Kotan Holdings Pty Ltd v Trade Practices Commission

[1991] FCA 336

Re: KOTAN HOLDINGS PTY LTD; BIG ROCK PTY LTD and COLIN SAUL ROCKMAN
And: TRADE PRACTICES COMMISSION
Nos. WA G46 and 58 of 1991
FED No. 336
Trade Practices
(1991) 13 ATPR 41-122

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Trade Practices - notices under s.155(1)(c) - requiring attendance for oral examination - whether power extends to gathering of evidence when decision made to institute proceedings - improper purposes - Commissioner consulting privately with counsel assisting before ruling on questions put to examinee - whether breach of natural justice - whether reasonable cause of action disclosed.

Trade Practices Act 1974 s.155(1)(c)

Shannahan and Rockman v Trade Practices Commission (1991) ATPR 41-115

Brambles Holdings Ltd v Trade Practices Commission (No.2) (1980) 44 FLR 182

Melbourne Steam Ship Company Ltd v Moorehead (1912) 15 CLR 33

Riley McKay v Bannerman (1977) 31 FLR 129

Pioneer Concrete (Victoria) Pty Ltd v Trade Practices Commission (1982) 152 CLR 460

HEARING

PERTH

#DATE 24:6:1991

Counsel for the Applicant: Mr C.A. Sweeney QC with Mr C. Colvin

Solicitors for the Applicant: Robinson Cox

Counsel for the Respondent: Mr D.R. Williams QC with Miss I. Pete rsen

Solicitors for the Respondent: Australian Government Solicitors

ORDER

The statement of claim is struck out.

The applicants pay the respondents costs of the motion.

NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Kotan Holdings Pty Ltd and Big Rock Pty Ltd are companies which retail new and used Toyota motor vehicles in Western Australia under the business names Midland Toyota and Big Rock Toyota respectively. Michael Bruce Shannahan and Colin Saul Rockman are directors of the companies. These proceedings represent the third round in litigious sparring in which the companies and their directors seek to prevent the Trade Practices Commission from continuing with oral examinations of Messrs. Shannahan and Rockman pursuant to its powers under s.155(1)(c) of the Trade Practices Act 1974. The history of the earlier litigation has already been set out in Shannahan and Rockman v Trade Practices Commission (1991) ATPR 41-115. In that case the directors sought declarations that notices issued to them under s.155(1)(c) on or about 15 March 1991 were invalid and associated injunctive relief restraining the Commission from requiring them to appear before it or any of its officers. Interlocutory injunctive relief in similar terms was sought pending the hearing and determination of the application. The substantive argument in support of the proposition that there was a serious case to be tried was that the Commission having allegedly decided to institute penalty proceedings against the directors for contraventions of the Act, the use of the s.155 examination to gather evidence amounted to use for an improper purpose and was beyond power. The claim for interlocutory relief was argued before me on 26 March 1991 and dismissed on that day. In the course of the judgment I observed that:

"Section 155 refers to the gathering of evidence and makes it quite clear that such evidence as is taken is available for use in proceedings under the Act. There is nothing in its terms, its context or its purpose to indicate that the power is in any way compromised by the Commission having made a decision to institute proceedings."

Upon the dismissal of the claim for interlocutory relief the parties agreed that an order be made dismissing the substantive application and an order was so made. An order was also made after argument that Messrs. Shannahan and Rockman pay the Commission's costs of those proceedings. That was the second round in the litigation. The first round concerned related notices issued in November 1990 and that was resolved with undertakings given to the Court on 5 February 1991.

