Australian Competition and Consumer Commission v SIP Australia Pty Ltd
[2000] FCA 541
•19 APRIL 2000
FEDERAL COURT OF AUSTRALIA
ACCC v SIP Australia Pty Ltd [2000] FCA 541
TRADE PRACTICES – application for leave to amend statement of claim – allegation of resale price maintenance – vertical arrangement – whether proposed vertical arrangement inconsistent with alleged horizontal agreement – arrangement in proposed amendment arose out of facts already pleaded – arrangement entered into six years previously.
Trade Practices Act 1974 (Cth): s 45, s 48, s 77(2)
Federal Court Rules: O 13 r2(7)
Trade Practices Commission v David Jones (Australia) Pty Ltd (1986) 13 FCR 446 cited
State of Queensland v Pioneer Concrete (Queensland) Pty Ltd (1999) ATPR 41‑691 citedAUSTRALIAN COMPETITION & CONSUMER COMMISSION v SIP AUSTRALIA PTY LIMITED & ORS
V 189 of 1999
GOLDBERG J
19 APRIL 2000
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 189 of 1999
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND:
SIP AUSTRALIA PTY LIMITED
(ACN 003 458 884)
First RespondentFILIPPO IPPASO
Second RespondentJOHN EDWIN GATES
Third RespondentBAKER BROS (AUST) PTY LTD
(ACN 006 977 886)
Fourth RespondentANDREW CLIVE BAKER
Fifth RespondentGUY EDWIN BAKER
Sixth RespondentJUDGE:
GOLDBERG J
DATE OF ORDER:
19 APRIL 2000
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The applicant have leave to file and serve an amended application and an amended statement of claim in the form of exhibits “MC5” and “MC6” to the affidavit of Meredith Cole sworn 27 March 2000 together with particulars of the request and persuasion referred to in paragraph 55 of the proposed amended statement of claim by 4.00pm on 3 May 2000.
2.The applicant pay any costs of the first, second and third respondents thrown away by reason of the amendments.
3.The costs of the parties of the application for leave to amend the application and statement of claim be costs in the cause.
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 189 of 1999
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND:
SIP AUSTRALIA PTY LIMITED
(ACN 003 458 884)
First RespondentFILIPPO IPPASO
Second RespondentJOHN EDWIN GATES
Third RespondentBAKER BROS (AUST) PTY LTD
(ACN 006 977 886)
Fourth RespondentANDREW CLIVE BAKER
Fifth RespondentGUY EDWIN BAKER
Sixth Respondent
JUDGE:
GOLDBERG J
DATE:
19 APRIL 2000
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
Introduction
The applicant, Australian Competition and Consumer Commission (“the Commission”), filed a notice of motion on 17 March 2000 for leave to amend its application and statement of claim. A number of the amendments are not opposed by the first, second and third respondents. The first and second respondents do, however, oppose that part of the proposed amendment which alleges a contravention of s 48 of the Trade Practices Act 1974 (Cth) (“the Act”) which relates to resale price maintenance.
The basis for the opposition requires a brief understanding of the progress of the proceeding to date. The original application and statement of claim was filed on 21 April 1999. The statement of claim alleged contraventions of s 45 of the Act by the first respondent, SIP Australia Pty Ltd (“SIP”), two of its directors, the second and third respondents, Baker Bros (Aust) Pty Ltd (“Baker Bros”), the fourth respondent, and by two of its directors, the fifth and sixth respondents. In short, the allegation was that SIP and Baker Bros entered into a market share and price-fixing agreement in March 1994 in relation to the supply and sale of compressors and compressor parts, manufactured and supplied by ABAC Area Compressa SpA (“ABAC”). The statement of claim alleged that the directors were knowingly concerned in these activities. Shortly afterwards, Baker Bros and its two directors filed a defence admitting the allegations in the statement of claim. The Commission, Baker Bros and its directors on 7 May 1999 filed joint submissions with the Court in relation to agreed facts and a consent to orders and agreed penalties. By agreed penalties, I mean penalties which the parties agreed were appropriate, it being accepted that the ultimate determination of the level of penalties was a matter for the Court.
