BlueScope Steel Limited v Australian Competition and Consumer Commission
[2025] FCAFC 118
•29 August 2025
FEDERAL COURT OF AUSTRALIA
BlueScope Steel Limited v Australian Competition and Consumer Commission [2025] FCAFC 118
Appeal from: Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475; Australian Competition and Consumer Commission v BlueScope Steel Limited (No 6) [2023] FCA 1029 File numbers: VID 775 of 2023
VID 838 of 2023Judgment of: WIGNEY, BROMWICH AND HALLEY JJ Date of judgment: 29 August 2025 Catchwords: COMPETITION – appeals from orders made as to liability for attempts to induce a corporation to arrive at an understanding containing a cartel provision, contravening ss 445ZZRJ and s 76(1)(d) of the Competition and Consumer Act 2010 (Cth) (the Act) – where primary judge found appellants attempted to induce nine counterparties to arrive at an understanding – where understandings found to contain a provision relating to a base or floor price for flat steel products, or implementing a price increase for those products – where appellants alleged they had not sought commitments to course of action from counterparties – whether commitment necessary for an understanding or an attempt to induce an understanding – where appellant claimed no intention to induce an understanding – whether primary judge erred in identifying relevant intention – where appellants claimed that inducements identified by primary judge were based on conduct which had already occurred – whether the primary judge erred in finding that the appellants intended to attempt to induce understandings containing cartel provisions – whether the primary judge erred in finding attempts to induce understandings within the meaning of s 44ZZRJ of the Act – whether the primary judge erred in concluding that the appellants’ conduct was capable of assent and/or immediately connected, or proximate, to an attempt to induce an understanding – whether the respondent was precluded by s 77(2) of the Act from seeking a pecuniary penalty in respect of the first appellant – whether the Court has the power to make a non-indemnification order – appeals dismissed Legislation: Competition and Consumer Act 2010 (Cth) Part IV, ss 45AD, 45AJ, 45E, 76, 77, 77A, 155
Corporations Act 2001 (Cth) ss 199A, 199B
Fair Work Act 2009 (Cth) ss 545, 546
Trade Practices Act 1974 (Cth) (repealed) ss 45, 45A, 75B(b)
Trade Practices Legislation Amendment Act (No 1) 2006 (Cth)
Restrictive Trade Practices Act 1956 (UK) (repealed) ss 6, 45
Commerce Act 1986 (NZ)
Explanatory Memorandum, Trade Practices Legislation Amendment Bill (No 1) (2005) (Cth)
Cases cited: Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission [2005] FCAFC 161; 159 FCR 452
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; 262 CLR 157
Australian Competition and Consumer Commission v Australian Egg Corporation Ltd [2017] FCAFC 152; 254 FCR 311
Australian Competition and Consumer Commission v Australian Egg Corporation Ltd [2016] FCA 69; 337 ALR 573
Australian Competition and Consumer Commission v BlueScope Steel Limited (No 2) [2020] FCA 625
Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475
Australian Competition and Consumer Commission v BlueScope Steel Limited (No 6) [2023] FCA 1029
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954; 92 FCR 375
Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2019] FCAFC 83
Australian Competition and Consumer Commission v J Hutchinson Pty Ltd [2025] HCA 10; 422 ALR 236
Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 794; 160 FCR 321
Australian Competition and Consumer Commission v Olex Australia Proprietary Limited [2017] FCA 222
Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd [2016] FCAFC 42; 244 FCR 190
Australian Competition and Consumer Commission v SIP Australia Pty Ltd [2002] FCA 824; ATPR 41-877
Baini v The Queen [2012] HCA 59; 246 CLR 469
Bond v The Queen (1992) 62 A Crim R 383
Bradford Old Bank Ltd v Sutcliffe [1918] 2 KB 833
Central Electricity Board v Halifax Corporation [1963] AC 785
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482
Country Care Group Pty Ltd v Commonwealth Director of Public Prosecutions [2020] FCAFC 30; 275 FCR 342
CVRZ v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCAFC 205
Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 72; 9 FCR 153
Khalil v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] FCAFC 26
L Grollo & Co Pty Ltd v Nu-Statt Decorating Pty Ltd [1978] FCA 33; 34 FLR 81
Morphett Arms Hotel Pty Ltd v Trade Practices Commission [1980] FCA 46; 30 ALR 88
R v Moussad [1999] NSWCCA 337; 152 FLR 373
Re Austin Motor Co Ltd’s Agreements [1958] Ch 61
Re British Basic Slag Ltd’s Agreements [1962] 3 All ER 247
Re British Basic Slag Ltd’s Agreements [1963] 2 All ER 807
Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213; 118 FCR 236
Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53
Top Performance Motors Pty Ltd v Ira Berk (1975) 5 ALR 465; 24 FLR 286
Trade Practices Commission v Email Ltd [1980] FCA 86; 31 ALR 53
Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) [1979] FCA 96; 40 FLR 83
Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 545; 7 FCR 534
Trade Practices Commission v Service Station Association Limited (1992) 109 ALR 465
Trade Practices Commission v Service Station AssociationLtd [1993] FCA 582; 44 FCR 206
Trade Practices Commission v Tubemakers of Australia Ltd (1983) 47 ALR 719; 76 FLR 455
VUAX v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 158; 238 FCR 588
Yorke v Lucas [1985] HCA 65; 158 CLR 661
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 568 Date of hearing: 26 – 29 August 2024 Counsel for BlueScope Steel Limited: Mr M Borsky KC, Mr A Barraclough and Mr P Annabell Solicitor for the BlueScope Steel Limited: Gilbert + Tobin Counsel for Jason Thomas Ellis: Dr R Higgins SC, Mr C Bannan Solicitor for Jason Thomas Ellis: Norton Rose Fulbright Counsel for the Respondent: Mr M Hodge KC, Mr J Clark, Ms S Chordia, Ms S Andrews Solicitor for the Respondent: Australian Government Solicitor ORDERS
VID 775 of 2023
BETWEEN: BLUESCOPE STEEL LIMITED
Appellant
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
First Respondent
JASON THOMAS ELLIS
Second Respondent
ORDER MADE BY:
WIGNEY, BROMWICH AND HALLEY JJ
DATE OF ORDER:
29 AUGUST 2025
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the costs of the first respondent, as agreed or taxed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
VID 838 of 2023 BETWEEN: JASON THOMAS ELLIS
Appellant
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
First Respondent
BLUESCOPE STEEL LIMITED
Second Respondent
ORDER MADE BY:
WIGNEY, BROMWICH AND HALLEY JJ
DATE OF ORDER:
29 AUGUST 2025
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the costs of the first respondent, as agreed or taxed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
INTRODUCTION
[1]
Overview
[1]
The relevant cartel proscription
[12]
The context for the contraventions found to have taken place
[15]
The flat steel market
[15]
Flat steel production
[18]
Market participants
[21]
BlueScope and its related entities
[21]
BlueScope Australia & New Zealand (BANZ)
[22]
BlueScope Coated Industrial Products (CIPA)
[24]
BlueScope Distribution
[31]
New Zealand Steel Limited (NZ Steel) and New Zealand Steel (Australia) Pty Ltd (NZSA)
[32]
BSL Thailand
[34]
Distributors
[35]
Import traders
[37]
Overseas mills
[39]
The impugned conduct
[41]
The benchmarking strategy for the distributors (seven contraventions found)
[41]
The Wright Steel understanding
[56]
The overseas mill strategy (Yieh Phui understanding)
[57]
The primary judge’s ultimate liability conclusions
[59]
The attempts to induce understandings with distributors
[60]
The attempt to induce the Wright Steel understanding
[67]
The attempt to induce the Yieh Phui understanding
[69]
THE GROUNDS OF APPEAL
[71]
Summary
[71]
BlueScope ground 1 and Ellis ground 1: the elements required to be established for an understanding
[72]
BlueScope grounds 2-4: intention required to be established/most probable inferences
[73]
Ellis ground 3: proof of an inducement
[74]
BlueScope ground 5, Ellis grounds 2, 4-6: benchmarking/sufficiently proximate conduct
[75]
BlueScope ground 6: limitation period for the OneSteel attempt
[77]
Ellis ground 8: non-indemnification order under s 76 of the Act
[78]
The ACCC’s stance
[79]
BlueScope ground 1 and Ellis ground 1: the elements required to be established for an understanding
[80]
The elements of an attempt to induce
[89]
The primary judge’s findings and the appellants’ challenge
[95]
The relevant authorities
[120]
British Basic Slag
[125]
Top Performance Motors
[144]
TPC v Nicholas Enterprises
[149]
TPC v Email Ltd; TPC v Service Station Association
[154]
ACCC v CC (NSW)
[165]
ACCC v Leahy Petroleum
[178]
ACCC v Egg Corp
[180]
ACCC v Hutchinson
[185]
Consideration and conclusions
[193]
A postscript on adducing exculpatory evidence
[201]
BlueScope grounds 2-4: intention required to be established/most probable inferences
[208]
Applicable principles and nature of the dispute
[209]
Overview of the primary judge’s findings
[223]
Second matter – Managerial investment in the RRP strategy: LJ [1439]
[232]
First matter – Financial pressures: LJ [1438]
[243]
Third and fourth matters – “recommended resale prices” were not based on usual commercial considerations: LJ [1440]-[1441]
[245]
Fifth matter – The Melbourne airport meeting: LJ [1442]
[248]
Sixth matter – Promotion to a large number of distributors: LJ [1443]
[256]
Seventh matter – Mr Ellis’ statements at the Wright Steel dinner: LJ [1444]
[262]
Eighth matter – Mr Unicomb’s email: LJ [1445]
[268]
Ninth matter – Creation and distribution of the December 2013 Benchmark spreadsheet: LJ [1446]
[273]
Tenth matter – Conversations between CIPA representatives and distributors: LJ [1447]
[279]
Eleventh matter – Complaints that distributors were not pricing in accordance with the CIPA price lists: LJ [1448]
[283]
Twelfth matter – Inducements to distributors: LJ [1449]
[288]
Thirteenth matter – Increase to NZSA’s pricing: LJ [1450]
[290]
Fourteenth matter – Internal CIPA reporting: LJ [1451]
[299]
Fifteenth matter – Meeting between Mr Ellis and Yieh Phui representatives in Taiwan: LJ [1452]
[301]
Sixteenth matter – Presentation Mr Ellis gave to Mr Vasella: LJ[1453]
[306]
Conclusion following the 16 matters
[309]
Conclusion on BlueScope’s grounds 2 to 4
[311]
Ellis ground 3: proof of inducements
[312]
Overview of the appeal point
[312]
What is it to induce or attempt to induce?
