Trade Practices Commission v Australia Meat Holdings Pty Ltd

Re: TRADE PRACTICES COMMISSION
And: AUSTRALIA MEAT HOLDINGS PTY LIMITED; THOMAS BORTHWICK & SONS (PACIFIC
HOLDINGS) LIMITED; BORTHWICKS PLC and THOMAS BORTHWICK & SONS (UK) LIMITED
No. NSW G92 of 1988
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

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

CATCHWORDS

Trade Practices - Mergers - Acquisition by cattle abattoir operator of shares in competitor company - Whether acquiring company is, or is likely to be, dominant in the relevant market - Definition of product market - Geographical limits of market - Consideration of factors relevant to dominance - Jurisdiction of Court in case where vendors of shares were United Kingdom companies - Whether as a matter of discretion orders should be made against the vendor companies - Width of appropriate undertaking offered as an alternative to order for divestiture of shares.

Trade Practices Act 1974, ss.4E, 5, 50, 75B, 81.

Protection of Trading Interests Act 1980 (UK), s.5

HEARING

SYDNEY

#DATE 15:7:1988

Counsel for the Applicant: Mr C A Sweeney QC with Mr J S Hilton and Mr G.S. Charny

Solicitors for the Applicant: Australian Government Solicitor

Counsel for the First Respondent: Mr A Goldberg QC with Mr A R Emmett QC, Mr and Mr P.M. Briscoe and Mr R.J. Wright

Solicitors for the First Respondent: Blake Dawson Waldron

Counsel for the Second, Third and Fourth Respondents: Mr B C Oslington QC with Mr R.J. Powell

Solicitors for the Second, Third and Fourth Respondents: Allen, Allen & Hemsley

ORDER

The proceeding stand over for further hearing at 9.30 am on Wednesday 3 August 1988.

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

JUDGE1

During the afternoon of Tuesday, 26 January 1988 (local time), whilst most Australians were sleeping off their Bicentennial celebrations, a series of meetings was held in London whereby an Australian company, Australia Meat Holdings Pty Limited ("AMH") acquired the whole of the issued capital of Thomas Borthwick & Sons (Australasia) Limited ("Borthwick"), an English company which has long been involved in the Australian meat trade. But, however appropriate the timing of this "buy back the farm" transaction, a question arises whether, in entering into the transaction, AMH -- which already operated several abattoirs in Queensland - contravened s.50 of the Trade Practices Act 1974. That section relevantly provides:

"50. (1) A corporation shall not acquire, directly

or indirectly, any shares in the capital, or any assets, of a body corporate if--

(a) as a result of the acquisition, the corporation would be, or be likely to be, in a position to dominate a market for goods or services; or

(b) in a case where the corporation is in a position to dominate a market for goods or services--

(i) the body corporate or another body corporate that is related to that body corporate is, or is likely to be, a competitor of the corporation or of a body corporate that is related to the corporation; and

(ii) the acquisition would, or would be likely to, substantially strengthen the power of the corporation to dominate that market.

(1A) ...

(2) If--

(a) a body corporate that is related to or associated with a corporation is, or two or more bodies corporate each of which is related to or associated with the one corporation together are, in a position to dominate a market for goods or services; or

(b) a corporation, and a body corporate that is, or two or more bodies corporate each of which is, related to or associated with that corporation, together are in a position to dominate a market for goods or services,

the corporation shall be deemed for the purposes of this section to be in a position to dominate that market.

(2A) ...

(2B) ...

(2C) ...

(3) In this section--

(a) a reference to a market for goods or services shall be construed as a reference to a substantial market for goods or services in Australasia in a State or Territory; and

(b) a reference to dominating a market for goods or services shall be construed as a reference to dominating such a market either as a supplier or as an acquirer of goods or services in that market.

(4) ...

(5) ..."

The Trade Practices Commission, the applicant herein, contends that, by its acquisition of the Borthwick shares, AMH, the first respondent, was placed in a position where it would be, or would be likely to be, in a position to dominate the fat cattle market in northern Queensland - or, alternatively, the separate fat cattle market in each of northern and central Queensland - or, alternatively, the acquisition would, or would be likely to, substantially strengthen the existing power of AMH to dominate that market or those markets. The transaction having been completed, the Commission seeks an order under s.81 of the Act; either an order under sub-s.(1) for the divestiture by AMH of the acquired shares or else a declaration under sub-s.(1A) that the acquisition is void. To enable the latter order the Commission has joined as additional respondents the vendors to AMH of the relevant shares, Thomas Borthwick & Sons (Pacific Holdings) Limited ("Pacific Holdings") and Thomas Borthwick & Sons (UK) Limited ("UK"), and the parent of those two companies, Borthwicks plc ("plc"). I shall refer to these three respondents collectively as "the Borthwick respondents". Borthwick itself, that is the company whose shares were acquired by AMH, is not a respondent to this proceeding. The relevant provisions of s.81 are as follows:

"81. (1) The Court may, on the application of the

Minister, the Commission or any other person, if it finds, or has in another proceeding instituted under this Part found, that a person has contravened section 50, by order, give directions for the purpose of securing the disposal by the person of all or any of the shares or assets acquired in contravention of that section.

(1A) Where--

(a) the Court finds, in a proceeding instituted under this Part, that a person (in this sub-section referred to as the 'acquirer') has acquired shares in the capital, or any assets, of a body corporate in contravention of section 50;

(b) the Court finds, whether in that proceeding or any other proceeding instituted under this Part, that the person (in this section referred to as the 'vendor') from whom the acquirer acquired those shares or those assets, as the case may be, was involved in the contravention; and

(c) at the time when the finding referred to in paragraph (b) is made, any of those shares or those assets, as the case may be, are vested in the acquirer or, if the acquirer is a body corporate, in any body corporate that is related to the acquirer,

the Court may, on the application of the Minister or the Commission, declare that the acquisition, in so far as it relates to the shares or assets referred to in paragraph (c), is void as from the day on which it took place and, where the Court makes such a declaration--

(d) the shares or the assets to which the declaration relates shall be deemed not to have been disposed of by the vendor; and

(e) the vendor shall refund to the acquirer any amount paid to the vendor in respect of the acquisition of the shares or assets to which the declaration relates.

(1B) ...

(1C) Where an application is made to the Court for an order under sub-section (1) or a declaration under sub-section (1A), the Court may, instead of making an order under sub-section (1) for the purpose of securing the disposal by a person of shares or assets or an order under sub-section (1A) that the acquisition by a person of shares or assets is void, accept, upon such conditions (if any) as the Court thinks fit, an undertaking by the person to dispose of other shares or assets owned by the person.

(2) An application under sub-section (1), (1A), or

(1B) may be made at any time within 3 years after the date on which the contravention occurred.

(3) ..."

Overview of the Queensland cattle industry

The Australian cattle herd amounts to some 25 million head, of which about 90% are cattle bred for meat production. In Queensland the proportion of beef cattle is even higher. The Australian Bureau of Statistics estimated that, at 31 March 1986, the Queensland herd contained 9,662,031 beasts, of which over 96% were beef cattle.
The Bureau's publication "Livestock and Livestock Products, Queensland, 1985-86" breaks up by breed the Queensland herd as at 31 March 1982; this apparently being the most recent date for which figures were then available. Of the total of 9,758,200 head, it was estimated that tropical breeds accounted for 1,906,570, British and European breeds 2,635,460, dairy breeds 276,400 and cross-breeds 4,869,470. The dominant cross-breeds were Brahman/British and Other tropical/British, so that some 60% of all beef cattle were either straight or cross-bred tropical cattle. There is no statistical evidence before the Court as to the distribution by breed of cattle in Queensland but it is common ground amongst the witnesses that tropical cattle, straight breeds and crosses, predominate in the north of the State and that most British and European breeds are to be found in the south. But their distribution is not defined only by latitudinal boundaries. There are tropical cattle in the arid south west of the State and there are pockets of British and European breeds in some of the coastal areas in the north.
There is no evidence as to the proportion of total sales constituted by cattle purchased for breeding purposes. Stud cattle are not relevant to this case. The remainder of the turn-off fall within one of three categories, the difference between which is only the degree of imminence of slaughter. "Fat cattle" are cattle in such a condition that there is no advantage in postponing slaughter. They may be in optimum condition. Alternatively, their condition may be such that, under the circumstances, there is no financial advantage in postponing slaughter; any improvement in condition being outweighed by the cost involved in obtaining that improvement. The purchasers of "fat cattle" are almost always operators of abattoirs. "Feed lot cattle" are cattle which are in near optimum condition but which would benefit at acceptable cost from a short stay -- up to 90 days -- in a feed lot where they can be intensively fed, usually with grain. "Feed lot cattle" are usually purchased by abattoir operators and housed in feed lots situated near the relevant abattoir. "Store cattle" are cattle purchased with an eye to long term, open pasture fattening. The purchaser may be an abattoir operator; but more often the purchaser will be a pastoralist anxious to put to good use his available grass. Some pastoralists do not breed cattle. They depend entirely upon the profits available from purchasing "store cattle", fattening them and reselling the cattle, generally as "fat cattle".
Exports constitute a major component of the Queensland beef trade, more so in the north than in the south of the State. Ms Rhonda Smith, a Senior Lecturer in the Department of Economics within the University of Melbourne, who has considerable experience in agricultural economics, particularly in Queensland, gave evidence on behalf of the applicant. During the course of this evidence she referred to, and adopted, industry estimates that between 80% and 90% of all beef produced in the north is exported compared to approximately 60% from the south. Although exports are made to many countries, the two most significant export markets are Japan and North America. However, there is some difference in the product predominantly exported to these markets. Japan takes considerable quantities of prime cuts, that is high quality cuts - such as tenderloin, cube roll and strip loin - which are likely to be served as such and without further processing, other than cooking. These cuts are taken from cattle designated in the trade as "Japanese ox". "Japanese ox" must comply with the specifications laid down by the Australian Meat and Livestock Corporation relating to the export of meat to Japan. Those specifications require that the beast be not more than four years of age and that it have achieved a specified minimum weight. In practice it is easier for British and European breeds, especially those grown on good pastures, to meet these specifications than it is for tropical breeds pastured in arid areas. Consequently, the former tend to dominate the Japanese trade. By contrast, the North American market consists predominantly of "manufacturing meat", that is relatively lean meat intended to be processed by grinding or mincing before cooking. A proportion of most carcasses goes into manufacturing meat. Even in the case of top quality stock, slaughtered to produce prime cuts, much of the carcass can only be used for manufacturing meat. In other cases the predominant purpose of the slaughter is to obtain manufacturing meat. Generally speaking, the proportion of the carcass which is suitable only for manufacturing meat is greater in the parts of Queensland where tropical breeds predominate.
Frequent reference was made in the evidence to three separate regions of Queensland: the northern, central and southern regions. Whether those regions each constitute a separate "market" within the meaning of s.50 of the Trade Practices Act is a question to which I shall return, but there appears to be widespread agreement upon the existence, and approximate boundaries, of the three regions. They are accepted by the Livestock and Meat Authority of Queensland ("LMAQ"), the Cattlemen's Union and the Australian Bureau of Statistics in defining its statistical divisions. The northern region constitutes that part of Queensland which lies north of a line drawn to follow shire boundaries approximately westerly from the coast just north of Mackay to the Northern Territory border. The northern region therefore includes the towns located on the railway line leading from Townsville to Mount Isa and the cattle stations served by those towns. The central region of the State is accepted as being the area which lies south of the northern region but north of a line drawn approximately westerly from a point a little north of Bundaberg. This region takes in Rockhampton and also the towns on the railway line linking Winton to Rockhampton through Longreach and Emerald. The southern region is the remainder of the State.
The term "abattoir" has been used throughout this case so as to exclude slaughterhouses killing only small numbers of stock for local use; it being accepted on all hands that their existence has no effect upon the resolution of the issues in this case. In other words, all "abattoirs" are licensed export abattoirs. Using the word "abattoir" in this sense, there are presently ten abattoirs in the northern region of Queensland, as defined above. Two of those abattoirs, the AMH abattoirs at Mareeba and Mount Isa, are presently closed. AMH has three operating abattoirs in the region, at Cairns, Townsville and Cape River. Borthwick has an abattoir at Bowen and Queensland Meat Export Co Pty Limited -- a member of the Angliss, also called Vestey, group -- operates at Townsville. The remaining three abattoirs are an abattoir at Townsville owned by Tancred (NQ) Pty Limited ("Tancred (NQ)") and two small abattoirs at Innisfail (Innisfail Butchering Company) and Tolga (Byrnes By-Products).
The central region contains six abattoirs: the Borthwick abattoir at Mackay, three abattoirs at Rockhampton -- owned respectively by AMH, Central Queensland Meat Export Co Pty Limited (Vestey) and Capricorn Meats -- the Teys Brothers (Biloela) Pty Limited abattoir at Biloela and the Bundaberg Public Abbatoir at Bundaberg.
In the southern region there are a further 25 abattoirs. Although three of these -- at Dinmore, at Beaudesert and at Bremer River (closed) -- are owned by AMH, and one other by Tancred Brothers Pty Limited ("Tancred"), it is not contended by the applicant that AMH is in a position to dominate the southern market. Furthermore, the applicant concedes that, if it is proper to treat the whole of Queensland as constituting, or being part of, a single market, AMH is not in a position to dominate that market. The applicant's case depends upon the proposition that two or more separate fat cattle markets exist within the State. Most of the voluminous evidence in the case was directed to the validity or otherwise of that proposition. I must deal with that evidence; but, before doing so, it is desirable to say something about the formation of AMH, the subject transaction and the course of this litigation.