A hearing in relation to those submissions was held on 7 May 1999 and on 25 June 1999 I published reasons for judgment where I granted injunctive relief and ordered the payment of pecuniary penalties by Baker Bros and its two directors. At that stage the only allegation in the statement of claim was of a horizontal agreement between SIP and Baker Bros which was alleged to contravene s 45 of the Act. On 30 June 1999 SIP filed and served its defence. It joined issue with the Commission on its material allegations but it also raised a number of affirmative allegations. It alleged in par 25 an agreement in March 1994 between it, Baker Bros and ABAC which was effectively for the exclusive distribution of ABAC compressors.
The defence raised an issue of exclusive dealing and alleged in pars 28 and 29:
“28.In the premises, the making of the agreement described in paragraph 25 would constitute a contravention of section 47(4) of the Trade Practices Act, but for the operation of section 47(10) of that Act.
29.In the premises, by virtue of the operation of section 45(6) of the Act, the making of the agreement described in paragraph 25 or the giving effect to that agreement does not constitute a contravention of section 45(2)(a)(i) or section 45(2)(b)(i) of the Act”.
There were other affirmative allegations, in particular relying on the joint venture exception to a price-fixing contravention found in s 45A(4) of the Act.
On 17 March 2000 the Commission filed a motion to amend the application and statement of claim. The contentious amendment was that ABAC in March 1994, by entering into what was called the March 1994 agreement, and by persuading Baker Bros to enter into it, induced or attempted to induce Baker Bros to contravene s 48 of the Act. Section 48 of the Act relates to a proscription on resale price maintenance. The Commission sought amendments to the application as well to seek declaratory and injunctive relief and penalties in relation to the claimed contravention of s 48 of the Act. There were subsequent further amendments to the proposed amended statement of claim and application. The amendments upon which argument proceeded before me were:
“Contravention of Section 48
54.Further, ABAC’s conduct in entering into and making the contract, arrangement or understanding described in paragraph 10 hereof was conduct outside Australia by ABAC in relation to the supply by ABAC of goods to persons within Australia: Baker Bros (Aust) and SIP, within the meaning of section 5(2) of the Act.
55.ABAC requested and persuaded Baker Bros (Aust) to enter into the 1994 Agreement.
56.Further, by entering into the 1994 Agreement, and by persuading Baker Bros (Aust) to enter into the 1994 Agreement, ABAC induced or attempted to induce Baker Bros (Aust) not to sell, at a price less than a price specified by ABAC, goods supplied to Baker Bros (Aust) by ABAC in contravention of section 48 of the Act.
PARTICULARS
The price specified was the ‘level of prices’ described in the 1994 Agreement.
57.Further,
(a) SIP
(b)Ippaso
sought to persuade and persuaded ABAC to induce Baker Bros (Aust) to enter into the 1994 Agreement.
PARTICULARS
The actions of SIP to persuade ABAC were partly written, partly oral and partly to be implied. Insofar as they were written they were contained in SIP’s signature (by Ippaso) to the March 1994 Agreement itself, and in letters by SIP to ABAC dated 5 January 1994, 7 February 1994, 8 March 1994 and 21 March 1994 and a facsimile of 14 March 1994, which may be inspected on reasonable notice.
Insofar as they were oral they were contained in conversations between Mr Ippaso of SIP and Dr Balma and Mr Arrigoni of ABAC on 10 December 1993, the substance of which was summarised in the letter of 5 January 1994.
Insofar as they were implied, they were to be implied from Ippaso’s action in signing the 1994 Agreement on behalf of SIP.58. SIP thereby:
(a)aided, abetted, counselled or procured ABAC to contravene section 48 of the Act as aforesaid;
(b)induced, or attempted to induce, ABAC to contravene section 48 of the Act as aforesaid;
(c)was directly or indirectly, knowingly concerned in, or party to, the contraventions by ABAC of section 48 of the Act.
59. Ippaso thereby:
(a)aided, abetted, counselled or procured ABAC to contravene section 48 of the Act as aforesaid;
(b)induced, or attempted to induce, ABAC to contravene section 48 of the Act as aforesaid;
(c)was directly or indirectly, knowingly concerned in, or party to, the contraventions by ABAC of section 48 of the Act as aforesaid.”
The matter came on for hearing urgently before Sundberg J on 23 March when, due to time constraints, it was adjourned to today and agreed and acknowledged by the first, second and third respondents that if leave was granted to make the amendments sought, such leave was to date from 23 March 2000, the reason for that being to ensure that no issue arose in relation to the provisions of s 77 of the Act which provide:
“(1)The Commission may institute a proceeding in the Court for the recovery on behalf of the Commonwealth of a pecuniary penalty referred to in section 76.
