Minister for Immigration, Local Government and Ethnic Affairs v Batey

Re: GRAHAM VINCENT GALLAGHER and ORS
And: PIONEER CONCRETE (NSW) PTY LIMITED
No. G663 of 1991
FED No. 75
Number of pages - 126
Trade Practices
(1993) 14 ATPR 41-216
(1993) 113 ALR 159

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Trade Practices - Whether concrete supply company entitled to terminate cartage contracts with its lorry owners drivers (LODs) on reasonable notice - whether concrete supply company obliged to buy trucks and pay goodwill to LODs if it terminates their contracts - estoppel - s. 52 Trade Practices Act - misleading and deceptive conduct - whether conduct of LODs of equalization of earnings and restriction on fleet size and cartage services is prohibited by ss. 45(2) or 45D(1) of Trade Practices Act - unfair harsh or unconscionable conduct - s. 88F Industrial Arbitration Act 1940 (NSW) - s. 45(2) and s. 45D(1) Trade Practices Act.

Trade Practices Act 1974: ss. 45(2), 45D(1) and 52.

Industrial Arbitration Act 1940 (NSW): s. 88F.

HEARING

SYDNEY, 15, 16, 18, 19, 22, 23, 24, 26, 29, 30 June; 1, 2, 6 July 1992

#DATE 26:2:1993

Counsel for the Applicants : J L Trew QC

I D Faulkner P J Renehan

Solicitors for the Applicants : Slater and Elias

Counsel for the Respondent : D A Cowdroy QC

M R Gracie

Solicitors for the Respondent : Allen Allen and Hemsley

ORDER

The Court orders that:

1. The matter be stood over to a date to be fixed to enable submissions to be made with respect to relief on the cross-claim and costs.

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

JUDGE1

Introduction

LOCKHART J. This case raises fundamental questions about the relationship between the respondent, Pioneer Concrete (NSW) Pty Limited ("Pioneer"), and the applicants who are carriers for Pioneer of ready mixed concrete within the Sydney metropolitan area. The applicants are thirteen in number, out of a total of 145 persons who are engaged by Pioneer to carry its ready mixed concrete to building sites in and around Sydney in trucks which are owned by those persons or their family companies or partnerships. Three of the trucks which carry Pioneer's ready mixed concrete are owned by Pioneer itself: it employs three drivers to drive them.

The applicants assert that Pioneer has conducted its business and its dealings with them and with the former owners of their trucks on the basis that each lorry owner/driver ("LOD") has an asset in the nature of goodwill attached to his transferable right to cart ready mixed concrete for Pioneer; that the LODs were free to sell their trucks "in work" (i.e. at a premium in the nature of goodwill provided that the purchaser be approved by Pioneer, such approval not to be unreasonably withheld); that the sales of trucks with goodwill were upon the basis that the purchaser would enjoy the same rights as the vendor, and that Pioneer would not determine its contractual arrangements with any LOD and would not fail to provide cartage works to him for ready mixed concrete without first paying to the LOD the value of his truck together with premium obtainable if the truck was sold on the open market to a willing purchaser.
The applicants allege that Pioneer is estopped by reason of the matters to which reference has just been made, together with certain other matters, from denying that the applicants have entitlements in the nature of goodwill (that is, the right to sell the truck in work); that at all relevant times the applicants believed and expected that Pioneer would conduct its business relations with them in accordance with their beliefs, expectations and assumptions arising from the conduct of Pioneer mentioned above; and that at all relevant times the beliefs, expectations and assumptions of the applicants were well known to Pioneer; that with knowledge of the applicants' beliefs, expectations and assumptions Pioneer stood by and permitted the applicants to spend money on, amongst other things, the purchase of new trucks and to use them exclusively for use of Pioneer; and that in the circumstances it is inequitable for Pioneer to enforce any rights contrary to those beliefs, expectations and assumptions.
The applicants rely on substantially the same facts to support a case that the conduct of Pioneer constitutes misleading and deceptive conduct under s. 52 of the Trade Practices Act 1974 ("the Trade Practices Act") and unfair, harsh and unconscionable conduct contrary to the provisions of s. 88F of the Industrial Arbitration Act 1940 (NSW) ("the Industrial Arbitration Act"). The parties agree that this Court has jurisdiction to hear the claim under s. 88F. I have some doubt about that point, but it is not necessary for me to determine it.
The applicants seek declarations, injunctions and damages with interest.
Pioneer denies all these allegations and brings a cross-claim against all 145 LODs alleging that they have engaged in conduct which contravenes s. 45(2) and s. 45D(1) of the Trade Practices Act. Pioneer alleges that the LODs have made a contract or arrangement or arrived at an understanding with each other to impose restrictions upon the number of trucks to be made available to Pioneer by them for the purpose of carrying its concrete and to prohibit Pioneer from engaging third parties or using its own employees to drive its trucks for the purpose of carting ready mixed concrete. These are referred to as the allegations of "restrictions on fleet".
Pioneer also alleges that the LODs have made a contract or arrangement or arrived at an understanding pursuant to which the number of trucks available to Pioneer for the cartage of ready mixed concrete is, or may be, restricted from time to time, in that the LODs have made arrangements so that those drivers with the highest earnings will be rostered off from time to time to equalise their earnings with other LODs. These are called "the equalization of earnings allegations".
Pioneer also alleges that the LODs, in concert with each other and with other persons, have hindered or prevented the supply of cartage services for ready mixed concrete by third persons to Pioneer ("the restriction on cartage services allegations"). Pioneer asserts that this conduct of the LODs has the purpose of, or would have or be likely to have the effect of, substantially lessening competition in the relevant markets contrary to s. 45(2) of the Trade Practices Act. Pioneer also asserts that the conduct of the LODs hinders or prevents the supply of cartage services and/or concrete by Pioneer to its customers and that this conduct would be likely to have the effect of causing substantial loss or damage to Pioneer's business, or resulting in a substantial lessening of competition in the relevant markets (the cartage market or the concrete market) in which Pioneer supplies cartage services and/or concrete. Also, Pioneer alleges that the conduct is engaged in for the purpose of, and would have or be likely to have the effect of, causing a substantial lessening of competition in the relevant market, and for these reasons contravenes s. 45D(1) of the Act. That allegation against the LODs is put in the alternative and pursuant to s. 45D.
The LODs deny all these allegations in the cross-claim.
The proceeding commenced with the first applicant, Graeme Vincent Gallagher, as the only applicant. Later, at the request of Mr Gallagher, I granted leave to add a further twelve of the LODs as co-applicants pursuant to O.6 r.2. The applicants have, it seems, been selected by the LODs on a basis which suggests that between them they represent the interests of many of the 145 LODs; so that once the questions of liability have been determined as between the thirteen applicants and Pioneer, for all practical purposes these questions should be determined in relation to the remaining LODs.
The evidence in the case, both oral and documentary, was substantial, the latter in particular. All thirteen applicants signed statements which were tendered in evidence and which they verified in the witness box. They were all cross-examined. Pioneer called various witnesses in support of its case who had signed earlier statements. Most of them were cross-examined. Three expert witnesses were called by the applicants and one by Pioneer; they too were cross-examined.
There are differences between witnesses on various matters. I do not think that any witness was untruthful; but where there is conflict between the evidence of the applicants or their witnesses and the evidence of the witnesses of the respondent I prefer the evidence of the witnesses of the respondent. It was more objectively stated and was more in accord with the probabilities and contemporaneous documents. I propose to make my findings of fact which will reflect my findings of credibility and reliability.

Facts
13. The respondent is a member of the National Ready Mixed Concrete Contractors Association (NSW) Limited ("the NRMCA"), formerly known as the Concrete Manufacturers Association ("the CMA"). The executive committee of the association of the LODs of the respondent is known as the Pioneer Ready Mixed Concrete Carriers Executive Committee ("the LODs Executive Committee").

The respondent has been supplying ready mixed concrete to the Sydney market since the mid 1950s when it began production at its concrete plant at St Peters. By 1961 the respondent had expanded its business to about seven plants and a total of 50 concrete carriers who delivered its ready mixed concrete. In 1966/67 the respondent embarked on increasing its fleet by purchasing additional vehicles and employing drivers culminating in a fleet size of 75 contract carriers and approximately 40 employees who drove vehicles. It is a major participant in the Sydney ready mixed concrete market. Its present market share is approximately 20%.
The respondent's ready mixed concrete operations involve the following activities:-

. marketing its product, maintaining relations with its customers, developing its product and preparing tenders for major projects; . determining the price of its product and competing for contracts to supply ready mixed concrete; . ensuring the supply of raw materials, weigh batching the raw materials and loading them plus water into the mixers which are mounted on trucks: drivers are responsible for the mixing of ready mixed concrete once the raw materials have been placed in the mixer mounted on the truck; . all aspects of quality control to the point at which the raw materials are placed in the mixer: the LODs are responsible for the quality of the ready mixed concrete from the point of loading to the point of delivery. The respondent remains responsible to the customer for the ultimate quality of the hardened product. Delivery of ready mixed concrete is the responsibility of the LODs;

. the preparation of dockets for each load of concrete, the dockets are then processed at the State Administration Office of the respondent. The accounting department of the respondent generates invoices for the customers and pro forma invoices for the LODs which act in substance as payment advices; . the credit department of the respondent attends to the collection of all moneys due for concrete supplied. The LODs are paid irrespective of whether or not the customer pays the respondent, unless the LODs fail to follow the delivery procedure for the concrete correctly.

The respondent currently produces ready mixed concrete from 16 operational plants in the Sydney Metropolitan Area.
The respondent's 16 operational plants are serviced by 148 trucks each of which carries a concrete mixer. Of the 148 trucks 145 are owned and driven by LODs, their companies or firms and the remaining 3 are owned by the respondent and are driven by its employees.
The respondent generally employs three people to operate its production facilities at the batching plants, namely:-

(a) the plant manager who is responsible for arranging and supervising sales of concrete in his area, production of concrete at his plant and reporting to head office;

(b) the allocator, whose function is to take orders from customers and organize the dispatch of those orders to the customers which includes arranging the cartage from the plant to the customer's site by the LODs; and

(c) the batcher, whose function is to operate the computer-operated or manual controls which run the machinery that produces the concrete.

In some of the smaller plants the functions of batcher and allocator are performed by one person. In most plants the batcher, or in large plants a yardman, will towards the end of the day ensure that the yard is clean, tidy and ready for the next day's work.
Plants are operated by the respondent on each week day and generally for half a day on Saturday. Plants will also open on Saturday afternoon, Sundays and public holidays on application. If concrete is delivered on Saturday afternoon the LOD is entitled under the relevant contract determination (to which I shall refer later) to a surcharge of $10.13 per cubic metre with a minimum of 3 cubic metres per load. If concrete is delivered on Sunday the LOD is entitled to a surcharge of $12.15 per cubic metre with a minimum of 3 cubic metres per load.

