FEDERAL COURT OF AUSTRALIA
J McPhee & Son (Aust) Pty Ltd v ACCC [2000] FCA 365
TRADE PRACTICES – appeal – attempts to make an arrangement or reach an understanding regarding quotations for freight cartage – one attempt not successful, one attempt successful – whether case found by primary judge differed from that advanced by applicant – whether primary judge misunderstood respondents’ case – whether primary judge was biased – assessment of witnesses by primary judge – corporate intention.
TRADE PRACTICES – appeal – penalty – object of penalty – deterrence – deliberateness of conduct – punishment.
TRADE PRACTICES – appeal – penalty – considerations in imposing penalty – attitude of contraveners to compliance with Trade Practices Act 1974 (Cth) – contraventions occurred after parent company was penalised for earlier contraventions – whether knowledge was held by contraveners of earlier contraventions – effect of knowledge of earlier contraventions in imposing penalty.
TRADE PRACTICES – appeal – penalty – two penalties imposed for related conduct – no distinction made before primary judge between forming arrangement and giving effect to arrangement – one penalty appropriate.
Trade Practices Act 1974 (Cth): s 4D, s 45, s 45A, s 75B, s 76(1)
R v Associated Northern Collieries (1912) 14 CLR 387 cited
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 cited
Browne v Dunn (1893) 6 R 67 considered
Briginshaw v Briginshaw (1938) 60 CLR 336 considered
Re JRL; Ex parte CJL (1986) 161 CLR 342 cited
Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40‑091 cited
Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 cited
Trade Practices Commission v Carlton & United Breweries Ltd (1991) 24 FCR 532 cited
Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41‑375 cited
Trade Practices Commission v Prestige Motors Pty Ltd (1994) ATPR 41‑359 cited
J McPHEE & SON (AUSTRALIA) PTY LIMITED & ORS v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
VG 162 of 1998
BLACK CJ, LEE & GOLDBERG JJ
12 APRIL 2000
MELBOURNE
| IN THE FEDERAL COURT OF AUSTRALIA |
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| BETWEEN: | J McPHEE & SON (AUSTRALIA) PTY LIMITED (ACN 001 856 113) First Appellant
RICHARD FORDE Second Appellant
DOUGLAS MORTON Third Appellant
CRAIG HOLLAND Fourth Appellant
GUY WEBB Fifth Appellant
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| AND: | AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Respondent
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| DATE OF ORDER: | |
| WHERE MADE: |
THE COURT ORDERS THAT:
1. The appeal be allowed in part.
2. Paragraphs 1, 2, 3 and 4 of the order of Heerey J made 27 March 1998 be set aside and in lieu thereof it be ordered that:
1. The first respondent pay the following pecuniary penalties:
(a) $2 million in respect of its contravention of the Trade Practices Act 1974 (Cth) (“the Act”) as alleged in paragraphs 12, 19 and 20 of the second further amended statement of claim (“the claim”).
(b) $500,000 in respect of its contravention of the Act as alleged in paragraphs 15 and 21 of the claim.
2. The second respondent pay a pecuniary penalty of $80,000 in respect of his contravention of the Act as alleged in paragraphs 24 and 25 of the claim.
3. The third respondent pay a pecuniary penalty of $65,000 in respect of his contravention of the Act as alleged in paragraphs 26 and 27 of the claim.
4. The fourth respondent pay a pecuniary penalty of $45,000 in respect of his contravention of the Act as alleged in paragraphs 30 and 31 of the claim.
3. The appellants file and serve any written submissions on the issue of the costs of the appeal within fourteen days and the respondent file and serve any written submissions on the issue of the costs of the appeal within fourteen days after the filing and service of the appellants’ submissions.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
| IN THE FEDERAL COURT OF AUSTRALIA |
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| JUDGE: | |
| DATE: | |
| PLACE: |
REASONS FOR JUDGMENT
Introduction
1 The appellants appeal against a decision of Heerey J that the first appellant, J McPhee & Son (Australia) Pty Limited (“McPhee”), engaged in conduct which involved contraventions of Pt IV (s 45) of the Trade Practices Act 1974 (Cth) (“the Act”) and that the second, third, fourth and fifth appellants, officers and employees of McPhee, were involved in those contraventions within the meaning of s 75B of the Act. His Honour ordered that McPhee pay pecuniary penalties totalling $3,750,000 and that the second, third, fourth and fifth appellants pay pecuniary penalties of, respectively, $100,000, $80,000, $60,000 and $15,000. Each of the appellants appeals against the decision of Heerey J insofar as he found that McPhee had contravened Pt IV of the Act and all appellants, except the fifth, appeal against the amount of the pecuniary penalties imposed.
2 In his reasons for judgment his Honour set out the case advanced by the Australian Competition and Consumer Commission (“the Commission”) and the case advanced by the appellants, made certain findings as to the credibility of witnesses and the probabilities and then made his findings of fact.
3 A primary submission of the appellants was that there was a fundamental flaw in his Honour’s reasoning and that this vitiated the whole of the judgment. The appellants also submitted that his Honour misunderstood McPhee’s case and consequently failed to consider it or have regard to it.
4 The appellants also contended that the judge erred in the way he approached the evidence and made findings of fact. One of their particular contentions was that his Honour approached the credibility of witnesses on a group basis rather than considering separately each witness’ evidence and credibility.
5 At a more detailed level the appellants challenged a number of his Honour’s findings as to which version of conversations between McPhee representatives and Discount Freight Express representatives he would accept. As we later point out, however, when the appellants’ complaints are examined closely, they are not so much that there was no evidence upon which his Honour could have made the findings he did, but rather that the nature of the evidence was such that he should not have accepted the DFE’s representatives’ versions of the conversations.
6 McPhee is an express freight carrier. One of the principal competitors in the express freight industry is Multi Group Distribution Services Pty Ltd which trades as Discount Freight Express (“DFE”). The conduct his Honour had to consider centred around two of McPhee’s customers, Just Jeans Pty Ltd (“Just Jeans”) and ACI Operations Ltd trading as ACI Florapak (“ACI Florapak”). His Honour found that McPhee attempted to make an arrangement or reach an understanding with DFE that it would submit to Just Jeans a quote for its freight cartage which was not less than McPhee’s quote. Such a quote is known in the industry colloquially as a “cover” quote. His Honour found that the agreement or understanding, although attempted, was not completed or given effect to. In relation to ACI Florapak he found that an arrangement or understanding whereby DFE would submit a quote to ACI Florapak which was not less than McPhee’s quote was completed and given effect to.
7 McPhee and DFE had a commercial relationship for many years, going back to 1974, which involved acting as a subcontractor for each other and sharing some facilities. There was also a personal friendship between the second appellant, Mr Richard Forde, a Director of McPhee, and Mr Gregory Poche, the Managing Director of DFE. His Honour found that as a consequence of this relationship each company had a policy of not quoting for business to a customer of the other, at least where the customer was not dissatisfied with the service provided and was only seeking a cheaper price. The appellants submitted that this finding was not justified by the evidence, which they said showed only a unilateral policy on the part of DFE.
8 On the hearing of the appeal the first appellant, McPhee, was represented by senior and junior counsel and the other appellants, Messrs Forde, Morton, Holland and Webb were separately represented, also by senior and junior counsel. The appeal was heard over five days. Extensive oral and written submissions were made on behalf of McPhee and on behalf of the other appellants. Some of the submissions covered the same ground, but others did not and it will be necessary from time to time in these reasons to make separate reference to those submissions. For convenience, we shall refer to the submissions made on behalf of the appellants, other than McPhee, as those made on behalf of the “executives”, recognising that this overstates the position of at least one of them.
THE JUST JEANS CONDUCT
9 His Honour made the following findings of fact. Just Jeans had been a major customer of McPhee for a number of years during which time McPhee had carried freight for Just Jeans throughout Australia. On 3 May 1995 McPhee gave Just Jeans a quote dated 2 May 1995 for future work. It provided for a substantial increase on the rates previously charged. Just Jeans said that the rates seemed excessively high and that due to the size of the increase it would need to go to tender and seek prices from other carriers. Mr Doug Morton, McPhee’s Business Development Manager, agreed and conceded that McPhee had left Just Jeans no alternative but to go to tender. An aspect of the quote, the significance of which will become apparent, was that it was based on an “average cubic factor of 1m3 equalling 178 kilograms”. The quotation gave rates for express service ex‑Sydney and ex‑Melbourne to named destinations and in each case there was the basic charge expressed as cents per kilogram and also a figure stated to be “Equivalent Cents per Kg (KG @ 250kg = 1M3)”. The standard in the industry assumed that a cubic metre of freight weighed 250kg but the McPhee quote was based on the assumption that freight for Just Jeans would be light in weight and only 178kg per cubic metre. Thus, if a carrier was using space to carry a load for which there was a lower than average chargeable weight, the rate needed to be correspondingly higher.
10 On or about 8 May 1995 Mr Forde telephoned Mr John Young, who was DFE’s General Manager in Victoria, and invited him and other DFE executives to visit McPhee’s premises for lunch on 16 May 1995. The invitation was accepted and on 16 May 1995 Mr Young and other DFE executives came to lunch. The other DFE executives at the lunch were Mr Gordon Wilson, DFE’s Victorian Sales Manager and Mr Brian Fitt, DFE’s General Manager Victoria. After they were given a tour of the new premises they had lunch with Mr Forde (the second appellant), Mr David Clarke, McPhee’s Sales Manager, Mr Craig Holland, McPhee’s General Manager Victoria (the fourth appellant), and Mr Doug Morton, (the third appellant). Some other McPhee personnel were also present. After the lunch a meeting took place in Mr Forde’s office. What happened at that meeting is controversial.
11 His Honour found that the lunch meeting was arranged by Mr Forde for the purpose of persuading DFE to put in a cover quote to Just Jeans. McPhee’s case was that the lunch was organised for innocent purposes to enable the DFE representatives to see over McPhee’s new premises.
12 At the meeting in Mr Forde’s office after lunch, Mr Forde spoke about the relationship between McPhee and DFE. The Just Jeans account was raised and Mr Morton and Mr Holland said that they wanted DFE to submit a quote to Just Jeans. His Honour found that McPhee’s intention was to have DFE quote, but not competitively. Mr Morton gave evidence that DFE was asked to quote for a number of reasons: friendship or commercial responsibility to Just Jeans so that DFE’s policy of not quoting McPhee clients did not get in the way; concern that if there were only two quotes, McPhee’s and IPEC’s and McPhee’s quote was the higher, its quote would seem unreasonable; and concern about the legality of DFE’s policy of not quoting on McPhee accounts.
13 His Honour found that McPhee must have believed that it had some chance of retaining the Just Jeans business and that its chance could only be affected for the worse by DFE putting in a competitive tender. His Honour said that there was no logic in McPhee intending the tender it asked DFE to submit to Just Jeans to be a competitive tender but that there would be logic in McPhee intending or hoping that the quote DFE submitted would “cover”, that is, in effect, not be competitive.
14 His Honour found that on the following day Mr Morton telephoned Mr Young and in the course of the conversation told him the rates McPhee had quoted to Just Jeans and said words to the effect that McPhee was seeking a significant increase from Just Jeans. (Mr Morton denied that he made any reference to rates in the conversation.) On the same day Mr Holland telephoned Mr Stephen Bates, DFE’s Deputy Managing Director, and made observations about Just Jeans which his Honour found were intended to make DFE quote high.
15 On 22 May 1995 Mr Bates spoke to Mr Morton on the telephone about Just Jeans and his Honour found that in the course of the conversation Mr Morton told Mr Bates to “watch the service – they demand a lot and they are cubic”.
16 Around the middle of May 1995 DFE received the Just Jeans tender document. On 19 June 1995 DFE handed a quote to Just Jeans and on 26 June DFE delivered a revised quote.
17 On 28 June 1995 Mr Forde had two telephone conversations with DFE officers. In the first he spoke to Mr Young and told him that DFE had submitted two quotations to Just Jeans and “that could put our relationship in jeopardy”. In his evidence Mr Forde denied speaking to Mr Young. In the second conversation Mr Forde spoke to Mr Poche (which Mr Forde agrees he did) and told him that DFE’s quote to Just Jeans had been 17.7% lower than McPhee’s quote. Mr Forde made a diary note at the time which referred to this figure. Mr Forde’s evidence was that he was referring in the note to the amount by which McPhee had been undercut by IPEC, but his Honour found that Mr Morton passed on the figure of 17.7% to Mr Poche and that Mr Poche was complaining about the difference between DFE and McPhee, not the difference between IPEC and McPhee.
18 On 5 July 1995 Just Jeans decided to accept the IPEC tender. On 6 July 1995 Mr Holland offered Just Jeans a 7% reduction in the rates in McPhee’s quotation and on 25 or 26 July 1995 Mr Holland offered a further 7% reduction in the rates in McPhee’s quotation. On 13 July 1995 DFE wrote to McPhee terminating their commercial relationship. On 15 August 1995 Just Jeans advised McPhee and IPEC that the account would go to IPEC.
Whether the case found by the judge was different from the case pleaded or advanced
by the Commission
19 The appellants submitted that his Honour decided the case on a basis not pleaded and on an issue not pleaded. It was submitted that it was not open on the pleading for his Honour to find, as he did, that IPEC was the object of the attempted arrangement or understanding.
20 His Honour found that the McPhee executives hoped that if DFE put in a cover quote McPhee’s chances against IPEC would be much improved. The executives submitted that his Honour reasoned that McPhee intended to use DFE as a tool to defeat the threat posed by IPEC to McPhee’s business from Just Jeans. It was submitted that this was not the case advanced at trial by the Commission, which was that McPhee attempted to make an arrangement or reach an understanding with DFE that DFE would take steps to ensure that the custom of Just Jeans would not be solicited or attracted away from McPhee by DFE. The executives submitted that there is an inconsistency therefore between the case advanced by the Commission and the case as found by his Honour. It was said that the case found by the judge was never the subject of pleading, cross‑examination or address and that it was never put, or open to be put, that IPEC was the “target”. We do not consider that there is such an inconsistency as claimed.
21 It was said that the object of the arrangement or understanding as found was IPEC whereas the object of the arrangement or understanding as pleaded was DFE. It was also said that the object as pleaded was not open on the evidence.
22 Paragraph 12 of the amended statement of claim commences with an allegation that McPhee attempted to make an arrangement with DFE in relation to Just Jeans which contained provisions to the effect that McPhee and DFE would take steps, including refraining from competing on prices or rates, to ensure that the custom of Just Jeans would not be attracted away from McPhee by DFE. Paragraph 12 is in the following terms:
“In or about May‑June 1995, McPhee attempted to make an arrangement or reach an understanding with DFE in relation to express freight transportation services provided by McPhee to Just Jeans Pty Ltd trading as ‘Just Jeans’ (‘Just Jeans’) and Jay Jay’s Warehouse Pty Ltd trading as ‘Jay Jay’s’ (‘Jay Jay’s’) containing provisions to the effect that:-
(a) McPhee and DFE would take steps, including refraining from competing on prices or rates, to ensure that the custom of Just Jeans and Jay Jay’s, being customers of McPhee, would not be solicited or attracted away from McPhee by DFE;
(b) if DFE was requested to quote for the custom of Just Jeans and Jay Jay’s, DFE would submit a quotation at a price or rate no less than the price or rate then being charged or proposed to be charged by McPhee;
(c) if McPhee sought to increase or had increased its prices or rates for services to Just Jeans and Jay Jay’s, DFE would assist McPhee to implement such increase by, if requested to quote for the custom of Just Jeans and Jay Jay’s, submitting a quotation at a price or rate no less than the price or rate to which McPhee had increased or proposed to increase its prices or rates;
(d) McPhee would supply to DFE details of the prices or rates charged by McPhee to Just Jeans to enable the provisions set out in sub‑paragraphs (a)‑(c) hereof to be put into effect.”
Particulars are given which include conversations to the effect that McPhee did not see IPEC as a serious contender for the business and that McPhee was confident of holding the business.
23 The appellants submitted that the pleading alleges that McPhee attempted to make an arrangement whereby DFE, if requested to quote, would put in a cover quote. His Honour found that McPhee attempted to get DFE to quote but not to quote competitively. Although the words are different the concept is the same, that is ensuring that the quote put in would not be considered more attractive to Just Jeans than the quote of McPhee. We do not see a pleading distinction or indeed a substantive distinction in the circumstances of this case between attempting to get DFE, if requested to quote, to quote at a price or rate no less than the price or rate charged or proposed to be charged by McPhee and attempting to get DFE to quote but not to quote competitively.
24 It is true that in the amended statement of claim there is no mention of IPEC, except in the particulars, and in the particulars the allegation being made is that McPhee, although worried about IPEC, did not really see it as a serious contender. But if one reduces the case as found to its essentials, they are that McPhee attempted to make an arrangement with DFE that DFE would not give a competitive quote in relation to the Just Jeans business. This is essentially the case that is pleaded. As the case was originally put DFE was asked to give a cover quote because it was DFE and not IPEC that presented the significant threat. On the case as it was ultimately found, it was IPEC that posed the more significant threat but DFE was asked to give a cover quote because, as his Honour found, a competitive quote would have been detrimental to McPhee’s interests. This finding was based upon his Honour’s determination that there was a chance that IPEC would in fact not get the business and that McPhee could.
