Attorney-General of the Commonwealth v Davids Holdings

[1992] FCA 654

JUDGMENT No. . , . , GZ'yJQ&

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA ) )

NEW SOUTH WALES DISTRIC T REGISTRY ) NO. NG 575 of 1992

)

BNERAL DIVISION )

BETWEEN: ATTORNEY GENERAL OF THE

COMMONWEALTY

Applicant

AND :	DAVIDS HOLDINGS PTY LIMITED First Respondent
9IW RETAILERS LIMITED

CORAM :	GUMMOW J.
PLACE :	SYDNEY
DATE :	18 AUGUST 1992  10 SEP 1992

REASONS FOR JUDGMENT (EX TEMPOREL

Yesterday afternoon I indicated that the court would not accept the undertakings tendered by the first respondent, Davids Holdings Pty Limited ("Davids"). the undertaking, as it was then proposed, is in the form of exhibit 2. This morning there was proposed a further undertaking in the form of exhibit 3. In addition to the affidavit evidence tendered yesterday by the second respondent ("QIW"), there was read this morning two further affidavits which were filed in Court

by counsel for Davids. The first is by a Mr J J Deuchars and	the second by a Mr W C Conley, both sworn today. Mr Deuchars
is managing director not of Davids itself but of Davids Distribution Pty Limited.
Where the affidavit of Mr Deuchars is put beside that for QIW read yesterday there is a conflict of opinion. It concerns likely or possible consequences of the acceptance or non-acceptance of the undertakings as regards the continued conduct of business by QIW and the manner of conduct of its business. I cannot now resolve that conflict of opinion, but must give weight to its existence.
I begin with the proposition which is not disputed that on the Attorney-General's application there is a serious question to be tried of the apprehended contravention of section 50 of the Trade Practices Act 1974 ("the TP Act"). I use the expression "serious question" in the technical sense given by the decision of the Full Court in E~itoma Ptv Ltd v Australasian Meat Industrv EmDloveeS Unioq (1984) 3 FCR 55. 1 also bear in mind that the court is able to offer a speedy
trial within eight or nine weeks of today.
On the issue of the seriousness of the question, counsel for Davids made various points, partly by reference to the matters that were discussed in the letter form the Chairman of
the Trade Practices Commission ( "the TPC " ) to the Attorney
dated 12 August 1992. Amongst other things, counsel for Davids pointed to apprehended difficulties in the Attorney's case with the definition of "market". However, I bear in mind, as counsel for the Attorney-General pointed out, that the view of the TPC in its letter of 12 August 1992 had proceeded form the basis that the matter was a finely-balanced one.
However, in my view, today as it was yesterday, QIW, as a party with an immediate interest, should be heard as to why proposed orders or undertakings should not be made or accepted with a particular view to their alleged adverse impacts upon the interests of that party. In any event the course has been taken is one that was not opposed by counsel for the moving party, the applicant.
Counsel for the Attorney, with the support of counsel for QIW, points to various difficulties in the implementation of the interlocutory regime sought to be established by the proposed form of undertakings as they now stand in exhibit 3. Counsel for Davids today, as yesterday, called into question the standing of QIW to contest the present application.
Senior counsel for Davids pointed to a number of matters, on of which was the possibility of exposure of his client in the market place with a 20 per cent holding to blocking purchases made in consummation of alliances that might be formed by QIW hereafter and before trial. That, he submitted, was a factor militating in favour of an interlocutory regime which permitted his client to continue with purchases subject to the possibility of divestment upon an adverse result at the trial. Whilst I would not discount the possibility of such blocking purchases taking place, I proceed on the footing that there is before me no evidence of any imminent threat of such activity.
Reference was made also to the obtaining by Davids of two extensions of time from the corporate regulatory authorities, the present extension expiring on 28 September. I take that also into account, but bear in mind the reasonable possibility as I would see it of further extensions being obtained.
Counsel referred to the position of shareholders, with both Davids and QIW pointing to greater hardship likely to flow to them from the pursuit of one particular course rather than another at the interlocutory level. However, the central fact of importance as it seems to me is the uncertainty that must exist with the possibility of divestiture orders hanging over the affairs of QIW. This is a matter I referred to yesterday. It must be very difficult for any divestiture
order to reinstate adequately the present statue g g ~ .
I also bear in mind the complexity of the proposed undertakings. Exhibit 3 is a document of five pages. I accept the point of counsel for Davids that if the document was briefer he would no doubt have been the subject of an accusation of undue conciseness of expression. Nevertheless there are, I think, severe problems with the erection of an
interlocutory structure in accordance with these proposed undertakings.
I referred yesterday to the uncertainty of expression and width of expression in a number of provisions. That uncertainty is increased by the addition of various of these paragraphs, some of which were pointed out in address by counsel for QIW.
Furthermore, as was also submitted by counsel opposing acceptance of the undertakings, there must be a difficulty in implementation at a practical level. For example, whilst it is quite true that Davids would not be in control of the board of QIW, the provisions of paragraph (d) of exhibit 3 postulate the appointment of five independent directors agreed by the representatives, if I might put it, of each side. The possibility of disputation in the implementation of such an arrangement, in my view, is considerable.
Another example is provided by paragraph (e) which is an obligation upon Davids not to do any act or thing as of now which would hinder or impede the effectiveness of any order for divestiture which might be made hereafter. It would not be possible, I should have thought, to assess whether before trial there had been or was threatened a failure to comply with that undertaking unless it was clear what was,or was likely to be, the terms of the order for divestiture. Even if I am wrong about that, there must be a very fertile field of debate that would be created by the acceptance of an undertaking in those terms.
Other matters were referred to which support the same view. I referred yesterday to the undesirability of erecting an interlocutory regime which is fraught with very real possibilities of contempt applications arising from disputes, which might indeed be quite bona fide disputes, as to the implementation of the undertakings.
Further, it may be that QIW would not readily have any standing to complain in the matter and the task would fall purely upon the Attorney of ensuring compliance with this commercial arrangement.
In all of these circumstances I decline to accept the undertaking now proposed in the form of exhibit 3.

