Trade Practices Commission v Garden City Cabs Co-Operative Ltd [1995] FCA 289

The original Word document is unavailable.

Please contact Judgments@fedcourt.gov.au to rectify.

CATCHWORDS

TRADE PRACTICES - whether operational rule of taxi cab co-operative an exclusionary provision - whether substantially lessening of competition in the market.

INTERLOCUTORY INJUNCTION - no serious question to be tried - balance of convenience against granting the orders sought.

Trade Practices Act s.4D, s.45(2), s.45(3)

ASX Operations Pty. Ltd. v. Pont Data Australia Pty. Ltd. [No. 1] (1990) 27 FCR 460 Appl.

Adamson v. New South Wales Rugby League Ltd. (1990) 27 FCR 535; on appeal 31 FCR 242 Appl.

Outboard Marine Australia Pty. Ltd. v. Hecar Investments No. 6 Pty. Ltd. (1982) 66 FLR 124 Appl.

Trade Practices Commission v. TNT Management Pty. Ltd. (1985) 6 FCR 1 Appl.

Trade Practices Commission v. Australian Meat Holdings Ltd. (1988) ATPR 40-878 Appl.

Magna Alloys and Research Pty. Ltd. v. Coffey [1981] VR 23

Queensland Co-Operative Milling Association Ltd; Re Defiance Holdings (1976) 25 FLR 169

Trade Practices Commission v. Garden City Cabs Co-Operative Ltd.

No. QG92 of 1994

Cooper J., Brisbane, 15 March, 1995

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION No. QG92 of 1994

BETWEEN:

TRADE PRACTICES COMMISSION

Applicant

AND:

GARDEN CITY CABS CO-OPERATIVE LTD.

Respondent

JUDGE MAKING ORDER: Cooper J.

WHERE MADE: Brisbane

DATE OF ORDER: 15 March, 1995

MINUTES OF ORDER

THE COURT ORDERS:

1. The application for interlocutory relief is dismissed.

2. The applicant pay the respondent's costs of and incidental to the application to be taxed if not agreed.

3. Liberty to apply.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION No. QG92 of 1994

BETWEEN:

TRADE PRACTICES COMMISSION

Applicant

AND:

GARDEN CITY CABS CO-OPERATIVE LTD.

Respondent

CORAM: Cooper J.

PLACE: Brisbane

DATE: 15 March, 1995

REASONS FOR JUDGMENT

The applicant is the Trade Practices Commission ("the TPC"). The respondent is a co-operative company whose members are owners or operators of licensed taxi cabs in the Toowoomba region.

Amongst the services offered to its members are the receipt of telephone requests for taxi services from members of the public and the allocation of those requests to available taxi cabs via a two-way radio network.

It is the practice of some owners or lessees of licensed taxi cabs to engage drivers to drive the cabs. These drivers may be employed to drive because the owner or operator does not himself/herself drive the cab or to supplement the time when the taxi cab is being driven by its owner or operator. These drivers are paid a commission equal to 50% of the fares paid during the periods that they are driving the taxi cabs.

The respondent as an approved taxi company has a number of operational rules. One of those rules, Operational Rule 54, provides as follows :-

"1. That the three day rule for drivers be changed to a minimum of five days for a period of six months.

2. That this rule be enforced by loss of radio rights for breaches of that rule. Such periods of suspension to be at the discretion of the Directors.

3. That at the expiration of the six month period the arrangements be again assessed by the Directors.

4. Introduction of the above to commence January 4th 1993."

The five day rule operates to require that when a change of driver occurs the new driver will be the only driver of the vehicle when it is available for hire during the ensuing period of five days. The rule excludes a member from driving his or her taxi cab during the five days in which the casual driver is employed. Members who drive their own taxi cabs, and do not employ a casual driver, may drive for whatever period or periods the member may wish and the member is not obliged to operate the vehicle in segments of not less than five days.

