Magan-Yates Nominees Pty Ltd and v Mercedes-Benz (Distribution) Pty Ltd

l 690

I N THE FDEIiFL COTJPT OF AIJSJSTRFLTA

m SO'UTH WALES DISTRICT REGISTRY

No.G258 of 1985

GENERAL

D I V I S I O N

BETWEEN :

MAGFJT-YATES	NOMINEES	PTP. LTD.
Applicant
m:

MERCEnFS-BE@TZ (DISTRIBUTTO@T)

PTP I L m .

First Fespondent

Second Respondent

MINTJT'E OF ORDER

JTJDGE :

FOX 3.

DATE OF

O R E R :

27 NOVEMBER 1.385

WHERE MADE:	f-ELBOURNE.
THE COURT ORDERS THAT:

1. The application be dismissed.

The costs of

this application be the respondents' costs

I	in the proceedings.

N o t e :

Settlement

and entry of orders is dealt

with in

Order 36 of the Federal Court Rules.

I N THE FEX3ERAL COURT. O F AUSTRALIA )

NEW

SOUTH

WALES

D I S T R I C T

E G I S T R Y

)

NO.Gi.58

1985

GENERAL

D I V I S I O N

-N

MAGAN-YATES

NOMINEES PTY. LTD.

Applicant

a m :

MERCEDES-BENZ

(DISTRIBUTION)

FT'I

. L;TD.

First Respondent

MERCEDES-BENZ AUSTRALIA

PTY

. LTD.

Second Respondent

CORAM:	FOX J.
D=:	27 NOVEMBER 1985.

REASONS FOR JUDGMENT

EX TEMPORE

€OX J.

These

are

interlocutory

proceedings

for injunctions

brought in reliance

on sub-para.45(2)rb)(ii). paras.L6(l)(a) and

( c ) , and sub-section 52(1)

of the Trade Practices Act 1974 ("the

2. . . . _

Act"). as well

as on a common law basis.

The applicant is a dealer in motor cars carrying

business at Mornington. So far as relevant. it does

so in the

name of W.

Lindner & Co. which has a

long experience in tradinu

in motor cars, includinu Mercedes-Benz cars. at Mornington.

The

first and second respondents are respectively the exclusive

distributor in Victoria (and some other states) and the exclusive

importer

into

Australia

Mercedes-Benz

motor

cars.

The

evidence discloses that other avenues exist

for the importation

of Mercedes-Benz cars. but the number

of cars imported through

these channels is	small.	and map be overlooked for	@&sent
,+Kp3sss.

TJnder an aureement

with

the

first

respondent

the

applicant (tradina as

W. Lindner & Co.) is given dealership

rlahts in

respect of those vehicles.

The

first respondent has

purported to determine the aureement

and those riqhts as from 31

December next.

It is common uround that there was no breach of

the aureement by the applicant.

The notice of termination

[or

non-renewal) purported to brinu the agreement to

end in

accordance with its terms. There has been	no challenae to the
validity or effect of the notice.

The evidence on both sides. bp affidavit and orally.

has

been extensive. and

I have had the benefit of detailed written

submissions on both sides. auqmented bp oral aruument.

The

contest

matters of fact is not ureat. althouqh there is

considerable

dispute in a number

instances

as to

the

conclusions to be drawn. In the circumstances. it seems unlikely

that there can be much more relevant evidence.

or much more to be

said in connection with the case.

The applicant. while dealing

fully with the respondent's evidence, nevertheless relies heavily

upon

the

principles

uoverning

the

deuree

satisfaction

necessary at the interlocutory stage.

To this point of time. it

may have been at a disadvantaue in some respects

in not having

had discovery or interroqatories

before

the

hearinu,

disadvantaue it souuht to overcome by the issue of subpoenas and

of notices to produce under Order	33	r.12 which were in larue
part lnpermissiblp r7iT1e.

It, is not disputed that the balance of convenience rests

with the applicant. who

will, before the prcceedings can be

brouuht on for hearina, have lost its franchise. This means in substance that it will no lonuer be able to obtain

new vehicles.

I I

or new

spare parts (the latter come from the second respondent)

or to sell used cars with the first respondent's warranty,

or to

provide authorised Mercedes-Benz service. More particularly, it

will not

now be able to hold itself out

able to

do these

I I

thinus in 1986.

