FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v TF Woollam & Son Pty Ltd [2011] FCA 973
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v TF Woollam & Son Pty Ltd [2011] FCA 973
CORRIGENDUM
1. In paragraph 95 of the Reasons for Judgment, in the last sentence, the word “lower” should read “raise”.
2. In paragraph 102 of the Reason for Judgment, in the first sentence the word “not” should be inserted between “had given”, therefore the sentence should read “of a representation that it had not given or received assistance …”.
3. In paragraph 164 of the Reasons for Judgment, in the second sentence, the word “its” should read “Woollam’s”.
4. In paragraph 166 of the Reasons for Judgment, in the last sentence, the word “these contraventions” should read “the contravention” and the following words be added after contravention “of s 45(2)(a)(ii)” therefore the sentence should read “concerned in the contravention of s 45(2)(a)(ii).
5. In paragraph 184 of the Reasons for Judgment, in the fifth line, the words “each of” should be deleted and after “s 45” the following should be inserted “(2)(a)(ii)”. The word “contraventions” should read “contravention”. Therefore the sentence should each “… concerned in Kelly’s s 45(2)(a)(ii) contravention in respect of the Rockhampton …”.
I certify that the preceding 5 (5) numbered paragraphs are a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Logan. |
Associate:
Dated: 26 October 2011
IN THE FEDERAL COURT OF AUSTRALIA | |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT ORDERS THAT:
1. The applicant bring in proposed minutes of orders to give effect to the reasons for judgment published today.
2. The proceeding be adjourned to a date to be fixed for consideration of those proposed orders and of questions as to penalty.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
QUEENSLAND DISTRICT REGISTRY | |
GENERAL DIVISION | QUD 236 of 2009 |
BETWEEN: | AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant |
AND: | TF WOOLLAM & SON PTY LTD ACN 009 676 064 First Respondent JM KELLY (PROJECT BUILDERS) PTY LTD ACN 010 280 412 Second Respondent CARMICHAEL BUILDERS PTY LTD ACN 010 723 396 Third Respondent JOHN GEOFFREY MURPHY Fourth Respondent GEORGE LUKE BOGIATZIS Fifth Respondent |
JUDGE: | LOGAN J |
DATE: | 24 AUGUST 2011 |
PLACE: | BRISBANE |
REASONS FOR JUDGMENT
1 The awarding of public works contracts by neutral evaluation following the submission of competitive tenders is a common practice in government contracting in Queensland, if not also elsewhere. One aim of the practice is to achieve value for public money in the undertaking of the public works. There is at least the potential for the subversion of that aim if there is collusion between tenderers in relation to price prior to the submission of tenders.
2 In this case, the Australian Competition and Consumer Commission (the ACCC) alleges that, in relation to tenders for various Queensland and local government public works projects, the respondents variously engaged in or were a party to conduct which contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) within Pt IV and, further or alternatively, s 52 within Pt V of what was then known as the Trade Practices Act 1974 (Cth) (TPA).
3 Section 45 of the TPA is directed to the subject of contracts, arrangements or understandings that restrict dealings or affect competition. The alleged contraventions of provisions in that section are said to arise out of arrangements or understandings in relation to a practice known as “cover pricing” (described below). Where a provision in the contract, arrangement or understanding in question relates to price, s 45A of the TPA may, by deeming, supply the element of substantially lessening competition and render s 45 of that Act applicable to circumstances to which it might not otherwise have application.
4 Section 52 of the TPA prohibits a corporation from engaging, in trade or commerce, in conduct that is misleading or deceptive or likely to mislead or deceive. Here, the alleged misleading or deceptive corporate conduct is said to be found, in ways more particularly described below, in representations arising from a binding code of conduct with respect to tendering and an ability to adhere to certain standard contractual terms which were misleading or deceptive having regard to undisclosed involvement by the respondent corporations in the practice of cover pricing in relation to the tenders concerned.
5 Accessorial liability in respect of a contravention of a provision in Pt IV is, materially, the province of s 76(i)(b) to (e) of the TPA. A person will be an accessory to a contravention if that person:
has attempted the contravention – s 76(1)(b);
has aided, abetted, counselled or procured the contravention – s 76(1)(c);
has induced or attempted to induce, whether by threats or promises or otherwise, the contravention – s 76(1)(d);
has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention – s 76(1)(e).
Again in ways more particularly described below, it is alleged that each of the individual respondents is liable as an accessory in respect of one or more of the alleged corporate contraventions.
6 I use the following abbreviations in these reasons for judgment:
(a) Australian Competition and Consumer Commission (ACCC);
(b) TF Woollam & Son Pty Ltd (Woollam);
(c) JM Kelly (Project Builders) Pty Ltd (Kelly);
(d) Carmichael Builders Pty Ltd (Carmichael);
(e) Sommer & Staff Constructions Pty Ltd (Sommer);
(f) George Luke Bogiatzis (Mr Bogiatzis);
(g) John Geoffrey Murphy (Mr Murphy);
(h) Gary McLeod (Mr McLeod);
(i) Sidney Edwin Matthews (Mr Matthews);
(j) Anthony Richardson (Mr Richardson”);
(k) collectively, the Callemondah, Rockhampton Airport, Jilalan and West Pacific Pines projects (the Projects);
(l) the second further amended statement of claim (statement of claim);
(m) the market alleged by the ACCC at paragraph 12 of the statement of claim (Market);
(n) the expert report entitled “Markets and competition among builders” forming exhibit PLW1 to Philip Lawrence Williams’ affidavit sworn 25 May 2010 ) (First Williams Report);
(o) the expert report entitled “Supplementary report” forming exhibit PLW1 to Philip Lawrence Williams’ affidavit sworn 21 July 2010 (Supplementary Williams Report).
7 So far as the alleged Part IV contraventions and related accessorial liability are concerned, the following table gives a general summary of the public works projects concerned, the alleged corporate parties to contravening arrangements or understandings and, where applicable, the individual alleged to be a party to a corporate contravention:
Project | Corporate parties to alleged contravention | Individual respondent allegedly concerned in corporate contravention |
Callemondah | Woollam (giver of cover price) Kelly (receiver of cover price) | Mr Bogiatzis (Fifth Respondent), as Managing Director of Woollam |
Jilalan | Woollam (giver of cover price) Kelly (receiver of cover price) | Mr Bogiatzis (Fifth Respondent), as Managing Director of Woollam |
Rockhampton Airport 1 | Woollam (giver of first cover price) Kelly (receiver of first cover price) | Mr Bogiatzis (Fifth Respondent), as Managing Director of Woollam |
Rockhampton Airport 2 | Kelly (giver of second cover price) Carmichael Builders (receiver of second cover price) | Mr Murphy of Carmichael Builders |
West Pacific Pines | Sommer (giver of cover price) Kelly (receiver of cover price) |
8 The ACCC has the burden of proving the allegations which it has made against the respondents. These are civil proceedings. That means that the standard to which the ACCC must prove its case is governed by s 140 of the Evidence Act 1995 (Cth) (Evidence Act). That requires proof on the balance of probabilities. In deciding whether there is proof to that standard, s 140(2) of that Act enables regard to be had to:
(a) the nature of the cause of action or defence; and
(b) the nature of the subject-matter of the proceeding; and
(c) the gravity of the matters alleged.
These considerations are especially pertinent here because, unlike a contravention of s 52 of the TPA, a contravention of s 45 of that Act or participation as a party to such a contravention may expose a person to the imposition of a civil penalty. Aside from that, it is only to be expected, having regard to the nature of the allegations made by the ACCC in the statement of claim, that a finding of any contravention in this case, be it of a Part IV or a Part V provision, will not only visit upon a respondent a degree of opprobrium within the community but may also carry with it adverse commercial consequences in terms of future dealings both with State and local governments and more generally. While it would be quite wrong to approach the standard of proof as if it fell to the ACCC to have to prove its allegations beyond reasonable doubt, I have decided that the effect of s 140(2) in the present circumstances is, to adopt the language employed by Dixon J (as he then was) in a leading case, that I should not be reasonably satisfied that the alleged contraventions are proved by “inexact proofs, indefinite testimony or indirect references”: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362. I have taken this into account in deciding whether the ACCC has proved its allegations on the balance of probabilities.
9 A convenient way of dealing with the allegations made by the ACCC is to consider them on a project by project basis. A risk with such an approach may be that it leaves the reader with the impression that questions concerning the credibility of witnesses, a consideration in this matter with respect to some witnesses, or matters of general application relevant to allegations concerning more than one of the Projects, have been approached in a compartmentalised way. Many witnesses either gave evidence before me or as the case may be, before the ACCC (in examinations conducted under s 155 of the TPA which were tendered in evidence), which was relevant to more than one of the Projects. Where it has proved necessary to form a view as to credibility, I have not approached an assessment of credibility piecemeal but rather by reference to the whole of their and other related evidence. I also indicate, where necessary, where a finding in respect of one project is also relevant with respect to others of the Projects.
10 It is also desirable at the outset to set out the material parts of s 45 and 45A of the TPA:
45 Contracts, arrangements or understandings that restrict dealings or affect competition
(1) If a provision of a contract made before the commencement of the Trade Practices Amendment Act 1977:
(a) is an exclusionary provision; or
(b) has the purpose, or has or is likely to have the effect, of substantially lessening competition;
that provision is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a corporation.
(2) A corporation shall not:
(a) make a contract or arrangement, or arrive at an understanding, if:
(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or
(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or
(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:
(i) is an exclusionary provision; or
(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition.
(3) For the purposes of this section and section 45A, competition, in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.
(4) For the purposes of the application of this section in relation to a particular corporation, a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding shall be deemed to have or to be likely to have the effect of substantially lessening competition if that provision and any one or more of the following provisions, namely:
(a) the other provisions of that contract, arrangement or understanding or proposed contract, arrangement or understanding; and
(b) the provisions of any other contract, arrangement or understanding or proposed contract, arrangement or understanding to which the corporation or a body corporate related to the corporation is or would be a party; together have or are likely to have that effect.
…
45A Contracts, arrangements or understandings in relation to prices
(1) Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.
…
(7) For the purposes of the preceding provisions of this section but without limiting the generality of those provisions, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed to have the purpose, or to have or to be likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied as mentioned in subsection (1) if the provision has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, such a price, discount, allowance, rebate or credit in relation to a re-supply of the goods or services by persons to whom the goods or services are or would be supplied by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them.
(8) The reference in subsection (1) to the supply or acquisition of goods or services by persons in competition with each other includes a reference to the supply or acquisition of goods or services by persons who, but for a provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with each other in relation to the supply or acquisition of the goods or services.
THE CALLEMONDAH PROJECT
11 Callemondah is located near Gladstone on the Central Queensland Coast. The Callemondah Project was a project administered for Queensland Rail by the Queensland Government’s Department of Public Works. It involved the construction of a new structural steel clad specialist workshop including all associated services, external works and support accommodation to house an under-floor wheel lath facility at Callemondah. In about November 2004 the Department of Public Works invited both Woollam and Kelly to tender for this project.
12 At the time, a Queensland Government policy known as the Capital Works Management Framework (CWMF) and a code of practice governed the undertaking of public works such as the Callemondah Project. An element of the CWMF was a system for the pre-qualification of would be contractors administered by that government’s Department of Public Works. The CWMF and the pre-qualification system were described in detail and in a way which was not controversial by a senior, experienced officer of the State Department of Public Works, Mr Donald Allan. I find the CWMF and the code of practice to be as described by Mr Allan. It is necessary to set out some of their salient features.
13 The pre-qualification system aimed to identify, in advance of the calling for tenders for particular projects, contractors who met pre-determined criteria such as financial capacity, technical, managerial and other capabilities, capacity to complete a project of a certain value and willingness to undertake work in particular geographic areas or of a particular type, eg schools or hospitals. There was provision for a number of different levels of pre-qualification. Within the CWMF projects were classified according to their value and the risks which they presented in terms of a need to meet, within time, particular State policy objectives. In turn, that determined the level of pre-qualified contractor who would be regarded as eligible to undertake projects of a particular classification. Pre-qualification registration was only granted upon application by a contractor. In the first instance, a contractor self-assessed as to whether it met the criteria for a particular level with the State undertaking referee and other checks and reserving to itself the right to determine whether to register the contractor as pre-qualified and, if so, at what level. There was provision for the regular updating of whether contractors met the prescribed criteria for a particular level of pre-qualification.
14 The advantage of the pre-qualification system for the State and for contractors was the elimination, because of the prior assessment undertaken to secure registration, of a need to vet such contractors tendering for a particular project. In effect, pre-qualification gave the State a pool of potential contractors already vetted as to their suitability to undertake projects at particular levels.
15 Another feature of the CWMF was provision for “select tendering”. By this provision and in respect of particular types of State works projects, a delegate within the State Department of Public Works could determine to invite a number of pre-qualified contractors to tender for a particular project in lieu of openly advertising for tenders. That feature of the policy had as its aims the minimisation of the total cost to the building industry of responding to general tender invitations while at the same time preserving elements of competitive, transparent and equitable tendering in relation to the letting of public works projects.
16 In conjunction with the CWMF, the Queensland Code of Practice for the Building and Construction Industry dated August 2000 (Code of Practice), which was another policy approved by the Queensland Government, was also applicable to public works undertaken by Queensland government departments and, as directed by relevant shareholding Ministers, to particular government owned corporations. The Code of Practice (clause 3.2) required those concerned with Queensland Government building and construction projects to adopt ethical principles consistent with the Australian Standard Code of Tendering (AS4120-1994) (The Australian Standard).
17 Clause 3 of the Code of Practice entitled, “Tendering Ethics” provided, inter alios:
“All parties operating at all levels on Queensland Government building and construction projects are to adopt ethical principles consistent with the [Australian Standard].
By clause 3.2:
“Collusive tendering practices are illegal and inconsistent with the establishment and maintenance of the ethical business practices that underlie good working relationships. Parties will ensure that collusive practices do not occur.
For the purpose of the principles outlines above, collusive practices include but are not limited to:
…
Any meetings of tenderers to discuss tenders before the submission of the tenders if the client is not present;
…
Agreements between tenderers to fix prices or conditions of contract [sic]; that is, any collaboration between tenderers on prices or conditions to be included in contracts or commissions without the consent of the client.
Any assistance to any tenderer to submit a cover tender; that is, a tender submitted as genuine yet has been deliberately priced in order not to win the contract or commission; …”
[Emphasis added]
18 The Australian Standard (Clause 4(g)) provided, in respect of the subject, “Ethics”, that it was based on principles which, inter alios, included that, “Parties shall not engage in practices such as collusion on tenders”.
