Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Limited

[1988] HCATrans 58

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No BlO of 1988

B e t w e e n -

QUEENSLAND WIRE INDUSTRIES PTY LTD

Applicant

and

THE BROKEN HILL PROPRIETARY COMPANY

LIMITED

First Respondent

and

AUSTRALIAN WIRE INDUSTRIES.PTY LTD

Second Respondent

Application for special leave to

appeal

Wire

DEANE J

DAWSON J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 25 MARCH 1988, AT 11.53 AM

Copyright in the High Court of Australia

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MR D.P. DRUMMOND, QC: If the Court pleases, I appear with

my learned friend,MR D.R. GORE,iC,forthe applicant.

(instructed by Hawthorn, Cuppai ge and Badgery)

MR J.H. BYRNE, QC:  May it please the Court, I appear with

my learned friend, MR P. KEANE, for the

respondent. (instructed by Chambers, McNab,

Tully and Wilson)

DEANE J:	Thank you, Mr Drummond.
MR DRUMMOND:	If the Court pleases, the applicant brought an

action in the Federal Court against the respondents

based upon section 46 of the TRADE PRACTICES ACT

for damages and also for injunctive relief for the

purpose of requiring the respondents to supply the

applicant with a product of BHP's steel mill called

Y-Bar. The applicant has been in business for some

20 years making fencing products from bulk wire which,

until very recently, it obtained very largely from BHP.

Last year it extended its operations into a wire mill

process in which it now makes the bulk wire it uses

and converts into fencing - it makes the bulk wire

from wire rod which it obtains from BHP.

It is able to make a full range

of rural fencing products, save for one important

component in such a system of fencing, steel

star-picket posts. These posts are made from the

Y-Bar that I have been mentioning.

TOOHEY J:  Mr Drummond, the Y-Bar apparently comes out as a

feed in long lengths, does it?

MR DRUMMOND:	That is so, Your Honour.
TOOHEY J:	What is required then, simply to provide a point at

one end and whatever is needed at the far end, plus

some holes, I suppose?

MR DRUMMOND:  Yes, Your Honour. Mr Justice Pincus, the trial

judge, referred to that process as a very simple process

and that is the process we want to engage in to give

us the complete range of product.

TOOHEY J:  Could I just understand exactly what is involved.

Presumably the feed is cut to the required length, brought to a point at one end - - -

MR DRUMMOND:	That is so.
TOOHEY J:	- there is the usual holes to take the wire -
MR DRUMMOND:	And there are some little notches put in the end

opposite to the point. That is the whole process.

It is also dipped in a tar-type paint, as the last step in the procedure.

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TOOHEY J:	Thank you.
MR DRUMMOND:	The action was dismissed by the trial judge on

the basis that the applicant had failed to prove one

element only in its section 46 claim, namely that it

had failed to prove that the respondent's refusal

of Y-Bar amounted to a taking advantage of market

power possessed by them, and for that reason the

claim was dismissed.

(Continued on page4)

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MR DRUMMOND (continuing):  The Full Court dismissed the

appeal on a different basis entirely, namely, on

the basis that there was no market for Y-Bar and

found it unnecessary to consider the point upon

which the judgment below had turned. Our submission

is that the case really does turn on whether there

has been a taking advantage of market power by

the respondents, notwithstanding the Full Court's

approach to the matter. If that is correct it

does involve a question of law of public importance
and the interpretation of that provision taking

advantage in section 46 of the Act.

Your Honours, we would put the central question

1n these proceedings in this way and we are going

to use the language of section 46 in its current

form because it is relevant to the outcome of proceedings,
although the form in which section 46 stood prior

to June 1986 is also of relevance to part of

damages claim. The way we would put the central

question, Your Honours, is this way: whether a

vertically integrated manufacturer and supplier

who has a substantial degree of power in the market

for the supply of a wide range of finished and

unfinished products.- we would call that market market A -

contravenes section 46 of the Act.if it refuses

to supply an intermediate unfinished product which

is necessary to make one of those finished products

and in respect of which it is the sole manufacturer

and potential supplier to a competing manufacturer
and supplier in market A.for the purpose of preventing
the other manufacturer and supplier from entering

the market for that particular finished product,

which we will call market B. That this is the

central question in the case, in our submission,

is apparent when one has regard to the unchallenged

findings of the trial judge.

DEANE J:  What would you define as the relevant markets

on the way you put your case, the relavant market

or markets? Mr Drummond, we are having some

sound problems for the moment. You can hear us,

can you? We can just hear you. I think we will

just take a break for a moment until somebody tells

me the problems are over. Mr Drummond, the position

is, I understand, that the sound has dropped out

from you to us, temporarily. You might say something

so that we can confirm that. Yes, it has dropped

out. We will adjourn until the temporary fault -

I presume it is temporary - is fixed.

