LK Jewellery Investments Pty Ltd v Percy Marks Pty Ltd

[1978] FCA 99

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m. JUSTICE _... M - !

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IN THE FEDERAT, COURT OF AUSTWLIA ) - .

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NE\! SC)UTH WALES DISTRICT REGISTRY G No. 104 of 1978
GENERAL DIVISIOK I

BETWEEN	:	L. K. JEWELLERY INVESTMENTS
PTY. LIMITED

Applicant

-	AND	:	PERCY MAMS PTY. ' LIMITED
AND OTHERS

Respondents

CORAM: Franki J.

21 November 1978

REASONS FOR JUDGNENT

In these proceedings the applicant sought an interlocutory

injunction under s.80 of the Trade Prac t ices A-ct 'i974 ( l l the Act") .

"\

The hearing before me las ted about two days and concluded t o o

l a t e on the Friday afternoon for me t o give any considered

reasons for judgment. Although no extensive legal argument was presented I considered that a proper case had been made out for

the grant of in te r locutory re l ie f	vi-hich I then granted	and
indicated that I would de l ive r my	reasons la te r .

'The -first f ive respondents are companies engaged i n

what i s cal led the "duty free" t rade i n Sydney i n which goods

a r e s o l d by r e t a i l t o persons about t o depart from Australia

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and, provided an appropriate procedure is followed, it i s

poss ib le for the goods t o be sold wi.thcsut l i a b i l i t y f o r customs

duty and apparently sales tax. Since the proceedings before me

were fo r i n t e r locu to ry r e l i e f it i s important . that I should.

olily deal with the evidence t o the extent necessary f o r my

consideration o f the present applica-tion. Any matters of f a c t

embodied in these reasIns a re interzded t o go no fur ther .

The applicarAt i s a r e t a i l e r of high c l a s s 3cwel.lery

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and a minor p a r t o f i t s business is in the du ty f r ee

t rade with persons short ly t o depart from the in te rna t iona l

a i r p o r t a t Sydney.

The most s a t i s f ac to ry method of operating involves

a procedure in which an invoice is attached t o t he package

containing the duty free goods a t the poin t of s a l e and the

goods are s ighted and the invoice detached a t t h e a i r p o r t

when the passenger i s departing from Australia. Those

,	invoices must ul t imately beforwarded	t o the Bureau o f
’	Customs.

The opportunity o f engaging in the du ty f r ee t r ade

depends upon a permission being given by the Bureau o f

Customs under the provisions o f s.40M o f the Customs Act

1901. After discussion between Teta i le rs opera t ing in

the t rade and representat ives of t he Bureau o f Customs

and the Department o f Transport the form o f approval was

a l t e r e d as from 1 October 1978 s o tha t the invoices which

had t o be detached a t t he a i rpo r t from Irsrnall1l packages

were required t o be detached by only one agent acting for

a l l persons t o whom these permissions had been given.

It seems t h a t t h e Bureau o f Customs requires tha t t h e

only persons permitted t o detach the relevant invoices

from small packages a t t he in t e rna t iona l a i rpo r t a t Sydney

a r e o f f i c e r s o f the sixth respondent.

The sixth respondent was incorporated on 19 June

1978 as a company limited by guarantee f o r the purpose of

ac t ing as agent a t the a i r p o r t t o col lect invoices which

had been attached t o both la rge and small packages o f duty

f r e e goods. The appl icant commenced business in about July

1978 and f o r some time made use o f services provided by

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D.F. Bonded 'Warehouses Pty. Ltd. t o co l l ec t t he r e l evan t

invoices a t t h e a i r p o r t and paid a fee of $625 per month.

The .evidence was tha t between the date when t h e a p p l h n t

commenced business and 19 October 1978 it had effected

26 duty , f ree t ransac t ions which involved 26 invoices

. being detached a t the a i r p o r t , each from a small package

containing jewellery. Evidence was tendered f o r t he

app l i can t t ha t 389 docke.ts had been detached a t t he a i rpo r t

by the s ixth respondent f o r the second.respondent in respec$

o f du ty f ree sa les	a t o.ne o f	i t s s tores during the	month
of September 1978.

The applicant 's evidence was that the s ix th

respondent would not perform the task o f removing invoices

f o r anyone other than a member and tha t membership involved

the payment or" f ees o f $16,671 per annum f o r any company

with one ) s tore in New South Wales i r respec t ive o f the number

o f - - l a rge o r small packets f rom which invoic.es. had t o be

detached a t the a i r p o r t . A somewhat different proceaure

operated f o r l a rge packages which could not be carried

by the passenger in the cabin o f t h e a i r c r a f t . It was

also alleged that more than half o f the cos ts o f operation

o f the sixth respondent were incurred in handl ing large

packages and tha t t he method by which charges had been

f ixed was inequitable and tha t as a r e s u l t t he appl icant

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had been obliged t o discontinue i ts duty free t rade. There

was also evidence that a Mr. Dikmans which, i f accepted,

would show t h a t a company o f which he was the managing

d i rec to r had ceased t o conduct the duty free business

which it had conducted on a small scale with persons intend-

ing t o depart from the in te rna t iona l a i r p o r t a t Sydney.

