Potato Marketing Corporation of Western Australia v Galati
[2015] WASC 430
•11 NOVEMBER 2015
POTATO MARKETING CORPORATION OF WESTERN AUSTRALIA -v- GALATI [2015] WASC 430
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 430 | |
| Case No: | CIV:2545/2015 | 30 OCTOBER 2015 | |
| Coram: | TOTTLE J | 11/11/15 | |
| 34 | Judgment Part: | 1 of 1 | |
| Result: | Application granted | ||
| B | |||
| PDF Version |
| Parties: | POTATO MARKETING CORPORATION OF WESTERN AUSTRALIA ANTONIO GALATI GALATI NOMINEES PTY LTD |
Catchwords: | Practice and procedure Application for interlocutory injunction Serious question to be tried Damages not adequate compensation Balance of convenience favours the grant of injunctive relief |
Legislation: | Commercial Arbitration Act 2012 (WA), s 7, s 8 Competition and Consumer Act 2010 (Cth) Competition Policy and Reform (Western Australia) Act 1996 (WA) Marketing of Potatoes Act 1947 (WA), s 19A, s 19(3), s 19(4), s 22, s 24, s 26, s 38, s 32 Marketing of Potatoes Regulations 1987 (WA), r 67(1)(d) Property Law Act 1969 (WA), s 10 Trade Practices Act 1974 (Cth), s 45(2) |
Case References: | Castlemaine Tooheys Ltd v The State of South Australia (1986) 161 CLR 148 Civil Aviation Authority v Australian Broadcasting Corporation (1995) 39 NSWLR 540 Emeco International Pty Ltd v O'Shea [2012] WASC 282 Minister For Indigenous Affairs v Catanach & Ors [2001] WASC 268 Peek v New South Wales Egg Corporation (1986) 6 NSWLR 1 Straits Exploration (Australia) v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187 Twinside Pty Ltd v Venetian Nominees Pty Ltd (2008) WASC 110 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ANTONIO GALATI
First Defendant
GALATI NOMINEES PTY LTD
Second Defendant
Catchwords:
Practice and procedure - Application for interlocutory injunction - Serious question to be tried - Damages not adequate compensation - Balance of convenience favours the grant of injunctive relief
Legislation:
Commercial Arbitration Act 2012 (WA), s 7, s 8
Competition and Consumer Act 2010 (Cth)
Competition Policy and Reform (Western Australia) Act 1996 (WA)
Marketing of Potatoes Act 1947 (WA), s 19A, s 19(3), s 19(4), s 22, s 24, s 26,
s 38, s 32
Marketing of Potatoes Regulations 1987 (WA), r 67(1)(d)
Property Law Act 1969 (WA), s 10
Trade Practices Act 1974 (Cth), s 45(2)
Result:
Application granted
Category: B
Representation:
Counsel:
Plaintiff : Ms P Cahill SC & Ms F Vernon
First Defendant : Mr D H Solomon & Ms L Retallack
Second Defendant : Mr D H Solomon & Ms L Retallack
Solicitors:
Plaintiff : Kott Gunning
First Defendant : Solomon Brothers
Second Defendant : Solomon Brothers
Case(s) referred to in judgment(s):
Castlemaine Tooheys Ltd v The State of South Australia (1986) 161 CLR 148
Civil Aviation Authority v Australian Broadcasting Corporation (1995) 39 NSWLR 540
Emeco International Pty Ltd v O'Shea [2012] WASC 282
Minister For Indigenous Affairs v Catanach & Ors [2001] WASC 268
Peek v New South Wales Egg Corporation (1986) 6 NSWLR 1
Straits Exploration (Australia) v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187
Twinside Pty Ltd v Venetian Nominees Pty Ltd (2008) WASC 110
- TOTTLE J:
Introduction
1 The plaintiff (the Corporation) is a statutory corporation created by the Marketing of Potatoes Act 1947 (WA) (the Act) with responsibility for regulating the production and marketing of ware potatoes, that is, potatoes grown for human consumption (potatoes) in Western Australia.
2 By a chamber summons issued on 30 September 2015 the Corporation applied for an interlocutory injunction restraining the second defendant (Galati Nominees) from selling potatoes grown by the first defendant (Mr Galati) and delivered to it in excess of the quantity of potatoes that Mr Galati is entitled to grow in accordance with the area licences and certificates of Domestic Market Entitlement (DME) allocated to him by the Corporation pursuant to the provisions of the Act. The relevant licences and certificates of DME are those granted in respect of the periods between 1 July 2015 and 3 October 2015 (Pool 1 period) and 4 October and 2 January 2016 (Pool 2 period).
3 Mr Galati is a director of Galati Nominees. Galati Nominees is authorised to take delivery of potatoes in Western Australia in its capacity as an agent appointed by the Corporation for that purpose.
4 To provide some context for the application for injunctive relief I record:
• The practical consequence of the injunction sought by the Corporation is that Galati Nominees will be prevented from selling more than 1,918 tonnes of the potatoes grown by Mr Galati in the Pool 1 period and more than 1,049 tonnes of the potatoes grown by him in the Pool 2 period.
• DMEs were issued to 23 growers in the Pool 1 period and 25 growers in the Pool 2 period and the aggregate of the quantities of potatoes specified in the DMEs for those periods was 12,217 and 13,273 respectively.
• The Corporation estimates that Mr Galati harvested at least 3,008 tonnes of potatoes in the Pool 1 period. It is not clear on the evidence how many of these tonnes have been delivered to Galati Nominees and sold by it.
• Mr Galati admits that he has planted potatoes which, if successfully harvested, will see him deliver to Galati Nominees potatoes in excess of his DME for the Pool 2 period.
• The Corporation estimates that Mr Galati will harvest 3,635 tonnes of potatoes to Galati Nominees in the Pool 2 period.
5 Galati Nominees' position is that, unless restrained by an injunction, it will sell all the potatoes delivered to it by Mr Galati in the Pool 2 period.
6 These proceedings were commenced following the breakdown of discussions between the parties aimed at resolving their differences. By letter from its solicitors dated 14 September 2015 the Corporation gave notice of its intention to commence proceedings and seek injunctive relief if suitable undertakings were not proffered by Galati Nominees.
7 The proceedings were commenced by a writ of summons with an indorsement of claim on 30 September 2015. The chamber summons seeking the injunctions was first brought on for hearing on 1 October 2015. I made certain directions that submissions and affidavits be filed and I adjourned the matter until 7 October 2015. On 7 October 2015 Galati Nominees gave an undertaking in the following terms:
From 7 October 2015 until the earlier of 11 November 2015 or determination of the plaintiff's application by chamber summons dated 30 September 2015, THE SECOND DEFENDANT UNDERTAKES to the Court that:
1. it will not sell either directly or indirectly ware potatoes delivered to it by the first defendant during the period from 1 July 2015 to 3 October 2015 ('Pool 1 2015/2016 Season') in excess of the first defendant's domestic market entitlement of 1,918 tonnes in respect of Pool 1 2015/2016 season;
2. it will not sell either directly or indirectly ware potatoes delivered to it by the first defendant from or after 4 October 2015 in excess of the first defendant's domestic market entitlement of 1,049 tonnes in respect of the period from 4 October 2015 to 2 January 2016 (Pool 2 2015/2016 Season).
8 Galati Nominees was prepared to give this undertaking because Mr Galati was not in a position to deliver more potatoes than he was permitted to grow in the Pool 2 period until 11 November 2015. At the hearing on 7 October 2015 I programmed the filing and service of further affidavits and listed the application for hearing on 30 October 2015.
9 On 7 October 2015 Mr Galati and Galati Nominees applied to the State Administrative Tribunal (the Tribunal) for orders that certain decisions of the Corporation be reviewed and set aside pursuant to s 19A of the Act. Those decisions included the decision by the Corporation to commence these proceedings. By an interim application Mr Galati and Galati Nominees sought an injunction requiring the Corporation to discontinue these proceedings. On 16 October 2015 the President of the Tribunal, Curthoys J, dismissed the interim application.
