Australian Competition and Consumer Commission v CC (NSW) Pty Ltd
[1999] FCA 954
•14 JULY 1999
FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v CC (NSW) Pty Ltd
[1999] FCA 954RESTRICTIVE TRADE PRACTICES – Price fixing – meeting of representatives of four tenderers (construction contractors) and of their Association representative prior to submission of tenders – alleged arrangement or understanding that successful tenderer pay “Special Fee” of $1,000,000 to Association and “Unsuccessful Tenderer’s Fee” of $750,000 to each of the three unsuccessful tenderers – whether alleged arrangement or understanding likely to have effect of fixing, controlling or maintaining price – meaning of “arrangement or understanding” – meaning of “likely” – meaning of “controlling” – whether arrangement or understanding included terms that Fees be paid from proceeds of job, be taken into account in preparation of tenders and not be disclosed to client – requirement of undertaking of obligations rather than mere factual expectations for “arrangement or understanding” to be established – whether arrangement or understanding had likely effect of controlling price – whether degree of specificity required – whether degree of proximity between agreement or understanding and price required – whether price competition must be affected.
MISLEADING CONDUCT – silence – failure by tenderer to disclose to client understanding arrived at with other tenderers – whether misleading and deceptive – absence of positive representation – no “duty” or “reasonable expectation” of disclosure.
EVIDENCE – tendency evidence – allegation of price-fixing by tenderers – whether evidence relating to other projects could be used to help establish the existence of the pleaded price-fixing arrangement or understanding on particular project – need to identify relevant “facts in issue” – requirement that tendency evidence have “significant probative value”.
Trade Practices Act 1974 (Cth) ss 45(2), 45A(1), 52
Evidence Act 1995 (Cth) ss 55, 97Jones v Dunkel (1959) 101 CLR 298, referred to
Zaknic Pty Ltd v Svelte Corporation Pty Ltd (1995) 61 FCR 171, followed
Aroutsidis v Illawarra Nominees Pty Ltd (1990) 21 FCR 500, referred to
D F Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 28 FCR 597 referred to
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437, distinguished
Newton v Federal Commissioner of Taxation (1958) (PC) 98 CLR 1, referred to
British Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 1 WLR 727, referred to
Top Performance Motors Pty Ltd v Ira Berk (Qld) (1975) 24 FLR 286 (FC), followed
Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) (1979) 40 FLR 83 referred to
Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10, referred to
Morphett Arms Hotel Pty Ltd v Trade Practices Commission (1980) 30 ALR 88 (FCA/FC), referred to
Trade Practices Commission v Service Station Association Limited (1992) ATPR 41-179, distinguished
Trade Practices Commission v Service Station Association Limited (1993) 44 FCR 206 (FC), distinguished
Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 7 FCR 534 (FC), considered
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 68 FLR 70 (FC), distinguished
United States v Socony-Vacuum Oil Co (1940) 310 US 150, referred to
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 (FC), considered
Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477(FC), applied
Lam v Ausintel Investments Pty Ltd (1989) 97 FLR 458 (CA), followed
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 (FC), referred to
Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd [1999] FCA 898 (FC), referred to
Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 (FC), referred to
RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 (FC), referred to
Briginshaw v Briginshaw (1938) 60 CLR 336, referred to
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170, referred toAUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called “TRADE PRACTICES COMMISSION”) v CC (NEW SOUTH WALES) PTY LIMITED (formerly called “CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED”)
NG 574 OF 1994
LINDGREN J
14 JULY 1999
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 574 OF 1994
BETWEEN:
AUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called “TRADE PRACTICES COMMISSION”)
ApplicantAND:
CC (NEW SOUTH WALES) PTY LIMITED (formerly called “CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED”)
First RespondentPETER WOOLLARD
Second RespondentHOLLAND STOLTE PTY LIMITED
Third RespondentGRAHAM RONALD DUFF
Fourth RespondentMULTIPLEX CONSTRUCTIONS PTY LIMITED
Fifth RespondentGEOFFREY THOMAS PALMER
Sixth RespondentLEIGHTON CONTRACTORS PTY LIMITED
Seventh RespondentLEONARD DIXON
Eighth RespondentTHE AUSTRALIAN FEDERATION OF CONSTRUCTION CONTRACTORS
Ninth RespondentRUSSELL NORMAN RICHMOND
Tenth RespondentJUDGE:
LINDGREN J
DATE OF ORDER:
14 JULY 1999
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The proceeding be stood over to the 22nd day of July 1999 for the making of directions for the further conduct of the proceeding.
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
NG 574 OF 1994
BETWEEN:
AUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called “TRADE PRACTICES COMMISSION”)
ApplicantAND:
CC (NEW SOUTH WALES) PTY LIMITED (formerly called “CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED”)
First RespondentPETER WOOLLARD
Second RespondentHOLLAND STOLTE PTY LIMITED
Third RespondentGRAHAM RONALD DUFF
Fourth RespondentMULTIPLEX CONSTRUCTIONS PTY LIMITED
Fifth RespondentGEOFFREY THOMAS PALMER
Sixth RespondentLEIGHTON CONTRACTORS PTY LIMITED
Seventh RespondentLEONARD DIXON
Eighth RespondentTHE AUSTRALIAN FEDERATION OF CONSTRUCTION CONTRACTORS
Ninth RespondentRUSSELL NORMAN RICHMOND
Tenth RespondentJUDGE:
LINDGREN J
DATE:
14 JULY 1999
PLACE:
SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
This proceeding has been disposed of as against all but the first respondent (“Concretes”) and the ninth respondent (“the AFCC”) in the ways mentioned below. The AFCC is an association of construction contractors of which Concretes and the other corporate respondents were, at all relevant times, members. On 16 November 1994, the AFCC was ordered to enter an appearance by 23 November 1994, in default of which the applicant (“the Commission”), then called the “Trade Practices Commission”, had leave to relist the matter with a view to seeking judgment. No appearance has been filed; nor has the leave been exercised. The present hearing has therefore been concerned only with the proceeding as between the Commission and Concretes.
BACKGROUND
The proceeding has already given rise to the following judgments:
Judgment
NumberDate Judge Reference 28 September 1994 Hill J (1994) 125 ALR 94 1 24 November 1994 Lindgren J (1994) ATPR 41-363 2 5 May 1995 Lindgren J (1995) ATPR 41-406 3 5 May 1995 Lindgren J (1995) ATPR 41-415 4 2 August 1995 Lindgren J (1995) 58 FCR 426 5 10 August 1995 Lindgren J Unreported 6 8 September 1995 Lindgren J (1995) ATPR 41-431 7 29 July 1998 Lindgren J (1998) ATPR 41-650
The proceeding arises out of what the Commission alleges to have been price fixing by major construction companies and their association, the AFCC, in connection with the tenders for a project known as the “Commonwealth Offices – Haymarket” (“the Project”) in contravention of the Trade Practices Act1974 (Cth) (“the Act”).
The Commission’s application was filed on 30 August 1994 and sought the imposition of pecuniary penalties and declaratory and injunctive relief. An amended statement of claim (“the Pleading”) was filed on 17 November 1994.
According to the Pleading, each individual respondent was at all material times employed by the corporate respondent named in the title to the proceeding immediately preceding his name. Accordingly, and so the Pleading describes them, Woollard was employed by Concretes, Duff was employed by Hollands, Palmer was employed by Multiplex, Dixon was employed by Leightons and Richmond was employed by the AFCC. I will use the same forms of reference. It is pleaded that all acts alleged in the Pleading were performed by the individual respondents in their capacities as employees of their corporate employers.
As noted above, the AFCC has not appeared. On 28 September 1994 Hill J stayed the proceeding in so far as it related to Mr Woollard. The remaining eight respondents, except Concretes, have withdrawn their defences and joined with the Commission in making submissions as to the level of penalty appropriate to be imposed and penalties have been imposed on them (see (1994) ATPR 41-363; (1995) ATPR 41-406; (1995) ATPR 41-415; and (1995) ATPR 41-431).
THE PLEADING
The following is an account of the facts as alleged by the Commission in the Pleading.
Concretes, Hollands, Multiplex and Leightons (“the Tenderers”) carried on business as construction contractors and were members of the AFCC. On or about 11 August 1988, Australian Construction Services (“ACS”), part of the Commonwealth Department of Administrative Services (“DAS”), invited the Tenderers to submit tenders for the Project.
Central to the Commission’s case is a meeting held in early October 1988 (“the Meeting”) at which, allegedly, two arrangements were made or understandings reached. (For brevity, I will generally use the word “understanding” to signify “arrangement or understanding”.) The terms in which the two understandings are pleaded are important. Paragraphs 15-24 of the Pleading are as follows:
“15.In or about September or October 1988 John Cunningham (‘Cunningham’) Director of Special Projects with the AFCC, for and on behalf of the AFCC, contacted the tenderers and notified them of his intention to conduct a meeting of tenderers in relation to the Haymarket project prior to the closing date for tenders. Cunningham invited an officer from each of the tenderers to attend such a meeting (‘the meeting’) prior to the closing of tenders and each of the tenderers accepted the invitation.
PARTICULARS
Cunningham contacted each of the tenderers by telephone.
16.It was the intention of Cunningham and of each of the tenderers respectively in setting up and agreeing to attend the meeting that each tenderer would be able to take into account, and would take into account in preparation of its tender, any matters agreed at the meeting (which Cunningham and each of the tenderers expected would include arrangements or understandings on the subjects of special fees (‘Special Fee’) and unsuccessful tenderers fees).
17.Prior to the meeting Richmond instructed Cunningham to propose to the tenderers that the successful tenderer should pay to the AFCC a Special Fee of $1,000,000.
18.In or about September or October 1988 the meeting took place at the premises of the AFCC at 655 Pacific Highway (cnr Christie Street) St Leonards in the State of New South Wales.
19. The meeting was attended by:
(a) Cunningham of the AFCC;
(b) Woollard of Concretes;
(c) Duff of Hollands;
(d) Palmer of Multiplex; and
(e) Dixon of Leightons.
20.At the meeting Cunningham proposed that the successful tenderer for the Haymarket project should pay an agreed amount called a Special Fee (‘Special Fee’) to the AFCC.
21.At or arising out of the meeting each of the tenderers, and the AFCC made or arrived at an arrangement and understanding between themselves to the effect that;
(a)each tenderer would, if its tender for the Haymarket project was accepted, pay from the proceeds of the job a Special Fee to the AFCC in the sum of $1,000,000;
(b)each tenderer would take into account in the preparation of its tender, the commitment to pay the Special Fee if successful.
(c)none of the tenderers or the AFCC would disclose to ACS the terms of the arrangement or understanding, or that a meeting of all tenderers had taken place.
PARTICULARS
(i)the arrangement or understanding was partly express and partly implied;
(ii) insofar as it was express it was oral:
(iii)as to the oral part it was constituted by the conversation at the meeting;
(iv)insofar it was implied it arose from the attendance at the meeting of Cunningham, and the representatives of the tenderers and the acceptance of the proposals put at the meeting;
(v)as to subparagraph 21(b) and (c) it was implied in order to give business efficacy to the arrangement or understanding; and
(vi)the Applicant will also rely on the inferences to be drawn from the facts set out in paragraphs 27-30 [it is not necessary to refer to the allegations made in paras 27-30].
22.After the agreement or understanding referred to in paragraph 21 had been reached Cunningham was asked to leave the room, and did so. The meeting resumed with Woollard of Concretes, Duff of Hollands, Palmer of Multiplex and Dixon of Leightons in attendance.
23.At the meeting it was then proposed that the successful tenderer should pay to each of the unsuccessful tenderers an unsuccessful tenderers fee (‘UTF’) in the sum of $750,000.
