Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd

[1982] FCA 193

Re: DANDY POWER EQUIPMENT PTY. LTD. and DANDY POWER PTY. LTD.
And: MERCURY MARINE PTY. LTD. (1982) 64 FLR 238
No. VG 20 of 1978
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Smithers J.(1)

CATCHWORDS

Trade Practices - exclusive dealing - supply of goods on conditions - refusal to supply goods - standard of proof - whether engaging in conduct has the purpose or has or is likely to have the effect of substantially lessening competition - reduction of competition in a sector of the market - degree of lessening of competition constituting a substantial lessening - whether purpose objective - relevance of availability of alternative supplies - relevance of absence of intention of person to whom supplies refused to trade competitively - effect on wholesale market of withdrawal of goods from retail market.

Trade Practices Act (1974) ss.4A; 4G; 45D(1); 47(1),(2),(3), (10),(12) and (13); ss.76; 82; 87.

Income Tax Assessment Act (1936) s.260.

Trade Practices - Exclusive dealing - Supply of goods on conditions - Refusal to supply goods - Standard of proof - Whether engaging in conduct had purpose or effect or was likely to have effect of substantially lessening competition - Reduction of competition in sector of market - Degree of lessening of competition constituting substantial lessening - Whether purpose subjective or objective - Relevance of availability of alternative supplies - Relevance of absence of intention of person to whom supplies were refused to trade competitively - Effect on wholesale market of withdrawal of goods from market - Trade Practices Act 1974 (Cth), ss. 4A, 4G, 45D(1), 47(1), 47(2), 47(3), 47(10), 47(12), 47(13), 76, 82, 87 - Income Tax Assessment Act 1936 (Cth), s. 260.

HEADNOTE

On 18th March, 1974, the first applicant company Dandy Power Equipment Pty. Ltd. (Dandy Power Equipment) entered into a franchise agreement (the 1974 agreement) with the defendant company Mercury Marine Pty. Ltd. (Mercury Marine) which provided, inter alia, that Dandy Power Equipment would: "In a manner satisfactory to the distributor, . . . actively promote the sale of (Mercury) products and . . . adequately and consistently display and demonstrate the products." The terms of the 1974 agreement complied with the provisions of the Trade Practices Act 1974 (the Act). In 1976 the second applicant, Dandy Power Pty. Ltd. (Dandy Power) was incorporated as a Victorian company trading in outboard motors, boats and allied products, and purchased the business of Dandy Power Equipment who had entered into a franchise agreement for Mercury products with International Marine Pty. Ltd. in 1972. Mercury Marine subsequently accepted Dandy Power as its franchisee, although its 1974 agreement was with Dandy Power Equipment rather than with Dandy Power. In 1976 a Chrysler motor car dealer, Dandenong Chrysler Pty. Ltd. (Dandenong Chrysler) established a small section dealing in boats with Chrysler outboard engines in its showroom opposite Dandy Power's premises in Dandenong. Dandenong Chrysler also had a Mercury franchise for its Hastings branch to which it transported Mercury motors which had been delivered by Mercury Marine to Dandenong Chrysler's showroom in Dandenong.

In mid 1977 the managing director of both applicant companies complained to the respondent that Dandenong Chrysler was displaying Mercury outboard motors in its Dandenong showroom. In or about November 1977 Dandenong Chrysler lost its Chrysler dealership and asked the defendant for a Mercury franchise.

Dandy Power had negotiated for a Chrysler dealership with Chrysler Marine and by letter dated 19th December, 1977, Dandy Power notified Mercury Marine of its intention forthwith officially to stock Chrysler motors and spare parts. Late in 1977 Mercury Marine indicated to its dealers that it proposed to change the form of its 1974 agreement and requested them, including Dandy Power, to execute a new Mercury franchise agreement. The applicant companies contended that, in the absence of a duly executed replacement, the 1974 agreement would continue to operate as it was a written contract which could only be modified or amended by the written mutual consent of both parties to the agreement. On 16th January, 1978, Mercury Marine wrote to the applicant companies advising that pursuant to cl. 6(b) of the 1974 agreement Mercury Marine thereby gave thirty days' notice of the termination of the 1974 agreement. The applicant companies wrote to Mercury Marine on 23rd January, 1978, pointing out that Mercury Marine had not advised the outcome of the proposed termination of the 1974 agreement and asking if Mercury Marine intended to terminate the supply of motors, spare parts and associated services to Dandy Power from a certain date, if at all, and if so, requesting the basis of such proposed intention.

The applicants sought damages pursuant to s. 82(1) of the Trade Practices Act 1974 and other relief pursuant to s. 87 of the Act against the defendant in respect of alleged contraventions of the provisions of s. 47(1), by engaging in conduct specified in ss. 47(2) and 47(3) of the Act relating to exclusive dealing.

Dandy Power contended that in contravention of s. 47(2) of the Act Mercury Marine supplied Mercury products and services to its dealers on condition that they would not, or would not save to a limited extent, acquire outboard motors and services from a competitor.

Evidence showed that, prima facie, the mere fact that supplies were not obtainable from Mercury Marine would have had no effect on Dandy Power's performance as a competitor with Mercury Marine in the outboard motor market and thus would not sustain a claim for damages. It appeared from the evidence that the real reason for the termination of the 1974 agreement by Mercury Marine and the incidental refusal of supplies to Dandy Power was that the managing director of both applicant companies had been difficult in his relations with Mercury Marine concerning warranties and had made excessive demands for the servicing of Mercury motors.

Held: (1) The court was satisfied on the balance of probabilities that, within the meaning of s. 47(3) of the Trade Practices Act 1974, the defendant company refused to supply goods to the plaintiff on 16th January, 1978, for the reason that the plaintiff had acquired and had not agreed not to acquire goods being outboard motors from a competitor of the defendant, and had resupplied and had not agreed not to resupply such goods.

(2) The court was not satisfied that the extent to which at any relevant time potential purchasers of outboard motors were deprived of the opportunity to view Mercury motors at the plaintiff's premises by the defendant's refusal of supplies did constitute any substantial lessening in competition in any retail market for such goods or of any wholesale market.

Hecar Investments No. 6 Pty. Ltd. v. Outboard Marine Australia Pty. Ltd. (1982) 62 FLR 159, referred to.

(3) The court was not satisfied on the evidence that in terminating the plaintiff's franchise and refusal of supplies in consequence thereof, for the reason that the plaintiff had acquired or had not agreed not to acquire goods from a competitor of the defendant, or had resupplied or not agreed not to resupply such goods of the defendant, the engaging in that conduct had, at any time, the purpose of substantially lessening competition in any market ot that the defendant in so engaging in such conduct had such purpose.

Trade Practices Commission v. Tooth & Co. Ltd. (1979) 142 CLR 397, referred to.

(4) Whether the purposes referred to in s. 47(10) of the Act be the subjective purpose of the person engaging in the relevant conduct or the objective purpose to be ascribed to the engaging in of that conduct by reference to the character of so doing, the court was not satisfied that it had been shown that the engaging in the conduct proved had the purpose of substantially lessening competition in the relevant market.

Hecar Investments No. 6 Pty. Ltd. v. Outboard Marine Australia Pty. Ltd. (1982) 62 FLR 159; Tillmans Butcheries Pty. Ltd. v. Australasian Meat Industry Employees' Union (1979) 42 FLR 331; Cool & Sons Pty. Ltd. v. O'Brien Glass Industries Ltd. (1981) 35 ALR 445, referred to.

Chandler v. Director of Public Prosecutions (1964) AC 763; R. v. Jakac (1961) VR 367; Smyth v. The Queen (1957) 98 CLR 163; Newton v. Federal Commissioner of Taxation (1958) 98 CLR 1; Naumovska v. Minister for Immigration and Ethnic Affairs (1982) 60 FLR 267; Hecar Investments No. 6 Pty. Ltd. v. Outboard Marine Australia Pty. Ltd. (1982) 62 FLR 159, referred to.

Per Smithers J. Competition in a market is substantially lessened if the extent of competition in the market which has been lost is seen by those competent to judge to be a substantial lessening of competition.

Tillmans Butcheries Pty. Ltd. v. Australasian Meat Industry Employees' Union (1979) 42 FLR 331; Cool & Sons Pty. Ltd. v. O'Brien Glass Industries Ltd. (1981) 35 ALR 445, referred to.

Per Smithers J. Section 47(1) of the Trade Practices Act 1974 may be compared to the provision in s. 260 of the Income Tax Assessment Act 1936 where the question is whether a contract or arrangement purports to have a particular purpose or effect.

Slutzkin v. Federal Commissioner of Taxation (1977) 140 CLR 314; Tillmans Butcheries Pty. Ltd. v. Australasian Meat Industry Employees' Union (1979) 42 FLR 331; Peate v. Federal Commissioner of Taxation (1964) 111 CLR 443, referred to.

(5) The condition concerning trading in Marine outboards which was imposed by the defendant upon its dealers did not contravene the provisions of s. 47(2) of the Act.

Actors and Announcers Equity Association of Australia v. Fontana Films Pty. Ltd. (1982) 56 ALJR 366; R. v. Judges of the Australian Industrial Court; Ex parte C.L.M. Holdings Pty. Ltd. (1977) 136 CLR 235, referred to.

(6) Accordingly the application would be dismissed.

HEARING

Melbourne, 1982, April 19; May 28; September 14. #DATE 14:9:1982

APPLICATION.

The facts appear in the judgment.

J. Fajgenbaum and R. A. Finkelstein, for the applicants.

S. P. Charles Q.C. and J. A. Strahan, for the respondent.

Cur. adv. vult.

Solicitors for the applicants: Aleck Sacks & Son.

Solicitors for the respondent: Blake & Riggall.

J. D. WHITEHEAD

ORDER

1. The application be dismissed.

2. Costs reserved.

JUDGE1

These proceedings which were commenced by writ on the 22nd day of June 1978 came on for hearing on 19 April 1982. The second-named plaintiff Dandy Power Pty. Ltd. (hereinafter called the plaintiff) seeks damages pursuant to s.82(1) of the Trade Practices Act 1974 (the Act) and other relief pursuant to s.87 thereof against the defendant Mercury Marine Pty. Ltd. in respect of alleged contraventions by the defendant of the provisions of s.47(1), by engaging in conduct specified in sub-sections (2) and (3) of s.47 of the Act.

The conduct alleged to fall within the provisions of s.47(2) was that in the course of its wholesale business in the distribution and sale of its outboard motors, Mercruiser engines, relevant spare parts and accessories, the defendant supplied such goods to its dealers on the condition that such dealers would not, except to a limited extent, acquire similar goods from competitors of the defendant or resupply such goods so acquired.

The conduct alleged to fall within the provisions of s.47(3) comprised first, the termination on 17 January 1978 of a dealership agreement existing between the plaintiff and the defendant, whereby, the defendant agreed to supply wholesale to the plaintiff, Mercury outboard engines, Mercruiser engines, spare parts and boat accessories for sale by the plaintiff to the public from its premises at Dandenong, and secondly, the defendant's refusal, following such termination, to supply such goods to the plaintiff. It is alleged that the defendant so refused to supply such goods for the reason that the plaintiff had acquired or had not agreed not to acquire similar goods from a competitor of the defendant, namely Chrysler Marine Pty. Ltd. (Chrysler Marine) or had resupplied or had not agreed not to resupply such goods.

It was alleged that the engaging by the defendant in the conduct complained of had the purpose, or had or had been likely to have the effect, of substantially lessening competition in a retail market in which the plaintiff supplied or acquired, or had been likely to supply or acquire goods or services or would but for the conduct referred to have been likely so to supply or acquire. It was also alleged that the conduct complained of had the purpose, or had or was likely to have had the effect, of substantially lessening competition in a wholesale market in which the defendant supplied goods (see s.47(10).

The plaintiff was incorporated under the Victorian Companies Act in 1976. It forthwith purchased the business which had theretofore been conducted by its co-plaintiff, Dandy Power Equipment Pty. Ltd (DPE). Lindsay Charles Stevenson was at all relevant times and still is the Managing Director of the plaintiff and DPE. In 1956 DPE began to trade in outboard motors. In 1961 it installed a boatbuilding production facility in its workshops. In the same year it commenced to trade as a franchisee dealer of a company called Outboard Marine (Australia) Pty. Ltd. (Outboard Marine) in relation to Johnson outboard motors. The franchise agreement did not permit DPE to stock or sell any other outboard motor products except a motor of small horsepower known as the Seagull motor. By 1965 DPE had become a dealer in fibreglass boats to which it fitted and balanced outboard motors, and attached trailers thereby producing a packaged product. Thereafter about 0% of DPE sales of outboard motors were of such packaged products and components thereof.

