Ross Payne & Company v Western Australian Lamb Marketing Board

[1983] FCA 180

ROSS PAYNE AND CO. AND OTHERS v. WESTERN AUSTRALIAN LAMB MARKETING BOARD
(1983) 77 FLR 286
No. WAG34 of 1983
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.(1)

CATCHWORDS

Trade Practices - restrictive trade practices - application for interlocutory injunction - alleged contract arrangement or understanding substantially lessening competition - alleged conduct by statutory corporation with virtual monopoly preventing competitive conduct among applicants - setting of killing fees for slaughter of lambs - requirement that applicants enter into agency agreements - jurisdiction to determine associated common law claim - whether reasonable notice given to determine existing agency agreement

Trade Practices Act 1974 (Cth), ss. 4, 4F(b), 45(2)(a)(ii), 45(2)(b)(ii), 45A(1), 46, 46(1)(c)

Marketing of Lamb Act 1971 (W.A.), ss.15, 15(1)(h), 16, 19(1), 21

Trade Practices - Restrictive trade practices - Whether an arrangement substantially lessening competition - Whether deterring or preventing competitive conduct - Statutory corporation controlling slaughter of lambs - Trade Practices Act 1974 (Cth), ss 4, 4F(b), 45(2), 45A(1), 46(1) - Marketing of Lamb Act 1971 (WA), ss 15, 16, 19, 21.

HEADNOTE

The applicants, of whom there were twenty-eight, owned and operated abattoirs in Western Australia. The respondent was a body corporate established by the Marketing of Lamb Act 1971. Since the Act came into operation no one was permitted to slaughter a lamb unless it was the property of the respondent and was being slaughtered on its behalf. Under the Act the respondent was empowered to appoint persons to act as its agents to carry out on its behalf such of its powers and functions as were prescribed or as were agreed to between it and each such agent.

The applicants, in their capacity as agents, bought, slaughtered, and sold lambs and accounted to the respondent for the proceeds less a killing fee fixed from time to time by the respondent. In 1983 the respondent wrote to the applicants requiring them to enter into new agency agreements with the respondent, as existing agreements were due to expire. The letter advised each applicant that differential killing fees applied for different categories of abattoirs, and that its abattoir had been placed in a certain category which attracted a set killing fee. Failure to accept the terms offered meant that no lambs could be slaughtered by that abattoir, although an affidavit filed by the respondent's secretary, in these proceedings, stated the respondent was always willing to negotiate terms with any abattoir. The applicants claimed the new agency agreements would have the effect of substantially lessening competition, contrary to s 45(2) of the Trade Practices Act 1974, and that the respondent, by its actions as controller of the lamb market was preventing them from engaging in competitive conduct in that market, contrary to s 46(1)(c) of the Trade Practices Act. The competitive conduct said to be prevented or lessened was competition between abattoirs for agency contracts with the respondent. An interlocutory injunction was sought by the applicants restraining the respondents from entering into new agreements and from terminating existing agreements.

Held: (1) On the material presently available, there is no evidence that the respondent's actions were for the substantial purpose of preventing abattoirs, including the applicants, from engaging in competitive conduct, and therefore the applicants have not made out a case to justify the injunction they seek.

Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1983) 57 ALJR 425, applied.

(2) The respondent, the Western Australian Lamb Marketing Board, is a trading corporation within the meaning of s 4 of the Trade Practices Act 1974.

Fencott v Muller (1983) 57 ALJR 317, referred to.

(3) Section 45 of the Trade Practices Act 1974 is not in its terms limited to contracts, agreements or arrangements where the parties are in competition with each other.

Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd (1978) 33 FLR 294, distinguished.

HEARING

Perth, 1983, August 3, 5. #DATE 5:8:1983

APPLICATION

Application for an interlocutory injunction under s 80 of the Trade Practices Act 1974 (Cth) restraining the respondent from entering into an arrangement likely to substantially lessen competition and from exercising its powers for the purpose of deferring or preventing persons from engaging in competitive conduct, contrary to the provisions of s 45(2) and s 46(1)(c) of the Trade Practices Act 1974 (Cth).

D K Malcolm QC and J G Fiocco, for the applicants.

D R Williams QC and P D Martino, for the respondent.

Cur adv vult

Solicitor for the applicants: P Bogue.

Solicitors for the respondent: Stone James Stephen Jacques.

FPC

ORDER

1. The application for an interlocutory injunction is dismissed.

2. The costs of the application are reserved.

Orders accordingly

JUDGE1

This is a matter of some complexity but circumstances dictate that a decision be given without delay.