19 As will be seen, the provisions of the Code of Practice and the Australian Standard assume an importance in the case brought by the ACCC.
20 Woollam and Kelly were each “pre-qualified”. Each admits that, to secure the registration which gave them that status, each agreed to be bound by the “Conditions of Pre-qualification” which formed part of the pre-qualification system. Clause 6 of those conditions provided that each pre-qualified contractor warranted that, in the event of entering into any contract with the State, it would not breach any contractual or legal requirements of the State, including the Code of Practice.
21 The Callemondah Project is an example of the application in practice of the provision in the State’s CWMF for select tendering. The evidence for that is found in the affidavit of Mr Donald Rivers, another officer of the Department of Public Works and in exhibits to his affidavit. I accept his evidence both in respect of the Callemondah Project and the others which he describes. That is subject to the reservation, annotated on his affidavit after objection, that the tender and related documents produced by him and sourced from one corporate respondent are not more generally admissible, save to the limited extent that the same are either expressly more generally admitted or that an individual respondent has expressly adopted the same.
22 As far as the Callemondah Project is concerned, Mr Rivers’ evidence establishes (and I find) that three pre-qualified contractors were selected to be invited and were invited to tender for this project, Woollam, Kelly and Sommer. The invitations were extended to Woollam and Kelly by letters dated 26 November 2004 and respectively addressed to them. The invitation to Sommer was made by a letter dated 2 December 2004.
23 Of these three, only Woollam and Kelly subsequently submitted tenders for the project. Each of those tenders is in evidence (the Woollam tender is Exhibit 13 to Mr Rivers’ affidavit. The Kelly tender is Exhibit 14 to that affidavit). Woollam tendered to undertake the project for the lump sum amount of $1,370,000.00. Its tender was dated 22 December 2004 and signed for that company by the Fifth Respondent, Mr George Bogiatzis. Kelly’s tender is also dated 22 December 2004. It is signed on its behalf by a Mr Tony Richardson. By that tender, Kelly undertook that it would complete the project for a lump sum price of $1,433,988.00. Tenders closed at 2.00 pm on 22 December 2004.
24 Each tender was submitted using the government approved tender form. In so doing, each of Woollam and Kelly represented that it “hereby [tendered] to execute and complete all work and perform all of the obligations in accordance with the Tender Documents” for the Callemondah Project. As defined in the related specification sent to each of them with the invitation to tender, the “Tender Documents” included the “Australian Standard” and the “Australian Standard General Conditions of Contract (AS2124 – 1992)” as amended by the “Department of Public Works’ Special Conditions of Contract and Annexure Part ‘A’ and Particular conditions of Contract relating to Security of Payment (Queensland Rail)”. Annexure “A” comprised “Queensland Rail Major Building and Construction Contract General Conditions”. As so amended, the obligations which each represented, via the completed tender, that it would perform included clause 6.3, which provided, inter alios, that the Contractor warranted that it “had no knowledge of the tender price of any other tenderer for the work under this Contract at the time of the Contractor’s submission of tender”.
25 In November and December 2004, the Fourth Respondent, Mr John Murphy, was Kelly’s construction manager. A Mr Anthony Robert Richardson was then that company’s chief estimator. I find that he is one and the same as the “Tony Richardson” who signed Kelly’s tender. Within Kelly, Mr Richardson reported to Mr Murphy. Mr Bogiatzis was then and remains the managing director of Woollam.
26 In the result, in January 2005, following an evaluation of the tenders by an officer of the Department of Public Works and consequential advice to Queensland Rail, Queensland Rail gave approval for the appointment of Woollam to undertake the Callemondah Project in accordance with its tender. As a consequence, on or about 28 January 2005, Woollam executed a contract with Queensland Rail for the undertaking of that project.
27 Kelly, Woollam, Mr Murphy and Mr Bogiatzis each admit that, either in November 2004 or the following month, Kelly decided either that:
(a) it did not wish to win the tender for the Callemondah Project; or
(b) it did not have sufficient resources or time to enable it properly to cost that project before tenders closed.
They further admit that this decision was made by Mr Murphy after a conversation (or conversations) in those months between him and Mr Richardson.
28 Also admitted by these parties is that, on or about 22 December 2004:
(a) Mr Richardson telephoned an employee or agent of Woollam (most likely Mr Palmer – “Woollam representative A”);
(b) Mr Richardson asked the “Woollam representative A” whether Woollam would give a cover price to Kelly in respect of the Callemondah Project with the telephone call then ending;
(c) A further telephone conversation occurred between Mr Richardson and “Woollam representative A” in which that representative gave a cover price in respect of the Callemondah Project to Mr Richardson.
29 As to a “cover price”, these same parties admit that, at all times material to this proceeding, they (and Mr Richardson) knew of a practice by that name which had developed and which was continuing amongst builder participants in the Central Queensland and South East Queensland markers for building services. That practice known as “cover pricing”, they admit, arose in circumstances where a builder participant wished to be seen to tender for a particular project but either:
(a) did not wish to win the tender; or
(b) did not have the time or resources to prepare a tender for that project.
By admission of these parties, the practice included the following:
(a) a builder (the first builder) wishing to be seen to tender for a particular project asks another builder (the second builder), which it knows or believes also to be tendering for the same project for a price, termed a “cover price” or a “cover” in respect of that project;
(b) the second builder may then give the first builder a cover price in respect of the project shortly prior to the close of tenders for that project.
30 Woollam and Mr Bogiatzis further admit, but Kelly and Mr Murphy do not, that the following are also features of the practice of “cover pricing”:
(a) the first builder and the second builder know or believe that:
(i) the second builder will be tendering for the particular project at a price less than the cover price
(ii) should it choose to tender for the particular project, the first builder will tender at a price no less than the cover price;
(iii) the first builder can tender at a price no less than the cover price without having to expend any time or resources in calculating its own price for the tender;
(iv) as between the first and second builders, the second builder’s price will be less than the first builder’s price should the first builder tender for the project;
(b) the first builder then lodges a tender for the project with a tender price no less than the cover price;
(c) the second builder then lodges a tender for the project with a price less than the cover price.
With respect to cover pricing, I shall term these the “additional features”.
31 Kelly’s Mr Richardson and Mr Murphy were each asked about their knowledge of the practice of covering pricing in the course of their respective examinations under s 155 of the TPA.
32 Mr Murphy acknowledged that, within Kelly, he was the person who made the ultimate decision as to whether a price was to be submitted for a particular project and what that price would be (T393, where “T” is refers to the transcript page, in this instance of the s 155 examination). As to deciding what the price would be, Mr Murphy stated that he made this decision in conjunction with Mr Richardson or, on occasion, with the company’s managing director.
33 As to cover pricing, the tenor of Mr Murphy’s answers when examined under s 155 was similar to the further admissions, noted above, made by Woollam and Mr Bogiatzis in their pleaded defence with respect to the practice of cover pricing, including with respect to the additional features. Thus, he admitted (T311-312) that a cover price, “involves a price being given to another contractor to ensure that … their price is not the lowest price submitted.” He related the circumstances in which a cover price would be sought as including insufficient time to prepare an estimate for a tender price, a “difficult” architect or principal for whom the company did not wish to work, the difficulty of a job and whether it was too large, too small or too distant from base. Another reason he gave for the seeking of a cover price might be wishing to be seen to be interested in work from a particular source, eg an architect or client even though the company was not interested in securing a particular project.
34 Mr Murphy acknowledged an understanding of the practice of cover pricing dating back, on his part, to 1985 or 1986. Even then, he understood the practice to be a longstanding one. As originally explained to him and as he understood it (T403-404), the practice was:
Well, that’s when you ring another contractor and ask them a cover price and they will give you a price that’s higher than their price and you submit that.
35 Mr Richardson gave a similar description of the practice in his examination (T325-327).
36 Having regard to the answers which each gave when examined under s 155, and to the roles which each undertook within Kelly in relation to tenders, I find that Mr Murphy and Mr Richardson and through them, Kelly each understood, in respect of each of the projects the subject of these proceedings with which they and that company had involvement, that the practice of cover pricing had each of the additional features as detailed above. That understanding was also evident in the answers which Mr Richardson gave in his oral evidence at the trial with respect to the practice of “cover pricing” as he understood it.
37 Kelly and Mr Murphy do not admit that the person whom I have termed “Woollam representative A” was, during the telephone conversations mentioned, acting within the scope of his actual or apparent authority. However, as a matter of inference, that “Woollam representative A” had such authority seems inherently likely, even taking into account considerations as mentioned in s 140(2) of the Evidence Act.
38 That this inference should be drawn flows from considering in conjunction the following. Kelly and Mr Murphy have each made admissions of a general nature in relation to the practice of cover pricing. I have made further findings as to their knowledge of the additional features of the practice. They further admit that Kelly made a decision either that it did not wish to win the Callemondah Project tender or that Kelly did not have sufficient resources or time to enable it properly to cost a tender before the tender closing date and that this decision was made following a conversation between Messrs Murphy and Richardson. Kelly and Mr Murphy also admit that Mr Richardson had particular telephone conversations with “Woollam representative A” on 22 December 2004 in which a cover price was sought on behalf of Kelly by Mr Richardson. That was the date upon which tenders closed. Mr Richardson, as I have found, had a detailed knowledge of the practice of “cover pricing”. An interval occurred in the conversations which he had on that subject on 22 December 2004. The request was made in the first conversation and the cover price was supplied in the second conversation. There was thus opportunity for internal consultation within Woollam in respect of the cover price request made by Mr Richardson on behalf of Kelly. Further, the admission, materially by Kelly and Mr Murphy, is that what was supplied in that second, 22 December 2004, telephone conversation with “Woollam representative A” was indeed a “cover price”. When these circumstances are considered collectively, it is inherently likely that the cover price that person supplied to Kelly, via Mr Richardson, was not the result of an individual frolic by “Woollam representative A” but rather a deliberate, authorised communication to Kelly on behalf of Woollam. In any event, the very request by Mr Richardson for and the communication by “Woollam representative A” to him of an amount to as a “cover price” was, by the admitted use of that term, pregnant with meaning, which included that person’s having the apparent authority of Woollam to communicate it as such on its behalf. Further, the understanding of the meaning of the term “cover price” by Mr Richardson and Mr Murphy was not idiosyncratic. On the whole of the evidence, the term was one which was well understood within the building industry to carry with it the features and the additional features which Woollam and Mr Bogiatzis admitted as against themselves. It is that meaning which plainly informs the use of the related term “cover tender” in the emphasised part of clause 3.2 of the Code of Practice extracted above. I infer from the use of that term in that code that the meaning of “cover price” was well understood within the Queensland Government by those concerned with the calling of invitations for tenders for the undertaking for public works, the evaluation of those tenders and the allocation of resultant contracts. Its use this way in a general policy document offers further evidence of the prevalence of understanding of the term “cover price” in and in relation to the building industry.
39 As far as the ACCC’s case against Woollam and Mr Bogiatzis is concerned, each admits (and I find) that:
(a) “Woollam representative A” orally sought advice from Mr Bogiatzis as to whether he was permitted to give a cover price to Kelly (by communication to Mr Richardson) in respect of the cover price, and if so, the cover price to be given.
(b) Mr Bogiatzis told “Woollam representative A” to give the cover price to Kelly or, which is the same thing, to Mr Richardson.
(c) “Woollam representative A” then had a further telephone conversation with Mr Richardson in which that cover price was communicated to Mr Richardson.
Woollam and Mr Bogiatzis do not admit the precise amount of the cover price thus communicated but do admit that it was less than or equal to $1,433,988.00 but more than $1,370,000.00, each exclusive of GST. As against Woollam and Mr Bogiatzis, that further admission is a sufficient foundation to make a finding accordingly. As against Kelly and Mr Murphy, a like finding may be made having regard to my conclusion as to their knowledge of the features of a “cover price” and that Kelly came to lodge a tender for the Callemondah Project in the GST exclusive amount of $1,433,988.00.
40 Whether the existence of a contract, arrangement or understanding in terms of s 45 of the TPA with respect to the Callemondah Project has been proved is a matter of controversy as between the ACCC on the one hand and Woollam, Mr Bogiatzis, Kelly and Mr Murphy on the other. Carmichael Builders is unconcerned with so much of the case as relates to the Callemondah Project.
41 The position of the ACCC is that, arising out of the knowledge of the relevant respondents of the practice of cover pricing and the admitted communications which occurred between Mr Richardson and “Woollam representative A” on 22 December 2004, it should be inferred that Kelly and Woollam arrived at an arrangement or understanding that:
(a) should Kelly decide to tender on the Callemondah Project, its tender price would be no less than the cover price given to it in respect of that project; and
(b) Woollam’s tender price for that project would be less than the cover price.
42 Apart from the general controversy as to whether an arrangement or understanding in these terms existed, Kelly particularly denies that there was a provision that Woollam’s tender price would be less than the cover price.
43 Woollam submits that the ACCC has, with respect to the Callemondah Project and such of the other subject projects in which it was a tenderer, failed to prove that:
(a) Woollam reached any arrangement or understanding with Kelly;
(b) the purpose of the “provisions” of the alleged arrangement or understanding was to fix, maintain or control prices of the services supplied or to be supplied by Woollam or Kelly;
(c) the provisions of the alleged arrangement or understanding had or were likely to have the effect of fixing, controlling or maintaining prices of the services supplied or to be supplied by Woollam or Kelly;
(d) Woollam and Kelly were in competition with each other in relation to that project;
(e) in the market generally.
44 For his part, Mr Bogiatzis submits that the claim of accessorial liability made against him by the ACCC must necessarily fail if the ACCC does not prove its case against Woollam. So much may readily be accepted in terms of principle: Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at [154]. His further submission is that proof of a case against Woollam does not carry with it a conclusion that the case against him is also proved. He submits that the ACCC has, as against him personally, failed to prove that:
(a) he had actual knowledge of the essential elements of the alleged contraventions of the TPA by Woollam; and
(b) he intentionally participated in the commission of the essential elements of any contravention of the TPA by Woollam.
