers to make a contract etc or to arrive at an understanding etc.
The language of subs 88(1) does not empower the ACCC to grant an authorisation to X applied for by Y, unless Y made the application on behalf of X. Thus, insofar as the application was by Marven for itself and on behalf of the other processors, no authorisation could be granted to the growers to do anything, unless it was an application made on their behalf. Though, of course, if an authorisation were to be granted to the processors to do certain things contemplated by pars 88(1)(a) and (b), the growers might have the statutory benefit of subs 88(6), which is in the following terms:
(6) An authorization granted by the Commission to a person under any of the preceding provisions of this section to:(a) make a contract or arrangement or arrive at an understanding;
(b) give effect to a provision of a contract, arrangement or understanding;
(c) require the giving of, or give, a covenant; or
(d) enforce the terms of a covenant;
has effect as if it were also an authorization in the same terms to every other person named or referred to in the application for the authorization as a party to the contract, arrangement or understanding or as a proposed party to the proposed contract, arrangement or understanding, or as a person who is or would be bound by, or entitled to the benefit of, the covenant or the proposed covenant, as the case may be.
14 In the present circumstances, before the terms of the authorisation and application are examined, it is important to note that the ACCC viewed the application as one by Marven not only for itself and processors, but also on behalf of the current and future contract growers to the processors. The primary judge found that the ACCC erred in treating the application as made on behalf of any growers. Not only was it not consented to by the growers, but also it was actively opposed by them. There was no argument under the notice of contention or otherwise on appeal to challenge that conclusion of the primary judge. The importance of this will become apparent in due course.
15 Thus, the appeal proceeded on the basis that the application for authorisation was one made by Marven, for itself and on behalf of the other five processors. Indeed, that is how the application (Form B) was filled out by Marven.
the authorisation granted
16 The terms of the authorisation granted were contained in a determination in writing contemplated by the terms of s 90. The immediate terms of the grant of authorisation were found in section 10 of the determination, and were as follows:
10.1 For the reasons outlined in section 9 of this determination, the Commission concludes that, subject to the conditions set out below, in all the circumstance, the arrangements for which authorisation is sought:* are likely to result in a benefit to the public; and
* that benefit would outweigh the detriment to the public constituted by any lessening of competition that would be likely to result from the arrangements.
10.2 The Commission therefore grants authorisation under section 88 of the TPA and the Competition Code, to application A90750, as amended on 20 November 2000, 4 April 2001, and 12 April 2001. This authorisation is subject to any application to the Australian Competition Tribunal for its review. Authorisation is granted subject to the following conditions.
[emphasis added]
Thereafter followed the terms of nine conditions subject to which the authorisation was granted. It is unnecessary, at this point, to refer to those conditions.
17 Clause 10.3 of the determination referred to a "Code of Conduct" which it was to be necessary to follow to obtain the benefits of authorisation in the following terms:
10.3 This authorisation is only in respect of those arrangements which are carried out in accordance with the Code of Conduct. Where a party has failed to comply with all clauses of the Code of Conduct any contract resulting from these negotiations is not protected by authorisation.
We will refer to the Code in due course.
18 The terms of the determination which granted the authorisation picked up and adopted that which had been applied for: see clauses 10.1 and 10.2 at [16] above. Thus, to understand what it was that was authorised by the ACCC in its determination, one needs to refer to the application itself. This is not to be seen as a restriction on the ACCC's powers under ss 88 and 90 by reference to the terms of the application (cf Re John Dee (Export) Pty Limited (1989) 87 ALR 321, 340-41). Rather, the terms of the determination can be seen to grant authorisation for that which was applied for. The language of the application is thus important.
the application
19 The application was entitled as follows:
APPLICATION TO ACCC FOR AUTHORIZATION
FOR CHICKEN GROWERS
TO ENGAGE IN
COLLECTIVE BARGAINING
WITH
THEIR PROCESSOR
By
VICTORIAN CHICKEN MEAT
PROCESSORS
20 By way of expressed background, the application referred to the doubts about the current regime under State legislation; it then described the "concerns of interested parties" in the following terms:
Growers are concerned about a perceived imbalance of bargaining power between themselves and Processors if the Act were repealed and the Industry deregulated completely.The Minister is concerned about a perceived imbalance of bargaining power. He has requested a Code of Conduct which includes minimum contract standards and dispute resolution procedures to ensure that any imbalance in bargaining power is addressed.
The Processors recognize the Grower concerns and also have reservations about the practicality of individually negotiating contract terms and conditions with each Grower. The Processors believe that if Growers were able to collectively negotiate, if they elected to do so, with their respective Processor, Grower interests would be safeguarded and a practical, cost effective system which is superior to the current system could be implemented.
A solution to these problems was then outlined, under the heading "Processor-Grower group Negotiations", in the following terms:
Negotiations by Growers on a collective basis with each of their respective Processors would allow more relevant contracts to be developed than under the current system. These contracts would better reflect the situation facing each Processor and its Grower group, allow greater flexibility in rewarding superior performance, lead to an improved allocation of resources and result in stronger economic outcomes for both parties.The cost of negotiations would be reduced in comparison to negotiating individually with each Grower. Individual Growers however will retain the right to opt out of collective negotiations and to negotiate specific contacts with Processors.