Lorry Owner Drivers
21. The respondent employs LODs as do all the major concrete companies in the Sydney Metropolitan region. The table below states the approximate number of trucks operated by each of these companies and indicates which of those trucks are owned and operated by the company and which are owned and operated by LODs.

"SYDNEY TRUCK NUMBERS AS AT 10 APRIL 1992 OWNERSHIP LOD COMPANY Atlas 0 3 Boral 154 8 Brookvale MMix 0 4 Concrite 0 35 Hiquality 17 57 Hymix 33 24 Jacksons 0 6 Metromix 43 50 P and F Formations 0 4 Pacific 0 8 Pioneer 145 3 Readymix 128 48 Smithfield 0 4 Transit 0 21 Tristar 0 21 United 0 10 Western Suburbs 0 7 TOTALS FOR SYDNEY 520 313"

The respondent's 145 LODs and its three employed drivers are responsible for the following aspects of the production and delivery of ready mixed concrete:-

. the positioning of the truck and mixer for receipt of constituent materials;

. mixing the dry constituent materials and additives with water in their concrete mixer trucks to yield ready-mixed concrete; . inspecting the ready-mixed concrete prior to departure from the batching plant to ensure the slump; . delivering ready-mixed concrete within the specified time and maintaining the concrete quality during the delivery process; and . delivering the ready-mixed concrete in accordance with the end user's instructions and completing delivery documentation.

The thirteen applicants are all LODs. The second applicant Mr Lewis has been engaged by the respondent since 1961. The last of the applicants to be appointed is the thirteenth applicant, Mr Shuker, who commenced as an LOD with the respondent in 1990.
The terms of the engagement of the respondent's LODs are to be gleaned, as might be expected, from a variety of sources including written applications by LODs for appointment and letters of appointment signed by officers of the respondent. Other terms arise by implication from the circumstances of the relationship between the respondent and LODs which their rights and obligations have been negotiated and adjusted from time to time. In particular, the Determination of the Industrial Commission of New South Wales of 20 November 1981 known as the Transport Industry Concrete Haulage Determination 1981 ("the Contract Determination"), and the variations thereon, was negotiated and consented to by each party.
In the case of most of the applicants, an application in writing seeking to become an LOD and a letter of appointment by the respondent as an LOD are relevant to the proceedings.
The circumstances of the respondent's business into which the applicants were absorbed are relevant in determining the contractual relations between them. I shall return to this matter later when dealing with the particular practices which are impugned in this proceeding.
In each case, the formal documents of application and appointment followed discussions between the incoming and outgoing LOD, representatives of the respondent and others, including sometimes the relevant delegate of the Transport Workers' Union ("the TWU"). The LODs are not employees of the respondent: they are small businessmen using trucks owned by them, their companies or their partnerships for the purpose of performing the concrete cartage work for the respondent. Nevertheless, they were all members of the TWU. Delegates of the union were involved in many of the activities of the LODs and their relationship with the respondent.
The LODs have pursued during their respective lifetimes a variety of occupations and many of them are only part-time LODs. For example, the applicant, Mr Gallagher, is an engineer by profession. He established an engineering business in South-East Asia which he sold to a German company in 1978 for $US1.2m prior to purchasing the truck with which he first commenced working for the respondent. Some of the LODs still have the truck which they initially purchased when becoming LODs. Others have resold their initial truck and purchased a truck or trucks since then, either new or secondhand.
It is unnecessary for me to set out in the case of each applicant the relevant provisions of the applications for appointment and letters of appointment (where applicable), but I will, as a sample, state the relevant provisions of the documents of appointment of a number of the applicants. This is not intended to be exhaustive.
The letter of the respondent appointing Mr Gallagher an LOD is dated 25 June 1979, and grants the respondent the first option to purchase Mr Gallagher's truck for a mutually agreed sum, being the net trade valuation of the truck, and not including a goodwill content. If the respondent decides not to exercise the option to purchase, then Mr Gallagher may dispose of his truck as he wishes, but it is a matter solely between himself and his prospective purchaser to make their own arrangements. If Mr Gallagher does sell his vehicle, then the respondent is under no obligation to contract with the purchaser to allow him or her to deliver the products of the respondent.
Mr O'Connell, the eleventh applicant, appears to have received two letters from the respondent confirming his appointment following a discussion with an officer of the respondent on 13 May 1989. It appears that Mr O'Connell may have applied in writing to become an LOD on 12 May 1989 (or perhaps 8 May 1989 but this is not clear from the evidence). The notice of appointment is undated, but was probably about May 1989. There is a second notice of appointment also undated. This informality in the documentation of appointment is not untypical.
Mr Sullivan, the seventh applicant, became an LOD with Borham/Lightning. Borham Pty Limited and Lightning Pty Limited are wholly owned subsidiaries of the respondent (they were taken over by the respondent). The Borham/Lightning fleet is part of the Sydney Metropolitan Concrete Division. The relevant letter of appointment from Lightning is 30 September 1985 which so far as is relevant simply accepts the offer of Mr Sullivan to deliver concrete as defined in the Contract Determination.

Mr Bradley, the twelfth applicant, applied in writing to become an LOD on 13 August 1990, though no copy of his letter is in evidence. There was a discussion between him and an officer of the respondent in August 1990. The respondent handed a letter to Mr Bradley which for the first time said:

"We are giving you this letter because we have intentions of changing our system of carting concrete. I can't guarantee your goodwill will be the same as what you paid for it if we change our system."

The letter is undated but appears to have been handed to Mr Bradley in draft form and unsigned at the time of his interview with the representative of the respondent in about August 1990. He said in evidence that he realized there could be a problem about recovering goodwill if he sold his vehicle, but despite this, he went ahead.

The last applicant, Mr Shuker, applied in writing dated 1 October 1990 and the respondent wrote to him on 29 October 1990 (apparently a second notice of appointment, the first one being provisional). The letter simply confirmed his appointment subject to the Contract Determination.
The position thus varies as between the applicants with respect to the existence of applications and letters of appointment and the substance of any conversations, but in the end little turns on this. This is because of the events that occurred between the parties over the years of their relationships, and because of the terms of the Contract Determination.
To the knowledge of the CMA, now known as the NRMCA, the practice whereby LODs sold their trucks "in work" (which included a sum of money as a premium or goodwill) commenced in about 1960. I shall refer later in some detail to the practice of the sale by LODs of their trucks with a goodwill component in the sale price.
Although the form of letters of appointment varied from time to time a fairly standard clause in the respondent's letters, reads substantially as follows:

"Truck owners are in no way restricted in disposing of their vehicles, and any business transactions entered into by such owners are accordingly solely matters for the parties of such transactions to make their own arrangements."

On some occasions, although this form of letter was handed by representatives of the respondent to an incoming LOD, the LOD did not sign it. A meeting took place in about July 1985 being a monthly meeting with the LOD delegates. It was attended by the applicants Messrs. Gallagher, Atkins and Lewis and by Mr Spedding, then the Divisional Manager, Sydney Metropolitan Concrete of the respondent. Mr Spedding presented the respondent's proposal for a standard "letter of appointment" and said to the persons present that he was concerned about there being no "binding contract" between the LODs and the respondent. He said that the local rules had not formally been made part of the terms of contract, that the letters of appointment were often not signed by incoming drivers and that the respondent wished to regularize the situation by introducing a letter of appointment to be signed by incoming drivers prior to commencing employment. One of the LODs' delegates (Mr Gallagher or Mr Atkins) responded by saying in effect that they were not signing anything and that they had been advised by the TWU not to sign anything. Mr Spedding replied that until the matter was resolved the respondent could not approve any new incoming drivers. Discussions ensued thereafter in which the TWU rejected proposals of the respondent and noted that "if any driver is stopped from selling because of these letters, the rest of the drivers will not load". Further discussions took place about the proposed letters of appointment. Statements were made by the LOD delegates to the effect that they did not want anything to appear in the letters of appointment which "may jeopardize the goodwill arrangements between our owner drivers". Mr Spedding replied:

"The local rules are merely making it clear that the company has nothing to do with the goodwill. They don't stop you selling the truck with goodwill."

In September 1985 Mr Spedding learnt from discussions with the LOD delegate (Mr Atkins) and a TWU official (Mr Ron Mitchell) that the LODs proposed to take industrial action if the respondent continued with its refusal to accept new owner-drivers until the issue of letters of appointment was resolved. To avert industrial action, Mr Spedding agreed with Mr Mitchell in words to the following effect:

"The letters of appointment will be signed by the incoming LODs but these letters will only make reference to the contract determination. The local rules will, however, take effect as an agreement between the LODs as a whole and Pioneer."

Mr Spedding then devised a new induction procedure to ensure that incoming LODs were informed of the local rules and other matters prior to commencing work with the respondent. This new procedure was prepared by him in writing and handed to the area managers of the respondent. It appears that the local rules were thereafter explained to incoming LODs by officers of the respondent.

During Mr Spedding's term as the respondent's divisional manager he considered various proposals for variation of the respondent's fleet size. The proposals included a negotiated payment for goodwill to any LODs whose services were terminated; but they were rejected by the LODs. Mr Spedding believed that if the respondent did not make such payments of goodwill, it would face a strike by all its LODs in the Sydney Metropolitan Concrete Division. Accordingly the proposals for variation of respondent's fleet size during the period of Mr Spedding's acting as divisional manager were not implemented.
The Contract Determination is part of all the contracts between the respondent and the applicants and almost certainly to the contracts between the respondent and the other LODs who are not applicants: see Gregory v. Philip Morris Limited (1988) 80 ALR 455 at 460-461 and 478-479. The Contract Determination was made by consent following industrial disputation between the respondent and its LODs. The determination has been varied from time to time and the latest published variation is that of 30 November 1990. The determination of 1981 was the result of negotiations between the respondent and the TWU.
The Contract Determination contains many provisions. I shall mention the critical ones. Clause 26 relates to "fleet size" and reads as follows:

"26.1 A contractor (i.e. the respondent) shall have the discretion to vary the number of vehicles required throughout his operations. In the event of a dispute arising in respect of this matter, the parties to this determination agree to follow the procedures of clause 25, Dispute Procedure."

Clause 25 entitled "Dispute Procedure" makes provision for what is to happen when there is a disagreement between the LODs and the "contractor", namely, for negotiation between the parties, and, if the matter is not resolved, then in due course notification is made to the Industrial Commission under the terms of the Industrial Arbitration Act 1940 (NSW). Clause 25.2 provides:

"25.2 Disciplinary Action - a contractor may cancel a contract of carriage in the event of dishonesty, theft, serious misconduct or where a carrier uses a contractor's mixer for transporting materials other than the contractor's products without prior approval from the contractor."