The formation of AMH
AMH was incorporated in 1986. The company has four equal shareholders, each of which is itself involved in the slaughter of cattle for the export trade: Elders IXL Limited ("Elders"), Metro Meat Limited ("Metro"), SCI Meat & Paper Pty Limited ("Smorgon") and Tancred.
The discussions which preceded the formation of the company occupied several months. They involved not only the four ultimate participants but also both Borthwick and Vestey. Besides its two Queensland abattoirs, Borthwick has interests in both Victoria and New South Wales. The four ultimate participants in the new venture, which was code-named "Avocado", were interested only in the Queensland abattoirs and their initial proposal was to purchase only those two abattoirs. But Borthwick was unwilling to fragment its operations. So the discussion turned to the possibility of Borthwick joining the consortium.
Vestey decided not to participate in Avocado some time before May 1986. In that month the proposal came to the attention of the Trade Practices Commission, which expressed concern at the possibility that it would contravene ss.45 and 50 of the Trade Practices Act. Borthwick was then still a potential participant. The Commission suggested that the venturers lodge an application for authorisation. Instead, they entered into negotiations with the Commission, as a result of which the terms of their draft agreement were amended in such a manner as to cause the Commission to decide not to oppose the proposal. By that time Borthwick had decided not to become a shareholder in the new company. Nonetheless the four shareholders in AMH continued to entertain the hope that AMH would eventually acquire the Borthwick abattoirs at Bowen and Mackay.
The four shareholders in AMH, together with various companies with which they were individually associated, entered into an agreement styled "Shareholders Agreement" on 29 July 1986. The first four recitals to that agreement made apparent the purpose behind the formation of the company:

"A. Each of Elders, Metro, Smorgon and Tancred (collectively referred to as the 'Participants') was, before the date hereof, independently engaged in Queensland, on its own account or through the operation of a related corporation, in the purchase and processing of livestock and the marketing of meat and meat by-products internationally.

B. Due to low utilisation of meat processing plants, owned or controlled by each of the Participants, the cost of meat processing is high, resulting in each of the Participants earning an inadequate return on its investment, and making the continued participation of each Participant in the meat processing industry in Queensland not viable within that industry's present structure.

C. Independent studies undertaken in relation to the Queensland meat processing industry indicate that rationalisation of existing meat processing plants must take place in order to ensure the future well-being of the industry in competitive domestic and international markets.

D. To ensure the continued participation of each of the Participants in the Queensland meat processing industry and to implement the proposals suggested by the independent studies referred to in recital C of this Agreement the Participants have agreed to become associated (on the terms and conditions contained in this Agreement) either directly or through a subsidiary as shareholders in a company called Australia Meat Holdings Pty. Limited

('Company'), which will acquire specified assets owned or controlled by each Participant."

The agreement provided for the acquisition by AMH of certain assets of the four shareholders. By this means AMH acquired 10 abattoirs -- nine in Queensland and one in the Northern Territory. AMH was also given the right of first refusal to acquire certain additional assets, including the Elders' abattoir at Toowoomba known as "Beef City" and the interests of Tancred, Tancred (NQ) and Foggitt Jones Pty Limited in the abattoir at Bohle (Townsville) said in the agreement to be "controlled by Tancred".
Part 5 of the agreement dealt with the acquisition by shareholders of cattle in Queensland. It provided that each of the shareholders "shall purchase the whole of their annual requirements of slaughter and feedlot cattle in Queensland in accordance with and subject to the procedures, terms and conditions" set out in that Part "and not otherwise". By para.5.01(a) each shareholder agreed to acquire "the first 35,000 of its annual requirements of slaughter or feedlot cattle in Queensland by purchasing the same itself in fat stock markets or by private treaty" at the rate of 1750 per month in each of the months January, February, November and December and at the rate of 3,500 in the other eight months of the year. If a shareholder purchased less than the agreed number in any two month period, the shortfall was not to be carried forward into subsequent months. Cattle acquired pursuant to the agreement by Tancred, for slaughter at Bohle, were to be acquired only "at markets within a radius of 160 kilometres or thereabouts" of Bohle "unless its requirements cannot be purchased by it at such markets due to seasonal conditions".
Para.5.02 went on to provide that AMH would purchase any additional fat cattle required by any member of the group, a procedure being specified. However, the agreement also prohibited the slaughter in Queensland of any cattle acquired pursuant to the agreement, whether by the shareholders themselves or through AMH, except by Elders at "Beef City" and by Tancred at Bohle or Oxley (Brisbane). The result was to limit the extent to which the shareholders could compete amongst themselves, and with AMH, for the purchase of fat cattle in Queensland.
Part 6 of the agreement made provision for the allocation and sale of product. Generally speaking, sales were to be undertaken by AMH itself rather than by individual shareholders. For that purpose para.10.01 provided for the individual shareholders' export quotas, with some exceptions, to be transferred to AMH. Paragraph 11.01 provided: "Each of the parties agrees that the interests of the Company as provided for in this Agreement will take precedence over the individual interests of the Participants in relation to the Queensland beef industry".

The negotiations for sale
So far as appears there were no further negotiations with Borthwick, either for the sale of its Queensland abattoirs or of its shares, before November 1987. In that month Mr John Gunthorpe, the Executive Director of the Meat Division of Elders, who was one of the founders of AMH and who served as its Chief Executive from 29 July 1986 until April 1987 and who is now Elders' senior nominee on the AMH board of directors, happened to meet Mr Peter Cash, a director, and the Chief Executive, of Borthwick and a director of plc, at Melbourne airport. According to Mr Cash, Mr Gunthorpe made a comment that "it was a pity the Elders deal had not gone through" and that "AMH would have to buy" Borthwick. Mr Cash replied that there were "lots of other fish in the water".
Despite this conversation AMH made no immediate approach to Borthwick. However, Borthwick became involved in discussions with Teys Brothers (Holdings) Limited ("Teys"), the parent of the companies which respectively operated abattoirs at Biloela and Beenleigh. On 8 January 1988 an agreement was made between plc and Teys for the sale to Teys of the whole of the issued share capital in Borthwick, together with the sale of the business of the Japanese branch of another Borthwick company: Thomas Borthwick & Sons International Limited. The consideration for the shares in Borthwick was agreed at $25 million. The agreement contained provisions designed to facilitate the continuance of the Australian business under its new management.
The sale to Teys was made subject to certain conditions, including a condition that the sale be approved by the shareholders of plc. Accordingly, the directors of plc convened an Extraordinary General Meeting of shareholders to be held in London on 26 January 1988.
Learning of the Teys' offer, some of the persons associated with AMH became interested in making to plc an alternative offer. But they did not do this immediately. On Friday 15 January 1988 Mr Victor Smorgon contacted Mr Trevor Kennedy, Managing Director of Consolidated Press Holdings Limited ("CPH"), which company held a 55% interest in Teys. As a result Mr Donald Bourke, Financial Controller of CPH, spoke to Mr Smorgon. Mr Smorgon told Mr Bourke that AMH wished to discuss the possibility of CPH causing Teys to withdraw its offer, so as to clear the way for an AMH offer to plc. In the event Mr Bourke attended a meeting on the following Monday, 18 January, at the office of Elders. Four other persons were present: Mr Gunthorpe, representing Elders, Mr Jack Smorgon of Smorgon, Mr Geoffrey Tancred representing Tancred and Mr Robert Wright of Metro.
During the course of this meeting Mr Tancred indicated to Mr Bourke the reason for AMH's interest in Borthwick. The note of the discussion taken by Mr Bourke, the accuracy of which was not challenged in cross-examination, includes the following:

"Mr. Tancred acknowledged that I had had previous experience in the Meat Industry and was therefore fully aware there was need to rationalise the Industry.

...

Mr Tancred went on to explain that the AMH had been a very successful partnership and that they were now running a profitable meat processing operation in North Queensland. AMH saw a new entry, such as Alan Teys, who they claim had no experience in North Queensland, as a real threat to the AMH being able to remain profitable and achieve further rationalisation in North Queensland."

Mr Alan Teys is the Chairman and Managing Director of Teys and of its two operating subsidiaries.

