Trade Practices Commission v Bata Shoe Co of Australia Pty Ltd

[1980] FCA 24

Re: TRADE PRACTICES COMMISSION
And: BATA SHOE COMPANY OF AUSTRALIA PTY. LIMITED
No. G16 of 1979
Trade Practices
44 FLR 149

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES
GENERAL DIVISION
Lockhart J.

CATCHWORDS

Trade Practices - resale price maintenance - footwear wholesale - refusal to supply - agent for respondent conveying communications to retailer - whether agent acting within the scope of its authority - whether respondent withholding supply because of retailers' lack of proper seating and fitting facilities for footwear at retail stores or because respondent feared retailer would sell or be likely to sell footwear at a price less than the price which the respondent had through its agent specified to the retailer as being the price below which the footwear was not to be sold

Trade Practices Act, 1974 (Cth.) ss. 96 (3) (a), (b), (d) (i) and (ii); (f), (6).

HEARING

SYDNEY

#DATE 12:3:1980

JUDGE1

The applicant seeks injunctions to restrain the respondent from engaging in the practice of resale price maintenance contrary to s. 48 of the Trade Practices Act 1974 ("the Act"), and to recover, on behalf of the Commonwealth of Australia, pecuniary penalties.

The respondent carries on business as a manufacturer, importer and wholesaler of leather footwear and polyvinyl chloride footwear, marketed under the trade name "Bata". Adnam and Pockley Pty. Limited ("Adnam and Pockley") is the agent of the respondent for the purpose of selling its footwear by wholesale in New South Wales.

The applicant alleges that the respondent has engaged, and continues to engage, in the practice of resale price maintenance as follows:-

(a) Between November 1976 and April 1977 the respondent by its agent made it known to Woolworths Limited ("Woolworths") that it would not supply Bata leather footwear to Woolworths unless Woolworths agreed not to sell that leather footwear at a price less than a price specified by the respondent (s. 96 (3) (a) of the Act);

(b) Between November 1976 and April 1977 the respondent by its agent induced or attempted to induce Woolworths not to sell Bata leather footwear supplied to Woolworths by the respondent at a price less than a price specified by the respondent (s. 96 (3) (b) of the Act);

(c) Between November 1976 and April 1977 the respondent by its agent used in relation to Bata leather footwear supplied or that may be supplied by it to Woolworths a statement of price that was likely to be understood by Woolworths as the price below which Bata leather footwear was not to be sold (s. 93 (3) (f) of the Act);

(d) Since about May 1977 the respondent has withheld the supply of Bata leather footwear to Woolworths for the reason that Woolworths had not agreed not to sell Bata leather footwear at prices less than prices specified by the respondent (s. 96 (3) (d) (i); and

(e) Since about May 1977 the respondent has withheld the supply of Bata leather footwear to Woolworths for the reason that Woolworths had sold or was likely to sell Bata leather footwear supplied to Woolworths by the respondent at prices less than prices specified by the respondent as the prices below which Bata leather footwear was not to be sold (s. 96 (3) (d) (ii) of the Act).

The case turns principally upon the evidence as to six conversations during the period November 1976 to April 1977 between officers of Adnam and Pockley and Woolworths. The witnesses are in conflict as to what was said during these conversations on material matters.

There is no dispute that since about May 1977 the respondent has refused to supply Woolworths with Bata leather footwear. The reason for this is primarily what the case is about. The applicant says that it is because the respondent feared that Woolworths would sell Bata leather footwear at prices below the minimum price specified by the respondent. The reason given by the respondent is that it will not sell to retailers like Woolworths, Coles, and K-Mart because their shops do not have proper facilities and staff for fitting shoes or adequate "after sales" service to deal with enquiries or complaints from customers, and that this is the policy of the Bata organisation, not only in Australia, but throughout the world.

Although it is alleged by the applicant in the statement of claim that the respondent withheld the supply of Bata leather footwear to Woolworths in November 1976, it is not disputed that this allegation has not been established and that in fact there was no such withholding of supply.

Nor is it disputed that the respondent at all material times has supplied polyvinyl chloride footwear to Woolworths and other similar retail organisations in Australia. The respondent says that the same considerations as to fitting facilities, staff and "after sales" service do not apply with respect to such footwear.

Before turning to the evidence as to the six conversations, it is convenient to say something of the respondent and its business.

The respondent is a member of the world-wide Bata organisation which had its origins in Czechoslovakia a little over a century ago. Until the second world war the Bata organisation carried on business principally in Europe; but at the beginning of the war Thomas Bata, the son of the founder of the organisation, left Czechoslovakia and went to Canada where he established its headquarters. They are still there. It developed from a small business at the end of the second world war to an organisation which is now the largest manufacturer of shoes in the world operating in about ninety-seven countries with over one hundred and two companies. Most of the companies not only manufacture shoes but sell them through retail outlets.

The Bata organisation employs about ninety thousand people and produces over three hundred million pairs of shoes a year. Its Australian operations began in the mid 1950's when a Bata company in Australia imported footwear but, due to import restrictions that were applied in 1953, the business ceased. It was not until 1961 that the Australian operations of the Bata organisation really commenced with the establishment of a factory at Seaford in Victoria on the Mornington Peninsular. The respondent commenced the manufacture of footwear from that plant in May 1961. There are no retail outlets managed or operated by the respondent in Australia. Its activities are importing and manufacturing shoes in Australia. Its New South Wales agent, Adnam and Pockley, sells Bata footwear in New South Wales by wholesale. Adnam and Pockley carries on business at Zetland, Sydney. It was appointed agent for the respondent in 1961. Stock is received from the respondent on a consignment basis only. Adnam and Pockley acts as agent for the respondent.
Conversation November 1976

The first conversation relied on by the applicant to establish its case was in November 1976 in the office of Mr. Adnam at Zetland between Mr. Adnam, Mr. Smart and Mr. Clegg. Mr. Adnam is the managing director of Adnam and Pockley. Mr. Smart is the footwear merchandise manager of Woolworths. Mr. Clegg is the footwear buyer for the "Big W" division of Woolworths. All three gave evidence.

Although Mr. Clegg said that Mr. Kelly, the sales manager of Adnam and Pockley, may have been present, no witness said positively that he was there. Mr. Kelly said that he was not there. I find that he was not present.

Mr. Smart and Mr. Clegg visited Mr. Adnam because Woolworths had been experiencing some difficulty in obtaining stocks in Queensland of Bata leather footwear from the Queensland agent of the respondent. Mr. Smart asked Mr. Adnam if it would be possible for Adnam and Pockley to look after the stock requirements of Woolworths for its Queensland variety store. Mr. Adnam agreed but he said that Woolworths may have trouble obtaining deliveries in New South Wales if it "did not have a look at our selling price". Mr. Smart asked Mr. Adnam to give him some guidance as to the price which Woolworths should charge for Bata leather footwear. Mr. Adnam said that, if it was to sell at somewhere near the selling price of Gowings Limited in Sydney, he felt that Adnam and Pockley would be able to continue supplying Woolworths. Mr. Smart told Mr. Adnam that Woolworths would increase its price.