AT 12 NOON SHORT ADJOURNMENT

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UPON RESUMING AT 12.17 PM:

DEANE J:  We will try again, Mr Drummond.

MR DRUMMOND:  Thank you, Your Honour. When the break came,

I had just been asked what I said were the

relevant markets.	The relevant markets are three
that were found by Mr Justice Pincus.	Can I take

the Court to page 41 of the application book, at

about point 5. His Honour is there summarizing

his conclusions on two markets advanced by BHP

and His Honour says:

It is only if one adopts the wider notion of substitutability just rejected that it

is possible to accept BHP's first contention

as to the market - that it is that for steel and steel products in Australia. It appears

to me that the second view propounded on

behalf of BHP, that the market is one for

the supply of rural fencing materials in this

country, better accords with commercial ideas -

However, His Honour accepted that those were two

relevant markets notwithstanding his clear

preference for the fencing market.

DAWSON J: Mr Drummond, there is no trouble with the facts,

is there, the facts are accepted as those found

by the trial judge?

MR DRUMMOND: Yes, Your Honour. There is just one point

that may need a little clarification and that is

the third market that His Honour found.

His Honour found that BHP had acted for the purpose

of denying us entry to what he called the "star-

picket market". That was a third narrower market,

different from the other two that I have just

mentioned. His Honour was quite deliberately identifying a third narrower market. He makes

reference to that at page 68 in summarizing his

conclusions. BHP:

has refused to supply Y-bar to the applicant,

thereby preventing the applicant from

competing with it in the star picket market.

TOOHEY J: Mr Drummond, in relation to your markets A and B

that you are identifying for us earlier, how do

they equate with the three markets to which you

just refer?

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MR DRUMMOND:  Your Honour, we put the two wider markets

into market A and the star-picket market into

market B.

TOOHEY J: Well, where does the difficulty arise that you

referred to?

MR DRUMMOND:  Only in identifying that there is this third

narrower market that Mr Justice Pinkus found, the

star-picket market, notwithstanding the fact that

it is given only brief mention in the course of

his reasons. His Honour was referring to a

star-nicket market which was one of the markets

which.was admitted on the pleadings and it was an

admission that was never resiled from even though

BHP,at the opening of its case, propounded these two other markets as the really relevant markets.

So that the existence of this third star-picket

market,which His Honour ultimately found to be

one of the three relevant ones, was a live issue

throughout the case.

If the Court pleases - - -

DEANE J: And what was the amount of evidence involved?

MR DRUMMOND: In relation to the market

DEANE J:	In relation to the case? How long did it take?
MR DRUMMOND:	The case went - I think it went about five or

six days in court. I think I am right on that,

Your Honour. A substantial period of time,

anyway, of that order.

DEANE J: And in the Full Court?

MR DRUMMOND:  In the Full Court, it went into the second day.

DEANE J:	Mr Drummond, the breakdown of sound did give us the	opportunity of discussing the matter and I think at	this stage we would like to hear what Mr Byrne has
to say.

MR DRUMMOND:	As Your Honours please.
MR BYRNE:	Your Honours, may I point out first of all that

what has now been described as market A, a

composite market, as I understood it to be put,

for the supply in Australia of rural fencing
products and, I gather, a market for steel and
steel products has not been advanced in that

fashion until today.

The way in which the applicant has until now

conducted its case with respect to the identification

of the markets can be identified, first of all, by

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looking at the six markets which it, by

paragraph 3 of the statement of claim at

page 2 of the application book, identified as

the markets which it contended were in issue in

the case.

Your Honours will see that identified in

subparagraph 3(a) to (f) are the six markets

which were originally pleaded by the applicant

as being relevant to the resolution of the case.

(Continued on page 8)

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MR BYRNE (continuing): During the course of the hearing

an amendment was made to add reference to other

markets upon which reliance was placed. Your Honours,

at page 20 of the application book, by paragraph 10A

the applicant amended its case to assert that the

relevant markets were markets for:

(i) the supply of steel and steel products -

and a separate and distinct market for:

(ii) the supply of rural fencing materials.

And then by subsequent paragraphs of paragraph l0A

it was asserted that BHP was in a position substantially

to control those markets.

When Mr Justice Pincus surmnarized the nature of

the markets which were being relied upon h~said, at

page 34 of the application book, in the first

complete paragraph, that six mawkets had been relied

upon, each of them for the supply of particular goods.

