Australian Competition & Consumer Commission v Jaycee Rectification & Building Services
[1996] FCA 824
•30 SEPTEMBER 1996
CATCHWORDS
TRADE PRACTICES - action for civil penalties for contravention of Part IV of the TPA - price fixing in water-proofing service in Sydney metropolitan area - joint submission on penalties by Commission and respondents - respondents co-operation with Commission - not binding on Court - whether the same should be accepted by Court
Trade Practices Act 1974 (Cth)
Trade Practices Commission v Hymix Industries Pty Limited (1995) ATPR 41-369
Trade Practices Commission v Allied Mills Industries Pty Limited (No4) (1981) 37 ALR 256
Trade Practices Commission v Axive Pty Ltd (1994) ATPR 41-368 Trade Practices Commission v TNT Australia Pty Ltd (1994) ATPR 41-296
ACCC v NW Frozen Foods Pty Ltd (unreported; 7 August 1996)
No NG 526 of 1996
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
- and -
JAYCEE RECTIFICATION AND BUILDING SERVICES PTY LTD
(ACN 003 418 081)
First Respondent
- and -
JOAQUIN CIGANDA
Second Respondent
- and -
ANTHONY JULIAN LODGE
Third Respondent
O'Loughlin J
Adelaide (heard in Sydney)
30 September 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 526 of 1996
)
GENERAL DIVISION )
BETWEEN:
AUSTRALIAN COMPETITION AND
CONSUMER COMMISSION
Applicant
- and -
JAYCEE RECTIFICATION AND BUILDING
SERVICES PTY LTD
(ACN 003 418 081)
First Respondent
- and -
JOAQUIN CIGANDA
Second Respondent
- and -
ANTHONY JULIAN LODGE
Third Respondent
Coram: O'Loughlin J
Place: Adelaide (heard in Sydney)
Date: 30 September 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
The First Respondent Jaycee Rectification and Building Services Pty Ltd pay a pecuniary penalty in the amount of $10,000.00.
The Second Respondent Joaquin Ciganda pay a pecuniary penalty in the amount of $5,000.00.
The Third Respondent Anthony Julian Lodge pay a pecuniary penalty in the amount of $10,000.00.
The First Respondent be restrained and an injunction is hereby granted restraining the first respondent, whether by itself, its servants, agents or otherwise, from making an arrangement or arriving at an understanding or a giving effect to an arrangement or understanding:-
(1)that has the purpose of presenting, restricting, or limiting the supply or acquisition of water-proofing services to or by particular persons; or
(2)that either fixes, controls, or maintains the price of water-proofing services to or by particular persons.
The Second Respondent and the Third Respondent and each of them be restrained and an injunction is hereby granted restraining them and each of the, whether by themselves, their servants, agents or otherwise, from aiding or abetting or counselling or procuring or inducing or being a party to or being directly or indirectly knowingly concerned in the making of an arrangement or in the arrival at an understanding or the giving effect to an arrangement or understanding with a person with whom they or either of them are competitive:-
(1)that has the purpose of presenting, restricting, or limiting the supply or acquisition of water-proofing services to or by particular persons; or
(2)that either fixes, controls, or maintains the price of water-proofing services to or by particular persons.
The First Respondent be restrained and an injunction is hereby granted restraining the First Respondent from engaging in conduct whereby it gives false quotations in the name of a fictitious or existing corporation or falsely represents that quotations given by it are given independently and without knowledge or agreement of the Third Respondent.
The Second Respondent and Third Respondent be restrained and an injunction is hereby granted restraining them and each of them from aiding or abetting or counselling or procuring or inducing or being a party to or being directly or indirectly knowingly concerned in the making or the giving of false quotations in the name of a fictitious corporation or falsely representing that quotations given by a corporation are given independently and without the knowledge or agreement of the Second and Third Respondents or either of them.
The Commission tax its costs in default of agreement and that one half thereof be paid jointly and severally by the first respondent and second respondent and that one half thereof be paid by the third respondent.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 526 of 1996
)
GENERAL DIVISION )
BETWEEN:
AUSTRALIAN COMPETITION AND
CONSUMER COMMISSION
Applicant
- and -
JAYCEE RECTIFICATION AND BUILDING
SERVICES PTY LTD
(ACN 003 418 081)
First Respondent
- and -
JOAQUIN CIGANDA
Second Respondent
- and -
ANTHONY JULIAN LODGE
Third Respondent
Coram: O'Loughlin J
Place: Adelaide (heard in Sydney)
Date: 30 September 1996
REASONS FOR JUDGMENT
In these civil proceedings the Australian Competition and Consumer Commission ("the Commission") has sought various declarations, injunctive orders, pecuniary penalties and costs against the respondents.