Neither Mr. Smart nor Mr. Clegg knew at that time what price was charged by Gowings; but later that day they found out what it was. Woolworths then increased its price to a level about three cents below the Gowings' price. Woolworths later opened two additional stores at Gladstone and Elizabeth in Queensland and stock flowed through without trouble.

There is some disparity in the evidence as to the extent of the increase in the price charged by Woolworths. Mr. Smart put the figure as being about three cents under the price of Gowings. Mr. Clegg said that the price was increased to the same price as the Gowings' price. I prefer the evidence of Mr. Smart on this point.

In my opinion Mr. Smart and Mr. Clegg held the view that, if Woolworths did not increase its price to somewhere near the Gowings' price, it would run the risk in the future of uncertain supply of Bata leather footwear from Adnam and Pockley.

Mr. Adnam said that he thought the conversation occurred about October 1976 and that a Mr. Mitchell was present also. Mr. Mitchell was a buyer employed by Woolworths who had retired before the hearing. Neither party called him to give evidence. It is unlikely that Mr. Mitchell was present.

Mr. Adnam denied that he ever suggested to any of the Woolworths' representatives that the price at which Woolworths ought to sell Bata shoes was the price at which any particular retailer sold them. He denied saying that Woolworths could still have problems with supply if it continued with its "present pricing policy". He said that he told them that Woolworths could have difficulty with supply if Adnam and Pockley ran out of stock which was quite a frequent happening.

Although there was a little inconsistency between the evidence of Mr. Smart and Mr. Clegg as to what was said in this conversation, it is not material; and I prefer the evidence of Mr. Smart as he appeared to me to be the witness with the most accurate recollection of the conversation. Both Mr. Smart and Mr. Clegg impressed me as truthful and reliable witnesses. Mr. Adnam was an elderly man who did not have a very clear recollection about conversations in 1976 and 1977. Where his evidence conflicts with the evidence of Mr. Smart and Mr. Clegg I accept the evidence of the latter gentlemen as being more reliable. I will return to Mr. Adnam's credibility later.

In my opinion, the probabilities support the version given by Mr. Smart and Mr. Clegg. Woolworths was experiencing a supply problem in Queensland. Evidence to this effect, although in general terms, was given by both Mr. Smart and Mr. Clegg. Mr. Adnam agreed that Mr. Clegg told him in this discussion that Woolworths had experienced problems with supply of Bata shoes in Queensland. Mr. Kelly said that Mr. Clegg told him earlier in 1976 that Woolworths was having difficulty with supply in Queensland. Mr. Adnam agreed that he was told that Woolworths was changing its policy and centralising its buying in Sydney. He agreed that Mr. Smart and Mr. Clegg asked for guidance as to price and that, although he did not say that Woolworths should charge somewhere near the price of Gowings, he did say that they should look at the prices charged by other Sydney retailers including Gowings.

The evidence of Mr. Smart and Mr. Clegg is corroborated by the fact that Woolworths did increase its prices for Bata shoes, to a level a few cents below the prices charged by Gowings.

Another matter of importance in determining the credibility and reliability of the witnesses is a letter of 18 November 1976 from Adnam and Pockley, signed by Mr. Kelly as sales manager, and addressed to the respondent for the attention of Mr. J. Lewis. Mr. Lewis was an employee of Woolworths from 1951 until October 1966, having been the Commonwealth footwear buyer for Woolworths from December 1959 until he left its employ. From October 1966 until October 1971 he was employed by a footwear importer and from January 1972 until October that year he was employed by Adnam and Pockley as its sales manager. From November 1972 until April 1978 he was employed by the respondent, originally as sales manager and later as marketing manager.

The letter reads as follows:-

"Dear John,
It has now been clearly established that both Woolworths Divisions, viz. Woolworths Family & Variety Stores and Woolworths Big W. Stores, are discounting our footwear.

Complaints have been received from Myers Western Stores Ltd. that, because of this, Woolworths Big W. country outlets are adversely affecting their business and, likewise, Managers of certain of the Myer Sydney Ltd. stores, which are operating within the same suburban complexes, are similarly affected.

For example, out Bata Stride is being retailed by Woolworths at $14.54 as a regular policy, whereas all traditional footwear retailers conform to a price of $14.99. Scout and ponytails are similarly discounted.

In the light of the above authentic information we are bringing this matter to your notice seeking a directive as to whether we should continue to supply Woolworths. Currently, we are holding a volume of orders for them but will delay shipment pending your decision in this matter.

With kindest regards,

Sincerely,
ADNAM AND POCKLEY PTY LTD

J.Kelly,
Sales Mgr."

Mr. Adnam said that he saw and approved the letter before it was signed by Mr. Kelly and that it accurately reflected a conversation that he had with Mr. Kelly before the letter was sent. He said that the reason for Mr. Kelly writing the letter was that the purchasing officer of Myer was a man who was "very unusual" and "who spends his time growling about - to all manufacturers - what other retailers are doing".

Mr. Adnam placed the conversation with Mr. Smart and Mr. Clegg as probably occurring before the writing of the letter.

Mr. Kelly said that the letter was prepared after discussion with Mr. Adnam, that the reference in the letter to "all traditional footwear retailers conform to a price of $14.99" was intended to mean that the average retailer sells that item at about $14.99. He said that the choice of the word "conform" was unfortunate as Adnam and Pockley did not have recommended prices; that the letter was written following a complaint by the footwear controller of Myer Western Stores; and that he thought it was necessary to send it to the respondent.

He said that the statement in the last sentence "Currently, we are holding a volume of orders for them but will delay shipment pending your decision in this matter" was not true; that orders were being executed progressively, not held; and that in fact Adnam and Pockley did not commence delaying shipment as Mr. Adnam decided to continue to supply until told otherwise by the respondent.

Mr. Kelly said that the letter was

"a simple report which we make dozens and dozens of continually about anything in the footwear trade that may affect Bata in any shape or form and having had a formal complaint by someone representing a firm of substance in any event, it behove Adnam and Pockley to report such a thing. What we reported was the context of advice or the complaint by Robinson, not expressing an opinion of ours. It was a simple report."

Mr. Adnam himself referred to the letter as a report to the respondent.

Adnam and Pockley received no reply to the letter. I shall mention later how the letter came to the attention of the managing director of the respondent.

This evidence of Mr. Kelly and Mr. Adnam was unconvincing. It was a report by the agent to his principal of compalints from an important customer; but it was much more than this.

Adnam and Pockley was drawing the attention of the respondent to the fact that Woolworths was discounting Bata footwear, that other retailers were charging the same price for Bata leather footwear wheras Woolworths was undercutting that price and that complaints had been received from the Myer organisation that the discounting by Woolworths was adversely affecting the business of Myer where the two were in competition in the same market. Adnam and Pockley thought it sufficiently serious to seek "a directive as to whether we should continue to supply Woolworths."