10 In these proceedings the Corporation ultimately seeks declaratory relief and damages from Mr Galati and, in addition to injunctive relief, damages from Galati Nominees. The Corporation filed and served its statement of claim on 23 October 2015.
11 The Corporation initially sought injunctions in terms which restricted the delivery of potatoes by Mr Galati to Galati Nominees on a weekly basis by reference to the quantities specified in weekly delivery schedules attached to the certificates of DME issued to Mr Galati, but this aspect of the injunctive relief was not pressed at the final hearing of the application.
The evidence
12 The Corporation read and relied upon affidavits sworn by: Mr Peter Evans, its chief executive officer, on 29 September 2015 and 29 October 2015; Mr Larry Hegarty, its senior operations officer, on 29 September 2015, 14 October 2015 and 21 October 2015; Mr Steven Jarman, a licensed surveyor, retained by the Corporation to undertake surveys of potato crops; Mr Stan Boczar, its chief financial officer; and Ms Katrina Welch, a solicitor employed by the Corporation's solicitors. Much of the Corporation's evidence was concerned with establishing that Mr Galati had grown and was continuing to grow potatoes in excess of his DMEs. In the event, this was a factual issue not contested by Galati Nominees.
13 Galati Nominees relied upon two affidavits sworn by Mr Galati on 1 October 2015 and 7 October 2015 and an affidavit sworn by Ms Lisa Retallack, a partner at Galati Nominees' solicitors, Solomon Brothers.
14 A large number of objections were taken by Galati Nominees to the Corporation's affidavits. At the hearing it was agreed that I would not rule on objections, but would consider them in the context of the weight to be attached to evidence to which objection was taken.
An overview of the regulated market and the Act
15 This overview is derived from a review of the provisions governing the marketing of potatoes as set out in pt IV of the Act and, unless otherwise stated, those paragraphs of the Corporation's affidavits which were not subject to any challenge or objection.
16 The Act prohibits the delivery and sale of potatoes within Western Australia to anyone other than the Corporation or its agents: s 22 of the Act. All potatoes delivered by growers to the Corporation or its agents are vested in and become the property of the Corporation: s 24 of the Act. On the vesting of potatoes in the Corporation in accordance with s 24, a grower acquires a claim for compensation for those potatoes in accordance with the provisions of the Act 'unless a contract between the grower and the Corporation otherwise provides': s 24 of the Act.
17 All commercial producers or growers of potatoes must be registered with the Corporation and must only plant potatoes in land specified in an area licence issued by the Corporation: s 22 of the Act.
18 For the purposes of potato marketing, the period between 1 July in one year and 30 June of the following year is referred to as a 'season'. Each season is divided into four periods of 13 weeks, referred to as 'pools'. Pool 1 runs from the beginning of July to the beginning of October. Pool 2 runs from the beginning of October to the beginning of January, and so on.
19 For each pool the Corporation submits a statement to the Minister setting out the estimated tonnage of potatoes needed to satisfy anticipated domestic demand (the Estimated Tonnage): s 26(2) of the Act. Once approved by the Minister, the Estimated Tonnage is advertised as the quantity of potatoes required to be accepted by the Corporation in that pool period.
20 In advance of each pool the Estimated Tonnage is broken down and allocated to growers. Each grower is allocated a DME for a pool and is licensed by the grant of an area licence to plant an area of land measured in hectares for the purposes of growing potatoes for the production of that grower's DME: s 28 of the Act.
21 Historically, DMEs have been allocated to growers on the basis of the DME allocated to the grower from the same pool in the previous season.
22 Potatoes are delivered by growers to the Corporation or to agents appointed by the Corporation to take deliveries from growers and for other purposes: s 22(2)(a) of the Act. Such agents are referred to as 'merchants'. The Corporation has appointed five agents, or merchants, to take delivery of potatoes on its behalf. They are Galati Nominees, Aldwich Holdings Pty Ltd, West Coast Potato Suppliers Pty Ltd, Pemberton Washpacking Co Pty Ltd and Patane Produce Pty Ltd.
23 For each pool the Corporation submits to the Minister a statement recommending a price per tonne for potatoes delivered and accepted for sale in a pool and, if approved by the Minister, that price becomes the 'pool price': s 32 of the Act. Growers may receive more or less than the recommended pool price, depending on the income received by the Corporation for that pool. The actual price received for particular deliveries is the subject of negotiation between the Corporation and the merchants to whom the deliveries are made. The Corporation will seek the highest possible price for each delivery.
24 Growers and merchants negotiate the terms relating to quantity, variety and date of delivery on which a merchant will accept delivery of potatoes.
25 The Corporation prepares a weekly quota, issued seven days in advance, which specifies the quantity and variety of potatoes that growers may deliver in the week identified in the quota and the quantity and variety of potatoes that each grower will have available for delivery to merchants in that week.
26 Mr Galati and Galati Nominees do not participate in this weekly quota system. This is one of several consequences which flow from an agreement (the Agreement) made on 26 July 2013 between the Corporation, Mr Galati and Galati Nominees.
27 If potatoes are delivered to one of the merchants other than Galati Nominees, once the merchant has washed, packed and graded the potatoes, the merchant is required to deliver a 'packout statement' to the Corporation. A packout statement specifies the quantity, variety and grade of potatoes in a particular delivery. Packout statements are required to be sent to the Corporation on a daily basis: reg 67(1)(d) of the Marketing of Potatoes Regulations 1987 (WA) (the Regulations). On receipt of a packout statement the Corporation renders an invoice to the merchant for the payment of the delivery to which the packout statement relates.
28 After making various deductions for grower levies, end-point royalties and the Corporation's costs, the Corporation pays the grower for the potatoes delivered to the merchants on a staged basis: three payments of approximately 65%, 15% and 15% are made in the course of the pool and a balance of approximately 5% is made following an audit of all pools at the end of the season.
29 If agreement cannot be reached between a grower and one of its merchants, the Corporation must accept delivery of a grower's potatoes provided that all relevant criteria concerning quality, size, variety and the like are met. The potatoes are received into what is described as the Corporation's Board Store.
30 Mr Evans, the Corporation's chief executive officer, gave evidence in his affidavit of 29 September 2015 at pars 7, 9, 11 and 12 to the effect that the Corporation's primary objective in regulating the marketing pools is to match supply of locally grown potatoes to demand. The Corporation aims to align production within +/- 5% of demand. The allocation of DMEs is of fundamental importance to enabling the level of supply to match demand. Objection was taken to this evidence on the grounds that it was irrelevant, vague or conclusionary, and constituted submissions. In my opinion, Mr Evans, in his capacity as the Corporation's chief executive officer, was in a position to know what the objectives of the Corporation were and how it set out to achieve them, and his evidence is admissible. The evidence gives the broader framework within which the more detailed provisions of the Act must be viewed.
31 Before leaving the regulatory scheme, mention should be made of s 19(3) and (4) of the Act. Section 19 appears in pt II of the Act. The section sets out the Corporation's general powers. Sections 19(3) and 19(4) were introduced into the Act in 1995. The subsections read as follows:
(3) The Corporation may from time to time appoint any person -
(a) on such terms and conditions as are; and
(b) to the extent and in the area that is,
agreed between the Corporation and that person, to act as the agent of the Corporation and that person may be thereby authorised to take deliveries from growers, to act as a grading and packing merchant, to sell or distribute potatoes, or to perform any other specified function on behalf of the Corporation.
(4) The appointment of a person under subsection (3) as an agent of the Corporation may from time to time be amended, or be revoked, by the Corporation.
The background and genesis of the dispute.
32 There were no significant disputes about the majority of the primary facts, and I set these out in the paragraphs which follow. In respect of those matters which were material to the resolution of the application and were disputed or were not clearly admitted, I have made references to the parties' affidavits. In issue were the conclusions to be drawn from the primary facts.