Provision was made at one stage in the course of the Contract Determination's history for either party to terminate the arrangement for carriage upon notice, but that did not find its way into the Contract Determination as amended.
The Contract Determination also makes provision for what are described as "local rules". Clause 27 is the relevant provision and it reads as follows:

"27.1 Local rules and conditions shall continue in force in so far as they do not conflict with the provisions of this determination."

Local rules are established by agreement between the LODs through the TWU delegate and various company managers on behalf of the "contractor". The local rules are recorded in minutes of meetings of the LOD delegates and various company managers of "contractors" including the respondent.

Equalization of Earnings
46. A practice known as equalization of earnings has existed amongst the LODs at all material times. In essence, it is an arrangement amongst the LODs pursuant to which their trucks are organized so as to ensure that their earnings are similar. The practice occurs both within each plant and also as between plants in the Sydney Metropolitan Concrete Division. The practice within each plant of the respondent is as follows:-

(a) A driver representing all the LODs in a particular plant maintains a record of earnings received throughout the day by each LOD, called the Earnings Log. At the end of each day, the driver ranks each truck by its cumulative earnings. A person appointed to represent all the LODs in a particular yard (the yard delegate) asks the respondent's truck allocator at the particular plant to inform him of the number of trucks the respondent requires for the following day. The yard delegate then arranges for only that number of trucks to be available the following day and "rosters off" the remaining trucks, starting with the highest earner. The respondent nevertheless requires those LODs who are rostered off by the yard delegate to be able to be contacted until 10 am the following day, and if contacted, to be available for work that day.

(b) The following day if the respondent requires for work more trucks than are available at the plant, the allocator makes enquiries of other nearby plants of the respondent as to whether any trucks will be available for the day or part of it. At each plant, the yard delegate maintains a "Daily Transfer Roster" given the order of availability of particular drivers for daily transfer.

(c) For those trucks which are rostered on, work in most plants is allocated for the first load in the order of the lowest earner to the highest earner and then through the day on the basis of the first to return to plant from the previous load. In some plants the first load is given in numerical order of truck numbers on a cyclical roster, with the first truck out on day 1 made the last truck out on day 2 and so forth.

(d) As the day progresses the yard delegate generally approaches the truck allocator to ask if those trucks which are not immediately required for work may be rostered off.

The practice of equalization of earnings as between plants of the respondent occurs as follows:-

(a) Towards the end of each month the yard delegate enquires from the plant manager his truck requirements for the following month, based on the anticipated workload.

(b) At about the same time the LOD delegates determine monthly earnings and year to date earnings at each plant. Earnings are based on a fortnightly cheque received during the month and earnings after receipt of that cheque are based upon daily records kept in a "yard book" maintained by the LOD delegate at each plant.

(c) The LOD delegates hold a monthly meeting to discuss the monthly truck allocation. At about this time the area delegate (representing all of the yard delegates in that area) usually contacts the respondent's area manager to confirm truck numbers which have been provided to him by the yard delegates in respect of each plant in the area. Sometimes, particularly in periods of high demand, this contact is not made before the monthly meeting between the area delegates and the respondent's management.

(d) A monthly meeting takes place between the area managers and the regional general manager representing the respondent, and a number of area delegates representing all of the yard delegates. At this meeting the respondent presents its truck requirements for each plant on the basis of anticipated customer demand. The LODs, if they have not already done so, present their truck transfer requirements determined primarily on the basis of equalization of earnings. The LODs determine which particular trucks are transferred to individual plants to meet the monthly truck allocations.

(e) On the basis of the cumulative earnings of every LOD and the plant average earnings, a roster called the "Period Transfer Roster" is drawn up by the LOD delegates. Trucks may be transferred by the LODs from those plants which have the lowest earnings to plants of higher earnings. Once transferred, individual trucks do not usually stay at their new plant for more than about a week. The transfers usually involve rotating one truck from the transferring plant with others from that plant as frequently as once a week.

LODs are paid in accordance with the rate specified in the Contract Determination. Generally speaking they are paid:

. a basic "flagfall" for a five kilometre minimum; . a rate per cubic metre of concrete per kilometre travelled; . in certain circumstances a waiting fee for waiting time at the delivery site;

. various other loadings and allowances provided for by the Contract Determination, including loading of $X paid to LODs being transferred between plants.

The practice of equalization of earnings has been permitted by the respondent to continue primarily in order to avoid the possibility of an industrial dispute between the respondent and its LODs. It is a practice recognized by the Contract Determination and is thus part of the contract between the parties. The rostering of trucks and the equalization of earnings has at all material times been a major issue for the respondent and the LODs, as has the size of the respondent's fleet. The management of the respondent has been concerned that any attempt by it to vary the size of the fleet to suit the respondent's requirements would result in significant industrial disputation. These concerns have been particularly great in periods of high demand such as mid 1987 to 1990. Consequently, in those periods, the respondent's management has not increased the size of its fleet as a means of overcoming some of the detrimental affects which the equalization of earnings scheme has on the respondent's business. At monthly meetings between the LOD delegates and the respondent's management in, for example, 1988 and 1989 the respondent's management said words to the effect that it needed more trucks in the eastern metropolitan area and that the procedure which the respondent had to go through to obtain trucks from outside was too slow and painful. The LOD delegates responded in words to the effect that there were no more trucks available in the fleet and that the respondent would have to make do with what it had.
Paragraph 6 of the Contract Determination requires the respondent to pay LODs for transfers initiated by the respondent. However, transfers due to equalization/rostering do not attract a transfer fee. Most transfers are made through equalization/rostering.
I shall state my findings with respect to the effect of the practice as it has relevance to a number of issues, though primarily on the cross-claim. It is convenient to deal with the effect of the practice at this stage.
I am satisfied that the practice of equalization of earnings both within plants and between plants hinders the respondent's operation in the following respects:

(a) The practice of rostering off trucks which are not required for available work often means that if an unexpected increase in workload arises during the day, due, for example, to a large order from a customer, insufficient trucks are likely to be available to meet that increased workload. Drivers have on a number of occasions been rostered off without the permission of the relevant plant manager or allocator. It is generally impractical to obtain trucks from other plants within the day on short notice. If the plant manager does not have enough trucks available to fulfil unexpected orders, customers are notified accordingly and often their business is lost to a competitor of the respondent.

(b) Although the respondent requires those LODs who are rostered off to be able to be contacted until 10 am to work on demand, in a number of instances drivers who have been rostered off have not been contactable before 10 am as required and therefore have not been available to meet an unexpected increase in demand.

(c) In the monthly meetings or discussions between LOD delegates and representatives of the respondent there have been conflicts between a delegate's assessment of truck requirements at particular plants and the respondent's assessment of truck requirements based on customer demand. Such conflicts arise because the respondent's requirements are assessed on the basis of projected customer demand, whereas the LOD's requirements for equalization of earnings are based upon an assessment of the comparative year to date earnings of trucks between plants for the previous month.

(d) When daily truck transfers are required, this increases significantly the cost of fulfilling customers' orders. These additional costs are covered by clause 6.2(b) of the Contract Determination. As a result of the additional costs in transferring trucks from one plant to another, the respondent attempts to avoid so far as possible relying upon daily truck transfers to service customer demands in a particular area.

(e) At times where demand has been generally high, there have on occasions not been enough trucks owned by the respondent available within the Sydney Metropolitan area to fulfil all customer orders. An increase in fleet size would have ensured that the respondent could expand its operations to meet demand. It is in my view likely that the LODs would resist any attempt to increase the fleet size and such action would be likely to lead to serious industrial disputation. In late 1987 the manager of the respondent's Artarmon plant, Mr Stark, had to seek further trucks from another operator within the Sydney Metropolitan Area. He obtained a truck from Readymix, a competitor of the respondent. Prior to this he had approached the Eastern Area Manager who informed him that before he could obtain the truck in these circumstances pursuant to an arrangement with LODs the following procedure had to be followed:-

(i) all plants in the Sydney Metropolitan Area had to be checked by the relevant plant personnel (i.e. the allocator or the plant manager) to ascertain if there were any spare trucks available;

(ii) if there were insufficient trucks available from the other plants, Mr Stark was to inform the yard delegate;

(iii) the yard delegate would then check all the plants within the Sydney Metropolitan Area to confirm the company's claim that insufficient trucks were available; and

(iv) only if the yard delegate also found that no trucks were available, would the respondent be allowed to obtain trucks without objection by the LODs. Mr Stark followed this procedure before obtaining the Readymix truck. I am satisfied that there were other instances where, due to insufficient trucks being available in the Sydney Metropolitan Area, trucks had to be obtained from areas outside Sydney including one instance where they were obtained from Katoomba.

(f) On a number of occasions LODs have arranged truck transfers to enable trucks to equalize earnings. Although the respondent had not requested the transfers, the LODs nevertheless required that the respondent pay for the transfers under clause 6.2(b) of the Contract Determination. One instance occurred at Blackwattle Bay in about late 1989 as follows:

(i) at the monthly meeting of the LOD delegates for the allocation of trucks, Mr Stark requested a number of trucks to be allocated to Blackwattle Bay;

(ii) the LODs decided for the purposes of equalization of earnings that more trucks would be transferred to Blackwattle Bay than Mr Stark requested. The truck numbers were increased accordingly, but the additional trucks did not all work on a daily basis;

(iii) later that day, which involved unexpectedly high demand, these additional trucks were required by the respondent for work elsewhere than at Blackwattle Bay;

(iv) the LODs demanded that the respondent pay a transfer fee for the additional trucks even though the LODs had moved those trucks to Blackwattle Bay of their own volition;

(v) the transfer fee would also have been required to be paid if the additional trucks at Blackwattle Bay were to be used at their original base plant or at any other plant which the respondent may have requested their use;

(vi) the payment of the transfer fee in this instance was contrary to the general understanding between the respondent and the LODs; such fees were normally not payable by the respondent where the LODs request the transfer for the purpose of equalization of earnings. Similar problems to this one occurred recently at the respondent's St Mary's plant and have occurred elsewhere.

(g) The existence of the equalization of earnings scheme means that the LODs have little or no incentive either to arrive at work early, finish jobs quickly and return to the plant for more work or to remain at the plant on call to meet unexpected customer orders. This is because under the scheme there will be little or no financial reward for LODs who do so.

(h) Individual LODs are generally more efficient the longer they have been working at a particular plant. They become familiar with the local rules, geography of the area and requirements for large jobs. The constant transfer of LODs between plants inhibits the respondent's ability to benefit from these factors. The LODs have continued to resist attempts by the management of the respondent to vary the number of LODs who are permanently based at particular plants to reflect the respondent's assessment of customer demand. At a number of meetings with the LOD delegates between, for example, August 1989 and June 1991 the respondent's request for variation of the base number of drivers allocated to each plant was discussed; and at the meeting in June 1991 the LODs confirmed their rejection of the respondent's proposals to vary base numbers. The attitude of the LOD delegates is described in paragraph 2.1 of the minutes of the TWU and the respondent's management meeting held on 27 June 1991: "2.1 Redistribution of trucks - last TWU General Meeting resulted in a vote between rank and file with a negative response to redistribution.