In my opinion the letter corroborates the evidence of Mr. Smart and Mr. Clegg that it had come to their attention, by way of gossip in the trade, that other retailers were exerting pressure on the Queensland agent of the respondent not to supply Woolworths with Bata shoes, and their evidence that Mr. Adnam suggested that there could be trouble with supplying Bata shoes to Woolworths in New South Wales unless a price was charged by Woolworths akin to the price generally charged by "traditional footwear retailers".

The letter of 18 November 1976 is a clear indication of the concern felt by Adnam and Pockley about Woolworths undercutting other retailers. I have not doubt that what was said by Mr. Adnam to Mr. Smart and Mr. Clegg in the November 1976 discussion gave a very clear impression to them that unless Woolworths increased its price so as to "conform" to the price charged by "all traditional footwear retailers", a guide being the price charged by Gowings, continuity of supply in New South Wales could not be guaranteed.

Although Mr. Adnam said that he thought the letter had been sent after the meeting between Mr. Smart, Mr. Clegg, and himself it is likely that the letter was sent before that meeting. The concern expressed by Adnam and Pockley in the letter as to the failure of Woolworths to conform to the selling price that "all traditional footwear retailers" were then charging was allayed by the undertaking given by Mr. Clegg or Mr. Smart to charge about the same price as the Gowings' price.

It was submitted by counsel for the respondent that Mr. Smart and Mr. Clegg did not know what the Gowings price was until after the November 1979 conversation had concluded and that it was inherently improbable that they would commit Woolworths during the conversation to charge the same price as Gowings, or a price very close to that price, without knowing what it was. I do not find this improbable. Mr. Smart and Mr. Clegg knew that the Woolworths' price was less than the Gowings price, although they did not know the precise difference. Their main concern was to ensure continuity of supply.

Counsel for the respondent submitted that, if the court accepts the evidence of Mr. Smart and Mr. Clegg, the respondent is not bound by the statements of Mr. Adnam as he was not acting within the scope of the authority of Adnam and Pockley as agent for the respondent. It was not suggested that his statements did not bind Adnam and Pockley.

The nature and scope of the actual authority of an agent is generally determined by the nature and scope of the duty entrusted to him: see Colonial Mutual Life Assurance Society Limited v. The Producers' and Citizens' Co-Operative Assurance Company of Australia Limited (1941) 46 C.L.R. 41; Coroneo v. Kurri Kurri and South Maitland Amusement Co. Limited (1934) 51 C.L.R. 329; Australasian Brokerage Limited v. Australian and New Zealand Banking Corporation Limited (1934) 52 C.L.R. 430.

Actual authority may be express or implied. The documentary evidence as to the terms of the agency of Adnam and Pockley is scant. The letter of appointment of Adnam and Pockley as the respondent's agent in New South Wales is dated 11 April 1961. It states that Adnam and Pockley was to be the sales representative of the respondent in New South Wales, to sell the products of the respondent at the prices and on the "sales terms" laid down from time to time by the respondent. Adnam and Pockley was to be responsible "in enforcing all distribution and pricing policies laid down by the company from time to time". The appointment was made initially until 31 December 1961, but it was renewed annually thereafter on the same terms.

Mr. Thring, the managing director of the respondent, said in evidence that it was the respondent's policy not to supply retailers who did not have proper facilities for the fitting of shoes, trained staff and "after sales" service. He regarded the administration of that policy in New South Wales as falling squarely within the authority of Adnam and Pockley. He denied that the respondent had a policy of not supplying retailers who discounted the prices of Bata leather footwear below those normally charged by other retailers; but for reasons which I shall refer to later I do not accept his denial.

In my opinion, it was the respondent's policy not to supply retailers who did not have proper facilities, trained staff and "after sales" service; and it was its policy also not to supply large retailers, such as Woolworths, who discounted Bata leather footwear below prices normally charged by other retailers. This is a matter which I will deal with fully later; but it is sufficient at this stage, on the question of agency, for me to say that the administration of the respondent's policy of not supplying retailers for reasons connected with pricing policy fell within the authority of Adnam and Pockley.

The respondent knew, at least by late March 1977, of the discussion that had taken place in November 1976 between Mr. Adnam, Mr. Smart and Mr. Clegg. The respondent never suggested that such a discussion should have been directly with it. When Mr. Thring saw the letter of 18 November 1976, which he says he saw for the first time in late March 1977, he did not protest to Mr. Adnam or Mr. Kelly that Adnam and Pockley was acting outside the scope of its authority. His sole reaction was one of disapproval that Adnam and Pockley had supplied Woolworths at all.

In April 1977 Mr. Thring was content to allow Adnam and Pockley to conduct the relevant discussions with Woolworths on behalf of the respondent on questions relating to supply or non-supply of Bata leather footwear.

The evidence establishes that customers in New South Wales appear to have assumed that Adnam and Pockley was the appropriate company to approach when any matters arose concerning prices of footwear. Mr. Adnam's evidence was that retailers frequently approached him for suggestions as to the appropriate price to be charged for Bata leather footwear. Retailers in New South Wales appear to have assumed that it was Adnam and Pockley who had the requisite authority to discuss prices. Also, both Adnam and Pockley and Woolworths regarded it as natural that the matters discussed in November 1976 should be discussed between them.

The letter from Adnam and Pockley to the respondent of 18 November 1976, and the letter of 26 April 1977 to which I shall refer later, show that Adnam and Pockley regarded its function as including discussions with retailers relating to price and implementing the respondent's policies as to price.

It is right in a case of this kind to take a practical and commercial view as to the scope of Adnam and Pockley's authority rather than a technical or legalistic one: see Australia and New Zealand Bank Limited v. Ateliers de Constructions Electriques de Charleroi 1967 1 A.C. 86 at p. 113.

For all practical purposes, Adnam and Pockley was authorised to handle on behalf of the respondent all matters arising out of sales in New South Wales including the enforcement of policies related to price.

If the statements and actions of Mr. Adnam did not fall within the scope of the express authority of Adnam and Pockley from the respondent they clearly were within its implied authority.

If the conduct of Mr. Adnam did not fall within the scope of the actual authority of Adnam and Pockley, whether express or implied, it fell within the scope of its ostensible authority. The matters to which I have referred establish this. If the actual authority of Adnam and Pockley was confined to conveying communications from the respondent to Woolworths, and vice versa, in relation to the respondent's supply policies, at best, from the respondent's point of view, what Adnam and Pockley did was to fulfill its role in a somewhat over zealous or excessive manner, but not so as to be unrelated to its authority. The most natural thing in the world for Woolworths to do, when it was concerned about continuity of supply and wanted to discuss questions relating to the respondent's supply policy, including matters concerned with price, was to speak to Adnam and Pockley about them.

