FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v McMahon Services Pty Ltd (ACN 008 274 020) (No 1) [2004] FCA 1171

TRADE PRACTICES – contravention of Trade Practices Act 1974 (Cth) – penalty – factors to consider in determining penalty – admission of aiding and abetting price fixing arrangement – approach of court where penalties agreed by parties – obligation of court to assess whether proposed penalties are within the permissible range – where penalties sought against corporate entity and against individuals who are sole directors of corporation – relevance of co-operation by respondents – discount to be applied in light of settlement.

Trade Practices Act 1974 (Cth) ss 45, 45A, 76

Australian Competition and Consumer Commission v Alice Car & Truck Rentals Pty Ltd (1997) ATPR 41-582 cited

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 applied

Australian Competition and Consumer Commission v Foamlite (Australia) Pty Ltd (1998) ATPR 41-615 cited

Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 applied

Rural Press Ltd v Australian Competition and Consumer Commission (2002) ATPR 41-883 cited

Rural Press Ltd v Australian Competition and Consumer Commission (2003) 203 ALR 217 cited

Boral Besser Masonary Ltd v Australian Competition and Consumer Commission (2003) 77 ALJR 623 cited

Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat and Live-stock Corporation (1980) 29 ALR 333 cited

Australian Competition and Consumer Commission v FFE Building Services Ltd [2003] FCA 1542 cited

Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (1998) ATPR 41-628 cited

Visy Paper Pty Ltd v Australian Competition and Consumer Commission (2003) 201 ALR 414 cited

Trade Practices Commission v Carlton United Breweries Ltd (1990) 24 FCR 532 cited

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 cited

Trade Practices Commission v Axive Pty Ltd (1994) ATPR 41-368 cited

Australian Competition and Consumer Commission v ABB Transmission & Distribution Ltd (No 2) (2002) ATPR 41-872

Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763 cited

Trade Practices Commission v Annand and Thompson Pty Ltd (1987) ATPR 40-772 cited

Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 cited

Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 cited

Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996) ATPR 41-515 cited

Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115 cited

Australian Competition and Consumer Commission v Roche Vitamins Pty Ltd [2001] FCA 150 cited

Australian Competition and Consumer Commission v Simsmetal Ltd (2004) ATPR 41-764 cited

Australian Competition and Consumer Commission v Cromford Pty Ltd (1998) ATPR 41-618 cited

Australian Competition and Consumer Commission v SIP Australia Pty Ltd (1999) ATPR 41-702 cited

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v McMAHON SERVICES PTY LTD (ACN 008 274 020); PHILLIP JAMES BUBNER; S.A. DEMOLITION AND SALVAGE PTY LTD (ACN 086 777 022); SPIROS PARENTES; DCD ENTERPRISES PTY LTD (ACN 050 165 485); FERNANDO DANIEL D’APOLLONIO AND VLADO TURIC

SAD 10 of 2003

LANDER J

9 SEPTEMBER 2004

ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 10 OF 2003

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	McMAHON SERVICES PTY LTD (ACN 008 274 020) FIRST RESPONDENT PHILLIP JAMES BUBNER SECOND RESPONDENT S.A. DEMOLITION AND SALVAGE PTY LTD (ACN 086 777 022) THIRD RESPONDENT SPIROS PARENTES FOURTH RESPONDENT DCD ENTERPRISES PTY LTD (ACN 050 165 485) FIFTH RESPONDENT FERNANDO DANIEL D'APOLLONIO SIXTH RESPONDENT VLADO TURIC SEVENTH RESPONDENT
JUDGE:	LANDER J
DATE OF ORDER:	9 SEPTEMBER 2004
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1. The fifth respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $52,000.

