S.A. Brewing Holdings Ltd, and Anor v Baxt, R., the Trade Practices Commission and Anor
[1989] FCA 144
•07 APRIL 1989
Re: S.A. BREWING HOLDINGS LIMITED; JOSEPH IAN NORMAN WINTER; IAN ROSS
WILSON; THE SOUTH AUSTRALIAN BREWING COMPANY LIMITED; GLENN WILLIAM
WHEATLAND and J. GADSDEN AUSTRALIA LIMITED
And: ROBERT BAXT; THE TRADE PRACTICES COMMISSION and JAMES GLIDDEN
Nos. 101 and 103 of 1988
FED No. 144
Trade Practices
COURT
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Von Doussa J.(1)
CATCHWORDS
Trade Practices - Section 155 notices - challenge to validity - sufficiency of manner in which matters identified - whether the matters alleged disclosed facts which constitute or may constitute contraventions of ss.45 and 46.
Trade Practices - Section 155 notice - whether matters designated in the notices alleged a contract arrangement or understanding which provides directly or indirectly for the acquisition of assets in a body corporate within the meaning of s.45(7) - meaning of "acquisition of ... assets, of a body corporate" - whether contract provided for acquisition of a legal or equitable interest in such assets - whether contract granted option to purchase or right of refusal - whether rights of entry granted by contract created legal or equitable interest in such assets - meaning of "provides ... directly or indirectly for the acquisition of ...".
Trade Practices - Misuse of market power - whether the alleged taking advantage of a substantial degree of power in a specified market must be done in that market.
Trade Practices Act 1974, ss.4(1), 4(4), 45(7), 46(1), 46(4), 50, 155, 163A
Melbourne Home of Ford Pty Ltd & Ors. v. Trade Practices
Commission & Anor. (No. 3) (1980) 47 FLR 163
Davenport v. Trade Practices Commission (1983) 70 FLR 123
Pyneboard Pty Ltd & Ors. v. Trade Practices Commission & Anor. (1982) 57 FLR 368
Bannerman & Anor. v. Mildura Fruit Juices Pty Ltd (1984) 55 ALR 367
W.A. Pines Pty Ltd v. Bannerman (1980) 41 FLR 175
Mackay & Anor. v. Wilson & Anor. (1947) 47 SR (NSW) 315
Pritchard v. Briggs & Ors. (1980) 1 Ch 338
Woodroffe v. Box (1954) 92 CLR 245
London & South Western Railway Co. v. Gomm (1882) 20 ChD 562
Cowell v. The Rosehill Racecourse Company Limited (1937) 56 CLR 605
Verrall v. Great Yarmouth Burrough Council (1981) QB 202
Sherritt Gordon Mines Ltd v. Federal Commissioner of Taxation (1976) 10 ALR 441
Trade Practices Commission v. Bowral Brickwords Pty Ltd (1984) 55 ALR 733
Broken Hill Pty Co. Ltd v. Trade Practices Commission (1980) 31 ALR 401
Perlman v. Perlman (1983) 155 CLR 474
Victorian Egg Marketing Board v. Parkwood Eggs Pty Ltd (1978) 20 ALR 129
Queensland Wire Industries Pty Ltd v. The Broken Hill Proprietary
Company Limited & Anor. (1989) ATPR 40-925
OD Transport Pty Ltd v. Western Australian Government Railways Commission (1986) 13 FCR 270
Williams & Ors. v. Papersave Pty Ltd (1987) 76 ALR 152
HEARING
ADELAIDE
#DATE 7:4:1989
Counsel for the applicants : Mr D.M.J. Bennett Q.C.
& Mr J.M. Mansfield Q.C. with Mr D.E. Clayton
Solicitors for the applicants : Finlaysons
Counsel for the 1st & 2nd respondents : Mr A.C. Chernov Q.C.
with Mr J.P. Jopling
Solicitors for the 1st & 2nd : Australian Government Solicitor respondents
ORDER
The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
In these two actions the applicants seek declarations under s.163A of the Trade Practices Act 1974 that notices served on each of them under s.155(1) of that Act are unauthorised, invalid and of no effect. In the first action eleven notices are under challenge. The first five applicants each received two notices requiring them to produce defined classes of documents; one notice concerned alleged matters that it is said constitute or may constitute contraventions of s.45, ("the s.45 matters") and the other notice concerned an alleged matter that it is said constitutes or may constitute a contravention of s.46 ("the s.46 matter"). In the case of the sixth applicant, one notice only was served concerning the s.46 matter. The fourth applicant ("SAB") is a subsidiary of the first applicant ("SAB Holdings"). The second and third applicants are respectively the Chairman and Managing Director of the first applicant. The fifth applicant is the Managing Director of the fourth applicant, and the sixth applicant, J. Gadsden Australia Limited ("Gadsden") is a related corporation of the first applicant.
In the second action, SAB Holdings and SAB seek to challenge the validity of a notice served under s.155(1) on the third respondent requiring him to appear before the second respondent to give oral evidence. At all material times up to 31 July 1987 the third respondent had been the Managing Director of SAB Holdings. That notice alleged the same s.45 and s.46 matters as the notices in the first action. Initially the first and second respondents challenged the standing of the applicants to attack the validity of the notice to the third respondent, but in the course of the trial the standing of the applicants to do so was conceded. The third respondent has taken no part in the trial. The first respondent is the Chairman of the second respondent, the Trade Practices Commission. For convenience I shall refer to the first and second respondent in each action as "the respondents".