Sub-section (6) of s. 96 of the Act provides:-

" (6) For the purposes of sub-section (3), anything done by a person acting on behalf of, or by arrangement with, the supplier shall be deemed to have been done by the supplier."

In Commissioner of Trade Practices v. Caltex Oil (Australia) Pty. Limited 1974 A.T.P.R. 40,000, Smithers J. considered the phrase "on behalf of" appearing in s. 66 (4) of the Restrictive Trade Practices Act 1971 which is in the same terms as sub-section (6) of s. 96 of the Act. His Honour held that s. 66 (4) was intended to go further than the law of agency. Spicer C. J. agreed with Smithers J. Joske J. took the same view.

In Trade Practices Commission v. Nicholas Enterprises Pty. Limited 1978 2 A.T.P.R. 40-097, Fisher J. adopted substantially the same view.

In my opinion Mr. Adnam's actions fall within the scope of s. 96 (6) so that what he did in November 1976 was done by Adnam and Pockley "acting on behalf" of the respondent, even if there was in truth no authority of Adnam and Pockley to bind the respondent under the general law of agency.

The statements of Mr. Adnam about the price that ought to be charged by Woolworths answer the description of a "price specified by the supplier" within the meaning of the relevant paragraphs of sub-section (3) of s. 96. The fact that a price is stated to be within a range of a particular figure, or that otherwise an element of approximation is introduced, does not detract from the true character of the price as being a specified price: see Trade Practices Commission v. Pye Industries Sales Pty. Limited 1978 A.T.P.R. 40-088.

The fact that the specification of a price is couched in terms of recommendation does not prevent it from being a price specified by the supplier: see Festival Stores v. Mikasa (N.S.W.) Pty. Limited (1971) 18 F.L.R. 260 per Spicer C. J. and Smithers J. and the judgment of the High Court in the appeal of Mikasa (N.S.W.) Pty. Limited v Festival Stores (1972) 127 C.L.R. 617.

In my opinion the discussion of November 1976 between Mr. Adnam, Mr. Smart and Mr. Clegg fell within the terms of s. 96 (3) of the Act in that the respondent made it known to Woolworths that the respondent would not supply goods to Woolworths unless Woolworths agreed not to sell those goods at a price less than a price specified by the respondent (s. 96 (3) (a) ); the respondent induced and attempted to induce Woolworths not to sell at a price less than a price specified by the respondent goods supplied to Woolworths by the respondent (s.96 (3) (b); and the respondent used, in relation to its goods supplied and that may be supplied by the respondent to Woolworths, a statement of a price that was likely to be understood by Woolworths as the price below which the goods were not to be sold (s. 96 (3) (f).
Conversation mid March 1977

Mr. Clegg gave evidence that he received a telephone call from Mr. Adnam in March 1977 when Mr. Adnam said that Adnam and Pockley had received some complaints from retailers in the Elizabeth area (that is of South Australia) that Woolworths was not selling at the maximum price allowable in South Australia. Mr. Clegg said that he told Mr. Adnam that he was not interested in hearing about the complaints of other retailers. He could not recall saying anything else. He said that soon after this conversation Mr. Kelly telephoned him and asked him what Woolworths was "going to do about it". Mr. Clegg said he did not recall his reply "but I do not think I gave any indication at all".

Mr. Adnam said that Adnam and Pockley has nothing to do with the supply of Bata footwear to purchasers in South Australia other than Woolworths; that he has never received complaints from retailers in South Australia as to the prices being charged by Woolworths in South Australia; that he knows retailers of footwear in South Australia, apart from Woolworths, only by repute; and that he has not had any dealings with retailers of Bata footwear in South Australia over the last 20 years. He denied ever telling "Mr. Smart" that he received any such complaints. In fact the evidence of this conversation was given by Mr. Clegg, not Mr. Smart.

Mr. Thring said that the respondent employs salesmen who cover the territory of South Australia operating from Adelaide and that Adnam and Pockley does not service any retail outlets in South Australia except Woolworths.

It may be that there were complaints made by retailers about the prices charged by Woolworths in the Elizabeth area, the complaints being made either direct to Adnam and Pockley or to the respondent who passed them on to Adnam and Pockley. This is in the realm of speculation so I make no findings about it.

The applicant's case as to these conversations rests upon the evidence of Mr. Clegg. The applicant contends that this evidence warrants the findings that the supplier (the respondent) used in relation to Bata shoes, a statement of a price that was likely to be understood by Mr. Clegg on behalf of Woolworths as the price below which the shoes were not to be sold (s. 96 (3) (f) ); that the respondent made it known to Mr. Clegg on behalf of Woolworths that it would not supply shoes to Woolworths unless Woolworths agreed not to sell those shoes at a price less than a price specified by the respondent (s. 96 (3) (a) ); and that the respondent induced or attempted to induce Woolworths not to sell, at a price less than a price specified by the respondent, the shoes supplied to Woolworths by the respondent (s. 96 (3) (f)).

In my opinion this evidence does not warrant these findings or any of them. It is too general and imprecise. Mr. Clegg does not appear to have taken the conversations very seriously. Nor did he treat them as a threat to withhold supply or as an indication by Adnam and Pockley that the price of Bata leather footwear in South Australia should be not less than the maximum price allowable in South Australia where price control legislation has been in force for some time.

Accordingly the applicant has not established its case in relation to these conversations.
Conversation about 7 April 1977

Mr. Smart said in evidence that somewhere between 5 and 10 April 1977 Mr. Kelly telephoned him whilst Mr. Clegg was on holidays:

"and told me that he had received a direction from the Bata head office in Melbourne to the effect they were not prepared to supply leather footwear to stores who discounted below the recommended level. Also he said that Bata had stipulated that they were not prepared to supply stock to stores who did not operate in a traditional footwear method. . . because we did not have the facilities of other retailers, i.e. seating and fitting facilities, but they would be prepared to supply us with P.V.C. stock which would refer to workboots and the like, of which they have continued to supply us."

Mr. Kelly said that on an occasion in March 1977, when Mr. Thring was travelling through Zetland to Sydney airport at Mascot, Mr. Thring, Mr. Adnam and he were discussing a number of matters and either Mr. Adnam or he mentioned the letter of 18 November 1976 and Mr. Thring claimed he had never seen it. Mr. Kelly obtained the copy retained by Adnam and Pockley and showed it to Mr. Thring who "was quite amazed". They discussed the letter and it was following that discussion that Mr. Thring wrote a memorandum dated 31 March 1977 to Adnam and Pockley for the attention of Mr. Kelly which was received by Adnam and Pockley on 4 April 1977. It seems that this discussion was on 28 March 1977.

Mr. Kelly said that, having received the memorandum of 31 March 1977, he telephoned Mr. Smart and that he read the letter in its entirety to him to which Mr. Smart replied "we will have to kick this around". Nothing further was said. Mr. Kelly said that he did not elaborate on the memorandum at all.