There is a standing exception from the rule for a wheelchair accessible taxi cab operated by a Mr. Sheridan which is allowed a 5 day/2 day rotation period. Exemptions are granted to the operation of the five day rule usually on grounds of illness, bereavement or other personal matters. The five day rule is enforced by threatening to withdraw from any member who breaches it access to the radio network. As 60% - 75% of the income of a taxi cab in the Toowoomba Taxi District is earned through radio bookings, loss of access to the radio network represents a significant sanction.

The five day rule has two consequences. The first is to prevent the taxi on any day being operated in double or multiple shifts. The second is that short term casual drivers are not employed for periods of less than five days.

The TPC has for some time been in correspondence and discussion with the respondent as to the continued operation of Operational Rule 54 - the five day rule. The TPC takes the view that the rule is anti-competitive and in breach of provisions of the Trade Practices Act 1974. The respondent contends that such is not the case.

Notwithstanding paragraph 3 of Rule 54 as set out above, the rule does not appear to have been reviewed by the directors after six months. At the General Meeting of 30 May, 1994 the following motion was proposed on the basis that the passing of it would remove the threat of action by the TPC :-

"The five day rule be withdrawn from the rules of Garden City Cabs"

The motion was resolved in the negative by 38 to 35 votes.

The TPC has instituted proceedings in this court for a pecuniary penalty and injunctive relief alleging that the five day rule amounts to a contract, arrangement or understanding, which the respondent is a party to or has given effect to, and which contravenes section 45 of the Trade Practices Act 1974. The TPC has filed a statement of claim in which it alleges that Operational Rule 54, and its enforcement by the threat of a sanction through a loss of the radio access, is a contract, arrangement or understanding containing a provision which has the purpose or likely effect of :-

(a) preventing or hindering any person being the holder of a licence to hire in respect of a taxi cab (a licensed taxi holder) or his or her agent being the holder of a hire drivers licence or any member or shareholder of the respondent from lawfully operating a taxi cab in the Toowoomba Taxi District at such times and during such period as the licensed taxi holder sees fit; or

(b) Substantially lessening competition in any market for the supply of taxi services in the Toowoomba Taxi District.

By way of interlocutory relief the TPC has sought :-

"7. An order requiring the Respondent:

(a) to suspend or withdraw any sanctions imposed directly or indirectly upon any person, being a licensed taxi holder, commissioned driver, member or shareholder of the Respondent or which otherwise disadvantages any such person for any alleged breach of or which gives effect to Operational Rule 54,

(b) to notify in writing forthwith, by notice posted up in the office of the Respondent and by mail to the address last notified by each of the members to the Respondent, to each member and shareholder of the Respondent, that the Respondent will not proceed with the arrangement the subject of Operational Rule 54 and that the Respondent will not give effect to or impose directly or indirectly any sanctions on any person whether licensed taxi holder, commissioned driver, member of shareholder or otherwise disadvantage any such person in the Toowoomba Taxi District for any alleged breach of its Operational Rule 54 pending the determination of this Application.

8. An injunction restraining the Respondent from giving effect to or imposing directly or indirectly any sanctions on any person in the Toowoomba Taxi District whether licensed taxi holder, commissioned driver, member or shareholder or otherwise disadvantaging any such person for any alleged breach of its Operational Rule 54, pending determination of this Application".

Section 45 of the Trade Practices Act 1974, so far as is relevant, provides :-

"45(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 an 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."

An "exclusionary provision" within the meaning of section 45(2)(a)(i) and 45(2)(b)(i) is defined in section 4D as follows :-

"4D(1)A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if -

(a) the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any two or more of whom are competitive with each other; and

(b) the provision has the purpose of preventing, restricting or limiting -

(i) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or

(ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions,

by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate.

(2) A person shall be deemed to be competitive with another person for the purposes of sub-section (1) if, and only if, the first-mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the 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 the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates."