45 As to s 52 of the TPA, the ACCC alleges the making of the following representations:
a. they had complied with the Code of Practice and had not:
i. discussed with another tenderer the tenders to be submitted;
ii. been a party to any collaboration between tenderers on prices without the consent of the client;
iii. given or received assistance to submit a cover tender;
b. they had complied with the Australian Standard and had not:
i. colluded with any other tenderers; and
ii. been involved in the submission of inflated tenders (ie cover prices) to advantage another tenderer;
c. they had complied with the terms of clause 6.3 and that they had no knowledge of the price of any other tenderer;
d. if they won the tender, they would:
i. not breach any contractual or legal requirements of the State;
ii. not breach the Code of Practice;
iii. not breach the Australian Standard; and
iv. be able to give a warranty in the terms of clause 6.3 that they had no knowledge of the tender price of any other tenderer for the work at the time of submission of the tenders.
46 Woollam admits that these representations were made: statement of claim, para [45]; Woollam Defence para [45]. Kelly admits the representations in sub-paragraphs (a)(iii) and (b) were made. They deny that the other representations were made.
47 The ACCC alleges that by reason of the Callemondah Project arrangement or understanding, each of these representations was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Act. By submitting their tenders, making the above representations and (in the case of Woollam) entering into a contract for the works, each of Woollam and Kelly contravened s 52. With one exception (relating to the application of the Australian Standard), Woollam admits that its conduct was misleading or deceptive or likely to mislead or deceive: Woollam Defence para [50]. Kelly largely denies that the representations were misleading or deceptive, save that it admits that it was misleading to represent that they had not received assistance to submit a cover tender: Kelly Defence, para [46].
48 As against Woollam, the ACCC also alleges, and Woollam admits that, by executing the contract in respect of the Callemondah Project it made a further representation via clause 6.3. That further representation was that it had no knowledge of the tender price of any other tenderer for the work at the time of submission of the tender.
49 I reject Woollam’s and Kelly’s submissions that the ACCC has failed to prove any arrangement or understanding between them in relation to the Callemondah Project and, for that matter such others of the Projects in respect of which it is alleged there was an arrangement or understanding between them. The seeking by Kelly from it and the communication by Woollam to Kelly of a “cover price” makes it more likely than not, even taking into account the considerations mentioned in s 140(2) of the Evidence Act, that these two corporate respondents, in each case, came to an arrangement or understanding.
50 An arrangement or understanding, though not a contract, must be consensual and carry with it an element of obligation rather than mere expectation. Thus, in Trade Practices Commission v Email Ltd (1980) 43 FLR 383 at 385, Lockhart J observed:
For there to be an arrangement or understanding there must be a meeting of the minds of those said to be parties to the arrangement or understanding. In some cases this may be inferred from circumstantial evidence. There must be a consensus as to what is to be done and not just a mere hope as to what might be done or happen. Independently held beliefs are not enough.
51 Later, in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (and Others) (1999) 92 FCR 375 (CC (NSW) Case) at [141], Lindgren J stated:
The cases require that at least one party "assume an obligation" or give an "assurance" or "undertaking" that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party.
[Emphasis in original]
52 More recently, these same sentiments are evident in the following passage from the joint judgment of French CJ and Kiefel J in Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [48]:
An arrangement or understanding ordinarily involves an element of reciprocal commitment even though it may not be legally enforceable. It involves more than a mere hope or expectation that each party will act in accordance with its terms.
[Footnote reference omitted]
53 Woollam puts it that, however soundly based it may have been, it and Kelly had no more than an expectation as to how each other would behave. It emphasises that, in relation to the Callemondah Project and, for that matter, the others, there were but two short telephone conversations between subordinate staff members. This is true but there did not have to be any more. As I have already observed, the term “cover price” as used in these conversations one to the other was one pregnant with meaning for each. The request for such a price and the giving of it engendered more than just mere expectations. Further, and contrary to the submissions of Kelly and Mr Murphy, there was the requisite meeting of minds for there to be an arrangement or understanding between Woollam and Kelly in relation to the Callemondah Project (and each of the others in the Projects involving contraventions alleged against those two corporate respondents). Mr Murphy authorised Mr Richardson to seek a cover price and, after an interval following the initial request, Mr Bogiatzis authorised “Woollam representative A” to communicate the same.
54 As already noted, the ACCC has alleged that the arrangement or understanding had two “provisions”. So it did. As a matter of necessary inference, each of these provisions was conveyed by the use one to the other of the term “cover price”, particularly in the circumstances then prevailing, which materially included, in the case of the Callemondah Project, that the conversations occurred on the date on which tenders closed.
55 That conclusion renders it unnecessary to resolve whether, for there to be an understanding or arrangement, there must be mutual obligations. In Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 at [75] Sackville J opined that, “There is no necessity for an element of mutual commitment between the parties to an arrangement or understanding, although in practice such an arrangement or understanding would ordinarily involve reciprocity of obligation”. It does not seem to me to follow from the words “arrangement” or “understanding” that either requires, as opposed to admits of, an element of mutual commitment to the exclusion of a consensus that, without any assumption of obligation by one party, the other will act or not act in a particular way. It is always a strong thing to engraft onto the ordinary meaning in context of the words which are used in a statutory provision words which do not appear in it. The question can, though, be left as an open one in this case because here the two provisions in the arrangement or understanding conveyed a mutual commitment as between Woollam and Kelly.
56 Woollam’s submission (and that of Mr Bogiatzis), based on the evidence of Mr Bogiatzis, was that Woollam (and he) did not care whether or not Kelly bid for the Callemondah Project (and the others) as Woollam had already prepared what it regarded as a competitive tender for that project (and the others) at the time when the cover price was requested of it by Kelly. I do accept this part of Mr Bogiatzis’ evidence (T416, lines 29 to 35). However, this submission and the evidence upon which it is based are something of a distraction. As the ACCC submitted, its case was not that Woollam’s tender price had been struck by the arrangement or understanding. Rather, one of the provisions of the arrangement or understanding was that, however derived, Woollam’s tender price would be less than the cover price which it furnished to Kelly.
57 Mr Bogiatzis also deposed that his purpose in allowing the cover price to be given to Kelly was to enable Kelly to be seen to tender for the Projects without winning them. He gave like evidence when earlier examined under s 155 of the TPA. This formed the foundation for his and Woollam’s submission that the purposes of the provisions in the arrangement or understanding were not one or the other of those proscribed by s 45(2)(a)(ii) or s 45(2)(b)(ii) of the TPA.
58 Kelly did not, in terms, focus its submissions on an absence of proof of purpose but its analysis of the evidence as to what was in the minds of various persons is nonetheless relevant to a consideration of whether, as against it, purpose has been proved. It also submitted that the evidence of Mr Bogiatzis as to his purpose was relevant to the ACCC’s case as against Woollam and him, but not as against Kelly. This submission ignores the discussion of purpose by Dowsett and Lander JJ, in relation to s 45 of the TPA, in Seven Network Ltd v News Ltd (2009) 182 FCR 160 (Seven Network Case) at [860] to [869] and, in particular, their conclusion at [865] that:
The object of the TPA is to promote competition. It does so by proscribing the making of a contract containing a provision which has the purpose of lessening competition. If ss 45 and 4F required that all parties to the contract who included the provision shared one substantial purpose, many contracts, arrangements or understandings which include anti-competitive provisions would fall outside the provisions of the TPA.
It is not necessary, in order for Kelly to be found to have contravened s 45, for there to be any shared proscribed purpose on the part of the parties to the arrangement or understanding.
59 Instead, as the language of each of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TPA dictates, the focus must be on whether a corporate respondent made an arrangement or understanding which has a provision or, as the case may be, gives effect to a provision in such an arrangement or understanding that, “has the purpose or has or is likely to have the effect, of substantially lessening competition”. Further, s 4F of the TPA makes it plain that the proscribed purpose need not be the only purpose but that it is sufficient if that is a substantial purpose.
60 It is a given that purpose is not to be confused with motive and must also be distinguished from effect: News Ltd v South Sydney District Rugby Leave Football Club Ltd (2003) 215 CLR 563 (South Sydney Football Club Case) at [18] per Gleeson CJ. Section 45 of the TPA treats purpose and effect differently. So far as a distinction between purpose and motive is concerned, the Chief Justice (ibid) put these matters in this way:
Purpose is to be distinguished from motive. The purpose of conduct is the end sought to be accomplished by the conduct. The motive for conduct is the reason for seeking that end. … [In] the context of competition law, it is necessary to identify purpose by describing what is sought to be achieved by reference to what is relevant in market terms.
61 Further, the inquiry must be as to whether the ACCC has proved that one or more of the parties to the arrangement or understanding had, subjectively, a proscribed purpose for the inclusion of the provisions in question: South Sydney Football Club Case at [18] per Gleeson CJ, at [43] per McHugh J, at [63] per Gummow J and at [212] per Callinan J; see also Seven Network Case at [851] per Dowsett and Lander JJ. In the latter (ibid), and by reference to Hughes v West Australian Cricket Association Inc (1986) 19 FCR 10, Dowsett and Lander JJ allowed that, “In identifying the appropriate purpose, the circumstances in which the contract, arrangement or understanding was made may be relevant”.
62 Another issue was whether the ACCC was impermissibly conflating purpose and effect or even whether the ACCC was mistakenly trying to “reverse engineer” purpose from effect. Such “reverse engineering” would indeed be an error, for it is clear that the purpose must be subjective. One, but not the only, submission made by the ACCC as to purpose relied on the following passage from the advice of the Judicial Committee in Ashton v Commissioner of Inland Reserve [1975] 1 WLR 1615 at 1621 (Ashton):
If an arrangement has a particular purpose, then that will be its intended effect. If it has a particular effect, then that will be its purpose and oral evidence to show that it has a different purpose or different effect to that which is shown by the arrangement itself is irrelevant to the determination of the question whether the arrangement has or purports to have the purpose or effect of in any way altering the incidence of income tax or relieving any person from his liability to pay income tax.
[Emphasis added]
63 Ashton was a case concerning the meaning and application of the New Zealand analogue of s 260 of the Income Tax Assessment Act 1936 (Cth), the then general anti-tax avoidance measure in that legislation. The passage quoted followed an expression of agreement (ibid) by Their Lordships with an observation made by Williams J in an earlier case concerning s 260, Federal Commissioner of Taxation v Newton (1957) 96 CLR 577 at 630, which later came before the Judicial Committee, Newton v Commissioner of Taxation [1958] AC 450. The observation made by Williams J which was quoted with approval in Ashton was:
During the argument of the present appeals the meaning of the words “purpose or effect” received considerable discussion. These words are in the alternative but they do not appear to me to have any real difference in meaning.
These passages from income tax cases concern differently worded provisions. To regard them, and particularly that part of the Judicial Committee’s advice in Ashton to which I have given emphasis, as relevant would be to ignore the influence which s 4F of the TPA has on the construction of s 45 of that Act. In particular, it would resurrect an argument made by the ACCC as intervener and expressly rejected in the High Court in the South Sydney Football Club Case. The judgment of Gummow J, in particular, in that case, at [59] to [66] contains a comprehensive examination of “purpose”. The following statement made by Gummow J at [63], offers an apposite explanation of why it is that reliance by the ACCC on the proposition, derived from Ashton, that if an arrangement has a particular effect then that will be its purpose must be rejected:
Before this Court, the Australian Competition and Consumer Commission (the ACCC), as intervener, submits that both the subjective purpose of the parties to the relevant contract, arrangement or understanding and the objective purpose of the impugned provision are relevant when determining whether or not the provision falls within the purview of s 4D. However, a construction which, depending upon the facts of the case, may require examination of either the subjective purpose of the parties or the objective purpose of the provision, or both, is not the product of reasoned statutory interpretation and falls foul of the provisions in s 4F. In addition, there is a danger that an examination of the objective purpose of a provision will give undue significance to the substantive effect of the provision, as opposed to the effect that the parties sought to achieve through its inclusion. The consistent distinction drawn in the Act, particularly in s 45 when read with s 4D, between "purpose" and "effect" demonstrates the impermissibility of such an approach.
[Emphasis in original]
64 Rejection of this part of the ACCC’s submissions with respect to purpose does not mean that its case fails, for it otherwise submitted that the purpose of the provisions was to be determined by reference to the subjective purpose of a party to the arrangement or understanding. As to subjective purpose, I consider that Woollam and Mr Bogiatzis have not confronted the ramifications of the admission which it and Mr Bogiatzis made as to the authorised communication of a “cover price” to Kelly and of the evidence as to purpose which Mr Bogiatzis did give.
65 I have already referred to the evidence of Mr Bogiatzis as to his purpose. His purpose was undoubtedly that of Woollam given that, at the time of the Callemondah Project (and the others), as now, he was that company’s managing director. What he terms a “purpose” is truly that, not a motive. There was some debate in the submissions of both the ACCC and Woollam as to whether one or the other was confusing purpose with motive. I do not consider that either the ACCC or Woollam conflated purpose and motive.
66 I accept that Mr Bogiatzis did indeed have a purpose which was to enable Kelly to be seen to tender for the Projects without winning them. I do not accept that, in the circumstances, which materially include his admitted authorisation of “Woollam representative A” to give a “cover price” to Kelly and his admitted understanding as to what was entailed in a “cover price”, that this was the only end which was sought to be accomplished by him and thus by Woollam.
67 To me, the inference seems inescapable that, in authorising the communication of a cover price, especially, as in the case of the Callemondah Project, on the closing date for tenders, Mr Bogiatzis and therefore Woollam also had as a purpose that such tender as Kelly came to submit would not be price competitive with that of Woollam. So much is also necessarily implicit in his evidence that he had only ever given a cover price “to enable another builder to be seen to tender for a particular project where it did not wish to win the tender or it did not have the time and resources to tender for the project” (Affidavit, para 17). That, in context, his purpose was that Kelly would be seen to tender without winning the tender is nothing more than putting in another way that Kelly would be seen to be a competitor but a competitor which, to his knowledge, would tender at a price in excess of the cover price the communication of which he had authorised. Yet another way of putting it is that Woollam would tender at less than the cover price and this tender would be seen to be competitive because Kelly would tender and tender in an amount in excess of the cover price. These were each substantial purposes of the communication of the cover price and of the provisions in the arrangement or understanding.
68 The subsequent lodgement of their respective tenders by Woollam and Kelly offers, in the amounts thereof, a compelling inference in the circumstances admitted, or which I have otherwise found, that each of these corporate respondents gave effect to their arrangement or understanding.
69 Did the provisions have the purpose of substantially lessening competition? The meaning of “competition” is supplied by s 45(3) of the TPA (quoted above). That the provisions have a purpose of substantially lessening competition is deemed to be so, the ACCC submits, by the operation in the circumstances of s 45A(1) of the TPA.
