S.C.I Operations Pty Ltd v Australia Paper Manufacturers Ltd & Anor Trade Practices Commission v A.P.M. Investments Pty Ltd and Fibre Containers Ltd

CATCHWORDS

TRADE PRACTICES

- Trade Practlces Act 1974 s.50

- action by

Trade Practices Commission seeking

~n~unctions

to prevent

merger - relevance of respondent's conduct in market

20 to 30

years ago. Whether rival corporation can sue for declaration under s.50 - relevance of Trade Practlces Commission's action

for injunctions

to corporation's action for declaratory relief.

PRACTICE AND PROCEDURE

- pleading making allegations of

respondent's conduct in market 20 to 30 years ago - whether tending to cause prejudice, embarrassment or delay in

proceeding - Order 11 rule 16(b) Federal Court Rules

applicant's rlght to plead

s it sees fit

- Court will not

intervene unless material alleged clearly has little probative

value - exercise of Court's discretion. Request for joint

hearing of application commenced by Trade Practices Commission

and part of application commenced by corporation

- balance of

convenience - whether jolnt hearing prejudiclal to respondent

I .

to both actions

- factors relevant to exerclse of discretion.

Trade Practices Act 1974 ss.46,'50, 80(1A), 163A.

Federal Court Rules Order

11 rule 16(b)

C.I. OPERATIONS PTY. LTD. v AUSTRALIAN PAPER MANUFACTURERS

LTD. and Anor.

No. VG 82 of 1983

TRADE PRACTICES COMMISSION v A.P.M. INVESTMENTS PTY. LIMITED

and FIBRE CONTAINERS LTD. and

No. VG 84 of 1983

WOODWARD 3 .

MELBOURNE

4 AUGUST 1983

. . ..

,v'	IN THE FEDERAL COURT	OF AUSTRALIA
,

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

No. VG 82 of 1983

BETWEEN :

S.C.I.

OPERATIONS

PTY.

LTD.

Applicant

and

AUSTRALIAN PAPER MANUFACTUR3RS LTD. Respondents

AND ANOR.

BETWEEN:

TRADE

PRACTICES

OMMISSION

A2plicant

and

A.P.M. INVESTMENTS

PTY.	LIMITED	First	Respondent
and

FIBRE CONTAINERS LTD. Second Respondent

AND ORS.

ORDERS

JUDGE MAKING ORDERS: Woodward J.

DATE OF FIRST ORDER: 26 July 1983

WHERE MADE:

Melbourne

THE COURT ORDERS THAT:

1. Leave be granted to the Trade Practices Commission

to amend its statement

of claim as sought.

2. The application of APM Investments Pty. Ltd. to

strike out paragraph	14 of the statement	of claim be
dismissed.

3 . The costs of both these applications be costs in

the cause.

. . . -

- 2 -

DATE OF SECOND ORDER: 28 July 1983

Melbourne

MADE:

WHERE

THE COURT ORDERS

THAT:

1. There be no joint hearing of Application

No. VG 84 of 1983 and part of Application No. VG

82 of 1983.

2 . Application No. VG 82 of 1983 be stayed until after

judgment has been given in Application No. VG

84 of 1983.

3 .

The directions hearing in VG

82 of 1983 be adjourned

until 14 days after the date of judgment in VG

84 of 1983.

4 .

Liberty to apply for further directions in VG

1983 be reserved.

5. The costs of all parties concerning this application

for a joint hearing be costs in the respective causes.

DATE OF REASONS FOR JUDGMENT: 4 August 1983

. - _

IN THE FEDERAL COURT

OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

No. VG 82 of 1983

BETWEEN:

S.C.I.	OPERATIONS	PTY.	LTD.	Applicant
and

AUSTRALIAN PAPER MANUFACTURERS LTD. Respondents

AND ANOR.

No. VG 84 of 1983

BETWEEN:

TRADE PRACTICES COMMISSION

Applicant

c ahd

A.P.M. INVESTMENTS

PTY. LIMITED

First Respondent

and

FIBRE CONTAINERS LTD.

