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Federal Court of Australia |
Last Updated: 6 June 2001
Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd
Trade Practices Act 1974 (Cth)
Trade Practices Commission v TNT Australia Pty Ltd & Ors (1995) ATPR 41-375 referred to Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd & Ors (1996) ATPR 41-522 referred to
Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 considered
Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 referred to
MULTIGROUP DISTRIBUTION SERVICES PTY LIMITED v TNT AUSTRALIA PTY LIMITED, ANSETT AUSTRALIA LIMITED, MAYNE NICKLESS LIMITED and J McPHEE & SON (AUSTRALIA) PTY LIMITED
NG 786 OF 1995
GYLES J
SYDNEY
4 JUNE 2001
IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
ORDERS:
The proceeding stand over to enable the parties to bring in short minutes to give effect to these reasons.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
JUDGE: |
GYLES J |
DATE: |
4 JUNE 2001 |
PLACE: |
SYDNEY |
1 This is an application by the applicant in the proceedings for leave to use part of a statement filed by the applicant of Gregory John Poche, a potential witness, which, in turn, involves use by the applicant of a number of reports known as lost customer reports ("LCRs") of the applicant. A decision on this point has major implications for preparation of the case which is fixed for hearing to commence in February 2002 and is expected to continue for some months thereafter. It is important that a decision be given promptly. In order for that to be done, I will need to give my decision in an abbreviated form and without the revision that I would prefer. I will endeavour to expose my reasoning, although without undue elaboration. I will assume a detailed knowledge of the proceedings and not explain aspects of the proceedings or the evidence on this application which are not essential to my reasoning. I will not reproduce all of the comprehensive arguments which have been put on behalf of the parties. To a large extent, they are contained in written submissions which have been exchanged and a verbatim transcript is available of the oral argument.
2 On 31 January 1995 Burchett J imposed penalties upon and granted injunctions against the first, second and third respondents to this proceeding at the suit of the then Trade Practices Commission for breach of Pt IV of the Trade Practices Act 1974 (Cth) ("the Act") (Trade Practices Commission v TNT Australia Pty Ltd & Ors (1995) ATPR 41-375 ("the TPC proceeding"). Each respondent had withdrawn its defence. It was alleged, and admitted, that five primary meetings took place between 1987 and 1990 where a series of anti-competitive agreements were reached in relation to express freight. Effect was given to these agreements by each of the companies on many occasions. A great number of instances were specified in documents filed in those proceedings.
3 The current proceeding was commenced in the South Australian Supreme Court on 21 July 1995. On 10 October 1995 the applicant had these proceedings transferred to this Court. The fourth respondent to the proceedings, J McPhee & Son (Australia) Pty Limited, had not been a respondent in the TPC proceeding. On 4 September 1996 Burchett J struck out the statement of claim. The respondents have referred to the following passage from his Honour's judgment in Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd & Ors (1996) ATPR 41-522 at 42-685:
"It is a supererogation to add that, if it is alleged customers are actually lost to the applicant, or their custom was threatened, by the making of uncommercial quotations, some detail of such an allegation would need to be revealed in the material facts to be pleaded, and particulars would be required."
4 An amended Statement of Claim was filed in February 1997, alleging breach of Pt IV of the Act and common law conspiracy. A common set of particulars was provided in relation to pleaded issues going to what might be called liability in relation to the alleged contraventions of the Act in the following form as to the arrangements:
"(a) The existence of the arrangement or understanding is to be inferred from the facts, matters and circumstances set out in the Schedule of Incidents annexed and marked "A".(b) To the extent relevant, the Applicant will rely on section 83 of the Act in respect of the findings of fact made by His Honour Justice Burchett in His Honour's Reasons for Judgment dated 31 January 1995 in Trade Practices Commission v TNT Australia Pty Limited & Ors (1995) ATPR 41-375, being proceedings G807 of 1992 in the Federal Court of Australia, Sydney Registry ("the TPC proceedings").
(c) The Applicant will provide full particulars following discovery and interrogatories in these proceedings."
5 A Schedule of Incidents is annexed to the Statement of Claim alleging 181 incidents, in chronological order from 1978 to 1996, with each incident described and cross-indexed to the relevant paragraph of the Statement of Claim. It is worth noting that the pleading of the contraventions goes beyond that pleaded in the TPC proceeding as to both substance and parties.
