Gallagher, G.V. v Pioneer Concrete (NSW) Pty Ltd

[1992] FCA 98

74

'JUDGMENT NO. .A

IN THE FEDERAL COURT OF AUSTRALIA ) )

NEW SOUTH WALES DISTRICT REGISTRY ) NO. G663 of 1991 ,

1

GENERAL DIVISION )

P r r - ' - ' / v ~ ~	PIONEER CONCRETE (NSW) PTY LTD
13 MAR 1992	Respondent

FEDERAL COURT OF

AUSTRALIA PIONEER CONCRETE (NSW! PTY
LTD

V Cross Claimant

%-_.M . ..

GRAHAM VINCENT' GALLAGHER

. Cross Respondent

12 March 1992

REASONS FOR JUDGMENT

LOCKHART J.

The applicant, Graham Vincent Gallagher, seeks an interlocutory injunction againstthe respondent, Pioneer Concrete (NSW) Pty Ltd, restraining it until the final determination of this proceeding or further order from departing from the terms of the arrangements between the respondent and its lorry owner drivers (of whom the applicant is one) (to whom for convenience I shall refer as "L.O.D. 'S " ) relating to rosters for work and the practice of equalization of earnings.

July 1992 so the period within which interlocutory relief would	subsist, if granted, would be in the order of four to five months.
The proceeding commenced on 25 October 1991. The mattei came before the Court on a motion for interlocutory relief shortly after the proceeding commenced and the respondent gave an undertaking to the Court in these terms:

During the hearing of the motion for interlocutory relief
last Tuesday I informed counsel for the parties that the Court
could hear the matter on a final basis commencing on Monday, 6

"Pending the determination of these proceedings, or until further order, the Respondent undertakes to the Court that it will not, without first giving the Applicant

21 days prior notice in writing, by itself,

its servants or agents, act upon or implement a purported notice of tennina'tion dated 10 October 1991, of the agreement for carriage of ready mixed concrete between the applicant and the respondent and between the applicant and the other 145 owner drivers of the respondent."

Reference to the purported notice of termination of 10

October 1991 is to a letter from the respondent to L.O.D. 'S	which
in essence states as follows:

that in the opinion of the respondent the ready mixed concrete industry has changed so much in the last three

operations and to focus on the need for increased	years that the respondent needs to change the basis of its	flexibility and efficiency of service to customers;
with this in mind the respondent has been seeking to hold discussions with its fleet of L.O.D.'s concerning changes which the respondent wishes to make to the way in which it runs the transport part of its business;
these discussions have not taken place for a number 06 reasons, one of which is a request by the L.O. D. 'S that the respondent provides details of the changes which the respondent wishes to make;
the changes which the respondent wishes to make concern the size of its fleet of vehicles for the delivery of ready mixed concrete and the type of vehicles to be employed;
the size and make up of the respondent's fleet is said by it to be no longer suitable to the needs of its business. If the respondent is to survive and prosper as a concrete manufacturer and supply ready mixed concrete then its fleet must be smaller and more flexible than it is at the moment. It must be able to achieve cost efficient changes to its business and this includes a much lower element of cost transport of the business.
with the law. In particular the availability of hydraulic
there is now available technology which will enable three axle trucks to carry loads of up to 5.75m3 in compliance
drives for the mixer will enable problems in respect of load size to be overcome.
The respondent therefore gave notice in the letter of 10

October that:

" P u r s u a n t t o the p r o v i s i o n s o f c l a u s e 26

F l e e t	S i z e o f	the	C o n t r a c t D e t e r m i n a t i o n	we
w i s h	t o r e d u c e	the	s i ze	o f o u r lorry owner

d r i v e r f l e e t from 146 t o 0 . T h i s r e d u c t i o n

may be a c h i e v e d i n a s t a g e d f a s h i o n and we

would be prepared	t o d i s c u s s a p r o c e s s	a l o n g
these l ines:
m	e	Nos o f t r u c k s t o l e a v e
31st November 1991	Approx.	30
23rd December	1991	4 0
3 0 t h March	1992	5 0
3 0 t h J u n e	1992	26

T o t a l t r u c k s t o l e a v e : 146

W e a r e p repared t o n e g o t i a t e the t e r m s upon

wh ich l o r r y owner d r i v e r s l e a v e o u r f l e e t

b u t we see the necessity t o r e d u c e a s

a b s o l u t e l y fundamenta l t o o u r b u s i n e s s .

