Australian Competition and Consumer Commission v J McPhee and Son (Australia) Pty Ltd (No. 3)

[1998] FCA 200

FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES - companies engaged in road freight transport - arrangement and understanding with competitor not to quote less than respondents’ price for its current customers - attempt at such arrangement and understanding - inducement - attempt - responsibility of company for officers

Trade Practices Act 1974 (Cth) ss 4D, 45(2)(a)(i) and (ii), 45A, 76(1)(a),(b),(c),(d) and (e), 84(2)

News Ltd v Australian Rugby Football League Ltd (1996) 46 FCR 410 at 558 applied
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 applied
Meridian Global Funds Management Asia Limited v Securities Commission [1995] 2 AC 500 at 506- 7 applied
Trade Practices Commission v Tubemakers of Australia Ltd (1983) 47 ALR 719 at 736 applied
Trade Practices Commission v Parkfield Operations Pty Ltd (1985) ATPR 40-639 applied
R v Associated Northern Collieries (1912) 14 CLR 387 at 400 applied
Yorke v Lucas (1983) 49 ALR 672 at 681 applied
The Heating Centre Pty Ltd v Trade Practices Commission (1986) 9 FCR 153 at 163 applied
Browne v Dunn (1893) 6 R 67 discussed
Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1 at 7 mentioned

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v J MCPHEE & SON (AUSTRALIA) PTY LTD & ORS (NO. 3)
NO. VG 948 of 1995

JUDGE:         HEEREY J
DATE:           26 FEBRUARY 1998
PLACE:         MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG  948 of   1995

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

J MCPHEE & SON (AUSTRALIA) PTY LTD
(ACN 001 856 113)
FIRST RESPONDENT

RICHARD FORDE
SECOND RESPONDENT

DOUG MORTON
THIRD RESPONDENT

DAVID CLARKE
FOURTH RESPONDENT

CRAIG HOLLAND
FIFTH RESPONDENT

GUY WEBB
SIXTH RESPONDENT

JUDGE:

HEEREY J

DATE OF ORDER:

26 FEBRUARY 1998

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1. Issues of penalties, costs and other relief adjourned for further hearing on a date to be fixed.

2. The applicant within seven days file and serve minutes of proposed orders together with written submissions.

3. The respondents file and serve written submissions within seven days thereafter. 

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 948 of 1995

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

J MCPHEE & SON (AUSTRALIA) PTY LTD
(ACN 001 856 113)
FIRST RESPONDENT

RICHARD FORDE
SECOND RESPONDENT

DOUG MORTON
THIRD RESPONDENT

DAVID CLARKE
FOURTH RESPONDENT

CRAIG HOLLAND
FIFTH RESPONDENT

GUY WEBB
SIXTH RESPONDENT

JUDGE:	HEEREY J
DATE:	26 FEBRUARY 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

HEEREY J:

CONTENTS

Page

1. INTRODUCTION   1

1. JUST JEANS   2

1. The Commission’s Case   2

1. The Respondents’ Case   6

1. Credibility and Probabilities   7

(a)       Demeanour   8
           (b)       Recording of recollections   8
           (c)       Why encourage a competitor?   8
           (d)       McPhee’s urging  10
           (e)       Lack of explanation  10
           (f)       Postponement  10
           (g)       Motive  11

1. Findings of Fact  12

(a)       McPhee - DFE relationship  12
           (b)       Just Jeans go to tender  12
           (c)       Calling the 16 May meeting  13
           (d)       Events of 16 May  14
           (e)       Morton - Young phone call 17 May  17
           (f)       Holland-Bates phone call 17 May  18
           (g)       Bates - Morton phone call 22 May  20
           (h)       DFE quotes to Just Jeans 19 and 26 June  21

(i)        Forde - Young and Poche - Forde phone calls 28 June  21
           (j)        Just Jeans outcome  27
           (k)      Termination of relationship  28

1. Legal issues  28

(a) TPA provisions 28

(b)       The relevant market  29
           (c)       Authority and corporate intent  29
           (d)       Attempt  30
           (e)       Conduct of the individual respondents  31
           (f)       Inducement  32
           (g)       Knowledge by individuals of other individuals’ intent  33
           (h)       The rule in Browne v Dunn  33

1. Conclusion  35

1. ACI FLORAPAK  36

1. The Commission’s Case  36

1. The Respondents’ Case  37

1. Credibility and Probabilities  37

1. Findings of Fact  39

1. Legal  Issues  43

1. ORDERS  44

1. INTRODUCTION
   The first respondent J McPhee & Son (Australia) Pty Ltd (“McPhee”) is an express freight carrier.  One of its principal competitors is Multi Group Distribution Services Pty Ltd which trades as Discount Freight Express (“DFE”). 

In this proceeding the applicant Australian  Competition and Consumer Commission (“the Commission” - an expression which, where the temporal context indicates, denotes its predecessor the Trade Practices Commission) seeks pecuniary penalties and injunctive relief in respect of alleged contraventions of Part IV of the Trade Practices Act 1974 (Cth) (“TPA”). The contraventions involve two of McPhee’s customers, namely Just Jeans Pty Ltd (“Just Jeans” - an expression which includes its subsidiary Jay Jay’s Warehouse Pty Ltd) and ACI Operations Pty Ltd trading as ACI Florapak (“ACI Florapak”).

In relation to both Just Jeans and ACI Florapak the Court is concerned with an arrangement or understanding that DFE would submit to the customer a quote which was not less than McPhee’s quote, an exercise known colloquially as a “cover” quote.

In relation to Just Jeans the Commission’s case is that McPhee attempted to make such an arrangement or reach such an understanding with DFE.  The respondents Forde, Morton and Holland are alleged to have attempted to induce DFE to enter into such an arrangement.  The case against the respondent Clarke was discontinued during the course of the trial. 

With ACI Florapak, the Commission alleges that the arrangement or understanding was completed and given effect to.  The respondent Webb is alleged to have been an accessory to the conduct of McPhee in relation to the making of the ACI Florapak arrangement and giving effect thereto.

The ACI Florapak contravention allegedly occurred in November 1994 and the Just Jeans contravention in May/June 1995.  However the case has been pleaded and conducted in a way that deals with the latter issue first and it will be convenient to follow that sequence in this judgment.

1. JUST JEANS

1. The Commission’s Case
   The place of the relevant individuals in the corporate hierarchies of McPhee and DFE were as follows:

McPHEE

Board of Directors
( Mortimer, R Cribb, J McPhee,
W Maloney, R Forde, H Chapman)

 

 

DOUG MORTON
Busines Development

Manager
ager

 

           

DFE

Gregory Poche
Managing Director

 

 

Kevin Quirke
National Sales Manager

Manager

 

 

Peter Jolly
Country Sales
Manager (Vic)

 

 

DOUG MORTON
Busines Development

Manager
ager

 

           

McPhee and DFE for many years had a commercial relationship which involved one acting as the sub-contractor for the other in certain parts of Australia and also sharing some other facilities.  The details of these arrangements varied from time to time but by late 1994 DFE acted as the South Australian country distributor for McPhee and McPhee acted as the distributor for DFE in the Adelaide Hills and the areas north of Adelaide and in the Central Coast region of New South Wales.  Also there was a personal friendship going back many years between Mr Forde and Mr Poche.  As a consequence of this relationship there was a policy of each company not quoting business to a customer of the other, at least where the customer was not dissatisfied with the service provided and was only seeking a cheaper price. 

One of McPhee’s major customers in Victoria was Just Jeans. On 2 May 1995 McPhee gave to Just Jeans a quote which was a substantial increase on the rates previously charged.  Just Jeans advised McPhee that it would go to tender. 

On about 8 May Mr Forde telephoned Mr Young and invited him and other DFE executives to visit McPhee’s premises in Campbellfield for lunch on 16 May.

On 16 May Messrs Young, Wilson and Fitt attended at McPhee’s premises.  After a tour of the premises the DFE men had lunch with Messrs Forde, Clarke, Holland and Morton and other McPhee personnel.  After the lunch a meeting took place in Mr Forde’s office.  Mr Forde commenced by reminding the DFE men of the existing commercial relationship.  Then one or other of the McPhee representatives said that McPhee was reviewing its charges for major customers, including Just Jeans, that Just Jeans were seeking tenders in the market place, that the only other tenderers would be IPEC and DFE, that McPhee wanted DFE to quote and that they were confident that McPhee would hold the Just Jeans account.

In the circumstances, and in particular in the context of the commercial relationship, McPhee was trying to persuade DFE to give a cover quote, although it is not suggested that word was used. 

Mr Young said that he would need to refer the matter to Messrs Poche and Bates.

On the day after the meeting Mr Morton phoned Mr Young and gave him details of the rates quoted by McPhee to Just Jeans.  He said words to the effect “At 250 to the metre you would need to be around 25 cents”.   The reference to 250 meant an assumed weight per cubic metre of 250 kilograms.  The reference to 25 cents was meant to be the rate per kilogram for freight from Melbourne to Sydney.

