FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Australian Egg Corporation Limited [2017] FCAFC 152
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
2. The appellant pay the respondents’ costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
THE COURT:
INTRODUCTION
1 This is an appeal by the Australian Competition and Consumer Commission (ACCC) against an order made by a judge of this Court dismissing a proceeding brought by it. The ACCC instituted a proceeding under the Competition and Consumer Act 2010 (Cth) (the Act) against six respondents claiming declarations, injunctions, pecuniary penalties and other orders. One of the respondents, Mr Zelko Lendich, pleaded guilty to a contravention of the Act and declarations and orders were made against him (Australian Competition and Consumer Commission v Australian Egg Corporation Limited [2016] FCA 447). The ACCC’s claim against the other five respondents proceeded to trial and after that trial, the primary judge made the order dismissing the proceeding (Australian Competition and Consumer Commission v Australian Egg Corporation Limited [2016] FCA 69).
2 The ACCC’s case was that each of the respondents attempted to induce egg producers in Australia to contravene s 44ZZRJ of the Act by making a contract or arrangement or arriving at an understanding which contained a cartel provision. In rejecting this case, the primary judge found that, although the evidence before him established conduct by at least two of the respondents which could constitute an attempt in the requisite sense and that the respondents intended that the attendees at a certain meeting on 8 February 2012 should take action to address and correct an oversupply of eggs, he was not persuaded, “to the requisite degree of persuasion”, as his Honour put it, that the respondents intended that this action should be pursuant to an agreement or understanding involving reciprocal obligations (at [403]). This conclusion was fatal to the ACCC’s case. There is a dispute between the parties as to whether the primary judge found that the ACCC had established conduct by the other three respondents which could constitute an attempt in the requisite sense.
THE RESPONDENTS
3 The following matters are not in dispute and are based on findings made by the primary judge.
4 The Australian Egg Corporation Ltd (AECL) is the first respondent. It is an unlisted public company limited by guarantee. AECL operates as an industry body and does not itself engage in the production, distribution, marketing or sale of eggs. AECL is an “industry services body” for the purposes of the Egg Industry Services Provision Act 2002 (Cth) and as such, it receives funding from the Commonwealth government. That funding is to be expended for defined purposes, including research and development and promotion. AECL operates as an industry representative body in many senses, but it is prohibited by its constitution and by Statutory Funding Agreements into which it has entered with the Commonwealth from engaging in agri-political activities.
5 AECL provides information to its members and others by three publications. First, it provides a fortnightly email update entitled “EggCorp EggsPress”. Secondly, it provides a quarterly magazine entitled “Eggstra! Eggstra!” to egg producers, Government ministers, Commonwealth and State departments and others with some involvement or interest in the egg industry. Thirdly, it provides a monthly publication called the “Layer and Egg Supply Forecast Report” to subscribers. Not all egg producers are subscribers to this publication.
6 AECL’s principal function is the collection, analysis and communication of information relating to the egg industry, including crisis and issue management.
7 There was an issue before the primary judge as to whether the Act applied to AECL. That issue, in turn, raised questions as to whether AECL is an agent or emanation of the Crown in the conventional sense, alternatively, whether AECL is a body corporate established for a purpose of the Commonwealth by or under a law of the Commonwealth and, if yes in either case, whether AECL carries on business in the sense contemplated by s 2A(2) of the Act. The primary judge decided each of these issues against AECL and held that the Act applied to the activities of AECL in January and February 2012. AECL has not filed a Notice of Contention with respect to that conclusion.
8 Mr Kellaway, who is the second respondent, is the managing director of AECL.
9 Farm Pride Foods Ltd (Farm Pride), which is the third respondent, carries on business as an egg producer and distributor in Victoria and New South Wales. The primary judge noted that it is said to be the third largest egg producer in Australia. At the relevant times, Mr Lendich and a Mr Bell were directors of Farm Pride. Mr Lendich was also a director of AECL. Mr Lendich was a managing director of Farm Pride until 30 April 2014.
10 Ironside Management Services Pty Ltd (IMS) which trades as “Twelve Oaks Poultry” is an egg producer based in Queensland. Mr Jeffrey Ironside is one of its directors and, at relevant times, was also chairman of the Board of Directors of AECL. The primary judge noted that IMS is described as a medium sized egg producer. IMS and Mr Ironside are the fourth and fifth respondents respectively.
AN OVERVIEW OF The Accc’s case
11 The ACCC alleged that the contravening conduct was carried out between 19 January 2012 and 8 February 2012. The ACCC alleged that the respondents engaged in conduct which involved encouraging egg producers to act in a “co-ordinated and consolidated fashion” and “thereby” to enter into an arrangement or arrive at an understanding containing a provision to limit the production for supply of eggs in Australia. The ACCC alleged that at the time of the encouragement, each of the egg producers was a corporation within s 4 of the Act and at least two of them were in competition with each other in relation to the production for supply and the supply of eggs. Furthermore, the provision of the arrangement or understanding, if entered into, would have had the purpose of directly or indirectly preventing, restricting or limiting the production for supply and the supply, or the likely production for supply and the likely supply, of eggs by any or all of the egg producers. The ACCC’s case was that by reason of the foregoing matters, each respondent attempted to induce the egg producers to contravene s 44ZZRJ of the Act.
12 The relevant events said to constitute the contravening conduct were a decision of the Board of AECL on 19 January 2012 to convene a meeting of certain egg producers on 8 February 2012 (the Summit), the convening of that meeting, the edition of EggCorp EggsPress of 25 January 2012, the statement and presentations made at the Summit, and conduct by omission of Messrs Kellaway, Lendich and Ironside in failing to disassociate themselves or AECL from the suggestion that the attendees should agree upon a limitation on their production. The ACCC also relied on the respective failures of Messrs Lendich and Bell to disassociate Farm Pride, and of Mr Ironside to disassociate IMS, from the same suggestion. As the primary judge noted, the conduct of the respondents alleged to constitute their respective attempts to induce the contravention of s 44ZZRJ was not identical (at [58]).
GROUNDS OF APPEAL AND GROUNDS OF CONTENTION
13 There are five grounds of appeal.
14 The first ground of appeal raises an issue of whether it was necessary for the ACCC to establish that the proposed arrangement or understanding contained mutual or reciprocal obligations. The ACCC contends that the primary judge erred in concluding that it was necessary for the ACCC to establish this matter. In the alternative (Ground 1A), the ACCC contends that the primary judge erred in failing to find that this was made out (at [65], [403]).
15 The second ground of appeal is that the primary judge erred in concluding that the moral pressure exerted on certain unidentified egg producers who attended the Summit and whose market share had grown above 4% was inconsistent with an attempt to induce egg producers to enter into an arrangement or understanding (at [384]).
16 The third and fourth grounds of appeal must be read together. They involve a challenge to the primary judge’s overall conclusion that he was not satisfied that the respondents had the necessary intent for the contravention alleged against them. The grounds raised the following contentions. First, there was a failure by the primary judge to give sufficient weight or “full effect” to various findings he made. Secondly, the primary judge erred in concluding that a reference in an email from Mr Kellaway dated 25 January 2012 to “a path forward in a co-ordinated and consolidated fashion” was “readily capable of an innocent explanation”. Thirdly, with respect to AECL’s role as a trade association, the primary judge erred in that he gave too much weight to the fact that it had a legitimate function of encouraging members to examine their profitability and to make production and pricing decisions and no weight to the fact that by reason of its representative status and the composition of its Board, AECL was likely to be influential and persuasive when giving directions or requests to egg producers to limit or reduce the supply of eggs (at [399]-[400]). Fourthly, the primary judge erred in not finding that the decision to invite only the top 25 egg producers to the Summit on 8 February 2012, rather than all of its members, was made “so that if the egg producers who attended the Summit did make an arrangement or arrive at an understanding, the top 25 was a sufficient number to cause a material effect on the supply of eggs and was inconsistent with the respondents being motivated out of a concern to inform AECL’s members that it was in their interests, independently of what others were doing, to act in a certain way”.
17 The fifth ground of appeal is that the primary judge erred in finding that particular conduct of Farm Pride, Mr Lendich and IMS was not sufficient for a finding that each of them had attempted to induce egg producers to make an arrangement or arrive at an understanding containing a cartel provision and not considering whether and not finding that, the conduct of the respondents constituted in part, not disassociating themselves from the conduct of each other between the Board meeting on 19 January 2012 and the day after the Summit on 9 February 2012.
18 Before this Court, AECL and Mr Kellaway were represented by the same lawyers and counsel. Farm Pride was represented by its own lawyers and counsel. IMS and Mr Ironside were represented by their lawyers and counsel.
19 Farm Pride filed a Notice of Contention in which it alleged that the decision of the primary judge should be affirmed on three grounds other than those relied on by him. First, it is contended that none of the matters alleged against Farm Pride identified a provision of any alleged arrangement or understanding with sufficient particularity to make out the features of a cartel provision specified by s 44ZZRD(3) of the Act. Secondly, it is contended that a failure by Mr Lendich to disassociate himself or Farm Pride from, or otherwise disavow the content of the presentations at the Summit, was incapable of constituting an attempt to induce a contravention of s 44ZZRJ of the Act. Thirdly, although because of his conclusions with respect to other issues the primary judge did not need to address the issue, it is contended that the primary judge erred in concluding that Mr Lendich’s conduct was to be attributed to Farm Pride pursuant to s 84(2) of the Act.