Our company t h e r e f o r e i n t e n d s t o i n t r o d u c e company owned t r u c k s t o the f l e e t and these w i l l be d r i v e n by d r i v e r s employed by o u r

company.	O b v i o u s l y	there	w i l l	be
o p p o r t u n i t i e s	f o r	some	lorry owner	d r i v e r s

who l e a v e o u r f l e e t t o t a k e u p a p o s i t i o n a s

a company employed d r i v e r . . . . w i t h i n 1 2

m o n t h s from the d a t e o f t h i s l e t t e r we w i l l

r e q u i r e a l l lorry owner d r i v e r s who r e m a i n w i l h u s t o h a v e vehicles c a p a b l e o f c a r r y i n g

,	5m i n c o m p l i a n c e w i t h the l a w and c a p a b l e
o f h a v i n g f i t t e d a r e a r power t a k e - o f f u n l t .
A l l t r u c k s over seven y e a r s o l d w i l l
t h e r e f o r e h a v e t o be r e p l a c e d w i t h new
d e t a i l s t o i n d i v i d u a l d r i v e r s o f the t y p e o f
t r u c k s o f a s u i t a b l e t y p e . W e w i l l p r o v i d e
t r u c k s w h i c h a r e s u i t a b l e and ar rangemen t s
w i l l be made t o i n t r o d u c e them on a
p r o g r e s s i v e b a s i s . However, I d o e m p h a s i z e
t h a t a l l r e m a i n i n g l o r r y owner d r i v e r s m u s t
h a v e t h i s p r o c e s s c o m p l e t e d w i t h i n 1 2 m o n t h s
from the d a t e o f t h i s l e t t e r . "

I t was t h i s document t h a t caused the a p p l i c a n t t o commence

t h i s p r o c e e d i n g . Though the a p p l i c a n t b r i n g s t h i s c a s e t o

p r o t e c t h i s own i n t e r e s t s , n o d o u b t the resul t o f it w i l l h a v e

a s u b s t a n t i a l b e a r i n g o n t h e r e l a t i o n s h i p b e t w e e n the r e s p o n d e n t

and its other L.O.D.'s and for all practical purposes bd determinative to a fair degree of their entitlements as against

the respondent.

The reference in the letter of 10 October to "clause 26 Fleet Size of the Contract Determination" is to the Transport Industry - Concrete Haulage Contract Determination, 30 November 1990, registered in the Industrial Commission of New South Wales.

The initial determination of 1981 has been varied' from time to time and the latest published variation is that of 30 November

1990. Clause 26 of that determination provides:

" A c o n t r a c t o r	s h a l l	h a v e	the	d i s c r e t i o n	t o
v a r y	the	number	o f	vehicles	r e q u i r e d

t h r o u g h o u t i t s o p e r a t i o n . . . . "

The trigger to the current motlon ior interlocutory relief is a memorandum dated 31 January 1992 from the respondent to its plant managers and others which reads as follows:

"As o f the 1 0 t h February , 1992 o u r

M e t r o p o l i t a n f l e e t o f Company concrete

t r u c k s w i l l no l o n g e r be p a r t i c i p a t i n g i n

the e q u a l e a r n i n g s s y s t e m o f restriction.

T h e i r work p o l i c y w i l l be a s f o l l o w s :

1 . T r u c k s w i l l be manned f o r a minimum o f

the b a s i c award h o u r s p e r week.

2 . T h e i r b a s e p l a n t s m a y change d i c t a t e d

by c u s t o m e r service r e q u i r e m e n t s .

3 . Order o f d e s p a t c h w i l l be d a i l y by

n u m e r i c a l o r d e r f o r the f i r s t l o a d

f o l l o w e d o r d e r o f r e t u r n t o p l a n t .

4 .    Company trucks are to be placed in the middle of the daily transfer roster at the plant to which they have been designated.

5.   If rostering off of the L.O.D. fleet occurs the company trucks will move up in despatch order progressively.

6.   If a company truck driver is sick or

absent then a relief driver is to be
used.

If you have any queries before the start of

operation of this system please *seek
consultation with us. "

The Sydney Metropolitan concrete market includes a number of major concrete companies, namely, the respondent, Boral, Readymix, Metromix and Hymix. There are also some smaller independent operators. The major companies also use L.O.D.'s and some company trucks.

In the respondent's Sydney Metropolitan Area (it is fairly
wide area including the city of Sydney and its suburbs, extending

to Penrith and Richmond, Campbelltown, Smithfield, St. Marys and

respondent for the delivery of ready mixed concrete, 145 of which

even as far as Lithgow) there are 148 trucks that operate for the

are owned by L. 0. D. 'S and three by the respondent itself. In ~ e b r u a r ~ this year the respondent directed its three company trucks to the Pendle Hill area where there were nine L.O.D.'s, thus bringing the total number of trucks there to twelve, a number which has since increased to 17, 14 being owned by L.O.D.'s and three by the respondent. Pendle Hill has the largest number of trucks assigned to it by the respondent in the

I

Sydney Metropolitan Area because, in addition to the ordinary workload in that area there are demands for concrete by two large jobs, namely, the Westmead Children's Hospital and the F4

Freeway.

