SST Consulting Services Pty Ltd v Rieson - [2004] FCA 937

FEDERAL COURT OF AUSTRALIA
SST Consulting Services Pty Ltd v Rieson [2004] FCA 937
TRADE PRACTICES – section 47 (1) of Trade Practices Act 1974 (Cth) (‘TPA’) –whether agreement gave effect to exclusive dealing within meaning of s 47(6) of TPA – whether requirement to provide pack and unpack services as condition of loan amounted to third line forcing – application of s 4L of TPA – whether contravening provision capable of severance
CONTRACT -illegality – whether obligations of the borrower to repay principal and interest void and unenforceable – test of severability – whether illegal provision is ancillary or whether the elimination of illegal promise alters the nature of the contract
CONTRACT -guarantee – whether guarantee rendered unenforceable because of illegality of principal obligations guaranteed
News Limited & Ors v Australian Rugby Football League Limited & Ors (1996) 64 FCR 410 cited
McFarlane v Daniell (1938) 38 SR 337 referred to
Humphries v The Proprietors Surfers Palms North Group Titles Plan 1955 (1994) 179 CLR 597 referred to
Carney v Herbert [1985] AC 301 cited
SST CONSULTING SERVICES PTY LTD ACN 083 263 914 v STEPHEN CHARLES RIESON & ANOR
N1367 OF 2002
EMMETT J
21 APRIL 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N1367 OF 2002

BETWEEN:

SST CONSULTING SERVICES PTY LTD ACN 083 263 914
APPLICANT

AND:

STEVEN CHARLES RIESON
FIRST RESPONDENT

SCOTT MURRAY BELL
SECOND RESPONDENT

JUDGE:

EMMETT J

DATE OF ORDER:

21 APRIL 2004

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.        Judgment be entered for the applicant in the sum of $1,514,890.00
2.        The cross-claim be dismissed.
3.        The applicant pay the respondents’ costs thrown away by:
(a)the applicant’s amendment to the reply to defence and defence to cross-claim, filed in Court on 20 April 2004, by inserting paragraph 4(b); and
(b)the applicant’s further application to the Court on 19 April 2004 to amend the reply to defence and defence to cross-claim, in so far as the application was unsuccessful.

4.The respondents otherwise pay the applicant’s costs including any reserved costs of interlocutory proceedings in the Federal Court and the costs of the proceedings and all interlocutory proceedings in the Supreme Court of New South Wales not dealt with by order of the Supreme Court.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N1367 OF 2002

BETWEEN:

SST CONSULTING SERVICES PTY LTD ACN 083 263 914
APPLICANT

AND:

STEVEN CHARLES RIESON

FIRST RESPONDENT

SCOTT MURRAY BELL
SECOND RESPONDENT

JUDGE:

EMMETT J

DATE:

21 APRIL 2004

PLACE:

SYDNEY

REASONS FOR JUDGMENT

The applicant, SST Consulting Services Pty Ltd (‘SST’) sues the respondents, Stephen Charles Rieson and Scott Murray Bell under a guarantee dated 23 December 1999 (‘the Guarantee’) in respect of indebtedness to SST of AFS Freight & Management (USA) Inc. (‘the Borrower’). Messrs Rieson and Bell were directors of the Borrower, which is indebted to SST…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] FCA 937
Decision Date: 21 APRIL 2004

CaseChat Overview and Summary

SST Consulting Services Pty Ltd (the applicant) sued Rieson (the respondent) for exclusive dealing practices in breach of s 47(1) of the Act. The applicant alleged that the respondent had supplied services to the applicant on the condition that the applicant would only purchase other services from a related entity. This alleged practice is known as third line forcing and is a form of exclusive dealing prohibited by s 47(6) of the Act. The matter was heard in the Supreme Court of New South Wales, which found in favour of the applicant. The court found that the respondent's conduct amounted to exclusive dealing practices in breach of the Act and awarded the applicant damages of $1,514,890.00. The court also dismissed the respondent's cross-claim and ordered the parties to pay their own costs.

The court considered whether the respondent's conduct amounted to exclusive dealing practices as defined by s 47(6) of the Act. The court found that the respondent's conduct did amount to exclusive dealing practices because it involved supplying services on the condition that the applicant would only purchase other services from a related entity. The court found that this conduct was a form of third line forcing, which is a prohibited practice under the Act. The court also considered whether the applicant had established a causal link between the respondent's conduct and the loss suffered by the applicant. The court found that the applicant had established this causal link and awarded damages accordingly.

The court's reasoning was based on a careful analysis of the relevant statutory provisions and case law. The court found that the respondent's conduct clearly fell within the definition of exclusive dealing practices in s 47(6) of the Act. The court also found that the applicant had established a causal link between the respondent's conduct and the loss suffered by the applicant. The court's decision was based on a thorough analysis of the evidence and the applicable legal principles.

The final orders of the court were that judgment be entered for the applicant in the sum of $1,514,890.00, that the respondent's cross-claim be dismissed, and that the parties pay their own costs. The court also ordered that the applicant pay certain costs thrown away by the respondent, and that the respondent pay the applicant's costs of interlocutory proceedings in the Federal Court and the Supreme Court of New South Wales.

Orders

Orders of the court

1. Judgment be entered for the applicant in the sum of $1,514,890.00

2. The cross-claim be dismissed.

3. The applicant pay the respondents’ costs thrown away by:

(a) the applicant’s amendment to the reply to defence and defence to cross-claim, filed in Court on 20 April 2004, by inserting paragraph 4(b); and

(b) the applicant’s further application to the Court on 19 April 2004 to amend the reply to defence and defence to cross-claim, in so far as the application was unsuccessful.

4. The respondents otherwise pay the applicant’s costs including any reserved costs of interlocutory proceedings in the Federal Court and the costs of the proceedings and all interlocutory proceedings in the Supreme Court of New South Wales not dealt with by order of the Supreme Court.

Background

Background to the litigation

Section 47(1) of the Act provides that a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing. Relevantly, s 47(6) provides that a corporation engages in the practice of exclusive dealing if the corporation supplies, or offers to supply, services on the condition that the person to whom the corporation supplies or offers or proposes to supply the services or, if that person is a body corporate, a body corporate related to that body corporate will acquire services of a particular kind from another person. That kind of exclusive dealing is known as third line forcing. It is common ground that AFS is related to the Borrower within the meaning of that expression as used in s 47(6). BACKGROUND When a consignee imports goods into Australia and the consignment consists of a full container load, the goods go directly to the consignee’s warehouse. If a consignment is less than a full container load or constitutes freight of all kinds (respectively ‘LCL’ and ‘FAK’), the containers are first unpacked so that the individual consignees can pick up their goods from a depot. Once the goods are unpacked and made available for distribution to the consignees, the empty containers are stored, handled and repaired for the shipping companies and lease companies that own the containers. The freight forwarders charge the shipping and leasing companies for that service. Similar services are provided in connection with the export of goods. The directors of SST are Messrs Peter Sweeney, Paul Sweeney and Denys Truman. Prior to sometime in late 1998 or early 1999 those three individuals carried on business relating to shipping, through various corporate entities. Those various corporate entities were generally known as the ‘Port Botany Group’. The Port Botany Group carried on business at several locations. The biggest was at Friendship Road, Port Botany, abutting Brotherson Dock; a site of about 12 hectares, which had several buildings on it used by the Port Botany Group for container repairs, container packing and unpacking and container storage. In addition, the Port Botany Group had a head office in Botany Road, where it also had several warehouses in which packing and unpacking and airfreight businesses were conducted. The Brisbane operation of the Port Botany Group was carried out at Fisherman’s Island, at the Port of Brisbane. Initially the business consisted of storing, handling and repairing empty containers and quarantine services and associated port services. Once that business was established, the Port Botany Group branched out into packing and unpacking and warehouse related services. The land in Sydney and on Fisherman’s Island were leased premises. The Port Botany Group engineered and constructed the buildings and paving on the premises. About 30 per cent of the turnover of the Port Botany Group was from packing and unpacking activities and about 70 per cent was from other activities, which included storing, handling and repairing containers and transport generally.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

EMMETT J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: EMMETT J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1367 OF 2002

BETWEEN:	SST CONSULTING SERVICES PTY LTD ACN 083 263 914 APPLICANT
AND:	STEVEN CHARLES RIESON FIRST RESPONDENT SCOTT MURRAY BELL SECOND RESPONDENT
JUDGE:	EMMETT J
DATE OF ORDER:	21 APRIL 2004
WHERE MADE:	SYDNEY