It was not put to Mr. Smart in cross examination that Mr. Kelly had read to him the whole or any part of the memorandum of 31 March. The two versions of the conversation are not irreconcilable. It is possible that Mr. Kelly read the memorandum to Mr. Smart and that he concluded that the respondent was not prepared to supply its leather footwear to stores who discounted below the recommended level and that it was not prepared to supply stock to stores who did not have seating and fitting facilities.

However, I prefer the evidence of Mr. Smart to that of Mr. Kelly where the two conflict. Mr. Smart impressed me as a truthful and reliable witness. Mr. Kelly at times tried to explain away things that were damaging to the respondent's case, such as the letter of 18 November 1976. His evidence about a letter of 26 April 1977 to which I will refer later, was unsatisfactory and unconvincing; and certain of his answers in the witness box were inconsistent with what had been said by him or on his instructions in a statement in answer to a notice under s. 155 of the Act served upon Adnam and Pockley. I will return later to Mr. Kelly's credibility.

Counsel for the respondent submitted that it does not matter which version of this conversation is correct because neither fell within the relevant paragraphs of the statement of claim: 15, 16, and 17. Those paragraphs plead this conversation but in terms that confine the relevant statement by Mr. Kelly to a statement of a price that was likely to be understood by Woolworths as the prices below which Bata footwear was not to be sold, namely the maximum prices at which footwear could be offered for sale in South Australia as specified pursuant to the South Australian Prices Act 1948-1976. There is no reference at all in any of the evidence of Mr. Smart relating to this conversation about South Australian prices or anything that could be so understood or construed. The applicant has failed to establish its case as to this conversation.
Conversation about 19 April 1977

It was alleged in the statement of claim that there was a breach of the resale price maintenance provisions of the Act by reason of a conversation on about 19 April 1977 between Mr. Kelly and Mr. Clegg. No evidence was led about this conversation and counsel for the applicant abandoned the applicant's case relating to it.
Conversation 22 April 1977

On 22 April 1977 there was a meeting in the office of Mr. Adnam attended by himself and Mr. Kelly on behalf of Adnam and Pockley, and by Mr. Smart and Mr. Clegg on behalf of Woolworths together with Mr. Robinson who was in 1977 a senior merchandising manager of Woolworths.

The evidence of Mr. Robinson, Mr. Smart and Mr. Clegg as to what occurred and was said at the meeting is substantially the same although Mr. Robinson's recollection was not as clear as the recollection of the other two.

Mr. Adnam and Mr. Kelly gave evidence that was substantially the same, although Mr. Adnam's recollection was not very clear about a number of matters.

I accept the evidence of the witnesses Robinson, Smart and Clegg. Mr. Smart's recollection is the most reliable, although I do not suggest that Mr. Clegg and Mr. Robinson were not truthful and reliable witnesses.

In my opinion what occurred, so far as material, was that, after Mr. Smart introduced Mr. Robinson to Mr. Adnam, Mr. Smart asked Mr. Kelly if he could give details of the letter that he had already spoken about to Mr. Clegg and himself on the telephone earlier that month. Mr. Kelly read out the letter, which in fact is the memorandum of 31 March 1977 from Mr. Thring to Adnam and Pockley addressed to the attention of Mr. Kelly. They were informed by Mr. Kelly that the respondent would be prepared to supply Woolworths with P.V.C. footwear if Woolworths would sell it at a price comparable to the maximum price in South Australia. It was made clear to them that Bata branded leather footwear would not be sold by the respondent to Woolworths for two reasons: first, because the respondent was not prepared to supply such footwear to discounters; and second, because it was not prepared to supply to retailers who did not have proper seating and fitting facilities.

Mr. Robinson told Mr. Adnam that Woolworths was prepared to increase its selling prices to the "recommended level" after the cessation of the current price freeze that the Prime Minister, Mr. Fraser, had asked private enterprise to voluntarily adhere to. Woolworths agreed to support the Prime Minister and Mr. Robinson asked Mr. Adnam if he would write to the respondent in Melbourne to see what its reaction would be. Mr. Adnam agreed to do this.

Before the meeting Woolworths had been in touch with the applicant and, although its primary concern was to obtain supply of Bata leather footwear, it regarded the meeting in part as a means of obtaining evidence for possible proceedings under the Act. Although this means that one should approach the evidence of the witnesses from Woolworths as to this conversation with care, in my opinion it does not detract from its veracity or reliability.

I prefer the evidence of Messrs. Robinson, Smart and Clegg where it conflicts with the evidence of Mr. Adnam or Mr. Kelly. I have mentioned already some reasons for my view. There are others. Mr. Adnam was cross examined about a letter written by Adnam and Pockley to Mr. Thring dated 26 April 1977 following the meeting of 22 April. It reads as follows:-

"Ref.: WOOLWORTHS.

Confirming our phone conversation on Friday, 22nd April, we wish to report that, in response to our request, three Woolworths' executives visited our office to discuss the current problem:

Mr. Chris Robinson, Australasian Mens' Wear Controller for Woolworths and Big W.

Mr. Bill Smart, Footwear Controller for Big W. and Variety stores

Mr. Bob Clegg, Footwear Buyer for Big W. Division.

The Woolworths' team made it abundantly clear they required continuity of supply under the Bata brand and was in no way interested in any other brand.

An undertaking was given by them to market all Bata products, including P.V.C., at a level comparable with general marketing practice operating in all states. This would have been effective as of now, except for the Government's current price freeze but, immediately this is lifted, they will look to us for guidance in the orderly marketing of Bata merchandise, which undertaking is a complete reversal from their normal approach to marketing.

The Woolworths' executives also pointed out that, in the forseeable future, the Big W. Division would expand to 25 outlets throughout Australia and, even at this juncture, are considering a suitably located warehouse from which to service their operation.

We are currently holding repeat orders from them, totalling some 600 prs., which have been "frozen" pending your final decision in this matter.

With an organisation the size of Woolworths, with their present and future potential, "Can Bata afford not to be a part of this operation?"

Yours faithfully,
ADNAM AND POCKLEY PTY. LIMITED.

Sales Manager."

Mr. Adnam was cross examined as to what he meant by the expression "orderly marketing of Bata merchandise" in the letter. He said that it had nothing to do with price, and was a reference to the conventional shoe store, a proper display of merchandise, service, fitting and so on. He said that he never brought price into the discussion and that this reference in the letter was because the Woolworth's representatives raised the question of price.

In my opinion the letter supports the evidence of Mr. Robinson, Mr. Smart and Mr. Clegg and does not support the evidence of Mr. Adnam or Mr. Kelly. The letter, upon its proper construction and in the light of the surrounding circumstances, leads to the conclusion that what Mr. Adnam was saying was that the Woolworths' representatives undertook to market all Bata products, including P.V.C. footwear, at a price level comparable to "general marketing practice operating in all States" in the sense of a price comparable to the price generally charged throughout Australia. The reference to Bata's undertaking to look to Adnam and Pockley or the respondent for guidance "in the orderly marketing of Bata merchandise" immediately the Government's current price freeze is lifted can be nothing but a reference to price.