[314]
The general circumstances in this case
[325]
(1) and (2) in the table at [329] above: CIPA would tighten tactical pricing and increase pricing to BlueScope distributor subsidiaries
[331]
(3) in the table at [329] above: NZSA would increase its pricing
[349]
(4) in the table at [329] above: The benchmarking strategy was being promoted to other distributors in the market
[353]
(5) in the table at [329] above: Transactional account
[357]
Conclusion on Mr Ellis’ ground 3
[358]
BlueScope ground 5, Ellis grounds 2, 4-6: benchmarking/sufficiently proximate conduct
[359]
Overview of the primary judge’s findings
[360]
Ellis ground 4: Floor or minimum price finding
[370]
Overview
[370]
Did the ACCC advance a case that the recommended resale price was a floor or minimum price?
[374]
Distinction between benchmark and floor price or minimum price
[388]
Could the recommended resale price operate as a floor price or minimum?
[391]
Was a floor price or minimum price supported by findings or evidence?
[401]
Ellis ground 2: Capability of acting as an understanding for the purposes of s 44ZZRJ
[423]
Overview
[423]
Can there be an understanding without strict adherence to a base or floor price?
[428]
Wright Steel and Yieh Phui understandings
[444]
Ellis ground 5: Capable of assent
[465]
Ellis ground 6: Conduct not sufficiently proximate
[477]
Overview
[477]
Distributors
[478]
Yieh Phui
[481]
BlueScope ground 6: was the ACCC precluded by s 77(2) of the Act from seeking a pecuniary penalty in respect of the OneSteel contravention?
[494]
Ellis ground 8: does the Court have the power to make a non-indemnification order?
[531]
DISPOSITION
[568]
THE COURT:
INTRODUCTION
Overview
These are appeals from findings of liability and aspects of the imposition of penalty by a judge of this Court. His Honour found proven, and sanctioned, attempts to induce multiple concurrent price fixing cartels in the flat steel products industry in Australia, as alleged by the Australian Competition and Consumer Commission (ACCC). The liability judgment (LJ) is ACCC v BlueScope Steel Limited (No 5) [2022] FCA 1475. The penalty judgment (PJ) is ACCC v BlueScope Steel Limited (No 6) [2023] FCA 1029. The appellants were the respondents in the primary proceedings, BlueScope Steel Limited and Mr Jason Thomas Ellis.
BlueScope was, during the period of the attempts, the dominant player in the Australian flat steel market and the only domestic manufacturer of flat steel products. Mr Ellis was, at the relevant times, General Manager of Sales and Marketing for BlueScope’s Coated Industrial Products Australia (CIPA) division. BlueScope, through CIPA, sold the flat steel products it manufactured to distributors to on-sell to end-users, with or without further processing. BlueScope faced competition at that level of the market from some foreign manufacturers and the import traders that imported similar products. Primarily through its subsidiaries, BlueScope also sold directly to end-users, facing competition at that level of the market from other distributors.
The primary judge found that both BlueScope and Mr Ellis had attempted to induce seven distributors of flat steel products, one joint venture importer of flat steel products, and one overseas flat steel mill, to contravene s 44ZZRJ of the Competition and Consumer Act 2010 (Cth) (the Act) by arriving at understandings each containing a cartel provision, as defined in s 44ZZRD(1) of the Act. All legislative references in these reasons are to the Act unless the contrary is indicated.
Mr Ellis joined CIPA in September 2013. That was a difficult time for the Australian flat steel market. Falling demand caused by the global financial crisis and the increase in overseas flat steel mills led to oversupply in the Australian market and an ensuing fall in steel prices. CIPA had seen a substantial reduction in its share of Australian steel sales from 2008 to 2012. Mr Ellis understood that BlueScope wanted him to do his best to reverse that trend: LJ [1438]. CIPA sold the flat steel products it could not sell in the Australian market overseas, at a loss.
The primary judge’s findings subject to these appeals are that, in the period from early September 2013 until at least April 2014, by the proven attempts to procure price fixing undertakings, BlueScope and Mr Ellis sought to implement a strategy to raise and to that extent fix the prices for flat steel products in the market, referred to throughout the liability judgment as the benchmarking strategy or the recommended resale price/RRP strategy. The strategy involved the publication of price lists by CIPA, which were promoted to distributors as a base or floor for their own prices. While that finding was based on the evidence as a whole, which was addressed in some detail earlier in the liability judgment, his Honour summarised key highlights by way of 16 categories of evidence at LJ [1438]-[1453], concluding at LJ [1454]:
Having regard to the whole of the evidence, I am satisfied that the respondents intended to induce a consensus or meeting of minds, being an understanding within the meaning of the Act. The consensus was for distributors to use the list prices in CIPA’s Distribution Market price lists for flat steel products as a base or floor price for their supply of flat steel products. I do not consider that the understanding that was sought to be induced was intended to be adopted by distributors in an absolute manner, requiring strict adherence to CIPA’s price lists as a base or floor price. Rather, the understanding that was sought to be induced was a more general adherence to a principal that distribution prices should be increased to the level of CIPA’s price lists by way of a floor. CIPA’s price lists provided a clear price level around which the understanding could cohere.
Those price lists were also promoted to an overseas mill for use as a reference point in their pricing, with the intention that this would increase prices. The strategy in relation to the overseas mill is referred to as the overseas mill strategy.
The primary judge thus concluded that BlueScope and Mr Ellis had attempted to induce seven distributors, an overseas steel mill and an import trader to arrive at understandings involving what is commonly referred to as a price fixing provision.
The appellants do not contest on appeal the existence of the RRP and overseas mill strategies, nor that their object was to increase flat steel prices in the Australian market. That is consistent with the position they took at the trial: LJ [593]. Instead, at the centre of their liability appeals is the proper description and characterisation of those strategies. They focus first on what case law required the ACCC to prove to establish liability, especially as to intention; and second, on the proof of the proscribed intention, asserting an alleged shortfall of necessary findings by the primary judge.
In particular, the appellants contend that understandings must involve an assurance, undertaking or commitment by at least one party to take future action, and that this requirement extends to what is required to establish an attempt to procure such a contravention. Because the primary judge found at LJ [657] that the ACCC did not need to prove that Mr Ellis or BlueScope went so far as to seek an assurance, undertaking or commitment, they contend that this was an error such that they should not have been found to have attempted to procure the entry into the alleged proscribed understandings.
The primary judge later observed at LJ [1420] that a significant part of the appellants’ closing submissions seemed to be directed to whether the evidence showed that BlueScope and Mr Ellis had attempted to reach a price fixing understanding, as opposed to whether they had attempted to induce a price fixing understanding being reached. His Honour further noted that part of this approach relied upon what was asserted to be positive evidence that:
(a)neither BlueScope nor Mr Ellis sought from the seven distributors, the import trader and the overseas mill, referred to as a matter of convenience as counterparties, to which the attempts to procure were alleged to be directed, a commitment as to the prices they would charge for flat steel products;
(b)the alleged counterparties did not give any such commitment and instead gave evidence that they could not give any such commitment; and
(c)neither BlueScope nor Mr Ellis offered any quid pro quo for such a commitment.
The respondents argued before his Honour that the absence of proof of such conduct was fatal to the ACCC’s case, a point that is maintained at the centre of these appeals.
Other features of his Honour’s liability reasoning and conclusions are also sought to be impugned so as to overturn the result. Collateral features of the penalties imposed on Mr Ellis are also challenged.
The relevant cartel proscription
Section 76(1)(d) provides that the Court may order a person to pay a pecuniary penalty if it is satisfied that a person has attempted to induce a person to contravene a provision in Pt IV, which includes s 44ZZRJ. Section 44ZZRJ, since renumbered as s 45AJ, prohibited a corporation from making a contract or arrangement, or arriving at an understanding that contained a cartel provision. Cartel provisions were defined in s 44ZZRD (now s 45AD). They included what is commonly referred to as a price fixing provision as a species of a proscribed cartel provision. There are two conditions which must be met for an alleged price fixing provision to be proscribed:
(a)the provision has the purpose or has or is likely to have the effect of fixing, controlling or maintaining the price for goods supplied or likely to be supplied by any or all of the parties to the contract, arrangement or understanding: the purpose/effect condition in s 44ZZRD(2); and
(b)two or more of the parties to the contract, arrangement or understanding are or are likely to be in competition with each other in relation to the supply of those goods: the competition condition in s 44ZZRD(3).
The ACCC must show that these conditions were met by the cartel provision which was in contemplation in order to show that there was an attempt to induce a person to contravene s 44ZZRJ, in breach of s 76(1)(d). It is important to keep steadily in mind the distinction between a substantive contravention, and, as in this case, an attempt to induce such a contravention.
This appeal tests how far an alleged contravenor must go to be found to have attempted to induce a contravention for the purpose of s 76(1)(d).
The context for the contraventions found to have taken place
The flat steel market
The Australian flat steel market operates at two functional levels: manufacturing/imports and distribution: LJ [5]. Through a corporate structure that is detailed further below, BlueScope and its related entities operated at both levels.
In the relevant period, BlueScope was the only Australian manufacturer of flat steel products. Its primary competition at the manufacturing/imports market level was from import traders, which imported flat steel products from overseas, largely from Asia: LJ [417], [426]. Both BlueScope and import traders sold to distributors, who operated at the distribution level of the market, buying these products to on-sell them to end-users, who could then use them in a variety of applications. Compared with direct supply by steel producers, distributors typically offered particular advantages such as a wider product range, shorter order to delivery times, lower minimum volumes, less onerous credit requirements and other processing services directly or by third parties, such as cutting, recoiling and drilling: LJ [380], [382].
The evidence established that blast furnaces in which raw steel is created must be kept constantly firing while operational: LJ [582]-[583]. Reducing capacity where demand drops is therefore usually uneconomical for producers, meaning mills’ steel production remains relatively constant: see LJ [581(c)]. The 2008 global financial crisis saw demand drop and remain depressed for some years, globally and in Australia, causing an oversupply problem for the global steel market, a problem which was compounded by increased production in Chinese and Indian steel mills over the same period: LJ [582]-[583]. Excess supply in the overseas market meant a ready supply of overseas steel products could be exported to Australia: LJ [375].
Flat steel production
Raw steel is produced in one of three semi-finished products known as steel slab, billets and blooms, which then undergo further processing to create a range of further products: LJ [363]-[364]. The products of concern in this matter are flat steel products, which are produced from steel slab. In summary, the products produced from steel slab include:
(a)hot rolled coil, a product created by reheating steel slab through a rolling mill, making it thinner and longer, before being rolled: LJ [365]-[366];
(b)cold rolled coil, a product created by passing hot rolled coil through a rolling mill at a low temperature to reduce its thickness, increase its strength and improve its finish: LJ [367];
(c)plate products, including two forms:
(i)pattern plate, produced by rolling steel slab to the desired thickness and cutting it to the desired length: LJ [368]; and
(ii)coil plate, produced by uncoiling hot rolled coil and cutting it to the desired length: LJ [368];
(d)metallic coated steel, produced by uncoiling cold rolled coil and applying a metal coating, preventing oxidization and increasing its durability; and
(e)painted steel, produced by painting cold rolled coil and metalling coated steel.
