Trade Practices Commission v CC (NSW) Pty Ltd [1995] FCA 375

CATCHWORDS

TRADE PRACTICES - restrictive trade practices - entering into an arrangement or understanding substantially lessening competition - pecuniary penalty to be imposed on individual - determination of appropriate amount.

TRADE PRACTICES COMMISSION v CC (NEW SOUTH WALES) PTY LIMITED & ORS (No 3)

No NG 574 OF 1994

LINDGREN J

SYDNEY

5 MAY 1995

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY) No NG 574 of 1994

GENERAL DIVISION )

BETWEEN:

TRADE PRACTICES COMMISSION

Applicant

AND:

CC (NEW SOUTH WALES) PTY LIMITED formerly known as

CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED

First Respondent

PETER WOOLLARD

Second Respondent

HOLLAND STOLTE PTY LIMITED

Third Respondent

GRAHAM RONALD DUFF

Fourth Respondent

MULTIPLEX CONSTRUCTIONS PTY LIMITED

Fifth Respondent

GEOFFREY THOMAS PALMER

Sixth Respondent

LEIGHTON CONTRACTORS PTY LIMITED

Seventh Respondent

LEONARD DIXON

Eighth Respondent

THE AUSTRALIAN FEDERATION OF CONSTRUCTION CONTRACTORS

Ninth Respondent

RUSSELL NORMAN RICHMOND

Tenth Respondent

CORAM: LINDGREN J

PLACE: SYDNEY

DATE: 5 MAY 1995

MINUTE OF ORDERS

THE COURT:

1. DECLARES that by engaging in the conduct referred to in paragraphs 15 to 19 and 21 of the Amended Statement of Claim, the fourth respondent, Graham Ronald Duff was directly or indirectly knowingly concerned in, and party to the first, third, fifth and seventh respondents ("the Tenderers") and the tenth respondent ("the AFCC") making or arriving at the arrangement which is referred to in paragraph 21 of the Amended Statement of Claim in contravention of s 45 (2) (a) (ii) of the Trade Practices Act 1974.

2. ORDERS that the fourth respondent, Graham Ronald Duff, pay to the Commonwealth of Australia a pecuniary penalty of $25,000 in respect of that contravention of s 45 (2) (a) (ii) referred to in paragraph 1 hereof.

3. DECLARES that by engaging in the conduct referred to in paragraphs 15 to 19 and 21 to 24 of the Amended Statement of Claim, the fourth respondent, Graham Ronald Duff was directly or indirectly knowingly concerned in, and party to the Tenderers and the AFCC making or arriving at the arrangement which is referred to in paragraph 24 of the Amended Statement of Claim in contravention of s 45 (2) (a) (ii) of the Trade Practices Act 1974.

4. ORDERS that the fourth respondent, Graham Ronald Duff, pay to the Commonwealth of Australia a pecuniary penalty of $25,000 in respect of that contravention of s 45 (2) (a) (ii) referred to in paragraph 3 hereof.

5. ORDERS that the fourth respondent, Graham Ronald Duff, be restrained until 5 May 2000, whether by his servants, agents or otherwise howsoever, from:

(a) making or arriving at;

(b) giving effect to;

(d) inducing or attempting to induce, any person to make or arrive at, or give effect to; or

(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the making or arriving at, or the giving effect to, by any person,

any contract, arrangement or understanding with any other person which contains a provision to the effect that:

(i) he will agree to pay to such other person which is unsuccessful an unsuccessful tenderer's fee or a fee payable upon the obtaining by it of any
contract; or

(ii) he will agree to pay to any industry association any special fee for that project which fee is payable upon or by reason of its having obtained any contract;

and which;

(iii)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 tender prices submitted in Australia by building or construction contractors;

(iv) has the purpose of preventing, restricting or limiting the supply of building or construction services by building or construction contractors in Australia to particular persons or classes of persons either absolutely or in particular circumstances or on particular conditions; or

(v) has the purpose, or has or is likely to have the effect, of substantially lessening competition.

6. DECLARES that by engaging in the conduct referred to in paragraphs 15-19 and 21-24 of the Amended Statement of Claim the fourth respondent, Graham Ronald Duff was
directly or indirectly concerned in and party to conduct in contravention of ss 52, 53 (aa), 53 (e) and/or 55A of the Trade Practices Act 1974.