Later the same day Mr Holland phoned Mr Bates and told him that McPhee were trying to get an increase in rates from Just Jeans and that McPhee wanted DFE to quote.  Mr Bates said that DFE would quote to win.  Mr Holland said that Just Jeans was a demanding account requiring high levels of service and that Mr Bates should be aware of the prices quoted by DFE.

On 19 June DFE submitted a quote to Just Jeans.  It was told by Mr Ivan Pellegrini of Just Jeans that its quote may not be successful.  On 26 June, after Just Jeans provided further information, DFE submitted an amended quote.  On 28 June Mr Forde phoned Mr Young and expressed concern that DFE had quoted twice to Just Jeans and said that could put DFE and McPhee’s relationship in jeopardy.  On the same day Mr Forde phoned Mr Poche and in effect complained that DFE had undercut McPhee.  On 13 July DFE wrote to McPhee terminating the commercial relationship.  IPEC won the tender. 

1. The Respondents’ Case.
   The 16 May lunch was arranged for reasons unconnected with the Just Jeans quote.  Mr Forde wanted to show the DFE people McPhee’s new premises.  DFE were planning new premises of their own and would, he thought, be interested in seeing McPhee’s.  Also there had been a change of management for DFE in Victoria and Mr Forde wanted his executives to meet the new DFE management and re-affirm the relationship of the two companies. 

By the time of the 16 May meeting McPhee was aware of the Just Jeans tender.  However the McPhee men were concerned to ensure that DFE gave to Just Jeans  a competitive and commercial quote, not a cover quote.

The case of  McPhee, as opened by its counsel, was that there were three reasons for requesting DFE to quote, these being reasons which activated Mr Morton: (i) “Friendship or commercial responsibility” to Just Jeans so that “if there was a tender, DFE’s policy of not quoting against McPhee clients did not get in the way”; (ii) If there were only two quotes, McPhee’s and IPEC’s, and, as seemed very likely, McPhee’s would be higher, its quote would seem unreasonable; and (iii) Mr Morton had personally recommended DFE to Mr Pellegrini and if DFE did not tender Mr Morton “would look foolish”. 

In his evidence-in-chief, Mr Morton gave evidence substantially along the lines of (i) and (ii).  However he did not mention (iii).  His evidence does not suggest that fear of personal embarrassment vis-à-vis Mr Pellegrini entered into the matter.  He did not say he recommended DFE to Mr Pellegrini - rather his account was that Mr Pellegrini announced to him that IPEC and DFE would be the two companies invited to quote. 

In his evidence Mr Morton added another reason (not mentioned in the opening) viz (iv) concern about “the legality of DFE not quoting, or their policy of not quoting on McPhee accounts”. 

The telephone calls made the day after the meeting were solely in order to ensure that DFE was in fact going to provide a commercial quote.

Mr Morton denies that he passed on McPhee’s rates to DFE.  Mr Forde denies that he complained about DFE undercutting McPhee.  He says that his complaint to Mr Poche was about IPEC’s low tender.

1. Credibility and Probabilities
   When I come to detailed findings of fact I shall make some observations as to probabilities and other circumstantial aspects affecting particular issues.  But I shall first make some more general observations. 

(a)Demeanour

All parties to the relevant meetings and telephone conversations gave evidence. Witnesses called by the Commission provided written witness statements and also gave evidence-in-chief viva voce as to conversations. As a consequence of my earlier ruling ((1997) 148 ALR 601) the respondents did not provide witness statements. All witnesses were thoroughly and skillfully cross-examined. I found the DFE witnesses more impressive than McPhee’s, and by a considerable margin.

(b)      Recording of recollections
The allegations came to the attention of the Commission.  By the end of May 1995 some of the DFE personnel involved had attended conferences with senior counsel and solicitors for DFE and officers of the Commission.  Some contemporaneous diary notes had been taken and following on from these conferences detailed written statements were made by early June. Revised statements were signed in December 1995.  These were the statements that were tendered as the respective witnesses’ evidence-in-chief at the trial. 

By contrast,  the respondents were not aware of the Commission’s investigation until December 1995. There were some McPhee contemporaneous notes, but much fewer than DFE’s. 

As might be expected, the evidence given at trial by DFE witnesses did not always coincide precisely with earlier statements and diary notes.  There were also some differences between such witnesses.  Nevertheless, in general terms the evidence of DFE witnesses was better supported by contemporaneous documentation than that of McPhee witnesses.  Moreover, the stage at which DFE witnesses were first asked to recall and record the relevant events was earlier. 

(c)       Why encourage a competitor?
Just Jeans was one of the top customers of McPhee in Victoria, worth some $1.5 to $2 million per year.  It had been a customer for thirteen years.  McPhee gave it good service.  It had about 300 retail outlets throughout Australia. Its service  requirements were demanding.  McPhee believed the IPEC quote was likely to be low.  There was a conflict in the evidence of some of the McPhee witnesses as to whether they believed at the time that IPEC was “cheap and nasty”, that is to say a provider of poor service at low prices.  There was probably an element of wishful thinking involved.  The only hope for Just Jeans not going to IPEC because of its lower price would be fear of bad service.  But if IPEC were not acceptable to Just Jeans because of apprehensions about service, then McPhee’s only competitor would be DFE. 

Whatever McPhee believed about IPEC’s prospects, McPhee must have believed that it had some chance.  (I reject Mr Morton’s evidence that he felt McPhee “had absolutely no chance of holding the Just Jeans account”.  This is entirely inconsistent with his conduct and that of all the other McPhee men.)  If so, that chance could only be affected for the worse by DFE putting in a competitive tender.  It is common ground that McPhee urged DFE to tender.  There is no logic in McPhee intending that to be a competitive tender.  There would however be logic in McPhee intending, or hoping, that the McPhee quote would “cover”. If that happened Just Jeans might be likely to think that the McPhee quote, confirmed by a very similar DFE quote, was a fair market price and that the lower IPEC price must have been based on cost cutting with the prospect of poor service.  There is a partial insight into the true position in Mr Morton’s evidence.  He said that if DFE did not quote

“it would have meant that Just Jeans would only have had one quote, and in my mind a very low quote from IPEC, and that wouldn’t have looked very good as far as we are concerned.  It might have insinuated that we were trying to rip Just Jeans off, so to speak.”

The one remaining and unspoken element is that the DFE quote should be no lower than McPhee’s.  Given McPhee’s record of good service, Just Jeans would then be likely to stay with McPhee. 

(d)      McPhee’s urging
It is one thing for McPhee to say that they wanted to let DFE know that the previous policy did not apply to Just Jeans and that they would have no objection to DFE quoting to Just Jeans.  This could have been done by a simple letter, thus satisfying Mr Morton’s alleged concern as to legality.  But once that had been made clear, there was no logical reason for McPhee continuing to urge, to the point of harassing, DFE to put in a quote which, on McPhee’s case, was intended to be a quote to win. 

(e)      Lack of explanation
On McPhee’s own case there was no explanation given to DFE at the time of what are now said to be the innocent reasons for asking DFE to quote, and quote to win. 

(f)       Postponement
In 1994 there was major litigation under the TPA involving the road transport industry. Also Mr Poche had for some years waged a campaign against what he alleged to be a cartel between the TNT and Mayne Nickless Groups. Price-fixing would be a sensitive subject for persons in this industry at an executive level.

On McPhee’s case, the lunch of 16 May was organised for entirely innocent purposes, quite unconnected with the Just Jeans tender.  Nevertheless, by the time 16 May arrived the Just Jeans tender process had commenced and it was known that DFE would be invited to bid.  Mr Forde said in evidence that he said to Mr Morton on the previous day:

“The gentlemen from DFE are coming tomorrow and we can tell them they are going to be asked to tender.”

Would not somebody in the position of Mr Forde, or other McPhee personnel, having innocently organised the lunch, pause to think

“We have just put in a quote to one of our major customers and here we are having a cosy top level lunch with a competitor who is also going to quote.  This meeting is going to look highly suspicious.  The tender process will be over in a few weeks.  There is no urgency for the meeting with DFE.  We had better put it off until the Just Jeans tender process is completed.”

In truth, McPhee probably had in mind the kind of outcome identified by Adam Smith in “The Wealth of Nations” (1776):

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Moreover, once the DFE men had toured the premises and met the McPhee executives over lunch, the innocent purposes of the visit had been achieved.  The visitors could have been farewelled.  The convening of the meeting which followed in Mr Forde’s office is consistent only with a purpose, shared by Messrs Forde, Morton and Holland, to discuss the Just Jeans tender and persuade DFE to quote. 

(g)      Motive
On 10 July 1995 the Commission gave DFE and its employees a written undertaking not to institute proceedings in respect of breaches of s 45A of the TPA subject to conditions, in effect, that they give full and frank assistance to the Commission in legal proceedings and were not the ring leader in unlawful conduct. There are apparently proceedings between DFE and McPhee in the Federal Court in Sydney. Also, as has been mentioned, Mr Poche has for some years been a crusader against what he claims to be a cartel in the road transport industry. Amongst other things, he has published newspaper advertisements making such allegations.

I do not think these matters, either individually or collectively, provide a sufficient motive for the DFE witnesses to give deliberately false evidence against McPhee.