In Australia, distributors ordinarily specialise in selling certain kinds of flat steel products. “Sheet and coil” distributors typically sell hot rolled coil, cold rolled coil, light gauge plate, metallic coated coil, and painted steel, while plate products are typically sold through “steel and tube” distributors: LJ [373].
A range of processing services can be provided in respect of sheet and coil products, including shearing, slitting and recoiling. These were offered by CIPA and distributors: LJ [1262]. Throughout the liability judgment, and this one, steel products subject to these processing services are referred to as “processed products.”
Market participants
BlueScope and its related entities
BlueScope carries on a significant business in the Australian steel market. At the relevant times, it was the dominant manufacturer and distributor of flat steel products. It was the only domestic manufacturer of hot rolled coil, cold rolled coil, plate and metallic coated steel, and the country’s largest producer of painted steel products: LJ [374].
BlueScope Australia & New Zealand (BANZ)
BlueScope Australia & New Zealand (BANZ) is a reporting division within BlueScope. At all relevant times, Mr Vassella was its Chief Executive Officer (CEO): LJ [27(a)]. While the ACCC did not rely on his conduct or knowledge in making out the understanding, the primary judge concluded that Mr Vassella was aware of key aspects of the benchmarking strategy and overseas mill strategy, though the evidence did not establish that he had been aware that, as part of those strategies, BlueScope was attempting to induce price fixing understandings: LJ [1550]-[1551].
Mr Ellis reported directly to Mr Vassella: LJ [291].
BlueScope Coated Industrial Products (CIPA)
This proceeding is primarily concerned with the conduct of CIPA, a business division within BANZ, and its employees.
CIPA manufactured a range of flat steel products. It supplied these to large end-users (usually manufacturing companies) and distributors, both directly and through BlueScope Distribution Pty Ltd, BlueScope’s internal distribution channel: LJ [396]. During the relevant period, CIPA supplied roughly two thirds of the flat steel in Australia: LJ [375].
CIPA’s management structure was comprised of two sections: Manufacturing, and Sales and Marketing: LJ [397]. During the relevant period, Mr Ellis was the General Manager of the latter section: LJ [397]. The Sales and Marketing section was further divided into four sales areas (LJ [398]):
(a)Distribution Markets;
(b)Building Markets;
(c)Manufacturing Markets; and
(d)the International Markets Group (IMG).
The centrally relevant figure at CIPA was Mr Ellis himself, its General Manager. He formally commenced that role on 1 September 2013, coming across from his role as President of BSL Thailand (a joint venture between BlueScope and Loxley Pty Ltd), which he had held since April 2010: LJ [289]-[290]. In Thailand, Mr Ellis had been responsible for sales and manufacturing of steel products by the BSL Thailand joint venture. He contends that this experience was relevant to identifying the purposes of the RRP strategy he implemented at CIPA. As General Manager at CIPA, Mr Ellis’ role included responsibility for the sales and marketing of steel products in Australia, and oversight of BlueScope’s supply chain: LJ [291].
Mr Hennessy was the Executive National Sales Manager for CIPA during the period the conduct took place: LJ [196]. From 1 September 2013 to 1 July 2014, he reported directly to Mr Ellis (LJ [199]), though he had known Mr Ellis since 1993, when the two worked at BHP Steel. Mr Hennessy was called as a witness for the ACCC and cross-examined.
Several Sales Managers, each with differing responsibilities for clients and geographic areas, reported to Mr Hennessy:
(a)Mr Brian Kelso, the Queensland Sales Manager, held responsibility for CIPA’s relationships with OneSteel and Vulcan Steel at the national level, though he also dealt with other distributors, such as CMC Steel and Southern Steel in respect of their Queensland businesses: LJ [27(d)], [400(a)].
(b)Mr Troy Gent, Sales Manager for New South Wales and Acting Sales Manager for Victoria and Tasmania. At the national level, he had responsibility for CIPA’s relationships with CMC Steel and BlueScope Distribution: LJ [27(f)], [400(b)].
(c)Mr Luke Sparks, the National Account Manager and Sales Manager for South Australia and the Northern Territory, and from August 2014 the NSW/ACT State Manager for Distribution and Manufacturing Markets: LJ [27(e)], [227], [400(c)].
Several other CIPA figures bear noting:
(a)Mr Anthony Palermo was CIPA’s National Pricing Manager during the relevant period: LJ [404]. In that role, he was responsible for the pricing of the whole range of products produced by CIPA: LJ [404].
(b)Mr Graham Unicomb, the Pricing Manager for Distribution at CIPA, held responsibility for the Distribution Markets sales area: LJ [27(h)], [404]. His primary responsibility was collecting the prices of competing products, largely imports, in order to determine an import parity price. That price played an important role in CIPA’s pricing for its own product range. Mr Unicomb reported to Mr Palermo: LJ [404].
(c)Mr Dieter Schulz was, in the relevant period, the president of the IMG at CIPA: LJ [205]. His team was responsible for all of BlueScope’s export sales from Australia and New Zealand: LJ [206].
BlueScope Distribution
CIPA also supplied flat steel products to a wholly-owned BlueScope subsidiary, BlueScope Distribution, which operated nationally as a distributor of flat steel products, trading under various business names, including Sheet Metal Supplies (SMS), Impact Steel and BlueScope Distribution (which the primary judge referred to as BSD to distinguish it from the corporate entity): LJ [22(b)], [408].
New Zealand Steel Limited (NZ Steel) and New Zealand Steel (Australia) Pty Ltd (NZSA)
New Zealand Steel Limited (NZ Steel) was another wholly owned subsidiary of BlueScope. It manufactured various flat steel products in New Zealand and supplied these to a further BlueScope subsidiary, New Zealand Steel (Australia) Pty Ltd (NZSA). NZSA operated as a steel trader for flat steel products in Australia, supplying distributors and occasionally end-users with products manufactured by NZ Steel: LJ [22(d)].
During the relevant period, Mr Sean O’Brien was the Manager of NZSA, leaving the role in July 2014: LJ [217]. He was also a Director of NZ Steel and left that role at the same time as his NZSA role. At the time he gave evidence, he no longer worked for BlueScope or its associated entities: LJ [219]. The primary judge found Mr O’Brien to be “an honest and impressive witness”, accepting his evidence in full: LJ [220].
BSL Thailand
BSL Thailand had no role in the conduct giving rise to the attempts. Its significance in this appeal stems only from the fact that Mr Ellis had been its President prior to joining CIPA in September 2013, where he had developed strategies that bore some similarity to the benchmarking strategy.
Distributors
BlueScope categorised distributors as “aligned” or “non-aligned”, meaning distributors who purchased all or most of their flat steel products from CIPA, and those that acquired all or most from import traders, respectively: LJ [445]-[446]. A non-exhaustive list is summarised in the following table:
Aligned distributors Non-aligned distributors · OneSteel Trading Pty Ltd
· Southern Steel Group Pty Limited
· CMC Steel Distribution Pty Ltd
· Apex Steel Pty Ltd*
· Vulcan Steel Pty Ltd
· Selection Steel Trading Pty Ltd
· Celhurst Pty Ltd trading as Selwood Steel
The asterisk against the reference to Apex Steel reflects there being conflicting evidence before the primary judge as to whether it was regarded as an aligned distributor, with Mr Hennessy describing it as aligned and Mr Kelso not referring to it as such: LJ [446]. These reasons adopt the categorisation of Apex Steel used by the primary judge, namely as an aligned distributor.
Several persons who held roles at the distributors at the relevant times also bear noting:
(a)Mr Dale Wood, the founder, sole director and company secretary of Selwood Steel;
(b)Mr Rod Gregory, the owner and Managing Director of Selection Steel;
(c)Mr Gary Collis, the General Manager, Sales and Trading at Selection Steel: LJ [255];
(d)Mr Neil Lobb, at the relevant times, the State Manager for NSW within CMC Steel, becoming its General Manager, Sheet & Coil in May 2014: LJ [230];
(e)Mr Rhys Jones, a director of Vulcan Steel: LJ [257];
(f)Mr Peter Wells, the founder of the Vulcan Steel corporate group and Chairman of the Board of Directors for Vulcan Steel: LJ [257];
(g)Mr Joseph Calleja, the Managing Director and part-owner of the Apex Steel corporate group: LJ [192];
(h)Mr Peter Smaller, the owner and Managing Director of Southern Steel: LJ [451], [704];
(i)Mr Kevin Smaller, the General Manager of various Southern Steel divisions: LJ [451];
(j)Mr David Bolzan, the National Procurement Manager at the relevant times for OneSteel: LJ [337], [449].
Import traders
Import traders operated in the flat steel market by purchasing and importing flat steel products manufactured in overseas steel mills and selling them on to distributors or end-users in Australia: LJ [426]. These included Wright Steel (Sales) Pty Ltd and Citic Australia Commodity Trading Pty Ltd, which were the subject of one of the alleged attempts: LJ [427]. Both companies carried on an unincorporated joint venture for import trading (the Wright Steel-Citic JV).
Mr Malcolm Griffith Wright owned Wright Steel. The business stopped trading independently in February 2001, at which point the Wright Steel-Citic JV commenced. He provided four witness statements and was cross-examined. He was found to be an honest witness, and the primary judge generally accepted his evidence, though it contained areas of inconsistency: LJ [260].
Overseas mills
Overseas steel mills manufactured products that were imported into the Australian market. For the most part, products manufactured in these mills were sold to import traders for distribution in Australia, though in a limited number of cases overseas mills sold directly to Australian distributors or end-users: LJ [419]. One Taiwanese mill, Yieh Phui, was the subject of one of the alleged attempts. Yieh Phui was a significant player in the Australian market, manufacturing 70% of all coated flat steel products imported into Australia annually: LJ [420].
An important aspect of the market was Australia’s anti-dumping measures, which were intended to halt overseas manufacturers undercutting Australian ones. In 2013, in response to a collapse in steel prices globally, Australia became increasingly protectionist of its local steel industries, leading to an increase in anti-dumping applications: LJ [6].
The impugned conduct
The benchmarking strategy for the distributors (seven contraventions found)
It is not necessary to summarise all of the primary judge’s findings about the relevant conduct, though those subject to challenge by the appellants will be discussed in further detail below. The following is a broad overview of the conduct found to amount to the attempts alleged by the ACCC.
This proceeding is primarily concerned with the conduct of the CIPA division of BlueScope, and in particular the conduct of Mr Ellis as CIPA’s General Manager of Sales and Marketing. BlueScope’s structure and functions are explained in further detail below. It is sufficient at this stage to note that CIPA manufactured flat steel products that it sold primarily to distributors.