Although there was substantial argument before me as to whether the respondent was a trading corporation for the purposes of the Trade Practices Act, I am prepared to assume that there is, on the evidence, a serious question to be tried on this issue.

In order to bring the respondent within the operation of section 45(2)(a)(ii) or (b)(ii) and to satisfy the requirement in section 45(3) that the relevant "competition" to which the contract arrangement or understanding must relate is a market in which the respondent competes with other parties to the agreement, it is alleged that the respondent competes in the market for the carriage of passengers by licensed taxi cabs in the Toowoomba Taxi District against its members, other persons licensed to drive taxi cabs and the members of Yellow Cabs, the other approved taxi cab company in Toowoomba. The allegation is that as the holder of a licence to hire in respect of a special disability taxi cab operated in the Toowoomba Taxi District, the respondent is a competitor in that market. This allegation is, in my view, misconceived on the factual material before the court and the legal framework for the provision of taxi services in Queensland.

Taxi services in Queensland are controlled by the State Transport Act 1960 (Qld.) and the State Transport Regulations 1987 (Qld.). This Act and the regulations are administered by the State Transport Department.

Queensland is divided into taxi districts. Within those districts taxi services for reward are provided by the persons who hold a licence to hire in respect of a vehicle approved for the purpose of that licence. A licence to hire enables the holder to carry passengers within the licensed area and outside it to a place that is not more than 40 kilometres from the principal post office in the licensed area (regulation 21).

The only persons entitled to drive a taxi meter cab are :-

(a) the holder or lessee of a current licence to hire issued in respect of that vehicle;

(b) the holder of a current driver's licence issued in respect of that type of vehicle; a hire driver's licence.

(See regulation 30)

It is the holder of the licence to hire, or the lessee of the licence to hire of that person, who competes in such market as exists for the provision of taxi services within the geographical limits set under the State Transport Regulations. Persons who hold a hire driver's licence but do not hold or lease a licence to hire in respect of an approved taxi cab do not compete in the market when he or she drives a taxi cab for the owner or lessee of that cab. That driver is a mere employee; the employer competes in the market using the labour of the casual driver.

On the material, the licence to hire in respect of the special vehicle for the carriage of passengers with disabilities is leased to a Mr. Sheridan. In this respect the respondent receives income unrelated to the earnings of the vehicle as a taxi cab. It performs the role of an equipment and licence supplier to Mr. Sheridan. Mr. Sheridan as lessee of the licence to hire is the one who competes in the market, not the respondent.

The only persons who operate taxis in the Toowoomba Taxi District, on the evidence before me, are individuals who are the holders of the relevant licence to hire (see regulations 10-17 inclusive as to the personal requirements and disqualifications of an applicant for a licence to hire).

Because the respondent is not a competitor in the market pleaded by the TPC and cannot be said to have aided, abetted, counselled or procured any person in a contravention of section 45(2)(a)(ii) or (b)(ii), there is no serious question to be tried that the respondent has contravened either of these subsections.

The exclusionary provision alleged by the TPC to which the respondent is a party is one where the two or more requisite competitors are the members of the respondent who hold a licence to hire and themselves operate taxi cabs in the Toowoomba Taxi District. It is alleged that the five day rule, as agreed by the members and as administered by the respondent, has the purpose of preventing, restricting or limiting :-

(a) the acquisition of the driving services from a particular class of casual drivers, namely those who refuse or are unable to work for a period of five days;

(b) the supply of taxi services to members of the public in the Toowoomba Taxi District as a class who may from time to time wish to hire a taxi.