70 One requirement which must exist for s 45A to deem the provisions to have the purpose of substantially lessening competition is that the parties to the arrangement or understating must be in competition with one another. That Woollam and Kelly were in competition is said by the ACCC to arise in one or the other of the following ways:
(a) each were in competition with each other in respect of the tenders for the Callemondah Project (and the others of the Projects in which they each tendered);
(b) each was in competition with the other in the “Queensland market” as that came to be defined in para 12 of the statement of claim (a market in Queensland for commercial construction projects having a value between about $1,000,000 and $20,000,000).
71 As against the ACCC it was submitted that Woollam and Kelly were not in competition with each other in relation to any of the Projects, including the Callemondah Project. Woollam wanted to win the Projects and Kelly did not, it was submitted. In support of this submission, reference was also made to the evidence given by Dr Williams, who gave expert evidence in the ACCC’s case. Attention was drawn to [93] of the First Williams Report in which he opined that Woollam and Kelly were not in competition as soon as the former was aware that the latter had sought a cover price.
72 There is a certain, superficial attraction about this submission. On further reflection and even before recourse to authority, it seems, with respect, rather odd that one can, by submitting a tender, present oneself to the party which has called for tenders as being in competition and yet, by virtue of the provisions of the arrangement or understanding, never disclosed to that party, thereby be entitled to a finding that one and one’s fellow party to that arrangement or understanding should not be regarded as competitors. Recourse to authority confirms the absence of merit in the submission. This is apparent from the following passage from the judgment of the Full Court in J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532 at [111] to [112] (McPhee), especially at [112]:
111 McPhee and DFE were, however, generally in competition with each other in the express freight market, and the fact that DFE may have had a policy of not quoting for business from McPhee customers (except where the customers were dissatisfied with the level of service they were receiving) does not mean that McPhee and DFE were not relevantly "competitive with each other" for the purposes of s 4D(1)(a) of the Act or "in competition with each other" for the purposes of s 45A(1) of the Act. As Just Jeans on 16 May was proposing to ask DFE to supply a quote and as McPhee was encouraging DFE to submit a quote, McPhee and DFE, in the terms of s 4D(2) of the Act were, or were likely to be, in competition with each other in relation to the supply of services to Just Jeans. It was that supply of services to which the relevant provision of the attempted arrangement or understanding was directed. The attempt involved putting McPhee and DFE into a position where they were in competition with each other for the Just Jeans business. The attempt by McPhee to get DFE to submit a non-competitive quote was an attempt to make a provision of the proposed arrangement or understanding which fell within s 4D(1) of the Act. It was irrelevant in this context that there was a pre-existing policy of DFE not to submit a quote to McPhee customers (except where the customers were dissatisfied with the level of the service they were receiving).
112 The same observations apply in relation to s 45A(1) of the Act. If the attempt had been successful McPhee and DFE would have been, in the terms of s 45A(1), "in competition with each other" in relation to the services to be supplied to Just Jeans; and there would have been a provision of that arrangement or understanding which had the purpose and the effect of fixing, controlling or maintaining the price for services to be supplied to Just Jeans by McPhee and DFE who were in competition with each other for that business. Again, the pre-existing policy of DFE was irrelevant as the attempt was to achieve an arrangement or understanding which contained a provision which fell within s 45(2)(a)(ii) by virtue of the provisions of s 45A(1).
These statements were made in relation to an attempt. Here, there were more than attempts as between Woollam and Kelly as they in fact made and gave effect to arrangements or understandings. In so doing, they were, in terms of s 45A(1) “in competition with each other”. That Kelly did not wish to win the tender is, like the policy of DFE referred to in the passage quoted, irrelevant. I find that, in respect of each of the Projects in which they each lodged tenders, Woollam and Kelly were in competition with each other. This finding involves no contradiction of the view expressed in para [93] of the First Williams Report. The finding is as to whether they were in competition for the purposes of s 45A(1) of the TPA whereas, in his report, Dr Williams is describing an economic effect of the making of the arrangement or understanding.
73 Strictly, this finding makes it unnecessary to determine whether Woollam and Kelly were also in competition with each other in the “Queensland market”, as pleaded. However, the issue was, as noted, the subject of expert evidence from Dr Williams and of closely contested submissions. In these circumstances, it is desirable to state my conclusion in respect of that issue.
74 Dr Williams combines academic attainment at doctoral level in economics with lengthy experience in applied economics in the field of competition in markets. He has undertaken advisory work and given forensic evidence in this field on many occasions in Australia and in New Zealand. Apart from the opinions which he gave in the First Williams’ Report and the Supplementary Williams Report, he gave oral evidence. I found him an impressive witness, demonstrably non-partisan in the frank and ready way in which he answered questions both from counsel and me in the course of his time in the witness box.
75 I thought these qualities and also, recalling the use of the word “about” in the pleading, the existence of the pleaded market were demonstrated in the following passage from his cross-examination by senior counsel for Woollam and Mr Bogiatzis (T173, line 18 to T174, line 20):
MR O’SHEA: … Now, in your supplementary report you then look – and if I could direct you to paragraphs 12 and 13 of your report – that you look at the size of projects which Woollam does?---Yes
And you select – you end up selecting a range of $500,000 to $20 million?---Yes
Now, you record in paragraph 12 Mr Bogiatzis says that Woollam tenders for projects up to $25 million, don’t you?---Yes.
So why have you selected $20 million rather than 25 million?---I’ll answer the question in two ways. The first thing to say is that markets are defined in a pretty rough and ready way. There’s no firm boundaries to markets, so that when one is defining a market one is trying to in a rough sort of way characterise the activities of the firm, in this case whose market power might be in question, and the competitors that it faces. My empirical analysis of that exhibit suggested that 85.7 per cent of the projects that it tendered for the government with – or that it was invited to tender for within that period lay within that bound. So I thought that that was a reasonable description of the type of activities that they were undertaking. And so anybody who bid for projects of this kind, I thought, would be constraining the market power of Woollam.
Did you conduct, then, an empirical analysis based on the figure of $25 million to see what percentage of products fell? For example, between a range of $500,000 and $25 million?--- I didn’t. I could do it almost readily here if you would like me to; I’ve got the spreadsheet in front of me.
Presumably, it would show that a slightly greater – well, I withdraw that. Presumably, it would show that greater than 85.71 per cent would fall within the range of 0.5 to 25 million dollars?---I’m not sure whether that’s true. That’s assuming that at least one project that it tendered for in this period lay between 20 and 25. I’m not sure whether that’s true or not.
All right. So you haven’t rejected the figure of $25 million on the basis that there are no projects falling between 20 and 25 million?---No, it seemed – there are not many projects on the list greater than 20. There are a few. And so I thought that this seemed a reasonable description of the nature of their business.
Could I suggest to you that on the basis of your report there’s no reason for selecting a maximum figure of $20 million as opposed to a maximum figure of $25 million?---Yes, I’m happy with that. As I said before, drawing boundaries to markets is not something that admits of very precise statements.
HIS HONOUR: I had an impression when I was reading your first report, Dr Williams, that – well, not just the kind you’ve mentioned in that answer, but that you were trying to define a market where these were companies that weren’t just doing domestic building work, and neither were they of an order of – just to use local corporate names – Hutchinson Builders or, beyond that, perhaps Laytons or the like, but rather there’s a market niche, as it were, below top tier, as it were, but still engaging in multimillion dollar contracting?---Exactly, yes.
[sic]
76 Even when closely cross-examined by senior counsel for Kelly and Mr Murphy, the position remained that there was evidence, in Dr Williams’ opinion, of that corporation also competing in the Queensland market as pleaded. This evidence and also, I thought, Dr Williams’ candour and lack of partisanship are found in the following passage from that cross-examination (T189, line 11 to T190, line 25):
MR COUPER: … If we can deal with some preliminaries. Is the situation so far as Kelly is concerned the same as the situation so far as Woollam is concerned? Namely, you don’t know what proportion of Kelly’s work is represented by the record in the PQC system?---Yes.
And is it the case that you think if it’s 20 per cent of Kelly’s work then that is a sufficiently significant proportion of the work to draw a conclusion about the entirety of Kelly’s work?---Well, as I state in paragraph 27, Mr Murphy does state that the Queensland government is their single biggest customer. I guess I – my answer to the previous question was incorrect. I do have some information that this is not an insignificant part of their work.
Well, do you still maintain that significant is 20 per cent plus?---Well, in a rough sort of way. I mean, I wouldn’t like to be held to that number.
I want to understand what you’ve done in paragraph 29. You identify that Kelly tendered for projects raining in price from .086 million dollars to $54.376 million dollars. Is that right?---Yes.
And then you choose a range of one to 20 million dollars and enquire what percentage of the tenders fell within that range; is that right?---Yes.
Is it the case you chose the range of one to 20 million dollars because that’s the market range you had arrived at in your earlier report?---Yes.
And for no other reasons?---That’s probably the reason, yes. I don’t know about no other, but ---
Well, there was no other?--- - - -I tried it. I tried it.
There was no other, was there?---I tried it. When I did my first report it seemed to be consistent with what people were saying. When I undertook - I only undertook the detailed analysis of the exhibit when I was asked to – whether I could keep the same – maintain the same conclusions if I did the work another way. And so what I did was to test whether this hunch that I had on the basis of the answers to the 155s held up. So the reason I tested one to 20 was to test whether that hunch – my rough guess in the first report – held up with respect to Kelly.
What you were doing was this, was it not, Dr Williams: asking yourself, “Can I justify the conclusion I came to in my first report by some means?”?---Well, I just don’t operate like that. I’m quite happy to change my opinions if I’m shown to be wrong, and in this case I was surprised that Kelly, in fact, tendered for more expensive projects than the other two respondents. I hadn’t been aware of that till I undertook this analysis.
You were surprised only because you claim to have missed Mr Murphy’s statement in his 155 transcript, correct?---No, no. The reason I was surprised was because I hadn’t undertaken this empirical analysis prior to the end of last week.
Well, would it be far to say if you had undertaken the empirical analysis in the first instance your conclusion would have been that Kelly operated in a market from about one to 50 million dollars?---No, because Kelly undertakes very few – the exhibit, sorry, to the Rivers affidavit suggests that Kelly undertakes very few projects in excess of $20 million.
Can I ask you this question just so I’m clear about what you’re saying: if it was hypothetically the case that a builder in a year did 25 projects – 24 of them less than $10 million, but one of $100 million – you would say that builder was not competing in a market for construction services of the level of $100 million. Is that right?---No. As I explained before, when one defines markets, one comes up with essentially a rough characterisation of the - - -
I’d like you to answer my question, please, Dr Williams?---The answer is no.
77 It may be accepted, as was pressed on behalf of Woollam and Kelly, that, as with other elements of a cause of action, materially here the alleged contraventions of s 45 of the TPA by virtue of an asserted deeming operation by s 45A, the market in which they are said to have competed must be pleaded and proved: see, for example, Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd (2008) 251 ALR 166 at [13] and [20]. By virtue of s 4E of the TPA, the alleged market must be one in Australia (and as otherwise specified by that section). Further, as with other elements of a civil penalty cause of action, it must be proved to the civil standard but taking into account considerations specified in s 140(2) of the Evidence Act.
78 In relation to Woollam and Kelly, such a market has been alleged and so proved. These corporate respondents sought a finding to the contrary by reference to a case not pleaded. Their submissions ignored the presence of the word “about” in the pleading. The ACCC’s pleading would have been in disconformity with Dr Williams’ evidence had the specified parameters as to value been of any greater precision. They did not need to be. The alleged market was one in Australia. I am well satisfied by reference to Dr Williams’ evidence, underscored as that is by the examples offered by such of the Projects in which Woollam and Kelly (and Carmichael) tendered, that there is such a market. It is really nothing to the point that it may be possible to discern other markets in which one or the other of those corporations competed: eg in New South Wales against other competitors or, occasionally, for higher value projects.
79 Another submission made against the ACCC was predicated upon reading items (a), (b) and (c) in para 12 of the statement of claim as if they were cast in the disjunctive. So read, it was said to follow that the existence of such itemised markets had not been proved. The pleading is though cast in the conjunctive. Its author is plainly trying to describe in a collective way particular stages of activity in the market. Nor is there any merit in trying, as was also done in submissions made on behalf of Woollam and Mr Bogiatzis, to suggest that, there is disconformity between the pleaded market descriptive adjective “commercial” and the evidence. Further particulars as to what was meant by “commercial” were never sought. The ordinary meaning of the word is apt to embrace projects which some might be disposed, on reflection, more precisely be described as “industrial”.
80 Finally, the submissions made in respect of the ACCC’s alternative case included a repetition of the misconception (given McPhee) that Kelly’s policy that it did not wish to win the subject projects meant that it was not in competition.
81 Did the provisions have the purpose of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of the price for goods or services supplied?
82 Reading the language of s 45A(1) of the TPA as a whole and in context, I respectfully agree with an observation made by Professor Heydon (as his Honour then was) that it may be incorrect to split the components of the expression, “fixing, controlling or maintaining”: Heydon JD, Trade Practices Law, (Lawbook Co, subscription service) at [4.810] (update 85). The expression may be a composite, an element of a description of particular types of provisions the presence of which in contracts, arrangements or understandings Parliament has chosen to deem to have the purpose or effect or likely to have the effect of substantially lessening competition. That, as Professor Heydon states (ibid), price fixing has been the more “traditionally observable” may, by the relative frequency of that encounter, create an impression that the expression is not, as a matter of construction, a composite. If so, it would not, in relation to statutory construction, be the first occasion when examples of the operation of a statute have diverted attention from the language employed by Parliament.
83 In the CC (NSW) Case at [133] Lindgren J referred to this and other parts of Professor Heydon’s work and to pertinent judicial authority in relation to the meaning of expression “fixing, controlling or maintaining” and its constituent elements:
The notion of "fixing, controlling or maintaining" in s 45A(1) of the Act has been discussed in several cases which are reviewed in Heydon, Trade Practices Law (1989), par [4.750]-[4.920]. As the learned author observes "[t]o fix prices is the most precise case" (par [4.780], p 2223). It has been said that "to maintain a price assumes that it has been fixed beforehand": Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437 at 449 per Lockhart J. The contrary is, however, arguable: it is arguable, for example, that it would "maintain" a price not yet fixed at a minimum level if all tenderers were to reach an understanding that a component sufficiently influential on price was to be included in their tender prices. I need not pursue this issue because it seems to me that the notion of "controlling" a price best fits the case pleaded and because the present case could not be one of "fixing" or "maintaining" the price to be charged to ACS while not one of "controlling" it. In saying this, I do not decide that the present case could not be one of "fixing" or "maintaining": it is simply unnecessary for me to decide the question. Again, Heydon observes that there may be no distinction between the words "control" and "maintain" and that it is perhaps even incorrect to split the expression "fix, control or maintain" at all, except by reference to the fact that price-fixing has been found to be more "traditionally observable" (par [4.810], p 2224).