The applicants, of whom there are 28, own and operate abattoirs south of the 26th parallel in Western Australia. They are not associated, except through their membership of the Meat and Allied Trades Federation of Australia, but they have joined in this application to seek interlocutory injunctive relief against the respondent.

The respondent is a body corporate established by the Marketing of Lamb Act 1971 of Western Australia. While keeping its position open for the substantive hearing of this matter, the respondent did not oppose the applicants' submission that it is a trading corporation as that term is defined in s.4 of the Trade Practices Act 1974. In so far as the status of the respondent goes to the jurisdiction of this court to hear the application, I am satisfied, having regard to the general powers of the respondent spelt out in s.15 of the Marketing of Lamb Act and the specific powers in s.21 of that Act, that the implied concession was properly made. Fencott v. Muller (1983) 57 ALJR 317; (1983) 46 ALR 41.

Until 1972 owners of abattoirs were free to purchase, slaughter and sell lambs on such terms as they were able to command. Since the Marketing of Lamb Act came into operation no one may slaughter a lamb unless it is the property of the respondent and is being slaughtered on its behalf (s.19(1)). A person in the possession of lambs may deliver them to the respondent by arrangement (s.16).

Section 15 empowers the respondent to appoint persons to act as its agents and may authorize those persons to carry out on its behalf "such of its powers and functions as are prescribed or are agreed to between it and each such agent" (s.15(1)(h)).

The Marketing of Lamb Act Regulations 1972 empower the respondent, by notice in the Gazette, to specify the names of those who have agreed to act as its agents, to specify in relation to any abattoir the class assigned to it by the respondent and to specify the number of lambs to be slaughtered and processed at an abattoir during a specified period (reg.3). There was no evidence of any such notice having been published, though mention was made of them.

Section 21 of the Act empowers the respondent to slaughter or arrange for the slaughter of any lambs of which it becomes the owner and also to sell or arrange for the sale of lamb products from lambs delivered to it. For this purpose the respondent may exercise any of the powers and functions conferred on it by s.15 including the power to appoint agents.

In practice the abattoirs, in their capacity as agents for the respondent, buy, slaughter and sell lambs and account to the respondent for the proceeds less a killing fee and an offal retention allowance.

It may be noted that neither in the Act nor in the regulations is there any express power to fix a killing fee.

Since the Act came into operation the applicants have, as agents for the respondent, bought, slaughtered and sold lambs and have received a killing fee fixed from time to time by the respondent.

The statement of claim pleads that the arrangements made from time to time with the respondent constitute express oral agreements or alternatively implied agreements between the parties. Although no defence has yet been filed, it is clear from the arguments of counsel that the respondent denies the existence of any contractual arrangement between it and the applicants. In the respondent's submission, all that has happened is that from time to time it has exercised its statutory powers to authorize the applicants to buy, slaughter and sell lambs and to receive allowances.

The catalyst for these proceedings was a letter written by the respondent to each of the applicants on 1 July 1983. After complaining that some non-export country abattoirs had committed breaches of the Act and regulations, the letter stated:

"It has been decided therefore, that current approvals to slaughter lambs on behalf of the Board will be terminated and a new form of Agency Agreement issued in lieu thereof. Forms of Agreement and copies of Regulations are attached hereto. Your current approval will expire on July 31st 1983 and failure to return the attached signed Agreement completed in full by this date, will signify your decision not to slaughter lambs on behalf of the Board".

The letter continued by establishing three categories of abattoirs for which differential killing fees were included. A typical letter contained this sentence:

"Your abattoir has been classified as Category 2 and your killing fee set at $4.60".

The proposed agreement was for a term of 11 months as from 1 August 1983. It constituted the particular abattoir the respondent's agent, provided for a killing fee and offal retention fee and provided for termination on one month's written notice at the instance of either party.

An affidavit filed on behalf of the applicants recites that the Meat and Allied Trades Federation attempted to negotiate agreements on behalf of the applicants with the respondent but that these were resisted by the latter which wrote to the Federation on 27 July:

" . . . local abattoir operators have been reminded by telegram of the necessity to respond to the 21st July deadline if they wish to act as Agents of the Board and slaughter lambs on its behalf".

There is an issue between the parties on the facts as to how far the respondent was prepared to negotiate. In an affidavit sworn 3 August, the secretary of the respondent deposed:

"5. The respondent has been and is willing to negotiate with agents regarding the terms of the proposed agency agreements. The respondent has been and is willing to negotiate with agents regarding the appropriate killing fee to be paid by the respondent to categories of agents for slaughtering lambs and with individual agents as to which category of abattoir that agent should be placed in".

The applicants allege that the respondent went no further than to say that if any abattoir could prove that it had been wrongly classified, the respondent would consider placing that abattoir in a different category.