Pioneer does not accept this position as being efficient and will take it up further at NRMCA level."

I do not accept the case of the applicants that equalization of earnings only becomes relevant after the needs of customers have been fulfilled. I accept the evidence of the witnesses of the respondent that the system of equalization of earnings means that LODs have little incentive to remain at plants to fulfil unexpected customer orders and little incentive to return to their plants quickly to receive further orders. The evidence establishes that it is well known and common in the industry that companies which operate LOD fleets are unable to service customers at short notice in the afternoon. By contrast producers who use company owned fleets have their trucks available for work throughout the day. I am satisfied that many customers who require concrete on short notice are more likely to approach companies which operate company owned fleets rather than one of the major operators using LODs.
The system of equalization of earnings was introduced at the respondent's plants over a period of years. It commenced probably in one of the smaller plants. The drivers at Artarmon or Brookvale were the last drivers to adopt the equalization of earnings system. After all the LODs had adopted an equalization of earnings system at their own plants, they introduced a system of equalization of earnings as between plants. Prior to the introduction of the equalization of earnings for the first load each day, trucks would go out from the plant in numerical order, each truck being identified by a number. The truck that went out first on one day would be the last to go out the next day and so on. For the next load, the trucks went out in the order in which they returned to the plant. This system of rostering meant that all trucks at the plant were available for the peak period. Trucks were generally always available because the income of drivers was solely dependant upon the volume of concrete delivered. In contrast, under the equalization of earnings system, even though a driver's income is based on the volume of concrete delivered, an LOD will be rostered off and not be available for work when his income exceeds that of the other LODs. I am satisfied that equalization of earnings reduces the availability of trucks.
The practice has the result that at certain times trucks which should be available at a particular plant are rostered off. As a result, that plant may be unable to fulfil all of its customer orders either promptly or at all.
The equalization and roster scheme allows each vehicle, including the three trucks owned by the respondent, 30 work days absence each year. After 30 days the loss of earnings for each truck is regarded as being outside the scheme and not to be "made up". The 30 day allowance does have some benefits because it permits a degree of regular and planned maintenance of trucks and concrete agitators. Also clause 18.2 of the Contract Determination provides for a maximum period of five days for painting of trucks in company colours, by the respondent's painting contractors. It seems that painting takes longer than five days per truck and the whole time for painting is made up through equalization/rostering. Rostering off creates some competition between drivers because a driver who is well organized and who provides good truck maintenance will have the least "down time" and will be in the top bracket of earnings and therefore more likely to be rostered off in appropriate circumstances.
The applicants assert that absence of equalization and rostering may cause the following:

. destruction of stability in the ready mixed concrete cartage system provided by the respondent; . hostile competition between drivers; . unplanned maintenance on trucks; . transfers to and from plants without regard to LODs personal circumstances or earnings, causing ill-feeling amongst drivers; . reduction in value of, if not destruction of, the asset possessed by LODs in the nature of goodwill; . an increase in costs for replacement drivers who will be required for longer hours in circumstances where the LOD has no additional income, and where the work for employed drivers cannot be planned with any certainty, unlike the system within rostering; . longer working hours for LODs for no additional income, and with no additional service to the respondent or its customers;

I am not persuaded that any of these consequences is likely to occur if the scheme is abandoned except the reduction or destruction of goodwill.
Restrictions on increases in fleet size
I shall state my findings now on this matter and the following three matters (preceding my findings on goodwill) for reasons of convenience, though their relevant is primarily as to the cross-claim.
The ready mixed concrete market is a cyclical market which goes through clearly defined periods of rise and fall. In order properly to compete in the market, it is necessary for ready mixed concrete producers to have the capacity to increase and decrease the size of their operations so that the respondent's ability to supply reflects market demand. In boom times it is necessary to increase the capacity of the respondent's operations. If there is a sufficiently large increase in demand in the area which the respondent needs to service, then ideally the respondent would open additional concrete plants. Additional concrete plants would however require an increase in fleet size. An increase in volume within a given area would require a greater number of trucks to deliver the additional concrete. When the demand for concrete falls it is desirable to reduce the number of plants and size of the fleet to reduce overheads and better utilize capital equipment.
In 1956 the respondent had one plant (at St Peters) and a fleet of six trucks operating from there. At that time, there were five LODs and one company truck. There was no equalization of earnings system in place, nor any limit on the size of the fleet. The trucks went out in the order that they came into the plant. This sometimes meant the trucks would arrive at the plant long before production was due to start. The respondent expanded in the Sydney Metropolitan Area by engaging more trucks and establishing new plants in outer suburbs. In the late 1970s or early 1980s the size of the concrete market stabilized and the LODs sought to freeze the number of trucks servicing it. They threatened industrial action at one stage if the respondent put on an additional truck. Restraints in the size of the respondent's fleet caused problems for the respondent in boom times and in market downturns. In boom times there were not enough trucks to satisfy all customer requirements which led to an inability to maintain existing share, let alone capture a further share of the expanding market. In depressed times the LODs negotiated an increase in rates as they experienced a downturn in utilization and therefore income.
I am satisfied that the respondent wished to increase its fleet size from time to time, but did not do so because of the fear of industrial action from the LODs. On many occasions the respondent's representatives have expressed a desire at meetings attended by the LOD delegates of the respondent to reduce its number of LODs and replace them with company owned trucks, but this has met with resistance by the LODs. It is plain in my mind that with the current LOD system and rate structure the respondent's capacity to become more efficient and therefore competitive in the future has been reduced: this has a harmful effect on the respondent's level of profitability. Proposals by representatives of the respondent to replace LODs with company trucks have been discussed on a number of occasions within the respondent's senior management, but have not been implemented because of the belief held by them that such a proposal would result in industrial action by the LODs.
During the period October 1985 to April 1987, the volume of demand f3r the respondent's product in the Sydney Metropolitan Area market was continually increasing. As a result of the increases in market demand, the respondent needed to increase its volume of production to maintain its market share. This could be done by any of the following methods:

(a) increasing truck utilization (that is, the cubic metres of concrete per month carried by each truck);

(b) transferring other trucks of the respondent into the Sydney Metropolitan Area from outside that area including trucks, for example, in the Borham/Lightning fleet;

(c) bringing in company owned trucks driven by company employees on a temporary or permanent basis; or

(d) permanently increasing the number of LODs.

In 1986, for example, market demand was at a peak and the respondent wished to increase its number of trucks in the Sydney fleet by bringing in trucks from the Borham/Lightning fleets to do work in the Sydney Metropolitan Concrete Division. The matter was discussed at meetings between LOD delegates and management of the respondent. The LODs would not agree to the respondent's suggestions except on certain terms and conditions which, in the opinion of the respondent, left significant constraints upon it in its flexibility to vary truck numbers in accordance with customer demand.
I am satisfied that the LODs in Sydney have acted to prevent the respondent from altering the size of its fleet by refusing to allow the respondent any increase at all in the number of company owned trucks and employee drivers and refusing to allow the respondent to introduce additional numbers of LODs into the Sydney operations. The LODs have prevented the respondent from altering the size of its fleet by threatening industrial action in the event of any changed fleet size.

(i) Restrictions on truck transfers due to equalization of earnings
66. Demand for deliveries of ready mixed concrete varies from time to time between the 16 plants of the respondent located throughout the Sydney Metropolitan Area. In order to meet customer demands efficiently it is sometimes necessary for the respondent to redeploy its trucks from one plant to another. The problems of equalization of earnings, restriction on increases in fleet size and restrictions on trucks transfers due to equalization of earnings are of course all intertwined.

(ii) Efforts to introduce further trucks
67. Efforts have been made by the respondent to introduce further trucks into its Sydney Metropolitan fleet. When the respondent has not had sufficient trucks to meet customer requirements in the Sydney Metropolitan area, it has attempted to bring from nearby country areas, its own trucks which were not being fully utilized. The LODs resisted this. As a result the respondent was required to hire trucks from time to time from competitors (Boral, Hymix or Readymix) in the Sydney Metropolitan Area so that it could meet its commitments with customers. These trucks were hired at a rate which left no margin for profit by the respondent. On one occasion in 1988, about the time of the 1988 Grand Prix in Adelaide, there was a discussion at one of the monthly meetings with the LOD delegates at which Mr Essing, then the Divisional Manager Metropolitan Concrete of Pioneer spoke to Mr Gallagher who said that some of the drivers were going to the Adelaide Grand Prix and Mr Essing said "We will not have enough trucks to service customer demand. We would like to bring in trucks from the country." Mr Gallagher replied "Those trucks are not part of our equalization scheme. You can't just bring them in like that". A lengthy discussion followed but Mr Gallagher continued to resist Mr Essing's requests. This is one of a number of examples established in evidence of unsuccessful efforts by the respondent to introduce further trucks to its Sydney Metropolitan fleet. I am satisfied that the respondent has suffered a loss of market share to smaller independent concrete companies with company owned trucks due in part to the refusal of the LODs to allow further trucks to be introduced by the respondent to meet its customer requirements in the Sydney Metropolitan Area.

(iii) Inability to reduce transport costs
68. Between 1985 and 1988 the cost of delivering ready mixed concrete represented between 20% and 25% of the delivered cost per cubic metre. The cost per cubic metre of concrete cartage in New South Wales has consistently been higher than elsewhere in Australia by approximately $4 per cubic metre. A rise of $3 to $4 per cubic metre occurred in New South Wales in about 1988 representing an increase of approximately 20%.

(iv) Goodwill payments, 69. The following table sets out the goodwill which the applicants allege (and the respondent does not deny) was paid by them in order to become an LOD with the respondent. TABLE OMITTED.

One of the expert witnesses called by the respondent was Dr Chris Hall who produced the table, which is accurate. I agree with the evidence of Dr Hall that the table demonstrates the following:

. The amount of goodwill paid is a significant proportion of the purchase price ranging from a minimum of 60% to a maximum of 94%. I agree also that the money was paid for goodwill representing essentially the money paid to gain access to a particular yard of the respondent.