There was then discussion about either CPH or Teys becoming a one-fifth shareholder in AMH. Mr Bourke indicated that neither Teys nor CPH had any idea of the financial performance of AMH or of the investment involved. In response to a question, Mr Bourke said that CPH would normally expect a return of cash outlay within three years, to which Mr Gunthorpe responded that the investment from each AMH shareholder of $13 million had been -- or perhaps he said "would be" -- repaid in a little over two years. In response to a question from Mr Bourke, Mr Wright stated that AMH had made $22 million in 11 months of operation, on a kill of 600,000 head of cattle. Mr Bourke calculated this out at $36 per head. Mr Tancred commented that AMH should have made an additional $4 per head. He added, according to Mr Bourke's note "that if they had not had competition from Borthwicks then they would have earned another $10 per head" -- taking the total profit to $46 per head. Although Mr Tancred did not refer to competition in respect of cattle purchases, Mr Bourke understood him at the time to be referring to such competition. However, he conceded in evidence that Mr Tancred might have had in mind the possibility of extra profit enuring from increased throughput occasioned by an absence of competition from Borthwick for livestock. As Mr Tancred was not called, there is no evidence as to what he did have in mind. Mr Bourke recorded that those present "also indicated that in the coming year probably the northern plants could operate with only one of the Borthwick plants, ie Mackay or Bowen".
No agreement was reached at this meeting. Later that day Mr Gunthorpe telephoned Mr Bourke to inform him that the members of AMH had decided to proceed with a counter bid. But he made a reference to continuing discussions and, a few minutes later, he telephoned again to say that the bid would be made conditional, so as to allow AMH to withdraw if suitable arrangements were made with Teys and CPH relative to Borthwick. Mr Tancred also telephoned Mr Bourke, speaking of the possibility of compromise and of getting Teys into AMH.
On that same day, in London, AMH delivered a letter to the Chairman of plc, Mr Lewis Robertson. That letter contained an offer by AMH to purchase the share capital of Borthwick and the Japanese business upon the same terms as in the Teys agreement, but subject to a variation in the price of the shares from $25 million to $29 million. The offer was made subject to the Teys agreement not becoming unconditional and was stated to be open for acceptance until 31 March 1988 unless withdrawn by AMH in the meantime. However, on the following day -- and apparently as a result of Mr Bourke having, on 19 January, informed Mr Gunthorpe that he saw no point in further discussions -- the offer was varied by deleting therefrom the reservation of the right of withdrawal.
The letter of offer requested Mr Robertson to communicate the AMH offer to the shareholders of plc before the scheduled Extraordinary General Meeting. But those in control of AMH were not content to leave the matter to the directors of plc. It happened that, at the time, Mr Michael Nugent, Chief Executive of Elders Agribusiness, was in London. He had arranged to lunch with Lord Vestey, the head of the Vestey group. In a move which throws light upon the nature of the relationship between AMH and Vestey at the most senior level, Mr Gunthorpe telephoned Mr Nugent and suggested that he raise with Lord Vestey the concern of AMH to acquire Borthwick. Mr Nugent did so. On 23 January he reported to Mr Gunthorpe Lord Vestey's advice that he (Mr Gunthorpe) contact Mr Bob Parker of Vestey, London. Mr Nugent's fax message went on: "They are willing to talk. Also may be able to get to some key Borthwick plc shareholders to get the directors to slow up so AMH can get its offer unconditional in interests of all Borthwick shareholders".
Mr Gunthorpe telephoned Mr Parker. Mr Gunthorpe told Mr Parker that AMH would not be in a position to get a board recommendation prior to the shareholders' meeting and that AMH would probably have to try to generate support from individual plc shareholders. Mr Parker said that he would see what he could do. Mr Gunthorpe took from this answer that Mr Parker "was intending to make sure that the shareholders were aware of the tenets upon which our offer had been placed to them".
Back in Australia other discussions were occuring; these being discussions involving the Trade Practices Commission. On 20 January 1988 Mr Bourke reported to Mr Kerry Packer, the head of CPH, the substance of his discussions with AMH. It was decided to seek legal advice. Mr Bourke prepared a narrative of events and had a discussion with Mr Bruce McWilliam of Allen, Allen & Hemsley, solicitors. Apparently at Mr McWilliams' suggestion, the narrative of events was, on 21 January 1988, faxed to Mr W R McComas, the then Chairman of the Trade Practices Commission.
As it happened, Allen, Allen & Hemsley were also acting for Borthwick in connection with the matter. At some stage -- the evidence does not indicate when -- it was decided in London that it would be desirable for Mr Ian Tonking of that firm, in company with Mr Cash, to see Mr McComas in Canberra in order to ascertain the Commission's likely reaction to the AMH offer. Mr Denis Carey, Group Chief Executive of plc, rang Mr Cash from London and asked him to attend that interview with Mr Tonking. The meeting was held on the afternoon of 21 January. Mr Cash gave Mr McComas some information regarding Queensland abattoirs, including kill levels and market shares. At the end of the meeting, according to Mr Cash, Mr McComas indicated that he could not say that there would not be a problem with the AMH offer. That position was confirmed, in more positive terms, in a fax sent to Mr Tonking later that same day. The fax read:

"I refer to my discussion this afternoon with you and Mr Cash and now confirm my advice that, on the basis of information presently available to the Trade Practices Commission, it would take the view that if Australia Meat Holdings Pty Limited proceeds further with its proposal to acquire the issued share capital of Thomas Borthwick & Sons (Australasia) Limited, that acquisition would be likely to contravene s.50 of the Trade Practices Act, in that it would place Australia Meat Holdings Pty Limited in a position where it would, or would be likely to, dominate the market for the purchase of cattle in the central and northern regions of Queensland for processing for export, and possibly for local consumption.

This view has been conveyed to Australia Meat Holdings Pty Limited with the request that within seven days of today's date it let me have an assurance that it will not proceed further with its proposal without consultation with the Trade Practices Commission. If this assurance is not forthcoming and Australia Meat Holdings Pty Limited intends to proceed with its proposal, that company has also been informed that the Commission will take such action as it might be advised to intervene in the proposal."

Mr Cash reported the position to Mr Carey; and it appears that Allen, Allen & Hemsley also had contact upon the matter with both Mr Carey and with Borthwick's London solicitors.

On 24 January Mr Cash left Australia for London. Upon the following day, Monday 25 January, counsel for the Trade Practices Commission moved in this Court for a mandatory interlocutory injunction requiring AMH forthwith to withdraw its offer to purchase the Borthwick shares, the claim being that the acquisition of those shares would contravene s.50 of the Trade Practices Act. Counsel for AMH resisted this application, arguing that the likely effect of such an order would be that the Teys' offer would be accepted by the shareholders in Borthwick so that, without any curial determination that the offer did contravene s.50, AMH would be eliminated from the contest for Borthwick. On behalf of AMH, counsel offered certain undertakings designed to ensure that, if AMH's bid were successful, pending final determination of the matter Borthwick's business would be maintained and conducted independently of, and in competition with, the businesses of AMH and of its shareholders.
I thought that, particularly having regard to the undertakings which were offered, it would not be appropriate to make the order sought by the Trade Practices Commission. But I did not want there to be any misunderstanding by AMH as to its position, and particularly as to the risk which it would run if it proceeded with its offer; the possibility of a divestiture order under s.81(1) having already been raised by counsel for the Trade Practices Commission. After obtaining instructions, senior counsel for AMH made the following statement:

"If AMH were to be successful in its bid for the Borthwick shares and the TPC was of the view that that acquisition was a contravention of Section 50 of the Trade Practices Act, the TPC would be able to preserve its position by seeking a divestiture order under Section 81 of the Act. AMH understands that it may suffer severe financial losses if the Court were to make such a divestiture order and is prepared to accept the commercial risk of the consequences that may flow from a divestiture order."

In the result, I accepted AMH's undertakings and I declined to make the order sought by the Commission.

Completion of the transaction

As previously indicated, several relevant meetings were held in London on 26 January. The first was the Extraordinary General Meeting of the shareholders of plc. The Chairman, Mr Robertson, read a statement to the meeting in which he referred to the advantages to the Borthwick group of the sale of the Australian business and in which he justified the price negotiated with Teys. He then went on to refer to the AMH offer, and the board's thinking in relation thereto:

"On 18 January, however - ten days after the announcement of the Teys agreement - there arrived the offer from Australia Meat Holdings, 'AMH', which was the subject of the circular which your Board issued on 22 January. This offer was - for the Australian assets - in the amount of A$29mn as against the Teys agreement figure of A$25mn; both offers covered the ancillary Japanese business at approximately asset value. Naturally your directors saw important attractions in a price advantage of A$4mn ... and they sought urgently to satisfy themselves that the two offers were in other respects comparable, so that price could be the simple determining factor.

Unfortunately it proved that there was one point of difference, and a very important one. Both offers included, as a condition, that the necessary approvals should be forthcoming, both in Australia and in the UK. One of those approvals, crucial to any final deal, was that of the Trade Practices Commission ...

Assurances were received that the TPC would have no objection to the completion of the Teys transaction, and would take no steps to stop it; but Borthwicks' advisors received written intimation by the TPC that the acquisition of the Borthwicks Australian business by AMH - as distinct from Teys - 'would be likely to contravene' the relevant section of the Trade Practices Act; that the TPC was requesting an assurance that AMH would not proceed further without consultation with the Commission; and that the Commission would, failing such assurance, take such action as it might be advised to intervene in the proposal.

The effect of this indication, unless it could be modified or Borthwicks could in some way be shielded from its implications, was to confront the Borthwicks Board with a choice between two substantially different proposals. One, the Teys agreement, offered A$25mn and was - subject to your agreement today - certain, and a firm commitment; but if the Borthwicks shareholders did not approve it, and if the whole procedure were not completed by 1 February, the offer would lapse. The other, the AMH offer, carried a higher price of A$29mn, but was at that moment not certain, in that not only did it not have TPC clearance, it had a clear indication that such clearance would not be granted - if at all - until after a period of investigation. Moreover, though Borthwicks might decide to accept the risk of the outcome of the TPC's enquiries, it seemed that it would probably be able to do so only on the basis that the Teys offer would lapse by reason of its time-limit, and that even a conditional agreement with AMH could be the subject of an injunction imposed by the TPC pending its investigations. In other words, Borthwicks might fall between two stools and find itself with no agreement at all - not even a conditional one - because Teys had lapsed, and AMH had been enjoined against entering into any agreement. It was felt that if this state of affairs were allowed to develop, Borthwicks' bargaining position thereafter would be very, very gravely weakened; even if AMH eventually received clearance, Borthwicks would have no firm agreement and the buyer would be free to vary his conditions or his price; and meanwhile the effective value of the Borthwicks Australian business would have been damaged, not least by the very serious uncertainty and unease engendered among staff.

Your Board strove to secure from AMH terms that would surmount these difficulties, whether by obtaining some more positive assurance from the TPC, or by providing an AMH commitment to assume entirely for their own account the whole of any TPC risk and its consequences. Despite the most serious and determined efforts, no such assurance or commitment was forthcoming up to last Friday; and your Board came unanimously to the view that Borthwicks could not wisely accept the risk of losing the certain and acceptable Teys transaction, in exchange for the uncertain - indeed, on TPC indications doubtful - though financially more favourable AMH offer.

Accordingly we recommended, in a circular issued on Friday, 22 January, (after allowing the maximum possible time for a more helpful response from AMH, or from the TPC, on the sought-for assurances and commitments) that the Teys sale should continue to be recommended to shareholders; and had there been no further development in the past four days, we would still so recommend.

But since Friday, and subsequent to the issue of the circular letter of that date, your Board's efforts to resolve the uncertainties of the AMH offer have borne fruit.

Following an unsuccessful application by the TPC to the Courts in Australia for a restraining injunction, AMH have given certain undertakings to the TPC to the effect that they will make no changes at all to the Borthwicks Australian businesses, pending the outcome of a TPC enquiry in February. On this basis the TPC will not now intervene to prohibit the sale of the businesses to AMH, and our advisors are now satisfied that we can enter into a firm commitment with AMH. AMH have sent us a signed agreement in essentially the same terms as the Teys agreement but conditional only on the Resolution approving the Teys agreement not being passed, and are able to make the purchase moneys available in London for an immediate completion.

Your directors believe that in these circumstances they can, and in the shareholders' interests they should conclude such an agreement with AMH, thus securing the more favourable price offered by them, whilst avoiding the earlier risks of uncertainty and possible frustration of the sale, to which I have referred. ...

I hope that this explanation has clarified the difficulty in which the Board was placed by the circumstances of the two offers, and the attitude of the TPC as stated to us last week; and I am sure that it will be agreed that a fully favourable transaction, at a price of A$4mn higher, is to be preferred if all obstacles can be and have been removed."

The shareholders did take that view. No formal resolution was put but, in an informal vote for the guidance of the directors, the shareholders unanimously indicated that they favoured the AMH offer. The meeting was then adjourned. During the adjournment a sale agreement with AMH was signed and exchanged. Upon resumption of the meeting the Chairman put to the meeting the resolution, of which notice had been given, to approve the sale to Teys. This was defeated; whereupon the Chairman announced that the agreement with AMH had become unconditional and would be completed forthwith.
The agreement was completed that day, meetings of the directors of the vendor companies, Pacific Holdings and UK, being held to authorize the relevant stock transfers.
On the following day, 27 January, the directors of plc met. In dealing with Mr Cash's position, Mr Robertson reported to the directors that Mr Cash "had played a considerable part in the successful disposal negotiations".

