Conference & Exhibition Organisers Pty Ltd v The Australian Beauty Trade Suppliers Ltd

Re: CONFERENCE AND EXHIBITION ORGANISERS PTY LIMITED
And: THE AUSTRALIAN BEAUTY TRADE SUPPLIERS LIMITED
No. G156 of 1990
FED No. 438
Trade Practices
96 ALR 439

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J.(1)

CATCHWORDS

Trade Practices - whether respondent trade association a 'trading corporation' within the meaning of the Trade Practices Act 1974 - circumscribed ambit of respondent's activities - significance of annual receipt of moneys from independent organiser of trade show - relevance of trading activities of members

Trade Practices Act 1974 - s 4, s 45

Commonwealth Constitution - s 51(xx)

The Queen v Federal Court of Australia; Ex parte The Western Australian National Football League (Incorporated) (1978-79) 143 CLR 190

State Superannuation Board v Trade Practices Commission 44 ALR 190

Hughes v Western Australian Cricket Association (Inc) 69 ALR 660

McCarthy v Australian Rough Riders Association Incorporated 1988 ATPR 40-836

HEARING

SYDNEY

#DATE 24:8:1990

Counsel for the Applicant: R. Cameron
Instructed by: Lee, Hourigan and Brooks

Counsel for the Respondent: I. Faulkner
Instructed by: Hunt and Hunt

ORDER

1. Declares that paragraph 4 and 8 of the respondent's document styled "Summary and Definition of the Rules, Regulations and Code of Ethics of the Australian Beauty Trade Suppliers Ltd" insofar as those paragraphs purport to operate and bind the members of the trade association named the "Australian Beauty Trade Suppliers Ltd" are void and have no effect.

2. Declares that the members of the aforesaid association are free and able to participate in any trade exhibition organised by the applicant or any other person.

3. Orders that the respondent pays the applicant's costs.

Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

JUDGE1

The applicant company has as its principal trading activity the organising and conducting of conferences and exhibitions and the provision of advice in relation thereto. The respondent company is a public company limited by guarantee. It operates as a trade association which provides advice to members, maintains a code of ethics, and arranges for a professional organiser to organise an annual trade show for the beauty salon industry. It appears to have no other relevant activities. It is clearly established that, even though no express provision is made for this in its memorandum of association, the provision of the annual trade show is its most significant activity.

It has about thirty-seven members who pay an annual membership fee of $100. It conducts its operation on the basis of voluntary members' labour.
The respondent has arranged an annual trade show in Sydney each year since 1982. Until this year, it appears that no other such shows were held in Australia. However, this year another trade association operating in the same industry, the Australian Beauty Association, proposed to organise a trade show in Melbourne on 16 and 17 June. It retained the applicant company to organise the show for it. The question emerged whether members of the respondent could exhibit at this show. This, in turn, depended upon whether certain rules of the respondent could operate to prevent its members so exhibiting. By the time the matter came on for hearing, the question of exhibition at the June show was no longer significant. Events had overtaken it. However as the applicant will be organising other such shows in the future for the Australian Beauty Association, it is desired that the underlying question be determined.
It is clear that members of the respondent who exhibit at a trade show organised other than through the respondent will be in breach of clause 4 of the respondent's rules. These rules are embodied in a document styled "Summary and Definition of the Rules, Regulations and Code of Ethics of the Australian Beauty Trade Suppliers Limited" ("the rules"). Clause 4 of the rules provides as follows:

"Members of the A.B.T.S. SHALL NOT exhibit their products at any other Trade Show or Exhibition (by any name) directed toward the Beauty Salon Industry (wholly or in part) organized by other than the A.B.T.S. during the Membership period. Private company Seminars are, of course, permitted. A Trade Show or Exhibition shall be defined for these purposes as being a display of products by company(s) at a function organized by other than the A.B.T.S. for the purpose of selling, obtaining orders or publicizing products to function attendees from the Beauty Salon Industry. This includes attendance or participation at that function by the Member or any of his staff or agents to obtain sales, orders or publicity by any means whatsoever via that function, including a concurrent display at another venue by the Member aimed at the attendees of that function."