It has been alleged against the first respondent, Jaycee Rectification and Building Services Pty Ltd ("Jaycee"), that it has, over a period of time, made arrangements or arrived at understandings and given effect to those arrangements or understandings in breach of the provisions of sub-pars
45(2)(a)(i) and (ii) and 45(2)(b)(i) and (ii) and sub-s 45A(1) of the Trade Practices Act 1974 (Cth) ("the TPA"). The provisions of s45, so far as they are material to this case, are as follows:-
"45(2) A corporation shall not:
(a)make a contract or arrangement, or arrive at an understanding, if:
(i)the proposed contract, arrangement or understanding contains an exclusionary provision; or
(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:
(i)is an exclusionary provision; or
(ii)has the purpose, or has or is likely to have the effect, of substantially lessening competition."
Sub-section 45A(1) states:-
"45A(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."
Jaycee has admitted to conduct constituting a breach of these sections. Jaycee has also admitted that it gave false quotations in the name of fictitious corporations and that such conduct constituted contraventions of s52 of the TPA. That section states (inter alia) that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
The allegations against the second and third respondents, Joaquin Ciganda and Anthony Julian Lodge, are that they aided or abetted or counselled or procured or induced or were a party to or were directly or indirectly knowingly concerned in each of Jaycee's contraventions. Both of them have admitted those allegations.
Sections 45 and 45A form part of Part IV of the TPA while s52 is found in Part V. Section 76 empowers the Court to order the payment of pecuniary penalties for contraventions of Part IV and s77 authorises the Minister or the Commission to institute proceedings in this Court for their recovery. Proceedings for breaches of Part IV of the TPA are civil proceedings. Section 78 states that criminal proceedings do not lie against a person merely because that person breached or was involved in a breach of Part IV. Section 79, on the other hand, provides that a person who contravenes most of the provisions of Part V of the TPA is guilty of an offence; but s52 is one provision of Part V that is not covered by s79. The Commission is entitled to sue for the recovery of pecuniary penalties against all respondents for admitted breaches of provisions of Part IV. However, the Commission has not sought, and cannot obtain, an order for pecuniary penalties with respect to admitted breaches of Part V of the TPA. The position is different with respect to the power of the Court to order injunctive relief pursuant to the provisions of s80 of the TPA. Such a power exists where the Court is satisfied that a person has engaged in or has otherwise been involved with a contravention of a provision of either Part IV, Part IVA or Part V of the TPA.
The respondents have co-operated with the Commission from the commencement of its inquiries and the Court has been asked, based on joint written submissions, to make orders and to fix penalties by consent. In par 14 of its application the Commission seeks an order that each of the respondents pay pecuniary penalties pursuant to s76 of the TPA in the following amounts:-
Jaycee $10,000.00
Mr Ciganda $ 5,000.00
Mr Lodge $10,000.00
The following findings of fact have been extrapolated from the joint submissions of the parties.
At all relevant times, Mr Ciganda was the Managing Director and "alter ego" of the first respondent, Jaycee. Jaycee and the third respondent, Mr Lodge, are both engaged in the business of providing a water-proofing service to buildings. They are in competition with each other and with third parties in the Sydney market for the supply of those services. Both are relatively small businesses: Jaycee employs up to four or five people and has a turnover of about $650,000.00 per year, whilst Mr Lodge employs a maximum of three people with a turnover of about $350,000.00 per annum. Their estimated net returns from the businesses are $40,000.00 and $30,000.00 per annum respectively.
I find that during the period 1991 to 1995 the respondents were parties to arrangements or understandings whereby, from time to time, they would take steps (including refraining from competing on prices) to ensure that customers of one of the parties would not be solicited or attracted away from that party by the other. I find that, from time to time, during this period the respondents engaged in the practice of submitting separate quotations to customers so that, by arrangement, one of the parties would deliberately quote at a higher price than the other. I find that the parties engaged in the practice of speaking with each other, either in person or by telephone, prior to tendering for contracts and that they would arrive at an understanding or make an arrangement as to the respective amounts of their tenders. I also find that, at times Mr Ciganda and Mr Lodge would arrange to make a bid for a particular contract in the name of a fictitious company. On such occasions, the different quotes would be previously agreed between Mr Ciganda and Mr Lodge. No customer was ever aware of these arrangements.