All the notices relating to the s.45 matters describe the "matters" in identical terms. So too, in the case of the notices relating to the s.46 matter, the "matter" is described in identical terms. Although the Statements of Claim seek to challenge the notices and the decisions to issue them on a variety of grounds, at trial the attack was limited to the description of each "matter" which the applicants contend fails to disclose facts which constitute or may constitute a contravention of s.45, and s.46, respectively.
Section 155, so far as it is relevant, provides :
"155 (1) Where the Commission, the Chairman or the Deputy Chairman has reason to believe that a person is capable of furnishing information, producing documents or giving evidence relating to a matter that constitutes, or may constitute, a contravention of this Act, ... a member of the Commission may, by notice in writing served on that person, require that person -
(a) to furnish ... information;
(b) to produce ... documents; or
(c) to appear ... to give any such evidence ..."
The power conferred by s.155(1) is an investigative power which is to be given a wide construction and should not be narrowly confined. Investigations may commence with little information, and will then need to be broad rather than specific. The investigative power may properly be exercised by enquiry into the existence of facts which do not themselves constitute a contravention, or deny the possibility of contravention, of the Act. The power may properly be exercised to ascertain facts which may merely indicate a further line of enquiry, or which tend to prove circumstances from which an inference can be drawn as to the existence of other facts which have a more immediate and proximate relationship to the matter under investigation. The power conferred by s.155(1) is in aid of that function and is a power which authorises enquiries both wide in scope and indefinite in subject matter: see Melbourne Home of Ford Pty Ltd & Ors v. Trade Practices Commission & Anor. (No.3) (1980) 47 FLR 163 at 173-174; Davenport v. Trade Practices Commission (1983) 70 FLR 123 at 125.
To amount to a valid exercise of the investigatory power a notice under s.155(1) must convey, with reasonable clarity, to the recipient what information he is required to furnish or what documents he is required to produce. Further, the notice must disclose that the Commissioner is entitled to require that the recipient furnish the information or produce the documents which the notice describes: Pyneboard Pty Ltd & Ors. v. Trade Practices Commission & Anor. (1982) 57 FLR 368 at 374; Bannerman & Anor. v. Mildura Fruit Juices Pty Ltd (1984) 55 ALR 367 at 371. To meet these requirements the notice must identify the "matter" that constitutes or may constitute a contravention of the Act. In W.A. Pines Pty Ltd v. Bannerman (1980) 41 FLR 175 at 179 Brennan J. said :
"'Matter', said Franki and Northrop JJ. in Melbourne Home of Ford Pty Ltd v. Trade Practices Commission & Bannerman (1979) 36 FLR 450 at 474 'is to be construed in its ordinary sense of an affair or a thing'. It refers to a body of facts, a body of facts which 'constitute' or 'may constitute' a contravention. A contravention is constituted by the conduct of persons (whether corporate or natural) and the factual circumstances attendant upon conduct, so the 'matter' to which s.155(1) refers comprehends the conduct of persons and the circumstances attendant upon it. Whether or not the relevant body of facts constitutes a contravention is a matter of law ..."
In Melbourne Home of Ford Pty Ltd & Ors. v. Trade Practices Commission & Anor. (No.3), (supra) the Full Court said at p 175-176 :
"Notices are to be reasonably, not preciously, construed and the terms used in notices will ordinarily take their meaning from the commercial circumstances in which the notices are given."
When considering the sufficiency of the identification of a "matter", the court will not resort to speculation or draw on improbable circumstances to uphold the validity of the notice if the language which it employs does not reasonably convey to the recipient a body of facts which, as a matter of law, constitute or may constitute a contravention of the Act. On a reasonable reading, the notice must identify the "matter" in such a way that the recipient can perceive the general ambit of the subject matter of the investigation that is being undertaken: Davenport v. Trade Practices Commission, (supra), at 132 and Bannerman & Anor. v. Mildura Fruit Juices Pty Ltd, (supra), at pp 373-374.
It is convenient to consider first the notices relating to the s.45 matters, as these matters are unrelated to the s.46 matter.
