Australian Competition and Consumer Commission v Lactalis Australia Pty Ltd
[2022] FCA 1087
•16 September 2022
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Lactalis Australia Pty Ltd [2022] FCA 1087
File number: QUD 245 of 2021 Judgment of: DERRINGTON J Date of judgment: 16 September 2022 Catchwords: STATUTORY INTERPRETATION – interpretation of industry code – interpretation of provisions imposing civil penalties – interpretation of undefined words or expressions –meaning of “publish” on its website – whether agreement constitutes a “single document” – reading additional words into statute – meaning of “prohibit” – meaning of “material breach” – whether material breach differs from fundamental breach – material breach in context of unilateral termination – intersection of contract law and Competition and Consumer (Industry Codes–Dairy) Regulations 2019 (Cth) (Dairy Code) – Chevron principle
PRIMARY INDUSTRY – Dairy Code – alleged breaches of mandatory industry code – milk supply agreements between farmers and processors – non-exclusive supply agreements – legal and practical effect of agreements
EVIDENCE – expert evidence – admissibility – whether opinion shown to be based on specialised skill and knowledge
Legislation: Competition and Consumer Act 2010 (Cth)
Evidence Act 1995 (Cth)
Legislation Act 2003 (Cth)
Competition and Consumer (Industry Codes—Dairy) Regulations 2019 (Cth)
Cases cited: Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212
AstraZeneca AB v Apotex Pty Ltd (2015) 257 CLR 356
Australian Competition and Consumer Commission v Valve Corp (No 3) (2016) 337 ALR 647
Australian Competition and Consumer Commission v Yazaki (2018) 262 FCR 243
Australian Securities and Investments Commission v King (2020) 270 CLR 1
Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378
Chevron USA Inc v Natural Resources Defense Council Inc (1984) 467 US 837
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389
Commissioner of Taxation v Auctus Resources Pty Ltd (2021) 284 FCR 294
Construction, Forestry, Mining & Energy Union v Mammoet Australia Pty Ltd (2013) 248 CLR 619
Country Roads Board v Neale Ads Pty Ltd (1930) 43 CLR 126
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2021] VSC 75
Gnych v Polish Club Ltd (2015) 255 CLR 414
Goldsbrough, Mort & Co Ltd v Quinn (1910) 10 CLR 674
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115
Legal Services Board v Gillespie-Jones (2013) 249 CLR 493
Lennard v Jessica Estates Pty Ltd (2008) 71 NSWLR 306
Minister for Immigration v SZVFW (2018) 264 CLR 541
Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Moorcroft (2021) 95 ALJR 557
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Re Section 46L of theCriminal Appeals Act 2004 (WA); ex parte Commissioner of Police (2020) 56 WAR 209
Sindel v Georgiou (1984) 154 CLR 661
SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516
SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362
Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93
The Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379
Uelese v Minister for Immigration and Border Protection (2015) 256 CLR 203
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 162 Date of hearing: 11-13 April 2022 Counsel for the Applicant: Ms F Forsyth QC with Mr T Goodwin Solicitor for the Applicant: Johnson Winter & Slattery Counsel for the Respondent: Mr M Hodge QC with Mr D Hume Solicitor for the Respondent: Clifford Chance ORDERS
QUD 245 of 2021 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: LACTALIS AUSTRALIA PTY LTD ACN 072 928 879
Respondent
ORDER MADE BY:
DERRINGTON J
DATE OF ORDER:
16 SEPTEMBER 2022
THE COURT ORDERS THAT:
1.It is declared pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) that Lactalis Australia Pty Ltd breached s 12(2) of the Competition and Consumer (Industry Codes–Dairy) Regulations 2019 (Cth) (Dairy Code) by failing to publish standard form Milk Supply Agreements on its website at or before the publication deadline of 2.00pm on 1 June 2020.
2.It is declared pursuant to s 21 of the Federal Court Act that from at least 17 June 2020 Lactalis Australia Pty Ltd breached s 13 of the Dairy Code by publishing on its website Milk Supply Agreements that did not comply with the requirements of s 34(2) and (3) of the Dairy Code in that such agreements as were published provided that Lactalis Australia Pty Ltd may unilaterally terminate them in circumstances which did not involve a material breach by a farmer.
3.It is declared pursuant to s 21 of the Federal Court Act that between 1 January 2020 and 14 January 2021, Lactalis Australia Pty Ltd breached s 17 of the Dairy Code by entering into Milk Supply Agreements that did not comply with the requirements of s 34(2) and (3) of the Dairy Code in that they provided that Lactalis Australia Pty Ltd may unilaterally terminate them in circumstances which did not involve a material breach by a farmer.
4.It is declared pursuant to s 21 of the Federal Court Act that Lactalis Australia Pty Ltd, in trade and commerce, breached s 51ACB of the Competition and Consumer Act 2010 (Cth) by its conduct in contravention of the Dairy Code identified in Orders 1 to 3 hereof.
5.The parties are to be heard as to the nature of any further relief to which the applicant may be entitled.
6.The parties are to be heard on the question of costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DERRINGTON J:
INTRODUCTION
In this action the Australian Competition and Consumer Commission (ACCC) has asserted that, in the period from 2020 to early 2021, Lactalis Australia Pty Ltd (Lactalis) contravened certain provisions of the Competition and Consumer (Industry Codes—Dairy) Regulations 2019 (Cth) (Dairy Code) in relation to its entry into certain Milk Supply Agreements between it and its supplier farmers. It has brought these proceedings against Lactalis seeking declaratory relief and the imposition of civil penalties in relation to those alleged contraventions. These are the first proceedings brought under the Dairy Code and there exists not a little uncertainty as to the scope of some of its provisions.
The essence of the ACCC’s allegations are that:
(a)Lactalis failed to publish its standard form Milk Supply Agreements for the 2020 / 2021 year on its website by the prescribed date of 1 June 2020, which omissions contravened s 12(2) of the Dairy Code;
(b)in contravention of s 12 of the Dairy Code, Lactalis failed to publish on its website a non-exclusive Milk Supply Agreement, being one in respect of which it was prepared to enter for the 2020 / 2021 year;
(c)the agreements into which Lactalis entered with its supplier farmers in the 2020 / 2021 year did not, for the most part, “consist of a single document”, which amounted to a contravention of ss 17 and 22 of the Dairy Code; and
(d)the agreements into which Lactalis entered contained clauses which contravened s 34 of the Dairy Code in that they purported to permit Lactalis to terminate them other than for a material breach.