Clause 8 of the rules provides as follows:

"Any infraction of the herein-contained or of the Articles of Association by any Member shall render that Member, and therefore his/her Company and products, liable to expulsion from Membership in the A.B.T.S. and therefore exclusion from exhibiting at the ensuing A.B.T.S. Trade Exhibition. In this case there will be no refunds of monies paid by the ex-member, either to the A.B.T.S. or to their Trade Exhibition Organizer.

Members shall abide by the Rules of the A.B.T.S. Trade Exhibition as set out by the A.B.T.S. Trade Exhibition Organizer, while acknowledging that any Contract or Agreement entered-into

(sic) with the Organizer is conditional upon approval by the current A.B.T.S. Committee who shall have the right to negate any such Contract or Agreement for any irregularity or infraction by the Member of the herein- contained. Members must acknowledge that the Trade Exhibition Organizer is contracted by the A.B.T.S. and that the Organizer is at all times subordinate to the current A.B.T.S. Committee in all matters relating to the A.B.T.S. Trade Exhibition and A.B.T.S. Membership."

Clause 11 provides as follows:

"Adherence to the herein-contained constitutes a Condition of Membership of the A.B.T.S."

The questions for determination by the court have been considerably narrowed by agreement between the parties. There is now no contest that these provisions would constitute a breach of s 45 of the Trade Practices Act 1974 ("the Act") as being relevantly "exclusionary" or as having "the purpose or effect of substantially lessening competition". The sole issue for determination is whether the section applies to the respondent company, it being contended by it that it is not a "corporation" within the meaning of the section.
"Corporation" is defined in the Act (s 4(1)) as meaning "a body corporate that...(b) is a trading corporation formed within the limits of Australia...".
"Trading corporation" is defined as meaning "a trading corporation within the meaning of paragraph 51(xx) of the Constitution".
Consequently, the matter for determination by the court is whether the respondent is a "trading corporation" as so defined.
Before considering the authorities bearing on this question, it is convenient to consider what the evidence shows to be the activities of the respondent.
The members of the respondent are all suppliers to the trade referred to as the beauty industry. They are wholesalers to individuals, partnerships and companies who conduct businesses such as beauty salons and retail to the public what are commonly described as beauty products. As such, the members are clearly enough engaged in trading enterprises. The respondent, however, does not itself engage in any such enterprises. It runs the association and holds regular meetings, the minutes of many of which are in evidence before me. It, obviously, acts as a monitor in respect of the adherence by its members to its rules. It may be said that this function is intended to ensure that the members, who clearly enough constitute a large proportion of beauty trade suppliers, act, in general terms, in what is perceived to be their common interest by (inter alia) not belittling each other in the marketplace. It is also quite clear that the main function of the association is the organisation, annually, of a trade exhibition at which members are required to exhibit and at which non-members may exhibit, but on less favourable terms.
The respondent has never directly organised the exhibition. It has always engaged a professional conference organiser. It has established a strong personal relationship with a particular organiser, a Ms Cummings, who has, apparently, performed this task in a manner which has earned the approval of the respondent and its members. Beyond requiring its members to deal directly with Ms Cummings in relation to the annual exhibition, the respondent has played no active role in its organisation. It is Ms Cummings, and previously an organisation with which she was associated, that allocated space to members in the exhibition building, saw to appropriate advertising and promotion, collected rental payments from the exhibitors and entrance fees from the public, and also attended to all expenditures. Occasionally the respondent itself played a minor role in promotion but these occasions were insufficient, in my view, to affect the general proposition that the organiser basically attended to the running of the exhibition. In particular, all contracts made in relation to the exhibition both on the promotional and the space-hiring side were made with the organiser and not with the respondent. However, it must be noted that there was very close liaison, indeed, between the respondent and the organiser as to the manner of conduct of the exhibition. The organiser regularly attended the relevant meetings of the respondent, where the running of the exhibition was discussed and any appropriate resolutions passed.
The balance sheets and other financial records of the respondent for recent years were in evidence. They clearly indicate that the respondent has received from the organiser at the conclusion of each exhibition an amount of money which is equivalent to about 10% of the nett proceeds of the exhibition. These amounts are shown as "members' promotional levies". They constitute the greater part of monies received by the respondent. Together with member's subscriptions they are used for the respondent's purposes including matters relating to the next exhibition. Mr. Robards, who gave evidence on behalf of the respondent, valiantly sought to characterise these receipts as being merely regular but adventitious gifts made by the organiser, at her discretion, to mark the fact that the exhibition had been successful in circumstances where there were some surplus monies after payment of expenses and provision of an adequate level of remuneration to herself. Mr. Robards said that although there was no obligation on the organiser to make these payments, the respondent had come to, in effect, expect and depend upon them.
I am unable to accept, on the balance of probabilities, that these payments fell into such a category. I consider that they were payments made to the respondent in consideration of its granting to the organiser the right or privilege of conducting the exhibition with a view to her making a profit. In other words, I consider that the respondent entered into one significant commercial transaction per year, with some minor ones occasionally associated with it.
Are these findings sufficient, however, to require that the respondent be regarded as a trading corporation within the meaning of the Act? I have not found this easy to decide.
The question of what constitutes a corporation, a "trading corporation" was considered in The Queen v Federal Court of Australia; Ex parte The Western Australian National Football League (Incorporated) and Another (1978-79) 143 CLR 190. It is not necessary to consider the facts of this case which, in my view, are significantly different from the present case. However, the case obviously contains important statements of principle to which I shall now make reference.
Barwick C.J., in dealing with the approach to be made to the determination of a whether corporation could properly be described as a trading corporation under the Constitution said (at p 208-209):