33 Mr Galati has grown potatoes in Western Australia for many years. Galati Nominees has been a merchant authorised by the Corporation to take delivery of potatoes for over 20 years.
34 It is common ground that Galati Nominees' present status as a merchant can be traced back to permits issued to it by the Corporation on 3 January 1995. These permits were issued under s 21 of the Act as it then was. Section 21 was repealed in 1995.
35 The permits in question were: first, a permit entitled 'Permit to Act as Wholesale Potato Merchant (Packing and Grading)', (the Packing Permit); the second is a permit entitled 'Permit to Act as a Wholesale Potato Merchant (Distributor)' (the Distributor Permit). Each permit was expressed to be valid until 31 March 1995. The parties disagreed as to how the arrangement between the Corporation and Galati Nominees should be characterised, but it is common ground that the terms and conditions in the Packing Permit and the Distributor Permit as modified subsequently by the terms of the Agreement have continued to govern their relationship until the present day.
36 The Packing Permit is expressed to be subject to terms and conditions including the following:
1. The Permit Holder shall at all times comply with the provisions of the Act, any amendments thereto, and any Regulations made thereunder.
…
4. The Permit Holder shall receive delivery of potatoes from such sources as the Authority may from time to time direct and all potatoes received by the Permit Holder pursuant to the provisions of this permit shall be washed, brushed, graded and packed in accordance with such directions as may be issued by the Authority from time to time.
…
8. The Permit Holder shall not dispose or attempt to offer to dispose (whether by sale, trade, exchange or howsoever) of any potatoes other than to:-
(a) the Authority;
(b) a Wholesale Potato Merchant (Distributor) the holder of a current permit in that respect issued by the Authority.
…
11. This permit may be cancelled by the Authority at any time following written notice to that effect being provided by the Authority to the Permit Holder and, without affecting the generality of the foregoing, the Authority shall have the power to revoke the permit in the following circumstances, namely:-
(a) failure to comply with the conditions endorsed hereon;
(b) a contravention by the Permit Holder of the provisions of the Act or its Regulations;
(c) failure to comply with any proper direction issued by the Authority from time to time;
(d) in the event that the Permit Holder sells, transfers, assigns or in any other way parts with control of the business being conducted by the Permit Holder and, in the case of a company, in the event that control of the company passes into the hands of persons other than those who exercise such control as at the date of grant of this permit, either as to shareholding or as to representation as directors.
The Permit Holder, as is attested by the execution hereof, hereby agrees to the terms and conditions upon which this permit is granted.
38 An unidentified signature on behalf of Galati Nominees and the date of 3 January 1995 appear below this sentence.
39 The Distributor Permit is expressed to be subject to terms and conditions as follows:
1. The Permit Holder shall comply with such conditions as may be notified to the Permit Holder by the Authority from time to time.
2. The Permit Holder shall at all times comply with the provisions of the Act, any amendments thereto, and any Regulations made thereunder.
3. the Permit Holder shall not accept delivery of potatoes for distribution or for any other purpose except from:-
(a) the Authority;
(b) another Wholesale Potato Merchant (Distributor) the holder of a current permit issued by the Authority;
(c) a Wholesale Potato Merchant (Grader and Packer) the holder of a current permit in that respect issued by the Authority.
4. The Permit Holder shall not dispose or attempt to offer to dispose (whether by sale, trade, exchange or howsoever) of any potatoes otherwise than to:-
(a) a retailer of potatoes;
(b) a person who requires the potatoes for use in providing meals for his customers, employees or guests;
(c) or the inmates of an institution;
(d) a potato product manufacturer within the meaning of that term in Section 26A(1) of the Act;
(e) a potato exporter within the meaning of that in Section 26B(1) of the Act.
It is expressly agreed that nothing herein contained shall permit the Permit Holder to dispose or attempt or offer to dispose of any potatoes to the public at large.
...
7. The Permit Holder shall not, unless authorised to that effect by the Authority in writing, perform any of the following functions:-
(a) accept delivery of potatoes from growers;
(b) effect sale or disposal of potatoes other than within Western Australia.
…
10. This permit may be cancelled by the Authority at any time following written notice to that effect being provided by the Authority to the Permit Holder and, without affecting the generality of the foregoing, the Authority shall have power to revoke the permit in the following circumstances, namely:-
(a) failure to comply with the conditions endorsed hereon;
(b) a contravention by the Permit Holder of the provisions o the Act or its Regulations;
(c) in the event that the Permit Holder sells, transfers, assigns or in any other way parts with control of the business being conducted by the Permit Holder and, in the case of a company, in the event that control of the company passes into the hands of persons other than those who exercise such control as at the date of grant of this permit, either as to shareholding or as to representation as directors.
The Permit Holder, as is attested by the execution hereof, hereby agrees to the terms and conditions upon which this permit is granted
- and is signed on behalf of Galati Nominees and is dated 3 January 1995.
41 With isolated and presently irrelevant exceptions, Mr Galati delivers all potatoes grown by him to Galati Nominees. Generally, Galati Nominees buys all of its potatoes from Mr Galati, though Mr Galati gave evidence to the effect that on each day between 23 September and 1 October 2015 Galati Nominees took deliveries of potatoes from other growers.
42 Mr Galati is a director and shareholder of Vegie Bandits Pty Ltd (Vegie Bandits) which operates a number of grocery and fresh produce outlets under the Spud Shed brand. Galati Nominees supplies the Spud Shed outlets with potatoes. It also supplies potatoes to the Coles supermarket chain and to Galati Management Pty Ltd, which operates a market floor at the Canning Vale markets.
43 In mid-2013, Vegie Bandits had Spud Shed outlets at Jandakot, Baldivis, Mandurah and Wangara. Mr Galati was keen to increase the quantities of potatoes that he could grow to meet demand generated by the Spud Shed outlets. Since 2013 other Spud Shed outlets have been opened and the opening of further outlets is planned.
44 Mr Galati, Galati Nominees and the Spud Shed retail outlets occupy a unique position in the Western Australian potato market because they constitute the only vertically integrated supply chain. Other merchants have common owners with particular growers but are not connected in terms of ownership or control with retailers.
45 Mr Galati has been an opponent of the regulated market for a number of years. The Corporation prosecuted Mr Galati for overplanting in 2010 and 2011. Mr Galati did not attend the hearing of the first prosecution and was fined $300 and ordered to pay the Corporation's costs of $1,950. Mr Galati did not attend the hearing of the second prosecution and was fined $3,000 and ordered to pay the Corporation's costs of $648.45.
46 It is necessary to refer to the Agreement in some detail. In the extract from the Agreement set out below, references to PMC are references to the Corporation.
47 Recitals D and E of the Agreement provide context and they read as follows:
D. Galati and the PMC wish to resolve all ongoing disputes between them, and record their agreement with respect to the production and delivery of Ware Potatoes by Galati on the terms and conditions contained in this Agreement.
E. To the extent set out in this Agreement, Galati Nominees and the PMC wish to vary some of the terms and conditions of the Agency Arrangement with respect to Ware Potatoes delivered to Galati Nominees by Galati.
48 Clause 1.1(c) of the Agreement defined the term 'Agency Arrangement' as it appeared in Recital D in the following terms:
Agency Arrangement means the appointment by the PMC of Galati Nominees as both a Packing/Grading agent and a Distributor Agent which operate on the basis of the terms contained in the Permits to Act as well as the long-standing day to day practices between the PMC and Galati Nominees.
49 The Permits to Act referred to in the definition of Agency Arrangement are the Packing Permit and the Distributor Permit.