Second Respondent

AND ORS.

WOODW RD

CORAM:

DATE:

4 AUGUST

1983

WOODWARD J.

REASONS

JUDGMENT

FOR

These directions hearings concern two related matters.

VG 84 of 1983 is an application

by the Trade Practices Commission

('TPC') for injunctions to prevent the first respondent ('APM')

from acquiring any shares in the capital

or assets of the second

- 2 -

respondent ('Fibre Containers'). Other respondents are shareholders in Fibre Containers. The appllcation is made

pursuant to

s.50 of the Trade Practices Act

1974

('the Act').

VG 82 of 1983 is an application by

S.C.I.

Operations

Pty. Ltd. ('SCI') .for declarations that s.50 of the Trade Practices Act operates to prohibit the acquisition by the respondents ('APM') of all the issued shares in Fibre Containers and that such an acquisition would be a contravention f s.50 of the Act.

That application also seeks a declaration that the

pricing pollcy adopted by APM constitutes a contravention of

s.46

of the Act. In connexion with this claim damages are also sought.

Joint directions heafiigs were held in these matters several occasions until a decision could be made by the trial

judge as to whether that part

of VG 82 relating to

s.50 of the Act

should be heard together with

VG 84.

In the event I have decided

that these matters should not be tried at the same time, and my

reasons are set out below.

I had earlier given leave to the respective applicants

in both matters to amend their statements of claim In

circumstances which also call for a considered statement of

reasons.

I shall deal with that questlon first. It was argued in

relation to the

TPC's application.

. .

- 3 -

Leave to amend statement

of claim

The central matter which the TPC must prove, if it is to

succeed, is that APM is, or by taking over Fibre Containers would be, in a position to control or dominate the relevant markets in which those companies operate.

In pleading the material facts

on which it will rely to

establish that proposition, the TPC has set out the present shares

of the market enjoyed by the respective particlpants

i it.

It has also, in para

14, made allegations concerning the

history of

APM's

distribution agreements, pricing policles and

acquisitions, claiming that such conduct of APM demonstrated Its

dominant position in the relevant markets.

c _

APM has filed a notice

of motion asking that what

might call this historical paragraph

of the statement of claim, or

alternatively parts of the particulars given under it, should

struck out as having a "tendency to cause prejudice, embarrassment

delay in the proceeding" (Federal Court Rules Order

rule

16(b)) -

In the course of argument about this matter the TPC has sought leave to amend its statement of claim.

As amended

the relevant paragraphs would read

. .

- 4 -

“14A.

Between approximately 1953 and the date of the

Application herein,

A.P.M. engaged in conduct:

(a) in the paperboard market:

(b) in the fibre container market;

as a result of which APM:

(i) strengthened its existing power and acquired further power in each of the said markets; further or alternatively,

(ii)

demonstrated the nature and extent in each of the said markets.

PARTICULARS

[Lengthy amended particulars

of distribution

agreements, pricing policies and acquisitions then

followl.

14B. No

changes of circumstances (if any) between

1953 and the date of the Application herein:

(a) in the paperboard market;

(b) in the fibre container market;

have to any material degree deprived

A.P.M. of

the market power which it held in 1953, but

which instead has been strengthened, acquired

or demonstrated as aforesaid.

15.

The nature and extent

of the market power

possessed by

A.P.M.

at the date of the

Application herein:

(a) by reason

of the matters referred to

paragraphs 8-13 hereof and the

particulars thereto: alternatively,

(b) by reason

of the conduct referred to in

paragraphs 8-14B hereof and the

particulars thereto:

is such that A.P.M. is in a position to control or dominate the paperboard market.

In pursuing their opposition

to such a pleading, in

spite

the changes from earlier form which these paragraphs

represent, counsel for APM have conceded that some consideration

of the recent past is necessary in order properly to understand

and assess the present position.

- 5 -

They have also conceded that the conduct of their client

in the market can provide material relevant to the issues before

the Court.