2. The sixth respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $24,000.

3. The seventh respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $24,000.

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

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 10 OF 2003

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

APPLICANT

AND:

McMAHON SERVICES PTY LTD (ACN 008 274 020)

FIRST RESPONDENT

PHILLIP JAMES BUBNER

SECOND RESPONDENT

S.A. DEMOLITION AND SALVAGE PTY LTD
(ACN 086 777 022)

THIRD RESPONDENT

SPIROS PARENTES

FOURTH RESPONDENT

DCD ENTERPRISES PTY LTD (ACN 050 165 485)

FIFTH RESPONDENT

FERNANDO DANIEL D'APOLLONIO

SIXTH RESPONDENT

VLADO TURIC

SEVENTH RESPONDENT

JUDGE:	LANDER J
DATE:	9 SEPTEMBER 2004
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1 On 24 January 2003 the applicant brought proceedings in this Court against all seven respondents. In that application the applicant sought declarations that each of the first, third and fifth respondents had breached s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) (the Act) and injunctions, orders and penalties under those subsections. The applicant also sought declarations that the second, fourth, sixth and seventh respondents had aided counsel or procured or, alternatively, were knowingly concerned in the conduct of the first, third and fifth respondents and injunctions, orders and penalties against those respondents.

2 The application was accompanied by a statement of claim which was amended from time to time and finally amended on 6 April 2004. Each of the respondents filed a defence to the statement of claim and, in due course, the matter was listed for hearing.

3 Shortly before the matter was due for hearing, the fifth to seventh respondents reached an agreement with the applicant, the general terms of which were that the fifth to seventh respondents would admit that they aided and abetted an understanding between the first and third respondents within the meaning of s 45(2)(a)(ii) of the Act and its implementation within the meaning of s 45(2)(b)(ii) of the Act and admit that that conduct constituted contraventions of s 76(1)(c) of the Act.

4 The fifth, sixth and seventh respondents also agreed to give undertakings, to which I will later refer, and to attend a Trade Practices Compliance Seminar conducted by an independent person within three months of the making of an order. More importantly, for the purpose of these reasons, the fifth, sixth and seventh respondents agreed with the applicant that each of those respondents would consent to a pecuniary penalty being imposed. However, the initial agreement between the applicant and the fifth, sixth and seventh respondents did not include any agreement as to the appropriate penalty.

5 The trial judge asked me to consider whether it was appropriate for the Court to accept the undertakings proffered by the fifth, sixth and seventh respondents and impose the appropriate penalties. The trial judge was of the opinion that the matter should be dealt with by another judge so that he would not be compromised in determining the issues between the remaining respondents.

6 As it happened, a little later, the third and fourth respondents also came to an agreement with the applicant in relation to the applicant’s claims against them and agreed to similar orders to those agreed to by the fifth, sixth and seventh respondents, although in their case the amount of the pecuniary penalty was not agreed.

7 The trial judge also asked me to consider whether the orders agreed upon between the applicant and the third and fourth respondents should be made, and to impose appropriate penalties. I have dealt with that matter separately in reasons given today.

8 After hearing both this matter and the matter concerning the third and fourth respondents, and before the trial was due to commence, the first and second respondents also reached some agreement with the applicant which meant that those respondents would submit to orders and to the imposition of penalties.

9 Apparently, the applicant and the first and second respondents agreed that the trial judge should deal with the matters relating to those respondents.

10 These reasons only deal with the applicant’s claims against the fifth, sixth and seventh respondents.

11 Broadly speaking, the applicant’s claim against all respondents was that the respondents had come to an arrangement or understanding which had the purpose or effect of fixing, controlling, or maintaining the price for demolition and asbestos removal services supplied or to be supplied in relation to a Request for Tender issued by the Commonwealth Department of Defence (the Request for Tender).

