FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v

Tyco Australia Pty Ltd ACN 008 399 004

[2000] FCA 1898

TRADE PRACTICES - penalty and injunctive relief imposed for breach of s 45 Trade Practices Act 1974 (Cth) where breach acknowledged by respondents and joint submissions lodged

Trade Practices Act 1974 (Cth), s 45

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v TYCO AUSTRALIA PTY LTD (formerly Wormald Australia Pty Ltd) T/as Wormald Fire Systems ACN 008 399 004 AND ORS

Q 239 OF 1999

DRUMMOND J

15 DECEMBER 2000

BRISBANE

THE COURT ORDERS THAT:

1.                  In respect of his ancillary involvement in the contraventions by the third respondent of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) alleged in paragraph 146 of the statement of claim, a penalty in respect of all contraventions of $70,000 be imposed upon the twenty-fifth respondent.

2.                  The penalty of the twenty-fifth respondent is to be paid to the Commonwealth of Australia as follows:

(a)                the sum of $13,000 within fourteen days of the date of this order;

(b)               the further sum of $6,000 on or before 4 June 2001;

(c)                the further sum of $6,000 on or before 4 December 2001;

(d)               the further sum of $6,000 on or before 4 June 2002;

(e)                the further sum of $6,000 on or before 4 December 2002;

(f)                 the further sum of $6,000 on or before 4 June 2003;

(g)                the further sum of $6,000 on or before 4 December 2003;

(h)                the further sum of $6,000 on or before 4 June 2004;

(i)                  the further sum of $6,000 on or before 4 December 2004;

(j)                 the further sum of $6,000 on or before 4 June 2005;

(k)               the further sum of $3,000 on or before 4 December 2005;

(l)                  if any instalment is not paid on or before the due date then the entire balance of the penalty of $70,000 then unpaid becomes immediately due and payable.

THE COURT ORDERS BY CONSENT OF THE APPLICANT AND THE TWENTY-FIFTH RESPONDENT THAT:

3.                  The twenty-fifth respondent be restrained, in Queensland and the Northern Territory, for a period of three years, from:

(i)                  being directly or indirectly knowingly concerned in or party to;

(ii)                inducing or attempting to induce; or

(iii)               aiding, abetting, counselling or procuring;

the making of, or arriving at, or giving effect to, by a corporation providing fire sprinkler system installation services, of any contract or arrangement or understanding (other than an agreement to jointly tender for the provision of the services referred to in subparagraph (a) hereof; an agreement with a related entity; or an agreement in so far as it relates to the licensing or assignment of a trademark, patent, registered design, copyright or EL rights within the meaning of the Circuits Layouts Act 1989 (Cth)) which contains a provision that:

(a)                has the purpose or effect or likely effect that:

(i)                  that corporation will not compete with another provider of fire sprinkler system installation services for the provision of those services to a particular person or class of persons; or

(ii)                that corporation will allow another provider of fire sprinkler system installation services to win any tender let by a third person for the provision of such services;  or

(iii)               another provider of fire sprinkler system installation services will allow that corporation to win any tender let by a third person for the provision of such services;  or

(b)               has the purpose or effect or likely effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices charged for fire sprinkler system installation services supplied or offered for supply by any of the parties to the contract, arrangement or understanding in competition with one another to other persons.

4.                  The twenty-fifth respondent be restrained, in Queensland and the Northern Territory, for a period of three years, from:

(i)                  being directly or indirectly knowingly concerned in or party to;

(ii)                inducing or attempting to induce; or

(iii)               aiding, abetting, counselling or procuring;

the making of, or arriving at, or giving effect to, by a corporation providing fire alarm system installation services, of any contract or arrangement or understanding (other than an agreement to jointly tender for the provision of the services referred to in subparagraph (a) hereof; an agreement with a related entity; or an agreement in so far as it relates to the licensing or assignment of a trademark, patent, registered design, copyright or EL rights within the meaning of the Circuits Layouts Act 1989 (Cth)) which contains a provision that:

(a)        has the purpose or effect or likely effect that:

                        that corporation will not compete with another provider of fire alarm system installation services for the provision of those services to a particular person or class of persons; or

                        that corporation will allow another provider of fire alarm system installation services to win any tender let by a third person for the provision of such services;  or

                        another provider of fire alarm system installation services will allow that corporation to win any tender let by a third person for the provision of such services;  or

(b)               has the purpose or effect or likely effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices charged for fire alarm system installation services supplied or offered for supply by any of the parties to the contract, arrangement or understanding in competition with one another to other persons.