50 Clause 2.1 of the Agreement is in the following terms:
In consideration of resolving all ongoing disputes between Galati and the PMC and establishing agreement in relation to the conduct of the parties for any licences currently in existence or any that may be granted by the PMC to Galati from time to time following the Effective Date, Galati:
(a) agrees to deliver all Ware Potatoes grown by him, or on his behalf, to Galati Nominees as a Packing/Grading Agent;
(b) agrees not to deliver any Ware Potatoes to the Board Store or to any Packing/Grading Agent other than Galati Nominees;
(c) agrees to the procedure set out in clause 5 hereof as the process for payment of compensation to him as required by section 24 of the Act for any and all Ware Potatoes delivered by him pursuant to clause 2.1(a), in substitution for any and all payments he would otherwise receive or be entitled to receive direct from the PMC for the Pool Amount;
(d) agrees to strictly comply with:
(i) all of the terms and conditions of his registration as a Commercial Producer;
(ii) all DME limitations placed on him by the PMC as a Commercial Producer; and
(iii) all terms and conditions of any licences granted to him under the Act, whether in existence at the date of this Agreement or granted by the PMC following the Effective Date.
3.1 Acceptance and Sale of Ware Potatoes
The parties agree to include the following as amended and additional terms to the Agency Arrangement, with respect to Galati Nominees' acceptance, refusal or sale of Ware Potatoes:
(a) Galati Nominees agrees to accept any and all Ware Potatoes delivered to it by Galati, unless it has obtained the prior written consent of the PMC to refuse a delivery;
(b) Galati Nominees must not transfer any Ware Potatoes delivered to it by Galati to any other Packing/Grading Agent or Distributor Agent, except with the prior written consent of the PMC;
(c) Galati Nominees must not deliver any Ware Potatoes delivered to it by Galati to the Board Store, except with the prior written consent of the PMC;
(d) Galati Nominees must not sell any Ware Potatoes, whether delivered to it by Galati or by any other Commercial Producer that are of Waste Grade; and
(e) in relation to any particular Pool, Galati Nominees must not sell Ware Potatoes delivered to it by Galati that are in excess of the DME allocated to Galati for that Pool.
53 Clause 3.2(a) reads as follows:
Galati Nominees shall not be required to provide a Packout Statement to the PMC for any Ware Potatoes received from it by Galati as has been previously required;
54 Clauses 3.2(e) and (f) read as follows:
(e) Galati Nominees must provide immediate written notice to the PMC in the event that:
(i) it receives a delivery of Ware Potatoes from Galati in which Galati's DME for the Pool to which that delivery relates is exceeded; or,
(ii) Galati Nominees becomes aware of, concerned that, or has any actual or constructive knowledge that Galati, or any person on behalf of Galati has grown or sold Ware Potatoes in excess of any licence, allocation, limitation or restriction placed upon Galati by the PMC.
(f) For the avoidance of doubt, anything that is within Galati's knowledge shall be deemed to also be within the knowledge of Galati Nominees for the purposes of clause 3.2(e).
55 Clause 3.3 reads as follows:
3.3 Payment to Galati Nominees
The parties agree to include the following as amended and additional terms to the Agency Agreement, with respect to the payment process between the PMC and Galati Nominees:
(a) The PMC must render an invoice to Galati Nominees based upon the variety, weight and grade of Ware Potatoes sold and identified in the Sales Statement, calculated at the Estimated Price;
(b) Galati Nominees must pay any invoice rendered by the PMC in accordance with clause 3.3(a) within 7 days of the date of the invoice;
(c) subject to due payment being made by Galati Nominees in accordance with clause 3.3(b), Galati Nominees shall be entitled to retain all proceeds from the sale of those Ware Potatoes to which the invoice raised in clause 3.3(a) relates; and
(d) the parties acknowledge that the Estimated Price is an estimate only, which is calculated by the PMC at the beginning of each Financial Year, and that as soon as practicable after the end of each Financial Year the PMC will give notice to Galati Nominees of the Actual Price (Adjustment Notice), and where:
(i) the Estimated Price exceeds the Actual Price the PMC shall refund the difference to Galati Nominees within 30 days of the date of the Adjustment Notice; and
(ii) the Actual Price exceeds the Estimated Price, Galati Nominees shall make payment of the difference to the PMC within 30 days of the date of the Adjustment Notice.
Galati Nominees and the PMC hereby agree and declare that except as varied or added to by clause 3 of this Agreement, the existing practices, terms and conditions upon which Galati acts as a Packing/Grading Agent and Distribution Agent in the Agency Arrangements shall remain in full force and effect.
57 Although cl 4.1 refers to 'Galati' as the Packing/Grading Agent and Distribution Agent, it is clear that this is a typographical error and the reference should be to Galati Nominees.
58 Clause 5 reads as follows:
5. PAYMENT TO GALATI UNDER SECTION 24 OF THE ACT
(a) The parties agree that any requirements and obligations in relation to the payment of compensation to Galati as a Commercial Producer pursuant to section 24 of the Act, shall be the responsibility of Galati Nominees from the Effective Date, and the process between the parties in relation to the payment of such compensation shall be as set out in this clause:
(i) at the same time as the PMC issue an invoice pursuant to clause 3.3(a) of this Agreement, the PMC will also issue a credit to Galati Nominees for the Pool amount together with a direction to Galati Nominees to pay the Pool Amount to Galati (Credit Note);
(ii) within 2 Business Days of receipt of the Credit Note from the PMC, Galati Nominees agrees to:
(A) make payment of the Pool Amount to Galati by such means and to such account as Galati may nominate from time to time; and
(B) issue to the PMC a notice of confirmation for payment of the Pool Amount to Galati;
(iii) Galati agrees that receipt of the Pool Amount from Galati Nominees, pursuant to clause 5(a)(ii) shall be in full and final satisfaction of all claims he may have against the PMC arising from or in any way connected with the delivery by him, or by anyone on his behalf, of Ware Potatoes to Galati Nominees as a Packing/Grading Agent, including any claim pursuant to section 24 of the Act;
(b) Galati Nominees agrees to indemnify the PMC, its servants, agents, officers and employees against all liability in respect of any action, demand, notice, claim, damages or proceeding made in any jurisdiction by Galati (or any person through Galati) relating to, or arising out of, or in connection with any failure or delay by Galati Nominees in making any payment or complying with any obligation under clause 5(a) of this Agreement, including solicitors costs on a full indemnity bases.
(c) The parties agree that this Agreement may be pleaded as an absolute bar to any or all claims (actual or potential), entitlements, actions, applications to court, suits, proceedings, demands, allegations, debts, damages, costs and expenses whether or not claimed on any existing or potential future cause of action, threatened or brought or attempted to be brought by or in the name of Galati against the PMC for any payment that is in any way connected with the delivery of Ware Potatoes to Galati Nominees, except payment that is due but unpaid pursuant to a Credit Note under clause 5(a) of this Agreement.
59 Clause 10.1 of the Agreement defines 'Event of Default' in terms not unusual in commercial agreements. Clause 10.2 provides for the service of a Default Notice. Clause 10.3 specifies the rights which arise upon an Event of Default. Clause 10.4 is in the following terms:
10.4 Preservation of other rights
Subject to the terms of this Agreement, if a party breaches (including repudiates) this Agreement, nothing in this clause will prejudice the right of the other party to recover damages or exercise any other right or remedy available to it at law, including to an injunction to restrain a breach or threatened breach of this Agreement.
60 Clause 12 sets out provisions aimed at resolving any disputes that may arise between the parties. It is in the following terms.
12. MEDIATION AND ARBITRATION
12.1 Mediation
Unless otherwise provided in this Agreement, any dispute or difference whatsoever arising out of or in connection with this Agreement shall be submitted to mediation in accordance with, and subject to, the Institute of Arbitrators & Mediators Australia Mediation and Conciliation Rules.
12.2 Arbitration
If the dispute or difference is not settled within 30 days of the submission to mediation (unless such period is extended by agreement of the parties), it shall be and is hereby submitted to arbitration in accordance with, and subject to, the Institute of Arbitrators & Mediators Australia Rules for the Conduct of Commercial Arbitrations. For disputes in which the quantum is less than $50,000, arbitration shall take place using the submission of documents alone unless both parties agree otherwise.