As the proceedings are of

an interlocutory nature I

I	should	forbear	as far as possible from expressing views on the
I

evidence which

may embarrass the court at

a final hearina. which

* .

. ,

it is still assumed will take place.

Reliance is principally placed by the applicant on

para.46(l)(cl.

primary consideration in the application

that paragraph is the nature and extent of the relevant market.

This is

a difficult question, and one which would probably

most cases be left to be determined

at the hearinu.

Here,

however. the applicant relies basically on

a one-brand market for

Mercedes-Benz motor cars. and	I	have heard much evidence and
aruument on the issue.

I do not

hink

there

a sinale

market

€OK

Mercedes-Benz motor cars.

TJndisputed evidence points against

such a conclusion.

From

the point of view

the applicant.

which sells

new Nissan and

Mercedes-Benz cars only (it

also sells

used cars). it may well appear that the Mercedes-Benz car.

which

is a luxury vehicle. constitutes a market on its

own. The market

is not however to be determined simply by the way	in which the	I	,
L:

Vendor sees it. or

how it operates so far as the vendor is

concerned.

It is necessary to

look at the commodilp. and see

what Other vehicles. if any.	are to be reuarded as substitutes
for it. in the sense that	a customer. thinking first of a

I . L 1 .

Mercedes-Benz. may turn to another brand. which as similar user

ChaKaCteKiStiCS. and is available. sells

at a price within the

ranqe of what

he or she might be taken to have had in mind to pay

for a Mercedes-Benz. and has other substitution features.

This

can be

expressed as the field of

rivalry or competition between

traders. actual or potential.

In determining the market. matters

of degree.

and of

judpent are very much involved, but the inquiry is to be based

on objective facts.

The evidence of Mr Yates (the qeneral

manaaer and director

of the applicant. and the "dealer principal"

of the Morninuton business) to this point, indicates that the

market is not confined to Mercedes-Benz cars. but includes other

makes of car.

such as the Jauuar and some B.M.W. models.

I say

this conscious of the emphasis placed by the applicant on the

lnpalty

Mercedes-Benz

owners to

the

brand.

Some

the

evidence of the respondent describes this market

as one for upper

lliurp class cars. or prestige cars, but

I do n o t

think these

classifications are particularly helpful. There

is indeed likely

to be some overlapping, largely governed by price. but it is not

necessary for me to decide exactly what the market

is.

The

ueographical extent of the market. I should add,

is said bp the

applicant to comprise the municipalities

of Mornington. Flinders

and

Hastinus

a-d the

Melbourne

metropolitan

area.

The

respondents claim that it

is at least as wide

as that.

If the market had been simply for Mercedes-Benz cars.

the first respondent. throuah its dealer agreements and bein? the

sole distributor. could properly be regarded

as "in a position

substantially to control" the market.

The meaninu of this phrase

is to some extent explained and expanded in sub-secn.46(3).

There

not

however

the

one-brand

market

and

neither

of the

- - - _ .

-._

- ..

- .

-_ -

l e,

- _

. -

-__

, I

respondents, on the evidence so	far, appears to be in	a position	I
!
r .

substantially to control a wider market. Rather is it

a hiahlp

r -

competitive market with rivals ready and able to accommodate

any

chanues

brought

about

by the

respondents.

The elements of

! ,

;

"control" have not in fact been uone into to any extent

at his

..I

I	hearin?.	The	respondents'	evidence	is	that	Mercedes-Benz	cars	!	.'
;	I.
I

constitute about one quarter of the cars sold in what has been

1 :

i::

called the upper luxury market, B.M.W. cars constituting	\	!..
t .

sliqhtly smaller part.	This, however. includes some makes	of	I	-'
:	I

I ..

vehicle which, on the applicant's view, should not belonu to the

I__. I .

upper luxury class. It includes some models	'of Mercedes-Benz	[ :<
I :
L -

which the applicant contends should not be included. Accordinu

to Mr Yates' evidence. the upper ranqe of Mercedes-Benz vehicles	! ,
, .

compete only with Jaguar and some	B.M.W.	models. while the lower	L .A
, _;
' I

ran?e compete in a wider market. Even accepting this limited	L .
I

I	situation to be the case, the market share of Mercedes-Benz is	I ..
i	!I:

I	less	than	half.	It is contended	that	he	percentage	of the	, -
I	! I

market is itself sufficient to raise a case of "control" which should uo to a hearin? and therefore is sufficient to entitle the

I-

;

applicant to an interlocutory injunction. This map be so in some

_ I

cases,

but

the

otality

evidence

(substantially

'. .

undisputed) is against

a conclusion of "control".