And His Honour says:

In setting them out I shall use the word "steel"

for "steel and steel products".	The markets
alleged related to the supply of -

And there are set out the six markets which were

identified in paragraph 3 of the applicant's statanent of claim. And subsequently His Honour makes reference

to the additional markets which were pleaded by

paragraph l0A.

In short, Your Honours, the market which has now

been described as market A,and which is said to be

fundamental to the question alleged to be of general

public importance justifying special leave,is a new

composite market which has never previously been

attempted to be proved, and which, in our respectful

submission, is not justified by either the evidence

or the findings which Mr Justice Pincus made, or

which the Full Court made.

It therefore, from the outset, in our respectful

submission, entirely ceases to be an appropriate case

for special leave if it were otherwise thought to be

one of general public importance which justified the

grant.

DAWSON J:  You accept the findings of fact of the trial judge,

do you?

(Continued on page 9)

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MR BYRNE:  Yes, Your Honour. Your Honours, may we say, also,

that as the question was formulated by our learned

friend this morning it was one which, as we understood

it, rather tended to assume the existence of a

market in unfinished products and, in particular,

assumed the existence of a market in the unfinished

produc~ Y-Bar. Now, Your Honours, we accept that

the finding of fact which was made by Mr Justice Pincus,

in the last page of his reasons, to which our learned

friend drew the Court's attention a little while

ago, involved a conclusion that there had been

a preventing of the applicant from competition

in the star-picket market - that is at page 68

of the application book.

But, in our respectful submission, the Full

Court was correct in appreciating that before an

offence against section 46 could be proved it is

necessary to establish, relevantly, impugned

conduct either in that market or in some other

market. There is no finding of any conduct infringing

section 46 on the part of BHP in the market which

is described as the star-picket market. It was,

therefore, necessary to ask what the Full Court

described as the anterior question. Given that

Y-Bar is not, itself, a product which is traded

it cannot form part of a market for steel and steel

products. lt is not dealt with in any such market;

it is not traded nor could it form part of the

market for rural fencing products or, if one adopts

a narrower view of the market and looks at what

was described as the third market, the market for

star-pickets. lt cannot, of course, because it

is, relevantly, an unfinished product and is not

in that market.

It was, therefore, only if the applicant were

1n a position to establis~ as the Full Court recognized,

that there was some other relevant market in which

there had been conduct offending section 46 that

there could be any reasonable prospect of the applicant

succeeding. And the fact that Y-Bar had never

been sold domestically in Australia inevitably

had, as the Full Court found, the consequence that

there was no market in respect of which infringement

of section 46 might be made out.

TOOHEY J:	Mr Byrne, was not that part of the argument as to whether or not there can be a relevant market
when if there is not one its absence is due to the refusal of a particular manufacturer or supplier
to make available the relevant material or product.
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MR BYRNE: 

Your Honour, it is right to say that in reply

before the Full Court, it was suggested that one
could find the existence of a market which had

never previously existed, by showing that there was somebody who wished to buy the intermediate product. But in our respectful submission, the Full Court was clearly right in taking the view

that one could not describe  :ircumstances

where, until then there had been no dealing, as

involving a market as soon as one prospective

customer came along and said, "I wish to buy the

product", a product which previously had not been
dealt with and in respect of which it could not
be said that the refusal to deal was in any

sense discriminatory.

Your Honours, the Full Court dealt with this

question at page 84 of the applicarion book.

pointing out, towards the foot of the page,

that an initial question was one of market

definition. Now here as I say, if leave were

to be granted here, the case which the applicant

wishes to advance is a case neither previously

pleaded nor proved. Their Honours then go on

to identify that the real issue was whether,in

circumstances where the product has never previously
been supplied, it could be right to regard there

being a market in respect of unfinished products,

which until then had not been dealt with in

a market in any real sense - they are products,

which until then, had been dealt with in BHP's

mill and its adjacent factory. In other words,

they were not particles of trade or commerce,
they were merely articles which were converted

from one unfinished state, in one mill, to fence

posts in another.

DEANE J: That involves the view that section 46 cannot

apply to a potential market?

MR BYRNE: Potential, Your Honour, in the sense that there

is no existing market, but the potential for

it may be realized if the applicant is compelled
to accept a new customer.	Yes, in that limited

sense, the question was alive.

DEANE J: It may well be right. It is a wide submission,

though, is not it, in that it means that if a

monopolist has sufficient power to prevent any

market at all in the goods which he controls,

section 46 will have nothing to say to him?