They maintain, however, that such conduct can only be

relevant if the markets were, at the time

of the conduct, for all

material purposes, the same as at the present time. They say that

the relevance of the historical material must be demonstrated in

the pleading by an assertion that the relevant markets were

substantially the same at the two periods

of time, at least

so far

as size of market, identity of participants and market shares are

concerned.

I think that to accept this submission would be to limit

unduly the right

of the applicant to state its

own case. So long

as it alleges that the conduct of APM

at some past time can be

linked to its present alleged pbsition of market dominance, either

as a demonstration of that dominance

or as a partial explanation

of it, it should be permitted

to plead that link and prove it if

it can. It should only be deprlved of that right

if it appears on

the face of the pleading that it is raising matters which will

have little probative value if they are established and which will

add substantially to the length of the hearing and its cost to the

parties.

It is with these thoughts in mind that I approach the

question as

the appropriate period over which the relevant

markets should

be studied in order to determine questions

- 6 -

dominance. Other thlngs being equal, more recent events will

clearly have a greater significance than events of ten, twenty or

thirty years ago. And if

a market is relatively volatile, the

relevant period would probably be shorter than in the case of a

stable market.

In the present case the TPC

has

chosen, for some

purposes,

allege facts going back to the 1950s.

APM

is, in

general, not prepared to concede the relevance

events that

occurred before about

1976.

It is very difficult for the Court to decide, before the

case has been opened

any evidence called, which facts will

prove to be material and which will prove	to be too remote to be
of significance.

Some of the earliest matters alleged in particulars as

they were originally drawn have been omitted from the redrafted

Statement of claim.

I confess to having some doubts about the

probative value of two of the allegations remaining In the claim.

One relates to events in 1958 and 1959 surrounding the entry of

SCI into the paperboard market. The other relates to the

acquisition in 1955 by	APM, and the dismantling, of a paperboard
mill.

- 7 -

But

long as it is alleged by the TPC that the

relevant markets have remained substantially unchanged since the

events alleged, or at least have not changed in such a way as to

make those events irrelevant, it seems to me that the Court should

allow the TPC

to plead its case as it sees flt.

The allegation concerning the stability

of the markets

over the relevant period was left to be implied in

the statement

of claim as originally drawn.

I believe that para

14B, as set out

above, now sufficiently alleges the relevance

of occurrences in

the alleged markets in the

1950s and 1960s to the issues which the

Court will have

to decide. With that amendment, I do not believe

that the pleading

can be said to have a "tendency

to cause

prejudice, embarrassment or delay in the proceeding".

I cannot

say that the time which it will take to examine those occurrences

will unduly delay the proceedicggs'.

The Court can intervene if it

appears that time is being wasted in the presentation	of	such
evidence.

I note in passing that Mr. McComas, appearing for Fibre

Containers, although concerned about anything which would add to the length of the hearing, did not seek to argue that the TPC's

allegations relating

to the 1950s and 1960s were irrelevant.

- 8 -

Before leaving this matter,

should perhaps add that

the difficulty of determining in advance what facts are likely to

prove material is greater in this case than In most. There

has

been only one reported case in which the effect

of s . 5 0 of the Act

has been fully considered. In -

TPC v Ansett Transport Industries

(1978) 32 FLR 305 @ 321-8, Northrop J. considered the meaning of

the expression 'control or dominate' and the matters which would

be relevant in determining whether a particular company was

in a

position of dominance.

His

Honour

recognized

that

dlfferent

markets could require different approaches, but for the service

industry with which he was concerned (namely car rentals) he

identified relevant factors as including market shares, the

capacity of the company in question to determine its own prices

without being inhibited

by the pricing policies

of others and the

ease with which new firms could enter the market.

It could be that in the present case the parties might

wish to argue that other factors are more relevant than these and

others listed by his Honour. But taking these factors alone, it

is clear that some historical perspective 1s necessary, since

questions of price determination and ease of entry must be looked

at over time.