If the evidence of DFE witnesses is false, there must have been a concerted plan to give false evidence involving, amongst other things, the concoction of diary notes.  There is no reason why the DFE individuals would go to these lengths, and for no personal benefit.  And the McPhee case does not suggest any unlawful conduct on the part of DFE men for which they might seek to exculpate themselves by falsely blaming McPhee. 

1. Findings of Fact
   (a)      McPhee - DFE relationship
   The essential elements of this were as already stated.  The relationship went back to 1974 when Mr Morton and Mr Forde, then operating a transport company called Colton Carriers, were asked by Mr Poche to become DFE agents for Victoria.  In late 1987 McPhee became part of the TNT Group.  However the relationship with  DFE continued as before.  McPhee had a substantial degree of operational independence within the TNT Group.

(b)      Just Jeans go to tender
On 22 May 1995 Just Jeans opened a new distribution centre in Sydney to service New South Wales, Queensland, ACT and the Northern Territory.  Previously stock was transported to Just Jeans stores throughout Australia by McPhee ex Melbourne, apart from distribution to stores in the Melbourne and Sydney metropolitan areas.   Prior to the opening of the new Sydney centre Just Jeans sought new rates from McPhee for freight ex Sydney.  Mr Pellegrini discussed his company’s requirements with Messrs Maloney, Holland and Morton in March and April.  On 3 May Mr Morton handed Mr Pellegrini a quote dated the previous day for the provision of express service transport to destinations ex Melbourne and ex Sydney.  Either on that occasion or in a telephone conversation within the following one or two days Mr Pellegrini said to Mr Morton that the McPhee rates seemed excessively high and that Just Jeans would need to seek prices from other carriers due to the size of the increase.  Mr Morton agreed and conceded that McPhee had left its customer no alternative but to go to tender.  Mr Morton said to Mr Pellegrini that the McPhee quote should be taken as their tender submission as it was the best they could do.

The McPhee quote was stated to be based on an “average cubic factor of 1 cubic metre equalling 178 kilograms”.  The quote gives rates for express service ex Sydney and ex Melbourne to named destinations.  In each instance there is a basic charge and a cents per kilogram charge and also a figure stated to be “Equivalent Cents per kg. (kg @ 250 kg = 1M³)”.  The standard in the industry assumes that a cubic metre of freight weighs 250 kg.  However the McPhee quote was based on the stated assumption that freight for Just Jeans would be lighter, namely 178 kilograms per cubic metre.  If a carrier is using space in a vehicle to carry a load for which there is a lower then average chargeable weight, the rate has to be correspondingly higher.  For example the figure quoted ex Sydney to Brisbane was a basic charge $6 plus 35.1 cents per kilogram and the equivalent at 250 kg per cubic metre was 25 cents.

Mr Pellegrini decided to invite IPEC and DFE to tender.  He prepared a tender document dated 16 May setting out details of Just Jeans’ requirements.  As to volumes, the tender document includes the note “One cubic metre = 176 kg”.

On 15 May Mr Pellegrini wrote to Mr Morton formally advising that because of McPhee’s proposed new rate structure Just Jeans “regrettably” had no alternative but to go to tender.  The letter advised that the tender process would be completed by the end of June.  It concluded with the comment that, irrespective of the outcome, Just Jeans expressed their “appreciation for the many years of loyal support and service McPhee’s have given our company”.  On either 15 or 16 May Mr Pellegrini told Mr Morton that Just Jeans was sending its tender document to IPEC and DFE.  Mr Morton had told Mr Forde shortly after 2 or 3 May that Just Jeans were going to tender.  There is no direct evidence that Mr Morton was told by Mr Pellegrini before the 15th that DFE would be invited to tender, but I infer that he and Mr Forde probably were aware from their knowledge of the industry that DFE was a likely prospect. 

(c)       Calling the 16 May meeting
On 8 May Mr Forde phoned Mr Young.  The two men had met several times when Mr Young worked for DFE in South Australia.  He had shown Mr Forde around DFE’s facilities there.  In the phone call Mr Forde said he had spoken to Mr Bates, that it would be a good opportunity to catch up since Mr Young had been back in Melbourne for a while and it would also be an opportunity for him to come and have lunch and look at McPhee’s new facility.  Mr Forde suggested that Mr Fitt come as well and Mr Young asked if he could bring Mr Wilson.  An appointment was made for 12 noon on 16 May. 

Mr Forde’s diary for 16 May has the entry in his handwriting:

“12.00  D.F.E.  John Young, Brian Fitt, Gordon Willson [sic]

To see new building.”

The first line is in blue, the second in black.  It does not look as though the blue pen was running out of ink.  It appears likely that the second line was added later.  It is a little odd that Mr Forde would add at some later stage the entry “To see new building”.  The purpose of the visit was, on his version, a simple and innocent one and something he would not need to note down lest he forget it.  The entry has a self-serving flavour.  It reflects in my view nervousness and an anxiety to put the meeting in an innocuous light. 

Mr Forde said in evidence that in early March, when they were moving into their new premises, he had discussed with Mr Holland in, as he put it, “the wouldn’t it be a good idea category” the possibility of asking the Victorian management of DFE to the new offices.  I am prepared to accept that this happened, but by the time Mr Forde actually telephoned Mr Young he was aware that Just Jeans were going to tender.  The DFE people were the first persons invited by Mr Forde to visit the new premises.  Pure co-incidence seems unlikely.  I find that Mr Forde’s invitation to the DFE men for the lunch was made with the purpose of discussing the Just Jeans tender. 

(d)      Events of 16 May
Messrs Young and Wilson arrived at McPhee’s premises in Barry Road, Campbellfield at approximately 12 noon.  Mr Forde came down to the reception desk to meet them.  Mr Young introduced Mr Wilson to him.  The three men then entered Mr Forde’s office and had a general discussion, mainly about the new McPhee building, although Mr Forde did mention a rumour to the effect that Mayne Nickless were about to withdraw financial support from IPEC.  Mr Fitt then arrived and Mr Forde took the three DFE men on a tour of the building.  On arriving at Mr Morton’s office Mr Morton came to the door and was introduced by Mr Forde.  At this stage Mr Morton said to Mr Forde in the presence of the DFE men:

“Have you spoken about JJ yet?” 

(Mr Young thought at the time Mr Morton said “JT” but realised from later conversation that he had said “JJ”.)

Mr Forde said:

“We will talk about it after lunch.”

The tour concluded at about 12.45 pm.  Mr Forde and three DFE men went upstairs to a large dining room.  There were approximately eight people already seated as they entered.  The conversation was general small talk.  The lunch concluded at about 1.20 pm. 

Messrs Wilson and Young then followed Mr Forde back to his office.  When they arrived there Messrs Morton and Clarke were present.  Mr Forde said that someone else would join them in a minute.  Mr Holland arrived shortly afterwards.  Introductions took place and business cards were exchanged.  There was some brief discussion about business and conditions in the industry. Mr Fitt, who had visited the toilet, then arrived and was introduced and took a seat at the table. 

Mr Forde then commenced to speak about the relationship between McPhee and DFE.  He appeared nervous.  He spoke about the relationship extending over a long period and said that because of management changes that had recently occurred he thought it was a good time to sit down and “touch base”.  He said that he wanted them to get together just to reaffirm the position of the two companies.  There was some discussion about the Riteway company which was part of the TNT group. 

Mr Clarke then said, “When we walk into DFE accounts, we quote, but we know what to quote”.  Mr Young responded quickly.  Because DFE was “well drilled in the TPC” he did not want to get involved in that conversation and did not want his two managers involved either.  He said that DFE approached the matter differently, that when they were approached by a McPhee account they explained that they had a commercial association with them, that they were large customers of DFE’s in South Australian country and New South Wales and that they would not quote. 

After what Mr Young described in evidence as “a fairly stunned silence” on behalf of the McPhee men, Mr Forde brought up the subject of Just Jeans.  He said that McPhee was reviewing their “A accounts,” (the term “A account” was understood to mean top accounts) which were not profitable.  He said:

“Our largest Victorian account, Just Jeans, will be contacting you as they have decided to go to the marketplace.  They will also be contacting IPEC.”

Mr Morton said that while McPhee was “friends with everybody” they were still worried about “the yellow people”.  This was understood to be a reference to IPEC whose vehicles are yellow.  Mr Morton said that McPhee did not really see IPEC as a serious contender and believed that Just Jeans thought the same way.  He said that DFE would definitely be approached by Just Jeans to quote and that they would like  DFE to quote.  Mr Holland said “It’s important for you to quote”.  Mr Morton again said, “We would like you to quote”. 

At that stage there was a lengthy pause in the conversation.  Two of the DFE witnesses, Mr Wilson and Mr Fitt, attributed to Mr Holland a comment to the effect that “We should turn the tape recorder off”, although in Mr Wilson’s case he cannot recall whether the reference was to turning on or turning off.  Also, there is some conflict as to whether there was mention of a tape recorder before or after the first mention of Just Jeans.  In his evidence Mr Holland denied making any reference to a tape recorder.  I am satisfied however that he did speak of turning the tape recorder off.  The remark is revealing.  It displays a feeling of guilty nervousness on the part of Mr Holland and a spontaneous attempt to lighten the tense atmosphere of the meeting with some black humour. 