At times, in the period from 1991 to 1995, Mr Ciganda would arrange for both Jaycee's quotation and Mr Lodge's quotation to be typed at his business premises. Mr Ciganda had Mr Lodge's letterhead in his possession, which he kept at the premises of Jaycee. Mr Ciganda would quote a price based on previous discussions with Mr Lodge in which either they had decided the specific amount each would quote for a job or they had decided who between them would quote the lower amount. Mr Ciganda would then fax to Mr Lodge the quotation either for his information where the specific price had been agreed, or for his approval where a specific price had not been agreed. Mr Lodge would, thereafter, call Mr Ciganda to confirm receipt of the quotation and, when relevant, to approve the specific price quoted on his behalf. The quotation would then be forwarded to the customer. The customer was not aware of the arrangement or understanding. Mr Lodge also kept Jaycee's letterhead at his premises and, by prior arrangement with Mr Ciganda, would draft quotations on behalf of Jaycee in the same way.
Despite the blatant nature of their conduct, the Commission has accepted, and I therefore feel compelled, for the purposes of these reasons, to accept that the respondents were not aware that their conduct constituted breaches of the provisions of the TPA. I have come to that conclusion because I have proceeded upon the premise that the Commission has comprehensively investigated this matter and has fully and adequately tested the respondents' protestations of ignorance. In those circumstances it would not be appropriate for the Court to question, without cause, the due performance of a public authority's duties. On the contrary, the Court is entitled to proceed with confidence in the knowledge that the Commission would not accept an explanation or a proposition without first examining and testing it. That important finding has a material and beneficial effect in lowering the penalties that would otherwise have been imposed on the respondents.
The parties acknowledge that it is for the Court to determine, not only whether contraventions have occurred, but also the quantum and nature of any penalty and the nature of other relief; Trade Practices Commission v Hymix Industries Pty Limited (1995) ATPR 41-369 at p40,102 per Lockhart J. The material before the Court has proved that there were breaches as particularised in the application and the question that remains is whether the Court should accept the agreements that have been struck by the parties on the issues of penalty. As
to this, Sheppard J said in Trade Practices Commission v Allied Mills Industries Pty Limited (No4) (1981) 37 ALR 256 at 259:-
"It is, of course, true that the penalty has been suggested to me by the agreement of the parties. Uninformed of their agreement, I may have selected a different figure, but I am satisfied that it would not have been very different from theirs. There is from time to time, amongst members of the profession and amongst the public, discussion concerning plea bargaining. Sometimes it is suggested that it involves disreputable conduct. It is my opinion that that is so if it at all implicates the court in private discussions as to what the court's attitude will or would be likely to be if a particular course is taken. In this case nothing of that kind has occurred. The parties have made their own agreement and put it to the court for approval, not knowing what its attitude was likely to be. That was the course adopted, perhaps in a less positive way, in a customs prosecution heard in the original jurisdiction of the High Court: Chip (Minister for Customs) v Campbell Beaumont Trading Pty Ltd (22 December 1969, unreported). The court there accepted the parties' view of the matter. This, of course, is not a criminal case; the liability is civil only. But, even in the most serious criminal cases, it is not unusual for the prosecution to accept a plea to a lesser charge, subject always to the approval of the court. I have said what I have only to explain that the course which the parties have adopted is both proper and not uncommon, even though perhaps novel in the comparatively new field of trade practices."
Lockhart J quoted this passage and expressed his agreement with it in Trade Practices Commission v Hymix Industries (supra), noting that the same approach has been followed by Sheppard J in the later case of Trade Practices Commission v Axive Pty Ltd (1994) ATPR 41-368 and by Burchett J in Trade Practices Commission v TNT Australia Pty Ltd (1994) ATPR 41-296. I also respectfully adopt it. More recently Heerey J has followed this line of authority in ACCC v NW Frozen Foods Pty Ltd (unreported; 7 August 1996). It is worthy of note
that in that case his Honour came to the conclusion that one of the proposed penalties was inadequate.
In a document entitled "Joint Submissions on Penalty" the parties identified ten occasions when collusive or false bidding took place. I do not consider that it is necessary to set out the detail of these transactions. Rather it will be sufficient to make a few general observations. Within the trade, the respondents are known as "Applicators". Applicators obtain their work from various sources including referrals from manufacturers of water-proofing membrane. One such manufacturer supplied most of the materials required by the respondents in their work and that manufacturer was in the habit of recommending the respondents to any inquirer.