6 The particulars of conduct giving effect to the arrangements or understandings were as follows:
"(a) The conduct giving effect to the arrangements or understandings is to be inferred from the facts, matters and circumstances set out in the Schedule of Incidents annexed and marked "A".(b) To the extent relevant, the Applicant will rely on section 83 of the Act in respect of the findings of fact made by His Honour Justice Burchett in His Honour's Reasons for Judgment dated 31 January 1995 in the TPC proceedings.
(c) The Applicant will provide full particulars following discovery and interrogatories in these proceedings."
7 Particulars of the conspiracy count (added by a further amendment to the Statement of Claim) refer to particularisation by the Amended Index to Pleadings and Statements ("AIPS") rather than the Schedule of Incidents. I shall return to the AIPS shortly.
8 The particulars of loss or damage were as follows:
"The Applicant is unable to quantify the loss and damage suffered as a result of the conduct of the Respondents at this stage. The Applicant alleges that the effect of the conduct of the Respondents, up at least until the time the First to Third respondents withdrew their defences in the TPC proceedings on 25 July 1994, on the profitability of the Applicant expressed as a percentage of sales was to suppress the profits of the Applicant to a level which were lower than that which would have been applied in the market where the Respondents did not engage in such conduct. By way of example, during the period ending 30 June 1988 the Applicant's profits expressed as a percentage of sales was 6.5%. Similar levels of profitability were maintained up until the period ending 30 June 1994, but during the period ending 30 June 1995, which is approximately one year after the Respondents withdrew their defences in the TPC proceedings, the Applicant's profitability expressed as a percentage of sales increased to 13.2%. The applicants loss and damage will be quantified in a report or reports of an expert firm of accountants which will be filed in due course."
9 In March 1997 Burchett J directed the applicant to:
"... to file and serve, in lieu of particulars for the time being of the Further Amended Statement of Claim and the Schedule of Incidents annexed thereto and marked `A', the witness statements on which it intends to rely on or before 31 July 1997 (other than those arising out of the inspection of discovered and subpoenaed documents and/or continuing inquiries or those not otherwise reasonably capable of being filed and served on or before 31 July 1997."
On 16 September 1997 time for complying with this direction was extended to 3 October 1997. During 1997 more than 200 witness statement were filed by the applicant. This led to the preparation of the AIPS which, as the name implies, identifies what are called "incidents" and cross references them to paragraphs of statements and paragraphs of the Statement of Claim. Where the statements were obtained for the purpose of the TPC proceeding, that is noted. In a limited number of cases it is said that statements are not yet available to prove the asserted incident. The AIPS included more than 800 incidents. In so doing it went well beyond those incidents identified in the Schedule of Incidents to the Statement of Claim.
10 The applicant filed a statement of Gregory John Poche on 30 March 2001. Mr Poche is the Chief Executive Officer of the applicant. He founded the company in May 1974 and has been associated with it ever since. Paragraphs 145 to 163 (inclusive) of that statement deal with the subject of LCRs. Mr Poche describes a system of recording lost customers from the late 1970s through to 2000 which increased in sophistication over time. His evidence, if accepted, would establish that the relevant documents are business records. In addition to identifying lost customers, the documents would often identify a reason or reasons for the loss of the customer. The relevant section of the statement concludes with the following paragraph (par 163):
"Having reviewed the lost customer summaries, it is my opinion that the results for the years 1986/1987 to lat least 1991/1992, they understate the rate of customer loss because in those initial years, the records were not kept as fully and accurately as they have been since then. With that qualification, and subject also to the qualification raised in paragraph 152, I believe that the figures set out in the lost customer summaries and shown in graphic form in Annexure "A" are substantially correct, although understating somewhat the true rate of loss particularly in the earlier years."