!	.;
I

terminating the franchise did not involve taking advantaae of

I .I

power	to control the market. even if there was the one-brand	1 .
i
L ~.

I T

market contended

fpr.

I believe this submission, as expressed.

1 ;

to be	sound.	r- .
e-;
1 ,
j .
r t I,

The lanquacre of the Act refers to "purpose"

F:,

"for the purpose

. .

: a

from

engaging

i'i

i .

competitive conduct..."

! .:

The "purpose" must be looked at subjectively, and the

present evidence is that there had to be a review by the first	l:
I ':
L
respondent of the number of dealerships. in the light of changina	l..;
I
5

circumstances

which

include6

a decline in the

number

r -

Mercedes-Benz which it would be possible to import	in	comlng	I:	~
,. , , l
I .

years. The	decision	was	said	to	be	made	with	a view to	S	I
.	.I

strengthening the competitive power

of remaining outlets. It was

also said 20

5e a decision made by the managing director

of the

first respondent (Mr Marshall) to advance the business interpsts

and lonu-term marketing requirements of the first respondent.

The

conclusion

reached

was

that

one

dealership

had

terminated. and the Morninaton franchise of the applicant was the

one chosen. Whatever the market and whatever the purpose. it

could be said that what the first respondent was doinq was to	f ,
prevent the applicant from engaging in "competitive conduct".	? . .>

- _

'. constructive purposes, but that is not

matter upon which

should attempt to elaborate in these proceedings. (see

s.4F of

the Act).

For the

reasons

given,

I am

the

view

that

sufficient case is not made out under para.46(l)(c).

1	l	The applicant	also	relies	on para.46(l)(a).	It	is
l

arced \$hat

the

first

respondent

a competitor

the

applicant.

~ Reliance

placed

the

sale

by the

first

respondent of some eight vehicles

to a

car rental

firm, as

I	showina that there is competition between the two.	I	do not
!

think that this arqument is tenable. The first respondent agrees

that the cars were sold. but claims that each delivery was

effected through

an authorised dealer. and comaission was paid to

the dealer on the sale. I do not think that the evidence on this

natter is sufficient to show that the applicant was

a competitor

of the first respondent.

The purpose to

which the paragraph

refers, of "eliminating

or substantially damaginq

a person ..." is

not sufficiently established.

The case relied upon under the

paragraph would point to

a quite unreal situation,

Sub-paragraph 45(2)(b)(ii) is relied upon. but.

as I

gather, without enthusiasm. On the evidence before me. the lack

of enthusiasm is justified. What is alleged is

an understanding

between the first respondent and Lanes Motors (Holdings) Ltd. and

Lanes Motors Ptp. Limited that after

December 1985,

new

I I

- .

, -.

vehicles. and new spare parts, would not

supplied to the

applicant and it would not be allowed to carry out authorised

services. There is not

any evidence of

an express agreement to

this effect,

or anythinq like it.

The

applicant relies simply

upon the fact that

49% of the capital of the first respondent is

held

by Lanes Motors (Holdings) Limited. which also

has

two

directors on

the board of the first respondent.

The directors

thus appointed

have a lesser voting power than those appointed by

the second respondent (which controls 51% of

the capital of the

first respondent). Lanes Motors Ptp. Limited also deals in

new

Mercedes-Benz cars and

has done

so in a

major way for years.

Those circumstances. alone

or toaether with any other facts

proved in the case do not lead to	an	inference of the aareement
alleqed.

The	applicant also relies upon sub-secn.52(1) of the

Act. Part

nf the evidence in relation to this claim involves a

disputed question of fact. but

a part particularly relatinq to

deception is the evidence

of Mr Marshall, who

is said

to have

been quilt? of deception (in trade or

commerce), by what he said

or did not say

on 4 April 1985 to Mr Yates.

Mr Yates contends that on that date Mr Marshall said to

him

"We

have

absolutely

no intention

terminating

pour

franchise. I give you my personal

guarantee".

Marshall

denies that he said those words, but aave evidence that what

said to Mr

Yates was to the effect that

he could auarantee that

10. . .

there had been no decision made to terminate the franchise.