It seems clear that the respondents are relatively small operators and that their offending conduct would have had minimal effect in the market. They are but two of some 20 or 30 Applicators in the Sydney Metropolitan area and their net return does not suggest a significant part of a market. Furthermore, the nature and extent of their offending is not that great when considered in context. The ten reported incidents occurred over a period of five years. In one case, neither party's quotation was accepted and on other occasions the submissions are silent on whether either party was a successful tenderer. The existence of third parties who were also involved in the tender process is another factor that favours the respondents. The respondents did not control a market; they did not have the power to force increased prices on the public. Indeed, one is left wondering how any financial benefit might have been gained as a result of their conduct and whether there was any loss or damage caused to their customers.
To their credit, the respondents have co-operated with the Commission; there is no suggestion that either has ever engaged in this sort of practise before and their financial circumstances suggest that the agreed fines (although small when compared to the maximum permissible fines) will impose some financial hardship on the respondents. In view of the fact that Mr Ciganda is, in effect, a sole trader who uses a corporate structure for his business, I questioned why, in totality, he and Jaycee should be fined $5,000.00 more than Mr Lodge. I was informed that this reflected his dominant role in the offending conduct. I accept that explanation.
The penalties in these proceedings should be recognised as being very low because of the unusual features in the case. Those features are, predominantly, the acceptance by the Commission, as result of appropriate inquiries that the respondents were unaware that they were breaching the TPA and the absence of evidence that would suggest financial loss or damage to a customer. In those circumstances I see no need to do more than impose the pecuniary penalties as agreed between the parties and to make appropriate injunctive orders.
The Court orders that each of the respondents pay pecuniary penalties in the following amounts:-
The First Respondent Jaycee Rectification
and Building Services Pty Ltd $10,000.00
The Second Respondent Joaquin Ciganda $ 5,000.00
The Third Respondent Anthony Julian Lodge $10,000.00
The Court further orders that the first respondent be restrained and an injunction is hereby granted restraining the first respondent, whether by itself, its servants, agents or otherwise, from making an arrangement or arriving at an understanding or a giving effect to an arrangement or understanding:-
(1)that has the purpose of presenting, restricting, or limiting the supply or acquisition of water-proofing services to or by particular persons; or
(2)that either fixes, controls, or maintains the price of water-proofing services to or by particular persons.
The Court further orders that the second respondent and the third respondent and each of them be restrained and an injunction is hereby granted restraining them and each of them, whether by themselves, their servants, agents or otherwise, from aiding or abetting or counselling or procuring or inducing or being a party to or being directly or indirectly knowingly concerned in the making of an arrangement or in the arrival at an understanding or the giving effect to
an arrangement or understanding with a person with whom they or either of them are competitive:
(1)that has the purpose of presenting, restricting, or limiting the supply or acquisition of water-proofing services to or by particular persons; or
(2)that either fixes, controls, or maintains the price of water-proofing services to or by particular persons.
The Court further orders that the first respondent be restrained and an injunction is hereby granted restraining the first respondent from engaging in conduct whereby it gives false quotations in the name of a fictitious or existing corporation or falsely represents that quotations given by it are given independently and without knowledge or agreement of the third respondent.
The Court further orders that the second respondent and third respondent be restrained and an injunction is hereby granted restraining them and each of them from aiding or abetting or counselling or procuring or inducing or being a party to or being directly or indirectly knowingly concerned in the making or the giving of false quotations in the name of a fictitious corporation or falsely representing that quotations given by a corporation are given independently and without the knowledge or agreement of the Second and Third Respondents or either of them.
If the within named Jaycee Rectification and Building Services Pty Ltd does not comply with these orders or any one or more of them, its assets may be seized and its directors or other officers may be liable to be imprisoned or otherwise dealt with for contempt of Court. If the within named Joaquin Ciganda and Anthony Julian Lodge or one or other of them does not comply with these orders or any one or more of them, his assets may be seized and he may be liable to be imprisoned or otherwise dealt with for contempt of Court.
Finally, there remains the question of costs. In my opinion they should be shared equally between Jaycee and Mr Ciganda on the one hand and Mr Lodge on the other. Hence the order will be that the Commission is to tax its costs in default of agreement and that one half thereof be paid jointly and severally by the first respondent and second respondent and that one half thereof be paid by the third respondent.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice O'Loughlin.
Associate:
Date:
Counsel for the applicant : Mr M Bezzi
Solicitor for the applicant : Australian Government
Solicitor
On the hearing of these proceedings
the respondents were represented by
solicitors
Solicitor for the first respondent
and second respondent : Mr K Tapsell of
Watkins, Tapsell and
Nolan
Solicitor for the third respondent : Mr R Leacock of
Leacock and Massey
Date of Hearing : 13 August 1996
1
4
0