It is not possible to determine this issue on the affidavits. I merely comment that the general willingness to negotiate expressed in the paragraph set out above hardly accords with the peremptory tone of the respondent's letter of 1 July.

The applicants' case against the respondent focuses mainly on ss.45 and 46 of the Trade Practices Act.

Section 45 provides that a corporation shall not make a contract or arrangement or arrive at an understanding if

"a provision of the proposed contract, arrangement or undertaking has the purpose or would have or be likely to have the effect, of substantially lessening competition". (s.45(2)(a)(ii)).

The section also provides that a corporation shall not give effect to a provision of a contract, arrangement or understanding, if that provision

"has the purpose, or has or is likely to have the effect of substantially lessening competition". (s.45(2)(b)(ii)).

Section 46(1)(c) provides that a corporation that is in a position substantially to control a market for goods and services shall not take advantage of its power for the purpose of

"deterring or preventing a person from engaging in competitive conduct in that market or in any other market".

The applicants claim that the respondent has contravened s.45 of the Act in two respects:

1. by setting a killing fee in the past and

1. by requiring the applicants now to enter into an agency agreement in the form proposed by it.

In the applicants' submission, the respondent has been and is in contravention of s.45(2)(a)(ii) and s.45(2)(b)(ii), because what was done and what is proposed substantially lessens competition by depriving the applicants of the opportunity to compete with one another in the provision of services for the respondent.

The applicants say further that the respondent has contravened s.46 by taking advantage of its statutory monopoly to require the applicants to accept an arrangement that would prevent them from engaging in competitive conduct in the lamb market.

In addition the applicants contend that the agency agreements in force at 1 July 1983 could not be determined except upon reasonable notice and that such notice would not be less than 6 months. The statement of claim pleads that the notice of termination was therefore ineffectual though no declaratory relief is sought in that respect.

The applicants acknowledge that this allegation is a non-federal claim but they say that it is part of the one controversy therefore justiciable before this court. Fencott v. Muller at p.331-2. I shall return to that argument later.

Sections 45 and 46 belong to Part IV of the Trade Practices Act. Section 51 provides that in determining whether a contravention of a provision of Part IV has been committed, regard shall not be had -

"(b) in the case of acts or things done in a State - except as provided by the regulations, to any act or thing that is, or is of a kind specifically authorized or approved by, or by regulations under, an Act passed by the Parliament of that State".

The respondent expressly disavowed any intention to rely upon this provision as an answer to the applicants' claim, while reserving the right to argue the point at the substantive hearing. The respondent adopted the same approach to an argument that it is an instrumentality or agent of the State of Western Australia, hence the Trade Practices Act has no application to it. Bradken Consolidated Ltd v. Broken Hill Co. Ltd. (1979) 53 ALJR 452; State Superannuation Board v. Trade Practices Commission (1982) ATPR 40-282. In that regard it is relevant to note that s.6 of the Marketing of Lamb Act provides that the respondent "is not an agent or servant of the Crown".

Thus, in considering whether there has been a contravention of s.45 or s.46 of the Trade Practices Act, the respondent stands in no special position by reason of its statutory origin.

But the respondent does rely upon the provisions of the Marketing of Lamb Act to argue that everything it has done has been simply in exercise of its statutory powers. And so, in appointing the applicants as agents, in renewing that agency and in determining killing fees they have received and may receive in the future, the respondent is doing no more than giving effect to the role in which it is cast by the Act.

But to say that is, I think, to pay insufficient regard to what the complaint of the applicants really is. They contend that what the respondent has done and proposes to do is in exercise of its power to appoint persons to act as its agents and to authorize those persons to carry out such of its functions "as are . . . agreed to between it and each such agent" (s..15(1)(h)). By requiring the applicants to enter into a common form of agreement for a predetermined killing fee, the respondent has deprived the applicants of the opportunity to compete with each other in the terms they will accept.

The respondent argued that s.45(2) is concerned with agreements made between those in competition with each other, where the agreement would have the effect of substantially lessening competition, and that it has no application where a party to the contract is, as in this case, someone who acquires the services of another.

While the deeming provisions of s.45A(1) speak of "bodies corporate . . . in competition with each other", that sub-section is expressed not to limit the generality of s.45 which does not in its terms require all the parties to the contract, arrangement or understanding to be in that relationship.

The real force of the respondent's argument is, I think, that in the past it has dealt with suppliers individually and that is what it proposes to do now. Any contract, arrangement or understanding is between the respondent and a particular abattoir. It is not possible to distil from this a contract, arrangement or understanding between suppliers or between suppliers and the respondent. In that event there is no contract, arrangement or understanding, actual or proposed, that itself has the purpose or would have or be likely to have the effect of substantially lessening competition.