7. NOTES that agreement of the applicant and the fourth respondent that there be no order as to costs.

8. ORDERS that the fourth respondent, Graham Ronald Duff, pay the penalties referred to in paragraphs 2 and 4 within 60 days of the date of this order.

9. NOTES the undertaking given by the fourth respondent by his counsel to make himself available at the reasonable request of the Trade Practices Commission and to make an affidavit for the use of the Trade Practices Commission.

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

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY) No NG 574 of 1994

GENERAL DIVISION )

BETWEEN:

TRADE PRACTICES COMMISSION

Applicant

AND:

CC (NEW SOUTH WALES) PTY LIMITED formerly known as

CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED

First Respondent

PETER WOOLLARD

Second Respondent

HOLLAND STOLTE PTY LIMITED

Third Respondent

GRAHAM RONALD DUFF

Fourth Respondent

MULTIPLEX CONSTRUCTIONS PTY LIMITED

Fifth Respondent

GEOFFREY THOMAS PALMER

Sixth Respondent

LEIGHTON CONTRACTORS PTY LIMITED

Seventh Respondent

LEONARD DIXON

Eighth Respondent

THE AUSTRALIAN FEDERATION OF CONSTRUCTION CONTRACTORS

Ninth Respondent

RUSSELL NORMAN RICHMOND

Tenth Respondent

CORAM: LINDGREN J

PLACE: SYDNEY

DATE: 5 MAY 1995

REASONS FOR JUDGMENT

These proceedings arise out of the Royal Commission into the Building Industry in New South Wales. In particular, they relate to alleged collusive tendering by major construction companies for a particular project known as the Commonwealth Offices - Haymarket ("the Haymarket Project"). The proceedings are brought in respect of contraventions of the Trade Practices Act 1974 (Cth) ("the Act"). These reasons relate to the proceedings only as between the applicant ("the Commission") and the fourth respondent ("Mr Duff").

The Commission commenced the proceedings by application filed on 30 August 1994 seeking one set of remedies against the corporate respondents, that is to say, the first, third, fifth, seventh and ninth respondents, and another set of remedies against the individual respondents, that is to say, the second, fourth, sixth, eighth and tenth respondents. With the application was filed a statement of claim. An amended statement of claim was filed on 17 November 1994. According to the pleading each individual respondent was at all material times employed by the corporate respondent named in the title to the proceedings immediately preceding his name. Accordingly, and so the pleading described them, at all material times Mr Woollard was employed by Concretes, Mr Duff was employed by Hollands, Mr Palmer was employed by Multiplex, Mr Dixon was employed by Leightons and Mr Richmond was employed by the AFCC. As well, it is pleaded that all acts alleged in the amended statement of claim were performed by the individual respondents in their capacities as employees of
their respective corporate employers.

Mr Duff is the third respondent to withdraw his defence and to join with the Commission in making a submission to the Court as to an appropriate level of penalty to be imposed. Mr Richmond was the first to do so. I gave judgment as against him on 24 November 1994 (reported at 1994 ATPR 41-363) and imposed a penalty of $10,000 ("the Richmond judgment"). The second respondent to withdraw its defence was Hollands. I delivered judgment against it earlier today (reported at 1995 ATPR 41-406), imposing a penalty of $400,000 ("the Hollands judgment").

Mr Duff's liability, like that of Mr Richmond, is accessory to that of his employer. I set out the provisions of the Act relevant to principal and accessory liability in the earlier two judgments. Generally I will not repeat those provisions here and, indeed, I take those two judgments as read. But this should be noted. Paragraph (e) of sub-section 76 (1) targets a person who "has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of [a relevant] provision". It is by means of this paragraph that the pleading seeks to draw in Mr Duff. Relevantly, it is, in effect, pleaded that Mr Duff was "knowingly involved in each of the contraventions by each of AFCC and each of the Tenderers" and that by engaging in the conduct pleaded against him, Mr Duff was "directly or indirectly knowingly concerned in, and party to, the Tenderers and the AFCC making and arriving at the arrangements or understandings ..." in contravention of s 45.