The course of the litigation
When the matter was before the Court on 25 January 1988 AMH was the only respondent. I was informed that the only major issue would be the definition of the relevant market, that the parties could be ready to litigate the matter within three or four weeks and that the hearing would occupy about one week. Accordingly, and having regard to the desirability of minimising the period during which AMH would be bound by its undertakings, I directed that the final hearing commence on Monday 29 February 1988. I stood the matter over for directions on 2 February 1988.
On 2 February I granted leave to the applicant to amend the Application which it had filed on 27 January so as to add as additional respondents Pacific Holdings and plc. At that time counsel for the additional respondents indicated that their clients would contest the jurisdiction of the Court to grant relief against them and sought an opportunity to raise this as a preliminary issue before the commencement of the final hearing. I fixed 15 February for the consideration of that matter. I made directions for the exchange of proofs of witnesses and for the discovery of documents.
On 15 February 1988 UK was added as a respondent, the applicant having in the meantime realized that this company was one of the vendors of the shares. The Borthwick respondents then applied for an order setting aside service upon each of them upon the basis that the Court had no jurisdiction to grant relief against any of them pursuant to s.81(1A) of the Trade Practices Act. I heard some argument that day upon the matter of jurisdiction but it quickly became apparent that the resolution of that question depended upon the determination of certain issues of fact. Counsel for the Borthwick respondents conceded that s.50 might apply to the acquisition of shares in a company incorporated outside Australia, and being shares registered outside Australia, provided that the company carried on business in Australia. But they argued that jurisdiction to make an order under s.81(1A) was not attracted merely by the circumstance that the vendor carried on business in Australia; a matter they put in issue in relation to each of their clients. They submitted that s.81(1A) could only be applied against the Borthwick companies if those companies had been involved in Australia in the breach of s.50. For their part, counsel for the applicant contended not only that the Borthwick respondents, or some of them, carried on business in Australia. They also claimed that those respondents had been involved in the contravention of s.50 within Australia. Having regard to the disputes between the parties upon what were agreed to be critical questions of fact, I ruled that it was not appropriate to determine the matter of jurisdiction as a preliminary issue and I adjourned the notice of motion until the trial. I directed that the Borthwick respondents file defences by 19 February 1988, but that such filing be without prejudice to their claim that the Court lacks jurisdiction to grant relief against them.
During the course of the trial a further notice of motion, to like effect, was filed by the Borthwick respondents. Both motions were considered together and evidence was adduced by both the applicant and the Borthwick respondents upon the question of jurisdiction. After hearing argument I indicated my view -- for reasons which I then shortly stated -- that, if the contravention of s.50 were to be established, the Court would have jurisdiction to grant the relief sought; whether that jurisdiction ought, in all of the circumstances of the case, to be exercised being, of course, a separate question to be considered at the conclusion of the evidence. Accordingly, I dismissed the notices of motion. As the evidence which had been adduced on the motions was relevant both to the question of involvement and to the question whether the Court, in the exercise of its discretion, ought to refuse relief under s.81(1A), I admitted as evidence in the principal proceeding the whole of the evidence tendered in connection with the notices of motion. I also indicated that I would deal with the matter of jurisdiction more fully in my reasons concerning the principal proceeding.
Counsel for the Borthwick respondents sought leave to appeal against my order dismissing the notices of motion. I refused that application. It seemed to me that an appeal would not raise any question of general importance. My resolution of the matter of jurisdiction had turned upon conclusions of fact. Moreover, I was conscious that any appeal at that stage would inevitably disrupt the hearing of the principal proceeding; to the possible prejudice of a party, AMH, who was not concerned with the matters sought to be argued on the proposed appeal. It would remain open to the Borthwick respondents to appeal upon any appropriate ground, including jurisdiction, if they were dissatisfied with the orders made in the principal proceeding. For similar reasons I refused to order a stay of proceedings whilst the Borthwick respondents applied to a Full Court for leave to appeal.
Notwithstanding my view about the undesirability of an appeal at that stage upon the question of jurisdiction, the Borthwick respondents applied to a Full Court for leave to appeal. That application was unsuccessful, the Full Court holding that the application was incompetent: see Thomas Borthwick & Sons (Pacific Holdings) Limited v Trade Practices Commission (Bowen CJ, Lockhart and Sheppard JJ, 15 April 1988, not reported).
In the event the estimate that a hearing would occupy one week proved sadly astray. The hearing in fact occupied a total of 23 days. The extra time was partly occasioned by the joinder of the Borthwick respondents, involving issues relevant only to those respondents, but the major cause of the expansion of hearing time was the amount of evidence which the applicant and AMH, particularly AMH, adduced upon the issue of market definition. I am sure that the parties intended this material to be helpful to the Court and I salute the industry of the many people involved in its collection and analysis. However, although none of the evidence is irrelevant, much of it has proved to be of little assistance. It is for me a matter of concern that the curial determination of the limits of a market -- about which question I assume commercial people frequently make almost intuitive judgments -- should be seen as requiring the time, effort and expense involved in this case. My concern is intensified by the circumstance that, almost by definition, proceedings to prevent a breach of s.50, or to reverse the effects of an antecedent breach, will always involve a measure of urgency. I suppose that the very flexibility of the concepts of market and of dominance necessarily casts a wide evidentiary net; but, in this type of litigation, there is a particular need for rigorous consideration of the probative value of potential items of evidence.
In particular I deprecate the course, taken by AMH, of supplying to economists proofs of the evidence to be given by other witnesses and then eliciting from those economists opinions as to the proper conclusion upon the definition of the market. Economists are able to assist the Court in relation to economic principles. But, once the relevant principles are expounded, their application to the facts of the case is a matter for the Court. The proper definition of a market is entirely a matter of fact, the determination of which ought not to be made more protracted and expensive by the adduction of unnecessary expert evidence.
In the event, the necessity of finding other hearing days, given existing commitments, has prolonged the finalization of the case beyond what I would have wished.

Definition of the market -- legal concepts
I had occasion, in Mark Lyons Pty Limited v Bursill Sportsgear Pty Limited (1987) 75 ALR 581 at pp.588-591, to discuss at some length the concept of "market", as that term is used in Part IV of the Trade Practices Act. I drew particularly upon the seminal decision of the Trade Practices Tribunal (Woodward J presiding) in Re Queensland Co-operative Milling Association Limited (1976) 25 FLR 169. I need not repeat my previous comments. But it is necessary to observe that, in Mark Lyons -- as in each of the authorities referred to therein -- the alleged market was one in which the relevant company acted as a vendor of goods or services to the public. Consequently, in discussing substitutability, the cases refer to the possible consequences of a decision to "give less and charge more"; to borrow the language used in Queensland Co-operative Milling at p.190. In the present case, the alleged market is one in which AMH acts as a purchaser of cattle from a wide variety of vendors, mainly breeders. It is the obverse situation; but nonetheless the description of a market contained in Queensland Co-operative Milling continues to provide guidance:

"A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them. (If there is no close competition there is of course a monopolistic market.) Within the bounds of a market there is substitution -- substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm's product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance and cost and price incentives.

It is the possibilities of such substitution which set the limits upon a firm's ability to 'give less and charge more'. Accordingly, in determining the outer boundaries of the market we ask a quite simple but fundamental question: If the firm were to 'give less and charge more' would there be, to put the matter colloquially, much of a reaction? And if so, from whom? In the language of economics the question is this: From which products and which activities could we expect a relatively high demand or supply response to price change, i.e. a relatively high cross-elasticity of demand or cross-elasticity of supply?"

One of the expert witnesses called on behalf of AMH, Associate Professor T G Parry of the Faculty of Economics at the University of New South Wales, discussed in his evidence the concept of "market". Drawing upon that evidence, and the decided cases, counsel for AMH put the following submissions relating to the concept of "market":

"A market is the field of activity in which buyers and sellers interact and the identification of market boundaries requires consideration of both the demand and supply side. The ideal definition of a market must take into account substitution possibilities in both consumption and production. The existence of price differentials between different products, reflecting differences in quality or other characteristics of the products, does not by itself place the products in different markets. The test of whether or not there are different markets is based on what happens (or would happen) on either the demand or the supply side in response to a change in relative price."

I adopt this submission and I hold that, in considering whether there are separate fat cattle markets within Queensland, it is necessary to consider what would happen on the supply side in response to a change in the price offered by buyers.

The product market
There is an issue between the parties as to the relevant product market. The applicant contends that the product market consists of cattle turned off for immediate slaughter and that it does not include either store cattle or feed lot cattle. AMH, by contrast, submits that there is but a single product -- beef cattle -- which includes all three categories. It is, of course, necessary to identify the relevant product in order to determine the geographical area within which that product is separately marketed.
I have already set out a description of each of the relevant categories. There is general agreement amongst the witnesses that, in relation to a small proportion of cattle turned off for sale, informed people may differ as to the appropriate category in which to place a particular beast. At the extremes there is no problem. Provided that abattoir capacity is available, there is no point in postponing the slaughter of an animal in optimum condition. Similarly, except perhaps in times of severe drought, cattle in poor condition are unlikely to be slaughtered. But differences may occur in relation to cattle in good, but sub-optimal, condition. One person may consider that any improvement in condition will not be worth the cost involved in achieving it. Another may think that a period in a feed lot -- or even on open pasture -- is worthwhile. Those witnesses who dealt with the matter used different language to refer to the proportion of cattle in connection with which opinions might differ as to whether they were store or fat cattle. Mrs Smith compared the position with "drawing lines on a map when you want to divide up regions, there is going to be a blur at the edges; but by and large the animals fall into quite clearly defined categories". Mr Grahame Flynn, General Manager, Livestock, of AMH said that there was "a top end" where stores and fat cattle merge but he agreed that, subject to that qualification, there was "a clearly understood and universally applied distinction" between these two categories. His evidence went on:

"Q If a cattle jobber gave evidence to his Honour that by and large store cattle buyers buy store cattle and fat cattle buyers buy fat cattle, he would be only stating the obvious, would he not?

A He would be stating a fact that was probably 80 per cent true but not 100 per cent. I would imagine it would be in that percentage that the two of them interlap. Even in females, there is a big interlap against (sic) with store. When there is a flush in the season the store buyer will come into the boning cow market and compete very strongly, to put more condition on them, get a calf out of them and then sell them.

Q But competition between store buyers and fat cattle buyers is fairly unusual, is it not?

A No, it is not, Mr Sweeney.

Q It bespeaks exceptional circumstances in the market, does it not?

A I keep repeating it is the 20 per cent, that there is a continual intermingle both in the female and the male cattle.

...

Q The reason why those terms fat cattle and store cattle are used so universally is so that people in the cattle industry have a clear understanding of what they mean, do you not agree?

A Yes. It is more of a -- in one term it is a case of utilization, at that top end. What to me is a store beast, to you might be a meatworks beast. It depends on the purchaser's ability to handle them, what purpose he is going to use them for."

Mr Ian Whan, Chief Research Officer for the LMAQ, gave similar evidence. He agreed that, in his writings, he had been accustomed to distinguish between store cattle and fat cattle. He said that they were "separate commodities", although "their utilization can overlap quite a bit, go to one market or the other". Mr Whan would not accept the suggestion that store cattle and fat cattle constituted separate markets, but he said that he had "talked about them as being separate parts within the market".
There is no doubt that the prices obtainable for store cattle are influenced by the price level for fat cattle. This is to be expected, given the fact that the purpose of purchasing stores is to convert them into fat cattle. But the two price levels do not directly correlate. They are subject to different influences, chiefly seasonal. Mr Ian Barrett, a cattle producer from the Bowen district, made the comment in evidence:

"stores are in demand if they had a storm somewhere where ... widespread storms, not just narrow strips, creates demand."

