Trade Practices Commission v Mobil Oil Aust Pty Ltd
[1984] FCA 246
•20 AUGUST 1984
Re: TRADE PRACTICES COMMISSION
And: MOBIL OIL AUSTRALIA LIMITED
No. WA G41 of 1983
(1984) ATPR para 40-482 / 55 ALR 527
Trade Practices - Evidence
3 FCR 168
COURT
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.(1)
CATCHWORDS
Trade Practices - resale price maintenance - sale of petroleum by respondent to dealers - whether respondent induced or attempted to induce petrol station proprietor not to sell petrol at price less than specified price - whether respondent made statement of price likely to be understood as price below which petrol not to be sold - meaning of specified price - meaning of attempt to induce - evidence - rule in Browne v. Dunn - balance of probability - relevance of seriousness of allegations - proof of proscribed conduct sufficient proof of inducement
Trade Practices Act 1974 ss. 48, 76, 77, 93
Trade Practices - Resale price maintenance - Sale of petroleum by wholesalers to dealers - Whether wholesaler induced or attempted to induce dealers not to sell below specified price - Meaning of specified price - Conduct of servants - Trade Practices Act 1974 (Cth), ss 48, 76, 77, 84(2), 93.
Evidence - Rule in Browne v. Dunn - Whether details of conversation must be put to witness who has no recollection of conversation.
HEADNOTE
Held: (1) Section 84(2) of the Trade Practices Act 1974 (Cth) deems the conduct of servants or agents of a corporation to be the conduct of the corporation itself. It follows that the conduct of the servants of the respondent was the conduct of the respondent.
Trade Practices Commission v. Tubemakers of Australia Ltd (1983) 47 ALR 719 at 738-749, referred to.
(2) The rule in Browne v. Dunn (1893) 6 R 67 does not require counsel to take a witness who has professed no recollection of a conversation through the detail of the conversation.
(3) For the purposes of a finding of resale price maintenance, the "price . . . specified" may be satisfied by:
(a) A price not specified in precise terms but within a range of a particular figure or otherwise having an element of approximation.
Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty Ltd (1978) ATPR 40-091; Trade Practices Commission v. Bata Shoe Co. of Australia Pty Ltd (No. 2) (1980) 44 FLR 149; Peter Williamson Pty Ltd v. Capitol Motors Ltd (1982) 41 ALR 613 at 620, referred to.
(b) A price specified by reference to some standard well known to the parties.
(4) Section 96(3)(b) constitutes an absolute prohibition on the conduct described therein. Mere proof of the conduct is sufficient. With the exception of "attempting to induce", s. 96 is concerned with conduct, not with the mental element that may accompany the conduct.
(5) Observations concerning whether statements made against the background of a Temporary Dealer Assistance Scheme for Petroleum Wholesalers by representatives of a wholesaler of petroleum constituted resale price maintenance.
HEARING
Perth, 1984, March 19-23; July 11, 12; August 20. #DATE 20:8:1984
APPLICATION.
Application for pecuniary penalties for contravention of Trade Practices Act 1974 (Cth), s. 48.
E.M. Franklyn Q.C., and C.J. Carr, for the applicant.
D.R. Williams Q.C. and P.D. Martino, for the respondent.
Cur. adv. vult.
Solicitor for the applicant: Australian Government Solicitor.
Solicitors for the respondent: Stone James Stephen Jaques.
G.F.V.
ORDER
1. The respondent contravened s.48 of the Trade
Practices Act 1974 by the telephone
conversation pleaded in para. 8 of the statement of claim.
2. The respondent contravened s.48 of the Trade
Practices Act 1974 by the telephone
conversations pleaded in paras 13, 14 and 15 of the statement of claim.
3. The question of penalties to be paid by
the respondent to the Commonwealth and the question of other relief sought by the applicant be adjourned to a date to be fixed.
JUDGE1
In this application the Trade Practices Commission seeks the imposition of penalties against the respondent Mobil Oil Australia Limited for alleged contraventions of s.48 of the Trade Practices Act 1974 ("the Act").
STATUTORY CONTEXT
Section 76 of the Act empowers the Court, if satisfied that a person has contravened a provision of Part IV (within which s.48 is to be found), to order the person to pay to the Commonwealth a pecuniary penalty, not exceeding $250,000 in the case of a body corporate, in respect of each act or omission by the person to which s.76 applies. Section 77 empowers the Commission to institute a proceeding in the Court for the recovery on behalf of the Commonwealth of a pecuniary penalty referred to in s.76.
Section 48 reads:
"A corporation or other person shall not engage in the practice of resale price maintenance".
Section 96 identifies the acts which constitute engaging in the practice of resale price maintenance. The Commission relies upon two categories of conduct only, to be found in paras.(b) and (f) of sub-s.96(3). They read:
"(b) the supplier inducing, or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier;
...
(f) the supplier using, in relation to any goods supplied, or that may be supplied, by the supplier to a second person, a statement of a price that is likely to be understood by that person as the price below which the goods are not to be sold".
During the hearing reference was made to sub-s.96(4) which amplifies and to a degree extends some of the concepts expressed in sub-s.96(3). It reads in part:
"For the purposes of sub-section (3) -
(a) where a price is specified by another person on behalf of the supplier, it shall be deemed to have been specified by the supplier;".
One further reference to s.96 is necessary. Sub-section (6) reads:
"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".
THE BACKGROUND
The Commission's claim that there have been contraventions of the resale price maintenance provisions of the Trade Practices Act arises from dealings in 1981 and 1982 between Mobil on the one hand and Robert Norman Quayle and Monica Alice Quayle on the other. Mobil is a wholesaler of petroleum. In 1981 Mr. and Mrs. Quayle carried on in partnership, under the registered business name "Dog Swamp Mobil Service", the business of retailing petroleum at a service station site in Wanneroo Road, Yokine. They leased the Dog Swamp site from Mobil and bought petroleum from the company under a reseller contract. On 27 January 1982 the Quayle's business was incorporated as Teegs Pty. Ltd., with Mr. and Mrs. Quayle as the sole shareholders and directors. Teegs entered into a lease and reseller contract with Mobil. Under the reseller contract the price set for products sold was "Mobil's List Price".