These reasons concern only whether the ACCC has established the occurrence of the alleged breaches and the declarations which might be made consequent upon any findings. Whether additional relief should be granted, including by the imposition of penalties or the making of injunctions, is to be determined following a further hearing.
BACKGROUND
The agreed facts
Prior to the hearing the parties reached agreement as to the factual basis on which the ACCC’s claims arise. That agreement was reduced to writing in the Amended Statement of Agreed Facts, the Supplementary Statement of Agreed Facts and the Further Supplementary Statement of Agreed Facts. The following recitation of facts is derived mostly from those documents.
There is no dispute as to the corporate status of Lactalis or the ACCC’s entitlement to bring these proceedings under the Competition and Consumer Act 2010 (Cth) (Competition and Consumer Act) and the Dairy Code.
Since at least 1 January 2020 Lactalis has been a “processor” of milk within the meaning of that term as defined in s 5 of the Dairy Code in that it has conducted a business, in trade or commerce, in the course of which it purchases milk from farmers, including for the purpose of processing that milk for sale as milk or other dairy products such as butter, cheese, milk powder, yoghurt and custard.
The Dairy Code commenced operation on 1 January 2020. It is delegated legislation made under the Competition and Consumer Act and prescribes a mandatory industry code in relation to processors purchasing milk from farmers.
The Australian dairy industry consists of around 5,700 dairy farm businesses of which about 98% are family owned and operated.
Lactalis is one of the largest processors in Australia which purchases milk from dairy farmers, largely for drinking milk sold to grocery retailers. In 2020, it purchased around 950 million litres of milk (approximately 11% of Australia’s raw milk production) and contracted with over 400 dairy farmers across all of Australia’s major dairying regions. It directly employs over 2,500 people across Australia.
Approximately 90% of drinking milk supplied in Australia is supplied as conventionally pasteurised (as opposed to UHT) milk with a shelf life of less than approximately 20 days from the date of milking. Drinking milk in Australia is sold and consumed relatively consistently across the year.
Processors of conventionally pasteurised drinking milk generally prefer supplies of fresh milk from farm to factory with relative consistency across the year.
On and from 17 June 2020 Lactalis published on its website the following documents:
(a)seven sets of the boilerplate Milk Supply Agreement documents as follows:
(i)Milk Supply Agreement – Queensland Payment Region;
(ii)Milk Supply Agreement – Queensland Payment Region – New Supplier;
(iii)Milk Supply Agreement – New South Wales – New Supplier;
(iv)Milk Supply Agreement – Victoria, Tasmania and NSW (Southern Riverina);
(v)Milk Supply Agreement – South Australia Payment Region;
(vi)Milk Supply Agreement – Western Australian Payment Region (for the supply period 1 January 2021 to 30 June 2021);
(vii)Milk Supply Agreement – Western Australian Payment Region – New Supplier;
(b)five editions of several Handbooks, each of which was applicable to a particular region as follows (collectively referred to herein as “Regional Handbooks”):
(i)Queensland & Northern NSW Region - Milk Supplier Handbook - Queensland and Northern NSW – Edition effective from 1 July 2020;
(ii)Victoria, Southern Riverina & Tasmania Region - Milk Supplier Handbook – Victoria & Riverina, South Australia and Tasmania – Edition effective from 1 July 2020;
(iii)South Australia Region - Milk Supplier Handbook – Victoria & Riverina, South Australia and Tasmania – Edition effective from 1 July 2020;
(iv)New South Wales Region - Milk Supplier Handbook – Central and Southern NSW – Edition effective from 1 July 2020;
(v)Western Australia Region - Milk Supplier Handbook – Western Australia – Edition effective from 1 July 2020; and
(c)the QDairy Farm Food Safety Manual which is a food safety program manual.
From around September 2020, Lactalis published on its website the following:
(a)an eighth boilerplate Milk Supply Agreement document named Milk Supply Agreement – Western Australian Payment Region (for the supply period 1 January 2021 to 30 June 2022); and
(b)a ninth boilerplate Milk Supply Agreement document named Milk Supply Agreement – Queensland Payment Region (for the supply period 1 January 2021 to 30 June 2021).
Lactalis’s general practice was to sign a Milk Supply Agreement (herein referred to as an “MSA”) after receiving at least part of a signed copy of the boilerplate document from farmers.
From 1 January 2020 until around 14 January 2021, Lactalis entered into 378 “Exclusive Supply” MSAs.
From 1 January 2020 until around 14 January 2021, Lactalis did not enter into any standard form “Non-Exclusive Supply” agreements in the form published on Lactalis’s website from 17 June 2020. In relation to an MSA dated 4 January 2021 entered into in relation to a farm nominated as “Farm 6750”, which by Condition 4 of Schedule 1 indicated that it was a “Non Exclusive Supply” agreement, the farmer in fact supplied Lactalis on an exclusive basis and Lactalis paid the exclusive price for this milk. The “Non-Exclusive Supply” option was inadvertently ticked by the farmer.
However, Lactalis did negotiate and enter into 13 non-standard, “Non-Exclusive Supply” MSAs with farmers in the period from 19 June 2020 to 5 May 2021. Nevertheless, it paid the “Exclusive Supply” price for the milk supplied by these farmers.
Lactalis’s method of entering into MSAs with farmers
On 344 occasions during the period from 1 January 2020 to 14 January 2021, Lactalis signed and sent to farmers executed copies of a version of the boilerplate MSA document (or part thereof) without the relevant Regional Handbook or QDairy Manual attached or otherwise provided with it.
On 19 occasions during the period from 1 January 2020 to 14 January 2021, after Lactalis signed the MSA document, it did not send an email providing the farmer with any pages of the executed MSA document, Regional Handbook or QDairy Manual.
Contents of the Lactalis boilerplate documents
The boilerplate MSA documents published on Lactalis’s website from 17 June 2020 and the boilerplate MSA documents published from or around September 2020 contained, inter alia, the following clauses:
(a)at Schedule 1:
Background
…
Therefore the Lactalis milk supply offers 3 separate but related documents;
1. The Milk Supply Agreement
2. The Milk Supply Handbook relevant to that dairy/Milk Payment region
3. The Quality Assurance Scheme applicable to that region
(b)at Schedule 6 clause 1.1:
Material Breach means
(a)a breach of any of the following Handbook and QDairy provisions (and subsections)
…
(iii) Processor Reputation (Handbook clause 6)
(c)at Schedule 6 clause 13.1:
13.1 Entire Agreement
This agreement together with the Handbook contains the entire agreement between the parties in relation to the subject matter of this Agreement and supersedes any prior agreement or understanding between the parties in relation to that subject matter.
(d)at Schedule 6 clause 10.1:
10.1 Termination rights
Either party may terminate this Agreement
(a)if the other party commits a Material Breach of this Agreement and, in the case of a Material Breach capable of remedy, fails to remedy the Material Breach within 14 days (or any longer period agreed between the parties) after the receipt of a written notice by the party not in default, giving full particulars of the Material Breach and requiring it to be remedied;
(b)immediately in the event that the other party (if an individual) is declared bankrupt;
(c)immediately in the event that the other party (if a corporation) enters into liquidation or any other form of external administration;
and the terminating party must give to the other party, as soon as practical after the terminating party terminates the agreement:
(a) written notice of:
(i) the termination;
(ii) the reason for termination; and
(iii) the day the termination takes effect.
The five editions of the Regional Handbooks published on Lactalis’s website on 17 June 2020 contained the following clause:
6. Processor Reputation
Lactalis reserves the right to suspend or terminate supply where in the opinion of Lactalis, the supplier has engaged in public denigration of processors, key customers or other stakeholders.
On 384 occasions during the period from 1 January 2020 to 14 January 2021, Lactalis entered into MSAs with farmers which contained the clauses outlined in paragraphs 20 and 21 above.
On 7 occasions during the period from 1 January 2020 to 14 January 2021, Lactalis entered into MSAs with farmers (being Farms 5130, 5150, 5234, 5350, 5354, 5538 and 6925) which contained the clauses outlined in paragraph 20 above but did not contain the clause outlined in paragraph 21 above.
ISSUES FOR CONSIDERATION
The issues requiring consideration in this matter are appropriately categorised by reference to the ACCC’s four distinct allegations referred to above. They are discussed in that order in these reasons.
However, before turning to them, it should be observed that several issues raised between the parties involved the consideration and interpretation of certain words or expressions which are undefined in the Dairy Code. That code, being a suite of regulations, is to be construed in the same manner as a statute: Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 398; Legislation Act 2003 (Cth) s 13(1). Accordingly, weight must be given to matters of text, context and purpose: see Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Moorcroft (2021) 95 ALJR 557, 562 at [15]; Australian Securities and Investments Commission v King (2020) 270 CLR 1, 15 at [24] (Kiefel CJ, Gageler and Keane JJ). Moreover, the approach to the proper construction of such words or expressions must not be divorced from the text of the Dairy Code itself. The High Court has repeatedly stated that words of a statute should be interpreted according to their natural and ordinary meaning, in light of the context and purpose: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 384 at [78] (McHugh, Gummow, Kirby and Hayne JJ). As stated by Kiefel CJ, Nettle and Gordon JJ in SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362, 368 at [14]:
The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.
(Footnotes omitted).
In Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378, 389 at [24] – [25], French CJ and Hayne J further explained the importance of context and purpose in the interpretive exercise in the following terms:
The context and purpose of a provision are important to its proper construction because, as the plurality said in Project Blue Sky Inc v Australian Broadcasting Authority, “[t]he primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute” (emphasis added). That is, statutory construction requires deciding what is the legal meaning of the relevant provision “by reference to the language of the instrument viewed as a whole”, and “the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed”.
Determination of the purpose of a statute or of particular provisions in a statute may be based upon an express statement of purpose in the statute itself, inference from its text and structure and, where appropriate, reference to extrinsic materials. The purpose of a statute resides in its text and structure. Determination of a statutory purpose neither permits nor requires some search for what those who promoted or passed the legislation may have had in mind when it was enacted. It is important in this respect, as in others, to recognise that to speak of legislative “intention” is to use a metaphor. Use of that metaphor must not mislead. “[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have”…
(Footnotes omitted).
It is also uncontroversial that regard may be had to legislative history and extrinsic material to interpret legislation. As recently stated by Thawley J in Commissioner of Taxation v Auctus Resources Pty Ltd (2021) 284 FCR 294, 308 at [53] (McKerracher J and Davies J agreeing):
The task of statutory construction must begin and end with a consideration of the text itself and the provision is to be construed in its context which includes legislative history and extrinsic material.
(Citations omitted).
As is not uncommon with modern legislation, there is no need in this case to assay the provisions of the Dairy Code in order to devine its purpose or the mischiefs it was intended to overcome. Section 7 of the Dairy Code provides that, for the purposes of section 51AE of the Competition and Consumer Act, the Dairy Code (Division 2) is (a) prescribed for the purposes of Part IVB of the Act; and (b) is declared to be a mandatory industry code. Being a mandatory industry code, it sets minimum standards of conduct for participants in the industry towards other participants or consumers in the industry where a problem such as a market failure has been identified: Dairy Code, Explanatory Statement, Purpose (paragraph 1) and Background (paragraph 1). In relation to the dairy industry, those identifiable market failures are said to “have arisen from the structure of the dairy industry and the terms of contracts offered by processors to farmers”, and include:
(a)an imbalance in bargaining power between dairy farmers and processors;
(b)some standard industry practices deterring farmers from responding to market signals; and
(c)unfairness of some standard industry practices and unreasonable transfer of risk to farmers.
A contravention of the Dairy Code may subject Lactalis to the imposition of civil penalties. Accordingly, the principles of construction relating to legislative provisions which give rise to potential civil penalties assume importance in these proceedings. These principles may be aptly stated as follows. Firstly, the imposition of a civil penalty should be “certain and its reach ascertainable by those who are subject to it”: Construction, Forestry, Mining & Energy Union v Mammoet Australia Pty Ltd (2013) 248 CLR 619, 634 – 635 at [48]. Second, the Court should presumptively avoid a construction which imposes a requirement “which may prove to be impossible or impracticable” to comply with: Uelese v Minister for Immigration and Border Protection (2015) 256 CLR 203, 232 at [100]. Third, the Court should presumptively avoid a construction “which appears irrational or unjust”: Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, 509 at [48]. Fourth, the Court should presumptively avoid a construction which creates a test that “can be applied only with difficulty”: The Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379, 416 – 417 at [92] – [93].
Were Milk Supply Agreements published by Lactalis on its website by 1 June 2020?
The ACCC’s first allegation is that during the period from 1 June 2020 until at least 17 June 2020, Lactalis failed to publish standard form MSAs on its website at or before the publication deadline (being 2.00pm on 1 June 2020), and that this constituted a breach of s 12(2) of the Dairy Code. The ACCC alleged that although Lactalis published certain information on its website about its MSAs, in order to obtain a copy of any of the agreements, Lactalis required persons, including farmers, to complete and then submit a form on Lactalis’s website, after which a standard form MSA would be emailed to that person. This, so the ACCC alleged, had the result that Lactalis had failed to “publish on its website” its standard form MSAs. Lactalis contended that its facilities for the provision of MSAs had the consequence that it had not contravened this publishing requirement during the period alleged. It is not alleged by the ACCC that any contravention continued after 17 June 2020, at which point the standard form MSAs became “visible on Lactalis’s website”.
Relevant Dairy Code provisions
Subdivision B of Division 2 of the Dairy Code imposes publication requirements on a processor in relation to standard form MSAs into which it is prepared to enter for the following financial year. Section 12 of the Dairy Code relevantly provides:
12 Requirement to publish standard forms of agreements each 1 June
Publication deadline
(1)This section applies in relation to a corporation that, at 2 pm (by legal time in the Australian Capital Territory) on 1 June in a financial year (the publication deadline):
(a) is a processor; and
(b) intends to purchase milk during the next financial year.
Requirement to publish standard forms of agreements
(2)The processor must, at or before the publication deadline, publish on its website in accordance with subsections (3) to (5):
(a)one or more standard forms of milk supply agreements; and
(b)for each standard form the processor publishes under paragraph (a)—a statement of the circumstances in which the processor would enter into a milk supply agreement in that form.
Note: The circumstances may, for example, relate to:
(a) the region in which the supply occurs; or
(b) the quantity of milk to be supplied; or
(c) the supply period; or(d)whether the processor has already entered into sufficient milk supply agreements to meet the processor’s demand for milk.
Civil penalty: 300 penalty units.
(3)The processor must publish as many standard forms and statements under subsection (2) as are necessary to ensure that the published statements cover the circumstances in which the processor intends to purchase milk in the financial year mentioned in paragraph (1)(b).
(4)Each standard form published under paragraph (2)(a) must be a standard form of a milk supply agreement that:
(a)has a supply period starting during the financial year mentioned in paragraph (1)(b); and
(b) provides for a cooling-off period of 14 days; and
(c)subject to subsection (5), is a non-exclusive supply agreement.
(5)If, in particular circumstances to which subsection (3) applies, the processor would enter into an exclusive supply agreement, the processor must publish under subsection (2):
(a)a standard form of an exclusive supply agreement the processor would enter into in those particular circumstances; and
(b)a standard form of a non-exclusive supply agreement the processor would enter into in those particular circumstances.
(6)The processor must not, after the publication deadline and before the end of the financial year mentioned in paragraph (1)(b), vary or remove from its website a standard form or statement published under subsection (2).
Civil penalty: 300 penalty units.
…
Section 12 required publication on the processor’s website of “one or more standard forms of milk supply agreements” and “for each standard form the processor publishes under paragraph (a) – a statement of the circumstances in which the processor would enter into a milk supply agreement in that form”: s 12(1)(a) and (b). The explanatory note to s 12(1) identifies that the circumstances referred to in s 12(2)(b) may, for example, relate to the “region in which the supply occurs”.
The requirements of s 12 ensure that:
(a)processors publish on their website standard form MSAs before the publication date;
(b)processors publish standard form non-exclusive MSAs as well as exclusive MSAs; and
(c)that farmers are made aware of the circumstances in which a processor would enter into any particular standard form MSA.
It is difficult to avoid the conclusion that the object or purpose sought to be achieved is that, within an appropriate time prior to the commencement of the forthcoming financial year, farmers would be able to access and compare the MSAs which the processors to whom they might supply would be prepared to enter into. This enables the farmer to make a fully informed choice as to which of the available MSAs would best suit their circumstances.
It was undisputed between the parties that at the publication deadline of 1 June 2020, Lactalis was a processor who intended to purchase milk during the next financial year and, as such, was subject to the obligations in s 12 of the Dairy Code.
The meaning of the expression “publish on its website”
The parties disputed the proper meaning of the expression, “publish on its website”. The word “publish” is not defined and should be accorded its natural and ordinary meaning. In that respect, Lactalis referred to the following ordinary senses of the word which were adopted by the Western Australian Court of Appeal in Re Section 46L of theCriminal Appeals Act 2004 (WA); ex parte Commissioner of Police (2020) 56 WAR 209, 239 – 240 at [161] – [174]:
(a)“[t]o make public”: Oxford English Dictionary;
(b)“[t]o make public or generally known; to declare or report openly or publicly; to announce …”: Oxford English Dictionary;
(c)“[t]o make generally accessible or available for acceptance or use (a work of art, information, etc.); to present to or before the public; spec. to make public (news, research findings, etc.) through the medium of print or the internet”;
(d)“to make publicly or generally known”: Macquarie Dictionary.
There is no reason to doubt that these are the ordinary meanings of the word with the consequence that s 12(2) required Lactalis’s standard form MSAs to be publicly available on its website. That did not occur. In no sense could it be said that the MSAs were published “on its website” in the period 1 June 2020 to 17 June 2020. It would strain the ordinary meaning or meanings of the word “publish” were it to include circumstances where the text of the MSA did not actually appear on the processor’s website but rather, after providing certain information, the farmer might receive a copy of the agreement via email. Lactalis’s standard form MSAs could not be said to be made public or generally known “on its website”. The expression used in s 12(2) is a composite one which requires that the standard form MSA is published and that publication must take place on the processor’s website. Lactalis’s submission sought to conflate the publishing on its website information about how to obtain a copy of the relevant MSA, with the statutory requirement. The two are not equivalent. Although it would seem that a farmer who visited Lactalis’s website might engage in a process whereby they would be sent a copy of an MSA, that is far from the website being the means of publication.
It is important to keep in mind that the processor is obliged under s 12(2) to take the requisite action “at or before the publication deadline”. That requirement is either satisfied at the relevant time or it is not. An ability, or mechanism allowing for a processor to distribute a copy of an MSA via email to a farmer, does not obviate compliance with this strict requirement. The matter can be tested by ascertaining whether, immediately after the deadline had expired, any publication of the MSA on Lactalis’s website has occurred. Necessarily, the answer is in the negative. Publication will only occur once a farmer, who has supplied relevant information, is sent an email containing the MSA and that email is received. The processor’s conduct in sending a copy of the MSA does not satisfy the publication obligation in s 12(2).
There is no “defence”, as such, provided by the Dairy Code. Despite the substantial submissions received on this topic, the meaning of the words of s 12(2) are relatively clear. The only method by which a processor might satisfy the requirements of s 12(2) is to publish the MSAs by making them readily available to the public on their website as and from the required date and time.
The Explanatory Statement to the Dairy Code supports a construction that is consistent with the meaning of the word “publish” as set out above. It provides (at 6-7):
Section 12 – Requirement to publish standard forms of agreements each 1 June
This section requires that by 2pm by legal time in the Australian Capital Territory (ACT) on 1 June in a financial year corporations that are processors and intend to purchase milk during the next financial year publish one or more standard forms of milk supply agreement (SFA) that the processor is willing to enter into, on their website. The requirement that this be done by 2pm ACT time effectively means by 2pm Australian Eastern Standard Time. To be clear, the intention is that processors’ SFAs are available publicly.
Requiring processors to publish one or more SFAs on a set date each year improves the farmers’ ability to compare prices and conditions across processors.
…
(Emphasis added).
This passage, which articulates the obvious purpose of s 12(2), also emphasises the important temporal aspect of the requirement. The publication of the standard form MSAs must occur as at a particular time. As at 2.00pm on 1 June 2020 it was not possible to ascertain the terms of Lactalis’s MSAs by reference to its website. In order for the terms of those agreements to be known, it was necessary to complete the form provided and await the receipt of Lactalis’s email.
The ACCC’s submissions
The gravamen of the ACCC’s complaint was that from 1 June 2020 until 17 June 2020, Lactalis did not publish any standard form MSAs on its website because, in order to obtain the standard form MSAs persons, including farmers, were required to submit a form on Lactalis’s website after which a standard form MSA would be emailed to them. Its submission, which should be accepted, is that the provision of a facility by which an MSA would be made available via email did not fall within the plain meaning of the words “publish on its website”. Put another way, the substance of what was published on the website was information as to how one might obtain a copy of an MSA, but that publication of the MSAs did not occur on the website.
According to the ACCC’s submissions, it was critical that the word “publish” be read with the remaining words of s 12(2), which requires the processor to publish “on its website”. General publication, in the sense of making the standard form MSAs available in some way to third parties, was said to be insufficient. It further submitted that compliance with s 12 required that the standard form MSAs be publicly available on Lactalis’s website, rather than being made available upon request through a portal by a person who has provided certain details, after which a copy would be sent by email. It should be mentioned that Lactalis disputed the assertion that the details were required to be entered into a “portal” but, instead, asserted that a farmer was required to access a link named “Milk Supply Agreements” which then took them to a web page where their details could be entered. As is apparent from the previous discussion, it is irrelevant whether the version advanced by the ACCC or Lactalis as to what was required by a farmer to obtain an MSA from Lactalis is accepted. In neither scenario are the MSAs published on the website.
The ACCC also submitted that Lactalis’s practice did not align with the purpose of the publication requirements under the Dairy Code, being to ensure that farmers have full and free access to information from all processors at the same point in time such that they may make an informed and timely decision as to the benefits of contracting with particular processors. In oral submissions, Ms Forsyth QC referred to the fact that a farmer had to input certain information, including personal details and information about their farm, and noted that this provided a disincentive to farmers. So the submission went, this enabled Lactalis to create (and store) an electronic history of accessing and delivery of the relevant MSA applicable to a region. It followed that even though there was no restriction on who could receive the MSAs by email, it was not “free, unrestricted access in the true sense, because it does come at the cost of providing personal information, including your identity, names of suppliers and other bits and pieces”. With respect, this submission seeks to give s 12(2) a wider reach than its words will permit. The requirement is that the MSAs be published and that occur on the processor’s website. As it has been concluded that Lactalis’s processes did not satisfy that, it need not be decided whether a processor might require steps to be taken to access the information. Nevertheless, it might be observed that unless it is suggested that compliance with s 12(2) can only occur if the terms of a processor’s MSAs are set out on the homepage of their website, which is not correct, it may not necessarily be discordant with the requirements of s 12(2) for a processor to require a farmer to take some steps before viewing the MSAs which exist on their website. That may be as simple as clicking on an icon or link which will immediately disclose the text of the MSAs. However, it might equally be that a link to a further page must be accessed and, on the page to which the reader is taken, they are to select other links to expose the relevant agreement. Likewise, if the MSAs are on the website and open to anyone to peruse, it cannot matter that the provision of information is required before the terms are revealed. There is no requirement in s 12(2) that access to the information on the website be wholly unrestricted in the sense that there can be no additional steps required to view it. So long as any required steps are not such as to have the result that publication does not occur, there is a strong argument that s 12(2) does not prevent the processor requesting information before a reader can access the text of the MSAs.
In this case it cannot be said that the publication has been prevented by Lactalis requiring the provision of information. As Mr Hodge QC submitted, one did not have to enter “true information” but could simply just enter any information. In that regard, paragraph [30] of the affidavit of Mr Houlihan referred to a copy of a compiled list of 195 emails which were sent following requests for copies of MSAs via Lactalis’s website. That list illustrated that it was possible for users to provide information which was false such as entering “Live Test” in the name field. In this respect, there would have been a publication by Lactalis if, after providing the information requested, the terms of the MSAs were available to be viewed on the website.
Submissions by Lactalis
Lactalis submitted that, on its proper construction, all that s 12(2) of the Dairy Code required was that a processor make its MSAs publicly available on the website. This, so it was said, reflected the applicable ordinary meanings of the word “publish” as identified in the definitions referred to above. It contended that s 12(2) does not specify any precise form of publishing. That is, there was no statutory direction which obliged processors to adopt any particular method of dissemination on the website such as ensuring that an MSA is available in a pdf format, or that it is visible either in html or some other format on the front page of the website. It submitted that the essential requirement was “public availability or accessibility, irrespective of the precise form”.
Lactalis also submitted that it published its MSAs in accordance with the requirements of the Dairy Code in the following manner, as was set out at paragraph [27] of Mr Houlihan’s affidavit:
(a)Any person could access the front page of Lactalis’s website located at
(b)From there, the person could access a link named ‘Milk Supply Agreements’ which linked them to a web page.
(c)Once on that web page, the person was asked to input the following information:
(i)Name;
(ii)State of residence; and
(iii)Email address.
(d)After that information was entered, the relevant MSA (based on the relevant region), including the milk supply agreement, Regional Handbook and QDairy Manual, were automatically and immediately sent to the email address provided.
Contrary to the ACCC’s allegation in its Amended Concise Statement, Lactalis submitted that this did not amount to requiring persons to “submit a form on Lactalis’ website”.
Lactalis further submitted that it distributed agreements in this way to ensure that farmers received the documents which are applicable to them and their circumstances, and that this was important as there were different health and safety requirements as between the different regions. This had the further advantage of creating an electronic history of accessing and delivering the relevant milk supply agreement applicable to a region. Although it may be correct that Lactalis’s process resulted in an orderly distribution of its MSAs, that is irrelevant to whether the requirements of s 12(2) were satisfied.
Lactalis also submitted that any person could access the agreements via the website, that such access was “instantaneous”, and that there was no restriction on who could access them. This somewhat overstates the position. “Instantaneous”, means that something was done instantly, whereas the mechanism implemented by Lactalis required a farmer to input the requisite personal and commercial information at an antecedent stage before subsequently receiving an email with a copy of the MSA. It could hardly be said this mechanism offered instantaneous access to farmers of the MSAs. Similarly, even though access to the MSAs was unrestricted, that does not address the question of whether they were “published on its website”.
In Lactalis’s submission the mechanism provided for via its website was wholly consistent with the objects of s 12(2) given that farmers were able, with ease, to obtain a copy of the relevant terms. This mechanism, so it was said, was more consistent with the objects of the Dairy Code than other potential mechanisms for publication. To this it was added that by emailing the documents directly to farmers, Lactalis ensured that farmers were provided with the MSAs and associated documents relevant to them and their circumstances. For this submission to be accepted, the sending of an email with a copy of an MSA would have to equate with the concept of “publish on its website”. Clearly, the two concepts are different and this submission, along with other permutations of it which were advanced by Lactalis, are flawed for that reason.
Lactalis also attempted to highlight the alleged meaninglessness of the distinctions drawn by the ACCC. For example, it posed this question in its submissions, “if it is publication to click a link on the website and have a pdf file downloaded to a person’s computer, why is it not publication to click a link and have the pdf file emailed to a person?”. It then submitted that “what must be done on the website is publishing i.e., the provision of public access. Public access is provided where all the tools for any member of the public to access the agreement are supplied on the website and are made available. That occurred here.”. However, again that submission conflates the concept of “publication” of information with that of the provision of directions to a person to equip them with the knowledge of how to access that information. Whilst Lactalis’s conduct amounted to the latter, it did not equate to the former.
Finally, Lactalis rightly took issue with the ACCC citing its own guidance documents published after the commencement of the Dairy Code, to support its proffered construction of the publication requirement in s 12(2). It submitted that it was irrelevant that the ACCC had made a public statement about its interpretation of this requirement. That submission should be accepted. It is unnecessary to consider the content of the guidance issued by the ACCC, and the conclusions reached in these reasons have had no regard to it. Likewise, the ACCC’s submission based on a letter from the ACCC of 14 May 2020 recommending that Lactalis take a particular course lacks relevance and has no bearing whatsoever on the construction question.
Evidence relied on by the ACCC
The ACCC relied on affidavit evidence of two of its employees, namely Mr Hedge and Ms Vaughan (who swore two affidavits dated 8 April 2022 and 12 April 2022 respectively) to establish that Lactalis contravened s 12(2) of the Dairy Code. Mr Hedge deposed that at around 2.00pm (AEST) on 1 June 2020, he visited Lactalis’s website and found that no standard form MSAs were displayed on the webpages he visited, nor did any webpage contain any links that would open the standard form MSAs. Instead, in order to obtain the standard form MSAs, Lactalis required persons to (a) complete a web form; (b) indicate whether they were a current Lactalis milk supplier, milk supplier to another company, or a member of the public; (c) provide their contact details; and (d) select the region for which they wished to receive documentation. Relevant documentation, including a standard form MSA, was then emailed to the person at the email address provided.
Ms Vaughan’s affidavit provided evidence of what occurred were one to indicate on Lactalis’s website that they were a supplier to another company. Her affidavit annexed various screenshots which disclosed questions such as the following: “Are you currently contracted for the 2021 year, yes or no? If so, with which companies?”. This required the farmer to disclose to whom they were supplying, provide details of the numbers of cows, annual milk volumes, as well as their personal details. Ms Forsyth QC rightly submitted that this was significant commercial information that a farmer was seemingly to disclose before they obtained a copy of an MSA.
The evidence of Mr Hedge and Ms Vaughan was unchallenged and ought to be accepted. It clearly establishes that from 1 June 2020 until 17 June 2020, Lactalis did not publish any standard form MSAs on its website with the result that it contravened s 12(2) of the Dairy Code. The contraventions were not rectified until 17 June 2020, when as evident from Mr Houlihan’s affidavit, standard form MSAs became “visible on Lactalis’s website”.
Lactalis’s failure to publish on the website
It follows that the ACCC has established Lactalis’s contraventions of s 12(2) of the Dairy Code. The clear language of s 12(2) required publication of the MSAs on its website at or before the publication deadline of 2.00pm on 1 June 2020. For the reasons stated above, Lactalis did not comply with this publishing requirement during the period 1 June 2020 to 17 June 2020. The construction put forward by Lactalis about the proper meaning of “publish on its website” cannot be maintained and it is irrelevant to the question of contravention that the mechanism provided by it for those 17 days may have had a similar result to providing a link where one could download an MSA to their computer.
Did Lactalis publish a non-exclusive MSA?
The ACCC’s second major allegation was that Lactalis failed to publish a standard form non-exclusive MSA in circumstances where s 12(5) of the Dairy Code required it to publish both exclusive and non-exclusive MSAs. The ACCC asserted that although Lactalis purported to publish the terms of a non-exclusive MSA into which it was prepared to enter, the substance of that agreement had the effect that it did not permit the producer to sell milk to another processor, with the consequence that the agreement was, in fact, an exclusive MSA. The ACCC contended that Lactalis’s contraventions in this respect occurred during the period 1 June 2020 until at least 23 July 2021, being the date of its Originating Application.
It was not disputed that Lactalis’s purported non-exclusive MSA required a farmer to supply Lactalis with a monthly minimum volume (MMV) which was defined as 90% of the prior financial year’s monthly farm supply or, where a farmer’s monthly production was less than the previous financial year, 90% of the current year’s monthly total farm supply (the MMV requirement). The ACCC submitted that as other processors would have no interest in contracting with a farmer to acquire the remaining 10% of their supply, the MMV requirement had the practical effect of “prohibiting” farmers from supplying milk to another processor. As such, the purported non-exclusive MSA was, effectively, an exclusive supply agreement.
Lactalis submitted that as its non-exclusive MSAs did not, by their terms, prohibit supply to another processor they could not be regarded as being “exclusive MSAs”. They were, therefore, non-exclusive and for the relevant period it complied with s 12(5) by causing the agreement to be publicised. However, given the findings in relation to the first issue, that submission could only be good, if at all, from 17 June 2020.
Relevant Dairy Code provisions
Although referred to above it is convenient to again set out the terms of s 12(3) and (5) of the Dairy Code. They provided as follows:
(3)The processor must publish as many standard forms and statements under subsection (2) as are necessary to ensure that the published statements cover the circumstances in which the processor intends to purchase milk in the financial year mentioned in paragraph (1)(b).
…
(5)If, in particular circumstances to which subsection (3) applies, the processor would enter into an exclusive supply agreement, the processor must publish under subsection (2):
(a)a standard form of an exclusive supply agreement the processor would enter into in those particular circumstances; and
(b)a standard form of a non-exclusive supply agreement the processor would enter into in those particular circumstances.
The effect of these sections was that in the relevant period Lactalis was required to publish both exclusive and non-exclusive standard form MSAs on its website. So much was not in dispute.
The concept of a “non-exclusive supply agreement” is defined in s 5 of the Dairy Code to mean “a milk supply agreement that is not an exclusive supply agreement”. An “exclusive supply agreement” is defined (s 5) to mean “a milk supply agreement between a farmer and a processor that prohibits the farmer supplying milk to another processor”.
The meaning of “prohibit”
Central to whether Lactalis failed to comply with s 12(5) is the meaning of the word, “prohibit” as it appears in the definition of “exclusive supply agreement”. It is not defined in either the Dairy Code, the Competition and Consumer Act, or in the Australian Consumer Law.
In the course of its submissions Lactalis referred to the following dictionary definitions of the word “prohibit”:
(a)to forbid (an action, a thing) by authority: Macquarie Dictionary;
(b)to forbid (an action, event, commodity, etc.) by a command, statute, law, or other authority; to interdict: Oxford English Dictionary.
Conversely, the ACCC referred to the following definitions from the Oxford English Dictionary (3rd ed., 2010):
(a)formally forbid someone from doing something; or
(b)(of a fact or situation) make (something) impossible; prevent.
It then submitted that the term “prohibit” as used in the definition of “exclusive supply agreement” should be read consistently with the latter, broader definition rather than the former, narrower one. The former, and those relied upon by Lactalis, include the element of an express proscriptive command by the document in question in the sense that there is a direction, order or requirement that the conduct in question not occur. The latter definition would include circumstances where, although there is no express restraint or proscription, compliance with the terms of the agreement render it practically impossible for a person to engage in the conduct. In reliance on the broader definition, the ACCC here submitted that the MMV requirement of the purported non-exclusive MSA that the farmer supply a minimum of 90% of its production to Lactalis amounted to an effective prohibition on supplying to other processors because it is not commercially viable for most farmers to supply 10% or less of their production volume to any other processor. It further submitted that a construction of the word “prohibits”, which includes prevention as a practical consequence of complying with the MSA’s terms, was consistent with the purposes of the Dairy Code, to, inter alia, address the imbalance in bargaining power between dairy farmers and processors, although how that purpose would be achieved by such construction was not explained in any detail.
In support of the broader definition, the ACCC also referred to various authorities, albeit ones which considered the power to make regulations to prohibit activities. In particular, reference was made to Country Roads Board v Neale Ads Pty Ltd (1930) 43 CLR 126, 134 – 135 where Knox CJ, Starke and Dixon JJ held that the power to make bylaws prohibiting conduct did not require entire and unconditional suppression to be valid, but that the relevant authority could prohibit such conduct completely or partially, conditionally or unconditionally. The ACCC also submitted that even where a prohibition is qualified (for example, where consent is capable of circumventing a prohibition), a restriction on certain conduct such as the use of land, has been held to “prohibit” that use: Lennard v Jessica Estates Pty Ltd (2008) 71 NSWLR 306, 312 at [27] (Tobias JA, McColl and Bell JJA agreeing). These authorities do not, however, address the issue at hand. As Lactalis submitted, the principle for which they stand is that a power to enact regulations prohibiting activities includes the power to prohibit all activities or some only. They do not stand for some overarching proposition that the term “prohibit” means practically deter. Indeed, they tend to support the construction of the word “prohibit” as involving the forbidding of the act or acts in question by a direction to that effect.
In the context of s 12(5) of the Dairy Code and the definitions of “exclusive supply agreement” and “non-exclusive supply agreement” the term, “prohibit”, refers to and means the “legal effect” of the agreement as opposed to its “practical effect” on most farmers. Lactalis advanced several substantive submissions which highlighted the flaws in the contrary construction. Firstly, a construction which favours the practical effect of an agreement is inherently uncertain and the answer to whether any contravention occurred would depend on the circumstances of the market and of the particular dairy farmers. As referred to earlier, achieving “certainty” in the construction of the Dairy Code’s provisions is important given that a contravention may result in the imposition of civil penalties. Courts can legitimately adopt a strict construction of a provision in such circumstances. This approach was applied in Australian Competition and Consumer Commission v Yazaki (2018) 262 FCR 243, 263 [67] – [68] where the Court (Allsop CJ, Middleton and Robertson JJ) said:
67If there is a true ambiguity, the Court may resolve that ambiguity in favour of a respondent. In relation to criminal offences, Gibbs J (as he then was) in Beckwith v The Queen (1976) 135 CLR 569 at 576 stated:
The rule formerly accepted, that statutes creating offences are to be strictly construed, has lost much of its importance in modern times. In determining the meaning of a penal statute the ordinary rules of construction must be applied, but if the language of the statute remains ambiguous or doubtful the ambiguity or doubt may be resolved in favour of the subject by refusing to extend the category of criminal offences … The rule is perhaps one of last resort. …
68This statement has been endorsed by the High Court in Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd (1983) 155 CLR 129 at 145; and Waugh v Kippen (1986) 160 CLR 156 at 164. These principles equally apply to civil penalty provisions: see Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 47-48 and Rich v Australian Securities and Investments Commission (2004) 220 CLR 129.