20 Mr Ironside also filed a Notice of Contention. He raised similar contentions to those raised by Farm Pride in its first and second contentions. In addition, he contended that the primary judge erred in failing to find that he made a certain statement at the Summit. IMS filed a Notice of Contention relying on the contentions raised by Mr Ironside and raising a similar contention to that raised by Farm Pride in its third contention.
THE FACTS
21 Most of the primary facts were not in dispute on the appeal and the ACCC’s appeal relates to the inferences which the primary judge drew, or did not draw from those primary facts.
22 In this section of these reasons, we will set out the key events in chronological order, none of which are in dispute. We will then summarise the primary judge’s approach to the various witnesses who gave evidence at the trial. We will then summarise how his Honour resolved the key factual issues before him.
The Key Events
23 On 26 November 2010, AECL in its fortnightly email update entitled “EggCorp EggsPress” advised readers that:
According to CIE [the Centre for International Economics], the egg industry can only advert a catastrophic result by culling birds 14 days earlier than their expected disposal date out to April 2011.
24 Throughout 2011, the information provided to the Board of AECL indicated that the supply of eggs was exceeding, and was likely to continue to exceed, demand. A recurrent theme at Board meetings was a consideration of the oversupply of eggs. Throughout 2011 and in early 2012, there was a standing item on the agenda for Board meetings for “Egg Industry KPIs” and under that item, reports were provided of egg production, egg consumption and national inventory levels.
25 The minutes of the Board meeting of AECL held on 23 March 2011 record the following:
… further discussed the need for the education of egg producers on how to manage their production levels and agreed that a meeting should be convened prior to the 15th AECL Forum at which Derek Quirke be invited to speak.
26 AECL monitors both egg production and the demand for eggs in Australia. Since 2003, it has engaged International Economics Pty Ltd, trading as The Centre for International Economics (CIE) to provide it with reports about matters such as levels of egg production, analysis of egg production and distribution markets in Australia, and forecasts of the demand for, and the supply of, eggs in Australia. Mr Quirke was the principal person within CIE providing the reports, analysis and forecasts to AECL.
27 On 5 April 2011, EggCorp EggsPress contained a statement that egg inventory stocks had increased significantly beyond levels recorded in April 2010 and that “[i]t is now crunch time where inventory levels must be carefully managed so as not to oversupply the market”.
28 AECL held two industry forums in 2011 and at the forum in Melbourne on 26 May 2011, Mr Quirke, in the course of his presentation, reported on an 8.3% increase in egg production in 2011 as well as presenting a projection of the impact this would have on prices “without continued action by industry”.
29 On 6 September 2011, EggCorp EggsPress contained a statement by Mr Kellaway:
AECL highly advises egg producers to take action now to curtail ongoing egg production over the next 2-3 months. This can be achieved by bringing the planned disposal date of spent hens forward by 2-4 weeks. This action is critical if we are to preserve a viable market.
30 On 4 October 2011, EggCorp EggsPress contained a statement by Mr Kellaway:
Action is now needed by all egg producers to closely monitor egg levels in all cool rooms and where necessary, by bringing forward the planned cull date for spent hens by at least 2 weeks.
31 On 24 November 2011, AECL held an industry forum in Launceston at which Mr Quirke presented on layer and egg supply forecasts.
32 At the annual general meeting of AECL held on 24 November 2011, the issue of egg oversupply was raised and the minutes of the meeting record the following:
Mr James Kellaway proposed that more be done to manage the annual market oversupply by convening a meeting for all egg producers prior to spring each year.
33 On 13 December 2011, EggCorp EggsPress contained information that inventory levels remained at 4 million dozen and that “[a]ction must be taken to reduce egg production over the short term”.
34 The Board of AECL met on 22 December 2011 and the minutes of that meeting record that the managing director noted that egg inventories have declined slightly, but remain very high. Furthermore, a Board action sheet for the meeting records that an alert notice to reduce stock levels was to be sent to all egg producers and that Mr Kellaway was responsible for taking this action.
35 On 11 January 2012, EggCorp EggsPress contained a statement as follows:
Egg Producers must take action to reduce egg production when inventory levels are above the “ideal” level.
36 The minutes of the Board meeting of AECL held on 19 January 2012 record the following:
The Managing Director noted that egg production and chick placement orders are at an all time high. AECL directors found these over supply figures disturbing and expressed the need to tackle the issue with some urgency.
They identified three solutions to the problem of oversupply: firstly, to discourage backyard egg production, secondly, to set up promotion to increase demand, and most urgently to invite the top 25 egg producers to a meeting to encourage destocking and egg disposal.
37 The primary judge was satisfied that the Board approved the third “solution”. The Board action sheet in respect of the meeting contained the following:
Hold EP 25 [top 25 egg producers] Summit in early February on over production.
38 On 20 January 2012, Mr Kellaway on behalf of AECL sent an email to 25 egg producers under the subject heading “Egg oversupply (crisis) meeting” as follows:
Dear egg producer,
In light of record levels of production (and increasing) and record levels of egg inventory, the AECL Board has considered it necessary to urgently convene a meeting to:
• Review the current oversupply situation (please see attached);
• Its impact on producer returns;
• The likely supply scenario for the remainder of 2012; and
• How to resolve the current crisis for the betterment of the egg industry.
In so doing, we are inviting the top 25 egg producers to attend a meeting which will be held in Sydney during the afternoon of either:
• Wednesday 8 February
• Thursday 9 February
AECL apologises for the short notice but we consider it CRITICAL that all major egg producers are present to help resolve the current crisis.
Please let me know your preferred date by return e-mail by Wednesday next week after which, I will let you know of the venue.
Please consider attending this meeting a priority in your diary.
Kind regards
James Kellaway
Managing Director.
(Emphasis in original.)
39 On 25 January 2012, EggCorp EggsPress contained a statement by Mr Kellaway as follows:
Dear Egg Producer,
Given the significant and now record levels of egg production and egg inventory, AECL has requested a meeting of the top 25 egg producers to seek a ‘path forward’ for the egg industry in a coordinated and consolidated fashion to ensure its profitable sustainability, a key part of the egg industry’s vision. All other egg producers are welcome to join the meeting that will take place in Sydney during early February.
If you wish to attend the summit meeting, please contact me on [phone number] or [email address].
Sincerely,
James Kellaway
Managing Director.
40 In another part of the same publication, the following appeared:
Layer & Supply Forecast Report – January
The Forecast Report for January has been distributed to all egg producer subscribers to the service. It paints a daunting picture of record and increasing egg supplies in the market given the chicks that have already been placed and those now on order. Production is now projected to reach 34 million dozen in July this year. Action is needed by all egg producers to control the oversupply and surplus. The best indicator is your cool room and the increasing stocks in inventory. The inventory report suggests that inventory levels are now at record volumes, in excess of 5 million dozen.
For further information, please contact James Kellaway on [telephone number] or [email address].
41 On 27 January 2012, Mr Kellaway on behalf of AECL sent an email to 25 egg producers entitled “Egg oversupply (crisis) meeting confirmed …” in which arrangements for the meeting on 8 February 2012 were confirmed.
42 On 30 January 2012, Mr Kellaway was interviewed on ABC radio. In the course of the interview, he said that 400,000 to 500,000 birds may need to be culled and that margins were low. He also said the following:
To that extent, any supply or any small chink in the market, can have significant ramifications if it’s sustained over the longer term.
43 On 31 January 2012, Mr Kellaway, on behalf of AECL, sent an email to 25 egg producers and one or two others entitled “Egg oversupply (crisis) meeting confirmed …” and as an attachment, an agenda for the meeting to be held on 8 February 2012. The agenda was as follows:
AUSTRALIAN EGG CORPORATION LIMITED
EP25 Summit
Egg oversupply (crisis) meeting
Wednesday 8 February, 2012
Commencing at 1.00pm
Mercure Hotel, Sydney Airport
20 Levey Street, Wolli Creek
AGENDA
1. Welcome & introductions
2. Purpose of the summit
3. Status of the current egg supply situation
4. Impact on producer returns (discussion)
5. Likely supply scenario for the remainder of 2012
6. How to resolve the current crisis
7. Other business
8. Next meeting
9. Close
44 The meeting referred to as the Summit was held in Sydney on 8 February 2012. Mr Kellaway, Mr Quirke and 22 persons representing 19 egg producers from all States and Territories, other than the Australian Capital Territory, attended. Mr Ironside chaired the Summit. Mr Kellaway made a PowerPoint presentation which lasted about 20 minutes and that was followed by a PowerPoint presentation by Mr Quirke which was entitled “Layer and Egg Supply Forecasting Update Current Oversupply”. Mr Ironside then said “there’s the information” and a discussion then ensued. During the discussion, Mr Kellaway made contemporaneous notes in point form. Those notes were as follows:
1. Egg exchange on the AECL website!
2. Imported powder displacement
3. Cull of birds
4. Egg donations
5. Lower stocking densities in cages
6. Prices are dropping with no reduction being passed on!
7. Growth above 4% then you need to cull!
8. Hens to be culled 6-8 weeks earlier!
9. Donation of eggs today to FoodBank!
10. Lower stocking densities! (longer term)
11. If the cool room is building in stock, cull the flock!
12. Imported powder/pulp! To pay the levy.
The primary judge added the numbering to these notes for ease of later reference.