12.3 Continue to perform
Notwithstanding the existence of a dispute or difference each party shall continue to perform its obligations pursuant to this Agreement.
62 Mr Galati signed the document 'as a Deed' and his signature was witnessed. The Agreement was expressed to be executed by Galati Nominees pursuant to s 127(1) of the Corporations Act 2001 (Cth) and Mr Galati and Mr Pasqualino Vincenzo Galati, another director of Galati Nominees, signed the Agreement on behalf of Galati Nominees.
63 In his affidavit of 7 October 2015 Mr Galati deposed that he entered the Agreement in reliance on an assurance from Mr Evans to the effect that the Corporation would increase the quantity of potatoes which he would be permitted to grow under his DMEs to 6,000 tonnes a season.
64 In the 2014/2015 season Mr Galati's area licences and DME entitlements for Pools 2, 3 and 4 were as follows:
Pool 2 27.83 hectares 1,049 tonnes
Pool 3 24.90 hectares 1,624 tonnes
Pool 4 25.45 hectares 1,400 tonnes
65 Mr Hegarty, of the Corporation, deposed that he estimated that Mr Galati planted and harvested potatoes for those Pools as follows:
Pool 2 78.99 hectares 2,757 tonnes
Pool 3 52.49 hectares 2,954 tonnes
Pool 4 53.22 hectares 2,970 tonnes
66 Mr Galati admits that he planted potatoes and harvested potatoes in excess of his area licences and DMEs in the 2014/2015 season. He has not adduced any evidence to contradict the estimates made by Mr Hegarty of the areas planted and the quantities harvested.
67 On 24 April 2015 and 17 June 2015 respectively the Corporation issued Mr Galati with area licences and DMEs for Pools 1 and 2 of the 2015/2016 season. Mr Galati's entitlements for those pools were as follows:
Pool 1 50.40 hectares 1,918 tonnes
Pool 2 27.83 hectares 1,049 tonnes
68 Mr Hegarty deposes that he estimates that in the Pool 1 period Mr Galati had, up to 21 September 2015, harvested 3,008 tonnes of potatoes from 65.32 hectares.
69 In his affidavit of 1 October 2015 Mr Galati deposed that he had not delivered any potatoes to Galati Nominees since 20 September 2015 and that all potatoes produced by him in Pool 1 of the 2015/2016 season which were held in storage following his last delivery to Galati Nominees on 20 September 2015 have been dumped as cattle feed. He deposed that he did not hold in storage any potatoes produced by him during Pool 1 of the 2015/2016 season. Mr Galati did not, however, give any evidence as to whether Galati Nominees held any potatoes delivered to it by him from his Pool 1 period DME which it had yet to sell.
70 Mr Hegarty estimates that Mr Galati could harvest up to 80.78 hectares in the Pool 2 period and that this harvest could yield 3,635 tonnes of potatoes.
71 Mr Galati admits that he planted and harvested potatoes in excess of his area licence and DME for Pool 1 of the 2015/2016 season. He admits that he has planted potatoes in excess of his area licence and DME for the Pool 2 period. Mr Galati has not adduced any evidence to suggest that the estimates made by Mr Hegarty in respect of these pools are incorrect.
72 In 2014 the Economic Regulation Authority of Western Australia (ERA) conducted an inquiry into micro-economic reform in Western Australia. The inquiry encompassed the regulated market for potatoes. In a report tabled in Parliament on 28 July 2014 the ERA recommended that the Act and the regulations made pursuant to it be repealed.
73 In a series of articles in the print and electronic media, which commenced in April 2015, it was reported that the Government of Western Australia intended to abolish the Corporation and the current regulated market, but that this would not take place until 2017.
74 The Corporation has received various expressions of concern from other growers about Mr Galati's conduct and that of Galati Nominees. In a letter attached to an email sent to Mr Evans on 3 July 2015, Mr Domenic Della-Vedova, of Beta Farms, a grower associated with another of the Corporation's merchants, West Coast Potato Supplies Pty Ltd, wrote as follows:
With vast oversupply of potatoes dragging down returns for growers and merchant, the last fourteen months have been some of the most challenging trading conditions we have experienced. It is obvious that the regulated Potato Industry in WA is running out of control. It is also clear that the lack of action and procrastination by the PMC board in dealing with Galati [N]ominees is nothing short of negligent.
At this very moment Galati has taken delivery of approx. 72t of seed potatoes to plant in the coming weeks. Even at conservative levels this would be enough seed to plant 20ha of potatoes. This seed will be planted sometime in the next three weeks. With more seed been (sic) delivered in the coming weeks, it is our opinion that this will lead to a worsening of the surplus position that we have experienced in pool 2, 3, and 4. 2014-2015.
The impact this will have on West Coast Supplies ability to maintain market share will be severe. Without the ability to source potatoes at a competitive price, it will leave us with no choice but to operate under a (sic) agreement similar to Galati. This will then by default, as the biggest player in the Industry, put us on side with the very person we are fighting.
…
Long term,
Depends on what PMC do in the coming weeks.
While we have supported the Regulated System in WA for a long time, we are very concern (sic) that real decisive action required is not happening, therefore we will reserve our legal rights regarding the above.
75 On 15 July 2015, the Corporation received a letter from solicitors acting on behalf of another merchant, Aldwich Holdings Pty Ltd, making allegations to the effect that the Corporation had failed to enforce the provisions of the Act, indicating that it was considering taking proceedings against the Corporation and seeking pre-action discovery.
76 In an interview broadcast on 6 September 2015 on the Australian Broadcasting Corporation's Landline radio programme, Mr Carlo Cocciolone, of Beta Spuds, said:
77 I'm not gonna sit back with my hands tied or sit on my hands because everybody else is going forwards. I'm not gonna sit there. So if I have to go forwards with everyone else, I will. I'll play the game now, but things start getting worse, I'll jump on and do what I have to do to survive.
78 In their respective affidavits of 29 September 2015 Mr Hegarty and Mr Bozcar gave evidence to the effect that there had been an oversupply of potatoes in Pools 2, 3 and 4 of the 2014/2015 season and that this had an adverse effect on the Corporation's income and the price paid to growers. In their evidence they attributed the oversupply in the market to Mr Galati's overplanting.
79 In his affidavit Mr Galati disputed that there was an oversupply as alleged by the Corporation's witnesses and disputed the consequences that the Corporation contended followed the oversupply. Mr Galati deposed that any oversupply was caused by other growers overplanting and by unlicensed growers planting and harvesting potatoes.
Interlocutory injunctions: principles
80 The Corporation must show:
1. There is a serious question to be tried or that it has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that the Corporation will succeed at trial.
2. It will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted.
3. The balance of convenience favours the granting of an injunction. (Castlemaine Tooheys Ltd v The State of South Australia (1986) 161 CLR 148, 153 (Mason ACJ)).
81 Some of the considerations bearing upon the application of these principles were discussed by Beech J in Twinside Pty Ltd v Venetian Nominees Pty Ltd (2008) WASC 110 and in applying the principles stated above I have regard to the considerations outlined by his Honour.
The parties' submissions
82 The parties filed detailed written outlines of submissions which were expanded upon in the course of the hearing. Without intending any disrespect to the parties' submissions, given that I am not required to determine the substantive issues on a final basis, I will summarise the principal arguments advanced without referring in detail to the authorities relied upon.
The Corporation's submissions
83 The Corporation's primary submission starts with the proposition that, by reason of cl 3.1(e) of the Agreement, Galati Nominees is subject to a negative stipulation to the effect that in any pool period it will not sell more potatoes delivered to it by Mr Galati than he is entitled to grow by reason of his DME for that period. In this respect, the Corporation emphasises that it is seeking to restrain its agent from disposing of its potatoes otherwise than in accordance with the Agreement and the statutory scheme. It relies upon the principle that a court will rarely decline injunctive relief for an apprehended breach of a negative covenant on the basis that damages will be a sufficient remedy: Emeco International Pty Ltd v O'Shea [2012] WASC 282 [20] (Edelman J) and the cases cited.