24.There arose from the meeting an arrangement or understanding between the tenderers to the effect that:
(a)each tenderer would, if its tender for the Haymarket project was accepted, pay from the proceeds of the job a UTF to each of the unsuccessful tenderers in the sum of $750,000;
(b)each tenderer would take into account in the preparation of its tender, the commitment to pay the UTF if successful; and
(c)none of the tenderers or the AFCC would disclose to ACS the terms of the arrangement or understanding or that a meeting of all tenderers had taken place.
PARTICULARS
(i)The arrangement or understanding was partly express and partly implied;
(ii) insofar as it was express it was oral:
(iii)as to the oral part it was constituted by the conversation at the meeting;
(iv)insofar it was implied it arose from the attendance at the meeting of the representatives of the tenderers and the acceptance of the proposals put at the meeting;
(v)as to subparagraph 24(b) and (c) it was implied in order to give business efficacy to the arrangement or understanding; and
(vi)the Applicant will also rely on the inferences to be drawn from the facts set out in paragraphs 32-35 [it is not necessary to refer to the allegations made in paras 32-35].” (emphasis supplied)
The terms of the “Special Fee understanding” pleaded in para 21 and of the “UTF understanding” pleaded in para 24 as understandings that the Special Fee and the UTFs would be paid from the proceeds of the job and that the Tenderers would “take into account” their commitments to pay them in the preparation of their tenders, have assumed particular importance. According to the Pleading, the Tenderers did in fact “take into account” those commitments in the preparation of their tenders.
ACS awarded the contract to Hollands. Richmond caused or procured the AFCC, through its National Executive Committee, to ratify and levy the Special Fee on Hollands. In or about January or February 1989, Hollands paid $200,000 or $300,000 to the AFCC as part of the Special Fee, and subsequently, over a period from 24 July 1989 to 1 February 1990, the AFCC sent a series of seven invoices of $100,000 each to Hollands which it also paid on account of the Special Fee. Each of Concretes, Multiplex and Leightons sent to Hollands a series of invoices which, in the case of Concretes and Leightons, totalled $750,000, and in the case of Multiplex with a set-off of $300,000 totalled $750,000, and represented its UTF. Hollands also paid the amounts of those invoices.
In the result, Hollands paid the Special Fee of $1,000,000 to the AFCC and UTFs totalling $2,250,000 to Concretes, Multiplex and Leightons – a total of $3,250,000. Each of the invoices sent by the AFCC and by Concretes, Multiplex and Leightons purported to make claims on Hollands for “consultancy services” but such services were not provided and were never intended to be provided.
In submitting its tender to ACS, Concretes represented to it (a) that its tender and tender price were free of collusion and fairly priced; and (b) that the tender had been prepared independently and without collusion or discussion with any of the other Tenderers.
RELEVANT PROVISIONS OF THE ACT
The sections of the Act relevant to the claims pressed by the Commission are ss 45 and s 45A (price fixing) and s 52 (misleading or deceptive conduct).
The Commission pleaded that Concretes “contravened” and “attempted to contravene” s 45 (read with s 45A) and that it was “knowingly involved” in similar contraventions by the other Tenderers, but argument has focused on the former allegation. The Pleading recognises that all four Tenderers were parties to both the Special Fee understanding and the UTF understanding but that the AFCC was a party only to the Special Fee understanding.
It is alleged that the making and implementation of the two understandings contravened paras 45(2)(a) and (b) of the Act, which were as follows:
“45(2) A corporation shall not --
(a)make a[n] …arrangement, or arrive at an understanding, if –
(i)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..
(ii)a provision of the proposed … arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or
(b)give effect to a provision of a[n] … arrangement or understanding, … if that provision –
(i) ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..
(ii)has the purpose, or has or is likely to have the effect, of substantially lessening competition.” (emphasis supplied)
Subsection 45A(1) provided, relevantly, that without limiting the generality of s 45, a provision of an arrangement or understanding was deemed for the purposes of s 45 to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision had the purpose, or had or was likely to have the effect, as the case may be, of fixing, controlling or maintaining the price for goods or services to be supplied by the parties or by any of them in competition with each other. The Tenderers were competitive with one another in relation to the supply of construction services in New South Wales.
Under s 76, if the Court is satisfied that a person contravened a provision of Part IV (in which s 45 occurs) or was an accessory of certain kinds to such a contravention, it may order the person to pay to the Commonwealth a pecuniary penalty. The parties agreed, however, that the present hearing was to be confined to the issue of contravention and that if I should find a contravention established, further evidence might be sought to be led relevant to relief to be granted, and, in particular, relevant to the level of any penalty to be imposed.
The Commission pleaded that by making the representations to ACS referred to above, Concretes, in trade or commerce, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, in contravention of the well known prohibition contained in s 52 of the Act. The Commission seeks only a declaration that Concretes did so. It is fair to say that the Commission treated this aspect of the case as relatively unimportant: it was not addressed in written submissions at all and the Commission’s oral submissions relating to it occupied only fourteen lines of transcript.
EVIDENCE
Introduction
The Commission’s evidence was largely documentary and circumstantial. It led no testimonial evidence at all from any of the four Tenderers’ representatives who were the only persons allegedly present at the second part of the Meeting, that is, from Woollard, Duff, Palmer or Dixon, and I am asked to infer that the alleged UTF understanding was reached on the basis of admissions made by Concretes and circumstantial evidence. In relation to the Special Fee understanding allegedly reached in the first part of the Meeting, the Commission led direct testimonial evidence from John Leslie Cunningham (“Cunningham”) alone. Cunningham was “Director, Special Projects” of the AFCC and in that capacity he reported to Richmond, who was the National Executive Director of the AFCC. In addition, the Commission again relied on admissions made by Concretes and circumstantial evidence.
Some of the circumstantial evidence on which the Commission relied was tendency evidence. This was evidence directed to establishing an “industry practice” according to which Special Fees and UTFs were payable and paid on large construction projects. This evidence was largely, but not entirely, documentary. Concretes objected to all evidence relied on as tendency evidence.
The Commission’s documentary evidence was contained chiefly in two lever arch folders which became Exhibit A2 and were arranged under tabs 1 to 11, according to their provenance. On the hearing, some of these documents were admitted into evidence without objection, some were admitted over objection and I deferred ruling on the remaining ones or admitted them provisionally subject to Concretes’ objection and pending delivery of these Reasons. For reasons that will appear below, I have concluded that all evidence relied on by the Commission as tendency evidence, that is, as showing a tendency of Concretes, the other Tenderers and the AFCC to reach understandings of the kinds alleged, is rendered not admissible by s 97 of the Evidence Act1995 (Cth) (“the Evidence Act”). This includes evidence of admissions by Concretes in so far as they were relied on for that purpose, even where admitted into evidence on the hearing. But admissions that were admitted on the hearing remain in evidence for other purposes. I have attached to these Reasons a list of the documents that were contained in Exhibit A2 and of my rulings on them which will, I hope, make the position plain.
Concretes submits that I should infer from the Commission’s failure to call direct testimonial evidence from any of Duff, Palmer, Dixon or Woollard, that their evidence would not have advanced the Commission’s case; cf Jones v Dunkel (1959) 101 CLR 298. In support, it relies on certain documents that it tendered to show that those witnesses were available to the Commission. I turn to those documents now.
As part of the settlements reached between the Commission and Hollands, Multiplex and Leightons, each of those three Tenderers undertook to co-operate with the Commission in relation to its proceeding against Concretes. More precisely, in the case of Multiplex and Leightons, the undertakings, expressed in letters dated 31 August 1995, were to co-operate by making available to the Commission upon reasonable request, any document or class of document sought by the Commission which the Tenderer concerned was reasonably able to produce, and to make available for interview by the Commission’s legal advisers any employee nominated by the Commission. In the case of Hollands, the undertaking was evidenced by a letter dated 20 April 1995 from the Australian Government Solicitor and was an undertaking “to make available, to assist the Commission in its enquiries, appropriate personnel and all relevant documents”. Moreover, in consideration of an indemnity given to him by the Commission’s predecessor, Woollard undertook, if the Commission so required, to provide it with a signed statement of his knowledge of facts surrounding discussions and arrangements in or about September and/or October 1988 between building companies and the AFCC in relation to Special Fees and/or UTFs in respect of the Project, and undertook to give evidence of the facts in court (see (1994) 125 ALR 94 at 97 and 98-99, which the parties agreed I should treat as evidence before me).
Concretes led no testimonial evidence but tendered certain documents, correspondence between its solicitors and the Commission’s solicitor, including the documents to which I have just referred.
The Commission submits that I should not draw a Jones v Dunkel inference against it because it cannot be reasonably expected to call Concretes’ “co-conspirators”. Indeed, it submits that a Jones v Dunkel inference should be drawn against Concretes on account of its failure to call any testimonial evidence to deny the allegations made against it. So far as concerns Woollard who represented Concretes at the Meeting, however, it is common ground that he had ceased to be a director and employee of Concretes prior to the hearing before me. The Commission also conceded that witnesses from the other three Tenderers were “equally available” to both parties. Concretes submits that it was entitled to choose not to lead testimonial evidence from its officers or employees based on its assessment that the evidence admissible against it would not prove contravention of the Act.
I do not draw a Jones v Dunkel inference against either party. I regard the Tenderers’ representatives who attended the Meeting as being as much within one party’s power as the other’s. Nor do I think that a Jones v Dunkel inference should be drawn against Concretes in respect of its failure to call officers or employees to establish that the fees were not “passed on”. It is not obvious that they could have said anything relevant and cogent because, on one view, the case put by Concretes is consistent with its having in fact included the fees as “loadings” in the calculation of its tender price. More generally, I think that Concretes was entitled to put the Commission to proof of its case which, it must be remembered, is one for a penalty.
Cunningham’s testimonial evidence
Cunningham was responsible for organising, when he considered appropriate, meetings of tenderers on various large projects. His uncontradicted evidence, which I accept, is that the term “Special Fee” was a term applied to fees levied by the AFCC on successful tenderers on a variety of projects at the approximate rate of 0.5 per cent to 0.75 per cent of the estimated total value of the project.
Cunningham states that he first became aware of the Project in about July or August 1988. At that time he spoke with Duff whom he knew as the Chief Executive of Hollands. He asked Duff whether there were any projects coming up which might lend themselves to a “Special Fee” for the AFCC. Duff replied that there were a couple, one of which was the Project which was a major undertaking with a price probably around $200,000,000. Duff told Cunningham that he could “probably put $1,000,000 on it”. This sum is 0.5 per cent of $200,000,000. Duff told Cunningham that the Tenderers were: Hollands, Multiplex, Leightons and Concretes. When Cunningham returned to Sydney, he looked up the Project in a publication by “Cordells”. From this he learned that the client was the “Construction Group” within the Administrative Services Department of the Commonwealth; that the estimated “value” of the Project was approximately $131,000,000; that the closure date for tenders was 21 October 1988; and that the Tenderers were the four companies mentioned.
Cunningham telephoned the Tenderers. He spoke to Dixon, whom he knew from previous dealings to be an estimator at Leightons; Palmer, whom he knew from previous dealings to be a director of Multiplex; and Woollard, whom he knew from previous dealings to be a director of Concretes. He said to each of them words to the following effect:
“Hello it is John Cunningham here. I’m telephoning to organise a tenderers’ meeting in relation to the Haymarket project. I understand that your company is a tenderer.”
He suggested a range of times for the meeting.
In October 1988, Cunningham attended a meeting at the AFCC office at Pacific Highway, St. Leonards, New South Wales. Duff, Palmer, Dixon and Woollard also attended. The first fifteen minutes or so were spent in general discussion about the Project, after which, according to Cunningham’s affidavit, he or Duff said:
“[T]he special fee for this tender will be $1,000,000.”