45 Mr Ironside then closed the meeting.
46 On 8 February 2012 at 6.09 pm, Mr Kellaway on behalf of AECL sent an EggCorp EggsPress email to egg producers in which he referred to egg stock levels and included the following:
With no short term ‘lull’ in production forecast, egg producers will need to intervene and reduce production ahead of their planned schedule as a matter of urgency in the short term.
Action is needed now.
47 On 9 February 2012, an email from the Victorian Farmers’ Federation was circulated with the subject line “Urgent Update – Eggs Oversupply”. The email attached an update from the President of the Victorian Farmers Federation Egg Group who had attended the Summit.
48 On 9 February 2012, Mr Kellaway on behalf of AECL sent an email to the attendees of the Summit, as well as Mr Frank Pace and Mr Paul Pace at Pace Farms, with the heading “Egg oversupply (crisis) meeting outcomes” and marked as high importance. The email referred to the outcome of the Summit. The email attached the February 2012 Supply Forecast Report. The email was in the following terms:
Dear egg producer,
Just a short note to thank you for those who attended the meeting yesterday at the Mercure Sydney Airport Hotel to discuss the current oversupply of eggs.
Outcomes of the meeting included:
• Egg sales have been growing by 6.7% on average each year over the last three years and by 4.8% in 2011.
• Egg production has been growing by 7% on average each year over the last three years and by 9.6% in 2011.
• As a result, the growth in egg production each year is exceeding the growth in egg sales each year with production growth above sales growth in 2011 by 4.8%.
• If any egg producer has grown their production by more than 5% any year over the last three, then you are contributing to the oversupply.
• Action can be taken by:
• ‘retiring’ birds 6-8 weeks earlier over your planned rotation for the remainder of 2012.
• donating eggs immediately to FoodBank Australia.
Please see attached just released Layer & Egg Supply Forecast Report for February. Thank you for your time yesterday…
…
James Kellaway
Managing Director
(Emphasis in original.)
The Evidence and Witnesses
49 The ACCC’s case was documentary and it did not call any witnesses.
50 AECL led evidence from Mr Ware who was one of its directors, and from Mr Kellaway. Farm Pride led evidence from Mr Bell who was a director of the company. IMS led evidence from Mr Ironside and, as to the case against Mr Ironside only, from a Mr Powter. Mr Powter attended the Summit.
51 The primary judge considered that, to an extent, the evidence of the various witnesses was affected by hindsight. He considered that the evidence of Mr Ware and Mr Ironside in particular was “not reliable or, at least, not wholly reliable” (at [84]). This was not because the evidence was given dishonestly, but rather could have been the consequence of a retrospective rationalisation of a witness’ own conduct. The primary judge’s overall impression was that the respondents’ evidence provided the Court with “an incomplete, and possibly sanitized, account of what had occurred” (at [84]).
52 We think it is fair to say that the primary judge did not wholly accept or reject the evidence of any witness. He accepted parts of the evidence and rejected other parts. This will be seen in the next section which summarises how the primary judge resolved key factual disputes.
Resolution of Factual Disputes
The Summit
53 The Summit was due to start at 1 pm. The primary judge found that the meeting started late – in the order of 15 to 30 minutes – and in the course of his discussion of that issue, rejected as unreliable Mr Ironside’s evidence that it could have been an hour (at [189]).
54 Mr Ironside chaired the meeting and he opened the meeting by welcoming attendees.
55 Mr Ironside gave evidence that he then told the meeting that there was a crisis in the industry with egg surpluses and that the purpose of the meeting was for attendees to absorb the information that was to be presented and then to go away and make up their own minds as to what they were going to do about it.
56 The primary judge rejected this evidence and insofar as Mr Kellaway gave evidence about obtaining legal advice before the meeting which might support it, he rejected Mr Kellaway’s evidence. He found that Mr Ironside did not make such a statement at the beginning of the meeting. He left open the possibility that Mr Ironside might have made such a statement at the conclusion of the meeting (at [313]-[337]).
57 The primary judge found that at the beginning of the meeting, Mr Ironside reminded those present of the reasons the meeting had been called and that a principal purpose was to consider action which could be taken to alleviate the situation of oversupply (at [244]).
58 There is no dispute that Mr Kellaway then made a PowerPoint presentation. The primary judge found that Mr Kellaway’s oral presentation was in accordance with the slides in his PowerPoint presentation. The primary judge’s summary of Mr Kellaway’s presentation will suffice for present purposes. It is as follows:
197 The introductory slide had the title “Egg oversupply (crisis) meeting” and the subtitle “James Kellaway Managing Director, AECL”. Each of his slides contained the AECL name and logo.
198 Mr Kellaway’s initial slides (with the heading “Purpose”) identified the purpose of the meeting:
• To review the current egg oversupply situation:
• Inventory stocks are now at record levels (5.4 million dozen, up by 2.1 million dozen on this time last year).
• Egg production is also at record levels (392 million dozen in 2011, up by 10% on 2010 levels and well ahead of egg sales).
• Since 2008, egg production has increased by 7.3% each year while egg sales have only increased by 6.5% each year.
• To assess the oversupply’s impact on producer returns:
• Wholesale egg prices have dropped “through the floor” and are yet to stabilise ($16-22 per box not uncommon with some valued even lower).
• To project the likely supply scenario for the remainder of 2012:
• Egg production is not forecast to ease moving forward with production peaking in July ‘12 at 34 million!
• To consider options to resolve the current crisis for the betterment of the egg industry.
200 Mr Kellaway then presented a number of graphs and charts illustrating movements in egg inventory levels, egg production and retail sales trends, and egg production and sales growth.
201 One of Mr Kellaway’s slides compared egg production with the volume of retail sales. It indicated that, in 2011, egg production had increased by 9.6% while retail sales had increased by 4.8%. The slide then continued with these dot points:
• Did all egg producers grow by 9.6% in 2011 or achieve average growth greater than of 6.7% each year over the last three years?
• No, some producers are growing faster than others …
202 Mr Kellaway then presented a chart entitled “Top 25 egg producer growth”. It compared the average annual growth in production over the three years (2009-2011) of the top 25 egg producers with the percentage sales growth in the same period. The chart indicated that the production of all but three producers had increased over the three year period (but no data was provided in respect of a further two producers). Some 11 (unidentified) producers were shown to have had production increases of more than 10%, several dramatically so.
203 Mr Kellaway then presented a slide headed “Solutions” with the following content:
• Short term:
• Dispose of eggs by either donating eggs to one or many charity groups or dumping/burying eggs.
• Reduce the number of laying hens by culling birds (there is currently capacity with the major processors). Use of an independent auditor?
• Increase demand? (AECL has invested $1 million above budget to assist ‘move’ volume).
• Medium term:
• Implore Government to enforce current caged legislation (higher stocking densities and caged design). There is projected to be the capacity to house 700,000 hens in 30 non-complying facilities.
• ‘Attack’ backyard production …
• Increase demand …
• Long term:
• Voluntary or regulated increases in stocking densities in cages, in the hen house or on the range.
• Increase demand …
205 Mr Kellaway then presented some information about FoodBank, a body which receives, stores and distributes food to welfare agencies throughout Australia. He noted that the advantages of donations of eggs to FoodBank included resolution of the oversupply, assistance in restoring the egg price, and good industry public relations.
206 In a slide headed “Media” Mr Kellaway reported on two recent media stories concerning egg production, being backyard egg production and egg oversupply. In relation to the latter, the slide included the following entry:
Egg oversupply was ‘leaked’ to the media – industrial sabotage – by an egg producer.
207 In a slide headed “Conclusion” Mr Kellaway said:
• It is now up to those represented in the room who constitute 68% of total egg production.
• DISCUSSION …
59 The primary judge interpreted Mr Kellaway’s evidence as being to the effect that his overall intention in presenting the information to the meeting was to present information and options. He considered this statement of intention as “unduly benign” and that Mr Kellaway was encouraging attendees to take action to address the crisis which he, Mr Kellaway, identified (at [209]).
60 Mr Kellaway’s presentation was followed by a presentation by Mr Quirke involving 16 slides. The primary judge accepted Mr Kellaway’s evidence that Mr Quirke’s presentation closely followed the content of his slides. Again, the primary judge’s summary of Mr Quirke’s presentation is sufficient for present purposes. It is as follows:
210 … The face page slide indicated that the presentation was by CIE and was entitled:
Layer and egg supply forecasting update
Current over supply
211 Mr Quirke provided data as to chick numbers and production, noting that the production of marketable eggs was up by 8.7% from 2010 and that this had caused “the impact on prices”. His slides contained forecasts of chick orders and placements to March 2012. He noted that eggs in stock were at record levels and comprised about 15% of monthly production.
212 A slide entitled “Higher production resulting in downward pressure on box prices” illustrated, in graphical form, the downward trend of prices for eggs since September 2010.