He said that in 1987, a drought year, "from June to September you were flat out giving them away, no one wanted them", that is store cattle. But, even under these circumstances, Mr Barrett said that the stores were not being bought for slaughter. Although Mr Barrett did not refer to the reason, it appears that, at that time, ample fat cattle were available.

The evidence shows that the practice within the industry is for sales of cattle to be advertised either as "fat cattle" sales or "store" sales. Sometimes each sale will be held successively at the one place upon the one day. There is some intermingling of purchasers. Mr Maurice Binstead, a large scale cattle dealer based at Rolleston in central Queensland, said that sometimes dealers will buy at fat cattle sales animals which were then only of manufacturing meat quality, and further fatten them for the Japanese market. But he summarised the position in this way:

"Normally they are specalist sales and fat sales are fat sales and store sales are store sales. Fat buyers do not usually operate at store sales. Sometimes they do on the quality in that range but store buyers do operate at fat sales because of the reasons I said".

This evidence is consistent with what was said by several witnesses employed by abattoir operators as to their own company's practice and experience.

It is common ground between the parties, and their expert witnesses, that the existence of marginal overlapping and substitutability does not in itself negative the existence of separate markets. A question of degree is involved in determining at what point the substitutability of one product for another means that the two products should be regarded as being with the same market. None of the expert witnesses offered any opinion upon that matter. A judgment must be made upon the basis of the whole of the relevant evidence, and considering that question from the point of view of both vendors and purchasers.
In one sense there is almost complete substitutability by vendors of stores for fat cattle. Except in times of drought, it will usually be open to a producer to sell cattle as stores rather than as fat cattle. But, of course, in so doing, the producer must sacrifice part of the income able to be derived from fattening the beast to slaughter condition. Where a producer takes this course, he or she is not substituting indifferently in the one market; but rather selling the animal as product X rather than retaining it, adding value to it, and selling it as product Y.
I have already referred to evidence that, under certain circumstances, purchasers may substitute as between store cattle and fat cattle. But this course is available only in respect of the overlap between the two categories, put at 20% by Mr Flynn. That it is an exceptional phenomenon is perhaps best illustrated by the fact that, as everyone agrees, there are two separate categories -- stores and fat cattle -- offered at sales.
The evidence establishes that, in the present context, store cattle and fat cattle are separate products offered in separate markets; and this notwithstanding that, on the margin, purchasers will sometimes buy one product in substitution for the other.
The question whether feed lot cattle constitute a separate market arose only late in the hearing. The issue was raised by counsel for the applicant, probably as a result of the production of figures showing that, of all cattle transported from one region to another, a significant proportion were granted the pleasures of the feed lot before slaughter. No doubt it was thought to be advantageous -- in connection with the dispute over the geographical market -- to minimise the number of fat cattle shown to be moved between regions.
I am not persuaded that feed lot cattle ought to be regarded as being within a different product market to fat cattle. There is no evidence of any practice, within the industry, of holding "feed lot sales" in the same way as producers and their agents hold store sales and fat cattle sales. Whereas, both in publications and in the evidence, there are frequent references to stores and fat cattle as being separate products, there is no such recognition of feed lot cattle. In contrast to the store market, but like the fat cattle market, usually the purchasers of feed lot cattle are slaughterers. And feed lot cattle are cattle very nearly ready for slaughter. There must be a high degree of substitutability. I think that the correct conclusion is that the sale of feed lot cattle takes place within the same market as the sale of fat cattle.
The relevant product market, for the purposes of this case, may then be defined as the fat cattle market, using that term to exclude store cattle but to include cattle purchased for feed lots.

The geographic market: vendors' attitudes
As I have indicated, the geographic limitations of the appropriate product market -- that is, upon my finding, the fat cattle market -- is a major issue in this case. There is no doubt that, as a general theoretical proposition, it is possible to transport fat cattle from any part of Queensland for slaughter in any other part. It does not, of course, follow that the whole of Queensland should be regarded as constituting, or being part of, a single market. That question depends upon whether or not, in practice as distinct from theory, the whole of Queensland is an area in which there is a single "field of rivalry" between those involved in the fat cattle market; between producers for sales and between abattoir operators for purchases.
Before turning to the evidence directly relating to that matter, it is desirable to note the effect of the evidence regarding methods of sale. Fat cattle are sold either by private treaty or by auction. There are advantages in private treaty sales, both to the vendor and to the purchaser. Sale by private treaty offers to a vendor the advantage of a certain price and some savings in selling and handling charges. The alternative, submission to auction, may mean, in the case of a large consignment, that the vendor depresses prices by "swamping" the sale. Consequently, the largest producers sell almost exclusively by private treaty, using sale yards only for the disposal of odd lots. From the purchaser's point of view, as Mr Flynn pointed out, sale by private treaty facilitates product planning. The purchaser knows how many cattle will be available and is able to plan delivery and throughput accordingly. Additionally, the reduced handling of cattle, which occurs when they are purchased directly from the grazier, minimises bruising.
There are three methods of private treaty purchases: direct liveweight purchase where the price is negotiated at a rate per liveweight kilo and the cattle are weighed at the point of delivery; per head direct purchase where a rate per head is offered by the buyer after visual inspection and upon the basis of the buyer's estimate of the dressed carcass weight of the beast, delivery being made at the vendor's property; and weight and grade purchase where the buyer quotes a price in cents per kilo based upon the dressed weight of the carcass as determined at the abattoir. According to Mr Flynn, weight and grade purchase -- commonly known as "over the hooks" -- is now the most popular method of sale. This opinion is borne out by figures contained in the livestock report submitted to the October 1987 meeting of the board of AMH. That report showed that, so far in 1987, AMH had purchased 54.5% of its cattle "over the hooks", 22.9% in the paddock and 22.7% at auction. Evidence from employees of other abattoir operators suggests that such a mix is fairly typical throughout the industry.
At sale yards cattle are auctioned upon a cents per liveweight kilo basis; the cattle being weighed after the sale and immediately before delivery to the purchaser.
The applicant called evidence from 32 producers, whose properties are widely scattered over northern and central Queensland. Some properties even extend into the eastern fringe of the Northern Territory; an area which has been regarded by all parties as part of northern Queensland, in the production sense. The applicant also called several agents and dealers. The producers who gave evidence included some of the largest cattle vendors in Queensland, in terms of turn-off. The purpose of this evidence was to establish the proposition that vendors of fat cattle are generally most unwilling to effect a sale at a location further from their own property than is absolutely necessary. That purpose was achieved. There is no doubt in my mind that, although producers and dealers tend to keep themselves aware of prices being realised for cattle over a large geographic area, they seek to sell their cattle locally.
There are a number of reasons for this attitude. In the first place, the expense of transporting cattle to the place of sale has to be met by the vendor. Transportation costs are high. For example, Mr J L P Griffith, Chief Executive Officer of Australian Agricultural Company Limited, a major pastoral company with extensive cattle holdings both in Queensland and in the Northern Territory, said that the cost of transporting an animal from "Brunette Downs" station -- which is situate just across the Northern Territory border from Mt Isa -- to Brisbane by road is about $40 greater than the cost of transporting the same animal to Townsville. Mr Griffith estimated the difference in road freight from the Gulf country to Brisbane, as distinct from Townsville, as being the equivalent of 15 to 20 cents per kilogram of hot dressed weight. On an average beast of 300 kgms this amounts to to $45-$60 per head. Mr Griffith conceded that rail freight rates were lower than road freight rates but he said that he would not consider using the railway for such a long journey because of the loss of condition which the cattle would sustain. For cattle, the journey from Cloncurry to Brisbane, by rail, takes seven days, with two spells on the way. Mr G L Hughes, manager of the Koolatah Pastoral Company, which owns stations in both northern and central Queensland, quoted $20 and $25 per head as the difference in transport costs from his company's stations on the Mitchell River, in the Cape York Peninsula, to Rockhampton and Biloela respectively, as compared with Cairns.
Even for producers on the coast, with direct access to the north-south railway line, freight costs are significant. For example, Mr Rodney Barrett, who has a property just out of Bowen, said in his written statement that the additional direct cost to him of sending his cattle to Townsville, Mackay and Brisbane -- as distinct from the Borthwick abattoir at Bowen -- would respectively be $9, $10 and $30 per head. The question was not picked up in Mr Barrett's oral evidence but the reference to Brisbane may have been an error for Rockhampton. Mr Ian Barrett, who has the adjoining property, gave evidence that the rail cost to Cannon Hill (Brisbane) was $62 per head as against $15.30 to Mackay and $30.65 to Rockhampton.
Direct costs are only part of the problem. Mr Griffith said that, apart altogether from the freight costs, "in many years it is not possible to consider a trip to southern Queensland for our cattle" from the northern stations "because of their condition due to drought and age. A large percentage of these cattle would perish before they reached their destination". But, even in the case of cattle in good condition, there is an indirect cost. Mr Griffith estimated that cattle sent from the Gulf country to Brisbane would lose about two per cent of their original body weight in transit. He stated a rule of thumb that a beast loses about a kilogram a day after the second day. Thus there is little weight loss on journeys to local abattoirs; even using the word "local" to encompass a journey from the Gulf country to Townsville.
Similar evidence was given by other producers, many of whom emphasised that aged cows constituted a significant component of the turn-off in the north. These cows were generally in poor condition and unfitted to sustain a long journey. Reference was also made to a fever found in northern Queensland called femoral fever, which is said to show no symptoms upon loading but which causes significant deaths to cattle under stress during travelling. Mr Rodney Barrett summed up the position in this way:

"A We cannot conclude that you can take cattle away from pastures and waters and their natural environment and not suffer a disadvantage. That is a fact of life and when they are put under stress they are then vulnerable to all of the extra things that affect them and they react probably more severely and so that you have such a thing as a loss of condition or maybe a disease problem or tremendous heat or adverse weather conditions or a two-man crew on a train that is not entitled to pick up waggons when a three-man crew is supposed to and all this nonsense so when those things occur - if everything goes 100 per cent well you can shift them around provided they are in store condition or something like that and expect a good job. If they are fats you can expect weight losses and because they are fat and heavy your problems are then a bit compounded.

Q In terms of travel though, any travel is going to cause some distress to the beasts, is it not?

A That is quite so, yes.

Q And it is only a question of degree of quantification?

A That is right.

Q Of the damage having regard to the particular voyage under consideration?

A Yes, that is quite correct.

...

Q I am sorry, I thought you were going to say something more?

A All I would add is that the human race being what we are it seems almost impossible to have the perfect run when it comes to trains or trucks or things like that.

Q And all you say is that when you send it over a long distance the odds are that --?

A Stacked against you.

Q -- the odds are higher that something is going to go wrong?

A Yes."