. The value of the goodwill has risen steeply over the years as is illustrated by the graph below (Dr Hall's graph). . I am satisfied that when the respondent converted from employee drivers to LODs in the mid 1970s no goodwill was paid on those trucks but that it had peaked to $160,000 in 1990. I accept Dr Hall's evidence that on a nominal investment of $1 in goodwill in 1974 this represents a cumulative rate of return of 111% per annum. Even for the owners such as Mr Gallagher who paid $20,500 for goodwill in 1979 the investment represents a cumulative rate of return of 20.5%. Goodwill increased more than seven times in the ten years from 1979 to 1989 during which period there were no additions to the fleet apart from the additions of the Lightning/Borham fleet in 1985 when a downturn in the rate of growth of the value of the goodwill is seen on the graph. Goodwill also decreased in 1990, partly because of a decline in the concrete market and partly because the respondent initiated reviews of the future of concrete carters and those actions were known in the market for goodwill. . Quite wide variations in goodwill are to be expected. In 1989 purchasers paid goodwill of approximately $150,000 (the figures ranging from $134,000 to $160,000) with an average of $149,666. In 1990 the market price for goodwill fell to an average of $135,000.

The LODs' Executive Committee interviews each new driver to ascertain his suitability for work in the industry, ascertains the price paid by the driver for the truck and any element of premium and goodwill and discusses the terms of engagement with him. In fact when purchases have been made of trucks, the purchaser has tended to stand in the same shoes as the vendor with respect to the respondent and the business goes on as between drivers and the respondent on the same basis as it did before. The new driver is included in all rosters, the only discernible change really being the identity of the driver. The practice of selling goodwill commenced in about 1960 to the knowledge of the members of the CMA (now the NRMCA), including the respondent.
It is plain that at all material times the respondent was generally aware of the practice whereby LODs leaving the industry sold their trucks at a premium for goodwill, that is, a premium above the trade valuation of the truck. In my opinion, although the respondent was well aware of this practice, it did not become involved in the transactions by which the trucks were sold and in later years made it perfectly plain to prospective LODs that no goodwill could be assured. Plainly officers of the respondent were present during discussions from time to time with the LOD delegates when the issue of goodwill was discussed; but, in my opinion, nothing that was said could be reasonably construed, in the light of the evidence as a whole, as indicating that the respondent committed itself to making any payments to LODs by way of goodwill even if it did, buy trucks from LODs, which it didn't. Indeed in 1988 there was an informal discussion between Mr Gallagher and Mr Essing, a senior officer of the respondent, when Mr Gallagher said that the LODs would like the respondent to buy some of the trucks, to which Mr Essing replied that the respondent would not pay the goodwill as it was and is company policy not to pay it.

I am satisfied that the abolition of goodwill payments would have enabled the respondent to achieve greater competitiveness in the Sydney Metropolitan market by achieving a reduction in cartage rates to a level which would make the respondent's cartage comparable to or more competitive with companies who operated their own fleets and by giving the respondent the flexibility to increase or decrease the fleet size depending on the size of the market.
During the time Mr White was area manager of Western Sydney of the respondent, October/November 1985 to April 1987, he had discussions with incoming LODs who intended to purchase trucks from LODs wishing to sell. It was his practice to inform them that LODs had to abide by the Contract Determination; that the respondent was aware of equalization of earnings as a practice, but did not support it; and that the respondent could not guarantee the LODs earnings and had nothing to do with goodwill on the truck and could not guarantee it.
During the period from about February 1981 to November 1981 Mr Abrahms, senior officer of the respondent, was involved in negotiations with representatives of the TWU and the LOD delegates with a view to establishing a Contract Determination which was intended to set out the rights and obligations between the LODs and the concrete manufacturers on a uniform basis for the whole industry. Prior to 20 November 1981 the terms of engagement between concrete manufacturers and concrete carters were governed by industrial agreements between particular manufacturers and their drivers and therefore differed among the various concrete manufacturers. These agreements were typically registered under the Industrial Arbitration Act. The major issue during the negotiations of the terms of the Contract Determination in 1981, was the extent to which the LODs should be given the right to sell their trucks "in work" with "goodwill", goodwill being the component in the price over and above the market value of the truck. There was much debate on this question. Prior to and at the time of finalizing the Contract Determination in November 1981, the respondent required its incoming LODs to sign a standard letter of appointment in a form which acknowledged that:

"If for any reason whatsoever a truck owner wishes to dispose of a truck used for the delivery of concrete for the Company it shall be offered to the Company who shall have first option to purchase the said truck for a mutually agreed sum, such sum being the net trade valuation of the truck and having no goodwill content."

The letter was sent to an LOD if the truck which was purchased by the LOD was originally owned by Pioneer. Approximately 30 such trucks existed in the fleet of the respondent. A different standard form of letter was provided to incoming LODs where a driver purchased a truck which had never been owned by the respondent. The letter acknowledged the entitlement of LODs to be free to dispose of their vehicles on the open market but acknowledged that such transactions were "solely matters for the parties". During the negotiations for the Contract Determination in 1981, the TWU officials and the LOD delegates requested the insertion of a clause in the Contract Determination dealing with the sale of trucks "in work". This was resisted by the NRMCA representatives including the respondent. As a compromise it was agreed that the LODs would be permitted to sell their trucks "in work", whilst the companies would be permitted to vary their fleet size as required by their operations. It was on this basis that clause 26 became part of the contract determination.

I am satisfied that the right to vary fleet size which was eventually incorporated into clause 26 was not to be qualified or restricted by any obligation to pay goodwill or any premium on termination of the services of an LOD. Such obligation was never discussed or referred to between the TWU and the NRMCA before or after the finalization of the Contract Determination.
On 20 November 1981 the Contract Determination was approved by the Industrial Commission. A number of documents accompanied the making of the determination and none of them referred to any provision whereby the respondent was to pay any amount for goodwill on a truck if it wished to vary its fleet size pursuant to clause 26 of the Contract Determination. Nor can any implication to that effect be made.
Following the finalization of the Contract Determination in November 1981, the LOD delegates were dissatisfied with the existing arrangements relating to the sale of trucks in work. In particular the LODs of the respondent objected to the provision in the letters of appointment which applied to the LODs who wished to sell a truck originally owned by the respondent whereby they were required first to offer the truck for sale to the respondent at trade valuation and with no goodwill content. In meetings with the LOD delegates in March 1982 the LODs demanded that the respondent remove this requirement and agree that if the respondent wished to purchase the truck from an LOD wishing to sell, then it would purchase at market prices including a premium for goodwill. The respondent refused to agree to these demands. In the result the LODs of the respondent proposed to go on strike unless the respondent agreed to depart from the status quo relating to the sale of trucks in work. Further stoppages by the LODs of the respondent were threatened later in March 1982. I am satisfied that the respondent decided that in order to avoid costly industrial stoppages it would accede to the demands of the TWU. In the result, a letter was sent by the respondent to the TWU dated 29 March 1982 and a letter in similar terms was sent by Borham and Lightning. The letter reads as follows, omitting formal parts:

"Further to our discussions today we wish to confirm that we have agreed that this Company's policy regarding the Sale of Trucks is as follows:

'Any Contract Carrier having a contract of carriage with the Company and with whom the Company has, by letter of Agreement, the first option to purchase the truck when offered for sale, must give the Company the first option to buy the truck at the owner's nominated price, such p;rice being a realistic figure (including premium) which can be reasonably achieved in the open market at that time.

Contract Carriers with whom the Company holds no such options are free to sell their trucks with premiums and with no restrictions.'"

Following the letter of 29 March 1982 the standard letter of appointment of LODs of the respondent no longer applied.

I am satisfied that it was never agreed between the parties that the rights of LODs to sell their trucks "in work" at a premium would affect the right of the respondent to vary its fleet size pursuant to clause 26 of the contract determination. I am also satisfied that it was never agreed that the respondent would only be able to vary its fleet size with a payment of goodwill to any LOD who was affected by such variation in fleet size. However, I am satisfied that it was believed by all parties as a result of the industrial action threatened by the LODs in March 1982 that they would go on strike if the respondent were to vary its fleet size pursuant to clause 26 without payment for any loss of goodwill. I am also satisfied that during the period from 1982 to 1984 it is plain that the policy of the respondent was not to recognize goodwill in the sense of being bound to pay it, other than as stipulated in the letter of 29 March 1982. They regarded the price paid by the new LODs for their trucks to be the fair market price for the trucks themselves. The LODs did not approve or accept that policy.
It is plain that any changes in fleet size of the respondent would give the respondent the flexibility to vary its numbers of trucks but also adversely affected the goodwill of each truck rendered redundant. If the respondent could increase truck numbers in periods of high demand this would prevent the current LODs from obtaining the exclusive benefit of increased earnings from increased market volume which in turn probably would be reflected in reduction in the goodwill component in the future sale of the truck. It is plain that because of the goodwill component, LODs resisted any increase or decrease in the fleet size irrespective of variation in the level of demand in the market. Also the existence of goodwill placed upward pressure on the rates which the respondent had to pay to the LODs and thus made it difficult for the respondent to control costs in order to be competitive with independents who were using company owned trucks.
Thus the history, especially the more recent history, of relations between the respondent and its LODs shows that although the respondent was well aware of the practice of incoming LODs paying a substantial component of the purchase price to an outgoing LOD for goodwill, it never bound itself to make any payment of that kind to any LOD except where it exercised an existing option to purchase which it held and that appears to apply only in cases where the respondent itself owned the trucks in question at some earlier stage. The letter of 29 March 1982, following as it did a period of close negotiation between the parties to the Contract Determination, shows that the most that the respondent was prepared to offer by way of itself paying goodwill was to pay it in those limited circumstances mentioned above.
By recognizing the right of LODs otherwise to sell their trucks with premiums and with no restrictions, all the respondent was doing was to recognize that if goodwill was to pass between an outgoing and incoming LOD then it was entirely a matter between the parties to that transaction and was nothing to do with the respondent, the respondent would not impede the payment of a figure for goodwill.
The applicants contend that there is an implied term in the contracts between the respondent and its LODs that if the respondent decides to purchase a truck from an LOD it must pay the market price including a premium for goodwill; or that if it decides to exercise any right of termination of the contract which it may have, it must as a term of that termination buy the truck from the LOD, paying the market price for the truck and a premium for goodwill. The applicants base this alleged implication upon various reports and memoranda.
I accept the submission of counsel for the applicants that it was a term of the contract between the respondent and the LODs that it would not conduct itself without good cause in a manner likely to destroy or seriously damage the goodwill of each LOD in his right to sell his truck in work. Each LOD appointed by the respondent is entitled to sell his truck in work after the passage of five years. This right has been recognized by the respondent at all material times since at least 1982. Plainly the sale of a truck in work by an LOD to an incoming LOD has taken place with a goodwill premium. From at least 1982 (probably from 1972) all sales of trucks by LODs have been, to the knowledge of the respondent, on the basis of the sale of a truck in work. As mentioned earlier the respondent has a first option from some LODs to purchase their trucks, initially without goodwill, but later with goodwill. This applies to LODs who purchased a truck originally owned by the respondent. Of the 13 applicants only Mr Gallagher falls into this category. In March 1982 the respondent informed the TWU that where it had an option to purchase, that option was subject to it agreeing to pay the retiring LODs "a realistic figure (including premium) which can be reasonably achieved in the open market at that time". In relation to other LODs who are not required to give that option they were "free to sell their trucks with premiums and with no restrictions". All applicants other than Messrs Gallagher, Lewis and Stewart became LODs after March 1982.
There is no provision for the payment of goodwill by the respondent to an LOD upon termination of his contract with the respondent to be found in any of the documents which constitute the appointment of the LOD by the respondent including applications or letters of acceptance. The Contract Determination and local rules make no reference to the payment of goodwill by the respondent in any circumstances. Apart from the limited class of case where the respondent has an option to purchase a truck from an LOD that was previously owned by the respondent, no applicant has ever received a letter from the respondent acknowledging any entitlement to goodwill. There is no evidence that any letter to this effect has ever been received by any of the 145 LODs. Of course the respondent knows of the payments of goodwill as between incoming and outgoing LODs; but this is a different matter. By agreeing in 1982, following its perception of potential industrial action, to pay goodwill to LODs where the respondent exercised an option to purchase a vehicle (a limited class of case) and by agreeing that all LODs could sell their trucks "in work" (that is with goodwill) the respondent did not bind itself to purchase any such trucks or if it varied its fleet size or terminated the services of all or any LODs to pay goodwill. I cannot discern from the evidence any facts from which it can be concluded that an implied term of the contract between the respondent and each LOD is that goodwill must be paid by the respondent if it purchases a truck from an LOD save in the limited class of case to which I referred earlier where the purchase is pursuant to an option to purchase.
It is not clear to me on what particular basis the applicants assert that there should be any such term implied. If it is intended that the term be implied so as to give the contract business efficacy then I reject the implication. Plainly there is not necessity that such a term be implied to give each contract between the respondent and an LOD business efficacy. If it is argued that it should be implied as a matter of reasonableness between the parties (a questionable proposition), then I discern no basis upon which the implication could be made. Rather the evidence points the other way. The question of payment of goodwill has arisen between the parties in various contexts over the years.
Prior to the contract determination in November 1981, the respondent's letters of acceptance contained one or more of the following provisions.