25 The case pleaded is one of an attempt to make an arrangement or reach an understanding with DFE that McPhee and DFE would take steps to ensure that Just Jeans’ custom would not be solicited or attracted away from McPhee by DFE. Such an arrangement or understanding can be established whether or not McPhee was apprehensive of the threat posed by IPEC. The concern about IPEC may well have been the motive for the attempt to make the pleaded arrangement or reach the pleaded understanding with McPhee but that motive does not change the nature or purpose of the arrangement or understanding attempted. It was not necessary to plead that the arrangement or understanding attempted was motivated by a concern about IPEC. The object of the attempted unlawful arrangement, properly construed, was always DFE, that is to say McPhee attempted to get DFE to participate in the arrangement; it did not attempt to get IPEC to participate in the arrangement. The object or purpose of the attempted arrangement was to keep the Just Jeans account for McPhee at McPhee’s price. This is the case pleaded in par 12 of the amended statement of claim. It is only sub‑par (a) of par 12 which pleads that the arrangement was to ensure that the Just Jeans business was not attracted away from McPhee by DFE. But that position still existed even if IPEC was regarded by McPhee as being the favourite to gain the Just Jeans business, if it be accepted, as his Honour found, that McPhee believed it had a chance of retaining the Just Jeans business. The motive for the unlawful arrangement, as the Commission’s case emerged, changed from a motive involving a situation in which there were two strong competitors and one with smaller prospects, to a motive in the context of a different competitive situation involving the same three parties, but in which the party formerly perceived as weak had become the strongest but the others still had some sort of a chance. Either way, the case involved a purpose to ensure that DFE’s quotation would support McPhee’s quotation and not be attractive to Just Jeans. It never became a case in which IPEC had any involvement in the attempted arrangement.
26 The change in the position of IPEC to that of a strong contender does not affect the pleading at all; the pleading focuses upon the parties to the alleged arrangement. This seems to us to be the end of the matter as a technical point of pleading, but if one looks more broadly to the question of fairness, no case of unfair departure from the limits of the pleading has been made out. The issues were extensively dealt with and the belief of the McPhee executives as to IPEC’s chances of taking the work away from McPhee was explored in the evidence. Similarly, par 12(b) of the statement of claim covers the situation whether the strong contender was DFE or IPEC. The paragraph simply alleges that there was an attempt to make an arrangement with DFE in relation to the Just Jeans work that, if DFE was requested to quote for the Just Jeans work, it would submit a quotation at a price or rate no less than the price or rate then being charged or proposed by McPhee. The reason for such an attempt was not the subject of the pleading. So, even if it could be said that IPEC was the object – in the sense of the motivating reason – for the alleged attempt, the unlawful act alleged is that covered by the pleading.
27 We do not consider that there was any unfairness involved in his Honour reaching the conclusion he did as the constituent elements of the case he found were put to the McPhee witnesses. They were given the opportunity to respond to the proposition that DFE and McPhee had prospects of obtaining the Just Jeans business, that IPEC had good prospects of obtaining the business and that the purpose of getting DFE to quote was to make the McPhee quote look more palatable to Just Jeans. For example, in cross‑examination, Mr Morton said that, in telling DFE that he wanted them to quote, he was asking mates to engage in an exercise in futility. He then said he wanted to clarify his answer and the following exchange occurred:
“HIS HONOUR: Do you want to add something? --- With DFE submitting a proposal to Just Jeans, I would expect that DFE would have submitted a proposal to Just Jeans to their standard and I believe that their standard would have been very, very close to McPhee’s standard, although possibly lower than. In my mind, IPEC’s quote was out of the ordinary, they would have come in to buy the business knowing the size of the account, knowing the service levels that were required, and me knowing that Just Jeans, Ivan Pellegrini, believed in the service of IPEC. So when you say that it was a futile exercise as far as DFE was concerned, by their standards it should not have been a futile exercise, they would have gone in as we did to try to win – to submit a proposal, a fair proposal.
MR BURNSIDE: You thought IPEC would get the job? --- I thought that IPEC would get the business.
Therefore, DFE would not get the job? --- That DFE would not get the business.
And therefore the effort and time and cost of putting together their tender was inevitably going to be a waste? --- Not – my feelings, personal feelings, yes. My personal feelings, yes, I emphasise my personal feelings.
Sure. I am only asking about how you saw the position as it stood? --- That’s right.
You didn’t want IPEC to buy the business in the way you have described, did you? --- Of course not.
And you thought that you might be in the race if DFE put in a quote? --- No, that is not correct.”
Later Mr Morton was asked in re‑examination:
“You were asked about why you wanted DFE to quote and, in the course of your answers in cross‑examination, you said, ‘I didn’t want to look bad in Just Jeans’ eyes’. Would you tell His Honour in what ways you feared you might look bad in their eyes if DFE didn’t quote?”
He answered:
“I thought, Your Honour, that we would have been asking – in their eyes, we may have been asking an unfair price for the work that we were doing.”
A similar line of questions was put to Mr Holland as follows:
“… were you optimistic or pessimistic about retaining the work based upon the rates that you set out in the 2 May 1995 quote? --- I would have to say I was neutral, because I was in no position to make any judgment as to how Ivan Pellegrini and his company would make their evaluation, taking into balance their requirements for high service, which normally means a higher price, and his desire to be confident that he was paying a price that he could afford and was prepared to pay.
So did you perceive at the time that IPEC, therefore, was a serious contender in relation to the Just Jeans account? --- Yes, I did.
Did you perceive at the time that your quote would be competitive with any quote that might be put in by IPEC for the Just Jeans account? --- On the basis of my experience in the market, as I described to His Honour yesterday, it was more likely, in my view, that IPEC’s submission in respect to the freight charges they would levy would cause them to put in a quote substantially under ours. That was just a general position, as I interpreted it, of their actions in the market at the time.
Therefore, your perception at the time was that IPEC was likely to win the account from McPhee? --- Quite possibly.
Quite likely, that was your perception at the time? --- Probable, depending on how Mr Pellegrini, how he weighted his evaluation cost versus service.
If you perceived that IPEC was a serious contender for the Just Jeans account, to encourage another competitor, DFE, to quote was commercially slitting McPhee’s throat, was it not? --- I didn’t regard it anything like that.
There was no commercial advantage, if McPhee perceived that IPEC was a serious contender, for McPhee to go off and to encourage another competitor, DFE, to quote against it? --- That’s not a judgment I believed I could make at the time.
You have no view one way or the other now, as you are giving evidence to His Honour? --- Both companies, both IPEC and DFE, were active competitors of McPhee, save and except for the practices of DFE in the market when it was uniquely a McPhee account that they were encountering. In my experience, both generally, in terms of their pricing, tended to be cheaper than McPhee and therefore both I would always consider as likely to take McPhee work, given half a chance.
If you perceived at the time that IPEC was a serious contender for the account, you were slitting your own throat to encourage another competitor, DFE, to put in a competitive tender? --- I have to say that I didn’t encourage DFE to put in a competitive tender. I simply wanted to be assured that they wouldn’t [sic, but presumably meant “would”] quote and not do what they had regularly done in the Melbourne market place when coming into contact with a customer who was currently using McPhee.
I thought your evidence in‑chief to Mr Peters yesterday was to the effect that at the lunch meeting on 16 May, Mr Morton was encouraging DFE to quote and you picked up and ran with that particular message? --- As a means of bringing to a conclusion a discussion about a customer, yes.
So you were encouraging DFE to quote, both on 16 May and again on 17 May? --- Yes, I was.”
28 As we note later in these reasons, Mr Young gave evidence that either Mr Forde or Mr Holland had expressed a belief that McPhee would keep the Just Jeans account.
Was there a fundamental flaw in his Honour’s reasoning?
29 As we have noted, the appellants submitted that there was a fundamental flaw in his Honour’s reasoning in that he was wrong in saying that there was no logic in McPhee asking DFE to submit a competitive quote. Associated with this submission is the submission that his Honour failed to consider the McPhee case because he also misunderstood it.
30 Central to the appellants’ argument is a passage in his Honour’s judgment in which he said:
“It is common ground that McPhee urged DFE to tender. There is no logic in McPhee intending that to be a competitive tender. There would however be logic in McPhee intending, or hoping, that the DFE quote would ‘cover’”.
As well as challenging his Honour’s “no logic” conclusion, this passage is said by the appellants to show a total misunderstanding of the McPhee case, which was that McPhee merely wanted “any” quote. It was said that any quote would have served McPhee’s purpose of making sure that its anticipated position at the top end would not make it look as though it was overcharging. This argument must of course be considered in the overall context of his Honour’s reasons, which included an explicit recitation of the relevant elements of the McPhee case, one of which was:
“If there were only two quotes, McPhee’s and IPEC’s, and, as seemed very likely, McPhee’s would be higher, its quote would seem unreasonable;”
31 Whilst it is true that his Honour did not later refer, explicitly, to McPhee’s desire to have “any quote” it seems to us that the foundation for that case was removed by his Honour’s finding that McPhee must have believed that it had some chance of keeping the business. His Honour rejected Mr Morton’s evidence that McPhee “had absolutely no chance of holding the Just Jeans account” and there was ample evidence that the McPhee executives believed McPhee did have a chance of keeping the Just Jeans business. For example, Mr Wilson said that at the meeting either Mr Morton or Mr Holland said words to the effect:
“We are looking for a substantial price rise due to the yield but we believe that we will keep the account on service.”
This evidence was maintained in cross‑examination. Mr Young gave evidence that either Mr Morton or Mr Holland said that because of their history with Just Jeans and their future development they were confident of holding the account. Once the finding is made that McPhee believed it had some chance of keeping the Just Jeans business then, as a matter of logic, it is true to say that the chance of keeping the business could only be affected for the worse by DFE putting in a competitive tender. That is to say, there was no logic in McPhee intending that the tender it had urged DFE to make was to be competitive, in the sense of it being a real, competitive, commercial quote, intended to gain the business. As the Commission submitted, McPhee did not explain why it suited its commercial objectives to have a competitive quote competing with its quote if it thought it would or could win the business.
32 Once the “any quote” foundation was removed and his Honour found that McPhee must have believed that it had some chance of keeping Just Jeans’ business his Honour was not in error in concluding that there was no logic in McPhee intending that the DFE tender be a competitive one, that is to say, one intended to gain the business.
33 The executives submitted that his Honour had erred in his use of Mr Morton’s evidence to support his reasoning that there was no logic in McPhee intending a DFE quote to be a competitive quote. His Honour had rejected Mr Morton’s evidence that he felt McPhee “had absolutely no chance of holding the Just Jeans account”. His Honour found a “partial insight into the true position in Mr Morton’s evidence” where he said that if DFE did not quote:
“it would have meant that Just Jeans would only have had one quote, and in my mind a very low quote from IPEC, and that wouldn’t have looked very good as far as we are concerned. It might have insinuated that we were trying to rip Just Jeans off, so to speak.”
The executives submitted that this evidence had been taken out of context by his Honour. The question asked of Mr Morton and his answer were as follows:
“What was your state of mind as at the time of being told about DFE and IPEC as the prospective tenderers, about whether or not DFE would respond to a request for tender? --- My immediate reaction was that I was unsure as to whether or not DFE would quote for the business. If they didn’t quote for the business, then it would have meant that Just Jeans would only have had one quote, and in my mind, a very low quote from IPEC, and that wouldn’t have looked very good as far as we are concerned. It might have insinuated that we were trying to rip Just Jeans off, so to speak. I also thought it wouldn’t be fair to Just Jeans to have gone to tender and end up with one quote against McPhee, and I was just concerned that if DFE didn’t quote, then I was a bit unsure of the legalities in that anyway and I could be standing right where I am now under different circumstances. Yes, I was concerned about the legality of DFE not quoting, or their policy not quoting on McPhee accounts.”
We do not consider that his Honour’s use of Mr Morton’s evidence was inappropriate or that it distorted that evidence. In essence, Mr Morton was saying that he wanted DFE to quote so as to make McPhee’s quote look more palatable to Just Jeans, or more reasonable, when compared with the IPEC quote. His Honour was using Mr Morton’s evidence in this passage to demonstrate that there was logic in McPhee intending DFE to supply a quotation which would demonstrate that the McPhee quote was at or about a fair market price and that the lower IPEC price was not acceptable as it was based on cost cutting and the prospect of poor service. It is but a short step from McPhee intending DFE to put in a quote which made the McPhee quote look attractive to McPhee intending DFE to put in a cover quote which was not truly competitive.
34 We now turn to consider the appellants’ contention that his Honour misunderstood the appellants’ case, a contention which they said was illustrated by the following observation and others like it:
“Needless to say, Mr Morton giving McPhee’s rates to a competitor is totally inconsistent with its case that its intention was for DFE to put in a competitive quote.”
35 As we have noted, it was said that McPhee’s case was that it did not intend that DFE put in any particular kind of quote but simply that DFE should quote. Certainly, evidence was given to that effect and also that no limitation, qualification or condition was placed on McPhee’s request. The answer to the present submission, however, is that the distinction sought to be drawn between McPhee’s case being that it simply asked DFE to quote – any quote - and a case that its intention was for DFE to put in a competitive quote is, in the circumstances of this case, a distinction without substance. The lack of substance in this distinction can be seen from McPhee’s opening written submissions and the manner in which DFE witnesses were cross‑examined. McPhee’s outline of opening submissions stated:
“There will be dispute over what precisely was said and by whom in some of the alleged conversations, but a number of facts are not disputed by McPhee, and McPhee expects the second to fifth respondents will not dispute a number of facts, in particular:
…
(e) in the meeting [on 16 May 1995] there was discussion about, among other things, the commercial relationship between DFE and McPhee and the forthcoming invitation to tender to be issued by Just Jeans to Ipec and DFE (but McPhee expects evidence to be led that:
(i) …
(ii) there was concern to ensure that DFE in fact gave Just Jeans a commercial quote so that Just Jeans would receive a range of quotes from more than one other competitor (ie. Other than Ipec); (emphasis added)
…”
36 The following cross‑examination also occurred:
Mr Wilson:
“Q: Isn’t the case that Mr Morton, of all the people present in Mr Forde’s office at this meeting, made it clear that his view was that DFE should quote for Just Jeans?
A: He certainly wanted us to quote, he seemed fairly – yes.
Q: And he didn’t say in your presence that he wanted you to quote on anything other than a competitive basis, did he?
A: No.
Q: When you left that meeting, the only statement made was that you were asked to quote and there was no restriction placed on how you should quote?
A: Not – no.” (emphasis added)
Mr Young:
“Q: At the 16 May meeting in Mr Forde’s office no-one from McPhee said that DFE was to quote for Just Jeans other than on a competitive basis, did they?
A: Other than they asked us to quote, that was the only - -
Q: But they didn’t express any limitation on how you quoted?
A: No, they did not.
Q: Indeed, they emphasised that they wanted you to quote?
A: Yes, they did.” (emphasis added)
37 We do not consider that there is any consequence in his Honour understanding that McPhee’s case was that its intention was for DFE to put in a competitive quote rather than a case that its intention was for DFE simply to put in a quote. In essence McPhee’s case, as illustrated by the questions put in cross‑examination set out above, was that no impropriety should or could be attributed to its request for DFE to submit a quote. Thus it was put that there was no statement that the quote should be other than on a competitive basis. McPhee strenuously disavowed the allegation that it intended that DFE should submit a non‑competitive or “cover” quote; and to the extent that its request for “any quote” could have a non‑competitive or improper element, the essence of McPhee’s case was to disavow that as well.
38 The executives also complained that a misunderstanding of their case was revealed by his Honour’s failure to take into account McPhee’s aim to have DFE depart from its self‑imposed practice of not quoting against McPhee. This submission fails to confront his Honour’s rejection of this limited view of the request to quote. It also fails to confront the consequence of his Honour’s finding that McPhee passed on rates to DFE. Even if McPhee’s intention was to ask DFE simply to quote, why would McPhee feel any need to pass on any rates to DFE? It matters not whether the rates passed on were actual or indicative or even incorrect. In this regard we note that the executives were unable to proffer any credible reason why Mr Morton would give any rates to Mr Young.
39 We reject also another aspect of this submission, namely that his Honour did not reject the evidence of Mr Forde, Mr Morton and Mr Holland but simply ignored it. His Honour’s reasons adequately refer to, and consider aspects of, the evidence of Mr Forde, Mr Morton and Mr Holland. It is quite incorrect to say that his Honour “simply ignored” the evidence of these witnesses.
Were there other errors?
40 The appellants subjected his Honour’s reasoning to very detailed scrutiny and sought to demonstrate that in numerous respects he had made an error in his understanding of the Commission’s case or of McPhee’s case, in his conclusions, in the nature of the logical process he employed or in the findings of fact he made. We have given careful consideration to all the submissions made but in our opinion they do not identify matters which have the effect of vitiating his Honour’s ultimate conclusions or his determination that there had been a contravention of the Act.
41 When analysed, the matters relied on as errors of logic are not errors of logic as such but rather complaints that his Honour made findings when there was evidence upon which he should have made different findings. The executives submitted that his Honour made a number of findings which were either not open on the evidence or against the weight of the evidence. We have considered these submissions and refer to specific examples later in these reasons. In each instance we have concluded that even if, contrary to our view, the impugned findings were not open, they are not such as to invalidate his Honour’s essential findings on critical issues.
42 We do not propose to analyse each and every error said to be found in his Honour’s reasoning process. These errors were canvassed in detail during the five days of hearing and extensive written submissions were also given to the Court on these issues. The errors asserted covered a wide spectrum, from matters of principle to matters of minor detail which could not in any way affect the outcome of the appeal. The matters to which we refer are exemplary of the criticisms made and relate to issues which we consider critical to the outcome of the appeal. They also include all the matters that we see as having the potential to affect the outcome of the appeal. We have not thought it necessary to deal in these reasons with every criticism where we have already considered and rejected arguments raising essentially the same point. This approach will become clearer as the reasons are read.
43 We now turn to discuss specific criticisms made of his Honour’s reasoning.
44 It was submitted that his Honour fell into the “logical error” of attaching significance to McPhee’s omission of an explanation to the DFE representatives as to why the request for a quote was being made. It was said that this could only be significant if it were assumed that the McPhee purpose was illicit. We disagree. His Honour was entitled to take the lack of such an explanation into account as a circumstance in determining which version of the reason for the request for a quote to accept. It was relevant to that issue and was a circumstance to be considered.