213 Mr Quirke noted that the market was following a similar trend to that observed in recent years and stated:
Industry needs to consider how to better align production and demand
- To smooth market impacts especially over spring
214 Mr Quirke’s penultimate slide was as follows:
Restraint on capacity required
• Production increased by 8.5% in 2011.
- Now looks like a 2% increase in 2012
- That’s an average of 5.25% over two years.
• There [has] been considerable expansion in capacity for some producers but not for others
- I would suggest a target production growth of around 4%. Are there egg producers growing above this suggested trend?
- Also smoothing out the expansion and placements would significantly benefit the industry.
215 Mr Quirke had provided his proposed slides to Mr Kellaway before 8 February for Mr Kellaway’s review. Mr Kellaway suggested to Mr Quirke that he include the words “Are there egg producers growing above this suggested trend?”, and Mr Quirke did so.
61 The primary judge then turned to consider the evidence as to the discussion which followed the presentations. He did so largely by reference to the notes made by Mr Kellaway (see [44] above) which he found were not notes of Mr Kellaway’s own remarks. He found that the matters in notes 3 (Cull of birds) and 7 (Growth above 4% then you need to cull!) were not matters addressed by Mr Quirke. The matter in note 8 (Hens to be culled 6-8 weeks earlier!) reflected the fact that at least one attendee at the meeting considered this an appropriate course of action. The matter in note 11 (If cool room is building in stock, cull the flock!) reflected a statement made by someone at the meeting. The primary judge found that Mr Lendich made statements at the meeting which led Mr Kellaway to make note 5 (Lower stocking densities in cages) and note 10 (Lower stocking densities! (longer term)).
The Elements of the ACCC’s Case
62 The primary judge then addressed each element of the ACCC’s case which he noted was a circumstantial case.
63 The first element was that there was an atmosphere of crisis which emerged at the AECL Board meeting on 19 January 2012 and was maintained until the Summit. The primary judge said that there was no difficulty in finding that such an atmosphere existed at material times (at [248]) and that it was significant (at [256]). That finding is not challenged and, in those circumstances, it is not necessary to review the evidence upon which the primary judge relied to make the finding. It may be noted that in the course of his review, the primary judge accepted Mr Kellaway’s evidence, although he said that it was somewhat understated, and he accepted Mr Ware’s evidence, although he said that in other respects he had doubts about the reliability of Mr Ware’s evidence. The primary judge also found, having regard to the figures for egg inventory levels, that the AECL had good reason to be concerned.
64 The second element was AECL’s custom and practice. In this respect, the primary judge found that it was “very evident” that AECL regarded an oversupply of eggs as a problem for the egg industry and that it considered it to be part of its role to prevent or correct an oversupply. In discharging that role, AECL not only provided egg producers with information about current and forecast egg supply, but called on them, from time to time, to reduce supply in the interests of the egg industry as a whole. Furthermore, AECL was accustomed to informing egg producers that a means of reducing egg supply was by culling hens earlier than planned. The primary judge found that these conclusions made “it more plausible, and probable, that the respondents had attempted in the period between 19 January and 8 February 2012 to encourage egg producers to take a form of collective action” (at [259], [261]). None of these findings are challenged.
65 The third element consisted of a number of circumstances surrounding the calling of the Summit. The primary judge accepted the following: it was the Board of AECL itself which decided to call the Summit; the Summit was called at short notice even though attendance would be a matter of some expense and inconvenience for many egg producers; that the holding of a special meeting was a departure from the methods which AECL had previously adopted in relation to an oversupply of eggs; and that the meeting was not a general meeting of AECL, but instead one at which the principal invitees were the top 25 egg producers. The evidence before the primary judge was that the top 25 egg producers were responsible for the production of approximately 68% of hen eggs produced in Australia. This was the first time AECL had called a special meeting of only the major egg producers. The primary judge also noted that egg producers other than the top 25 producers were also welcome to attend the meeting (at [264]).
66 The fourth element was what the primary judge described as contemporaneous statements of purpose. The primary judge considered a number of statements made by Mr Kellaway before the Summit and, in particular, his statement on 25 January 2012 that AECL had requested the meeting “to seek a ‘path forward’ … in a co-ordinated and consolidated fashion”. The primary judge rejected Mr Kellaway’s evidence that he was intending to suggest by these statements that egg producers would get a better understanding of the situation. The primary judge said that the language suggested something much more positive than the mere development of an understanding. Mr Kellaway was contemplating at the time that the Summit would address courses of action to tackle the problem of oversupply (at [274]).
67 Mr Kellaway’s comments to the ABC reporter supported a conclusion that Mr Kellaway contemplated that a substantial number of hens may need to be culled and he appreciated at the time that the culling of such a large number of hens would require action of a “co-ordinated and consolidated” kind (at [278]).
68 The fifth element was the reference to an “independent auditor”. It is convenient to deal with this topic in the one place and we do that below (at [80]-[82]).
69 The sixth element was the fact (as found by the primary judge) that there were overt statements of moral pressure being brought to bear on some producers at the Summit. The primary judge said that this was “consistent with, and supportive of, the ACCC case that at least some producers were being asked to limit egg production” (at [312]).
70 The seventh element consisted of communications after the Summit. We have already set out a passage from EggCorp EggsPress to egg producers at 6.09 pm on 8 February 2012 (at [46] above). The primary judge said that the communication was significant because it shows that AECL was providing not only information, but also firm advice as to how egg producers should deal with the situation of oversupply. The same may be said of Mr Kellaway’s email to attendees (and Mr Frank Pace and to Mr Paul Pace at Pace Farms) at 5.48 pm on Thursday, 9 February 2012. This is also set out above (at [48]). The primary judge also noted the continuation (from the Summit) of the moral pressure on producers whose production had grown at a greater rate than others. Finally, there was the communication from the Victorian Farmers’ Federation, about which it is unnecessary to make any further comment.
71 The eighth element can be described as a consciousness of wrongdoing. This can be dealt with briefly. The primary judge analysed the correspondence after the Summit and reached the conclusion that it did not reveal a consciousness of wrongdoing.
72 The final element was the explanation for the Summit. The ACCC submitted that there was no innocent explanation for the Summit. The primary judge rejected the evidence of Messrs Kellaway, Ware and Ironside that, in effect, the Summit was called for the purpose of disseminating information. The primary judge found that the Summit was essentially “a call to action with information being provided in support of that call” (at [378]). The primary judge said that that did not make out the ACCC case. He said that it was the ACCC which carried the onus.
73 The ACCC did not challenge any of the findings set out above. It made clear that it did not challenge any finding made prior to the primary judge’s consideration of the circumstantial case which is dealt with in the next section of these reasons.
THE PRIMARY JUDGE’S CONSIDERATION OF THE ACCC’S CIRCUMSTANTIAL CASE
74 The primary judge said that each of the elements of the ACCC’s circumstantial case had to be considered collectively. He said that the ACCC’s case had “some force”. There was conduct which, looked at generally, could be characterised as a form of affirmative action directed towards the inducement the ACCC alleged. However, his Honour said that the evidence did not establish that the respondents had the intention of inducing a proscribed arrangement or that any respondent conveyed to the attendees at the Summit the potential for such an arrangement or understanding.
75 The primary judge drew a distinction between two situations and the distinction played an important part in his reasoning. The first situation was where industry participants are brought to an appreciation that it is in their interests, independently of what others are doing, to act in a particular way. Such conduct did not involve a contravention of the Act. By contrast, the second situation involved conduct where industry participants are invited to agree to act in a particular way in the expectation of reciprocal conduct by others and that does involve a contravention of the Act. The primary judge agreed with a characterisation of the evidence advanced by counsel for AECL and Mr Kellaway. It was consistent with an outcome of “We want everybody to think harder about their own circumstances and what they can do to solve the problem which is, in part, theirs and, in part, the industry’s”. The primary judge noted that it needed to be added that suggestions and recommendations as to particular conduct which producers could take were also made (at [382]).
76 In an important paragraph in his analysis, the primary judge said (at [383]):
The evidence warrants a finding that the means by which egg production could be reduced (removing one hen from each cage and bringing forward the disposal of hens by 6-8 weeks) were canvassed at the Summit, but there is insufficient evidence to warrant the conclusion that these options were propounded as a form of collective action involving reciprocal obligations or understandings by the egg producers. It is one thing to conclude that suggestions, even firmly expressed suggestions, were made that removing a hen from a cage and bringing forward hen disposal were forms of action which producers, making independent judgments about their own commercial interests, could (or even should) adopt: it is another thing to conclude that the respondents were proposing that producers agree that each would pursue either or both of these options on the understanding that their competitors would do likewise. There is no persuasive evidence that a proposal to that effect was articulated.
77 The primary judge said that the emphasis at the Summit on those producers (unidentified) who had increased their production rapidly was inconsistent with an intention to induce mutual and reciprocal action. In essence, that was because that course would only emphasise to “innocent” producers that the obvious solution was for the “culpable” producers to bring their egg production back to levels which were sustainable. In other words, any conduct being suggested did not involve action by the innocent producers (at [383]-[384]).