The two s.45 matters are described in paragraphs (a) and (b) of the notices which commence :
"WHEREAS I, ROBERT BAXT, Chairman of the TRADE PRACTICES COMMISSION ("the Commission"), have reason to believe that ... is capable of producing documents relating to matters that constitute or may constitute contraventions of section 45 ... namely:
(a) At some time unknown to the Commission but estimated to be between 1 July 1985 and 1 September 1988 ... SAB and S.A.B. Holdings made a contract or arrangement with Carlton and United Breweries Limited ('CUB') or a related corporation of CUB or arrived at an understanding with CUB or a related corporation of CUB containing a provision under which, by a series of acts or things within the contemplation of the parties, including the entry by CUB, SAB and SAB Holdings into an agreement of a type which was entered into by each of CUB, SAB and SAB Holdings on 1 September 1988 and has been described therein as a 'Production Agreement', a position was to be established in which the production facilities of SAB at its Southwark Brewery and the disposition of those production facilities at that Brewery would be under the control of CUB or a related corporation of CUB and that this contract, arrangement or understanding may have had the purpose or may have had or have been likely to have had the effect of substantially lessening competition in any wholesale and/or retail market for both draught and packaged beer in the State of South Australia or in Australia; and
(b) that between the time of the making of the contract, arrangement or understanding referred to in paragraph (a) hereof and the present, CUB or a related corporation of CUB, SAB and SAB Holdings have each given effect to that contract, arrangement or understanding by, amongst other things, entering into the 'Production Agreement' referred to in paragraph (a) hereof:"
The applicants submit that the s.45 notices, and in particular the description of the "position ... to be established", are to be read with the Production Agreement, which was tendered as part of the applicants' case, and construed accordingly. I agree with this submission. It is only by reading the notices in this way that the "matters" described can be properly understood. The notices allege that the offending "position" was to be achieved by a "series of acts or things within the contemplation of the parties, including the entry ... into an agreement"... like the Production Agreement. It is true that the wording alleges a contract, arrangement or understanding apart from the Production Agreement itself, but the clear thrust of paras.(a) and (b) of the notices is that the provisions of the contract, arrangement or understanding which led to the offending position find expression in the Production Agreement. The period alleged in para.(a) ends on the date of the execution of the Production Agreement; para.(b) alleges that the parties each gave effect to the alleged contract arrangement or understanding by among other things entering into the Production Agreement; and, it is to be noted, the terms of the Production Agreement say that it expresses the entire agreement between the parties (clause 27). I agree with a submission of the applicants that any suggestion that the validity of the s.45 notices could be upheld on the footing that the "matters" described refer to provisions of a contract, arrangement or understanding which do not find expression in the Production Agreement would require the Court to "draw on improbable circumstances to uphold the validity of a notice" (Davenport v. Trade Practices Commission (supra) at 132). The language used in the s.45 notices identifies the Production Agreement as the central feature of the matter of concern to the Chairman, and in my opinion the validity of the s.45 notices should be judged against the terms of the Production Agreement. I did not understand counsel for the respondents to seriously contend otherwise. Whilst at one point counsel drew attention to the fact that the notices refer to a contract, arrangement or understanding reached between 1 July 1985 and 1 September 1988, the detailed submissions of the respondents concentrated upon the provisions of the Production Agreement.
The applicants have informed the Court that the Production Agreement contains confidential information which is not publicly known, and which could be market sensitive and of benefit to competitors. The respondents do not dispute this assertion. Orders have been made in the course of the trial pursuant to s.50 of the Federal Court of Australia Act 1976 forbidding publication of the contents of the Production Agreement. The need to protect this confidentiality means that I shall give only the bare outline of those parts of the Production Agreement necessary to illustrate why it is that the applicants contend that the s.45 notices are invalid, and to consider the arguments advanced for and against invalidity.
The Production Agreement, executed on 1 September 1988, is between CUB, SAB and SAB Holdings. The preamble records:
"WHEREAS:
A. SAB owns and operates brewing and packaging facilities at Thebarton, South Australia ('the Southwark Brewery') which facilities have a manufacturing capacity not presently fully utilized by SAB.
B. SAB is a wholly-owned subsidiary of Holdings. C. CUB requires additional brewery facilities for the manufacture of beer to supply its markets and has agreed to grant a licence to SAB to manufacture and package beer for CUB at the Southwark Brewery on the terms and conditions set out in this Agreement."
By clause 2, CUB grants to SAB a licence to manufacture and package CUB beer products at the Southwark Brewery. By clause 3, it is provided that the licence will be for an initial term expiring on 31 December 1991 and CUB may elect to extend the term by five years. By clause 4, all CUB products manufactured and packaged by SAB under the licence are to be sold by SAB to CUB at prices to be determined periodically in accordance with methods set out in a schedule. Clause 8 deals with matters of quality control. By clause 8.2, for a period at the commencement of the licence, SAB agrees to permit access to the Southwark Brewery at all reasonable times by such of CUB's competent and experienced personnel as CUB considers appropriate to assist and advise and instruct SAB in relation to the manufacture and packaging of CUB products. By clause 8.11, SAB agrees that during the currency of the licence it shall give nominated officers or representatives of CUB such access as CUB shall from time to time determine as being necessary for the reasonable purposes of the administration of the Production Agreement by CUB to the Southwark Brewery at any reasonable time. Other clauses deal with confidentiality, with ordering, with minimum and maximum quantities to be manufactured packaged and delivered from time to time, and with a range of contingencies for which provision could be expected. Clause 17 provides that on the happening of a future event, which is likely to happen during the initial term, and at the election of CUB, the parties shall become bound by an arrangement of a different kind, in lieu of the Production Agreement, under which SAB brewing facilities would be used, inter alia, for the manufacture and packaging of beer for CUB. I shall refer to this alternative arrangement as "the anticipated agreement", although it is given a different description in the Production Agreement.
Clause 16 of the Production Agreement and clause 18 of the anticipated agreement are of particular importance to the applicants' submissions. By their terms, these clauses, inter alia, grant to CUB rights exercisable on the happening of specified contingencies which are either options to purchase or rights of first refusals over certain assets, being brewing or production facilities.