45 It was submitted that his Honour assumed that DFE was a threat to McPhee but that he did not analyse why that would be so. It was said that he ignored the evidence of Mr Morton that DFE never had a chance of having its quote accepted. Neither submission is correct. His Honour considered and specifically rejected Mr Morton’s evidence that he felt McPhee had absolutely no chance of holding the Just Jeans account, finding that that evidence was entirely inconsistent with his conduct and that of all the other McPhee personnel. As noted earlier, there was in any event evidence that McPhee believed it had a chance of retaining the account and further evidence that DFE might succeed in obtaining the Just Jeans business. For example, Mr Clarke, McPhee’s then sales manager for Victoria, gave the following evidence:
“You were pretty sure they would lose it [the Just Jeans business] to IPEC? --- I really can’t say. I would say IPEC would have been a good favourite, yes.
Did you think that they might possibly lose it to DFE? --- That was an option. I mean, many a slip between the cup and the lip, you know.
Is this a fair summary of your state of mind as you sat in the meeting: that you thought McPhee would lose it and it might go to IPEC, or it might go to DFE? --- Provided they both submitted a proposal to Just Jeans, yes, that would be the case.”
46 In the course of summarising the Commission’s case his Honour said that there was a policy of each company (McPhee and DFE) not quoting for business to a customer of the other, at least where the customer was not dissatisfied with the service provided and was only seeking a cheaper price. The appellants submitted that this was neither the Commission’s case nor, on the evidence, the fact, because the policy was unilateral on the part of DFE. His Honour did not make a specific finding on this issue and it is of peripheral relevance to his critical findings. His Honour found that at the meeting on 16 May 1995 Mr Clarke said:
“When we walk into DFE accounts we quote, but we know what to quote.”
Mr Clarke’s evidence was that when Mr Young asked him whether they ran into DFE accounts much he answered:
“Yes, now and then. And when we do, we know how to handle it, but there is not much point in tearing each other apart.”
Mr Clarke explained this answer in a way which did not admit of an anti‑competitive situation. But Mr Wilson’s evidence was that Mr Clarke said words to the effect:
“We are playing the game from our side. We know what to quote when we come across a DFE account”.
There was therefore evidence to the effect that when a DFE customer asked for a quote from McPhee, McPhee did not provide a competitive quote. We deal with other submissions in relation to this evidence later in these reasons.
47 It was said that his Honour had no proper basis for inferring that by 15 May 1995 Mr Morton and Mr Forde were aware that DFE would be invited to tender for the Just Jeans business and that on the evidence given by Messrs Morton, Pellegrini and Forde no such information for the Just Jeans business was passed on to Mr Morton or Mr Forde until 15 May 1995.
48 The inference drawn by his Honour must be looked at in context. His Honour said:
“On either 15 or 16 May Mr Pellegrini told Mr Morton that Just Jeans was sending its tender document to IPEC and DFE. Mr Morton had told Mr Forde shortly after 2 or 3 May that Just Jeans were going to tender. There is no direct evidence that Mr Morton was told by Mr Pellegrini before the 15th that DFE would be invited to tender, but I infer that he and Mr Forde probably were aware from their knowledge of the industry that DFE was a likely prospect.”
This inference was open to be drawn from the evidence that had been given about the nature of the industry and the principal players in it. However there was, in any case, direct evidence that Mr Morton was told by Mr Pellegrini before 15 May 1995 that DFE would be invited to tender. In the course of examination‑in‑chief Mr Holland said that he regarded IPEC as a serious competitor of McPhee but he was concerned that IPEC’s service standards would bring IPEC undone. He was then asked whether he had any view about Just Jeans’ opinion of IPEC and he responded:
“Well, I had the view I have just described at the time that I met with Mr Pellegrini and with Mr Morton on 27 April, at which time Mr Pellegrini indicated to me that the indicative ratings we had given him that we wished to apply for their new ex‑Sydney warehouse were higher than he could tolerate. That discussion led to Mr Pellegrini telling me that he felt he would have no option, if indeed that was going to be our confirmed rating proposition, he had no option but to go to the market to get other rates. He did, in that conversation, identify DFE and IPEC as the two companies he would go to. We had a discussion about – he asked me what my view was of their ability to service his company’s needs and indeed in respect to IPEC, I did query that with Ivan on the basis of the experience I have described. However, Ivan was quite quick to reply to the effect that two of their major suppliers, Levi and Consolidating Apparel in Adelaide, used IPEC and Ivan had canvassed those companies’ distribution managers, who both gave Ivan a positive view about IPEC’s service ability. Also, he had checked with a distribution manager of a company called Jacqueline Eve, who Just Jeans had acquired some 8 to 9 months earlier, and similarly that distribution manager expressed satisfaction at the service that he received from IPEC.”
There was therefore a direct evidentiary basis for his Honour’s finding that Mr Morton was told by Mr Pellegrini before 15 May 1995 that DFE would be invited to tender. What is also clear from the evidence of Mr Forde and Mr Morton is that shortly after 2 or 3 May 1995 Mr Forde and Mr Morton were aware that Just Jeans was going to tender. Mr Morton said that at the time McPhee put in its quote (3 May 1995) he thought that it was virtually certain Just Jeans would go to tender and he learned about that formally on 15 May 1995. Mr Morton said that he told Mr Forde that Just Jeans was going to tender after he was aware of that fact around 2 or 3 May 1995. Mr Forde also gave evidence that he learned from Mr Morton on 3 May 1995 that Just Jeans was proposing to go to tender or was likely to go to tender and he accepted that from 3 May 1995 he knew that it was highly likely, if not certain, that Just Jeans would go to tender. We reject the submission that it was not open to his Honour to infer that Mr Morton and Mr Forde were probably aware before the luncheon invitation was extended that DFE was likely to be asked to tender by Just Jeans.
49 It was also open to his Honour to find that Mr Forde initially arranged the meeting of 16 May 1995 for the purpose of persuading DFE Victorian management to put in a cover quote. At the time Mr Forde extended the invitation, he was aware that Just Jeans was going to tender, having learned this on about 2 or 3 May 1995. His Honour had drawn an inference, which was open to him on the evidence, that Mr Forde knew that DFE was likely to be invited to tender. It was open to his Honour to find that it was an unlikely coincidence that the DFE representatives were the first people to be invited to visit the new premises.
50 In any event, even if the finding had not been open, that circumstance would not invalidate the essential conclusions about McPhee’s intent on the day of the meeting, and what occurred at the meeting and thereafter. Having regard, however, to our conclusion that the disputed finding was open to his Honour, it is unnecessary to pursue that issue further.
51 Criticism was made of his Honour’s reasoning that if the lunch on 16 May 1995 had originally been organised for an entirely innocent purpose it should, in the light of later events, have been postponed as the meeting would look suspicious having regard to the quote McPhee had given to Just Jeans and the fact, known by McPhee, that DFE was going to be asked to quote. The appellants submitted to the contrary, namely that a need for postponement would only become evident if those arranging the lunch thought there was something wrong about it in the first place. There is merit in both approaches. Whether the criticism is justified and whether one approach rather than the other is to be preferred would depend, at least in part, upon the knowledge of trade practices law and of the sensitivities involved in meetings with competitors to be attributed to the organisers of the luncheon. We are inclined to think that his Honour was correct in the view he took, but it is not necessary to express a final conclusion on the matter, because whichever way one looks at it the finding about postponement was not a critical step in his Honour’s reasoning. His conclusions about the meeting are amply supported by his other findings of fact.
52 It was submitted that there had been a denial of natural justice or procedural fairness to the appellants in a finding of his Honour that a diary entry of Mr Forde for 16 May 1995 had a self‑serving flavour and reflected nervousness and an anxiety to put the meeting in an innocuous light. His Honour said:
“The first line is in blue, the second in black. It does not look as though the blue pen was running out of ink. It appears likely that the second line was added later. It is a little odd that Mr Forde would add at some later stage the entry ‘To see new building’. …”
The diary entry specified a time for the meeting on one line and on the second line there appeared the words “to see new building” which had been made by a pen using different ink to the pen which had made the first entry. The entry stated:
“12.00 D.F.E. John Young, Brian Fitt, Gordon Willson [sic]
To see new building.”
His Honour’s observation that “it appears likely that the second line was added later” is in accordance with the evidence‑in‑chief given by Mr Forde when it was put to him that the words on the second line “To see new building” were written in a different coloured ink from the names of those persons on the line above. Mr Forde responded:
“That was written on the same date, but in a different pen. I have a habit of being surrounded by pens.
…
I wrote ‘to see new building’ on the same day, at a later time.”
In cross‑examination Mr Forde agreed that the entry was written in two different inks. But, again, this is not a crucial finding and although it may have been used to reflect adversely on Mr Forde’s credit, the fact is that the two entries were made at different times and Mr Forde could not recall why they were made at different times.
53 It was submitted that his Honour had informed himself about whether the blue pen was running out of ink and that his Honour’s statement “It appears likely that the second line was added later” gave the impression that he was drawing an inference, whereas that was the evidence led in‑chief from Mr Forde. His Honour’s finding that the entry was self‑serving and that it reflected nervousness and an anxiety to put the meeting in an innocuous light was, in our view, open. Counsel submitted that a finding was implicit in his Honour’s reasons that Mr Forde had fabricated this evidence for the purpose of misleading the Court but we do not agree. There is nothing in his Honour’s reasons which suggests that he concluded that Mr Forde had engaged in fabrication. Rather his Honour was considering an acknowledged later addition to the first entry. The reference to the blue pen not running out of ink is no more than a step towards concluding that the second line was not made at the same time as the first line. We reject the submission that his Honour gave the appearance of having assumed a role as advocate for the Commission or as inquisitor.
54 It was submitted that a finding made by his Honour as to an event at the post luncheon meeting was wrong and against the weight of the evidence. In a passage we have referred to in another context his Honour found that at that meeting Mr Clarke had said:
“When we walk into DFE accounts, we quote, but we know what to quote”.
His Honour found that Mr Young said that at that point he did not want to get involved in the conversation and his Honour then continued:
“After what Mr Young described in evidence as ‘a fairly stunned silence’ on behalf of the McPhee men, Mr Forde brought up the subject of Just Jeans.”
55 In his evidence Mr Clarke denied making the statement:
“We’re playing the game from our side. We know what to quote when we come across a Discount Freight Express account”,
although he conceded he had said something similar “but not in that context”. Mr Clarke said that in response to a question from Mr Young whether McPhee “ran into DFE accounts much” he had said:
“Yes, now and then. And when we do, we know how to handle it, but there is not much point in tearing each other apart”.
Shortly afterwards, Mr Clarke was asked what he meant by his statement “there is not much point in tearing each other apart” and he answered:
“I didn’t want him [Mr Young] to think by my first statement we were having a price war with DFE or anything or starting a war with them, so I just made that comment”.
Mr Young in his witness statement and in examination‑in‑chief said that Mr Clarke made a statement in the terms found by his Honour. Mr Fitt said in his witness statement that either Mr Clarke or Mr Holland said “When we go into DFE accounts, we quote, but we know what to quote” and in examination‑in‑chief and cross‑examination said that Mr Clarke made this comment. It was open to his Honour to accept Mr Young’s version as he did. In any event, whatever version was accepted, it provided evidence of the same character, namely that McPhee had a policy of not quoting competitively to customers of DFE. To this extent DFE’s policy of not quoting for the business of a customer of McPhee was not unilateral in its purpose.
56 It was further submitted that his Honour was wrong in accepting Mr Young’s evidence‑in‑chief that there was “a fairly stunned silence”. This was a curious submission as it was not suggested that it was not open on the evidence for his Honour to make this finding. Mr Young had given evidence to that effect. The criticism appears to be that Mr Young’s evidence‑in‑chief on the point was different to his witness statement. In his witness statement he said that after he told the meeting what DFE’s policy was, his statement was received by the McPhee representatives:
“with what appeared to me to be a puzzled response in that they looked at each other and had puzzled looks on their faces”.
Such difference as there is between the two ways of describing what happened cannot lead to the conclusion that it was not open to his Honour, having heard the witness give his oral evidence, to accept the way in which he described the event in his evidence‑in‑chief.
57 His Honour found that Mr Morton had said that McPhee did not really see IPEC as a serious contender and believed that Just Jeans thought the same way. The appellants submitted that this finding was inconsistent with his Honour’s conclusion that McPhee was apprehensive about the threat posed by IPEC, which was likely to give a considerably cheaper quote. It was submitted that on the evidence McPhee did see IPEC as a serious threat. The executives directed attention to the evidence of Mr Morton and Mr Pellegrini to the effect that Just Jeans had a basis for a good opinion of IPEC’s service and Mr Young and Mr Fitt’s evidence that McPhee was worried about IPEC. As against this, Mr Young said that at the meeting on 16 May 1995 either Mr Forde or Mr Holland had said that they were “pretty confident of holding the account”. Mr Young also said that Mr Morton had said that they were:
“'still a bit worried about the yellow people’ [a reference to IPEC] … [but] he didn’t really believe they were a serious contender.”
Mr Wilson gave similar evidence that either Mr Holland or Mr Morton said that they believed that they would keep the account on service. Mr Forde also gave evidence that in May 1995 he knew that IPEC was not known for giving the sort of service that Just Jeans was accustomed to getting, that he regarded IPEC as cheap and nasty, that it was his view that Just Jeans would not go along with a cheap and nasty express freight operator and that IPEC was not in a position to offer the sort of service that Just Jeans wanted. We are satisfied that there was evidence before his Honour from which it was open to him to make the finding that Mr Morton said that McPhee did not really see IPEC as a serious contender. This conclusion also answers the contention that his Honour’s analysis of the evidence about IPEC’s prospects was fundamentally flawed.
58 It was submitted that his Honour’s finding that McPhee badly wanted to keep Just Jeans’ business and that it must have believed that it had some chance of doing so was made in the absence of any analysis of the evidence that related to these findings. It is true that his Honour expressed the findings in a conclusionary way but a careful reading of the evidence shows that the findings were open on the evidence. Mr Bates gave evidence that in the course of the telephone conversation with Mr Holland on 17 May 1995 Mr Holland said that:
“Doug [Morton] was running off at the mouth a bit at lunch about us being desperate not to lose the Just Jeans account”
Furthermore, his Honour could infer from the evidence given by Mr Forde that McPhee had just lost another major account to IPEC and that McPhee would not like to see the Just Jeans account go the same way.
59 As noted above, Mr Young said that at the meeting on 16 May 1995 Mr Morton said that they were still worried about the “yellow people” (IPEC) and also said that they did not really see IPEC as a serious contender and that they believed Just Jeans thought that way as well. Mr Young also gave evidence that at the meeting either Mr Forde or Mr Holland said:
“We are confident of holding the business with Just Jeans because of their history and their future development”.
Mr Wilson gave similar evidence when he said that either Mr Morton or Mr Holland said words to the effect:
“We are looking for a substantial price rise due to the yield but we believe that we will keep the account on service.”
There was conflicting evidence on these issues but it was open to his Honour on the evidence to make the challenged findings and we can see no reason to disturb them.
60 His Honour found that during the course of the post‑luncheon meeting Mr Holland spoke about turning the tape recorder off. The appellants submitted that this finding was against the weight of the evidence. Mr Holland denied making any reference to a tape recorder but there was unambiguous evidence from two of the DFE witnesses, Mr Wilson and Mr Fitt, that Mr Holland did make such a statement. Although the appellants submitted that Mr Wilson was not a reliable witness and pointed to the fact that neither Mr Fitt’s earlier witness statements nor his diary note of the conference had referred to Mr Holland making this statement, there was evidence from Mr Wilson and Mr Fitt which justified his Honour’s finding. His Honour used the remark in reaching a conclusion that there was a display of a feeling of guilty nervousness. We can see no reason to disturb this finding.
61 A significant issue in the trial involved a telephone conversation between Mr Morton and Mr Young on the day after the luncheon meeting during which, according to Mr Young, Mr Morton gave him details of the rates which McPhee had quoted Just Jeans. Mr Morton admitted that he had a telephone conversation with Mr Young on that date but denied there was any reference by him to rates. The appellants submitted that the finding that Mr Morton mentioned rates at all was against the weight of the evidence. This submission fails to take into account the clear evidence of Mr Young (in his witness statement) that Mr Morton said words to the effect:
“Further to our meeting the other day, you will definitely be contacted by Just Jeans in the next few days and we would like you to quote. We don’t charge them a cube but the freight cubes at 176 to the metre and at 250 to the metre you would need to be around 25 cents.”
Mr Young gave substantially the same evidence in examination‑in‑chief. Mr Young made a note in his diary at the time of the telephone conversation in these terms:
“McPhee JJ 176 per m3 25 cents at 250 3 cents over”.
We reject the submission that the finding that Mr Morton mentioned rates at all was not properly open. Once his Honour accepted Mr Young’s version of the conversation, which he was entitled to do, it cannot be said that the finding was not properly open on the evidence or was against the weight of the evidence. We can see no reason to disturb his Honour’s finding on this issue.
62 The appellants also submitted that there was significant doubt about the accuracy of Mr Young’s diary notes and when they were made. Although the appellants identified some inconsistencies in Mr Young’s evidence, there was clear evidence that he made the relevant note in his diary when the telephone conversation finished. The appellants submitted that Mr Young was not asked in evidence‑in‑chief when he made the notes in his diary but that submission is incorrect insofar as it invites the conclusion that Mr Young did not give evidence‑in‑chief on that point. Although he was not specifically asked the question, in the course of his evidence‑in‑chief he said:
“… I have written the notes down in the bottom right‑hand corner quickly as the phone call finished.”
We reject the appellants’ submission that it is extremely doubtful that Mr Young made the notes of the conversation contemporaneously. The weight of the evidence supports the finding that he did. In evidence‑in‑chief Mr Young repeated his account of the conversation, which had been set out in his witness statement, in substantially the same terms and in terms consistent with the notes in his diary. Mr Young’s evidence was also corroborated by Mr Fitt and Mr Wilson. Mr Fitt was present in Mr Young’s office when the telephone rang and Mr Young answered the call and addressed the caller as “Doug”. Mr Fitt said that when the telephone call finished Mr Young said: “He has just given me the rates” and Mr Young then told Mr Gordon Wilson who had just entered the room that:
“I have just had a call from McPhees and they’ve given me the rates for Just Jeans.”