1. On 8 May 1991 Kotan Holdings and Big Rock filed an application, WA G46 of 1991, seeking a declaration that the notices of 15 March 1991 served on their directors were invalid and a declaration that any proposed resumption of the examination pursuant to those notices would also be invalid. Injunctive relief was also sought and a claim made for interlocutory relief restraining the continuance of the examination pending the hearing and determination of the substantive application. A statement of claim filed with the application complained that the Commission or its officers or solicitors had decided that proceedings should be instituted against Shannahan and Rockman and that the notices were issued and the examination conducted for purpose that included the purposes of:
   1. providing the Commission with admissible evidence intended to be
   

tendered in the envisaged proceedings for contravention;

2. relieving the Commission from the effects of its inability to

obtain discovery or to interrogate in penalty proceedings;

3. depriving the proposed defendants of the effective benefits of

their immunity from discovery and interrogation;

4. effectively removing from the jurisdiction of the Court the power

to restrict discovery and interrogation;

5. obtaining evidence to be used in penalty proceedings on

the question of quantum of any penalty.

For these reasons the issue of the notices and the examinations pursuant to them are said to constitute the exercise of a statutory power for an improper purpose, abuse of a statutory power or conduct beyond power. A further ground for the claim that there was an abuse of statutory power arose from the allegation that the Commission required the examinees to answer questions that did not relate to the contraventions mentioned in the notices, and because the Commissioner presiding at the examination consulted privately with counsel assisting him before ruling upon objections to questions asked by counsel. This latter conduct was said to have been a breach of the rules of natural justice.

1. On 14 June, Lee J. ordered that the applicants attend on the Registrar by 26 June to obtain a date for a directions hearing. On 17 June however, Mr Rockman filed an application, WA G58 of 1991, seeking a declaration that a further notice dated 7 June 1991, served on him on or about 10 June 1991, was invalid. Injunctive relief and interim relief was also claimed. On 17 June 1991 directions were made in WAG 46 and 58 of 1991 that the proceedings be consolidated and that a minute which had been filed of a proposed statement of claim in the consolidated proceedings should stand as the statement of claim in those proceedings. On the same day the Commission filed a motion to strike out the statement of claim in WA G46 of 1991 and this was set down for hearing in the consolidated proceedings on 21 June 1991. The claim for interlocutory relief was also stood over to that date on the basis that it could proceed on Monday, 24 June, if the strike out motion were unsuccessful. Argument proceeded on the strike out motion on Friday, 21 June and judgment was reserved until today.

2. The complaint made in the consolidated statement of claim relating to the notices of 15 March 1991 and the conduct of the examinations under them was in substance the same as the complaint made in the statement of claim in WA G46 of 1991. Similar complaints were made of the notice of 7 June 1991.

3. On a claim for interlocutory relief, the questions for the Court are whether there is a serious issue to be tried between the parties and whether the balance of convenience favours the grant of such relief. On a motion to strike out a statement of claim for failure to disclose a reasonable cause of action however, the order sought will not be made unless it appears that the cause of action is manifestly untenable. In this case again the central issue is whether or not, the Commission having allegedly decided that proceedings should be instituted against the addressees of the notices, it was proper for it to proceed to exercise its power under s.155(1)(c) for the purpose, inter alia, of providing it with admissible evidence in such proceedings. For the purpose of deciding this motion it is, of course, assumed that the allegations of fact made in the statement of claim can be made out.

4. In his submissions for the applicants, Mr Sweeney did not contend that, if for example, the Chairman of the Commission were convinced that a contravention had occurred, he could not use s.155 to determine whether he had evidence sufficient to support penalty proceedings. But he could not, it was said, use the power to gather evidence and deliver the companies and individuals concerned into penalty proceedings in the Court "on a slab as though it were a mortuary, all trussed up, no loose ends anywhere, absolutely nothing to be said about it". There was no clear line drawn here between what was a permissible use of the power and what was not in those cases in which the Commission had formed the view that proceedings should be instituted. It seemed rather to be accepted, as a matter of degree, that a certain amount of evidence gathering might be permissible as a benefit of the inquiry to determine whether there was sufficient evidence to warrant the institution of proceedings. This is of course not a case in which the Commission has commenced penalty proceedings and seeks to use its investigative power to extract evidence from a defendant for use in those proceedings. In such a case it would seem the power conferred by s.155 is exhausted, the matter having passed into the realm of judicial power - Brambles Holdings Ltd v Trade Practices Commission (No. 2) (1980) 44 FLR 182 at 185-189 (Franki J.) citing Melbourne Steam Ship Company Ltd v Moorehead (1912) 15 CLR 33.

