TNT Australia Pty Ltd & ors v Fels, A.H.M. Ansett Transport Industries (Operations) Pty Ltd v Fels, A.H.M. J. McPhee & Son (Australia) Pty Ltd v Fels, A.H.M

Re: TNT AUSTRALIA PTY LIMITED; ANSETT TRANSPORT INDUSTRIES (OPERATIONS)
PROPRIETARY LIMITED and J. McPHEE and SON (AUSTRALIA) PTY LIMITED
And: ALLAN HERBERT MILLER FELS and TRADE PRACTICES COMMISSION
Nos. G826-828 of 1991
FED No. 189
Discovery and Interrogatories

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Gummow J.(1)

CATCHWORDS

Discovery and Interrogatories - application to review decision to issue notices under s. 155 (1) of Trade Practices Act 1974 - requirement of honest and reasonable belief that addressee of s. 155 notice has capacity to furnish information relating to body of facts that constitute or may constitute contravention of Trade Practices Act 1974 - claims that belief of Chairman was colourable or insufficient and that Chairman failed to consider burden placed on applicants - whether evidence sufficient to ground suspicion that applicants had good case proof of which likely to be aided by discovery.

Trade Practices Act 1974

Administrative Decisions (Judicial Review) Act 1977

Prices Surveillance Act 1983

Ricegrowers Co-operative Mills Ltd v Bannerman (1981) 56 FLR 443

Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1979) 36 FLR 450

W.A. Pines Pty Ltd v Bannerman (1980) 41 FLR 175

Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368

S.A. Brewing Holdings Ltd v Baxt (1989) 23 FCR 357

Shannahan v Trade Practices Commission (1991) 28 FCR 239 MF1 v National Crime Authority (1991) 105 ALR 1

Nestle Australia Ltd v Commissioner of Taxation (1986) 10 FCR 78

Regina v Secretary of State for the Home Department, Ex parte Herbage (No. 2) (1987) QB 1077

Re Federal Commissioner of Taxation; Ex parte Swiss Aluminium Australia Ltd (1987) 72 ALR 247

Minister for Immigration and Ethnic Affairs v Taveli (1990) 23 FCR 162

HEARING

SYDNEY

#DATE 15:4:1992

In Matter No. G826 of 1991
Counsel and solicitors for P.R. Graham QC and D.L. Williams instructed
the applicant: by Blake Dawson Waldron.

Counsel and solicitors for C.A. Sweeney QC and D.R. Pritchard
the respondents: instructed by the Australian Government

Solicitor.

In Matter No. G827 of 1991:
Counsel and solicitors for L.D.S. Waddy QC and M. Speakman instructed
the applicant: by Blake Dawson Waldron.

Counsel and solicitors for C.A. Sweeney QC and D.R. Pritchard
the respondents: instructed by the Australian

Government Solicitor.

In Matter No. G828 of 1991:
Counsel and solicitors for D.L. Williams instructed by
the applicant: Blake Dawson Waldron.

Counsel and solicitors for C.A. Sweeney QC and D.R. Pritchard
the respondents: instructed by the Australian

Government Solicitor.

ORDER

The respondents give discovery with verification in relation to so much of the issues raised by paras 12 and 13 of the Statement of Claim filed in each matter on 19 December 1991 as concern the question whether the stated belief of the first respondent in eachof the notices issued 20 November 1991 was a belief of convenience to permit the pursuit under s. 155 of the Trade Practices Act 1974 of investigations as to the prices charged for the transport of freight which were beyond the powers conferred by the Prices Surveillance Act 1983.

The balance of the motion filed in each matter on 18 March 1992 be stood over to a date to be fixed.
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

JUDGE1

Each of these three Applications concerns notices dated 20 November 1991 and issued and signed by the first respondent ("the Chairman") as Chairman of the second respondent ("the TPC"). In respect of each applicant, two notices were issued, one relying on para (a) and the other upon para (b) of sub-s. 155 (1) of the Trade Practices Act 1974 ("the TP Act"). This provision is in the following terms:

"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, or is relevant to the making of a decision by the Commission under subsection 93 (3), a member of the Commission may, by notice in writing served on that person, require that person -

(a) to furnish to the Commission, by writing signed by that person or, in the case of a body corporate, by a competent officer of the body corporate, within the time and in the manner specified in the notice, any such information;

(b) to produce to the Commission, or to a person specified in the notice acting on its behalf, in accordance with the notice, any such documents;or

(c) to appear before the Commission at a time and place specified in the notice to give any such evidence, either orally or in writing, and produce any such documents."

On 19 December 1991, each of the addressees of these notices, TNT Australia Pty Limited ("TNT"), Ansett Transport Industries (Operations) Proprietary Limited ("Ansett"), and J McPhee and Son (Australia) Pty Limited ("McPhee") instituted proceedings in this Court impugning each of the two notices received by it. The jurisdiction of the Court is attracted by s. 163A of the TP Act. In addition, pursuant to the Administrative Decisions (Judicial Review) Act 1977 ("the ADJR Act") the applicants seek orders of review of the decisions of the Chairman to issue the notices under paras (a) and (b) of sub-s. 155 (1) of the TP Act. It should be noted that in the case of those decisions, there is no entitlement to reasons under s. 13 of the ADJR Act: Ricegrowers Co-operative Mills Ltd v Bannerman (1981) 56 FLR 443 at 449, 458.
In each matter, the Application was accompanied by a Statement of Claim, and a Defence has been filed. The Statements of Claim are in similar terms. By consent, I have ordered that each proceeding be heard together with the other two and that, subject to relevance, the evidence in each proceeding be treated as evidence in each other proceeding.
What is now before me for determination are three Motions, one in each proceeding, all filed 18 March 1992 and all seeking an order as to the giving by the respondents of discovery and the administration to them of interrogatories. I indicated to the parties that any question of interrogatories would await the determination of the application for discovery, and the hearing of the motions proceeded on that footing.
What is sought in each proceeding is an order that the Chairman and the TPC give discovery in relation to the issues raised by paras 12, 13, 19, 20 and 21 of the Statement of Claim.
Before turning to consider those paragraphs, I should note that the Chairman was appointed to that office on 27 June 1991, for the period 1 July 1991 to 30 June 1996, and that he then already held the office of part-time Chairman of the Prices Surveillance Authority ("the PSA") for a five year term commencing 19 March 1989. He had previously been a part-time member of the PSA for a period of five years from 1984.
The PSA is a body established by the Prices Surveillance Act 1983 ("the PSA Act"). The functions of the PSA are set out in Part III of the statute. They include the holding of inquiries into matters relating to prices for the supply of goods or services, and the reporting to the Minister of the results of each such inquiry (sub-s. 17 (1)). In addition, s. 21 provides for the declaration of goods or services of a specified description to be "notified goods or services" for the purposes of the PSA Act. Neither TNT nor Ansett nor McPhee have been or are subject to either an inquiry or a declaration. Nor are they currently the subject of any internal investigations which may lead to such an inquiry or declaration. However, what is described in the evidence as the "road freight industry" is the subject of complaints received and dealt with by the PSA.
The issue on 20 November 1991 of the notices presently in issue was a sequel to certain events in July and August 1991. Notices expressed to be issued pursuant to s. 155 (1) (b) of the TP Act were served on or about 27 July 1991 on TNT and Ansett. After correspondence with the solicitor for those companies in which detailed submissions were made (including complaints as to the very short period allowed for compliance with the notices and as to the hardship which would be suffered in complying with the notices) the solicitor for the TPC replied on 2 August 1991 stating that the Chairman of the TPC had decided to withdraw the notices. However, the letter indicated that the Chairman intended to issue fresh notices after addressing the "valid concerns" of TNT and Ansett. That was done on 20 November 1991.
The Notices dated 20 November 1991, one under para (a) and the other under para (b) of sub-s. 155 (1) of the TP Act, are set out in schedules attached to the Statement of Claim in each proceeding. They are in similar form. That under para (a), requiring the answering of questions, recites that the Chairman has reason to believe that in a period commencing on a date unknown to the TPC and continuing at the date of the notice, TNT, Ansett, McPhee and Mayne Nickless Limited ("Mayne Nickless") gave effect to provisions of one or more arrangements or understandings to which each of them was a party. The provisions are said to have provided that each of the parties would take steps (including refraining from competing on prices or rates) to ensure that the customers of one party would not be solicited by any of the other parties, and that if one of the parties obtained the custom of a customer of one of the other parties, steps would be taken (by increasing prices or rates, or by other means) to induce that customer to return to its former allegiance, and if those attempts failed the first party would compensate the second for its loss. The provisions also were said to include exclusionary provisions and to have the purpose and effect or likely effect of substantially lessening competition in the market in Australia for express freight transportation services, and of fixing, controlling or maintaining prices for services supplied by the parties, in competition with each other. A belief to the same effect is recited in each of the other notices issued in reliance upon para (b) of sub-s. 155 (1), and calling for the production of documents to the TPC.
The parties are not in dispute as to a great many of the principles to be derived from the decisions concerning s. 155 of the TP Act. These include Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1979) 36 FLR 450; W.A. Pines Pty Ltd v Bannerman (1980) 41 FLR 175; Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368; S.A. Brewing Holdings Ltd v Baxt (1989) 23 FCR 357 and Shannahan v Trade Practices Commission (1991) 28 FCR 239. See also MF1 v National Crime Authority (1991) 105 ALR 1 at 10-12.
It is accepted by all parties that the expression in sub-s. 155 (1) "has reason to believe" states a condition precedent to the valid imposition of requirements under the section, and that what is involved is both an actual belief and a proper basis in fact for that belief, in the sense that there must be reasonable grounds or cause for the belief. The belief must relate to the capacity of the addressee of the notice to furnish, produce or give the information, document or evidence sought; there is no statutory requirement that the TPC, the Chairman or the Deputy Chairman believe that there has been or may be a contravention of the statute. Further, the phrase "relating to a matter" refers to a body or complex of facts that constitute or may constitute contraventions.
I turn now to the particular provisions of the Statements of Claim said by the applicants to present issues in respect of which orders for discovery against the respondents are appropriate.
Paragraphs 19 and 20 allege that the requirements of the notices in each case are "harsh, unreasonable and oppressive" (para 19) and that the requirements are so unreasonable that no reasonable person could have exercised in this way the power to issue the notices (para 20). I would not be minded to order discovery in respect of those issues.
However, para 19 also pleads ("the remaining issue") that the requirements of the notices were imposed without regard to the burden they would place upon the applicant in question. It is also alleged (para 21) that in issuing the notices the Chairman failed to use his power to do so "in good faith for the purpose for which it was conferred" and had not had regard to the effect that the exercise of the power would have upon the applicants. In particulars of paras 19, 20 and 21, it is put, in various ways, that the Chairman did not consider the large operations of the applicants as involving businesses conducted with many employees from many sites across Australia. It is also said that the Chairman failed to consider the "prevailing economic conditions" and the ability or inability of the applicants to comply with the requirements of the notices without prejudice to their business.
Many of these considerations had been stressed in the earlier round of correspondence, in particular in the letter dated 1 August 1991 from the solicitor for TNT and Ansett to the Chairman.
Counsel for TNT (whose submissions were adopted by counsel for Ansett and McPhee) submitted that what was required in the present case was for the Chairman to have had reason to believe that TNT be (not may be) capable of furnishing information relating to a complex or body of facts which together constitute or, taking into account undiscovered facts, may constitute, a contravention of the TP Act. He submitted that the belief must be held by the Chairman "by virtue of" that office, and not "by virtue of" some other office he holds or has held, in particular his present and past offices in the PSA. In this regard, counsel referred to paras 12 and 13 of the Statement of Claim.
In para 12, the applicants plead that when deciding to issue the notices presently in contention, the Chairman did not have the necessary "reason to believe" within the meaning of sub-s. 155 (1) of the TPC. It is said, in particulars, that his statement of professed belief in these notices conflicted with what had been stated in the earlier notices, and that his "professed belief" in the current notices was "colourable and no belief at all". Paragraph 13 is pleaded in the alternative to para 12. It is there alleged that the Chairman had no "genuine or sufficient belief" in the sense required by sub-s. 155 (1). Again, it is asserted that the belief professed on the face of the notices was "colourable and insufficient to found a proper exercise of power" under that section. Reliance is placed upon the particulars provided for para 12 and, in addition, it is asserted in the particulars of para 13 that:
"(b) The (Chairman) was at all material times the

Chairman of the (PSA) . . . and as such desirous of investigating the prices charged for the provision of freight transportation services but was without power under the (PSA) Act to do so.

(c) The professed belief of the (Chairman) as recorded in the Section 155 (1) (a) Notice and in the Section 155 (1) (b) Notice was no more than a belief of convenience to permit the (Chairman) as Chairman of the

(PSA) to purportedly impose the requirements upon the Applicant set forth in the said notices."

In address, counsel for TNT stressed the importance to his case of the issue disclosed by those paragraphs.

All parties accepted for these motions the discussion by Wilcox J. of the principles applicable to discovery in administrative review proceedings, in Nestle Australia Ltd v Commissioner of Taxation (1986) 10 FCR 78 at 83:

"There is little discussion in the authorities as to what must be demonstrated by an applicant for review in order to avoid the stigma of 'fishing'. It would be absurd to require that the applicant demonstrate a prima facie case of legal error; otherwise discovery would be available only when unnecessary. It is clear that there should at least be sufficient definition of the issues to enable it to be seen that the documents relate to a live issue in the case (cf Murchison v Keating (1984) 1 FCR 341 at 344-5), but W A Pines (41 FLR 175) suggests that this is not enough. In the latter case Brennan J., at 181, referred to cases in which 'sufficient is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery'. In Reid v Nairn (unreported, 25 March 1985) Fisher J. allowed discovery only after finding 'some evidence which could support an arguable case for review of the decision' under challenge. In that case his Honour limited discovery to documents relating to those aspects of the case which appeared to be vulnerable to attack. I propose to adopt the approach taken in these two cases and to consider, in relation to each of the three categories of documents sought by the applicant, whether there is evidence to ground a suspicion that the applicant has a good case, proof of which is likely to be aided by discovery."

However, I should note that in the Court of Appeal in England, the matter of discovery in administrative review proceedings since has been approached in a manner which may have been somewhat more favourable to the present applicants. In Regina v Secretary of State for the Home Department, Ex parte Herbage (No. 2) (1987) QB 1077 at 1089, May L.J. said:

"In the majority of applications for judicial review the underlying facts are agreed, or appear in documentary form, and the issues for the court are largely, if not entirely, questions of law. However, although the court's function is supervisory, it may well involve some investigation of the facts of a case . . . It should not be often that this power need be exercised, but in the instant case I agree with the judge that if the merits of the judicial review proceedings and allegations were to be gone into, then clearly the discovery ordered would be necessary and proper."

These remarks were referred to in this Court by Beaumont J. in Re Federal Commissioner of Taxation; Ex parte Swiss Aluminium Australia Ltd (1987) 72 ALR 247 at 248-9, as authority for the proposition that whilst the view was once taken that because discovery was a remedy in aid of civil proceedings, it should not be ordered except where the relief sought was to enforce a civil right, the modern view is that discovery can be ordered in proceedings for judicial review. Of course, the question remains in each case whether and to what extent discovery should be ordered. It is here that both sides accept what was said in Nestle supra.

A related but distinct question, and one on which different views have been expressed, concerns the desirability or otherwise in having decision-makers subjected to cross-examination upon affidavits filed by them in administrative review proceedings; see O. 54 r. 8, and Minister for Immigration and Ethnic Affairs v Taveli (1990) 23 FCR 162 at 164-7, 183, 189-90.
Counsel for TNT rightly emphasised that the remarks of Brennan J. in W.A. Pines supra at 181, to which reference was made by Wilcox J. in Nestle supra, were made where discovery had been sought but there was no evidence to suggest that the respondent, the then Chairman of the TPC, did not have the requisite cause for a belief required by sub-s. 155 (1) of the TP Act. There was a bare allegation in the Statement of Claim, which was denied. Hence, his Honour's comment that the applicant was seeking to ransack the Chairman's documents in the hope of making a case.

For the purposes of the motions seeking orders for discovery, I admitted various affidavit, oral and documentary evidence. It is appropriate now to turn briefly to consider the effect of that evidence in the light of the submissions made by the applicants that, accepting what had been said by Brennan J. in W.A. Pines as applicable to these motions, they met that criterion. I should emphasise that nothing said here forecloses argument at the trial upon evidence then tendered. These are interlocutory proceedings.
In short, the evidence stands as follows: TNT and Ansett had recorded major losses in the financial year ended June 1991; the PSA had received numerous complaints about prices in the freight industry and had commenced preliminary inquiries prior to June 1991; the Chairman had been head of the PSA since 19 March 1989 and was appointed head of the TPC on 1 July 1991; the Chairman had expressed a desire for the two bodies to merge, or at least work more closely together; on 27 July 1991, s. 155 notices were addressed to TNT and Ansett; on 1 August 1991, the applicants' solicitor complained of the burden placed on his clients; the July notices were withdrawn; during this period, there appears to have been limited, mainly oral, communication between the officers of the PSA and TPC concerning complaints about pricing in the freight industry; and in November 1991, fresh notices in different (and for the main part narrower) terms were issued.
I turn now to consider the evidence in more detail.
In relation to paras 19, 20 and 21, TNT tendered annual reports which showed that it had recorded losses of approximately $l.8m and $49.4m in 1990 and 1991 respectively. In addition, Ansett tendered its annual report for 1991 which disclosed a loss of almost $88m for that financial year. McPhee gave no details of its performance for the same period. In addition, counsel for TNT tendered the annual report of the PSA for 1990-1991 ("the PSA Report"), which referred generally to the downturn in economic activity in Australia during that period. Counsel for the respondents questioned the significance of this evidence, arguing that it did not have the tendency to show that it was appropriate to investigate whether or not the Chairman took into account the burden that would be placed on the applicants in complying with the s. 155 notices. Counsel for the respondents also contended that the applicants had made a deliberate election for the purposes of these motions not to read the affidavits filed on the issue of hardship and oppression, leaving the Court to rely on "tangential matters" such as the size of a particular year's losses and the fact that the country is going through a recession. Counsel for TNT responded that the affidavits mentioned above would take a day to read, and that it would be inappropriate to do so at this stage. In addition, reference was made to the correspondence concerning the July notices.
As it stands, the evidence does not suggest that the Chairman failed to consider the burden that might be imposed on the applicants by the issuing of the s. 155 notices. The circumstance that the July notices were withdrawn in response to a letter from the applicants' solicitor complaining of that burden is consistent with the question of burden being very much in the Chairman's mind when he issued the November notices. I would not order discovery upon the remaining issue in para 19 nor in relation to para 21. I have already stated my conclusion as to the first issue in para 19 and as to para 20. I turn to the issues raised by paras 12 and 13.
Counsel for the applicants drew attention to the differences between the preamble of the notice issued in July 1991 and that of the two notices issued to each of the applicants in November 1991. It was argued that the mere fact of discrepancy demonstrated that there was room properly to investigate whether or not the Chairman had ever relevantly held a required belief. Counsel for the respondents replied that in most cases the alterations were made to narrow the field of inquiry - referring to "express freight transportation services" rather than simply "freight transportation services", and confining inquiries to currently serving officers of each company. This was, it was said, in response to the statements in the letter of 1 August 1991 that TNT had approximately 4,000 officers and generated 100,000 documents per week in Australia from about 500 places of business, and that the width of the July notices was such that it would take a staff of at least ten persons more than a year to comply. As the evidence now stands, I would, as I have already indicated, accept the respondents' contention that the withdrawal of the July notices and the changes made in the November notices may be seen as a response to the concerns of hardship expressed by the applicants. I do not accept the applicants' contention that those discrepancies are sufficient of themselves to justify on the present motions an investigation into whether or not the Chairman had an honest and reasonable belief in the matters stated in the preamble to the November notices. But that was not all the material relied upon.
The relationship between the TPC and the PSA was referred to in documents issued by these statutory bodies and in newspaper articles that were tendered. The PSA Report makes numerous references to the close working relationship of the TPC and PSA, and to the possibility of merger. Reference is made to "considerable overlap" in the roles of the two bodies in recent years. The PSA Report elsewhere refers to the PSA "complementing, but not duplicating", the role of the TPC in competition policy. It would appear that the Chairman himself has been quite open about his desire for the TPC and PSA to work closer together, advocating a merger of the two bodies to strengthen control over anti-competitive practices.
Evidence of the co-operation of the two bodies on the issues concerning the freight industry also was tendered by the applicants. "Price Probe", the PSA newsletter, for March 1990 revealed that the PSA had received complaints both from contract customers and from occasional courier clients about the cost of freight services, had raised those matters with the companies involved, and was awaiting a full explanation. "Price Probe" for September 1991 detailed the size of price increases in freight charges, referred to the market power of TNT and Mayne Nickless, reported allegations of tacit agreements between the two bodies with regard to pricing policy, and stated that details of "the complaints about alleged predatory pricing and collusive pricing" had been passed on to the TPC "which is responsible for dealing with such matters". This transfer of information from the PSA to the TPC, and the TPC's investigation of the applicants, also were reported in several newspaper articles tendered by counsel for TNT. It is worth noting that the Chairman is quoted as saying that "the PSA did not believe the complaints came within its ambit and had passed them on to the TPC for investigation" ("Transport and Distribution Letter", Issue No. 277, 21 November 1991).
The applicants tendered a letter, dated 1 July 1991, from Mr Eva, Assistant Commissioner of the TPC, to the PSA, requesting "whatever details are available" about complaints made in relation to the freight transportation industry. The respondents tendered a letter from Mr Eva to the PSA, dated 19 November 1991 (the day before the s. 155 notices were issued) stating that he had received no such "detail" as requested by the earlier letter, despite what had been said in the "Price Probe" for September 1991. The PSA letter in response, dated 29 November 1991, stated, omitting formal parts:

"I refer to your letter of 19 November 1991 concerning the above matter. It is my understanding that an officer of the PSA (Ms C Berger) contacted Mr Barry Doolan of the TPC and advised him of allegations that had been made to the PSA by some complainants. This contact was via telephone. During the course of the conversation, Ms Berger became aware that the TPC had received similar complaints which they were investigating. Consequently, nothing was provided in writing to the TPC. The PSA has a policy of not divulging any information that could identify complainants to other bodies. In dealing with complaints on overnight couriers, the PSA complaints officer emphasised that the Authority's interest lay only in the impacts on pricing. She referred complainants to the TPC regarding alleged anti- competitive market behaviour. In some instances she was informed that complainants had approached both bodies simultaneously. The PSA is prepared to discuss the issues raised by complainants in general terms, and I understand that tentative arrangements have in fact been made to do this."

In the light of the evidence as it now stands (and, of course, at the trial a quite different picture may emerge), I have reached the conclusion on the present motions that there is evidence to ground a suspicion that the applicants have a good case that the stated belief of the Chairman in each of the notices issued 20 November 1991 was colourable in the sense of being a belief of convenience to permit him to pursue under s. 155 investigations as to the prices charged for the transport of freight which were beyond the powers conferred by the PSA. I would order discovery upon that issue. Otherwise the applications for discovery are refused.
The balance of the motions will stand over to a date to be fixed. I will hear the parties on costs.

[1992] FCA 189

15 APRIL 1992