AGREED PENALTIES

12 As I have already noted the parties did not initially agree the appropriate penalties. Indeed, there was no agreement when this matter was called on for hearing. After ACCC’s counsel, Ms Layton QC, had made her submissions and during the respondents’ counsel’s submissions I was advised that the penalties had been agreed:

1. The fifth respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $52,000.

2. The sixth respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $24,000.

3. The seventh respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $24,000.

13 The parties also agreed on a timetable for payment.

14 It is well settled that penalty proposals put forward by the parties in matters of this nature do not bind the Court. The Court has its own responsibility to determine the appropriate penalties, and that is done in any given matter, having regard to the surrounding circumstances of the particular case: Australian Competition and Consumer Commission v Alice Car & Truck Rentals Pty Ltd (1997) ATPR 41-582 at 44,048; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 290; Australian Competition and Consumer Commission v Foamlite (Australia) Pty Ltd (1998) ATPR 41-615 at 40,743. Obviously, where both parties accept an amount as adequately accommodating the gravity of the contravention, the Court will place greater weight on the recommendation.

15 In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission, Burchett and Kiefel JJ said at 291 (and on this matter Carr J agreed):

‘ There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.’

16 That decision was approved by the Full Court of this Court in Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72. In that case, the Court summarised the propositions for which the decision in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission stands. The Court said at [53]:

‘(i) It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the TP Act in respect of a contravention of the TP Act.

(ii) Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another.

(iii) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed.

(iv) The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC’s views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more “subjective” matters.

(v) In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so.

(vi) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court’s view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range.’

17 Even though these penalties might appear low, for the reasons which follow I consider that the penalties proposed by the parties are not unreasonable and reflect the degree of involvement of the respondents. They are within the range of penalties that the Court should apply and can be described as appropriate penalties.

NATURE OF THE CONTRAVENTIONS

18 The applicant, the Australian Competition and Consumer Commission (ACCC), claims that the fifth to seventh respondents aided and abetted or, alternatively, were knowingly concerned in contraventions of ss 45(2)(a)(ii), 45(2)(b)(ii) and 76 of the Act. Section 45 relevantly provides:

‘(2) A corporation shall not:

(a) make a contract or arrangement, or arrive at an understanding, if:

(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or

(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:

(i) is an exclusionary provision; or

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

19 To establish breach of subsections 45(2)(a)(ii) and (2)(b)(ii) of those provisions it is necessary to prove an anti competitive purpose or effect. However, insofar as an arrangement or understanding may have the effect of fixing, controlling, maintaining, or providing for the fixing of prices in respect of goods or services to be acquired or supplied, s 45A deems the arrangement or understanding to have the necessary anti competitive effect. Section 45A is in the following terms:

‘(1) Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.

…’

20 Section 76 of the Act extends liability for breach of s 45 to those who aid and abet or are knowingly concerned in a contravention. Section 76 provides:

‘(1) If the Court is satisfied that a person:

(a) has contravened any of the following provisions:

(i) a provision of Part IV;

(ii) section 75AU or 75AYA;

(b) has attempted to contravene such a provision;

(d) has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision;

(e) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or

(f) has conspired with others to contravene such a provision;

the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.’

21 The contraventions in this matter are said to arise from an arrangement or understanding between the first and third respondents to the principal proceedings which would have the effect of substantially lessening competition. The ACCC’s case against all respondents was that the price fixing arrangement or understanding had been implemented, and each of the respondents had been involved in that arrangement or understanding in various capacities.

22 The ACCC and the fifth, sixth and seventh respondents have agreed on a statement of agreed facts for the purposes of imposition of penalties. I shall refer to those facts in some detail but it is necessary, first, to put those facts in context.

23 The first respondent, McMahon Services Pty Ltd (McMahon Services), is one of the two largest industrial and commercial demolition and asbestos removal contractors in South Australia.

24 The second respondent is alleged in ACCC’s Statement of Claim to be the Operations Demolition Manager of McMahon Services, who had the responsibility for the submission of McMahon Services’ response to the Request for Tender and for making arrangements to ensure the success of McMahon Services’ tender.

25 The third respondent, SA Demolition and Salvage Pty Ltd (SA Demolition) carries on a similar business to McMahon Services.

