Trade Practices Commission v Tubemakers of Australia Ltd

[1983] FCA 209

Re: TRADE PRACTICES COMMISSION
And: TUBEMAKERS OF AUSTRALIA LIMITED; STEEL SUPPLIES (AUST) PTY. LIMITED;
BARRY NEIL BINT
No. WAG 39 of 1982
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.

CATCHWORDS

Trade Practices - restrictive trade practices - attempt to control and to induce others to control discounts on steel products - pecuniary penalties - whether single penalty appropriate where contraventions inextricably linked to one arrangement or understanding - factors relevant to determination of penalty - apportionment of penalty - injunction

Trade Practices Act 1974 ss.45(2)(a), 76(1), 76(3), 77, 80

HEARING

PERTH

#DATE 26:8:1983

ORDER

1. The respondent Tubemakers of Australia Limited pay to the Commonwealth of Australia a pecuniary penalty of $15,000 in respect of the matters alleged against it in paragraphs 6, 7, 9, 13, 15 and 16 of the statement of claim.

2. Pursuant to section 77 of the Trade Practices Act 1974, judgment be entered for the applicant the Trade Practices Commission on behalf of the Commonwealth of Australia against the respondent Tubemakers of Australia Limited for the sum of $15,000.

3. The respondent Steel Supplies (Aust) Pty. Limited pay to the Commonwealth of Australia a pecuniary penalty of $10,000 in respect of the matters alleged against it in paragraphs 8, 14 and 17 of the statement of claim.

4. Pursuant to section 77 of the Trade Practices Act 1974, judgment be entered for the applicant the Trade Practices Commission on behalf of the Commonwealth of Australia against the respondent Steel Supplies (Aust) Pty. Limited for the sum of $10,000.

5. The respondent Barry Neil Bint pay to the Commonwealth of Australia a pecuniary penalty of $2,000 in respect of the matters alleged against him in paragraphs 6, 7, 9 and 18 of the statement of claim.

6. Pursuant to section 77 of the Trade Practices Act 1974, judgment be entered for the applicant the Trade Practices Commission on behalf of the Commonwealth of Australia against the respondent Barry Neil Bint for the sum of $2,000.

7. The respondents pay to the applicant its costs of the application, to be taxed as one set of costs.

JUDGE1

On 20 May 1983 I made the following orders in this matter:

"1. The first respondent attempted to contravene s.45(2)(a) of the Trade Practices Act 1974, attempted to induce the second respondent to contravene s.45(2)(a) of the Act and attempted to induce other steel merchants to contravene s.45(2)(a) of the Act in the manner and on the occasions alleged in the statement of claim.

2. The second respondent attempted to contravene s.45(2)(a) of the Act and attempted to induce other steel merchants to contravene s.45(2)(a) of the Act in the manner and on the occasions alleged in the statement of claim.

3. The third respondent attempted to induce the second respondent to contravene s.45(2)(a) of the Act in the manner and on the occasions alleged in the statement of claim.

4. The question of the penalties to be paid by the respondents to the Commonwealth and the question of other relief sought by the applicant be adjourned to a date to be fixed."

The question of penalties was listed for hearing on 14 June but, because of the unavailability of counsel, the matter was unable to proceed. Only now has it proved possible to hear the submissions of counsel.

Pursuant to Order 49 Rule 5 of the Federal Court Rules, the respondents filed affidavits by James Middleton Griggs, the managing director of Tubemakers, Anthony Bowen Daniels, the executive general manager of its merchandising divisions, and Barry Neil Bint, the third respondent.

The attempted contraventions of s.45(2)(a) of the Trade Practices Act 1974, mentioned in in the order of 20 May 1983, related to an arrangement or understanding for the control of discounts by steel merchants. The circumstances under which these acts took place are dealt with at length in my reasons for judgment and need not be repeated here.

Section 76 of the Act provides that, if the Court is satisfied that there has been an attempt to contravene s.45 or to induce another to contravene the section, the Court may order a pecuniary penalty, not exceeding $50,000 in the case of a person not being a body corporate or $250,000 in the case of a body corporate, in respect of each act or omission to which s.76 applies "as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part to have engaged in any similar conduct".

The imposition of penalties is controlled by sub-s.(3) of s.76 which reads:

"(3) If conduct constitutes a contravention of two or more provisions of Part IV, a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions but a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct".

In the respondents' submission, although Tubemakers attempted to contravene s.45(2)(a), attempted to induce Steel Supplies to contravene that provision, and attempted to induce other steel merchants to do likewise, it was in truth the same conduct in each case. In the respondents' further submission, although Steel Supplies attempted to contravene s.45(2)(a) and attempted to induce other steel merchants to do likewise, the same conduct was involved in each contravention.

