Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd
[2007] FCA 794
•29 May 2007
FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 794
TRADE PRACTICES – price-fixing – arrangements or understandings – whether existed between competitors within the Geelong retail petrol market – whether contained provisions for the fixing of retail petrol prices – whether necessary for parties to have commitment or moral obligation – applicant pleaded existence of seven bipartite and one tripartite interlocking arrangements or understandings and that effect was given to them on a number of occasions within a two-year period – relied on oral evidence of some alleged parties to them, circumstantial evidence in the form of data as to times of telephone communications between parties to alleged arrangements or understandings and changes in retail price of petrol, as well as admissions by some alleged parties to arrangements or understandings – whether evidence established existence, and giving effect to, of arrangements or understandings – whether evidence of origins of alleged arrangements or understandings sufficient – whether oral evidence and circumstantial evidence inconsistent – oral evidence not specific as to any particular occasion – circumstantial evidence often inconsistent with oral evidence, and with applicant’s allegations – whether judgment should be given on admissions
EVIDENCE – admissions – whether appropriate to exercise discretion to pronounce judgment based on admissions – whether reason to question correctness of facts admitted or agreed – whether previous representations made in furtherance of common purpose – whether reasonably open to find that representations were made in furtherance of common purpose – existence of common purpose established by evidence other than previous representation itself
WORDS AND PHRASES – “contract”, “arrangement”, “understanding”, “make an arrangement”, “arrive at an understanding”, “provision”
Corporations Act 2001 (Cth) s 500(2)
Evidence Act 1995 (Cth) ss 38(1)(c), 50, 57(2), 59(1), 60, 81(1), 83, 87, 87(1)(a), 87(1)(b), 87(1)(c), 87(2), 140
Federal Court of Australia Act 1976 (Cth) s 21(1)
Trade Practices Act 1974 (Cth) ss 4(1), 6A(1), 6A(2)(a), 6A(2)(d), 45, 45(2), 45(2)(a), 45(2)(b), 45A, 45A(1), 45A(5), 45A(6), 75B, 76, 76(1A)(b), 76(1B), 77(1), 80, 80(1), 84(2), 155
Federal Court Rules (Cth) O 1 r 8, O 11 r 13, O 11 r 13(1), O 18 r 4
Adams v Naylor [1946] AC 543 cited
Ahern v R (1988) 165 CLR 87 cited
Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission [2005] FCAFC 161 (2005) ATPR 42-078 followed
ACCC v Apco Service Stations Pty Ltd & Anor [2006] HCATrans 272 cited
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954 (1999) 92 FCR 375 cited
Australian Competition and Consumer Commission v Francis [2004] FCA 487 (2004) 142 FCR 1 cited
Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2004] FCA 1678 (2004) 141 FCR 183 cited
Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254 cited
British Basic Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 2 All ER 807 cited
Damberg v Damberg [2001] NSWCA 87 (2001) 52 NSWLR 492 followed
Federal Commissioner of Taxation v Cooper Brookes (Wollongong) Pty Ltd (1979) 41 FLR 277 cited
Federal Commissioner of Taxation v Lutovi Investments Pty Ltd (1978) 140 CLR 434 discussed
Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221 cited
L Grollo & Co Pty Ltd v Nu-Statt Decorating Pty Ltd (1978) 34 FLR 81 cited
R v Macraild (unreported, NSW Court of Criminal Appeal, Sully, Dunford and Simpson JJ, 18 December 1997) cited
Royster v Cavey [1947] KB 204 cited
Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213 (2002) 118 FCR 236 cited
Symes v The Proprietors Strata Plan No 31731 [2003] NSWCA 7 cited
Termijtelen v Van Arkel [1974] 1 NSWLR 525 cited
Top Performance Motors Pty Ltd v Ira Berk (Queensland) Pty Ltd (1975) 24 FLR 286 cited
Trade Practices Commission v Email Ltd (1980) 31 ALR 53 cited
Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 cited
Tripodi v R (1961) 104 CLR 1 cited
Watt v R [2000] NSWCCA 37 cited
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v LEAHY PETROLEUM PTY LTD (ACN 078 819 431), APCO SERVICE STATIONS PTY LTD (ACN 007 229 898), PEGASUS RETAIL PTY LTD (ACN 000 641 270), UNITED GEELONG PTY LTD (ACN 004 895 881), BRUMAR (VIC) PTY LTD (ACN 084 399 879), UNITED RETAIL PTY LTD (ACN 086 310 152), LIBERTY PETROLEUM PTY LTD (ACN 071 833 844), ANDRIANOPOULOS MOTORS PTY LTD (ACN 004 975 955), IAN LESLEY CARMICHAEL, MICHAEL JOHN WARNER, PETER JOSEPH ANDERSON, BRUNO GALLUCCI, ANDREW RONALD PITMAN, EINOKALEVI HEIKKILA, GARRY VICTOR DALTON, COLIN JAMES WILLIAMSON, ALAN SHUVALY AND CHRISTOS ANDRIANOPOULOS
V 1012 of 2003
GRAY J
29 MAY 2007
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 1012 of 2003
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANTAND:
LEAHY PETROLEUM PTY LTD (ACN 078 819 431)
FIRST RESPONDENTAPCO SERVICE STATIONS PTY LTD (ACN 007 229 898)
SECOND RESPONDENTPEGASUS RETAIL PTY LTD (ACN 000 641 270)
THIRD RESPONDENTUNITED GEELONG PTY LTD (ACN 004 895 881)
FOURTH RESPONDENTBRUMAR (VIC) PTY LTD (ACN 084 399 879)
FIFTH RESPONDENTUNITED RETAIL PTY LTD (ACN 086 310 152)
SIXTH RESPONDENTLIBERTY PETROLEUM PTY LTD (ACN 071 833 844)
SEVENTH RESPONDENTANDRIANOPOULOS MOTORS PTY LTD (ACN 004 975 955)
EIGHTH RESPONDENTIAN LESLEY CARMICHAEL
NINTH RESPONDENTMICHAEL JOHN WARNER
TENTH RESPONDENTPETER JOSEPH ANDERSON
ELEVENTH RESPONDENTBRUNO GALLUCCI
TWELFTH RESPONDENTANDREW RONALD PITMAN
THIRTEENTH RESPONDENTEINOKALEVI HEIKKILA
FOURTEENTH RESPONDENTGARRY VICTOR DALTON
FIFTEENTH RESPONDENTCOLIN JAMES WILLIAMSON
SIXTEENTH RESPONDENTALAN SHUVALY
SEVENTEENTH RESPONDENTCHRISTOS ANDRIANOPOULOS
EIGHTEENTH RESPONDENTJUDGE:
GRAY J
DATE OF ORDER:
29 MAY 2007
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The application be dismissed.
The question of costs be reserved.
On or before 22 June 2007, any party wishing to raise any issue about costs file and serve on each other party affected by that issue a written outline of submissions, no more than six pages in length, setting out the issue or issues of costs that the party seeks to raise and a brief account of the submissions that the party wishes to make about each such issue.
On or before 13 July 2007, each party affected by an issue relating to costs raised by another party file and serve on the party raising the issue a written outline of submissions, no more than six pages in length, setting out the party’s response to the submissions made by the other party about the issue.
The proceeding be listed for hearing in relation to any issues of costs at 10.15 am on 26 July 2007.
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
V 1012 of 2003
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANTAND:
LEAHY PETROLEUM PTY LTD (ACN 078 819 431)
FIRST RESPONDENTAPCO SERVICE STATIONS PTY LTD (ACN 007 229 898)
SECOND RESPONDENTPEGASUS RETAIL PTY LTD (ACN 000 641 270)
THIRD RESPONDENTUNITED GEELONG PTY LTD (ACN 004 895 881)
FOURTH RESPONDENTBRUMAR (VIC) PTY LTD (ACN 084 399 879)
FIFTH RESPONDENTUNITED RETAIL PTY LTD (ACN 086 310 152)
SIXTH RESPONDENTLIBERTY PETROLEUM PTY LTD (ACN 071 833 844)
SEVENTH RESPONDENTANDRIANOPOULOS MOTORS PTY LTD (ACN 004 975 955)
EIGHTH RESPONDENTIAN LESLEY CARMICHAEL
NINTH RESPONDENTMICHAEL JOHN WARNER
TENTH RESPONDENTPETER JOSEPH ANDERSON
ELEVENTH RESPONDENTBRUNO GALLUCCI
TWELFTH RESPONDENTANDREW RONALD PITMAN
THIRTEENTH RESPONDENTEINOKALEVI HEIKKILA
FOURTEENTH RESPONDENTGARRY VICTOR DALTON
FIFTEENTH RESPONDENTCOLIN JAMES WILLIAMSON
SIXTEENTH RESPONDENTALAN SHUVALY
SEVENTEENTH RESPONDENTCHRISTOS ANDRIANOPOULOS
EIGHTEENTH RESPONDENT
JUDGE:
GRAY J
DATE:
29 MAY 2007
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
The nature of the proceeding [1] The legislation [5] Section 45 of the Trade Practices Act and associated provisions [5] Enforcement provisions [8] Provisions relating to admissions [15] Provisions relating to the standard of proof [22] The construction of the legislative provisions [23] Arrangements or understandings [23] The use of admissions [42] The parties [56] The applicant [56] The corporate respondents [57] The natural person respondents [63] The Geelong petrol market [66] The definition of the market [66] The setting of prices [67] Branding [68] Geography [69] The corporate respondents' sites [71] Other market participants [76] Board prices [85] Spotting board prices [86] The pattern of petrol price movements [90] The sawtooth pattern [90] Possible causes of the sawtooth pattern [93] Multiple causes [93] Competition for market share [95] Price support [96] Anti-competitive practices [98] Factors present in the Geelong petrol market [99] Competition for market share [100] Price support [101] Unsuccessful attempts at price increases [104] The relationship between Melbourne prices and Geelong prices [106] The sawtooth pattern continues [117] The arrangements or understandings alleged [119] Eight interlocking arrangements or understandings [119] Terminology [120] Arrangement No 1 [121] Arrangement No 2 [122] Arrangement No 3 [123] Arrangements Nos 4, 5 and 6 [124] Arrangement No 7 [125] Arrangement No 8 [126] Giving effect to the alleged arrangements or understandings [127] The evidence [128] Three kinds of evidence [128] The direct evidence [131] The leniency agreements [133] Annexure B [137] Call cycles [147] The origins of the alleged arrangements or understandings [150] The direct evidence [178] Ian Carmichael [179] Michael Warner [204] Graeme Chisholm [224] Alan Shuvaly [231] Darren Campigli [246] Anton Maurer [257] Gordon Primmer [261] Wayne Purtell [266] Phil Carmichael [272] David Potter [279] Eino Heikkila [280] Garry Dalton [298] Robert Riordan [304] Robert Hambrook [314] The circumstantial evidence [318] 19 - 20 January 1999 [322] 11 - 12 March 1999 [328] 25 - 26 March 1999 [336] 9 - 10 April 1999 [341] 20-Apr-1999 [347] 28-Apr-1999 [354] 7 - 8 May 1999 [359] 17 - 18 June 1999 [368] 22 - 23 June 1999 [379] 29 - 30 June 1999 [393] 5 - 6 July 1999 [404] 8 - 9 July 1999 [418] 22 - 23 July 1999 [425] 26 - 27 July 1999 [431] 29 - 30 July 1999 [436] 19 - 20 August 1999 [439] 26 - 27 August 1999 [446] 2 - 3 September 1999 [449] 9 - 10 September 1999 [456] 13 - 14 September 1999 [462] 16 - 17 September 1999 [468] 21-Sep-1999 [472] 23 - 24 September 1999 [478] 27 - 28 September 1999 [481] 30 September - 1 October 1999 [485] 7 - 8 October 1999 [493] 26-Oct-1999 [498] 4 - 5 November 1999 [500] 11 - 12 November 1999 [508] 18-Nov-1999 [513] 3 - 4 December 1999 [514] 9 - 10 December 1999 [520] 30 - 31 December 1999 [530] 5 - 6 January 2000 [539] 10 - 11 January 2000 [547] 1 - 2 February 2000 [557] 10 - 11 February 2000 [565] 18 - 19 February 2000 [581] 24 - 25 February 2000 [593] 2 - 3 March 2000 [611] 8 - 9 March 2000 [625] 10 - 11 March 2000 [638] 24 - 25 March 2000 [649] 31-Mar-2000 [660] 14 - 15 April 2000 [667] 20-Apr-2000 [686] 10-May-2000 [695] 19-May-2000 [700] 26 - 27 May 2000 [707] 7-Jun-2000 [719] 15-Jun-2000 [729] 6 - 7 July 2000 [745] 14-Jul-2000 [754] 14 - 15 August 2000 [762] 23-Aug-2000 [767] 8-Sep-2000 [775] 4-Oct-2000 [781] 19 - 20 October 2000 [790] 27-Oct-2000 [798] 3 - 4 November 2000 [804] 17 - 18 November 2000 [818] 28-Nov-2000 [834] 15-Dec-2000 [841] General patterns [844] The morning post-peak increase period: 1 January-mid-June 1999 [848] The midnight increase period: 17 June 1999-11 March 2000 [853] The daytime increase period: 12 March-31 December 2000 [863] Annexure B generally [868] The admissions [870] Leahy, Ian Carmichael and Michael Warner [870] Eino Heikkila [886] Liberty and Alan Shuvaly [891] Out of court admissions [894] Admissions in evidence [902] Reasoning and principal findings [922] Communications about prices [922] Petrol price cycles [926] The circumstantial evidence [932] The oral evidence [937] Commitment [940] Other issues [950] Occasional arrangements or understandings [961] The admissions [962] Conclusion [965] Dismissing the application [965] Costs [966] Orders [967]
The nature of the proceeding
This proceeding is concerned with allegations of the fixing of retail prices of petrol in the Geelong retail petrol market. The Australian Competition and Consumer Commission (‘the ACCC’) alleged that a series of arrangements or understandings existed, between competitors in that market, each containing a provision having the purpose, or having or being likely to have the effect, of fixing those prices. Further, the ACCC alleged that, on a number of occasions in 1999 and 2000, the parties to all or some of those arrangements or understandings gave effect to their arrangements or understandings, by fixing the retail price of unleaded petrol (‘ULP’). This conduct was alleged to have contravened s 45(2)(a) and (b) of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’).