In cross-examination, Cunningham said that it was probably he rather than Duff who said those words. There was no evidence to the contrary and I accept that Cunningham said them. Cunningham added:
“It is a $200,000,000 job. At 0.5% to 0.75% it is at the lower end of the range.”
Each of Duff, Palmer, Dixon, and Woollard nodded his head or said words to the effect of:
“OK” or “Fine”.
Cunningham then left the meeting.
Concretes submits that the evidence to which I have just referred shows a unilateral imposition of the Special Fee by the AFCC through Cunningham, not an “arrangement or understanding” between the four Tenderers. I will say more of this submission later.
In his affidavit, Cunningham states:
“15. I did not agree, at the meeting or at any other time, on behalf of the AFCC nor to my knowledge did any other person on behalf of the AFCC at the time of the meeting or at any other time agree to provide any particular services for payment of the $1,000,000 special fee referred to above.
16. To the best of my knowledge no particular services were provided by the AFCC to the successful tenderer.” (emphasis supplied)
In cross-examination, Cunningham agreed that he had not intended to convey by this paragraph that the AFCC had not rendered any services to the Tenderers but merely that it had not rendered any specifically related to the Project.
Concretes submits that the AFCC was entitled to levy, and did levy, the Special Fee on the Tenderers as a means of funding the services it provided to its members generally.
Tendency evidence – documents relating to all other projects
There are four classes of document, each of which relates to all the other projects to which the Commission refers. The first two classes also relate to the Project.
(i) The schedule provided by Concretes to the Royal Commission
On 30 May 1991, the Royal Commission wrote to Concretes in relation to its hearings into aspects of tendering practices within the building industry, and, in particular, in relation to what it called in the letter “Special Fees” and “Unsuccessful Tenderers Fees”. The letter asked Concretes to provide a schedule listing the “projects in which [Concretes] was a Tenderer, whether successful or not, in respect of which any arrangement for payment of tender fees was made [or] a special fee was payable” (emphasis supplied). The letter stated that the schedule should include the following:
“(a) the name of the project;
(b) date of submission of tender;
(c) the name of successful tenderer;
(d) the name of unsuccessful tenderers;
(e) the amount of unsuccessful tenderer fees;
(f) the amount of the special fee;
(g) the name of each contractor who submitted a cover bid;
(h) details of each tender fee believed to have been paid; and(i) contract value of the project, (if known).”
In response, Concretes supplied a schedule to the Royal Commission headed “TENDERS SUBMITTED FOR WHICH CONCRETE CONSTRUCTIONS (NSW) WAS A TENDERER”. The schedule included information in relation to the Project and other projects. I will set out below a slightly modified version of relevant entries relating to the Project and the other projects on which the Commission relies. Clearly, the schedule must be read with the Royal Commission’s letter to which it responds. I have incorporated in the schedule, in the form of notes, material from the Royal Commission’s letter of request to explain the column headings.
PROJECT
DATE1
OTHER TENDERERS2
CONTRACTOR 3
MEETING HELD AT MBA FEE 4
AFCC FEE
MBA/AFCC FEE
RTC 5
NO
TOTAL RTC’s
RTC to CCL6
REIM. RECEIVED7
REMARKS
Oceanic Hotel, Coogee 7 Apr ‘90 Multiplex
Hutcherson
Stuart
Sabemo
HollandsConcretes ? - $200 000 - $200 000 5 $1 000 000 N/A N/A $200 000 paid to AFCC
$200 000 paid to AFCC ex gratiaNews Limited, Chullora 24 Apr ‘90 Leightons
Sabemo
Thiess
Hollands
EdwardsConcretes
AFCC
or
MBA?
- - $500 000 $100 000 5 $500 000 N/A N/A Fee to be reimbursed to client Airport Central 29 May ‘89 Multiplex
HollandsConcretes AFCC Nil $750 000 - $750 000 2 $1 500 000 N/A N/A Fee no longer applicable due to renegotiated price Commonwealth Bank Refurbishment 28 Apr ‘86 Leightons
Baulderstone
1 otherLeightons MBA $250 000 - - $250 000 3 $750 000 $250 000 $200 000 $50 000 unpaid Metro Plaza North Sydney 26 Sep ‘88 Girvan
Multiplex
Hollands
LeightonsGirvan AFCC - - $1 000 000 $500 000 4 $2 000 000 $500 000 $100 000 Girvan in liquidation
$400 000 unpaidCommonwealth Offices – Haymarket 29 Oct ‘88 Hollands
Multiplex
LeightonsHollands AFCC Nil $1 000 000 - $750 000 3 $2 250 000 $750 000 $750 000 Newcastle Hospital 2 Sep ‘86 Hollands
Leightons
White
Citra/Doran
McCloy-HutchersonMcCloy-Hutcherson MBA $200,000 Nil - $500,000 5 $2,500,000 $500,000 $140,000 $360,000 unpaid St George Building Society 13 Apr ‘87 White
Hutcherson/IVM
LeightonsHutcherson/IVM MBA $250,000 Nil - $250,000 3 $750,000 $250,000 $250,000 1 of submission of tender
2 i.e. in addition to Concretes
3 i.e. the successful tenderer
4 special fee payable to The Master Builders’ Association of New South Wales. In none of the eight cases was a Special Fee payable to both the AFCC and the MBA: it was said to be payable only to one or the other
5 RTC = “Reimbursed Tenderer’s Costs” (“RTC” and “UTF” can be treated as being synonymous for present purposes)
6 UTF (or RTC) payable to Concretes (clearly, this column is not applicable where Concretes was the successful tenderer)7 amount of UTF (or RTC) received by Concretes
The content of the schedule constitutes admissions by Concretes. The importance of this document should not be underestimated: read with the Royal Commission’s letter, it includes admissions by Concretes in relation to the Project: that the Tenderers were the tenderers; that Hollands was the successful Tenderer; that there was an arrangement for payment by the successful Tenderer of a Special Fee of $1,000,000 to the AFCC; that there was an arrangement for payment by the successful Tenderer of a UTF of $750,000 to each of the three unsuccessful Tenderers; that in this connection there was a meeting of some kind at the offices of the AFCC; and that Hollands paid Concretes the whole of Concretes’ UTF of $750,000.
(ii) The AFCC’s Cash Flow Forecasts in respect of Special Contract Fees
The second document relating to projects (including the Project) is one produced by the AFCC. It comprises eleven pages headed “CASH FLOW FORECASTS – SPECIAL CONTRACT FEES”. The first page refers to the “most likely” position for 1989-1990. The remaining pages are in some cases for 1990/91 and in others for 1991/92. They are variously headed “DREAMTIME”, “WORST”, “M[OST] LIKELY” and “BEST”. I admitted into evidence, as well as the entries in these documents relating to the Project, those relating to the News Limited, Chullora project on which the Commission relies on the ground that they might be relevant to complete the evidentiary picture relating to that project, part of which appeared from admissions made by certain officers of Concretes in respect of that project in a conversation referred to below. But as appears later, my final ruling is that none of the AFCC’s Cash Flow Forecast sheets are admitted other than those relating to the Project.
I will describe the entries relating to the various projects below.
(iii) Documents produced by Concretes relating to other projects for which it was a tenderer
The third group of documents relating to the other projects comprises miscellaneous invoices and documents evidencing the making of payments. Documents of that kind in respect of the Project were also produced and were admitted into evidence. It will be recalled that Concretes was the successful tenderer on the Oceanic Hotel, Coogee, News Ltd, Chullora, and Airport Central projects (three projects) and that it was an unsuccessful tenderer on the Commonwealth Bank Refurbishment, Metro Plaza, North Sydney, Newcastle Hospital and St George Building Society, Kogarah, projects (four projects) (as well as on the Project itself). Documents of Concretes were sought to be relied on by the Commission with a view to establishing payments by Concretes as a successful tenderer and to Concretes as an unsuccessful tenderer on the respective projects. I will also refer to those documents below.
(iv) AFCC Service Fee Estimates 1988-1989
There is an AFCC document headed “SERVICE FEE ESTIMATES 1988-89” which, under the heading “ANTICIPATED”, records, inter alia, the following:
“C’wealth Offices
(Bruno) $1,000,000 $100K per month
from Nov 1988
Telecom Haymarket
(all AFCC members) $1,000,000 $100K per month
from Dec 1988”The Commission did not seriously press the other entries in the document. On the hearing, I admitted provisionally the two entries set out above. Dennis Richard Eagar (“Eagar”), who was at relevant times Deputy Executive Director of the AFCC, gave evidence that the second entry related to the Project.
Tendency evidence – the documentary evidence relating to each other project
Unfortunately, in order to deal with the evidence relating to other projects, it is necessary that I describe it in some detail.
The Commission relied on evidence relating to other projects, designated as “Oceanic Hotel, Coogee”, “Metro Plaza, North Sydney”, “News Limited, Chullora”, “Airport Central”, “Commonwealth Bank Refurbishment”, “Newcastle Hospital” and “St George Building Society, Kogarah”.
1. Oceanic Hotel, Coogee project
In respect of this project, Concretes advised the Royal Commission that there was an arrangement for payment of a Special Fee of $200,000 to the AFCC and an arrangement for payment of a UTF of $200,000 to each unsuccessful tenderer; that it (Concretes) was the successful tenderer and that Multiplex, Hutcherson, Stuart, Sabemo and Hollands were the five unsuccessful tenderers; that it (Concretes) had paid the Special Fee of $200,000 to the AFCC, an additional $200,000 to the AFCC ex gratia, and to each of the five unsuccessful tenderers, a UTF of $200,000 making total of $1,000,000.
Special Fee
According to the AFCC’s “DREAMTIME” 1990/1991 forecast revised on 9 July 1990 it was to receive $25,000 in each of July, September and November 1990 and January 1991 – a total of $100,000 for the year. According to the AFCC’s “WORST” 1990/91 forecast revised on 6 February 1991, it was to receive $300,000 in February 1991 - $200,000 better than its “DREAMTIME” forecast for the same period. The two amounts total $400,000, the amount Concretes says it paid. According to the “BEST” 1990/91 forecast, revised on 6 February 1991, the AFCC was to receive $300,000 in February 1991. According to the AFCC’s “WORST” 1991/92 forecast revised on 6 February 1991, it was to receive $400,000 in June 1992. According to the “M[OST] LIKELY” 1990/91 forecast, revised on 6 February 1991, the AFCC was to receive $300,000 in February 1991.
This evidence is confusing. While the first two yearly totals aggregate $400,000, the total amount Concretes told the Royal Commission it paid to the AFCC, none of the figure seems to represent the $200,000 referred to as the AFCC’s fee of which Concretes informed the Royal Commission. It is not even certain whether the totals should be aggregated.
According to a Concretes internal file note of a meeting between Richmond of the AFCC and Messrs White and Cooper of Concretes, the following was agreed:
“$200,000 Oceanic Hotel
via KBH ex gratia : Payable 3 months
that is 10/12/90
........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....
$200,000 Oceanic Fee to AFCC : Payable 10/11/90”This evidence is consistent with Concretes’ response to the Royal Commission.
There are in evidence two invoices from the AFCC to Concretes, both dated 1 February 1991 for $200,000, and both being in respect of:
“Contractual & Industrial Services for NSW projects 1990/91 financial year.”
Again, the total of $400,000 is the total amount Concretes told the Royal Commission it paid to the AFCC. Other documents show that Concretes paid the AFCC in respect of this project $200,000 on 4 February 1991 for AFCC fees, and $200,000 on 8 February 1991 for “Contractual & Industrial Services” – again, a total of $400,000. I infer that the two invoices and the two payments were for the Special Fee of $200,000 and the ex gratia payment of $200,000 of which Concretes informed the Royal Commission and which are referred to in the internal file note mentioned above.