Either Mr Forde or Mr Holland said that McPhee had a good history with Just Jeans and because of that they were confident of holding the account.  Mr Holland said that they were a very demanding account with high expectations.  Mr Young said that he would need to refer the matter to Stephen (Bates) and Greg (Poche).  After some further brief discussion relating to other industry matters Mr Young said that he had to leave as he had another appointment at 3.00 pm.   The three DFE men then left the premises at approximately 2.10 pm.

(e)      Morton-Young phone call 17 May
On 17 May Mr Young was in his office with Mr Fitt when he received a phone call from Mr Morton.  Mr Morton said:

“You’ll definitely be contacted by Just Jeans in the next few days and we would like you to quote.  We don’t charge them a cube, but the freight cubes at 176 to the metre and at 250 to the metre you would need to be around 25 cents.”

He also said words to the effect that McPhee was seeking a significant increase from Just Jeans.  Mr Young was very surprised and merely said “OK” or something similar and the conversation then concluded.  He made a note in his diary as follows:

“McPhee JJ 176 per m³ 25 cents at 250 3 cents over.”

Mr Young could not recall the meaning of the notation “3 cents over”.  Mr Morton admitted phoning Mr Young the day after the meeting.  He gave as his reason:

“I had no satisfaction in my mind that DFE would quote ...  I was still concerned that DFE would not quote.”

The conversation was “very, very, very short”.  He did not recall saying that DFE would definitely be contacted by Just Jeans.  He denied any reference to rates. 

I accept Mr Young’s version of this conversation.  I think it not credible that he invented this version of the conversation immediately it had occurred and then told the invented version to Messrs Fitt and Wilson.  Needless to say, Mr Morton giving McPhee’s rates to a competitor is totally inconsistent with its case that its intention was for DFE to put in a competitive quote. 

The reference to 176 rather than 178 is explicable on the basis that by this time Mr Morton would have been aware of the Just Jeans specification.  The lower the cubic equivalent, the higher the rate that would have to be charged.  It was consistent with McPhee’s purpose in getting DFE to quote, but at a price not lower than its own, for Mr Morton to give the lower cubic figure. 

(f)        Holland-Bates phone call 17 May
On 17 May at 5.30 pm Mr Holland telephoned Mr Bates.  The two men had got to know each other when Mr Bates worked for DFE in Melbourne from 1981 to 1991 but had not spoken for some four years.

Mr Holland referred to the fact that the DFE men had been to lunch at McPhee’s and asked “Have you caught up with them about Just Jeans?”  Mr Bates said “No, I haven’t but that’s a very old customer of yours”.  Mr Holland said that McPhee had Just Jeans for ten years, that they were trying to get an increase in rates from them and that Just Jeans would ask DFE to tender.  Mr Bates said that DFE’s position was clear.  If they were asked by a McPhee account to quote they would declare up front the operational interdependency and mostly decline to quote.  Mr Holland said:

“No, we want you to quote.  They obviously won’t go to anyone else in TNT and they won’t go to Maynes because they don’t like them.” 

Mr Bates then said:

“OK, if that is the case, if we quote we would quote to win the business”. 

Mr Holland said:

“Yes, I understand.  Just be aware they are difficult people in relation to service.  They expect a lot.  They have a lot of returns and they are cubic.  We haven’t been able to get an increase for the last four years.”

The reference to “cubic” means a customer whose goods are light in relation to volume, that is less than the standard 250 kilograms per cubic metre.  Mr Holland said that the McPhee men who were at the lunch

“were obviously marketing people and I just wanted you to look at the prices that you quote in light of their service requirements and the cube.  Doug [Morton] was running off at the mouth a bit at the lunch about us being desperate not to lose the Just Jeans account.”

Mr Holland said that Just Jeans would send DFE all the tender information Mr Bates said that when they got the information they would look at it and decide whether to quote.

Despite some possible ambiguity in Mr Bates’ witness statements, I am satisfied that Mr Holland was referring to the prices DFE should quote, and not to McPhee’s quote.  I conclude that once Mr Bates had made it known (contrary to McPhee’s hope and expectation) that DFE would not cover McPhee, but would quote to win, Mr Holland sought to make the best he could of the situation by suggesting factors that would make the DFE quote high. 

(g)      Bates - Morton phone call 22 May
On 19 May Mr Bates told Mr Poche that Mr Holland had called him “out of the blue”.  He related the substance of the conversation.  Mr Poche suggested that it might be worth Mr Bates phoning Mr Morton to see if he could find any more information as to the likelihood of McPhee losing the Just Jeans account or whether they were simply just wanting a quote from DFE, “more for the exercise than anything else”. 

Mr Bates finally made telephone contact with Mr Morton on Monday 22 May.  Mr Bates said that he wanted to talk to Mr Morton about Just Jeans.  Mr Morton said that he was sorry he got carried away the other day but “it is a big account of ours and I don’t want to lose it”.  Mr Bates said:

“If DFE quoted it would quote to win and it sounds like you are going to lose it anyway and we would rather get it than have it go to Mayne’s.”

Mr Morton said:

“No they won’t go to IPEC.  They had a look at them and weren’t very impressed”. 

Mr Bates said that DFE would quote to win the business.  Mr Morton said :

“Watch the service - they demand a lot and they are cubic.  I remember when I was twenty-one, no more like thirty-one, if you know what I mean.”

Mr Bates said:

“No I don’t but I will wait until we get the information and I will talk with you soon.”

Mr Bates did not understand the cryptic reference to twenty-one and thirty-one. 

Mr Morton’s version is that Mr Bates called and said that DFE would quote to win the business, whereupon he said to Mr Bates “That’s all I wanted to hear”.  He did not recall saying that he did not want to lose the Just Jeans account, although he agreed that he was in fact unhappy about that prospect, after thirteen years.  He denied saying “Watch the service, they demand a lot and they are cubic”. 

I accept Mr Bates’ version.  It is consistent with the line Mr Morton took in the 17 May conversation (see above).

(h)       DFE quotes to Just Jeans 19 and 26 June
Sometime about mid May DFE Melbourne received the Just Jeans tender document.  Mr Wilson sent it on to Mr Quirke the National Sales Manager.  Mr Quirke spoke to Mr Pellegrini who was visiting Sydney on 23 May.  He obtained more information about Just Jeans’ requirements and sent a memo to Mr Young and Mr Bates.  He then proceeded to work on preparing a quote. 

On 5 June, at Mr Quirke’s request, Mr Wilson visited Mr Pellegrini at Just Jeans’ Victorian premises and obtained further information.  Mr Pellegrini told them that McPhee had recommended DFE as being an excellent company to quote.  He also indicated that Just Jeans had a very good relationship with McPhee and with Messrs Forde and Morton. 

On 15 June Mr Quirke signed a quote on behalf of DFE.  On 19 June Mr Wilson met Mr Pellegrini and handed him the quote.  He commented to Mr Pellegrini that the DFE tender incorporated a minimum charge for single consignments despatched from any capital city.  Mr Pellegrini said that about 30 per cent of Just Jeans’ business would be single consignments and that “may go against you”.

Mr Wilson reported that comment to Mr Quirke who later asked him to deliver a revised quote.  Mr Wilson delivered the revised quote on 26 June.

1. Forde - Young and Poche - Forde phone calls 28 June
   On 28 June at about 10.30 am Mr Forde telephoned Mr Young.  He said that he had been trying to get through to Mr Bates or Mr Poche.  He said he had “got some concerns at Altona”.  Mr Young asked him if he meant Just Jeans and Mr Young said:

“Yes.  It is causing us some concern as DFE has gone in twice and that could put our relationship in jeopardy”. 

Mr Young said the quote was being handled by Mr Quirke in Sydney and he would ring him and have someone ring Mr Forde back. 

Mr Poche telephoned Mr Forde at about 2.20 pm on the same day.  After some brief small talk, the following conversation occurred.  (This version comes from Mr Poche’s witness statement.  I accept it as accurate, with one qualification.)

Forde:

“Are you keeping out of trouble?”

Poche:           

No it looks like we’re in trouble with you over quoting one of your customers and I won’t go into any details as it wouldn’t be right, but yes we had quoted as requested.”

Forde:

“We have been doing the work for many years.”

Poche:

”We thought we weren’t in serious contention as their manager had spent so much time telling us how good McPhees were.”

Forde:

“Yes, we’ve done a lot for them over the [here he said a number of years] years and for most of the time we’ve been so good to them we’ve done it for less than it cost.  We just aren’t going to do that any more.”

Poche:

“I don’t blame you.  We wouldn’t go to all that effort, invest money in equipment and all that for no return either.”

Forde:

“The yellow people are also talking with them but your offer was up to seventeen per cent lower.”

Poche:

“I don’t want to discuss any such details.  This has already been a problem.  Doug has tried to discuss prices with us and we won’t be involved in that.  Are you sure whether our quote or IPEC’s quote is the lowest?”