The relief sought is primarily the imposition of pecuniary penalties (of a civil, not a criminal, kind), but also includes declaratory and injunctive relief.
Some respondents have admitted the substance of the allegations against them. Some of the natural person respondents, associated with the corporate respondents, gave evidence on behalf of the ACCC at the trial of the proceeding. In addition to that direct evidence, the ACCC relied on circumstantial evidence, principally a document compiled from data available to the ACCC of records of telephone communications between participants in the Geelong retail petrol market, and records of changes to the retail price of ULP by various participants in that market. The ACCC also sought to rely on the formal admissions made by some respondents, and on other admissions. In some instances, it sought to use admissions by one party against another party, on the basis that the two parties concerned were engaged in the furtherance of a common purpose, and that the statements of one were admissible against the other.
These reasons for judgment deal extensively with the factual issues arising from the evidence. They also deal with some legal issues, principally those concerned with the elements necessary for the existence of an arrangement or understanding for the purposes of s 45(2) of the Trade Practices Act. They are necessarily long, because the trial occupied 31 days, and the quantity of documentary evidence tendered was substantial and required extensive analysis.
The legislation
Section 45 of the Trade Practices Act and associated provisions
Section 45 of the Trade Practices Act provides, so far as is relevant:
‘(2) A corporation shall not:
(a) make a contract or arrangement, or arrive at an
understanding, if:...
(ii) a provision of the proposed contract, arrangement or
understanding has the purpose, or would have or be
likely to have the effect, of substantially lessening
competition; or(b) give effect to a provision of a contract, arrangement or
understanding, whether the contract or arrangement was
made, or the understanding was arrived at, before or after the
commencement of this section, if that provision:...
(ii) has the purpose, or has or is likely to have the effect,
of substantially lessening competition.(3) For the purposes of this section and section 45A, competition, in
relation to a provision of a contract, arrangement or understanding
or of a proposed contract, arrangement or understanding, means
competition in any market in which a corporation that is a party to
the contract, arrangement or understanding or would be a party to
the proposed contract, arrangement or understanding, or any body
corporate related to such a corporation, supplies or acquires, or is
likely to supply or acquire, goods or services or would, but for the
provision, supply or acquire, or be likely to supply or acquire, goods
or services.(4) For the purposes of the application of this section in relation to a
particular corporation, a provision of a contract, arrangement or
understanding or of a proposed contract, arrangement or
understanding shall be deemed to have or to be likely to have the
effect of substantially lessening competition if that provision and any
one or more of the following provisions, namely:(a) the other provisions of that contract, arrangement or
understanding or proposed contract, arrangement or
understanding; and(b) the provisions of any other contract, arrangement or
understanding or proposed contract, arrangement or
understanding to which the corporation or a body corporate
related to the corporation is or would be a party;together have or are likely to have that effect.’
Section 45A of the Trade Practices Act provides relevantly:
‘(1) Without limiting the generality of section 45, a provision of a contract,
arrangement or understanding, or of a proposed contract,
arrangement or understanding, shall be deemed for the purposes of
that section to have the purpose, or to have or to be likely to have the
effect, of substantially lessening competition if the provision has the
purpose, or has or is likely to have the effect, as the case may be, of
fixing, controlling or maintaining, or providing for the fixing,
controlling or maintaining of, the price for, or a discount, allowance,
rebate or credit in relation to, goods or services supplied or acquired
or to be supplied or acquired by the parties to the contract,
arrangement or understanding or the proposed parties to the
proposed contract, arrangement or understanding, or by any of them,
or by any bodies corporate that are related to any of them, in
competition with each other....
(5) For the purposes of this Act, a provision of a contract, arrangement
or understanding, or of a proposed contract, arrangement or
understanding, shall not be taken not to have the purpose, or not to
have or to be likely to have the effect, of fixing, controlling or
maintaining, or providing for the fixing, controlling or maintaining
of, the price for, or a discount, allowance, rebate or credit in relation
to, goods or services by reason only of:(a) the form of, or of that provision of, the contract, arrangement
or understanding or the proposed contract, arrangement or
understanding; or(b) any description given to, or to that provision of, the contract,
arrangement or understanding or the proposed contract,
arrangement or understanding by the parties or proposed
parties.(6) For the purposes of this Act but without limiting the generality of
subsection (5), a provision of a contract, arrangement or
understanding, or of a proposed contract, arrangement or
understanding, shall not be taken not to have the purpose, or not to
have or to be likely to have the effect, of fixing, controlling or
maintaining, or providing for the fixing, controlling or maintaining
of, the price for, or a discount, allowance, rebate or credit in relation
to, goods or services by reason only that the provision recommends,
or provides for the recommending of, such a price, discount,
allowance, rebate or credit if in fact the provision has that purpose
or has or is likely to have that effect.’
Among the definitions in s 4(1) of the Trade Practices Act, the following are relevant:
‘corporation means a body corporate that:
...
(b) is a trading corporation formed within the limits of Australia
...
price includes a charge of any description.
...
trading corporation means a trading corporation within the meaning of paragraph 51(xx) of the Constitution.’
Enforcement provisions
Sections 45 and 45A of the Trade Practices Act are found in Pt IV. Part VI of the Trade Practices Act relates to enforcement and remedies. The first relevant provision of Pt VI is s 75B, which provides relevantly as follows:
‘(1) A reference in this Part to a person involved in a contravention of a
provision of Part IV...shall be read as a reference to a person who:(a) has aided, abetted, counselled or procured the contravention;
(b) has induced, whether by threats or promises or otherwise, the
contravention;(c) has been in any way, directly or indirectly, knowingly
concerned in, or party to, the contravention; or(d) has conspired with others to effect the contravention.
(2) In this Part, unless the contrary intention appears:
(a) a reference to the Court in relation to a matter is a reference
to any court having jurisdiction in the matter;(b) a reference to the Federal Court is a reference to the Federal
Court of Australia’.Section 76 of the Trade Practices Act provides, so far as is relevant to the present proceeding:
‘(1) If the Court is satisfied that a person:
(a) has contravened any of the following provisions:
(i) a provision of Part IV;
...
(b) has attempted to contravene such a provision;
(c) has aided, abetted, counselled or procured a person to
contravene such a provision;(d) has induced, or attempted to induce, a person, whether by
threats or promises or otherwise, to contravene such a
provision;(e) has been in any way, directly or indirectly, knowingly
concerned in, or party to, the contravention by a person of
such a provision; or(f) has conspired with others to contravene such a provision;
the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.’
By s 76(1A)(b), the penalty payable by a body corporate is not to exceed $10 000 000, for each act or omission to which s 76 applies, with exceptions not relevant to this proceeding. By s 76(1B), the pecuniary penalty payable by a person other than a body corporate is not to exceed $500 000 for each act or omission to which s 76 applies. By s 77(1), the ACCC may institute a proceeding in a court for the recovery on behalf of the Commonwealth of a pecuniary penalty referred to in s 76.
Section 80 of the Trade Practices Act provides for the grant of injunctions, relevantly as follows:
‘(1) Subject to subsections (1A), (1AAA) and (1B), where, on the
application of the Commission or any other person, the Court is
satisfied that a person has engaged, or is proposing to engage, in
conduct that constitutes or would constitute:(a) a contravention of any of the following provisions:
(i) a provision of Part IV...
(b) attempting to contravene such a provision;
(c) aiding, abetting, counselling or procuring a person to
contravene such a provision;(d) inducing, or attempting to induce, whether by threats, promises
or otherwise, a person to contravene such a provision;(e) being in any way, directly or indirectly, knowingly concerned
in, or party to, the contravention by a person of such a
provision; or(f) conspiring with others to contravene such a provision;
the Court may grant an injunction in such terms as the Court
determines to be appropriate....
(4) The power of the Court to grant an injunction restraining a person
from engaging in conduct may be exercised:(a) whether or not it appears to the Court that the person intends
to engage again, or to continue to engage, in conduct of that
kind;(b) whether or not the person has previously engaged in conduct
of that kind; and(c) whether or not there is an imminent danger of substantial
damage to any person if the first-mentioned person engages
in conduct of that kind.(5) The power of the Court to grant an injunction requiring a person to do
an act or thing may be exercised:(a) whether or not it appears to the Court that the person intends
to refuse or fail again, or to continue to refuse or fail, to do
that act or thing;(b) whether or not the person has previously refused or failed to do
that act or thing; and(c) whether or not there is an imminent danger of substantial
damage to any person if the first-mentioned person refuses or
fails to do that act or thing.’Section 84(2) of the Trade Practices Act provides:
‘Any conduct engaged in on behalf of a body corporate:
(a) by a director, servant or agent of the body corporate within the scope
of the person’s actual or apparent authority; or(b) by any other person at the direction or with the consent or agreement
(whether express or implied) of a director, servant or agent of the
body corporate, where the giving of the direction, consent or
agreement is within the scope of the actual or apparent authority of
the director, servant or agent;shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate.’