78 The primary judge then turned to address two key arguments advanced by the ACCC.
79 First, Mr Kellaway in the EggCorp EggsPress of 25 January 2012 had referred to a path forward in “a co-ordinated and consolidated fashion” and the ACCC submitted that this was an indication of an intention to encourage action involving reciprocal obligations. The primary judge agreed that the reference to “a co-ordinated and consolidated fashion” could be read as suggesting coordinated action by agreement by various producers. However, the primary judge said that the reference was “readily capable of an innocent explanation” being the adoption simultaneously of different strategies in a planned way and those different strategies included donating eggs, culling birds or take such action as might increase demand.
80 Secondly, the primary judge addressed the reference in Mr Kellaway’s slide to an independent auditor. The primary judge agreed with the ACCC that this was particularly significant. He referred to his earlier findings about this matter (at [280]-[307]). Those findings may be summarised as follows.
81 First, in referring to an independent auditor in his slide presentation, Mr Kellaway was contemplating (and informing the attendees at the Summit) that an independent auditor might be used in conjunction with a planned reduction in hen numbers by culling and that an independent auditor would be able to monitor and report upon the extent to which egg producers had culled their flocks (at [302]). Mr Kellaway contemplated that the use of an independent auditor might overcome the misgivings of egg producers arising from their distrust of their competitors. It would be a means of checking that all egg producers were taking like action and a form of assurance to egg producers and the removal of a disincentive to engage in culling action (at [303]). Secondly, Mr Kellaway made reference to an independent auditor in his slide presentation because of the discussion at the Board meeting on 19 January 2012 and he was giving effect to what was said at that meeting. At the Board meeting, Mr Lendich suggested the use of an independent auditor in order to overcome a perceived impediment to one of the options for reducing the egg supply and that purpose was known by all directors (at [306]). At the Summit, Mr Kellaway explained this to the attendees at the Summit (at [307]).
82 Having referred to these earlier findings, the primary judge said that the retention of an independent auditor for the identified purpose was capable of an “innocent” explanation being “a means by which AECL, and through it egg producers, would know whether each producer was heeding the AECL’s warnings and whether each was, by voluntary and independent action, reducing its hen numbers” (at [388]). The following observation by his Honour is important (at [388]):
... In this way, the proposed retention of an independent auditor does not point persuasively to an intention that producers enter into an agreement or understanding with respect to reduction of hen numbers.
83 The primary judge considered that the following matters were relevant to his final conclusion. First, the egg industry is generally of a competitive kind and it was likely that individual egg producers would take action only if they perceived it to be in their own individual interest to do so, and practical for them to do so (at [391]). Secondly, the fact that a range of short term solutions were suggested is an indicator that the requisite degree of mutuality or reciprocity was unlikely. Thirdly, the fact that egg producers around Australia operated in separate markets militated against AECL and Mr Kellaway (who would have known that fact) having sought to induce an agreement or understanding of a proscribed kind among the attendees generally. Fourthly, although it was not necessary for the purposes of establishing an attempt to induce a contravention of s 44ZZRJ to establish that a single course of action is proposed, the fact that different options were proposed in the practical context of the Summit (where an agreement or understanding of this type would be difficult to achieve) counted against a finding of attempt. Fifthly, it was relevant that there was no evidence of any proposal having been put to the vote at the Summit or of a call for an indicative show of support, although not as relevant as it would be had there been more detailed direct evidence of what had occurred at the Summit. Sixthly, the role and character of AECL is important. The primary judge said that although AECL was not an egg producer, it was, in a particular way, a participant in the Australian egg industry. Furthermore, AECL does, in some respects, act as an entity representing the Australian egg industry. AECL’s role and character are relevant to the issue because trade associations and their officers may legitimately encourage their members to examine their profitability and to make production and pricing decisions in order to maintain profitability. Providing there is no suggestion of cooperative action, the conduct does not amount to an attempt to induce cartel conduct. Finally, it is relevant that the ACCC’s case did not include an allegation as to the precise form of the alleged intended arrangement or understanding. That is not essential, but its absence makes it “more difficult to be satisfied that the respondents did seek to induce an agreement or understanding which contravened s 44ZZRJ”, or as the primary judge said (at [81]), “the uncertain and general nature of the putative arrangement makes the pinpointing of conduct or words referable to such an arrangement difficult”.
84 The primary judge expressed his conclusions in the following way (at [403]):
As already indicated, I consider that the ACCC evidence does establish conduct by the respondents which could constitute an attempt in the requisite sense. However, in my opinion, the ACCC case falls short of establishing that the respondents who participated in the trial had an intention to bring about an arrangement or understanding with the proscribed qualities and that any proposed an arrangement or understanding between producers for the reduction of the supply of eggs. It does establish that these respondents intended that the Attendees should take action to address and correct the oversupply of eggs but not (to the requisite degree of persuasion) that this action should be pursuant to an agreement or understanding involving reciprocal obligations.
85 The primary judge said that the ACCC’s case was strongest against AECL and Mr Kellaway. However, intention to induce the attendees to reach an agreement or understanding for a form of collective action was not established.
86 Despite the statement in the first sentence of the passage from the primary judge’s reasons set out above (at [84]), it is not entirely clear whether the ACCC’s case against the other respondents failed not only for the reason that intention was not established, but also because his Honour considered that in their case the physical acts necessary to make out an attempt were not established. For example, in the case of IMS and Mr Ironside, the primary judge said (at [405]):
Although I regarded a number of the aspects of the evidence of Mr Ironside as unreliable, I am not persuaded that the ACCC has established the attempt by him and IMS which it alleges. It has not established particular conduct of Mr Ironside which would warrant a finding that he had made such an attempt or that he had the requisite intention.
87 A little later, he said the following (at [408]):
In these circumstances, it is unnecessary to consider the ACCC submission that conduct constituting an attempt could be constituted, at least in part, by an omission by a respondent to disassociate himself from statements or conduct of another.
88 This notion of failing to disassociate themselves from statements or conduct of others was pleaded against Mr Lendich and Farm Pride, and against Mr Ironside and IMS. Although it is not entirely clear, we think by reference to the context, that in the case of Farm Pride (through Mr Lendich) and Mr Ironside and IMS, the primary judge did not address the failure to disassociate plea, not because he had found conduct by reason of other facts, but rather because his finding as to a lack of intention made it unnecessary for him to consider whether conduct sufficient for an attempt was established. The position is otherwise with AECL and Mr Kellaway where conduct sufficient for an attempt was established, but not intention.
89 Finally, the primary judge said that had it been necessary for him to do so, he would have found that Mr Lendich’s conduct was to be attributed to both AECL and Farm Pride, and Mr Ironside’s conduct to both AECL and IMS (at [409]).
THE APPEAL – ANALYSIS
90 With respect, the primary judge’s reasons are both careful and detailed. This was acknowledged by counsel for the ACCC who said that it was difficult to pinpoint precisely where the primary judge had gone wrong. Nevertheless, the submission was that he had erred. The ACCC submitted that its documentary case was a strong one and that this was not a case where an applicant failed because the Court accepted the oral evidence of the respondents’ witnesses. In fact, the Court rejected their evidence on a number of matters. The ACCC submitted that it failed at the last hurdle because the primary judge was not prepared to infer the required intention for a contravention by way of an attempt. The ACCC submitted that this was a “Warren v Coombes” type of case (Warren v Coombes and Another (1979) 142 CLR 531 (Warren v Coombes)) and that this Court is in as good a position as the primary judge to decide whether the relevant inference should be drawn. The ACCC’s arguments on the appeal consisted of two threads. First, it submitted that the primary judge made a number of specific errors. Secondly, it submitted even if its first submission is not made out, this Court should draw the inference which the primary judge declined to draw.
91 Before analysing these arguments, it is convenient to state (in summary form) the relevant principles concerning an attempt to induce the making of an arrangement or the reaching of an understanding which contravenes s 44ZZRJ of the Act. Section 76(1) makes it clear that the inducement can be by way of threats, promises or other conduct.
92 In order to establish an attempt, an applicant must prove both intention and conduct. The intention is to bring about the proscribed result which in this case is the making of an arrangement or the reaching of an understanding within s 44ZZRJ (Trade Practices Commission v Tubemakers of Australia Ltd and Others [1983] FCA 99; (1983) 47 ALR 719 (Tubemakers) at 737 and 743 per Toohey J). It is not necessary in order to establish the relevant intention to prove that it was accompanied by or included an expectation of success or a belief that the purpose would be achieved (Tubemakers at 736 per Toohey J).
93 The conduct which is necessary to constitute an attempt is a step towards the commission of a contravention, which is immediately and not merely remotely connected with it (Tubemakers at 736 per Toohey J referring to Archbold’s Pleading Evidence & Practice 36th, para 4101). The Full Court of this Court in Trade Practices Commission v Parkfield Operations Pty Ltd and Another (1985) 7 FCR 534 (Parkfield Operations) at 538-539 made a similar point when it said that an attempt must involve taking a step towards the commission of contravening conduct and that it is not sufficient that it be merely remotely connected or preparatory to the commission of it. In Australian Competition & Consumer Commission v SIP Australia Pty Limited [2001] FCA 824; (2002) ATPR 41-877 (ACCC v SIP Australia) at 45-015, Goldberg J made the point that what is required for an inducement is that “there be an affirmative or positive act or course of conduct directed to the person who is said to be the object of the inducement”. In addition to that point, his Honour also referred to the decision of the Full Court of this Court in the The Heating Centre Pty Ltd v Trade Practices Commission (1986) 9 FCR 153 at 164 where it was said that mere persuasion, with no promise or threat, may well be an attempt to induce.