84 The likelihood of a breach by Galati Nominees of the negative stipulation for which the Corporation contends is made out by Mr Galati's admissions.
85 The Corporation makes a secondary submission that there is a serious question to be tried on the basis that it is a statutory corporation which has standing to bring proceedings for an injunction to further its statutory functions and the goals of the legislation under which it was established. In support of this submission, the Corporation relies upon the decisions of the New South Wales Court of Appeal in Peek v New South Wales Egg Corporation (1986) 6 NSWLR 1 and Civil Aviation Authority v Australian Broadcasting Corporation (1995) 39 NSWLR 540.
86 The Corporation submits that damages are not an adequate remedy because if Mr Galati and Galati Nominees are allowed to operate outside of the regulated market this will, in effect, render the Corporation unable to regulate the market for potatoes as the Act requires it to do. The Corporation also points to the risk that other participants in the market will follow the lead taken by Mr Galati and Galati Nominees and act outside the regulated market with the consequent risk of de facto deregulation in advance of a decision by Parliament to repeal the Act. These are injuries that the Corporation submits cannot be measured in monetary terms.
87 The Corporation's submissions on the balance of convenience duplicate the substance of some of their submissions to the effect that damages are an inadequate remedy.
88 The Corporation submits that in determining where the balance of convenience lies, the interests of the public and third parties, and the potential detriment that might be caused to third parties, are relevant and can be accorded more or less weight according to the other material circumstances. In this respect, the Corporation points to the likelihood that other growers will suffer financial losses in the event that Mr Galati and Galati Nominees are able to operate outside of the regulated system. The Corporation also points to the unfairness inherent in permitting Mr Galati and Galati Nominees to act outside the regulated system caused to those growers and merchants who conduct their activities within the regulated system .
89 The Corporation says that the detriment that may be suffered by Galati Nominees if an injunction is granted and it is later found that it should not have been, is the difference in the income that Galati Nominees could have earned if it had been allowed to operate without constraint and that which it could earn subject to the cl 3.1(e) restraint. It was submitted that such a loss is compensable pursuant to the undertaking as to damages which the Corporation has provided.
Galati Nominees' submissions
90 Galati Nominees attacked the Corporation's case at each stage of its development.
91 First, Galati Nominees submitted that the proceedings should be stayed because the Corporation has not complied with the requirement for mediation set out in cl 12 of the Agreement. For this submission, reliance was placed on the decision of the Court of Appeal in Straits Exploration (Australia) v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187. Galati Nominees reinforced this submission by drawing attention to the fact that the Agreement included an 'arbitration agreement' for the purposes of s 7 of the Commercial Arbitration Act 2012 (WA), albeit that Mr Galati and Galati Nominees said that they could not request that the dispute be referred to arbitration pursuant to s 8 of the Commercial Arbitration Act 2012 (WA) until there had been compliance with the requirement for mediation. It was submitted that if the action was stayed and the dispute was still unresolved after mediation, then it should be referred to arbitration. It was submitted that an arbitrator could grant an injunction so the Corporation would not be deprived of the opportunity of obtaining an injunction if the matter was referred to arbitration.
92 Secondly, it was submitted that cl 3.1(e) was not a provision which imposed any binding contractual obligation upon Galati Nominees. It was contended that the clause varied the 'Agency Arrangement' and it was argued that those arrangements were not of a contractual nature. It was submitted that the 'Agency Arrangement' involved no more than the appointment of Galati Nominees as an agent pursuant to a statutory power, s 19(3) of the Act, and not the creation of a contract. Given that context, it was submitted that nothing in any of the clauses of the Agreement which varied the Agency Arrangement created obligations of a promissory nature binding upon Galati Nominees.
93 Thirdly, and alternatively, it was submitted that cl 3.1(e) did not create an enforceable contractual obligation because it was not supported by consideration. It was submitted that, even though the Agreement was expressed to have been executed as a deed, the Corporation did not execute it as a deed. The Corporation is a corporation aggregate to which s 10 of the Property Law Act 1969 (WA) applies. It was contended that for a deed to be executed by the Corporation, its common seal was required to be affixed in the presence of two officers in accordance with the requirements of s 10(1) of the Property Law Act 1969. Galati Nominees contended that the Agreement was an exception to the general rule that a party who executes and delivers a deed is bound by it, irrespective of whether the other party or parties execute it. It was contended that the Agreement purported to vary an agreement between the Corporation and Galati Nominees involving bilateral obligations and thus it was not binding unless executed by the Corporation as a deed. It was argued that it was not sufficient that the Corporation had executed the Agreement under hand only.
94 Fourthly, Galati Nominees submits that if the Agreement is enforceable and cl 3.1(e) imposes a contractual restraint on it, then the agreement is one which has the purpose, or is likely to have the effect, of substantially lessening competition contrary to s 45(2) of the Competition and Consumer Act 2010 (Cth) and, in the light of that, injunctive relief should be refused. In outline, this argument was put in essentially three different ways. First, it was contended that when the provisions of pt IV of the Trade Practices Act 1974 (Cth) were incorporated into the law of the State of Western Australia by the provisions of the Competition Policy Reform (Western Australia) Act 1996 (WA) as the Competition Code of Western Australia (the Competition Code) it had the consequence that s 19(3) of the Act had to be read subject to s 45(2) of the Competition Code so that an agent (merchant) could not be appointed on terms that contravened s 45(2) of the Competition Code. Secondly, it was contended that because s 45(2) was a provision of a later State Act with which s 19(3) of the Act was inconsistent (if construed to allow a provision inconsistent with s 45(2) of the Competition Code), it was partially repealed to the extent of the inconsistency. Thirdly, it was contended that the Corporation's purpose in entering the Agreement was to keep retail prices higher by requiring the Spud Shed outlets to acquire potatoes from growers other than Mr Galati at an increased cost so as to reduce price competition in the retail market in order to ensure strong wholesale prices and strong returns to growers.
95 Fifthly, it was submitted that there is no requirement for the court to intervene and grant injunctive relief compelling Galati Nominees to observe the negative stipulation in cl 3.1(e) of the Agreement because the Corporation could simply terminate Galati Nominees' agency. It has a statutory power to do so: s 19(4) of the Act. The availability to the Corporation of this alternative practical remedy was advanced as a discretionary factor which weighed against the grant of relief.
96 Sixthly, in relation to the balance of convenience Galati Nominees submits that there is no evidence of negative consequences in the potato market as a result of Mr Galati growing more potatoes than he was permitted to grow by his DMEs in past pool periods. It was submitted that the evidence did not permit me to draw the conclusion that there had been an oversupply of potatoes to the market in the pool periods in which Mr Galati had grown more potatoes than he was permitted to grow, or if there was an oversupply, there is no evidence that it was caused by Mr Galati and no evidence that there have been negative effects suffered by the Corporation or third parties. Thus, it was submitted there is no basis upon which I could conclude that if an injunction is not granted any negative impacts will be suffered by growers.
97 Seventhly, Galati Nominees and its related entities that operate the Spud Shed outlets will suffer significant loss if they are restrained from accepting delivery of potatoes from Mr Galati in excess of his DME because it will be forced to obtain delivery of potatoes from other growers at additional cost which will force up their prices and damage their goodwill. It was contended that the undertaking as to damages will not provide an adequate remedy for the damage to the goodwill of those businesses because it is difficult to calculate.