Prior to Mr Ellis starting at CIPA in September 2013, CIPA had provided monthly price lists to aligned distributors. Those price lists specified:
(a)an “advanced offer” price, for products with standard specifications, referred to by some witnesses as an “alto” price (an acronym of “advanced lead time offer” price); and
(b)a “custom offer” price, for products with custom specifications.
The price lists also specified lead times for product delivery, which varied depending on whether the product was an advanced or custom offer.
CIPA supplied products to aligned distributors and BlueScope Distribution at the prices specified in those price lists, with additional discounts and rebates applied for loyalty, early settlement or longer lead times: LJ [562]. These rebates and discounts were less transparent, and were negotiated, to an extent, by the distributors. The price offered after all discounts and rebates was referred to as the “net net price”. Price lists did not specify the net net price, leaving this for the distributors to calculate instead.
For non-aligned distributors, CIPA offered a negotiated discounted price, usually around the time those distributors were considering import offers.
In addition to the discounts referred to above, CIPA provided additional ad hoc discounts in response to specific requests, referred to as “tactical pricing” or “end user targeted rebates” (EUTs): LJ [566].
CIPA’s Distribution Markets sales team and its Pricing Team met monthly to discuss the list price, being the price before any discounts or rebates were applied, and the net net price: LJ [554], [860]. The list price and net net price were based on the prices for equivalent products supplied by overseas mills, referred to as the import parity price (often abbreviated to IPP), with a premium to reflect the value added by CIPA supplying domestically: LJ [554]-[555].
Mr Ellis formally commenced at CIPA on 1 September 2013: LJ [613]. Immediately prior to that formal start date, from mid-August 2013, he had meetings with customers and Sales and Marketing Staff at CIPA. Mr Ellis’ early concerns centred on CIPA’s falling sales to distributors and increased competition from foreign mills, which threatened BlueScope’s domestic position: LJ [1308], [1309]. In speaking to customers, Mr Ellis received feedback that distributors were frustrated that BlueScope Distribution and, to a lesser extent, NZSA, were undercutting them, and that it was not economically viable for distributors to compete with the prices BlueScope was offering end-users for CIPA products.
In conversations with some distributors, as well as Wright Steel (an import trader), Mr Ellis raised that CIPA would soon be publishing price lists, and there would be an “opportunity” to use them as a “benchmark” when setting prices, to put value back into the flat steel market. One such meeting was held at Melbourne airport on 6 September 2013, with four distributors in attendance (the Melbourne Airport Meeting). Feedback was given from representatives of one distributor, Vulcan Steel, that prices should allow a 15% margin for distributors.
On 16 September 2013, a spreadsheet titled “BSL CIPA Benchmarks and Premiums – December 2013” (the December 2013 Benchmark spreadsheet), was circulated to some members of CIPA’s Sales and Marketing staff. That spreadsheet listed CIPA’s flat steel products and contained various columns showing the “list price” and import parity price for each product. The discount for longer lead times was replaced by a “distributor support discount”, that applied regardless of when an order was made: LJ [964]; see also LJ [833], and Mr Kelso’s evidence at LJ [984] at the foot of p 289. The new list prices were higher than had previously been provided to distributors, and a larger discount was applied, meaning the net net prices remained roughly steady. Margins between the list and net net prices for different products ranged between 13% and 15%. The spreadsheet did not include an express reference to a recommended resale price.
On 17 September 2013, the spreadsheet was sent to six of the seven distributors subject to the attempts. The actual prices included in the versions of the spreadsheet sent to distributors differed to a limited extent for the distributor who received it. Members of CIPA’s Sales and Marketing team then promoted the use of list prices by distributors in setting the distributors’ own prices.
On 30 October 2013, prices for January 2014 were issued using the same spreadsheet format as the December 2013 Benchmark spreadsheet. CIPA price lists for February 2014 were not in evidence: LJ [1145]. The price lists for March 2014 differed however, now referring to a “base” recommended resale price (rather than list price): LJ [1167]. Versions of those price lists were issued on a number of subsequent occasions. CIPA staff promoted those lists for use by distributors in setting the distributors’ own prices.
Mr Ellis also directed that controls over tactical pricing must be constrained, and that BlueScope Distribution price by reference to the lists. He had developed a strategy to have NZSA price by reference to the CIPA price lists as well. Though NZSA agreed to publish list prices that matched the CIPA price lists, its general manager offered significant discounts to his customers, which was met by further pressure from CIPA to increase its net prices: LJ [1039].
Mr Ellis’ evidence at trial (which was substantially rejected by the primary judge, especially as to his exculpatory characterisation of what had taken place) was that the CIPA price lists were provided to serve as a recommended price which distributors could choose to take into account in their own pricing decisions: LJ [627]. He stated that the benchmarking strategy gave distributors an “opportunity” to price by reference to the CIPA price lists, and that he “hoped” that distributors would set their prices on that basis: LJ [631]. He stated, however, that it would not have been commercially feasible for BlueScope to have arrived at understandings with distributors that they would use the prices as the benchmark for their pricing, as the distributors faced a high degree of competition, needed to retain pricing flexibility to negotiate prices with large customers and needed to incorporate their own costs into their prices: LJ [631]. Arguments consistent with this evidence are raised on appeal. However, there is no challenge to the findings of the primary judge rejecting that evidence, and these arguments must be considered with that in mind.
The Wright Steel understanding
The attempt in relation to Wright Steel, an import trader, is distinct from those directed to distributors, but was also part of the benchmarking strategy. The primary judge found that it occurred in the course of a dinner between Mr Ellis, Mr Hennessy (who reported directly to Mr Ellis at CIPA) and Mr Wright, the owner of Wright Steel (as noted above). The dinner occurred on 12 September 2013, early in Mr Ellis’ tenure at CIPA, before the publication of the December 2013 Benchmark spreadsheet. Considering conflicting accounts of what occurred at that dinner from each of Messrs Ellis, Hennessy and Wright, the primary judge found that Mr Ellis had proposed that Wright Steel could encourage its customers, who were distributors in the Australian flat steel market, to use the CIPA price lists as a benchmark for their prices: LJ [804].
The overseas mill strategy (Yieh Phui understanding)
The overseas mill strategy was distinct from but closely related to the benchmarking strategy: LJ [1428]. The existence of this strategy is relevant only to an understanding directed to Yieh Phui which was, as noted above, a Taiwanese steel mill. The relevant conduct for this attempt occurred on 26 February 2014, when Mr Ellis and Mr Dieter Schulz of CIPA attended a meeting with several senior Yieh Phui representatives at Yieh Phui’s offices in Kaohsiung, Taiwan: LJ [68].
A recording of at least part of the 26 February 2014 meeting, and a transcript of that recording, were in evidence, having been produced by Yieh Phui to the ACCC pursuant to a notice issued under s 155 of the Act: LJ [1306], [1357]. The primary judge summarised his findings as to what occurred at that meeting at LJ [1452]:
…Mr Ellis stated that there was an opportunity for Yieh Phui to sell steel at “better prices” than they were currently achieving and that Yieh Phui was “leaving some profitability behind”. Mr Ellis explained that BlueScope’s recommended resale price lists were prices at the distribution level of the market, suggesting that Yieh Phui base its (import) prices on BlueScope’s recommended resale prices. Mr Ellis told Yieh Phui that when BlueScope set the recommended resale price in Australia, it established a “market norm” …
The primary judge’s ultimate liability conclusions
The penultimate part of the primary judge’s reasons recorded the ultimate findings his Honour reached with respect to the attempts alleged by the ACCC that were found to have been established. His Honour:
(a)at LJ [1415]-[1424], gave a detailed overview of his conclusions as to the allegations overall;
(b)at LJ [1425]-[1457], made findings as to what the appellants’ intended by their conduct; and
(c)at LJ [1425]-[1546], separately addressed the conclusions reached for each alleged attempt, one by one, listing a summary of the conduct established by the evidence relied upon.
The attempts to induce understandings with distributors
The primary judge ultimately found that on the proven conduct of BlueScope and Mr Ellis, taken as a whole, they had attempted to induce seven distributors in the Australian flat steel market to arrive at separate price fixing understandings with BlueScope. Those distributors were:
(a)Selection Steel Trading Pty Ltd;
(b)Apex Steel Pty Ltd;
(c)Southern Steel Group Pty Limited;
(d)Vulcan Steel Pty Ltd;
(e)CMC Steel Distribution Pty Ltd;
(f)Celhurst Pty Ltd trading as Selwood Steel; and
(g)OneSteel Trading Pty Ltd.
The primary judge found that each of the first five attempts to induce listed above (that is, all attempts to induce apart from those directed to Selwood Steel and OneSteel), would have resulted in an understanding including two cartel provisions:
(a)that the distributor who was party to the understanding would use the list prices in CIPA’s Distribution Market price lists as a base or floor price when selling flat steel products to end-users in Australia; and
(b)that BlueScope Distribution would sell flat steel products to end-users in Australia in accordance with CIPA’s Distribution Market price lists: LJ [1462], [1469] (Selection Steel); LJ [1471], [1477] (Apex Steel); LJ [1479], [1485] (Southern Steel); LJ[1487], [1493] (Vulcan Steel); LJ [1509] [1515] (CMC Steel).
The primary judge found that the remaining two attempts directed to Selwood Steel and OneSteel would have resulted in understandings only involving the first cartel provision identified above: LJ [1498], [1504] (Selwood Steel), LJ [1520], [1526] (OneSteel).
For each of the first five distributors listed above, the primary judge found that BlueScope and Mr Ellis had knowledge of the essential facts that would have rendered the contemplated understanding unlawful. As to the point reached with each distributor in respect of the attempt, his Honour found that the critical fact was that BlueScope’s proposals were capable of assent, and identified the inducement offered by Mr Ellis as the proposal that CIPA would tighten its tactical pricing with impacts on price levels that were relevant to each distributor, which would confer advantages to each of them by reducing competition at the distribution level of the market: LJ [1466] (Selection Steel); LJ [1474] (Apex Steel); LJ [1483] (Southern Steel); LJ [1490] (Vulcan Steel); and LJ [1512] (CMC Steel).
For Selwood Steel, the primary judge also found as a critical fact that BlueScope’s proposal was capable of assent, that Mr Wood for Selwood Steel understood that Mr Ellis was seeking a consensus, and that the inducement offered was a transactional account with BlueScope: LJ [1502].
For OneSteel, it is clearest to reproduce what the primary judge found at LJ [1524], rather than endeavouring to summarise it:
There is no evidence that BlueScope or Mr Ellis offered OneSteel inducements in the nature of promised commercial advantages (such as CIPA reducing its tactical pricing or even that BlueScope Distribution would increase its prices in accordance with CIPA’s price lists). Nevertheless, an inducement may comprise other persuasive conduct that is intended to induce a consensus. In the case of OneSteel, the evidence shows that what was communicated to, and understood by, OneSteel, was that the benchmarking strategy was being promoted to other distributors in the market. In Mr Ellis’s words, there was an “opportunity” for distributors to set their prices by reference to CIPA’s recommended resale prices. The opportunity was created by BlueScope and Mr Ellis seeking to persuade a significant number of distributors to set their prices by reference to CIPA’s price lists. I find that that “opportunity” was communicated to OneSteel, and that the communication of the “opportunity” was an inducement to reach a price fixing understanding within the meaning of the Act. I find that the conduct of BlueScope and Mr Ellis was sufficient to constitute an attempt to induce an understanding containing the cartel provision referred to above. The critical fact is that BlueScope’s proposals to OneSteel were capable of assent.