Section 155 of the Trade Practices Act provides, so far as is relevant:
‘(1)Subject to subsection (2A), if the Commission, the Chairperson or the Deputy Chairperson has reason to believe that a person is capable of furnishing information, producing documents or giving evidence relating to a matter that constitutes, or may constitute, a contravention of this Act…a member of the Commission may, by notice in writing served on that person, require that person:
(a)to furnish to the Commission, by writing signed by that person or, in the case of a body corporate, by a competent officer of the body corporate, within the time and in the manner specified in the notice, any such information;
(b)to produce to the Commission, or to a person specified in the notice acting on its behalf, in accordance with the notice, any such documents; or
(c)to appear before the Commission at a time and place specified in the notice to give any such evidence, either orally or in writing, and produce any such documents.
…
(3)The Commission may require the evidence referred to in paragraph (1)(c) to be given on oath or affirmation and for that purpose any member of the Commission may administer an oath or affirmation.
…
(5) A person shall not:
(a)refuse or fail to comply with a notice under this section;
(b)in purported compliance with such a notice, knowingly furnish information or give evidence that is false or misleading; or
(c)obstruct or hinder an authorized officer acting in pursuance of subsection (2).
(5A)Paragraph (5)(a) does not apply to the extent that the person is not capable of complying with the notice.
…
(6A)A person who contravenes subsection (5) or (6) is guilty of an offence punishable on conviction by a fine not exceeding 20 penalty units or imprisonment for 12 months.’
Section 21(1) of the Federal Court of Australia Act 1976 (Cth) provides:
‘The Court may, in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed.’
Provisions relating to admissions
Section 59(1) of the Evidence Act 1995 (Cth) (‘the Evidence Act’) provides:
‘Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that the person intended to assert by the representation.’
According to the definition of ‘hearsay rule’, found in the dictionary of the Evidence Act, the hearsay rule is s 59(1). Section 60 of the Evidence Act provides:
‘The hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of the fact intended to be asserted by the representation.’
By s 81(1) of the Evidence Act, the hearsay rule does not apply to evidence of an admission. According to the Evidence Act’s dictionary, an admission means a previous representation that is made by a person who is or becomes a party to a proceeding and is adverse to the person’s interest in the outcome of the proceeding. Section 83 provides:
‘(1)Section 81 does not prevent the application of the hearsay rule…to evidence of an admission in respect of the case of a third party.
(2)The evidence may be used in respect of the case of a third party if that party consents.
(3) Consent cannot be given in respect of part only of the evidence.
(4) In this section:
third party means a party to the proceeding concerned, other than the party who:
(a) made the admission; or
(b) adduced the evidence.’
Section 87 of the Evidence Act provides:
‘(1)For the purpose of determining whether a previous representation made by a person is also taken to be an admission by a party, the court is to admit the representation if it is reasonably open to find that:
(a)when the representation was made, the person had authority to make statements on behalf of the party in relation to the matter with respect to which the representation was made; or
(b)when the representation was made, the person was an employee of the party, or had authority otherwise to act for the party, and the representation related to a matter within the scope of the person’s employment or authority; or
(c)the representation was made by the person in furtherance of a common purpose (whether lawful or not) that the person had with the party or one or more persons including the party.
(2)For the purposes of this section, the hearsay rule does not apply to a previous representation made by a person that tends to prove:
(a)that the person had authority to make statements on behalf of another person in relation to a matter; or
(b)that the person was an employee of another person or had authority otherwise to act for another person; or
(c) the scope of the person’s employment or authority.’
Section 57(2) of the Evidence Act provides, so far as is relevant, that:
‘if the relevance of evidence of an act done by a person depends on the court making a finding that the person and one or more other persons had, or were acting in furtherance of, a common purpose (whether to effect an unlawful conspiracy or otherwise), the court may use the evidence itself in determining whether the common purpose existed.’
Order 11 r 13(1) of the Federal Court Rules (Cth) (‘the Federal Court Rules’) provides as follows:
‘Subject to subrule (3) and to Order 43, rule 7 (which deals with persons under disability), an allegation of fact made by a party in his pleading is deemed to be admitted by the opposite party unless it is traversed by that party in his pleading or a joinder of issue under rule 14 operates as a denial of it.’
Order 18 r 4 of the Federal Court Rules provides:
‘(1)If an admission is made by a party, whether by a pleading or otherwise, the Court may pronounce any judgment or make any order to which the applicant is entitled on the admission.
(2)The Court may exercise its powers under subrule (1) notwithstanding that other questions in the proceeding have not been determined.’
Provisions relating to the standard of proof
Section 140 of the Evidence Act provides as follows:
‘(1)In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2)Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:
(a) the nature of the cause of action or defence; and
(b) the nature of the subject-matter of the proceeding; and
(c) the gravity of the matters alleged.’
The construction of the legislative provisions
Arrangements or understandings
The starting point for determining the meaning of statutory provisions must be those provisions themselves. Previous authorities, in which the courts have pronounced upon the meanings of particular provisions, may be binding, and are often helpful. Sometimes, however, those pronouncements are made in the context of the resolution of particular issues, which may differ from those raised in a current case. As Merkel J recognised in Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2004] FCA 1678 (2004) 141 FCR 183 (‘the Ballarat case’) at [57], previous statements of principle can be difficult to apply in a case that raises different issues. As his Honour said, it is necessary to return to the words of the statute.
Section 45(2)(a) of the Trade Practices Act uses the terms ‘contract’, ‘arrangement’ and ‘understanding’. These are plainly intended to represent a spectrum of consensual dealings. The words of the statute themselves so demonstrate. They provide that a corporation is not to ‘make’ a contract or arrangement, or to ‘arrive at’ an understanding, if the contract, arrangement or understanding has a specified content. A corporation cannot ‘make’ a contract or arrangement, or ‘arrive at’ an understanding, without there being at least one other party to the contract, arrangement or understanding. The other party must also participate in the making, or the arriving at, before there can be a contract, arrangement or understanding. Clearly, it is not possible to ‘make’ something, or to ‘arrive at’ something, unless what is made or arrived at exists at the end of the process of making or arriving at. What must exist for s 45(2)(a) to apply is one of the three forms of consensual dealing.
The term ‘contract’ is well understood by lawyers. A contract is the result of the acceptance by one party of an offer made by another, resulting in the minds of the two parties being at one as to the agreement they have made. It must be supported by good consideration, have sufficient certainty of terms that it be possible to determine what has been agreed, and be accompanied by an intention on the part of the parties that a legally binding relationship should be established by it. In ordinary circumstances, the obligations created by a contract are enforceable in a court, but their enforceability is subject to the possibility of defences arising from the nature of the contract itself, or from external circumstances. One defence arising from the nature of the contract itself results from the illegality of its purpose. In using the word ‘contract’ in s 45(2)(a) of the Trade Practices Act, Parliament must have intended to refer to a consensual dealing having the fundamental characteristics of a contract, but not necessarily being enforceable in a court of law, because s 45(2)(a) would itself give rise to the defence of illegality, and thereby prevent enforcement. Thus, the word ‘contract’ for the purposes of s 45(2)(a) describes a consensual dealing with a high degree of formality.
The word ‘arrangement’ is less clearly understood, and more susceptible of elasticity as to its meaning. In general, it appears to connote a consensual dealing lacking some of the essential elements that would otherwise make it a contract. For instance, a dealing that would otherwise be a contract may be described as an ‘arrangement’ if the parties to it intended not to create a legally binding relationship, but only to give expression to their intentions as to the obligations that each felt morally bound to adhere to in relation to what was to pass between them, or to be carried out by them. Of course, an arrangement might be a broader concept than this, because it is a term the boundaries of which have not been fixed in the traditional understanding of lawyers. The Oxford English Dictionary gives as the apparently appropriate meaning of the word ‘arrangement’ ‘a settlement of mutual relations or claims between parties; an adjustment of disputed or debatable matters; a settlement by agreement’, or alternatively, ‘disposition of measures for the accomplishment of a purpose; preparations for successful performance.’ The ordinary understanding of what amounts to an ‘arrangement’ makes it difficult to envisage that an arrangement could come about without express negotiations between the parties, although there have been suggestions that an arrangement can be tacit. See Federal Commissioner of Taxation v Cooper Brookes (Wollongong) Pty Ltd (1979) 41 FLR 277 at 301 – 302 per Fisher J, with whom Brennan and Deane JJ agreed, referred to by Franki J in Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 24 in the context of s 45(2) of the Trade Practices Act. At the very least, there must be some express communication between the parties, although what is said may not amount to offer and acceptance for the purposes of the law of contract. The need for express communication is also suggested by the use of the verb ‘make’ in conjunction with both ‘contract’ and ‘arrangement’ in s 45(2)(a) of the Trade Practices Act. It is hard to see how two parties could ‘make’ an ‘arrangement’ without doing so expressly, at least as to the substance of the arrangement, even if the acceptance by one party of what the other has communicated is implicit in some act, rather than expressed in words.
The word ‘understanding’ is obviously intended to connote a less precise dealing than either a contract or arrangement. This is so because of the meaning of the word ‘understanding’ itself, and because, in the terms of s 45(2)(a), the parties to it may ‘arrive at’ it instead of making it. Once again, the Oxford English Dictionary supplies an appropriate definition: ‘a mutual arrangement or agreement of an informal but more or less explicit nature.’ It is the informal and less explicit nature of an understanding that led Smithers J to describe the concept of an understanding as ‘broad and flexible’ in L Grollo & Co Pty Ltd v Nu-Statt Decorating Pty Ltd (1978) 34 FLR 81 at 89.
However broad and flexible an understanding might be, for the purposes of s 45(2)(a) of the Trade Practices Act it must be a consensual dealing between parties. Like an arrangement, it falls outside the sphere of contractual obligations of a kind normally enforceable in a court. Unlike an arrangement, it can be tacit, in the sense that it can be arrived at by each party, either by words or acts, signifying an intention to act in a particular way in relation to a matter of concern to another party. In order to be a consensual dealing, however, an understanding must involve a meeting of minds. In Top Performance Motors Pty Ltd v Ira Berk (Queensland) Pty Ltd (1975) 24 FLR 286 at 291, Smithers J (with whom Evatt J agreed) referred to what Diplock LJ said in British Basic Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 2 All ER 807 at 819 in relation to English legislation in terms different from s 45(2) of the Trade Practices Act, and said:
‘by parity of reasoning it would follow that the existence of an arrangement of the kind contemplated in s. 45 is conditional upon a meeting of the minds of the parties to the arrangement in which one of them is understood, by the other or others, and intends to be so understood, as undertaking, in the role of a reasonable and conscientious man, to regard himself as being in some degree under a duty, moral or legal, to conduct himself in some particular way, at any rate so long as the other party or parties conducted themselves in the way contemplated by the arrangement.
It seems to me also that an understanding must involve the meeting of two or more minds. Where the minds of the parties are at one that a proposed transaction between them proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a particular course of conduct, it would seem that there would be an understanding within the meaning of the Act.’
Similarly, in Grollo at 89, Smithers J said as to an understanding that:
‘It may arise merely where the minds of the parties are at one that a proposed transaction proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a particular course of conduct’.
This view as to what is necessary for the formation of an understanding has been followed on many occasions. It is unnecessary to set out all of the authorities in which it has been referred to. I accept the correctness of what Smithers J said without hesitation. It is important, however, not to confuse what is required for the formation of an understanding within the meaning of s 45(2)(a) of the Trade Practices Act with what is required to be the content of an arrangement or understanding for the purposes of s 45(2)(a). Counsel for the ACCC were inclined to rely on authorities describing the formation of an understanding, when attempting to persuade the Court as to the required content.