In cross‑examination Mr Fitt said that he saw Mr Young during the telephone conversation write some figures on a Post‑it note, not in his diary, although he did not see what Mr Young wrote. Mr Wilson said that on 18 May 1995 he had a conversation with Mr Young in which Mr Young said that he had a phone call from Doug Morton and it sounded like he (Mr Morton) was asking him to cover the rates.
63 Mr Young gave evidence that he had initially thought the conversation in his office after Mr Morton’s telephone call was with Mr Wilson and that it was two or three weeks later, after speaking with Mr Fitt, that he realised he had spoken in his office to Mr Fitt and not to Mr Wilson. Mr Young also said that he believed he had spoken to Mr Wilson after the telephone call and asked him if Mr Wilson had heard him repeat the figures or heard him speaking. He said that Mr Wilson said he had not. Mr Young acknowledged that Mr Wilson had not been in the room at the time of the telephone conversation so that Mr Wilson could not have heard him.
64 Notwithstanding these inconsistencies, and other inconsistencies pointed out in the submissions on behalf of the executives, there was a substantial body of evidence upon which it was open to his Honour to find that Mr Morton had given Mr Young the rates McPhee quoted Just Jeans or rates to quote to Just Jeans. That evidence included the evidence of Mr Quirke, who said that on a date between 23 May and 5 June 1995 he received a telephone call from Mr Young in which Mr Young told him that he had received a telephone call from Mr Morton who had telephoned him about DFE’s pending quote for Just Jeans. Mr Young told Mr Quirke that Mr Morton said that if they were going to quote the business and they quoted 25¢ per kilogram at 250kg per cubic metre that was “a rate that McPhee would be comfortable with us quoting.” We should note that this evidence of conversations between DFE personnel was not the subject of objection and, in any event, was relevant to the issue, contested by the appellants, that the DFE personnel were not aware of what the Commission said McPhee was attempting to do and the effect of what the McPhee people were saying.
65 Although Mr Young gave evidence that Mr Morton referred to 176kg, whereas Just Jeans had quoted 178kg, his Honour explained the difference on the footing that by the time of the conversation Mr Morton would have been aware of the Just Jeans specification. The appellants submitted that there was no foundation in the evidence for his Honour’s finding that by the time of the telephone call Mr Morton would have been aware of the Just Jeans specification so as to explain his reference to 176kg rather than 178kg. Mr Morton denied knowledge of the specification at that time but there was evidence before his Honour which entitled him not to accept his denial and to infer that Mr Morton had such knowledge. It was a matter for his Honour, who had the advantage of seeing Mr Morton give evidence, to determine whether he would accept his denial. In any case, even if it was not open to his Honour to make this finding, the crucial issue is that in Mr Young’s version of the conversation, which his Honour accepted, Mr Morton was purporting to pass on to Mr Young rates quoted to Just Jeans by McPhee or rates to quote Just Jeans. We consider this to be a critical finding because one strains to find an innocent explanation for such a conversation.
66 It was said that Mr Morton did not give Mr Young McPhee’s actual rates, which were 22¢ per kilogram @ 250kg and an assumed weight of 178kg per cubic metre. Mr Young said he was told 25¢ per kilogram and an assumed weight of 176kg per cubic metre. We see no significance in the discrepancy between the figures, the important and significant factor being the communication of what were said to be, or taken to be, McPhee’s rates. It does not diminish the significance of the communication whether Mr Young gave Mr Morton indicative or actual rates. On his Honour’s findings the purpose was the same, namely to attempt to get DFE either to cover quote or not to quote competitively.
67 It was submitted that his Honour’s findings as to the terms of the conversation between Mr Young and Mr Morton exhibited pre‑judgment and provided a reasonable apprehension of bias. We reject the submission. The complaint made is that his Honour’s finding that Mr Morton gave Mr Young McPhee’s rates for Just Jeans was not properly open on the evidence or was against the weight of the evidence. This submission cannot succeed as we are satisfied that there was evidence before his Honour upon which it was open to him to make this finding. But even if it were not, the manner in which his Honour analysed the evidence in relation to the telephone conversation and made his findings in relation to it does not show in any way a pre‑judgment of the issue or any circumstance which could give rise to a reasonable apprehension of bias.
68 Another critical conversation considered by his Honour was a conversation between Mr Holland and Mr Bates on 17 May, the day after the luncheon meeting, in which his Honour found that once Mr Bates made it known that DFE would not cover McPhee, but would quote to win, Mr Holland suggested factors which would make DFE quote at a higher rate. The appellants submitted that having regard to Mr Bates’ evidence under cross‑examination his Honour should have found that in this conversation Mr Bates said that DFE would quote to win and Mr Holland said that was how it should be. His Honour found that Mr Holland said that McPhee wanted DFE to quote and then went on:
“Mr Bates then said:
‘OK, if that is the case, if we quote we would quote to win the business.’
Mr Holland said:
‘Yes, I understand …’ ”
However, Mr Bates also gave evidence, set out by his Honour, that after Mr Holland said that he understood that DFE would quote to win, Mr Holland continued:
“Just be aware they are difficult people in relation to service. They expect a lot. They have a lot of returns and they are cubic. We haven’t been able to get an increase for the last four years”.
Mr Bates said that Mr Holland continued by saying that the McPhee men at lunch were marketing people and then said:
“I just wanted you to be aware of the prices that would be quoted in light of their service requirements and the cube”.
69 Mr Holland said in cross‑examination that he did not mention that DFE should be aware of its costings but he did agree that, after Mr Bates said that if DFE quoted it would quote to win, he raised the fact that Just Jeans had high service expectations and was a demanding account, that Just Jeans had a lot of returns, that Just Jeans was cubic and also made reference to the fact that McPhee had not had an increase from Just Jeans in the last four years. He had also said in evidence‑in‑chief that he told Mr Bates that over the last four years he had had difficulty protecting the yields on the Just Jeans account.
70 It was clearly open on this evidence for his Honour to find that Mr Holland was suggesting factors that would encourage DFE to understand that it should quote rates to Just Jeans that would assist in maintaining the price charged to Just Jeans for the service of carrying its goods.
71 Another significant conversation upon which his Honour relied was a conversation between Mr Poche and Mr Forde on 28 June 1995. His Honour concluded that Mr Forde was disappointed and angry that DFE had not covered McPhee’s quote but had quoted competitively and had quoted twice. His Honour found:
“This is only consistent with McPhee’s intention all along being not that DFE should quote competitively, but that it should cover.”
His finding was based in part on that portion of the conversation in which Mr Forde told Mr Poche in relation to DFE’s quote to Just Jeans “your offer was up to seventeen percent lower”. Mr Forde made an entry in his diary on 28 June 1995 in relation to this conversation which included “I mentioned gap of 17.7% to be qualified”. Just Jeans produced a summary of the tenders received from McPhee, DFE and IPEC dated 28 June 1995 which set out the various tender figures. The figure quoted by DFE for transport to Just Jeans stores ex‑Melbourne is 17.7% lower than the figure quoted by McPhee. McPhee had a number of explanations for the figure of 17.7% referred to in Mr Forde’s diary note but his Honour regarded the diary note as:
“convincing corroboration of Mr Poche’s evidence that what McPhee were complaining about was not the difference between IPEC and McPhee but the difference between DFE and McPhee”.
We reject the submission that his Honour erred in relying upon the figure of 17.7% and the manner in which it was discussed and recorded when, it was said, that evidence did not support his Honour’s conclusion that McPhee’s intention all along was that DFE should not quote competitively but should cover. It was open to his Honour to rely upon the figure of 17.7% as he did and to reject the explanations of the appellants.
72 All the appellants criticised strongly his Honour’s reference to the passage from Adam Smith’s The Wealth of Nations in which the author asserts a tendency for people “in the same trade” to engage in anti‑competitive conduct whenever they meet together for any purpose. It was contended forcibly that this indicated bias. We disagree. The passage to which his Honour referred is very well‑known and its use in the specific context in which it appears in the judgment does not constitute a step in the reasoning or an indication of pre‑judgment. As we read his Honour’s reasons, he used the passage to illustrate the conclusion to which, in his view, the evidence in the case led.
The assessment of witnesses
73 A number of the appellants’ other submissions can be considered together. It was submitted that his Honour did not deal individually with the witnesses as to particular issues and that his Honour found all Commission witnesses “were as equally good as the appellant witnesses were bad”. It was put in somewhat the same way when it was said that his Honour treated the witnesses as “job lots, all equally good or universally bad”, with the result that the appellants did not receive a fair trial. It was also said that his Honour gave “wholesale preference” to the DFE witnesses as a group over the McPhee witnesses as a group. We reject these submissions because they do not take into account the manner in which his Honour approached the evidence, particularly on critical issues.
74 In an early part of his reasons, his Honour made what he called some general observations on issues which included the demeanour of witnesses and the recording of the recollections of witnesses. He preceded these general observations with the statement that:
“When I come to detailed findings of fact I shall make some observations as to probabilities and other circumstantial aspects affecting particular issues.”
As we shall demonstrate, his Honour considered and determined contested evidence on particular issues, but before doing so he found “the DFE witnesses more impressive than McPhee’s, and by a considerable margin”. He also found that DFE personnel had made some contemporaneous diary notes, that written statements were made by them in early June 1995 and that revised statements were signed in December 1995. His Honour concluded that:
“in general terms the evidence of DFE witnesses was better supported by contemporaneous documentation than that of McPhee witnesses”
and that the DFE witnesses were first asked to recall and record the relevant events earlier than the McPhee witnesses.
75 These general findings and observations of his Honour are, in our view, unobjectionable observations to make under the heading they were made, namely “Credibility and Probabilities”. But his Honour did not leave those observations as his only findings about the credibility of witnesses where there were competing versions or conflicts of testimony. As foreshadowed, when his Honour came to making detailed findings of fact he considered the probabilities in relation to particular issues and, where there was conflicting evidence, he considered the competing evidence of the witnesses and formed a view as to whose evidence he would accept on each issue. We refer to some of these detailed findings as exemplary of the manner in which his Honour considered the witnesses and the case put.
76 This aspect of his Honour’s assessment of the credibility of witnesses was relied upon by the executives in further support of their submission that his reasons disclose pre‑judgment and give rise to a reasonable apprehension of bias. In our view, however, the matters relied on do not support any such conclusion. It is said, for example, that his Honour’s finding that Mr Forde’s invitation to the DFE representatives for lunch was made for the purpose of discussing the Just Jeans tender was against the evidence and the weight of the evidence and showed bias. Assuming for present purposes that the first part of that submission is correct (and in our view it would not matter if it were correct because McPhee knew by the date of the meeting that DFE either had been, or would be, asked to tender), it simply does not follow that his Honour’s reasoning shows pre‑judgment of the issue or gives rise to a reasonable apprehension of bias.
77 The same may be said in relation to his Honour’s observation that:
“… the essence of the Commission’s case is not a conspiratorial agreement at some earlier point in time (although no doubt the evidence does in fact lead to that conclusion) but rather that on 16 May and thereafter each of the individual respondents acted with the intent of inducing DFE to enter into the proscribed arrangement or understanding.”
It was submitted that the conduct found by his Honour was consistent with the innocent purposes put forward by McPhee and that his Honour failed to recognise and give weight to inconsistencies in the evidence of Commission witnesses and failed to recognise and give weight to the evidence of McPhee witnesses. We are satisfied that his Honour recognised and considered the case McPhee sought to make out and the evidence adduced in support of it. We are also satisfied that his Honour’s observation about the evidence leading to a conclusion of a conspiratorial agreement does not demonstrate any pre‑judgment of the issues in the case nor does it give rise to a reasonable apprehension of bias.
78 We now consider some respects in which his Honour gave specific consideration to the assessment of witnesses on particular issues.
79 His Honour considered in detail the evidence given in relation to the visit to the McPhee premises and the meeting on 16 May 1995. One issue was a statement attributed to Mr Holland that “We should turn the tape recorder off”. We have concluded earlier that there was evidence which supported a finding that Mr Holland made such a statement. His Honour noted that two witnesses attributed a comment to this effect to Mr Holland and that Mr Holland denied making any reference to a tape recorder. His Honour was satisfied that Mr Holland did speak of turning the tape recorder off and that the remark revealed nervousness and was a spontaneous attempt to lighten the tense atmosphere of the meeting with some black humour. Such an observation was consistent with the findings his Honour had made.
80 His Honour considered and evaluated conflicting evidence relating to a telephone conversation between Mr Morton and Mr Young on 17 May 1995 referred to earlier in these reasons. His Honour referred to Mr Young’s version of the conversation and the note he made in his diary at the time. He then noted that Mr Morton admitted to making a telephone call to Mr Young the day after the meeting but denied that he made any reference to rates. His Honour accepted Mr Young’s version of the conversation saying:
“I think it not credible that he invented this version of the conversation immediately it had occurred and then told the invented version to Messrs Fitt and Wilson …
The reference to 176 rather than 178 is explicable on the basis that by this time Mr Morton would have been aware of the Just Jeans specification.”
The evidence of Mr Fitt and Mr Wilson on the issue was considered by his Honour, as noted earlier in these reasons. It should also be noted that Mr Young had a conversation with Mr Quirke in which, Mr Quirke said, Mr Young told him that he had received a telephone call from Mr Morton who had suggested a rate to Mr Young at which DFE might quote. Mr Young told Mr Quirke that Mr Morton said that if they were going to quote the business and they quoted 25¢ per kilogram @ 250kg per cubic metre that was a rate that McPhee would be comfortable with DFE quoting. As we stated earlier, it was open to his Honour to make the findings he did in respect of this issue.
81 There was also a conflict between Mr Bates and Mr Morton about what occurred when Mr Bates telephoned Mr Morton on 22 May 1995. Mr Bates’ version included a statement by Mr Morton:
“Watch the service – they demand a lot and they are cubic. I remember when I was 21, no more like 31, if you know what I mean?”
Mr Morton gave a different version of the conversation and denied that he said “Watch the service, they demand a lot and they are cubic”. His Honour accepted Mr Bates’ version of the conversation saying that it was consistent with the line Mr Morton took in the conversation with Mr Young on 17 May 1995. The significance of this conversation does not depend upon how the conversation came about but upon the substance of what Mr Morton said.
82 Another critical issue was the content of a conversation on 28 June 1995 between Mr Poche and Mr Forde. His Honour, with one qualification, accepted Mr Poche’s version of the conversation set out in his witness statement. As we have noted, he found corroboration for Mr Poche’s version in an entry Mr Forde made in his diary for 28 June 1995. That version involved attributing to Mr Forde the statement that DFE’s quote to Just Jeans was 17.7% lower than McPhee’s quote. Such a statement was denied by McPhee, Mr Forde saying that he had been told that IPEC was the successful tenderer and that McPhee had been undercut by IPEC by 17.7% or thereabouts. The judge analysed a summary prepared by Just Jeans of the tenders it had received (Exhibit J) which showed that DFE’s quote in relation to Just Jeans stores ex Melbourne was 17.7% lower than McPhee’s quote. The figure of 17.7% had been recorded by Mr Forde in his diary. His Honour reasoned:
“There can be no doubt that 17.7 per cent was the figure Mr Forde mentioned since it is recorded in his diary. I think this is what Mr Poche heard, rather than “15, 16, 17 per cent”. There can be no doubt that this is the figure Mr Morton passed on to Mr Forde. There is thus convincing corroboration of Mr Poche’s evidence that what McPhee were complaining about was not the difference between IPEC and McPhee but the difference between DFE and McPhee. Mr Morton and Mr Forde were disappointed, and indeed angry, that DFE had not covered their quote but had quoted competitively, and quoted twice. This is only consistent with McPhee’s intention all along being not that DFE should quote competitively, but that it should cover.”
His Honour then considered McPhee’s alternative explanation for the 17.7% figure and rejected it for the detailed reasons he set out.
83 We are quite satisfied that his Honour did not approach the determination of the facts with a closed mind and that he did not treat the witnesses as “job lots”. On the contrary, he considered individual issues by reference to the evidence of the relevant witnesses and formed a view on each issue. The structure of the judgment shows that his Honour considered the credibility of individual witnesses, particularly in relation to critical issues, and that he had this in mind at the time he made his initial general comments about the credibility of witnesses. As is often done in reasons for judgment, his Honour stated general conclusions and subsequently expressed particular findings on particular issues after having considered the evidence of relevant particular witnesses.
84 The appellants relied on an associated submission that in preferring the DFE witnesses his Honour “ignored the vested interest that DFE and its individual employee witnesses had in the outcome” because they had a conditional immunity from suit and DFE had instituted proceedings against McPhee in the Federal Court in the Sydney Registry. This submission fails to take account of the judge’s specific consideration of this matter under the heading “Motive” and must be rejected accordingly. His Honour referred to the Commission’s written undertaking to DFE and its employees on 10 July 1995 not to institute proceedings in respect of breaches of s 45A of the Act subject to conditions. He referred to the proceedings between DFE and McPhee in Sydney and to the fact that Mr Poche had for some years been a crusader against what he had claimed was a cartel in the road transport industry. His Honour then said:
“I do not think these matters, either individually or collectively, provide a sufficient motive for the DFE witnesses to give deliberately false evidence against McPhee”,
and he explained why he reached this conclusion.
85 The executives were critical of his Honour’s finding that there was not a sufficient motive for the DFE witnesses to give deliberately false evidence against McPhee. This criticism was made under the rubric of the submission that the executives had not been afforded procedural fairness and that there had been a denial of natural justice and circumstances giving rise to an apprehension of bias on the part of his Honour. We do not consider that the criticism of his Honour’s finding as to lack of motive, even if correct, could support a conclusion that procedural fairness was denied or that an apprehension of bias could arise. The submission is to be treated as made in support of the ground that the trial judge made a finding which was either not open on the evidence before him or was against the weight of the evidence. We will consider the submission accordingly.