When the s.45 notices are read with the Production Agreement, the applicants contend that it is clear from the description of the matters that s.45 does not apply to the contract, arrangement or understanding referred to as it is a contract, arrangement or understanding which provides directly or indirectly for the acquisition of assets of a body corporate within the meaning of s.45(7). That sub.s. reads :
"(7) This section does not apply to or in relation to a contract, arrangement or understanding in so far as the contract, arrangement or understanding provides, or to or in relation to a proposed contract, arrangement or understanding in so far as the proposed contract, arrangement or understanding would provide, directly or indirectly for the acquisition of any shares in the capital, or any assets, of a body corporate."
In s.4(4) it is provided :
"In this Act -
(a) ...
(b) a reference to the acquisition of assets of a body corporate shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such assets but does not include a reference to an acquisition by way of charge only or an acquisition in the ordinary course of business."
The applicants submit that the "production facilities" described in para.(a) of the s.45 notices must be an asset of a body corporate within the meaning of s.45(7) and "the disposition of those production facilities" must be a reference to the disposal of them. I did not understand the respondents to disagree with these interpretations which I accept.
The applicants then argue that clause 16 of the Production Agreement and clause 18 of the anticipated agreement include true options granted to CUB to purchase relevant production facilities which create an equitable interest therein. In the alternative, the applicants urge a wider meaning for the words "the acquisition of ... any assets, of a body corporate" in s.45(7). It is argued that even if on their proper construction clauses 16 and 18 do not grant true options, they at least grant CUB rights of first refusal. Either an option or a first refusal is an asset which has been acquired. The notion of "control" referred to in the notices has to be understood in context. The relevant control must refer, it is said, to a lease or licence given by the provisions of clause 8 to CUB to enter onto SAB's premises. Again, it does not matter whether the rights of entry so given amount to the grant to CUB of an equitable interest in the premises, as either a lease or licence to enter is an asset. So, it is contended, the "control" alleged of the production facilities and of the disposition of those facilities arises from the acquisition of assets of a body corporate; the contract, arrangement or understanding alleged "provides ... directly or indirectly for ..." that acquisition; and, pursuant to s.45(7), s.45 does not apply "to or in relation to" the contract, arrangement or understanding.
In my opinion, the submission that clauses 16 of the Production Agreement and clause 18 of the anticipated agreement grant options to purchase must be rejected. The difference between an option to purchase and a right of refusal is identified in the often cited passage from the judgment of Street J. in Mackay & Anor. v. Wilson & Anor. (1947) 47 SR (N.S.W). 315 at 325 :
"Speaking generally, the giving of an option to purchase land prima facie implies that the giver of the option is to be taken as making a continuing offer to sell the land, which may at any moment be converted into a contract by the optionee notifying his acceptance of that offer. The agreement to give the option imposes a positive obligation on the prospective vendor to keep the offer open during the agreed period so that it remains available for acceptance by the optionee at any moment within that period. It has more than a mere contractual operation and confers upon the optionee an equitable interest in the land, the subject of the agreement: see, for example, per Williams J. in Sharp v. The Union Trustee Co. of Australia Ltd. (1944) 69 CLR 539 at 558; Austn Digest (1945) 472. But an agreement to give 'the first refusal' or 'a right of pre-emption' confers no immediate right upon the prospective purchaser. It imposes a negative obligation on the possible vendor requiring him to refrain from selling the land to any other person without giving to the holder of the right of first refusal the opportunity of purchasing in preference to any other buyer. It is not an offer and in itself it imposes no obligation on the owner of the land to sell the same. He may do so or not as he wishes. But if he does decide to sell, then the holder of the right of first refusal has the right to receive the first offer, which he also may accept or not as he wishes. The right is merely contractual and no equitable interest in the land is created by the agreement."
This passage was cited with approval by Goff L.J. in Pritchard v. Briggs & Ors. (1980) 1 Ch 338, at 389 where the Court of Appeal held that a right of refusal creates no equitable interest in the subject land. Whilst the distinction between an option to purchase and a right of refusal is clear in principle, it is not always easy to determine whether a provision in an agreement is of one kind or the other. In every case it is a matter of determining, according to recognised principles of construction, what the parties intended. It is necessary "to look at the whole of what the parties to an instrument have said, and in the light of that whole to determine whether they have or have not conveyed an intention that an immediate offer is being made or is to be made": Woodroffe v. Box (1954) 92 CLR 245 at 258 per Fullagar and Kitto JJ.
A matter which the cases treat as being of paramount importance is whether the condition may operate to require the grantor to convey his estate without his consent, or whether it leaves the grantee's interest subject to the volition of the grantor. This is the distinction stressed by Street J. in Mackay v. Wilson (supra), and it is expressed also in the famous passage from the judgment of Sir George Jessel MR in London & South Western Railway Co. v. Gomm (1882) 20 ChD 562 at 581 which reads :
"The right to call for a conveyance of the land is an equitable interest or equitable estate. In the ordinary case of a contract for purchase there is no doubt about this, and an option for repurchase is not different in its nature. A person exercising the option has to do two things, he has to give notice of his intention to purchase, and to pay the purchase-money; but as far as the man who is liable to convey is concerned, his estate or interest is taken away from him without his consent, and the right to take it away being vested in another, the convenant giving the option must give that other an interest in the land."