94 For the purposes of both elements of an attempt, that is to say intention and conduct, it is not necessary for the precise terms of the proposed arrangement or understanding to have been formulated. This point was made by the Full Court in Parkfield Operations (at 539) and another way of putting the point is that it is not necessary for an attempt to be made out to establish that the relevant conduct had reached an advanced stage. Having said this, it is perhaps trite to note that the more advanced the conduct, the more likely it is that the inference of the necessary intention will be drawn.
95 In order for there to be an arrangement or understanding within s 44ZZRJ, there must be a meeting of minds and this involves a commitment to act in a particular way. A mere expectation as distinct from an assumption of obligation, assurance or undertaking to act in a particular way is not sufficient. Unlike an arrangement, an understanding can be tacit (Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (and Others) (1999) 92 FCR 375 (CC Pty Ltd) at [135]-[141] per Lindgren J; Apco Service Stations Pty Ltd and Another v Australian Competition and Consumer Commission (2005) 159 FCR 452 at [45]-[47]; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd and Others (2007) 160 FCR 321 at [28]-[39] per Gray J).
96 For some time, there has been a debate in the authorities as to whether a meeting of minds involving only one party assuming an obligation as distinct from mutual or reciprocal obligations can constitute an arrangement or understanding of a proscribed kind. The issue has not been authoritatively determined. The courts which have addressed the issue have consistently said that even if the undertaking of a unilateral obligation can constitute a contravening arrangement or understanding, such cases are likely to be rare (see, for example, Trade Practices Commission v Service Station Association Limited and Others (1993) 44 FCR 206 (Service Station Association) at 230-231 per Lockhart J, at 238 per Spender and Lee JJ; CC (NSW) Pty Ltd at [139] per Lindgren J). For reasons which we will give, it will not be necessary for us to resolve the issue in this case.
97 In Service Station Association, one of the respondents, Service Station Association Limited (SSAL), was alleged to be liable to pay a pecuniary penalty by reason of conduct inducing or attempting to induce petrol retailers to fix prices and thereby contravene s 45(2)(a)(ii) of the Trade Practices Act 1974 (Cth). SSAL was the trade association of petrol retailers in New South Wales with approximately 1,100 members. The trial judge held that a contravention was not established because the intention of SSAL was not to bring about the making by dealers of the arrangements alleged or the arrival by them at the understanding alleged, but a lawful one of “bring[ing] about a willingness among dealers to examine their individual businesses and the retail prices charged and to increase their retail margins” (Service Station Association at 225). A number of petrol retailers were failing and SSAL recommended that retailers concentrate on profit rather than volume and it published recommended retail prices. The Full Court held that the trial judge had not erred and dismissed the appeal.
98 It seems clear that an industry body may perform an educative or information providing role towards its members without contravening cartel and associated provisions. As a general proposition, it may be said that an industry body may, in the interests of its members and of the industry, provide information to its members and suggest that they examine their present practices and consider changing them.
99 We turn now to the ACCC’s submissions.
100 As we have said, the ACCC sought to identify a number of specific errors in the primary judge’s reasons.
101 First, in its written submissions, the ACCC submitted that it is not necessary for there to be mutuality or reciprocity of obligations between the parties to an arrangement or understanding (paragraph 11). It submitted that this particular case was a case where mutual or reciprocal obligations were not necessary because the conduct suggested was a specific information exchange in connection with a planned cull and that was to be verified and checked by an independent auditor and was to be carried out through a trade association (paragraphs 30-33). Counsel for the ACCC refined this submission in the course of his oral submissions. As we understood his submission, it was that the “requirement” for mutuality or reciprocity of obligations was, in effect, a tool of analysis to be applied and adapted to the particular circumstances of the case. He did not argue that it was an irrelevant consideration to be ignored in favour of simply saying that a unilateral obligation (or obligations) is sufficient. He submitted that where a trade association or industry body is involved, mutuality or reciprocity recedes into the background. The individual producers might decide to act for the industry. The necessary commitment might be present and the mutuality might be less obvious. Counsel for the ACCC submitted at one point that personifying the collective is a form of mutuality. We note that at another point, he did appear to submit that mutuality or reciprocity is not necessary.
102 Insofar as the ACCC submitted that the primary judge erred in holding that mutuality or reciprocity of obligations was necessary, we reject that submission. The primary judge was aware that a contravening arrangement or understanding might not necessarily involve a reciprocity of obligations. In discussing the relevant principles, his Honour said (at [65]):
… The necessary consensus or meeting of minds need not involve, although it commonly will, a reciprocity of obligations.
103 The primary judge proceeded on the basis that in this case the attempted inducement must relate to an arrangement or understanding involving mutuality or reciprocal obligations because that was how the case was pleaded and conducted and, in a sense, is the natural way to view the allegations made by the ACCC.
104 In its Further Amended Statement of Claim, the ACCC alleged against AECL that it intentionally encouraged the egg producers at the Summit to act in a co-ordinated and consolidated fashion to limit the production for supply and the supply of eggs in Australia. This pleading is representative of the pleas against the other respondents. The ACCC further alleged that at least two of the egg producers were or were likely to be in competition with each other in relation to the production for supply and the supply of eggs. On a number of occasions in closing submissions to the primary judge, counsel for the ACCC referred to mutual obligations or mutual agreement (see Annexure A to Farm Pride’s written submissions to this Court). The primary judge dealt with the case on the basis that mutuality or reciprocity of obligations was necessary and that was both understandable and correct in light of the pleadings, the way the case was presented to him and the nature of the case.
105 We will deal with the ACCC’s submission that the primary judge placed too much weight on the fact that AECL was an industry representative body and its submission that the evidence about the independent auditor and the culling of hens established a sufficient level of commitment and mutuality or reciprocity of obligations later in these reasons.
106 Secondly, the ACCC submitted that there is a dichotomy between an industry body providing information to its members and suggesting reflection on the action that they might individually take and an industry body providing information and making a call for action. The former is not inducing a contravening arrangement or understanding, whereas the latter is inducing a contravening arrangement or understanding. Service Station Association falls into the former category. This case falls into the latter category because the primary judge found that the ACCC did not restrict itself as a matter of custom and practice to the provision of information (at [259]) and he found that the purpose of the Summit was not limited to the provision of information to the attendees (at [371]). This statement of the primary judge’s findings is correct.
107 Nevertheless, we reject the submission to the extent that it is to the effect that once a trade association or industry body goes beyond the provision of information it is attempting to induce a contravening arrangement or understanding. With respect, we think the primary judge correctly summarised the matter when he said (at [400]):
I accept, nevertheless, the respondents’ submission that the role and character of AECL is important. In particular, I accept the submission made by reference to Trade Practices Commission v Service Station Association Ltd [1993] FCA 405; (1993) 44 FCR 206, that trade associations and their officers may legitimately encourage their members to examine their profitability and to make production and pricing decisions in order to maintain profitability. Conduct of that kind, at least when directed to the decisions of industry participants in their own businesses and without any suggestion of cooperative action, does not amount to cartel conduct, or even an attempt to induce cartel conduct.
108 The primary judge put the point in a slightly different way (but to the same effect) when he said that conduct whereby industry participants are brought to an appreciation that it is in their interests, independently of what others are doing, to act in a certain way providing it does not involve an expectation of reciprocal conduct by others is lawful (at [388]). We will deal with the alternative submission that the primary judge erred in the significance he attached to the fact that AECL was an industry representative body later in these reasons.
109 Thirdly, the ACCC submitted that the primary judge erred in applying the incorrect standard of proof. As we understood the submission, which, it must be said, was not at the forefront of the ACCC’s submissions, the primary judge applied the criminal standard of proof or a standard akin to that standard. The correct standard was the civil standard of proof, that is, proof on the balance of probabilities informed by the matters in s 140(2) of the Evidence Act 1995 (Cth). The basis of the ACCC’s submission was the assertion that on occasion the primary judge referred in his reasons to there being an innocent explanation for conduct. It is said that to approach the evidence by asking whether there are explanations consistent with innocence is to apply the criminal standard of proof.
110 We reject this submission. The primary judge was clearly aware of the appropriate standard of proof. He said (at [86]):
In assessing the evidence and the matters to be proved by the ACCC, I keep in mind s 140 of the Evidence Act 1995 (Cth) and the Briginshaw principles.
111 The references to the ACCC not having negatived an understanding as a reasonable one in the context of Mr Kellaway’s statement about “co-ordinated and consolidated action” and an “innocent” explanation for the retention of an independent auditor for the identified purpose (at [387]-[388]) must be read in context. When that is done, there is no substance in the suggestion that the primary judge did other than apply the standard of proof which he correctly identified.