5.                  The twenty-fifth respondent pay the applicant’s costs of and incidental to these proceedings in the agreed amount of $7,000within fourteen days of the date of this order.

The Court notes that:

6.                  The forty-ninth, fiftieth, fifty-first and fifty-second respondents have given, and the applicant has accepted, undertakings pursuant to s 87B of the Trade Practices Act 1974 (Cth) to participate in trade practices compliance training in a form acceptable to the applicant.

THE COURT FURTHER ORDERS THAT:

7.                  In respect of its contraventions of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth), and of its ancillary involvement in contraventions of those sections, alleged in paragraph 136 of the statement of claim, a penalty in respect of all contraventions which occurred after 30 September 1993 of $300,000 be imposed upon the fifteenth respondent.

8.                  In respect of his ancillary involvement in the contraventions by the fifteenth respondent of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) alleged in paragraph 170 of the statement of claim, a penalty in respect of all contraventions which occurred after 30 September 1993 of $60,000 be imposed upon the forty-ninth respondent.

9.                  In respect of his ancillary involvement in the contraventions by the fifteenth respondent of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) alleged in paragraph 171 of the statement of claim, a penalty in respect of all contraventions which occurred after 30 September 1993 of $25,000 be imposed upon the fiftieth respondent.

10.              In respect of his ancillary involvement in the contraventions by the fifteenth respondent of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) alleged in paragraph 172 of the statement of claim, a penalty in respect of all contraventions which occurred after 30 September 1993 of $25,000 be imposed upon the fifty-first respondent.

11.              In respect of his ancillary involvement in the contraventions by the fifteenth respondent of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) alleged in paragraph 173 of the statement of claim, a penalty in respect of all contraventions which occurred after 30 September 1993 of $50,000 be imposed upon the fifty-second respondent.

12.              The penalty of the fifteenth respondent is to be paid to the Commonwealth of Australia as follows:

(a)                the sum of $60,000 on or before 8 June 2001;

(b)               the further sum of $60,000 on or before 8 December 2001;

(c)                the further sum of $60,000 on or before 8 June 2002;

(d)               the further sum of $60,000 on or before 8 December 2002;

(e)                the further sum of $60,000 on or before 8 June 2003;

(f)                 if any instalment is not paid on or before the due date then the entire balance of the penalty of $300,000 then unpaid becomes immediately due and payable.

13.              The penalty of the forty-ninth respondent is to be paid to the Commonwealth of Australia as follows:

(a)                the sum of $10,000 on or before 8 June 2001;

(b)               the further sum of $10,000 on or before 8 December 2001;

(c)                the further sum of $10,000 on or before 8 June 2002;

(d)               the further sum of $10,000 on or before 8 December 2002;

(e)                the further sum of $10,000 on or before 8 June 2003;

(f)                 the further sum of $10,000 on or before 8 December 2003;

(g)                if any instalment is not paid on or before the due date then the entire balance of the penalty of $60,000 then unpaid becomes immediately due and payable.

14.              The penalty of the fiftieth respondent is to be paid to the Commonwealth of Australia as follows:

(a)                the sum of $5,000 on or before 8 December 2001;

(b)               the further sum of $5,000 on or before 8 June 2002;

(c)                the further sum of $5,000 on or before 8 December 2002;

(d)               the further sum of $5,000 on or before 8 June 2003;

(e)                the further sum of $5,000 on or before 8 December 2003;

(f)                 if any instalment is not paid on or before the due date then the entire balance of the penalty of $25,000 then unpaid becomes immediately due and payable.