1. That in the event of sale of their vehicles, the LODs' business arrangements were "solely a matter for the parties to such transaction to make their own arrangements" (see for example Mr Gallagher's letter of acceptance of 25 June 1979).

2. That the respondent was not obliged to contract with any prospective purchaser (whether or not the respondent had an option of first purchase). (See Mr Stewart's letter of acceptance of 28 February 1968).

3. Where the respondent had an option, such purchase was for a net trade valuation "and having no goodwill content" (see Mr Gallagher's letter of acceptance of 25 June 1979).

Mr Gallagher acknowledged in evidence that at least since 1981 the respondent has made it clear to incoming LODs that any matter of goodwill was a matter entirely between themselves and the persons from whom they were purchasing the truck.
Nowhere do I discern from this material the implication on which the applicants rely.
Goodwill has been created in consequence of the course of conduct pursued by the LODs. It has not been created by the respondent and the respondent has not been involved in any sale of or trade in, goodwill. It is true that the respondent has had knowledge of the existence of goodwill and has been aware from time to time of the amounts paid for goodwill. However, this cannot render the respondent liable to make payments for goodwill on any basis in law.

(vi) Letters of 10 October 1991 (IAS8) and 31 March 1992 (IAS9)
92. At meetings between representatives of the respondent and LODs' delegates the respondent from time to time raised the question of its improvement to fleet productivity by adopting various measures including redeployment of its trucks from one plant to another on an hourly or daily basis. At one such meeting in August or September 1991, Mr Gallagher suggested to Mr Stainton that if he put the proposed changes into writing they would be discussed. In the result a letter was written by the respondent to the LOD delegates of 10 October 1991 of importance in this case. It is necessary to set out its terms in full.

"10 October 1991

The Delegates

Pioneer Concrete Lorry Owner Driver Group c/- Chairman - Les Lewis

ARTARMON CONCRETE PLANT

Dear Sirs,

RE: PIONEER CONCRETE FLEET It is evidence to us that as the ready mixed concrete industry has changed so much in the last three years, that we need to change the basics of how Pioneer operates and focus on the need to be a company able to provide very flexible and efficient service to customers. With this in mind, our company has been seeking to hold discussions with our fleet of concrete lorry owner drivers concerning changes we wish to make to the way we run the transport part of our business. These discussions have not taken place for a number of reasons, one of which is a request by the drivers that we provide details of the changes our company wishes to make. I have held a series of talks with our company management and I am now able to inform you of the changes that Pioneer is seeking to bring about in respect of the transport element of its concrete business as follows:-

1. FLEET SIZE

The size and make-up of our fleet is no longer suitable to the needs of our business. If Pioneer is to survive and prosper as a concrete manufacturer and ready mixed concrete supplier then our fleet must be smaller and more flexible than it is now. We must be able to achieve cost efficient changes to our business and this includes a much lower cost transport element of the business.

I therefore give formal notice that pursuant to the provisions of Clause 26 Fleet Size of the Contract Determination we wish to reduce the size of our lorry owner driver fleet from 146 to zero. This reduction may be achieved in a staged fashion and we would be prepared to discuss a process along these lines: Date Nos of trucks to leave 31st November, 1991 Approx. 30 23rd December, 1991 " 40 30th March, 1992 " 50 30th June, 1992 " 26 Total trucks to leave 146 We are prepared to negotiate the terms upon which lorry owner drivers leave our fleet but we see the necessity to reduce as absolutely fundamental to our business. Our company therefore intends to introduce company owned trucks to the fleet and these will be driven by drivers employed by our company. Obviously there will be opportunities for some lorry owner drivers who leave our fleet to take up a position as a company employed driver.

2. VEHICLE TYPE

There is now available technology which will enable three axle trucks to carry loads of up to 5.75m3 in compliance with the law. In particular the availability of hydraulic drives for the mixer will enable problems in respect of load size to be overcome.

I therefore give formal notice that within 12 months from the date of this letter, we will require all lorry owner drivers who remain with us to have vehicles capable of carrying 5m3 in compliance with the law and capable of having fitted a rear power take-off unit. All trucks over seven years old will therefore have to be replaced with new trucks of a suitable type. We will provide details to individual drivers of the type of trucks which are suitable and arrangements will be made to introduce them on a progressive basis. However, I do emphasize that all remaining lorry owner drivers must have this process completed within 12 months from the date of this letter.

The Sydney metropolitan ready mixed concrete market is currently in a state of decline reflecting the decline in the building industry, and as demand for concrete has fallen, so has the price of concrete. For example, in the nine months period between June 1991 and March 1992, the price of the respondent's concrete has fallen by 13% per cubic metre.
The majors, including the respondent, are to an extent able to adopt measures to reduce their respective costs of production of ready mixed concrete. But so long as they continue to use LODs, I am satisfied that they are unable to make any significant reductions in their cartage costs or utilize their resources more efficiently. I accept the evidence of Mr Stainton, the Regional General Manager of the respondent, that if the respondent was able to utilize a company owned fleet of trucks, the average cost of cartage of concrete would fall from approximately $22 per cubic metre to approximately $17 per cubic metre.
Independent manufacturers of ready mixed concrete are able to take advantage of fluctuations in the market more readily than the majors because of their ability to provide cartage services more readily, both on week days and on weekends. If the respondent continues to utilize only the contract services provided by the LODs (I leave aside the three company employed drivers), it will suffer a severe disadvantage in its ability to compete in the Sydney market.
The cost of cartage of ready mixed concrete is greater in Sydney than in any other capital city of Australia. I can discern no cause for this phenomenon other than the costs which are imposed by the Contract Determination which necessarily presupposes the existence of the LOD system.
The costs applicable to the cartage of ready mixed concrete by LODs are also greater than the costs borne by the independents with employee driven fleets. I am satisfied from the evidence including the evidence of an officer of an independent company that its costs of cartage over the past five years have been less than those of the respondent.

Flexibility and rivalry in the concrete cartage market
169. There is a considerable lack of flexibility and rivalry in the concrete cartage market due to a number of causes. First, the Contract Determination introduces inflexibility into competition amongst carters because it sets minimum rates and conditions and adjusts rates by formula. Second, there are what the experts have described as institutional factors imposed on the cartage market by government regulatory authorities. For example, the Roads and Traffic Authority axle load limitations limit flexibility to compete by placing a limit on loads carried. Third and most significantly for present purposes is the inflexibility that arises from practices adopted by the LODs. There is widespread use in the Sydney market of the following practices all of which are attributed to the LODs and the system which they represent:

. entry is restricted by the LODs to yards and to companies, hence truck numbers are restricted; . new entrants to a yard must be approved by the LODs; . exit from a yard or company is restricted by the LODs; . temporary transfers between yards are subject to approval by the LODs;

. multiple truck ownership is prohibited by the LODs and the TWU; . rotation or sharing of work is done to equalize incomes (that is equalization of earnings) by means of systems operated by the LODs;

. all carters at a yard or company receive the same rates.

All of these practices have the necessary consequence of limiting rivalry and flexibility within the market; and the association between the LODs and the TWU necessarily facilitates the LODs' ability to maintain the practices primarily through threat of industrial action.
The combined effect of the practices adopted by the LODs, in particular the restrictions on truck numbers, on multiple truck ownership and on truck relocation, together with the Contract Determination is that individual carters of concrete do not have the means to offer rivalry even if they are more efficient or even if they wish to seek additional work. The effect of the practice of equalization of earnings is that the carters do not have the incentive to offer rivalry even if they are able to do so. Equalization of earnings together with the Contract Determination reduces the risks usually associated with being a small business person and thus reduces some of the incentive actively to engage in rivalrous competition. The guaranteed equality of earnings to the LODs ensures that there is little incentive to seek more efficient and better methods of cartage and then to pass those benefits on to consumers. The effect of the Contract Determination is that all carters accept the same rates, the rates are increased in line with cost by means of a formula and individual carters are insulated from the effects of competition.
In my opinion the combined effect of the practices of the LODs and the Contract Determination is to limit competition in the concrete cartage market.
Thus the level of competition in the concrete cartage market is diminished by the practices of equalization of earnings and restrictions on truck numbers. It is almost impossible, if not impossible, for a person seeking entry to the major segment of the market to do so unless a truck is available for sale with attendant goodwill. Thus new entrants cannot add rivalrous pressure to the market. The equalization practices together with the practices which restrict truck numbers, including the prohibition on multiple ownership of trucks by one carter, make it impossible for an LOD to seek additional work even if he wishes to do so.
I accept the correctness of the submission of counsel for the respondent that the size of the goodwill payments is a useful and reliable indication of the extent of the barriers to entry to that part of the cartage market which services the majors, that is about 70% of the total market for cartage.
I adopt the following statement by the Trade Practices Tribunal in Re Lamont (1990) ATPR 51,512 (a case relating to the ready mixed concrete industry and LODs in the ACT/Queanbeyan cartage market), at 51,527:

"However, in the market for concrete cartage goodwill payments purchase nothing more than the right to enter the market. Such payments increase the already significant barriers to entry in this market. Furthermore, increase in goodwill payments are likely to put pressure on the rates charged by lorry-owner drivers both because drivers who have paid a significant amount of goodwill will have financing costs and because drivers will wish to protect the value of their investment by ensuring that rates remain high."