98 Eighthly, it was contended that the benefit of lower retail prices for potatoes (which would be lost if an injunction was granted) is a facet of the public interest which tips the balance of convenience against the grant of interlocutory relief. In a similar vein, it was submitted that it would not be in the public interest to grant an injunction which, on Galati Nominees' case, involved enforcing a contractual term which would have the effect of substantially lessening competition in the retail market for potatoes.
Should the proceedings be stayed?
99 In my view, cl 12.1 does not operate in the manner for which Galati Nominees contends, that is, it does not prevent the Corporation from approaching the court to seek an injunction to restrain a threatened breach of the Agreement. As pointed out by the Corporation, the opening words of cl 12 of the Agreement are, 'unless otherwise provided in this Agreement … ' and cl 10.4 does otherwise provide by expressly preserving the availability of the remedy of an injunction to restrain a threatened breach of the Agreement. In holding that there is a right on the part of the Corporation to approach the court for injunctive relief, I am not deciding any wider issue as to whether Mr Galati and Galati Nominees may apply for a stay of these proceedings on the basis of the arbitration clause or otherwise, although my understanding of the submission that was advanced on behalf of Mr Galati and Galati Nominees was that if an injunction was granted their preferred course was to have orders made providing for an expedited trial.
Is there a serious question to be tried?
100 For the purposes of considering whether there is a serious question to be tried, I have reached the provisional conclusions about the strength of the Corporation's case set out below.
101 I have concluded that cl 3.1(e) of the Agreement imposes an enforceable contractual obligation on Galati Nominees not to sell in any pool period more potatoes delivered to it by Mr Galati than he is permitted to grow by his DME for that period.
102 My reasoning in reaching this conclusion involves forming intermediate conclusions that:
(a) the obligation is one of a promissory nature and not merely an incident of the appointment of Galati Nominees as the Corporation's agent pursuant to the Act; and
(b) the obligation is supported by consideration moving from the Corporation to Galati Nominees and Mr Galati.
103 Three matters point to the obligation being promissory. First, both the Packing Permit and the Distributor Permit, which are the foundation for the relationship between the Corporation and Galati Nominees, conclude with a statement that Galati Nominees agrees to the terms and conditions set out in the permit, and this agreement was attested to by a signature placed on the document by someone on behalf of Galati Nominees. The form of the permits are to be contrasted with the forms prescribed by the Regulations for area licences and certificates of domestic market entitlements which do not record that the grower agrees to the terms of the licence or certificate and do not provide for the grower to sign them.
104 Secondly, s 19(3) of the Act expressly states that the Corporation may appoint agents on terms and conditions that are agreed. This implies a bilateral process as distinct from the exercise by the Corporation of its statutory powers on a unilateral basis.
105 Thirdly, the variations to the Agency Arrangement are found in a document entitled 'Agreement' with the indicia of a document whose provisions are intended to have contractual effect. Other provisions in the Agreement which vary the Agency Arrangement can only be construed sensibly as being promissory in nature, for example, cl 5(b).
106 I turn now to the issue of consideration. The consideration for the obligation in cl 3.1(e) is the mutual promises encompassed in cl 3, cl 4 and cl 5, all of which are directed to varying the Agency Arrangement. By cl 3.2(a) the Corporation promises that it would not require Galati Nominees to provide Packout Statements. By cl 5 the Corporation promised that Mr Galati could receive payment for its potatoes otherwise than as claims for compensation made under s 24 of the Act.
107 There was much debate in submissions as to whether the Agreement was a deed or not and, therefore, whether there was a need to show consideration at all. It is said that 'a deed imports consideration' but if the appropriate remedy for breach of a covenant in a deed is an equitable one, any lack of consideration will attract the maxim that 'equity does not assist a volunteer': see the discussion in Dr Nicholas Seddon, Seddon on Deeds, (2015) [6.22], [6.25] and the cases to which the author refers. Thus, if I had been of the view that there was no consideration for the restraint imposed on Galati Nominees by cl 3.1(e), a finding that the Agreement had been executed as a deed and bound Galati Nominees would not have assisted the Corporation.
108 I do not think that either the Trade Practices Act 1974, s 45(2), or the introduction of the Competition Code into the law of Western Australia had any of the effects on the statutory power conferred on the Corporation by s 19(3) of the Act to appoint agents as is contended for by Galati Nominees. The existence of such a power cannot, of itself, amount to a contravention of, and is not inconsistent with, either law. I will return to the 'substantial lessening of competition issue', (and in particular, whether the s 19(3) power has been exercised in a way which effects a substantial lessening of competition), when dealing with the balance of convenience.
109 The admissions made by Mr Galati on behalf of himself and Galati Nominees that he has planted and will deliver potatoes in excess of the quantities permitted by his Pool 2 DME and that, unless restrained, Galati Nominees will sell those potatoes, obviate the need to give consideration to the risk of a breach of the obligation in question.
110 I turn now to the alternative basis upon which the Corporation submits that there is a serious question to be tried; namely, that it has standing to bring proceedings to further its statutory functions and the goals of the Act.
111 In Minister For Indigenous Affairs v Catanach & Ors[2001] WASC 268, Pullin J, as his Honour then was, referred to the decision of the Court of Appeal in New South Wales in Peek and the discussion of the principles relevant to the circumstances in which a court might grant injunctive relief to a statutory corporation to restrain a breach of the law in the following terms:
[55]In Peek v New South Wales Egg Corp (1986) 6 NSWLR 1, the New South Wales Court of Appeal had to consider whether an injunction was rightly granted on an application by the New South Wales Egg Corporation to restrain the Peeks with respect to their production and sale of eggs in contravention of the Egg Industry Act. In that case, there was evidence that one of the defendants had evinced an intention to produce and market unlicensed eggs in an extensive systematic way unless the Board agreed to a proposition which it found unacceptable. Prosecutions had already been launched which had failed to inhibit the defendants, seizure was an unwieldy remedy and was fraught with the possibility of violence, and the scale and continuity of the defendants' operations could not be effectively checked by the occasional imposition of criminal penalties. There were also difficulties with proof of the offences and evidence that the continuation of the defendants' conduct would encourage other rebel producers and undermine confidence in the ability of the Corporation to enforce a statutory scheme. The Court of Appeal therefore held that the injunction was rightly granted.
[56]In discussing the principles which were applicable, however, Kirby P pointed out that courts of equity have no general duty to enforce the law, including the criminal law, whether at the behest of the Attorney General or any other person with the requisite standing. The primary rule is that the criminal law is enforced by appropriate procedures in the criminal courts - see Peek v New South Wales Egg Corp, at 2; Gouriet v Union of Post Office Workers [1978] AC 435; Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 and Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 3rd ed, para 2135. Kirby P, in Peek's case, advanced six reasons why restraint should be exercised in providing injunctive relief where criminal sanctions have not been exhausted. Those reasons led Mackenzie J in Brisbane City Council v Georgeray Contracting Pty Ltd (1995) 79 A Crim R 265 and Harper J in Pell v National Gallery [1998] 2 VR 391 to refuse applications for an injunction. Mackenzie J noted that proof that there is a deliberate flouting of the law is fundamental in an application of this kind or that the potential consequences of the threatened action are so serious that urgent action is required to stop it. Harper J, in Pell's case, noted in particular that if, in a statutory offence, it had been intended to provide amongst the sanctions enacted the facility of injunctive relief, the legislature could readily have done so.
112 In Peek Glass JA, with whose reasons Kirby P and Samuel JA agreed, said this about the Egg Corporation's locus standi to apply for injunctive relief:
Assuming that the evidence established a claim that the defendants had converted the eggs of the Corporation, there could be no challenge to its standing to secure an injunction to restrain further conversion. Accordingly the argument must be limited to the Corporation's standing to obtain injunctive relief to restrain the breach of a provision of the public law that hens should not be kept at an unlicensed place (s 32). The Corporation will have standing for this purpose if it is able to demonstrate a special interest in the subject matter of the action over and above that enjoyed by the public generally: Day v Pinglen Pty Ltd (1981) 148 CLR 289 at 299. I have no doubt that a special interest of the Corporation in that sense was shown by pointing to the statutory scheme which charges it with the orderly marketing of eggs (s 17(2)), imposes upon it a duty to ensure the purity of eggs in the interest of public health (s 17(3)) and to procure the prescription and enforcement of standards of quality and grade (s 17(4)). A further special interest was shown in the financial loss which the Board would suffer if eggs not subject to quota were produced by unlicensed hens and sold (9).