86 As noted above, his Honour found that the undertaking given by the Commission to DFE and its employees not to institute proceedings in respect of breaches of s 45 of the Act and proceedings in the Federal Court between DFE and McPhee did not either individually or collectively provide a sufficient motive for the DFE witnesses deliberately to give false evidence against McPhee. It was open to his Honour so to find and it cannot be said that such a finding was inappropriate. His Honour went on to say that there was no reason why the DFE individuals would go to the length of giving false evidence involving the concoction of diary notes. However the executives pointed out that Mr Young had given evidence that the reason why Mr Poche wanted the Just Jeans events recorded in employees’ diaries was to make sure that DFE would not be involved in an action by the Commission alleging collusion over the Just Jeans tender. When his Honour said that there was no reason why the DFE individuals would go to the lengths of giving false evidence involving the concoction of diary notes and that the McPhee case did not suggest any unlawful conduct on the part of the DFE individuals for which they might seek to exculpate themselves by falsely blaming McPhee, his Honour does not appear to have had in mind the evidence to which we have referred that the DFE individuals made their diary notes (save for Mr Young’s note in relation to his conversation with Mr Morton on 17 May 1995) to make sure that they would not be involved in any Commission action. His Honour must, however, have had in mind the potential for the DFE witnesses to be involved in proceedings in relation to contraventions of the Act because he had specifically referred to the written undertaking by the Commission not to institute proceedings in respect of breaches of s 45A of the Act subject to conditions that they gave full and frank assistance to the Commission in legal proceedings and were not the “ring‑leaders” in unlawful conduct.
87 The executives, in criticising his Honour’s consideration of whether there was any sufficient motive for DFE witnesses to give false evidence, referred to authorities which, it was said, stood for the proposition that it was impermissible for a trial judge to give a direction along the lines of “Why should the complainant lie?” as a reason for bolstering the probative value of the complainant in the prosecution: R v Jovanovic (1997) 42 NSWLR 520; R v E (1996) 39 NSWLR 450; F (1995) 83 A Crim R 502. These authorities were concerned with directions to juries and are not relevant to the present consideration.
88 We are satisfied that it was open to his Honour to reject the evidence of Messrs Forde, Morton and Holland on critical issues in the manner he did. Having regard to the conflict between the evidence of Commission witnesses and McPhee witnesses, it was necessary for him to assess and make findings as to the credibility of the relevant witnesses. In undertaking the task of assessing credibility his Honour did not fail to use, nor did he palpably misuse, the advantage he had as trial judge. The findings his Honour made are not shown to be based on evidence inconsistent with facts incontrovertibly established by the evidence or which is glaringly improbable: Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479; Abalos v Australian Postal Commission (1990) 171 CLR 167. The appellants’ complaint is, rather, that his Honour preferred or accepted the evidence of the DFE witnesses over the evidence of the McPhee witnesses on critical issues and that he should have disbelieved the DFE witnesses. The appellants did not submit that the DFE witnesses were lying; rather it was submitted that they had been encouraged to recollect and that they came up with memories which were exaggerated or which misconstrued what occurred at the time. However his Honour accepted the DFE witnesses as reliable and there was substantial evidence before him which entitled him to reach this conclusion. There were inconsistencies in their evidence and these were recognised by his Honour, but the inconsistencies were not such as to demonstrate that in making the findings he did, his Honour failed to use or palpably misused the advantage he had as trial judge.
89 We now refer to a number of examples which demonstrate why, even putting the general question of demeanour to one side, it was open to his Honour to reject the evidence of Messrs Forde, Morton and Holland. Mr Forde said in examination‑in‑chief that he had been told by Mr Morton that the difference between the McPhee quote and the IPEC quote was 17% and that in his telephone conversation with Mr Poche on 28 June 1995 he was concerned about IPEC and not DFE and did not refer to an amount by which DFE’s quote was lower than McPhee’s quote. His Honour did not accept Mr Forde’s version of the conversation but, rather, accepted Mr Poche’s version. Mr Forde’s version was not consistent with his diary entry where he had noted “I mentioned gap of 17.7% to be qualified”. His Honour was entitled to find that there was “convincing corroboration” of Mr Poche’s evidence.
90 Mr Morton denied that he had made any reference to rates in his telephone conversation with Mr Young on 17 May 1995 but his Honour rejected Mr Morton’s evidence in this respect and accepted Mr Young’s version of the conversation. Mr Young’s account was consistent with the description he gave to Mr Fitt and Mr Wilson shortly after the conversation and to Mr Quirke some time later. As his Honour said, it was not credible that Mr Young invented a false version immediately after the conversation ended.
91 Mr Holland said that at the meeting after lunch on 16 May 1995 when Mr Morton raised the matter of Just Jeans and said that DFE should provide Just Jeans with a quote, he wanted to change the substance of the conversation because it was not the way they ran their business, mindful of trade practices legislation and just normal business ethics. However, notwithstanding his evidence that this was something they did not do, he agreed that he reaffirmed what Mr Morton had said about wanting DFE to quote the account. Indeed, his evidence‑in‑chief was:
“I think in trying to change that discussion, I said, ‘You guys should quote. It’s an account that we have been trying to improve our yield position with, they are a very demanding customer’. Then I said words to the effect, ‘But, look, we’re not here to talk about customers,’ and started a discussion on either enterprise bargaining and/or Tasmania. I don’t remember the order in which I did that.”
92 His Honour did not accept the reasons Mr Morton gave for wanting DFE to quote, namely to make McPhee’s quote look more appropriate, to be fair to Just Jeans and because of the concern about the legal implications of DFE’s policy. No explanation was given to DFE by McPhee as to why DFE was being asked by McPhee to provide a quote to Just Jeans.
Was there an innocent hypothesis?
93 The appellants submitted that his Honour gave no real attention to the possibility of there being an innocent hypothesis which explained McPhee’s conduct. We do not accept the submission because it is apparent on a fair reading of his Honour’s reasons that he articulated the case advanced by McPhee and then made findings as to why he could not accept that case and why he rejected it. The principal case advanced by McPhee was that it did not ask DFE for a cover quote but asked McPhee to put in a quote; that is to put in a quote simpliciter, not to put in a quote which was to be competitive or commercial. His Honour set out the case opened by McPhee’s counsel as to the reasons why McPhee requested DFE to quote and identified the evidence given as to those reasons.
94 His Honour recognised and articulated McPhee’s reasons for requesting DFE to quote in the following passage:
“The case of McPhee, as opened by its counsel, was that there were three reasons for requesting DFE to quote, these being reasons which activated Mr Morton: (i) ‘Friendship or commercial responsibility’ to Just Jeans so that ‘if there was a tender, DFE’s policy of not quoting against McPhee clients did not get in the way’; (ii) If there were only two quotes, McPhee’s and IPEC’s, and, as seemed very likely, McPhee’s would be higher, its quote would seem unreasonable; and (iii) Mr Morton had personally recommended DFE to Mr Pellegrini and if DFE did not tender Mr Morton ‘would look foolish’.
In his evidence‑in‑chief, Mr Morton gave evidence substantially along the lines of (i) and (ii). However he did not mention (iii). His evidence does not suggest that fear of personal embarrassment vis-à-vis Mr Pellegrini entered into the matter. He did not say he recommended DFE to Mr Pellegrini – rather his account was that Mr Pellegrini announced to him that IPEC and DFE would be the two companies invited to quote.
In his evidence Mr Morton added another reason (not mentioned in the opening) viz (iv) concern about ‘the legality of DFE not quoting, or their policy of not quoting on McPhee accounts’.”
95 His Honour confronted the proposition that McPhee intended the quote it asked DFE to put in to be a competitive tender. The appellants submitted that, so expressed, this was a misunderstanding of McPhee’s case as McPhee did not ask DFE to put in a competitive tender but simply asked DFE to put in a tender. For present purposes we need not address this distinction which we have discussed earlier in these reasons. What is clear is that his Honour considered whether there was a possibility that requesting DFE to tender or quote was explicable by reference to an innocent hypothesis. His Honour found that there was no logic in McPhee intending that the tender it had urged DFE to put in be a competitive tender. We have discussed that finding earlier in these reasons. The finding demonstrates that his Honour had turned his mind to whether the request by McPhee to DFE to tender or quote could be explained by matters consistent with an innocent hypothesis.
96 This is demonstrated further by his Honour’s observations that:
“On McPhee’s own case there was no explanation given to DFE at the time of what are now said to be the innocent reasons for asking DFE to quote, and quote to win.”
and that:
“Needless to say, Mr Morton giving McPhee’s rates to a competitor is totally inconsistent with its case that its intention was for DFE to put in a competitive quote”
It is also demonstrated by his Honour’s analysis and reasoning as to why he could not accept McPhee’s explanation for the 17.7% figure mentioned by Mr Forde to Mr Poche on 28 June 1995 which was said to support McPhee’s case that Mr Forde was complaining to Mr Poche about IPEC.
Was there unfairness and an apprehension of bias?
97 In addition to the specific submissions discussed above, the appellants submitted generally that aspects of the conduct of the trial made it unfair and that his Honour’s reasons disclosed pre‑judgment and gave rise to a reasonable apprehension of bias. We mention later in a different context some of the relevant authorities. We have already referred to a number of examples relied upon by the appellants in support of this submission which we have rejected, such as his Honour’s consideration of Mr Forde’s diary entry for 16 May 1995.
98 In support of the general submission of unfairness and bias it was said that his Honour did not deal with evidence favourable to the appellants. There is no substance in that submission. On numerous issues, including critical issues, his Honour had regard to the evidence of the appellants and formed a view as to which evidence he would accept.
99 In further support of the general submission of unfairness and bias, the appellants criticised various respects in which his Honour was said to have drawn inferences that were not open on the evidence or that were against the weight of the evidence. We are satisfied that in respect of these further complaints about the inferences which were said not to be open, there was indeed evidence from which it was open to his Honour to draw them.
100 We refer to one of the complaints by way of example. It was submitted that the inference that Messrs Forde, Morton and Holland were seeking a cover quote was not open on the evidence, was against the weight of the evidence and was derived entirely from false logic. That submission fails to have regard to the evidence given as to the substance of the conversations on 16 May 1995 when, for example, Mr Holland and Mr Morton told DFE executives that it was important for them to quote, or that they would like them to quote, and either Mr Morton or Mr Holland said words to the effect that McPhee was looking for a substantial price rise due to the yield. Further, Mr Forde acknowledged that there was a discussion about the problems of dealing with the Just Jeans account and that it was a difficult account to service. The submission also fails to take account of Mr Young’s evidence of his telephone conversation with Mr Morton on 17 May 1995 when Mr Morton told him the rates McPhee quoted Just Jeans. It fails to take account of the telephone conversation on 17 May 1995 between Mr Holland and Mr Bates when Mr Holland told Mr Bates that Just Jeans expected a lot, had a lot of returns, were cubic and that McPhee had not been able to get an increase for the last four years. It fails to take account of the telephone conversation on 22 May 1995 when Mr Morton told Mr Bates to watch the service and that Just Jeans demanded a lot and were cubic. It fails to take account of the telephone conversation on 28 June 1995 between Mr Poche and Mr Forde when the 17.7% difference in the quotations was discussed.
101 The appellants also submitted that two other instances of procedural unfairness, a denial of natural justice and circumstances giving rise to an apprehension of bias occurred when his Honour twice stopped counsel from what was said to be a pursuit of a positive motive for DFE witnesses to exaggerate or incorrectly reconstruct their recollections when creating diary entries after the event. There is no substance in this submission. On the first occasion his Honour was concerned that the case did not go beyond the factual issues and extend to other issues which were not relevant. When his Honour referred to the fact that he was “not going to hear too much about it”, he was referring to what was said to be a vendetta by Mr Poche over a period of years. His Honour was saying no more than that he was going to ensure that the parties did not stray beyond the issues then before the Court. In fact, he allowed counsel for McPhee to continue cross‑examination notwithstanding objection. The second occasion relied upon arose on an objection by counsel for the Commission to cross‑examination of Mr Poche by counsel for McPhee. There had been a number of questions about when DFE first raised issues with the Commission. Objection was taken to the relevance of the question and, after hearing submissions, his Honour said that the subject matter of the question did not affect the issues in the case. Counsel for McPhee then said:
“I am saying it is relevant to credit, but if your Honour is not assisted, I will move on.”
His Honour replied “No, I do not think it is important”, and the cross‑examination proceeded on other matters.
102 This exchange does not support an argument that there was procedural unfairness or a denial of natural justice nor can it give rise to any apprehension of bias. His Honour was in a position to form a judgment as to what might or might not be a relevant line of cross‑examination on issues of credit and we can see no basis for suggesting that the way in which his Honour dealt with matter was in any way out of the ordinary, much less such as to involve unfairness or an apprehension of bias.
103 Another submission that the trial was unfair and that his Honour displayed bias was made under the rubric of the rule in Browne v Dunn (1893) 6 R 67. It involved a number of points with which we have already dealt, such as the scope of the pleadings, and it also involved a complaint that there were critical findings on matters that had not been put to the appellants’ witnesses. In considering this submission it has to be remembered that the rule in Browne v Dunn has two aspects. The first is that it is a rule concerned with fairness in the conduct of a trial and with the notice that has to be given of matters to be put against a party or a witness. The second is that the rule is not inflexible: Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 345.
104 In respect of some of the matters relied upon, fairness did not require that his Honour avoid drawing adverse conclusions because those conclusions had not specifically been put to witnesses in the course of the trial. For example, it was submitted that his Honour’s finding that in the days following 16 May 1995 the executives acted “viz‑a‑viz their colleagues in a mutually supportive way, as a team” was not put to Messrs Forde, Morton and Holland with respect to the conduct of each of them. This was a conclusion which his Honour was entitled to draw from the evidence; it was not a matter of fact that was required to be put to the witnesses before any such conclusion could fairly be reached by his Honour. The same may be said about the criticism of his Honour’s finding that the relationship between McPhee and DFE:
“was implicitly relied upon by McPhee as a matter of loyalty – the ties that bind – and by way of suggested disadvantage to DFE if the relationship did not continue”.
105 Other aspects of the submission involve a misunderstanding of his Honour’s findings. Thus it was submitted that it was not put to Mr Forde that he fabricated the diary entry of 16 May 1995 in two different coloured inks, seeking to put the meeting in an innocuous light. As we have stated already, this submission misunderstands his Honour’s finding. He did not find that Mr Forde had fabricated the diary entry. He did find that the second line in black ink had been added later but Mr Forde was given the opportunity to explain how this had come about and he gave an explanation. Another aspect of this submission was that the appellants’ witnesses were not given any opportunity to deny that any part of the reason for what they did was a concern about IPEC. Accepting this to be so, the question is whether it was unfair for his Honour to proceed to make the findings he did. In answering that question it is of critical importance to note that two of the important witnesses were cross‑examined by counsel for the Commission as to their views about IPEC’s prospects. This aspect is discussed above in connection with the criticism that the case was decided on a basis and on an issue that had not been pleaded. In the circumstances we do not think it can be said that his Honour’s findings could not consistently with fairness have been made.
106 There were some other matters in respect of which it was said that findings were made on matters that had not been put to the appellants’ witnesses. We do not consider, however, that there are any such matters of such significance as to lead to the conclusion that the trial was unfair.
107 An example is his Honour’s finding that at the meeting on 16 May Mr Clarke said:
“When we walk into DFE accounts, we quote, but we know what to quote.”
It was submitted that Mr Clarke was not challenged on his version which is set out in par 55 (above) and that the version accepted by his Honour was not put to Mr Clarke. What was put to Mr Clarke was that he had said:
“We’re playing the game from our side. We know what to quote when we come across a Discount Freight Express account”.
The difference between this version put to Mr Clarke and the version accepted by his Honour is, in substance, marginal and no case of unfairness is made out.
Were there errors of law?
108 It was submitted that the relevant provisions of the Act were not contravened by the facts as found. The points were not raised in the amended notice of appeal, nor were they raised in the appellants’ written submissions filed before the appeal. His Honour’s reasons show that these issues were not raised at trial, as his Honour said:
“It was not disputed that an arrangement or understanding between McPhee and DFE for the latter to give a cover quote to Just Jeans would be a contravention of the provisions just mentioned [s 45(2)(a)(i) and s 45(2)()(ii)]. An attempt to make such an agreement or arrive at such an understanding would contravene TPA s 76(1)(b).
…
By the time of the trial it was not in dispute that McPhee and DFE were in competition in a market, however that market be defined”
Perhaps because of the brief way in which these points were developed, the absence of any mention of them in the amended notice of appeal or in the appellants’ primary written submissions and the very large number of other points argued by the appellants, the points do not appear to have been dealt with by counsel for the Commission. The question then arises whether, in these circumstances, the points should be considered at all. Since, however, there are, in our view, short answers to the points, we think it best to deal with them, even though we have not had the advantage of full argument.
109 The appellants submitted that if the object of the arrangement or understanding was IPEC, there could be no “exclusionary provision” within the meaning of s 4D of the Act as there was no attempt to get IPEC to be a party to the arrangement or understanding. We reject that submission. The attempt found by his Honour was that at all times McPhee attempted to make an arrangement or to reach an understanding with DFE, albeit because of McPhee’s concern about IPEC. The attempt involved a purpose of ensuring that DFE’s quotation would not be competitive with McPhee’s quotation. That purpose was sought to be achieved with DFE and the purpose would have been effected if DFE had agreed with, and implemented, the arrangement or understanding which McPhee was seeking to make or reach. Although a concern about IPEC may have been the motive for the attempt, it did not require the participation of IPEC for the attempt to succeed; it only required the participation of DFE.