"The only sure guide to the nature of the company is a purview of its current activities, a judgment as to its nature being made after an overview of all those activities. I remain of the firm conviction that for constitutional purposes a corporation formed within the limits of Australia will satisfy the description "trading corporation" if trading is a substantial corporate activity. ...(O)nce it is found that trading is a substantial and not a merely peripheral activity not forbidden by the organic rules of the corporation, the conclusion that the corporation is a trading corporation is open. ...

Trade for constitutional purposes cannot be confined to dealing in goods or commodities. Its full parameters may be difficult of definition. But the commercial nature of an activity is an element in deciding whether the action is in trade or trading."

Mason J. (at p 233) said: "`Trading corporation' is not and never has been a term of art or one having a special legal meaning... Essentially it is a description or label given to a corporation when its trading activities form a significantly sufficient proportion of its overall activities as to merit its description as a trading corporation."
Again, his Honour said (at p 235): "The financial revenue of the Leagues is so great and the commercial means by which it is achieved so varied that I have no hesitation in concluding that trading constitutes their principal activity. In saying this I treat all their activities which I have listed and which produce revenue as trading activities. I do not limit the concept of trading to buying and selling at a profit; it extends to business activities carried on with a view to earning revenue."
His Honour also said (at p 234): "Not every corporation which is engaged in trading activity is a trading corporation. The trading activity of a corporation may be so slight and so incidental to some other principal activity, viz. religion or education in the case of a church or school, that it could not be described as a trading corporation. Whether the trading activities of a particular corporation are sufficient to warrant its being characterised as a trading corporation is very much a question of fact and degree."
This case, which is generally referred to as Adamsons' case, was considered again by the High Court in State Superannuation Board v Trade Practices Commission 44 ALR 1, where Mason, Murphy and Deane JJ. said, in respect of it, (at p 14) that the decision was "of importance for two reasons."

"First, the majority of the court (Barwick C.J., Mason, Jacobs and Murphy JJ.), rejecting the argument that the purpose for which a corporation is formed is the sole or principal criterion of its character as a trading corporation, concluded that the relevant character of the football leagues and the football club was to be ascertained by reference to their established activities (see 143 CLR 208-11, 233-7, 237 and 239-40). In adopting this view their Honours disapproved the approach taken by the majority in St George which placed emphasis on the purpose for which the County Council was formed (see, for example, 130 CLR at 562). Secondly, the judgments of the majority in Adamson make it clear that, in having regard to the activities of a corporation for the purpose of ascertaining its trading character, the court looks beyond its `predominant and characteristic activity' (cf at 213 per Gibbs J.). Barwick C.J. (at 208) spoke of making a judgment `after an overview' of all the corporation's current activities, the conclusion being open that it is a trading corporation once it is found that `trading is a substantial and not a merely peripheral activity'. Mason J. said that it `is very much a question of fact and degree' (at 234), having earlier stated that the expression is essentially: `... a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation' (at 233). Murphy J. said (at 239): `As long as the trading is not insubstantial, the fact that trading is incidental to other activities does not prevent it being a trading corporation.' Indeed, it was essential to the majority's approach and to its rejection of St George that a corporation whose trading activities take place so that it may carry on its primary or dominant undertaking, eg as a sporting club, may nevertheless be a trading corporation. The point is that the corporation engages in trading activities and these activities do not cease to be trading activities because they are entered in to in the course of, or for the purpose of, carrying on a primary or dominant undertaking not described by reference to trade. As the carrying on of that undertaking requires or involves engagement in trading activities, there is no difficulty in categorizing the corporation as a trading corporation when it engages in the activities. Indeed, we would go on to say that there is nothing in Adamson which lends support for the view that the fact that a corporation carries on independent trading activities on a significant scale will not result in its being properly categorized as a trading corporation if other more extensive non-trading activities properly warrant its being also categorized as a corporation of some other type. If there be any difference in the comments made by the majority in Adamson it is one of emphasis only..."

See also Hughes v Western Australian Cricket Association (Inc) and Others 69 ALR 660, per Toohey J. at 671 et seq, and also McCarthy and Others v Australian Rough Riders Association Incorporated and Another 1988 ATPR 40-836, per Spender J. at pp 49-025 and 49-028.
What result is produced in the present case by the application of these principles to the facts that I have found? In the first place, I am satisfied that the commercial activity of granting to the organiser the right or privilege of running the exhibition as a profit-making venture in consideration of the provision to the respondent of a sum of money from those profits, consistently calculated to be around 10%, is relevantly a trading activity. I consider that a reference in Hughes (per Toohey J. at p 672) to "trading" as denoting "the activity of providing, for reward, goods or services" is not intended to be an exclusive definition. It is clear from Adamson that wider commercial activities can attract the description of "trading". It may well be, of course, that the expression used in Hughes was intended to have a wider import than would appear at first sight. If regard is paid to the definition of services in s 4 of the Act, then, in my view, it could properly be held that the respondent was providing a "service" to the organiser, for reward, and was thus engaged in an act of trading within that definition of the term.
In any event, whether one adopts the approach of characterising this activity of the respondent as being clearly of a commercial nature, or whether one sees it as the provision of a "service" within the expanded statutory meaning, the result, in my view, is the same: the activity constitutes "trading" by the respondent.

Is this annual act of trading sufficient to constitute the respondent a "trading corporation"? if one looks simply to the annual accounting records of the respondent, it is clear that the receipt of these monies from the organiser of the exhibition provides it with the majority of its funds. I regard this as a significant but not necessarily determinative factor. It is clear that the respondent is not properly to be regarded as engaged in running a profit-making venture. Insofar as it receives money in the course of its operations, that money is, obviously, to be utilised in the pursuit of its main purposes, namely the advancement of the business interests of its members, particularly by the provision, through an outside organiser, of the annual exhibition. However, it must be borne in mind that a corporation can properly be characterised as a trading corporation even if its trading activities are ancillary to non-trading purposes, provided that the trading activities can properly described as significant and not merely peripheral.
I am satisfied that the activity under consideration can properly be described as a significant and not merely peripheral activity of the respondent. Is this enough to attract to the respondent the label of a "trading corporation"? I have found this question difficult to answer in light of the statements in the authorities. The difficulty in the way of attaching the label is, in my view, the generally small and circumscribed ambit of the respondent's activities. If one conjures up a concept of a "trading corporation" within the meaning of the Constitution one sees an organisation which, even if it has a substantial number of non-commercial activities, nevertheless has a level of commercial activity which could, in itself, be described as of significant size. This is, of course, a different concept from a company which has a commercial activity which forms a significantly high proportion of its total activity but has such a generally low level of activity that its commercial activity, although being of proportionate significance, could not in any real sense be described as a substantial activity. Putting this question in terms of the present case, is it possible to describe the respondent as a "trading corporation" within the meaning of the Constitution, simply because it engages in one trading transaction a year which produces a high proportion of its funds but which, in itself, could not be described as being in any sense significant or substantial? I find this a most difficult question, but in this event, I do not have to decide it, as I am of the view, that the commercial activity of the respondent should not be seen as confined to this transaction.
It was submitted on behalf of the applicant that a wider view should be taken of the activities of the respondent. This was put firstly on the basis that the actual commercial venture of the running of the exhibition could be regarded as a trading activity of the respondent, either because the organiser should be regarded as conducting the exhibition as agent for the respondent or because she and the respondent could properly be regarded as being participants in a joint venture of running the exhibition. I do not accept these submissions. In my view the facts indicate, clearly enough, that the organiser was an independent contractor in relation to the exhibition.
As I understand it, however, a further basis was put for seeing the respondent as being significantly engaged in trading activity. It is a corporation whose members are undoubtedly traders and whose total commercial endeavours account for a very large proportion of the trade in the beauty industry. Clearly they do not perform any trading activities on behalf of the respondent. However, were it not for their trading activities, the respondent would not have been called into being. It exists to monitor those activities, to render advice in relation to them, to regulate them by the imposition of rules which are relevantly exclusionary and anti-competitive, and to further them by the making of necessary arrangements on their behalf for an outside organiser to conduct an annual trade exhibition in which the members can undertake advantageous trading activities on their own account. Even though those trading activities are not in any sense conducted on behalf of the respondent, it is through those trading activities, which include necessary payments to the organiser for the hiring of exhibition space and the like, that the respondent receives the major portion of its funds which enable it to continue its activities.
These considerations lead, in my opinion, to the result that the respondent can properly be viewed as a corporation which exists solely because of the very significant trading activity of its members and for the purpose of assisting, monitoring and regulating those activities and entering into arrangements on behalf of its trader-members for the purpose of advancing their trade. In the process of performing this latter function it also engages in one clear act of trade itself which produces for it the greater part of its funding. Does the contribution of these matters suffice to make it a trading corporation?
I consider that the trend of authority, appearing form the passages cited above, is against the application of strict juristic categories in determining whether the description "trading corporation" fits a particular company. I think the cases sufficiently indicate that the matter is one of fact and degree and can be approached on the basis of a broad impression gained from a consideration of the general nature of the corporation's activities in the commercial setting in which it conducts them. It is perfectly clear that the respondent is a corporation which is able, under its rules, to produce situations in an industry which the Act is directed at preventing. Although its actual trading activities can only be regarded as insubstantial in themselves, they are, in my view, sufficient, when seen in the whole framework of circumstance in which they occur, to enable the respondent to be characterised as a trading corporation. I find it to be so.
The result is that I hold that the respondent's rules set out above are in breach of s 45 of the Act. I accordingly make declarations in accordance with paragraphs (A) and (B) of the application and I order the respondent to pay the applicants costs.

[1990] FCA 438

24 AUGUST 1990