The effect of the arrangements and practices on competition in the ready mixed concrete market
176. I am satisfied that restrictions in the market for cartage services has and is likely to have the effect of lessening competition in the market for ready mixed concrete due to the following factors:-

. Concrete companies are restricted in their ability to offer lower prices. For example the restrictions of the LODs make it difficult or uneconomic for majors such as the respondent to compete for weekend work (because of the differences between week day and weekend work rates embodied in the Contract Determination). Consequently there is less competitive pressure to reduce the price to weekend customers because there are fewer active rivals in the market. . Concrete companies are restricted in their ability to offer more flexible services.

. All the major concrete companies tend to have the same cartage costs and those costs tend to increase at the same time and at the same rate.

. Concrete companies are unable or at least severely hampered in their capacity to reduce their costs by better resource allocation.

. It is difficult for concrete companies to introduce more efficient new technology.

. Company incentives to drivers to increase productivity are restricted.

As to goodwill, the value of goodwill in the concrete cartage market is in my opinion almost entirely attributable to both the relative security and stability of income associated with the equalization practices and to a lesser extent associated with the Contract Determination. It is also attributable to the restraint on competition imposed by arrangements which bar entry to potential competitors and which effectively stop any erosion of opportunities for work.
Because of their ability to engage employees, the independents are
Restriction on truck fleet
able to utilize truck fleets according to the needs of the market. The majors, including the respondent, are unable to do so because of the restrictions imposed upon them by the LODs relating to any increase or decrease in the fleet size.
Also the action of rostering off is an integral part of the equalization scheme as practiced by the LODs and demonstrates the difficulties faced by the respondent in the marketplace. The transfer system is unwieldy and costly. The practices of the LODs are unique to the Sydney market. They do not exist in any other capital city in Australia.

Substantial lessening of competition
180. Barriers to entry are the most important structural indication of a detriment to competition in a market for goods or services: see Queensland Wire Industries Pty Ltd v. Broken Hill Co Pty Ltd (1989) 167 CLR 177; Re Queensland Co-Operative Milling Association Limited v. Defiance Holdings Limited (1976) ATPR 40-012 and subsequent decisions of the Trade Practices Tribunal and the courts. The Contract Determination fixes or adjusts rates in ways that limit the ability of the freer market to use the price mechanism as a restraining device and to operate as a signal for changes in market conditions. The equalization system based on equity among the LODs conceals important differences and attributes between individual operators. It substantially removes the incentive for market participants to experiment with different pricing and product initiatives. Practices which limit the ability of participants in the market to change the number, form and ownership of the trucks operating in the market add rigidity, which makes the activities of concrete production and distribution less capable of responding to unforeseen variations in demand commonly found within the Sydney markets. The practices penalize efficient operators and subsidize inefficient operators. I accept the evidence of Dr Norman who gave as an example of the point, the following:

"Carter A is motivated and would like to seek a higher income by pursuing work actively, being willing to work long hours and generally engaging in rivalrous conduct characteristic of independent small businesses, while carter B is not so motivated. The effect of the equalisations scheme is that as soon as carter A's income is noticeably above carter B's, additional work is denied to carter A. In the course of time carter A will lose the incentive to engage in rivalry and any market pressure on carter B to operate competitively will be removed."

These practices in my opinion impair the economic performance of this market sector by limiting the market benefits that would arise from more rivalrous activities among the existing participants and by depriving the market of potentially different and more efficient operators. They are acts of protection which are contradictory to the dictates of market competition. There is a lessening of competition in the concrete cartage market caused by an artificial limit being imposed on the number of trucks that may be used which is in turn caused by the conduct of the LODs in both the equalization arrangements and the arrangements which limit the number of trucks. There is also a lessening of competition in the ready mixed concrete market caused by the inability of the majors including the respondent to obtain cartage services and to supply ready mixed concrete to their customers to meet the requirements of customer demand. The practices of restricting truck numbers and rostering off trucks as an integral part of the equalization system each results in the lessening of competition in the relevant markets. The practices adopted by the LODs are motivated by a desire both to maintain the value of goodwill and to equalize and raise returns to LODs.
The effects of these practices create:-

. a quasi monopoly position and the expectation by the LODs of its perpetuation;

. the basis for goodwill payments of the size observed in the industry;

. poorer performance;

. higher prices for cartage and ultimately for the price of ready mixed concrete;

. market inflexibility and lessening of competition in the markets for concrete cartage and ready mixed concrete.

Cartage constitutes about 15% of the cost to a customer of a load of concrete, although there is a wide range of variation depending on circumstances. I agree with Dr Hall that this suggests that if cartage rates can be cut by 10% the price of concrete can be dropped by about 1.5% (that is one-tenth of 15%). The evidence suggests that the actual cut that may be possible in cartage rates may be much larger than 10%. Sydney rates for concrete cartage per cubic metre for the respondent are the highest in Australia and some 28.4% higher than in the lowest cost capital, Brisbane. If rates in Sydney are compared with rates in other capital cities, the difference is as follows:

City Cost of Cartage in dollar terms per Cubic Metre of concrete Sydney 22.20 Brisbane 15.90 Melbourne 19.90 Adelaide 16.00 Perth 20.70

The restrictions on flexibility and rivalry in the cartage market are largely due to the practices adopted by the LODs. Other factors such as institutional and functional limitations and the Contract Determination also reduce flexibility and rivalry; but there is little that competitors in the concrete market can do about them and their effect is relatively minor by comparison with the LODs' restrictions. The practices adopted by the LODs have the effect of limiting the potential for rivalry in the concrete market by making it difficult for companies to offer lower prices or improved services or to introduce new technology. The extent of the limitation is that it restricts opportunities for concrete companies such as the respondent to cut prices. Whether the concrete companies would do this if the restrictions were abolished or whether they would just add to profits depends ultimately on the competitive nature of the concrete market and on the particular attitudes of the companies concerned.
Having found that this is a clear case where the conduct of the LODs lessens competition in both markets it falls to me to determine whether the lessening of competition is substantial or likely to be substantial.
This question has been examined in a number of the decisions of the courts and the Trade Practices Tribunal. The concept of "substantial" is a relative one.

"It need not, it is plain, be necessarily capable of quantitative assessment; but it should be sufficiently definable - have sufficient substance - as to permit some factual judgment of its relative importance. The term 'relative' is used deliberately. One thing can be large only in relation to another." Re: QCMA

(1976) 25 FLR 169.

In Radio 2UE Sydney Pty Limited v. Stereo FM Pty Limited (1982) 62 FLR 437 I said at 444:

"In the context of section 45, the word 'substantial' is used in a relative sense. The very notion of competition imports relativity. One needs to know something of the business carried on in the relative market and the nature and extent of the market before one can say that any particular lessening of competition is substantial."

See alsxo ASX Operations Pty Ltd (1991) 27 FCR 460; Dowling v Dalgety Australia Limited (1992) 106 ALR 75 and Eastern Express Pty Limited v General Newspapers Pty Limitd (1992) 106 ALR 297.
In my opinion the anticompetitive effects of the restrictions imposed by the LODs is a significant factor in deciding competitive success in the concrete market. This is evidenced by the size of the goodwill payments. The effects of the practices are likely to cause a substantial lessening of competition in the markets for both concrete cartage and ready mixed concrete. As to the cartage market, the practices are plainly designed to have, and do in fact have, the effect of restricting competition and they prevent and hinder competition in the cartage market (s. 4G of the Trade Practices Act). It cannot be doubted that the erection or maintenance of barriers to entry can lead to a substantial lessening of competition: see Outboard Marine Australia Pty Ltd v. Hecar Investments No 6 Pty Ltd (1987) 66 FLR 120. Restrictions on the independent operation of a business is a significant structural element in a market; and arrangements which curtail the independent operation of a business clearly lessens competition. These considerations all apply in the present case and lead in my view to a substantial lessening of competition. As to the concrete market, the practices have the effect of restricting competition in that market for the reasons already mentioned. The concrete market is inherently competitive with relatively low barriers to entry and significant interdependence between competitors. Demand in the concrete market is significantly elastic and cross elastic with respect to actual price to the customer and with respect to reliability and quality of service. Market share is an important indicator of competitive success and as a source of competitive success within a relatively large competitive range. A company which can acquire additional market share in this industry, other things being equal, has the potential to lower unit costs and thus become more competitively advantaged relative to its rivals. There are no significant economies of scale relative to the total market size so that this competitive advantage arising from acquisition of market share is unlikely to lead to any market dominance in the long term, but does offer opportunities for extensive rivalry as a means of making the best use of resources over the short to medium term.
The flexibility required to pursue such rivalrous strategies is impeded by the restrictions and arrangements interposed by the LODs. This reduces the relative ability of individual competitors to engage in rivalry and to put competitive pressure on rivals. In my opinion if the restrictions were limited, the flexibility would be increased substantially. The nature of the concrete market is such that rivalrous pressure of this kind would be irresistible; the interdependence in the market is such that rivals would have little choice but to respond. This would be likely to increase competition in the market as a whole.
I turn then to the specific issues that arise under the Trade Practices Act.
Section 45(2)
Section 45(2) provides so far as relevant:-

"(2) A corporation shall not make an arrangement or arrive at an understanding if -

(i) a proposed arrangement or understanding contains an exclusionary provision; or

(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

(b) give effect to a provision of a contract, arrangement or understanding, ... if that provision -

(i) is an exclusionary provision; or

(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition."