11 The graph referred to shows lost customers rising to a peak in 1992, with a steady decline to 1998 and an increase again after 1998 to 2000. This evidence is referred to in par 25 of the applicant's summary of its case on loss and damage filed on 25 May 2001, which annexes what is called a "methodology report" by the expert who has been retained for the applicant to give evidence as to damages. Paragraph 25 of the summary is in the following terms:
"It will be seen then that one of the keys to the derivation of "but for" revenues is the rate of customer loss. The Applicant will be seeking to prove its customer loss through the evidence of Mr Poche and others and through the lost customer reports and related documents. The Applicant will not be seeking to lead evidence from witnesses of each example of customer loss that is identified through the lost customer reports. The Applicant will lead evidence in respect of what is in effect a sample drawn from those reports and will ask the Court, on the basis of that evidence and by reason of the fact that customer loss was both the obvious purpose and the likely effect of the Respondents' predatory activity, to draw the inference that the higher rate of customer loss that will be demonstrated for the period from 1987 to 1995 compared with the period thereafter was due to the predatory activities of the Respondents. The Applicant will rely on the totality of the lost customer reports for that purpose although it concedes that, of the approximately 2,800 customer reports that have been discovered, about 1,200 ascribe the loss of the customer to a cause that is obviously unrelated to unlawful activity on the part of the Respondents. These may be regarded as instances of natural customer loss."
12 This, of course, needs to be understood in the light of the whole of the summary, including the methodology report. This aspect of Mr Poche's statement provoked complaint from the respondents and on 20 April 2001 I held that the part of Mr Poche's statement which related to LCRs (and the use made of the reports themselves) could not be relied upon without leave because they did not arise out of the inspection of the discovered or subpoenaed documents and/or continuing inquiries and were reasonably capable of being filed and served on or before 3 October 1997. Hence this application for leave.
13 The applicant discovered between 2,500 and 3,000 LCRs for the period ending 30 June 1995. None were discovered for the period from 1 July 1995 onwards. It appears from the evidence that the solicitors for at least one of the respondents paid some attention to these LCRs.
14 The solicitors for the respondents have carried out exercises on small samples of the LCRs in an endeavour to track down customers. This evidence, and other evidence which has been led as to the situation within the various organisations, together with commonsense, lead me to the following findings:
1. many customers will be difficult to locate;
2. many customers will no longer exist: some ceasing to exist since 1997;
3. many customers will have destroyed documents, including a significant number since 1997;
4. the relevant personnel in many customers will not now be available: some will have disappeared since 1997;
5. the memory of those personnel from customers who can be identified and spoken to will have faded with time at an increasing rate;
6. the respondents themselves will have severe difficulty in obtaining instructions as to its dealings with those customers because of the loss or destruction of records and the turnover in personnel which has occurred over the years since 1997.
15 I should add that an examination of some of the LCRs shows them to be difficult to read and, on occasion, cryptic in meaning.
16 The explanation given by the solicitor for the applicant for not filing the statement by Mr Poche as to the LCRs in 1997 and in not particularising incidents referred to in the LCRs at that time was as follows:
"12. My firm was, at the time the 7 March 1997 Orders were made, aware of the practice of the Applicant in maintaining "Lost Customer Reports", and of its practice of consolidating those individual Lost Customer Reports into annualised reports. However, those reports had not, at that time, been analysed. Nor had the whereabouts of all of the Lost Customer Reports been established. A large proportion of the Lost Customer Reports were then held at branch offices of the Applicant and had not been retrieved and assembled at the Applicant's head office for the purposes of discovery.13. At the time the Orders were made, I formed the opinion that it would be premature to have served the Applicant's Lost Customer Reports at a time when their evidentiary significance could not be finally assessed until at least the following steps had first been completed:
(a) analysing the TPC Statements and preparation of the AIPS;
(b) at least a substantial proportion of the Applicant's witness interviews had been conducted;
(c) discovery of the documents had taken place, or was at least well advanced;
(d) the pleadings were closed; and
(e) the Applicant had conferred with and received advice from experts as to the appropriate mode of proof of its damages case, which advice could, in turn, only be given when steps (a) to (d) had been taken or were substantially advanced."
17 In its submissions, the applicant summarised the forensic purposes for which it requires the LCRs as follows:
"1. The Applicant wishes to tender the Lost Customer Reports at trial:1.1 in support of its case on liability: as part of the proof that it lost customers to the Respondents by reason of unlawful "predatory" conduct on the part of the Respondents; and
1.2 in support of its case on damages: as part of the proof of the Applicant's loss under paragraph 28(a) of the second further amended statement of claim ("statement of claim").
2. As to 1.1: the Applicant says that it should be allowed to rely both on individual Lost Customer Reports and on evidence to be adduced from witnesses relating to customer losses identified in those reports to support the inference that the Respondents' unlawful predatory behaviour caused the Applicant to suffer a higher rate of customer loss than it would have suffered in a "normal" competitive market. In this way, the Lost Customer Reports are relevant both in helping to prove directly that the Respondents engaged in predatory behaviour in contravention of section 46 and in helping to prove that such unlawful predatory behaviour caused the Applicant loss.