Section 45(2)(a) of the Trade Practices Act, and the other provisions found in s 45 and s 45A, which are set out above, make a number of things very clear. To fall within s 45(2)(a), an arrangement or understanding must be substantial enough to contain at least one ‘provision’. The Oxford English Dictionary relevantly defines ‘provision’ as meaning:
‘Each of the clauses or divisions of a legal or formal statement, or such a statement itself, providing for some particular matter; also, a clause in such a statement which makes an express stipulation or condition; a proviso.’
A provision must provide for something to occur, or not to occur. Further, the kind of provision contemplated by s 45(2)(a)(ii) is a provision capable of having a ‘purpose’ or an ‘effect’. This element is supplied by the deeming effect of s 45A(1) if the provision has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, among other things, a price. By s 45A(5), the determination of whether a provision of the required kind exists is not dependent upon form, or upon express description. The requisite provision can be in the form of a recommendation, according to s 45A(6). What is important is its substance. There must therefore be sufficient substance to whatever is the result of the formation of an understanding for it to contain a provision of the required kind.
In Federal Commissioner of Taxation v Lutovi Investments Pty Ltd (1978) 140 CLR 434, the High Court was dealing with the meaning of the word ‘arrangement’ in legislation other than the Trade Practices Act. In a passage that has often been cited in judgments dealing with arrangements or understandings under the Trade Practices Act, Gibbs and Mason JJ (with whom Murphy J agreed) said at 444:
‘It is, however, necessary that an arrangement should be consensual, and that there should be some adoption of it. But in our view it is not essential that the parties are committed to it or are bound to support it. An arrangement may be informal as well as unenforceable and the parties may be free to withdraw from it or to act inconsistently with it, notwithstanding their adoption of it.’
This passage cannot be relied upon to suggest that an arrangement or understanding under s 45(2)(a) of the Trade Practices Act need have no substance at all. Plainly, it contemplates that there must be something of substance from which the parties can withdraw, or with which they can act inconsistently. By their ‘adoption’ of whatever matter of substance is part of the arrangement or understanding, the parties will necessarily have adopted a provision that they see as an appropriate way to regulate their future conduct. To say that they are able to withdraw from the adoption of such a provision, or to act inconsistently with it, is to say nothing more than that an arrangement or understanding is not enforceable in a court of law in the way that a contract is. The notion of an arrangement or understanding that each party will act as it sees fit on every occasion is entirely foreign to s 45 of the Trade Practices Act.
Counsel for the ACCC found it necessary to grapple with the use of the word ‘commitment’ in the judgment of the Full Court in Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission [2005] FCAFC 161 (2005) ATPR 42-078 (‘Apco Service Stations’) at [43] – [47]. In that case, which concerned allegations that dealers in the Ballarat retail petrol market had been involved in an arrangement or understanding to fix the price of petrol, and which involved some of the parties to the present case, the trial judge had declined to make a finding that one dealer became committed to any price increase agreed on by the other dealers. In addition, his Honour had made a finding that the other dealers had no expectation that the uncommitted dealer’s readiness to receive telephone calls about prices meant that the uncommitted dealer would substantially match those prices. The Full Court expressed the view that these findings led to the unavoidable conclusion that the uncommitted dealer was not a party to any understanding that it would fix its prices at the same level as the other dealers or at any particular level, or even that it would increase its prices at all. In expressing this view, at [45], the Full Court pointed out that the appellants in that case had not disputed that the trial judge had enunciated the correct legal principles. The trial judge had referred, and the Full Court also referred, to observations of Lindgren J in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954 (1999) 92 FCR 375 at [141], which were specifically endorsed by a Full Court in Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213 (2002) 118 FCR 236 at [79]. Lindgren J said:
‘The cases require that at least one party “assume an obligation” or give an “assurance” or “undertaking” that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party. In the present case, for example, each individual who attended the Meeting may have expected that as a matter of fact the others would return to their respective offices by car, or, to express the matter differently, each may have been expected by the others to act in that way. Each may even have “aroused” that expectation by things he said at the Meeting. But these factual expectations do not found an “understanding” in the sense in which the word is used in ss 45 and 45A. The conjunction of the word “understanding” with the words “agreement” and “arrangement” and the nature of the provisions show that something more is required.’
In Apco Service Stations at [46], the Full Court said that the trial judge’s findings amounted to no more than what Lindgren J described as a ‘factual expectation’, falling short of an ‘understanding’. The Full Court then referred at [47] to the judgment of Lockhart J in Trade Practices Commission v Email Ltd (1980) 31 ALR 53 as a practical illustration of the proposition that a mere hope or expectation that a party will act in a particular way is insufficient to constitute an ‘understanding’ for the purposes of s 45(2) of the Trade Practices Act. The Full Court pointed out that Lockhart J in Email held that, whilst sending price lists to a competitor assisted the competitor to follow the sender’s prices if it chose to do so, and to do so more quickly than might otherwise be the case, in the absence of any commitment such communications were not sufficient to give rise to the meeting of minds essential to an arrangement or understanding. The Full Court held that the same principle was applicable in the Apco Service Stations case. Information conveyed by some dealers to the uncommitted dealer may have been useful to the uncommitted dealer in enabling him to have his franchisees check competitors’ prices and know when to raise his own prices if he chose to do so, but the absence of any expectation that he would do so was fatal to the existence of any understanding.
In the present case, counsel for the ACCC recognised that the judgment in Apco Service Stations was binding on me. They made the formal submission that the Full Court was in error when it required that there be some commitment, before there could be an understanding for the purposes of s 45(2)(a) of the Trade Practices Act. The reality is that the previous authorities dealing with the content of an understanding, as distinct from its formation, provide ample support for what the Full Court said in Apco Service Stations. More than ample support is also found in the analysis of the relevant provisions, which I have already set out in [24] – [34]. As I have said, for the purposes of s 45(2)(a) there can be no such thing as an understanding that leaves each party to it free to do whatever it wishes. Whatever word may be chosen to represent the essential element of an understanding for the purposes of the relevant statutory provisions, it is clear that element involves the assumption of an obligation, unenforceable in any court of law, but merely morally binding or binding in honour. Any reservation that may have existed about this has been dispelled by the High Court, which dismissed the ACCC’s application for special leave to appeal from the Full Court in Apco Service Stations on 2 June 2006. See ACCC v Apco Service Stations Pty Ltd & Anor [2006] HCATrans 272. At line 619, giving the judgment of himself and Hayne J, Gleeson CJ said:
‘The decision of the Full Court of the Federal Court turned not upon any controversial view of the meaning of the relevant provisions of the Trade Practices Act but upon the Full Court’s view of the facts in the light of the case as pleaded and argued by the Commission. In the light of the facts as found, the case does not raise any issue of law suitable to a grant of special leave to appeal. The application is dismissed with costs.’
For all of these reasons, quite apart from its binding effect on me, the correctness of the Full Court’s judgment in Apco Service Stations cannot be doubted.
As I have said, the concepts of contract, arrangement and understanding relevant to the application of s 45(2)(a) of the Trade Practices Act are concepts representing points on a spectrum of consensual dealings. It is possible that the spectrum might be extended in one direction beyond contract, to include even more solemnly binding consensual obligations, such as deeds under seal. It is difficult to see that the spectrum of consensual dealings could extend in the other direction beyond the concept of ‘understanding’, whilst still remaining relevant for the purposes of s 45(2)(a). That end of the spectrum, therefore, lies somewhere between the outer limits of what constitutes an ‘understanding’ and the closest form of non-consensual dealing that could be imagined. It is possible that this closest form is the expectation that a party will act in a particular way, engendered by that party, to which Lindgren J referred in CC (NSW) Pty Ltd at [141]. It may be in the realm of parallel conduct, even conscious parallel conduct, such as the adoption of identical prices for homogeneous products, which clearly lies beyond the realm of ‘understanding’. See the American authorities cited by Lockhart J in Email at 56 – 57.
The line between what amounts to an ‘understanding’ for the purposes of s 45(2)(a) and what falls outside the spectrum of consensual dealings relevant to that provision will always be difficult to draw. This is particularly so in a case such as the present, in which there is an absence of evidence of express communications from which arrangements or understandings might have been derived, and a consequent reliance upon courses of conduct, coupled with circumstantial evidence, as the only means by which the existence of arrangements or understandings can be established. The crucial question in this case is on which side of the shadowy line delimiting ‘understanding’ the conduct of various parties fell.
Counsel for the ACCC cited numerous authorities on the question whether, for an arrangement or understanding to exist, it is necessary for the parties to have assumed mutual obligations, or whether an arrangement or understanding can exist where only one party assumes an obligation towards the other party. It is unnecessary to cite these authorities, or to refer to them in detail, because the question is academic so far as the present case is concerned. The ACCC has pleaded a series of arrangements or understandings to the effect that both (or all three in the case of one alleged arrangement or understanding) parties to each of them would increase their prices to the same or a similar amount at or about the same time. It is unnecessary to consider what would have happened if the allegation had been that only one party would so increase its prices, whilst the other party was free to do whatever it saw fit. Apart from anything else, it is obvious that it would be more difficult to sustain an allegation of an arrangement or understanding of that kind than it is to make good an allegation of the existence of an arrangement or understanding involving mutual obligations.
The use of admissions
It is clear that the power given to the Court by O 18 r 4(1) of the Federal Court Rules to pronounce judgment based on the admissions of a party is discretionary. The use of the word ‘may’ in the rule itself indicates this. If authority be needed to make good the proposition that the power is discretionary, it is found in Termijtelen v Van Arkel [1974] 1 NSWLR 525 at 529 per Hope JA and at 534 – 535 per Bowen CJ in Eq. In that case, the Court of Appeal of New South Wales was examining three separate legislative grants of power to give judgment based on admissions arising from pleadings. Their Honours held that each of the three grants of power was a grant of discretionary power.
There is some authority, apparently not conclusive, as to the circumstances in which the discretion might be exercised. As long ago as Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221, the House of Lords recognised that there were circumstances in which a court should not be bound to accept admissions. At 225, Lord Loreburn LC (with whom the Earl of Halsbury, Lord Atkinson and Lord Shaw agreed) said:
‘It is the duty of a Court to decide cases according to the truth and fact, not according to any assumed or artificial state of facts which the parties may find it convenient to present. No doubt Courts of Law allow and indeed encourage parties to simplify litigation by making admissions and to a certain extent by waiving their rights, because, when there is a real controversy depending upon real facts, everyone ought to facilitate its authoritative settlement. But that is a very different thing from allowing people to obtain an adjudication upon the footing that something exists or has happened which in truth does not exist, or has never happened. The objection to such a course is most striking when the parties agree to admit as true something which lies at the root of the jurisdiction, and any judgment obtained upon the footing of its truth may be used as a weapon in terrorem against persons not parties to the admission. A Court of Justice can never be bound to accept as true any fact, merely because it is admitted between the parties.’
In Damberg v Damberg [2001] NSWCA 87 (2001) 52 NSWLR 492 at [148] – [160], Heydon JA (as his Honour then was), with whom Spigelman CJ and Sheller JA agreed, engaged in a lengthy examination of the question whether, and to what extent, admissions or agreements between the parties could bind a court. At [148], Heydon JA identified the problem as being ‘the extent to which the parties, by their conduct of proceedings, can prevent the court from deciding a case in accordance with the law or the facts.’ At [149], his Honour acknowledged that the pleadings define the issues in a civil case, and that a party failing to plead a claim or defence will generally be unable to rely on it at a later time. His Honour then proceeded to discuss the various ways in which admissions of fact can be made: informal out-of-court admissions at [151]; formal admissions in answer to interrogatories at [152]; and formal admissions pursuant to rules of court at [153]. His Honour pointed out that each kind of admission can be contradicted by other evidence, or the court can choose not to act on the admissions. At [154], his Honour said:
‘A party may admit allegations made in pleadings by the opposing party, and may do so either expressly or by non-traverse. The effect of such admissions is to narrow the issues in dispute: they can thus have the effect of restricting the evidence to be tendered and can prevent evidence being called to the contrary.’