Later in that case, at [168], his Honour elaborated upon what constituted “controlling”:
168 The word "control" is not defined in the Act. Its natural or ordinary meaning is "to exercise restraint or direction over" (the Macquarie Dictionary) or "to exercise restraint or direction upon the free action of" (the Oxford English Dictionary) a person or thing. There are degrees of control and there may be control although the "restraint" or "direction" is not total. An arrangement or understanding has the effect of "controlling price" if it restrains a freedom that would otherwise exist as to a price to be charged.
His Honour added, at [176]:
I do not think that some specificity as to price is a necessary element of the notion of "controlling" price within s 45A. To insist on such a requirement would be to introduce an unauthorised general limitation on the notion and would allow the statutory prohibition to be easily circumvented — a result that cannot have been intended and should not be lightly accepted.
I approach the meaning to be given to the constituent elements of the expression “fixing, controlling or maintaining” in the same way as did Lindgren J in the CC (NSW) Case. Again as in the CC (NSW) Case, it is, in my opinion, “controlling” which is of greatest present relevance. If the expression “fixing, controlling or maintaining” is a composite then a case will fall within that composite if, for example, the provisions can be said to have a “controlling” of price as their purpose. If each of the words in the expression is a strict alternative, that one of those alternatives is satisfied will be sufficient.
84 The purpose of the provisions was to put a ceiling on the price at which Woollam tenders, because it was to be less than the communicated cover price and a floor on the price at which Kelly tendered because it was to be more than the cover price. That amounts to a “controlling” of the price at which services are to be supplied. It matters not that there is no greater specificity as to price than the imposition, via the cover price, of a ceiling and floor. The imposition of such limits is nonetheless a control on the price. It does not detract from this conclusion that Woollam costed its tender for the Callemondah Project prior to its receipt of the request for a cover price. In is nonetheless the case that, by becoming a party to the arrangement or understanding, Woollam assumed obligations by virtue of the provisions of that arrangement or understanding, as did Kelly for that matter.
85 The ACCC alternatively submitted that the meaning of “fixing” was wide enough to cover an arrangement or understanding such as that struck between Woollam and Kelly. In Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1983) 68 FLR 70 at 72 the Full Court observed that the word “fixing” took its colour from its general context and the words used with it, “controlling” and “maintaining”. Construing the word in this way serves to underscore the ordinary meaning which the word carries, which is “to fasten, make firm or stable in position” (Oxford English Dictionary, Online Edition). Here, ranges which had a price ceiling or, as the case may be, floor were fixed but there was no greater precision. This, I consider, is more aptly described as “controlling”. If the price were settled with precision that, in my opinion, would constitute “fixing”.
86 I conclude that the provisions had the purpose, which was a substantial purpose, of controlling the price for which each of Woollam and Kelly was respectively to supply its services pursuant to the tenders respectively submitted by them.
87 The case of the ACCC was not only put on the basis of “purpose” of the provisions but also that of their “effect” or “likely effect”, the other alternatives presented in s 45A(1) of the TPA. In Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 50, Franki J observed of the phrase, “has or is likely to have” that “the word ‘has’ requires the question to be tested against the established facts whereas the words ‘likely to have’, while referring to the period at or about the time when the arrangement was made or the understanding entered into, allows any reasonable inference to be drawn.”
88 The established facts in this case include the tenders which each of Woollam and Kelly submitted in respect of the Callemondah Project. Given the respective lump sum amounts, it is inherently likely that the provisions of the arrangement or understanding between Woollam and Kelly in respect of a cover price had the effect of controlling their respective prices. Further, having regard to the mutual understanding of these companies as to what was entailed in the giving and receiving of a cover price, it was, objectively, inherently likely that these provisions would have this effect in respect of the price of services to be supplied by them in respect of that project. The alternative basis upon which the ACCC sought to rely upon s 45A is also made out.
89 Woollam and Mr Bogiatzis also put forward that there was a distinction to be drawn between “bid” and “price” with s 45A being inapplicable to conduct which entailed nothing more than the submission of a bid to supply services for a specified amount. The deeming effect of that section was not engaged, it was submitted, with respect to fixing, controlling or maintaining tender prices, only prices. Yet further, it was submitted that the section was not directed to the price at which services might be supplied. It was submitted that the TPA contained an example, in s 44ZZRD of a distinction being drawn between price fixing (s 44ZZRD(2)) and bids, as defined by s 44ZZRB (s 44ZZRD(3)(c)).
90 There is no merit in this submission. Each tender specified a price at which services were “to be supplied”. The presence of that expression in s 45A(1) means that, to this extent, the section looks to the future. Reference to s 44ZZRD is but an irrelevant distraction.
91 For these reasons, I conclude that Woollam and Kelly, in respect of the Callemondah Project:
(a) made an arrangement or understanding which contained provisions (as particularised) which had the purpose or which had or which were likely to have the effect of substantially lessening competition, contrary to s 45(2)(a)(ii) of the TPA; and
(b) gave effect to provisions (as particularised) which had the purpose or had or were likely to have the effect of substantially lessening competition, contrary to s 45(2)(b)(ii) of the TPA.
In each instance, the element of substantially lessening competition is made out by virtue of the operation of s 45A(1) of that Act.
92 Accessorial liability in respect of these contraventions in relation to the Callemondah Project is pleaded only against Mr Bogiatzis. The concepts of the accessorial liability for which s 76 of the TPA provides have their origins in the criminal law: Yorke v Lucas (1985) 158 CLR 661. One such criminal law requirement, evident from Giorgianni v The Queen (1985) 156 CLR 473, is that accessorial liability is dependent upon knowledge of the essential matters which go to make up a contravention. This does not mean that it must be proved that the alleged accessory knew that the facts are capable of characterisation in the language of the statute providing for the contravention committed by the principal offender: Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [48].
93 It was put on behalf of Mr Bogiatzis that acceptance of his evidence as to his purpose necessarily meant that he could not be liable as an accessory. It was also put that it was exculpatory that he had struck Woollam’s final tender price without taking into account the cover price.
94 As against this, the following have been proved by the ACCC in respect of Mr Bogiatzis in relation to the Callemondah Project:
(a) his knowledge of the practice of cover pricing and its features, as described above;
(b) his authorisation of “Woollam representative A” to communicate a “cover price” to Kelly.
95 I do accept that, in respect of the Callemondah Project tender, Mr Bogiatzis and thus Woollam had already settled upon a tender price by the time when the request for a cover price was made. That request was made on the closing date for tenders. Woollam must by that stage already have undertaken considerable preparatory work in the calculation of a tender price. The request for a cover price doubtless presented an opportunity to lower whatever price at which Woollam proposed to tender but Mr Bogiatzis did not then know that Kelly was the only other contractor invited to tender.
96 It does not follow from this that the ACCC has not made out an accessorial liability case against Mr Bogiatzis. Given the very nature of the practice of cover pricing, the price given to Kelly must necessarily have been in excess of the price Woollam had settled upon. Having made the cover pricing arrangement or understanding with Kelly, Woollam necessarily constrained itself not to revise upwards beyond the cover price, before the close of tenders, the price it had earlier settled upon. The control was real, even if the touch of that control was light. All of this must necessarily have been within Mr Bogiatzis’ knowledge given his knowledge of the practice of cover pricing and his acknowledged authorisation of the communication of a “cover price” to Kelly. Also necessarily within his knowledge, given his knowledge of the practice of cover pricing, was that the communicated cover price would put a floor on Kelly’s tender price. As I have already stated, Woollam and Mr Bogiatzis have not confronted the ramifications of the admissions which he made and evidence as to purpose which he gave. Even if not approached from the perspective of knowledge of the purpose of the provisions but rather in terms of knowing the likely effect of the provisions of the arrangement or understanding the result is no different. Inherent in the knowledge of the practice of cover pricing and the authorising of the communication of the same is the knowledge that it is at least likely that Kelly’s tender price will be controlled by the cover price and that Woollam has thereby put a ceiling on the price at which it will tender.
97 Seized with all of this knowledge, Mr Bogiatzis later on 22 December 2004 signed the tender submitted by Woollam. In so doing with that knowledge he gave effect to the arrangement or understanding the making of which with Kelly he had authorised.
98 For these reasons, I am satisfied that Mr Bogiatzis was knowingly concerned in each of the s 45(2)(a)(ii) contravention and the s 45(2)(b)(ii) contravention alleged against Woollam in respect of the Callemondah Project.
99 I turn to the alleged contraventions of s 52 in relation to the Callemondah Project. The general nature of the ACCC’s case was that, by the lodgement by each of Woollam and Kelly of a tender in the approved form and by virtue of the status of each of them as pre-qualified contractors, a number of representations were made by Woollam and Kelly, given that neither notified the State’s Department of Public Works that it could not comply with the Code of Practice, the Australian Standard or clause 6.3 of the General Conditions. Details of the alleged representations made in this manner have already been given above. As Woollam had in fact signed the contract, the ACCC alleged that it made a further misleading representation by virtue of clause 6.3. This contractually based representation was alleged to be misleading or deceptive in the same way as the clause 6.3 based representation derived from the statement made on the approved tender form which was incorporated by reference as part of the Tender Documents.
100 Woollam’s pleaded stance was to admit the making of the alleged representations and their misleading or deceptive quality, save in one respect. It denied it had made a misleading or deceptive representation that, in respect of its tender for the Callemondah Project, it had been a party to collaboration with Kelly on prices, without the consent of the client (para 50(e)(i)(B) of the statement of claim was denied). Its pleaded position was that the Australian Standard did not prohibit involvement in an inflated tender but rather prohibited the submission of an inflated tender to advantage another. It submitted that there had been no submission of an inflated tender to advantage another. In its closing submissions, Woollam sought to resile from these admissions, inspired by the differing stance taken with the alleged representations taken by Kelly and on the basis that there ought to be a symmetry of outcome as between it and Kelly with respect to these representations.
101 The merits of Kelly’s position with respect to the other s 52 allegations are desirably considered in detail. That is because, if it lacks substance, it is of academic interest as to whether Woollam should be permitted to alter its pleaded position so as to accord with that of Kelly.
102 So far as the Callemondah Project was concerned, Kelly admitted only to the making of a representation that it had given or received assistance to submit a cover tender (the representation in para 45(f)(iii) of the statement of claim). It submitted, correctly, that this alleged representation had its origin in the Code of Practice. Kelly admitted this representation to be misleading or deceptive.
103 Kelly pointed to other alleged representations sourced in the Code of Practice. These, it was said, followed a standard pleaded form (clause 45(f)), which was that it [or as the case may be Woollam]:
(i) had not discussed with any other tenderers the tenders to be submitted before the submission of the tenders, in the absence of the client;
(ii) had not been a party to any collaboration between tenderers on prices without the consent of the client;
104 There was, Kelly noted, a corresponding standard form of allegation (para 46(d)(i) of the statement of claim) as to why these representations were misleading or deceptive:
…
(d) misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Act, in that, in respect of its tender for the Callemondah project:
(i) Kelly had not complied with the terms of the Code of Practice as:
A. it had discussed with another tenderer (Woollam) the tenders to be submitted before the submission of the tenders for the Callemondah project, in the absence of the client;
B. it had been party to collaboration with Woollam on prices, without the consent of the client;
105 It was first put that the allegations inaccurately pleaded the terms of the Code of Practice. Kelly acknowledged that the Code of Practice and, in particular, clause 3.2 had elsewhere been accurately stated in the pleading.
106 The focus of the first dot point in clause 3.2 of the Code of Practice is not a discussion but a meeting. The ACCC does not allege a representation grounded in the holding of a meeting. Clause 3.2 does not admit of the pleaded representation for the reason which Kelly gives. The ACCC had more than one opportunity to amend its pleading. The discussion based representation which it pleads in para 45(f)(i) of the statement of claim has not been made out. Its s 52 case against Kelly fails to this extent.
107 There is no substance in the balance of Kelly’s challenge to the way in which the Code of Practice based representations are pleaded in para 45(f) of the statement of claim. I am satisfied that the representation in para 45(f)(ii) as pleaded was made by Kelly and that it was misleading or deceptive.
108 Kelly put it that the Code of Practice prohibited “collaboration on prices”. “Collaboration”, it was submitted, implied something mutual. Further, clause 3.2 used the plural “prices” and, even if there had been “collaboration”, it had not been with respect to more than one price. Clause 3.2 is not to be read in such a pedantic way. It needs to be read purposively and in the context of its opening words as well as the Code of Practice as a whole. In its reference by way of an example of “collusive practices” to collaboration on prices it is describing in a general way a particular practice. In that generality, the plural embraces the singular. The example in the clause captures collaboration on the price of one tenderer and well as collaboration on the price of more than one. Further and in any event, even if this part of the clause and thus the representation must be regarded as directed to the plural only, that is what occurred here under the provisions of the arrangement or understanding made by Woollam and Kelly. The cover price provided both a ceiling for Woollam’s price and a floor for Kelly’s. Yet further, mutuality was a feature of the arrangement or understanding. It was misleading or deceptive for Kelly to make this representation given the arrangement or understanding to which it was a party.
109 Kelly’s next challenge to the s 52 case took as its starting point its admission that it had represented that it had complied with the Australian Standard (para 45(g)). The alleged representations derived from this were:
(a) it had not colluded with other tenderers for the Callemondah Project (para 45(g)(i)); and
(b) it had not been involved with the submission of inflated tenders (ie cover prices) to advantage another tenderer (para 45(g)(ii)).
110 Kelly submitted that the use of the word “collusion” in that standard must be read in the context in which it appears in clause 7.4. So much may readily be accepted. Further analysis of the submission requires that clause 7.4 of the Standard be set out in full:
7.4 Formulation of tenders
No Tenderer shall engage in any uncompetitive behaviour or other practice which denies legitimate business opportunities to other Tenderers or other participants in the tender process including, but not limited to the following:
(a) The payment of unsuccessful tender fees.
(b) The payment to any third party of moneys, incentives or other concessions contingent upon the success of the tender, which do not relate to the provision of bona fide services relevant to the object of the tender.