Authorization by the ACCC to permit Growers to negotiate collectively contract terms and conditions, if they elect to do so (Participating Growers), with their respective Processor offers a practical and effective way of satisfying the interests of all parties.
[emphasis added]
21 It is clear at this stage that the authorisation sought was directed to permitting the growers to engage in collective bargaining. This introduction to the application concluded by referring to the Code of Conduct which had already been agreed amongst the processors. This Code of Conduct was said to safeguard the growers' interests. The application stated as follows:
Growers' interests may be further safeguarded by including the Code of Conduct agreed by all Processors as part of the Authorization. The Code sets out the process for Participating Growers to appoint from among themselves, Growers who with the Processor representatives will form a Processor Negotiation Group. This Group will negotiate the Collective Agreement. There may be more than one Processor Negotiation Group (if the Processor agrees), so that more than one Collective Agreement may be in place with a Processor to better reflect any varied conditions among Growers associated with that Processor.The Code also contains conditions and dispute resolution procedures which will be included in contracts, a further safeguard to Growers.
Authorization for the conduct of collective negotiations has been provided in South Australia and Tasmania by the ACCC and the arrangements are working satisfactorily.
22 The application then identified the parties to it: Marven, for itself and on behalf of the other five processors. The purpose of the application was also stated at this point:
...so that Contract Growers (either current or future) who elect to negotiate collectively may form Processor Negotiating Groups (PNGs) from among Growers contracted to each Processor to undertake negotiations with their respective Processor.
23 Under the heading "Authorisation Requested" the terms of that which was sought were set out as follows:
Application is made under subsection 88(1) of the Trade Practices Act 1974 for authorization to make or give effect to a contract arrangement or understanding that has the purpose or effect of substantially lessening competition within the meaning of section 45 of the TPA.Specifically authorization is sought to permit the contract Growers of each Processor to collectively negotiate a standard growing agreement or agreements and matters arising therefrom with their respective Processor including the agreement of a common fee or fees.
Authorization is also sought to enable Growers to appoint representatives from among Participating Growers within their Processor Group to enter into negotiations with the Processor on a standard growing agreement or agreements and matters arising therefrom.
The negotiations, minimum contract standards and dispute resolution procedures will be conducted under a Code of Conduct which is agreed by all Processors party to this application or by future Processors who agree to the said Code.
The Code of Conduct is attached to and forms part of the collective negotiation process for which Authorization is sought.
24 At this point, as a matter of language, the application appears to be seeking the grant of an authorisation to the growers to do the things mentioned in the paragraphs under the heading "Authorisation Requested" at [23] above.
25 Attached to the application was the outline of the proposed Code of Conduct. Under the heading "Code For Grower Collective Agreements" the following explanation of the Code of Conduct was given:
The Code of Conduct for the Victorian Chicken Meat Industry sets out guidelines to be followed when an ACCC Authorized Collective Agreement is being developed. The rights and restrictions which apply to growers who elect to negotiate individually with a Processor are also set out.The Code of Conduct consists of guidelines and contains minimum standards which are to form part of the collectively agreed Growing Contract. The detail which is agreed by the parties will be set out in each Growing Contract negotiated. The Growing Contracts may contain other or differing actions and procedures which have been agreed by both parties.
Growers who elect to negotiate collectively with their individual Processor under ACCC Authorization will be known as Participating Growers (PGs). The PGs will need to appoint from among themselves, growers who with Processor representatives will form a Processor Negotiation Group (PNG) to negotiate the Collective Agreement.
26 The extent of the guidelines was identified as follows:
The guidelines cover:* Formation, functions, composition, appointment of representatives and meetings of the PNG;
* How matters agreed or not agreed by the PNG are to be dealt with including matters related to individual growers;
* Dispute/mediation mechanisms;
* Rights of Non-Participating Growers (NPGs) and
* Standards to be included in Collective Contracts.
27 There were then set out matters concerning each of these elements of the guidelines. Whilst the Code did not determine the precise content of each contract (each was to be the subject of future negotiation) it did set down what all "Growing Contracts" would provide for: term - commencement and expiry, a statement of what was to be provided by, and the responsibility of, the grower and the processor, terms of payment, guidelines for measuring efficiency, dealing with government compensation moneys, dispute resolution procedures, force majeure, assignment, termination and default.
28 In discussing the application in the determination, the ACCC said the following:
5. The Application5.1 In contrast to previous authorisations in this industry the Applicant on this occasion is not seeking authorisation for a specific growing agreement between a processor and growers. Rather, authorisation is sought for arrangements which would enable groups of growers to collectively negotiate and give effect to growing agreements with individual processors, in accordance with minimum terms and conditions set out in a Code of Conduct. A copy of the Code is attached.
5.2 In particular, authorisation is sought to permit the contract growers of each processor to collectively negotiate and give effect to a standard growing agreement or agreements and matters arising therefrom with their respective processors, including the agreement of a common fee or fees.