5. Reference was made to the judgment of Bowen C.J. in Riley Mckay v Bannerman (1977) 31 FLR 129 at 134 where his Honour said:
   

"In my opinion, the power of giving a notice requiring information under s.155(1) must be exercised for the purposes for which it is given and not otherwise; that is, to assist the commission in the exercise of its functions."

But as I have already indicated in the judgment on 26 March, there is nothing in the context, policy or purpose of s.155 which would indicate that the power conferred by it is in any way compromised by the Commission having decided to undertake proceedings. It is plain from the terms of sub-s.155(7) that the legislature must have intended that evidence to be gathered by this means could be used in penalty proceedings. That conclusion is reinforced by the observation of Mason J. in Pioneer Concrete (Victoria) Pty Ltd v Trade Practices Commission (1982) 152 CLR 460 at 472:

"(Section 155) is a power given to the Commission, not to the Court. Accordingly, it is not a power which is an element in the proceedings of a court. Its purpose, and this will have a bearing on its construction, is to aid the Commission in the discharge of its functions under the Act. These functions include the investigation of alleged breaches, the acquisition of information and the obtaining of evidence for submission to the Court in proceedings in respect of contravention."

The improper purposes imputed to the Commission in the statement of claim go beyond the mere collection of admissible evidence to allegedly relieving the Commission from the effects of its inability to obtain discovery or to interrogate in penalty proceedings. This latter purpose is expressed also in terms of depriving "the proposed defendants" of their immunity from discovery and interrogatories. Yet that is precisely what s.155 does. It overrides the privilege against self-incrimination and allows incriminating evidence so gathered to be used in penalty proceedings. In my opinion there is no more merit in the plea now than there was when substantially the same contentions were put before me on 26 March 1991. I am satisfied that on the question of improper purposes there is no reasonable cause of action.

1. The same, in my opinion, is true of the natural justice point. The examination process undertaken when the Commission exercises its powers under s.155(1)(c) involves no determination by the Commission and beyond the exercise of the coercive power to require answers to questions does not affect the right of the examinee. Whatever application the rules of natural justice may have in this situation, they do not prevent the Commissioner conducting the inquiry from taking advice in private from counsel assisting before making a ruling. The process is inquisitorial, not adversarial. The objection to particular questions is directed to the Commissioner. It is simply part of the process of decision making on questions that he first consults with his counsel. There is, in my opinion, no reasonable cause of action based upon breach of the rules of natural justice.

2. The only other matter arising under the statement of claim is the contention that the Commission has purported to require the examinee to answer questions on oath that did not relate to the contravention. No relief is claimed which is relevant to that plea. Nor does it appear to have any bearing upon any interest of the applicant companies or even Mr Rockman in 58 of 1991 as it relates to examinations conducted under the notices of 15 March.

3. In my opinion no part of the statement of claim discloses a reasonable cause of action and it should be struck out.

4. (Counsel for the applicants made an application for a stay of the examination of Mr Rockman which is due to commence at 9.30 today. He asked that the examination be stayed pending advice on the institution of an appeal against this decision. Counsel for the respondent Commission advised that the Commissioner conducting the examination would not be available again until the end of July.)

5. The application for a stay is refused having regard both to the merits of the case as pleaded, the disruption or inconvenience caused by the making of a stay order and the availability of remedies in these proceedings relating to the use of any evidence unlawfully obtained and the power of a court hearing any penalty proceedings to reject, in its discretion, evidence unlawfully obtained.