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The reasons given by Mr. Dikmans were t h a t t h e f e e s demanded

by the sixth respondent were t o o high and that any a l t e r n a t i v e

method o f operation was t o o cumbersome.

. The applicant bases i t s case upon three al leged

v io la t ions of the Act. They a r e as follows :

? A . The respondents consti tuting the sixth respondent

have made a contract o r arrangement o r have a r r ived a t an

understanding which i s , o r would have, the effect o f

substantially lessening competition. That i s t o say they

have agreed that only members .of the sixth respondent should

enjoy the benefit of the services of t h a t corrpany, t o have

the relevant invoices detached from customer's packages a t

t he a i r p o r t as required by custom. The e f f e c t o f t h i s was

t o exclude from the f i e ld of competition those who do not

d e s i r e t o . b e members o f the sixth respondent o r who do n o t

des i r e t o pay Yne membership fees imposed and s.45 of t he Act

has been contravened.

- 133. That by f ix ing the membership f ee a t the current

rate the respondezts have entered into a contract o r

arrangement o r have arrived a t an understanding which contains

a provision which has o r is l i k e l y t o have the e f f ec t o f

f ix ing the pr ice of a service scpplied and thereby comes

within S. 45A and offends against S. 45 o f t he Act.

- 2. That the sixth respondent being i n a pos i t ion

subs tan t ia l ly t o conirol the market of the ent i t lement t o

carry out the services of detaching invoices from small

packages a t the inter:mtional airy>ort a t Sydney, contrary

t o s.46 of the Act, twk advantage of tha t power by imposing

two requirements, be:'L-:-? it would supply those services,

namely membership of t h e sixth respondent, and payment o f a

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services which was not calculated by reference t o the value

of the services rendered bu t was calculated only by

aggregating the cost o f supply of services t o a l l members.

It was fur ther a l leged that the s ixth respondent had taken

advantage o f t h i s power f o r the purpose of eliminating

o r subs tan t ia l ly damaging the appl icant , a competi tzr in

t h e d i f f e r e n t inarket of the supply of duty free goods, or

a l t e rna t ive ly that it had the purpose o f de te r r ing o r

preventing the applicant from.engaging in competit ive

conduct i n tha t o ther market namely the mzrket conprising

t h e s a l e	o f duty free	goods m	the sense tha t	by	being
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precluded f r o m using the services o f the s ixth respondent

otherwise than in accordance with the requirement of

membership and.:payment o f fees the appl icant i s unable

t o compete with the o the r pa r t i e s h the market of the

duty free supply of goods.

2- That a l l 'or some o f the respondents had ac t ed i n

concert with one another, contrary t o s.45D, i n engaging

i n conduct that hinders or prevents the supply o f services

by the sixth respondent t o the appl icant where tha t conduct

has o r i s l i k e l y t o have t h e e f f e c t o f causing a subs tan t ia l

l o s s o r damage t o the applicant corporation, by being

excluded from the duty free market.

I have to decide f irst whether a prima fac ie case

has been made out in the 'sense i n which that phrase was

used i n Beecham G r a m L t d . v. Bristol Laboratories L t d . (1968)

118 C.L.R. 618. Senior counsel for the respondents stated

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that in the interlocutory proceedings the respondents did

not wish t o contend ' that they were not trading corporations.

I proceed t o consider whether o r not a prima f a c i e

case has been made out in re la t ion ' t o each of t he th ree

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al leged violat ions o f t he Act. I consider that i f t he

evidence remains as it was before me the appl icant has a

real and ' s ign i f i can t chance of e s t ab l i sh ing tha t t he first

L five respondents have -made a contract o r arrangement or

contrary t o S. 45( l ) of the Act

have arr ived a t an understandindwhich has the e f f ec t of

substantially lessening competit ion i n the market o f t he

supply of d u t y free goods t o persons about t o leave

Australia by a i r . I a l s o consider on the same bas i s that the

applicant has a real and s ign i f i can t chance o f es tabl ishing

matters within s.45A(1) o f the Act s u f f i c i e n t for the

I1deemingfl provisions o f that sect ion t o be applicable.

Having reached the conclusionswhich I have j u s t

expressed it is not real ly necessary f o r me t o say any

more since : those conclusions justify the orders which I

have made. However, as a t p resent advised , I doubt whether

the appl icant has made o u t a prima f a c i e c a s e i n r e l a t i o n

t o S. 46(1) o f t he Act because of the requirement tha t

i n r e l a t i o n t o s .46(1) (a) the person there referred t o must

be one who is acornpet i tor and because of the requirement

i n s .4G(l)(a) that the relevant purpose i s t h a t o f Itdeterring

.. o r preventing a person from engaging in.competitive conduct.. .f1.