For these reasons there will be leave

amend the

statement of claim as sought; (other minor amendments

are not

opposed). The application to strike out para 14 of the statement

of claim is dismissed. Although it is true that a party seeking

- 9 -

leave to amend pleadings

will

usually be required to bear the

costs of such an application,

A€” has persisted in its application

to	strike out after the amendments were proposed and has been

unsuccessful in the main thrust

of its arguments.

I think the

most appropriate order in the circumstances is that the costs of

all parties should be costs in the cause.

- 10 -

Application for joint hearinq

.t the first directions hearings in

t :hese matters, SCI

applied for a joint hearing with the TPC's action

(VG 84 of 1983)

of that part of its own action (VG 82 of 1983) which sought

declarations relating to

s.50

of the Act. It was ruled at that

time, and on a later occasion when the application

was renewed,

that the question was one which should be determined	by the trial	_ .
judge.

After most other interlocutory matters had been dealt

wlth, and the Chief Judge had arranged, pursuant

to s.15(1) of the

Federal Court of Australia Act

1976, that I should constitute the

Court in these matters,

I heard argument on this question

of a

~oint

hearing.

The order sought by SCI-'was in the following terms:

1. Application VG 84 and application VG 82 (limited to the

relief claimed In respect of Section

5 0 ) be tried at the

same time and that the evidence in each application be

evidence in the other.

2. TPC may make an address opening its case and then adduce its evidence.

3 . SCI may examine but not (without leave) cross examine witnesses called by the TPC.

4. Upon the completion of the evidence called by TPC, SCI may make an opening address and then adduce its

evidence.

SCI

shall

not

(without

leave)

call

any

witness previously called by the

TPC.

5 .

Following the closure

of the TPC and SCI cases, the

Respondents' [Am's] position shall be governed by Order

32 Rule 4 [concerning the conduct

of trials].

- 11 -

6. In the event that the Respondents elect to call evidence, the TPC followed by SCI shall be entitled to cross examine.

7. SCI may address after the TPC.

This application was supported

by Fibre Containers, "not

consented to" by the

TPC and vigorously opposed by APM. In

setting out my reasons for deciding against it, it is convenient

to deal first with the position as it would have been had SCI

claimed relief only in relation to s.50

of the Act, and then to

consider the relevance

of other pending claims by SCI against APM.

Since my decision

on this issue is based in part

on the

apparent policy of the Act, it is necessary to trace the history

of two relevant sections

of the

Act.

S.80 gives the Court

,power to grant injunctions

c _

restrain contraventions of the Act. When first enacted in

1974

the right to seek an in~unction was given generally to the Attorney-General, the TPC or any other person. Following

amendments, the right is given

to the Mlnister, the TPC or any

other person - except in relation to threatened contraventions of

s.50, as to which s.80(1A) expressly provides that a person other

than the Minister

the TPC "is not entitled to make an

application

....

for an injunction". This last provision was

introduced by the Trade Practices Amendment Act

1977, s.48. Its

* purpose, I assume, was to prevent companies or individuals

involved in takeover battles using the Court's processes to gain

tactical advantages in the form

of delays.

- 12 -

On the 0th

er h

and, an exten siv e right

to seek

declarations "in relation to the operation or effect

of any

provision of this Act" (other than certain speclfled divisions

the Act not relevant for present purposes) "or in relation

o the

validity of any act or thing done, proposed

be done or

purporting to have been done under this Act,

" had been given by

the insertion in

the Act of s.163A,

which was brought about by

s.15 of the Trade Practices Amendment Act

1976.

This wide power for parties

to seek declaratlons was not

cut back a year later when the right

to seek injunctions pursuant

to S . 50 was limited to the Mlnister and the TPC. As at present

advised, I can see no reason why a party alleging a contravention

of s . 5 0 ,

which is not alleged by the TPC, should have

to wait

until the merger in question

-iS completed, and then take the

action it 1s clearly entitled to take under s.81 of the Act, seeking an order for divestiture of shares. It could well be in the interests of both parties for the opponent of the merger to

indicate its intentions by suing inltially for a declaration and

adding a claim for divestiture if and when it became appropriate

to do so.