113 In Peek, the Egg Corporation was not only seeking an injunction but was claiming damages for the conversion of its eggs. This is the explanation for Glass JA's reference to the standing to seek an injunction to restrain a further conversion. Contrary to the submissions made on behalf of Galati Nominees, it is clear that the balance of his Honour's observations concern the Egg Corporation's standing to apply for an injunction to restrain breaches of the Egg Industry Act 1983 (NSW).
114 Although Kirby P agreed with the reasons of Glass JA, he added some observations of his own on the question of standing. His Honour summarised the policy reasons which underlie the primary rule that the courts have no general duty to enforce the law, including the criminal law, and then gave consideration to the approach to the exceptions to the primary rule and made the following observations:
With the primary rule and some of the reasons for it in mind it is possible to approach the exceptions. It is not particularly helpful to say that 'special' or 'exceptional' circumstances must be established. Lord Templeman in Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] AC 754 at 776-777 quoted with approval a passage of Lord Bridge of Harwich, then Bridge LJ, in Stafford Borough Council v Elkenford Ltd [1977] 1 WLR 324 at 330; [1977] 2 All ER 519 at 528. This passage pointed to the fact that the primary rule is not an inflexible one but one which succumbs to the proper exercise of the court's discretion in particular circumstances:
- 'We have been urged to say that the court will only exercise its discretion to restrain by injunction the commission of offences in breach of statutory prohibitions if the plaintiff authority has first shown that it has exhausted the possibility of restraining those breaches by the exercise of statutory remedies. Ordinarily no doubt that is a very salutory approach to the question, but it is not in my judgment an inflexible rule. The reason why it is ordinarily proper to ask whether the authority seeking the injunction has first exhausted the statutory remedies is because in the ordinary case it is only because those remedies have been invoked and have proved inadequate that one can draw the inference, which is the essential foundation for the exercise of the court's discretion to grant an injunction, that the offender is ... "deliberately and flagrantly flouting the law".'
- This passage, and a number of other passages in earlier judgments illustrate, without exhausting them, the kind of circumstances in which injunctive relief will be offered, although criminal remedies remain unexhausted. Such circumstances include cases where:
(a) The criminal penalty provided is not effective or is wholly ineffective in the circumstances to deter the unlawful conduct of the party whom it is sought to restrain, such that the conclusion is readily reached that prosecution and the processes of the criminal law will not deter that party from a continuing breach of the criminal law: see Attorney-General v Sheffield Gas Consumers Co (1853) 3 De G M & G 304 at 320-321; 43 ER 119 at 125, 126; cf Mason J in Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 49, 50.
(b) The party whom it is sought to restrain has evidenced a clear and unequivocalintention to continue to flout the criminal law: see Lord Templeman in Stoke-on-Trent, (at 776).
(c) Unless the party in breach of the criminal law is stopped, there is a significant risk that widespread breaches of the law will be encouraged by others, resentful of the continuing activities of the party in breach or encouraged in that course by the example of such a breach: see Slade J in Burnley Borough Council v England (1977) 76 LGR 393; cf Lord Denning MR in Stafford Borough Council v Elkenford Ltd (at 329; 527).
I do not pretend that the above instances provide inflexible principles or even exhaustive guidelines for the exercise of the discretion at first instance, when it is argued that the circumstances are so 'special' or 'exceptional' as to warrant injunctive relief, although criminal sanctions remain unexhausted. But the cases referred to, and the categories which they illustrate, clearly show how truly exceptional the circumstances must be before such relief will be offered. And the reason for this caution is the better understood by an appreciation of the reasons why caution is required. (4 - 5)
115 It was submitted on behalf of Galati Nominees that the decision in Peek should be distinguished because Peek was concerned with the granting of an injunction to restrain a criminal offence and there is no question of Galati Nominees having committed a criminal offence. I do not read the exceptions to the 'primary rule' discussed by Kirby P as being confined to circumstances involving criminal conduct.
116 In this case, Mr Galati and Galati Nominees have made no secret of their desire to operate outside of the law (as presently constituted by the Act and the Regulations) in relation to the production and marketing of potatoes and their intention to do so unless restrained. If not restrained, Mr Galati and Galati Nominees intend to disregard the present regulatory system in an extensive and systematic way. Mr Galati, and no doubt others, considers that the Act should be repealed immediately but that does not entitle him or Galati Nominees to disregard the Act.
117 Having regard to these matters, I am satisfied that the Corporation has established that there is a serious question to be tried on the alternative basis raised by it.
The balance of convenience and the adequacy of damages
118 I will deal with these issues together.
119 In relation to Galati Nominees' 'substantial lessening of competition' submission, I make the preliminary observation that it would be extremely rare for a court to be satisfied on an application for an interlocutory injunction that a particular contractual provision had the purpose or effect proscribed by s 45(2) of the Competition and Consumer Act 2010 or the equivalent provision in the Competition Code.
120 Moreover, if cl 3.1(e) had the consequence for which Galati Nominees contends, it is difficult to understand why Galati Nominees accepted the term in July 2013.
121 Section 45(2) reads as follows:
(2) [Where corporation may not make contract or arrangement] A corporation shall not:
(a) make a contract or arrangement, or arrive at an understanding, if:
(i) the proposed contract, 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, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, 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.
123 In this case, the evidence was limited to Mr Galati's assertions that, if Galati Nominees is not permitted to sell all of the potatoes grown by Mr Galati and delivered to it, it will have to buy from other growers at higher prices forcing the price of potatoes in the Spud Shed outlets up. This, it is said, will cause a substantial lessening of competition. This evidence does not form an adequate basis for drawing the conclusion that enforcing the restraint in cl 3.1(e) will substantially lessen competition. I accept that there may be a risk that there may be some adverse consequences on competition, but I do not accept that the risk is such that it tips the balance of convenience against the grant of injunctive relief.
124 I am satisfied that there is a real danger that if Galati Nominees is not restrained from selling potatoes grown by Mr Galati in excess of his relevant DMEs, the Corporation will not be able to regulate the market for potatoes effectively and in accordance with the Act. There is a real risk that other growers and merchants who have operated in compliance with the Act will follow Mr Galati's lead and operate without regard to the provisions of the Act. This carries with it the risk of disorderly de facto deregulation. If there is to be deregulation, this must be achieved in accordance with a timetable and in a manner specified by the State Government and Parliament. In my view, these factors highlight that damages would not be an adequate remedy and that the balance of convenience favours the grant of relief.
125 I should add that the public interest (in the widest sense) suffers if a scheme established by law is contravened by persons who decide unilaterally that the scheme should not apply to them. In essence, this is the position taken by Mr Galati and Galati Nominees. The aspect of the public interest to which I have just adverted is thus a factor that favours the grant of an injunction.
126 The serious question to be tried question and the balance of convenience are related and interdependent considerations bearing on the exercise of the court's discretion as to the grant of interlocutory injunctive relief. My provisional assessment is that the Corporation has a relatively strong case on each of the alternative bases upon which it relies and this is a factor which influences me to conclude that the balance of convenience favours the grant of an injunction.
127 I consider that, in the event that it is subsequently found that an injunction should not have been granted, Galati Nominees will be protected to a significant extent by its ability (and the ability of its related entities who operate the Spud Shed outlets) to call upon the Corporation's undertaking as to damages.
128 For the reasons given above, I consider that the balance of convenience favours the grant of injunctive relief.
129 I will hear the parties in relation to the terms of the order and costs.