In 1965 Outboard Marine terminated the Johnson franchise of DPE. Thereupon DPE entered into a franchise agreement with International Marine Pty. Ltd. whose products were the Mercury outboard motor, the Mercruiser motor and other Mercury products. In 1970 International Marine terminated the franchise of DPE and for 12 Months DPE did not have an outboard motor franchise. During that time seven major outboard motor dealers in the Melbourne area formed a company known as Big 7 Marine Pty. Ltd. which purchased goods in bulk and produced boats by sub-contract and fitted them with trailers and motors. Two of the seven dealers had Evinrude franchises, one had Johnson and three had Mercury franchises. DPE had no franchise at the time. Its contribution was in the supply of boats.

In 1972 the defendant decided to take over the distribution of its own engines from International Marine Pty. Ltd. and offered DPE a franchise in respect of Mercury Products and an agreement was signed. It provided that the franchisee should sell Mercury products exclusively. The agreement was in force until 1974 when it was replaced by an agreement in terms modified to comply with the provisions of the Trade Practices Act 1974. The new agreement did not provide that Mercury products exclusively should be handled by the franchisee. It did provide however, that DPE would "In a manner satisfactory to the Distributor, . . . actively promote the sale of Products and . . . adequately and consistently display and demonstrate the Products.". In 1976 when the plaintiff took over the business of DPE no formal steps were taken to substitute the plaintiff for DPE in the franchise agreement. As a matter of practice, however, the plaintiff stepped into the shoes of DPE and the plaintiff was accepted by the defendant as its franchisee. No point is made by the defendant in these proceedings that as a matter of form its agreement was with DPE and not with the plaintiff.

In late 1977 the defendant indicated to all its dealers that it proposed to change the form of the existing franchise agreement and requested them, including the plaintiff, to execute the new agreement.

Between 1972 and 1978 DPE and the plaintiff as its successor purchased Johnson and Evinrude motors from overseas and also from Big 7. These were mostly of the smaller horsepower range. Although the defendant must have had a general knowledge of those purchases no serious objection was ever taken to them. When DPE acquired the franchise for Mercury in 1972 it had Johnson, Evinrude, Seagull and Honda motors on its floor. At that time Mr. Stevenson said to Mr. Donald Magner, the Regional Manager of the defendant "Do not put the squeeze on me to get rid of them. You will have to earn your place on my floor." Mr. Magner said "I presume you will dispose of them as time goes on." Mr. Stevenson said "Well we will see what will happen as time goes on. I cannot give any undertaking." From time to time thereafter the Executives of the defendant would make what have been called snide remarks and innuendos on the subject. But no strong pressure was put on the plaintiff to exclude other motors totally.

In 1974 a Mercury dealers advisory council was established on the initiative of the defendant. The idea was that from time to time dealers would meet. In the morning they would confer amongst themselves. In the afternoon Mercury executives would join the meeting and there would be a dinner in the evening. The purpose was that dealers could list their complaints, put forward their ideas for better exploitation of the market and for co-operation between themselves and the defendant. Mr. Stevenson was prominent in these dealer/council meetings and until the meeting held in November 1977 was the chairman. In 1974 Mr. Fred Fox became the Victorian Regional Manager of the defendant. He treated Mr. Stevenson as the Chairman of those meetings and used to ask him to prepare the agenda.

The plaintiff had a well equipped service workshop and a number of competent mechanics. All had some training with the defendant's training scheme which has been under the control of one, Mr. Ron Turley who at all material times was the Regional Service Manager of the defendant in Victoria. In relation to the servicing of Mercury motors the situation was that various items of service were covered by the warranty extended by the defendant to purchasers of Mercury products. The plaintiff would perform the necessary service to Mercury engines and in respect of items though to be covered by the warranty would make no charge against the owner of the engine but would make a claim against the defendant. In connection with these claims Mercury would either accept or reject them in whole or in part. This procedure led to many controversies between the plaintiff and the defendant. There were two issues which arose namely, whether the work done was really covered by the warranty, and whether the charge made by the plaintiff for doing the work was within the scale of charges specified by the defendant. It was a constant complaint by the dealers that the time specified was too short to enable the work to be done properly within those times and the dealer allowances too low.

From 1971 to 1973 and to some extent later there was considerable trouble between the plaintiff and the defendant, and indeed between other dealers and the defendant, because of difficulties arising from motors of a particular 40 hp. model called the Red Band 40's. These motors showed a tendancy to blow up. The cause of this difficulty was a matter of controversy between the plaintiff and other dealers with the defendant. But it would seem that ultimately the faults therein were corrected mainly at the expense of the defendant. Some 120 odd motors had to be recalled. The work of correcting the trouble was done by the defendant and other dealers. Considerable conflict arose as to the charges made by the dealers in connection with the correction of the defects. Sometimes a new engine block had to be installed, sometimes the block and pistons were merely repaired.

In 1973 Chrysler Marine Pty. Ltd. began to bring in to Australia, Chrysler outboard motors completely assembled. In 1977 it was attempting to obtain a significant share of the Australian outboard motor market and at that time had about 7% of the market. In 1976 a Chrysler motor car dealer called Dandenong Chrysler Pty. Ltd. with premises including showroom opposite the plaintiff's premises in Dandenong established a small section dealing in boats with Chrysler outboard engines. It also had a Mercury franchise in connection with a branch at Hastings. Mercury motors for Hastings were delivered by the defendant to Dandenong Chrysler and Dandenong Chrysler transported them from Dandenong to Hastings. About the middle of 1977 Mr. Stevenson complained to the defendant that Dandenong Chrysler had begun to display in their front windows Mercury outboard motors. He asked whether Dandenong Chrysler had been appointed a Mercury dealer. Mr. Stevenson complained quite strongly and asked the defendant to do something about it. He spoke to Mr. Robert Ford the National Marketing Manager and Mr. Fox about the matter whenever he could see them but he received no satisfaction. It is agreed by Mr. Ford that in fact Mr. Stevenson was "fobbed off". He was told that Dandenong Chrysler was not a Mercury dealer and that there was nothing that the defendant could do about the window display as Dandenong Chrysler was entitled to buy Mercury outboard motors in connexion with their Hastings dealership and what they did with those motors after purchasing them was out of the control of the defendant. A few months later Mr. Stevenson told Mr. Ford and Mr. Fox that if Dandenong Chrysler were putting in Mercury on top of Chrysler then he intended to have a look at putting in Chrysler on top of Mercury. In connexion with this matter the parties were not on good terms.

On 21 October 1977 Mr. Stevenson attended a demonstration of Chrysler's new range of models in Sydney and became attracted to the idea of becoming a Chrysler franchisee. Chrysler Marine Pty. Ltd. had been offering Mr. Stevenson a Chrysler dealership for some months before this. Arising out of his controversy about Dandenong Chrysler Mr. Stevenson decided to treat the matter seriously. The day after Mr. Stevenson returned from Sydney Mr. Fox rang him and said "I believe that you have been up at the Chrysler Conference". Mr. Stevenson said "So what" and Mr. Fox asked "are you interested in Chrysler". Mr. Stevenson said "Of course we are. We are always interested in any product. What does it mean to you?" Mr. Fox said "Nothing, we have just got to bear it in mind". Conversations of that type between Mr. Stevenson and Mr. Fox took place on three or four occasions before and on 17 November 1977.

At that last conversation Mr. Stevenson told Mr. Fox that if he did take on Chrysler he would certainly retain Mercury unless the defendant intended to "sack us". Mr. Fox said "No decision had been made". Mr. Stevenson said that if the defendant appointed Dandenong Chrysler a Mercury dealer "we will obviously make a quicker decision on Chrysler".

On 21 or 22 November Mr. Fox again called on Mr. Stevenson. He said that he had just been to see Dandenong Chrysler and had been told that Chrysler had asked them to make way for the plaintiff to be appointed a Chrysler dealer. He asked if the plaintiff had signed with Chrysler and Mr. Stevenson said "No, I have not at this stage". He refused to say whether he would do so or not. Mr. Stevenson again asked if the defendant was seriously thinking of appointing Dandenong Chrysler. Mr. Fox said all applications had to be considered. Mr. Stevenson complained that a Mercury franchise was not of much value if the defendant was prepared to appoint people over the road "after all those years". He asked Mr. Fox if the defendant intended to sack the plaintiff if "it went Chrysler". Mr. Fox said, "No, that is not my intention of being here". He said he had to make a report to his principal. Mr. Fox made a report in writing to Mr. Ford in the following terms:-
"After visiting Dandy Chrysler who have definitely been cancelled as Chrysler Dealers, I called on Lindsay Stevenson at Dandy Power and had a long discussion.

I explained to Lindsay that I had just come from Dandy Chrysler who had informed me of their cancellation and were requesting a Mercury Franchise. Their reason for approaching Mercury is because Mr. Roy Williams of Chrysler has confirmed with Dandy Chrysler that their termination was brought about to make the way clear for the appointment of Dandy Power.

I then asked Lindsay once again if there was any truth to this and he replied, "I have told you already, that I have not signed with Chrysler". I asked Lindsay if he was considering signing with Chrysler in the near future and he replied, "That is confidential information that I cannot comment on at this time". He then went on to say he had been having discussions with Chrysler and he went to their Sydney Release. He believes anyone should be able to sell anything they wanted to and he would do this wherever possible, that is why he sells OMA motors as well as Mercury and will continue to buy and sell anything he can get at a discount price.

He also brought up the fact that Dandy Chrysler were selling some Mercury's from Dandenong and was prepared to accept that as it was the same as he is doing.

I then asked Lindsay what he (his) views would be if I appointed Dandy Chrysler as a Mercury Dealer as they would continue to sell Mercury Motors from Hastings and if I did not appoint them they would get an Evinrude Dealership and still sell 2 Brands from the one outlet.

Lindsay said, "are you considering appointing them", and I replied, yes I must give consideration to every request for a Mercury dealership. That is why I am here. I am discussing the matter as we promised to do at the Dealer Meeting. He replied, "well that shows how little value there is in a Mercury Franchise, you can appoint anyone anytime". I replied, 'yes, I suppose we could, but we do not do things that way and that is why I am here talking about it with you. As I have just asked what would be your thoughts or what would you rather have across the road, another Mercury Dealer, or, an Evinrude Dealer who can also sell Mercury from their premises just as you do.' Lindsay replied, that I would have to make the decision myself but if I did cancel him would he have access to Mercury Parts and Accessories. I replied, I had not made any mention at this stage of cancelling him, I had only suggested appointing another Mercury Dealer Opposite.

He replied, if I did that it would only speed up any plans he had to change.
He then mentioned that he had spoken to Bob Ford about an exclusive territory and would give consideration to more Mercury sales if we cancelled Siesta Marine and give him the area exclusively.

My summary of the facts are:-

1) Dandy Power is the best Marine outlet in Victoria.

2) It also sells more P & A than anybody I know.

3) Their O/B Sales have dropped by 50% this year from 147 down to 75. Also Big 7 purchases down from 405 to 152 for year, so he is not selling from other Dealers, but if anything supplying them.

4) We have more problems, Warranty trouble, and demands from Lindsay than all other dealers combined. Another complaint this week $600 to do 3 hour Warranty job.

5) Lindsay is stalling on signing Dealer Agreements. He is promising to look at them and discuss several changes he wants before he will sign.

6) He admits he is talking with Chrysler about a Chrysler Dealership.

7) He admits he will buy and sell any brand of motor.

8) Every other brand of motor sold is one less Mercury on the water.

9) He is now refusing to work on 1750's because they all blow up. (Statement by R. Harroway, his Service Manager)

10) Staff in all departments of Mercury are tired of Lindsay's complaints and demands. Even you Bob have been fed up with him at times.

I have studied the situation for some time and my decision is, we appoint Dandy Chrysler and let Dandy Power Pty. Ltd. go. We may lose a few motor sales for a start and we will certainly lose P & A sales, however, our smaller dealers will absorb the extra demand for parts and benefit from the change over.

Bob, I want to make this move and feel long term it will be the best for Mercury.
Your comments please."
Mr. Stevenson agrees that in substance this report is an accurate statement of what had taken place between himself and Mr. Fox.

But on the issue as to the reasons which actuated the defendant in terminating the plaintiff's Mercury franchise it is the state of mind of the defendant's Australian Marketing Manager Mr. Ford that is critical. The franchise agreement might be terminated according to its terms by either party by thirty days notice in writing without assigning any reason therefor. It is to be observed that the provisions of the Trade Practices Act did not consitute a barrier to the termination of the franchise agreement. The Act is concerned with refusal of supplies. But it would seem that like all the parties concerned in this case the defendant regarded termination of the franchise agreement and refusal of supplies as bound up together. It seems to have been assumed that if the franchise were terminated supplies of motors would cease.

According to Mr. Ford he had already decided to terminate the plaintiff's Mercury franchise when he received the report of Mr. Fox. He said that he had been hospitalized from 10 - 13 November in connection with a threat of serious cancer. Fortunately the threat did not materialise. He said that arising out of that threat and its accompanying anxiety and his hospitalisation he was concerned to examine his attitude to life. He reflected on "the hassles of the last few months and the heavier hassles of the last few weeks" and wondered "if it was all worth it". Those hassles, he said, related to difficulties associated with the plaintiff's conduct as a franchisee. He said that in the middle of November he came to a clear and firm state of mind that it would be better to be without the plaintiff and risk losing engine sales. At the same time he decided not to act immediately but to discuss the matter with his American superior Mr. Donald Graves who was expected to visit Victoria on about 27 November. Mr. Graves came as expected and stayed until 5 December. During his visit Mr. Ford discussed with him his proposal to cancel the plaintiff's franchise. There can be no doubt that amongst other aspects of the matter they discussed the fact that the plaintiff was expected to take a Chrysler franchise. Mr. Ford received little help from Mr. Graves. He left it to Mr. Ford to make up his own mind.

During December Mr. Stevenson had numerous conversations with Mr. Fox and some with Mr. Ford. He continued to complain about the Mercury motors on display "over the road" and sought co-operation from the defendant to have them removed. Again he was "fobbed off". On 19 December Mr. Stevenson wrote to Mr. Fox in the following terms:-
"In confirmation of our telephone conversation/s of this day we wish to confirm as follows:-

DANDENONG CHRYSLER have been repeatedly quoting to Clients for some two weeks past that they are Mercury Dealers. They have been prominently displaying and offering for sale a range of new Mercury motors, which are being supplied direct to their Company by your Company.

We can not tolerate this position. Over the past ten days I have repeatedly requested you to correct this inflammatory situation, without result.

I have again repeated my request to you this day. You have again declined to take any action.
I therefore feel that we have given you every opportunity of defusing the position which, by now, we must assume has been deliberately engineered by your Company.

I therefore advise that, in the self protection of our business we now intend to officially stock Chrysler motors and spare parts forthwith.
We are not obliged to notify you of our intentions, under our Dealer's Agreement, but consider it common courtesy, which is more than your Company has done for us.

I emphasise that we are not, repeat NOT, relinquishing our Mercury Dealership by this action.

I regret that this step has been forced upon us, but your company's attitude leaves us no alternative."
On 30 December 1977 the defendant wrote to the plaintiff in the following terms:-
"We acknowledge receipt of your letter of the 19th instant giving notice of your intention to officially stock Chrysler Motors and spare parts in the future.

Under the terms of your appointment as a Mercury Dealer you are clearly entitled to do so and we have no objection to your adopting that course.

However, we are greatly concerned at your refusal to sign the Mercury Dealer Agreement forwarded to you some time ago unless amendments set out in your letter of the 23rd November last are incorporated in it. These amendments are not acceptable to us and we accordingly require you to notify us during the course of the next seven days that you accept the terms of the agreement without variation as has been the case with other Dealers.

We also wish to raise with you, at this stage, the numerous occasions on which you have failed to satisfactorily resolve customers' problems and the complaints which have been received from customers during the period of your dealership both as to the quality of the service you have provided and the charges which you have made for repairs. Instances of the foregoing, calculated on the basis of units sold, are greatly in excess of any received by us in respect of any other dealer in Australia.

These matters obviously cause severe damage to the reputation of our products and could result in a substantial loss of business. The fact that you are now dealing with two makes of motors may well lead to a further deterioration in the quality of your organization's performance and we expect you to take all necessary steps to ensure that service and repairs are carried out on our motors with the utmost efficiency and that charges for work performed are fair and reasonable.

We expect advice from you regarding the Dealership Agreement within the seven day period mentioned above." (Exhibit D)
The plaintiff answered this by letter dated 6 January 1978 in the following terms:-
"In further reply to your letter of 30 December 1977, I wish to advise as follows:

re: DEALER AGREEMENT

You expressed "great concern" at the manner in which we returned the Agreement to you.

We are indeed surprised at this attitude as at the date of your letter it was some six weeks since we handed the Agreement to you and we have had no prior communication from you, of any description, relative to this matter until the present time.

We always have been, and remain, open to discussion of the various points raised therein at any time by mutual arrangement.
We are also surprised to hear that all (?) other dealers have accepted your Contract in its basic form as we firmly believe that there are a number of dealers who have either not accepted it, or alternatively have accepted it with qualifications.

We believe that in the absence of a duly executed replacement that our 1974 Agreement would continue to operate, as this agreement being a written contract can only be modified or amended by the written mutual consent of both parties. However, now that you raise the matter we will hasten to get advice on the subject and may be in a position to officially reply by the end of this month allowing for the vacation period applicable to our professional advisers.

Meantime, we will expect that my aforementioned remarks, as above, must still apply.

re: SERVICE COMPLAINT

We are indeed quite amazed to note your remarks in this regard and, indeed, we must insist on evidence to back up your statement when we will be pleased to produce counter evidence from our Company.

I will undergo extensive research on the subject within the next two weeks and would expect you to do similarly or retract your defamatory statement.

I again reiterate that we have always been open to discussion on these matters, and will continue to be, but apparently this is not your desire."
The defendant then wrote to the plaintiff a letter of 16 January 1978 in the following terms:-
"Pursuant to Clause 6 (b) of the Agreement dated the 18th day of March 1974 between Mercury Marine Pty. Ltd. and Dandy Power Equipment Pty. Ltd., Mercury Marine Pty. Ltd. hereby gives notice of the termination of that agreement at the expiration of thirty days from the date of the receipt of this notice by Dandy Power Equipment Pty. Ltd.

Your attention is drawn to the provisions of Clause 6 (f) of the agreement which, inter alia, provides that upon termination of the agreement for any reason:

(1) Dealer shall at his own cost immediately return to Distributor all items or material on loan or consignment;

(2) Dealer shall immediately pay all sums due to Distributor on any account whatsoever;

(4) Dealer shall forthwith cease to use all signs or other media identifying Dealer as a sales outlet for the products of Distributor.'

Kindly acknowledge receipt of this letter.
DATED this 16th day of January 1978."
The plaintiff replied on 23 January as follows:-
"Receipt is acknowledged of your communication dated 16th January 1978, sighted this day by the undersigned, in which you indicate your proposed intention to terminate the supposed Agreement between our two Companies, dated 18th March 1974.

However, you do not advise as to the outcome of this proposed Agreement termination. i.e. Is it your intention to terminate the supply of motors, spare parts, and associated services to our Company from a certain date, if at all? If so, as to the basis of such proposed intention?

We are seeking advice upon this matter, for which purpose we would request your immediate reply to the above questions within seven (7) days from the date hereof."
This letter was not the subject of a written reply. It is against this background that the first question in these proceedings must be approached. That is whether the circumstance that the plaintiff had acquired outboard motors from Chrysler Marine or that the plaintiff had not agreed not to acquire outboard motors from Chrysler Marine, or that the plaintiff had re-supplied motors acquired from Chrysler Marine or had not agreed not to re-supply Chrysler motors, or any combination of such circumstances, was an operative reason in the decision of Mr. Ford to terminate the franchise agreement with DPE or the plaintiff and to refuse to supply Mercury motors to that company and the plaintiff as from 16 January 1978. There is of course no evidence of any actual request having been made by the plaintiff after 16 January 1978 for the supply of any Mercury motors or of any actual refusal by the defendant to supply any particular motor. Nevertheless this case has been conducted on the basis that the information in the letter of 16 January 1978 was an intimation to DPE and to the plaintiff that if such a request for outboard motors were made it would not be complied with. I think therefore that as from 16 January 1978 there was an operative refusal to supply any Mercury outboard motors. The terms and duration of that refusal are discussed hereafter. The position may be different with respect to the motors known as Mercruisers and spare parts and accessories. That matter is also dealt with later in these reasons for judgment.

It is of course for the plaintiff to prove on a balance of probabilities that the fact that it had acquired or was about to acquire or had not agreed not to acquire or had re-supplied or had not agreed not to resupply motors acquired by it from Chrysler Marine was an operative reason actuating Mr. Ford in the making of his decision to terminate the franchise agreement and to refuse to supply any further Mercury motors after 16 January 1978. As establishing the affirmative on this question the plaintiff relies largely on the framework set out above. It submits that the proper inference to be drawn on all the matters referred to is that the circumstance that it had entered into a franchise agreement with Chrysler Marine was at least one of the operating reasons in Mr. Ford's mind. It emphasises that the defendant's letter of 16 January 1978 terminating the franchise was the defendant's answer to the plaintiff's advice of 19 December 1977 that it had entered into a franchise agreement with Chrysler marine. It points to the intense interest taken by both Mr. Fox and Mr. Ford in the question of whether the plaintiff was about to take a franchise from Chrysler Marine, and whether it had taken such a franchise. It points also to the readiness with which the defendant tolerated the Mercury engines display in Dandenong Chrysler, and to the fact that the defendant had a distinct objection to its franchisees entering into a franchise agreement with one of its competitors. It relies also upon the circumstance that Mr. Ford had a belief that it would be detrimental to the defendant in its marketing of Mercury motors that they should appear in the same showroom as Chrysler motors which could be sold more cheaply than Mercury and in respect of which Mr. Ford was under the impression that Mr. Stevenson had received what might be regarded as a "sweetheart deal" from Chrysler Marine which would induce him although a Mercury franchisee, to fail to promote the Mercury product and talk it down in favour of the Chrysler motor.

On this last matter Mr. Ford said "Chrysler were not enjoying the market share they had enjoyed a few years before - I would consider that for Chrysler to win a company with the apparent stature of Dandy Power the size - would be a feather in their cap and therefore they would make every effort to do so. I also knew the tactics of my competitor because I have known him for a long time, and I suspected that he might go in and offer him a pretty good deal". He said he believed that the defendant's product would be at a disadvantage in its price and he presumed that a larger discount would be offered on a Chrysler motor to make it attractive to the plaintiff. He believed also that Mr. Stevenson would probably have obtained exclusivity over a very wide territorial boundary for his franchise and would have no competitors so far as Chrysler was concerned. In substance he was right about these matters.

All these factors might well give rise to an inference that in terminating the franchise agreement Mr. Ford was influenced by the circumstance that the plaintiff had or was about to acquire a Chrysler franchise.

Mr. Ford denied this. He said that the fact that the plaintiff had acquired or was about to acquire a Chrysler franchise did not play any part in his decision to terminate the franchise agreement. Mr. Ford said that he reached a clear and firm state of mind about the middle of November when or shortly after he went into hospital where the chastening experience conderning his health gave him a "different view on life". He said that the disputes between the plaintiff and the defendant in relation to warranty claims and discounts and in particular Mr. Stevenson's demanding and domineering attitude with the defendant's staff was much in his mind. Members of the staff were seriously disturbed by Mr. Stevenson's conduct to the extent that some of them were threatening to resign. Also he had sensed an emerging hostility to the defendant on the part of Mr. Stevenson. He felt that Mr. Stevenson was using the dealer council meetings to make trouble between the dealers and the defendant. Mr. Ford said that taking all these matters into account he decided not later than the middle of November to terminate the plaintiff's franchise agreement and take the risk of a possible loss of sales. I accept that Mr. Ford genuinely felt that the attitude of Mr. Stevenson was one of open hostility and embarrassing to the defendant. Also that he felt genuinely that it was almost as though Mr. Stevenson were trying to incite other dealers against the defendant and to do so on issues which were not necessarily of general interest to the whole meeting. I accept that Mr. Stevenson was apt to bring up trivial matters and make a great fuss about them, and to do so so often, that more than one dealer had complained to Mr. Ford about Mr. Stevenson trying to run the dealers' meetings. I accept that Mr. Stevenson was overbearing in his attitude towards the defendant's staff, that he regarded himself as being entitled to exclusive access to certain territory for his franchise. I accept that Mr. Ford believed that Mr. Stevenson's attitude in relation to warranty claims and service matters generally was unreasonable and caused much irritation and nervous strain to Mr. Turley, Mr. Fox and Mr. Kenneth Clarke, the Victorian Service Manager on matters concerning warranty and dealer entitlements. Various of these matters had been referred to him and he and Mr. Stevenson had become involved in those disputes. I accept that Mr. Turley and Mr. Clarke ultimately became disturbed to such an extent that Mr. Turley threatened to resign and Mr. Clarke demanded that either Mr. Stevenson be sacked or he himself would resign. I do not consider it necessary to resolve the merits of the various disputes concerning warranties and servicing or concerning Mr. Young's boat or Mrs. McClare's complaint. I do not doubt that Mr. Ford genuinely believed that Mr. Stevenson was a most difficult person to have dealings with and thus the plaintiff was an unsatisfactory dealer. Apart altogether from the complicating factor arising out of the plaintiff's franchise agreement with Chrysler it would not have been surprising if Mr. Ford had decided to terminate the plaintiff's franchise agreement.

Mr. Ford said that he knew that a termination was likely to evoke litigation as Mr. Stevenson was known to be litigiously inclined. During November he had not acted. He was waiting to confer with Mr. Graves. He took the view that "were we to proceed and cancel Mr. Stevenson, which was our resolve, we had better make sure we crossed our "t's" and dotted the "i's"." Mr. Ford said that after he had decided to terminate the franchise agreement he received information that the plaintiff was thinking of taking a Chrysler franchise. He knew then, that a cancellation at that stage might appear to be a reaction to that circumstance, although it was not. In this state of mind he called on Mr. Stevenson on or about 22 November. Their conversation of that day was in the main concerned with the display of Mercury motors by Dandy Chrysler across the road. He asked Mr. Stevenson whether he was talking with Chrysler and said that Mr. Stevenson was devious with him and that he, Mr. Ford was devious in return. He said "Whilst on the one hand the conversation had some relevance with regard to our future I also was not prepared to commit myself to the fact that I was about to fire him or cancel him."

Asked what effect the knowledge that the plaintiff intended to take on Chrysler had upon his previously informed intention he said, "It reaffirmed my thoughts and confirmed that it must be done and done immediately and I had already started the process of doing this but it just made my resolve, if I may say, I felt a little more comfortable about it, quite frankly, that it was the right decision." He said he realised that that knowledge made it legally harder, hence he decided he would get the defendant's solicitors, Blake & Rigall to take the matter up on his behalf and as a result of that the letter of 30 December was written.

He said that before taking the step of terminating the agreement he had discussed the matter with Messrs Turley, Clarke and Fox. Mr. Clarke was very encouraged and announced that he would not have to resign from the defendant, Mr. Turley felt encouraged and Mr. Fox of course approved.

Undoubtedly there were what have been called hassles between the plaintiff and the defendant, and quite substantial ones, in respect of warranty claims and service matters. Mr. D with the Mercury Service Division. He said it would put in a claim for the time it took to do warranty work and the defendant would allow whatever "the book said" about half "and we would try to justify the balance". The defendant also used to say that the Americans laid down the times for jobs and the defendant should be able to do it in the time. Asked whether it was fair to say that Mr. Stevenson made Mr. Clarke's life a misery with complaints about warranties Mr. Stevenson said "It depends on which side of the fence you are on who is in misery."

Thus the evidence discloses a situation in which Mr. Ford might well have decided to cancel the franchise of Mr. Stevenson apart from any question of Mr. Stevenson selling other brands or taking another dealership and I do not doubt that Mr. Stevenson's unreasonable demands and conduct played a part in the making of the ultimate decision. Nevertheless as Mr. Fox said, Mr. Ford always remained reluctant to terminate the dealership. The question is what factor it was which overcame Mr. Ford's reluctance to terminate the dealership. I am forced to the conclusion that ultimately it was Mr. Stevenson's determination to take a Chrysler dealership. It is quite likely that while in hospital early in November 1977 Mr. Ford did contemplate the difficulties the defendant was having and would probably continue to have with Mr. Stevenson and did seriously consider terminating the franchise agreement. Mr.Fox had repeatedly urged that course and replacing the plaintiff with Dandy Chrysler. In various ways it might make life easier although with the prospect of litigation, loss of sales and the necessity to explain this course to his superiors in America the balance might well have been other way. Mr. Ford's own evidence comes very close to acknowledgement that the ultimate operative reason was the plaintiff's action in becoming a Chrysler franchisee. It is clear therefore that the circumstances that Mr. Stevenson was going to take a Chrysler dealership was present in Mr. Ford's mind when he was making a decision about terminating the plaintiff's franchise. He was asked whether points 6, 7 and 8 in Mr. Fox's memorandum of 22 November were in any way active in his mind when he ultimately made the decision to terminate the Mercury franchise. He said, "I think they were all quite active in my mind.". The following passage ensued:-
"MR. FAJGENBAUM: They were all equally significant? --- I do not know about equally significant but this was part of my dilemma.

They were all significant? --- I think looking at this I do not think that there are any that are insignificant.

The fact that Lindsay Stevenson was talking with Chrysler . . . was a significant matter? --- As much as others, Yes.

And so was the fact that your concern was that if he took on another dealership, there would be fewer Mercury sales made? --- That is one of the things out of.

How many is it? --- out of ten.

Mr. Ford, At the time when you heard that Mr. Stevenson was talking to Chrysler, you assumed that if he was talking to Chrysler, Chrysler would be offering him a good deal? --- I thought that could be a possibility, yes.

. . .

You also knew that Mr. Stevenson would try and secure for himself a good contract? --- Yes, that would be a possibility. It may well be, it could have been.

You believe that the terms of Dandy Power dealing with Chrysler would put your product at a cost disadvantage on the showroom floor? --- If all those things happened.

Did you believe that at the time when Mr. Stevenson was dealing with Chrysler? --- It could have been through my mind as a speculation.

. . . .

You presumed, did you not, that a larger discount would be offered on the Chrysler engines than you could offer on Mercury engines to make it attractive for him? --- Not in anything specific. As I suggested initally to his Honour, for any person to change there has to be a reason for change. There has to be some attraction for going over than what is normal.

Did these considerations go through your mind saying, "How are we going to get on if Dandy Power takes on the Chrysler franchise."? --- They were part of the ten points. It was not a primary thing.

I am not asking you that? --- No, as things turned out, it started to have some effect, maybe, yes.
It is to be noted that point (6) of Mr. Fox's memorandum was, "He admits he is talking with Chrysler about a Chrysler dealership." Point (7) was "He admits he will buy and sell any brand of motor". Point (8) was "Every other brand of motor sold is one less Mercury on the water."

It is apparent therefore that Mr. Ford did not make up his mind to terminate the Mercury franchise finally, until he knew that the plaintiff had acquired or was about to acquire the Chrysler franchise. Mr. Ford agreed that it was necessary for him at that stage in making a decision to terminate the dealership, to exclude from his mind that the plaintiff had taken or was about to take the Chrysler franchise. He agreed this was a difficult exercise. The question is did he do so. If it were true, that Mr. Ford's decision to terminate on 16 January were referrable only to those aspects of Mr. Stevenson's relations with the defendant other than his decision to take a Chrysler dealership, I do not think there would have been on Mr. Ford's part from the middle of November onwards the intense interest which he displayed as to whether or not Mr. Stevenson did actually intend to take on a Chrysler dealership. The same may be said about his interest in Mr. Stevenson's intention to sign or not to sign the new Mercury dealership agreement. Finally there is Mr. Ford's artificial approach to the question of termination which is revealed in the letter of 30 December 1977.

The probability is that Mr. Ford knew about Mr. Stevenson having been to the Chrysler demonstration of its new range of models in Sydney before he went into hospital. Mr. Stevenson's Sydney visit was on 21 October. Mr. Fox was in touch with him immediately thereafter. The attendance by somebody like Mr. Stevenson at the Chrysler demonstration was of positive significance to a person like Mr. Fox and of course to Mr. Ford. It would be very strange that Mr. Fox would not tell Mr. Ford about the matter over the next twenty days or so. Probabilities seem to be that as far as Mr. Ford was concerned, the conversation between Mr. Fox and Mr. Stevenson of 17 November was reported to Mr. Ford and he asked Mr. Fox to give him a full report. Thus it was that Mr. Fox told Mr. Stevenson on 18 November that he had to make a report. This he did on 22 November. It was a day or two after this that Mr. Ford himself went to see Mr. Stevenson. Why he should do this is hard to understand. If he had already decided to terminate the dealership on grounds, that so far as one can see, were substantial and as there was a clause in the franchise agreement which enabled him to terminate the contract at any time without assigning any reason for it, it is hard to think what he expected to achieve in a meeting with Mr. Stevenson. It was a conversation in which Mr. Ford says Mr. Stevenson was devious and he was just as devious in return. He said at that conversation he was not prepared to commit himself to the fact that he was about to cancel the agreement. In other words his mind was not made up and he was interested in the plaintiff's intentions concerning Chrysler.

When Mr. Graves had come and gone giving Mr. Ford very little comfort, Mr. Ford decided to take the step of terminating the plaintiff's franchise. Realising that his reasons for doing this might be misconstrued, he consulted his solicitors. At that stage if his reasons were not to be misconstrued there was every reason for a plain statement of what his reasons were, or at any rate, there was good reason to refrain from any contrived and misleading approach to the problem. But it was the contrived approach which was adopted. That approach was implemented by the letter of 30 December. Its contents raise a number of matters for consideration. The delicate point about the plan to terminate the agreement was, as Mr. Ford knew that he had knowledge that Mr. Stevenson intended to take a Chrysler dealership. The first thing that the letter does is to say something which is quite untrue, namely, that the defendant had no objection to Mr. Stevenson taking the Chrysler dealership. And the basis on which the letter was written was that the dealership was to continue. Mr. Ford had every objection to Mr. Stevenson taking the Chrysler dealership and he knew that the dealership was not to continue. The fourth paragraph of the letter recounts the defendant's dissatisfaction with the plaintiff's failure to "resolve customer's problems" and "the complaints which have been received from customers during the period of your dealership both as to the quality of the service you have provided and the charges you have made for repairs." It is to be noted that several times in the course of his evidence Mr. Ford said that really there was no cause for complaint concerning the relationship between Mr. Stevenson and his customers. Certainly there had been a recent incident about Mr. Young's boat and Mr. McClaw's engine. But the fourth paragraph is a general accusation about lack of customer satisfaction throughout the whole of the dealership. There is really no evidence of any such. The letter omits the real dissatisfaction of the defendant, namely that Mr. Stevenson unduly pressed for excessive warranty payments and worried the life out of the staff.

The fifth paragraph seems to hint that unless when Mr. Stevenson is handling both Mercury and Chrysler motors his customer performance improves, that his dealership will be in jeopardy. Nevertheless the general tone of the letter is that notwithstanding the Chrysler deal the defendant expects Mr. Stevenson to sign the new dealership agreement and conduct the dual franchise of Mercury and Chrysler satisfactorily for an indefinite period. It is clear that at that time the last thing Mr. Ford wanted was for Mr. Stevenson to sign the new dealership arrangement. Had he done so the plan to terminate the franchise would have been thrown into disaray, possibly frustrated. One is left to think that the unjustifiable accusation that Mr. Stevenson had not given satisfaction to his own customers was likely to provoke him to refuse to sign the new franchise agreement. In that event his dealership might perhaps have been terminated on that ground. But that did not eventuate. Mr. Stevenson replied that he was "quite amazed to note your remarks in this regard" (service complaints) and to "insist on evidence to back up your statement when we will be pleased to produce counter evidence from our company." Mr. Stevenson did not refuse to sign a new agreement but pointed out that it was six weeks since he had written to the defendant on the matter of the new agreement and that he was and remained "open to discussion on the various points raised therein at any time by mutual arrangement." The defendant's reply to this letter was to terminate the existing agreement under the clause giving notice of termination within 30 days.

At no time in the course of the proceedings did the defendant communicate to the plaintiff that the real reason for the termination of the agreement and the incidental refusal of supplies was that Mr. Stevenson had been so difficult in his relations with the company in relation to warranty and had made excessive demands for assistance in the servicing of Mercury motors.

The letter seems to have been designed to put Mr. Stevenson into a false position so that there would be no question that the dealership could not be terminated without a contravention of the Trade Practices Act. Accordingly, therefore, I am unable to accept the evidence of Mr. Ford that the entering into of the Chrysler dealership was not an operative reason actuating him to decide to terminate the plaintiff's Mercury dealership. It may well be that Mr. Ford believes that it was not.

There were aspects of the evidence of Mr. Ford which caused me disquiet. There is the repeated statement by Mr. Ford such as:-
"MR. FAJGENBAUM: Mr. Ford, you said yesterday that your company had no complaint really about the servicing given to engines by Dandy Power: that customers did not complain about the servicing they received from Dandy Power, but the problem really arose about difficulties between the service department at Dandy Power and Mercury Marine over a number of matters? --- Yes.

. . .

Over how long a period had these difficult relations . . . gone on prior to 1977? --- they had gone on for some time, for quite a number of years, . . . "
There was Mr. Ford's statement that Mr. Turley had resigned because difficulties with Dandy Power. But Mr. Turley did not leave till 1979. Mr. Ford was vague on a number of dates which one would have expected him to recall and he failed to recall matters which one expected him to recall. Thus although he had a number of telephone coversations with Mr. Graves after Mr. Graves returned to America and before the termination he could not recall whether in any of those conversations he had mentioned the problem of terminating Mr. Stevenson's dealership. There is the circumstance that Mr. Ford said that one of the reasons actuating him to decide to terminate Mr. Stevenson's dealership was the fact that Mr. Stevenson's sales had fallen off in 1977. This can hardly be accepted because it appears that even at that stage Mr. Stevenson still had the third highest sales and that the sales of nearly all the dealers had declined, as much if not more than the sales of the plaintiff.

Having regard to the foregoing I am satisfied on the balance of probabilities that, within the meaning of s.47(3) this defendant did on 16 January 1978 refuse to supply goods to the plaintiff for the reason that the plaintiff had acquired and had not agreed not to acquire goods being outboard motors from a competitor of the defendant, and had re-supplied and had not agreed not to re-supply such goods.

Effect of the refusal on competition

I come therefore to the question whether the refusal of the defendant to supply Mercury Motors to the plaintiff "has the purpose or has or is likely to have the effect of substantially lessening competition" in the relevant market (see ss.47(10) and 47(13). The question arises with respect to conduct alleged to have the purpose or to have had the effect or to have been likely to have the effect of lessening, preventing or hindering competition in a market, defined in s.47(13). Hereafter I use the expression "lessening" as including preventing and hindering (see s.4G of the Act). To my mind competition in a market is the sum of activity engaged in by persons in promoting the sale to potential buyers of the goods with which that market is concerned. One question is, what degree of lessening of competition constitutes a substantial lessening for the purposes of s.47(10)? As stated by Franki J. in Hecar Investments No. 6 Pty. Ltd. v. Outboard Marine Australia Pty. Ltd. No. G9 of 1982 dated 25 June 1982 (unreported) it is to the point that the sanction upon a corporation for a contravention of s.47(1) may be a penalty as high as $250,000 (see s.76). Furthermore provisions of s.47(1) although designed to achieve free competition in trade nevertheless impose restrictions on freedom of trade which is itself an ancient and valuable public interest. Conduct which will entail that or some other large penalty would ordinarily be understood to be conduct which, having regard to the purposes of the Act, involves serious trade consequences. To apply the concept of substantially lessening competition in a market, it is necessary to assess the nature and extent of the market, the probable nature and extent of competition which would exist therein but for the conduct in question, the way the market operates and the nature and extent of the contemplated lessening. To my mind one must look at the relevant significant portion of the market, ask oneself how and to what extent there would have been competition therein but for the conduct, assess what is left and determine whether what has been lost in relation to what would have been, is seen to be a substantial lessening of competition. I prefer not to substitute other adverbs for "substantially". "Substantially" is a word the meaning of which in the circumstances in which it is applied must, to some extent, be of uncertain incidence and a matter of judgment. There is no precise scale by which to measure what is substantial. I think in the context, particularly the penalty and other remedies for contraventions of the Act, and the nature of trade which is the subject of the Act, the word is used in a sense importing a greater rather than a less degree of lessening. Accordingly in my opinion competition in a market is substantially lessened if the extent of competition in the market which has been lost, is seen by those competent to judge to be a substantial lessening of competition. Has competitive trading in the market been substantially interfered with? It is then that the public as such will suffer. In this connection I refer to the remarks of Bowen C.J. and Deane J. in Tillmanns Butcheries Pty. Ltd. v. The Australasian Meat Industry Employees' Union & Ors. (1979) 2 A.T.P.R. 40-138 at pp. 18,494, 18,495 and 18,500 respectively and those of Keely J. in Cool & Sons Pty. Ltd. v. O'Brien Glass Industries Ltd. (1980) 3 A.T.P.R. 40-220 at p.43,003.

Although the words "substantially lessened in a market" refer generally to a market, it is the degree to which competition has been lessened which is critical, not the proportion of that lessening to the whole of the competition which exists in the total market. Thus a lessening in a significant section of the market, if a substantial lessening of otherwise active competition may, according to circumstances, be a substantial lessening of competition in a market.

This action commenced on 22 June 1978. The plaintiff relies upon a refusal of supplies consequent upon the termination of the franchise in January 1978. Section 47(1) only applies to that refusal if, at the relevant time, it could be said that it "has the purpose or has or is likely to have the effect of substantially lessening competition" in a market. (see s.47(10). It seems to me that for the purpose of s.47(10) the relevant time at which the relevant conduct must be looked at is the time at which the conduct specified in s.47(2) and (3) was engaged in. A person engaging in conduct must know, or at least be able to judge, when he so engages, whether his conduct is lawful; whether for instance s.47(3) applies to it, and thus whether his conduct is then of the kind referred to in s.47(1). A refusal of supplies is not always, and was not in this case, something that occurred on a particular day and was then over and done with. The refusal had continuity and was certainly in force when the action was commenced. When one comes to consider whether as at 22 June 1978 it should be said that engaging in the conduct in question "has the purpose or has or is likely to substantially lessen competition" in any market it must be noticed that although the actual or likely effect of conduct may be assessed objectively by reference to the nature of the conduct operating in particular circumstances, it may be that the purpose which such engaging in conduct "has" cannot be similarly assessed. "Purpose" is normally a mental factor pertaining to the mind of a natural person.

The relevant market may be a market in which the plaintiff or the defendant supplied or acquired goods. For the purposes of this case the parties appeared to adopt the view and to my mind, quite correctly, that the most important relevant markets are the retail market or markets in which the plaintiff sells outboard motors to the public and the wholesale market in which the defendant sells outboard motors to dealers. The plaintiff has particularised the relevant retail markets as the retail markets in which the plaintiff had competed for some years being the retail market extending throughout the whole of Victoria, and the retail market in Dandenong and the surrounding district extending up to 16 km. from Dandenong and the relevant wholesale markets as the market in Victoria and the market extending throughout Australia. It was left to me to approve such particulars after further consideration, and I do so.

The plaintiff did all its trading from its well appointed showroom, workshop and surrounds over some three acres at Elizabeth Street, Dandenong. It sold some 52% of the outboard motors sold by it in 1976 and 1977 to persons apparently resident within a radius of 16 km. of its Dandenong premises. The rest were sold to persons resident in Melbourne suburbs and the country districts as far away as Wodonga. It sold to such customers not only Mercury outboards but also Mercruiser motors, Johnson and Evinrude outboard motors, Seagull outboard motors and small numbers of other outboard motors.

Retail Market

In 1978 total retail sales of Mercury outboard motors in Australia through all dealers would probably have been of the order of 9,000. Total retail sales of all outboard motors in Australia would have been in the order of 44,000 and in Victoria some 13,000. These figures reflect Mercury sales as shown in Exhibits 13, 27, 29 and 33 and various estimates of the defendant's market share. Even if the plaintiff had promoted Mercury sales as it did before 1978, the plaintiff's probable share of this total Victorian market would have been less than one hundred motors. According to Exhibit "S" total Mercury unit sales in 1977 were about 130. Once the plaintiff became the promoter of Chrysler against Mercury it cannot be thought that Mercury sales would have approached that figure.

Total retail sales by five of the local dealers of Mercury outboard motors in Dandenong and district as shown in Exhibit 25 for the two years 1976 and 1977 were of the order of 900 motors, thus averaging about 450 per year but with a decline in 1977. That total does not take into account Mercury sales in that area by other dealers, which would have been substantial. To guage the total Dandenong and district outboard motor market, the sales of other brands, which would be more substantial still, would have to be added. The best estimate one can make of the total sales of all outboard motors in that area in 1977 is to be made by treating the Mercury market share as about 30% of the total outboard motor market. If then, for 1977, the total Mercury sales are estimated at 800 the total number of motors sold in the area in question in 1977 would have been in the order of 2000 motors. The total would probably have fallen in 1978 and possibly thereafter. But the probable Mercury share of the plaintiff in that market cannot be made the subject even of an approximate guess. It cannot be inferred that it would have been significant as a competitive factor. Chrysler sales would alter the whole picture. And Chrysler sales by the plaintiff in 1978 were some 140 motors.

In the four years 1974 to 1977 the plaintiff's sales of Mercury units had fallen from about 230 units to about 130 and in 1978 the market was in decline. There is no evidence of any persuasive value as to how many Mercury motors might have been sold in 1978 and beyond, had the plaintiff remained a Mercury franchisee. I do not accept the plaintiff's estimate of an overlap of 10 - 20%. There would apparently have been a continuing decline in demand and in addition sales of Mercury would have been lost to Chrysler.

In November 1977, the plaintiff took delivery of a number of Chrysler outboard motors and soon afterwards entered into a franchise agreement with the Chrysler Marine Company. Chrysler outboards were in a horsepower range covering most of the Mercury range. Chrysler could not supply motors of more than 140 h.p. and Mercury did supply motors in higher ranges. The number of motors sold of these higher horsepower was relatively small but the profit on them was higher than on the more popular motor of say 25 - 50 h.p.

It is clear that the terms of the plaintiff's franchise agreement with Chrysler were very favourable to the plaintiff. It provided a buying price 7 1/2% less than the normal wholesale price, and for a 2 1/2% cash discount. It would seem that this was a specially favourable financial arrangement not available to other Chrysler dealers. The plaintiff had negotiated also exclusive rights over a very large territory. The plaintiff could obtain no such terms from Mercury. Mr. Stevenson appeared to assert, or at any rate I draw the inference, that from the time the plaintiff made its deal with Chrysler it decided to promote the sales of Chrysler motors in preference to Mercury. I see no reason to doubt that in 1978 Mercury sales would in any event have decreased dramatically. When Mr. Stevenson took the Chrysler franchise he was angry with the defendant because it would not protect him from competition from Dandy Chrysler across the road or even Siesta Marine a few kilometres away and that it had failed to react to his demand for exclusive territory. He obtained from Chrysler all he could have hoped for as an outboard motor dealer. The wholesale price of motors was he believed less than that allowed to any other Chrysler dealers and the cash discount was the highest. In addition he had obtained an exclusive dealership over a very large area extending from Lilydale, along the Maroondah Highway to Springvale Road, then south west to the South Road, Beach Road intersection; then south along the coast to Frankston, then from Tooradin, Koo-wee-rup, Drouin and Noojee to Lilydale. Obviously the profit on sales of Chrysler would be considerably greater than those of Mercury. Any trader in such circumstances could be expected to favour Chrysler ahead of Mercury. But Mr. Stevenson was not any trader. It may be said that his policy was relentlessly to pursue every dollar to the disregard of every other consideration. Not only did Mr. Stevenson have the profit incentive to concentrate on Chrysler at the expense of Mercury, but it was explained by Counsel for the plaintiff that the deal with Chrysler was not a "sweatheart" deal because to get its benefits Mr. Stevenson had to attain a quota of sales of Chrysler. The quota was not disclosed.

Accordingly, even had the franchise agreement not been terminated the probable sales of Mercury motors in 1978 and beyond were likely to be quite few. It is useless to guess but it appears that, apart from those Mercury owners who insisted on Mercury replacements for their Mercury trade-in, few other customers would have been sold Mercury motors. Accordingly it does not appear that even had the plaintiff's franchise not been terminated the degree to which Mercury, as marketed by the plaintiff, would have been a competitive factor in the retail outboard motor market as from January 1978, would not have been reduced to an insignificant level by the plaintiff's own conduct and policy. The following passage in Mr. Stevenson's evidence is relevant:-
MR. CHARLES: What sort of a method do you use to convince people to buy a Chrysler rather than Mercury? --- You do not have any standard advice of the selling.

You conduct a lot of sales talk yourself, do you not? What sort of method do you use with a customer to try to convince him to buy a Chrysler rather than a Mercury? --- To say that Chrysler is a simple motor and it is cheaper to service because it is simpler; that our spare parts supply is better and it is more adequately serviceable.

HIS HONOUR: And it is cheaper? --- Overall the motor is cheaper that was the main reason to put it in.
Mr. Stevenson said nothing to create the impression that he would have endeavoured to promote Mercury. In any event on that subject I would have grave doubts of his reliability. He was not a frank witness and quite impervious to those restraints against making exaggerated and misleading statements which normally apply. He conceded quite freely that he had tried to squeeze dealers out and had done all he could to reduce competition in the market, for his own benefit, ignoring the provisions of the Trade Practices Act. That he should also seek to operate the Act for his own benefit did not appear to strike him in the least as a possible cause for eyebrow raising. But the question has to be looked at in the light of the fact that the defendant did terminate the franchise agreement. It must be asked whether as a result of that event the significance of Mercury as a factor in the competition in the retail outboard motor market, as contributed to by the plaintiff, was further, and if so, substantially lessened.

For practical purposes Mercury motors were not sold by the plaintiff in the course of competitive trading in the market as from January 1978. It is for the plaintiff to show that that feature of its trading in the market was the effect of and resulted from the defendant's refusal to supply motors to it. It must prove that there was a level of competition with Mercury products that would probably have been attained, but was not attained, because the plaintiff could not obtain supplies direct from the defendant and that the short fall resulted in a substantial lessening in competition. I am not satisfied that these facts are proved. Thus, over the whole range of Chrysler motors the plaintiff stood to gain much higher rewards by selling Chrysler rather than Mercury, and, to obtain these rewards the plaintiff was required to attain an undisclosed quota volume of purchases of Chrysler motors. Accordingly the plaintiff could not afford to sell Mercury until it was in a position, by sales of Chrysler, to cover the purchases it was bound to make to ensure its "good deal" with Chrysler.

The conduct of the plaintiff in marketing Mercury products in 1978 was most odd. In assessing the significance of this conduct it is well to remember that Mr. Stevenson had in mind to claim damages from the defendant under the Trade Practices Act in respect of the termination of his franchise almost from the moment when it occurred. He told Mr. Ford that unless the decision were reversed they would finish up in the Courts. Any claim for damages would depend upon it being shown that the defendant's refusal to supply had caused loss to the plaintiff. In the circumstances, merely to say that the defendant had refused supplies was not enough. The outstanding facts were that the plaintiff already had on hand what could well have been upwards of a year's supply of motors for normal trading and, in addition he had an alternative source of supply.

From 1971 there had been in existence a company called Big Seven Marine Pty. Ltd. It was formed largely on the initiative of Mr. Stevenson by seven dealers to enable them to buy in bulk. Mr. Stevenson said:-
MR. FAJGENBAUM: How did you trade for the next twelve months? --- I got together a quantity of seven major dealers in the Melbourne area and formed a company known as Big 7 Marine Pty. Limited. Do you wish to know the purpose for that?

Yes? --- Whereby we produced our own boats by sub-contract, having had our moulds made at our cost, and we fitted them with trailers and we supplied each other with motors, bearing in mind that these seven dealers held different agencies, different dealerships. There were two Evinrude, one Johnson, three Mercury, and Dandy Power was nothing. From those other six dealers, they would get the supplies wherever they could at the best price and we packaged them up with these boats and trailers and really put on a very strong package deal concept for the consumer, and so I supplied some boats that I could buy at favourable prices from interstate. The other six dealers supplied the best motors they could, and one dealer bought a hundred trailers at a time to get the best price, and so we supplied the public with a package deal. . . ."
By 1978 some of the members of Big Seven had gone out of business and one had died. But since January 1978 the plaintiff has been able to obtain as many Mercury Outboard motors as he desired through the remaining members subject only to such motors being available at the Mercury factory level. The plaintiff has always been able to obtain those motors at the same wholesale price that it would have paid had it remained a Mercury Outboard franchisee. The only disadvantage was that the motors were available only at the Mercury factory or the premises of a member of Big Seven. There is no ambiguity about this. The following passage in the evidence of Mr. Stevenson is in point.
"MR. CHARLES: The fact is in relation to Mercury motors that since termination you have sold on occasions Mercury motors, have you not? --- Seventeen, I think, was the figure.

The answer to the question is, "Yes"? --- I have sold some, yes.

You have got those through the good offices of other members of the Group? --- Yes.

Which members? --- Stylecraft, Rod Hay, and one or two from Parkview, yes, spread throughout.

Whenever you have asked for a Mercury motor have you been able to get it? --- No.

When did any of these people refuse to assist you? --- When they could not get motors from the factory that were not available.

Because the motors were not available? --- Yes, when they could not get them and (b) when they were on limited stock and would say, "I have only got one or two. I cannot let you have them."

Were you then able to go to somebody else and make the same request? --- Not if they were unavailable from the factory but I would try other dealers to see if they had one on the floor and would let me have it.

"I shall begin by considering the word 'purpose' for both sides have relied on this word in different senses. Broadly, the appellants contend that it is to be given a subjective meaning and the Crown an objective one.

I have no doubt that it is subjective. A purpose must exist in the mind. It cannot exist anywhere else. The word can be used to designate either the main object which a man wants or hopes to achieve by the contemplated act, or it can be used to designate those objects which he knows will probably be achieved by the act, whether he wants them or not. I am satisfied that in the criminal law in general, and in this statute in particular, its ordinary sense is the latter one. In the former sense it cannot in practice be distinguished from motive which is normally irrelevant in criminal law. Its use in that sense would make this statute quite inept."
See also R v. Jakac (1961) V.R. 367 at 371. But reference must also be made to what was said by the High Court in Smyth v. R. (1957) 98 C.L.R. 163 at p.166 by way of disapproval of ". . . the use, where a specific intent must be found, of the supposed presumption, conclusive or otherwise, that a man intends the natural, or natural and probable, consequences of his acts: . . . "

Purpose has been defined as "the idea or aim kept before the mind as the end of effort . . . an end desired", Chambers Twentieth Century Dictionary - Revised Edition. And in Newton & Ors v. Commissioner of Taxation (1958) A.C. 450 at 465 in relation to a provision that "Every . . . arrangement . . . shall so far as it has or purports to have the purpose or effect . . . void . . ."., it was said that the word "purpose" means, not motive, but the effect which it is sought to achieve - the end in view. "Effect" means the end accomplished and achieved.

I would have regard also to what was said on the subject of purpose by Sheppard J. in Trendafila Naumovska v. The Minister for Immigration & Ethnic Affairs and John Menadue No. G179 of 1981 decided on 30 April 1982, (unreported) in which he expressed the view, the case not being a criminal case, that he "should caution himself from taking too much from cases involving criminal law.".

The interpretation of the reference to "purpose" in s.47(10) depends upon the nature of the enactment and the context in which the particular provision occurs. The nature of Part IV of the Act is that it aims to ensure a state of competitive trading by providing, rules of conduct, penalties and remedies to persons who suffer if the rules are contravened. It does not create criminal offences. In Hecar Investments No. 6 Pty. Ltd. v. Outboard Marine Australia Pty. Ltd. (supra) Franki J. indicated that the test of purpose under s.47(10) was a subjective one. I think he was using the term subjective in the sense that the purpose was actually in the mind of the person engaging in that conduct. Accordingly I look at the problem first on the basis that the test is subjective. On this basis it was for the plaintiff to establish that the defendant's purpose was to substantially lessen competition in a market for outboard motors or Mercury products generally. In this context the plaintiff's purpose was the purpose in Mr. Ford's mind. The relevant market could be either of the retail outboard motor markets referred to earlier in these reasons or the wholesale market. For the present I confine my observations to the retail markets. Mr. Ford contended that the plaintiff's adoption of a Chrysler franchise did not influence him in the making of his decision to terminate the Mercury franchise. But I have determined that against him. As a result it is my finding that the considerations which so influenced him included, the disruptive influence of Mr. Stevenson in the relationship between the defendant and its dealers, Mr. Ford's belief that the relationship between the defendant, its employees and the plaintiff had degenerated to a state of incompatibility, Mr. Stevenson's demands for exclusive territory and other special privileges, and Mr. Stevenson's relentless and overbearing demands relating to servicing and warranties. But there was also what he considered the disadvantageous position of Mercury motors on the plaintiff's floor arising from what he believed to be the "very good deal" made by Mr. Stevenson with Chrysler Marine Pty. Ltd.

The suggestion that Mr. Ford actually intended to substantially lessen competition in a relevant market might possibly arise from the fact that the plaintiff's franchise was terminated and that Mr. Ford realised that as a result there might be at least some short-term loss of sales of Mercury products on the market. However, it is clear that Mr. Ford regretted this and hoped to recoup such loss of sales as might be involved through other dealers, new or old. Mr. Ford's objective as Marketing Manager of the defendant was to increase sales and thus the competitive trading through dealers in Mercury products to the greatest extent possible. In relation to the relevant question the relevant market does not concern only the plaintiff's activities as a dealer but the total trading therein of all the defendant's dealers. It would not necessarily follow that if the plaintiff ceased to trade in Mercury products there would be a substantial lessening of competition in any such market. It would depend on the previous significance of the plaintiff as a Mercury competitor, on the degree to which the plaintiff having become a Chrysler franchisee was likely to use Mercury products in competing in the market, and the significance of what it would do in that respect in relation to the total of the relevant portion of the market concerned. If one considers all the reasons above for Mr. Ford terminating the franchise, all of those specified above and the probable disadvantages of Mercury on the plaintiff's floor would, I think, be operative reasons. But I am quite satisfied that the one purpose that was not in Mr. Ford's mind was that of substantially lessening competition in any market. The problem before him was one in which Mercury was about to be taken out of competition in the market, to a material extent at least, by Mr. Stevenson. Mr. Ford did not wish to take Mercury further out of the market although he realized that to terminate the franchise agreement with all its consequences, might to some extent have that result. Once it appeared that the fact that Mr. Stevenson acquired a Chrysler franchise was one of the reasons actuating Mr. Ford to terminate the franchise, it follows that there was in Mr. Ford's mind some purpose related to that reason. Terminating the franchise was not going to lessen competition so far as it was already lessened by the plaintiff selling Chrysler. Terminating the franchise could only produce a lessening of competition in two ways. One, through the plaintiff having a shortage of Mercury supplies which he would desire to sell on his floor in competition with Chrysler. Secondly if it operated as an intimidatory factor in the conduct of other dealers, so that they would hesitate to enter into franchise agreements with Chrysler or some other competitor. As to the former, the degree of lessening of competition that might occur depended on Mr. Stevenson's desire to sell Mercury motors. If he had sufficient desire, he had motors on hand and access to whatever supplies he wanted. Mr. Ford must have known this. And he knew that Mr. Stevenson, through his good deal, had every incentive to use the Mercury reputation as a decoy and the Mercury motor as a backdrop rather than to sell it on its merits. Thus, so far as the termination of the franchise or consequent refusal of supplies had a purpose relating to future trading in Mercury motors, it is consistent with all the evidence that Mr. Ford's purpose in refusing supplies to the plaintiff was to avoid what might be called the commercial abuse of his product and its reputation. To have it used as a decoy and not promoted for sale was an embarrassing situation and one which the defendant would wish to attempt to avoid.

The purpose described above is a purpose different from that of substantially lessening competition in a market. The former might be achieved without any effect or with only a minor effect on such competition. Indeed according to my findings in this case this is probably what happened. In my opinion the refusal of supplies did not effectuate an actual or likely substantial lessening of competition because I do not believe that the plaintiff would in any event have used reasonable efforts to sell Mercury motors in market competition and did not use in competition alternative supplies available to it. Indeed, substantial lessening of competition in the market was not necessarily a consequence of the termination of the franchise or the refusal of supplies and not a consequence in fact.

However, in my opinion there is a real question as to whether the purpose referred to in s.47(10) is the purpose in the mind of the person who engaged in the relevant conduct or is the purpose attributed to the act of engaging in that conduct and to be ascertained from the nature of that act of engaging in that conduct. The purpose to be identified is the purpose which the engaging in the relevant conduct "has". This is a form of words hardly apt to refer to the subjective purpose of the person performing the relevant act and apt to induce an objective rather than a subjective approach. Section 47(1) may be compared to the provision in s.260 of the Income Tax Act where the question is whether a contract or arrangement purports to have a particular purpose or effect (see s.260, Income Tax Assessment Act (1936)). In relation to this provision Aickin J. said in Slutzkin & Ors. v. Commissioner of Taxation (1977) 140 C.L.R. 314 at p.329:-
". . . It has long been settled that s.260 is not concerned with the subjective purposes, motives or the intentions of taxpayers but with the character of the acts done and transactions entered into - (see Newton's Case (34) where the Privy Council approved a passage in the judgment of Williams J. in this Court (35) that what must be looked at is the 'overt acts by which it (i.e. the arrangement) was implemented' in order to ascertain its purpose . . . "
Reference may be made also to Tillmanns Butcheries Pty. Ltd. v. The Australasian Meat Industry Employees' Union & Others (supra) at p.18,500 where in dealing with the meaning of purpose Deane J. drew attention to the disparity between the form of words used in s.45D(1) of the Act and that used in s.260 of the Income Tax Assessment Act. The relevant words used in s.45D(1) are "where the conduct is engaged in for the purpose . . . ". Deane J. said "The 'purpose' referred to in s.45D(1) is the operative subjective purpose of those engaging in the relevant conduct in concert. In this regard, one may contrast the purpose referred to in s.45D(1) with the objective purpose of an arrangement under s.260 of the Income Tax Assessment Act 1936 (see Peate v. Federal Commissioner of Taxation (1964) 111 C.L.R. 443 at p.468)". But in relation to the form of words in s.47(10) the contrast is not to be seen. Both s.260 and s.47(10) are dealing with the nature of conduct rather than the minds of actors. Accordingly there is much to be said for the view that the purpose referred to in s.47(10) is the purpose to be attributed to the act of engaging in the relevant conduct as revealed by the nature and character of that act. If this be correct the plaintiff will succeed in establishing the relevant purpose if it proves that the overt acts done in the course of engaging in the conduct were intrinsically of such a character that it is proper to infer therefrom that the purpose of the engaging in those acts was to substantially lessen competition in a relevant market. The overt act proved is the refusal of supplies involved in the termination of the franchise agreement. And that is the only overt Act. The question is whether from the character of that Act the inference in question should be drawn, namely, that the engaging in that act had the purpose of substantially lessening competition in a market. The overt act may be looked at in isolation or in the light of surrounding circumstances. If it is looked at in isolation no inference could be drawn at all. One could not tell why the franchise was terminated and supplies refused. It could have been due to unsatisfactory conduct as a dealer. If it is looked at in the light of surrounding circumstances then the character of the act may be seen as not necessarily aimed at lessening competition in any market at all. Relevant objective facts would be the size of the market concerned, the degree to which the Mercury product would have been used by the plaintiff as a competitive product in any event, the probable extent of participation in competition of Mercury motors that would have occurred but for the conduct complained of, and the degree to which, as a competitive product, the plaintiff was deprived of supplies of Mercury products by the conduct complained of, having regard to the plaintiff's access to supplies through Big 7.

Having regard to my observations earlier in these reasons I do not consider that it is to be inferred that the relevant act had the character of having the purpose of substantially lessening competition in any of the relevant markets. Also if the circumstances are taken into account the refusal of supplies may be seen as a response to the plaintiff's contemplated conduct in largely taking Mercury motors out of competition as practised by it, and as a move to protect the Mercury product from being in a commercial sense, abused, by being treated as a decoy and a backdrop to the Chrysler stock which the plaintiff really intended to sell also. Accordingly whether the purposes referred to in s.47(10) be the subjective purpose of the person engaging in the relevant conduct or the purpose to be ascribed to the engaging in that conduct by reference to the character of so doing, I am not satisfied that it is shown that the engaging in the conduct proved had the purpose of substantially lessening competition in the relevant market.

Was there an intimidatory purpose?

It was put for the plaintiff that the conduct of the defendant could be explained on the basis that it believed that, if it showed that it could discipline Mr. Stevenson when he showed a disposition to enter into a franchise agreement with another distributor in addition to his Mercury dealership, that would certainly discourage other Mercury franchisees from doing the same. It was said that I should draw the inference that the purpose of terminating the plaintiff's franchise and refusing supplies was to achieve this. If the defendant had that objective then the purpose of its conduct would have been to substantially lessen competition in the market. There are certain features of the defendant's conduct which raise some suggestion that the defendant might have had that objective in mind when terminating the plaintiff's franchise. I remain puzzled by the circumstance that although Mr. Ford wished to escape "hassles" in conducting his business by terminating the plaintiff's franchise, he knew that to do so was likely to provoke Mr. Stevenson to institute heavy litigation. Such litigation would surely create much hassle itself. In addition Mr. Ford had to justify to his superiors taking the risk of such litigation. His superiors are interested only in the financial returns from Australia and are not likely easily to condone financial loss. One may be forgiven for suspecting that Mr. Ford would not have embarked upon the course he chose, without prior approval of his superiors and for reasons better than the avoidance of hassles.

However, I do not consider that I should draw the inference suggested. I have found against Mr. Ford that he was influenced by the fact that the plaintiff took a Chrysler franchise. But he is not without credit and I do not disbelieve him that he did adopt the course he did on his own responsibility. I do not think that it was taken to frighten other franchisees who might be thinking of entering into franchises with other distributors. I am confirmed in this by reference to the letter from Mr. Graves to Mr. Ford dated 16 January 1978. Mr. Ford said he received no help from Mr. Graves and reference to that letter certainly confirms that, and there is no hint in it that there is some sort of a long range objective of controlling dealers generally. I think it confirms also that there was nothing in the way of a plan worked out between Mr. Ford and his superiors to act against Mr. Stevenson for the purpose of frightening others. The same may be said about Mr. Fox's memorandum of 22 November 1977 and perhaps with greater emphasis. It obviously reflects concern on the part of the defendant about the plaintiff's conduct and relationship with the defendant and there is not the slightest hint of any secondary objective or motive.

The View of the Customer

It has been argued that for the purpose of s.47(10) there is a lessening of competition in a retail market if the goods of competing traders cease to be displayed as they would be if a refusal in contravention of the Act had not occurred, in that a purchaser is less likely to be able to view and purchase the brand of motor not displayed. Reliance is placed on the view to this effect expressed in Franki J. in Hecar Investments No. 6 Pty. Ltd. v. outboard Marine Australia Pty. Ltd. (supra).

I have some reservation as to whether in the circumstances of this case the aspect of the competitive scene to which attention is directed is a factor of lessening of competition in a market within the contemplation of ss.47(10) and 47(13). However, if it be so, the observations above concerning the purpose and effect of the defendant's refusal of supplies would seem to be fully applicable to it. It remains for the plaintiff to establish that the lessening of competition in that aspect was substantial and that it was the purpose or result of the defendant's conduct. How much presentation of Mercury motors to potential purchasers would have occurred, in any event, remains quite doubtful. It would have been the plaintiff's practice to direct its customers away from Mercury. And in any event substantial stocks of Mercury motors were on hand in January 1978 and were obtainable by the plaintiff at all times thereafter. Possible purchasers of Mercury who could not see Mercury at the plaintiff's showrooms could see them in the premises of other dealers, one of whom was situated opposite the plaintiff's premises in Dandenong and another, Siesta Marine, was only a few kilometres distant, and in the premises of the many other dealers in the metropolitan and even country districts. It is clear that would be purchasers of outboard motors travel long distances to buy them. Mercury outboard motors are well known and widely advertised. The relevant markets were very large.

Accordingly I am not satisfied that the extent to which at any relevant time potential purchasers of outboard motors were deprived of the opportunity to view Mercury motors at the plaintiff's premises by the defendant's refusal of supplies did constitute any substantial lessening in competition in any retail market for such goods or of any wholesale market.

Wholesale Market

Part of the case for the plaintiff was that the refusal of the defendant of January 1978 to supply Mercury outboard motors had the purpose or had, or was likely to have the effect of substantially lessening competition in the wholesale market in which the defendant supplied goods or but for such refusal would have supplied or been likely to supply goods. Mr. Fajgenbaum contended that by refusing supplies the defendant avoided the situation on the plaintiff's floor that its goods were seen to be at a price disadvantage as against Chrysler. He contended that had the situation persisted the defendant would have been forced to reduce its prices, that a general reduction of the defendant's wholesale prices would have followed and thereby competition in the wholesale market for outboard motors would have been intensified, and all very much to the public benefit. To my mind there is a deceptive simplicity about this contention. I am unable to think that in the circumstances pertaining to the wholesale marketing of Mercury products and the other products in wholesale competition with them that the circumstance that Mercury may have been displayed on the sale floor as Chrysler in the plaintiff's showroom but was not, had any but the most remote and unreal connection with competition in the wholesale market. As was pointed out by Stephen J. in Trade Practices Commission & Anor. v. Tooth & Co. Ltd. & Anor. (1979) 142 C.L.R. 397 at 415, "A feature of s.47 . . . is that it is wholly unconcerned with the price at which goods or services, the supply of which it compels, are in fact supplied or procured . . . a general freedom to nominate one's own price prevails.". In certain circumstances it could be that exposure to price competition on the floor of one of a number of dealers could result or be likely to result in wholesale price reductions across the board. In a case in which there was a probability that that might occur it might be said that the refusal of supplies was a step likely to substantially lessen competition. It is a question of fact as to what the probabilities are. But if the circumstances in the trade are such that, so far as can be seen, the price competition envisaged is so limited and so little likely to result in any change in wholesale price structures, then to withdraw from it is not to act in a way likely substantially to lessen competition. That would seem to be the position in this case. Theoretically the forces for competition of the kind alleged were present but in the circumstances their actual strength was insignificant. As Mr. Fox said, "We are the dearest motor and cannot enter into price wars.". The defendant had no desire that Mercury motors be sold on the plaintiff's floor at prices which would have been equal to or less than or even more competitive with those of Chrysler motors. It simply was not competing on that basis.

Also the degree of competition presented by the Chrysler motors on the plaintiff's floor must be looked at against the total wholesale trade of the defendant and its competitors in the wholesale market. The loss of sales by reason of the invasion of Chrysler on the plaintiff's floor was not a significant event in the whole competitive wholesale scene. The wholesale market in which the defendant supplied goods was the market throughout Victoria and Australia provided by dealers who purchased Mercury products and the products sold by other wholesale distributors of outboard motors. There were at the material times some seven or eight of such distributors who, in competition with others, sold some 40,000 motors and allied products to a large number of dealers spread throughout Australia. There were at least 200 of such dealers who were franchised dealers of Mercury goods. There is no specific evidence of the total number of dealers who purchased outboard motors and associated products from the distributors. But as the defendant had about 20% of the trade it is a reasonable inference that the total number of dealers would be over one thousand. It is not established to my satisfaction that the defendant's refusal to supply the plaintiff in January 1978 had or was likely to have any appreciable effect on competition between the distributors and thus in the wholesale market. As indicated above only a very small number of motors were likely, in any event, to have been acquired by the plaintiff direct from the defendant from January 1978. The loss of those outboard sales by the defendant would have no effect on the degree of competition between the distributors. And it was the intention of the defendant to promote sales of motors through new or existing dealers to make up for such sales to the plaintiff as were lost. There was continual movement in the appointment of new dealers. In January 1978 the defendant contemplated appointing Dandy Chrysler as Mercury dealers in Dandenong and in August it was so appointed. The plaintiff's case so far as it related to the wholesale market is in my opinion an artificial one and not sustained.

It is to be noted in para. 18 of the amended statement of claim the words "had the purpose or alternatively" do not appear. If reference is made to the original statement of claim it can be seen that the omission is merely a typographical error. The case was argued on the basis that there was no such omission. I grant leave to insert the words omitted.

It follows that I am not satisfied on the evidence that in terminating the plaintiff's franchise and refusal of supplies in consequence thereof for the reason that the plaintiff had acquired or had not agreed not to acquire goods from a competitor of the defendant or had re-supplied, or not agreed not to re-supply such goods the defendant, the engaging in that conduct had, at any time, the purpose of substantially lessening competition in any market or that defendant in so engaging in such conduct had such purpose.

Exclusivity - Mercury Dealers

It was contended by the plaintiff that in contravention of s.47(2) of the Act the defendant supplied Mercury products and services to its dealers on the condition that they would not or would not save or to a limited extent acquire outboard motors and services in relation thereto from a competitor. It was said that such a condition had been imposed generally since the coming into operation of the Trade Practices Act in 1974. The defendant conceded that prior to the coming into operation of the Act it did supply its products on such a condition. It admitted also that between the time when the Act came into operation and August 1978 its products were supplied to dealers on condition that they did not acquire or trade in Mariner outboard motors unless their trade in Mariner outboards was carried on in premises separate from those in which they sold Mercury products. Subject thereto it denies that since the Act came into operation it has supplied its products to dealers on condition that they will only trade in Mercury products. It admitted that at all times it has preferred that its dealers trade exclusively in Mercury products and that on occasion it has endeavoured to persuade dealers to do so.

Mariner outboard motors were marketed in Australia by a company called Mariner International Corporation at all material times up to August 1978. That company was a wholly owned subsidiary of an American company called Mariner Corporation which was a wholly owned subsidiary of Brunswick Corporation incorporated in the State of Delaware, U.S.A. The defendant is also a wholly owned subsidiary of the Brunswick Corporation. That corporation considered that sales of Mercury and Mariner by separate traders selling against each other in competition would result in higher sales of the two motors than would be achieved if both motors were sold by the same traders. The defendant contended that s.47(2) of the Act was not contravened by the imposition of the condition on franchised Mercury dealers that they would not trade in Mariner motors. It was said that by reason of s.47(12), s.47(1) did not apply to such conduct. Sub-section 12 of s.47 provides:-
"(12) Sub-section (1) does not apply with respect to any conduct engaged in by a body corporate by way of restricting dealings by another body corporate if those bodies corporate are related to each other."
It was contended by Mr. Charles for the defendant that the imposition of the condition upon Mercury dealers was conduct properly described as conduct by way of restricting dealings by another body corporate. It was said that although the condition bound the defendant's own franchisees and did not bind the other body corporate, namely, Mariner International, it was the effect of the imposition of the condition that the area of the potential trading operations of Mariner International was restricted. It meant that in trading in Australia there were certain traders with whom Mariner International could not do business. It appears to me that for the purposes of Part (IV) of the Act such a situation was one in which there was a restriction of dealings by Mariner International and that that restriction was brought about by the conduct of the defendant. Just as a law such as s.45D of the Trade Practices Act 1974 which forbids persons other than trading corporations to engage in conduct likely to cause damage to the business of a trading corporation may be a law with respect to the trading of trading corporations, (c.f. Actors and Announcers Equity Association of Australia & Ors. v. Fontana Films Pty. Ltd. (1982) 56 A.L.J.R. 366 per Gibbs J. at p.370 and R v. The Judges of the Australian Industrial Court and Anor Ex Parte C.L.M. Holdings Pty. Ltd. and Anor (1977) 136 C.L.R. 235 at pp.246-7.) so it seems to me that a restriction designed to prevent a person from dealing with a particular corporation may be regarded as a restriction upon the business of that corporation. Accordingly it was conduct engaged in by the defendant "by way of restricting dealings of Mariner International Corporation.".

The provision in the sub-section is one about engaging in conduct of any kind "by way" of restricting dealings by other corporations. To my mind "by way" indicates that the conduct may operate directly or indirectly in achieving the restriction referred to. It is a restriction upon a related company which is to be exempted from the operation of s.47(1) of the Act. Once it is seen that the object is to exempt that class of restriction it is of no importance how the restriction has arisen. The exemption does not go to restrictions arising out of some agreement binding on the related company but to a restriction arising by way of conduct of any kind.

It is submitted, also, that s.47(1) does not apply to the condition that Mercury dealers should not be trading in Mariner motors, because in the relevant circumstances that condition would not operate to lessen competition. It was pointed out that there is credible evidence that Mariner International had and implemented a policy that it would not place its Mariner motors for sale with Mercury dealers. I accept that evidence. It appears in the testimony of Mr. Magner the Manager of International Marine Corporation in the early 1970's that in 1973 when it launched the Mariner motor its instructions were to launch the Mariner motor with all vigour, but not at the expense of Mercury. In 1977 the policy was changed in that three Mercury dealers were supplied with Mariner engines on condition that the two brands were marketed from separate premises. The defendant accepted this degree of invasion of its Mercury dealers' exclusiveness.

It was contended by Mr. Fajgenbaum that there was inadequate evidence that the companies said to be subsidiaries of another company were in that relation. If that were so it could not be shown that Mariner International corporation was related to the defendant for the purposes of s.47(12) of the Act. A related company is to be identified by reference to s.4A(1) and (5) of the Trade Practices Act in the following terms:-
"SEC.4A Subsidiary, holding and related bodies corporate

(1) For the purposes of this Act, a body corporate shall, subject to sub-section (3), be deemed to be a subsidiary of another body corporate if -

(a) that other body corporate -

(i) controls the composition of the board of directors of the first-mentioned body corporate;

(ii) is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first mentioned body corporate; or

(iii) holds more than one-half of the allotted share capital of the first-mentioned body corporate (excluding any part of the allotted share capital that caries no right to participate beyond a specified amount in a distribution of either profits or capital); or

(b) the first-mentioned body corporate is a subsidiary of any body corporate that is that other body corporate's subsidiary (including any body corporate that is that other body corporate's subsidiary by another application or other applications of this paragraph).

. . .

(5) Where a body corporate -

(a) is the holding company of another body corporate;

(b) is a subsidiary of another body corporate; or

(c) is a subsidiary of the holding company of another body corporate,

that first-mentioned body corporate and that other body corporate shall, for the purposes of this Act, be deemed to be related to each other."

However, the relevant evidence was given by Mr. Bob Montgomery, who is a qualified legal practitioner of the United States, a licensed attorney in the employ of the Marine Power Group of Brunswick Corporation. He gave evidence that Mariner International Corporation was a wholly owned subsidiary of Mariner Corporation which in turn was wholly owned by Brunswick Corporation, and, that the defendant company has at all times been a wholly owned subsidiary of Brunswick Corporation.

Mr. Fajgenbaum submitted that the terms used by Mr. Montogmery were not shown to have the meaning relevant to those terms as used in s.4A(1) and (5) of the Act. I am unable to accede to this submission for the following reasons. First it is a principle of private international law that foreign law is presumed to be the same as local law until the contrary is shown. See Halsbury Vol. 8 para. 794.

The state of foreign law is a fact. Mr. Montogmery gave evidence of the matters deposed to by him as fact. His evidence was not challenged in cross examination or otherwise. Indeed counsel for the plaintiff treated it as non contentious and withdrew objection to it.

I conclude therefore, that the condition concerning trading in Mariner outboards which was imposed by the defendant upon its dealers did not contravene the provisions of s.47(2) of the Act.

On the wider contention, however, much evidence was given. Except in respect of one dealer no direct acceptable evidence was given that a dealer was ever informed that his franchise would be terminated or that it would be in jeopardy if he became a franchisee of a competitor of the defendant. That one dealer was Mr. Kenneth Evans. He said that he had a Hanimex franchise between 1971 and 1977 while he was a Mercury franchisee. He said that in 1978 the New South Wales Manager, Mr. Kevin Ryan, told him that it would be a good idea to desist from selling Hanimex if he expected to keep the Mercury franchise. He said although he took this seriously he did not give up selling Hanimex but was discreet in displaying that make of motor. Mr. Ryan denied having put the matter to Mr. Evans in the manner deposed to by him and it appears that at least in the latter years of Mr. Evans' dealership Hanimex were prominently displayed by him. He never lost his Mercury franchise and ultimately sold his business to Mr. Lane with Hanimex motors on the floor. I am of opinion that Mr. Evans misunderstood the significance of what was said to him. As indicated above it was the defendant's objective to achieve a state of affairs in which its dealers dealt in Mercury products only. The defendant's desire that dealers should sell only Mercury products was openly expressed from time to time. Dealers who did trade in competitors' products were spoken to from time to time and every argument was used to persuade them to desist. This was quite legitimate. No doubt the great bulk of dealers knew that the defendant was not pleased if they sold other brands of motors. Many would not desire to displease the defendant. No doubt there was much support extended to dealers in the way of assistance at shows, and advertising matter as well as prompt despatch of supplies that might have been forthcoming to those in favour rather than those who did not comply with the defendant's desires. And there was much selling "under the lap". But apart from Mr. Evans there was not one other dealer who gave evidence of threats to terminate his dealership for trading in a competitor's goods. From time to time a dealer whose sales had fallen off and who was selling a competitor's brand was asked if he would like to surrender his franchise, such as Mr. Fraser and Mr. Hay. Neither of them did. Certain others did. Nobody was terminated for "dualling", as it was called, except two dealers who insisted on selling Mariner motors. It is clear that many dealers did sell brands other than Mercury while remaining Mercury dealers. Thus, Central Marine in Hobart, Griffith Marine, Boatarama of Darwin, Wynum of Brisbane and Terry Hire of Rockhampton.

It was proved also that those promoting new brands of outboard motors in Australian during the years 1979 and 1980 and beyond had great difficulty in arranging outlets for their products. The most attractive method of launching a new motor was to persuade persons already dealing in outboard motors to accept the new motors as items to be promoted in the course of their existing business alongside the established brands. Thus Mr. Alfred Pensini in 1979 and 1980 endeavouring to launch the Japanese Tohatsu motor found that dealers with existing franchises were unwilling to market the Tohatsu. They pleaded probable problems with their existing suppliers. He did not succeed in enlisting any Mercury or OMA franchisees but did persuade some Chrysler dealers to stock the new motor. Mr. Pensini did not succeed in launching the new motor through the existing dealership network. Mr. Evans found the same difficulty in 1980 when he assumed responsibility for promoting Tohatsu. The same experience was encountered by those promoting Honda and Suzuki motors.

It appears that it was reported by those contacting dealers that some actually said they dared not take on the new brand for fear of jeopardising their existing dealerships. It is equally clear, that although Mr. Stevenson has recently been in personal touch with up to 80 Mercury dealers, not one has been called to give evidence of any actual stipulation existing between himself and Mercury that he is not to trade in other brands. It is evidently widely known to dealers that Mercury does not like its dealers selling other brands. No secret is made of this and persuasion is used to endeavour to achieve one brand operation by dealers. No doubt a wink is frequently as good as a nod and if there were evidence that dealers who "dualled" found themselves harassed or terminated it might be possible to draw the inference that despite its protestations to the contrary the reality was that the defendant did impose a condition of exclusivity upon its dealers. But there is no such evidence.

In the circumstances, therefore, I am not satisfied that the defendant has supplied goods to dealers upon the condition that such dealers would not or would only to some limited extent acquire outboard motors or other products from the defendant's competitors. Similarly it has not been shown to my satisfaction that the defendant engaged in conduct of a similar kind to that specified in s.47(2) and (3) of the Act which taken in conjunction with such conduct had the effect or was likely to have the effect of substantially lessening competition in any market.

Accordingly there should be judgment for the defendant. As to the costs I give leave to the parties to make submissions should they desire to do so.