Bruising was another matter mentioned by witnesses. Bruising can be minimised by the careful handling of cattle, especially during loading and unloading. But there was a general acceptance amongst the witnesses that, despite all endeavours, some bruising is likely to result from road or rail travel. Cattle do not necessarily suffer more bruising from a long journey than from a short journey. Everything depends upon the way in which they are handled. But several witnesses pointed out that a journey from northern Queensland to southern Queensland necessarily involves at least one spell -- often two spells -- en route, for the purposes of which the cattle have to be unloaded and reloaded. So there is an increased opportunity for bruising to occur. Bruising is at the expense of the producer, bruised meat being cut from the carcass before weighing.
Apart from the costs just discussed, there are intangible disadvantages, at least in the eyes of some producers, in selling to a distant market. Several witnesses made the comment that they like to visit the abattoir at the time of the slaughter of their cattle in order to inspect the carcasses. In this way they obtain helpful information as to the condition of their stock. They also pointed out the management problems which result from selling at a distance. The producer remains responsible for the stock whilst in transit, so that if something goes wrong with the transportation arrangements he or she may have to travel a considerable distance to organize spelling, or to cope with sick or dead animals. Reference was also made to concern about receiving prompt payment from a distant buyer, as distinct from a known local buyer, and to the desirability, for humanitarian reasons, of minimising the distress suffered by cattle during transportation.
Some of the producers who gave evidence told of occasions when they had sold cattle to an abattoir outside their own region. Without exception these were recounted as extraordinary events, and not readily to be repeated. They were said to have been caused either by unusual seasonal conditions or by a desire to test alternative possibilities. Each one of these witnesses said that, when the costs of transportation were taken into account, the return was less than would normally have been obtainable locally.
The perception and attitude of the producer witnesses can accurately be summarized by making short quotations from the evidence of three of them. Mr R J Schmidt, Managing Director of King Ranch Australia and a man with 35 years experience in the industry, said in his statement: "It is my considered opinion that northern based producers including King Ranch are effectively constrained to selling to north based purchasers and that there is in effect a discrete livestock selling market there". Mr Ian Barrett, who has been in the industry since 1956, said: "From my experience and knowledge of the local industry I can say that very few cattle are ever sent by local producers to saleyards or meatworks in southern Queensland. The only time I would consider selling cattle in southern Queensland would be in desperate times such as severe drought". Mr K H Power, a producer near Cloncurry, put the matter in this pithy manner: "I am a firm believer that to go past the first set of weighing scales is only foolhardiness as cattle lose weight, bruising increases and returns diminish".
Mr J J Daniels has been a stock and station agent for 30 years, 28 of them in Cloncurry. In 1987 he sold about 21,000 cattle on behalf of clients. He has also been a grazier on his own account since 1967. The evidence does not disclose whether Mr Power is one of his clients but the two men share the same philosophy. Mr Daniels said in evidence:
"I advise my clients, whether they be selling

to meatworks or whether we decide to sell to a meatworks, that you weigh your cattle over the first set of scales that are available -- and that is Cloncurry."

Where that advice is followed, the property in the animals immediately passes to the meatworks company which can, of course, choose the place of slaughter; but the meatworks company bears the costs and risks of transportation.

It is significant that there is no evidence -- whether from any cattle producer or from any purchaser -- as to the existence of any producer who habitually sells fat cattle at a location remote from the property from which they are turned-off. If there was such a producer, turning-off cattle in any volume, his or her existence would be unlikely to have escaped the knowledge of AMH people such as Mr Flynn. Particularly under those circumstances, it is a safe finding to say that, except under extraordinary conditions, producers sell locally: in the paddock, at a local sales yard or to the local abattoir. (I use the word "local", of course, in the expanded sense necessary to accommodate the distances found in northern Queensland. In fact the "local" sales yard or abattoir may be some hundreds of kilometers from the vendor's property but nonetheless be "the first set of weighing scales".) As Mr Whan agreed in cross-examination, producers in the north "appear not to want to send their cattle away".
This attitude is so entrenched, and supported by such cogent factors, that, in my opinion, it is unlikely to be affected by anything short of a major change in present purchasing policies. It is significant that, although the difference between southern prices and northern and central prices not infrequently rises above the freight cost, there is no evidence that producers in these regions "chase" the southern prices by sending their cattle south. No doubt there may come a point where northern and central producers would become interested in sending cattle south. Perhaps some would react to a major rise in southern prices. But I think that, for many producers, more than a price rise would be required. They are perhaps more likely to respond to a changed form of agreement, whereby the risk and responsibility of the journey is cast upon the purchaser. But such a change would be contrary to the recent trend towards weight and grade purchase.

The geographic market: purchasers' conduct
There is evidence as to the behaviour of abattoir operators. The applicant called several witnesses who were employees of central or southern abattoirs and who deposed to the fact that their companies normally made all their purchases in the local region. They admitted to some exceptions and, in particular, it appears not to be uncommon for some southern abattoirs to purchase in the central region; property in the stock there passing and the purchaser accepting the cost and risk of transportation back to the abattoir. Some of the witnesses called by AMH were employed by southern abattoirs. They asserted the willingness of their employers to purchase cattle in northern Queensland whenever the prevailing prices so permitted. But in fact only a minor percentage of the cattle purchased by their respective employers came from central Queensland. The proportion of north Queensland stock was extremely small. Mr J McKenzie, General Manager of the R J Gilbertson Group which operates a boning room at the Cannon Hill abattoir in Brisbane, agreed that 22% of the cattle slaughtered by his company at Cannon Hill came from central Queensland and 9% from the north. The Tancred abattoir at Oxley (Brisbane) may take as little as 2% of its stock from north Queensland, according to Mr Reginald Clanchy, the company's Livestock Manager; and this on a definition of north Queensland by Mr Clanchy which draws the line through Nebo, south of Mackay. Mr Clanchy put purchases from central Queensland at 40% of the total throughput of the abattoir. Smorgon, which operates an abattoir at Inverell in northern New South Wales, purchases cattle in southern and central Queensland but not at all in northern Queensland. Mr Malcolm Foster, General Manager, Beef Operations of Elders agreed that the proportion of stock purchased for the company's feedlot at "Beef City" Toowoomba which comes from northern Queensland "would not be high". He would not comment, one way or the other, upon the suggestion that the proportion was in fact less than 1%. Apparently the company buys mainly British breed stock. Morex Meat Australia Pty Limited, which operates abattoirs at Maryborough, Roma and Grantham in southern Queensland, sends buyers to both northern and central Queensland sales. Nonetheless it was conceded by Mr Max Nunn, the chief cattle buyer of the company, that the company purchased only "a small percentage" of its fat cattle north of Rockhampton. The cattle purchased by Morex in northern Queensland are mainly bulls, which are used for the production of manufacturing meat.

I add that, if -- contrary to my opinion -- it were necessary to show that the person engaged on behalf of the vendor in conduct in Australia had the necessary knowledge to justify the epithet "knowingly", Mr Cash had that knowledge. As he himself agreed in evidence, on matters of market share, he was the expert "as far as Borthwicks is concerned".
Counsel for the Borthwick respondents submit that there was no causal relationship between such activity as did take place in Australia, on behalf of those companies, and the ultimate acquisition by AMH. Consequently, they say, there was no conduct which could constitute the companies being knowingly involved in the acquisition in Australia.
It is true that the visit by Mr Cash and Mr Tonking did not achieve the result desired by Mr Carey. The Trade Practices Commission did not drop its opposition to the acquisition. It is less clear that the other activity which took place in Australia between 18 January and 26 January was ineffectual. It is noteworthy that, in his statement to the Extraordinary General Meeting on 26 January, Mr Robertson referred to the view of "our advisors" as to the effect of the undertaking given to this Court upon the previous day. The information conveyed from Australia was critical to the directors' change of mind, and it may be inferred that the advice referred to included advice from Australian lawyers. And I have already quoted the accolade given to Mr Cash by Mr Robertson at the plc board meeting of 27 January.
However, leaving aside any question of fact, it seems to me to be erroneous to read s.75B as being limited to conduct without which the relevant contravention could not have occurred. The words "knowingly concerned" are commonly found in statutory provisions creating criminal offences. In that context the word "concerned" has been read as requiring facts connecting the accused with the commission of the relevant offence: see Rex v Goldie (1937) 59 CLR 254, Ashbury v Reid (1961) WAR 49, Regina v Hussain (1969) 2 QB 567, Regina v Kelly (1975) 24 FLR 441, Regina v Tannous (1987) 10 NSWLR 303. In Ashbury v Reid the Full Court of the Supreme Court of Western Australia, after quoting the Oxford dictionary definition of "concerned", said at p.51: "The question which a court should ask itself in determining whether an act or omission on the part of an individual comes within the terms of s.54 is whether on the facts it can reasonably be said that the act or omission shown to have been done or neglected to be done by the defendant does in truth implicate or involve him in the offence, whether it does show a practical connexion between him and the offence".
Tannous is an interesting case, in the present context. The appellant had agreed with two other persons that certain money owing to him could be used in the importation of cannabis, in the sale of which he was to become a participant. He took no other part in the enterprise. In fact his money was not used so that there was no causal relationship between the involvement of the appellant and the actual importation. Notwithstanding this, the Court held that there was evidence upon which he could be convicted of being knowingly concerned in the importation. At pp.308-309, Lee J said:

"The 'concern' to which the section speaks is not a concern personal to the appellant in the sense of being in his mind, but it is a concern which can be demonstrated objectively by reference to his association, whatever it may be, with the importation. It must be shown that he is 'concerned in' not just 'concerned about the importation'. A father, learning that his son had made arrangements to import narcotic drugs into this country, might well be anxious about, interested in or concerned about that fact and he might evince that anxiety, interest or concern to others. But he would not be guilty of the offence of being knowingly concerned merely from his knowledge of the importation and his state of mind arising therefrom. Before he could be convicted under the section he would have to do something to connect himself with or involve himself in the importation."

The Borthwick respondents were more than concerned about the acquisition of Borthwick by AMH. They were concerned in that matter. They took active steps to bring it about. Part of that activity took place in Australia. It matters not that a part of the Australian conduct, the visit to Mr McComas, not only failed of its purpose but, as events turned out, proved to be unnecessary.
In my opinion the evidence demonstrates that the Borthwick respondents engaged in conduct, within Australia, which answers the description of being "knowingly concerned" in the acquisition by AMH. It follows that the Court has jurisdiction to declare the transaction void under s.81(1A) against those two respondents, Pacific Holdings and UK, who were vendors to AMH of the shares.

Relief: declaration under s.81(1A)
It does not, of course, follow that the Court ought to exercise that jurisdiction. The Court retains a discretion as to the appropriate form of relief. I am of the opinion that it would be inappropriate to make a declaration under s.81(1A). There are three separate considerations which impel me to that conclusion. Standing alone, any one of these reasons might be sufficient. Taken in combination, they are overwhelming.
The first consideration arises out of the events of 25 January 1988. On the previous Thursday, 21 January, the Trade Practices Commission had clearly indicated by letter to Mr Tonking that its then view was that the acquisition by AMH of the Borthwick shares would constitute a breach of s.50. Reference was made to an assurance being requested of AMH that it would not proceed with its proposal, failing which "that company" -- that is AMH -- "has also been informed that the Commission will take such action as it might be advised to intervene in the proposal". That letter did not say whether or not any legal action would also involve the vendors of the shares.
When the initial application was made in this Court, on 25 January 1988, the only respondent referred to was AMH. It is true that nothing was said to negative the possibility that, at a later stage, the Borthwick respondents, or some of them, might be joined in the proceeding and that an application might be made under s.81(1A). But neither was any such action foreshadowed. On the contrary, the discussion revolved around divestiture. As intimated above, counsel for AMH made an express statement taking upon their client the risk of such an outcome.
The course taken by the Trade Practices Commission on 25 January, and the acceptance of the risk of divestiture by AMH, was not inconsistent with the possibility that the Commission would subsequently make an alternative claim, involving the vendors, for a declaration under s.81(1A). But, if the Commission then had in mind such a claim, it did not so intimate to any of the Borthwick companies. Perhaps the directors of plc assumed too much in their company's favour, but the result of the failure of the Commission to notify its intention to seek relief under s.81(1A) was that the directors went to the shareholders' meeting on 26 January under the belief that there was no risk that the Commission would attempt to frustrate the transaction. Acting upon that belief, they jettisoned their previous reluctance to endorse the AMH offer and they recommended its acceptance. Implicit in that recommendation was a recommendation that the shareholders reject the conditional agreement made with Teys. I am satisfied from the evidence of Mr Robertson and Mr Carey that, so far as those two gentlemen were concerned, the events of 25 January, combined with the absence of any threat of action by the Trade Practices Commission, were critical to their personal decisions to abandon the Teys agreement and to accept the AMH offer. The Teys agreement having been rejected by the shareholders, it is no longer available to the vendor companies. Perhaps, in the event of an order under s.81(1A), a new agreement might be negotiated with Teys -- or with someone else -- but, as Mr Robertson said to the shareholders on 26 January, the vendors' bargaining position would be very poor. Moreover, the Borthwick group has used the proceeds of the sale to retire certain debts. Difficulties would be experienced if the group now had to find $29 million to repay AMH.
I accept that the Court should not be astute to protect parties against the consequences of commercial risks freely undertaken by them. No doubt it is true that, in entering the transaction with AMH upon the assumption that the Commission would not seek to invoke s.81(1A), the vendors took upon themselves a commercial risk. But I think that, in so doing, they were substantially influenced by what had occurred in Australia upon the previous day, combined with the fact that no intimation had been given to them by the Commission that, if they did accept the AMH offer, the Commission might seek relief under s.81(1A). Although I intend no criticism of the Commission by the comment -- much was done in a very short time -- I think that, under these unusual circumstances, the failure of the Commission to issue a warning lulled the directors and the shareholders of plc into a not unjustifiable belief that they were not at risk in taking the course which they did. There would be a measure of harshness if the Court were now effectively to declare the transaction void, putting the vendors in a worse position than their position before the meetings of 26 January.
The word "effectively" leads to my second reason for refusing relief under s.81(1A). The evidence indicates that, in actual fact, it is unlikely that any declaration made by this Court would achieve the desired purpose of reversing the transaction.
The relevant shares are held upon the London register of a company incorporated in the United Kingdom. The lex situs of the shares is the United Kingdom so that, when registration of the transfer of the shares was effected on 26 January 1988, AMH became the owner of the shares according to the relevant (United Kingdom) law. (If it be relevant, it may be noted that the situation was the same under Australian law. Unless and until this Court intervenes under s.81(1A), under Australian law the transaction is valid and the transfer effective to convey title to the purchaser.)
There are two results of a declaration under s.81(1A) relating to shares. Firstly, the shares "shall be deemed not to have been disposed of by the vendor": para.(d). Secondly, the vendor comes under an obligation to refund the purchase price: para.(e). It is important to note that the sub-section does not itself make void the disposition of the shares. Rather it empowers the Court to make an order, in the exercise of its discretion, which will have that effect. It follows that any enforcement by the United Kingdom courts of a declaration of invalidity would depend not only upon their recognition of the relevant Australian law but also upon their readiness to enforce the judgment of this Court. In expert evidence as to the relevant United Kingdom law, Professor James Crawford, Challis Professor of International Law at the University of Sydney, expressed the view that the English courts would not enforce such a judgment. He stated three reasons: firstly, because -- on his understanding of the facts -- the Borthwick respondents were at no stage present or resident within Australia and had not submitted to the jurisdiction of this Court; secondly, the enforcement of this Court's judgment would involve the enforcement of a foreign penal, confiscatory or public law; and thirdly, that the judgment would involve a declaration of title. These reasons were put as alternatives, any one of them being, in the Professor's opinion, a sufficient reason for an English court to refuse recognition.
Professor Crawford's views were challenged, in some respects, in cross-examination; but not by the leading of any conflicting evidence. As to the first reason, Professor Crawford conceded that this reason depended upon an assumption as to the facts and that, in forming a view upon that matter, it would be necessary to determine whether the activities carried on by Mr Cash in Australia, on behalf of the Borthwick respondents, were so significant as to result in one or more of those companies being regarded as carrying on business here; the test being "substantial activity" within Australia.
As to the second matter, the real issue was whether s.50 of the Trade Practices Act constituted a "public law". The relevant principle was discussed by the High Court of Australia in its recent decision in the "Spycatcher" case: Her Majesty's Attorney-General in and for the United Kingdom v Heinemann Publishers Australia Pty Limited (2 June 1988, not yet reported). Ordinarily, I would refer primarily to a recent High Court decision relating to a principle of the common law rather than to earlier English authority. However, in this particular case, the question is not the state of the common law of Australia but the position under English law. If there is a difference between the two, it is the latter law which is relevant. I hasten to add that I do not detect any divergence between the approach taken in the two countries, so that "Spycatcher" provides a much fuller discussion of the relevant principle than I will attempt. But I will confine myself to English authorities.
The term "public law" is explained in Dicey and Morris "The Conflict of Laws" (11th edition, 1987) at p.106 as being "all those rules (other than penal and revenue laws) which are enforced as an assertion of the authority of central or local government". At p.108 the learned authors give as examples import and export regulations, trading with the enemy legislation, price control regulations and anti-trust legislation.
As Dicey and Morris point out, there is not a lot of authority upon the question of enforcement of public laws. Professor Crawford referred to Attorney-General of New Zealand v Ortiz (1984) 1 AC 1, a case in which the New Zealand government unsuccessfully sought to recover, in the English courts, an "historic article" unlawfully removed from New Zealand and subsequently taken to London. The defendant lived in Switzerland. The ultimate decision in the case, in the House of Lords, depended upon the question whether, upon the proper interpretation of the New Zealand legislation, the article had been forfeited to the Crown. However, in the Court of Appeal the view was taken that, in any event, the New Zealand law would be unenforceable in England. Lord Denning MR regarded the action as being one to enforce a public law saying, at pp.20-21:

"This suit by a foreign state to enforce its laws is to be distinguished altogether from a suit between private firms or individuals which raises a question as to whether a contract has been broken by one or the other or whether a wrong has been done by one to the other. In such a suit our courts will often recognise the existence of the laws of a foreign state. We will recognise the foreign law so much that we will refuse to enforce a contract which is in breach of the laws of the foreign state ...

This present case is different. It is a suit by a foreign state brought in the English courts here to enforce its laws. No one has ever doubted that our courts will not entertain a suit brought by a foreign sovereign, directly or indirectly, to enforce the penal or revenue laws of that foreign state. We do not sit to collect taxes for another country or to inflict punishments for it. Now the question arises whether this rule extends to 'other public laws.' Dicey & Morris, The Conflict of Laws, 10th ed. (1980), vol. 1, p.90, rule 3 say it does. I agree with them. The term 'other public laws' is very uncertain. But so are the terms 'penal' and 'revenue.' ... But what are 'other public laws'? I think they are laws which are eiusdem generis with 'penal' or 'revenue' laws.

Then what is the genus? Or, in English, what is the general concept which embraces 'penal' and 'revenue' laws and others like them? It is to be found, I think, by going back to the classification of acts taken in international law. One class comprises those acts which are done by a sovereign 'jure imperii,' that is, by virtue of his sovereign authority. The others are those which are done by him 'jure gestionis,' that is, which obtain their validity by virtue of his performance of them.

...

Applied to our present problem the class of laws which will be enforced are those laws which are an exercise by the sovereign government of its sovereign authority over property within its territory or over its subjects wherever they may be. But other laws will not be enforced. By international law every sovereign state has no sovereignty beyond its own frontiers. The courts of other countries will not allow it to go beyond the bounds. They will not enforce any of its laws which purport to exercise sovereignty beyond the limits of its authority."

The remaining members of the Court, Ackner and O'Connor LJJ, regarded the New Zealand law as a "penal law" although, in so categorizing it, Ackner LJ at p.32 used language close to that used by Lord Denning to describe a "public law":

"The question whether a foreign law is penal must be decided by the English court. It must determine for itself, in the first place, the substance of the right sought to be enforced; and in the second place, whether its enforcement would, either directly or indirectly, involve the execution of the penal law of another state. The rule has its foundation in the well-recognised principle that crimes, including in that term all breaches of public law, punishable by pecuniary mulct, or otherwise, at the instance of the state government, or someone representing the public, are local in this sense, that they are only cognisable and punishable in the country where they were committed. Accordingly, no proceeding, even in the shape of a civil suit, which has for its object the enforcement by the state, whether directly or indirectly of punishment imposed for such breaches by the lex fori, ought to be admitted in the courts of any other country: ..."

The distinction made by Dicey and Morris between the situation -- as in Ortiz -- where the foreign government must rely upon its own legislation to make out the title necessary for its success in the English court, and a case in which the foreign legislation has already operated to transfer title in the foreign state is illustrated by Williams and Humbert Ltd v W & H Trade Marks (Jersey) Ltd (1986) AC 368. However, that qualification does not assist the present applicant. Because the shares are registered in England, transfer of the title to the shares cannot be effected under Australian law alone; even with an order of this Court. Failing voluntary compliance with such an order, the applicant would be compelled to seek an order in an English court and there rely upon the Australian legislation and this Court's order. The situation is not unlike that in Schemmer v Property Resources Ltd (1975) Ch 273 wherein Goulding J set aside an order granting leave to serve notice of a writ upon a Bahamas company of whose assets, including United Kingdom assets, the plaintiff was a receiver. The plaintiff had been appointed by a United States court in the course of proceedings commenced by the Securities and Exchange Commission under the Securities Exchange Act 1934 (US), various fraudulent practices being alleged. The defendant did not carry on business in the United States and had not submitted to the jurisdiction of the United States court. At p.288 Goulding J said:

"The situation relied on by the plaintiffs is that PRL is actively or passively concerned in a violation of the laws of a foreign country, and a court in that country has in consequence appointed a receiver of its assets. Under those circumstances (and in the absence of any other ground of foreign jurisdiction) the English court ought not, in my judgment, to regard the appointment as having any effect on assets outside the foreign court's territorial limits."

The third point made by Professor Crawford arises out of a limitation contained in the relevant United Kingdom legislation relating to the enforcement in that country of a judgment of this Court. There are two separate statutes potentially relating to recognition of judgments of Australian courts: the Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933. Because of the lack of evidence as to the relevant Orders in Council, it is not clear to me which of these statutes, if either of them, would enable enforcement in a United Kingdom court of an order of this Court. But that omission does not matter. It is a feature of both Acts that they apply only to judgments or orders in civil proceedings which provide for the payment of a sum of money. An order in the form of a declaration that a transaction is void is not enforceable in the United Kingdom under either Act or, so far as the evidence indicates, in any other manner.
Having regard to the other matters advanced, it is not necessary to determine the factual issue raised by Professor Crawford's first point. Notwithstanding the reference in Schemmer to the fact that the defendant was neither resident nor incorporated in the United States, it seems to me that Professor Crawford is correct in asserting that a United Kingdom court will not enforce a "public" or "penal" law even against a resident of the relevant foreign state: see, for example, Frankfurther v W L Exner Limited (1947) Ch 629 and Government of India, Ministry of Finance (Revenue Division) v Taylor (1955) AC 491. And his third point appears irresistable. Consequently, I accept Professor Crawford's view that, even as things stood at the commencement of this proceeding, any order which might be made in this Court pursuant to s.81(1A) of the Trade Practices Act would be unenforceable in the United Kingdom.
However, the Borthwick respondents were not content to rely upon the matters considered by Professor Crawford. They took steps to improve their position even further. Section 5(1) of the Protection of Trading Interests Act 1980 (UK) provides:

"5. (1) A judgment to which this section applies

shall not be registered under Part II of the Administration of Justice Act 1920 or Part I of the Foreign Judgments (Reciprocal Enforcement) Act 1933 and no court in the United Kingdom shall entertain proceedings at common law for the recovery of any sum payable under such a judgment."

Subsection (2) makes the section apply to certain categories of foreign judgments. These categories include "a judgment based on a provision or rule of law specified or described in an order under subsection (4) below and given after the coming into force of the order". Subsection (4) empowers the Secretary of State to "make an order in respect of any provision or rule of law which appears to him to be concerned with the prohibition or regulation of agreements, arrangements or practices designed to restrain, distort or restrict competition in the carrying on of business of any description or to be otherwise concerned with the promotion of such competition ..."

On 23 March 1988, apparently on the application of plc, the United Kingdom Minister for Trade made an order under s.5(4) whereby he specified, for the purposes of s.5(2) of the Protection of Trading Interests Act, s.81(1A) of the Australian Trade Practices Act. That order removes any doubt that may remain as to the unenforceability in the United Kingdom of any order which this Court might make under s.81(1A).
There remains the theoretical possibility that the Borthwick respondents might decide voluntarily to comply with an order under s.81(1A). Having regard to the course of this case, I would never have had much confidence in that possibility eventuating. But whatever confidence I might have had has been further diminished by evidence of resolutions passed at meetings of the directors of each of the three Borthwick respondents which took place on 18 March 1988. According to the minutes of those meetings, each of the boards resolved as follows:

"It was reported to the Meeting that the legal advice received by the Company was that any order made by the Federal Court of Australia in the proceedings commenced against the Company by the Trade Practices Commission was not enforceable in England and that consequently the Company needed to consider whether it should comply with such an order.

After consideration by the Meeting IT WAS RESOLVED that the Company should not comply with any order of the Federal Court in the proceedings brought against it and that it should, if necessary, instruct Lovell, White & King to defend any proceedings to enforce the order of the Federal Court in England."

Of course, it would be open to the various boards of directors to recant this attitude and to decide voluntarily to give effect to any order which I might make. However, this is most unlikely. The only realistic view is that the Borthwick respondents would ignore any order made under s.81(1A) and that enforcement action against them, or any of them, in the United Kingdom courts would fail. Consequently, any such order must be regarded as futile.
My third reason for concluding that no order ought to be made is that it is possible to avoid the undesirable features of AMH's breach of s.50 without making such an order. I turn to that question.

Orders
In a case where the Court finds that a person has contravened s.50 by acquiring shares in a corporation it will often be appropriate to make an order under s.81(1) requiring that person to dispose of those shares. It hardly lies in the mouth of the contravenor of s.50 to complain that the effect of such an order will be to cause it also to lose control of assets which are irrelevant to that corporation's dominance in a particular market. If the Court has no other way of vindicating the public interest sought to be protected by ss.50 and 81, it must be prepared to restore the position which existed before the contravention occurred.
But, ideally, it is better to mould the order to the necessities of the case, going only so far as to remove from the control of the acquirer those assets which contribute to its market dominance. There is no public interest in forcing the divestiture of those that do not. Section 81(1) is not a penal provision.
However, in the absence of an undertaking by the acquirer, there is a problem about taking this course. Where the contravention of s.50 takes the form of an acquisition of shares, the only order which may be made under s.81(1) is for the disposal by the acquirer of those shares. The reference to "assets", in s.81(1), is not a reference to assets indirectly acquired, through the acquisition of the company owning those assets, but to a direct acquisition of the assets of a body corporate. Section s.81(1) mirrors the proscriptions in the opening words of s.50(1).
In the present case, counsel for AMH indicate that, if it is unsuccessful in its submission that there has been no breach of s.50, their client would wish to have the opportunity to frame a suitable undertaking under s.81(1C) of the Act, as an alternative to an order under s.81(1) for the disposal of the whole of the Borthwick shares. If no suitable undertaking is forthcoming, I will make an order under s.81(1). But it is appropriate to give the opportunity sought by counsel and, in accordance with the further request of counsel, to indicate my view as to the width of the appropriate undertaking.
The major question in relation to any undertaking is the assets to which it should relate. As indicated, the Victorian and New South Wales assets are irrelevant to AMH's position in the Queensland market. They may be excluded from any undertaking. It is equally clear that the undertaking should involve the Bowen abattoir. But there is a dispute between the applicant and AMH regarding Mackay.
Mackay lies outside the northern region of Queensland, as defined above. In the agreement for the sale of various assets by Tancred to Tancred (NQ) the City of Mackay was treated as being in northern Queensland. That course is consistent with the perception of Mr Reginald Clanchy, Tancred's Livestock Manager, that the boundary between the northern and central region runs through Nebo, south west of Mackay. But that is a minority view. All of the other witnesses who were asked to define the northern region drew the line immediately north of the city. Looking at the map, it is not difficult to see why they did. The rail and road pattern is such that Mackay is able to serve an extensive area to its south west, along with the coastal strip north west and south east of the city. Although there is a short rail line from Finch Hatton, west of Mackay, areas further to the west have more convenient access to Bowen, to their north.
The livestock purchase records of the Mackay abattoir confirm the impression gained from the map. In 1986 the abattoir purchased 92,021 cattle, of which 78,868 came from the central region, 8,265 from the northern region and 4,888 from the southern region of Queensland. There were no interstate purchases. In 1987 the picture was much the same, the respective figures being: central 95,281, northern 8,705, southern 2,657 and interstate 34; a total of 106,677 head.
There is a difficulty in reconciling the Borthwick livestock purchase figures with the records of the LMAQ relating to cattle slaughtering capacity and throughput of licensed abattoirs. According to the LMAQ, the Mackay throughput in 1986 was 118,094 and in 1987 117,971 head; theoretical capacity being 123,900. However, there is nothing in the LMAQ records to contradict the impression conveyed by the Borthwick livestock purchase records that the central region is the predominant source of livestock for slaughter at the Mackay abattoir.
Notwithstanding this fact, counsel for the applicant submit that any undertaking to be given by AMH should extend to the Mackay abattoir. They submit that Mackay should not be excluded merely because it falls outside the area -- the northern region -- in which AMH has obtained a position of market dominance. Counsel argue that the prima facie position is that the Court, by an order under s.81(1) or by acceptance of an undertaking under s.81(1C), will require a corporation contravening s.50(1) to divest itself of whatever has been acquired by that contravention, except only any assets whose retention adds nothing to the strength of that corporation in the relevant market. Counsel point out that, although Mackay is within the central region, as defined by most of the witnesses, it immediately adjoins the southern boundary of the northern region. The Mackay abattoir does in fact draw cattle from the northern region. Notwithstanding that such cattle constitute only a small proportion of the cattle slaughtered in Mackay, the consequence, say counsel, is that control of the Mackay abattoir gives to AMH some additional strength in the northern market. Furthermore, say counsel, the drawing power of the Mackay abattoir ought not to be judged only by reference to the current situation. Counsel suggest that, as Borthwick owns the Bowen abattoir, about 160 km to the north, it is reasonable to assume that the company has tended to direct cattle which emanated from points north of Mackay to Bowen; leaving to the Mackay abattoir the maximum potential to take cattle from more southerly areas. The suggestion is that, if AMH retains control of Mackay, but is forced to divest itself of Bowen, AMH may move aggressively into areas north of Mackay in an attempt to increase throughput at Mackay. Counsel suggest that, whether or not such a result be intended, such conduct is likely to put at risk the future of the Bowen abattoir. Having regard to Mr Tancred's statement at the meeting with Mr Bourke on 18 January 1988 that, in the coming year, only one of the Borthwick plants needed to be operated, there must be some question, say counsel, as to the long term viability of two plants; and it is clear that Mackay is the better abattoir of the two, with the added advantage of a strong brand identity in Japan. Under those circumstances, it is submitted, there is doubt whether an independent operator at Bowen could sustain aggressive competition by AMH, from Mackay in the south, Cape River to the west and Townsville in the north.
The competing view, put by counsel for AMH, is that, if Bowen were under independent control, it would be able to compete effectively with the three AMH abattoirs, particularly because it has a natural advantage in respect of local producers. The comment is further made that the Mackay abattoir has to face competition from the Rockhampton abattoirs. Counsel submit that it would aid competition if the Bowen and Mackay abattoirs were in separate hands, but there is no guarantee of this result if AMH is forced to sell them both.
I see the force of both sets of submissions regarding future competition. But they are essentially speculative. So much depends upon unknown factors: particularly the identity of the purchaser of Bowen. The instant question must, I think, be determined upon a more principled basis. I accept that the location of a particular asset is not decisive upon the question whether it ought to be included in an undertaking to divest. The question rather is whether the retention of that asset, gained in contravention of s.50(1), will serve to assist the contravening corporation to dominate the relevant market. If there is no nexus between the retention of the asset and domination, there is no need to insist upon divestiture. If there is such a nexus, of more than minimal proportions, the Court should insist that the contravening corporation divest itself of that asset. Only in that way may the policy underlying s.50(1) be vindicated.
Circumstances may exist in which the application of that principle is inappropriate. However, I do not think that the speculative matters referred to on behalf of AMH constitute such circumstances. In my view an appropriate undertaking in this case will include an offer to dispose of the Mackay abattoir, as well as that at Bowen.
I leave to counsel for AMH the task of formulating the terms of the undertaking. Provision will need to be made both as to the date by which divestiture will occur and as to a mechanism to ensure that the new owner is a person independent of AMH. No doubt counsel will consult together on the draft.
Counsel may also wish to discuss the matter of costs. In default of agreement upon this matter I will hear submissions regarding costs when the undertaking is brought into Court.
The only order I will make today is to adjourn the matter for further mention -- and, hopefully, the making of final orders -- at 9.30 am on Wednesday 3 August 1988.

SUMMARY OF CONCLUSIONS
This matter has been listed for judgment today, but I do not propose to make any substantive orders at this time. I think that the better course is for me to announce, in summary form, the conclusions which I have reached, to publish my full reasons for reaching those conclusions and to stand the matter over to another day, when submissions may be put as to the form of the orders appropriate to those conclusions.
I summarize my findings as follow:

1. In relation to the definition of the relevant product

market, I am of the opinion that there is a market for store cattle which is separate from that of slaughter cattle. However, I find that feed lot cattle are within the same market as cattle intended for immediate slaughter. The relevant product market comprises what may be called "fat cattle", that is both feed lot cattle and cattle intended for immediate slaughter.

2. In connection with the geographical limits of the

market, I find that there are two fat cattle markets in Queensland: one being in the northern region of the State -- broadly defined as being the area north of Mackay -- and the other consisting of the remainder of the State, that is the central and southern regions combined.

3. No claim is made by the Trade Practices Commission

that, if there is a combined central-southern market, Australia Meat Holdings is, or has become, able to dominate that market. But such a claim is made in connection with any northern market. I reject the view that AMH was in a position of dominance of the northern market prior to its takeover of Thomas Borthwick & Sons (Australia) Pty Limited on 26 January last; but I am of the opinion that, as a result of the acquisition by it of the shares of that company, it has placed itself in a position whereby it is, or is likely to be, in a position to dominate the north Queensland fat cattle market. Accordingly, the Trade Practices Commission has established that, in making that acquisition, AMH contravened s.50 of the Trade Practices Act 1974.

4. As intimated during the hearing, I am of the opinion

that the Court has jurisdiction to entertain the claim made by the Trade Practices Commission for an order under s.81(1A) of the Act against the vendors of the shares -- two United Kingdom companies -- declaring the acquisition void. But I am of the further opinion that the Court ought not to take that course. There are three reasons for that further opinion which may be shortly stated as harshness, futility and lack of necessity.

5. There is, in my view, no reason of principle to

preclude the making of an order under s.81(1) of the Act compelling AMH to divest itself of the Borthwick shares which it acquired in January. However, such an order would also deprive AMH of control of assets, situate in Victoria and in New South Wales, which are irrelevant to its dominance in north Queensland. Under those circumstances, and having regard to the offer of AMH to dispose of the matter by an appropriate undertaking to the Court, I will not now make such an order. Rather I will give to counsel an opportunity to formulate that undertaking.

6. In connection with the width of the undertaking, I

have reached the conclusion that the assets to be divested by AMH should include both the Bowen and Mackay abattoirs.

The only order I will make today is to stand the matter over until 9.30 am on Wednesday 3 August for discussion of the form of the relevant undertaking and for submissions as to costs.

[1988] FCA 338

15 JULY 1988

Key Legal Topics

Areas of Law

Competition Law

Legal Concepts

Mergers

Market Dominance

Jurisdiction