26 The fourth respondent was, but is no longer, a director, secretary and manager of the third respondent.

27 The fifth respondent, DCD Enterprises Pty Ltd, is a trading corporation and the owner of the registered business name, D & V Services, and carries on the business of, among other things, asbestos removal and industrial commercial and domestic demolition contracting in South Australia under that business name. I shall refer to the fifth respondent as D & V Services, which is the name under which the fifth respondent trades.

28 Fernando D’Apollonio and Vlado Turic, the sixth and seventh respondents, are directors and shareholders of D & V Services.

29 The sixth and seventh respondents were acquainted with various employees of McMahon Services. They were also friendly with Peter Parentes, the fourth respondent, by reason of a long business relationship. Pursuant to that arrangement each of the sixth and seventh respondents, on the one hand, and the fourth respondent, on the other hand, worked together and assisted each other on various projects from time to time.

30 Mr Sabatino Feleppa is not a respondent but it is important to understand his involvement in this matter. He was a consultant who provided cost estimation and tender preparation services to demolition and asbestos removal companies in Adelaide, including D & V Services.

31 At various times, he was a trainer, assessor and training coordinator at the Construction Industry Training Centre (CITC), TAFE Marleston. In that capacity, he was responsible for teaching courses on asbestos removal. He was experienced in all aspects of the demolition and asbestos removal industry in South Australia, including the preparation of cost estimates.

THE ARRANGEMENT OR UNDERSTANDING

32 In November 2000, D & V Services, through Mr D’Apollonio and Mr Turic, agreed to assist Mr Parentes in the preparation of a tender to be submitted by SA Demolition in response to a Request for Tender issued by the Commonwealth Department of Defence for the removal of asbestos from, and the demolition of structures at, the Marlu Curu site at Salisbury, South Australia. The redevelopment was required to prepare 700 hectares of land at Marlu Curu for sale to the South Australian Government over several years. The initial stage of the redevelopment involved the sale of a portion of that land termed Marlu Curu Stage 1 land. This sale was to provide direct support to the Holden vehicle manufacturing plant at Elizabeth. The Department of Defence was obliged under the agreement for the sale of the land to demolish and clear the land as well as undertake any necessary site remediation.

33 Due to time constraints, only the four largest demolition contractors in the State, two of which were McMahon Services and SA Demolition, were issued with the Request for Tender.

34 SA Demolition, through Mr Parentes, enlisted the assistance of Mr D’Apollonio and Mr Turic to prepare its tender.

35 Each of the sixth and seventh respondents had known Mr Feleppa for some time. They arranged for him to assist them in the preparation of the tender that was to be submitted by SA Demolition.

36 During the first half of November 2000, Mr Feleppa performed a series of tasks for the purpose of preparing the tender. It is an agreed fact that he eventually arrived at an estimated tender price of approximately $1.6 million. That estimate was conveyed by Mr Feleppa to Mr D’Apollonio and Mr Turic who in turn provided it to Mr Parentes. Although, of course, this was not known to any party, Mr Feleppa’s estimate was $300,000 less than the Department of Defence’s pre-tender budget estimate for the demolition work of $1.9 million.

37 Mr Lane, counsel for the fifth, sixth and seventh respondents, submitted that Mr Feleppa’s assessment was rejected by his clients as being untenably low. I am not prepared to find that to be the case. It may have been that, after the events to which I am about to refer, the sixth and seventh respondents concluded that Mr Feleppa’s assessment was flawed but there is no evidence that they did so when it was received.

38 Moreover, and more particularly, there is no evidence that the third or fourth respondents, on receipt of Mr Feleppa’s assessment or at any time thereafter, concluded that the assessment was too low. They were in fact relying upon the fifth, sixth and seventh respondents, and Mr Feleppa, for advice in relation to the tender.

39 Simultaneously with Mr Feleppa’s retainer, Mr D’Apollonio and Mr Turic became aware that the Request for Tender had also been issued to McMahon Services. Mr D’Apollonio and Mr Turic knew that officers of McMahon Services were making investigations for the purposes of compiling a tender for submission.