110 It was also submitted that there could not have been an attempt to make an arrangement or reach an understanding that contained an “exclusionary provision” within s 4D of the Act because s 4D only applies where the arrangement or understanding is between persons who are competitive with each other. It was said that DFE and McPhee were not relevantly in competition with each other or likely to be in competition with each other in relation to Just Jeans’ business because of DFE’s policy (whether mutual or unilateral) of not quoting for business from McPhee customers.
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).
113 Another submission of the appellants was that although his Honour had found that each of the individual appellants had acted with the intent of inducing DFE to enter into the proscribed arrangement or understanding, he had not analysed the conduct of each individual separately. His Honour considered that it was unreal for him to compartmentalise the words of each individual used at the meeting on 16 May 1995 and then analyse the effect of those words in a vacuum. He found that each individual participated in the conversation on 16 May 1995 and that what happened, especially as both Mr Morton and Mr Holland told the DFE representatives “We want you to quote” was the kind of situation discussed by Isaacs J in R v Associated Northern Collieries (1912) 14 CLR 387 at 400:
“Community of purpose may be proved by independent facts, but it need not be. If the other defendant is shown to be committing other acts, tending to the same end, then though primarily each set of acts is attributable to the person whose acts they are, and to him alone, there may be such a concurrence of time, character, direction and result as naturally to lead to the inference that these separate acts were the outcome of pre‑concert, or some mutual contemporaneous engagement, or that they were themselves the manifestations of mutual consent to carry out a common purpose, thus forming as well as evidencing a combination to effect the one object towards which the separate acts are found to converge.”
His Honour then noted that the Commission’s case was that on 16 May 1995, and thereafter, each of Messrs Forde, Morton and Holland acted with the intent of inducing DFE to enter into the proscribed arrangement or understanding. His Honour then reasoned as follows:
“The inference in my opinion is inescapable that in participating in the meeting in the way they did the individual respondents displayed an intention to so induce the DFE men. Each held, and was seen by DFE to hold, high office in McPhee. None of the individual respondents disassociated himself from what was said by another. On the contrary, both at the meeting and in the days that followed they acted viz-à-viz their colleagues in a mutually supportive way, as a team.”
114 We do not consider that his Honour erred in the manner in which he approached the conduct of the individual appellants. He had earlier identified the manner in which each individual participated in the conversation on 16 May and it was open to him to find that on that occasion the manner in which each individual participated was the result of “some mutual contemporaneous engagement” or the manifestation of a “mutual consent to carry out a common purpose”. For example there was evidence which his Honour accepted that when Mr Forde was taking the DFE representatives on a tour of the building before lunch and they came to Mr Morton’s office, Mr Morton said to Mr Forde:
“Have you spoken about JJ yet?”
Mr Forde replied:
“We will talk about it after lunch.”
115 It is not correct to say, as the executives submitted, that his Honour considered that what happened at the meeting showed the outcome of pre‑concert. Pre‑concert was only one of the matters considered by Isaacs J in the passage referred to above. The executives submitted that his Honour rejected the approach of analysing each individual’s conduct, relying on the fact that each individual participated in the conversation on 16 May 1995. The submission misunderstands his Honour’s reasoning. Although his Honour rejected the submission that he compartmentalise the words of each individual for the purpose of determining whether the words used were capable of constituting the alleged attempt to induce by each individual, he nevertheless considered the conduct of each individual at the meeting of 16 May 1995 and on subsequent days. We should add that we see no basis for the submission that his Honour made any of the individual appellants responsible for Mr Clarke’s conduct. When his Honour said:
“None of the individual respondents dissociated himself from what was said by another. On the contrary, both at the meeting and in the days that followed they acted viz‑a‑viz their colleagues in a mutually supportive way, as a team”,
he was not referring to or including Mr Clarke who was not at that stage a respondent. The case against Mr Clarke had been discontinued during the trial.
116 It was also submitted that in this passage his Honour wrongly treated the McPhee executives as a “team”. It is apparent from the context in which his Honour made this observation that he was not treating the McPhee executives as colluding together at each point at which contact with the DFE executives occurred. Rather he was saying that each McPhee executive had an intention to achieve the same end, that is to induce the DFE executives to put in a non‑competitive quote or cover quote. To that extent the acts and conduct of each of them were supportive of the acts and conduct of the others of them because they were directed to the same end.
117 Although his Honour did not, in terms, make a finding as to when the attempt occurred, it is clear from his Honour’s reasons that he regarded the genesis of the attempt as being at the meeting on 16 May 1995 and that constituent elements of the attempt continued thereafter in the conversations to which he referred on 17 May 1995, 22 May 1995 and 28 June 1995. It should not be forgotten that as at 28 June 1995 the Just Jeans tender procedure was still open. On 5 July 1995 Just Jeans decided in principle to accept the IPEC tender and, as we have noted earlier (par 18) Mr Holland offered Just Jeans a reduction in the rates in McPhee’s quotation on 6 July 1995 and offered a further reduction on 25 or 26 July 1995. It was not until 15 August 1995 that Just Jeans told McPhee and IPEC that the account would go to IPEC. His Honour did not limit himself to a finding of relevant intent or attempt on 16 May 1995, as is made clear by the passage set out in par 113 above. This is also made clear by an earlier passage in his Honour’s reasons:
“Here the proposed arrangement or understanding was much more specific. McPhee only had to secure DFE’s acquiescence and the arrangement or understanding would be complete. This is exactly what Messrs Forde, Morton and Holland tried to do on 16 May and thereafter”. (emphasis added)
118 It was submitted that his Honour failed to recognise that Mr Holland sought to change the topic but there was other evidence from which it was open to his Honour to find that Mr Holland had the intent of inducing DFE to enter into a proscribed arrangement or understanding. Although Mr Holland sought to change the topic, before doing so he said that they wanted DFE to quote for the Just Jeans account. His evidence was that he “reaffirmed” what Mr Morton had said about wanting DFE to quote for the Just Jeans account. In particular Mr Holland said:
“Having heard Doug [Morton] make that statement, I eventually reaffirmed it and led the discussion elsewhere.”
Thus, although Mr Holland may have sought to change the topic, he actively participated in putting forward the proposal that DFE should submit a quote to Just Jeans. Further, on the following day, 17 May 1995, Mr Holland telephoned Mr Bates and in the course of the conversation suggested factors which his Honour found would make DFE quote at a higher rate.
119 The executives submitted that his Honour erred in the manner in which he found that an “attempt” had occurred. It was submitted that his Honour did not make a finding as to when the attempt occurred nor did he identify its constituent elements. As we have observed earlier, it is apparent from his Honour’s reasons that he found that the attempt occurred on 16 May 1995 and on the dates of the subsequent conversations to which he had referred. The executives submitted that insofar as the allegation of attempt was limited to events on 16 May 1995, what happened on that day was too subtle, too tentative and too remote to constitute an attempt because the DFE representatives did not give any indication that DFE would even quote. It was said that the events of that day could have been no more than merely preparatory, and that if the attempt was said to be constituted by a combination of events on 16 May 1995 and thereafter, his Honour did not determine what the subsequent events were, nor did he consider the involvement of each of the individuals in, and knowledge of, the conduct of others in respect of those subsequent events.
120 Whether an attempt occurred should not be considered solely by reference to what took place on 16 May 1995 and, as we have observed earlier, his Honour did not approach the matter in this way. What occurred on that day must be considered in the light of what occurred on 17 May, 22 May and 28 June 1995. His Honour found that McPhee’s conduct “went well beyond preparation” and in our view his Honour’s finding was correct having regard to the nature of the conversations on 16 May 1995 and on 17 and 22 May 1995 and 28 June 1995. His Honour reasoned:
McPhee only had to secure DFE’s acquiescence and the arrangement or understanding would be complete. This is exactly what Messrs Forde, Morton and Holland tried to do on 16 May and thereafter.”
It is thus clear that his Honour had in mind the conversations which occurred subsequent to 16 May, namely on 17 and 22 May 1995 and 28 June 1995. What had occurred on 16 May 1995 and thereafter was not too subtle, too tentative or too remote having regard to his Honour’s findings as to what had occurred and what had been said on those dates. As his Honour observed, all that was needed to complete the arrangement or understanding was DFE’s acquiescence. McPhee’s conduct and that of its representatives had advanced well beyond preparation to the stage of persuasion and a positive attempt to induce.
121 In any event, if what was said was subtle it was not lost on the DFE representatives. Mr Wilson said:
“I was shocked by what I had heard and I was simply wanting to leave the premises.”
122 Mr Fitt who was in Mr Young’s office on 17 May 1995 when Mr Morton telephoned said that after the telephone conversation finished Mr Young said:
“You’ve got to be fucking kidding. I don’t believe it. He has just given me the rates.”
Mr Fitt replied:
“That was the reason for the meeting. That was why they wanted us there. What do we do?”
Mr Young responded that he would talk to Mr Poche and Mr Bates about it. At that point Mr Wilson entered the room and, according to Mr Fitt, Mr Young said words to the effect:
“I have had a call from McPhees and they’ve given me the rates for Just Jeans.”
Mr Wilson also said in re‑examination that in the course of a conversation with Mr Young on 18 May 1995 Mr Young said:
“I didn’t tell you earlier but I’ve had a phone call from Doug Morton and it sounds like he’s asking me to cover the rates”.
123 Some of this evidence and other evidence of this nature was not objected to or was admitted over objection, his Honour ruling that it had become relevant to the issues as they had been developed in the course of the trial. Those issues included whether DFE was aware of what the Commission says McPhee was trying to do and the effect of what the McPhee executives were saying.
124 Although, as noted earlier, Mr Wilson said that at the meeting on 16 May Mr Morton did not say that he wanted DFE to quote on anything other than a competitive basis and that the only statement made at the meeting about quoting was that DFE was asked to quote and no restriction was placed on how DFE should quote, he also said that his understanding at the end of the meeting was:
“certainly that we were being asked to quote but we were being asked to quote in a manner that I didn’t believe was ethical”.
He also said that some minutes after the point at which the McPhee representatives said they wanted DFE to submit a quote to Just Jeans he observed that Mr Young was “distressed and nervous”.
125 This evidence must be understood in the light of what had been said at the meeting. Not only had Mr Morton and Mr Holland told the DFE representatives that they wanted DFE to submit a quote to Just Jeans, the DFE representatives had also been told that McPhee was reviewingmajor accounts looking for a significant increase in prices and trying to increase its margins. They were also told that there were some nonsensical or ridiculous prices being quoted by competitors.
126 In cross‑examination Mr Young said that in the conversation with Mr Morton on 17 May 1995 he believed Mr Morton was telling him the basis of how McPhee quoted and that his reaction was that he was getting a break from a competitor. He said later that at the 16 May 1995 meeting the McPhee people only asked DFE to quote and did not express any limitation on how DFE quoted. He said however, that when Mr Morton telephoned him the next day the only thing that rattled him was the actual rates being quoted and that he did not want to get involved in it. He understood that Mr Morton was telling him that the figures Mr Morton had given him were based on the increased rate McPhee had tried to charge Just Jeans. He also understood that Mr Morton was telling him what McPhee had quoted and the inference he drew was that he was being told “the rate we [DFE] would need to quote to be about the McPhee price”.
127 We reject the submission that his Honour did not determine what were the subsequent events or the involvement of each of the individuals in those events or their knowledge of the conduct of the other individuals. That submission fails to have regard to a considerable part of his Honour’s reasons where he considered and analysed in some detail (as we have considered earlier) what occurred after 16 May 1995. His Honour’s reference to:
“This is exactly what Messrs Forde, Morton and Holland tried to do on 16 May and thereafter.”
can only be a reference to the earlier passages in his reasons where he had set out in some details what had occurred, in particular on 17 May, 22 May and 28 June 1995 when there were conversations between, respectively, Mr Young and Mr Morton, Mr Bates and Mr Holland, Mr Bates and Mr Morton, Mr Young and Mr Forde and Mr Poche and Mr Forde. His Honour set out those conversations in some detail, analysed them and drew conclusions from each of them in relation to the involvement in the attempt of each of Messrs Morton, Holland and Forde. We are satisfied that his Honour considered separately the involvement and participation of each of Messrs Morton, Holland and Forde in the constituent elements of the attempt which he found.
128 McPhee submitted that his Honour erred in finding that McPhee’s intention was to be ascertained from an aggregation of the mental state of the individuals involved and that the principles applicable to aggregation of knowledge in cases of fraud, such as in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, are not applicable to ascertaining corporate intention. It was submitted that it was necessary to consider the intention of each of the individual McPhee representatives separately. We do not consider, however, that his Honour did aggregate the mental state of the individuals involved. Rather, he considered the intention of each individual and attributed it to McPhee. In reasoning in this way his Honour correctly applied the principles set out in Krakowski v Eurolynx Properties Ltd at 582‑583 and Meridian Global Funds Management Asia Limited v Securities Commission [1995] 2 AC 500 at 506‑507. In particular the principles set out in Krakowski v Eurolynx Properties Ltd apply to ascertaining corporate intention. The case involved a claim of fraudulent misrepresentation and a majority of the High Court (Brennan, Deane, Gaudron and McHugh JJ) held that the state of mind of Eurolynx could be established from the state of mind of several persons including its agent and officers. The majority said at 582‑583:
“The mind of Eurolynx does not depend upon the acceptance of the evidence of Gilbert alone as to his appreciation of the significance of the separate agreement. Account must be taken of the evidence that Eurolynx’ agent (Cini) and Eurolynx’ officer (Ryan) who had first procured the agreement of Mermelstein (as agent for the purchasers) to buy unit 12 knew that the purchasers were willing to buy on the footing that the rent reserved by the lease was what the tenant had been and was willing to pay for a lease of the property offered to them. In other words, they were willing to buy at a price ten times the amount of the rent which the property itself would yield. Their knowledge was the knowledge of Eurolynx, for they were the persons who were responsible for the initial negotiations and who had set the scene in which the representation had been made by the s 32 statement and the proffered contract of sale. As Bright J said in Brambles Holdings Ltd v Carey [(1976) 15 SASR 270 at 279]:
‘Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. This process is often necessary in cases in which companies are charged with offences such as conspiracy to defraud.’
A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them. Neither Cini nor Ryan was called to give evidence. It is erroneous to make a finding as to the company’s intention or willingness to misrepresent the contractual arrangements with Swaeder without reference to the knowledge of Cini and Ryan.”
129 McPhee also submitted that his Honour relied erroneously on s 84(2) of the Act in ascertaining McPhee’s intention. That submission may be based on a mis‑reading of his Honour’s reasons which we read as having moved, at that point, from intent to conduct. His Honour’s reference to s 84(2) appears to have been made not in the context of determining McPhee’s intention but rather in the context of determining whether the conduct of the individuals is to be considered as conduct of McPhee and attributed to it. However, having regard to our earlier conclusion about aggregation of intention, it is unnecessary to pursue this matter further.
Briginshaw v Briginshaw
130 The executives submitted that this was a case for careful application of the principle in Briginshaw v Briginshaw (1938) 60 CLR 336 at 360‑363. They submitted that the fact that the case was not referred to by his Honour and the fact that his Honour made no reference to the exclusion of a reasonable hypothesis consistent with innocence suggested that he did not advert to the Briginshaw principle. This principle applies to penalty proceedings of the present type but the fact that a trial judge does not refer specifically or explicitly to the Briginshaw principle does not mean that he or she has not given due consideration to the well‑known principle discussed in that case. Although his Honour did not refer specifically to the case, the nature and structure of his reasoning on particular issues shows that he had the Briginshaw principle in mind when making his findings, and that he arrived at a sufficient degree of satisfaction having regard to the gravity of the matter to be proved: Briginshaw v Briginshaw (above) at 362. We refer to two examples. His Honour accepted Mr Young’s version of a telephone conversation between Mr Morton and Mr Young on 17 May 1995. His Honour reasoned:
“I think it not credible that he invented this version of the conversation immediately it had occurred and then told the invented version to Messrs Fitt and Wilson.” (emphasis added)
We also refer to his Honour’s finding about the telephone conversation between Mr Poche and Mr Forde on 28 June 1995. We have set out earlier his Honour’s reasoning but the passage bears repeating here:
“There can be no doubt that 17.7 per cent was the figure Mr Forde mentioned since it is recorded in his diary. I think this is what Mr Poche heard, rather than ‘15, 16, 17 per cent’. There can be no doubt that this is the figure Mr Morton passed on to Mr Forde. There is thus convincing corroboration of Mr Poche’s evidence that what McPhee were complaining about was not the difference between IPEC and McPhee but the difference between DFE and McPhee. Mr Morton and Mr Forde were disappointed, and indeed angry, that DFE had not covered their quote but had quoted competitively, and quoted twice. This is only consistent with McPhee’s intention all along being not that DFE should quote competitively, but that it should cover.” (emphasis added)
His Honour’s ultimate finding was expressed in terms that he had:
“no doubt that the true intent of McPhee was to have DFE quote, but not competitively.” (emphasis added)
It was on this basis that his Honour was:
“satisfied the alleged contraventions occurred.”
In considering the facts that led to this conclusion his Honour clearly had in mind the need to be satisfied to the appropriate degree.
THE ACI FLORAPAK CONDUCT
131 At material times McPhee supplied services to ACI Florapak as a carrier of ACI Florapak goods. In November 1994 Mr Jolly, an Area Manager or Country Sales Manager for DFE with responsibility for the Gippsland region, attended ACI Florapak’s premises at Drouin and spoke to the ACI Florapak Manager on site about “quoting” for the carriage of ACI Florapak goods.
132 Part of Mr Jolly’s duties was to canvass new business in the Gippsland region. Mr Jolly thought that DFE’s “policy”, referred to earlier in these reasons, namely not to supply a “quote” to a business for which carrier services were supplied by McPhee unless the business was dissatisfied with McPhee’s service, did not apply to ACI Florapak which he described as a “shared” account in that carrier services were supplied by McPhee and others. Mr Jolly, however, indicated to ACI Florapak that DFE would quote only for work being done by carriers other than McPhee.