The sale of petroleum from service station
sites is of course a highly competitive business. Within a particular trading area, that is an area in which the price at one site may affect sales at other sites, competition is particularly keen. Service station proprietors keep a close watch on prices being charged by their competitors. Within a trading area prices may move, not only over the course of a week, but from day to day and sometimes during the course of a day. The extent of a trading area depends upon a number of considerations. The distance of one site from another is clearly relevant but there are other factors. For instance the existence of a highway may bring into competition sites that, in other circumstances, would be too far apart to influence each other. This is particularly true where access to one site from a highway is restricted.
MOBIL'S ORGANISATIONFor a better understanding of the evidence, reference should be made to the Mobil hierarchy in Western Australia at the relevant times, in particular those persons with whom Mr. Quayle came in contact on the various occasions mentioned in the course of evidence.
From 1 September 1981 Mr. Densley was Mobil's resale manager for Western Australia. He was responsible for the administration of all wholesale and retail sales within the State. Western Australia is divided into a number of areas for each of which there is an area manager. For the area in which Perth falls, he is known as the metropolitan area manager. At all relevant times until 30 April 1982 that position was occupied by Mr. Ross; thereafter it was held by Mr. Williams.
The metropolitan area manager controls five retail territory managers, each of whom is responsible within an identified area for service stations owned and operated by Mobil or leased from Mobil and for some private service stations operating under the Mobil brand name. Mr. Densley described the territory managers as "the people who have the direct front-line contact with dealers on a day to day basis". The territory manager is sometimes known as the resale representative, retail representative, representative or just the "rep". Until March 1981 the territory manager was Mr. Denkinger and thereafter until May 1982 he was Mr. Totaro.
Mobil's defence put in issue the authority of Mr. Ross to bind the company by what he was alleged to have said. In the end the denial of authority was largely formal. Sub-s.84(2) of the Act reads:
"Any conduct engaged in on behalf of a body corporate by a director, agent or servant of the body corporate or by any other person at the direction or with the consent or agreement (whether express or implied) of a director, agent or servant of the body corporate shall be deemed, for the purposes of this Act, to have engaged in also by the body corporate".
In effect sub-s.84(2) deems the conduct of servants or agents of a corporation to be the conduct of the corporation itself. See the discussion in Trade Practices Commission v. Tubemakers of Australia Ltd. (1983) 48 ALR 719 at pp 738-740. There is no doubt that at all material times Mr. Ross and Mr. Totaro (whose conversation with Mr. Quayle is also relied upon by the Commission) were servants of Mobil; it follows that their conduct in relation to the Quayles and Teegs was conduct by Mobil. In so far as anything turns on the fact that Mr. Williams replaced Mr. Ross as metropolitan area manager on 30 April 1982, it is apparent that there was a "handing-over period" (to use Mr. Densley's expression) and that Mr. Ross continued to be concerned with the Dog Swamp site at least until 13 May 1982 when there was a meeting in Mr. Densley's office. Reference has already been made to the deeming provisions in para. 96(4)(a) and sub-s.96(6).
TEMPORARY DEALER ASSISTANCE REBATETo assist dealers in their highly competitive situation, Mobil has a Temporary Dealer Assistance Rebate Scale, known as TDAR. Manual 1907, issued by Mobil in March 1981, described TDAR in this way:
"The Temporary Dealer Assistance Rebate Scale
(TDAR) is the basic delegation for providing rebates in a retail class of trade. These rebates provide price support for Mobil dealers in areas affected by price cutting.
The TDAR Scale was developed to provide management with a ready means of ensuring non-discriminatory Mobil support aligned to proposed posted prices to meet major competitive activity.
The TDAR Scale is graded to encourage dealers to post maximum prices in their trading area consistent with major competitive activity in their local market place.
To avoid price discrimination all Mobil dealers in the same trading area should be given equal opportunity to avail themselves of the TDAR Scale to meet major competitive activity.
It is proposed that the scale covers a range of posted prices from the point where the dealer support becomes necessary down to reseller list price".
The system, as first introduced, was described by Mr. Fannin, who was manager pricing for Mobil in Australia between 11077 and 1983, as follows:
"... there was a scale of resale prices for each state which generally represented a range of retail prices which were likely to be encountered in the market-place of that particular capital city. Against each item of price was marked what the dealer margin would be if he bought product at Mobil's maximum wholesale price. Against that also was notated what support Mobil was willing to give the dealer to increase his margin to make the business a viable business at each of the posted prices which were likely to be encountered in that capital city".
The price at which a dealer buys petroleum is known as the dealer tank wagon price, being the maximum price Mobil can charge for bulk deliveries as set by the relevant statutory authority. In 1981 and 1982 that authority was either the Prices Justification Tribunal established under the Prices Justification Act 1973 or its successor the Petroleum Products Pricing Authority established under the Petroleum Products Pricing Act 1981.
In 1980 Mobil reviewed its TDAR at the request of dealers who felt that their margins were being eroded. The revised system assumed that, for a dealer to be competitive, he had to post a price equal to Mobil's maximum wholesale price. The aim was to provide support that would produce a margin to the dealer of 6% on that price. If the dealer increased his price above Mobil's maximum wholesale price, he would increase his margin by .1% for every .1 of a cent the litre retail price increased. Of course, in doing so the dealer might lessen his ability to compete with other dealers. The revised system accommodated a lowering of the retail price below a margin of 6% of the dealer tank wagon price, but only to a level of 5%. If a dealer chose to go below that price, Mobil would not support him except in accordance with the scale appropriate to a dealer selling at a margin of 5% of the dealer tank wagon price. In other words, a dealer who sought to lower his retail price must weigh the advantages of increased sales against lower margins and a rate of support that stopped at a margin of 5% of the wholesale price.
The basis of the revised TDAR and the reason for the revision appeared in an internal memorandum from Mobil's head office dated 6 May 1980. The letter spoke of "a need for increasing Dealer Support to maintain Dealer Viability in the current Retail Climate of declining margins, static volume and increased operating costs". The letter continued:
"The method of calculating these TDAR Scales is to assume a Dealer Margin of 6% for Postings at current Reseller List Price is adequate to provide a reasonable Margin on gasoline sales at that level of Posted Price.