15.              The penalty of the fifty-first respondent is to be paid to the Commonwealth of Australia as follows:

(a)                the sum of $10,000 within twenty-one days of the date of this order;

(b)               the further sum of $5,000 on or before 8 December 2001;

(c)                the further sum of $5,000 on or before 8 June 2002;

(d)               the further sum of $5,000 on or before 8 December 2002;

(e)                if any instalment is not paid on or before the due date then the entire balance of the penalty of $25,000 then unpaid becomes immediately due and payable.

16.              The penalty of the fifty-second respondent is to be paid to the Commonwealth of Australia as follows:

(a)                the sum of $5,000 within twenty-one days of the date of this order;

(b)               the further sum of $10,000 on or before 8 December 2001;

(c)                the further sum of $10,000 on or before 8 June 2002;

(d)               the further sum of $10,000 on or before 8 December 2002;

(e)                the further sum of $10,000 on or before 8 June 2003;

(f)                 the further sum of $5,000 on or before 8 December 2003;

(g)                if any instalment is not paid on or before the due date then the entire balance of the penalty of $50,000 then unpaid becomes immediately due and payable.

THE COURT ORDERS BY CONSENT OF THE APPLICANT AND THE FIFTEENTH, FORTY-NINTH, FIFTIETH, FIFTY-FIRST and FIFTY-SECOND RESPONDENTS THAT:

17.              The fifteenth respondent be restrained, in Queensland and the Northern Territory, for a period of three years, whether by its directors, servants, agents, or otherwise howsoever, from making, arriving at or giving effect to any contract or arrangement or understanding (other than an agreement to jointly tender for the provision of the services referred to in subparagraph (a) hereof; an agreement with a related entity; or an agreement in so far as it relates to the licensing or assignment of a trademark, patent, registered design, copyright or EL rights within the meaning of the Circuits Layouts Act 1989 (Cth)) which contains a provision that:

(a)                has the purpose or effect or likely effect, whether by itself or together with another provision of any contract, arrangement or understanding to which the fifteenth respondent is a party, that:

(i)         the fifteenth respondent will not compete with another provider of fire sprinkler system installation services for the provision of those services to a particular person or class of persons; or

(ii)        the fifteenth respondent will allow another provider of fire sprinkler system installation services to win any tender let by a third person for the provision of such services;  or

(iii)       another provider of fire sprinkler system installation services will allow the fifteenth respondent to win any tender let by a third person for the provision of such services;  or

(b)               has the purpose or effect or likely effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices charged for fire sprinkler system installation services supplied or offered for supply by any of the parties to the contract, arrangement or understanding in competition with one another to other persons.

18.              Each of the forty-ninth, fiftieth, fifty-first and fifty-second respondents be restrained, in Queensland and the Northern Territory, for a period of three years, from:

(i)         being directly or indirectly knowingly concerned in or party to;

(ii)        inducing or attempting to induce; or

(iii)       aiding, abetting, counselling or procuring;

the making of, or arriving at, or giving effect to, by a corporation providing fire sprinkler system installation services, of any contract or arrangement or understanding (other than an agreement to jointly tender for the provision of the services referred to in subparagraph (a) hereof; an agreement with a related entity; or an agreement in so far as it relates to the licensing or assignment of a trademark, patent, registered design, copyright or EL rights within the meaning of the Circuits Layouts Act 1989 (Cth)) which contains a provision that:

(a)                has the purpose or effect or likely effect that:

(i)         that corporation will not compete with another provider of fire sprinkler system installation services for the provision of those services to a particular person or class of persons; or

(ii)        that corporation will allow another provider of fire sprinkler system installation services to win any tender let by a third person for the provision of such services;  or

(iii)       another provider of fire sprinkler system installation services will allow that corporation to win any tender let by a third person for the provision of such services;  or

(b)               has the purpose or effect or likely effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices charged for fire sprinkler system installation services supplied or offered for supply by any of the parties to the contract, arrangement or understanding in competition with one another to other persons.

19.              The fifteenth respondent pay the applicant’s costs of and incidental to these proceedings in the agreed amount of $35,000 within twenty-one days of the date of this order.