At the relevant time, s 76 provided that if the Court was satisfied that a person had been in any way, directly or indirectly, knowingly concerned in or party to, the contravention of a provision of Part IV, the Court might order the person to pay to the Commonwealth such pecuniary penalty in respect of each act or omission by the person to which the section applied, as the Court determined

"to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether th[at] person ha[d] previously been found by the Court in proceedings under this Part to have engaged in a similar conduct".

At all material times, s 76 provided that the pecuniary penalty payable by a person other than a body corporate was not to exceed $50,000 for each act or omission to which the section applied.

It is convenient for me to repeat the "FACTS AS PLEADED" section contained in the Hollands judgment delivered earlier today.

"The following is an account of the facts alleged by the Commission in the amended statement of claim.

At all material times Concretes, Hollands, Multiplex and Leightons carried on business as building and construction contractors in New South Wales and were members of the AFCC. On or about 11 August 1988, Australian Construction Services ('ACS'), part of the Commonwealth Department of Administrative Services, for and on behalf of the Commonwealth of Australia, invited Concretes, Hollands, Multiplex and Leightons ('the Tenderers') to submit tenders for the Haymarket Project.

In or about September or October 1988, John Cunningham ('Cunningham'), Director of Special Projects with the AFCC, for and on behalf of the AFCC, contacted the Tenderers and notified them of his intention to conduct a meeting of them in relation to the Haymarket Project prior to the closing date for tenders. The Tenderers accepted Cunningham's invitation. The intention of Cunningham and of each of the Tenderers in the setting up of, and agreement to attend the meeting, was that the Tenderers would be enabled to take into account in the preparation of their tenders any matters agreed at the meeting, which they expected would include arrangements or understandings on the subjects of a 'special fee' payable by the successful Tenderer to the AFCC, and unsuccessful tenderers' fees payable by the successful Tenderer to the three unsuccessful Tenderers.

Prior to the proposed meeting, Richmond instructed Cunningham to propose that the successful Tenderer should pay to the AFCC a special fee of $1,000,000.

The meeting took place in September or October 1988 and was attended by Woollard of Concretes, Duff of Hollands, Palmer of Multiplex, Dixon of Leightons and Cunningham of the AFCC ('the Meeting') when it was agreed that each Tenderer would, if its tender was accepted, pay a special fee to the AFCC of $1,000,000 ('the Special Fee'), would take its obligation to do so into account in the preparation of its tender, and would not disclose to ACS the terms of the arrangement or understanding or the fact that the Meeting had taken place (para 21 of the amended statement of claim).

After that agreement ('the Special Fee agreement') had been reached, Cunningham was asked to leave the room which he did and the Meeting resumed between the four representatives of the Tenderers who agreed that the successful Tenderer would pay to each of the unsuccessful Tenderers an unsuccessful tenderer's fee of $750,000 ('the UTF'), and that each Tenderer would take this obligation into account in the preparation of its tender, and would not disclose to ACS the terms of the arrangement or understanding or the fact that the Meeting had taken place ('the UTFs agreement') (para 24 of the amended
statement of claim).

The Tenderers did take into account the arrangements or understandings reached at the Meeting in the preparation and submission of their tenders; ACS awarded the contract to Hollands; Richmond caused or procured the AFCC by its National Executive Committee to ratify and levy the Special Fee on Hollands; in or about January or February 1989 Hollands paid $200,000 or $300,000 to the AFCC as part of the Special Fee; subsequently over a period from 24 July 1989 to 1 February 1990 the AFCC sent a series of seven invoices of $100,000 each to Hollands which it paid on account of the Special Fee; Concretes, Multiplex and Leightons each sent to Hollands a series of invoices which represented parts of the respective UTFs and totalled, in respect of each of the other three tenderers, $750,000 which Hollands paid. Each of the invoices sent by the AFCC and by Concretes, Multiplex and Leightons to Hollands purported to be claims for 'consultancy services' which had not been provided and which were never intended to be provided.

The amended statement of claim further alleges that the conduct pleaded constituted various contraventions of the Trade Practices Act 1974 ('the Act')".

I will not give an account of the course of the proceedings to date: such an account can be found in the Hollands judgment. Nor will I again refer to the several single judge decisions of this Court in which it has been held that it is appropriate for the Commission and a respondent to make a joint submission as to a penalty appropriate to be imposed and that it may be appropriate for the Court to impose that penalty: see the Hollands judgment delivered earlier today.