Even assuming that those casual drivers who cannot or will not work for periods of five days or more are a class of persons for the purpose of section 4D because they do not satisfy the criteria for employment (ASX Operations Pty. Ltd. v. Pont Data Australia Pty. Ltd. [No. 1] (1990) 27 FCR 460 at 487-488), the provision of work under a contract of service is not a service within the meaning of section 4D or section 45(2)(b)(ii) (see the definition of "services" in section 4(1); Adamson v. New South Wales Rugby League Ltd. (1990) 27 FCR 535; on appeal 31 FCR 242). Additionally, there is no evidence that the holders of licences to hire compete with each other to employ casual drivers. On the material before me employers pay remuneration calculated at 50% of the earnings of the taxi cab for the period it is being driven by a casual driver. There is therefore no price competition between employers seeking casual drivers nor is there any evidence to suggest that any casual drivers are prepared to work for less than 50% of the taxi cab's earnings. Even if employed labour came within the definition of
services there is no evidence of a competitive market for such labour in Toowoomba.

The TPC therefore does not make out a serious question to be tried of an exclusionary provision on the first basis contended for by it.

I turn to the second basis argued by the TPC

The relevant purpose required by section 4(D)(1) is the subjective purpose of the respondent (ASX Operations Pty. Ltd. v. Pont Data Australia Pty. Ltd. [No. 1] (1990) 27 FCR 460).

Here the TPC must show that there is a serious question to be tried that the subjective purpose of the five day rule was the preventing, restricting or limiting of taxi services to particular persons or a class of persons. In my view the TPC fails for two reasons: the first is that no particular persons or class of persons can be identified and the second is that no subjective purpose to prevent, restrict or limit taxi services to users of taxi services in the Toowoomba Taxi District can be shown.

The Toowoomba Taxi District has geographical limits. The holders of licences to hire may not ply for hire outside those geographical limits. The potential users of taxi services in the Toowoomba Taxi District are all those persons resident or present in the area who may wish to use a taxi cab from time to time. If the five day rule operates in respect of users of taxi cabs in Toowoomba, it does so without discriminating between persons or any class of persons. There is no feature which
distinguishes or differentiates between taxi cab users. The situation may be contrasted with the distinction between users in ASX Operations Pty. Ltd. v. Pont Data Australia Pty. Ltd. [No. 1] who agreed to the conditions of use of the service and those who would not; the denial of access to the service because of a refusal to comply with the conditions was the feature that marked out the class.

Additionally, the subjective purpose was not to do anything in relation to the way taxi services were provided in the Toowoomba Taxi District by members of the respondent. The five day rule was agreed in circumstances where there was, on the evidence and apparently agreed by all sides, an over-supply of capacity to serve the market for taxi services by approximately ten taxi cabs. The subjective purpose of prohibiting double and multiple shifts was to avoid additional capacity, if any, being introduced into the market by such practices. The level of taxi services available to taxi users remained unaltered by the introduction of the five day rule. It is important to note that the five day rule was not introduced in isolation. It was part of a course of conduct to manage capacity to ensure that there existed in the market a twenty-four hour, seven day service. The respondent, as a condition of its approval by the Department of Transport, was required to maintain, if necessary, a roster of vehicles to ensure that such a taxi service was available (Policy Statement No. PC:06). The demand in Toowoomba was so poor on Sunday, Monday and Tuesday nights that a roster was necessary. Otherwise no adequate taxi service was available. The five day rule was essentially to avoid additional capacity by the use of double or multiple shifts being introduced for the period Wednesday to Saturday inclusive.

For the above reasons the TPC has not made out a serious question to be tried.

Although the question of balance of convenience does not arise (Magna Alloys and Research Pty. Ltd. v. Coffey [1981] VR 23), I should record briefly that I consider the balance of convenience to be against making the orders sought.