133 A few hours after his visit to ACI Florapak’s premises at Drouin, whilst attending to other duties near Sale in the Gippsland region, Mr Jolly received a call on his mobile telephone from a Mr Webb who said he was a “Branch Manager of Gippsland” employed by McPhee. Mr Jolly had not heard of Mr Webb before that call. Mr Jolly said that in that telephone call Mr Webb sought to arrange a meeting with him. It was agreed that Mr Webb would contact Mr Jolly at the DFE depot at Traralgon to which Mr Jolly would be returning later that day.
134 The two men met when Mr Jolly arrived at Traralgon and had a discussion over a few drinks. On the morning of the next day Mr Jolly visited the McPhee depot at Traralgon and spoke to Mr Webb.
135 Little of the foregoing was in dispute in the hearing before his Honour. The evidence of Mr Jolly and Mr Webb divided sharply, however, on what was discussed when they met and where they met.
136 Mr Jolly said that at the first meeting, after Mr Jolly had said that DFE intended to quote for ACI Florapak’s business, Mr Webb had said that ACI Florapak was McPhee’s major account in Gippsland and that it would hurt McPhee if DFE started carrying ACI Florapak’s goods. Mr Webb asked Mr Jolly to “cover” quote and said that he would supply McPhee’s rates to Mr Jolly the next morning. Mr Jolly said he agreed to the proposal to “cover” quote on McPhee’s work for ACI Florapak. Mr Jolly said that when he attended McPhee’s premises the next day he was given “a dollar and cents kilo figure” by Mr Webb. Mr Jolly said he prepared a quote which was “a cent or two higher” than the rates given to him by Mr Webb on some routes and “a cent or two lower” on others. After the quote was delivered ACI Florapak asked DFE if the quote could be reduced. Mr Jolly responded that the rates could not be improved upon. DFE was not given a contract to carry any of ACI Florapak’s goods.
137 Mr Webb denied that ACI Florapak was mentioned in his discussions with Mr Jolly, or that any request was made by him for DFE to “cover” McPhee’s rates.
138 His Honour accepted Mr Jolly’s evidence on material issues and did not accept the evidence given by Mr Webb. The task for the appellants therefore is to show that the advantage enjoyed by the trial judge in assessing the manner of delivery of evidence by witnesses, their demeanour, was either misused or of no relevance: see the discussion at par 88 above.
139 McPhee submitted that it was “inherently improbable” that Mr Jolly, without further discussion, would agree to do something “illegal”. In the context of the whole of the evidence before his Honour, however, there was no “inherent improbability” in Mr Jolly falling in so readily with Mr Webb’s suggestion and therefore the content of Mr Jolly’s evidence did not in itself provide grounds for setting aside the acceptance of it by his Honour.
140 Other submissions contended that the findings made by his Honour were “not reasonably open”, a phrase which tends to minimise the task an appellant has to discharge before findings of fact that are based on views formed as to the weight to be attributed to oral testimony may be set aside.
141 Counsel for McPhee pointed to matters that may have given his Honour cause to give consideration to some aspects of Mr Jolly’s evidence but none of those matters was capable of stamping the evidence of Mr Jolly as so glaringly improbable as to make his Honour’s acceptance of it incapable of rational explanation. For example, the submission that if Mr Jolly engaged in such discussions with Mr Webb it was contrary to standing instructions given to him by his superiors, may have given his Honour reason to look closely at Mr Jolly’s explanations for his conduct but, obviously, it did not dictate a conclusion that Mr Jolly’s evidence could not be accepted.
142 Other submissions were even more distant from the principles established in the authorities referred to in par 88. For example, it was submitted that his Honour had failed to recognise that acceptance of Mr Jolly’s evidence would involve an implicit finding that Mr Jolly did not disclose to Mr Webb when they met that Mr Jolly intended at that time not to quote for the McPhee portion of ACI Florapak work. Therefore, it was said, Mr Jolly could not be accepted as a reliable witness. Apart from the submission not advancing the case McPhee had put to his Honour, it was only a minor element amongst the many matters his Honour had to consider in assessing Mr Jolly’s evidence. Obviously, it did not in itself dictate a finding adverse to Mr Jolly’s credit. Further, it was said that his Honour erred in describing Mr Jolly as Country Sales Manager when his position was Field Sales Manager – Victorian Country. For what it was worth, Mr Jolly described his position as Area Manager but whatever the proper description may have been, the point is trivial.
143 It was not necessary for his Honour to set out and discuss, chapter and verse, every submission on how the evidence of witnesses was to be weighed and evaluated. His Honour found Mr Jolly to be a more impressive witness than Mr Webb. In doing so his Honour referred to the material elements that appeared to suggest consistency in Mr Jolly’s evidence and why he found Mr Webb’s contrary evidence lacking in cogency and to be improbable. No more was required of his Honour.
144 In summary, the challenges to his Honour’s acceptance of Mr Jolly’s evidence were not directed to demonstrating an error of law on the part of his Honour but to persuading this Court to carry out a re-evaluation of that evidence.
145 It was further submitted that, in any event, Mr Jolly lacked authority to commit DFE to an understanding, agreement or arrangement with McPhee from which a contravention of s 45 of the Act could result. That was not a submission put to his Honour. In the absence of any further elaboration of the point in the cases presented to his Honour, it would appear to have been an inference available to his Honour that it was within the authority of an Area Manager to exercise broad discretions and judgments when formulating quotations for potential customers. In any event, by his conduct, Mr Jolly held out that he had such authority in responding to Mr Webb’s encouragement to reach an understanding. There is no substance in the ground.
146 It was further submitted, variously on the ground of perceived bias, procedural irregularity or exercise by his Honour of prejudgment, that the hearing of the issues in the ACI Florapak conduct of McPhee had miscarried. The submission did not identify material particulars capable of supporting the ground. In short, it was submitted that because his Honour had found against McPhee and its executives in respect of the Just Jeans conduct, McPhee’s case did not receive the benefit of an open mind when his Honour came to determine the issues raised in the ACI Florapak conduct.
147 The relevant test for present purposes is whether a judge is in a position of conflict that may cause a reasonable person to apprehend that the impartial performance of duty may be compromised: Livesey v New South Wales Bar Association (1983) 151 CLR 288 at 293‑294; R v Watson (1976) 136 CLR 248; Vakauta v Kelly (1989) 167 CLR 568; Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198; Galea v Galea (1990) 19 NSWLR 263; Karpin v Karpin [1999] NSWSC 335. No such circumstance was identified and the matters relied upon to support the ground went no further than contentions about alternative conclusions that were available to be drawn on the evidence but not drawn by his Honour.
148 As Mason J said in Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352:
“There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way.”
149 No ground of appeal was established to permit the findings made by his Honour to be disturbed.
PENALTIES
150 The appellants submitted that the penalties imposed were manifestly excessive; that they failed to have regard to what was said to be the minuscule economic impact that the offending conduct had or was capable of having; that they were totally disproportionate to other comparable penalties; that, in effect, they treated McPhee as if it were its parent TNT Limited (“TNT”); and that they included a component of punishment which was not a relevant factor. It was also submitted that two penalties were imposed in respect of the ACI Florapak conduct when only one penalty was proper in the circumstances.
151 It was accepted that an appellate court may interfere with a penalty imposed only if it is shown that the trial judge fell into error by acting on a wrong principle, by acting on a misapprehension of the facts, by taking into account irrelevant material or by failing to take into account relevant material. It was also submitted that error could be presumed if the penalty imposed was manifestly excessive: Pye Industries Sales Pty Ltd v Trade Practices Commission (1979) ATPR 40‑124 at 18,325‑18,327. It was submitted that the principal object, if not the only object of imposing a penalty for a contravention of Pt IV of the Act, is deterrence and not imposition of punishment: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 297.
152 The appellants submitted that his Honour made various errors which vitiated his determination of the penalties imposed. We set out and deal with those submissions in the following paragraphs.
153 Section 76(1) of the Act requires the Court, when determining an appropriate pecuniary penalty, to have regard to all relevant matters, including “the nature and extent of the act or omission”. It was submitted that his Honour did not do so. It was submitted that the economic impact that would have followed from the making of the attempted arrangement with DFE in respect of Just Jeans and the economic impact of the ACI Florapak arrangement was negligible. His Honour found that the maximum over-payment which Just Jeans might have made was $391,605 per year and that for some years Just Jeans could have paid a similar amount in excess of the market price for the services to which the attempted arrangement related. It was submitted that any potential loss referred to by his Honour depended upon the attempt being successful and IPEC’s quote not being accepted because of the DFE cover quote. It was said that it was too speculative to conclude that the IPEC quote would not be accepted because of DFE’s cover quote and that such a conclusion was against the evidence and the weight of evidence. Further, it was submitted that his Honour failed to take into account that the Just Jeans contract was for twelve months only.
154 There is of course an important difference between a submission that his Honour failed to have regard to the nature and extent of the act or omission and a submission that, if he did so, he did not give sufficient weight to aspects of that consideration. In his reasons for judgment on the amount of the penalties, his Honour referred to, and set out in full, the provisions of s 76(1) of the Act. Later in his reasons his Honour specifically addressed the nature and extent of the act or omission and the loss or damage suffered as a result of the act or omission. His Honour said:
“Through its most senior management in Victoria, including a member of its Board, McPhee engaged in a carefully planned, covert and sophisticated attempt to bring about a price‑fixing arrangement which would cause substantial damage to a long‑standing customer, and profit to itself.”
Later in his reasons his Honour said:
“The only remaining aspect that need be referred to is the potential loss or damage to Just Jeans. Exhibit J showed that the difference between McPhee’s quote and the successful quote of IPEC in terms of annual cost to Just Jeans was $391,605. This gives some indication of the damage Just Jeans would have suffered if it had been led, by a cover quote from DFE, into accepting McPhee’s quote. Given the present low inflationary climate and the long standing relationship between Just Jeans and McPhee, it may be inferred that, had the proposed arrangement worked, Just Jeans would have been paying a similar amount in excess of the market price for some years at least, to the detriment of its shareholders and customers and its capacity to compete effectively in its markets.”
We are satisfied that his Honour did have regard to the nature and extent of the act or omission and of any loss or damage suffered or which might have been suffered as a result of the act or omission. His Honour understood that the occurrence of damage depended upon Just Jeans accepting McPhee’squote and it was appropriate for him to have some regard to the loss that might have been suffered by Just Jeans if McPhee had succeeded in its attempt substantially to lessen competition by maintaining the price at which express freight services were supplied to Just Jeans. Although the Just Jeans contract was only for twelve months, it was not inappropriate, having regard to the long‑standing relationship between Just Jeans and McPhee, for his Honour to take the view that had McPhee’s attempt to get a cover quote for DFE succeeded and had McPhee retained the Just Jeans contract as a result, the commercial relationship might have continued beyond the immediate contract. The fact is that no loss or damage was in fact suffered by Just Jeans because the acts of McPhee did not proceed beyond an attempt, but his Honour quite clearly took that into account.
155 His Honour specifically addressed the issue of the nature and extent of the act in relation to ACI Florapak and of the loss or damage suffered by ACI Florapak as a result of the act when he reasoned:
“As was correctly submitted, the amounts involved were not large. The total annual turnover for the account was $17,500.”
156 It was then submitted that his Honour did not advert to the fact that McPhee had never been found to have engaged in such conduct in the past but rather treated McPhee as being visited by the defaults of TNT. His Honour was required by s 76(1) of the Act to have regard to:
“whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in a similar conduct”.
Although his Honour had regard to the record of an interview on radio with Mr Fred Millar, Chairman of TNT, on 10 August 1994 (to which we shall return), we do not accept the submission that his Honour did not advert to the fact that McPhee had not been found to have contravened the Act in the past. His Honour did so in the following passage:
“One of the many remarkable features of this case is that on 10 August 1994, only nine months before the Just Jeans incident, TNT Australia Pty Limited (TNT Australia) withdrew its defence to a proceeding by the Trade Practices Commission alleging serious price‑fixing, including, be it noted, ‘cover quoting’. TNT Australia agreed to the imposition of a negotiated penalty of $4.1 million.
TNT Australia is a fellow subsidiary with McPhee of TNT Limited, the holding company of the TNT Group. I do not treat this as a previous finding of engagement in similar conduct by McPhee for the purposes of the fourth of the express criteria in s 76(1). Nevertheless some of the circumstances of this episode are relevant to the corporate culture that existed at a high level within McPhee in relation to compliance with the TPA.”
The use of the transcript of the interview with Mr Millar is relevant to another ground of appeal, but we are satisfied that his Honour did not use the transcript of the interview for the purpose of taking into account or finding that McPhee itself had previously been found to have engaged in similar conduct.
157 It was submitted that his Honour had begged the question of what level of penalty represented a sufficient deterrent in the following passage of his reasons:
“If a penalty were simply fixed at a level sufficient to cost the contravenor more than the benefit to be derived from the anti‑competitive conduct, it would not matter that the contravenor had repeatedly violated Pt IV … But Parliament has expressly made prior contraventions relevant.”
It was said that established authority demonstrates that it is important in setting a penalty that it does not become a mere “cost” but is a deterrent, although without being oppressive. However, it is, of course, inappropriate to consider, in isolation, particular passages from his Honour’s reasons without taking into account his reasoning a whole. The passage to which we have referred is but one part of his Honour’s analysis of the principles to be applied to the determination of penalty for contraventions under Pt IV of the Act. Later in his Honour’s reasons he gave consideration to the proposition that the objective of the imposition of penalties is deterrence. For example, his Honour said:
“The fact that s 76 provides for penalties for individuals also suggests that penalty considerations extend beyond an assessment of the cost and benefit of the contravention.”
Later in his Honour’s reasons he said:
“It hardly needs to be added that deterrence remains a primary objective of the imposition of penalty (even though not expressly mentioned in s 76).
…
By setting penalties at such a level [$10 million for corporate contraveners] Parliament clearly intended that the Court should deter conduct which is considered (perhaps more so than previously) to be very damaging to the Australian community.
…
Deterrence is especially significant in relation to price‑fixing.”
We are satisfied that his Honour took into account deterrence in a substantial way in fixing the penalties.
158 In the course of his reasons his Honour referred to s 76(1) of the Act, which he said made it clear that “all relevant matters” to which regard was to be had were not limited to the four criteria specified in the subsection. His Honour said:
“In my opinion, s 76 does not limit the Court in fixing a penalty to considering the contravenor as an economic actor whose conduct is to be assessed in purely cost benefit terms. …
If a penalty were simply fixed at a level sufficient to cost the contravenor more than the benefit to be derived from the anti‑competitive conduct, it would not matter that the contravenor had repeatedly violated Pt IV …”
His Honour then continued, in the passage criticised by the appellants:
“Similarly, on a strict economic analysis of cost and benefit it would not matter that conduct was systematic, deliberate or covert. But these matters have often been taken into account in fixing penalty.”
His Honour then referred to five authorities in support of this proposition. The appellants submitted that the authorities did not support the conclusion that whether “conduct was systematic, deliberate or covert” may be used to assess the degree of culpability, rather than what is required for deterrence. We reject this submission. As a matter of principle, we consider that in fixing penalties under s 76 it is appropriate and relevant to take into account whether the conduct that contravened the Act was systematic, deliberate or covert. The authorities to which his Honour then referred do take these matters into account in determining penalty. Thus in Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40‑091, Smithers J said at 17,896:
“The penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act.”
The relevant appellants criticised his Honour’s reliance upon this passage and submitted that Smithers J’s statement should be considered by reference to the earlier statement at 17,895 that:
“It is clearly the intention of Parliament to lay down conditions for the conduct of corporate trade and commerce which will ensure that traders operate in competitive conditions and that the public has the benefits which flow therefrom.”
However, the observation of Smithers J upon which his Honour relied in this case was made in the context of analysing the culpability of the defendant, as appears from the passage (at 17,896) in which the following observation was made:
“The defendant had had experience in the operation of the Act and had access to advice in matters arising thereunder. As the sole importer of Stihl products it was in a commanding position in relation to marketing thereof. It has been in business since 1971 in a large way with an annual turnover in recent years of several millions of dollars. The penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act. It should be sufficiently high to have a deterrent quality …”
159 In Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296, the second case referred to by his Honour, Toohey J said at 298:
“The penalty should be such as to deter not only the particular offender but others who may be disposed to engage in prohibited conduct of a similar kind.”
A little later (also at 298) Toohey J said:
“Clearly much depends upon the deliberateness of the offender’s conduct, the extent to which retail price maintenance has been carried on and the damage caused to anyone by that conduct …
The seriousness of a contravention may also be measured by the degree to which it was initiated or acquiesced in by senior management.”
160 Similarly, in Trade Practices Commission v Carlton & United Breweries Ltd (1991) 24 FCR 532 Northrop J said at 542:
“On the facts of this case regard must be given to the strength of CUB in these markets and the deterrent effect of the penalty imposed.”
In the immediately preceding paragraph Northrop J said:
“It must be accepted that on the material before the Court, the conduct by Mr Bartels was deliberate. It was not accidental or unintended. This is made clear from the facts set out in pars 21 and 22 of the statement. The expression of concern in relation to the action therein described the managing director by a corporation of the size, strength and standing of CUB could only be described as a blatant, if not fully understood, contravention of s 46(1)(c) of the Trade Practices Act. This is the most serious aspect of the contravention and great weight must be given to it.”
161 Again, in Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41‑375 Burchett J said, at 40,166:
“The contraventions of the law were serious, deliberate, and systematic.”
Those of the appellants to whom this question was relevant submitted that, nevertheless, in assessing penalty Burchett J accepted the primacy of the deterrent purpose in the imposition of penalty and the requirement to enforce observance of the policy of the Act. Immediately preceding the passage relied on by the appellants, however, Burchett J said:
“The purpose of penalties imposed under s 76 is that the provisions of the Act shall be adhered to in commerce and industry. It follows that a serious, deliberate, and systematic course of conduct contrary to the requirements of the Act must generally be met by really severe penalties. Especially must that be so where senior management of a large company is involved.”