Forde:

“We haven’t even been concerned about IPEC.  We haven’t taken them seriously and your quote was fifteen, sixteen or seventeen per cent lower.  We know you’ve had a second bite at it.”

Poche:

“Yes.  We added to the quote and also addressed a need which is very important to their business.  But we have carefully costed the work and have been rational and commercial in our offer.  Unlike IPEC, who still seem to be off the rails with their pricing.  I believe we were sensible, have quoted to make a return and believe we have taken all costs into account.  I’d be surprised if IPEC has not quoted low. When we attempted to correct our below cost quotes, they gained the customers off us in most cases and at rates at least as low as our previous problem rates.”

Forde:

“No, your offer is the one being considered and we’re not backing down as we need those rates to do the business.”

Poche:

“We are also being told our quote wasn’t good enough and I believe there is a lot of hard negotiating going on in relation to your price increase.”

Forde:

“Well we’re not going to back down, we’re going back tomorrow and we’re sticking to our guns.”

Poche:

“I don’t blame you.  We won’t do business unless it’s worthwhile.  If you want to talk to me more I’m going to the Gold Coast.”

Mr Forde’s diary for 28 June contains the following entry:

“G.P. Discussion
Priced rationally to make a profit
Put in Commercial quote
I mentioned gap of 17.7% to be qualified
”  that our price was solid and could not be changed
” likelihood that IPEC would undercut.
& Win.”

In his evidence Mr Forde denied that he spoke to Mr Young at all on 28 June.  He agreed that he spoke to Mr Poche.  His evidence was that on the 28th he was told by Mr Morton that he in turn had been told by Mr Pellegrini that IPEC were the successful tenderer and that Mr Morton had “told me a figure of 17.7 per cent or thereabouts, and said that he would show me, when he next met me, the document”. 

Mr Forde says that the most significant part of what Mr Morton told him was “that we had been undercut aggressively by IPEC”.  His evidence was that in the telephone conversation with Mr Poche he said he was told by Mr Morton the difference was 17 per cent

“and that I was probably angry more than anything from an industry point of view, that IPEC had undercut us by so much.”

Mr Forde denied saying to Mr Poche that DFE’s quote was 15,16,17 per cent lower than McPhee’s.  Mr Forde’s evidence was that he was concerned about IPEC.

This episode is revealing, and not only as to Mr Forde’s credit. 

The document referred to by Mr Forde  as having been obtained from Just Jeans was a summary of the bids received in terms of their estimated cost to Just Jeans.  It received in evidence as exhibit J and was as follows:

28th June, 1995

NATIONAL FREIGHT TENDER

Calculations are based on the volume of freight moved ex.Altona for the period 01/04/94 -31/03/95.

Ex. Sydney covers all Stores which have been assigned to the Sydney Distribution Centre.

Ex. Melbourne covers all Stores which have been assigned to the Melbourne Distribution Centre.

Exclusions: - Distribution Centre to Melbourne and Sydney metro   Stores

-   Store returns to Distribution Centres.

MCPHEE	MCPHEE	IPEC	DFE
CURRENT	NEW
Just Jeans Stores ex.  Sydney	693,962	760,649	526,320	596,487
*Just Jeans Stores ex.  Melbourne	481,282	638,617	487,688	525,319
Jay Jay’s Stores ex.  Melbourne	119,534	168,368	132,960	155,412
Stores to Stores Transfers
-  Within Capital Cities	40,824	46,656	75,816	96,360
-  All other areas	224,664	265,512	265,512	322,314
TOTAL	$1,560,266	$1,879,801	$1,488,296	$1,695,892
Variation on current.	$319,535	($71,970)	$135,626
% Variation on current	20.48	(4.61)	8.69

(Emphasis in bold in original, * added)

Counsel for the Commission prepared a document which is an analysis of the four tenders:  McPhee current price, McPhee new (2 May) quote, IPEC quote and DFE (second) quote.  In respect of each tender five items are considered:

Total
           Ex Sydney
           Ex Melbourne
           Transfers:  Capital Cities
           Transfers:  Other Areas

In respect of each (ie twenty calculations, being five prices in each of the four tenders) the calculations give the percentage of the McPhee new quote.  In the case of the ex Melbourne rate (marked * above) the DFE price ($525,319) is 17.7 per cent under the McPhee new price ($638,617).

There can be no doubt that 17.7 per cent was the figure Mr Forde mentioned since it is recorded in his diary.  I think this is what Mr Poche heard, rather than “15,16,17 per cent”.  There can be no doubt that this is the figure Mr Morton passed on to Mr Forde.  There is thus convincing corroboration of Mr Poche’s evidence that what McPhee were complaining about was not the difference between IPEC and McPhee but the difference between DFE and McPhee. Mr Morton and Mr Forde were disappointed, and indeed angry, that DFE had not covered their quote but had quoted competitively, and quoted twice.  This is only consistent with McPhee’s intention all along being not that DFE should quote competitively, but that it should cover.

In a rejoinder filed after the conclusion of the hearing counsel for the respondents sought to raise an alternative explanation of the 17.7 per cent figure.  This involved taking a further set of comparisons, described as “ex Melbourne & Transfers:  Capital cities”.  This showed IPEC as being 17.77 per cent less than the McPhee new quote and DFE 9.29 per cent less.  This was said to support the McPhee case that Mr Forde was complaining to Mr Poche about IPEC, not DFE. 

There are a number of problems with this explanation.  First, 17.77 per cent taken to one decimal point would be 17.8 per cent, not 17.7 per cent.  Secondly, and more importantly, Mr Morton did not say in evidence that the suggested explanation is what he in fact did.  He admitted that in doing arithmetic on the Just Jeans comparisons of the quotes, “I went by that statement [exhibit J] only”.  Exhibit J does not include any set of figures for “ex Melbourne & Transfers:  Capital cities”.  What the respondents’ counsel have done is to create a new set by adding the “ex Melbourne” figures to the “Transfers: Capital cities figures”.  For example, in the case of the McPhee new price:

Exhibit J “ex Melbourne”  $638,617
           Exhibit J “Transfers:  Capital cities”      46,656
           Respondents’ rejoinder   $685,273

Thirdly, Mr Morton denied giving the 17.7 per cent figure to Mr Forde on 28 June.  Indeed he denied receiving exhibit J until after the 28th.  Yet the figure appears in Mr Forde’s diary.  Fourthly, Mr Forde’s diary note is consistent with Mr Poche’s account of the conversation.  When Mr Forde writes “Priced rationally to make a profit.  Put in commercial quote” he is obviously referring to what Mr Poche is saying about the DFE quote.  When Mr Forde writes “I mentioned gap of 17.7 per cent to be qualified.  I mentioned that our price was solid and could not be changed” he is logically comparing the quote previously mentioned (i.e. DFE’s) and “our price” (i.e. McPhee’s).  Then he writes of a “likelihood that IPEC wd undercut & win” thus referring to the future.  He is not telling Mr Poche what the IPEC quote was, and comparing it with McPhee’s. 

Finally, if the point Mr Morton and Mr Forde wanted to make was that IPEC was much cheaper than McPhee, there was a simple and obvious way of doing it.  Exhibit J shows (in bold type) that the total cost to Just Jeans for the IPEC quote is $1,488,296 and for McPhee is $1,879,801.  A moment on a pocket calculator would show IPEC was 20.8 per cent less than McPhee.  This is an even more dramatic figure than the 17.7 per cent. 

(j)        Just Jeans outcome
On 29 June Mr Morton and Mr Holland met with Mr Pellegrini and discussed the figures in exhibit J.  Mr Pellegrini asked them if they wanted to reconsider McPhee’s submission.

On 5 June Mr Pellegrini decided in principle to accept the IPEC tender subject to being satisfied there would be no operational problems.

On 6 July Mr Holland phoned Mr Pellegrini and offered a 6 per cent reduction on McPhee’s proposal.  He said that since McPhee had now carried freight to and from McPhee’s new Sydney Distribution Centre since it became operational, he was now in a better position to appreciate the different volumes emanating out of Sydney and Melbourne. 

On 25 or 26 July Mr Holland phoned and offered Mr Pellegrini a further reduction of approximately 7 per cent.

By 31 July Mr Pellegrini was satisfied the operational concerns regarding IPEC could be overcome.  On 15 August he advised McPhee and IPEC by letter that the account would go to IPEC. 

(k)       Termination of relationship
On 13 July DFE wrote to McPhee terminating the commercial relationship.

1. Legal Issues
   (a)      TPA provisions
   The Commission’s case is that the arrangement or understanding which McPhee attempted to make or reach with DFE would have contained an exclusionary provision, contrary to TPA s 45(2)(a)(i).

In terms of TPA s 4D(1), the proposed arrangement or understanding would have contained an exclusionary provision because (i) the arrangement or understanding was to be made or arrived at between McPhee and DFE, who were competitive with each other, and (ii) the provision that the price quoted by DFE to Just Jeans would not be less than that quoted by McPhee had the purpose of (A) preventing, restricting or limiting the supply of transport services by DFE to Just Jeans and/or (B) limiting Just Jeans to acquiring transport services from McPhee.