The terms of clause 16 of the Production Agreement grant a number of different rights. In so far as rights granted to CUB depend on the volition of SAB and SAB Holdings, the applicants concede that those rights are not options to purchase. However, it is contended that there are rights granted to CUB which do not depend on the volition of SAB and SAB Holdings which should be construed as options. The particular grant relied on is exercisable by CUB "If at any time during the term hereof (SAB) Holdings and or companies related to (SAB) Holdings shall decide to dispose of any interest in a substantial part..." of relevant production facilities. It is argued that as the occasion to exercise the grant might be triggered by a decision of a related company, that event might be one against the volition of SAB Holdings. In theory, a company which is related to another might make a decision against the wishes of the other company, but that theoretical possibility is not, in my view, of assistance to the applicants in the present case. The Production Agreement is drafted on the assumption that SAB Holdings will control the making of the decision whether or not to dispose of production facilities. This is evident from the terms of the preamble, and the provisions of clause 16, in particular clause 16.7. The theoretical possibility that a related company might in some way own a part of the relevant production assets, sufficient to enable a decision by it to dispose of those assets to trigger clause 16.1, and the further theoretical possibility that the related company may decide to dispose of that part of the assets against the wishes of SAB Holdings and its wholly owned subsidiary SAB, are so remote from the practical setting contemplated by the agreement that I do not think such possibilities give any guide to the intention of the parties. In my view the right granted by clause 16 on which the applicants rely is a right of refusal. Indeed it is described in clause 16 as "a first right of refusal". Standing alone such a description adopted by the parties may not be definitive of the right granted, but in this case the description is of importance as it contrasts with the language used in clause 16.6 where, in my view, an option to purchase is granted to CUB in the unlikely event that an order is made for the winding up of SAB or SAB Holdings upon the summons of a creditor. In that case the contingency upon which the exercise of the right is conditioned is one not dependant on the volition of the grantor. I mention clause 16.6 in relation to the construction of the clause on which the applicants rely, but clause 16.6 itself is not relevant to the outcome of these proceedings as the possible disposition of production facilities under that clause is not within the contemplation of the s.45 notices.
Reliance is also placed on clause 18 of the anticipated agreement as providing for the acquisition of assets of a body corporate which attracts the exemption granted by s.45(7). Clause 18 makes several alternative provisions for the disposal and divestment of interests which the parties would hold under the arrangement envisaged by it. According to its terms, clause 18.1 would operate if SAB Holdings decided to dispose of specified interests; its operation depends on the voluntary decision of SAB Holdings. Clause 18.1 would give a right of refusal, not an option. Clause 18.2 however would operate in the event that SAB Holdings or certain subsidiaries of SAB Holdings became the victim of a hostile takeover. In this event the clause would operate, and on giving notice, CUB could require a conveyance by SAB Holdings or the relevant subsidiary against its will. The clause provides for payment according to a predetermined formula. As a matter of construction I consider that clause 18.2 should be characterised as an option to purchase. However, the anticipated agreement is just that. It is not yet binding on the parties, but may become so in the future upon the happening of a likely event, and at the election of CUB. When the agreement becomes binding it contemplates the establishment of a business in respect of which the option to purchase provided for in clause 18.2 would then operate. Those events could occur in as soon as about two and a half years; it may happen at some later time during the extended term of the Production Agreement; or they may never happen. In the meantime the contract already made between the parties, the Production Agreement, does not contain a provision pursuant to which CUB has acquired a legal or equitable interest in assets of a body corporate. At the most the contract contemplates the possible acquisition of an equitable interest under clause 18.2 of the anticipated agreement over assets of a body corporate which will comprise the assets of a business yet to be established. Whether a prospect for the possible acquisition of assets in the future contemplated by a provision of an existing contract exempts that contract, pursuant to s.45(7), from s.45 is a matter to be considered. Subject to that question, I consider that the contract, arrangement or understanding referred to in the descriptions of the s.45 matters, and reflected in the terms of the Production Agreement, does not provide an option to purchase; and that CUB did not acquire an equitable interest under clause 16, or clause 18, in assets.
I now turn to the nature of the rights of entry given to CUB under clause 8 of the Production Agreement. In my view these are no more than contractual licences to enter and, although given for valuable consideration, transfer no interest, legal or equitable, in assets of SAB or SAB Holdings: Cowell v. The Rosehill Racecourse Company Limited (1937) 56 CLR 605.