To determine the level of support for postings above and below Reseller List Price this percentage has been factored by 0.1% for each 0.1 cpl (cents per litre) movement in Posted Price i.e. Reseller List Price 31.7 cpl, TDAR is based on Dealer Margin of 6%. For Posted Price 31.8 TDAR is based on Dealer Margin of 6.1% of Posted Price; for Posted Price 31.6 TDAR is based on Dealer Margin of 5.9 of Posted Price.
This system for determining the TDAR Scale has been adopted to provide an equitable method of determining TDAR to provide adequate dealer margins on gasoline sales. The Scale terminates at a Posted Price 2.0 cpl above Reseller List Price with a percentage of 8% of Posted Price and at a Posted Price 1.0 cpl below Reseller List Price with a percentage of 5% of Posted Prices. In the event that Posted Prices below Reseller List Price minus 1.0 cpl are necessary for a dealer to remain viable then the TDAR Support is calculated on the basis of a Dealer Margin of 5% of the actual Posted Price".
The letter contained the following statement which is important in the light of the evidence:
"In the event of Dealers posting prices below those on the TDAR Scales attached no commitment for support of these lower levels is to be given".
I add one last passage from the letter:
"The level of discounting in the market place and subsequent erosion of margins is causing considerable concern. It is our desire to support our dealers in the current competitive climate, however we should not be supporting inefficient operations for the sake of volume nor should we allow our margins to be eroded to such a degree that our whole retail operation becomes suspect".
The system of application for and approval of TDAR was described by Mr. Densley in this way. The first point of contact is between the dealer and his territory manager or rep. That contact will usually be in the form of a telephone call or a visit to the service station by the territory manager. If it appears that there is justification for support, the dealer completes a TDAR form which begins:
"I wish to advise of pricing conditions which are influencing my trade, and affecting my ability to be competitive, and hereby apply for temporary dealer price assistance".
The form then provides for the inclusion of a list of other service stations in the trading area, with a statement of their posted prices for super and standard petroleum. Thereafter the dealer states his wish to retail motor spirit as from the opening of business on a particular date at a price "not more than" a price which is then inserted in respect of both super and standard petroleum. The territory manager then prepares another form entitled "TDAR MULTIPLE CHANGES" in which are inserted particulars of posted prices in the area and some comment under the heading "REASON FOR PROPOSAL". A perusal of the forms tendered in evidence suggests that although the reason for proposal is handwritten, it tends to follow a formula in these terms "Assistance necessary to enable dealers to profitably match competitors. This T.D.A.R. does not affect the status of competitive sites within trading area". These forms are accompanied by a map of the area, pinpointing the various sites whose posted prices are said by the dealer in question to be the justification for the price he wishes to charge and his need for TDAR support.
Continuing with Mr. Densley's exposition, the territory manager takes the forms to his retail area manager who supports the application by endorsement, rejects it or seeks further clarification. If the application is approved by the retail area manager, it is forwarded to the resale manager (in this case Mr. Densley) for ultimate approval. Mr. Densley explained his approach in this way:
"If it looks clear cut then I will approve it; if I am in doubt I will seek some clarification from those people".
By the time the hearing had concluded, it was apparent that Mr. Densley's neat and logical explanation of the system by which applications for TDAR were received and processed by Mobil was some distance removed from the way the system worked in practice. Indeed, in the course of his closing address, counsel for the Commission described TDAR as "a sham, or at best, ... a carefully contrived scheme to increase the prospects of maintaining resale prices for petrol". Counsel for Mobil objected to such a proposition which did not appear in the pleadings, had not hitherto been mentioned by counsel and had not been put to any of the witnesses. I upheld the objection but I treat as relevant the actual operation of the scheme for any light it may throw upon the issues whether conversations took place, what was said, what remarks made were intended to mean and what they were understood to mean.
It is apparent from the evidence of Mr. Quayle and of Mr. Totaro that applications for TDAR were sometimes prepared by the latter in advance of any formal request for assistance, that applications were sometimes completed by him before they went to the dealer, that he was not averse to signing an application form in the name of a dealer and that dates shown on the various forms, as to application, endorsement and approval, did not always correspond with the facts. Notwithstanding the lapse of a day or two which, according to Mr. Densley, would take place between submission of an application by the territory manager and his approval, there was one instance of an application apparently prepared and signed by Mr. Totaro, Mr. Myles (an employee of Teegs), Mr. Ross and Mr. Densley all on the one day.
Despite the undoubted existence of some system, it would be wrong to conclude that, on each occasion TDAR support arose for consideration, it was initiated by a dealer in anticipation of a change in his posted price, was discussed by him with the territory manager, was made the subject of an application by the dealer completing a form, was then considered by the territory manager and ultimately found its way to the resale manager for acceptance or rejection. This has to be borne in mind when considering the evidence of conversations alleged to have taken place. On the other hand, it is clear that TDAR did exist and provided financial benefit to service station operators, though only to the point where Mobil considered that it would not be in the best interests of the industry for posted prices to go too low, thereby eroding the profit margins of dealers and in turn causing harm to Mobil's own business.
THE CONVERSATIONSThe events upon which the Commission relies as constituting resale price maintenance by Mobil began in March 1981 and continued until April 1982. For the most part they concerned conversations between representatives of Mobil and Mr. Quayle.
Although it will be necessary to refer to the evidence in some detail, it may be useful to say something about the general impression made by the witnesses. Mr. Quayle was not well disposed towards Mobil and tended to give his evidence an emphasis inimical to the company. There had been disagreements over late payment for fuel supplied by Mobil, over an Esso car wash operated by Mr. Quayle in Mount Lawley between April 1981 and February 1982, over the existence of an Ampol service station only 300 metres or so from the Dog Swamp site which Mr. Quayle operated on commission between October 1981 and December 1982 and over the relevant trading area in which the Dog Swamp site fell. Mr. Quayle considered that his sales were affected by a wider range of service stations than Mobil would acknowledge.
But Mr. Quayle had a clear and detailed recollection of events and I found his evidence generally credible. Indeed in many respects his account of conversations was not challenged or was met by no more than statements that witnesses had no recollection of saying what they were alleged to have said. By contrast Mr. Ross and Mr. Totaro, the Mobil representatives most closely involved in the conversations, had little clear recollection of events and their evidence was in many respects quite tentative. That is not to be critical of them for Mr. Quayle was only one of many dealers with whom they came in contact. The conversations were spread over a couple of years and may not have been regarded by the Mobil representatives as specially significant. On the other hand, Mr. Quayle was directly affected by the subject matter of the conversations and might be expected to have a more precise recollection of what was said. The fact is that, where conversations are involved, I prefer the evidence of Mr. Quayle. However important questions arise as to the construction to be placed upon those conversations.
The Commission relies upon conversations said to have taken place on 7 March 1981 and 27 April, 29 April, 5 May and 13 May 1982.
As to the conversation of 7 March 1981, the context is that on 6 March Mr. and Mrs. Quayle reduced the price at which they advertised and sold supergrade petroleum from 37.5 cents a litre to 37.2 cents a litre. At the time the generally prevailing retail price in the area was 37.5 cents a litre, as is borne out by the evidence of Mr. Quayle and of Mr. Ross. I accept the evidence of Mr. Quayle that he did reduce his retail price in this way. According to Mr. Quayle, on Saturday 7 March Mr. Ross telephoned him to say that he had just driven past the Dog Swamp site and had noticed the advertised price of 37.2 cents a litre. Mr. Ross made several statements which are particularised in para. 8 of the statement of claim in this way:
"(i) You are destabilising the market by that drop.
(ii) I want the price up.
(iii) You'll get no help or support from me until the price is back up.
(iv) I would point out to you strongly, Bob, that you will lose any support or help from me if you continue to keep the price at 37.2."
Mr. Quayle's oral evidence was substantially to this effect. He replied that his business had improved with the drop in price and that he was quite happy with the drop. He then said that he would like something done about promotion of the service station, meaning promotional assistance from Mobil; it was in that context that Mr. Ross said "you'll get no support from me in any way until you have put your price back up to 37.5", adding that he would get someone from Mobil to see Mr. Quayle about promotional assistance. Mr. Quayle said that, in view of what he had been told regarding promotion and because of the forceful nature of Mr. Ross' conversation, he said he would put his price back to 37.5. This he did before the start of business on Monday 9 March, though later that day he reduced the price to 37.4 cents a litre following a telephone call from a competitor.
In cross-examination Mr. Quayle was asked and answered as follows:
"Did you understand Hamish Ross to be stipulating a price to you? --- I understood him to be stipulating a price, yes; clearly".
In the Commission's submission, the statements made by Mr. Ross constituted an inducement to Mr. and Mrs. Quayle not to sell or advertise or offer for sale super grade petrol at less than 37.5 cents a litre (in contravention of para. 96(3)(b) of the Act) and further constituted the use by Mobil of a statement of a price as the price below which its petroleum was not to be sold or advertised for sale or offered for sale (in contravention of para. 96(3)(f) of the Act).
In his evidence Mr. Ross said that he had no recollection of such a conversation. In a written statement made to the Commission on 2 November 1982, Mr. Ross had earlier said that although he had no specific recollection of the conversation, it is possible that he held a conversation with Mr. Quayle relating to price support at the time. In that statement he referred to a conversation with Mr. Quayle on 6 March 1981. The reason for selecting this date rather than 7 March was that in a statement furnished to the Commission by Mr. Quayle, being a statement on which Mr. Ross was asked to comment, Mr. Quayle identified the day of the conversation as Friday 6 March 1981. This difference between the date identified in Mr. Quayle's statement to the Commission and the date referred to in the statement of claim and in Mr. Quayle's oral evidence was made the subject of an attack by Mobil. But there is force in the submission made by counsel for the Commission that, when Mr. Quayle's statement was taken by an officer of the Commission, there was some confusion as to dates. The written statement also contains the sentence "On Monday 8 March 1981, I put the price back to 37.5 CPL". But Monday was 9 March. It may be, as counsel for the Commission suggested, that when the statement was taken reference was made to the wrong calendar. But there was no evidence on the point. Mr. Quayle's oral evidence may certainly be tested against his written statement, including a passage indicating that the telephone call from Mr. Ross was on the same day as the price was lowered. But in the end the question is whether or not I accept Mr. Quayle's evidence, which substantially I do.
There is one matter of some importance. There was evidence that Mobil ceased price support to most of its Perth dealers, including Mr. Quayle, on 5 February 1981. This is not incompatible with Mr. Ross having made the statements he is alleged to have made, for the matter of price support was still a live issue. But it may have some bearing on the construction to be placed on those remarks. This is a matter to which I shall refer later in these reasons.
The next relevant conversation is said to have occurred on 27 April 1982, this time between Mr. Quayle and Mr. Totaro who was then Mobil's territory manager for an area which included the Dog Swamp site. Again Mr. Quayle gave evidence in precise terms as to what was said to him when Mr. Totaro telephoned. This time the context was that on 26 April 1982 Teegs (by then the Quayles' business had been incorporated) was selling and advertising super grade petroleum at 38.5 cents a litre and was receiving from Mobil TDAR assistance to the extent of 1.84 cents a litre off Mobil's maximum wholesale price, while other dealers in the area were selling at prices of 38.3 and 38.4 cents a litre. On 27 April Teegs reduced its price from 38.5 cents a litre to 38.3 cents a litre. Paragraph 13 of the statement of claim pleads Mr. Totaro's remarks in this way:
"(i) Hamish Ross will not agree to you going to 38.3.
(ii) Your site is not in the same trading area as the Mobil one at Charles Street.
(iii) The Caltex at the Charles Hotel is not in your area.
(iv) The Caltex at the Charles Hotel does not affect your site.
(v) Hamish will only support you to 38.5.
(vi) Shell are trying to get their retail price up to 38.9 and Mobil will look as though it is not conforming to Shell's attempts to raise the price."
The reference to the Mobil service station in Charles Street and the Caltex service station at the Charles Hotel was a reference to the fact that, at the time Mr. Totaro telephoned, both service stations were selling super grade petroleum at 38.3 cents a litre. In respect of the Caltex service station, Mr. Quayle's evidence of the price being charged was corroborated by the testimony of Mr. Paratore, the proprietor of that station.
Counsel for the Commission conducted a detailed analysis of various records, including some of Mobil's Dealers Meter Invoice Receipts, to demonstrate that TDAR assistance on 26 April 1982 was 1.84 cents a litre for super grade petroleum sold at 38.5 cents a litre. It is unnecessary to set out that analysis; it is enough to say that, in my view, it established the level of support in question.
Mr. Totaro agreed that he might have spoken to Mr. Quayle about the end of April 1982; he was speaking to all his dealers at least once a week about that time. He could not remember any specific conversation with Mr. Quayle but agreed that he may have made some of the statements attributed to him. Not only was there no denial by Mr. Totaro of what he is alleged to have said, but his evidence of what Mr. Ross said to him about this time lends support to the evidence of Mr. Quayle. Mr. Totaro said that towards the end of April 1982 Mr. Quayle had made an application for TDAR assistance to enable him to drop his price from 38.5 to 38.3 cents a litre. He put this request to Mr. Ross who replied "I will not support him to 38.3 because I believe it is a 38.5 market".
Again I accept the evidence of Mr. Quayle concerning the reduction of price, the level of support and his conversation with Mr. Totaro on 27 April 1982. I am satisfied that Mr. Totaro used the words pleaded in para. 13 of the statement of claim or words to that effect.
The next conversation took place on 29 April. Mr. Quayle said that he rang Mr. Ross to enquire whether Ross had spoken to Totaro about his (Quayle's) wish to get TDAR assistance at 38.3 cents a litre. Paragraph 14 of the statement of claim pleads that Mr. Ross made the following remarks:
"(i) Your site is in a 38.5 trading area and we will not support you at 38.3.
(ii) You are in a 38.5 trading area. We will only support you at 38.5.
(iii) I will send your discount authority to Ray Densley (then state retail manager for Mobil) but I won't recommend it."
Mr. Quayle gave evidence of statements made by Mr. Ross, in the terms pleaded or substantially to that effect.
Mr. Ross did not deny the conversation. Indeed his evidence lends some support to it for he said that at the end of April 1982 Mr. Quayle rang him to say that he was posting a price of 38.3 and was seeking Mobil's additional support. In Mr. Ross' words "My reply to him would have been that I would not recommend that additional support because the common posted price in his trading area was still 38.5". I accept Mr. Quayle's account of what took place in that telephone conversation.
Mr. Quayle gave evidence that on 5 May 1982 he made "a final call" to Mr. Ross because he had not received official approval for price support at 38.3 cents a litre. Mr. Quayle said that Mr. Ross reiterated that the Dog Swamp site was in a 38.5 trading area and did not fall into the 38.3 area. Mr. Quayle asked to see Mr. Forgan, then state manager for Mobil. Mr. Ross replied that it would be better if he saw Mr. Densley. Mr. Densley telephoned Mr. Quayle shortly afterwards and an appointment was made for 3 pm on 13 May.
Mr. Ross did not recall that conversation but I accept Mr. Quayle's evidence of it.
Mr. Densley recalled a telephone call from Mr. Quayle shortly before the meeting on 13 May; but his recollection was that Mr. Quayle rang to talk about the rental being charged for the Dog Swamp site and the general profitability of the service station.
It is common ground that a meeting was held on 13 May 1982 at Mobil's office at 191 St. George's Terrace Perth. Those present were Mr. Quayle, Mrs. Quayle, Mr. Densley, Mr. Totaro, Mr. Ross and Mr. Williams who had just taken over from Mr. Ross as area manager. Mr. Quayle said he took with him a profit operating analysis for the 12 months period ended April 1982 and also an operating analysis for a projected 12 months. He discussed with the meeting the figures he had prepared, in particular how the volume of business had slipped. He pointed out that the Dog Swamp site was now selling super grade petroleum at 38.3 cents a litre but Mobil North Perth had further reduced its price to 38.2. Mr. Densley repeated that Teegs would only get support at 38.5. Mr. Quayle said that he would like the site reappraised, by which he meant reassessed by Mobil, having regard to a number of factors contributing to the amount of business being done. In response to a statement by Mr. Densley that dealers were earning more than they ever had, Mr. Quayle said:
"Back in February 1979 we were earning a margin of about 2.03 cents ... which represented about 8.7 per cent of sales profit and currently the margin on 38.5 was 2.46 ... Okay, it's gone up but fractionally and in actual fact it only represents 6.4 on the sales price".
Mr. Quayle said he wanted price support to 38.2 cents a litre and the site reappraised on a rental basis due to roadworks carried out in Wanneroo Road which had affected access to and egress from the site. There was a dispute, as there had been in the past, about the extent of the trading area affecting the Dog Swamp site and Mr. Quayle suggested that he and Mobil should approach the Trade Practices Commission for a ruling on the matter, that is whether the site was in a 38.2 or 38.3 cents a litre area. Mr. Densley replied that he would not accede to the request for support at 38.3 cents a litre because Mr. Quayle was in a 38.5 cents trading area and that he was not in the same trading area as the Mobil site in North Perth. He added: "We don't support price drops". Asked in cross-examination what he understood that remark to mean, Mr. Quayle answered: "I understood it to suggest that he does not support people who lead the price down".
Mr. Densley's evidence was that the purpose of the meeting was to discuss the rental being charged for the Dog Swamp site and the general profitability of the service station. That morning he had approved TDAR assistance for sales of super grade petroleum at 38.3 cents a litre. The approval related to several applications including one by Teegs. Curiously Mr. Densley did not mention this fact to Mr. Quayle at the meeting. There is another curious feature of this application. The document itself is dated 30 April 1982 and, although processing ordinarily took only a few days, this application was not approved until nearly a fortnight had elapsed and then, on the day of the meeting. Mr. Densley did explain that the application was at first not endorsed by the area manager because the price proposed to be charged was not the most common posted price at the time. The application was endorsed on 9 May as circumstances had then changed. Even so, it is rather hard to understand the delay that followed but, more particularly, the reason why no mention was made of the approval at the meeting.
In his evidence-in-chief, Mr. Densley said that he could not recall discussion of any particular price at which Mobil would support Teegs but "we certainly, from my memory, discussed the Mobil price support policy of supporting competition to the most common posted price". In cross-examination Mr. Densley at first said that he did not believe that price support was discussed at the meeting but later agreed "we may have been talking about the price support system". I think the distinction Mr. Densley was seeking to draw was between discussion of the policy in general, which he agreed took place, and discussion about support at a particular price, which he said did not take place.
Mr. Totaro said he believed that an issue discussed at the meeting was the request for additional price assistance. Referring to Mr. Quayle, he said "He was also presenting figures to substantiate a claim for additional price assistance". Mr. Williams thought the meeting was "mainly to do with rent reductions justified on the basis of loss of volume". He could not recall any discussion about price support and clearly had no detailed recollection of the meeting. Mr. Ross' recollection of the meeting was much the same. The conversation "centred mainly around the profitability of the service station and volume throughput of the service station". He could not recall any discussion about posted prices or about trading areas. He was not cross-examined about the meeting.
I have not found it easy to piece together the content of what was said at the meeting on 13 May 1982. It should be noted that Mrs. Quayle, who was present, did not give evidence. I accept Mr. Densley's evidence that, so far as he was concerned, the meeting was called to discuss the general situation of the Dog Swamp site. I am satisfied that the conversation touched on a number of matters relating to the profitability of the service station and the way in which Mr. Quayle operated it. As mentioned earlier, relations between the company and the Quayles were already strained. In that regard it is of some interest to note a statement made by Mr. Ross concerning Mrs. Quayles attitude at the meeting: "She had become quite emotional at the meeting and had made a statement that Quayles were not liked by Mobil. I recall at that meeting saying to her that that was not true". I have no doubt that in the course of discussion reference was made to Mobil's price support policy and that it may have extended to the notion of the relevant trading area for the Dog Swamp site. But I am not satisfied that the discussion descended to the particularity concerning price of which Mr. Quayle spoke. In particular, I am not satisfied that Mr. Densley said: "We are not going to support you at 38.3". It would have been a strange thing for him to say since, only that morning, he had approved TDAR support for Teegs at a price of 38.3 cents a litre for super grade petroleum.
The Commission argues that the conversations of 27 April, 29 April, 5 May and 13 May 1982 constituted an attempt to induce Teegs not to sell or advertise for sale super grade petrol at less than 38.5 cents a litre (in contravention of para. 96(3)(b) of the Act) and the use by Mobil of a statement of a price as the price below which its petroleum was not to be sold or offered for sale (in contravention of para. 96(3)(f) of the Act).
THE RULE IN BROWNE v. DUNNIn the course of his final address counsel for Mobil submitted that, by reason of what is known as the rule in Browne v. Dunn, the Court should accept the evidence of Mr. Ross concerning telephone conversations alleged to have taken place with Mr. Quayle. The existence and scope of the rule have been the subject of much debate in judicial decisions and academic commentaries. The matter was recently considered at some length by Hunt J. in Allied Pastoral Holdings Pty. Ltd. v. Commissioner of Taxation (1983) 1 NSWLR 1 and by McGregor J. in Naga v. Quintell & Marineland N.T. Pty. Limited (unreported decision of Full Court of Federal Court delivered on 13 June 1984). In the former decision at p.16 Hunt J. said:
"It has in my experience always been a rule of professional practice that, unless notice has already clearly been given of the cross-examiner's intention to rely upon such matters, it is necessary to put to an opponent's witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings. Such a rule of practice is necessary both to give the witness the opportunity to deal with that other evidence, or the inferences to be drawn from it, and to allow the other party the opportunity to call evidence either to corroborate that explanation or to contradict the inference sought to be drawn. That rule of practice follows from what I have always believed to be rules of conduct which are essential to fair play at the trial and which are generally regarded as being established by the decision of the House of Lords in Browne v. Dunn (1894) 6 R 67".
The point of counsel's submission was that there was a failure to cross-examine Mr. Ross on important aspects of his evidence, with the consequence that his evidence should be accepted. Counsel referred to three particular questions and the answers thereto; in view of the submission I set out the questions and answers verbatim:
"On 7 March 1981, did you have a conversation with Mr. Quayle?---No, I have no recollection of having a conversation on that date with him.
...
Did you, on Saturday 7 March 1981, drive past Mobil Dog Swamp?---I have no recollection of driving past. I could have; as I said, I lived very close by. Saturday morning was normally a morning that we were out shopping or doing something else, so it is quite possible that I could have driven past on that day.
Did you Saturday, 7 March 1981, telephone Mobil Dog Swamp?---No. I have no recollection of doing that".
Mr. Williams Q.C., counsel for Mobil, submitted that although there was some cross-examination of Mr. Ross concerning the telephone conversation alleged by Mr. Quayle, at no stage was it ever put to Mr. Ross that any of the three statements set out above was wrong or indeed that he (Ross) made statements as alleged in para. 8 of the statement of claim.
Counsel for the Commission responded in these terms. The Commission led evidence before Mobil did. Even before Mr. Quayle gave evidence, it was apparent from the statement of claim and from the statement made by Mr. Quayle to the Commission, which had been available to Mobil and its legal advisers before the hearing, exactly what the Commission's case would be. Ample notice had therefore been given to Mobil of the matters upon which the Commission intended to rely. Furthermore Mr. Ross was cross- examined on the three matters referred to. Counsel referred to a question to Mr. Ross in cross-examination "You have absolutely no recollection, was your evidence, of the conversation that Mr. Quayle has alleged and that you have been informed of?---That is correct". The next question made clear the conversation to which Mr. Ross' attention was being directed:
"That took place, in his allegation, on 7 March?---Yes, that is right".
The answer "Yes, that is right" was simply an acknowledgement by Mr. Ross that he knew the conversation he was being asked about. As to Mr. Ross driving past the Dog Swamp site on 7 March 1981, he was asked in cross-examination:
"You told us of your wife having a car and an account (this was a reference to an account Mrs. Ross had at the Dog Swamp site). You used to drive her car or your car into Dog Swamp or past Dog Swamp station?---Certainly, yes.
I realise that you preserve your week-ends, but does that mean you close your eyes to anything that affects your company's business from 5 o'clock on Friday?---No, I do not.
Or from 5 o'clock any night?---No".
I agree with counsel for the Commission that, Mr. Ross having said that he had absolutely no recollection of the telephone conversation alleged by Mr. Quayle, there was nothing to be gained by taking him through the detail of the conversation.
A similar complaint was made by counsel for Mobil in relation to the cross-examination of Mr. Totaro, in particular an alleged failure to cross-examine him on the statement particularised in para. 13(f) of the statement of claim which reads:
"Shell are trying to get their retail price up to 38.9 and Mobil will look as though it's not conforming to Shell's attempts to raise the price".
Again counsel for the Commission responded by referring to the statement of claim itself, Mr. Quayle's statement to the Commission and his oral evidence. He drew attention to passages in cross-examination, particularly at p.564 of the transcript where Mr. Totaro was asked whether Shell had a policy of going to 38.9 and was starting to implement that policy, to which Mr. Totaro answered: "I am not aware of any Shell policy".
I find it unnecessary to consider the operation of the rule in Browne v. Dunn any further. I am quite satisfied that Mobil's legal advisers were fully alerted before the hearing and during the hearing to the allegations made against the company and the evidence upon which the Commission relied. Nor was there any failure on the part of the Commission's counsel to put all relevant matters on which they could speak to Mr. Ross or Mr. Totaro.
EFFECT OF CONVERSATIONSI have accepted the evidence of Mr. Quayle that the words pleaded in paras 8, 13, 14 and 15 of the statement of claim, or words substantially to that effect, were used by Messrs. Ross and Totaro. A question then arises as to the proper construction to be placed upon those remarks.
Counsel for Mobil stressed that whatever was said by Mobil's employees was said in connection with the TDAR scheme. That scheme is not concerned with price as such but with the relationship between prices charged by a dealer and the financial support offered by Mobil. When Mr. Ross and Mr. Totaro spoke of Mobil "only supporting" the Quayles or Teegs to or at a particular price, counsel submitted, it was not a question of granting or withholding any support at all. What Mobil was indicating was that if the Quayles or Teegs dropped their price below a particular price, they would receive no support beyond that which they were already getting.
To the extent that remarks were so confined, that is a reasonable construction to place on them. That was the way the system operated and that was the understanding of other dealers such as Mr. Wiltshire (Mobil Service Station, North Perth), Mr. Pearson (Two-Way Service Station, Midland) and Mr. Sanzone (Greenwood Mobil Service Station, Greenwood) who operated under the system. And, had the remarks been made as a routine response to an application for additional assistance at the reduced price, there would be much to be said for the submission that Mobil was saying no more than that the Quayles or Teegs lowered their price at their own risk in the sense that no additional assistance would be granted.
But there are a number of considerations that militate against placing such a limited construction on what was said. To begin with, the conversations were initiated by Mobil's employees rather than by Mr. Quayle. The conversation of 7 March 1981 was initiated by Mr. Ross because he saw that the Quayles were advertising supergrade petrol for sale at 37.2 cents a litre. They were not at that stage seeking additional support from Mobil or indeed any support at all under the TDAR scheme for none was offered by Mobil at that time. However they were looking for support of a different kind, promotional assistance. It is true that the conversations of 27 April, 29 April and 5 May 1982 took place against the background of an application by Teegs for TDAR support at 38.3 cents a litre. But, even with those conversations, it is difficult to regard what was said as no more than a routine response to an application for TDAR assistance. "Price" was a word that featured in several of the conversations. Of course the word cannot be torn from its context; its significance may only be determined with reference to the entirety of the conversations. But Mr. Ross' telephone conversation of 7 March 1981 included such comments as "I want the price up", "You'll get no help or support from me until the price is back up" and "... you will lose any support ... if you continue to keep the price at 37.2". Likewise, when Mr. Totaro telephoned on 27 April 1982, he spoke of "Shell ... trying to get their retail price up to 38.9 and Mobil will look as though it's not conforming ..." and "Hamish Ross will not agree to you going to 38.3". Again, on 5 May 1982 Mr. Ross said "You're staying at 38.5".
When regard is had to the entirety of these conversations, I am not persuaded that Mobil's employees were doing no more than indicating to Mr. Quayle that additional support would not be forthcoming below a certain retail price. Indeed I am satisfied that when Mr. Ross telephoned on 7 March 1981, he was understood to mean that the Quayles should not drop their price from 37.5 to 37.2 cents a litre. Equally I am satisfied that when Mr. Totaro telephoned on 27 April 1982 he was understood to mean that Teegs should not drop its price from 38.5 to 38.3 cents a litre. The conversation of 29 April, taken on its own, may not bear that construction. But when it is seen for what it was, a follow up of the conversation two days earlier, I am satisfied that Mr. Ross was understood to mean that Teegs should not lower its price. This is confirmed by Mr. Ross' statement on 5 May "You're staying at 38.5".
In several decisions the Federal Court has held that the standard of proof where a contravention of s.96 is alleged is the civil standard, namely proof on the balance of probabilities. But in reaching conclusions and in drawing inferences the Court should be mindful of the seriousness of the allegations, having regard to the penalties involved. Trade Practices Commission v. Nicholas Enterprises Pty. Ltd. (1979) 26 ALR 609 at 643; Peter Williamson Pty. Ltd. v. Capitol Motors Ltd. (1982) 41 ALR 613 at 620. I have kept these warnings in mind.
THE LAW APPLICABLEExpressed in an abbreviated way, the allegations against Mobil are of inducing, attempting to induce and specifying a minimum price. Mr. Williams Q.C. submitted that for Mobil to induce the Quayles not to sell, four conditions must be met.
(1) Mobil must have specified a price.
(2) Mobil must, at the relevant time, have had the intention of inducing the Quayles not to sell Mobil fuel for less than the specified price.
(3) Mobil must have done things which, irrespective of intention, had the potential to induce the Quayles so to act.
(4) The Quayles must have, in consequence of Mobil's acts, sold fuel for the specified or a greater price or alternatively have positively refrained from selling fuel for less than the specified price.
As to price, counsel acknowledged that in several decisions (in particular Trade Practices Commission v. Stihl Chain Saws (Aust) Pty. Ltd. (1978) ATPR 40-091; Trade Practices Commission v. Bata Shoe Company of Australia Pty. Ltd. (No. 2) (1980) 44 FLR 149; and Peter Williamson Pty. Ltd. v. Capitol Motors Ltd. supra.) the Federal Court has construed the notion of specified price to include a price not specified in precise terms but within a range of a particular figure or otherwise having an element of approximation. Equally, I would suggest, a price may be specified by reference to some standard well known to the parties, from which a price may be ascertained. Counsel did not contest the authority of those decisions; but he did urge caution in accepting evidence as amounting to the specification of a price where no specific price was mentioned.
As to the requirement of inducing, counsel submitted that this involved a mental element, in particular the intention of modifying the conduct of the person said to be induced. Where an attempt to induce is alleged, the submission was that there must be an intention to bring about the required result. I accept that, in the case of attempt, there must be an intention to bring about the prohibited result. I refer to my decision in Trade Practices Commission v. Tubemakers of Australia Ltd. supra, in particular at p 737 where I said:
"In ordinary parlance, to say that a person has attempted to do something means that he has acted with the purpose of bringing about that which he is said to have attempted. Questions may arise as to what precisely must be proved to establish attempt to commit an offence, but the principle that proof of intent is necessary is well established; R. v. Mohan (1975) 2 All ER 193".
It is clear too that, where a person is alleged to have aided or abetted a contravention of Part IV of the Act or to have been a party to such a contravention, proof of actual or constructive knowledge of the essential facts constituting the contravention is required (Yorke v. Lucas (1983) 49 ALR 672).
But, where the contravention alleged is one of inducement as opposed to an attempt to induce, I am of the opinion that para. 96(3)(b) contains an absolute prohibition on the conduct in question, absolute in the sense that proof of the conduct proscribed is sufficient. See Tubemakers case at p.737. Although a contravention of s.48 carries serious financial consequences, the proceedings are civil. With the exception of "attempting to induce", it seems to me that s.96 is concerned with conduct, not with the mental element that may accompany the conduct.
As to the third and fourth of the suggested conditions, Mr. Williams did not refer to any particular authority, the implication of his address being that these are largely evidentiary matters. I accept them as requirements for a contravention of para. 96(3)(b).
Where a contravention of para. 96(3)(f) is alleged, Mr. Williams submitted that only two conditions need be satisfied.
(1) Mobil must have made a statement of price in relation to its fuel.
(2) It must be likely that Mr. Quayle understood the statement as indicating a price below which he was not to sell that fuel.
These requirements, I think, flow from the language of para. (f), subject to the meaning attached to the notion of price in the decisions mentioned earlier in these reasons.
WAS THERE A CONTRAVENTION OF SECTION 96?As to the telephone conversation between Mr. Ross and Mr. Quayle on 7 March 1981, the Quayles had at the time reduced the price of super grade petroleum from 37.5 cents a litre to 37.2 cents a litre. In consequence of the telephone conversation, they reverted to the price of 37.5 cents a litre early on the morning of 9 March though later that day they reduced the price again.
I am satisfied that by this conversation Mobil, through its servant Mr. Ross, induced Mr. and Mrs. Quayle not to sell super grade petroleum at a price less than 37.5 cents a litre. The evidence disclosed an express reference by Mr. Ross to 37.5 cents as the price to which the Quayles were to revert; and they did revert to it even if only temporarily. Equally I am satisfied that by that conversation Mr. Ross used a statement of a price, 37.5 cents a litre, likely to be understood by Mr. Quayle as the price below which super grade petroleum was not to be sold. Indeed the evidence was that not only was the statement likely to be so understood by Mr. Quayle but that in fact it was so understood by him.
As to the conversations of 27 April, 29 April and 5 May 1982, I am not satisfied that Mobil, through its servants Mr. Ross and Mr. Totaro, attempted to induce Teegs not to sell super grade petroleum at less than 38.5 cents a litre; that is, I am not satisfied that they acted with the purpose of bringing about a situation in which Teegs did not sell at less than 38.5 cents a litre. I accept that Mr. Ross and Mr. Totaro were primarily concerned with TDAR support and that such support was commonly discussed by reference to posted prices. I doubt that they kept in their minds the distinction between posted prices as a component of TDAR support and Mobil's general reluctance to see its dealers drop their prices too much. Whether or not that be an accurate assessment, I am not satisfied that either man had the necessary mental element to allow me to conclude that he acted with the intention of specifying a price below which Teegs was not to go as opposed to specifying a price below which Teegs would lose any further support.
However, I am satisfied that, in those conversations, Mr. Ross and Mr. Totaro did use a price viz. 38.5 cents a litre which was likely to be understood by Mr. Quayle as the price below which super grade petroleum was not to be sold. I am also satisfied that Mr. Quayle did so understand what was said to him.
No argument was addressed to the Court whether conduct, falling within both paras (b) and (f) of sub-s.96(3) of the Act constituted one or two contraventions for the purposes of s.76. Section 76 is concerned with a penalty in respect of "each act or omission" to which the section applies. I regard the telephone conversation of 7 March 1981 as one act. Whether the conversations of 27 April, 29 April and 5 May 1982 may be regarded as separate acts, they are not so pleaded in the statement of claim and I propose to treat them as one act. In any event I am of the opinion that this is how they should be treated.
CONCLUSIONS
My conclusions are that:
(1) Mobil contravened s.48 of the Trade Practices Act by the telephone conversation of 7 March 1981.
(2) Mobil contravened s.48 of the Trade Practices Act by the telephone conversations of 27 April, 29 April and 5 May 1982.
The question of the penalties to be paid by Mobil to the Commonwealth and the question of other relief sought by the Commission will be adjourned to a date to be fixed.
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