Also it is said that the proposed arrangement or understanding would have contained a provision which would have or be likely to have the effect of substantially lessening competition contrary to TPA s 45(2)(a)(ii) because the provision already referred to had the purpose, or was likely to have the effect, of fixing, controlling or maintaining the price of transport services to be supplied by McPhee and DFE to Just Jeans: TPA s 45A(1).

It was not disputed that an arrangement or understanding between McPhee and DFE for the latter to give a cover quote to Just Jeans would be a contravention of the provisions just mentioned. An attempt to make such an agreement or arrive at such an understanding would contravene TPA s 76(1)(b).

In the case of the respondents Forde, Morton and Holland, they contravened TPA s 76(1)(d) by attempting to induce DFE to contravene TPA ss 45(2)(a)(i) and (ii). (An allegation that these respondents aided, abetted, counselled or procured an attempted contravention was struck out: (1997) ATPR 41-571 at 43,922.)

(b)      The relevant market
By the time of trial it was not in dispute that McPhee and DFE were in competition in a market, however that market be defined. Thus there was no issue that this particular aspect of ss 45(2)(a)(i), s 4D, 45(2)(a)(ii) and 45A was satisfied. This issue was implicitly treated as having been resolved by my earlier ruling (1997) ATPR 41-570 at 43,290 to 43,921. For the purposes of this judgment I incorporate what I then said and in particular reference to a passage in the Full Court’s decision in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 558.

(c)        Authority and corporate intent
Intention is an essential element of attempt. How is this to be established in relation to the corporate respondent McPhee? Bound up with this issue is the question of the responsibility of McPhee for its directors and officers and the imputation of their intent to the company. This issue was also raised in the striking out application (1997) ATPR 41-570 at 43,918 to 43,920. Again, I incorporate what I said in my earlier ruling which referred to Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 and Meridian Global Funds Management Asia Limited v Securities Commission [1995] 2 AC 500 at 506-7.

The individual respondents who took the active role in these events were, quite simply, McPhee in Victoria.  Mr Forde was a Director of the company and a Director for the southern region, which included Victoria.  Mr Holland was the General Manager Victoria, Mr Morton was the Business Development Manager Victoria.  It is not suggested they were acting in a private capacity.  The benefit they sought to obtain - retaining the Just Jeans account at increased rates - was for McPhee and not for themselves.  The critical discussions took place at McPhee’s premises, or in telephone conversations to and from these premises.  The individual respondents handed out their McPhee business cards, from which it can be inferred that their seniority and title descriptions encompassed the authority to deal and negotiate with DFE, as they purported to do. 

Unless it be the law that there has to be a Board resolution or express written authority to an individual before a company can be said to have the relevant intent to engage in price-fixing arrangements or understandings arising from that individual’s conduct (a proposition which I find preposterous) it seems to me clear that the intention of Messrs Forde, Morton and Holland is to be imputed to McPhee and their conduct is the conduct of McPhee. 

In any event, the Commission can rely on TPA s 84(2).

(d)      Attempt
For conduct to amount to an attempt it must involve one or more steps towards the commission of a specified illegal act and be immediately, and not merely remotely, connected with the commission of that act:  Trade Practices Commission v Tubemakers of Australia Ltd (1983) 47 ALR 719 at 736.

There is no doubt here that the conduct of McPhee went well beyond preparation.  A meeting was arranged with the DFE men.  These men, who would be taken to have the necessary authority on behalf of DFE, were then asked to quote in circumstances which, as I have found, was intended to be an invitation not to quote competitively but to give a cover quote.  The present case is stronger that Trade Practices Commission v Parkfield Operations Pty Ltd (1985) ATPR 40-639 where the Full Court held that an approach by one petrol retailer to another to raise a possible price-fixing arrangement with other retailers then unspecified was nevertheless an attempt. The Full Court said (at 47,190):

“The conversations cannot reasonably be regarded as having any purpose other than progressing the making of an agreement to which XL and other retailers would hopefully be parties.  They went far beyond merely evidencing an intention to make an agreement or arrive at an understanding with XL and other retailers.”

Here the proposed arrangement or understanding was much more specific.  McPhee only had to secure DFE’s acquiescence and the arrangement or understanding would be complete.  This is exactly what Messrs Forde, Morton and Holland tried to do on 16 May and thereafter.

(e)      Conduct of the individual respondents
The individual respondents asserted that if one looked at each individual’s conduct the words used were not capable of constituting the alleged attempt to induce by that individual.

This argument requires the Court to compartmentalise the words of each individual used at the crucial meeting and then analyse the effect of those words in a vacuum.  This is totally unreal.  Each individual participated in the conversation on 16 May.  What happened, especially as Messrs Morton and Holland chimed in saying to the DFE men “We want you to quote,” is the kind of situation discussed by Isaacs J in R v Associated Northern Collieries (1912) 14 CLR 387 at 400:

“Community of purpose may be proved by independent facts, but it need not be.  If the other defendant is shown to be committing other acts, tending to the same end, then though primarily each set of acts is attributable to the person whose acts they are, and to him alone, there may be such a concurrence of time, character, direction and result as naturally to lead to the inference that these separate acts were the outcome of pre-concert, or some mutual contemporaneous engagement, or that they were themselves the manifestations of mutual consent to carry out a common purpose, thus forming as well as evidencing a combination to effect the one object towards which the separate acts are found to converge.”

Here the essence of the Commission’s case is not a conspiratorial agreement at some earlier point in time (although no doubt the evidence does in fact lead to that conclusion) but rather that on 16 May and thereafter each of the individual respondents acted with the intent of inducing DFE to enter into the proscribed arrangement or understanding.  The inference in my opinion is inescapable that in participating in the meeting in the way they did the individual respondents displayed an intention to so induce the DFE men.  Each held, and was seen by DFE to hold, high office in McPhee.  None of the individual respondents dissociated himself from what was said by another.  On the contrary, both at the meeting and in the days that followed they acted viz-a-viz their colleagues in a mutually supportive way, as a team. 

(f)        Inducement
Inducement for the purposes of the TPA is not limited to threats or promises. Note particularly s 76(1)(d) which speaks of a person who “has induced, or attempted to induce, a person, whether by threats or promises or otherwise to contravene such a provision”.  (Emphasis added)

The Full Court in Yorke v Lucas (1983) 49 ALR 672 at 681 held that inducement included:

“... some act of persuasion or stimulation aimed at ensuring that an act is committed which constitutes a contravention.  The word ‘incite’ is akin to ‘induce’, although ‘induce’ probably covers a wider field.  ‘Incite’ is a word familiar to the criminal law and involves some deliberate act of rousing, stimulating, urging or spurring on: Young v Cassels (1914) 33 NZLR 852 at 854. Thus something more than innocent participation by the defendant is involved in the notion of inducing a person to commit a contravention.”

The primary meaning of “induce” is “to lead or move by persuasion or influence, as to some action or state of mind” (Macquarie Dictionary) or “to lead (a person) by persuasion or some influence to some action, condition, belief, etc” (Shorter Oxford).

As Pincus J said in The Heating Centre Pty Ltd v Trade Practices Commission (1986) 9 FCR 153 at 163 with the concurrence of Lockhart and Wilcox JJ:

“... mere persuasion, with no promise or threat, may well be an attempt to induce.”

The discussion about DFE tendering for the Just Jeans account took place in a context where Mr Forde had commenced the meeting by reminding all present of the commercial relationship between DFE and McPhee and reaffirming its importance.  It is clear that the relationship and its preservation was being raised as relevant to determining what DFE should do in connection with McPhee’s major customer.  The intent of the McPhee men, particularly Mr Forde, was to convey that it would be consistent with, and beneficial to, that commercial relationship for DFE to bid for the Just Jeans account, but not to win it.  Reference to the relationship was used as persuasion.  It was in that context Messrs Forde, Morton and Holland all joined in the request for DFE to bid.

(g)      Knowledge by individuals of other individuals’ intent
It was argued that individual respondents could not be found guilty of a contravention unless they were shown to have been aware of the intent of each other respondent. 

I refer to what I said in the earlier application (1997) ATPR 41-571 at 43,923. All that is necessary is to demonstrate that the particular individual had the requisite intent.