These conclusions raise squarely for consideration the alternative submission that the right of refusal contained in clause 16 and the licence to enter under clause 8 of the Production Agreement are assets acquired by CUB. Put in this way, the submission has a beguiling attraction as, generally speaking, contractual rights over property, even if they are not coupled with an equitable interest, are aptly described as assets. Contractual rights are usually of value. The breach of those rights is actionable in damages, and the rights may be amenable to protection by injunction or specific performance: see Verrall v. Great Yarmouth Burrough Council (1981) QB 202 at 216. But the question here is not simply whether those rights may in the abstract be "assets", but whether the acquisition of those rights amounts to "the acquisition of ... any assets, of a body corporate" within the meaning of s.45(7), having regard to the definition in s.4(4). The lanugage employed in s.4(4) is that "in this Act ... a reference to the acquisition of assets of a body corporate shall be construed as ...". On a literal reading the definition is exclusive, and such a construction gains support from the contrasting language in s.4(1). That sub-section commences "In this Act, unless the contrary intention appears ...". The words to be defined are then listed, followed by, in some instances, "means" and in other instances "includes". The use of the expression "means" conveys that the definition is conclusive and exhaustive: Sherritt Gordon Mines Ltd v. Federal Commissioner of Taxation (1976) 10 ALR 441 at 455. The indication that a definition is intended to be exclusive is even stronger, in my view, where the expression "shall be construed as" is used. It is argued by Donald and Haydon, "Trade Practices Law", Vol. 1, at para.9.2.4, that the expression "acquire ... any assets, of a body corporate" in s.50 may, in that section at least, have a wider meaning than the definition given in s.4(4) so as to accommodate the provisions of sub.ss.50(4) & (5). The suggestion of this possibility prompts an enquiry as to the limits of the meaning of the expression if the s.4(4) definition is not exclusive. The uncertainty of meaning that would then arise is a strong reason for rejecting the wider interpretation: cf. Trade Practices Commission v. Bowral Brickworks Pty Ltd (1984) 55 ALR 733 at 735. In Broken Hill Pty Co. Ltd v. Trade Practices Commission (1980) 31 ALR 401 Bowen C.J. at p 409, and Franki J. at p 416, observed that the draftsman appeared to assume that an equity to go to the court for its assistance to force the selling corporation to do what it must under the contract of sale to secure fulfilment of a condition of the type referred to in s.50(4) was sufficient to amount to an equitable interest within the meaning of s.4(4). Brennan J. at p 423-425 thought that the provisions of s.50 were to be reconciled by giving a particular construction to s.50(4). No member of the court suggested that s.4(4) was not to be construed as an exclusive definition. In the present case no reason has been advanced why the definition in s.4(4) should not be treated as exclusive, and in my view the words "acquisition of ... any assets, of a body corporate" in s.45(7) should be given the meaning ascribed to them by s.4(4). On that footing the acquisitions by CUB of a right of refusal and of a contractual licence to enter were not "acquisition(s) of ... any assets, of a body corporate" within the meaning of s.45(7).
On the applicants' contention, this conclusion is not necessarily the end of the matter. Attention is drawn to the phrases in s.45(7), "to or in relation to" and "directly or indirectly". It is argued that both phrases serve to give the sub-section a very wide application. It may be accepted that the words "in relation to" are words of wide import normally requiring a liberal construction (see Perlman v. Perlman (1983) 155 CLR 474 at 489, 498), but it is difficult to see any difference between the section applying "to" and applying "in relation to" a contract, arrangement or understanding in question. I do not think these words can broaden the kind of provision to which the sub-section applies.
The words "directly or indirectly" require closer consideration. The placement of these words in s.45(7) is to be contrasted with the placement of the same words in s.50(1) and s.50(1A). In s.45(7), in the passage "in so far as the contract ... provides ... directly or indirectly for the acquisition of ... any assets, of a body corporate", the words could be construed as qualifying "provides" although they could also be construed as qualifying the notion of "acquisition". In s.50(1) and 50(1A) the language used is "acquire, directly or indirectly, ... any assets, of a body corporate ...". Clearly the words there qualify "acquire". In ss.50(1) and 50(1A) it seems tolerably clear that "directly or indirectly" relate to the method by which the assets are held after acquisition, so that, for example, an acquisition of an asset of a body corporate by a servant or agent on behalf of the corporation would be an acquisition indirectly by the corporation; the words "directly or indirectly" do not qualify the nature of the right or interest the acquisition of which is prohibited. As there is an interaction between s.45(7) and s.50, it could be expected that the exemption from the provisions of s.45 which s.45(7) gives would operate in respect of a contract, arrangement or understanding in so far as it provides for the acquisition, directly or indirectly, of any shares in the capital, or any assets, of a body corporate. But the strange positioning of the words "directly or indirectly" in s.45(7) opens the possibility that the sub-section should be construed in a wide way, as the applicants contend, so as to include a prospect for the possible acquisition of assets in the future contemplated by a provision of an existing contract, in particular, by the right of refusal in clause 16 of the Production Agreement, and by clause 17 of the Production Agreement which contemplates the anticipated agreement under which CUB would acquire an equitable interest if and when the two conditions on which the anticipated agreement depends are fulfilled. The applicants' submission is that although such a provision in a contract would not provide directly for the acquisition of a legal or equitable interest in assets of a body corporate, it provides indirectly for such acquisition in the sense, for example, that the exercise of the right of refusal will bring about an acquisition of a legal or equitable interest. Notwithstanding the contrasting language in s.45(7) and s.50(1) I think the words "directly or indirectly" in s.45(7) should be construed as qualifying the notion of "acquisition" and not the word "provides". This achieves a similarity in concept with s.50. The applicants' construction, if correct, would remove the certainty which s.4(4) otherwise would give as to the nature of what must be acquired to amount to an acquisition of any share in the capital of, or any asset of, a body corporate.