(2)A proceeding under subsection (1) may be commenced within 6 years after the contravention.”
There is some concern that as the March 1994 agreement was entered into on or about 24 March 1994, any later application for amendment may raise problems under s 77(2) of the Act. On 31 March the Commission filed affidavits by the two Baker Bros directors which set out their account of the circumstances on which the Commission relies in support of its claim for contraventions. The Commission has also given the respondents notice of certain documents upon which it relies which are particularised in the proposed amendment.
The first and second respondents oppose the amendments to raise the s 48 claim on a number of grounds:
·The Commission is bound by its initial characterisation of the conduct, which characterisation was carried through its joint submission with Baker Bros and the penalty hearing before me and through an unsuccessful mediation.
·The s 48 pleading is inconsistent with the existing pleading which alleges a contravention of s 45.
·The pleading of the s 48 claim is inadequate and ineffective and is liable to be struck out, so leave should not be granted.
·I should in any event exercise my discretion against allowing the amendment because the Commission has effectively changed its course.
·If I decide that the pleading is defective but can be cured by further amendment, I should not allow further amendment, as to do so would take the amendment outside the six year period specified in s 77(2) of the Act and although O 13 r2(7) of the Federal Court Rules is enlivened I should exercise my discretion against amendment.
It was not contended that the s 48 claim or pleading did not arise out of substantially the same facts as those already pleaded to support the Commission’s existing claims. I am satisfied that the s 48 claim as pleaded does arise out of substantially the same facts as those already pleaded in relation to the alleged s 45 contraventions.
The Commission submitted that the amendment was brought about by the defence raised by SIP and made the following submissions:
·The pleading arose out of substantially the same facts as those already alleged.
·There is no principle that one cannot allege contraventions of both s 45 and s 48 of the Act, especially where the defence raised by SIP is that s 45 does not apply to the circumstances raised because of the pleading that the conduct comes within s 47 of the Act. If the conduct does contravene s 45 and s 48 of the Act then by reason of s 45(5) of the Act s 45 will not apply and s 48 will apply.
·The respondents suffer no prejudice from the amendment.
·The pleading alleges material facts.
·Any need for particulars under any of the paragraphs proposed is removed by the filing of the affidavits by the two Baker directors on 31 March 2000 which set out in some detail the matters relied upon in support of the claim for contraventions by the Commission.
·If further amendment is required it should be allowed under O 13 r2(7) as it arises out of substantially the same facts.
As the respondents correctly submit the whole thrust and conduct of the proceeding to date has been a s 45 claim and an allegation of a horizontal agreement. But that, of itself, is no reason to disallow the amendment unless the respondents can point to some prejudice as a result of the amendment. It is true that the conduct alleged occurred just over six years ago and that the proceeding commenced just on one year ago, but that of itself does not constitute prejudice. The change from alleging an horizontal agreement to adding a vertical arrangement as well does not constitute relevant prejudice unless the respondents in some way are inhibited now in meeting that case.
The respondents did not submit that they were so inhibited. It was said that the unsuccessful mediation was conducted on the basis of a claim that there was a contravention of s 45 and that if the s 48 claim had been made a year ago a different approach might have been taken by SIP in relation to the case and the mediation. It was also said that penalties were fixed against Baker Bros and its directors on the basis of a contravention of s 45 only.
There is no reason why the mediation cannot be reinvoked if the amendment is allowed so as to have the mediation conducted against a background not only of an alleged s 45 contravention but also an alleged s 48 contravention. To that extent I do not consider that it is relevant prejudice that if the s 48 claim had been raised at such an earlier point of time it could have been dealt with or considered at the time of the mediation.
So far as the issue of the penalties fixed against Baker Bros and its directors are concerned, if ultimately a contravention of s 48 is established, the fact that Baker Bros was only penalised in relation to a s 45 claim can be taken into account by the Court fixing the penalties. How the Court might take that into account is not for me to speculate at this point of time. The only point to be made is that that is a matter that can be taken into account because it exists as an historical fact.
I do not consider that changing the characterisation of the case at this stage is sufficient reason to disallow the amendment. The Commission has not travelled so far down the road that it ought not to be allowed to change or vary its course.