The expression "lorry owner drivers" ("L.O.D.'s") is intended to encompass those people who own their own trucks which includes the cabin and primemover but not the concrete agitator unit which is placed upon the chassis of the primemover. The agitator unit is owned by the respondent.

The applicant asserts that the respondent has ceased to abide by what are described in the evidence as the rostering and equalisation of earnings arrangements, to which reference will be made later, so far as the three company owned and operated vehicles are concerned, to the disadvantage of the L.O.D:s. The respondent asserts that it has not in fact varied those arrangements, but is giving effect to them, indeed, to the

present purposes is narrow.

detriment of the respondent itself. So the area of dispute for

The following is a summary of the allegations made by the parties in the pleadings from which the issues between them emerge. Since 1979 when the applicant purchased a truck for which he paid $25,000 premium or goodwill, in addition to the cost of the truck itself, the applicant has conducted his business of carting ready mixed concrete exclusively with the respondent. He replaced his truck more than once, most recently' in 1981 for $85,000, being the purchase price of the new truck. He is a member of an Association of L.O.D. 'S called "The Pioneer Ready Mix Concrete Carriers Executive Committee".

Since about 1974 the respondent has conducted its business as a ready mixed concrete manufacturer and supplier on the basis of representations to L.O.D.'s which, so it is alleged, have led them to believe and expect that the following, amongst others, assumptions exist in relation to deal&gs between them, namely:

1.	that the L.O.D.'s would receive all of the cartage work of ready mixed concrete of the respondent;
2.	that each L.O.D. had an asset in the nature of goodwill attached to the transferable right to cart ready mixed concrete for the respondent;

3.   that the L.O.D.'s were free to sell their trucks at a premium in the nature of goodwill provided that the respondent approved the purchaser, such approval not to be unreasonably withheld.

The respondent is estopped from denying that the applicant has an entitlement in the nature of goodwlll attached to his contractual arrangements with the respondent. The letter of 10 October 1991 is notice of a determination by the respondent of

l

its contractual arrangements with the applicant which is unauthorised. It has destroyedthe opportunity for the applicant to sell his truck with goodwill.

This conduct on the part of the respondent is said to
constitute a breach of contract. Alternatively, it is pleaded

as misleading and deceptive conduct pursuant to S. 52 of the

T r a d e P r a c t i c e A c t 1974.

The applicant claims damages for breach of contract under

S. 82 for alleged contravention of S. 52 of the T r a d e P r a c t i c e s

A c t .

The respondent denies all material allegations made by the applicant and in addition cross claims against the applicant. In its cross claim the respondent asserts that the contract or arrangeinent which is asserted by the applicant to exist between it and the respondent and other L.O.D.'s in a similar interest

constitutes a contract, arrangement or understanding having the	to the applicant in their relationship to the respondent
purpose and likely to have the effect of substantially lessening competition contrary to the provisions of S. 45(2)(a)(ii) of the T r a d e P r a c t i c e s A c t and that, by giving effect to this
arrangement, the relevant conduct is in breach of S. 45(2)(b)(ii) of the T r a d e P r a c t i c e s A c t . The respondent asserts that the roster system and equalization of earnings arrangement is also in breach of the anti-competitive provisions of S. 45 of the
Trade Practices Act. There are other assertions in the cross'
claim which it is unnecessary to mention for present purposes.

A deal of evidence has been furnished by affidavits filed

by both parties for the purposes of this motion for interlocutory injunctive relief. However, it is sufficient for present purposes to say that it is obvious there are questions to be determined at the final hearing between the parties in relation to the issues raised on the pleadings which at this 'interlocutory stage enable the Court to say that they-are serious questions to be tried. It is not a case where it is possible to say at this stage whether the prospects of success of any party are strong or weak. For example, there is evidence from an expert witness called by the respondent in relation to questions of competition and anti-competitive effect of the arrangements which are said to constitute contraventions of S. 45 of the Trade Practices Act. These issues cannot be examined in any depth or at all at this stage of the case, especially as the final hearing is only a