UTFs
On 27 April 1990, Sabemo Pty Ltd invoiced Concretes $50,000 “for the hire and delivery to site [Oceanic Hotel, Coogee] of builders plant and equipment all as advised”. There are three further invoices of the same date, identically worded and for the same sum. That is, on 27 April 1990 Sabemo invoiced Concretes for a total of $200,000. It will be recalled that according to the information which Concretes gave to the Royal Commission, $200,000 was the amount of the UTF payable by Concretes to each of the unsuccessful tenderers, Multiplex, Hutcherson, Stuart, Sabemo and Hollands.
There is an undated invoice from Stuart Bros Pty Ltd to Concretes for “hire of shedding, compressors, overhead gantry materials” for $204,300 less a discount of $4,300 “as agreed”. Although this invoice for $200,000 (the UTF payable by Concretes to Stuart Bros Pty Ltd) is, within Exhibit A2, among the Sabemo and AFCC invoices to Concretes for this project, it does not refer to the project.
2. Metro Plaza, North Sydney project
Concretes informed the Royal Commission that on this project there was an arrangement for payment of a Special Fee of $1,000,000 to the AFCC and an arrangement for payment of a UTF of $500,000 to each of the unsuccessful tenderers; that Girvan was the successful tenderer; that it (Concretes), Multiplex, Hollands and Leightons were the unsuccessful tenderers; and that Concretes had received from Girvan only $100,000 of its UTF of $500,000, leaving $400,000 unpaid, as Girvan was stated to be in liquidation.
Special Fee
The AFCC’s “M[OST] LIKELY” 1989/90 cash flow forecast revised on 9 July 1990 showed it receiving $75,000 in August 1989 and $50,000 in each of the months of October and November 1989 and January 1990 – a total of $225,000 – a relatively small sum in relation to the $1,000,000 Special Fee advised by Concretes to the Royal Commission (one can speculate that this may have been due to Girvan’s being in liquidation). There is no other entry in the AFCC’s Cash Flow Forecast documents relating to this project.
UTFs
Concretes invoiced Girvan $100,000 on 1 May 1989, $100,000 on 1 or 31 (or both) August 1989, and $100,000 on 31 October 1989. Each invoice was in respect of “Metro Plaza, North Sydney Consultancy Services”. Although the documents are not clear, there may be five rather than four separate invoices for $100,000 each. If there are five, they would give a total of $500,000, that is, the amount of the UTF referred to by Concretes in the schedule it supplied to the Royal Commission. Apparently only one invoice was paid by Girvan. This is consistent with the information that Concretes gave to the Royal Commission.
3. News Limited, Chullora project
This project was unusual in that there was testimonial evidence as well as documentary evidence relating to it. I will address the testimonial evidence later.
Concretes informed the Royal Commission that on this project there was an arrangement for payment of a Special Fee of $500,000 to the AFCC or the MBA and a UTF of $100,000 payable to each of five unsuccessful tenderers; that it (Concretes) was the successful tenderer and that the unsuccessful ones were Leightons, Sabemo, Thiess, Hollands and Edwards; and that the fees paid by Concretes and charged to the client (a total of $1,000,000) were to be reimbursed to the client.
Special Fee
The AFCC’s “DREAMTIME” cash flow forecast of special contract fees for 1990-1991 revised on 9 July 1990 showed $50,000 being received for the months of September and November 1990 and January, March and May 1991 – a total of $250,000. For the “BEST” forecast for 1990/91, revised on 6 February 1991, no receipt was forecast. On a separate “DREAMTIME” forecast for 1990/91, revised on 6 February 1991, there was no entry against the News Limited, Chullora project. On a “DREAMTIME” forecast for 1991/92 and a “MOST LIKELY” forecast for 1991/92, both revised on 6 February 1991, $400,000 was forecast to be received in June 1992.
By an internal Concretes memo dated 29 June 1990, John Cooper stated to Paul White that “a sum of $500,000 was ... included for AFCC in our News Limited bid”. The memo continued:
“Regarding News Limited, the amount is $0.5 million – we have received no service for it ... . I will meet with Cunningham and renegotiate the fee for News Limited.
The Estimating Department has now been instructed not to include any special fee provisions, either incoming or outgoing.”
(Concretes submits that this evidence supports its contention that the Special Fee was a charge for services rendered by the AFCC).
An internal Concretes file note dated 2 July 1990 apparently of a meeting between John Cooper (of Concretes), Phil McWilliams unidentified and Cunningham (AFCC), stated:
“With regard to News Limited – since this was basically a schedule of rates job how do we agree a fee? John Cooper suggested we might see a fee of $200,000 being acceptable.
AFCC to check with their internal records and come back – probably by Wednesday 4 July 1990.”
UTFs
Other documents show that on 15 November 1990 Leightons invoiced the successful tenderer, Concretes, $40,000 for “Consulting Service News Ltd Chullora 1st & 2nd Progress Claim” and within Concretes’ records that invoice was allocated to the Sydney Print Complex. It will be remembered, however, that according to the information supplied by Concretes to the Royal Commission, the UTF on this project was $100,000.
4. Airport Central project
Concretes told the Royal Commission that on this project there was a meeting at the office of the AFCC at which an arrangement was made for payment of a Special Fee of $750,000 to the AFCC and an arrangement was made for payment of a UTF of $750,000 to each of two unsuccessful tenderers; that it (Concretes) was the successful tenderer, that Multiplex and Hollands were the unsuccessful tenderers; and that the “fee” (which, in light of documents discussed below apparently refers to the Special Fee), was “no longer applicable due to renegotiated price”.
Special Fee
According to the AFCC’s “M[OST] LIKELY” forecast for 1989/90, revised on 9 July 1990, the AFCC forecast receiving no fees on this project. According to its “DREAMTIME” forecast for 1990/91, revised on 9 July 1990, it predicted receiving for that year $100,000 in each of the months of October, November and December 1990 and January and February 1991. For the year 1991/92, there are “DREAMTIME”, “M[OST] LIKELY” and a second “DREAMTIME” forecast in evidence. According to the “DREAMTIME” forecast for 1991/92, revised on 9 July 1990, the AFCC forecast receiving $50,000 in each of the months of July and October 1991 and January and April 1992 – a total of only $200,000.
By an internal Concretes memo dated 29 June 1990, Mr Cooper advised Mr White that it had come to Mr Cooper’s notice that $750,000 had been included as an AFCC fee in Concretes’ bid for Airport Central and that since the project had been tendered for more than a year earlier and was subsequently renegotiated with no reference to the original tender, he (Mr Cooper) could see no entitlement on the AFCC’s part to be paid. He advised Mr White that the “Estimating Department” had been instructed “not to include any special fee provisions, either incoming or outgoing”.
An internal Concretes file note dated 2 July 1990 referred to a meeting between Mr Cooper of Concretes, a Mr Phil McWilliams, and Cunningham over the question of the AFCC’s fee payable in respect of the Airport Central project in which Concretes’ position was that in view of the change to a “screwed down” negotiated fixed price job, the sum of $750,000 should not be payable to the AFCC. According to the note, Mr Cunningham had suggested that there was an agreement that if the contract became a “negotiated” one, $500,000 rather than $750,000 would be the AFCC’s fee. The file note continued:
“CCL suggested that we could not afford anything – AFCC suggested perhaps postponing/deferring the fee to acceptable long term payments or wait for another job that could afford it.”
Finally, there is in evidence a file note of a meeting attended by Messrs White and Cooper of Concretes and Richmond at which it was agreed that Concretes should make an ex gratia payment of $250,000 by 30 June 1992 “[t]o cover changed Airport Central condition”.
UTFs
On 11 October 1990, Hollands invoiced Concretes for $200,000 for “Consulting Services (Airport Central)” from July 1990 to October 1990; on 5 November 1990 Hollands invoiced Concretes for $50,000 for “Consulting Services (Airport Central)” for November 1990; on 5 December 1990 Hollands invoiced Concretes for $50,000 for “Consulting Services (Airport Central)” for December 1990; on 14 January 1991 Hollands invoiced Concretes for $50,000 for “Consulting Services (Airport Central)” for January 1991; and on 8 February 1991 Hollands invoiced Concretes for $50,000 for “Consulting Services (Airport Central)” for February 1991. The total of these invoices was $400,000, that is, $350,000 short of the $750,000 referred to by Concretes in the schedule which it provided to the Royal Commission. On two of the invoices the words “PAY AS SUB CONTRACT” are stamped. There are also two documents allocating invoices to this particular project.
5. Commonwealth Bank Refurbishment project
Concretes advised the Royal Commission that at a meeting held at premises of the MBA, it was arranged that on this project a Special Fee of $250,000 was payable to the MBA and a UTF of $250,000 was payable to each of three unsuccessful tenderers; that Leightons was the successful tenderer and that the unsuccessful ones were Concretes, Baulderstone and one other unidentified company; and that Leightons had paid to Concretes $200,000 of the $250,000 UTF payable to it, leaving $50,000 unpaid.
Special Fee
The AFCC’s Cash Flow Forecast sheets do not include any fee payable to it in respect of this project.
UTFs
There are documents in evidence showing that Concretes invoiced Leightons for “Consultancy Services” in respect of the “Commonwealth Bank” for a sum of $50,000 on each of 17 May 1988 and 8 February 1989, and $150,000 on 9 November 1989. The first of these invoices was apparently paid on 28 June 1988, the second on 16 May 1989, and the third, as to $100,000 only, on 2 January 1990, leaving a balance of $50,000 outstanding. This is consistent with what Concretes had told the Royal Commission.
6. Newcastle Hospital project
Concretes told the Royal Commission that there was a meeting at the MBA premises when an arrangement was made that on this project a Special Fee of $200,000 would be payable to the MBA and a UTF of $500,000 would be payable to each of five unsuccessful tenderers; that “McCloy-Hutcherson” was the successful tenderer and that Concretes and four other construction companies, Hollands, Leightons, White and Citra/Doran, were unsuccessful tenderers; and that of the UTF of $500,000 payable to Concretes, McCloy-Hutcherson had paid only $140,000 leaving $360,000 unpaid.Special Fee
There is in evidence an MBA document relating to a meeting of representatives of the tenderers on the Newcastle Hospital project. The document does not refer to any fee payable to the MBA or to UTFs payable to unsuccessful tenderers. I admitted the document into evidence as demonstrating only that Hollands, Concretes and Leightons were in competition with each other in the construction services market. (Concretes did not submit that I should not find that the Tenderers were in competition in that market.)
Naturally, the AFCC’s Cash Flow Forecast sheets do not refer to this project.
UTFs
Other documentary evidence shows that Concretes invoiced K B Hutcherson Pty Ltd $180,000 on 31 October 1989 for “Consultancy Services on McCloy-Hutcherson Joint Venture Newcastle Hospital”; that the total amount due by the Hutcherson-McCloy Joint Venture to Concretes was $500,000; that Concretes had received $140,000 of which $70,000 was attributed to K B Hutcherson leaving that company owing $180,000 of $250,000; that Concretes invoiced McCloy-Hutcherson Pty Ltd for $160,000 on 6 September 1989 for “Consultancy Services on Newcastle Hospital Project”; and that on 21 April 1989 Concretes invoiced McCloy-Hutcherson Pty Ltd for $140,000 for “Consultancy Services on Newcastle Hospital Project.”
7. St George Building Society, Kogarah project
Although neither party referred to this project on the hearing or in written submissions, the Commission did not state that it did not rely on it and I presume that it still does so.