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

REASONS FOR JUDGMENT

1                     I have before me proceedings as between the Australian Competition and Consumer Commission and the twenty-fifth respondent, Mr Michael John Lewis, in those proceedings.  The parties have reached agreement on a statement of facts and joint submissions, including submissions on the appropriate penalty and orders which are exhibited in the material before the Court today.

2                     The proceedings arise out of arrangements in contravention of s 45 the Trade Practices Act 1974 (Cth), which operated in the first half, or thereabouts, of the 1990s in the fire sprinkler and fire alarm installation markets, generally speaking in the South East Queensland area.  All the major organisations involved in those markets were involved in the conduct contravening s 45.  The general background to today’s proceedings is discussed at a little length in the initial judgments I gave involving the Commission and Tyco Australia Pty Ltd on 14 December 1999.

3                     Mr Lewis was, from mid 1994 to early 1996, General Manager, Fire Contracting for Queensland and Northern Territory for FFE Building Services Ltd.  He was the most senior person in that organisation in Queensland during that period and was responsible for both fire sprinkler and fire alarm contracting.

4                     He was fully aware of the activities of subordinates in engaging in the conduct which constitutes FFE’s involvement in contraventions of s 45 and can be said to have encouraged that participation in the sense that he stood by, knowing what was going on, allowing his company to take the benefits of the activities of his subordinates in winning certain contracts which the material before me indicates FFE would very probably not have won.  But Mr Lewis took no steps to stop that conduct.

5                     It is apparent that FFE was a very substantial participant in the two markets.

6                     Mr Lewis is currently employed on a net income approaching $70,000 per annum.  His new employer is in receivership, so his employment is subject to a degree of uncertainty.  It is proposed that, in addition to various restraining and other orders which the Court is being asked to make by consent, a pecuniary penalty of $70,000, to be paid over an extended period of time, be imposed on Mr Lewis.

7                     I consider that the orders proposed, including the penalty and the arrangements for payment over time, are within the appropriate range of orders and penalties to be made.  I think that the orders generally are appropriate.  I am therefore prepared to make by consent orders in terms of the minutes of orders which form part of exhibit 2.

8                     The next group of respondents in the proceedings brought by the Commission who are to be dealt with today are the fifteenth respondent, Trident Fire Protection Pty Ltd and four of its directors and shareholders, the forty-ninth to fifty-second respondents.  I have before me joint submissions, including agreed statements of fact and proposed orders, which I will make exhibit 5 in today’s proceedings.

9                     Trident is described as a mid size competitor in the sprinkler market.  It was not involved in the fire alarm installation market.  It benefited from the participation of the forty-ninth and fifty-second respondents in the meetings at which arrangements, in contravention of s 45 the Trade Practices Act, were made by winning a number of contracts it may well not otherwise have won.

10                  The two most active directors participating in these meetings were the forty-ninth and fifty-second respondents.  The other two directors, the fiftieth and fifty-first respondents, were well aware of the activities of their co-directors and stood by, allowing their company to take the benefit of those activities.  It is proposed that the different levels of involvement be recognised by the penalties suggested for the directors, with the fiftieth and fifty-first respondents receiving penalties of $25,000 each, the fifty-second respondent, $50,000, and the forty-ninth respondent, $60,000.  The difference between the forty-ninth and fifty-second respondents is explained by the fact that Mr Preece destroyed certain incriminating evidence when he became aware of the Commission’s investigation.   He did, however, subsequently co-operate fully with the Commission in the investigations.

11                  A penalty of $300,000 is proposed for the company which has ceased contracting new business.   I note that each of the forty-ninth to fifty-second respondents has personally guaranteed payment of the penalty and the other monetary orders which it is proposed should be imposed on the company.   I am satisfied that the orders proposed in the draft minutes are appropriate in the circumstances of the case and that the penalties proposed, $300,000, as I have said, for the company, and penalties ranging from $25,000 to $60,000 for the four directors, are within a proper range of penalty.  I will therefore make orders in terms of the minutes of orders by consent which are included in exhibit 5.

Associate:

Dated:              15 December 2000