I do not accept that there is such an inconsistent pleading that the s 48 claim should not be allowed to be maintained at the same time as the s 45 claim. True it is that s 45(5) provides:
“This section does not apply to or in relation to:
(c)a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding in so far as the provision relates to:
(i) conduct that contravenes section 48 …”
But that does not mean that in the circumstances of this case there may not be room for the operation of both sections. The s 45 claim relates to allegations of both market sharing and price-fixing and it was submitted by Mr Ginnane, who appeared for the Commission, that s 45(5)(c) did not affect the market share component of the allegation. That is a matter to be worked out at trial. As Fisher J said in Trade Practices Commission v David Jones (Australia) Pty Ltd (1986) 13 FCR 446 at 473 to 474:
“It is important to note that s 45(5)(c) does not refer to and exclude from s 45 an understanding which includes a provision relating to conduct contravening s 48. It merely provides that the Act does not apply to or in relation to the provision relating to such conduct. Therefore, s 45(5)(c) does not apply to exclude the understanding from s 45 but only a particular provision of the understanding.”
I turn to the claim that the pleading is defective and liable to be struck out. The respondents submitted that par 56 of the claim fails to plead material facts to support a contravention of s 48. Paragraph 56 relies on s 96 of the Act which provides:
“Subject to this Part, a corporation (in this section called ‘the supplier’) engages in the practice of resale price maintenance if that corporation does an act referred to in any of the paragraphs of subsection (3).”
Subsection (3) provides:
The acts referred to in subsections (1) and (2) are the following:
…
(b)The supplier inducing, or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier.
…”
The respondents submitted that entry into an agreement could not constitute an inducement but in my view that is a question of fact to be determined at trial depending on the nature of the evidence and the surrounding circumstances. Certainly persuasion to enter into an agreement may constitute inducement: The Heating Centre Pty Ltd v Trade Practices Commission (1986) 9 FCR 153 at 164 per Pincus J.
I agree with the respondents’ submission that it is necessary for the Commission to plead ABAC’s actions and conduct which induced Baker Bros not to sell ABAC goods at a price less than that specified by ABAC. To that extent par 55 is incomplete. It simply alleges:
“ABAC requested and persuaded Baker Bros (Aust) to enter into the 1994 agreement”.
It is then followed by par 56 which provides:
“Further, by entering into the 1994 Agreement, and by persuading Baker Bros (Aust) to enter into the 1994 Agreement, ABAC induced or attempted to induce Baker Bros (Aust) not to sell, at a price less than a price specified by ABAC, goods supplied to Baker Bros (Aust) by ABAC in contravention of section 48 of the Act.”
Then the matters relied upon as constituting a contravention of section 96(3)(b) follow. The nature, the timing and the date of the persuasion is left very much up in the air and unidentified. I consider that par 55 and consequentially par 56 are incomplete. Mr Ginnane submitted that the respondents know the case they have to meet by virtue of the affidavits of the two Baker Bros directors filed on 31 March 2000. But the respondents are entitled to know by reference to the pleading the case they have to meet: Banque Commerciale SA (In liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J. I accept that in recent times the courts have been more flexible in their approach to pleadings where it is otherwise clear what case the respondents have to meet. This issue was recently the subject of the following observation by Drummond J in State of Queensland v Pioneer Concrete (Queensland) Pty Ltd (1999) ATPR 41‑691 at 42,828:
“18. While, prima facie, the Court’s rules with respect to pleadings must be complied with, compliance is enforced by the invocation of the Court’s discretion to strike out non‑conforming pleadings. Consistently with the comments in Beech Petroleum, judges of this Court have dealt with challenges to the adequacy of pleadings in a more flexible way than would be required by a strict application of those rules. This is an approach that reflects the discretionary nature of the Court’s power to control pleadings and the objective of the Court’s case management system, provided for by O 10 r1, of achieving efficient and economical use of the resources of all the parties, as well as those of the Court. Australia Competition and Consumer Commission v Golden West Network Pty Ltd (Federal Court of Australia, 19 August 1997, unreported) provides an example. There Lockhart J said:
‘It is important that I say something about motions to strike out statements of claim in the conduct of modern litigation. Today, courts are playing an increasingly active role in case management. Motions to strike out pleadings are matters of practice and procedure. In its role of case management, courts devise various procedures to overcome deficiencies in pleadings other than by simply ordering that the offending paragraphs be struck out. Sometimes it is appropriate to strike them out, sometimes not. On some occasions it is better for the court to direct the applicant, whose statement of claim is under challenge, to furnish particulars or to file and serve affidavits to show that there really are facts which can be proved and which, if proved, would support the general statements made in the statement of claim. This is not, of course, intended to be a substitute for a defective pleading in every case because, as is well known, pleadings must assert basic or constitutive facts, not the evidence by which they are to be proved. But case management is a sensible and flexible thing. It must not be unduly circumscribed.’