The "complete reversal" to which Mr. Adnam was referring was the fact that Woolworths was prepared to undertake to charge a price not below a certain agreed price which was the opposite to what it normally did.

The evidence of Mr. Adnam as to what he meant by the "orderly marketing of Bata merchandise", namely the selling of shoes by conventional shoe stores properly displaying merchandise with adequate service and fitting facilities, is incredulous. His evidence goes to a critical issue in the case and I do not accept him as a credible or reliable witness on this matter. This must therefore cast doubt as to his credibility and reliability generally. Hence my preference for the evidence of the witnesses called by the applicant.

I should add that the small inconsistencies in the evidence of Messrs. Robinson, Smart and Clegg are to be expected where people recall events independently rather than in concert.

Counsel for the respondent stressed that Mr. Smart said in evidence that Mr. Kelly read the letter of 31 March 1977 in the context of a reference to South Australian prices whereas in truth there is no such reference in the letter itself. This is true; but, reading the evidence of Mr. Smart as a whole, what he is saying is that the letter was read out; and that there was a reference to South Australian prices by Mr. Kelly whether in his apparent reading of the letter itself or otherwise. Further, Mr. Smart was not cross examined on this point.

I am satisfied that there was a reference made to South Australian prices, namely that it would be permissible for Woolworths to obtain P.V.C. footwear in the future provided the prices were not less than the maximum permitted under South Australian price legislation. It is also noteworthy that in the memorandum of 31 March, the statement is made:

"because our P.V.C. waterproof footwear is of a type which is traditionally sold through all types of outlets, this may be sold to Woolworths for either their variety stores or 'Big W' but, needless to say we would expect them to follow an orderly marketing plan."

This is consistent with Mr. Kelly having said at the meeting that Woolworths would receive supplies of P.V.C. waterproof footwear in the future provided it did not charge less than the maximum prices permitted under South Australian law.

The applicant contends that the evidence as to this conversation establishes that the respondent falls within the terms of s. 96 (3) (a), (b) and (f) of the Act.

What I have said earlier about the acts of Adnam and Pockley being treated as the acts of the respondent applies also to this conversation. As to the 22 April conversation it was Mr. Thring who wrote the memorandum to Adnam and Pockley of 31 March 1977 for the attention of Mr. Kelly where he expressly directed Adnam and Pockley to follow the policies mentioned by him, including the non-supply of Bata leather footwear to Woolworths. Mr. Kelly wrote to Mr. Thring on 26 April 1977, after the meeting of 22 April, in terms leaving no doubt that it was his understanding that he was to conduct the relevant discussions with Woolworths as to future supply of Bata footwear. Mr. Thring replied by letter of 28 April 1977. From these documents it is clear that whatever was said during the 22 April meeting by Mr. Adnam or Mr. Kelly was said on behalf of the respondent.

Turning to s. 96 (3) (a) first. It applies where the supplier makes it known to the second person that the supplier will not supply goods to the second person unless the second person agrees not to sell those goods at a price less than a price specified by the supplier. Adnam and Pockley made it known to Woolworths, and I treat Adnam and Pockley and the respondent as the same for this purpose, that the respondent would not supply goods to Woolworths, being P.V.C. footwear, unless Woolworths agreed not to sell those goods at a price below the maximum price at which footwear could be sold in South Australia pursuant to the South Australian Prices legislation. These statements fall within paragraph (a).

What I have said in relation to paragraph (a) applies also to paragraphs (b) and (f).

Accordingly, in my opinion, the applicant has established its case as to this conversation in respect of P.V.C. footwear (see paragraphs 21, 22 and 23 of the statement of claim). Although those paragraphs refer to "Bata footwear", which by definition (paragraph 4 of the statement of claim) means Bata leather footwear and Bata P.V.C. footwear collectively, I regard the relevant allegations in the statement of claim as being capable of dichotomy so that, in the end they have been established as to Bata P.V.C. footwear only.

The applicant's case that this conversation falls within the terms of paragraph (a), (b) and (f) must fail as to Bata leather footwear. It was made known in clear terms to the representatives of Woolworths at the meeting that the respondent would not supply it with Bata leather footwear both because it was a discounter and because it did not have proper seating and fitting facilities and service in its shops. Those statements do not fall within paragraphs (a), (b) and (c).

Non supply of Bata branded leather footwear
after about May 1977

It is common ground that from May 1977 onwards the respondent has not supplied Bata leather footwear to Woolworths.

The actual date on which supply commenced to be withheld is not entirely clear from the evidence; but it does not matter.

The main question in the case is why the respondent has not supplied Bata leather footwear to Woolworths since May 1977. There has been no withholding of supply of Bata P.V.C. footwear to Woolworths.

The applicant's case is that the respondent has not supplied Woolworths because it was the policy of the respondent not to supply Bata leather footwear to discounters, of which Woolworths is one. The respondent's case is that the prices charged by retailers for Bata leather footwear does not concern it and that Woolworths has not been supplied because it did not provide proper seating and fitting facilities, trained staff (i.e. trained in relation to footwear) or after "sales service".

I am satisfied that it is the respondent's policy not to supply retailers with Bata leather footwear unless they provide seats for customers and facilities for the fitting of shoes, trained staff and "after sales" service. This is the policy, not only of the respondent, but of the Bata group generally. I have no doubt that the respondent is proud of its product and does not wish to sell its Bata leather footwear to retailers who do not have adequate facilities and service.

Counsel for the applicant submitted that the respondent paid lip service only to this policy and did not really care whether the appropriate facilities and services were provided by retailers.

Although certain shoe fitting courses are conducted by the Bata group overseas and by the Canadian Footwear Institute which the respondent has supported since 1961 (two or three of its staff attend each year the Bata group courses overseas and twelve of its staff have attended the course at the Canadian Footwear Institute), some of the courses deal with sales and marketing techniques and business principles, not the fitting of footwear.

Employees of the respondent attend retail outlets in January/February of each year to assist in the fitting of children's shoes; but this happens only in the greater Melbourne metropolitan area and involves about three employees only. Indeed, only one of them does it every year and the other two sometimes assist him. This assistance is provided on days when business is at its highest level, but only on about three or four days during January and February. The employee visits only one store per day which tends to be one of the larger department stores in Melbourne. Hence, retailers which are not large department stores or situated more than about 26 kilometres from Melbourne do not have the benefit of this assistance.

A course is conducted by the Footwear Retailers' Association of Victoria. Only two employees of the respondent have attended that course and no steps have been taken by the respondent to inform retailers in Victoria of the desirability of their employees attending it. Nothing is done by the respondent specifically to check that proper after sales service is given by retailers. The respondent had never received any complaint from a customer about service received when purchasing Bata footwear from a Woolworths' store; but complaints have been received in relation to other retailers. Woolworths sold Bata leather footwear in its Big W "junior department" stores, variety stores and Big W discount stores from about 1965 until supply ceased in about May 1977.