Concretes advised the Royal Commission that on this project there was a meeting at the MBA premises when an arrangement was made for payment of a special Fee of $250,000 to the MBA and a UTF of $250,000 to each of three unsuccessful tenderers; that the successful tenderer was K B Hutcherson Pty Ltd and that there were three unsuccessful tenderers namely, Concretes, White and Leightons; and that Concretes had received its UTF of $250,000 from Hutcherson.
Special Fee
Naturally, the project is not shown in the AFCC’s Cash Flow Forecast sheets.
UTFs
Documents produced by Concretes show that it invoiced Hutcherson on 6 September 1989 for $50,000 for “Consultancy Services on St George Building Society Kogarah” and that “IVM/KBH Joint Venture” paid that amount on 1 November 1989; that Concretes invoiced Hutcherson $50,000 on 8 February 1989 and that IVM/KBH Joint Venture paid that amount on 9 May 1989; and that Concretes invoiced Hutcherson $50,000 for “Consultancy Services” on 17 May 1988 and that IVM/KBH Joint Venture paid that amount, apparently on 22 September 1988. Of course, these amounts total only $150,000.
Mr Bird’s evidence in relation to the News Ltd, Chullora project and industry practice
The Commission read an affidavit of Gary Norman Thomas Bird sworn 6 January 1998. That affidavit recounted admissions made to him by officers of Concretes and was directed, at least in part, to establishing that on the News Limited, Chullora project, Concretes, the successful tenderer, had been party to an understanding with competing tenderers for the inclusion in tenders of a Special Fee and UTFs. The admissions also went to the existence of an industry practice and to how Concretes treated the fees in the preparation of its tender for that project. In his affidavit, Mr Bird also provided direct evidence of certain matters touching the News Limited, Chullora project.
It is convenient to recall that Concretes informed the Royal Commission that on the News Limited, Chullora project, there were arrangements for payment of a Special Fee of $500,000 to the AFCC or the MBA and a UTF of $100,000 to each of the five unsuccessful tenderers; that it (Concretes) was the successful tenderer and that it (Concretes) was to reimburse the fees totalling $1,000,000 to its client (this was an implied admission that Concretes had paid the Special Fee and the UTFs).
Mr Bird’s evidence was to the following effect. The News Limited, Chullora project was the construction for News Limited of its Sydney print complex at Chullora. From about February 1980 until 30 June 1994 Mr Bird was employed in various managerial roles by News Limited and from about June 1989 until he retired in 1994 he was Project Manager in respect of the project. The head building contract for the project was for about $108,000,000. Six construction companies submitted tenders. (Concretes informed the Royal Commission that it submitted its tender for the News Limited, Chullora project on 24 April 1990.) Six companies, Concretes, “A W Edwards”, Leightons, Hollands, Sabemo Pty Ltd and Thiess Contractors Pty Ltd submitted tenders “in a ‘Schedule of Rates’ format”. On 27 June 1990 a “letter of intent” was forwarded to Concretes on behalf of News Limited and subsequently a formal contract was entered into and Concretes commenced work.
On 25 January 1991 Ross Coulthart from the television programme “A Current Affair” informed Mr Bird by telephone that someone had alleged that News Limited had been “ripped off” by the tenderers who had added $1,000,000 to their tender amounts: $500,000 for the MBA and/or the AFCC and $500,000 for the unsuccessful tenderers.
In February 1991 Mr Bird was contacted by staff of the Royal Commission who sought information about the project which he provided. In May 1991 he wrote to the Royal Commission advising of his conversation with Mr Coulthart. On 23 May 1991 he read an article in the “Daily Telegraph Mirror” about collusive tendering by construction companies and a particular reference to the News Limited, Chullora project. Mr Bird telephoned John Cooper, the New South Wales General Manager of Concretes, and read to him an extract from the newspaper article. They arranged to meet the following day.
On Friday 24 May 1991, Mr Cooper, together with Steve Paine, a Works Manager employed by News Limited, met with Mr Cooper and Chris Denny, a director of Concretes. Mr Bird handed Messrs Cooper and Denny a copy of the newspaper article. According to Mr Bird’s affidavit, the following exchange took place:
“[Bird]: I’d like your comments as to whether there is any truth to the article.
[Denny]:Yes, there was an agreement between us and the other tenderers to pass on $1 million tendering costs to News Limited.” (emphasis supplied)
According to Mr Bird’s affidavit, at various points in the conversation Mr Cooper said words to the following effect:
“The passing on of tendering costs has been an industry practice for the last 50 years. There is no big construction organisation that doesn’t take part in it. We only do it in about 2 out of every 20 to 40 tenders – in less than 5% of our jobs. It is usually on major projects.”
and
“One of the reasons for passing on the tendering costs to clients is that a lot of clients put builders to the expense of tendering just so they can obtain finance.”
and
“The AFCC called a meeting of the main tenderers to discuss this job and set the fees. The AFCC set the fees at $500,000 for itself and $100,000 for each tenderer as the cost of compiling the tenders. The AFCC’s and the MBA’s published rates which successful tenderers have to pay aren’t sufficient to cover their running costs, so this is how they raise their running costs.” (emphasis supplied)
According to Mr Bird, at one point during the meeting the following exchange took place between himself and Mr Denny:
“[Mr Bird]: So where was the $1 million in your tender costings?
[Mr Denny]:Partly in the establishment costs and partly spread throughout the schedule of rates.”
During the meeting, Mr Bird made handwritten notes of the conversation as it progressed. He annexed a copy to his affidavit. Mr Bird’s handwritten notes included the following:
“Indust Practice 50 yrs”
“~ 2 out 20-40 tenders’
< 5% usually major projects
lge. costs compiling Tender.
Reasons supporting tendering expense
– Lot tenders called by client for finance”“Re News Job.
AFCC called a meeting
& put fee $500,000
& $100,000 each
Tenderer as cost
of compiling Tenders.”“Fee either into prelim section
& call fees
OR
as C.D [Chris Denny] says
Part into estab. costs
& part throughout the rates.”
Later the same day, Mr Cooper asked Mr Bird to prepare minutes of the meeting and to send them to him (Mr Cooper). According to Mr Bird, again on the same day, Friday 24 May, he sent a memo to his superior, Mr Muscat, reporting on the meeting. The memo included the following:
“Summary of Matters Discussed.
1. C.C.L. factored an extra $1 million into their tender.
2.The $1 million was hidden partly in establishment costs, and partly throughout the schedule of rates.
3. C.C.L. has not paid any money to the other contractors at this stage.
4.It has been industry practice over the last 50 years for major tenderers to enter into agreements where the successful tenderer pays the tendering costs of the unsuccessful tenderers. As an example, The Australian Federation Of Construction Contractors (A.F.C.C.) called a meeting of prospective tenderers about a new job and put an A.F.C.C. fee of $500,000 on the job for itself, and $100,000 to each of the tenderers towards the cost of compiling tenders. C.C.L’s latest legal advice is that this practice is not legal from a trade practices point of view. There would not be one big contractor that is not party to this practice.
5.The A.F.C.C. and M.B.A. published rates on levies for construction jobs are insufficient to cover their normal running costs. Most of the major companies are now with The A.F.C.C. The tendering fees are usually hidden in the preliminary section of the tenders.
6.C.C.L. would normally factor in the above tendering costs in around 5% of their major projects, as there is a large cost associated with preparing tenders, and a lot of tenders are called by clients purely to arrange financial transactions.”
The following Monday 27 May, or partly on Friday 24 May and partly on Monday 27 May, Mr Bird had minutes typed up of the meeting based on the handwritten notes he had made during it and on his own recollection of the conversation, which, he said, was at that time “very clear”. He stated that in preparing the typed minutes, he supplemented and clarified his handwritten notes, and that the typed minutes, a copy of which was also annexed to his affidavit, were an accurate record of the substance of what had occurred at the meeting. The minutes included the following (he said that “GB” referred to himself, Gary Bird, “JC” referred to John Cooper, and “CD” referred to Chris Denny):
“Matters Discussed.
1 C.C.L. Response to Allegations
1.1G.B. Handed J.C. & C.D. a copy of an article titled “Public money in building rort” which appeared on page 7 of the Metro edition of The Daily Telegraph Mirror on the 23.5.91. He asked C.C.L. to comment if there was any truth in the article.
1.2C.D. admitted C.C.L. and other tenderers had been involved in a scheme to pass $1 million tendering costs on to News Ltd.
1.3 J.C. advised :
(i)The passing on of tendering costs to clients has been an industry practice for the last 50 years; and
(ii)C.C.L. adopts this practice in less than 5% of their jobs, and it usually occurs on major projects; and
(iii)One of the reasons supporting the passing on of the tendering costs to clients is that a lot of clients put builders to the expense of tendering just so the client can obtain finance; and
(iv)C.C.L’s latest legal advice is this industry practice may not be legal from the trade practices point of view.
2.Involvement Of The Australian Federation Of Construction Contractors (A.F.C.C.) In News Limited’s Job.
2.1J.C : The A.F.C.C. called a meeting of the main tenderers to discuss The News Ltd. Job and set fees.
2.2J.C. : The A.F.C.C. set the fees at $500,000 for the A.F.C.C. and $100,000 for each tenderer as the cost of compiling the tenders. There is no big construction organization that does not take part in this practice. The A.F.C.C. and the M.B.A. publish rates which successful tenderers pay to cover the A.F.C.C. and M.B.A. running costs. However these published fees are nowhere near sufficient to cover running costs.
2.3........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
3.Incorporating The $1 Million Fee.
In response to a question by G.B, C.D. advised the $1M fee was partly contained in the establishment costs, and partly spread throughout the schedule of rates.”
On or about Monday 27 May, Mr Bird forwarded a copy of the minutes to Mr Cooper who did not indicate to Mr Bird that he had not received the document or that the minutes were inaccurate.
In cross-examination, Mr Bird agreed that his affidavit was based on the typed minutes. Concretes draws attention to the fact that the minutes did, but that the handwritten notes did not, mention “passing on” and that none of the documents referred to a pre-arrangement for “passing on”.
Following negotiations, Concretes repaid the sum of $1,000,000 to News Limited. Concretes’ cheque for $1,000,000 was accepted on behalf of News Limited on the following conditions which were set out in Concretes’ covering letter of 23 July 1992:
“1.That payment is in full and final satisfaction of all and any alleged claims made in relation to certain tendering practices at or about the time of the submission of our original tender;
2.That the payment is without admissions as to the lawfulness or otherwise of those practices and is made as a commercial gesture of goodwill between us;
3.That the terms of our resolution of this matter shall remain confidential between us and shall not be disclosed to any third party.”
Tendency evidence – the law
Subsection 55(1) of the Evidence Act provides:
“55. (1)The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding.”
Concretes’ first submission is that the evidence relied on by the Commission as tendency evidence does not pass this statutory test of relevance.
Subsection 97(1) of the Evidence Act is as follows:
“97. (1)Evidence of the character, reputation or conduct of a person, or a tendency that a person has or had, is not admissible to prove that a person has or had a tendency (whether because of the person’s character or otherwise) to act in a particular way, or to have a particular state of mind, if:
(a)the party adducing the evidence has not given reasonable notice in writing to each other party of the party’s intention to adduce the evidence; or
(b)the court thinks that the evidence would not, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value.”
The Dictionary in the Evidence Act provides that:
“Probative value of evidence means the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue.”
Clearly, the definition takes in the language of s 55(1). The “probative value” of evidence can therefore be conceived of as the “extent of relevance” of evidence or the “extent to which evidence is rationally probative of the existence of a fact in issue”.