If this construction is correct, it follows that s.45(7) has no application in the present case as the contract, arrangement or understanding alleged does not provide directly or indirectly for the acquisition of any assets of a body corporate. The respondents submit that the control alleged in the s.45 matters over production facilities may arise by reason of the combination of rights granted to CUB under the Production Agreement which impose on SAB or SAB Holdings obligations to produce certain quantities of CUB product, obligations to maintain set standards, obligations in regard to the mode of production and the supply of information to CUB, and the rights of entry, particularly the right under clause 8.11 to "such access as CUB shall from time to time determine as being necessary for the reasonable purposes of the administration of this agreement ... at any reasonable time"; and that control over the disposition of the production facilities may arise by reason of the right of refusal in clause 16. In my view the respondents' submission correctly expresses a reasonable construction of the description of the s.45 matter when read with the Production Agreement. Each matter postulates a body of facts which may constitute a contravention of the Act. Whether, as a matter of fact, there has or has not been a contravention of s.45 is the question to which the investigatory process, of which the notices under s.155(1) are part, is directed. On the conclusions which I have expressed, no part of the "matter", as described, appears to attract the exemption from s.45 contained in s.45(7), and it cannot be said that, as a matter of law, either "matter" fails to disclose a body of facts which may constitute a contravention of s.45.
On the other hand, if the wide construction of s.45(7) based on the words "directly or indirectly" for which the applicants contend is correct, that construction would lead to the conclusion that by the right of refusal and the anticipated agreement for which the Production Agreement provides, the contract, arrangement or understanding alleged provides indirectly for the acquisition of assets of a body corporate. However, the grant of the licences to CUB to enter under clause 8 would still not be within the language of s.45(7), as they cannot lead on to the acquisition of a legal or equitable interest in assets. The Production Agreement contemplates that the licences to enter will always remain contractual rights of a personal nature. Section 45(7) only exempts a contract, arrangement or understanding from the operation of s.45 "in so far as" it provides for a relevant acquisition. The whole contract, arrangement or understanding is not protected from s.45 just because one of many provisions in it so provides. Even if the section does not apply in so far as the alleged contract, arrangement or understanding provides indirectly through the right of refusal and the anticipated agreement for the disposition of relevant production facilities, the other aspects of the "matter" described in para.(a) of the s.45 notices remain subject to the operation of s.45. In my view the notices would be valid in so far as they allege a contract, arrangement or undertaking containing a provision under which a position was to be established in which the production facilities of SAB at its Southwark Brewery would be under the control of CUB or a related corporation of CUB. I consider the additional allegation of the establishment of a position in which the disposition of those production facilities would be under the control of CUB or a related corporation of CUB, could be severed from the balance of the "matter".
I turn now to the s.46 notices. Each notice described the "matter" under investigation in the following way:
"At some time unknown to the Commission but estimated to be between 3 December 1986 and 24 March 1987 ... CUB having a substantial degree of power in the markets for draught beer and packaged beer in New South Wales, and, or Victoria and, or, Australia took advantage of that power by terminating or threatening to terminate a contract or agreement between CUB and J. Gadsden Australia Limited, a related corporation of ... SAB Holdings, under which beer cans were supplied to CUB, for the purpose of deterring or preventing Payless Superbarn (NSW) Proprietary Limited and, or, Payless Superbarn (Vic.) Proprietary Limited (both these corporations hereinafter collectively referred to as the 'Payless companies') from selling under brand names of the Payless companies packaged beer produced by SAB, another related corporation of SAB Holdings, in the markets for packaged beer in New South Wales and, or, Victoria and, or, Australia;"
In short, the notices allege that CUB, having a substantial degree of power in certain beer markets, took advantage of that power to persuade Gadsden (a can supplier) to cause its related company, SAB Holdings, to refuse to supply beer to the Payless companies. Section 46(1), so far as is relevant, provides :
"A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of -
(a) ...
(b) ...
(c) deterring or preventing a person from engaging in competitive conduct in that or any other market."
It is provided in s.46(4) that :
"In this section -
(a) ...
(b) ..., and
(c) a reference to power in relation to ... a market is a reference to power ... in that market either as a supplier or as an acquirer of goods or services in that market."
The applicants argue that the body of facts designated as the "matter" cannot give rise to a contravention of s.46. The argument runs in this way: Paragraph 46(4)(c) defines the relevant power as "power as a supplier or as an acquirer of goods in that market". Emphasis is placed on the words "that market". CUB can therefore only take advantage of the power alleged in the beer market in contravention of s.46 by acting in its capacity as a supplier of beer. Otherwise it is something else that it is taking advantage of. CUB's alleged dominance in the beer market cannot be a relevant matter in the can market. For there to be a contravention of s.46 the exercise of relevant power in a particular market must be a "take(ing) advantage of that power" in that market. It is argued that the s.46 notice alleges a substantial degree of power in a beer market, but a taking advantage of that power in the can market not the beer market. Even if it is the fact that CUB has such power in the can market as to be able to mould Gadsden to its will, that power is not a product of its power in the beer market, nor is taking advantage of that power taking advantage of its power in the beer market.
It will be noted that the s.46 notice does not refer to the notion of a "can market", but even if it is assumed that the applicants' construction of the s.46 notices is correct, I do not think that the body of facts alleged as "the matter" fall necessarily, as a matter of law, outside the prohibition of s.46(1).