Tenderers shall observe all relevant statutory and other legal requirements in the formulation of their tenders and shall not –
(i) accept or provide secret commissions;
(ii) collude with other Tenderers;
(iii) submit inflated tenders (i.e. cover prices) to advantage another Tenderer;
(iv) enter any improper commercial arrangements with any other contractors, subcontractors, suppliers, agents or any other party;
(v) seek to influence contract decisions by improper means; or
(vi) accept incentives to provide contracts or services to other contractors, subcontractors or suppliers which financially disadvantage the Principal.
111 Having regard to the other items set out in items (i) to (vi) of clause 7.4 of the Australian Standard, Kelly submitted that it is plain that the strain of cover pricing to which the Australian Standard is directed is the more serious form of “submit[ting] inflated tenders (ie cover prices) to advantage another Tenderer”. The cover price sought and given in this instance was not, it was submitted, of such a kind. Implicit in the submission was that this activity could not fall within the term “collude” in terms of item (ii) because of the more particular reference to “cover price” in item (iii).
112 I reject this submission in relation to para 45(g)(i) of the statement of claim. It is not apparent to me that items (i) to (vi) in clause 7.4 are meant to be mutually exclusive one of the other. That item (iii) refers to the submission of an “inflated tender (ie cover price)” is no reason not to regard the reference to “collude” as anything other than carrying a general meaning. Item (iv), “enter any improper commercial arrangements with any other contractors etc” is cast in just as general terms as item (ii) and is apt even to cover what is specified in item (iii). “Tenderer” is defined by clause 3.4 to include “contractor”. The purpose of the items is just to amplify and alert by examples what can be entailed in the requirement to “observe all relevant statutory and other legal requirements in the formulation of their tenders”. “Collude” in its ordinary meaning is:
To act in secret concert with, chiefly in order to trick or baffle some third person or party; to play into one another's hands; to conspire, plot, connive; to play false; to act in play merely.
[Oxford English Dictionary, Online Edition]
That is the sense in which it is used in item (ii) in clause 7.4. As so used, it aptly covers the conduct of Kelly and Woollam in seeking and giving a cover price. Kelly made the pleaded representation in para 45(g)(i) of the statement of claim. Given its collusion with Woollam that representation was misleading or deceptive.
113 The position is, on analysis, no less clear in relation to the para 45(g)(ii) representation. The language of item (iii) in clause 7.4 is compressed. “Cover price” is not itself defined in the Australian Standard. That Standard is directed to ethical conduct in the construction industry. The term is used in the Standard as a term of art or technical term as understood within that industry. That it has such a meaning was evident on the evidence in this case. In that industry it carries the meaning and the features as I have found Woollam and Kelly understood it. Once this is appreciated, the adjective “inflated” governing “tender” is a sign post and tells against item (iii) applying to the submission of a tender which is below a “cover price”. Rather, the item is directed to the submission of tenders above a cover price. Kelly was involved in just such conduct in relation to the Callemondah Project. So, too, was Woollam for that matter for it was Woollam which supplied the cover price and which understood what so doing entailed in terms of the tender Kelly would submit.
114 The representations alleged in para 45(g) of the statement of claim were just made by Kelly; they were also misleading or deceptive as alleged by the ACCC. The could not be otherwise than misleading or deceptive in light of the findings which I have made as to its conduct with respect to the Callemondah Project.
115 Kelly’s next challenge in respect of the alleged representations centered on that grounded in clause 6.3 of the General Conditions (para 45(h) of the statement of claim). It denied making such a representation and, in any event, that it was misleading or deceptive.
116 There is no substance in Kelly’s denial that it made the alleged representation. It is nothing to the point that it did not come to be awarded and sign a contract containing clause 6.3 of the General Conditions, much less, as Kelly put it that it did not at that time believe it could win the tender. In lodging its tender, it materially warranted that it was able to comply with the Tender Documents, which included clause 6.3 in the General Conditions. It thus represented that it had no knowledge of the tender price of any other tenderer for the work in respect of the Callemondah Project at the time of the submission of its tender.
117 Kelly also put it that the pleaded representation could not be misleading or deceptive because it did not know what the price of the other tenderer was. It submitted, “the highest that its state of mind could be put is that it believed that the tender price of the other tenderer would be less than the cover price which it had been given by the other tenderer.” That this was the highest its state of mind might be put may be accepted. That does not mean that it is not misleading or deceptive, given that knowledge, to represent that one has no knowledge of the tender price of another tenderer; quite the reverse. Knowledge that the price of the other tenderer is less than the cover price is some knowledge of the other tenderer. Further, that is a critical piece of knowledge. That Kelly made a misleading or deceptive representation in terms of para 45(h) is proved.
118 By parity of reasoning, it necessarily follows that Woollam made like representations to those which I have found Kelly made and that they were similarly misleading or deceptive. It also follows that in respect of such of the representations which I have found Kelly did not make, Woollam, too, did not make them. Yet further, it follows from my discussion of clause 6.3 of the General Conditions that Woollam made the contractually based representation and that this was misleading or deceptive. It could not be otherwise given that Woollam communicated the cover price to Kelly and knew that Kelly’s tender price would be in excess of this cover price.
119 In light of this conclusion, there is an academic quality about whether Woollam should be held to its admissions. Nonetheless, insofar as a departure from its pleaded case was entailed in its seeking to align its position with that of Kelly, I see no injustice in permitting that. Woollam did not seek to withdraw its admission of any of the documents which contained alleged representations. All that it sought to do was to make controversial as against it what were truly questions of construction. There was no prejudice to the ACCC in its adopting this course.
120 Having regard to Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 at [15], the ACCC must show as against Mr Bogiatzis, in respect of each of the representations that he had actual knowledge that:
the representation was made and
it was misleading or
Woollam had no reasonable grounds for making it.
121 Further, to the extent that the ACCC has failed to prove that Woollam made a particular representation, it necessarily follows that Mr Bogiatzis cannot be found liable as an accessory. Given my findings as to representations which were not made by Woollam, the case of the ACCC against Mr Bogiatzis necessarily fails to this extent.
122 As to the representations which were made, Mr Bogiatzis was the person who authored them on behalf of Woollam. It was he who signed the tender which that company submitted and it was he who signed the contract with Queensland Rail. It was also Mr Bogiatzis who had, before then, authorised the communication of the cover price to Kelly, knowing what was entailed in such a communication. It necessarily follows that he knew the representations which I have found Woollam did make were misleading or deceptive and that Woollam had no reasonable ground for making them. The ACCC has to this extent proved accessorial liability against Mr Bogiatzis with respect to its s 52 allegations.
THE JILALAN PROJECT
123 The following facts are not controversial with respect to so much of the ACCC’s case as relates to this project.
124 By letters dated 15 February 2005, the State Department of Public Works invited Woollam, Kelly, Sommer and yet another building company, Abigroup Contractors Pty Ltd respectively to tender for another Queensland Rail project. This project involved the construction of a third locomotive inspection shed and a related service road at the Sarina-Jilalan Rail depot in North Queensland. The invitations did not specify who else had been invited to tender. Tenders for the project closed at 2.00 pm on 15 March 2005.
125 After that invitation had been received by it, Kelly once again decided that it either did not wish to win that tender or that it did not have sufficient resources or time to enable it to win the tender. It had made this decision by 15 March 2005. The person who made this decision on behalf of Kelly was Mr Murphy. He made this decision after discussion with Mr Richardson.
126 On or about 15 March 2005 and on behalf of Kelly, Mr Richardson telephoned an employee or agent of Woollam, most likely a Mr McLeod. I shall term that person “Woollam representative B”. Mr Richardson asked “Woollam representative B” whether he would give him a cover price for the Jilalan Project. Such a price was not given then and there. Instead, “Woollam representative B” sought oral advice from Mr Bogiatzis as to whether a cover price should be given and in what amount. In response, Mr Bogiatzis authorised “Woollam representative B” to give a cover price to Kelly. He also specified the amount of that price. The price so specified was then communicated to Mr Richardson by “Woollam representative B”. The precise amount of that authorised and communicated cover price is not known but it was between $2,635,970 and $2,789,090, each exclusive of GST.
127 On 15 March 2005, Woollam lodged a tender in the approved form to undertake the Jilalan Project. The amount, exclusive of GST, of its tender price was $2,635,970. Mr Bogiatzis signed Woollam’s tender. That same day, Kelly also lodged a tender in the approved form for this project. The amount of its tender price was $2,789,090. On this occasion, another employee of Kelly, a Mr Ashley Gowlett, signed Kelly’s tender on its behalf, with the witness being Mr Richardson. Mr Gowlett was an estimator and another subordinate of Mr Murphy within Kelly. Woollam submitted the lowest tender and, on this basis, was awarded the contract for the Jilalan Project later in March 2005.
128 As to controversial issues, for like reasons to those already given in respect of “Woollam representative A” in relation to the Callemondah Project, I find, as against both Woollam and Kelly, that “Woollam representative B” acted within the scope of either his actual or apparent authority in communicating the cover price to Kelly’s Mr Richardson.
129 Also for like reasons, Woollam and Kelly made a like arrangement or came to a like understanding containing provisions the nature and purpose of which were identical to those which I have found in relation to the Callemondah Project. Yet again for like reasons, those provisions further or alternatively had or were likely to have the effect of “fixing, controlling or maintaining” the prices in which the services to be supplied by Woollam and Kelly (or either of them) in respect of the Jilalan Project. Yet further, in lodging their respective tenders, Woollam and Kelly respectively gave effect to their arrangement or understanding, on the same basis which I have found they gave effect to their arrangement or understanding in respect of the Callemondah Project. I therefore reach like conclusions as to their contraventions of s 45 of the TPA.
130 I also reach a like conclusion that Mr Bogiatzis was knowingly concerned in those contraventions of s 45 by Woollam.
131 The s 52 case of the ACCC in respect of the Jilalan Project is the same as its s 52 case in respect of the Callemondah Project. I conclude that it succeeds and fails in the same way. Its case that Mr Bogiatzis was a party to Woollam’s alleged s 52 contraventions likewise succeeds and fails to the same extent.
WEST PACIFIC PINES PROJECT
132 This was another Queensland Government project, on this occasion for the construction of Stage 1 of the West Pacific Pines State School in the Gold Coast hinterland.
133 Evidence as to the calling for tenders for this project and subsequent receipt of tenders was given by Mr Martin Cooper, an experienced project manager and civil engineer. I accept the evidence he gave on these subjects. The tender of that part of his affidavit which related to his understanding of the practice of cover pricing was not pressed by the ACCC and I have disregarded his evidence to that extent.
134 Mr Cooper is the sole director of a company known as Ridgemill Project Management Pty Ltd (Ridgemill), which acts as trustee of a family trust. In July 2006, Ridgemill was retained by the State, via the unit of public administration which has come to be known as “Education Queensland”, as project manager for the design and subsequent construction of Stage 1 of the West Pacific Pines State School. That project involved the construction of as number of general learning areas, classroom blocks, covered areas and associated landscaping, parking and playing areas.
135 Following the completion of design work, the project was put out to tender. This was undertaken by the adoption of the same type of invitation to tender process as had been adopted by the Department of Public Works for the two Queensland Rail projects which I have already considered. Once again, the invitees were pre-qualified contractors. On this occasion, the invitations to tender were not sent directly by the Department of Public Works to the tenderers selected for invitation. Rather, what occurred was that, upon completion of the design work, staff of Education Queensland liaised with staff of the Department of Public Works so as to identify pre-qualified contractors that would be invited to tender. Once these had been identified, Mr Cooper then received a list of the contractors which were to be invitees from an officer of Education Queensland. The contractors on that list were:
(a) FK Gardner & Sons Pty Ltd;
(b) Kelly;
(c) Northbuild Constructions Pty Ltd;
(d) Dickinson Constructions Pty Ltd;
(e) Sommer; and
(f) Evans & Harch Pty Ltd.
136 Following his receipt of this list, Mr Cooper caused Ridgemill to send each of the contractors a letter dated 27 February 2007 inviting them to collect the tender documents from Ridgemill’s office at Milton. The tender process made provision for a pre-tender (ie pre-close of tender) site inspection by invitees. This occurred on 15 March 2007. Mr Cooper can recall that representatives of each of the invited contractors attended this site inspection. The accuracy of his recollection is confirmed by contemporaneous minutes of that site inspection. The companies to which these invitations were sent were each in competition one with the other.
137 Tenders for the project were originally due to close at 2:00 pm on 20 March 2007. This was later extended to 2:00 pm on 28 March 2007. Tenders for the project were received from each of the invited contractors. After close of tenders a panel of which Mr Cooper was a member evaluated them for Education Queensland. In the result, on 5 April 2007, the State, via Education Queensland, came to accept the tender of Northbuild Constructions Pty Ltd.
138 Unbeknown to Mr Cooper, Mr Gowlett had, on behalf of Kelly sought a cover price for the project from Mr Donald, Sommer’s general manager, on or about 28 March 2007. This request was made by telephone. Later the same day and on behalf of Sommer, Mr Donald supplied Mr Gowlett with a cover price. The precise cover price supplied is not known but it was less than or equal to $15,455,693 (inclusive of GST), but more than $15,206,809 (inclusive of GST). Save that it does not admit that Mr Donald acted on behalf of Sommer, Kelly admits these facts. Quite apart from the operation of s 84(2) of the TPA, there is no doubt, given his position, that Mr Donald was authorised to communicate the cover price on behalf of Sommer to Kelly. He confirmed this and the request for and giving of the cover price in his evidence. Mr Donald had the benefit of an immunity arrangement with the ACCC. I have taken this into account in assessing his credibility. I did not on initial impression or later on reflection see any reason to doubt the credibility of Mr Donald’s affidavit and oral evidence.
139 Kelly also admitted that the reason why it had sought a cover price for the project was that it had decided either that it did not wish to win the West Pacific Pines Project or it did not have sufficient resources to enable it properly to cost that project before tenders closed.
140 Mr Donald recorded his understanding of the practice of cover pricing in the following passage in his affidavit:
59 The party who is asked to give the cover price may agree to give one or not. If it agrees to give a cover price, it is generally provided to the requesting construction company on the day the tender closes. That is because the company who is giving the cover price does not normally have all the subcontractor prices for their own tender until just before the tender closes. Once the price for the party giving the cover price has been worked out, someone from that company will phone the requesting company and give them a cover price. That usually occurs only a matter of hours, or even a shorter period, prior to the closing of the tenders.
60 The cover price given is a price above which the company providing the cover price is going to tender for the project. The company providing a cover price to a competitor looks at their own final price and add a percentage which is generally five to ten percent on top of the price. This margin is added in the hope that the cover price given to the competitor will not make them look silly with an embarrassingly high price.