Section 4D defines the term "exclusionary provision" for the purposes of s. 45 as being in essence a collective boycott, by referring to any provision in an agreement between competitors which has the purpose of either restricting the supply of goods or services by all or any of those competitors to particular persons or classes of persons or restricting the acquisition of goods or services by all or any of those competitors from particular persons or classes of persons.
The respondent contends that the arrangement or understanding of limiting truck numbers and equalization of earnings (being an understanding that they will not compete with each other for more than an equal share of the available business) is an exclusionary provision because its purpose is to restrict the number of trucks by excluding third parties and employees of the respondent from supplying cartage services or concrete (s. 45(2)(a)(i)). By raising and equalizing earnings through restricting or limiting the number of trucks, the purpose of the LODs or the likely effect of the arrangement or understanding is substantially to lessen competition (s. 45(2)(a)(ii)). The relevant arrangement or understanding is given effect to, thus contravening s. 45(2)(b). The respondent's case based on these provisions of the Trade Practice Act is confined to such of the cross respondents as are corporations.
Fifty-one of the cross-respondents are corporations owned or controlled by or in which LODs are substantially interested. Each of those corporations supplies contract cartage services to the respondent. If the corporate cross-respondents have contravened s. 45(2) then it is alleged that the remaining cross-respondents have been knowingly concerned in such conduct for the purposes of s. 75B of the Trade Practices Act and the contrary was not suggested.
The relevant conduct of the LODs (I shall continue to refer to LODs, but for the purpose of the present question I include also the relevant corporations) consists of the actions of maintaining static truck numbers by refusing to permit the increase or decrease of trucks except on the terms of the LODs and the action of rostering off trucks at such times as the LODs wish which is part of the equalization scheme as enforced by the LODs.
The purpose and the effect of this conduct is to inhibit or restrict other persons from entering the concrete cartage market as an LOD; and it has the purpose or effect of substantially lessening competition in the concrete cartage market and the ready mixed concrete market, the two of which overlap for the reasons mentioned earlier.
The conduct has the effect of preventing or restricting the supply of both cartage services and of ready mixed concrete. The limitation on cartage services, the inability of the majors to obtain cartage services readily when demand requires it and the inability to obtain more efficient resource use of their cartage facilities and plant, added to the factors which I mentioned earlier when discussing the substantial lessening of competition, all lead to the conclusion that the effect of the relevant conduct is substantial in its lessening of competition. By way of contrast, other majors, that is other than the respondent, have the benefit of a greater mix of employee drivers with LODs, whilst independent companies have all their trucks operated by employee drivers. These companies which are competitors of the respondent in the Sydney metropolitan concrete cartage market and concrete market are not subject to the same restrictions or limitations of delivery and supply as is the respondent.
The relevant arrangement or understanding constitutes an exclusionary provision within the meaning of s. 4D. The LODs would otherwise be in competition with each other and the purpose of the arrangement is to restrict or limit the supply of concrete cartage services to the respondent and its customers. It has also prevented, restricted or limited the supply of ready mixed concrete to the customers of the respondent. The LODs by virtue of that conduct have made an arrangement or arrived at an understanding which contains an exclusionary provision which has the purpose or effect of substantially lessening competition contrary to the provisions of s. 45(2)(a). LODs have also given effect to such provision contrary to s. 45(2)(b).
As to the exclusion of third parties from supplying cartage services, it is true that the Contract Determination entitles the respondent to vary its fleet size, but in practice the activities of the LODs ensures that the control of entrance to the market is dominated by them. The exclusionary provision does have the purpose described in s. 4D(1)(b) because it relates to a restriction of the supply of services by LODs.
The respondent's case of contravention of s. 45(2) is stronger it seems to me in so far as it is based upon (a) an arrangement or understanding which has a provision that has the purpose or has or is likely to have the effect of substantially lessening competition in the concrete cartage market or concrete market or (b) the giving effect to such provision. Although the tests posed by the definition of exclusionary provision are satisfied in this case, there is a real question whether, at least as to the alleged exclusionary provision restricting the numbers of trucks, the relevant purpose is not a purpose within the meaning of s. 4D because it does not relate to any restriction of the supply of services by any party to the alleged arrangement or understanding, namely, any LOD. I do not accept the correctness of that contention but I see force in it.
In my opinion it has been established that the LODs have contravened s. 45(2)(a)(i) and (ii) and s. 45(2)(b)(i) and (ii).

Section 45D of the Trade Practices Act
202. Section 45D so far as relevant in this case provides as follows:

"45D(1) Subject to this section, a person shall not, in concert with a second person, engage in conduct that hinders or prevents the supply of goods or services by a third person to a fourth person (not being an employer of the first-mentioned person), or the acquisition of goods or services by a third person from a fourth person (not being an employer of the first-mentioned person), or the acquisition of goods or services by a third person from a fourth person (not being an employer of the first-mentioned person), where

(a) the third person is, and the fourth person is not, a corporation and -

(i) the conduct would have or be likely to have the effect of causing

(A) substantial loss or damage to the business of the third person or of a body corporate that is related to that person; or

(B) a substantial lessening of competition in any market in which the third person or a body corporate is related to that person supplies or acquires goods or services: and

(ii) the conduct is engaged in for the purpose, and would have or be likely to have the effect, of causing -

(A) substantial loss or damage to the business of the third person or of a body corporate that is related to that person; or

(B) a substantial lessening of competition in any market in which the fourth person acquires goods or services.

(b) The fourth person is a corporation and the conduct is engaged in for the purpose, and would have or be likely to have the effect, of causing -

(i) substantial loss or damage to the business of the fourth person or of a body corporate that is related to that person; or

(ii) a substantial lessening of competition in any market in which the fourth person or a body corporate that is related to that person supplies or acquires goods or services."

The respondent puts its case based on s. 45D as follows:-

(a) LODs have in concert with each other engaged in conduct that hinders or prevents the supply of cartage services and/or concrete by the respondent to its customers where (i) the respondent is and the customers are not corporations and (ii) the conduct of restricting the number of trucks and the practice of equalization would be likely to have the effect of causing (a) substantial loss or damage to the business of the respondent or (b) a substantial lessening of competition in either or both of the cartage market or concrete market in which the respondent supplies or requires goods and/or services, namely, cartage services and/or concrete; and,

(b) the conduct is engaged in for the purpose and would have or be likely to have the effect of causing a substantial lessening of competition in either the cartage market or the concrete market in which the customers acquire goods and/or services, that is cartage services and/or concrete (s. 45D(i)(a)).

A second way in which the case is put is that LODs are acting in concert with each other by engaging in conduct that hinders or prevents the supply of goods or services of cartage or concrete by the respondent to its customers where the customers are corporations; and the conduct is engaged in for the purpose and would be likely to have the effect of causing a substantial lessening of competition in either the cartage market or the concrete market in which the customers acquire goods or services, namely, cartage services and/or concrete (s. 45D(1)(b)).
A third way in which the case is put by the respondent is that LODs have acted in concert with each other by engaging in conduct that hinders or prevents the supply of cartage services by third party carriers or employees of the respondent to the respondent where the respondent is a corporation; and the conduct is engaged in for the purpose and would have or be likely to have the effect of causing a substantial lessening of competition in the market in which the respondent supplies or acquires services, namely, cartage services (s. 45D(1)(b)).
The final way in which the case is put is that LODs have acted in concert with each other by engaging in conduct that hinders or prevents the acquisition of ready mixed concrete by customers from the respondent where the respondent is a corporation and the conduct is engaged in for the purpose and would have or be likely to have the effect of causing a substantial lessening of competition in the market for cartage services and/or concrete market in which the respondent supplies or acquires goods or services (s. 45D(1)(b)).
The LODs by their conduct of restricting the supply of trucks to the respondent and by the rostering off of trucks as part of the equalization system have in my view engaged in conduct which has hindered or prevented the respondent from acquiring cartage services, and is continuing to do so. The same conduct has had the effect and is continuing to have the effect of restricting supply of cartage and of concrete services by the respondent to its customers. This conduct has been engaged in and is being engaged in for the purpose of or is likely to have the effect of causing substantial lessening of competition in the concrete cartage market and the ready mixed concrete market. In my view the conduct offends s. 45D(1)(a)(i)(B) and s. 45D(1)(b)(ii). In other words the respondent has established its case on its cross-claim except in so far as it alleges that the relevant conduct has had the effect or is likely to have the effect of causing substantial loss or damage to the business of the respondent (s. 45D(1)(a)(i)(A) and s. 45D(1)(a)(ii)(A) and s. 45D(1)(b)(i)). This lastmentioned aspect of the case was not seriously pressed in final addresses by counsel for the respondent.

Summary of Conclusions
208. This case has involved a very large amount of evidence, documentary and oral. Numerous questions of law have arisen and have been the subject of extensive submissions by counsel for the parties, especially written submissions. I have mentioned the principal submissions made by counsel. By not referring to every other submission it does not follow that I have not considered them. I have carefully considered every submission. It is simply that the sheer number of the submissions in the light of the volume of the material before the Court has made it for all practical purposes impossible to cover each of them in terms in these reasons for judgment. But my answers to the principal submissions carry with them inevitably the ancillary submissions.

. Each LOD is entitled to terminate his contract with the respondent. The respondent is also entitled to terminate its contract with each LOD. In each case reasonable notice of termination must be given if the right is exercised. . The Transport Industry Concrete Haulage Determination 1981 (as amended), being a determination of the New South Wales Industrial Commission as it then was, does not prohibit the respondent from changing its cartage policy and system. The respondent is not permanently locked into its arrangements with LODs. . Clause 26 of the Contract Determination entitles the respondent to vary its fleet size.

. This power must be exercised in good faith. The power of fleet variation may be exercised by the respondent by reducing the size of its LOD fleet to zero if it wishes provided it does so in good faith. I see nothing in the evidence which suggests that the respondent in seeking to reduce its LOD fleet to nil has acted or is acting otherwise than in good faith according to its perception of its future business needs. . There is no term express or implied in the contracts between the respondents and each LOD that goodwill must be paid by the respondent if it purchases a truck from an LOD save in the limited class of case where it exercises an option to purchase a truck from an LOD and the truck was originally the property of the respondent. Nor is there any term, express or implied, requiring the respondent as the price for terminating any contract between itself and an LOD to purchase the truck of the LOD or to pay to him an element attributable to goodwill. . The case for the applicants based on breach of contract, misleading conduct pursuant to s. 52 of the Trade Practices Act 1974, estoppel and s. 88F of the Industrial Arbitration Act 1940 (NSW) fails. . The practices and arrangements of and between the LODs of limiting truck numbers and equalizing earnings are anticompetitive and substantially lessen competition in the relevant markets of concrete cartage services and the ready mixed concrete market itself. It has been established by the respondents that the LODs have contravened s. 45(2)(a)(i) and (ii) and s. 45(2)(b)(i) and (ii) of the Trade Practices Act and s.45D(1)(a)(i)(B) and s. 45D(1)(b)(ii) of the Trade Practices Act.

I do not propose to make orders today. I shall stand the matter over to a date to be fixed in the near future to enable submissions to be made with respect to appropriate relief on the cross-claim and as to costs. I direct the respondent to bring in short minutes to give effect to these reasons for judgment, both with respect to the applicants' claim and the cross-claim. The short minutes should be discussed between counsel before the matter is next listed so that all matters except those truly in dispute may be agreed in advance by the parties.

[1993] FCA 75

26 FEBRUARY 1993