In the case of Mr. Bint the finding was of attempting to induce Steel Supplies to contravene s.45(2)(a) so no question of the application of s.76(3) arises.

There are two obstacles in the way of applying s.76(3) in the present case. The first is that the conduct of Tubemakers and Steel Supplies was held to be an attempt to contravene a provision of Part IV and an attempt to induce another to contravene such a provision. Section 76(1) distinguishes a contravention from an attempt and from an inducement. Secondly, the conduct of Tubemakers and Steel Supplies was not held to involve a contravention of two or more provisions of Part IV; only one provision was involved.

It does not follow that I should not apply the philosophy of sub-s.(3) if the matters found against Tubemakers and Steel Supplies were aspects of the same conduct or even of conduct that was very similar. If in truth there was, in the case of each company, a single infringement of s.45, a single penalty is appropriate. See Trade Practices Commission v. Simpson Pope Ltd. (1980) 30 ALR 544 per Franki J. at p.556.

So far as Tubemakers is concerned, I regard its conduct as an attempt by it to contravene s.45(2)(a) and to induce others, including Steel Supplies, to do so. It may not be the same conduct in each case but it is conduct inextricably linked to one arrangement or understanding. The same may be said of the conduct found against Steel Supplies. I therefore propose to approach the question of penalties on the basis that, in the case of Tubemakers, there was essentially one contravention and that, in the case of Steel Supplies, there was essentially one contravention.

Mr. Malcolm Q.C., counsel for the respondents, invited the Court to fix a total sum by way of penalty, at least so far as Tubemakers and Steel Supplies were concerned, and to apportion that between the companies, with the larger share to Tubemakers.

I do not accept the submission in its entirety because it is possible and appropriate to distinguish the conduct of Tubemakers, with Mr. Bint the directing force, and Steel Supplies, with Mr. Achterberg at the helm. At the same time it is proper to have regard to the fact that Tubemakers initiated the proposal for an arrangement or understanding regarding discounts and Tubemakers sought the meeting of ISSCA at which such an arrangement or understanding was discussed.

Had the steel merchants arrived at an arrangement or understanding to control discounts, there would have been a serious infringement of s.45 and one with serious commercial consequences. But it has always been the respondents' case that there was no likelihood of the other steel merchants responding to Mr. Bint and Mr. Achterberg at the ISSCA meeting on 29 July 1982. Whether or not that is so, the attempt was made.

This is the first occasion on which proceedings under the Trade Practices Act have been brought against any of the respondents. The Court was urged to take into account a number of considerations relevant to the imposition of penalties and I shall refer to those I regard as most significant. Some relate to the conduct of the respondents at the time; others direct attention to subsequent events.

It is apparent that since the introduction of the Trade Practices Act Tubemakers has been concerned to bring home to its staff the implications of the legislation and the need to avoid conduct likely to contravene the Act. It has done this through meetings of its executive committee, by engaging the services of a leading Trade Practices lawyer to advise whether any of the company's practices might be in conflict with the Act, by conducting seminars to advise its officers of the implications of the Act and by the preparation of a Trade Practices manual (updated from time to time) which has been distributed to all executives whose duties might be affected by the Act. While these steps have been taken in the name of Tubemakers, they have been on behalf of all members of the Tubemakers group, including Steel Supplies.

In my earlier reasons for judgment, I accepted that neither Mr. Griggs nor Mr. Daniels knew in advance of the ISSCA meeting of 29 July 1982. I have no reason to doubt what each says in his affidavit, that had he been aware of the meeting he would have directed that no representative of the Tubemakers group should attend. The applicant did not suggest that any member of the board of Tubemakers or of Steel Supplies or of the executive committee of the former played any part in events leading to the ISSCA meeting. At the same time, Mr. Bint and Mr. Achterberg appear to have been influenced by Tubemakers' message of the urgent need to improve the profitability of Steel Supplies. Nevertheless, I am satisfied that, in doing what they did, they went beyond anything contemplated by Mr. Griggs or Mr. Daniels.

Mr. Bint and Mr. Achterberg cannot be dismissed as junior officers. Each held a responsible position and was entrusted with a wide discretion. But, in view of the steps taken by Tubemakers to ensure that the provisions of the Trade Practices Act were complied with, and the unawareness of the most senior officers of both companies, the conduct of Mr. Bint and Mr. Achterberg should not carry the same consequences for the companies as it might otherwise have done. Neither man is now with the companies.