61 The company that receives the cover price will tender at the cover price, or perhaps above it. Certainly, the tender price of the party receiving the cover price will not be less than the cover price.
62 In summary, where a cover price is sought and given, there are two essential elements to the understanding between the parties:
(a) the party receiving the cover price is to tender for no less than the cover price; and
(b) the party giving the cover price will tender for a price less than the cover price.
63 To the best of my knowledge from having worked for a number of employers in the construction industry, my understanding of the practice of cover pricing as set out above, is one that is shared throughout the construction industry in Australia (and also in New Zealand) and has been for as long as I have worked in the construction industry.
141 Mr Donald was taxed in cross-examination about this understanding, but adhered, I thought, to what he had stated in his affidavit. The following passage from his oral evidence is noteworthy in this regard (T375, lines 1 to 5):
And from the point of view of the person asking for a cover price, they might well ask for the cover price and then decide for whatever reason not to actually lodge the tender?
They may. It’s not my experience.
I find that Mr Donald’s “expectation” when he supplied the cover price for the West Pacific Pines project to Kelly’s Mr Gowlett was that Kelly would lodge a tender. His further “expectation” was that it would do so specifying a price which equalled or exceeded that cover price because, having requested a “cover price”, Kelly would consider itself obliged not to tender below that cover price. It was put on behalf of Kelly that Mr Donald’s account of his understanding of the practice of cover pricing was that it entailed “expectation” rather then commitment. In a sense it did, but the “expectation” was that Kelly would regard itself as bound to act in a particular way.
142 It was also put for Kelly that an answer given in re-examination by Mr Donald as to what he would do if, having given a cover price, Sommer decided to increase its tender price above that price indicated an absence of obligation to tender below the cover price. Mr Donald answered that he would attempt to contact the party to which the cover price had been supplied. The question was a hypothetical one. Even so, I rather thought that the fact Mr Donald, faced with such a scenario, regarded himself as bound to try and contact the other party underscored the obligation to tender below the cover price which otherwise fell upon the party which had supplied the cover price. That party was no longer free to charge what it liked without regard to the interest of the party to which the cover price had been supplied.
143 On analysis, Mr Donald’s understanding of the practice of cover pricing was not materially different to the understanding which Woollam’s Mr Bogiatzis had, which I have detailed above (including to the extent of what I have termed the “additional features”). The same may be said of Kelly’s Mr Gowlett, having regard to the answers which he gave when examined under s 155 of the TPA (The transcript of that examination is exhibited to an affidavit of the ACCC’s Mr Shirley with the relevant parts being found at p 450, line 19 to p 451, line 47; p 452, line 33 to p 453, line 4; p 454, line 45 to p 455, line 45; p 456, line 17 to p 458, line 47; p 460, line 19 to p 463, line 10 and p 477, line 16 to p 480, line 33 of the exhibit). Mr Gowlett, I am sure, when he received the cover price expected that Sommer would, because it had given a cover price, do nothing other than tender in an amount below the cover price and that any tender of Kelly would have to be above that price.
144 In short then, when Mr Gowlett on behalf of Kelly sought from Mr Donald a cover price and when Mr Donald later that day supplied a cover price on behalf of Sommer to Kelly, each of the participants in those conversations had a like understanding of the practice of cover pricing. The term was one which was pregnant with meaning for each of these men and thereby for the companies they represented. I conclude that on or about 28 March 2007 Kelly and Sommer made an arrangement or understanding in respect of the West Pacific Pines project tender. The provisions of that understanding were the same as those of the arrangements or understandings struck between Woollam and Kelly in relation to the Callemondah and Jilalan Projects.
145 The purpose of the provisions of the arrangement or understanding as between Kelly and Sommer in relation to the West Pacific Pines Project was, given the understanding which Mr Donald and Mr Gowlett had of the practice of cover pricing, no different from the purpose of the provisions in the arrangements or understandings in relation to the Callemondah and Jilalan Projects. Further, the likely effect of those provisions was the same. The reasoning which I have set out at length in respect of the Callemondah Project is just as applicable here. In the same way and for the same reasons, s 45A operates so as to deem both a purpose and a likely effect of substantially lessening competition. Here, too, the arrangement or understanding controlled the tender price of each of Kelly and of Sommer.
146 Kelly gave effect to the arrangement or understanding by lodging a tender for a price in excess of the cover price.
147 For these reasons, I conclude that, in respect of the West Pacific Pines Project, Kelly contravened both s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TPA in the manner alleged by the ACCC.
148 As for the alleged contraventions of s 52 by Kelly in relation to this project, Kelly employed the State’s approved form in the lodgement of its tender. As with the forms employed in respect of the Callemondah and Jilalan Projects, it thus contained the statement that the tenderer, “hereby tender[s] to execute and complete all work and perform all of the obligations in accordance with the Tender Documents for: the West Pacific Pines Project. Kelly’s form was dated 28 March 2007, signed by Mr Gowlett on its behalf and lodged that day with Ridgemill.
149 The “Tender Documents” as defined for the purposes of the West Pacific Pines Project included the General Conditions of Contract (AS2124-1992), as amended by the Special Conditions of Tender. Clause 6.3 of those General Conditions as so amended provided, materially:
The Contractor warrants and represents to the Principal and agrees with the Principal that it is a condition precedent to the agreement between itself and the Principal that –
(a) it had no knowledge of the tender price of any other tenderer for the work under the Contract at time of submission of its tender [sic]:
150 The ACCC alleged (para 137 of the statement of claim) that, flowing from its pre-qualified status, its lodgement of its tender in the approved form and its failure then or thereafter to notify the State that it could not comply with the Code of Practice, the Australian Standard or clause 6.3 of the General Conditions Kelly had represented that:
(f) it had complied with the terms of the Code of Practice, and in particular that:
(i) it had not discussed with any other tenderers the tenders to be submitted before the submission of the tenders, in the absence of the client;
(ii) it had not been a party to any collaboration between tenderers on prices without the consent of the client;
(iii) it had not given or received assistance to submit a cover tender, being a tender submitted as genuine but which had been deliberately priced in order not to win the contract;
(g) it had complied with the terms of the Australian Standard, and in particular that:
(i) it had not colluded with any other tenderers;
(ii) it had not been involved in the submission on inflated tenders (i.e. cover prices) to advantage another tenderer;
(h) it had complied with the terms of West Pacific Pines clause 6.3 (being part of the Tender Documents) and that it had no knowledge of the tender price of any other tenderer for the work under the West Pacific Pines contract at the time of the submission of their tenders;
(i) further, or in the alternative to the preceding sub-paragraphs, if it won the tender for the West Pacific Pines project and entered into a contract for the performance of the work comprising the West Pacific Pines project, that it would:
(i) not breach any contractual or legal requirements of the State;
(ii) not breach the Code of Practice;
(iii) not breach the Australian Standard; and
(iv) be able to warrant the Education Queensland in the terms of West Pacific Pines clause 6.3 to the effect that it had no knowledge of the tender price of any other tenderer for the work under the West Pacific Pines contract at the time of the submission of their tenders
151 The ACCC further alleged (para 138 of the statement of claim) that these representations were misleading or deceptive or likely to mislead or deceive in that:
i) Kelly had not complied with the terms of the Code of Practice as:
A it had discussed with another tenderer (Sommer) the tenders to be submitted before the submission of the tenders for the West Pacific Pines project, in the absence of the client;
B it had been a party to collaboration with Sommer on prices, without the consent of the client;
C it had received assistance from Sommer to submit a cover tender, being a tender submitted as genuine but which had been deliberately priced in order not to win the contract;
(ii) Kelly had not complied with the terms of the Australian Standard as:
A it had colluded with another tenderer (being Sommer) for the West Pacific Pines project;
B it had been involved in the submission of an inflated tender (that is, its tender based on the West Pacific Pines cover price) to advantage Sommer;
(iii) Kelly had not complied with the terms of West Pacific Pines clause 6.3 in that it had knowledge of the tender price of another tenderer for the work under the West Pacific Pines project at the time of the submission of their tenders as it knew or believed that Sommer’s price was below the West Pacific Pines cover price.
152 In the alternative, the ACCC (also in para 138 of the statement of claim) alleged that these representations were misleading or deceptive in that, if Kelly had won the tender for the West Pacific Pines Project and entered into a contract for the performance of work for that project it would have breached:
A the Code of Practice for the reasons set out in its primary case (as above);
B the Australian Standard, for the reasons set out in its primary case (as above);
C the contractual requirements of the State in that it would not have been able to warrant to Education Queensland in the terms of West Pacific Pines clause 6.3 to the effect that it had no knowledge of the tender price of any other tenderer for the work under the West Pacific Pines contract at the time of the submission of their tenders, as it did know or believe that Sommer tender price was below the West Pacific Pines cover price.
153 For like reasons to those already given in respect of the ACCC’s s 52 case in respect of the Callemondah Project, I find that Kelly made each of the alleged representations. Further, these representations were, in the circumstances, likewise misleading or deceptive as alleged. They could not be otherwise given Kelly’s collusion with Sommer and its failure ever to disclose the same either to Ridgemill or to the State directly.
THE ROCKHAMPTON AIRPORT PROJECT
154 Evidence concerning the nature and origins of this project and the tender processes was given by Mr Donald Blackwell, the Director of Rockhampton Airport and an officer of what is now the Rockhampton Regional Council and Mr Steven Turner, an architect and director of Sanders Turner Ellick Architects Pty Ltd (STE Architects). Subject to the deletion of the affidavit evidence which Mr Blackwell gave with respect to his understanding of the impact of the practice of cover pricing, which was not tendered in the ACCC’s TPA liability case, I accept all of the evidence which these two gentlemen gave.
155 The Rockhampton Regional Council is, materially, a successor of the Rockhampton City Council (the Council). The Council (and now its successor) has owned and operated the Rockhampton Airport since approximately the late 1980’s. In the first half of last decade, the Council resolved to upgrade, by extension and refurbishment, the Rockhampton Airport Terminal. To this end, it came to engage STE Architects to provide services to it in relation to that project. Those services included design, documentation, construction management and contract administration for the project. STE Architects also had the role, on behalf of the Council, in the calling of tenders for the project, in the evaluation of tenders received and in the making of a resultant recommendation to the Council.
156 As a result, in or about June 2005 STE Architects caused an advertisement to be placed in the “Rockhampton Morning Bulletin” calling for contractors to register to tender for the Rockhampton Airport Project. No tender registrations were received by STE Architects in response to this advertisement. Mr Turner then recommended to Mr Blackwell that the best approach was to telephone around various building contractors to see if anyone was interested in tendering for the project. At the time, such an absence of response and a related, consequential need for the making of direct approaches was not unusual in Mr Turner’s experience because there was then a construction boom. Mr Blackwell authorised Mr Turner to make such approaches. Accordingly, Mr Turner telephoned a number of contractors and invited them to tender for the project. The contractors which he called for this purpose included but were not limited to:
(a) Woollam;
(b) Kelly; and
(c) Carmichael.
These companies were then competitors.
157 On behalf of the Council, STE Architects prepared conditions of tender for the Rockhampton Airport Project (Conditions of Tender). In the result each of Woollam (via both its Rockhampton and Mackay offices), Kelly and Carmichael collected tender documents, which included the conditions of Tender, from the office of STE Architects in June 2005. The tender documents also included the General Conditions of Contract (AS2124-1992), already referred to in relation to other projects, supplementary conditions of contract and addenda issued by the Council. A standard tender form was employed for the purposes of the tender process. It contained the following statement:
I/We tender to perform the work for the above project as described in, and in accordance with, the tender documents referenced in the Conditions of tendering and in accordance with the attached Schedule of rates/Contract sum analysis/priced Bill of quantities and for the lump sum (which includes the specified provisional sum of …
158 In response, the following tenders for the project, each in the approved form and each dated 6 July 2005, came to be received by STE Architects on that date:
(a) from Carmichael, a tender in the amount of $8,912,520 signed on its behalf by a Mr Sidney Matthews;
(b) from Woollam, a tender in the amount of $8,456,800;
(c) from Kelly, a tender in the amount of $8,745,385.
159 Following the receipt of these tenders and on behalf of the Council, Mr Turner came to conduct further negotiations with Woollam as the lowest tenderer. This led to its submission of an amended tender. It was this amended tender which, on Mr Turner’s advice, the Council came to accept in October 2005.
160 Unbeknown to Mr Turner or Mr Blackwell or anyone else in either STE Architects or the Council at the time, because none of it was disclosed to them by any of those involved, the following had occurred in relation to the tenders for the project.
161 Kelly and Mr Murphy admit (and I find) that, in or about June or July 2005, Kelly decided that it did not wish to win the tender for the Rockhampton Airport Project. This decision was made by Mr John Murphy (the Fourth Respondent) on behalf of Kelly following conversations which he had with Mr Richardson and Mr Geoffrey Murphy.
162 Woollam and Kelly each admit (and I find) the following. On or about 6 July 2005, Mr Richardson, on behalf of Kelly, telephoned an employee or agent of Woollam, most likely a Mr Palmer (“Woollam representative C”) and asked for a cover price in respect of the project. “Woollam representative C” then sought oral advice from Mr Bogiatzis as to whether he might give a cover price to Kelly. Mr Bogiatzis authorised this person to give Kelly a cover price and specified the amount thereof. While the precise amount of the cover price is not known, it was within the range from $8,456,800 and $8,745,385. “Woollam representative C” then communicated this cover price on behalf of Woollam to Kelly’s Mr Richardson.
163 There can be no doubt that, via the conversations which occurred between Mr Richardson and “Woollam representative C” on or about 6 July 2005, Kelly and Woollam made an arrangement or came to an understanding. The ACCC alleges that this arrangement or understanding included the following provisions:
(a) should Kelly decide to tender on the Rockhampton Airport project, its tender price would be no less than the cover price supplied to it; and
(b) Woollam’s tender price for that project would be less than this cover price.
164 Neither Kelly nor Woollam admit that such provisions were included. Kelly goes further and expressly denies that there was a provision that its tender price would be less than the cover price it supplied. The position though is no different to that with respect to the Callemondah Project. Here, too, Mr Richardson made the request for the cover price on behalf of Kelly and Mr Bogiatzis authorised an employee of Woollam (here, “Woollam representative C”) to supply such a price to him and specified what that price should be. Each of these men, as I have already related, had a common understanding, well evident from their evidence, including when examined under s 155 of the TPA, as to the practice of cover pricing. The term “cover price” was one pregnant with meaning for each of them. That meaning included each of the features found in the provisions which the ACCC alleges were included in the arrangement or understanding between Kelly and Woollam. I find that that arrangement or understanding included those provisions.