162 Finally, in Trade Practices Commission v Prestige Motors Pty Ltd (1994) ATPR 41‑359 Lee J said, at 42,699:
“Some of the additional matters that may be relevant to the assessment of the appropriate penalty under s. 76 have been referred to in cases such as T.P.C. v Annand & Thompson Pty Ltd (1987) ATPR 40‑772 per Spender J at 48,394 and T.P.C. v C.S.R. Limited (1991) ATPR 41‑076 per French J at 52,152‑52,153 but in the end the particular facts of each case must determine the appropriate penalty having regard to the object to be served by s. 76, namely, to promote competitive conduct in trade or commerce by use of penalties sufficient to deter acts that would tend to be destructive ofsuch competition. It is also necessary to have regard to the object of the provisions of the Act that have been breached, being the contravention in respect of which the penalty has to be imposed.”
The additional matters to which Lee J referred were those referred to in earlier decisions as possibly coming within “all relevant matters” to which a court must have regard pursuant to s 76, but as his Honour said “a clear statement of the purpose of s 76” is set out by Smithers J in the passage in Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (at 17,896)referred to above.
163 We therefore reject the submission that the observations in the cases relied upon by his Honour show that the conduct constituting the contravention only has relevance when considering deterrence. We are satisfied that the authorities support the proposition that among the matters relevant to the imposition of a penalty under s 76 of the Act is whether the relevant conduct was systematic, deliberate or covert.
164 In the course of his consideration of these authorities, his Honour said that he would not necessarily agree with the observations of French J in Trade Practices Commission v CSR Limited (1991) ATPR 41‑076 at 52,152 that the principal, and probably the only, object of penalties imposed by s 76 is deterrence and that the moral and amoral components of behaviour have no part to play in the fixing of pecuniary penalties under the Act. His Honour accepted that in the context of a case of abuse of market power under s 46 competition should be considered to be “… by its very nature … deliberate and ruthless”: see Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Limited (1989) 167 CLR 177 at 191 per Mason CJ and Wilson J.
165 It was submitted that his Honour fell into error because the point of the observation in Queensland Wire Industries Pty Ltd v The Broken Hill Proprietary Company Limited said to have been overlooked by his Honour, was that the provisions of Pt IV of the Act were enacted to achieve a perceived public good and to prohibit competition which would not be unlawful at common law. While compensation might be recovered the conduct was not rendered criminal and was not to be treated as if it were upon assessment of penalty.
166 But his Honour did no more than state that he did not necessarily agree with the conclusion of French J in Trade Practices Commission v CSR Limited (above) that the moral and amoral components of a contravener’s behaviour had no part to play in the fixing of pecuniary penalties under the Act. We accept that the provisions of the Act are not designed to regulate or proscribe moral conduct, but they are calculated and intended to proscribe particular aspects of commercial conduct. One of those aspects is price fixing or price collusion. In such circumstances it is relevant, in determining the amount of a pecuniary penalty under s 76, to consider whether there has been a deliberate contravention or a deliberate attempt to contravene the Act. Such a consideration does not involve a moral issue but takes into account the deliberateness or the calculated manner in which a course of conduct has been undertaken. The reservation his Honour expressed in accepting the observations made about s 76 in Trade Practices Commission v CSR Limited (above) does not reveal error in the process of assessing the penalties to be imposed.
167 It was submitted that his Honour was in error when he relied upon earlier decisions which he said took into account “matters not confined to competition policy and which might fairly be called moral considerations” when those authorities did not support the proposition that the Court should take into account moral considerations in considering the imposition of penalties under s 76. As we have observed earlier we do not consider that the Act is concerned to regulate moral conduct; rather it is concerned with commercial and business conduct. Although his Honour referred to the fact that in earlier decisions the Court had taken into account matters “which might fairly be called moral considerations”, a close reading of those cases shows that what the Court was concerned with was not so much moral considerations as considerations relating to the deliberateness of the conduct and the manner in which the contravention occurred, which is the approach his Honour, in fact, applied in this case.
168 In the course of his reasons his Honour said:
“The fact that s 76 provides for penalties for individuals also suggests that penalty considerations extend beyond an assessment of the cost and benefit of the contravention. In the case of an individual there would not ordinarily be a personal benefit accruing in the way that there usually is for a corporate contravenor. There is no basis in s 76 for concluding that Parliament intended different regimes to apply to a corporate and individual contravenors. ‘Person’ in s 76(1) includes both bodies corporate and individuals.”
It was submitted that in this passage his Honour begged the question as to what the regime was which applied to corporate and individual contraveners. We do not see any error in this passage of his Honour’s reasons. All his Honour was saying, with which we agree, is that the fact that s 76 provides for penalties for individuals as well as corporations shows that there were considerations relevant to determining penalty which extend beyond an assessment of the cost and benefit of the contravention.
169 In the course of his Honour’s reasons he said:
“Moreover, if the only consideration was the fixing of a price sufficiently high to outweigh the benefits to be derived from the contravening conduct there would need to be some attempt to quantify those benefits in dollar terms. This is not usually done and was not done in the present case.”
It was submitted that the issue of the quantification of benefits usually comes before the Court by way of agreed facts and that the practice of litigation does not determine the parameters of the discretion. We agree, but we do not consider that his Honour was saying anything more than that the determination of an appropriate penalty requires a consideration of matters other than the assessment of the cost and benefit of the contravention.
170 It was submitted that his Honour was bound by the decision in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (above) that the purpose of the imposition of a penalty under s 76 of the Act was not punishment and that his Honour had “attempted to amend the [statutory] provisions to render the conduct ‘criminal’ when Parliament has not done so”. Although his Honour referred to Carr J’s “slight reservation” in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission that “the cases decided to date” have not ruled out or excluded punishment as one of the purposes of s 76 and the observations of Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 45 that:
“None of the cases which have emphasised the deterrent nature of penalties makes deterrence an exclusive consideration and excludes punishment as a relevant consideration save for Trade Practices Commission v CSR Limited”,
his Honour did not determine that punishment was a relevant consideration to take into account. When his Honour said that he did not read NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (above) “as making irrelevant any of the factors to which I have referred to in fixing the penalties in this case” he was not referring to punishment as being one of those factors. It is therefore not necessary for us to consider whether punishment is a relevant factor to be taken into account. His Honour did not suggest that NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission was not binding on him and we did not hear full argument as to whether NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission was correctly decided on this point.
171 We reject the submission that his Honour regarded the contraventions of the Act as criminal offences. His Honour made no observation to this effect and indeed said to the contrary in the following passage:
“While there has been a clear policy decision by Parliament that contraventions of the laws against anti‑competitive conduct contained in Part IV are not criminal offences, nevertheless s 76 imparts into the penalty fixing process concepts of moral responsibility long known to the criminal law. In other words the sources of the substantive provisions of Part IV are doubtless economic policy and theory, but the penalties for contraventions are to be applied in a moral universe.”
172 His Honour then referred to the observation of Sheppard J in Trade Practices Commission v Axive Pty Ltd (1994) ATPR 41‑368 at 42,794 that:
“… ordinary sentencing principles … apply notwithstanding that this is not a criminal prosecution.”
A careful analysis of this part of his Honour’s reasons demonstrates, in our view, that what he was concerned with was not so much that the penalties were to reflect a moral judgment but that they were to take into account the manner in which the contravention occurred, the fact that the conduct was a breach of the relevant provisions of the Act and other matters such as remorse. This is made clear when his Honour said:
“By moral considerations I do not mean some kind of saccharine piety.”
Although his Honour referred to the fact that price fixing and the kind of collusive bidding that he found had been attempted was “a form of cheating”, we do not consider that his Honour was saying anything more than the conduct involved a deliberate contravention of the Act.
173 It was submitted that his Honour had, in effect, penalised McPhee for exercising its rights of appeal. His Honour had published his reasons for finding that there had been contraventions of the Act on 26 February 1998 and subsequently heard argument on the imposition of penalties and published his reasons for the penalties he imposed on 27 March 1998. We reject the submission that his Honour penalised McPhee for exercising its rights of appeal. His Honour explicitly said:
“McPhee and its executives have indicated that they intend to appeal, as of course is their right. Likewise they are not to be penalised for defending the case against them …”
There is nothing in his Honour’s reasons to suggest that he penalised McPhee for exercising its right of appeal.
174 It was said that his Honour erred in the manner in which he took into account and used a transcript of an interview conducted on 10 August 1994 with Mr Millar as Chairman of TNT and the conclusion his Honour reached from the fact that McPhee had a copy of that interview in its possession. The interview was given on the day penalties were imposed by Burchett J on a fellow subsidiary of McPhee, TNT Australia Pty Limited (“TNT Australia”) following an agreement as to what those penalties should be. The reasons for imposing those penalties were published on 31 January 1995. TNT Australia had admitted liability and his Honour found that Mr Millar’s statements in the interview were:
“an explicit repudiation of the admission of liability for which TNT Australia received a substantial benefit in the penalty fixing process.”
In that interview Mr Millar had said that TNT Australia did not acknowledge that it was guilty of the contraventions of the Act which were alleged and that it denied liability for these matters.
175 His Honour noted that a record of this interview was included in McPhee’s discovered documents and his Honour then stated:
“I accept that McPhee has operational independence within the TNT Group. But for present purposes, the fact that McPhee had a transcript of this interview within its possession gives an insight into its true attitude towards compliance with the Act. Continue as before, and if caught, admit nothing. It is significant that the TPA compliance manual which McPhee now puts forward (dated July 1996) gives some ‘real life examples’ of penalties imposed by the Court, but does not mention TNT Australia.”
There was, however, no evidence before his Honour as to why or how the transcript of the interview came into McPhee’s possession and it was submitted that the fact that McPhee had the transcript of the interview in its possession did not lead to the conclusion that McPhee’s true attitude was “continue as before, and if caught, admit nothing”.
176 We agree with the submission that his Honour was in error in taking the interview into account in the manner in which he did. We do not agree that the fact of possession of the transcript of the interview supports the conclusion that McPhee’s true attitude was as stated by his Honour. His Honour had accepted that McPhee had operational independence within TNT and we consider it was an error to assume, as his Honour did, that McPhee’s attitude towards compliance with the Act was to be determined by reference to the contents of the interview and possession of a transcript of it. Apart from aspects of the relationship with DFE, the attempt to make an arrangement or understanding involved in the Just Jeans conduct and the making of an arrangement or understanding involved in the ACI Florapak conduct (the latter being separate and distinct from the former), it was not shown that McPhee or the individual appellants had an attitude of indifference to the Act. Possession of a transcript of statements made by Mr Millar in an interview does not warrant that conclusion.
177 His Honour accepted that steps had been taken since the TNT Australia contravention to enhance compliance with the Act but found that the conduct of Messrs Forde, Holland and Morton, who must have been aware of the TNT Australia contravention, indicated a lack of commitment to the principles of the Act. These conclusions were reached in the context of his Honour’s consideration of the Millar interview and the TNT Australia contravention. It is apparent that the interview was a consideration his Honour took into account as a significant factor in assessing the penalty to be paid by McPhee and also the penalties to be paid by the individuals in relation to the contravention involved in the Just Jeans conduct. In this respect we consider his Honour was in error.
178 It is therefore necessary to set aside his Honour’s orders as to the penalties imposed in relation to the Just Jeans conduct and to determine what we consider to be appropriate penalties. Save for the use his Honour made of the transcript of the interview with Mr Millar, the matters to which his Honour had regard were relevant and appropriate in determining the amount of the penalties. We would not have set the penalties at the levels determined by his Honour but that difference may be explained by the regard given by his Honour to the contents of the interview transcript referred to above. In all other respects however, we adopt his Honour’s reasoning in relation to the determination of the appropriate penalties.
179 In the circumstances the penalty for McPhee’s contravention in relation to the Just Jeans conduct should be fixed at $2 million. The respective penalties imposed on Mr Forde, Mr Morton and Mr Holland should be $80,000, $65,000 and $45,000 respectively.
180 McPhee submitted that his Honour erred in imposing two penalties in respect of the contraventions occasioned by the ACI Florapak conduct. His Honour imposed a penalty of $500,000 for McPhee’s contravention of s 45 in making an arrangement or arriving at an understanding, containing an exclusionary provision or a provision having the purpose of substantially lessening competition and he imposed an additional penalty of $250,000 for the contravention of s 45 constituted by giving effect to that arrangement or understanding.
181 The case presented to his Honour did not distinguish the conduct of McPhee involving the formation of the proscribed arrangement or understanding from the conduct of McPhee said to constitute giving effect to such arrangement or understanding. According to the Commission’s case, the delivery by Mr Webb to Mr Jolly of McPhee’s rates was an integral part of the conduct that constituted the contravention of s 45 in making, or arriving at, an understanding or arrangement. That same act was also relied upon by the Commission as the act which constituted the further contravention by McPhee of giving effect to the arrangement or understanding.
182 If the disclosure by McPhee to DFE of the rates charged by McPhee to ACI Florapak could be said to be an act giving effect to an arrangement or understanding already made or arrived at, it was not conduct distinguishable from the conduct of McPhee which constituted the making of such an arrangement or understanding. Pursuant to s 76(3) of the Act, if conduct constitutes a contravention of two or more provisions of Pt IV, a proceeding may be instituted in respect of each contravention but a person is not liable to more than one pecuniary penalty in respect of the same conduct. This was not a case involving repeated conduct concerning discrete events occurring at different times and involving disparate parties: Trade Practices Commission v Simpson Pope Ltd (1980) 47 FLR 334 per Franki J at 336.
183 We therefore accept the submission that his Honour erred in imposing separate penalties in respect of the ACI Florapak conduct. The conduct which constituted the second contravention was part and parcel of the conduct which constituted the first contravention and s 76(3) prescribed that only one penalty could be imposed.
184 It is necessary therefore for us to assess the appropriate penalty in respect of the ACI Florapak conduct also. A salutary penalty is required for conduct that involves contraventions of the Act in reaching an arrangement or understanding and giving effect thereto, particularly when regard is given to the degree of concealment that usually attaches to such conduct and the difficulties faced by authorities charged with the duty of uncovering and prosecuting such contraventions in the public interest. His Honour noted that McPhee’s conduct suggested a willingness on its part to contravene the Act for the purpose of distorting a relevant market. On the other hand, as his Honour also observed, the conduct related to a minor account and involved impulsive acts by a single officer of the company at lower managerial level. In our opinion, a penalty of $500,000 is appropriate for the conduct of McPhee in reaching an arrangement or understanding and giving effect thereto as described.
185 If it could be said that the conduct relevant to the two contraventions was not the same conduct for the purpose of s 76(3), we would be of the opinion that his Honour’s discretion in calculating the appropriate penalty to be imposed miscarried, in that his Honour failed to have regard to the interlocking nature of the conduct involved in the two contraventions and to the need to set a total penalty appropriate in the circumstances. On the particular facts of this case, it was not appropriate to impose a substantive penalty for each breach of the Act arising as they did out of the one transaction. The appropriate course was to set a penalty for the conduct imposed in respect of one breach and to take the other breach into account: Trade Practices Commission v Allied Mills Industries Pty Ltd (1981) 60 FLR 1 per Sheppard J at 40; Trade Practices Commission v TNT Australia Pty Ltd (above) at 40,169; McDonald v The Queen (1994) 48 FCR 555. For the reasons we have set out above, we consider that the appropriate total of penalty would have been a sum of $500,000.
Conclusion
186 His Honour did not make any order or declaration that McPhee had contravened provisions of the Act or that the second, third, fourth and fifth appellants were involved in any such contraventions. Having made findings as to such contraventions for the reasons which he gave on 26 February 1998 his Honour ordered that issues of penalties, costs and other relief be adjourned for further hearing to a date to be fixed. That hearing occurred on 16 March 1998. His Honour reserved his decision and on 27 March 1998 his Honour ordered the payment of pecuniary penalties.
187 Although we have concluded that the appeal has not succeeded in respect of his Honour’s decision that the “Just Jeans conduct” and the “ACI Florapak conduct” was in contravention of s 45 of the Act, and that the second, third and fourth appellants were involved in the contraventions occasioned by the “Just Jeans conduct”, and the fifth appellant in the contraventions occasioned by the ACI Florapak conduct, there is no order in respect of which it can be said that the appeal is dismissed. Because we have allowed the appeals in respect of the penalties imposed on McPhee and the second, third and fourth appellants, the order of the Court must necessarily be that the appeal is allowed in part, that the orders made as to the payment of pecuniary penalties be set aside and that in lieu thereof it be ordered that there be paid by the appellants the respective pecuniary penalties we have determined.
188 The parties should be given the opportunity to make submissions on the costs of the appeal. The appellants should file and serve any written submissions on which they wish to rely within fourteen days and the Commission should file and serve any written submissions on which it wishes to rely within fourteen days after the filing and service of the appellants’ submissions.
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I certify that the preceding one hundred and eighty‑eight (188) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Black, Justice Lee and Justice Goldberg. |
Associate:
Dated: 12 April 2000
| Counsel for the First Appellant: | Mr P R Hayes QC and Mr T V Hurley |
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| Solicitor for the First Appellant: | Clayton Utz |
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| Counsel for Second, Third, Fourth and Fifth Appellants: | Mr A B Shand QC and Mr I D Martindale |
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| Solicitor for Second, Third, Fourth and Fifth Appellants: | Clayton Utz |
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| Counsel for the Respondent: | Mr J W K Burnside QC and Mr J B R Beach |
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| Solicitor for the Respondent: | Australian Government Solicitor |
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| Date of Hearing: | 31 August, 1 September 1998 2, 3 and 4 February 1999 |
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| Date of Judgment: | 12 April 2000 |