3. As to damages: the Applicant relies on the totality of its Lost Customer Reports and related records to prove its rate of customer loss after 30 June 1995 (ie, after, it is assumed, the Respondents ceased to engage in unlawful predatory behaviour) and its rate of customer loss up to that date (ie during the period when, it is alleged, the Respondents engaged in unlawful predatory behaviour).
4. Insofar as the Applicant seeks to rely on its Lost Customer Reports and associated records for the purpose of helping to prove its loss, it will not be seeking to rely on individual instances of predation or on evidence relating to individual customer losses referred to in any of those reports."
18 I am satisfied that the respondents are correct in submitting that if the applicant is permitted to rely upon those reports, and evidence relating to them, in the manner proposed on the issue of liability, there will be massive consequences for the future hearing of this case. There will be an enormous task of investigation by the respondents both in their own respective organisations and in relation to the customers concerned. Furthermore, a discovery regime which has occupied the parties in an enormous effort, involving close supervision by a Registrar of the Court, will need to effectively commence again. Although the applicant chose to discover LCRs, this was not the result of any conscious definition of categories of documents by the parties or the Court. Unexplained, this was no substitute for particulars or discovery. It is not clear from the evidence before me that the applicant has discovered all documents relating to those customers and it certainly has not discovered any documents past 1 July 1995, yet it now seeks to rely upon those documents. The respondents have simply not discovered any documents at all in relation to those customers. It may be assumed that, as a result of investigations, statements from probably hundreds of witnesses will be obtained by one party or another. The case will certainly not be heard next year, as presently scheduled, and it may be doubted whether it will be ready the following year.
19 In my opinion, there is no doubt that the respondents will suffer irredeemable prejudice if the applicant is permitted to use this material in the way it seeks. It is more than three and a half years since the expiry of the time limited by Burchett J for particularising a case which had by then been on foot for two years, and which relates, for the most part, to the period between 1987 and 1994. The loss of documents, the loss of relevant personnel and the fading of memories cannot be remedied by any order the Court can make. The analysis by McHugh J in Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 (at 552-553), although in a different context, is compelling in the present circumstances. The respondents would not be able to properly defend themselves against a serious charge.
20 The applicant has failed to put forward any cogent reason why the lapse of time between October 1997 and the present should be ignored. The evidence of the solicitor to which I have referred is, in my opinion, insufficient. An internal decision as to when evidence should be disclosed is no basis to ignore prejudice to the other side. It is also put by the solicitor that he misunderstood the effect of the order of Burchett J. Even if that be so, there is no satisfactory explanation for why Mr Poche, the founder of the applicant and who has been intimately involved with it, its records and its customers over the years, should not have put on whatever evidence he wished by the appropriate time limit fixed by the order of Burchett J. On any view, that evidence could have been put on at that time. I should make clear that I do not regard what were called "generic incidents" appearing in the AIPS as justifying what is now proposed by the applicant. I have considered the applicant's argument that dealings between the solicitors meant that the respondents had waived reliance upon the order of Burchett J. I can find no support in the evidence for that conclusion.
21 In my opinion, the respondents are correct in submitting that the position now taken by the applicant as to the use of the material relating to LCRs on liability is a fundamental change in the scope and direction of the applicant's case.
22 Counsel for the applicant have pressed me with the decision of the High Court in Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146. In my view, that decision does not assist the applicant. Amongst other things, prejudice and injustice to the other party is present here in a way which was not the case there. Further, what was shut out in that case was the raising of a new complete defence to a claim. In the present case, the consequence is that the applicant will not be able to rely upon some evidence which would, it alleges, support its case. There has never been any principle that a party must be able to call every piece of evidence to support its case regardless of the effect upon other parties. Here, at the time when the proceedings were brought, the applicant had the advantage of the preparation of the TPC proceeding, including the evidence which the Trade Practices Commission had assembled. It chose to include an extra respondent and to plead a wider set of understandings, but was able to support its ultimate pleading by cross references to particular incidents, most of which were supported by statements. The case which it set out to make is still available to it. The applicant was not, of course, and still is not, limited to the Trade Practices Commission's evidence. The AIPS is far reaching. It must be borne in mind that the applicant was a participant in the relevant industry at the relevant time, and between the time that the TPC proceeding was commenced and October 1997 the applicant had ample time to consider evidence available from its own resources, including, as we now know from Mr Poche's statement, the LCRs.