For completeness, it should be noted that the findings as to cartel provisions differed in a particular respect from those alleged in the ACCC’s pleadings, because of what emerged during the trial. Relevantly for this appeal, the ACCC had framed the alleged provisions about the use that distributors would make of CIPA’s lists as being that they would use them as a “benchmark” for their prices. Over the course of the trial, the ACCC clarified that by this it meant that the prices would be used as a “base” or “floor” price, to which an additional amount might be added reflecting the processing costs of each distributor: LJ [592]. That framing is reflected in the language by which the primary judge described the cartel provisions in his Honour’s findings.
The attempt to induce the Wright Steel understanding
The primary judge also found that BlueScope and Mr Ellis had attempted to induce Wright Steel and/or Citic which operated a joint venture importing flat steel into Australia, to arrive at an understanding. The cartel provisions of that understanding are summarised at LJ [1530], and repeated as findings of attempts to induce those contraventions at LJ [1535]:
(a)Wright Steel and/or Citic would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists; and
(b)BlueScope CIPA and NZSA would sell flat steel products to distributors in Australia at increased prices by reference to CIPA’s Distribution Market price lists.
As with all seven distributor attempts, the primary judge found that BlueScope and Mr Ellis had knowledge of the essential facts that would have rendered the contemplated understanding unlawful, and that BlueScope’s proposal was capable of assent: LJ [1533]-[1534]. His Honour found that the inducement offered by BlueScope and Mr Ellis was a promise that CIPA and NZSA would be increasing their prices, coupled with a threat that if the import traders did not increase prices, BlueScope would initiate anti-dumping complaints against the imported products: LJ [1533].
The attempt to induce the Yieh Phui understanding
The primary judge found that BlueScope and Mr Ellis had attempted to induce Yieh Phui, the Taiwanese flat steel mill, to arrive at a price fixing understanding. The cartel provision was that Yieh Phui would sell flat steel products to import traders at a higher price than it was doing at the time of the 26 February 2014 meeting outlined at [57] above, by reference to CIPA’s Distribution Market price lists: LJ [1540], [1546].
As with all seven distributor attempts, and the Wright Steel attempt, the primary judge found that BlueScope and Mr Ellis had knowledge of the essential facts that would have rendered the contemplated understanding unlawful (at LJ [1545]), and that BlueScope’s proposal was capable of assent: LJ [1533]. His Honour identified the inducement offered by BlueScope and Mr Ellis as having two key aspects: an implicit promise that BlueScope would support the prices reflected in its price lists; and a threat of anti-dumping action against any imports at low prices (explicitly made in relation to low priced imports from Vietnam and India). His Honour characterised the totality of Mr Ellis’ statements to Yieh Phui as being in the nature of persuasive arguments for Yieh Phui to increase its prices, which his Honour found was sufficient to constitute an attempt to induce an understanding: LJ [1544].
THE GROUNDS OF APPEAL
Summary
BlueScope raises six grounds of appeal and Mr Ellis raises seven grounds of appeal, with a degree of overlap. They can be grouped together as follows, in accordance with the way they were addressed by the appellants.
BlueScope ground 1 and Ellis ground 1: the elements required to be established for an understanding
The appellants contend that authority, properly understood, dictates that at least one party making a commitment, or giving an assurance or undertaking, is a necessary element to be established to prove the formation of an understanding, and the primary judge erred by failing to identify this as a legal requirement.
BlueScope grounds 2-4: intention required to be established/most probable inferences
BlueScope contends that the factual findings on which the primary judge relied in finding that the intention element was made out were equally or more consistent with it merely hoping or intending that each of the distributors, and also Wright Steel and Yieh Phui, would raise their prices, without intending that they make a commitment to do so. As such, BlueScope contends that a finding that was necessary to ground any contravention was absent.
Ellis ground 3: proof of an inducement
Mr Ellis contends that the primary judge erred in finding that he had offered “inducements” to the distributors to enter into understandings, in circumstances where, on the factual findings made, he was merely informing them of steps already taken or decisions already made, regardless of any action taken by the distributors.
BlueScope ground 5, Ellis grounds 2, 4-6: benchmarking/sufficiently proximate conduct
The appellants contend that the primary judge erred:
(a)in finding that the recommended resale price was a base or floor price, by concluding that the attempted understandings contained cartel provisions for “fixing, controlling or maintaining” the price for flat steel products; and
(b)in finding that the steps taken by BlueScope and Mr Ellis were sufficiently proximate to give rise to attempts to induce entry into those understandings.
Mr Ellis also specifically contends that the primary judge erred in finding that, when considering whether a person has attempted to induce an understanding containing a cartel provision, the “critical fact” was whether proposals made are “capable of assent”: LJ [1524].
BlueScope ground 6: limitation period for the OneSteel attempt
BlueScope contends that the primary judge erred in finding that s 77(2) did not prevent the ACCC from seeking a pecuniary penalty against BlueScope in relation to the attempt to induce OneSteel to arrive at an understanding containing a cartel provision.
Ellis ground 8: non-indemnification order under s 76 of the Act
Mr Ellis contends that the primary judge erred in finding that s 76 empowered the Court to order that he be prevented from making any claim in respect of any applicable insurance policy for payment or reimbursement for any pecuniary penalty imposed by the Court.
The ACCC’s stance
The ACCC defends the primary judge’s reasoning in respect of each ground of appeal.
BlueScope ground 1 and Ellis ground 1: the elements required to be established for an understanding
Section 76(1)(a)(i) provides that, if the Court is satisfied that a person has contravened a provision of Pt IV (aside from, at the relevant time, s 44ZZRF or s 45ZZRG), it may order payment of a pecuniary penalty and related relief. At the relevant time, Pt IV included s 44ZZRJ (now s 45AJ), which proscribed a corporation making a contract or arrangement, or arriving at an understanding, which contains a cartel provision. Paragraphs (b) to (f) of s 76(1) create contraventions directed to the same substantive provisions which apply to accessories, attempts, conspiracies, inducement, and attempts to induce relating to the same contraventions in the same way, and make provision for the same relief. These include:
(a)s 76(1)(b), which applies where a person “has attempted to contravene”; and
(b)s 76(1)(d), which applies where a person “has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene”,
the specified provisions of Pt IV.
The contraventions found to have been established by the primary judge were attempts to induce the reaching of understandings which included a term to fix the price of flat steel, contrary to s 76(1)(d).
For contraventions of this kind to be proven, two foundational elements, being conduct and intention, must be established. These elements are in addition to proof that the understandings which were the subject of the attempts to induce would have contained cartel provisions (not in issue in these appeals). The need for proof of conduct and intention has been clearly stated by the Full Court for over four decades and repeatedly reaffirmed. One of the earliest statements to this effect was made by Toohey J when his Honour was a member of this Court in Trade Practices Commission v Tubemakers of Australia Ltd (1983) 47 ALR 719 at 737, 743; 76 FLR 455 at 473, 479, approved in numerous cases since then, including explicitly in Australian Competition and Consumer Commission v Australian Egg Corporation Ltd [2017] FCAFC 152; 254 FCR 311 at [92] (Besanko, Foster and Yates JJ).
The correctness of Tubemakers and Egg Corp has not been questioned by any party in these appeals. Rather, the dispute turns on what the requirements for a concluded understanding are. The answers to that question flow through to the appellants’ challenge to the primary judge’s findings on intention and conduct.
For an attempt to induce, the relevant intention is to bring about the proscribed outcome (here, an understanding), and the conduct must involve steps that are more than merely preparatory to bring about that outcome. These concepts are discussed further in addressing the appellants’ grounds relating to intention (BlueScope grounds 2-4) and conduct (BlueScope ground 5, Ellis grounds 2, and 4-6).
The appellants contended at trial, and maintain on appeal, that a necessary element of a concluded understanding is that at least one party makes a commitment, assumes an obligation or gives an assurance or undertaking. From this, the appellants extrapolated that, in the case of an attempt to induce an understanding, there needs to be conduct and intention directed to bringing about that commitment, obligation, assurance or undertaking.
For present purposes, the appellants appear to consider each of obligation, commitment, assurance and undertaking to be essentially interchangeable. That is because their cases depended on treating these four non-statutory concepts as being identical to the statutory proscription of an understanding. However, as will be seen, each of those four non-statutory terms can entail various degrees of stringency, according to the circumstances and the quality of the evidence. The appellants’ cases at least implied a higher rather than lower degree of stringency. That especially emerged in placing weight on an asserted need for a commitment for there to be a concluded understanding. These reasons will generally refer to this further element which the appellants claim is necessary to prove a concluded understanding as a commitment. This approach is adopted because “commitment” was a key term used by the appellants to refer to this concept in the conduct of the trial, especially in the cross-examination of a number of key witnesses, rather than due to any abstract conclusion that a “commitment” is an inherently more burdensome concept than an “obligation”, “assurance” or “undertaking”. To the contrary, as will be illustrated below, each of these non-statutory concepts can take on a broad range of meanings entailing varying degrees of stringency depending on the context in which they are used.
The primary judge ultimately rejected this argument, and expressly found that the contraventions alleged did not require seeking a commitment (or equivalent concept), but rather required no more than a step towards the inducement of a price fixing understanding that was more than merely preparatory and was not merely remotely connected with the inducement to reach the contemplated understandings: LJ [657]. The appellants assert that his Honour erred by failing to identify that seeking a commitment (or equivalent concept) was a requirement for the contraventions by way of the alleged attempts to induce, both as to conduct and as to intention.
Upon close consideration, the precise issue in dispute is not squarely answered by authority in terms of this degree of granular detail being required, as asserted by the appellants, but rather turns on the correctness or otherwise of the analysis and conclusions reached by the primary judge in light of careful consideration of that authority. For the reasons set out below, his Honour did not err.
The elements of an attempt to induce
It is convenient first to set out the apparently uncontested elements of an attempt, and an attempt to induce as set out by the Full Court in Egg Corp:
[92] In order to establish an attempt, an applicant must prove both intention and conduct. The intention is to bring about the proscribed result which in this case is the making of an arrangement or the reaching of an understanding … (Trade Practices Commission v Tubemakers of Australia Ltd (1983) 76 FLR 455; 47 ALR 719 (Tubemakers) at 472-473; 737 and 479; 743 per Toohey J). It is not necessary in order to establish the relevant intention to prove that it was accompanied by or included an expectation of success or a belief that the purpose would be achieved (Tubemakers at 471-472; 736 per Toohey J).