However I think it would be contrary to the spirit and scheme of the legislation if parties were able by indirect means

to	gain perceived advantages whlch they were prohibited from

obtaining by direct means.

- 13 -

Thus when the TPC has instituted proceedings for

injunctions to prevent a merger, and has obtained interlocutory injunctions or undertakings to hold the position until judgment has been delivered, I believe the Court should be slow to permit

another interested party to participate in those

proceedings

adding to their length and their cost

- by the device of seeking a

declaration In a claim which covers similar ground

that

comprehended by the

TPC action.

So far as remedies are concerned,

it is difficult to see that there would be any advantage to the

third party in adding

a declaration to an injunction: nor would

the Court be likely to refuse an injunction but grant a

declaration, particularly bearing in mind the discretionary nature

of both remedies.

It may be that some shecial circumstance might arise in

a particular merger case which would cause the Court to allow a

party's claim simply for a declaration to

be heard together with a

TPC claim for an injunction, but

I find it difficult to envisage

what those circumstances might be. The fact that the party's

application was filed a short time before the

TPC application

would not, in my view,

be a sufficient reason to justify a joint

hearing. If I am

right

about

the

principles

involved,

the

sequence of issuing proceedings could not, of itself, be sufficient to produce a different result. Nor, in my opinion,

does the fact that a person has given undertakings not

to take

advantage

of the

s . 5 0

proceedings against a rival bidder to

improve his

own chances of a successful takeover, give that person

any

entitlement to a

voice

those

proceedings.

those

proceedings are successful, the third party may be advantaged, but

that is no reason why

e should be entitled

to add to his rival's

burdens in the trial

of the action.

The next question

to be considered is whether the

position is altered by the fact that the

SCI application in this

case

seeks

not

only

a declaration concerning alleged

contraventions of

s.50

of the Act, but also damages and other

relief for alleged breaches of s . 4 6 , which deals with

monopolization.

SCI has not asked that this part

its application

should be tried together with the TPC application. Whatever

happens, there will be two

distririct actions for hearing, with the

TPC playing a major role in the first and no part in the second. constituted. It must eventually be resolved; and much if not all

of the evidence relating

to a claim of abuse

of market power

amounting to monopolistic conduct, would also be relevant

to the

TPC's claim of conduct demonstrating market dominance in a merger context. The TPC has indicated that evidence from SCI will play a significant part in the case it will present.

- 15 -

It would seem, at first sight, that it would save time

and costs if

the evldence on such matters adduced in the

s.50

hearing could be used, without having to	be repeated, in the	s.46
hearing.

This would, of course, only be possible (in the absence

of consent) if the same judge tried both matters one after

the

other, and the parties

to the second case were represented in the

first - that is, if S C I had the opportunity to lead evidence and

cross-examine witnesses in the

s.50 hearing. This would require a

joint hearing of the SCI and TPC applications or, possibly, the

addition of S C I as a party

to the TPC application. This latter

course was mentioned in passing by counsel for

S C I but was not

pressed. Since there would be no advantages in taking this course

rather than that

of joint hearings

I do not consider this

c .

alternative further.

After anxious consideration, I have reached the conclusion that the convenience

of a joint hearing of overlapping

evidence is not as clear as might at first appear, and the

possible injustices to APM if this course were followed outweigh

any advantages that a joint hearing might offer.

On the subject of convenience, there can

be no doubt

that the presence

of counsel representing

S C I would

add to the

length of the S . 50 hearing. They would wish to make	opening and
closing addresses, to be free to adduce evidence,	to examine

- 16 -

further all TPC witnesses (including those from SCI) and to

cross-examine APM witnesses. Although the Court would try

ensure that there

was no wasteful coverage of ground already

covered by the TPC - either in leading evidence or in

cross-examination - the views on such questions

of counsel for the

respective parties would not always coincide, and further time

would be lost

in the course

of such procedural debates.