By the time of the hearing, para (a) of s 97(1) no longer presented a difficulty. Concretes’ second submission is that the evidence on which the Commission relies as tendency evidence is made inadmissible by the operation of s 97(1)(b). Section 97(1)(b)’s notion of “significant probative value” has been held to mean something more than the mere relevance to which s 55(1) refers but something less than “substantial” probative value: see the criminal cases, R v Lockyer (1996) 89 A Crim R 457 at 459; R v Lock (1997) 91 A Crim R 356 at 361; R v AH (1997) 42 NSWLR 702 at 709; R v Fordham (Hunt CJ at CL, Smart J, Howie AJ, 2 December 1997, unreported) at 15 (Howie AJ). The expression “significant probative value” in s 97(1)(b) was considered by Lehane J in the civil proceeding, Zaknic Pty Ltd v Svelte Corporation Pty Ltd (1995) 61 FCR 171 at 175-176. His Honour thought that because the expression called for more than mere statutory relevance, it was permissible to turn for guidance to cases decided before the Evidence Act came into force. After referring to the cases, two of which are noted below, his Honour concluded:
“It is clear ... that where in reported cases evidence of this kind has been admitted, it has been, as a matter of commonsense, clearly and strongly probative of the relevant fact in issue: ... ” (at 176)
(See too FAI General Insurance Co Ltd v McSweeney (1998) 10 ANZ Insurance Cases 61-400 at p 74,406).
In Aroutsidis v Illawarra Nominees Pty Ltd (1990) 21 FCR 500, which pre-dated the Evidence Act, the relevant fact in issue was whether certain representations had been made. The applicants sought to lead evidence of representations made to two other persons. That evidence was objected to on the ground that it was not logically probative of the fact in issue. Hill J allowed the evidence to be led subject to the objection. His Honour reviewed the authorities and concluded that the evidence should be rejected on the ground that it was not logically probative of the terms of the particular conversation between the relevant respondent and the applicants.
In D F Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 28 FCR 597, which also pre-dated the Evidence Act, the relevant “fact in issue” was again whether particular representations had been made. The applicants alleged that an officer of the respondent Bank had made certain representations, mainly oral, on the faith of which they had entered into foreign currency loan agreements with the Bank. They sought to lead evidence of “similar” statements made to three other individuals by the same officer. Gummow J drew attention to the fact that for the purpose of the general law principles governing the admissibility of “similar fact evidence”, it is first necessary to understand when “facts” are to be treated as “similar”. His Honour distinguished between similarity in wider and narrower senses and pointed out that two facts may have a common feature and so be similar in a wide sense, yet not be similar in a narrower sense because the feature is irrelevant to the purpose of the enquiry at hand. His Honour said:
“Facts similar, in the narrow meaning, to the fact in issue will be relevant thereto in the legal sense; it is only when this kind of relevance has been found that the question arises as to whether such similar facts, though relevant, are not admissible because of the operation of the exclusionary rule or discretion restricting the admissibility of ‘similar fact’ evidence ... “ (at 605)
Emphasising that the dealings by the officer with customers varied according to the circumstances and that it was necessary for the applicants to establish the specific representations made to them, his Honour disallowed the evidence of what the officer had said to other customers as not being legally relevant.
Although both Aroutsidis and Lyons were decided under the general law, as Lehane J observed in Zaknic, such cases provide guidance as to the construction of the expression “significant probative value” in s 97(1)(b).
Aroutsidis, Lyons and Zaknic were civil cases, whereas the others noted above decided under s 97 were criminal. The same principles apply in both classes of case, but in practice “similar fact” or “tendency” evidence, while always considered carefully before being admitted, seems to have been admitted even less readily in criminal cases than in civil ones. The present case is not criminal: contravention of s 45 is not declared to be an “offence” and s 76 empowers the Court to order payment of a “pecuniary penalty” not a “fine”. Accordingly, the legislature intended that the civil rather than the criminal standard of proof apply. On the other hand, it cannot be ignored that the section provides for payment of substantial pecuniary penalties to the Commonwealth, and, to this extent, can be seen as “quasi-criminal”.
Concretes finally submits that if I should conclude that the evidence relied on by the Commission as tendency evidence is relevant and is not rendered inadmissible by s 97, yet I should, in the exercise of my discretion, exclude it under s 135 of the Evidence Act. That section provides, relevantly, as follows:
“135. The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:
(a) be unfairly prejudicial to a party; ... ”
Conclusion on tendency evidence
If the evidence tendered by the Commission as tendency evidence fails to meet the relevance test laid down in s 55 of the Evidence Act it is not admissible, and if it does meet that test it is admissible unless s 97 or s 135 lead to a different result: see s 56 of the Evidence Act.
The first task under both s 55 and s 97 is to identify the “fact in issue in the proceeding” in relation to which the evidence is tendered. The Australian Law Reform Commission (“ALRC”) in its “Interim Report No 26 on Evidence”, explained the statutory test of relevance in the following terms:
“The definition requires a minimal logical connection between the evidence and the ‘fact in issue’. In terms of probability, relevant evidence need not render a ‘fact in issue’ probable, or ‘sufficiently probable’ – it is enough if it only makes the fact in issue more probable or less probable than it would be without the evidence – i.e. it ‘affects the probability’. The definition requires the judge to ask ‘could’ the evidence, if accepted, affect the probabilities. Thus, where a judge is in doubt whether a logical connection exists between a fact asserted by evidence and a ‘fact in issue’, he should hold that the evidence is relevant if satisfied that a reasonable jury could probably find such a logical connection. An indirect connection with a matter in issue is sufficient ... .” (vol 1 para 641, pp 350-351)
In a footnote to this passage, the ALRC stated:
“The expression ‘fact in issue’ should be interpreted as referring to the issues in the proceedings defined by substantive law and pleadings ... ”
The “fact in issue in the proceeding” in relation to the Special Fee understanding is, under para 21 of the Pleading, whether at or arising out of the Meeting “each of the tenderers, and the AFCC made or arrived at an arrangement and understanding between themselves” to the effect of the matters set out in subparas (a), (b) and (c) of para 21(set out earlier). Similarly, the “fact in issue in the proceeding” in relation to the UTF understanding is, in terms of para 24, whether there arose from the Meeting “an arrangement or understanding between the tenderers to the effect” of the matters set out in subparas (a), (b) and (c) of para 24 (also set out earlier). The “fact in issue in the proceeding” is not, for example, necessarily limited to the question whether the words which Cunningham testified were spoken at the first part of the meeting, were in fact spoken. The speaking of those words was a primary fact sought to be proved from which I am asked to draw an inference as to the existence of the fact in issue as defined in the Pleading.
Each piece of evidence in relation to the other projects must be assessed against the statutory test as it applies to a fact in issue in the sense just mentioned. Because I have concluded that none of that evidence passes the “significant probative value” test of s 97, I do not find it necessary to decide whether it passes the threshold test of relevance laid down in s 55. I will assume that it does.
Section 97 endorses the common law’s healthy scepticism in relation to similar fact evidence. The evidence relied on by the Commission as tendency evidence in the present case is evidence in relation to the other projects found in: the admissions made by Concretes in the schedule of information which it furnished to the Royal Commission; the AFCC’s Cash Flow Forecast sheets; the internal documents of Concretes in relation to invoicing and payment in respect of other projects; the AFCC’s Service Fee Estimates 1988-1989; and the testimony of Mr Bird of the admissions made by officers of Concretes in relation to the News Limited, Chullora project. None of this evidence went to the primary facts by which the arrangements or understandings in respect of other projects were made or arrived at. Perhaps the strongest of this body of evidence comprises the admissions made by Concretes to the Royal Commission and Mr Bird’s evidence of his conversations with Messrs Cooper and Denny of Concretes.
I accept that the evidence establishes a practice in the construction industry of the payment of Special Fees to the AFCC and UTFs to unsuccessful tenderers in respect of substantial construction projects. But I think that this evidence does not, either by itself or having regard to the other evidence adduced by the Commission, have significant probative value in relation to the precise question whether, at the Meeting in early October 1988 the AFCC and the Tenderers reached the Special Fee understanding and the Tenderers reached the UTF understanding, involving in each case, at base and at least, mutual commitments or undertakings that each Tenderer would, if the successful one, pay the fees (see below). Therefore I reject the evidence relating to other projects in so far as it is relied on for the purpose mentioned.
Further observations can be made about the AFCC’s Cash Flow Forecast sheets, the Concretes documents relating to invoicing and payment, and the AFCC’s Service Fee Estimates for 1988-1989. The AFCC’s Cash Flow Forecast sheets represent some unidentified person’s forecast, on various bases, of receipts by the AFCC of Special Fees from construction projects. The forecasts are confusing. They seem to be characterised by internal inconsistencies and in some respects do, and in other respects do not, sit well with the terms of the arrangements of which Concretes informed the Royal Commission.
Similarly, Concretes’ internal documents in relation to invoicing and payment in respect of the other projects are, on their face, not suggestive of the understandings pleaded. So far as the documents themselves reveal, the services described in the invoices may have been rendered, and such payments as are proved, may have been made for those services.
I do not overlook the fact that s 97 permits me to take into account other evidence adduced by the Commission in deciding whether the evidence presently discussed has significant probative value. But it seems inappropriate to make the initial assumption that the Special Fee understanding and the UTF understanding as pleaded were arrived at and then to admit the invoices on the basis that in conformity with that assumption, they are to be taken as meaning what they do not say.
Finally, in relation to the AFCC’s Service Fee Estimates 1988-1989, I reject all entries other than that for the Project (“Telecom Haymarket”) for the reasons I gave above in relation to the AFCC’s Cash Flow Forecast sheets.
If I had been of the view that the evidence relied on as tendency evidence, to which I have referred, had significant probative value, I would have exercised my discretion under s 135 not to admit it on the ground that its probative value is “substantially outweighed by the danger that the evidence might: ... be unfairly prejudicial to [Concretes]”. While the present proceeding is not a criminal one, the Commission seeks imposition of, no doubt, a substantial penalty on Concretes. In these circumstances, I am required to resist any temptation to find, on the basis of evidence of an industry practice, including Concretes’ own participation in that practice on other occasions, that at the Meeting, Concretes arrived at the two pleaded understandings in respect of the Project.
A Full Court of this Court dismissed an appeal: (1993) 44 FCR 206. Lockhart J, with whom Spender and Lee JJ agreed, set out the above passage and said (at 228):
“His Honour did not find that there could never be transgression of s 45, aided by s 45A, unless there was an agreement or understanding as to a particular price in the sense of a precise price. His Honour specifically recognised that there may be a relevant arrangement to fix, control or maintain prices notwithstanding there is no agreement to charge literally identical prices. What his Honour said was that on the facts of this case a decision as to price is a critical factor because of the reasons which he gave and to which I have referred. In short, small differences in price may be critical to a motorist in determining from which service station petrol will be purchased. A motorist probably attaches no particular loyalty to any specific brand as against another. The movements in the recommended price between 16 July and 31 October were almost always by 1 or 2 cpl steps. This suggested to his Honour a market in which fine adjustment of price is important.
I perceive no error in those statements of his Honour; in my opinion they are correct. I reject the argument that his Honour was saying that in the absence of an arrangement or understanding as to a specific price there could never be a transgression of s 45, aided by s 45A.” (emphasis supplied)
The facts of the case were special. I do not think that the passages set out, when read in context, signify that in all cases where a market is characterised by a high degree of price competition, an agreement, arrangement or understanding will not be caught by s 45A unless it fixes a price or price increase with some specificity. (Concretes points to evidence in ACS’ documents that there was a downturn in the workload of construction companies with consequential keenness of price competition favourable to ACS here.) Rather, I think that Heerey J was making the point (to which the Full Court also drew attention) that, in the special circumstances of the market with which he was concerned as one characterised by very fine differences in the prices being charged by competitors for the same product and an absence of brand loyalty, coupled with the vagueness of the alleged arrangement or understanding, it was unlikely that the respondents had come to an arrangement or understanding within s 45A, involving, as it would have done on the facts, the assumption of mutual obligations.
In Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 7 FCR 534, a Full Court of this Court apparently accepted that an arrangement or understanding between petrol retailers to raise their prices by “four or six cents a litre” was within s 45A. (I say “apparently” because there was also evidence that a specific price was mentioned by one of the retailers and it is not clear whether the Court acted on the basis that the arrangement or understanding was one for that price or for the increase in price. It may, of course, have been that the Court did not see that the distinction would lead to any difference in result.)
I do not think that some specificity as to price is a necessary element of the notion of “controlling” price within s 45A. To insist on such a requirement would be to introduce an unauthorised general limitation on the notion and would allow the statutory prohibition to be easily circumvented – a result that cannot have been intended and should not be lightly accepted.
On the assumption in favour of Concretes that the concept of controlling price involves a degree of proximity between the arrangement or understanding and the price charged or to be charged, in my view that requirement is satisfied in the present case, even though the UTF understanding did not encompass some of the elements contended for by the Commission. True, the UTF understanding was, but was no more than, that the successful Tenderer would pay a UTF of $750,000 to each of the three unsuccessful Tenderers. But the question that arises is simply the factual one whether, on the evidence, that limited understanding was likely as at the time of the Meeting to have the effect of controlling the price to be charged to ACS. In my opinion, on the evidence before me and for reasons mentioned later, it was, and, if it should be relevant, the Tenderers understood that it was.
Concretes also submits that because the supposed UTF understanding left the Tenderers with a great deal of freedom as to the price which they would charge, it did not have the effect of controlling price competition and therefore did not fall within the terms of s 45A. It seems to me, however, that putting to one side de minimis cases, the degree of control, although relevant to penalty, is not relevant to the issue of contravention. I do not consider the degree of control here to have been de minimis.
It may be suggested that support for Concretes’ present submission is to be found in Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437 (“Radio 2UE”). In that case the applicant, an AM radio station, complained about an arrangement by which the respondents, two commercial FM radio stations operating in the same market as the applicant, issued a “combined Sydney FM rate card” inviting advertisers to advertise on both stations at the combined rates of charge shown on the card. Those rates were in fact simply aggregates of the rates charged by the respective respondents, who remained free to change their own individual rates.
At first instance, Lockhart J held that the arrangement did not infringe s 45 (read with s 45A). His Honour said (at 448):
“It is important to distinguish between arrangements (I use this expression for convenience to encompass also contracts and undertakings) which restrain price competition and arrangements which merely incidentally affect it or have some connexion with it. Not every arrangement between competitors which has some possible impact on price is per se unlawful under the section.
Nor in my view was s 45A introduced by Parliament to make arrangements unlawful which affect price by improving competition. It is fundamental to both ss 45A and 45 that the relevant conduct, in purpose or effect, substantially lessens competition or would be likely to do so. If competition is improved by an arrangement I cannot perceive how it could be characterized as a price fixing arrangement within the ambit of those sections. This case is an example in my view of such an arrangement. Later cases will doubtless provide other examples. If competitors make an arrangement to establish a better market by, for example, forming an organization through which they operate by exchanging information in ways that make prices more competitive, I do not see how such an arrangement is, per se, prohibited by s 45A.
My approach to the construction and operation of s 45A is generally in accord with the approach taken by the courts of the United States of America in decisions under the Sherman Act. They reflect the concern of those courts to carefully consider the relevant conduct before characterizing it as an arrangement in restraint of price competition and they distinguish between arrangements which directly or indirectly restrain price competition and those which merely incidentally affect it: see Board of Trade of the City of Chicago v United States (1918) 246 US 231 and United States v Socony-Vacuum Oil Co Inc (1940) 310 US 150.” (emphasis supplied)
Lockhart J’s decision was affirmed on appeal: (1982) 68 FLR 70. The Full Court said (at 72):
“In our view the word ‘fixing’ in s 45A takes colour from its general context and from the words used with it — ‘controlling or maintaining’ — and not every determination of a price, following discussion between competitors, will amount to a price ‘fixing’. There must, we believe, be an element of intention or likelihood to affect price competition before price ‘fixing’ can be established. This will often be a matter of inference, requiring no direct evidence for it to be established.” (emphasis supplied)
The Full Court did not have to decide, however, and left open the question whether Lockhart J was correct in asserting that a price-fixing arrangement with a net advantageous effect on competition would not constitute a contravention of s 45. That question does not arise in the present case: Concretes does not submit that the supposed UTF understanding improved competition or might have done so.
The passages set out above were not intended to signify that in every case of alleged fixing, controlling or maintaining of price, it must be shown that the agreement, arrangement or understanding had, or was likely to have, the effect described in s 45 (a substantial lessening) in relation to price competition. So to require would be to ignore the plain “per se” nature of s 45A. Heydon has suggested that the words highlighted in the passage from the Full Court’s judgment were probably not meant to be anything more than a paraphrase of the statutory words “has the purpose, or has or is likely to have the effect ... of fixing, controlling or maintaining ... the price for ... goods ... supplied ... by the parties to the contract ... in competition with each other” (op cit [4.800] at 2224).
An agreement, arrangement or understanding that has the effect of fixing, maintaining or controlling price will have some effect on price competition, although not necessarily the effect of eliminating or even substantially lessening it. The effect of controlling price, even without a substantial lessening of price competition, can form the foundation of a deemed contravention of s 45 of the Act. As Douglas J said in United States v Socony-Vacuum Oil Co (1940) 310 US 150 (n 59 at 225-226):
“Price-fixing agreements may or may not be aimed at complete elimination of price competition. The group making those agreements may or may not have power to control the market. But the fact that the group cannot control the market prices does not necessarily mean that the agreement as to prices has no utility to the members of the combination. The effectiveness of price-fixing agreements is dependent on many factors, such as competitive tactics, position in the industry, the formula underlying price policies. Whatever economic justification particular price-fixing agreements may be thought to have, the law does not permit an inquiry into their reasonableness. They are all banned because of their actual or potential threat to the central nervous system of the economy.”
The Commission had a choice here of establishing a contravention of s 45 in relation to price by proving either, in terms of s 45, an effect or likely effect of substantially lessening price competition, or, in terms of s 45A, an effect or likely effect of fixing, maintaining or controlling price.
In my view, the UTF understanding, to the extent that I have found it proved, was likely to have the effect of controlling the price to ACS if, as a matter of fact, each Tenderer was likely, if the successful one, to pay the UTFs out of the proceeds of the job and to take them into account in calculating its tender price. It is necessary now to turn to these questions.
On the evidence, was the UTF understanding likely to have the effect of controlling the price to be charged to ACS for the Project?
As I have already indicated, in my view it is not enough for the Commission to establish, as it has pleaded, that the UTF understanding was likely to have the effect of controlling a component of the price: it must establish that it was likely to have the effect of controlling the overall price.
The following considerations lead me to conclude that the UTF understanding was likely to have that effect.
First the Meeting took place between the time when the identity of the Tenderers was known and the closing date for tenders (28 October 1988).
Second, the UTFs were called “fees” and were treated by the Tenderers in the invoices and payment records as one would expect a cost of the Project to be treated.
Third, according to the information furnished by Concretes to the Royal Commission, the purpose of UTFs was to reimburse unsuccessful tenderers their wasted cost of tendering for the particular project in question.
Fourth, the client in respect of a particular project derives the benefit of the tendering process on that project and the cost of tendering can reasonably be expected to be greater or less according to the size and complexity of the client’s project so there are elements of obviousness and comparative equity in expecting that the particular client bear the cost of tendering associated with its project.
Fifth, even in relation to the tender prices, the sum of $2,250,000 is not insignificant and having regard to the fact that other costs of a comparable size incurred in relation to the Project were taken into account in the calculation of at least Hollands’ and Concretes’ tender prices, I infer that all Tenderers would probably treat the UTFs as a cost to be treated similarly.
A Tender Business Paper dated 9 January 1989 of ACS included entries for “Tender Estimate” and “Tenders Received” as follows:
“3. Tender Estimate
Lump Sum subject to R&F
Fixed Price$160,000,000
$180,000,0004. Tenders Received (Price Order)
(subject to adjustment of acceptable alternatives)Holland-Stolte
Leighton Contractors
Concrete Constructions
MultiplexL.S. + R&F
$142,583,968.17
$146,897,827.00
$150,390,000.00
$153,784,000.00Fixed [lump sum] Price
$159,968,732.59
$166,232,746.00
$169,180,000.00
$173,400,000.00
(The Tender Business Paper recommended acceptance of the lowest fixed lump sum price of Hollands of $159,968,732.59, subject to certain reductions which gave a revised tender price recommended for acceptance of $159,530,912.59.)
Sixth, in any event, I do not think that the likelihood of the UTFs’ controlling the price is to be assessed by comparing the amount of $2,250,000 with the tender prices alone: a more appropriate comparison is between that amount and the amount of expected profit.
There is no evidence of the level of profit being calculated by the other Tenderers but Concretes’ “Tender Summary” dated 28 October 1988 shows that it was applying a 5 per cent profit margin to its estimate of the cost to it of carrying out the Project. That document showed a net total “building cost” of $132,998,852 to which a 5 per cent margin was applied giving a profit of $6,649,942, and a total of “other costs” of $32,244,006 to which again a 5 per cent profit margin was applied giving a profit of $1,612,200. In the result, the “tender total” figure was $173,505,002 (according to the ACS “Tender Business Paper” dated 9 January 1989 referred to earlier, Concretes’ fixed price tender was ultimately in fact a little lower at $169,180,000).
The UTFs totalling $2,250,000 may be compared with the profit figure which, calculated at 5 per cent on a tender price of $169,180,000, was $8,459,000. In my opinion, a tenderer would not readily absorb fees totalling $2,250,000 in a profit of $8,459,000 ($2,250,000 is 26.6 per cent of $8,459,000). Rather than do that, a tenderer would probably have increased the amount of its tender price so as to cover, in whole or in substantial part, the UTFs of $2,250,000.
There is no evidence of the level of profit which the other Tenderers were expecting to make. But the fixed lump sum tender prices were within the fairly narrow range of $159,968,732 to $173,400,000. Even if one were to assume a level of expected profit substantially greater than that of Concretes, it is more likely than not that a cost as large as $2,250,000 would not have been borne by a Tenderer out of its expected profit but would have been passed on to ACS, in whole or in substantial part, by being taken into account as an additional cost of the Project in the calculation of its tender price.
Seventh, the evidence shows that Concretes treated the Special Fee of $1,000,000 as a cost of the Project in the calculation of its tender price. Although this does not establish that it or the other three Tenderers similarly treated the UTFs totalling $2,250,000, it does show at least that there was nothing improbable in a Tenderer’s treating fees of the size of $2,250,000 in that way.
Eighth, according to Mr Bird, Mr Cooper and Mr Denny of Concretes, admitted to him that Concretes “passed on” tendering costs “in about 2 of every 20 to 40 tenders ... usually on major projects”, and that Concretes had passed on the smaller UTFs totalling $500,000 (and the Special Fee of $500,000) on the News Limited, Chullora project. Notwithstanding the cross-examination of Mr Bird and the absence of a reference to “passing on” in Mr Bird’s memorandum to Mr Muscat which he prepared on the day of the meeting (the memorandum referred to the notion of “factoring in”), I find that those words or words to the same effect were used. That was the overall effect of Mr Bird’s evidence in cross-examination which I found persuasive. Moreover, it must be remembered that the context in which the meeting took place and an explanation from Concretes was sought, was the publicised allegation that News Limited had been the victim of a “building rort” by Concretes on the Chullora project. While not conclusive, the admission by Mr Cooper and Mr Denny shows that it was in conformity with Concretes’ practice on a major project such as the Project, to treat UTFs as “loadings” to be passed on to the client. I infer that it was more likely than not that the other Tenderers did likewise.