Heydon JA then mentioned concessions by a solicitor before a trial or by counsel during a trial, or admissions ordered by a court as an alternative to filing evidence to the contrary within a specified time. His Honour also made reference to a statutory power permitting agreed statements of facts. At [155], his Honour said:
‘There are significant limitations on the extent to which the use of the above facilities can compel a court to decide a case on a basis contrary to fact.’
At [157], Heydon JA pointed out that ‘the court is not bound to act on admissions made by the parties or on states of fact agreed between the parties.’ His Honour then cited the Gramophone Co case, quoting an extensive passage from the speech of Lord Loreburn LC, including the passage I have quoted at [43]. At [158] and [159], his Honour referred to two other English cases, Adams v Naylor [1946] AC 543 and Royster v Cavey [1947] KB 204, in both of which it had been held that crucial admissions on which the cases had been conducted at first instance should not be accepted, because they were contrary to fact. By way of conclusion, at [160], Heydon JA said:
‘In short, the courts are averse to pronouncing judgments on hypotheses which are not correct. To do so is tantamount to giving advisory opinions and to encouraging collusive litigation. On the other hand, the courts will act on admissions of or agreements about matters of fact where there is no reason to doubt their correctness. But they are reluctant to do so where there is reason to question the correctness of the facts admitted or agreed.’
In Symes v The Proprietors Strata Plan No 31731 [2003] NSWCA 7 at [45], Heydon JA (with whom Sheller JA and McClellan J agreed) referred to Damberg, saying:
‘It is true that there are cases where the courts are averse to pronouncing judgments on incorrect factual hypotheses, because to do so amounts to the giving of advisory opinions and to encouraging collusive litigation: see the cases discussed in Damberg v Damberg (2001) 52 NSWLR 492 at [148]-[160]. However, these perils do not exist here. It has not been demonstrated that the hypothesis that No 3 wall was common property is plainly incorrect. There is some evidence that it was incorrect; on this appeal evidence strongly pointing in the contrary direction has been filed. Courts commonly act on admissions in relation to matters of fact which might be disputed if the parties desired to do so, but which they have chosen to arrive at a compromise about.’
Counsel for the ACCC in the present case sought to draw from these authorities the proposition that, before departing from an admission made by a party on the pleadings, the Court would need to be satisfied affirmatively that the admission was ‘plainly incorrect’. The Court could not be so satisfied if it only took the view that the applicant had failed to discharge its burden of proof in relation to the fact or event admitted. To apply a lesser test, it was argued, would be to place an admitting respondent in no different position from a non-admitting one. Counsel for the ACCC also referred to the public policy encouraging the settlement of litigation, which underlies the readiness of the courts to accept admissions on the pleadings as removing the admitted facts from the field of dispute.
In my view, to confine the non-acceptance of admissions on the pleadings to circumstances in which their falsity has been established would be too stringent a rule. I recognise that it is important that a party whose allegations in the pleadings have been admitted ought to be entitled to rely upon those admissions. Too great a willingness to depart from those admissions would lead to the lengthening of trials and to uncertainty in the administration of justice, both of which are very undesirable. It seems to me, however, that Heydon JA’s formulation of the test in Damberg is the appropriate one, namely that the Court can (and perhaps should) decline to act on admissions when there is ‘reason to doubt their correctness’, or ‘reason to question the correctness of the facts admitted or agreed.’
In a case such as the present, there are particular public policy reasons for adopting this less stringent test. The size of this piece of litigation, and the expense of retaining solicitors and counsel to conduct a full-scale defence in a long trial, provide a powerful incentive to the making of admissions, in the hope of securing leniency. In a case in which admissions on the pleadings are made by parties who lack the resources to conduct lengthy litigation in their own defence, the Court should be more ready to put aside the admissions if they appear to be unreliable. Further, in a case such as this, allegations are made of the existence, and the giving effect to, of arrangements or understandings between various parties. There is no alleged arrangement or understanding the existence of which is admitted by both (or, in one instance, all three) parties to it. At best for the ACCC, one party to an alleged arrangement or understanding has admitted the existence, and the implementation, of that arrangement or understanding. The other alleged party (or, in one instance, two parties) to each such admitted arrangement or understanding has defended itself against the allegation. In those circumstances, if the applicant fails to prove against the non-admitting party (or parties) the existence of the arrangement or understanding, then there is a considerable risk that the processes of the Court will be brought into disrepute, if the Court should be required to find against the admitting party that the arrangement or understanding existed and was implemented, but finds in favour of the denying party (or parties) that it did not exist. Members of the public would have some difficulty in understanding how the Court, in a civil case, could reach such contradictory findings. Again, this provides a substantial reason for refusing to act on admissions on the pleadings if, in the light of the evidence, those admissions may be unreliable.
Another factor pertinent to a case such as the present is that an admission may amount to a concession as to a matter of law, or a conclusion on a matter of mixed fact and law. If the law is complex, or there is difficulty in determining on which side of an indistinct line the particular facts fall, it is necessary to be wary of accepting an admission conflicting with conclusions drawn on the evidence, and with the benefit of full submissions as to the law.
The other issue that may arise in this case, with respect to which it is necessary to look at some authorities, is the question of the admissibility against one respondent of an admission made by another respondent. For instance, if A gives evidence of a conversation between A and B, and A’s evidence is that, in the course of the conversation, B said something probative of the existence of an arrangement or understanding between B and C, the evidence is plainly admissible against B as an admission, pursuant to the exception in s 81(1) of the Evidence Act to the hearsay rule in s 59(1). The question is whether this admission is also admissible against C.
Section 57(2) of the Evidence Act does not answer this question itself. It provides in its own terms that it deals only with the relevance of evidence. Indeed, it is one of the provisions in Pt 3.1 of the Evidence Act, all of which deal with relevance. There can be no doubt that, if the statement made by B in the conversation with A is indicative of the existence of an arrangement or understanding between B and C then, consistently with s 57(2), the Court may use the content of that statement to determine whether it is evidence that the requisite common purpose existed, and therefore that the evidence is relevant to that question. Given its relevance, the evidence is still not admissible against C unless s 87(1)(c) of the Evidence Act applies. For that to apply, it must be reasonably open to the Court to find that the statement was made in furtherance of a common purpose that B and C had. It is clear that s 87(1)(c) can only operate if it is reasonably open from evidence other than the statement itself that the statement is made in furtherance of a common purpose. This follows from the terms of s 87 itself. The three paragraphs of subs (1) deal with three different situations in which a representation by one person is taken to be an admission by another person. Subsection (2) makes provision for the prerequisites to admissibility under s 87(1)(a) and (b) to be proved by a representation by the same person who made the representation that is tendered as an admission. The prerequisite representation may, and often will, be contained in the same statement that is sought to be tendered as an admission against the party who made it. Section 87(2) says nothing at all about the manner in which the prerequisite to admissibility under s 87(1)(c) is to be established. If the existence of the required common purpose could be established by the representation itself, then a statement by B that indicated that B had a common purpose with C would always be admissible against C. The statement by B would be permitted to pull itself up by its own bootstraps. This would be an undesirable, and unintended, result of the application of s 87(1)(c).
Some confirmation of this proposition is available from the authorities. On two occasions, the New South Wales Court of Criminal Appeal has said that s 87(1)(c) of the Evidence Act 1995 (NSW) (which is in the same form as s 87(1)(c) of the Evidence Act) reproduces the pre-existing common law. See R v Macraild (unreported, NSW Court of Criminal Appeal, Sully, Dunford and Simpson JJ, 18 December 1997) at 9 and Watt v R [2000] NSWCCA 37 at [8]. The pre-existing common law is found in Tripodi v R (1961) 104 CLR 1 at 7 and Ahern v R (1988) 165 CLR 87 at 100. In both of these cases, the High Court of Australia made it clear that the statement by B could only be admissible against C if there were ‘reasonable evidence’ establishing the existence of the common purpose, apart from the statement itself. I do not necessarily accept, as the New South Wales Court of Criminal Appeals appears to have done, that the ‘reasonable evidence’ test is identical to the formulation ‘reasonably open to find’ preferred by the legislature. For present purposes, however, Macraild and Watt stand as authority for the proposition that, so far as they are consistent with the terms of s 87(1)(c) of the Evidence Act, Tripodi and Ahern are to be taken as providing authority on the proper construction of that provision. It follows that s 87(1)(c) must be applied on the basis that the admissibility of B’s statement as against C can only be determined by reference to evidence other than the statement itself.
Termijtelen is authority for the proposition that the fact that an admission is a deemed admission, pursuant to a provision such as O 11 r 13 of the Federal Court Rules, does not have any effect on the question whether the Court should make a finding in accordance with it if the admission appears unreliable. It is also possible for the Court to dispense with compliance with the requirements of O 11 r 13, under the general dispensing power found in O 1 r 8 of the Federal Court Rules. See Australian Competition and Consumer Commission v Francis [2004] FCA 487 (2004) 142 FCR 1 at [42] – [43]. It is clear that the powers in O 18 r 4(1) and (2) respectively are discretionary; the Court is not obliged to give judgment on the basis of admissions made, whether in pleadings or otherwise. Nor is it obliged to give such judgment without determining the other issues remaining in the proceeding.
The parties
The applicant
The applicant, the ACCC, is established by s 6A(1) of the Trade Practices Act. By s 6A(2)(a), the ACCC is a body corporate and by s 6A(2)(d) it may sue in its corporate name. The ACCC is a party given standing by s 77(1) of the Trade Practices Act to institute a proceeding for the recovery on behalf of the Commonwealth of a pecuniary penalty referred to in s 76. Section 80(1) also gives the ACCC standing to apply for an injunction.
The corporate respondents
Among the 18 respondents to the proceeding, the first eight are corporations. They are respectively: the first respondent, Leahy Petroleum Pty Ltd (‘Leahy’); the second respondent, Apco Service Stations Pty Ltd (‘Apco’); the third respondent, Pegasus Retail Pty Ltd (‘Pegasus’); the fourth respondent, United Geelong Pty Ltd, formerly called United Fuels Pty Ltd (‘United Fuels’); the fifth respondent, Brumar (Vic) Pty Ltd (‘Brumar’); the sixth respondent, United Retail Pty Ltd (‘United Retail’); the seventh respondent, Liberty Petroleum Pty Ltd (‘Liberty’) and the eighth respondent, Andrianopoulos Motors Pty Ltd (‘Andrianopoulos’).
On 4 February 2004, Leahy filed a defence in this proceeding, in which it admitted some allegations against it. On 11 April 2005, Leahy entered into voluntary administration. At a creditors’ meeting on 6 May 2005, Leahy was placed in liquidation. The ACCC sought the leave of the Court, pursuant to s 500(2) of the Corporations Act 2001 (Cth) (‘the Corporations Act’), to continue the proceeding against Leahy, on the basis that it wished to obtain declaratory relief against Leahy, and to have imposed on Leahy a pecuniary penalty, which would not be provable in the liquidation. The only evidence about the affairs of Leahy discloses that, at the time it went into liquidation, Leahy’s liabilities exceeded its assets by in excess of $1 600 000. In the circumstances, I declined to grant leave to proceed. The trouble and expense of proceeding to impose a pecuniary penalty on Leahy, which is extremely unlikely ever to be collected, is unwarranted. Declaratory relief is a largely pointless exercise at the best of times, and has absolutely no point in a case in which the person about whose conduct the declaration is sought is never going to conduct any further activities. If the function of a declaration is to record in a formal way the past acts of a corporation, so that its past conduct may be taken into account against it if it should ever contravene the law in a relevant way again, there is no point in making a declaration when the corporation has ceased to function permanently. As will be seen, there are two natural persons who are alleged to have given rise to the contravening conduct alleged against Leahy. If those contraventions were to be established, and declaratory relief is of any symbolic value at all, any desire for such relief would be satisfied amply by making declarations about the conduct of the two natural persons. In the absence of leave to proceed, no relief can be sought or granted against Leahy in this proceeding.