19. When it is said that a pleading is so bad that it should be struck out, the outcome, in my opinion, is now to be governed not just by whether the pleading fails to comply with one or other of the rules of pleading. The Court will take into account whether the defects are of substance, ie, whether, notwithstanding any deficiencies in the pleading, the fundamental function of pleading is still served. The Court will also take into account how these objectives can best be achieved, where a pleading does not do that: striking out may be appropriate in some cases while an order for particulars or directions under O 10 r1(2), including directions of the kind referred to by Lockhart J, may be appropriate in others."
It is said by the respondents that what is missing in the pleading are the acts of persuasion by ABAC which are relied upon by the Commission. The respondents submitted that that was a matter for pleading material facts rather than particulars. In some areas the dividing line between a pleading of material facts and the provision of particulars is blurred. The allegation of “persuasion” falls into that category in my view. I consider that the complaints of the respondents will be best answered by the provision of particulars under par 55 of the proposed amended statement of claim.
To the extent that such a requirement or such a provision requires an amendment outside the period specified in s 77(2) of the Act, that is more than six years after the contravention, I would exercise the discretion given to me pursuant to O 13 r2(7) of the Federal Court Rules. I can see no prejudice to the respondents in allowing or requiring the provision of such particulars.
The final submission of the respondents to which I should direct attention is that they submitted that as an overall exercise of discretion I should not allow the proposed amendment. The respondents submitted that there were public interest considerations in having a situation where the Commission, when seeking penalties under the Act, should plead its case early on, particularly when a choice as to characterisation of conduct is required. In this case the choice was between s 45 and s 48 of the Act.
I accept the proposition that it is important that the Commission, in such penalty cases, finalise its pleading as early as possible to enable the respondents to prepare their case, to gather their evidence and to consider the manner in which they wish to conduct their defence. What that means is that any amendments should be allowed in sufficient time to enable the respondents to prepare their case properly to that extent. It is not suggested that at this point of time the amendment is such that it will not allow the respondents to prepare their case properly or adequately.
Although it was submitted by the respondents that a lot of matters had occurred since the commencement of the action, that is, the acceptance of the allegations by the Baker Bros respondents, and the conduct of a mediation, I do not consider that the Commission is so far down the track that it ought not to be allowed, as a matter of public interest, to seek and make the amendments it now seeks to make. It was also submitted that the Commission should plead a consistent pleading as a matter of public interest and I accept that that is so. But for the reasons to which I have already referred, I am satisfied that the pleading ought to be allowed to go forward on the basis proposed.
I do not consider there has been that amount of delay in relation to the proposed amendments coming forward that I should disallow the amendments for those reasons. Ultimately the matter by which I have to determine whether or not the amendments should be allowed, is not only the interests of justice but the particular interests of firstly, enabling the Commission to put forward the whole of the case it wishes to put forward and secondly, ensuring that I am not putting the respondents into a position where they are prejudiced by anything which has hitherto occurred or prejudiced in the future conduct of their case.
I am satisfied that the respondents will not suffer any prejudice if the amendments are allowed, and I would therefore propose to give the Commission leave to file and serve an amended application and an amended statement of claim in the form submitted to me and being exhibits MC5 and MC6 to the affidavit of Meredith Cole sworn 27 March 2000 and that such amended statement of claim provide particulars of the request and persuasion referred to in par 55 and that such amended application and statement of claim be filed and served by 4.00 pm on 3 May 2000.
I certify that the preceding twenty‑four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.
Associate:
Dated: April 2000
Counsel for the applicant: Mr T J Ginnane Solicitor for the applicant: Australian Government Solicitor Counsel for the first and second respondents: Mr J Lockhart Solicitor for the first and second respondents: Blake Dawson Waldron Date of Hearing: 19 April 2000 Date of Judgment: 19 April 2000
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