5.3 Authorisation is also sought to enable growers to appoint representatives from among their collective groups to enter into negotiations with their processor on the standard growing agreement or agreements and matters arising therefrom.
5.4 In addition to authorisation to negotiate and give effect to collective growing agreements, authorisation is sought for an industry Code of Conduct that would govern the negotiation of individual contracts between a processor and collective groups of growers.
29 This was an accurate distillation of the nature of the application, as, at least principally, one concerned with the conduct of growers.
30 Immediately thereafter, in clause 5.5, the ACCC described the application as made by Marven for itself and on behalf of the other five processors and on behalf of current and future contract growers to those processors, as follows:
5.5 The application was made by Marven Poultry Pty Ltd, for itself and on behalf of five other chicken meat processing companies operating in Victoria, Inghams Enterprises Pty Ltd, Bartter Enterprises Pty Ltd, Eatmore Poultry Pty Ltd, Hazeldene Chicken Farm Pty Ltd, and La Ionica Farming Operations Pty Ltd, and current and future contract growers to those processors.
31 The VFFCMG put the proposition to the ACCC that, in substance, the applicants (the processors) were seeking authorisation for the growers, and that this was not contemplated by subs 88(1) of the Act. The proposition was put succinctly by the solicitors for the VFFCMG as follows:
The application lodged by Marven Poultry Pty Ltd is not an application for the granting of an authorisation to Marven Poultry Pty Ltd (or the processors purported to be represented) to do something which would constitute the making of a contract or arrangement which would have the purpose or would or might have the effect of substantially lessening competition. It is an application seeking authorisation for the contracted Growers to collectively negotiate a standard growing agreement and to appoint representatives to enter into negotiations.[emphasis in original]
32 The ACCC expressed this argument somewhat differently in clause 7.4 of the determination as follows:
7.4 Legal Validity of the Application. The VFF argued that the application by Marven Poultry is not in compliance with section 88 of the TPA. The VFF questioned the legal validity of the application on the grounds that the Applicant and processors on whose behalf the application was made are not parties to the proposed arrangements. Instead, the VFF argued, the processors have lodged an application seeking authorisation for the contracted growers to collectively negotiate a standard growing agreement and to appoint representatives to enter into negotiations.[emphasis in original]
33 This was not the point made by the solicitors for the VFFCMG. Whether or not the processors were party to the proposed arrangements, the point made by the VFFCMG, through its solicitors, was that the application by Marven for itself and on behalf of the other processors did not seek authorisation for it and them to do anything, but for others (the growers) to do something. The reformulation of this proposition, away from its identification of a necessary statutory precondition, to one based on or related to standing, lies at the base of the difficulties in this case.
34 Reformulated in the above way by the ACCC, the VFFCMG's objection to the validity of the application was dealt with at clauses 9.9 to 9.14 of the determination. Clause 9.9 restated the reformulated objection as follows:
The Commission notes the argument by the VFF that the application is invalid on the grounds that the processors are third parties and not parties to the proposed conduct. The VFF submits that Marven Poultry is unable to seek authorisation for conduct to which Marven Poultry is not a party.
35 The ACCC then (in clause 9.10) gave two answers to the reformulated objection. First, it stated that an application can be made on behalf of a party (that is, here, the growers) by someone else (that is, here, the processors). (This is so, but not in the circumstances here, as found by the primary judge - see [14] above.) Secondly, it stated that in its view the applicant:
...is a party to, and/or knowingly concerned in, the proposed arrangements. Authorisation is sought for growers to negotiate standard growing agreements with their respective processor. Authorisation is also sought to enable growers to appoint representatives to enter into negotiations with processors. It is proposed that the guidelines to be followed in electing representatives and in negotiation be set out in a Code of Conduct for which authorisation is also sought and to which both processors and participating growers (those who elect to engage in collective negotiation under the Code) will be parties. Authorisation is also sought to give effect to the collective growing agreements which result from negotiations. Both the processors and growers who elect to collectively negotiate will be parties to and/or knowingly concerned in the proposed arrangements which are the subject of the authorisation application.
Thus, leaving aside the view that the applicant (Marven for itself and on behalf of the other processors) can be seen as making the application on behalf of the growers, and treating the application as made by Marven only for itself and on behalf of the other processors, it was said by the ACCC here that the authorisation can be sought by the processors because both processors and growers will be parties to, or knowingly concerned in, the relevant contravening conduct. To express the matter as the learned primary judge did, and as Mr Robertson SC, senior counsel for the ACCC, did, the processors were "at risk" of liability for their involvement (either as parties or as accessories) in the posited unlawful conduct of the growers in their collective bargaining.
36 At this point, it is important to emphasise, as the ACCC elsewhere in the determination did (at cl 9.236) that the authorisation (and the application) related to and was (and were) limited to negotiations between an individual processor and growers. And thus it (and they) was (and were) not directed to negotiations between processors (such as any attempts by the processors to bargain collectively) or between growers of competing processors.
37 The ACCC then, in clauses 9.11 and 9.12, elaborated upon its view as to the validity of the application expressed in clause 9.10. The ACCC noted that Marven "had named present and future growers as parties or proposed parties to the contract, arrangement or understanding for which authorisation is sought". This expression of the role of the authorisation for a state of affairs, ("the contract, arrangement or understanding for which authorisation was sought") masks an important difficulty with this part of the determination. Subsection 88(1) provides authority to the ACCC to grant an authorisation to a corporation (or person under the Competition Code) to do something (as set out in pars 88(1)(a) and (b)). It does not authorise a state of affairs or conduct. To view the matter as the ACCC expressed itself here directs attention to the conduct in question in the abstract, but without directing attention to who is being authorised to do what.
38 Subsection 88(6) of the Act was then referred to, and in the light of its terms the following was stated, in clause 9.12:
In effect, authorisation to engage in the proposed arrangements has the effect of authorising the Applicant and any other party named in the application as a party or proposed party to the proposed arrangements to also engage in the arrangements for which authorisation is sought.
39 It is not clear from clauses 9.9 to 9.12 who is being authorised to do what. Nevertheless, the context of these paragraphs is an application and a determination neither of which contains an express request for a grant of authorisation to the processors to do anything.
40 Before turning to the approach of the primary judge and the arguments of the parties, it is appropriate to note some further parts of the determination. First, authorisation was not sought for any specific agreement, but rather, as stated by clause 9.106 of the determination:
...for a proposed arrangement under which growers can negotiate growing agreements collectively including price and contract terms, subject to certain criteria and minimum standards set out in the Code and give effect to these agreements. The Commission considers that the flexibility of the negotiating processes under the proposed arrangements is a significant improvement on current arrangements and consistent with moves from a regulated to deregulated industry.[emphasis added]
41 Secondly, at clause 9.237 the ACCC noted the role or place of the Code of Conduct by saying the following:
This authorisation is only in respect of those arrangements which are carried out in accordance with the Code of Conduct. Where a party has failed to comply with all clauses of the Code of Conduct any contract resulting from these negotiations is not protected by authorisation. In effect contracts signed will not be protected by authorisation unless both parties to the contract comply with all clauses of the Code including the formation of PNGs, the negotiation process, the signing of contracts and dispute resolution.
As to the same point, see [17] above.
the approach of the primary judge
42 Issues were raised before the primary judge which were not canvassed on appeal. In particular, there was a claim, rejected by the primary judge, of apprehended bias.
43 The issue argued on appeal was put differently to the primary judge. The issue was posited by the primary judge in much the same fashion as had the ACCC (see [32] above), when he expressed it in the following terms in [25] of his reasons for judgment:
25. The VFFCMG filed a submission with the ACCC opposing the grant of the authorisation. It first argued that the application for the authorisation, lodged by Marven, did not comply with the requirements of s 88. That was because Marven, and the other five processors on whose behalf the application had been made, were not parties to any arrangement or understanding which might contravene s 45, and therefore lacked standing to seek an authorisation.
44 The primary judge recited the submissions put to him on behalf of the appellant (as applicant) at [36] to [41] of his reasons. These submissions were, in substance, as follows:
(a) That on its proper construction, subs 88(1) could not be invoked by a corporation not at risk of contravention of s 45. This was put as a question of standing. This argument turned, in part, on the proposition that s 45 only applied "horizontally" and not "vertically".
(b) That in the circumstances, it could not be said that Marven made the application "on behalf of" growers.
(c) That Marven and the other processors had no standing to bring an application on behalf of growers at least in circumstances where the overwhelming majority of growers opposed the making of the application.
45 As we have already foreshadowed, the arguments referred to at [44(b) and (c)] above were substantially upheld by the primary judge. He held (and there was no issue on appeal) that this application could not be read or characterised as one "on behalf of" growers.
46 The argument referred to at [44(a)] above did not reflect the simplicity of the point made by the growers' solicitors (see [31] above), which was the only argument propounded orally on appeal by Mr Middleton QC, who appeared for the appellant. Rather, the argument apparently put to the primary judge was a development of the reformulated proposition expressed by the ACCC. (See [32] above.)
47 Thus, by the way the matter was argued before him, his Honour focussed upon the question of the risk faced by Marven and the producers of contravention of the Act and the related question of standing. The primary judge said the following in this respect at [48] to [50] of his reasons:
[48] I am conscious of the fact that there are statements in several cases in which the Trade Practices Tribunal and the Australian Competition Tribunal have suggested that the test for standing under s 88 is subjective, and that all that is necessary is that the applicant believes on what appears to him to be good grounds that, without an authorisation, he would contravene s 45: Re Applications by Australasian Performing Rights Association (1999) ATPR 41-701 at 42,937. There are also statements to the effect that the ACCC is not justified in refusing an authorisation upon the basis that the application might appear to it to be unnecessary: Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 at 180 and Re Applications by Concrete Carters Association (Victoria) (1977) 31 FLR 193 at 245-246.[49] Notwithstanding the language in which the test has been formulated in these cases, it seems clear to me that there is an objective element which must be satisfied when determining the issue of standing. I am fortified in that conclusion by the fact that in Re Australasian Performing Rights Association the Tribunal, constituted by von Doussa J, and two other members, referred to the earlier authorities, and went on to say at par [31]:
"In the present case there were reasonable grounds for APRA to apprehend that its conduct if not authorised might be in breach of the TPA ..."
[50] That observation by the Tribunal suggests that the test for standing is not purely subjective, but has an objective element. As a matter of basic principle, the power conferred upon the ACCC to grant an authorisation could not have been intended to be used in circumstances where that body concluded that there was clearly no risk of any contravention of s 45.
48 It is important to note that the Tribunal, in Re Applications by Australian Performing Rights Association (1999) ATPR 41-701, referred to by his Honour, spoke of APRA having reasonable grounds to apprehend that its conduct if not authorised might contravene the Act. The authorisation was sought for APRA to do something contemplated by pars 88(1)(a) and (b).
49 Having rejected the proposition that the application was made "on behalf of" growers the primary judge said at [59]:
...However, it does not follow that the authorisation was necessarily invalid. That depends upon whether or not the second limb of the ACCC's reasoning, namely that the processors themselves were at risk of contravening s 45, was correct. If so, the application and the decision to grant the authorisation may still have been valid.
50 His Honour then said that it was not an easy question to resolve. He referred to the question as to whether s 45 of the Act was concerned only with "horizontal" conduct and in this respect his Honour referred to ACCC v SIP Australia Pty Limited [2002] FCA 824; South Sydney District Rugby League Football Club Ltd v News Ltd [1999] FCA 1710; (1999) 169 ALR 120, 135 (per Hely J); [2000] FCA 1541; (2000) 177 ALR 611, 680 (per Finn J); [2001] FCA 862; (2001) 111 FCR 456, 481 (per Heerey J) and 517-8 (per Merkel J); and ACCC v Visy Paper Pty Limited [2000] FCA 1640; (2000) 186 ALR 731, 749 (per Sackville J); and [2001] FCA 1075; (2001) 112 FCR 37, 52-55 (per Hill and North JJ), and 56-7 (contra Conti J). His Honour did not find it necessary to express a view on this issue, though it should be noted that the majority of the Full Court in Visy Paper saw s 45 as extending beyond "horizontal" conduct. There is no necessity for us to enter this debate.
51 His Honour found the processors to be "at risk" of contravening s 45 in the absence of an authorisation under subs 88(1). The two reasons for this conclusion were expressed in [68] to [76] to be that the processors might be parties to unlawful conduct or liable under s 75B of the Act, as follows:
[68] The position under the BCI Act, and also in relation to the "proposed arrangements", is that the processors are permitted, if not required, to agree among themselves the price to be paid to growers for the services which they provide. That, prima facie, constitutes an "arrangement or understanding" which has the purpose, or would have or be likely to have the effect, of substantially lessening competition, particularly when one has regard to the extended definition of "purpose", in cases of price fixing, pursuant to s 45A.[69] It follows that the processors are, or may be, parties in their own right to a contravention of s 45. Accordingly, they have standing to seek an authorisation in order to avoid having the consequences of such a contravention visited upon them.
[70] Even if I am wrong in holding that this anterior arrangement or understanding among the processors is, prima facie, a contravention of s 45, they are also at risk of contravening that section in a different way. Section 75B creates what may be described as "derivative liability". It provides, inter alia, that a reference in Pt VI of the Act (which deals with enforcement and remedies) to a person involved in a contravention of a provision of Part IV shall be read as a reference to a person who has "aided, abetted, counselled, or procured the contravention", or "has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention".
[71] It can be argued that by participating in the arrangements prescribed by the BCI Act, or by engaging in the "proposed arrangements", the processors may themselves be derivatively liable for any contravention of s 45 by the growers. In particular, it may be said that by negotiating and entering into contracts with the growers, knowing that they have agreed amongst themselves to fix prices, the processors have been, or will be, "knowingly concerned" in any contravention of that section by the growers. Moreover, it is arguable that such derivative liability makes the processors relevantly "parties" to the arrangement or understanding reached by the growers, in contravention of the section.
[72] It should be noted that this approach is consistent with that taken in the criminal law in relation to illegal sales, and the doctrine of complicity. The offence of illegal sale generally incriminates the vendor as the principal. In this circumstance, courts have always imposed liability upon the purchaser as an accessory, provided that the purchaser possessed the requisite mens rea: Sayce v Coupe [1953] 1 QB 1.
[73] Once it becomes clear that Marven and the other processors are at risk of contravening s 45, whether directly, as parties to their own arrangement or understanding, or derivatively, as parties to an arrangement or understanding arrived at amongst the growers, they have standing to seek an authorisation in order to protect themselves.
[74] Section 88(6) then operates, of its own force, to confer upon the growers, who are "... named or referred to in the application for the authorisation as [parties] to the contract, arrangement or understanding or as proposed [parties] to the proposed contract, arrangement or understanding ..." what, from their perspective, may be regarded as an unwanted indemnity. However, that is a consequence of the operation of the Act. It matters not that the persons protected by the subsection do not want that protection.
[75] A corporation faced with the prospect of incurring a large pecuniary penalty (of up to $10 million) for contravening s 45 of the Act would normally welcome a decision by the ACCC to grant it an authorisation. It is somewhat ironic that in this case the applicant, and those growers whom he represents, are aggrieved by just such a decision. Nonetheless, in my view s 88(6) confers upon those parties the protection which they do not seek. Once it becomes clear that Marven and the other processors had standing to seek an authorisation to protect themselves from the risk of contravening s 45, the growers gained that protection, unwanted though it may have been. The processors were entitled to seek authorisation. It was granted to them in order to provide them with protection from the operation of s 45. However, the consequence of that authorisation, whether expressly stated or not, is that the growers, who are "named or referred to in the application for authorisation as a party to the ... arrangement or understanding" now find themselves indemnified as well.
[76] It is plain that a majority of the growers are dissatisfied not merely with the fact that an authorisation has been granted without their consent, but also with a number of the conditions attached to that authorisation. However, it must be borne in mind that even though the growers are "beneficiaries" of an unwanted indemnity which includes unwanted conditions, they are not required by that indemnity (nor could they be so required), to comply with those conditions. Of course, if they do not comply with those conditions, they will not be able to gain the benefit of that authorisation. Nonetheless, the growers are not required by the authorisation to do any act, or to refrain from doing any act. The authorisation merely ensures that if they engage in the conduct which is now "authorised", they will not be in breach of s 45.
52 These paragraphs assume that the only issue was standing for the processors to seek an authorisation of their own conduct. (See especially [74] of his Honours reasons which posit subs 88(6) protection to the growers, and ex hypothesi subs 88(1) protection for the processors.)
53 There is a particular difficulty with [68] of his Honour's reasons in that the application was not directed to arrangements between processors: see [36] above and clause 9.236 of the ACCC's determination:
9.236 This authorisation relates to, and is limited to, negotiations between an individual processor and grower groups. This authorisation does not in any way extend to negotiations between processors or between growers of competing processors.
54 Another difficulty with these paragraphs is that whilst accessorial liability provided by s 75B may create derivative liability under Part VI of the Act, it does not of itself create a contravention of Part IV of the Act. The focussing upon s 75B highlights (though his Honour did not express it thus) what Marven and the processors were, in the appellant's submission, doing with the application - seeking to have authorised the conduct of the growers, so that there could be no accessorial or derivative liability in the processors.
the appeal
55 The appellant submitted that the principal deficiency in the primary judge's reasoning at [68] to [76] was a lack of focus upon what it was that Marven and the processors were applying for. It can be seen in [68] to [76] of his Honour's reasons that he saw the application as one for the authorisation of conduct of the processors, hence his Honour's view at [74] that the growers were obtaining protection by subs 88(6).
56 The appellant submitted that the application for authorisation, when analysed, was not for the processors to act in accordance with pars 88(1)(a) and (b), but for the growers so to act; and so, the appellant submitted, the authorisation was to the same effect. It argued that the questions as to standing, as to whether the processors were "at risk" and as to whether s 45 extended to "vertical" as well as "horizontal" conduct, were all beside the point. The application was to authorise the growers to do things. Absent the application being made "on behalf of" the growers, subs 88(1) of the Act did not authorise the processors to make such an application.
57 A good deal of the submissions of the ACCC on appeal reiterated and supported the conclusions of the primary judge: Marven and the processors were involved in the conduct, were "at risk" and so could make the application. When pressed, Mr Robertson SC, who appeared for the ACCC, submitted that the application should be read as one in which conduct of the processors was sought to be authorised. In particular, he submitted, in written submissions, as follows:
9. What is significant is that the conduct the subject of the authorisation is not one single piece of conduct and it is not conduct solely between growers without the involvement of processors. Instead the authorised conduct includes a range of contracts, agreements or understanding that would or might breach s 45 of the Act. (What the authorised conduct does not cover is described in paragraph 9.236 of the First Respondent's determination at AB 97 as follows: "This authorisation relates to, and is limited to , negotiations between an individual processor and grower groups. This authorisation does not in any way extend to negotiations between processors or between growers of competing processors.") In particular, it includes:a) The contract, arrangement or understanding between the six processors in Victoria (horizontal conduct) as to the Code of Conduct - see notice of contention ground 2 (argued in paragraph 15 below).
b) The process and manner of negotiation and any resulting contract, arrangement or understanding in diverse ongoing conduct by:
(i) growers collectively (horizontal conduct); and
(ii) growers collectively with their processor (vertical conduct) - pursuant and in relation to the Code of Conduct. (This process is summarised in paragraphs 5.6 to 5.29 of the First Respondent's determination at AB 28-32. The actual Code of Conduct authorised by the First Respondent begins at AB 174.)
c) The Collective Agreements ultimately formed by and between a processor and groups of growers through the process described in (b).
d) Any matters arising under the above authorised conduct.
[emphasis in original]
58 Again, these submissions, as did the approach of the ACCC in the determination (see [37] above), focussed upon the conduct as a whole, or as a state of affairs, as the subject of the authorisation. Because, it was said, the processors were involved in "the conduct the subject of the authorisation" then the authorisation must be valid. Further, it was said, this appreciation of the bilateral conduct between the processors and the growers and not just amongst the growers themselves, gainsaid the appellant's perceived arguments that the processors could never be in breach of s 45.
59 The appellant's submissions sought to avoid these propositions. Put simply, it was said that what was asked for and granted was authorisation for the growers to act in a particular way. It may be, it was submitted, that the processors could have asked for and been granted authorisation for acts by them falling within pars 88(1)(a) and (b); if that had been done, and if such authorisation had been granted, one could then identify what the statutory effect of subs 88(6) on the growers was.
60 The appellant's argument can be summarised as follows: the authorisation granted was in terms of the authorisation applied for. The authorisation applied for was to authorise growers to act in a certain way. Absent circumstances allowing the application to be made on behalf of growers, the processors or Marven could not seek authorisation for the growers to do anything. The fact that the processors may have been at risk by participating in some fashion in the overall conduct involving them and the growers may well have given them standing to request an authorisation for them to act in a way or in ways contemplated by pars 88(1)(a) and (b). They did not do so. In circumstances where the ACCC has granted authorisation by reference to the terms of the application one must read the application to understand who was applying for authorisation for whom and for that person to do what. Here, it was said, the only sensible reading of the application is that it was made by the processors for authorisation to the growers to engage in the process of collective bargaining with the respective processors in accordance with the Code of Conduct. As such, subs 88(1) did not provide statutory authority for an authorisation so applied for.
61 In light of the terms, structure and substance of the application and the authorisation to which we have earlier referred, we agree with these submissions of the appellant. The authorisation sought was substantially in terms for growers to bargain collectively. If that occurred in compliance with the Code of Conduct, the conduct referred to in the application (see [23] above) would not be a contravention of the Act (pars 88(1)(c) to (e) of the Act). The application did not, in terms, seek authorisation for the processors to do anything. It may well be that if the growers' conduct is in contravention of s 45 the processors would be "at risk" in the way discussed by the primary judge in respect of some aspect or aspects of their conduct. The application did not, however, in terms, seek authorisation for the processors to do any act contemplated by pars 88(1)(a) and (b).
62 The ACCC filed a notice of contention which, as argued, contained three points:
1. His Honour should have held that section 45 of the Trade Practices Act 1974 ("the Act") extends to "vertical conduct", at least for the purposes of section 88 of the Act and in relation to the present facts.2. His Honour should have held that, for the purposes of s 88 of the Act, there was a proposed contract, arrangement or understanding between the second Respondent and the other processors to make or give effect to terms in accordance with the Code of Conduct that would have the purpose or would or might have the effect of substantially lessening competition within the meaning of section 45 of the Act.
3. His Honour should have held that, for the purposes of s 88 of the Act, there was a proposed contract, arrangement or understanding between a processor and growers to make or give effect to terms in accordance with the Code of Conduct that would have the purpose or would or might have the effect of substantially lessening competition within the meaning of section 45 of the Act.
63 The second point was most strongly pressed. It was submitted that there was a proposed contract, arrangement or understanding among Marven and the other processors to give effect to terms in accordance with the Code of Conduct. The argument of the ACCC in [15] of its written submissions stated as follows in support of this second point in the notice of contention:
15. Further his Honour should have held that, for the purposes of s 88 of the At, there was a proposed contract, arrangement or understanding between the Second Respondent and the other processors to give effect to terms in accordance with the Code of Conduct that would have the purpose or would or might have the effect of substantially lessening competition within the meaning of s 45 of the Act.
It was not the making of the Code which was the relevant arrangement, but giving it effect in negotiations.
64 The ACCC referred to the application for authorisation for "an industry" Code: clause 5.4 of the determination - see [28] above. It was submitted by the ACCC that part of the "conduct authorised" was a Code of Conduct for growers to engage in collective bargaining with a processor, and that the agreement amongst the six processors to negotiate with their respective growers in accordance with the Code of Conduct was conduct (of the processors) which in absence of authorisation may breach s 45 of the Act.
65 The appellant gave two answers to these submissions on the second point in the notice of contention. First, what appears as clause 5.4 of the determination ([28] above) and the Code of Conduct is not a "subject of authorisation"; following the Code is an element necessary to be followed for growers to have authorisation to act in the way contemplated by the application. Embedded within this submission is the proposition (correct in our view) that s 88 does not, and cannot, authorise a Code of Conduct. It authorises the applicant (or, if relevant, the person on whose behalf the applicant applies) to do something contemplated by pars 88(1) (a) and (b). The appellant reads the Code of Conduct as a document which must be followed if the persons whose conduct sought to be authorised are to gain the protection of the authorisation. The appellant submitted that these persons were the growers. It so submitted, not because it was not possible for the processors to seek authorisation to do something contemplated by pars 88(1)(a) and (b) and not because the processors were not to participate in the negotiations conducted in accordance with the Code of Conduct, but because that was the sensible reading of the application.
66 The second answer of the appellant to the second point in the notice of contention was likewise expressed: it may be that the processors could have sought or could seek authorisation for them to give effect to the terms of the Code of Conduct. The appellant submits, however, that they did not make such an application. Nowhere, it was said, did the application (granted in its terms) say anything to the effect that: we, the processors, seek authorisation to do x or y.
67 The fact that the circumstances throw up the possibility of a differently framed application and the ability of the ACCC to grant an authorisation in terms of such an application, beyond the terms of that actually requested and granted, does not, it was said, transform this application (granted according to its terms of request) into a document asking for something not asked for.
68 We think that these submissions of the appellant are correct. Nowhere was there a request for (or grant of) authorisation to the processors. It is to be recalled that the ACCC treated the application as made for Marven, on behalf of processors and on behalf of growers. It seems to us that it is necessary to recognise the limitations of the words of subs 88(1) in terms of the authority it gave the ACCC.
69 To be valid (at least in part) the application (granted in terms) must be read as seeking authorisation for the processors to act in a certain way. If the authorisation is so read, it might be seen as one in which the ACCC granted (or purported to grant) authorisation to those involved in the conduct (growers and processors) for their respective parts in the conduct. Since all parties to the conduct were applicants (in the view of the ACCC) this might explain why the imprecise and inaccurate language of authorisation of the conduct was used.
70 If this approach were to be taken, it could not, however, transform the authorisation into one validly granted to the growers. The authorisation could only be seen as one granted to the processors for their conduct in participating in the proposed conduct. The effect of subs 88(6) on the growers might, or might not, then cover the totality of the conduct of the growers.
71 The difficulty with this approach is that it is contrary to the terms of the application and the authorisation. To the extent that the application sought authorisation for someone to do something, it sought authorisation for the growers to bargain collectively. The processors could not seek that. It was thought that they could.
72 The view that they could stemmed, in part, from an error as to the capacity of the processors to apply on behalf of the growers. It also stemmed, in part, from the ACCC misdirecting itself as to the right question, by focusing on "the conduct the subject of the authorisation" as opposed to who could be authorised to do what. It was no doubt assisted to that error by the processors, who at no time sought authorisation for themselves.
relief
73 For the reasons set out above, the authorisation granted by the first respondent on the application A90750 made by the second respondent was not one capable of being authorised by the ACCC pursuant to subs 88(1) of the Act. In consequence, the appellant was, and remains, entitled to orders in respect of the purported authorisation. The parties are agreed that persons who acted in reliance on the terms of the authorisation ought not to have their position prejudiced by any declaration or order operating retrospectively to set aside the determination and authorisation as and from the date of its making. Rather, the parties submit that this Court, in the exercise of its discretion under par 16(1)(a) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) should set aside the authorisation as and from a future date. Unfortunately, the parties have been unable to agree upon such a date. (The efficacy of this approach was not debated before us: cf Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597, 614-15 [51], 618 [63] and 646-47 [152] and Plaintiff S157/2002 v Commonwealth of Australia [2003] HCA 2; (2003) 195 ALR 24, 45 [76].) We are prepared to approach the orders upon the basis requested by the parties. Nevertheless, it should be recognised that this does not affect our reasons for allowing the appeal: that the authorisation granted by the ACCC was not authorised by subs 88(1) of the Act.
74 The ACCC submits that the authorisation should not be set aside earlier than seven months from the judgment of the Court. This period reflects the time the ACCC would require to consider a fresh application for authorisation to be made by the processors to seek authorisation under s 88 of the Act of the scheme for collective bargaining which the ACCC purported to authorise in its determination dated 28 June 2001.
75 The appellant submits that a period of one month is a sufficient period to enable the Victorian chicken meat industry to adjust to the setting aside of the authorisation.
76 The materials accompanying the ACCC's determination and the appellant's contention that the majority of Victorian chicken growers consider one month sufficient to adjust arrangements within the industry absent the authorisation, indicate clearly that those growers will not be seeking authorisation of collective bargaining on the basis authorised by the ACCC in its determination dated 28 June 2001. Rather, contracts will have to be negotiated individually between processor and grower or different arrangements as to collective bargaining will have to be agreed conditional upon ultimate authorisation under subs 88(1) by the ACCC. In these circumstances, there are no reasonable grounds to delay the setting aside of the determination authorising collective bargaining by Victorian chicken growers in terms of the application A90750. The order to set aside the determination and authorisation of the first respondent dated 28 June 2001 will be expressed to take effect one month from the date of pronouncement of this judgment.
77 Given the way the matter appears to have been argued before the primary judge, we will hear the parties on costs of the matter at first instance.
I certify that the preceding seventy seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox, Cooper and Allsop. |
Associate:
Dated: 5 August 2003
Counsel for the Appellant: |
Mr J E Middleton QC with Mr P G Cawthorn |
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Solicitor for the Appellant: |
Nevett Ford |
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Counsel for the First Respondent: |
Mr A Robertson SC with Mr D Star |
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Solicitor for the First Respondent: |
Australian Government Solicitor |
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Date of Hearing: |
6 March 2003 |
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Date of Judgment: |
5 August 2003 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2003/164.html