165 That Kelly and Woollam subsequently came to lodge tenders with STE Architects in the amounts which they did was not happenstance, given the cover price arrangement or understanding between these companies. Each was giving effect to that arrangement or understanding.
166 What was the purpose or likely effect of the provisions is controversial. The position though is no different, so far as purpose or likely effect is concerned, from that with respect to the Callemondah Project and for like reasons. Here, too, there was a purpose of controlling price and that was always the likely effect of those provisions. Section 45A has the same deeming effect here as I found it to have in relation to the Callemondah Project arrangement or understanding. It follows that, in respect of the arrangement or understanding as between Kelly and Woollam in relation to the Rockhampton Airport Project, the ACCC has proved that each contravened both s 45(2)(a)(ii) and s 45)2)(b)(ii) of the TPA. In relation to Woollam’s contraventions of these provisions, and for like reasons to those given in respect of the Callemondah Project, the ACCC has also proved that Mr Bogiatzis was knowingly concerned in these contraventions.
167 The ACCC also alleges a separate cover price arrangement or understanding in respect of the Rockhampton Airport Project. It alleges that such an arrangement was made as between Carmichael and Kelly.
168 Kelly admits that, on or about 6 July 2005, one Mr Matthews, then a building estimator in the employ of Carmichael, telephoned Kelly’s Mr Richardson and asked whether Kelly could give Carmichael a cover price for the Rockhampton Airport Project. It further admits that Mr Richardson agreed to do this and that Mr Richardson then sought confirmation from Mr John Murphy that he could give such a price to Carmichael. Mr Murphy provided such confirmation and Mr Richardson then relayed a cover price to Mr Matthews. The precise amount of the cover price is not known but Kelly admits that it was within the range from $8,745,385 to $8,912,520. As against Kelly and on the basis of its admissions, I find these matters proved.
169 Carmichael does not admit these matters. As to them, I did though have the benefit of oral and affidavit evidence from Mr Matthews.
170 In July 2005 Mr Matthews held the position of senior estimator with Carmichael. He had joined that company in about March 2004 and remained with it until he was laid off in September 2008. There is a controversy as to Mr Matthews’ credibility. I observed him closely in the witness box. He is a large, middle aged man with lengthy experience in the construction industry both as an estimator and a contract administrator. I noted at the time that he gave frank, spontaneous answers. Then and, on reflection, now my view was and is that he is to be regarded as an honest witness who did his best to recall events from his then employment with Carmichael. At the time of those events he had no reason to suspect that, some five years later, he would be required to recall them in detail in the witness box. He was relieved of his position of senior estimator later in 2005 by Mr Tony Carmichael but stayed on with the company until he was laid off in 2008. Since then he has worked with the Queensland Murray-Darling Committee Incorporated as a contract co-ordinator. In forming the view which I express as to Mr Matthews’ credibility I have expressly taken into account his employment history with Carmichael.
171 Mr Matthews was well aware of the practice of cover pricing, having first encountered it in the early 1990’s when working for a variety of commercial and domestic construction companies. The description which he gave of his understanding of the practice was in general accord with the features of the practice, including the “additional features”, as admitted by Woollam and Mr Bogiatzis and described in detail above.
172 Mr Matthews did not have any unassisted recollection of the Rockhampton Airport Project tender by Carmichael. He did though have a general recollection of having requested a cover price from Mr Richardson of Kelly on a number of occasions and, on the other hand, of Mr Richardson’s requesting a cover price from him and of supplying such a price to him. Mr Matthews was adamant that whenever he gave a cover price he always secured approval in advance from Mr Tony Carmichael not only to give it but also as to its amount. He was likewise adamant that he only requested a cover price from another contractor after being directed by Mr Tony Carmichael so to do. I accept this evidence.
173 Carmichael’s file for the Rockhampton Airport Project was in evidence, as was a spreadsheet, being a business record of Carmichael maintained at the time by Mr Matthews when its employee. The Rockhampton Airport Project was one of the projects registered on this spreadsheet (job number 01/2713). Mr Matthews examined Carmichael’s file for the Rockhampton Airport Project. That file, he noted, contained little or no pricing information. Having regard to his knowledge of practices within Carmichael, this suggested to him that the project was costed either on a pre-determined “square metre” basis or via a cover price. As to the former, his expectation was that, had it been used, the file would have contained a record of the rate used to price the job. It contained no such rate. Also drawing on his experience, Mr Matthews opined that, as the Rockhampton Airport Project was a refurbishment, a square metre rate would not have been appropriate. Mr Matthews also recalled that Kelly’s head office was at Rockhampton and that the only person with whom he ever had contact at Kelly was Mr Richardson. Mr Matthews identified his authorship of Carmichael’s facsimile of 6 July 2005 to the Council enclosing its tender.
174 Mr Tony Carmichael’s evidence raised the possibility that Mr Matthews had just left the undertaking of required costings for the Rockhampton Airport Project until too late and that he had sought a cover price on his own initiative so as to put a tender in. His evidence was that he had not authorised any estimator to seek a cover price.
175 It is important to understand Mr Tony Carmichael’s then role in the company. Carmichael was a family company founded by Mr Lee Carmichael and his wife, Lyn. They had three sons, of whom Mr Tony Carmichael was one, each of whom was involved in the company. As Mr Tony Carmichael related in oral evidence, at the time when the Rockhampton Airport Project was under tender, his father remained a director of Carmichael but had no involvement with that tender. At the time, Mr Lee Carmichael was running a project at Emerald. On the other hand, Mr Tony Carmichael stated that he “basically had all the say in running the company at that stage, in 2005, I had full control of all estimators, all project managers and administration”. He had complete control over the price at which Carmichael would tender for a project. The account which Mr Tony Carmichael gave of the decisive role he played within Carmichael accorded with the impression of his role which I formed on the basis of Mr Matthews’ evidence. I accept this part of Mr Tony Carmichael’s evidence but, as will be seen, not all of his evidence. His was the decisive role within that company.
176 According to Mr Tony Carmichael, it was only after the event that he found out from Mr Matthews that, “He had done a cover quote” for the Rockhampton Airport Project. “Cover quote” was plainly used by Mr Carmichael as a synonym for “cover price”. Mr Carmichael stated that he never authorised any estimator to use a cover price. As I understood his evidence, it was his ascertaining that Mr Matthews had used a cover price which precipitated his demotion from senior estimator to contract administrator. Mr Tony Carmichael was taxed at some length in cross examination about Carmichael’s response to the s 155 questionnaire administered by the ACCC and also the answers which he gave when examined under s 155. As to the latter, I found the following passage in his cross examination particularly revealing in light of his earlier oral evidence about never having authorised an estimator to use a cover price (T 466, lines 35 to 40):
[Quote from his s 155 examination being put to him]
If a cover price was going to be sought in respect of a particular job, would you normally expect to be consulted before the decision was made? I would probably expect to, I suppose. I don’t know, yes.
Given that your evidence is now that you never authorised anyone to obtain a cover price, is that a correct answer? It is a correct answer, yes.
177 Overall, the impression which I formed of Mr Tony Carmichael’s oral evidence before me was not favourable. I formed the distinct impression that he was, though he denied it, endeavouring to shift responsibility to Mr Matthews. The more accurate answer, I thought, and the one which better accorded with his then managerial responsibilities, was in the quote from his s 155 examination which formed the basis for the question put to him in cross examination as quoted in the preceding paragraph.
178 For completeness, I should mention that, in his oral evidence, Mr Richardson acknowledged awareness of the Rockhampton Airport Project and of a vague recollection of being contacted by another builder for a cover price. He was not able specifically to state that this was Mr Matthews although he acknowledged that it could have been him. He stated that, had he been telephoned with a request for a cover price he would have been authorised to give one.
179 Viewed collectively, the evidence from Mr Matthews which I have recited and Mr Tony Carmichael’s then position and s 155 response make it inherently likely, in my opinion, that Carmichael’s tender was based on a cover price obtained by Mr Matthews with Mr Tony Carmichael’s permission from Kelly’s Mr Richardson. That is so even taking into account, as I must, considerations raised by s 140(2) of the Evidence Act.
180 For these reasons, I conclude, as against Carmichael that, on or about 6 July 2005, Mr Matthews on its behalf requested and later obtained from Mr Richardson of Kelly a cover price. The cover price supplied was in the range from $8,745,385 to $8,912,520. That is was within this range is inherently likely having regard to the prices each company came to adopt in their tenders and the knowledge of the practice of cover pricing possessed by Messrs Richardson and Matthews. Again having regard to their knowledge of the practice, the arrangement or understanding between these companies had each of the provisions alleged by the ACCC.
181 So far as the purpose of the provisions is concerned, that purpose is no different to the purpose which I described in relation to the Callemondah Project and for like reasons, including with respect to the deeming effect of s 45A of the TPA. Here, too, there was a controlling of price. That was also always the likely effect of those provisions of the arrangement or understanding.
182 Each of the corporate respondents gave effect to the arrangement or understanding to which it was a party by submitting a tender in the particular price which it did.
183 The result is that Kelly and Carmichael have each contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) in the manner alleged by the ACCC.
184 As to accessorial involvement, Mr Murphy authorised the giving by Mr Richardson on behalf of Kelly of a “cover price” to Carmichael in response to its request via Mr Matthews. Given the awareness, described above, which Mr Murphy had of the practice of cover pricing, it necessarily follows, for the same reasons as I gave in respect of Mr Bogiatzis’ accessorial liability conclusion, that Mr Murphy was knowingly concerned in each of Kelly’s s 45 contraventions in respect of the Rockhampton Airport Project.
185 It remains to consider the ACCC’s s 52 case in respect of the Rockhampton Airport Project. In submitting their respective tenders, each of Woollam, Kelly and Carmichael was required to comply with the Conditions of Tendering dated 8 June 2005. Those conditions (by clause 16(a)), required each tenderer to provide a completed Letter of Tender in accordance with Schedule 3. That schedule provided that the tenderer warranted that the tender was made without any connection, knowledge or arrangements with any other tenderer and that, if the Letter of Tender was accepted, the tenderer would unequivocally and irrevocably promise that they would, when requested, sign the contract and proceed in accordance with its terms. Clause 29 of the Conditions of Tendering provided that the tenderer warranted that neither it nor any of its servants or agents nor any other party on its behalf had any knowledge of the tender price of any other tenderer prior to submitting its tender, nor had it disclosed to any rival the tender price, and that its tender was a genuine competitive tender.
186 Each respondent admits that the General Conditions of Contract for the project contained clause 6.3, the contents of which I have previously detailed.
187 For its part, Woollam denies having completed and signed a Letter of Tender. There is no evidence that it did. It admits though that it failed to submit a signed Letter of Tender and that it did not advise either the Council or STE Architects that it had not and was not able to comply with the requirements of the precedent letter found in Schedule 3. Kelly admits that it either completed and signed a Letter of Tender or failed so to do in the same way as Woollam. Carmichael admits that it did submit a Letter of Tender in accordance with Schedule 3.
188 The ACCC alleges that, by reason of the foregoing, each of Woollam, Kelly and Carmichael expressly or impliedly represented that:
(a) they had no connection, knowledge or arrangements with any other tenderer in respect of the tender;
(b) they had no knowledge of the price of any other tenderer at the time of the submission of the tender;
(c) they could give a warranty to the effect that they had no knowledge of the price of any other tenderer at the time of submission of the tender;
(d) their tender was a genuine competitive tender.
189 Of the three corporate respondents, the only admission in respect of these alleged representations is made by Kelly. It admits that it did make a representation that there had been no connection, knowledge or arrangement with any other tenderer in respect of the tender. Kelly also admits that this representation was misleading or deceptive as there had been a connection between it and Woollam and between it and Carmichael.
190 The ACCC further alleges that, in submitting their respective tenders, and having regard to the terms of the Conditions of Tender, the General Conditions and the schedule 3 Letter of Tender (or its absence without a statement that the terms of that letter could not be met) each of the corporate respondents impliedly represented:
(a) they had submitted tenders at competitive prices;
(b) they had arrived at their respective tender prices independently of any discussion involving, or the making of, any arrangement or understanding with any other tenderer; and
(c) they had neither obtained nor given a cover price to any other tenderer.
Of the corporate respondents, only Woollam makes any admission in relation to these alleged, implied representations. It admits that it made the first two of them. There is no doubt, given Woollam’s arrangement or understanding with Kelly and its failure to disclose the same either to the Council directly or to STE Architects, that each of the implied representations it admits was misleading or deceptive.
191 Even apart from the limited admissions that each corporate respondent made each of the alleged representations, both express and implied, is a conclusion which flows, in my opinion, from the lodgement of their respective tenders against the background of the Conditions of Tendering, the provision in schedule 3 for a Letter of Tender and the General Conditions. I have already discussed the construction of clause 6.3. Further, given the respective cover price arrangements or understandings between the corporate respondents and their failure to disclose the same, each of the representations was misleading or deceptive.
192 In becoming a party to the contract for the project, Woollam also made a contractual representation that it had no knowledge of the tender price of any other tenderer at the time of lodging its tender. It admits the making of this representation and that it was misleading or deceptive.
193 It follows that I find that the ACCC has made out its s 52 case as alleged as against each of the corporate respondents.
ORDERS
194 The ACCC sought the making of declarations in respect of such of the contraventions as were found proven. The granting of declaratory relief is discretionary. Here, there is a strong public interest in granting the same.
195 Sommer, which is not a party against which the ACCC chose to institute proceedings, but which is mentioned in the evidence I have recited in these reasons for judgment, sought and was granted leave to make such submissions as it may be advised as to the form of orders which the Court might make. In these circumstances and given a need for it and the parties to have time to consider lengthy reasons for judgment, and that the ACCC has not succeeded in respect of each of the contraventions which it alleged, it is desirable, before pronouncing final orders, to require the ACCC to bring in proposed minutes of orders and to afford the other parties, as well as Sommer, an opportunity to make submissions concerning the same. This opportunity might conveniently be extended in conjunction with the hearing of submissions as to penalty in respect of the corporate Part IV contraventions and in respect of accessorial liability.
196 I therefore propose in the first instance to make an order requiring the ACCC to bring in proposed short minutes of orders to give effect to these reasons for judgment and then to make related procedural orders to the ends which I have mentioned.
I certify that the preceding one hundred and ninety-six (196) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. |
Associate:
