Trade Practices Commission v Simsmetal Ltd
[1994] FCA 902
•9 Nov 1994
902 sr
JUDGMENT No. ..... , ........ . , .J , . . IN THE FEDERAL COURT
OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY ) GENERAL DIVISION )
1 NO. VG413 OF 1992 B E T W E E N : TRADE PRACTICES COMMISSION Applicant
and
SIMSMETAL LIMITED
First Respondent
and
NORMET INDUSTRIES NOMINEES
PTY. LTD.
Second Respondent
and
PETER WRIGHT
Third Respondent
and
LINDSAY DAVIS
Fourth Respondent
I
and
PAUL JAMES SAILAH
Fifth Respondent
BX TEMPORE REASONS FOR JUDGMENT and
MICHAEL BAKER
Sixth Respondent
CORAM: LEE J.
DATE : 9 NOVEMBER 1994
PLACE: MELBOURNEThe applicant, the Trade Practices Commission ( "the T.P.C."), on behalf of the Commonwealth, instituted
proceedings under s.76 of the Trade Practices Act 1974 ("the
Act") for the recovery of pecuniary penalties for alleged
contraventions of sub-paras.45(2)(a)(i), 45(2)(a)(ii) and
45(2) (b)(ii) of the Act by the corporate respondents and the
third to sixth respondents as natural persons who are either
employees or officers of the corporate respondents. The T.P.C.
~,
also applies for injunctive relief under s.80 of the Act to restrain future contraventions of the Act by the respondents for a period of three years.
The proceedings arise out of arrangements between the first respondent, Simsmetal Limited ("Simsmetal"), and the second respondent, Normet Industries Nominees Pty Ltd ("Nonnet") (together, the "corporate respondents") who carried on business as metal merchants and recyclers of scrap metal in Victoria. The corporate respondents were in competition with each other for the purchase of ferrous scrap metal, including
metal from derelict car bodies throughout Victoria and the border regions of New South Wales and Victoria. From August to September 1991, in contravention of sub-paras.45(2)(a)(ii) and 45(2)(b)(ii) respectively, the corporate respondents arrived at and gave effect to a price fixing and market sharing arrangement which related to the purchase of derelict motor car bodies. At the same time, in contravention of sub- para.45(2)(a)(i), the corporate respondents agreed to exclude a competitor, Commercial Metal Corporation, from the market for the purchase of derelict car bodies.
The corporate respondents admitted that the price fixing and exclusionary arrangements involved contraventions of the Act. The non-corporate respondents also admitted that they committed offences under s.79 of the Act by being directly or indirectly, knowingly concerned or party to the alleged contraventions.
The T.P.C. and the respondents have reached agreement as to the appropriate penalty to be imposed and the extent of the injunctive relief to be granted. The question of what constitutes an appropriate penalty in a given case is ultimately a question for the Court to determine. As recognised by Lockhart J. in Trade Practices Commission v Hvmix Industries Ptv Ltd, (unreported, Federal Court of Australia, 25 August 1994), the practice of suggesting to the
Court the appropriate penalty to be imposed for contraventions
of the Act is not uncommon and further, for public interest
considerations, it is a practice which should not be dissuaded
(see: The Commerce Commission v New Zealand Milk Cor~oration
Ltd [l9941 2 NZLR 730).The facts would appear to give rise to serious contraventions of the Act. The pecuniary penalties to which the parties have agreed are significantly less than those which could be expected to apply to the same conduct since amendments to the Act which increased the level of the range of penalties. The figures suggested to the Court as the appropriate penalties indicate, however, that the approach adopted by the parties in fixing those figures is not dissimilar to the approach that would have been adopted by the Court had it been necessary for the Court to undertake the penalty fixing exercise itself. I agree with the reasoning of Lockhart J. in Hvmix that no useful purpose is served by the Court stating whether the penalties to which the parties have agreed are the size of which the Court itself would have imposed.
The main tenet of the Act is the promotion of
competition between parties engaging in trade or commerce. The
primary purpose and regulatory effect of pecuniary penalties
which would be antithetical to the promotion of competition is to deter parties in the market from engaging in conduct (see: Trade Practices Commission v Stihl Chain Saws (1978) ATPR 40-041 at 17,891). I am satisfied that the penalties which have been agreed by the respondents and the T.P.C. have a sufficient deterrent effect to counterbalance the profit apparently derived from the contravening conduct.
In determining that the suggested penalty is appropriate I have given account to the fact that Simsmetal has taken some steps to better ensure that the company complies with the relevant laws in future. I have also taken into account that there was ultimately an admission of the allegations by all respondents and thereafter the respondents co-operated with the T.P.C in this matter. Those concessions by the respondents have saved the community substantial expense.
The penalty to be imposed on Simsmetal for the contraventions of sub-paras.45(2)(a)(ii) and 45(2)(b)(ii) is at variance with the penalty levied at Normet for the same contraventions. The variance is proportionate to the market share held by each of the corporate respondents for the supply of all ferrous scrap metal in Victoria during 1991 and 1992 (Simsmetal supplied close to 45 per cent and Normet close to 15 per cent) and is also reflective of the part each played in forming the agreement. To that extent the difference in
penalty is appropriate. The agreed penalty to be imposed on Normet for the exclusionary aspect of the arrangement is greater relative to the agreed penalty for the price fixing and market sharing arrangement imposed on both Simsmetal and Normet. I am satisfied that the relative difference is referrable to the extent to which Nonnet was active in promoting that contravening conduct. It is also appropriate that the agreed penalty to be imposed on the third respondent, as employee of the first corporate respondent, and fifth respondent, as employee and director of the second respondent, is at variance with the agreed penalty to be imposed on the fourth and sixth respondents for the reason that it reflects the extent to which the third and fifth respondents were directly and actively involved in the discussions and implementation of the arrangement.
The agreement between the parties also provides for injunctive relief against the corporate respondents which would, by its terms, have injunctive effect on the non- corporate respondents. The question of whether or not an injunction is an appropriate form of relief together with the question of the form that the injunction should take are both matters which are for the Court to determine.
Counsel for the T.P.C submitted that as the non- corporate respondents remain in the employ of the corporate respondents and the economic considerations giving rise to the contravening conduct remain the same, there is a serious risk of the respondents engaging in the same or similar contravening conduct again. Although counsel submits that injunctive relief is essential in this case for the dual reason that the conduct was of a deliberate nature committed over a not insubstantial period of time and rhe respondents initially denied that their conduct contravened the Act, it is necessary to approach the application with caution for the reason that upon the granting of an injunction contraventions of the Act will be dealt with by the summary process of contempt rather than by way of prosecution under the Act (see: m o d o r e Business Machines Ptv Ltd v Trade Practices commission 92 ALR 563 at 575).
I am satisfied that in the particular circumstances
of this case an injunction is an appropriate form of relief. Iam not satisfied however, that the injunction should have the
form set out in the proposed orders. The offending conduct related to car bodies, it did not extend more broadly to the non-ferrous scrap metal market, and to that extent the terms of the injunction will be amended. The concern of counsel for the T.P.C that conditions exist for like arrangements to be made between the respondents in relation to the more general
market of scrap metal is not persuasive given that the
penalties agreed to between the parties and approved by the
Court for contraventions relating to the more limited market of car bodies should be of sufficient deterrence to dissuade repetition of any such closely related conduct.
Further, I am not satisfied that there should be any geographical limitation to the application of the injunction notwithstanding that at this time only Simsmetal has scrap metal processing operations in all States (with the exception of Tasmania). The injunction is to apply for a period of three years and in that period Normet may expand its operations inter-state.
The Court, therefore, makes orders in terms of the minute of orders amended as indicated and duly initialled by me and dated 9 November 1994.
I certify that the preceding
( 7 ) pages are a true copy of the
Reasons for Judgment of his Honour Mr Justice Lee.
Counsel for the Applicant: G.A.A. Nettle Q.C.
C .M Scerri
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the First, Third &
Fourth Respondents: D.G. Williamson Q.C.
Solicitors for the First, Third &
Fourth Respondents: Minter Ellison Morris Fletcher
Counsel for the Second, Fifth &
Sixth Respondents: J. Beach
Solicitors for the Second, Fifth &
Sixth Respondents: Price Brent
Date of Hearing: 9 November 1994 Date of Judgment: 9 November 1994
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No. VG 413 of 1992.
FEES PAID . ........ ...... .. ........ ..-.......
BETWEEN:
- Applicant
AND:
Second Respondent
Third Respondent - LINDSAY DAWS Fourth Respondent
v F i h Respn~ident
MICHABLBAKER Sixth Respo~idtnt
JUDGE: LEE J DATE: 9 NOVEMBER 1994 PLACE: MELBOURNE
1. It is declared that by making or aniving at the single wrmgcment which is
f t f d to in paragraph I l of the Statement of Claim, the first respondent.
S i t a l Limited contravened scctio~i 45(2)(a)(ii) of the Trade Practices Act 1974.
AUSTRALIAN GOVERNMENT SOLICITOR AND SOLICITOR
APPLICANTAddress Level 5, Block D, Ben'amia Offices Chan Street, BELCO &E, Y ACT 2617 Postal Address P.O. Bax 43. BlZCONNEN ACT 261 6 Address for Snvice
C/- The Office of the Australian Government Solicitor 12th Floor 200 Queen Strcet MELBOURNE VIC 3000 Contact O f f i r
Michalle Painter Telephone No. (06) 2G4 2948
Facsimile No. (06) 264 2933
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2. The first respondent. Simsmetal Limited. pay to the Commonwealth of Australia a pecuniary penalty of $125,000 in respect of the contravention of s.45(2)(a)(ii)
r e f e d to h p i r a p 1 1 1 hereof. 3. It is declared that by giving effect to h e single arrangement which is rcferred to in paragraph 17 of the Statement of Claim, the first respondent. Simsme~al Lknitcd contmvcned section 45(2)(bXii) of the Trade Practices Act 1974.
4. The first respondent, Sirnsmctal Limited, pay to the Commonwealth of Australia
a pecuniary penalty of $125,000 in rtspect of the contrave~~tion f s.45&b)(ii) rcfcmd to in paragraph 3 hereof.
5. It is declared that by making or aniving at the CMC arrangement which ir rcfwrcd to in paragraph 20(a) of the Statement of Claim, the first respondent, Simsmetal Limited conb-avcned section 45(2(a)(i) of the Trade Practices Act
1974.
6. The first respondent. Simsmetd Limited, pay to the Commonwealth of Australiir a pecuniary penalty of $102,500 in rospect of the contravenhon of s.45(2)(Il)(i)
refemd to in paragraph 5 hereof.
7. It is declared that by making or arriving at thc single arrangement which is referred to in paragraph 11 of the Statement of Claim, second rchpondcnt,
Nomet Industries Nominces Pty Ltd.. contravened section 45(2)(a)(ii) of the
Trade Practices Act 1974.
8. The second respondent, Normct I~idustries Nominees Pty Ltd., pay to the Commonwealth of Australia a pecuniary penalty of $30,000 in respect of the contravention of s,45(2XaXii) referred to in p i ap iph 7 hcrcof.
9. It is d c c l d that by giving effect to the clngIe arrangement which is referred to
in "aph 16of the Statement of Claim, the second
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Industries Nominces Pty Ltd., contrdvcncd scction 45(2)(b)(ii) of the Trade
Practices Act 1974.10. The sccond respondent. Normet Industries Nominees Ply Ltd., pay 10 the Commonwealth of Australia a pecuniary penalty of $30,000 in respect of the
conmvcntion of ~.45(2)(b)(li) referred to in paragraph 9 hereof. 11. It is declared that by making or arriving at the CMC arrangement which icr referred to in paragraph %a) of the Statement of Claim, the sccond rcspondcnt, Normet lndustrics Nominees Pty Ltd, contriivcned section 45(2)(a)(i) of the
T r i Practices Act 1974. 12. Thc sccond respondent, Normet Industries Nominees Pty Ltd., pay to the Comrnonwcalth of Australia a pecuniary penalty of $40,000 in respect of the
conir~vention of s.45(2XaKi) referred to in paragraph I l hereof. 13. It h dcclarcd that by engaging in the conduct which is referred to in paragraph 24(a), (b) and (c) of the Statement of Claim, the third respondent. Peter Wright, was directly or indirectly. knowingly ~oncemd in, or party to, the conbavention
refemd to in paragraph 1 hereof.