matter of some months away. Nor does any party contend to the	contrary.
This is a case where any question of interlocutory relief must be determined on the balance of convenience. In the present case a rather curious situation has arisen which only really evolved in the course of argument on the hearing of the motion before the Court. The issue between the parties for the purposes of the motion for interlocutory injunctions really turns upon whether the deployment by the respondent of the three company1
owned trucks manned by its employees at the Pendle Hill depot is contraryto the roster system and equalization of earnings system hitherto in force within the Sydney Metropolitan Area between the respondent and its L.O.D.'s.
The critical matter for present purposes is the roster systemwith the equalization of earnings system, the latter being the result of the other.
I should emphasise at this point that none of the statements of fact which I make are intended to be final; they are simply findings made for interlocutory purposes on the evidence before me and they do not reflect any concluded view which I may have on the evidence.
Tnere are four roster systems in operation for L.O.D.'s of the respondent in the Sydney Metropolitan Area, namely:

1. Daily rosterinq
The trucks in each plant work in a cyclic roster so that the

first truck at work for loading on a particular day becomes the last truck for loading the following day, the second truck for work on the first day becomes the first truck to work the second day and so on. The first truck to be loaded is the lowest earner, the second truck to be loaded is the second lowest earner and so forth. Until at least 10 February 1992 the three trucks owned by the respondent participated in these daily rostering'

systems. The question is whether they have participated since

then in those systems.

2. The Dailv Transfer Roster
Vehicles may be transfered short term on a daily basis to

ensure that special requirements at particular plants can be serviced by an adequate number of concrete mixer trucks. Where necessary the allocater of a particular plant enquires of other plants of the respondent whether it is necessary to obtain additional trucks from other plants for short periods. The allocater then telephones the process plants requesting additional trucks for his plant and at each plant there is a daily transfer roster which is drawn up in advance by the yard delegate in consultation with the particular plant manager, so that at short notice a particular driver is aware that he will be the &next to be available for daily transfer.

3. Period Transfer Roster

A similar roster is drawn up in advance anticipating requirements for monthly transfers of trucks. This roster is drawn up by the yard delegate after consultation and agreement with the plant manager of the respondent on the basis of each yard's requirements and equalization of earnings; the latter on the basis that the lowest earners will, where possible, be transfered to plants of higher earnings.

1. Rosterinu Off Roster I Each day, from the daily earnings information, at the end

of the day's work the yard delegate asks the allocates to state the number of trucks required for the business planned for the following day. If all trucks are not required, the surplus number will be "rostered off" the following day, in reverse order of earnings as evidenced in the "yard book", so that the highest earner on a cumulative basis is the first to be rostered off. The requirement of the respondent is that those ro~kered off are to be available to be contacted and on stand-by until 10 a.m. the following day to asslst with work on demand. Each day during the work of that day the yard delegate and the allocater monitor the work demand, and trucks are rostered off during the day on the same basis as mentioned earlier.

There is evidence that the three trucks owned by the
respondent and engaged at Pendle Hill are "doing the work of 4.89

trucks on the basis of equalization of earnings and not being

cartage of contract work in the Sydney Metropolitan Area occurs	rostered off". This means that as most of the daily work for
between 6.30 a.m. and 11 a.m. and as the requirement for the
fleet after 11 a.m. is usually no more than one-third of the total number of trucks, it is the trucks of the company at Pendle Hill that. are being used to fulfil the requirements of customers which arise in the latter part of the morning or afternoon of a particular day because the employees who drive the three company trucks are on duty until the latter part of each afternoon, whereas the L.O.D.'s by then may have been rostered off. ~ence'
the company trucks may have been used more during the day than the trucks owned by the L.O.D:s.
The roster of drivers is prepared to ensure equalization of earnings. Records are kept of the loads and payments for all drivers. The day to day earnings of all drivers is recorded at the site in a book called "An Earnings Log", in which the drivers record the amounts which they earn. The driGers are paid fortnightly, and copies of the respdndentrs records of such payments are given by the respondent to the executive of the Drivers' Association and those records are checked against the earnings log. Those drivers with the most earnings are then rostered off sufficiently to equalize earnings with other drivers.
This system of rostering the drivers for daily work and equalization of earnings is in essence a very simple system
designed to ensure that drivers who report for work at proper times during the morning of each day's work are able to fulfil
the orders of customers of the respondent, are rostered in such a way that at the end of any given period they earn the same as each other. The equalization of earnings is really the necessary result of the proper application of a daily roster system.
Until the transfer by the respondent of its three trucks to Pendle Hill, the respondent had participated in each of the four rosters. For a long time the respondent's company owned trucks' have always been regarded exactly the same as trucks owned by the
lorry owner drivers and have participated fully in equalization, daily rostering off and long term truck transfers. There is evidence that the respondent has refused to permit its three companytrucks to participate in daily rostering and planning for truck movements. There was a meeting on 3 February 1992 of the respondent's plant managers at the respondent's Granville laboratory. The meeting was addressed by the respondent's area manager for Eastern Sydney, Mr G Stark; who said:

"Pioneer is going to take its three company trucks off the L.O.D. equalised earning system. We are going to transfer the trucks and the company drivers to Pendle Hill. . . . They are not to participate in the L.O.D.

equalisation scheme. "

On 10 February 1992 the three company trucks commenced work at Pendle Hill. The trucks occupied a position in the L.O.D.

equalization roster, but did not participate in the equalization scheme as the company trucks continued to work each day after the

L.O.D:s had been rostered off. There is conflict of evidence as to the effect of the new policy introduced pursuant to the 31 January memorandum at Pendle Hill. There is evidence from the respondent that the new policy does not automatically give priority to the three company trucks over the L.O.D.'s for available work.

There is also evidence From the respondent that the new policy does not operate to deprive L.0.D.s of earnings in favour of company trucks if the L.O. D. s are prepared to make themselves available for work on the same basis upon which the respondent wishes the company trucks to be available. If the L.0.D.s are not prepared to be available for work to the full extent that the company trucks are made available under the new policy then they will generally take fewer orders from the company trucks and consequently earn less. There is evidence on behalf of the applicant that the true position is that the L.O.D. trucks at Pendle Hill prior to 10 February serviced all of the respondent's requirements within the rostering system, and that as most of the concrete cartage occurs between 6 a.m. and 11 a.m. the position now is if all trucks remain rostered on, that after 11 a.m. there will be twelve or fifteen trucks to do the work that may on many days be handled by say three or four trucks for the remainder of the day'. If all trucks remain rostered on then invariably twelve or fifteen trucks would be required to wait several hours each

day for little, if any, work.

The new policy may in fact operate to deprive L.O.D.'s of earnings in favour of company trucks because by transfering three company trucks to a high volume plant such as Pendle Hill the respondent is displacing a similar number of L.O.D. trucks to a low volume plant. Therefore those trucks that are displaced will earn a lower amount than the three company trucks that have displaced them. Further, even if three L.O.D. trucks are taken away there will be loss of income because the respondent's trucks'

earnings are not being "equalized".

For the purposes of this motion for interlocutory relief I am satisfied that the changes introduced by the respondent to the Pendle Hill plant with respect to its three company trucks have changed the equalization of earnings system.

The respondent gave the undertakings mentioned earlier in October of last year with a view to preserving the status quo pending the final determination of this proceeding, and counsel for the respondent said in Court that it is not the intention of the respondent until the determination of the proceeding to give notice of its intention to act upon the purported notice of termination of 10 October 1991. That is if I may say so a commendable attitude in all the circumstances. However, I am of the opinion that the status quo has been disturbed by the arrangements which have been put into place by the respondent at

Pendle Hill following its memorandum of 31 January 1992 which on	its face says that the company trucks "will no longer be
participating in the equal earnings system of restriction", and this appears to be the better view of what has occurred so far as the evidence goes at present. I think it undesirable that the status quo be disturbed in this manner pending the final determination of the proceeding. Accordingly, the position as it was prior to the 31 January 1992 memorandum being sent on
behalf of the respondent should be restored. I do not think that the respondent will suffer any serious jeopardy by an injunction1 being granted to achieve this result, and it will serve to retain the status quo pending the proper examination on the final hearing of all issues.
Upon the applicant by its counsel giving the usual undertaking as to damages, the Court orders that pending the determination of this proceeding or further order the respondent by itself its servants or agents be restrained fkom using its lorry owner driver fleet and its reaiy mixed concrete trucks owned by it for the cartage of ready mixed concrete otherwise than on the same terms and on the same basis as subsisted between the respondent and its lorry owner drivers prior to 31 January
1992. Liberty to apply is reserved to either party on three days
notice.
The Court gives the following directions for the purpose of preparing this case for final hearing:

4.    The matter is adjourned for further directions to a date to be fixed.

I certify that this and the preceding eighteen (18) pages are a true copy of the reasons for

Mr. Justice Lockhart.	judgment herein of the Honourable ' ,
Associate Dated: 12 March

Counsel for the Applicant	J.L. Trew Q.C.
I. Faulkner
Solicitors for the Applicant :	Slater & Elias
Counsel for the Respondent	D.A. Cowdroy Q.C.
M.R. Gracie

Solicitors for the Respondent :	Allen Allen & Hemsley
Date of Hearing	10 March 1992
Date of Judgment	12 March 1992