112 Fourthly, the ACCC submitted that the primary judge erred in not placing sufficient weight on Mr Kellaway’s email dated 9 February 2012. The terms of that email are set out above (at [48]). The ACCC points, in particular, to the reference to the “Outcomes” of the meeting. Initially it seemed to be suggested by the ACCC that this email was part of the conduct constituting the attempt. That was later clarified as not being advanced and properly so. It is clear from the pleadings and the primary judge’s reasons that, on the ACCC’s case, the attempt was complete and did not continue after Mr Kellaway’s PowerPoint presentation or, if not then, when the matter was put to those at the Summit for discussion or, if not then, at some point prior to the end of the discussion. The ACCC submitted that even if the email was not part of the conduct constituting the attempt, it was nevertheless relevant to a consideration of Mr Kellaway’s intention. We accept that it might be used in that way. The difficulty for the ACCC is that we do not think it can take the matter any further than the findings of the primary judge to the effect that, accepting Mr Kellaway’s evidence as the primary judge did, Mr Kellaway was summarising matters discussed or stated at the Summit, not matters agreed or settled upon at the Summit and to the effect that the email is an indication that AECL was prepared to go beyond the provision of information and contained a continuation of the moral pressure being applied to those egg producers producing at an above average level (at [342]-[343]).
113 Fifthly, the ACCC submitted that the primary judge erred in the weight he placed on two circumstances attending the fact that the Summit was called by an industry representative body. The ACCC submitted that both circumstances were inconsistent with AECL carrying out the function of providing information. The first circumstance is that AECL, through Mr Kellaway, exerted moral pressure on egg producers producing at an above average level of production. That, as we have said, was the finding of the primary judge (at [312], [384]-[385]). That criticism of some of its members is, it is submitted by the ACCC, inconsistent with a purely educative role and inconsistent with encouraging members to engage in self-reflection. The second circumstance is that the invitation to the Summit was directed not to all egg producers, but rather to the top 25 egg producers. That circumstance indicated that achieving a particular result, rather than merely educating its members, was the primary purpose of the Summit. Both these points have force, but again as with the previous points, the difficulty for the ACCC is that the primary judge was aware of these matters (at [263]-[264], [312]) and he made a clear finding that the Summit was not called primarily for information purposes. It was, as the primary judge put it, essentially a call to action with information being provided in support of that call (at [378]).
114 Sixthly, the ACCC submitted that the primary judge erred in law in not holding that the contraventions were made out even on the findings that he did make. The submission was linked to the suggestion concerning the use of an independent auditor and involved the following steps. The ACCC referred to the primary judge’s findings about the suggestion of an independent auditor (at [302]-[306]). Those findings are summarised above (at [81]).
115 In his conclusions concerning the independent auditor, the primary judge said (at [388]):
I agree with the ACCC that the reference in Mr Kellaway’s slide to an independent auditor is particularly significant. I have already made findings about that. However, the retention of an independent auditor for the identified purpose may also have an “innocent” explanation. The reports of an independent auditor would have provided a means by which AECL, and through it egg producers, would know whether each producer was heeding the AECL’s warnings and whether each was, by voluntary and independent action, reducing its hen numbers. In this way, the proposed retention of an independent auditor does not point persuasively to an intention that producers enter into an agreement or understanding with respect to reduction of hen numbers.
(Emphasis added.)
116 The ACCC submitted that the primary judge did not actually make a finding of the “innocent” explanation he identified. In any event and proceeding on the basis that such a finding was made, the ACCC submitted that the explanation would not be “innocent” and in failing to reach that conclusion, the primary judge must have made an error of law. In fact, the proposal would be a contravening arrangement or understanding. In other words, if it be assumed that each producer by voluntary and independent action decided to reduce its hen numbers and that was done on the basis or understanding (in whole or part) that AECL would engage an independent auditor so that the producers would know whether each producer was heeding AECL’s warnings, then that would be a contravening agreement or understanding. The ACCC submitted that the necessary level of commitment would be present and that, as matter of policy, this Court should hold such an arrangement or understanding falls within the terms of the Act.
117 We reject this submission. We do not think that voluntary and independent action by each producer in reducing its hen numbers becomes contravening conduct because it is done in the knowledge that there is a mechanism whereby each producer is informed that an industry problem – excess production – is being addressed. We do not think that that involves a provision of the arrangement or understanding which has the purpose of directly or indirectly preventing, restricting or limiting the supply of eggs. We should add in this context that we accept the submission of counsel for AECL and Mr Kellaway that the finding concerning the disclosure of information goes no further than is set out at [388] of the primary judge’s reasons (at [115] above).
118 Seventhly, the ACCC submitted that the primary judge had given insufficient weight to certain matters which the ACCC described as “admissions”. The first matter was Mr Kellaway’s statement to the ABC reporter on 30 January 2012 to the effect that 400,000 to 500,000 birds may need to be culled. The submission was that such a large culling could only result from collective action and Mr Kellaway must have understood that. The second matter was that Mr Kellaway had made inquiries, or caused inquiries to be made, about the capacity of processors to deal with a demand for the culling of hens (at [301]). This indicates that the proposal Mr Kellaway had in mind was well advanced. These arguments about weight are more conveniently dealt with as part of the ACCC’s general challenge to the primary judge’s decision. We say that because the primary judge was aware of these matters and of their significance (at [278], [301]).
119 Finally, the ACCC submitted that the primary judge erred in his approach to his own findings concerning the moral pressure being brought to bear on some of the producers at the Summit. We think the primary judge’s finding was that moral pressure was brought to bear on those producers who had grown at a faster rate than the industry average (at [311]-[312]). The ACCC made two submissions about this topic of moral pressure.
120 First, in its oral submission in reply, the ACCC submitted that the moral pressure was applied to all producers because even those not growing above average were encouraged not to do so in the future. This appears to be a new point and one not put to the primary judge. In any event, there does not appear to be a proper basis for such a conclusion.
121 Secondly, the ACCC submitted that there is an inconsistency between the following two findings (at [386], [403]):
386 To my mind, the fact that Mr Kellaway chose to highlight for the Attendees that some of their members were particularly responsible for the oversupply is inconsistent with him having had an intention to induce all of the Attendees to agree upon a form of mutual and reciprocal action.
403 As already indicated, I consider that the ACCC evidence does establish conduct by the respondents which could constitute an attempt in the requisite sense. However, in my opinion, the ACCC case falls short of establishing that the respondents who participated in the trial had an intention to bring about an arrangement or understanding with the proscribed qualities and that any proposed an arrangement or understanding between producers for the reduction of the supply of eggs. It does establish that these respondents intended that the Attendees should take action to address and correct the oversupply of eggs but not (to the requisite degree of persuasion) that this action should be pursuant to an agreement or understanding involving reciprocal obligations.
122 The ACCC submitted that it was inconsistent for the primary judge to find that the respondents intended all of the attendees at the Summit to take action to address and correct the oversupply of eggs (at [403]) on the one hand and, on the other, to conclude that the focus on those producers growing at an above average rate was inconsistent with an intention to induce all of the attendees to agree upon a form of mutual and reciprocal action (at [386]). We reject this submission because it seems to us to assume that the evidence permitted of precise findings. We do not think that it did. Other than indicating that a precise proposal had not been formulated, there is no inconsistency or tension between Mr Kellaway urging the egg producers to do something and “laying the blame” on producers who were growing at an above average rate.
123 We reject the ACCC’s submissions as to the specific errors said to have been made by the primary judge.
124 We turn now to the ACCC’s submission that the primary judge erred in failing to draw the inference that the respondents had the necessary intention to make out an attempt. That submission requires some consideration to be given to the basis upon which the primary judge decided not to draw the conclusion that the necessary intention was present and to this Court’s role on an appeal.
125 The primary judge made a number of findings which we have summarised. As to some matters, he accepted a witness’ evidence and as to other matters, he rejected it. We think when he came to consider whether the relevant intention was made out, he put the evidence of witnesses that they did not have the intention to one side. He considered all of the findings he had made and asked himself whether the necessary intention was established. In the circumstances, that final question did not involve relying on a witness’ credit or reliability or both.
126 As to this Court’s role on an appeal, the Federal Court of Australia Act 1976 (Cth) gives this Court a number of powers on an appeal, including the power to affirm, reverse or vary the judgment appealed from and the power to give such judgment, or make such order, as, in all the circumstances, the Court thinks fit, or refuse to make an order (s 28(1)(a) and (b)). The Court is to have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact (s 27). The Court is required to conduct a real review (Fox v Percy (2003) 214 CLR 118 (Fox v Percy) at [25] per Gleeson CJ, Gummow and Kirby JJ).
127 As we have previously said, the primary judge made detailed findings concerning the evidence of witnesses which he accepted and the evidence which he rejected. There are no challenges to the primary judge’s findings as to credibility and reliability. The tests which the Court applies where there are challenges of that nature are well known (Fox v Percy at [29] per Gleeson CJ, Gummow and Kirby JJ; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357 at [76] per Heydon, Crennan and Bell JJ; Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679 at [43]).