A similar argument was advanced in opposition to an interlocutory injunction in Victorian Egg Marketing Board v. Parkwood Eggs Pty Ltd (1978) 20 ALR 129. Parkwood alleged that conduct or threatened conduct by the Victorian Egg Marketing Board in the Australian Capital Territory would contravene s.46. At that time s.46(1) then read :
"A corporation that is in a position substantially to control a market for goods or services shall not take advantage of the power in relation to that market that it has by virtue of being in that position for the purpose of ..." one of the proscribed purposes.
It was common ground between the parties that there were separate geographical markets for the wholesale supply of eggs and egg products in Victoria and the Australian Capital Territory. It was conceded that the Board was in a position substantially to control the Victorian market. Parkwood alleged that the Board had taken or threatened to take advantage of its power in relation to the Victorian market for the purpose of eliminating or substantially damaging Parkwood, a competitor in another market (the ACT market). In the Full Court, Bowen CJ. rejected the argument that the section could only be contravened where the corporation with dominant power in a market took advantage of that power in that market. He said, at p 138 :
"It was argued that the Board could not contravene s.46(1) unless the act of taking advantage was done in or in relation to the Victorian market. In my view however all that s46(1) requires is that there be a taking advantage of a power. The power in question is one in relation to a market which the corporation is in a position substantially to control. Properly construed the sub-section does not contain a further requirement that whatever it is that constitutes a 'taking advantage', has also to be done in relation to that same market. As the 'taking advantage of the power' is proscribed if its purpose is to damage competitors, prospective entrants, or competitive behaviour, inter alia in another market, I do not consider that the words 'in relation to that market' should qualify the words 'take advantage of'. They are rather part of the phrase 'power in relation to that market that it has ...', and merely describe the power which is derived from being in a position substantially to control the market."
The other member of the court, Brennan J., at pp 147-148 considered that construction of s.46 was open but did not express a concluded view.
In my opinion the provisions of s.46(1) as amended by the Trade Practices Revision Act 1986, the relevant provisions of which came into force on 1 June 1986 and govern this case, require a similar construction. As amended, the terms of s.46(1) contain no limitation to the effect that the taking advantage of a substantial degree of power in a market for the proscribed purpose must be done in the same market in which the corporation has the substantial degree of power. Nor is such a limitation contained in para.46(4)(c). In that paragraph the expression "that market" twice appearing, is used to qualify and define a reference to "power in relation to ... a market", and in my opinion the expression should not be construed so as to impose a limitation on the operation of the words "take advantage of" which appear in sub.s.46(1) and not in para.46(4)(c).
In Queensland Wire Industries Pty Ltd v. The Broken Hill Proprietary Company Limited & Anor. (1989) ATPR 40-925 Mason CJ. and Wilson J. said at p 50,008 :
"The analysis of a sec.46 claim necessarily begins with a description of the market in which the defendant is thought to have a substantial degree of power. ...
After the market has been delimited, the question is whether the defendant has 'a substantial degree of power' within that market."
And later at p 50,010 :
"Once it is established that a firm has a substantial degree of market power, the issue is whether it has 'take(n) advantage' of that power for the purpose of 'substantially damaging a competitor', 'preventing the entry' of a competitor into a market, or 'preventing a person from engaging in competitive conduct' in a market: sec. 46(1)(a), (b) and (c)."
The concluding words "in a market" refer to the market in which the defendant has a substantial degree of market power or any other market. Mason C.J. and Wilson J. do not suggest there is a further requirement that the exercise of market power must be in the market in which it is found that the defendant has a substantial degree of power. Nor do the other members of the Court suggest such a requirement, although it must be said that the point of law which the applicants have raised in the present case did not arise for determination in that case. No such limitation has previously been identified: see OD Transport Pty Ltd v. Western Australian Government Railways Commission (1986) 13 FCR 270 at 279. No limitation is imposed by s.46 on where or how an exercise of power must take place to constitute a contravention of the section. Once it is established that a defendant has a substantial degree of power in a particular market, it will be necessary to examine the conduct of the defendant which is said to constitute the taking advantage of market power for a proscribed purpose. Whether that conduct is an exercise of that market power, or the exercise of something else, is a question of fact. See, for example, Williams & Ors. v. Papersave Pty Ltd (1987) 76 ALR 152 where it was held that the evidence failed to establish that the impugned conduct was a use of market power. Once the market in which the substantial degree of power exists is delimited and the market in which the proscribed purpose was to take effect is identified, in a particular case the defendant's conduct may clearly appear to be a use of the substantial degree of market power; Queensland Wire Industries Pty Ltd v. The Broken Hill Proprietary Company Limited & Anor. (supra) is an example of this kind. In other cases the web of facts and circumstances which establish a taking advantage of power for a proscribed purpose may be complex and subtle.
In the instant case whether or not the alleged termination or threat to terminate a contract or agreement between CUB and Gadsden was an exercise of power held by CUB in one of the specified beer market is a factual question, the answer to which is likely to require consideration of many facets of the operation of the specified beer markets, and the positions occupied by CUB and Gadsden in relation to those markets. That being so, it cannot be said that, as a matter of law, the s.46 notices do not allege facts which may constitute a contravention of s.46. I consider that the challenge raised by the applicants to the validity of the notices fails.
For these reasons, the applications in each action should be dismissed. I will hear counsel as to costs.
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