There is I think a

serious question to be tried

on this

matter. The question is however whether any interlocutory relief

- -

is appropriate.

The only relief sought is

an injunction but it

has not been formulated.	The claim is stated in the written
submissions as follows:

- .

"the applicant is entitled to

injunction to restrain the

conduct which was inconsistent with the representation made."

Without resolvinu the dispute between Mr Yates and

Mr Marshall as

to what was said on

4 April 1985. the deception to be relied upon

would

the

effect

that

knowinu

termination

the

applicant's franchise was beinu actively considered, the first

respondent.	through Mr	Marshall.	said	that	no	decision	to	p;
;'
..

terminate had been made.	or that termination was not intended,	or	:A
\ '
(,

would not occur. Notice

of termination was uiven orally

on 7 (or

. .

8) June 1985 and in writinu on

or about

21 Auuust 1985.

The

period of notice expired

on 31 December 1985.

It is not possible to frame

an injunction which will.

it were. stay

undo the effect of the alleqed deceptive

conduct, It is true. on the evidence, that the applicant acted

to its detriment as	a result of the conduct in question. but this
provides no basis	for settinu aside. nr postponinq for some

period.

the

notice

termination.

The applicant

can

claim

relief by way of damaues, but cannot obtain interlocutory relief

of the nature claimed.

.m,

Accepting Mr Pates' account

of-what was said

on 4 April.

I:,

the applicant's case would	be in no	better position.	l	~~
:.

There is -also a common law

claim which I

should also

L -.

mention. It is based on the terms of the dealership agreement.

Clause 10 is the termination clause:

"10.

This Agreement shall become effective on the day hereinbefore first written and shall except as

hereinafter

provided

continue

force

until

December 31st, 1983. Unless written notice of

termination is given bp one party to the other

least three

( 3 )

months before the said expiry

date this agreement shall automatically continue

in force for another year and thereafter be

renewed in the same manner for the same period."

It is clause

12 which is particularlp relied on:

"12.

In the interest of harmonious relations betijeen

Dealer Ethe applicant3 and Distributor Cthe first

respondent1 the Dealer should report promptly

writing

the senior

management

Distributor any act

or failure by the Distributor

which the Dealer deems not to be

in "good faith".

"Good faith" shall mean that the Distributor 2r.d

its representatives act in a fair and impartial

manner towar& the Dealer guaranteeing that the

Dealer is

free from coercion. intimidation or

threats.

The purpose

this

requirement

notification

afford

the

Distributor

opportunity to consider the claim and if found

meritorious to undertake such corrective action

as to

correct

the

conditions

so that the

Distributor shall

always act in good

faith."

. - ..

12,

which negated the right to terminate under clause

10.

Alternatively, it is put that clause 12 is also indicative of a

. .

wider duty to act

in aood faith,

a breach of which has

the

consequence mentioned.

All I need say about these submissions is that

do not

accept that, statutory provisSons apart. there was the

wider

duty. and that whichever way the matter is put it does not

provide the basis

for an interlocutory injunction.

It is submitted on behalf of the respondents, that even

if the applicant's case was otherwise made out.

I should dismiss

the application in the exercise of my discretion. The principal reason is that to grant an injunction, which must at least

continue

beyond

31 December.

would

force

a close

relationship

between

the

parties,

contrary

well-knom

principles. As a

general

proposition

I do not

think

this

submission is sound when dealinq

with applications under the

Trade Practices Act. It miaht however have application

n a case

arisinq under para.46(l)(c), such

as the present. The fact that

the parties are in a

contractual relationship. and this is the

source of the applicant's rights. raises questions central to the

operation of the paragraph. The question which arises is whether

a licence becomes irrevocable by reason of it.

In the present

case what would I think be most influential. in relation to the

exercise of discretion. would be the fact that the contractual

licence is from year to year only,

so that it can readily be

1 ,

terminated.

The fact is

that the applicant has

had six months

notice of the termination of the

licence.

I do not however come

to the question of the exercise of discretion.

-The present application should therefore

be dismissed.

The costs should be the respondents' costs in the proceedings.

...

I c e r t i f y thai this and the &dte (Id)	i
preceding pages are a t r u e copy of the
Reasons forJudgmenthereinofhi5Honol;r l

[1985] FCA 600

27 Nov 1985