[93] The conduct which is necessary to constitute an attempt is a step towards the commission of a contravention, which is immediately and not merely remotely connected with it (Tubemakers at 472; 736 per Toohey J referring to Archbold’s Pleading Evidence & Practice 36th [Ed], para 4101). The Full Court of this Court in Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 7 FCR 534 (Parkfield Operations) at 538-539 made a similar point when it said that an attempt must involve taking a step towards the commission of contravening conduct and that it is not sufficient that it be merely remotely connected or preparatory to the commission of it. In Australian Competition and Consumer Commission v SIP Australia Pty Ltd [2002] ATPR 41-877 (ACCC v SIP Australia) at 45-015, Goldberg J made the point that what is required for an inducement is that “there be an affirmative or positive act or course of conduct directed to the person who is said to be the object of the inducement”. In addition to that point, his Honour also referred to the decision of the Full Court of this Court in Heating Centre Pty Ltd v Trade Practices Commission (1986) 9 FCR 153 at 164 where it was said that mere persuasion, with no promise or threat, may well be an attempt to induce.
[94] For the purposes of both elements of an attempt, that is to say intention and conduct, it is not necessary for the precise terms of the proposed arrangement or understanding to have been formulated. This point was made by the Full Court in Parkfield Operations (at 539) and another way of putting the point is that it is not necessary for an attempt to be made out to establish that the relevant conduct had reached an advanced stage. Having said this, it is perhaps trite to note that the more advanced the conduct, the more likely it is that the inference of the necessary intention will be drawn.
[95] In order for there to be an arrangement or understanding …, there must be a meeting of minds and this involves a commitment to act in a particular way. A mere expectation as distinct from an assumption of obligation, assurance or undertaking to act in a particular way is not sufficient. Unlike an arrangement, an understanding can be tacit (Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (1999) 92 FCR 375 (CC Pty Ltd) at [135]-[141] per Lindgren J; Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission (2005) 159 FCR 452 at [45]-[47]; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 at [28]-[39] per Gray J).
[96] For some time, there has been a debate in the authorities as to whether a meeting of minds involving only one party assuming an obligation as distinct from mutual or reciprocal obligations can constitute an arrangement or understanding of a proscribed kind. The issue has not been authoritatively determined. The courts which have addressed the issue have consistently said that even if the undertaking of a unilateral obligation can constitute a contravening arrangement or understanding, such cases are likely to be rare (see, for example, Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 (Service Station Association) at 230-231 per Lockhart J, at 238 per Spender and Lee JJ; CC (NSW) Pty Ltd at [139] per Lindgren J). For reasons which we will give, it will not be necessary for us to resolve the issue in this case.
Egg Corp thus expressly approved the earlier Full Court decision in Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 545; 7 FCR 534 (Bowen CJ, Smithers and Morling JJ) as to the elements of an attempt to induce. Parkfield Operations had also been referred to by the primary judge in Egg Corp, White J, without the Full Court suggesting any error by his Honour: Australian Competition and Consumer Commission v Australian Egg Corporation Ltd [2016] FCA 69; 337 ALR 573 at [67] (Egg Corp PJ). The primary judge in the case at hand also referred to and applied Parkfield Operations: LJ [86], [97]. It is therefore instructive to refer to what was said in Parkfield Operations at 539-540 (being the main part of the passage quoted by White J):
Finally, his Honour thought that there could be no attempt to induce XL to make an arrangement of the kind alleged if there was no arrangement which was in place or could readily be effected. He thought that the evidence established no more than that there was an invitation “to start to see if an arrangement can be made”. We do not think that it was necessary for any arrangement to be in place, or readily able to be effected, with the other retailers. It was sufficient that the respondents sought to persuade XL to enter into an arrangement to increase prices. As was said in Yorke v Lucas (1983) 49 ALR 672 at 681 (affirmed by the High Court, (1985) 59 ALJR 776 [; 158 CLR 661]):
“Inducing a contravention in the context of s 75B(b) connotes, in our view, some act of compulsion by force or threat of force or some act of persuasion or stimulation aimed at ensuring that an act is committed which constitutes a contravention. The word ‘incite’ is akin to ‘induce’, though induce probably covers a wider field.”
(Emphasis added.)
The terms of s 75B(b) of the Trade Practice Act 1976 (Cth) reproduced by the High Court in Yorke v Lucas [1985] HCA 65; 158 CLR 661 at 664 (“has induced, whether by threats or promises or otherwise, the contravention”) are not materially different for present purposes from the language used in s 76(1)(d) (“has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene”). The debate then turns on the degree or content of persuasion or like conduct required, and the accompanying state of mind, aimed at ensuring that what has taken place constitutes a contravention.
At all times, it must be kept steadily in mind that the primary judge, and therefore this Court, is not concerned with even an attempt to contravene, much less a completed contravention, but rather an attempt to induce a contravention. That said, the requirements for a concluded understanding are likely to be illuminating as to what is required for an attempt to induce such a contravention, in terms of the requisite intention and conduct. The appellants appear to contend that an attempt to induce an understanding must involve an intention to seek a commitment, a proposition that seems to go further than the ordinary view of what is required. But plainly enough, if a commitment is not required for a concluded understanding, it cannot be required for an attempt to induce one.
Before proceeding further down the specific pathway of authority on understandings, it is instructive to have regard to some observations of more general application for this complex area of the law. In Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53, a cartel arrangement and misuse of market power case, Gummow, Hayne and Heydon JJ (with whom Gleeson CJ and Callinan J relevantly agreed), made some observations about what is required to prove accessorial liability that are of relevance to the present debate. At [48], their Honours described an argument advanced that the accessories did not know that the principal’s conduct had the purpose or likely effect of substantially lessening competition in the defined market as wholly unrealistic, and observed (footnotes omitted.):
Only a handful of lawyers think or speak in that fashion, and then only at a late stage of analysis of any particular problem. In order to know the essential facts, and thus satisfy s 75B(1) of the Act and like provisions, it is not necessary to know that those facts are capable of characterisation in the language of the statute.
That observation has some relevance in these appeals due to the dangers inherent in elevating above the words used by Parliament the language of analytical tools developed by courts over time to determine whether or not a statutory proscription has been contravened. Words and phrases such as “meeting of the minds”, “consensus”, “commitment” and “obligation” in the jurisprudence of cartel conduct are not the terms of Parliament’s proscription, but rather language used to analyse whether a contravening understanding or arrangement, as legislated, has been established. The emphasised words used by the Full Court in Parkfield Operations reproduced above focus on the proscription. It is the substance of what took place, as established by the evidence, that matters most, ahead of the form of language used to assess that substance. The language of a court is not to be read as a statute, no matter how useful or instructive: Baini v The Queen [2012] HCA 59; 246 CLR 469 at [14] (French CJ, Hayne, Crennan, Kiefel and Bell JJ). Doing so creates the risk of error in the conclusion reached.
The primary judge’s findings and the appellants’ challenge
The primary judge addressed the principles applicable to an attempt to induce a contravention at both the general level, and separately as to both intention and conduct, by reference to what his Honour was satisfied had been shown to have taken place by the evidence. In particular, his Honour relied upon the passages in Tubemakers, Parkfield Operations and Egg Corp referred to above, enhanced by reference to more general authority on the content of attempts, including in the generally more stringent regime applicable to criminal law: see LJ [84]-[99]. No error has been suggested in any of this analysis. His Honour was clearly aware that more than merely preparatory conduct and a corresponding state of mind was required, and indeed said so. The criticism advanced by the appellants is by way of asserted omission, and in particular, by reference to what the appellants say was a requirement to find that they were seeking, or at least intending to seek, a “commitment” or an analogue.
The word “commitment” has not been used by Parliament but has been one of a number of longstanding analytical or linguistic tools deployed by courts in deciding whether a concluded arrangement has been arrived at, sometimes flowing over to a decision as to whether a concluded understanding has been reached. The primary judge was very much alive to this usage, but did not accept the need for conduct or state of mind couched in that language, or going that far, to have been established for either a concluded understanding, or an attempt to induce such an understanding. The line of authority on this topic is considered in some detail below, mostly being authority that was referred to and relied upon by the primary judge, but not requiring consideration by his Honour in as much detail as is now necessary because of the challenge to the explanation of the principles he enunciated.
The primary judge encapsulated the appellants’ trial contentions as to conduct succinctly at LJ [96], which the appellants contend should have been accepted and determinative. His Honour set out his response to these contentions at LJ [97] (emphasis in original):
[96] The respondents drew a distinction between persuading a competitor to increase their price and persuading a competitor to arrive at an understanding containing a provision that they will increase their price. The respondents argued that conduct in the first category is lawful while conduct in the second is unlawful. The distinction can be accepted in theory but is likely to be a fine one in practice. For example, if competitor A says to competitor B that competitor B should increase its prices because they are unprofitable, that might be characterised as mere persuasion (in the form of a persuasive argument) to increase prices and may not involve an inducement to reach an understanding and a contravention of the law. An illustration of such conduct is given by the findings in Trade Practices Commission v Service Station AssociationLtd (1992) 109 ALR 465 (Service Station Association) (see at 488 per Heerey J) (upheld on appeal in Trade Practices Commission v Service Station AssociationLtd (1993) 44 FCR 206 (Service Station Association (Full Court)) at 224-225, 238 per Lockhart J, Spender and Lee JJ agreeing). However, an added statement that competitor A is intending to do likewise may, in appropriate circumstances, be characterised as an attempt to persuade competitor B to arrive at an understanding to increase prices. Further, as Heerey J observed in that case (at 488), the objective likelihood of particular conduct producing a particular result (viz, arrive at an understanding) is relevant to ascertaining what was intended by the conduct (referring to the observations of Windeyer J in Vallance v The Queen (1961) 108 CLR 56 at 82).
[97] In Parkfield, the Full Court concluded (at 539) that an attempt to contravene does not need to have reached an advanced stage before it comes within the purview of s 76(1)(b). In respect of an attempt to induce a contravention within s 76(1)(d), the Full Court said that it is not necessary for any arrangement to be in place, or readily able to be effected – it is sufficient that the respondents sought to persuade the counterparties to enter into an arrangement to increase prices (also at 539). Those statements were approved by the Full Court in Australian Egg Corporation (at [94]): [[94] in Egg Corp was then quoted by the primary judge, as extracted at [89] above].
The appellants take particular issue with the penultimate sentence in LJ [96]:
However, an added statement that competitor A is intending to do likewise may, in appropriate circumstances, be characterised as an attempt to persuade competitor B to arrive at an understanding to increase prices.
That challenge is doubtless because this, in substance and in considerably greater detail, was at the core of what the primary judge found had taken place in relation to the alleged attempts to induce that his Honour found had been established. The conduct aspect notionally leads the charge, but it is the state of mind attendant upon the conduct alleged and proven – the intention – that is the real heart of the liability appeals. The appellants ultimately rely on the absence of any finding of an intention to seek a “commitment” as being fatal to the ACCC’s case.