Further, it 1s almost impossible to predict what effect a separate and earlier hearing

of the TPC application would be

likely to have on the SCI claim. Much would no doubt depend on

the detailed findings in the TPC action and its result. The

effect of those on the parties' attltudes to further litigation

could only be a matter for unprofitable speculation at this stage.

All that can be said is that a separate consideration

of the TPC

application will shorten the first hearing, and there can be	no
certainty that it will lengthen the second hearing.

On the question

of justice between the parties, as

dlstinct from convenience, the only complaints which SCI could

make if it were prevented from taking part in the TPC hearing are,

first, that it is effectively being denied its day in court

on the

s . 5 0 matter - which for all practical purposes would presumably be

determined in the TPC proceedlngs

- and, secondly, that APM would

- 17 -

have an opportunity to cross-examine SCI witnesses who would not

have the protection

of their own counsel. Such evidence would

then be available for use against them in cross-examination in the

later proceedings.

As to the first of these claims, I have already stated

my view that the scheme

of the Act does not contemplate a party in

SCI's position having a day in court when the TPC takes action to

prevent a merger. As to the second,

I have already indicated to

counsel for SCI that, if it is thought that SCI witnesses are not

being adequately protected, counsel may seek leave	to appear in
the TPC matter for that limlted purpose.

On the other hand I find persuasive the argument

counsel for APM that their client could

be prejudiced by having to

defend an action under

S . 50 of -&e

Act while another part

of the

same action, based on overlapping material, is awaiting trial and

has not been the subject

of requests for further particulars or

interrogation. In other words, they say, APM would be beginning

its defence of an action in which SCI knew just how it intended to

make out its case, but APM did not have the benefit of any such

details. This position could be cured if the hearing of the TPC

case were further delayed, but

party wishes that to happen.

The situation is, APM alleges, made even worse by the recent issue

of yet another related application, No. VG 126 of 1983 dated 19

July 1983, in which SCI seeks declarations, an injunction and	L
damages by reason of APM's alleged exclusive dealing in

C l

- 18 -

contravention of s.47 of the Act.

It seems that, once again,

there would be a conslderable overlap

of relevant evidence between

that action (which is not before me) and the two actions presently

being considered: the possibility of prejudice to APM would seem

to be quite real.

For all the reasons I have given, and particularly since

it is not possible to deal with

all the matters presently before

the Court in one hearing (and yet another related application has

recently been filed), I think I should exercise my discretion by

refusing this application for a ~oint	hearing with two different
applicants involved.

Before leaving this aspect

of the case I should say that

neither of the applicants gave any support

to the suggestion put

forward by counsel for APM tKat, if there

was to be a

~oint

hearing, it should be on the condition that there would

be joint

counsel briefed for the applicants (see Lewis v Daily Telegraph

Ltd.

- (No. 2 ) 1964 1 QBD 601 and Goold v Porter

1974 VR 102). It

is obviously inappropriate that the TPC. with its independent

statutory responsibilities, should be represented

by the same

counsel as a party with strong commercial interests in the outcome

of the proceedings. However the principle underlying the cases

cited, that a respondent

to litigation should not normally have to

face two separate sets

of applicants' representatives, is relevant

and has played a part in my decision.

- 19 -

I said at the conclusion of argument in t

.his matter,

I have reached a firm decision - though I was not without doubts in the course of argument - that I should refuse this application

for a Joint hearlng and stay all aspects

of VG 82 of 1983 until

after judgment has been given in VG 04 of 1983. The directions

hearing in VG 82 of 1983 will be adjourned until

14 days after the

date of judgment in VG 84 of 1983, with liberty to apply in the

meantime.

I certify that

this and the 18

preceding pages are

a true copy of the

Reasons for Jflgment herein

of the CO

,k,&&dt

the Honourable

[1983] FCA 182

4 Aug 1983