(h)       The rule in Browne v Dunn

There was some complaint by counsel for the respondents as to alleged non-compliance with the rule in Browne v Dunn (1893) 6 R 67. As pointed out recently by Tamberlin J in Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1 at 7, the rule is ultimately one of procedural fairness. An essential element of the rule - and one which was very much present in Browne v Dunn itself - is that the impugned witness has had no notice on the point on which his or her evidence is subsequently attacked. This is apparent from the following passage in the speech of Lord Herschell LC (at 70-71):

“Now, my Lords, I cannot help saying that it seems to me to be absolutely essential to the proper conduct of a cause, where it is intended to suggest that a witness is not speaking the truth on a particular point, to direct his attention to the fact by some questions put in cross-examination showing that that imputation is intended to be made, and not to take his evidence and pass it by as a matter altogether unchallenged, and then, when it is impossible for him to explain, as perhaps he might have been able to do if such questions had been put to him, the circumstances which it is suggested indicate that the story he tells ought not to be believed, to argue that he is a witness unworthy of credit.  My Lords, I have always understood that if you intend to impeach a witness you are bound, whilst he is in the box, to give him an opportunity of making any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair play and fair dealing with witnesses.  Sometimes reflections have been made upon excessive cross-examination of witnesses, and it has been complained of as undue; but it seems to me that a cross-examination of a witness which errs in the direction of excess may be far more fair to him than to leave him without cross-examination, and afterwards to suggest that he is not a witness of truth, I mean upon a point on which it is not otherwise perfectly clear that he has had full notice beforehand that there is an intention to impeach the credibility of the story which he is telling.  Of course I do not deny for a moment that there are cases in which that notice has been so distinctly and unmistakably given, and the point upon which he is impeached, and is to be impeached, is so manifest, that it is not necessary to waste time in putting questions to him upon it.  All I am saying is that it will not do to impeach the credibility of a witness upon a matter on which he has not had any opportunity of giving an explanation by reason of there having been no suggestion whatever in the course of the case that his story is not accepted.” (Emphasis added) 

In the present case there was an elaborate statement of claim with extensive particulars - so much so that counsel for the respondents in the earlier strikeout application complained of it being a “play script”.  Prior to trial the Commission served detailed witness statements.  These largely comprised direct evidence of meetings and telephone conversations in which the various respondents participated.  The respondents could be under no illusion as to the case sought to be made against them.  They had every opportunity to give such evidence as they wished in order to meet that case.  Moreover, as a result of the earlier ruling, they were not hampered by having to commit themselves to any written version before stepping into the witness box.

In the circumstances of this case, the rule in Browne v Dunn did not require counsel for the Commission when cross-examining the respondents to debate the competing probabilities which might arise from the evidence of that witness, still less from other evidence.  Moreover, counsel for the Commission made their final submissions before the respondents’ counsel, who thus had the opportunity to argue against inferences and conclusions the Commission sought to raise. 

1. Conclusion
   McPhee badly wanted to keep Just Jeans’ business.  They were apprehensive of the threat posed by IPEC, which was likely to give a considerably cheaper quote.  Messrs Forde, Morton and Holland all hoped that if DFE put in a cover quote McPhee’s chances against IPEC would be much improved.  Mr Forde arranged the meeting of 16 May 1995 for the purpose of persuading the DFE Victorian management to put in a cover quote.

Given the sensitivity in the road transport industry to allegations of price-fixing, it is not surprising that the McPhee men put their request to DFE in guarded terms, without spelling out their intent explicitly.  So much was this the case that the DFE men may not really have got the message, although they were certainly puzzled and suspicious.

But I have no doubt that the true intent of McPhee was to have DFE quote, but not quote competitively.  This is confirmed by, amongst other things, Mr Forde’s complaint to Mr Poche on 28 June about DFE undercutting McPhee - something which on McPhee’s present case, is what they intended DFE to do all along. Mr Forde’s reference to Mr Young on the 28th to putting the relationship “in jeopardy” also reflects another theme which emerged at the 16 May meeting.  As already mentioned, the relationship and its preservation were raised in the context of discussing what DFE should do in connection with the Just Jeans tender. The relationship was implicitly relied on by McPhee both as a matter of loyalty - the ties that bind - and by way of suggested disadvantage to DFE if the relationship did not continue.

I am satisfied the alleged contraventions occurred.

1. ACI FLORAPAK

1. The Commission’s Case
   ACI Florapak was a McPhee customer.  In November 1994 DFE’s Victorian Country Sales Manager Mr Peter Jolly visited the ACI Florapak premises and spoke to the manager Mr Pietro Scalzo about the possibility of DFE quoting for ACI Florapak’s business.  About three or four hours later on the same day Mr Guy Webb, McPhee’s Gippsland Area Manager, rang Mr Jolly and asked to speak to him.  The two men had not met previously.  By arrangement Mr Webb came to the DFE depot at Traralgon shortly after 5.00 pm that day and the two men went off for a drink.  Over drinks Mr Webb told Mr Jolly that ACI Florapak were McPhee’s major account in Gippsland and to take the work would hurt them.  He asked Mr Jolly to cover McPhee’s rates.  Mr Jolly agreed and said he would cover.  He said he would collect McPhee’s rates from Mr Webb.  The next morning Mr Jolly visited the McPhee depot in Traralgon. Mr Webb gave him some rates. Subsequently Mr Jolly prepared a quote which as to some services was the same as the rates which Mr Webb had given him.  DFE did not get the work. 

1. The Respondents’ Case
   Mr Webb’s version concedes the two meetings with Mr Jolly occurred but denies that there was any mention of ACI Florapak or any discussion or agreement to cover McPhee’s rates.  His motive in seeking the meeting was to “strike up a rapport” with Mr Jolly and discuss sharing deliveries to some of the smaller towns in the area. 

1. Credibility and Probabilities
   As will be seen, there is a stark conflict of evidence.  Mr Jolly’s demeanour became relevant not only in assessing his evidence in court but, on Mr Webb’s account, as an important feature of the events of November 1994.  In evidence-in-chief Mr Webb was asked by his counsel was there anything that he noticed when he first met Mr Jolly at the DFE depot.  Mr Webb said that two main things stuck in his mind, that Mr Jolly’s handshake wasn’t very strong and he “didn’t seem to look me in the eye”.  He went on to say:

“I recall, because of his handshake and the way he appeared to me that I was suspicious of him and I distinctly remember going to the pub thinking ‘I am not going to mention any account that I don’t know that DFE have’.”

I do not accept this evidence.  It appeared to me contrived and unconvincing.  Judging by his demeanour in the witness box, Mr Jolly is a typical salesman, with a brisk, cheerful and outgoing style.  I think it much more likely that the two men hit it off well.

It is true, as counsel for Mr Webb stressed, that there is no direct evidence as to how Mr Webb became aware that Mr Jolly had visited ACI Florapak.  Mr Scalzo did not say that he told Mr Webb.  However Mr Jolly, whose evidence I accept, said that Mr Webb told him he had been aware of the visit.  There is no doubt that Mr Jolly’s visit in fact took place.  It is not inherently unlikely that by some means not disclosed by the evidence Mr Webb became aware of his competitor’s visit to his prize customer.  Moreover, Mr Jolly had been visiting Traralgon several days a week for some four months and the two depots are only about a kilometre apart.  It would be an amazing coincidence if within a few hours of Mr Jolly’s visit to ACI Florapak Mr Webb just happened to decide to pay a social visit.  Further there is the admitted fact of Mr Jolly’s visit to McPhee’s depot the next morning.  If the first meeting was no more than a “getting to know you” event, there seems no need for such a prompt follow-up.  On the other hand, if there was an agreement to put in a covering quote, an early meeting was obviously necessary.

An intriguing issue arose over the location of the drinking venue to which the two men adjourned after first meeting at the DFE depot.  Mr Jolly said Mr Webb invited him to the Traralgon Football Club.  Mr Webb said the meeting took place at the Crown Hotel.  Mr Webb said that after he found out about the present proceedings he went and checked the visitors’ attendance register at the Club and found no reference to Mr Jolly.  The Commission had also been exploring this avenue and its counsel produced an extract from the Traralgon Football Club visitors’ attendance register over the period 25 October to 13 December 1994.  It is true that the register does not record any visit by Mr Jolly.  It is equally true that there are not a great number of entries, perhaps suggesting that there is not particularly rigorous compliance with the requirements of the Liquor Control Act 1987 (Vic). The position was not improved for the respondents when Mr Webb was asked in re-examination how often in 1994 he went to the Traralgon Football Club, either on his own or with someone else as a visitor. He said “Three, maybe four times a week”. When counsel sought to limit the damage by directing Mr Webb’s attention to the period of October to December Mr Webb said “I couldn’t tell you. I would have gone there a couple of times a week”.

I am satisfied that the meeting did take place at the Football Club.  It is clear that it was Mr Webb’s regular practice to go there.  It is inherently more likely that meeting someone new in the town for the first time Mr Webb would want to take Mr Jolly to his club rather than a hotel, and one described by Mr Jolly as “a bit rough”.  It is unlikely to be an issue on which there was genuine failure of recollection.  I am inclined to think that Mr Webb has put the meeting in the hotel rather than the club because that would be more consistent with his account of immediate suspicion and distrust of Mr Jolly.

1. Findings of Fact
   Mr Jolly had worked for various companies in the transport industry in Victoria since 1983.  On 22 August 1994 he joined DFE as its Victorian Country Sales Manager.  He was personally involved in sales in the Gippsland Region but was also responsible for the conduct of other representatives in Geelong and Bendigo.  He reported directly to Mr Fitt.

Upon starting with DFE Mr Young and Mr Fitt told him that DFE and McPhee helped each other out with linehaul and delivery in country areas and were major accounts of each other.  They told him that if a client was using McPhee he should tell them that they were a major account of DFE and that DFE would prefer not to quote unless the account was in jeopardy or the client was using multiple carriers in which case he could quote the other carrier’s part of the business. 