The Commission seeks against Mr Duff declaratory and injunctive relief as well as the imposition of penalties. The Commission and Mr Duff have joined in making a submission on
penalty. Mr Duff has agreed and, indeed, undertaken to the Court, that he will withdraw his defence, and so it is common ground that I should proceed to determine penalty and the fate of the other forms of relief sought by the Commission on the basis that the allegations in the amended statement of claim are made out, at least as between the Commission and Mr Duff. But I emphasise that no evidence has been led and I make no factual findings.

The joint submission made by counsel for the Commission and Mr Duff as to the imposition of penalties included the following:

"The contraventions of Part IV alleged in the pleadings and now admitted were serious and occurred in an industry of importance to the Australian economy.

The Commission accepts that a number of important features warrant the imposition of penalties lower than might otherwise have been appropriate.

First, Graham Ronald Duff, by withdrawing his Defence, has saved the further expenditure of public money and court time. Additionally, Mr Duff's commitment to assist the Commission in its case against the remaining respondents warrants, in the Commission's submission, some leniency.

Second, Mr Duff had no involvement at all in the construction activities of Holland Stolte including their costing until July 1987. From that date until August 1988 his involvement in the construction activities of Holland Stolte were [sic] nominal only. From that date his primary responsibility was the financing of the debt only. From that date his primary responsibility was the financing of the debt of the Holland group including Holland Stolte, all of which matured on 13 October 1988 and which, because of the financial position of the Holland Group was not refinanced until December 1990. The meeting in September or October 1988 was the first meeting of the AFCC which Mr Duff had attended. He contends that he had never been to any 'similar
meetings' in the past.

Even allowing for these ameliorating factors, the contraventions clearly justify, as Mr Duff fully accepts, the imposition of the penalties agreed by the parties. Mr Duff positively submits that the Court should not impose any lower penalties. He acknowledges that the Commission would have wished to make extensive submissions on penalty and would have sought penalties of a considerably higher order had the proposed penalties not been, as they are, actively supported by Mr Duff.

The Commission and Mr Duff jointly submit that the total penalties to which I shall refer fairly reflect the seriousness of the contraventions whilst allowing reasonably for the mitigating factors which I have mentioned. The Commission accepts that it was an essential element in the decision of Mr Duff to withdraw his Defence that he had received an indication from the Commission that if he did so, the Commission would urge the Court that the penalties should be as submitted and no more. In return, Mr Duff urges the Court that the agreed penalties, and no lesser amount, should be imposed.

On the quantum of penalties:

The Commission and Graham Ronald Duff jointly submit that the following penalties should be imposed:

total penalties of $50,000, consisting of the $25,000 for each of the contraventions identified in Schedule 1 of these submissions. An order is sought that the penalties be paid within 60 days of the order.

No additional penalty is sought in relation to the other contraventions made out, but the Court is entitled to take them into account in satisfying itself that the penalties agreed between the parties are appropriate."

For the kinds of reason indicated in the Hollands judgment I think it appropriate to fix penalties totalling $50,000 on Mr Duff, the essential reason being that I would have thought it appropriate to impose a penalty of that general order even without the suggestion of that precise figure by the parties.
It is perhaps noteworthy that by the Richmond judgment, I imposed a penalty of $10,000 on Mr Richmond, the tenth respondent, who was at the relevant time an officer of the AFCC, the ninth respondent. As I said in that judgment, his involvement was substantially less, in my view, than that of an officer of a Tenderer. Mr Duff was such an officer. As well, counsel for the Commission made it clear that he relied only on the Special Fee agreement and not on the UTFs agreement in relation to Richmond, but this consideration does not apply in favour of Mr Duff.

Without more, I can proceed to make orders generally as formulated by counsel for the Commission and Mr Duff. Those orders will include payment by Mr Duff of pecuniary penalties in the sum of $50,000. As well, there will be, by consent, declaratory and injunctive relief.

I certify that this and the preceding 8 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

Associate:

Dated: 8 June 1995

Heard: 5 May 1995

Place: Sydney

Decision: 5 May 1995

Appearances: Mr C A Sweeney QC with Mr P Clay of counsel instructed by Australian Government Solicitor appeared for the applicant.

Mr R J Webb of counsel instructed by Kemp Strang & Chippindall appeared for the fourth respondent.

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