23 The applicant will not be permitted to utilise the paragraphs of Mr Poche's statement which deal with LCRs or the reports themselves on any issue going to liability except insofar as they relate to an incident identified in the AIPS.
24 Whether the same ruling should apply in relation to damages is a different, and much more evenly balanced, question. I am not at all sure that the regime of providing statements in lieu of particulars was applicable to material going strictly to damages only. Even if it did, weighing the prejudice to either side is a very different exercise. For this purpose, I assume that the only use to be made of the material will be that foreshadowed in the summary of the applicant's case on loss and damage filed on 25 May 2001. Indeed, the relevant paragraphs of Mr Poche's statement appear to me to be directed to tying in with that, rather than with liability.
25 Whether or not the methodology outlined in Mr Poche's statement is appropriate or will prevail will be determined at the final hearing. As counsel for the applicant has pointed out, there is virtually no direct assistance to be gleaned from Australian authority as to the proper method of approaching proof of damages in a case such as the present. I would certainly not rule out the approach posed by the applicant at this stage, and I do not understand this to have been submitted by the respondents. If it is to be given effect, then the use of the LCRs, at what has been called the "macro level", seems to me to be appropriate. Inability to refer to the LCRs for this purpose would be a serious disadvantage in presenting the case which is sought to be made on damages. I do not agree that it follows that use at what was called the "micro level", which amounts to individual customers being used by way of sample, is appropriate. If it is, then there are hundreds of examples which can be given from the material already provided within the AIPS.
26 However, the respondents put that, beguiling as it sounds to simply use the LCRs at a high level of generality to support the methodology proposed, the reality is that if the figures are to have any probative value then it must be open to the respondents to investigate and test the hypotheses which are put forward on the basis of the LCRs. If this be so, the respondents contend that the same type of investigation needs to be carried out for this purpose as that which I have mentioned in relation to liability.
27 Whilst I do not discount this consideration entirely, I am not satisfied that the use of the LCRs in the manner outlined will have such serious consequences for the respondents that the use of them should be prohibited. It is apparent from the face of the documents that I have inspected, and from the analyses by the solicitors, that the LCRs and the summaries of them are unreliable as to the reason for the loss of the customer. Indeed, on the face of many of the LCRs, reasons are attributed which have nothing to do with any cartel activity. It is also, no doubt, possible that reasons other than cartel activity are advanced when, in truth, that was the reason, either unbeknown to the customer or not disclosed. I am not convinced of the forensic value of showing that the LCRs are more unreliable than they seem, which would no doubt be the purpose of any further investigation of them by the respondents. Be that as it may, the respondents should not be shut out from doing such proper examination as is justified. If, as a result of this, the hearing date needs to be abandoned, then so be it. The applicant can hardly complain. I should make clear, however, that I would require persuasion before letting that happen. I should also make it clear that I would not permit further discovery to take place as a result of this evidence without a separate application and justification, save discovery by the applicant of post 1 July 1995 reports and associated documents.
28 I propose to grant leave to the applicant to utilise the identified paragraphs of Mr Poche's statement and the LCRs, limited to the issue of proof of loss or damage, on the footing that no evidence as to individual customers will be permitted and that the use of the material will be strictly limited to that which is foreshadowed in the summary of the applicant's case on loss or damage filed on 25 May 2001, with the restrictions I have mentioned.
29 I will stand the matter over for a short agreed period in order that the parties can bring in short minutes of order to give effect to these reasons. I will hear argument as to costs on that occasion.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. |
Associate:
Dated: 5 June 2001
Counsel for the Applicant: |
RC McDougall QC with G Brandis |
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Solicitor for the Applicant: |
Phillips Fox |
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Counsel for the First, Second and Fourth Respondents: |
MR Speakman |
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Solicitor for the First, Second and Fourth Respondents: |
Clayton Utz |
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Counsel for the Third Respondent: |
AC Archibald QC with RJ Wright |
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Solicitor for the Third Respondent: |
Blake Dawson Waldron |
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Date of Hearing: |
20 April, 28 May, 1 June 2001 |
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Date of Judgment: |
4 June 2001 |
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