The taxi market in Toowoomba is so controlled by the State Transport Regulations that the abolition of the five day rule will have no impact upon the present availability of taxi services in the Toowoomba Taxi District and the cost of them to taxi users. Any impact on the market would be de minimus for two reasons. The first is the inflexibility in the way that taxi services are operated in the area under the State Transport Regulations - the taxi rank rule, the no touting rule, the taxi meter rules. The conduct of the suppliers of taxi services in the Toowoomba Taxi District is the antithesis of what the Trade Practices Tribunal in Queensland Co-Operative Milling Association Ltd; Re Defiance Holdings (1976) 25 FLR 169 saw in the concept of competition. The Tribunal said (at 188-189) :-

"Competition expresses itself as rivalrous market behaviour. In the course of these proceedings, two rather different emphases were placed upon the most useful form such rivalry can take. On the one hand it was put to us that price competition is the most valuable and desirable form of competition. On the other hand it was said that if there is rivalry in other dimensions of business conduct - in service, in technology, in quality and consistency of product - an absence of price competition need not be of great concern.

In our view effective competition requires both that prices should be flexible, reflecting the forces of demand and supply, and that there should be independent rivalry in all dimensions of the price-product-service packages offered to consumers and customers."

The second reason is the over supply of capacity in the Toowoomba Taxi District. The impact of the five day rule is not to deny capacity to service unfulfilled demand. The only allegation of unsatisfied demand is the contested allegation that the night club trade at between 1.00 a.m. and 3.00 a.m. on Saturday and Sunday mornings is delayed in getting taxis on demand when leaving a Toowoomba night club. I do not accept that it necessarily follows that double or multiple shifts will reduce delays in the night club trade. The hour at which the service is required, the behaviour and state of intoxication of some patrons are circumstances which may reasonably be considered as unattractive features of this segment of the trade. They may be sufficient reasons in themselves to dissuade some taxi owners from making their taxis available to service the trade and to discourage some employed drivers from attending such ranks.

The convenience of consumers is not an important feature for the determination of the state of competition in a market: Outboard Marine Australia Pty. Ltd. v. Hecar Investments No. 6 Pty. Ltd. (1982) 66 FLR 124 at 135; Trade Practices Commission v. Australian Meat Holdings Ltd. (1988) ATPR 40-878; Trade Practices Commission v. TNT Management Pty. Ltd. (1985) 6 FCR 1. Mere delay to night club patrons in the circumstances in which and time at which they seek taxis is not indicative of the competitive state of the market in my view. If, as alleged, the delay is and was unacceptable, then the State Transport Department would, one assumes, require the respondent to roster on sufficient taxis to provide an adequate service and there is no suggestion on the material that this has ever been contemplated.

The TPC submitted that some owners of taxi cabs had complained that they were suffering financial loss because of the operation of the five day rule. But as counsel for the TPC made clear in her submissions, the possibility of increased earnings to those taxi cab owners came not through increased economic activity in the market, but from the ability to exclude employed part-time taxi drivers from the peak demand periods. The increase in income comes from not having to share the income of the peak periods with the casual employees.

The one group which stands to suffer by the removal of the five day rule, whether on an interlocutory basis or permanently, is the employed casual taxi drivers. They will lose an arrangement which effectively delivers guaranteed minimum hours and the potential to earn a reasonable wage and be faced with the possibility of only being offered work at the margins in the off-peak periods for indefinite periods of time. The impact of the abolition of what amount to minimum conditions of employment in the absence of any demonstrable public interest or benefit to be gained in the market for taxi services in the Toowoomba Taxi District would itself be sufficient, in my view, to swing the balance of convenience against making the orders sought.

The application for interlocutory relief is dismissed with costs.

THE COURT ORDERS:

1. The application for interlocutory relief is dismissed.

2. The applicant pay the respondent's costs of and incidental to the application to be taxed if not agreed.

3. Liberty to apply.

I certify that this and the preceding fourteen (14) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.

Date: 15 March, 1995

Associate

Counsel for the Applicant: Ms. P. Wolfe

Solicitors for the Applicant: Australian Government Solicitor

Counsel for the Respondent: Mr. F.L. Harrison Q.C.

Solicitors for the Respondent: Hogan & Young as town agents for Shine Murdoch Solicitors

Date of Hearing: 23 August, 1994

Place of Hearing: Brisbane

Date of Judgment: 15 March, 1995

Top