14. Tbc third respondent, Pctcr Wright, pay to the Comn~onwealth of Australia a pecuniary penalty of $50,000 in respect of the contravention referred to in
paragraph 13 hereof. 15. It is declared that by engaging in thc conduct which is r c f c rd to in paragraph 25 of the Statement of Claim, the fourth respondent, L~ndsay Davis, was duectly or indirectly, knowingly concerned in, or party to, the contravention referred to in
paragraph 1 hereof. 16. The fourth respondent, Liiidsay Davis, pay to the Commonwealth of Australia a
pecuniary penalty of $ 1 0 , ~ in respect of the contravention referredvviqd,,,-
(C
paragmph 15 hereof. : * ,:
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17. It is declared that by cogaging in the conduct which is r o f m d to in paragraph 26 of the Statement of Claim the fifth respondent, Pal11 Jtlmes Sdah was directly or indirectly, knowingly conccrncd in, or party to, the con~vention referred to in paragraph 7 hereof.
10. Thc fifth respondent, Paul Jarnes Sailah. pay to the Commanwealtl~ of Anstmlta a pecuniary penalty of $50,000 in respect of the contravention referred to in plrragraph 17 hereof.
19. It is declared that by engaging in the conduct which is referred to in paragraph 27
of the Statement of Claim, thc sixth respondent. Michael Baker, was directly or indirectly, knowingly concerned in, or party to, the contravention refcrrcd to in
paragraph 7 tmof .
20. The sixth wpondent, Michaal Baker, pay to the Commonwealth of Autitralia a pecuniary penalty of $10,000 in respect of the contravcntion referrcd to in
paragraph 1 9 hereof.
21. The rust respondent, Simrullctal Limited, be restrained unt~l 9 November l997 whether by its directors, servants or agents W otherwise howsoever from:
((L) mnaking or amving at;
(b) giving effect to; or
(c) attempting to make or arrive at any contract, arrangement or understanding with any oillet person who is or would otherwise be likely to hc in competition with h e first respondent which contains a povision that:
(i)
has the purpose, or has or is likely to have the effect, of fixing. controll~ng or maintaining. or providing for Ule fixing, conuolling or
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the price paid for derelict car hodies acquired, or to be acquired, in
Ausealia by the first respondent from any person;(ii) has the purpose o f preventing. restricting or limiting the acquisition of derelict cat bodies in Australia by the first respondent from particular persons or classcv of persons either absolutely nr in particular circumstances or on particular conditions.
22. The sscond respondent, Normet Industries Nominees Pty Ltd., be restrained until 9 November 1997 whether by its directors, servants or agents or otherwise howsocvw, from:
(a) making or arriving at; (b) giving effect to; or (c) attempting to make or arrive at any contract, arrangement or understanding with any othcr person who is or would othcrwi be likely ~CI be in competition with the second respondent which contains a provision that:
(i)
has the purpose, or has or is likely to have the effect, of fixing, controlling or h i ta in ing. or providing for the fixing, controlling or maintaining of.
Australia by the w o n d respondent from any person; the price paid for dercllct car bodies acqmrd. or to be acquired, in (ii) has the purpose of preventing, restricting or li~niting the acquisition of
derelict car bodies in Auntralia by the second respondent from particular
persons or classes of persons either absolutely or in pclrti~ular
circumstances or on puticular conditions.
- .
23. The fmt respondent, Simsrnetal Limited, pay to the Applicant the ,gahbP
: . . ., .I $
$55,000 in respect of the Applicant's coats of this proceeding.
i
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6
24. The second respondent, Nonnet Industries Nominees Pty Ltd.. pay to the
Applicanr the sum of $50,000 in respect of the applicant's cusk of this proceeding.
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