Notwithstanding the limited steps taken by the respondent to pursue, implement and supervise this policy, in my opinion the policy exists and played a part in the respondent's decision to not supply Woolworths with Bata leather footwear after May, 1977. After all, the respondent does not appear to have been inundated with complaints about its leather footwear or about retailers and, doubtless, it has been content to trust the retailers with whom it has dealt in the past and who appear to have given satisfactory service to the public.

The decision not to supply Woolworths with Bata leather footwear after May 1977 was made by Mr. Thring as the managing director of the respondent. He said that the reason for his decision was that he heard for the first time on 28 March 1977 of the 18 November 1976 letter and of the fact that Bata leather shoes were being supplied by the respondent to Woolworths for resale in its "variety" stores. Mr. Thring knew that Bata footwear had been supplied by the respondent to Woolworths since the 1960's but he thought it was to the Woolworths "Big W" department stores which were previously department stores similar to Myer and David Jones with proper seating and fitting facilities, trained staff, and "after sales" service. The "Big W: stores changed their character in the 1970's and thereafter ceased to provide those facilities. Woolworths "variety" stores do not provide those facilities.

In my opinion Mr. Thring's decision not to supply Woolworths with Bata leather footwear was made because Woolworths, in its various types of stores ("Big W" stores, "variety" stores, and discount stores), did not provide those facilities and because it was a major discounter, namely a retailer that sold its goods for prices below those generally charged by other retailers.

Mr. Thring said that his decision had nothing to do with the fact that Woolworths was a discounter. I do not believe him.

It is clear from the 18 November 1966 letter that what concerned Adnam and Pockley was the complaint from a large retailer, that Woolworths was discounting Bata footwear. I do not accept the evidence of Mr. Thring, Mr. Adnam and Mr. Kelly that this complaint played no part in the decision to discontinue supplying Bata leather footwear to Woolworths.

Although I accept Mr. Thring when he said that he did not know of this letter until late March 1977, I have no doubt that he wished to ensure that substantial undercutting of prices did not occur as this would lead to complaints by large customers, such as occurred in November 1976 with the complaint from Myer Western Stores Limited, and thus disturb the tranquility of the respondent's relations with its established retail outlets.

Notwithstanding that prices charged by retailers for Bata leather footwear varied from time to time, Mr. Thring did not want a price war on his hands between the traditional retail outlets and a large discount organisation such as Woolworths. Also, if Woolworths was supplied with Bata leather footwear, other large discounters, like Coles and K-Mart would have to be supplied too. This would only compound the problem.

That Mr. Thring placed importance upon the absence of "repercussion from conventional shoe retailers" on questions of price is clear from his letter of 28 April 1977 in reply to Mr. Kelly's letter of 26 April. In that letter he drew Mr. Kelly's attention to the fact that one of the top five customers of the respondent was a discounter who sold the respondent's leather shoes under its own brands, not the Bata brand, yet their had been "no Bata branding nor advertising. There has been little if any repercussion from conventional shoe retailers".

The memorandum of 31 March 1977 is a revealing document. When read either alone or in the light of other documents and the evidence as a whole, including the oral evidence of Mr. Thring, it is a clear statement that the respondent was not prepared to sell its P.V.C. footwear to Woolworths unless it followed "an orderly marketing plan". In my opinion this was a reference to the necessity for Woolworths not to engage in the practice of discounting but to conform to much the same price as other retailers for Bata footwear including P.V.C. footwear.

Mr. Thring gave the following evidence in cross-examination:

"Q. Over on page (2), you say in the second paragraph that you would be prepared to sell pvc footwear. Then in the last phrase, you say, "But needless to say we would expect them to follow an orderly marketing plan." What do you mean by the expression, an orderly marketing plan? --- There are several facts.

Q. What did you mean when you used the expression, an orderly marketing plan? --- I meant that the customer must order sufficiently in time, plan his requirements so that our factory could produce the shoes in order to meet his delivery requirements, that he would maintain a sufficient stock of any of the articles which he was carrying and to ensure that any periods where there is a high demand that he has sufficient stock to cover that demand, that he particularly ensures in the case of any of our nationally advertised footwear that the public have sufficient quantities available to them so that they are not disappointed and disillusioned by going to shops and finding our shoes are not available after having been advertised. I also mean in that the shoes must be attractively displayed, that displays are kept in good attractive order and that the customer service that is required after their purchase is properly settled.

Q. That was a reference to P.V.C. footwear. Is there customer service which you would expect to be given in respect of P.V.C. footwear? --- It does not seem to require the same amount of customer service which our leather footwear would require."

I do not believe his evidence as to what he meant by the phrase "an orderly marketing plan". I have referred earlier to the conversation of 22 April 1977 and accepted the evidence of Messrs. Robinson, Smart and Clegg. They were told by Mr. Kelly, in the presence of Mr. Adnam, that the respondent would supply Woolworths with P.V.C. footwear if Woolworths would sell it at a price comparable to the maximum price permitted in South Australia. This evidence is consistent with the 31 March memorandum and with the phrase "an orderly marketing plan" construed as I think it must be, and as it was intended by Mr. Thring notwithstanding his subsequent rationalisation of its meaning.

Nor do I accept Mr. Adnam's evidence that the reference to "orderly marketing of Bata merchandise" in the letter of 26 April was to "the conventional shoe store, a proper display of merchandise, service, fitting and so on". He denied that he meant by that expression "marketing it at prices comparable to the prices other people were selling at" and that the words were referring only to price. I do not believe him. In my opinion he meant much the same as Mr. Thring meant by his use of the phrase "an orderly marketing plan".

It is as well to remember the letter of 18 November 1976 when Mr. Kelly said, to the knowledge and with the approval of Mr. Adnam, "all traditional footwear retailers conform to a price of $14.99" in the context of the complaint from Myer Western Stores Limited that its business was being adversely affected by the discounting of footwear by Woolworths.

The letter of 18 November 1976, the memorandum of 31 March 1977, and the letters of 26 and 28 April 1977 are all substantially consistent with each other and with the evidence of Messrs. Robinson, Smart and Clegg as to what was said in the relevant conversations, in particular the conversation of 22 April 1977. They confirm that the respondent and Adnam and Pockley were concerned that Woolworths was discounting the respondent's Bata footwear and attracting complaints from Myer Western Stores Limited, even to the point where Adnam and Pockley sought a directive from the respondent as to whether it should continue to supply Woolworths; and said that Adnam and Pockley was holding a volume of orders, and would delay shipment, pending the decision of the respondent in the matter of future supply to Woolworths.

It is inconceivable that Mr. Adnam or Mr. Kelly could have intended the phrase "orderly marketing of Bata merchandise" in the letter of 26 April to refer to anything except price. I do not think that Mr. Thring had a different understanding of what his agent was talking about. I think they were all fully seized of what each other had in mind.

There is other evidence which corroborates the evidence of Messrs. Robinson, Clegg and Smart and is consistent with my construction of the contemporaneous documents.

Evidence was given by a Mrs. Kelly, an invoice clerk employed by Woolworths at its Gladstone "Big W" store in Queensland and responsible for seeing that orders were delivered on time, of a conversation which she had with Mr. Lewis the marketing manager of the respondent. Mrs. Kelly said that on 1 July 1977 she telephoned Mr. Lewis and asked him why Woolworths was not receiving its orders, to which he said:-

"It is about time somebody had the guts to stand up and be counted and tell you people what is going on. It was company policy directed by the managing director that they would not supply Bata branded shoes to discount stores . . . That is not true because K-Mart do sell some of our shoes."

Mr. Lewis in effect denied that he said this.

Evidence was given by a Mr. Murden, the manager of Woolworths "Big W" store at Gladstone, Queensland, of a telephone conversation with Mr. Lewis on 1 August 1977. Mr. Murden said that he asked Mr. Lewis why stock had not been despatched to Gladstone and that Mr. Lewis said:-

"It was not the company's practice to supply footwear to discount stores and he read a part of his company policy, which I believed to be his company policy, which stated no leather branded shoes would be supplied to discount stores, namely the 'Big W'."

Mr. Murden said that Mr. Lewis then said he would not supply the shoes and he quoted to him a script from the Act apparently giving some authority to this policy. He said that Mr. Lewis said that the respondent would not supply branded shoes made by Bata such as "Ponytails" "Strides" and "Scouts" and would only supply unbranded shoes. Mr. Lewis disputes the correctness of this evidence.

I accept the evidence of Mrs. Kelly and Mr. Murden. I do not accept the evidence of Mr. Lewis. Not only did Mrs. Kelly and Mr. Murden impress me as witnesses of truth but their evidence as to what Mr. Lewis said is consistent with what I find the policy of the respondent to be and with the contemporaneous documents.

The applicant's case is pleaded in paragraphs 24, 25 and 26 of the statement of claim, as follows:-

"24. Since in or about May 1977 the defendant has withheld the supply of leather footwear to Woolworths Limited for the reason that Woolworths Limited had not agreed not to sell Bata leather footwear at prices less than prices specified by the defendant, namely, the maximum prices at which footwear could be offered for sale in the State of South Australia as specified pursuant to the South Australian Prices Act 1948-1976.

25. Further, or alternatively to paragraph 24, since in or about May 1977 the defendant has withheld the supply of Bata leather footwear to Woolworths Limited for the reason that Woolworths Limited had sold, or was likely to sell, Bata leather footwear supplied to Woolworths Limited by the defendant at prices less than prices specified by the defendant as the prices below which Bata leather footwear was not to be sold, namely, the maximum prices at which footwear could be offered for sale in the State of South Australia as specified pursuant to the South Australian Prices Act 1948-1976.

26. By reason of the matters and on the occasions hereinbefore stated, the defendant since November 1976 has engaged, and continues to engage, in contraventions of the Act, namely, the practice of resale price maintenance contrary to the provisions of section 48 of the Act."

Paragraph 24 of the statement of claim is based upon s. 96 (3) (d) (i) of the Act, namely that a person engages in the practice of retail price maintenance if that person, being the supplier, withholds the supply of goods to a second person for the reason that the second person has not agreed not to sell those goods at a price less than a price specified by the supplier.

Paragraphs 25 of the statement of claim is based upon s. 96 (3) (d) (ii), namely that a person engages in the practice of resale price maintenance if that person, being a supplier, withholds the supply of goods to a second person for the reason that the second person has sold or is likely to sell goods supplied to him by the supplier at a price less than a price specified by the supplier as the price below which the goods are not to be sold.

I have already made findings as to the relevant conversations, in particular the conversation of 22 April 1977. I have accepted the evidence of Messrs. Robinson, Smart and Clegg as to what was said during those conversations from which it follows that they, as the spokesmen for Woolworths, made it clear to Mr. Adnam and Mr. Kelly that they wanted to ensure continuity of supply of Bata footwear to Woolworths and gave an undertaking to market all Bata products, including P.V.C. footwear, at a price level comparable with "general marketing practice operating in all States", and that this would be effective immediately save for the unofficial price freeze requested by the Prime Minister, to which Woolworths was a party; but that immediately it was lifted "Woolworths would look to the respondent for guidance in the orderly marketing of Bata merchandise". The reason for not supplying Woolworths was not because it had not agreed not to sell Bata footwear at prices less than those specified by the respondent, namely the maximum prices permissible under the South Australian Prices Act. The policy of the respondent was twofold, namely not to sell to large discounters or to retailers who did not have proper seating and fitting facilities, trained staff and "after sales" service. The respondent refused to supply Bata leather footwear to Woolworths notwithstanding the undertaking to which I have referred.

The evidence does not establish that Woolworths had not agreed not to sell Bata leather footwear at prices less than the maximum prices permitted under South Australian law. The allegations in paragraph 24 of the statement of claim have not been established.

The decision of the respondent not to supply Woolworths with Bata leather footwear was taken by Mr. Thring before the conversation of 22 April 1977. That conversation was not an enquiry by Adnam and Pockley of Woolworths as to what it would be prepared to do. Rather it was the occasion for Adnam and Pockley to tell Woolworths of the decision already taken by the respondent that Woolworths would not be supplied with Bata leather footwear in the future for two reasons, one being that it was a discounter.

One of the reasons for Mr. Thring's decision not to supply Woolworths with Bata leather footwear in the future was that it was a large discounter whose business was based on charging less than other established retailers. Not only had it sold Bata leather footwear at prices below those charged by most retailers but he assumed that it would continue to do so. His decision was made before the 22 April meeting and there is no evidence that his view was changed by anything that transpired then.

The respondent knew that, subject to slight variations, established retail outlets handling Bata shoes charged much the same prices. Some were discounters but on a small scale and they provided proper facilities. They would not trouble any major customer of the respondent.

I am satisfied that a reason, and a substantial reason, for the respondent withholding the supply of Bata leather footwear to Woolworths after May 1977 was that Woolworths had sold, or was likely to sell, such footwear at a price less than the price which the respondent had through its agent specified to Woolworths as being the price below which the footwear was not to be sold.

The fact that this was a substantial reason for the withholding of supply of Bata leather footwear from Woolworths is sufficient to constitute a breach of s. 96 (3) (e) II: see s. 4F (b) of the Act. Paragraph 25 of the statement of claim has been established.

There remain the questions of injunction, pecuniary penalty and costs. I will adjourn the further hearing of this proceeding to a date to be fixed so that the parties may consider my reasons for judgment and then deal with these questions.