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

[1985] FCA 600

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l 690

i	I N THE FDEIiFL COTJPT OF AIJSJSTRFLTA
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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

Am :

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.

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2. The costs of this application be the respondents' costs

I in the proceedings.

I 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 )

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NEW SOUTH WALES D I S T R I C T E G I S T R Y ) NO.Gi.58 of 1985

GENERAL D I V I S I O N

._

-N B :

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 on

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 of 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

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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 an 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

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i contest on matters of fact is not ureat. althouqh there is

considerable dispute in a number of 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 of 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, a

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

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

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new vehicles.

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or new spare parts (the latter come from the second respondent)

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

I	provide authorised Mercedes-Benz service. More particularly, it
!	will not now be able to hold itself out as able to do these
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I	thinus in 1986.
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As the proceedings are of an interlocutory nature I

I	should	forbear	as far as possible from expressing views on the
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evidence which may embarrass the court at a final hearina. which

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it is still assumed will take place.

Reliance is principally placed by the applicant on

para.46(l)(cl. A primary consideration in the application of

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

This is a difficult question, and one which would probably in

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 is a sinale market €OK

Mercedes-Benz motor cars. TJndisputed evidence points against $*

such a conclusion. From the point of view of 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

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

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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

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traders. actual or potential.

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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 of Mercedes-Benz owners to the brand. Some of 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.

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

I	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
is not however the one-brand market and neither of the

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respondents, on the evidence so	far, appears to be in	a position	I
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substantially to control a wider market. Rather is it a hiahlp r -

competitive market with rivals ready and able to accommodate to .

any	chanues	brought	about	by the	respondents.	The elements of	! ,
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"control" have not in fact been uone into to any extent	at his	..I
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I	hearin?.	The	respondents'	evidence	is	that	Mercedes-Benz	cars	!	.'
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constitute about one quarter of the cars sold in what has been	1 :
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called the upper luxury market, B.M.W. cars constituting	\	!..
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sliqhtly smaller part.	This, however. includes some makes	of	I	-'
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vehicle which, on the applicant's view, should not belonu to the I I__. I .

upper luxury class. It includes some models	'of Mercedes-Benz	[ :<
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which the applicant contends should not be included. Accordinu I

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to Mr Yates' evidence. the upper ranqe of Mercedes-Benz vehicles	! ,
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compete only with Jaguar and some	B.M.W.	models. while the lower	L .A
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ran?e compete in a wider market. Even accepting this limited	L .
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I	situation to be the case, the market share of Mercedes-Benz is	I ..
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I	less	than	half.	It is contended	that	he	percentage	of the	, -
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market is itself sufficient to raise a case of "control" which should uo to a hearin? and therefore is sufficient to entitle the !

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

cases, but the otality of evidence he (substantially '. .

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undisputed) is against a conclusion of "control".

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terminating the franchise did not involve taking advantaae of a

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power	to control the market. even if there was the one-brand	1 .
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market contended	fpr.	I believe this submission, as expressed.	1 ;
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to be	sound.	r- .
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The lanquacre of the Act refers to "purpose" :

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"for the purpose of . . : a

(c) "deterring or preventing a person	from	engaging	in	i'i
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competitive conduct..."
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The "purpose" must be looked at subjectively, and the

present evidence is that there had to be a review by the first	l:
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respondent of the number of dealerships. in the light of changina	l..;
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circumstances which include6 a decline in the number of

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Mercedes-Benz which it would be possible to import	in	comlng	I:	~
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years. The	decision	was	said	to	be	made	with	a view to	S	I
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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 to be

terminated. and the Morninaton franchise of the applicant was the

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

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

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'. constructive purposes, but that is not a matter upon which I

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should attempt to elaborate in these proceedings. (see s.4F of

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the Act). -

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For the reasons given, I am of the view that a

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

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1	l	The applicant	also	relies	on para.46(l)(a).	It	is
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arced \$hat the first respondent is a competitor of the

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applicant. ~ Reliance is placed on 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
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think that this arqument is tenable. The first respondent agrees

I	that the cars were sold. but claims that each delivery was
effected through an authorised dealer. and comaission was paid to
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i	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
i	of the first respondent. The purpose to which the paragraph
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:	refers, of "eliminating or substantially damaginq a person ..." is
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not sufficiently established. The case relied upon under the
I	paragraph would point to a quite unreal situation,
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I Sub-paragraph 45(2)(b)(ii) is relied upon. but. as I

i	gather, without enthusiasm. On the evidence before me. the lack
i	of enthusiasm is justified. What is alleged is an understanding
!	I	between the first respondent and Lanes Motors (Holdings) Ltd. and
Lanes Motors Ptp. Limited that after 31 December 1985, new
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vehicles. and new spare parts, would not be 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 of terminating pour

franchise. I give you my personal guarantee". Mr Marshall

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

said to Mr Yates was to the effect that he could auarantee that

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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

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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:

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"the applicant is entitled to an 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 be to the effect that knowinu termination of the

applicant's franchise was beinu actively considered, the first

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respondent.	through Mr	Marshall.	said	that	no	decision	to	p;
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terminate had been made.	or that termination was not intended,	or	:A
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would not occur. Notice of termination was uiven orally on 7 (or

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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. as

it were. stay or 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 of termination. The applicant can claim

relief by way of damaues, but cannot obtain interlocutory relief

of the nature claimed.

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.m, Accepting Mr Pates' account of-what was said on 4 April.

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the applicant's case would	be in no	better position.	l	~~
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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 in force until
December 31st, 1983. Unless written notice of
termination is given bp one party to the other at
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 in
writing to the senior management of he
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 i

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I	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 of this requirement of
notification is to 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."

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12, which negated the right to terminate under clause 10.

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

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wider duty to act in aood faith, a breach of which has the

consequence mentioned. ~

All I need say about these submissions is that I do not

accept that, statutory provisSons apart. there was the wider

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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 be to force a close

relationship between the parties, contrary to 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

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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

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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.

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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

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