I consider that a prima fac ie case has been made

out with- regard t o a ' contravention o f S. 45D o f the Act.

.	*	Early in the proceedings	before me	the s ix th
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respondent offered an undertaking t o admit -the applicant as

.. . a member upon payment of the membership f e e and subject t o

cer tain other provis ions but the appl icant submit ted that

s ince it was a l leg ing a contravention o f the -Act i n

cer ta in respec ts it d id not wish . t o assoc ia te it se l f with

such an alleged contravention by becoming a member o f

the sixth respondent. I consider t h i s t o be a reas'onable

approach and t h e r e f w e I do not consider this undertaking

offered by. the s ixth respondent , o r any subsequent

va r i a t ion o f it t o be appropriate. The appl icant offered

various undertakings and the ul t imate order which I

,. . decided to make was subs t an t i a l ly upon the bas i s of

.. . those undertakings.

In looking a t the question of whether it was

des i r ab le fo r me t o gran t in te r locutory re l ie f I considered

it very important t o balance the l ikely detr iment t o

the respondents, and p a r t i c u l a r l y t o the s ixth respondent ,

of grant ing-rel ief against the probable detr iment t o t h e ,

applicant if r e l i e f was denied. It seemed probable that

the appl icant would be unable t o continue i t s duty free

t rade t o the detriment o f the public i f the sixth respondent

was not required t o perform the service o f detaching the

relevant invoices a t t he a i r p o r t from duty free goods

contained i n small packages. The sixth respondent was

a t all times prepared t o perform these services but only

if the appl icant became a member and paid a subscription

;	which may very well ultimately be held t o be unreasonable
f o r the work t o be performed. It appears likely that
the applicant has a r e a l and s ign i f i can t chance of
es tabl ishing tha t the subscription would be so g rea t t ha t
it would have the e f f e c t o f preventing the a p p l k a n t from
engaging in the re levant du ty f ree t rade .

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The r e l evan t s ec t ions o f ' t he Trade Practices Act

a re not ye t the subjec t of suf f ic ien t jud ic ia l cons idera t ion

f o r it t o be wise f o r me t o express the reasons why I

consider tha t the appl icant has establ ished a prima f a c i e

case in the relevant sense in any	more	d e t a i l	tha t	I	have
already done.

Whilst t h e Court should be particularly careful

when an interlocutory order in the na.ture o f a mandatory

injunction i s sought I consider that i n this case it

provides the only adequate relief. Somewhat similar r e l i e f

was granted in Comet Radio Vision Services L t d . v. Farnell-

Tandberg Ltd.rI97g 1 W.L.R. 1295.

The order which I made f ixed a r a t e f o r the

provision of t he r e l evan t s e rv i ces in a way which was

admittedly somewhat a rb i t ra ry but the appl icant also gave

the usual undertaking as t o damages and i n add-ition I

reserved l iber ty t o each par ty t o apply and I provided

that the order should only operate unt i l fur ther order .

' I made the following orders :

1. That upon the applicant paying t o t h e s i x t h

respondent the sum of $1667 in r e spec t o f services t o be

rendered by it t o the appl icant f o r a period of th ree months

and the rea f t e r f o r s o long as such,services are rendered

p ro r a t a fo r any such fur ther per iod, and upon the appl icant

fur ther under tak ing ' tha t i f it be adjudged that t he app l i can t

i s not ent i t led without taking up' membership i n t h e s i x t h

respondent t o have it perf.orm services f o r the appl icant ,

the appl icant w i l l ' pay the sum o f $616,671, t o t he s ix th

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respondent o r such par t thereof as has not already been

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paid under the undertaking a ear l ie r g iven , and the undertaking

in r e spec t of the $16,671 has been secured by bank guarantee,

and upon the applicant giving the usual undertaking as

i. t o damages the s ixth respondent do un t i l fu r the r o rde r

supply t o the appl icant the serv ices of an agent required

in r e spec t of small packages pursuant t o the permission

issued by the Collector of Customs t o the appl icant 'by

not ice of 29 September 1978, copy of which is se t ou t an

annexure E t o t h e a f f i d a v i t of Louis Kermedy sworn on

1978. l 9 October v .

2. Any pa r ty has l i b e r t y t o apply on two days notice

t o t he o the r pa r t i e s .

3. Cos t s reserved. are

I also said t h a t I would endeavour t o f i x a date

for the hearing of the matter and t o arrange a schedule,

i f appropriate, f o r anyinterlocutory matters that may be

necessary when I delivered my reasons. The appl icant ,

through i t s senior counsel, gave the relevant undertakilzgs.