It follows from the foregoing that, in order for ground 1 of either appeal to be able to succeed, the appellants must first establish that the primary judge erred in concluding as part of LJ [106]-[108] and LJ [145]-[148] (relevant extracts reproduced below) that a commitment is not required for an understanding to be reached – that is, for there to be a concluded understanding, as opposed to any kind of attempt directed towards arriving at it. If such a commitment is not required to establish that an understanding has been arrived at for the purposes of s 44ZZRJ (now s 45AJ), then it necessarily follows that a commitment or the seeking of a commitment is also not required for either an attempt to reach such an understanding for the purposes of s 76(1)(b) or, as presently relevant, an attempt to induce such an understanding for the purposes of s 76(1)(d). If, but only if, a commitment (or an equivalent concept) is always required for a concluded understanding in breach of s 44ZZRJ (now s 45AJ) to be made out, then the appellants must also establish that a commitment forms part of what is required for an attempt to induce such an understanding.
One of the difficulties in addressing the authorities in this area is the disparate factual circumstances in which an understanding can be alleged to have been reached, attempted, or attempted to be induced. It is an occupational hazard for judges to elevate what is sufficient into something that is also necessary, simply because it was a feature of the case that was being decided and perhaps necessary to make good an allegation in the particular circumstances of that case. It is easy to conflate what is sufficient for the case at hand to what is universally required for all cases – or at least for a judgment to be read in that more general or universal way.
This dilemma may be manifested in the way that the case was run, relevantly, by the ACCC: see the reasoning in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2019] FCAFC 83 at [61]-[63] (Middleton, Perram and Bromwich JJ). In that case, the ACCC failed in its argument to the effect that something that was sufficient in the abstract had been erroneously elevated to something necessary, not because the Court made a finding to the opposite effect – their Honours expressly declined to decide that point – but rather because of the way that the ACCC’s case in Colgate-Palmolive was run at trial.
The primary judge’s reasoning and conclusion that the ACCC’s claim that BlueScope was liable to pay a pecuniary penalty pursuant to s 76(1) of the Act in respect of its conduct in attempting to induce OneSteel to contravene s 44ZZRJ of the Act by arriving at an understanding containing a cartel provision was correct. BlueScope’s arguments that the primary judge erred in so concluding are rejected. Appeal ground 6 has not been made out.
Ellis ground 8: does the Court have the power to make a non-indemnification order?
Having ordered Mr Ellis to pay pecuniary penalties totalling $575,000 pursuant to s 76(1) of the Act (PJ order 5), the primary judge made the following order (PJ order 6):
Ellis is not to pursue any claim or accept any indemnity under any directors and officers insurance policy to which BlueScope or Ellis is a party or an insured for payment or reimbursement of any part of the pecuniary penalty the subject of order 5.
The primary judge and the parties called that order the non-indemnification order.
Mr Ellis’ appeal ground 8 is, in essence, that the primary judge erred in concluding that s 76 of the Act confers power on the Court to make the non-indemnification order.
The context for the making of the non-indemnification order was that there was evidence that BlueScope had taken out a Directors and Officers Liability Policy with an insurance company which the insurer was obliged to “pay to or on behalf of Insured persons any amount the Insured Person is legally obligated to pay as a fine or penalty, to the extent permitted by law”: PJ [161]. It was uncontentious that Mr Ellis was an Insured Person for the purposes of the policy.
The ACCC sought the non-indemnification order against Mr Ellis given his “central, ongoing and relentless role in the attempts to induce the price fixing understandings, his conduct during the investigation and trial, and his absence of contrition”: PJ [162]. The ACCC submitted before the primary judge that a non-indemnification order was “necessary to ensure that he [Mr Ellis] feels a ‘real sting or burden’ of any penalty ordered and that the penalty achieves the required deterrent effect”: PJ [162]. As for the power to make the order, the ACCC relied on the decision of the majority in the High Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; 262 CLR 157 (ABCC) concerning the cognate pecuniary penalty provision in the Fair Work Act 2009 (Cth) (s 546) and argued, by analogy, that s 76(1) of the Act included the power to make a non-indemnification order.
Mr Ellis opposed the making of the non-indemnification order on the basis that the decision in ABCC was distinguishable because it was concerned with the question whether one respondent (a union official) could be ordered to pay a pecuniary penalty personally and not seek or receive an indemnity from the other respondent (the union in question). It was not concerned with whether a respondent could seek or receive an indemnity from an insurer who was not a party to the proceeding. Mr Ellis also argued that the constructional issue in respect of s 76(1) of the Act was different to the issue in respect of s 546 of the Fair Work Act because the Act included s 77A, which provided that a body corporate must not indemnify an officer in respect of a pecuniary penalty. Mr Ellis also relied on the fact that the Act does not contain a provision like s 199B of the Corporations Act 2001 (Cth), which prohibits a company from paying a premium for a contract insuring an officer of the company against liabilities arising from, among other things, contraventions of certain provisions of that Act.
The primary judge accepted the ACCC’s submissions, rejected Mr Ellis’ submissions (PJ [164]-[173]) and found that the Court had power under s 76(1) of the Act to make the non-indemnification order: PJ [174]. His Honour found that it was appropriate to make the non-indemnification order: PJ [175].
Mr Ellis contends that the primary judge erred in concluding that the Court was empowered to make the non-indemnification order. His submissions largely mirrored those that he advanced before the primary judge.
The primary judge did not err in concluding that the Court has powers to make personal payment or non-indemnification orders of the sort he made against Mr Ellis. The Court has the power to make such orders essentially for the reasons given by the majority in ABCC. While ABCC involved a different statutory provision and some different circumstances, the reasoning of the majority in that case applies equally to s 76(1) of the Act and the statutory scheme in the Act in relation to pecuniary penalties more generally. The points of distinction relied on by Mr Ellis have no real significance.
In ABCC, the primary judge in this Court had made pecuniary penalty orders against a union and one of its officials for contravening a civil remedy provision of the Fair Work Act and made an order that the union must not indemnify the official against the pecuniary penalty orders made against him. The primary judge held that the Court was empowered to make such an order by s 545 of the Fair Work Act, which relevantly provided that the Court may make any order it considered appropriate if the Court was satisfied that a person had contravened a civil remedy provision. The Full Court of this Court allowed an appeal from that order, holding that s 545 of the Fair Work Act did not empower the Court to make such an order. That finding was unanimously upheld in the High Court.
The majority in the High Court, however, held that the power in s 546 of the Fair Work Act to make a pecuniary penalty order carried with it an implied power to make an order that a person against whom a pecuniary penalty order is made pay that penalty and not seek or accept an indemnity from a co-contravenor. Section 546(1) of the Fair Work Act is in relevantly the same terms as s 76(1) of the Act. It relevantly provides that the Court “may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”. While the finding by the majority was directed to whether the Court was empowered to make an order that a contravenor not seek or accept an indemnity from a co-contravenor, that was simply a product of the fact that the order in question involved co-contravenors. Careful attention to the reasoning of the majority judges reveals that the finding was not limited to the power to make a non-indemnification order as between co-contravenors, but extended to orders requiring a contravenor pay a pecuniary personally, or not seek or accept an indemnity from a third party.
Chief Justice Kiefel observed (at [40]) that “[e]very court possesses jurisdiction arising by implication, upon the principle that a grant of power carries with it everything necessary for its exercise” and that the term “necessary” in that context means “reasonably required or legally necessary to the accomplishment of what is specifically provided to be done by the statute”. Her Honour reasoned (at [41]) that it was difficult to see how an order requiring a pecuniary penalty to be paid by the union official and not the union “in order that the effect of the penalty to a much greater extent be felt by him … could not be seen as necessary to the exercise of the power given by s 546(1), particularly when regard is had to its principal, if not its only, purpose”.
The Chief Justice’s reference, in that context, to the purpose of the power to impose a pecuniary penalty was a reference to the principle that the principal, if not only, purpose of imposing a pecuniary penalty is to deter the contravenor and others from engaging in the same or similar contravening conduct: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 at [55]. Her Honour concluded (at [44]) that a “personal payment order” (an order preventing the contravenor from seeking indemnification with respect to the payment of the penalty – see [7]) “adds only to the effect which is felt by a contravenor” and thereby “seeks to accomplish the purpose for which the power is given by s 546(1) within the limits of what is necessary to its effective exercise”. It followed, her Honour held (at [49]), that the “power to make a pecuniary penalty order given by s 546(1) carries with it a power to make the person the subject of such an order pay the penalty personally”.
It may be observed that none of that reasoning hinged on, or was in any way influenced by, the fact that the personal payment order in question in ABCC prevented one contravenor from seeking or accepting an indemnity from a co-contravenor. The reasoning focussed on the fact that the purpose of imposing a penalty is to deter, and that an order requiring a person to personally pay a penalty (and not seek or accept an indemnity from anyone else) may be necessary to ensure that the power to impose a pecuniary penalty is effectively exercised. The same can be said in respect of the reasoning in the joint judgment of the other majority judges, Keane, Nettle and Gordon JJ.
Like Kiefel CJ, Keane, Nettle and Gordon JJ noted (at [115]) that from the express conferral of power in s 546 of the Fair Work Act to order a person to pay a pecuniary penalty “arises an implied power to make such other orders as are necessary for or facilitative of the type of orders expressly provided for”. Their Honours reasoned (at [118]) that it followed that the express grant of power in s 546 of the Fair Work Act to impose a pecuniary penalty carried with it an “implied power to make such further orders as are reasonably required for, or legally ancillary to, the accomplishment of the deterrent effect that the penalty is calculated to achieve” and (at [119]) “to achieve the effect which a pecuniary penalty is calculated to achieve by ordering that a contravenor pay the penalty personally”.
The reasons of Keane, Nettle and Gordon JJ also included the following (at [120]):
Given that s 546 expressly empowers the court to order a specific person to pay a pecuniary penalty, it is no stretch to accept that there is power in s 546 to make orders designed to ensure that the person against whom the order is made cannot avoid the incidence of the penalty. It is to take too narrow a view of the purpose of s 546 to regard the provision as being concerned with no more than that an amount of money be paid by someone in discharge of a debt created by order of the court. Section 546 is not about the creation and collection of debts; it is about penalising a contravention of the law. It is to take too narrow a view of the extent of the power conferred by s 546 to deny that it extends to the making of orders designed to ensure that a particular person cannot defeat the purpose of an order that the person pay the penalty imposed on him or her.
As can be seen, that reasoning applies to any form of order, directed to the contravenor in question, that the contravenor personally pay the pecuniary penalty and not seek or accept an indemnity from anyone else. It is not limited to orders preventing a contravenor from seeking or accepting an indemnity from a co-contravenor.