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MR BYRNE:  Your Honour, the section, with respect, does not speak in terms of potential markets. One can see

that, for example, by reference to section 46(4) where in the section itself a reference to power is said to be a reference - it is defined to mean

a reference to 'market power' and a reference to

'market' is a reference to a market for goods or

services. In our respectful submission that can

only be taken as indicating a legislative intent

to refer to existing markets. After all, those

are the things to be regulated.

DAWSON J: But surely a market can exist even though it is

not exploited, in a sense that at any time you want

to sell your product you will find that there is

a market there.

MR BYRNE:  Your Honour, we would submit that at the point

when there are dealings in the articles there is

then a market. Up until that time one sees potential

but not, in fact, a market until the trading begins.

DAWSON J: That is not the normal use of the word, is it?

When you ask is there a market for a product you

are asking whether you can sell it?

MR BYRNE:  Well, there are, Your Honour, people who no doubt

use the expression in that way but often if one

asks whether or not there is a market, for example,

for apples in a particular area one will be asking

"Where can I go to the place and buy them?"

DAWSON J:  Then there is a real question as to the sense in 'Which

it is used in section 46, is there not?

MR BYRNE:  Your Honour, it is not our submission that there

are not questions of some importance involved in

the case. We rather put our opposition upon two

grounds, first of all that the decision of the

courts below are correct and, secondly, that it

would not be appropriate to seek to resolve this

question against a background where the facts which

are said to give rise to it and the relevant markets
which are expressed to be the subject of the question

of law said to arise, are now being defined in

a way quite differently from those which have

previously been the subject of evidence. We would

then, in our respectful submission, be confronting a case which is one which has not been the subject of consideration previously and it is not the subject
of findings of fact which would provide a convenient

vehicle for the resolution of the legal question

that arises.

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MR BYRNE (continuing): In other words, the Court, when it

came to hear the appeal, might well find the debate

arid because the markets upon which the applicant

relies to advance its legal point have not been

found to exist. Those are our submissions.

DEANE J:  Thank you, Mr Byrne. Mr Drummond, we would like

to hear what you say on the second of the two points

to which Mr Byrne has referred.

MR DRUMMOND: It is, in our submission, not correct to say

that we have identified new markets for the first

time. The markets we have been talking about,

the steel market and the fencing market, are the two markets which were put forward at the end of our case by BHP in its opening and which

Mr Justice Pincus found to be two of the relevant

markets at page 41 of the judgment. The third

market i~ as we have submitted, a market for star-

pickets .. That was admitted on the pleadings and

it was an admission that was never resiled from
by the respondents.

So that it is, in our respectful submission,

not right to accept the second point advanced by
our learned friend.

TOOHEY J: Mr Drummond, it is not clear to me that the notice

of appeal, as presently formulated, throws up what

is likely to be the real question if special leave

were granted.

MR DRUMMOND:	Your Honour is right and I had proposed to put to the Court that in the event of leave being granted we be allowed to make some amendments to the notice and could I indicate what those amendments are: in paragraph 2(iii) of the draft notice of appeal we would want to include a reference to the market for the supply of steel and steel products
as well as the market for rural fencing; we would
want in ground 2(v) to make a reference to the rural fencing materials market and we would want in ground 2(vi) to make the reference to the market
a reference to the star-picket market.

TOOHEY J:  But your notice of appeal seems to be confined

to arguing that the Full Court was in error in
holding that it was necessary for the applicant

to prove that there was a market in Australia for

Y-Bar. It does not assert that the Full Court

should have held that there was such a market.

It may be that that is not part of the case but

it seemed to me, from what you were saying earlier

in the day, that it was.

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MR DRUMMOND (continuing): Your Honour, it was argued below

that there was a market in the sense of a potential

market for Y-Bar but, in view of the three markets

that were found by His Honour Mr Justice Pincus,

the question of whether there was a potential market

for Y-Bar was an unnecessary one, although we would
certainly seek to include in the notice of appeal a

ground that would raise for determination

the relevance of that issue argued below in the

Full Court.

DEANE J:  If you are given leave we will not restrict you in

terms of your notice of appeal, but you should be

conscious of the fact that the fact that we do not restrict you does not preclude your being confined

when and if the matter comes on for hearing.

Also, having heard what Mr Byrne has said, you should

bear in mind that, if you are given leave, it is unlikely

that you would be allowed to raise any new questions

of fact on the hearing of the appeal.

MR DRUMMOND:	I understand that, Your Honour.
DEANE J:	Very well, the Court is prepared to grant you leave,

Mr Drummond.

MR DRUMMOND:	As Your Honour pleases.
DEANE J:	Special leave to appeal is granted.

AT 12.38 PM THE MATTER WAS ADJOURNED SINE DIE

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