Second, the generality and vagueness of the proposition that one looks to the impact of an agreement on “most farmers” is problematic in that, in seeking to ascertain whether the requirement has been met, it would not be clear which farmers in each particular region are to be considered. There would be many factors which might influence the viability of a farmer supplying to a second processor. They would include, amongst other things, the size of the dairy, its proximity to the processor, and the availability of supply from surrounding farms. Third, the concept of “practical effect” is neither expressly nor impliedly found within the term “prohibit” as is used within the Dairy Code. It is an expression of broad connotation and one which is not easily objectively ascertained. Whether a farmer is practically prevented from supplying 10% of their milk to another processor may depend upon an individual farmer’s perceptions of the costs and benefits of doing so. Fourth, there is also support within other sections of the Dairy Code which indicate that the term “prohibited” is intended to apply to legal prohibitions rather than practical effects. Reference was made to s 42(2)(b) where the word is used in relation to “other conditions prohibited by section 15” in which the word prohibited is used as meaning the existence of an express direct restriction on the relevant activity. Lactalis also referred to the headings to ss 27 and 28 each of which used the word “prohibited” in the same sense.
The foregoing submissions of Lactalis should be accepted. The more common meaning of the word “prohibit” is concerned with the prevention of something by command pursuant to some authority. In the context of the definition of the expression an “exclusive supply agreement” the prohibition is to be derived from the MSA and, it might be expected, from the terms of that agreement. Were it intended that the definition would extend to an agreement that had the economic effect of preventing a farmer from supplying milk to another processor, it would have been relatively easy for that to be expressly stated. Moreover, it would be unusual to construe a provision, the contravention of which might result in the imposition of civil penalties, in a way which would lead to great uncertainty in its application. It would be almost impossible for a processor to ascertain in advance whether any requirement in its MSA would have the consequence of preventing “most farmers”, either generally or in a specific area, from entering into supply agreements with other processors.
In the course of the hearing it was submitted by the ACCC that the fact that Lactalis has subsequently amended its pro forma agreement to allow farmers to nominate a non-exclusive option without the 90% requirement, is indicative that its construction is correct and Lactalis’s actions are an effective admission that its non-exclusive MSAs did not meet the statutory definition. With great respect, that submission is not sustainable. Lactalis’s actions neither assist nor have any relevance to the purely interpretative exercise required to be undertaken. Certainly, they do not amount to a tacit admission as to the correct construction of the Dairy Code.
It follows that Lactalis did not contravene s 12(5) of the Dairy Code as alleged. At least in the period from 17 June 2020 it complied with the requirement to publish a non-exclusive MSA, being one which did not prohibit supply to another processor.
Did the Lactalis Milk Supply Agreement effectively prohibit the supply to other processors?
In light of the above it is strictly unnecessary to consider whether Lactalis’s non-exclusive MSAs effectively prevented farmers supplying to other processors. However, the ACCC adduced significant evidence in relation to this issue and it is appropriate to address it to some extent. In particular, some observations should be made concerning the expert evidence of Mr Mulvany which was adduced by the ACCC. The intent of Mr Mulvany’s report was to establish that the majority of farmers who supplied to Lactalis could not economically enter into a supply agreement with another processor for the supply of 10% of their product.
The Reports of Mr Mulvany
Unfortunately, there were no submissions made to the Court as to the application of these principles. That said, it suffices to observe that there was nothing identified in the Dairy Code which rendered the impugned provisions of the MSAs void or unenforceable such that cl 2 of the MSA had no operative effect.
In this case the prohibition imposed by s 17 is the entering into of the MSA which does not comply with the specified requirements. One such requirement for the contents of an MSA is that it must specify the circumstances in which the processor may unilaterally terminate the agreement and that any such circumstances must involve a material breach of the MSA by the farmer. The prohibition is not upon the existence of a term in the agreement which does not comply with any of the stipulated requirements, but the entering into of the agreement which contains such a term. Clause 2 of schedule 6 of the MSA does not render a non-complying MSA compliant in the present circumstances, if at all. It permits the severance of clauses which are “invalid or unenforceable under the Code”. There is nothing in the Code which renders clauses which makes an MSA non-compliant invalid or unenforceable. To the extent to which a non-complying term might be unenforceable that consequence is a result of the application of public policy.
The MSA permits termination other than for material breach
Given the foregoing the combination of cl 10.1 of Schedule 6 and cl 6 of the Handbook have the consequence that Lactalis is entitled to terminate the MSA other than for a material breach in the sense that they permit termination for breaches which are other than important or significant. Any denigration by a farmer of processors, key customers or other stakeholders will breach the section regardless of whether the breach can be described as “important” or “significant”. It follows that the MSAs entered into do not comply with the Dairy Code and Lactalis has contravened s 17 on each occasion on which one such non-complying MSA was entered into.
Relief
The ACCC failed to establish the alleged contraventions concerning the publication of non-exclusive MSAs or those concerning the requirement that an MSA be contained in a single document. However, it did establish that, in contravention of s 12(2) of the Dairy Code, Lactalis failed to publish its MSAs on its website as at 2:00pm on 1 June 2020 and it is entitled to a declaration to that effect. It has also established that the MSAs which were published and entered into by Lactalis did not comply with s 34(2) and (3) in that they permitted Lactalis to unilaterally terminate them other than in circumstances involving a material breach. As a result it is entitled to declarations that Lactalis breached s 13 of the Dairy Code by publishing such agreements and breached s 17 by entering into them.
The ACCC seeks further remedies in its Originating Application including by way of injunctive relief and the imposition of penalties. A further hearing is required to determine whether such relief is appropriate.
The parties are to be heard on the question of the costs of the first hearing.
I certify that the preceding one hundred and sixty-two (162) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington. Associate:
Dated: 16 September 2022
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