RECORDED : NOT TRANSCRIBED

Counsel for Davids seeks leave to embark upon further cross-examination and to issue notices to produce to elicit evidence which would go to the question of what steps have been taken since the announcement of Davids' takeover in May this year, being steps which might result in serious prejudice to Davids if it is now enjoined or which were taken with the purpose of defeating Davids' takeover offer.

The position as to the maintenance of the status quo between the granting of any interlocutory injunctive relief after the undertaking expires at 4.15 this afternoon and the trial would be sufficiently protected, it seems to me, with a cross undertaking of the nature already indicated in exchanges between the bench with counsel for the Attorney-General and counsel for QIW. I accept the submissions from counsel for the Attorney-General that in all the circumstances the further leave sought should be refused.

RECORDED : NOT TRANSCRIBED

The applicant, the Attorney-General for the Commonwealth, moves for interlocutory relief in substance having the same effect as the undertakings previously given for a limited period to the Court, the last of which will expire today. As I indicated earlier today when dealing with the application by Davids that the appropriate interlocutory regime was the acceptance of undertakings in the form of what is now exhibit

to apprehended contravention of S. 50 of the TP Act.	3, in my view there has been shown to be a serious question as
Since dealing with that application this morning and rejecting the proposed undertaking I have given directions to commence preparation for trial in November and take the matter up for further directions before Cooper J in Brisbane on 27 August 1992. His Honour will have before him on that day, also for directions, matter number QG 3012 of 1992. The two matters may then be put in tandem.
Cooper J will then have before him any application by Davids as to the inappropriateness of the early November hearing date, in particular, on the footing that inadequate time is allowed for preparation for trial. This was foreshadowed this afternoon by counsel for Davids.
To revert to the present application, I also indicated this morning that in my view the balance of convenience favoured the position taken by the Attorney-General. I indicated that one of the matters I took into account in forming that view was the position in the interim of Davids, particularly as to its exposure to what one might call adverse steps by QIW whilst any interlocutory orders were in force.
Evidence was given this afternoon which gave more substance to that apprehension. I should indicate that if
not, as I now understand things, have been minded to reach a that evidence had been available to me this morning I would
different conclusion as to the fate of exhibit 3. Nevertheless an undertaking is, I think, appropriate. One has been proffered by QIW.
It is not in terms of sufficient width which would accommodate the concerns expressed by Davids. Nevertheless, I think it is of sufficient strength to take it into account, together with the undertakings as to damages also given by QIW
- the applicant being in a special position as to the giving of undertakings as to damages - to support the conclusion
which I have reached that the appropriate measure is to grant interlocutory relief.
In framing the proposed injunction I have regard to the submissions made by counsel for Davids that the TP Act is drawn in such a way as to make it inappropriate, if not impossible, to frame an injunction which would restrain, on the facts of this case, Davids until further order, increasing its percentage shareholding from what is now nearly 20 per cent. It was suggested that the appropriate form of injunction would pick some specific percentage for example above 49 per cent, for the operation of the restraint.
However, having regard to the submission that were made in response by counsel for the Attorney-General, I am satisfied that in the circumstances of this case, it is
appropriate, within the meaning of S. 80, to grant an injunction in the terms I now read out.

I certify that this and the preceding eight (8) pages are

a true copy of the Reasons for Judgment herein of the

Honourable Mr Justice Gummow.

Associate: $

Date: 18 August 1992

Counsel and solicitors	Mr D Officer QC and
for the applicant:	Mr M Walcon instructed by the Australian Government Solicitor
Counsel and solicitors	Mr C A Sweeney QC and
for the first respondent:	Mr R Parsons instructed by Blake Dawson Waldron
Counsel and solicitors	Mr A Myers QC and
for the second respondent:	Mr D Robinson instructed by
Clarke and Kann