In that event it does not assist the applicants to point to the scope of the injunctive power in s.80 of the Trade Practices Act which embraces attempting to contravene a provision of Part IV or inducing or attempting to induce a person to contravene such a provision. Since the completed act is itself not in contravention of Part IV, an attempt or inducement cannot be.

As to s.46, it may be accepted that the respondent is in a position substantially to control the market for the supply of lamb slaughtering services in Western Australia. Indeed the Marketing of Lamb Act effectively confers upon it a monopoly in this regard. Has it taken advantage of that power for the purpose of deterring or preventing a person from engaging in competitive conduct in that market?

The general tenor of s.46 is that a corporation which is in a position substantially to control the market, as a supplier or acquirer of services, shall not use that position for the purpose of eliminating or damaging a competitor.

But s.46(1)(c) is not necessarily so limited. The purpose there mentioned is that of

"deterring or preventing a person from engaging in competitive conduct . . . ".

In that regard s.4F(b) deems a person to have engaged or to engage in conduct for a particular purpose if

"(i) the person engaged or engages in the conduct for purposes that included or include that purpose . . . ; and

(ii) that purpose . . . was or is a substantial purpose . . . ".

Paragraph (c) of s.46(1), in contrast with para.(a), does not speak of a person who is a 'competitor' of the market controller. It speaks of someone who engages in 'competitive conduct' and that may be wide enough to embrace a person who competes with someone other than the market preventing that competition.

In Victorian Egg Marketing Board v. Parkwood Eggs Pty. Ltd. (1978) ATPR 40-081 the applicant had a virtual monopoly of the sale of eggs in Victoria and it was restrained, by interlocutory injunction, from selling eggs in the Australian Capital Territory at a price lower than that of the respondent. But the parties were actually or potentially in competition with each other, a different situation to that involved here.

I find it unnecessary to reach a firm conclusion on the question whether s.46(1)(c) extends to the conduct of which the applicants complain. It is perhaps enough to say that I am not persuaded that it does. But the applicants face another obstacle. On the material presently available, there is nothing to indicate that what the respondent has proposed by way of agency agreements is for the substantial purpose of preventing abattoirs from engaging in competitive conduct.

The respondent has fixed categories of abattoirs, has fixed a killing fee for each category and has offered each of the applicants an agency agreement geared to a particular category. There is no evidence that the respondent has done this to prevent competition among the applicants or that any applicant has been placed in a category which is inappropriate. The applicants' concern at what I have already described as the peremptory tone of the letter of 1 July is understandable but I am not satisfied that they have made out a case to justify the injunction they seek.

I reach that conclusion, whether adopting the approach taken in Beecham Group Ltd. v. Bristol Laboratories Pty. Ltd. (1968) 118 C.L.R. 618 or that suggested by Gibbs C.J. in The Australian Coarse Grain Pool Pty. Limited v. The Barley Marketing Board of Queensland (unreported decision delivered 22 December 1982).

There remains the contention that there were agency agreements in force at July 1983 that could not be determined except on 6 months' notice. As I read the application and statement of claim, the applicants do not claim an injunction to restrain premature determination of the agency agreements independently of the relief sought under the Trade Practices Act. It is only in the 'minute of orders sought' filed by the applicants and presently the subject of an undertaking by the respondent that the court is asked to restrain the respondent from terminating the current approvals of the applicants or any of them.

Having concluded that a case for an interlocutory injunction under the Trade Practices Act is not warranted, it is not, I think, strictly necessary to examine the merits of the common law claim. However there are other difficulties in the way of the applicants; I shall do no more than enumerate them.

Any claim relating to the current approvals is a non-federal claim. It is doubtful that it is part of the one controversy in the sense expressed in Fencott v. Muller, except perhaps in so far as it is related to the allegation that the killing fee set in the past involved the respondent in a contravention of s.45 of the Trade Practices Act. Furthermore the claim presupposes a contract between each applicant and the respondent, an implied term of each contract that it would not be determined except on reasonable notice, and a conclusion that reasonable notice would not be less than 6 months. Evidence on these matters is almost entirely lacking.

It follows then that the application for an interlocutory injunction must fail. An expedited hearing of the substantive claim is desirable and directions will now be given to this end.

I would just add this comment. Although the respondent has successfully resisted the present application, it was its letter of 1 July 1983 that prompted these proceedings. Reference has been made to para.5 of the affidavit which speaks of the respondent's willingness to negotiate with the applicants regarding the terms of the proposed agency agreements. That opportunity is now available to the respondent.