Ninth, the understanding that payment of the UTFs would not be disclosed to ACS facilitated a “loading” of the whole of those fees into the calculation of the tender prices. It made it possible for all Tenderers to add on the whole of the UTFs without the possibility of detection. I acknowledge that a Tenderer wishing to do so could not be sure that the others would do so too: they might choose to bear part of the UTFs themselves by “shaving their profits”. But in my view, the secrecy surrounding the understanding made it more likely than not that the whole of the UTFs would be “passed on” to ACS, leaving the Tenderers’ price competitive above the $2,250,000 “platform”.
I infer that the UTF understanding was likely to have the effect of controlling, by way of increasing, by $2,250,000 or by a substantial part of that sum, the price that ACS would be charged for the Project. The Tenderers knew many of the matters referred to above, including their mutual undertakings of secrecy and the fact that none of them would readily pay UTFs totalling $2,250,000 out of the profit on the Project and would prefer to pass it on to ACS.
Extent of price increase
Notwithstanding my conclusions above as to what I infer was more likely than not, I do not know for certain that the price charged to ACS was a particular amount (such as, $2,250,000) higher than what it would otherwise have been.
In the absence of the UTF understanding, would the Tenderers have taken into account tendering costs in the calculation of their tender prices? If so, what would the effect of their doing so have been on their tender prices? Which Tenderer would have been the successful one? How would its price for the project have compared with Hollands’ actual tender price? How was the cost of unsuccessful tendering treated by the Tenderers prior to the introduction of the practice with which this case has been concerned? The evidence before me does not touch on these questions at all. In the absence of such evidence, I do not infer that unsuccessful tendering costs would have been reflected in the tender prices at all. (Analogous questions can be asked on the hypothesis that the Special Fee was not levied.)
It is open to Concretes (and to the Commission) on the hearing on penalty to lead evidence directed to establishing the extent to which the UTF understanding in fact caused ACS to be charged a higher price than that which it would have been charged in its absence.
The issue of contravention of s 52 of the Act
As noted earlier, the Commission alleges, relevantly, that Concretes represented to ACS by implication and by silence that its tender was free of collusion and fairly priced, and that Concretes thereby engaged in conduct which was misleading and deceptive or likely to mislead and deceive, in contravention of s 52 of the Act. In this respect, the Commission seeks only declaratory relief.
The Act provides in s 4(2) that a reference in it to engaging in conduct shall be read as a reference to, relevantly, “refusing to do any act” and that a reference to refusing to do an act includes a reference to “refraining (otherwise than inadvertently) from doing that act.” But as Gummow J (with whom Black CJ and Cooper J agreed) said in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, after referring to this provision (at 40):
“ ... in any case where a failure to speak is relied upon the question must be whether in particular circumstances the silence constitutes or is part of misleading or deceptive conduct. The expanded meaning given by s 4(2) to ‘conduct’ should not distract attention from the fundamental issue in the case at hand.”
In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477, Bowen CJ pointed out that silence may be misleading where there is a failure to mention a qualification to a prior statement or a failure to inform of a change of events which renders a prior statement misleading (at 489-490). That is, silence can be misleading because of the relationship between it and positive conduct. As the Chief Justice recognised in the same case, silence may also be misleading where it constitutes a failure to perform a “duty of disclosure” and such a duty is not limited to the categories of duty recognised at common law and in equity: it may arise from the circumstances of the particular case.
There has been some discussion in the authorities of the use of the notion of “duty” in the present context and a better notion to invoke is probably that of “reasonable expectation”: cf Kimberley NZI Finance Ltd v Toreo Pty Ltd (1989) ATPR (Digest) 46-054 (French J) at p 53,195; Demagogue v Ramensky (1992) 39 FCR 31 (FC) at 40-41 (Gummow J); Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 (Hill J) at 114; Lawson v Ampol Ltd (1993) ATPR 41-204 (Einfeld J) at p 40,863; Warner v Elders Rural Finance Ltd (1993) 41 FCR 399 (FC) at 401-402 (Foster and Drummond JJ), 404-405 (Hill J) (see too Diane Skapinker “Silence is golden – or is it?” (1995) 69 ALJ 165).
In Rhone-Poulenc, above, the Court had to decide whether the respondents engaged in misleading conduct by selling a fungicide which was not registered as required under the Pesticides Act 1978 (NSW) and the Agricultural Standards Act 1952 (Qld), and which was therefore under both Acts subject to seizure from the buyers and forfeiture, and not able to be lawfully used as a fungicide. Bowen CJ and Lockhart J held that the respondents had not contravened s 52 (Jackson J dissented). Bowen CJ observed that neither the category of relationship between the parties (seller and buyer) nor the particular circumstances of the case gave rise to a duty to disclose. The respondents’ conduct would not, according to his Honour, lead a buyer into error as to whether the respondents had complied with the law requiring registration as they had been silent in this respect (at 490-491). Similarly, Lockhart J contrasted the facts of the case with a hypothetical situation of the respondents’ having placed on the container labels stating that the product was registered under the relevant legislation (at 505).
In subsequent cases also, silence has not readily been found to be misleading or deceptive. In Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458, the New South Wales Court of Appeal held that the respondents were not obliged to disclose to the appellant new facts which might improve his bargaining position in commercial negotiations at their expense. Gleeson CJ, with whom Samuels AJA and Meagher JA agreed, said (at 475):
“Where parties are dealing at arm’s length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice. It would normally only be if there were an obligation of full disclosure that a different result would follow. That could occur, for example, by reason of some feature of the relationship between the parties, or because previous communications between them gave rise to a duty to add to or correct earlier information.”
In Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 a Full Court of this Court made it clear (at 466) that s 52 “gives rise to no duty to provide information” and (at 467) that:
“[w]here the contravention of s 52 alleged involves a failure to make a full and fair disclosure of information, the applicant carries the onus of establishing how or in what manner that which was said involved error or how that which was left unsaid had the potential to mislead or deceive.”
The relationship between Concretes and ACS was that of tenderer and client. That relationship is not of a class that gives rise to a “duty” or “reasonable expectation” of disclosure. Nor, in my opinion, did any particular circumstances of the case do so.
Nor do I think that Concretes’ non-disclosure falsified a positive statement made by it. The “conditions of tender” for the Project stated:
“The tender Price in accordance with these Conditions of Tender shall be for a lump sum contract. The Tenderer must tender two Tender Prices. The first Tender Price is to be for a lump sum subject to adjustment for rise and fall in costs … The second Tender Price is to be for a fixed lump sum not subject to any adjustment for rise and fall in costs.”
The Commission does not submit that the words of Concretes’ tender in response to this invitation gave rise to a positive misrepresentation or that Concretes did or said anything to cause ACS to direct its mind to the matter of collusion or to form a positive belief in relation to that matter.
The implied representations contended for (in substance, absence of collusion) would apply to tenders universally. Moreover, it is difficult to see why, if the Commission’s submission reflects the law, there would not be an implied representation by all parties negotiating contracts at arm’s length that they have complied with all laws and disclosed all matters, non-compliance with and non-disclosure of which, would or might be detrimental to the other party. But s 52 has not been construed so broadly; cf Rhone-Poulenc above at 490-491 per Bowen CJ.
As Concretes and ACS negotiated at arm’s length, and no special circumstances or communications can be pointed to from which a duty or a reasonable expectation of disclosure arose, I do not think that Concretes engaged in misleading or deceptive conduct as alleged. Indeed, unlike the buyers of the fungicide in Rhone-Poulenc, ACS received the full benefit of what was held out to it – a tender by Concretes to undertake the Project for the tender price without any possibility of defeasance.
I am not persuaded to alter the views expressed above by the decision of a Full Court of this Court given recently and since the hearing in the present case, in Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd [1999] FCA 898. In that case, the appellant promoted and sold certain “face-lift tilt-up equipment” without revealing that use of it in a certain way would or might constitute an infringement of patent. The Full Court upheld the trial Judge’s conclusion that the activity of promoting and selling the equipment without warning customers of the “liability” they were being induced to incur, constituted misleading conduct. In the present case, as noted above, there was no chance of ACS’s being deprived of the benefit of its contract with the successful Tenderer or of incurring any liability.
There is a question as to whether it would be appropriate to grant the declaration sought by the Commission. The Commission seeks no other relief in respect of the alleged contravention of s 52. In some cases it is appropriate to make a declaration of a finding of contravention in the absence of substantive relief; cf Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 (FC) at 93-101 (Sheppard J, with whom Foster J agreed), 107-112 (Hill J); RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 (FC) at 175-178 (Beaumont and Spender JJ). In view of my conclusion expressed above, I need not decide if the present is such a case.
CONCLUSION
In my view, the Commission has established according to the civil standard of the balance of probabilities, but bearing in mind the warning given in such cases as Briginshaw v Briginshaw (1938) 60 CLR 336 and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170, that Concretes made and arrived at an arrangement or understanding with the other three Tenderers in the second part of the Meeting that the successful Tenderer would pay a UTF of $750,000 to each of the three unsuccessful Tenderers in respect of the Project and that that arrangement or understanding was likely to have the effect of controlling the price that ACS would be charged for the Project.
I will list the proceeding for a date when I will give directions in relation to the hearing on penalty.
I certify that the preceding two hundred and seventeen (217) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate:
Dated: 14 July 1999
Counsel for the Applicant: Mr F M Douglas QC with Mr P R Clay and Ms P A Painter Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Respondent: Mr J D Heydon QC with Mr G O’L Reynolds Solicitor for the Respondent: Corrs Chambers Westgarth Date of Hearing: 6, 7, 8 October 1998 Date of Judgment: 14 July 1999
Documents within Exhibit A2, with identification of those documents or parts of documents not admissible as evidence of tendency by reason of the operation of s 97 of the Evidence Act 1995
VOLUME 1
Tab 1
1.1-1.3 (1-34) admitted
1.4 (35-42) pages 35, 36, 39 (“Service Fees”) and 41 admitted
1.5 (43) entry for “Telecom Haymarket” admitted; otherwise not admitted1.6 (44-54)entries for the Project admitted; otherwise not admitted
1.7 (55-58) not admitted
1.8 (59-65) not admittedTab 2
2.1 (76-77) admitted to show competitiveness
2.2 (78-80) admitted to show competitivenessTab 3
3.1-3.20 (81-380) admitted, except for pp 141-153 which were excluded from the tenderTab 4
4.1-4.4 (381-425) admittedTab 5
5.1 (426-449) admittedTab 6
6.1-6.3 (450-458) admittedTab 7 [There is no Tab 7]
Tab 8 [There is no Tab 8]
VOLUME 2
Tab 9
9.1 (1544-1609) s 97 operates in the respect discussed in Reasons
9.2 (1610-1653) s 97 operates in the respect discussed in ReasonsTab 10
10.1 (1654-1683) admitted
10.2 (1684-1686) admitted
10.3 (1687) s 97 operates in the respect discussed in Reasons
10.4 (1688) s 97 operates in the respect discussed in Reasons
10.5 (1689) s 97 operates in the respect discussed in Reasons
10.6 (1690-1691) admitted10.7 (1692)line of entries relating to the Project admitted; s 97 operates on the remaining entries in the respect discussed in Reasons
10.8 (1693-1699) pages 1693-1695 relating to the Project admitted; s 97 operates on the remainder in the respect discussed in Reasons
Tab 11
11.1-11.4 admitted
51