128 The scope of this Court’s review in cases where the allegation is that the primary judge erred in the inferences he drew or failed to draw from established primary facts is well known and was stated in the following way by the majority of the Court in Warren v Coombes (at 551):
… Shortly expressed, the established principles are, we think, that in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it. …
129 However, there are limitations on the power of review which the passage from the majority in Warren v Coombes itself suggests. In Branir Pty Ltd and Others v Owston Nominees (No 2) Pty Ltd and Another (2001) 117 FCR 424 (Branir), Allsop J (as his Honour then was) (with whom Drummond and Mansfield JJ agreed) made it clear that the role of this Court was to correct error and that in order to succeed, the appellant must demonstrate error (at [25]). His Honour summarised the relevant principles in four propositions. It is the fourth proposition which is of particular relevance in this case, but in order to understand the context, it is necessary to set out the passage in full (at [28]):
… From Warren v Coombes, the passages of Menzies J and Walsh J in Edwards v Noble, from the other authority cited by the majority in Warren v Coombes and from more recent decisions of the High Court flow a number of relevant propositions. First, the appeal court must make up its own mind on the facts. Secondly, that task can only be done in the light of, and taking into account and weighing, the judgment appealed from. In this process, the advantages of the trial judge may reside in the credibility of witnesses, in which case departure is only justified in circumstances described in Abalos v Australian Postal Commission (1988) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472 and SRA v Earthline, supra. The advantages of the trial judge may be more subtle and imprecise, yet real, not giving rise to a protection of the nature accorded credibility findings, but, nevertheless, being highly relevant to the assessment of the weight to be accorded the views of the trial judge. Thirdly, while the appeal court has a duty to make up its own mind, it does not deal with the case as if trying it at first instance. Rather, in its examination of the material, it accords proper weight to the trial judge’s views. Fourthly, in that process of considering the facts for itself and giving weight to the views of, and advantages held by, the trial judge, if a choice arises between conclusions equally open and finely balanced and where there is, or can be, no preponderance of view, the conclusion of error is not necessarily arrived at merely because of a preference of view of the appeal court for some fact or facts contrary to the view reached by the trial judge.
130 There is nothing in Fox v Percy which suggests that the fourth proposition is incorrect. In fact, the following passage from the reasons of Gleeson CJ, Gummow and Kirby JJ supports the proposition (at [23]):
The foregoing procedure shapes the requirements and limitations, of such an appeal. On the one hand, the appellate court is obliged to “give the judgment which in its opinion ought to have been given in the first instance”. On the other, it must, of necessity, observe the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses’ credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.
(Citations omitted.)
(see also Zuvela v Cosmarnan Concrete Pty Ltd [1996] HCA 30; (1996) 140 ALR 227 at 229-230.)
131 It seems to us that it is important to bear in mind that in this case the matter in respect of which the primary judge is said to have failed to draw an appropriate inference is not a matter where there is only one right answer, such as there is where the construction of a document is in issue (an example given by Allsop J in Branir at [25]), where a different view by the appeal court itself establishes error. In this case, the primary judge refused to draw an inference going to the intention of the respective respondents.
132 It seems to us that the issue of whether the inference of intention should have been drawn was finely balanced. The primary judge carefully weighed all the relevant issues and decided that intention had not been made out. It has not been demonstrated that he erred. The advantages he enjoyed over this Court may have been modest, but, in the absence of a preponderance of view against that taken by the primary judge, we would not interfere with his conclusion. In those circumstances, the appeal must be dismissed.
THE NOTICES OF CONTENTION
133 As the appeal is to be dismissed, it is not strictly necessary for this Court to address the respective Notices of Contention. However, it is appropriate that the following observations be made.
134 It is convenient to start with a description of Mr Lendich’s conduct and Mr Ironside’s conduct as found by the primary judge.
135 Mr Lendich was at the meeting of the Board of Directors of AECL on 19 January 2012. The primary judge found that he spoke passionately about the effects on the industry of the oversupply of eggs (at [249]) and he suggested the use of an independent auditor “in order to overcome a perceived impediment to one of the options for reducing the egg supply” (at [306]). Mr Lendich spoke at the Summit and he addressed lowering stocking densities in cages and lowering stocking densities in the longer term (at [237]).
136 Mr Ironside was at the meeting on 19 January 2012 and, in fact, he was the chairman of the Board of Directors. Clearly, he would have heard what Mr Lendich said at the meeting. He was the chairman of the Summit meeting. He gave evidence that he made a statement at the beginning of the Summit which the primary judge described as a “disclaimer”, but the primary judge did not accept that evidence (at [316]). The primary judge said that it was possible that Mr Ironside made the statement at the conclusion of the meeting, but by then, it was too late as the attempt as alleged was complete and it was clear that no collective agreement or understanding would eventuate. It seems that Mr Ironside and IMS challenge that finding in their respective Notices of Contention because they contend that the primary judge should have found that after the Presentations and during the Meeting Mr Ironside made the statement. To have any effect, this must have been at a time before it became clear that no collective agreement would eventuate. In our opinion, the primary judge may be taken to have rejected this possibility. All his Honour left open was the possibility that the statement was made at the end of the meeting when it no longer mattered and even as to that, the primary judge said that he doubted that Mr Ironside had made the statement he claimed (at [322]). No reason of the type identified by Gleeson CJ, Gummow and Kirby JJ in Fox v Percy (at [28]-[29]) has been identified for interfering with the primary judge’s finding. Even if, contrary to our view, the primary judge did not make a finding about whether Mr Ironside made a statement during the meeting, there is no basis upon which this Court could make such a finding. The primary judge was quite unimpressed by many aspects of Mr Ironside’s evidence (at [84], [336], [372]).
137 Mr Ironside and IMS contend that the absence of a concrete proposal by way of an arrangement or understanding is fatal in this case. They submitted that this case is very different from the case of Parkfield Operations. The submission was that the proposal was far less developed than it was in Parkfield Operations. We reject this submission because we think the primary judge took into account the stage the proposal had reached and there is no error in his analysis. He stated the relevant principles in the following way:
78 … Section 76(1)(d) will be engaged if a respondent has engaged in the requisite conduct with the particular intention, even if the form of the proposed agreement or understanding is unparticularised, undeveloped and inchoate. It is not necessary for the ACCC to establish in addition that the agreement or understanding was to take a particular form or to have a particular content or would involve, as in this case, only particular egg producers.
…
81 I accept however, the submission of Mr Doyle SC, counsel for AECL and Mr Kellaway, that the uncertain and general nature of the putative arrangement makes the pinpointing of conduct or words referrable to such an arrangement difficult, and that account should be taken of this in the assessment of the evidence.
138 In terms of the application of these principles, he said (at [394]):
It is true that an attempt to induce a contravention of s 44ZZRJ does not require that a single form of action be proposed. A contravention could occur if one producer agreed on one course of action (earlier culling of hens) and another producer on a different course of action (donation of eggs already produced to FoodBank). However, an agreement or understanding of this kind would be unusual and in the practical context of a meeting such as the Summit, one which would be difficult to achieve. This counts against the respondents having attempted to achieve an agreement or understanding for individual producers to take different forms of action.
There is no error in this analysis.
139 Farm Pride, Mr Ironside and IMS submitted that the primary judge’s decision should be upheld on the basis that the ACCC had not established conduct sufficient for an attempt.
140 Farm Pride submitted that no attempt to induce egg producers was made at the Board meeting on 19 January 2012 because egg producers were not present at that meeting and it was a closed meeting. Mr Lendich spoke at the Summit on 8 February 2012, but Farm Pride submitted two matters should be noted. First, on one view of the case, the alleged attempt had either been committed or not before Mr Lendich addressed the meeting. Secondly, even if that is not the case, the primary judge’s findings went no further than finding that Mr Lendich made statements that led Mr Kellaway to make the notes leading to note 5 (Lower stocking densities in cages) and note 10 (Lower stocking densities! (longer term)). Farm Pride submitted that the statements made by Mr Lendich did not constitute conduct amounting to the alleged attempt.
141 Mr Ironside and IMS submitted that Mr Ironside’s presence at the Board meeting on 19 January 2012 and his approval of the Board’s decision to call the Summit and his presence at the Summit did not amount to conduct sufficient to constitute an attempt.
142 We do not propose to resolve this issue in circumstances where it is not necessary for us to do so. We do not have the benefit of any analysis by the primary judge and the submissions on the appeal with respect to this issue were brief.
143 The final contention is made by Farm Pride and IMS and it is that the conduct of Mr Lendich and Mr Ironside cannot be attributed to Farm Pride and IMS respectively. Mr Lendich and Mr Ironside attended the Board meeting on 19 January 2012 as directors of AECL and not as representatives of Farm Pride and IMS respectively. They both attended the Summit on behalf of AECL and their respective companies. We think that their conduct at the Summit can be attributed to AECL, but the fact that they were representatives of their companies at the Summit does not mean that their conduct can be attributed to their respective companies. There are two contextual matters of importance and they are that, assuming there was an attempt by Mr Lendich and Mr Ironside which commenced at the Board meeting on 19 January 2012, that was in their capacity as directors of AECL and, at least in the case of Mr Ironside, there was no further positive conduct at the Summit. In the case of the one matter which Mr Ironside was alleged to have said at the Summit, the primary judge found that he did not make the statement (at [228]). Had it been necessary to decide this contention of Farm Pride and IMS finally, we would have been disposed to accept it.
CONCLUSION
144 For these reasons, the appeal must be dismissed. The appellant must pay the respondents’ costs of the appeal.
I certify that the preceding one hundred and forty-four (144) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Besanko, Foster and Yates. |
SAD 63 of 2016 | |
IRONSIDE MANAGEMENT SERVICES PTY LTD | |
Fifth Respondent: | JEFFREY WILLIAM IRONSIDE |