Section 76 of the Act enjoins the court to have regard to "any loss or damage suffered as a result of the act or omission". No loss or damage has been suffered in the present case except by the respondents themselves. The proceedings have attracted considerable publicity in this State and elsewhere. They have occupied more than 7 sitting days of the court and the applicant's costs, which the respondents must pay, have been estimated at $40,000. The respondents will have to meet their own costs which are not likely to be any less.

Finally it must be remembered that what is alleged against the respondents is not a contravention of a provision of Part IV, but an attempt at a contravention which had little prospect of success.

For all these reasons I impose penalties which, taken on their own, might be regarded as somewhat modest in comparison with some other penalties that have been imposed under the Act.

As to Tubemakers, I am of the opinion that an appropriate penalty would be $15,000 in respect of the three attempted contraventions found against it.

As to Steel Supplies, I am of the opinion that a penalty of $10,000 is appropriate for the two attempted contraventions found against it, having regard to its lesser role in the proceedings and to its position as a member of the Tubemakers group.

Mr. Bint remains something of an enigma. He did not give evidence on the hearing of the application and, although he subsequently filed an affidavit, that document still leaves some matters unexplained. In particular it gives no adequate explanation for the memorandum of 20 July 1982 addressed to Mr. Achterberg. Nor does it satisfactorily account for the calling of the meeting of 29 July. But there is no doubt that Mr. Bint has suffered the most as a result of these proceedings. Because of his actions he offered his resignation from the Tubemakers group with which he had been for more than 32 years. After publication of my reasons for judgment on 20 May, that resignation was accepted.

Although Mr. Bint received a substantial sum by way of superannuation, much of that has gone in paying off mortgages and the balance will not, without resort to capital, meet living expenses. In view of his age and, no doubt, because of the circumstances of his resignation, Mr. Bint will have difficulty in finding comparable employment.

Counsel for the respondents asked that there be one set of costs payable by all respondents. I infer from this that Mr. Bint is unlikely to have to meet any of those costs. Whether he will have to meet any of the penalty imposed on him must be a matter for speculation. Having regard to all that these proceedings have cost him, I am of the opinion that a penalty of $2,000 would be appropriate.

There remains the question of an injunction which the applicant has sought against each of the respondents. In short it seeks to restrain them from making a contract or arrangement or arriving at an understanding or attempting or inducing or attempting to induce anyone from making a contract or arrangement or arriving at an understanding in respect of the supply of steel products in Western Australia contrary to s.45 of the Trade Practices Act.

While s.80 of the Act empowers the Court, and empowered it before the recent amendments to that section, to grant an injunction whether or not it appeared to the Court that the person against whom the injunction was sought intended to engage again or to continue to engage in conduct of the kind sought to be restrained, the likelihood of repetition is a relevant consideration. Pye Industries Sales Pty. Ltd. v. Trade Practices Commission (1979) ATPR 40-124 at p.18,327. It may well be that s.80 permits the court to impose an injunction by way of sanction as an alternative to or as an addition to the imposition of a pecuniary penalty. But I do not think that such a use of the section is appropriate here.

In the circumstances of this case, I am of the opinion that it is unlikely that any further breach of s.45 will occur and that the imposition of financial penalties are sufficient to bring home to the respondents and to others the implications of the sort of conduct in which the respondents have engaged.

The order of the court will be that:

1. The respondent Tubemakers of Australia Limited pay to the Commonwealth of Australia a pecuniary penalty of $15,000 in respect of the matters alleged against it in paragraphs 6, 7, 9, 13, 15 and 16 of the statement of claim.

2. Pursuant to section 77 of the Trade Practices Act 1974, judgment be entered for the applicant the Trade Practices Commission on behalf of the Commonwealth of Australia against the respondent Tubemakers of Australia Limited for the sum of $15,000.

3. The respondent Steel Supplies (Aust) Pty. Limited pay to the Commonwealth of Australia a pecuniary penalty of $10,000 in respect of the matters alleged against it in paragraphs 8, 14 and 17 of the statement of claim.

4. Pursuant to section 77 of the Trade Practices Act 1974, judgment be entered for the applicant the Trade Practices Commission on behalf of the Commonwealth of Australia against the respondent Steel Supplies (Aust) Pty. Limited for the sum of $10,000.

5. The respondent Barry Neil Bint pay to the Commonwealth of Australia a pecuniary penalty of $2,000 in respect of the matters alleged against him in paragraphs 6, 7, 9 and 18 of the statement of claim.

6. Pursuant to section 77 of the Trade Practices Act 1974, judgment be entered for the applicant the Trade Practices Commission on behalf of the Commonwealth of Australia against the respondent Barry Neil Bint for the sum of $2,000.

7. The respondents pay to the applicant its costs of the application, to be taxed as one set of costs.