It follows that, while the decision in ABCC was factually concerned with whether the Court could order that a contravenor (the union official) not seek or accept an indemnity or payment of the penalty imposed on him from his co-contravenor (the union), the principle enunciated by the majority was not so limited. Mr Ellis’ submission to the contrary is rejected.
There is no other reason why the reasoning in ABCC could be said to be inapplicable to s 76(1) of the Act. As already noted, s 76(1) of the Act is in relevantly similar terms to s 546(1) of the Fair Work Act. Mr Ellis’ contention to the contrary focussed on the fact that the statutory scheme in relation to the imposition of pecuniary penalties under the Act included s 77A(1) which provides as follows:
77A Indemnification of officers
(1)A body corporate (the first body), or a body corporate related to the first body, must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer of the first body:
(a) a civil liability;
(b)legal costs incurred in defending or resisting proceedings in which the person is found to have such a liability.
Penalty: 25 penalty units.
As can be seen, s 77A(1) of the Act essentially prohibits a company (or related company) from indemnifying a person against a civil liability that the person incurred as an officer of the company. It would, in the present case, prohibit BlueScope from indemnifying Mr Ellis against the pecuniary penalty imposed on him. It would not, however, prohibit Mr Ellis from seeking or accepting an indemnity in respect of the pecuniary penalties under the insurance policy referred to earlier. Nor would it (or did it) prohibit BlueScope from taking out, or paying the premiums in respect of, the insurance policy which relevantly covered Mr Ellis.
The Fair Work Act does not include a provision like s 77A of the Act. That is, Mr Ellis submitted, another point of distinction between the constructional issue in this case and the issue considered in ABCC.
It may be accepted, as Mr Ellis submitted, that the process of construing s 76(1) of the Act includes considering the statutory text in the context of the statutory scheme of which it forms part and that an implied statutory power must cohere with that statutory scheme. Accordingly, in construing s 76(1) of the Act, s 77A of the Act cannot be set aside. Equally, it is necessary to have regard to other contextual considerations, including any relevant legislative history.
Section 77A was originally inserted in the Act which preceded it, the Trade Practices Act 1974 (Cth), by the Trade Practices Legislation Amendment Act (No 1) 2006 (Cth). The Explanatory Memorandum to the Trade Practices Legislation Amendment Bill (No 1) (2005) stated as follows in relation to the insertion of s 77A in the Trade Practices Act:
Part 3 — Indemnities
… Part 3 of this Schedule addresses recommendation 10.2.3 of the Dawson Review. To that end, corporations will be prohibited from indemnifying officers against pecuniary penalties imposed, and legal costs incurred, as a result of proceedings pursuant to section 76 for a contravention of Part IV of the TP Act. Such a prohibition is consistent with the prohibition in section 199A of the Corporations Act 2001.
As adverted to in that statement, s 199A of the Corporations Act is in relevantly the same terms as s 77A of the Act. Mr Ellis submitted that it was of significance that the Explanatory Memorandum did not refer to s 199B of the Corporations Act, which, as noted earlier, prohibits a company from paying a premium for a contract insuring an officer of the company against liabilities arising from, among other things, contraventions of certain provisions of the Corporations Act. Indeed, he went so far as to contend that there was a deliberate legislative choice to limit the application of s 77A to the scope of operation of s 199A and not s 199B of the Corporations Act. That contention rather overstates the matter and it is at best doubtful whether such an inference can be drawn.
As the statement in the Explanatory Memorandum notes, the insertion of s 77A followed a recommendation made in the 2003 Report of the Trade Practices Review Committee, commonly referred to as the “Dawson Review” as one of its lead authors was Sir Daryl Dawson, AC KBE CB. The relevant recommendation in the Dawson Review was as follows:
The New Zealand legislation also prohibits a corporation from indemnifying a director, servant or agent of the corporation against liability for payment of a pecuniary penalty imposed for price fixing. The Committee considers that there should be a similar provision in our Act, but that it should extend to indirect as well as direct indemnification and should apply generally to pecuniary penalties imposed for breaches of Part IV.
As can be seen, the recommendation was that a provision similar to a provision in New Zealand’s equivalent to the Trade Practices Act (the Commerce Act 1986) should be included in the Trade Practices Act. The recommendation said nothing about the existence of an equivalent provision in the Corporations Act, let alone recommend that a provision like s 199B should or should not be inserted in the Act. The available and preferable inference, in the circumstances, was that no consideration was given to insertion of a provision like s 199B of the Corporations Act, either by the Dawson Review or the legislature when s 77A was inserted into the Trade Practices Act. That is hardly surprising given that s 199B of the Corporations Act is a bespoke provision which essentially prevents a company from indemnifying its officers in respect of breaches of duties owed by officers to the company itself.
In any event, the presence of s 77A in the Act, and the absence of a provision like s 199B of the Corporations Act, does not compel a conclusion that s 76(1) of the Act does not carry with it an implied power to make a personal payment or non-indemnification order of the sort that the primary judge made against Mr Ellis. The majority in ABCC considered the relevance of provisions like s 77A of the Act to the constructional task, albeit in the context of the construction of s 546 of the Fair Work Act. The appellant in ABCC had argued that the fact that Parliament had determined that it was necessary to provide an express prohibition of indemnification in the Act and the Corporations Act indicated that a similar express prohibition in the Fair Work Act would be necessary to achieve the same result. That argument was rejected. Chief Justice Kiefel stated (at [46]):
The prohibitions in the statutes mentioned [s 77A of the Act and s 199A of the Corporations Act] reflect a policy which the legislature has determined should be applied universally. It is not suggested that such a policy is to be found in s 546(1). These statutory provisions do not provide assistance in determining the question of construction with respect to s 546(1), as to whether a power may be implied in order to render a pecuniary penalty order effective.
Justices Keane, Nettle and Gordon similarly observed (at [128]) that s 77A of the Act and s 199A of the Corporations Act “are grounded in policy considerations applicable in all cases falling within the ambit of those sections regardless of the circumstances” and “apply whether or not it is considered that it is otherwise necessary or desirable that indemnity be prohibited”. Their Honours reasoned that it followed that those provisions contributed “nothing to the task of determining the scope of the power implicit in s 546 to accomplish the specific remedy imposed by a pecuniary penalty order according to the circumstances of each case”. While those observations were made in respect of construing s 546 of the Fair Work Act, the same reasoning applies in respect of the construction of s 76(1) of the Act. The fact that the Act does not contain a provision like s 199B of the Corporations Act is of no moment for essentially the same reasons. Like s 77A of the Act and s 199A of the Corporations Act, s 199B of the Corporations Act is undoubtedly grounded in policy considerations and contributes nothing to the task of determining the scope of the implied powers that are reasonably required or legally necessary to the accomplishment of the power in s 76(1) of the Act.
The reasoning of the majority judges in ABCC concerning the relevance of s 77A of the Act and like provisions applies to the constructional issue in respect of s 76(1) of the Act, even though the issue in ABCC was the proper construction of s 546 of the Fair Work Act.
It might also be added that s 77A and like provisions, such as ss 199A and 199B of the Corporations Act are different in another respect to the implied power in s 76(1) of the Act to make a personal payment or non-indemnification order. Unlike personal payment orders and non-indemnification orders, which are directed to the person upon whom the pecuniary penalty has been imposed, s 77A of the Act and ss 199A and 199B of the Corporations Act are directed at a third party, namely a company of which the person is an officer. That company need not be a co-contravenor. The prohibitions in those provisions may ultimately have the effect that it is more likely that the contravening officer will pay the pecuniary penalty himself or herself, though they may not necessarily secure that result and they do not, in terms, directly require the contravening officer to personally pay the penalty.
In any event, the reasoning in ABCC relevantly applies and Mr Ellis’ arguments based on s 77A of the Act and ss 199A and 199B of the Corporations Act have no merit and should be rejected.
Two final points should be noted. First, many of Mr Ellis’ arguments in support of the proposition that s 76(1) of the Act does not carry with it an implied power to make a personal payment or non-identification order echo the reasoning of the dissenting judge in ABCC, Gageler J (as the Chief Justice then was). Mr Ellis made the formal submission that Gageler J was correct in his reasoning in ABCC and, by implication, the majority judges were incorrect. It is unnecessary to address that formal submissions other than to note that no persuasive argument was advanced as to why this Court should not follow the reasoning of the majority in ABCC and that, for the reasons already given, that reasoning applies equally to the circumstances of this case.
Second, Mr Ellis submitted that there was evidence before the primary judge that he had limited financial means to pay a pecuniary penalty. It followed, so it was submitted, that that the non-indemnification order rendered the pecuniary penalty order less efficacious, presumably because it made it less likely that the penalty would in fact be paid.
It may be accepted that evidence in relation to Mr Ellis’ financial circumstances was adduced at the penalty stage of the proceeding. The primary judge considered that evidence: PJ [142]-[155]. It would be fair to say that the primary judge was somewhat sceptical in respect of Mr Ellis’ contention that he had limited access to financial resources to pay any pecuniary penalty. His Honour inferred that Mr Ellis “currently owns no assets by reason of his own financial planning choices, and that such wealth that he has gained over the years is held by other members of his family”: PJ [155]. His Honour also accepted that whatever pecuniary penalty he imposed, it would “only be paid if others, no doubt at Mr Ellis’ request, choose to make funds available for that purpose”: PJ [155].
It does not necessarily follow, however, that the imposition of a pecuniary penalty on Mr Ellis was somehow rendered less efficacious by the making of the non-indemnification order. The pecuniary penalty order would undoubtedly be denuded of any sting or burden if Mr Ellis was able to claim or accept indemnification pursuant to an insurance policy. It is also difficult to see how the penalty would have any deterrent effect in those circumstances. If Mr Ellis was not able to claim or receive any such indemnification, the pecuniary penalty would still carry some sting or burden for Mr Ellis. It would also have a deterrent effect, not only on Mr Ellis himself, but on others in like circumstances to him.
In any event, the argument based on Mr Ellis’ financial circumstances has no significance to the issue of construction to which this appeal ground is directed. It has no bearing on the question whether the primary judge had the power to make the non-indemnification order. The question of whether the primary judge’s exercise of the discretion to make the order somehow miscarried is beyond the scope of the appeal ground.
Mr Ellis failed to establish or demonstrate that the primary judge erred in concluding that s 76(1) of the Act confers power on the Court to make an order that he be prevented from pursuing any claim or accepting any indemnity under any insurance policy to which he or BlueScope was a party or insured for payment or reimbursement of any part of the pecuniary penalty imposed on him. Mr Ellis’ appeal ground 8 must accordingly be dismissed.
DISPOSITION
The appeals are to be dismissed and the appellants are to pay the costs of the ACCC, as agreed or taxed.
I certify that the preceding five hundred and sixty-eight (568) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Wigney, Bromwich and Halley. Associate:
Dated: 29 August 2025
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