In November 1994 Mr Jolly was visiting Gippsland probably two or three days a week.  He received a message from the Branch Manager of DFE’s depot at Traralgon to visit ACI Florapak.  It was part of the Branch Manager’s duties to advise Mr Jolly of prospective customers, based on observations by DFE drivers or other enquiries.  Mr Jolly ascertained that the responsible officer at ACI Florapak was Mr Pietro Scalzo.  He telephoned Mr Scalzo and asked if he could come and quote for his business.  Mr Scalzo agreed and Mr Jolly attended the ACI Florapak premises in Drouin on either Monday 14 or Tuesday 15 November.  Mr Scalzo showed him the premises and various freight which required transport.  Mr Scalzo said that both TNT General (that is the name of the business conducted by TNT) and McPhee performed well, that ACI Florapak had been with McPhee for years but that DFE could quote.  Mr Scalzo said that ACI Florapak would be the biggest freight distributor in Gippsland with a total transport bill of $20,000 per month and that they were McPhee’s biggest account in Gippsland.  Mr Jolly told Mr Scalzo that DFE did a lot of work for McPhee, that each was a client of the other, that DFE did linehaul and distribution of freight for each other and on a commercial basis they chose not to quote against McPhee, but that he would put in a quote for general freight and air satchels. 

About three or four hours after Mr Jolly left Mr Scalzo he received in his car a call on his mobile telephone.  It was from Mr Webb who introduced himself as manager of McPhee’s in Gippsland and said “I would like to have a drink with you”.  Mr Jolly said “I am staying in town tonight, where will I meet you”? Mr Webb said that he would drop into the DFE depot at 5.00 pm to pick Mr Jolly up.  At about 5.10 pm Mr Webb came to the DFE depot in Standing Drive, Traralgon.  Mr Jolly introduced himself and Mr Webb said “Hello, I’m Guy Webb, let’s go”.  Mr Jolly then followed Mr Webb’s vehicle to the Traralgon Football Club where they arrived at about 5.15 pm.

Mr Webb said in evidence that as soon as he met Mr Jolly at the DFE depot Mr Jolly asked him if he had seen the DFE depot.  Mr Webb said that he had.  He asked Mr Jolly if he had seen the McPhee depot.  Mr Jolly said he had not and they arranged for Mr Jolly to go to the McPhee depot the next morning.  Mr Webb says Mr Jolly then put some papers into a brief case.   Mr Webb asked him if he would like a lift “to the pub”.  Mr Jolly said that there was not much point and got in his own car and followed him.

Mr Webb’s evidence as to the conversation immediately upon meeting Mr Jolly at the DFE depot was denied by Mr Jolly. Mr Webb’s evidence did not come out in a very spontaneous fashion in evidence-in-chief. Mr Jolly’s version is the more probable.  If the two had previously agreed to go and have a drink once they met, it is likely that that’s what they immediately did.  I think Mr Webb has inserted this earlier discussion about an agreement to visit the McPhee depot the next day to make that admitted visit bear as innocent a complexion as possible and to distance it from any subsequent conversation between them while having drinks. 

At the Football Club the two men sat down and bought some beers.  For a short time there was social conversation and an exchange of business cards.  According to Mr Jolly, whose evidence I accept, the following conversation took place:

Webb:

“I believe you were in ACI Florapak today.”

Jolly:

“Yes.”

Webb:

“Are you going to quote and are you aware of the arrangement that exists?”

Jolly:

“Yes I am aware of the agreement between our two companies, that we do work for each other and it’s a commercial decision that we don’t quote against each other.”

Webb:

“How are Landmark and Gippsland Printing going?”

Jolly:

Very well.”

Webb:

“We had problems with both of them which were service related.  We didn’t need those accounts.”

Webb:

“Are you going to quote ACI?”

Jolly:

“Yes I am.”

Webb:

“Don’t take the work off us, it’s our major account in Gippsland and it will hurt us.  Cover the rates.  Give me a ring in the morning and I will give you the rates.”

Jolly:

“Yeah, OK.  I will give you a call and I will see you in the morning and collect the rates.”

They then turned to other matters such as football.  At about 6.30 pm Mr Jolly left the club and returned to his hotel. 

On Mr Webb’s version the two men also discussed their respective families.  Mr Webb said he was married with two children and Mr Jolly mentioned that he was married and that he and his wife were trying to have children but were having difficulty.  This level of intimacy between two men who had not met before is not easy to reconcile with the wariness which Mr Webb says he brought to the conversation. 

Mr Webb denies that there was any mention of ACI Florapak at the conversation.  I do not accept this evidence.

The following morning at about 9.30 am Mr Jolly telephoned Mr Webb and said that he would “drop over and have a look around”.  About half an hour later he drove to the McPhee depot and met Mr Webb who gave him a guided tour.  Whilst in the office Mr Jolly asked him if he had the rates for ACI.  Mr Webb said that he could not find the original quote at the moment but he then gave in dollar terms a basic charge and a charge for Sydney, Adelaide, Brisbane and Perth in cents.  Mr Jolly made a note of the rates in his 1994 diary which he destroyed at the end of the 1994 year in accordance with his usual practice.  At the time he made a statement in October 1995 he could not recall the figures per kilo or the basic charge. 

In the course of the conversation Mr Webb said words to the effect “If you come across any other McPhee account, give me a call”.  At the conclusion of the meeting Mr Jolly said:

“Ok Guy, I will cover the rates.  Nice to meet you.  I will see you later.  Next  time we might have a game of golf.”

On Mr Jolly’s return to Melbourne he prepared a quote for ACI Florapak.  While the quotation contained a large number of destinations both to capital cities and country areas nationally, he used the rates which Mr Webb had given him to calculate the rates for Sydney, Adelaide, Perth and Brisbane.  For Sydney and Adelaide he quoted a cent or two higher than the rates Mr Webb had provided, in order to ensure that DFE did not secure the work from McPhee in relation to at least those two legs.  In relation to the lower volume routes of Perth and Brisbane he quoted a cent or two lower, intending that they be competitive with the rates charged by TNT General for the carriage of bulk freight.  Mr Jolly did not know the rates which TNT General were charging nor of the McPhee rates in relation to destinations other than Sydney, Adelaide, Brisbane or Perth.  In relation to each such other destination he calculated competitive rates. 

A comparison of the actual rates quoted by McPhee and DFE does not literally accord with Mr Jolly’s evidence.  For example, as to Sydney the McPhee rate was 28 cents and the DFE rate was 32 cents, so it was strictly speaking 4 cents higher and not “a cent or two”.  Also the DFE basic charge was $7 as against $6.30.  However, bearing in mind that Mr Jolly was speaking from memory when he made his statement in October 1995, I do find that such discrepancy as there is inconsistent with the basic thrust of his evidence.

On 29 November Mr Jolly discussed with Mr Scalzo the quote he had given.  Mr Scalzo said that some of it looked good and some of it looked a bit high.  He asked: “Can you review it?”  Mr Jolly said “No, I have given it my best shot”. 

Mr Scalzo said he appreciated that, would keep it on file and if anything happened he would give Mr Jolly a call.  Mr Scalzo did not accept that the quotation and DFE never dealt with ACI Florapak.

1. Legal  Issues
   Once Mr Jolly’s evidence is accepted, it is clear that there was a concluded arrangement and understanding between McPhee and DFE, who were competitive with each other, which arrangement or understanding contained a provision that DFE would put in a quote to ACI Florapak for certain transportation services that was not less than McPhee’s price. That provision contravened s 45(2)(a)(i) and (ii). Moreover McPhee gave effect to the arrangement or understanding by supplying to DFE the rates charged by McPhee to ACI Florapak.

Mr Webb

• was directly and knowingly concerned in the contraventions: TPA s 76(1)(e). He was the only individual involved on the McPhee side and took the initiative;

• aided, abetted, counselled and procured McPhee and DFE to engage in the contraventions: TPA s 76(1)(c); and

• induced DFE to engage in the contraventions: TPA s 76(1)(d).

McPhee is liable for Mr Webb’s conduct.  Mutatis mutandis, the reasons already discussed in relation to Just Jeans apply.

1. ORDERS
   Issues of penalties, costs and other relief will be adjourned for further hearing on a date to be fixed.

The Commission is to file and serve within seven days minutes of proposed orders together with written submissions.  The respondents are to file written submissions within seven days thereafter. 

I certify that this and the preceding forty-three (43) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey

Associate:

Dated:  26 February 1998

Counsel for the Applicant:	J W K Burnside QC and J Beach
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the first Respondent:	P R Hayes QC and I D Martindale
Solicitor for the first Respondent:	Clayton Utz
Counsel for the second and third Respondents:	C M Maxwell
Solicitors for the second and third Respondents	Lander & Rogers
Counsel for the fourth and sixth Respondents	N Lucarelli and D Chan
Solicitors for the fourth and six	Lander & Rogers
Respondents
Counsel for the fifth Respondent	J W S Peters
Solicitors for the fifth Respondent	Lander & Rogers
Date of Hearing:	2,3,4,5,6,9,10,11 and 13 February 1998
Date of Judgment:	26 February 1998