On 15 August 2005, during the trial of the proceeding, the ACCC discontinued the proceeding against Pegasus. The ACCC also abandoned its allegations of conduct contravening the Trade Practices Act in relation to Pegasus.
United Fuels came into existence in order to merge the business interests of Eino Heikkila (the 14th respondent), which involved wholesale and retail distribution of Shell-branded petroleum products in Geelong, and Robert James Riordan, which involved similar activities in Colac. With encouragement and assistance from Shell, the two formed United Fuels, of which they and their respective spouses were directors. Responsibilities were divided between them, with Mr Heikkila being in charge of retailing in Geelong, including setting prices for the United Fuels outlets, and Mr Riordan being in charge of wholesaling, and of the operations to the west of Geelong, including Colac. With the passage of time, a personal rift developed between Mr Heikkila and Mr Riordan, and progressed to the point where they were barely able to communicate. As a result, with the cooperation of Shell, they negotiated a settlement, under which Mr Heikkila left the business, and the petroleum retailing industry, altogether. The wholesale distributorship was sold to an unrelated company, Triton Petroleum Pty Ltd (‘Triton’), which was said to be controlled by Shell. Mr Riordan formed United Retail, which he controlled, to carry on the retail business as the operator of a number of Shell outlets. Robert Keith Hambrook was employed by United Fuels as its accountant, and became the financial controller for United Retail. Mr Riordan and Mr Hambrook gave evidence on behalf of United Fuels and United Retail at the trial. United Fuels ceased to trade on 30 September 1999, and subsequently changed its name. Accordingly, conduct in contravention of the Trade Practices Act is only alleged against United Fuels up to that date. From 1 October 1999, United Retail effectively became the successor to United Fuels in the conduct of the relevant business. Accordingly, conduct in contravention of the Trade Practices Act is alleged against United Retail only after that date.
On 17 December 2004, Merkel J delivered judgment in the Ballarat case, to which I have referred in [23], in a proceeding in which the ACCC alleged the existence of an arrangement or understanding to fix the prices of petrol in the City of Ballarat and its surrounding area. Among those found to be parties to the Ballarat arrangement or understanding was Brumar. Merkel J also found that Brumar had given effect to that arrangement or understanding on some 53 occasions. See the Ballarat case at [382]. On 17 March 2005, his Honour imposed a pecuniary penalty of $4 000 000 on Brumar in respect of those contraventions. See Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254 at [42]. By that date, Brumar was already in liquidation, consequent upon a creditors’ meeting on 17 February 2005. Earlier, Brumar had sold its business assets for a sum exceeding $26 000 000. Settlement of the sale occurred on 26 July 2003. After satisfaction of secured and other creditors out of the proceeds of sale, Brumar was left with $994 400. By the time of the liquidation, Brumar was said to have had total assets of $50 000 and creditors totalling $400. After investigation by the liquidator, on 18 May 2005, the liquidator expressed the view that a distribution to creditors of close to 100c in the dollar would be likely, subject to the resolution of a dispute as to whether any debt in respect of the costs awarded against Brumar by Merkel J on 17 March 2005 was provable in the liquidation. The liquidator contended that such a debt could not be proved in the liquidation. For practical purposes, any surplus of assets over liabilities of Brumar would be more than exhausted by the payment of the penalty imposed by Merkel J and the payment of any costs ordered by his Honour. The prospect of the ACCC recovering any pecuniary penalty from Brumar appears to be non-existent. Accordingly, for reasons similar to those I have given with respect to Leahy in [58], I also refused the ACCC’s application, pursuant to s 500(2) of the Corporations Act, for leave to proceed against Brumar.
There is no dispute that each of Apco, United Fuels, United Retail, Liberty and Andrianopoulos answers the description of ‘trading corporation formed within the limits of Australia’, and is therefore a ‘corporation’ for the purposes of the provisions of the Trade Practices Act to which I have referred. Prior to their respective liquidations, Leahy and Brumar also fell within the same provision of the definition of ‘corporation’ in s 4(1) of the Trade Practices Act.
The natural person respondents
The remaining respondents are all natural persons, each associated with one or more of the corporate respondents.
Each of the natural person respondents is an officer or employee of one (or, in two cases, two) of the corporate respondents. The ninth respondent, Ian Lesley Carmichael, was Operations and Transport Manager of Leahy. The 10th respondent, Michael John Warner, was the Corporate Accountant for Leahy. Peter Joseph Anderson, the 11th respondent, was a director and secretary of Apco, and also Apco’s General Manager. Up to September or October 1999, the 12th respondent, Bruno Gallucci, was the Retail Business Manager of Pegasus. From October 1999 until May 2000, the position of Retail Business Manager of Pegasus was held by Andrew Ronald Pitman, the 13th respondent. At the same time as it discontinued the proceeding against Pegasus, the ACCC discontinued the proceeding, and abandoned its claims, against Mr Gallucci and Mr Pitman. The 14th respondent, Eino Kalevi Heikkila (whose two given names have been joined as if they were a single name in the title to the proceeding) was a director and the secretary, and occupied the position of General Manager, of United Fuels up to 30 September 1999, when United Fuels ceased trading. The 15th respondent, Garry Victor Dalton, was the Operations Coordinator for Geelong and Ballarat of Brumar from October 1998. Colin James Williamson, the 16th respondent, was employed by United Fuels, in the management of one of its retail outlets, until 30 September 1999. Thereafter, he continued to work at the same outlet, as an employee of United Retail, with the title Customer Service Leader, and additional responsibilities. Alan Shuvaly, the 17th respondent, was National Pricing Manager of Liberty. The 18th respondent, Christos Andrianopoulos (‘Chris Andrianopoulos’), was Director of Marketing for Andrianopoulos.
Ian Carmichael, Michael Warner, Eino Heikkila and Alan Shuvaly filed defences, each admitting the allegations made against him and against the corporation with which he was associated. Each gave evidence on behalf of the ACCC. Garry Dalton gave evidence in his own defence. Peter Anderson, Colin Williamson and Chris Andrianopoulos did not give evidence. There was some evidence that Colin Williamson had suffered a major heart attack not long before the trial and that his poor health may have been a factor in his decision not to give evidence.
The Geelong petrol market
The definition of the market
In the amended statement of claim, the ACCC pleaded that the Geelong retail petrol market involved the sale of petroleum products, including ULP and super-grade petrol (‘Super’) in the metropolitan area of the City of Geelong. Although, on the pleadings, the extent of the relevant market was a matter of controversy, the controversy did not surface in the course of the trial. There was no expert evidence about the structure of the market. It was largely accepted by the parties, if not common ground, that there was a market for the sale of petroleum products, including ULP and Super, to members of the public in the Geelong metropolitan area. It is also the case that some of the retailers of petroleum products operating in the Geelong metropolitan area had retail outlets in outlying towns around Geelong, so that price movements in the Geelong metropolitan area tended to be influential on price movements in those outlying towns, which included Meredith, Lara, Bannockburn, Drysdale, Queenscliff, Point Lonsdale, Torquay and Anglesea. The reverse did not apply; price movements in those outlying towns did not themselves influence prices in the Geelong retail petrol market.
The unavailability of precise data about times of price increases for a number of participants in the Geelong retail petrol market makes Annexure B less useful than it might otherwise have been. It makes it impossible to make any finding based on Annexure B alone about the possible implementation of Arrangements Nos 4 and 6. It must be assumed that the ACCC took the view that it could not make its case as to the timing of price increases any better by tendering the material, available to it, of telephone calls between United Fuels and United Retail and their various outlets, from which conclusions might have been drawn as to when instructions were given to implement a price increase.
Where Annexure B does contain specific data for the timing of price increases, the picture becomes very confused. On the one hand, it is possible to point to price increases, particularly by Apco, Leahy and (with the exception of the early months of 1999) Chisholm, preceded by telephone calls that might have been about the prospective price increase. The ACCC sought to use Annexure B extensively in this way. On the other hand, significant parts of the data in Annexure B involving precise times of petrol price increases are inconsistent with the ACCC’s contentions. There are occasions when increases by Brumar, Mobil outlets, Caltex Quick Bite or BP Corford Express preceded increases by any of Apco, Leahy or Chisholm, thereby providing evidence that a price rise from Melbourne was finding its way into the Geelong petrol market through participants in that market whose prices were set in Melbourne. There are other occasions when it is only possible to determine the range of times during which a price increase at some Mobil outlets might have occurred, so the evidence of the flow-on of a Melbourne price increase is not so clear. Even more damaging to the ACCC’s case are the significant numbers of occasions when price increases by Apco, Leahy and Chisholm occur at times that might suggest coordination, but Annexure B contains no sign of any telephone calls that might have contained information about prospective increases. In my detailed analysis of Annexure B, I have drawn attention to the way in which price increases by Apco and Leahy, and (when information about Chisholm’s increases was available) Chisholm, fell into clear patterns, which were remarkably consistent throughout the relevant periods, whether or not there were telephone calls and whether or not the price increases by those parties were preceded by increases by other competitors. It seems clear that, although Annexure B had been available to all parties to this proceeding for some considerable time before the trial, no-one had discerned the existence of these patterns, so no attempt was made to lead any oral evidence that might have explained them. The existence of the patterns in Annexure B lends considerable support to the evidence that the petrol price cycle occurred in much the same way irrespective of the presence or absence of communications between competitors that might have concerned petrol prices.
The oral evidence
Neither the nature of the Geelong retail petrol market nor the data in Annexure B provides any form of sure foundation for the proposition that arrangements or understandings to fix the price of petrol existed between participants in the market. It is therefore necessary to examine closely the oral evidence to see whether the requisite elements for an arrangement or understanding are made out. In the absence of any allegation that any of the alleged arrangements or understandings had an express origin, the ACCC was driven to relying on evidence of courses of conduct, from which arrangements or understandings might have developed, and on the perceptions of the witnesses as to what it was they were engaged in and how communications between them affected their own behaviour.
On the question of courses of conduct, I have already pointed out in some detail that there is a considerable lack of evidence of the origins of any of the alleged arrangements or understandings. Only in relation to Arrangement No 1 is there any evidence at all. That is only to the effect that the practice of passing price information between Apco and Leahy had evolved over a number of years, as a result of many telephone conversations between Ian Carmichael and Peter Anderson.
As to the other alleged arrangements or understandings, there is no express evidence of a course of conduct from which an arrangement or understanding was said to have resulted. Graeme Chisholm and Darren Campigli gave evidence of when they began to receive telephone calls about price increases. Wayne Purtell spoke of his contact with Eino Heikkila between 1997 and early 1999, when Mr Dalton took over Mr Purtell’s position. Mr Heikkila did not specify when he began talking with Ian Carmichael or Michael Warner about prices, other than to say that it was in the mid-1990s. He did give evidence about his conversations with Mr Purtell, and with Garry Dalton. There is a complete absence of evidence about any course of conduct from which any arrangement or understanding between Leahy and United Retail might have come into existence. Gordon Primmer was not asked to give any evidence about a course of conduct from which an arrangement or understanding between Leahy and the partnership which operated BP Meredith may have come into being. In view of the limited nature of the admission made by Leahy, Mr Carmichael and Mr Warner (detailed at [883]), which is an admission of a conversation between Leahy and Primmer after BP Meredith ceased to operate as a commission agent for Leahy and became an independent retailer at the beginning of 2000, it is strange that Mr Primmer was not invited to give any evidence about the origins of Arrangement No 7. In view of Alan Shuvaly’s evidence about what passed between him and Peter Anderson a few weeks after Liberty opened its Geelong outlet, it is also surprising that the evidence is completely silent as to any course of conduct from which Arrangement No 8 might have developed.
Commitment
One curious feature of the case is that counsel for the ACCC did not ask any of its witnesses to give evidence-in-chief about one essential element of an arrangement or understanding. The judgment of the Full Court in Apco Service Stations was delivered on 17 August 2005. That was the eighth day of the trial in this case. Ian Carmichael, who was the ACCC’s first witness other than its own leading investigation officer, was still in the witness box and did not complete his evidence until part of the way through the morning of 18 August 2005. If the ACCC had been unaware of the significance of the element of commitment, or moral obligation, or obligation binding in honour only, from earlier authorities, it must have become aware from the Full Court’s judgment that it ought to give attention to that issue in this case. Even if the ACCC believed that the Full Court was wrong in Apco Service Stations (as it apparently did), it was still at risk if it did not attempt to address the issue of commitment. No application was made to reopen the evidence-in-chief of Ian Carmichael. Despite the fact that he had given evidence about the issue in cross-examination, no attempt was made to re-examine him about it. Counsel for the ACCC did not invite any witness to give evidence of his own state of mind on receiving information about a prospective price increase, as to whether he felt constrained to act on the information, or about whether he regarded the person providing the information as constrained to act on it. These subjects were left to those cross-examining.
In his cross-examination by counsel for Apco, Ian Carmichael assented readily and unequivocably to a number of propositions. Mr Carmichael did not see himself as being able to ring Peter Anderson and tell him off about Apco’s failure to increase its price. He did not think Mr Anderson was in any way obliged to move his price up. He could only give Mr Anderson information and hope that he would move. Mr Anderson was morally free not to lift his price and had a free choice. The same was true for Chisholm. Mr Carmichael volunteered that it was true for ‘all’. Leahy was free to do what it liked. In cross-examination by counsel for United Fuels and United Retail, Mr Carmichael agreed that neither Eino Heikkila nor Colin Williamson ever committed to a price-fixing arrangement. The former always gave non-responsive answers to Mr Carmichael’s calls, and the latter only answered to the effect that he would pass on the information.
In cross-examination by counsel for Apco, Michael Warner agreed that Peter Anderson was perfectly free to keep Apco’s prices down if there was a commercial necessity for him to do so. Leahy was equally free not to change its price if it chose not to change it, notwithstanding any discussion with any competitor. Mr Warner himself said that there was no commitment to effect a price rise. Leahy just passed on information about prospective price rises. He did not see himself as telling people how to set their price. He was just passing on information that he had been given as to what the market was going to do. At the time of giving evidence in this case, Mr Warner believed that he was not fixing prices.
Also in cross-examination by counsel for Apco, Graeme Chisholm said that he never felt obligated to move Chisholm’s price when he received a call. He never undertook to do anything. He regarded himself as having a total free choice as to what he would do with the information and with Chisholm prices. Nobody at Leahy ever rang him to tick him off or criticise him for not moving Chisholm’s prices up at any given time. Mr Chisholm never rang Leahy to tick them off about their prices. It did not cross his mind to do that.
Mr Shuvaly’s evidence made it clear at a number of points that he would only increase Liberty’s price at its Geelong outlet if he felt comfortable enough about the state of the market. In cross-examination by counsel for Andrianopoulos and Chris Andrianopoulos, Mr Shuvaly confirmed that he was his own man. No-one could tell him when Liberty was to change its prices, or by how much, or whether to change them at all. A decision depended on Mr Shuvaly’s judgment as to the interests of Liberty. He never attempted to persuade others to move their prices up and never agreed with any suggestion of Mr Anderson or Mr Andrianopoulos that he should do so.
Darren Campigli made it very clear in his evidence that Chisholm would not necessarily increase its prices in response to telephone calls on behalf of Leahy about prospective price increases. His three possible responses to such calls were to thank the caller, to say that Chisholm would move its prices, or to say that it would check what other competitors had done before making a decision. In evidence-in-chief, Mr Campigli volunteered that Mr Carmichael and Mr Warner never told him that he had to move Chisholm’s prices, or anything like that. He assumed that receipt of information allowed the adjustment of prices, so that the market would be similar, instead of having large price differentials. In cross-examination by counsel for Apco and Peter Anderson, Mr Campigli agreed that Chisholm made its own decisions, as a matter of its own choice, about pricing. Mr Campigli never felt obliged to change Chisholm’s prices. It was up to Chisholm to decide whether to increase its prices. Mr Carmichael and Mr Warner never told him what Chisholm had to do and he never felt obliged to raise prices just because they had telephoned. Leahy was also free to do what it liked with its pricing.
Gordon Primmer also made it clear that he did not necessarily increase his prices as a result of the receipt of information from Leahy about a prospective price rise. Sometimes he asked whether the rest of the market was up, or suggested that if a competitor at Bannockburn were to increase, then BP Meredith would also go up.
Wayne Purtell’s evidence also made it clear that Brumar would make its own decisions about price increases, based on information from a variety of sources, including that which Mr Purtell received from Mr Heikkila. Mr Heikkila’s evidence was that, when he made telephone calls to Mr Purtell, and later to Mr Dalton, his purpose was just to pass on market information. In cross-examination by counsel for Garry Dalton, Mr Heikkila said that he would not simply increase prices at the United Fuels outlets as a result of a telephone call, without spotting the board prices of competitors. Mr Dalton never agreed with Mr Heikkila about what Brumar would do with its prices. Mr Heikkila never asked him to. In Mr Heikkila’s mind, Mr Dalton remained free to do what he liked with his prices. Mr Heikkila felt that he remained free to do what he liked with his prices. His calls to Brumar were made merely in the hope that Brumar would increase its prices at some time after the call. In cross-examination by counsel for United Fuels and United Retail, Mr Heikkila confirmed that, whenever he received a call from Mr Carmichael or Mr Warner about fuel prices, he made his own inquiries.
Thus, all of the witnesses called to give evidence for the ACCC who acted on behalf of parties to the alleged arrangements or understandings confirmed to a greater or lesser degree the absence of any commitment, moral obligation, or obligation binding in honour on the part of any party to any of those arrangements or understandings. The evidence on the issue is all one way. It is not possible to dismiss it, as counsel for the ACCC attempted to do in submissions, as indicative of freedom to withdraw from, or to act inconsistently with, an arrangement or understanding on a particular occasion. The plain fact is that there was nothing by way of constraint to raise prices, felt or otherwise, from which any party had to withdraw, or with which it was necessary to act inconsistently, if prices were not increased on a particular occasion. The express evidence is overwhelmingly to the effect that an essential element of an arrangement or understanding, whether in the abstract or as pleaded, in the form of a commitment or obligation to increase prices, did not exist. The ACCC invited me to draw the inference from the circumstantial evidence that, in fact, such a commitment or obligation did exist in the case of each alleged arrangement or understanding. For numerous reasons that I have already given, the circumstantial evidence does not point to this conclusion. Even if it did, it would not do so with sufficient strength to cause me to disbelieve the oral evidence on this issue. The situation was that each party to each alleged arrangement or understanding was free to do as it wished on every occasion when information about a prospective price increase was passed to it. As I have said, an arrangement or understanding in which each party is free to do as it wishes is a creature unknown to s 45(2) of the Trade Practices Act.
This finding is fatal to the ACCC’s case. The absence of any element of commitment, or obligation, from any of the alleged arrangements or understandings must lead to the conclusion that none of those arrangements or understandings is capable of amounting to an arrangement or understanding within the meaning of s 45(2)(a) of the Trade Practices Act. None of them is capable of containing a provision for the fixing of prices.
Other issues
In relation to each of the alleged arrangements or understandings, there are additional reasons for finding that they did not exist, either at all or as pleaded by the ACCC. It is advisable that I should summarise those reasons, although I have referred to them in more detail elsewhere in these reasons for judgment.
From the data in Annexure B, it is clear that Ian Carmichael’s recollection of the timing of telephone conversations he had with Peter Anderson, and of subsequent price rises, is inaccurate. In evidence-in-chief, Mr Carmichael said that he would often receive a phone call from Mr Anderson between 2.00 and 3.00 o’clock in the afternoon, and the nominated time for the price rise would be about an hour later. In cross-examination, he said that his recollection was that most of the price increases occurred in the afternoon. He could not remember an occasion when the price rise was more than two hours after the telephone call. As my analysis of Annexure B demonstrates, afternoon price increases were unusual in the two-year period covered by Annexure B. Consistently during both the morning post-peak increase period and the midnight increase period, both Leahy and Apco increased their prices otherwise than in the afternoon. Even during the daytime increase period, not all of the increases occurred in the afternoon. The substantial majority of price increases by Leahy and Apco began well outside two hours of any telephone communication between them. In submissions, counsel for the ACCC tended to ignore Mr Carmichael’s evidence about timing, and to focus more on the evidence of Mr Warner, who said that some of the price increases were overnight. It is true that some were but, with one exception, those that were were concentrated entirely in the midnight increase period, when Leahy consistently raised its prices at about midnight. Elsewhere in his evidence, Mr Warner also spoke of the two hour period after a telephone call from Mr Anderson as being crucial in determining whether a price rise would stick. As Annexure B shows, the occasions on which price increases occurred within two hours of a call cycle were very rare.
There were other difficulties about the reliability of the evidence of Mr Carmichael and Mr Warner. On the one hand, Mr Carmichael seemed to be keen to present himself as the central figure in the process of disseminating price information in the Geelong petrol market. On the other hand, perhaps because of the clause in his leniency agreement that would have entitled the ACCC to repudiate that agreement if Mr Carmichael turned out to have been the ringleader in petrol price-fixing in Geelong, Mr Carmichael was anxious to point to Mr Anderson as the source of the information and to himself as a conduit for it to other competitors. In cross-examination, Mr Carmichael was very keen to concede that almost any proposition put to him ‘could have been’ true. A large part of his difficulty may have arisen from the fact that, when he was called to give evidence, he had no idea what the data in Annexure B showed. Had he been given the opportunity to know that that data was inconsistent with his recollection at a number of points, Mr Carmichael might have realised that his recollection was faulty, and might have been able to give evidence more helpful to the ACCC’s case. Mr Warner backed away substantially from admissions that he had made, when he adopted in cross-examination the position that all that he and Mr Carmichael had been doing was passing on information about pricing. Even leaving aside the issue of commitment, having regard to the circumstances of the Geelong petrol market and, in accordance with s 140(2)(c) of the Evidence Act, the gravity of the allegation, it would be very difficult to make a finding against Mr Anderson, on the balance of probabilities, that he was a party to an arrangement or understanding containing a provision for the fixing of the price of petrol. The evidence relating to the passing of information about intended price increases between Apco and Leahy, and about the conveying of it by Leahy to other competitors, is susceptible of the innocent explanation that it was to urge competitors to increase their prices, and perhaps to facilitate reassurance among them that the price would increase. There is insufficient substance in the evidence to warrant a refusal to accept the innocent explanation.
The ACCC’s inability to prove the existence of Arrangement No 1 must have a significant impact on the question whether I should find that the other alleged arrangements or understandings existed, because the ACCC’s conception of the case is that of a chain of arrangements or understandings. If Leahy’s telephone calls as part of the call cycles were not passing on a price and a time arranged between Leahy and Apco, but were merely passing on information about a prospective price increase, it is unlikely that any such arrangement or understanding as is alleged to have involved any party to this proceeding existed.
There are even greater problems with respect to some of the specific arrangements or understandings. Whatever might have been the case with Arrangement No 5 during Wayne Purtell’s time at Brumar (and I do not suggest that the evidence discloses that any such arrangement or understanding existed), there is no suggestion in the evidence that Garry Dalton inherited the same arrangement or understanding. Mr Dalton’s evidence that any information he received from Mr Heikkila was of no value to Brumar in making its decisions about setting prices makes it abundantly clear that there was no arrangement or understanding between United Fuels and Brumar, containing a provision for the fixing of prices. This evidence is confirmed by the fact, demonstrated by the data in Annexure B, that telephone contact between Mr Heikkila and Mr Dalton ceased in early July 1999. Mr Dalton’s evidence in this regard was not the subject of serious challenge in cross-examination on behalf of the ACCC, most of which was directed to attempting to establish that Mr Heikkila’s calls were about intended price increases by United Fuels. It was rational for Mr Dalton to regard Mr Heikkila’s information as irrelevant to Brumar’s decisions on pricing, because his view of United Fuels conforms with the other evidence about United Fuels, namely that its outlets were not high profile sites, the prices at which would be likely to impact on the rest of the market.
There is also great difficulty in finding that Arrangement No 6 existed. Apart from the improbability of an arrangement or understanding coming about from a course of conduct in a period of a little over two months, when no relevant conduct appears to have occurred, the allegation of such an arrangement or understanding is inconsistent with the evidence of Robert Riordan and Robert Hambrook. At the heart of that evidence is that Colin Williamson did not relay to Mr Riordan (or in his absence Mr Hambrook) information Mr Williamson had received from Leahy. In other words, such information was not taken into account in the setting of prices by United Retail. There is no reason not to accept the evidence of Mr Riordan and Mr Hambrook. That evidence went into detail about the manner in which Mr Riordan kept track of the prices of competitors in the Geelong petrol market, and the impact of Shell’s price support on United Retail’s decisions about pricing. It is impossible to accept that Mr Williamson was influencing decisions taken by Mr Riordan or Mr Hambrook about the setting of prices, by passing on to them information obtained from Leahy in the guise of some other information about prices in the market.
The fact that the major oil companies, particularly Caltex and Shell, operated systems of price support applicable to Chisholm, United Fuels, United Retail and Brumar is very damaging to the ACCC’s case. In particular, the evidence that a withdrawal of price support necessitated a price increase, whatever was happening in the rest of the market, coupled with the absence of any evidence as to particular dates or times of withdrawal of price support, makes it impossible to tell from Annexure B which price changes were the result of information from competitors and which were the result of decisions by the major oil companies.
The absence of specific times for price increases on the part of United Fuels, United Retail, BP Meredith, Andrianopoulos and Liberty means that there is no effective circumstantial evidence from which it can be said that a particular price rise may have been related to a particular telephone conversation.
As I have said, Leahy, Ian Carmichael and Michael Warner made only very limited admissions in relation to Arrangement No 7. What they admitted was nowhere near enough to establish the existence of an arrangement or understanding. No attempt was made to explore this issue in oral evidence. The uncertainty of what passed between Mr Carmichael and Mr Warner on the one hand and Mr Primmer on the other about prices, coupled with the absence of any price data for BP Meredith in Annexure B, makes it impossible to say that any such arrangement or understanding as is alleged between them existed.
Arrangement No 8 presents particular problems. There is an element of improbability inherent in the proposition that three agressive discounters would collaborate to fix the price of the commodity they were discounting. Only a Geelong-centric view of the world would lead to an assumption that all of the very many telephone calls between Peter Anderson, Chris Andrianopoulos and Alan Shuvaly recorded in Annexure B were concerned with Geelong. Each had responsibilities in relation to outlets in a number of other places in Victoria. Mr Shuvaly’s evidence is to the effect that they communicated often about a variety of subjects. Mr Shuvaly’s evidence is entirely inconsistent with the existence of any arrangement or understanding between Liberty, Apco and Andrianopoulos, both as to any possible origin for such an arrangement or understanding, and as to the possibility that effect was given to it. The ACCC could only point to 16 periods in the two years covered by Annexure B on which it is able to find data enabling it to contend that effect was given to Arrangement No 8. If an arrangement or understanding of the kind alleged did exist, it is difficult to see why it would have been put into effect on such a small number of occasions. There is so little evidence supporting the allegation that Arrangement No 8 existed, or that effect was ever given to it, that I am obliged to conclude that it is not reasonably open to find that Mr Anderson’s admissions, to which I have referred in [903] – [905], were made in furtherance of a common purpose with Andrianopoulos, Mr Andrianopoulos, Liberty or Mr Shuvaly, so as to make those admissions admissible in evidence against any one of those four parties.
The overall effect of the evidence in this case is that it is more probable than not that none of the arrangements or understandings alleged by the ACCC in fact existed. Not only did the evidence led by the ACCC fail to prove the existence of such arrangements or understandings, particularly the requisite element of commitment, but the preponderance of the evidence suggests that no such arrangements or understandings existed. There can be no doubt that a good deal of information about price increases was passed between competitors in the Geelong petrol market, most of it by means of telephone conversations, but this did not amount to the fixing of prices. It was more likely to have been the mere passage of such information in the hope that a general price rise could be achieved. On occasions, it amounted to urging a decision to increase a price, particularly in the case of what was designated as follow-up or complaint calls, but the fact that these were made is itself inconsistent with the existence of the alleged arrangements or understandings.
Occasional arrangements or understandings
To the extent to which the ACCC put an alternative case, to the effect that each occasion of a price rise following a communication about prices was itself a separate arrangement or understanding, the case must also fail. There are many reasons why it is impossible to say on the evidence that a price rise by any particular competitor in the Geelong petrol market on any particular occasion was the result of making an arrangement or arriving at an understanding that the rise would be made. The evidence abounds with factors that impacted on decisions to make price increases, so it is impossible to isolate one. The unavailability of data for price increases on the part of a number of competitors means that there is an absence of circumstantial evidence that would be crucial to making out the allegation. The case was never seriously put on the basis that each conversation amounted to the making of a separate arrangement or the arriving at of an understanding.
The admissions
The admissions on which the ACCC relied do not improve its situation. Those made by Leahy, Ian Carmichael and Michael Warner were quite specific in some respects. They do involve blanket admissions of the existence of understandings containing provisions for the fixing of prices, but these are admissions of conclusions from a number of different factual and legal elements, and it is unclear whether each of those elements has been admitted. In particular, there is no admission of the vital element of commitment or obligation, moral or otherwise. If the admissions were taken to amount to admissions of an understanding falling within s 45(2)(a) of the Trade Practices Act, they would be so far inconsistent with the evidence, including the evidence of Mr Carmichael and Mr Warner, that it would be necessary to decide the case without relying on them. Insofar as other respondents made formal admissions riddled with alternatives, and amounting to admissions of matters that involve both fact and law, those admissions are themselves unreliable and in conflict with the evidence, and I do not make findings in accordance with them. This includes Liberty’s deemed admission, to which I refer in [893].
The admissions made in interviews and examinations under s 155 of the Trade Practices Act do not amount to anything like significant evidence in relation to the crucial issues in the case. Peter Anderson’s admissions that he discussed petrol prices with representatives of competitors in Geelong are hardly necessary. The evidence makes it clear that a number of competitors in Geelong had such discussions. Mr Anderson’s admissions go no further than that in supporting the ACCC’s case. In particular, they do not go to the commitment issue. Alan Shuvaly’s admissions, in the statement that he signed in fulfilment of his obligation under the leniency agreement, are largely in conflict with his evidence. For the most part, in cross-examination he continued to insist that his evidence-in-chief was correct. Because his evidence was given in his own words, I regard it as more reliable than the words negotiated between his lawyers and those acting for the ACCC to satisfy that obligation. Counsel for the ACCC did persuade Mr Shuvaly in the witness box to make admissions that he had received predictive phone calls from Mr Anderson about price increases but, as I have said, this kind of evidence does not go anywhere near establishing the existence of an arrangement or understanding to fix prices.
Similarly, the issues that emerged in evidence, in relation to which the ACCC sought to rely on s 87(1)(c) of the Evidence Act, are not of great significance, particularly on the commitment issue. At best, they assist in establishing that there had been discussions about prices, a fact that is hardly contentious on the evidence. Having regard to the evidence generally, it is not reasonably open to find that arrangements or understandings existed, or that effect was given to them, so as to make the admissions of one party admissible under s 87(1)(c) against the other party or parties to that alleged arrangement or understanding.
Conclusion
Dismissing the application
My finding that none of the arrangements or understandings alleged by the ACCC existed requires that I dismiss the proceeding against the respondents who defended it. My refusal to rely on the admissions made by the respondents who consented to the case being decided against them, coupled with the finding that the alleged arrangements or understandings did not exist, also leads to the conclusion that I should not give effect to the consents. It follows that the application should be dismissed altogether.
Costs
In the normal course, costs would follow the event. The ACCC must certainly be made to pay the costs of all respondents who defended the proceeding. Issues may arise, however, in relation to the respondents who consented to the making of orders against them, which I have declined to make. So far, no party has had an opportunity to make submissions about those issues, and any other issues of costs that might arise as a result of the dismissal of the application.
Orders
The appropriate order, therefore, is to dismiss the application, to reserve the question of costs, with directions fixing a timetable for the filing and service of brief written outlines of submissions by parties who wish to raise issues of costs, and brief written outlines in response to those submissions, and fixing a date on which parties who wish to do so may make submissions about costs. If all costs issues cannot be resolved by consent before that date, it will be necessary for me to hear oral submissions on that day and to resolve outstanding costs issues.
I certify that the preceding nine hundred and sixty-seven (967) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray.
Associate:
Dated: 29 May 2007
Counsel for the applicant: M Crennan SC with S McLeish Solicitor for the applicant: Australian Government Solicitor Counsel for the first respondent: The first respondent did not appear Counsel for the second and 11th respondents: SG O’Bryan SC with DK Shirrefs Solicitor for the second and 11th respondents: Alan Williamson Counsel for the third respondent: NJ Young QC with MH O’Bryan Solicitor for the third respondent: Blake Dawson Waldron Counsel for the fourth and sixth respondents: E Szabo Solicitor for the fourth and sixth respondents: Coulter Roache Counsel for the fifth respondent: The fifth respondent did not appear Counsel for the seventh respondent: The seventh respondent did not appear Counsel for the eighth and 18th respondents: L Glick SC with R Heath Solicitor for the eighth and 18th respondents: Schetzer Brott & Appel Counsel for the ninth and 10th respondents: The ninth and 10th respondents did not appear Counsel for the 12th respondent: P Anastassiou SC with P Neskovcin Solicitor for the 12th respondent: Phillips Fox Counsel for the 13th respondent: T North SC with P Nugent Solicitor for the 13th respondent: Michael J Creelman Counsel for the 14th respondent: D Burnett Solicitor for the 14th respondent: Eric Faulkner Counsel for the 15th respondent: J Lester on 4 August 2005, SG O’Bryan SC on and after 7 September 2005 Solicitor for the 15th respondent: Davies Collison Cave Counsel for the 16th respondent: B Ross Solicitor for the 16th respondent: BJ Fennelly & Associates Counsel for the 17th respondent: R Brett QC with D Star Solicitor for the 17th respondent: Tisher Liner & Co Dates of hearing: 4-5, 9-11, 15-18, 29-31 August, 1-2, 7-8, 12-13 September, 18-19, 21, 25-28 October, 2-4 and 9-11 November 2005. Date of judgment: 29 May 2007
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