40 In mid November 2000, Mr Turic attended the offices of McMahon Services. I do not know who initiated that visit or why he visited. During his visit, he was handed a piece of paper by the second respondent, Mr Phillip Bubner, McMahon Services’ Demolition Operations Manager. The document Mr Turic was handed was a photocopy of ‘Tender Schedule B-Summary of Proposed Contract Price’ (the draft tender). The draft tender disclosed McMahon Services breakdown of the proposed contract price. It read as follows:

‘TENDER SCHEDULE “B”

SUMMARY OF PROPOSED CONTRACT PRICE

The Tenderer must submit a breakdown of the proposed Contract Price as detailed in the schedule below.

ITEM	ELEMENTS OF WORK	STAGE 1A AMOUNT $	STAGE 1B AMOUNT A$
1.	Preliminaries	Allowed in demo
2.	Demolition	845,000	1,060,000
3.	Concrete crushing and stockpiling	263,600	320,000
	TOTAL CONTRACT PRICE	1,108,600	1,380,000
		2,488,600’

There was other writing on the document but that writing is not relevant to these proceedings.

41 The total figure on the document was $2,488,600. Mr Turic gave this document to Mr D’Apollonio.

42 Sometime thereafter, Mr Turic and Mr D’Apollonio met with Mr Parentes and Mr Feleppa and handed the McMahon Services draft tender to Mr Feleppa, and asked him to incorporate the figures listed in that document into the tender document to be submitted by SA Demolition. Mr Parentes agreed to this course of action and Mr Feleppa inserted that same figure in the SA Demolition tender document. The SA Demolition tender document was submitted to the Department of Defence on or about 15 November 2000.

43 Thus, the ‘Tender Schedule B – Summary of Proposed Contract Price’ attached to SA Demolition’s tender document contained precisely the same figures to those appearing in McMahon Services draft tender.

44 However, the actual McMahon Services ‘Tender Schedule B – Summary of Proposed Contract Price’ which was submitted in response to the Request for Tender proposed a contract price, in total, of $2,174,634, exclusive of GST. The total proposed contract price GST inclusive was $2,392,096.

45 It is agreed that when Mr D’Apollonio and Mr Turic provided Mr Feleppa with the draft tender and requested him to insert the figures into the SA Demolition tender, both Mr D’Apollonio and Mr Turic believed that the total price to be included in due course in the McMahon Services’ tender would be less than $2,488,600, although neither knew the precise figure at which McMahon Services would tender.

46 Mr Turic was listed as a ‘key person’ in the SA Demolition tender.

47 Mr D’Apollonio and Mr Turic knew that there was an understanding between McMahon Services and SA Demolition that SA Demolition would tender at a price no less than the price specified on the document. That price had been provided by McMahon Services.

48 Both Mr D’Apollonio and Mr Turic knew that SA Demolition would not be successful ahead of McMahon Services in winning the tender. They also understood that if McMahon Services was successful in its tender that D & V Services would be subcontracted by McMahon Services to perform the asbestos removal component of the redevelopment.

49 It was alleged further that, in accordance with the arrangement or understanding, McMahon Services would give to SA Demolition $50,000. It is not clear whether the fifth, sixth and seventh respondents accept that to be part of the arrangement or understanding. I shall ignore the allegation for the purpose of considering the appropriate penalties.

50 The Department of Defence was deprived of two competitive tenders.

51 Mr Feleppa’s opinion as an appropriate tender for SA Demolition was some $800,000 less than the actual tender submitted by SA Demolition. The actual tender submitted by SA Demolition exceeded the Department of Defence’s pre-tender budget estimate by approximately $500,000.

52 Similarly, the McMahon Services tender exceeded the Department of Defence’s pre-tender budget estimate by $492,096.

53 After consideration of the four tenders received, the Department of Defence nominated McMahon Services as the successful tenderer.

54 Mr D’Apollonio and Mr Turic, in providing the draft tender to Mr Parentes and taking part in writing those figures into SA Demolition’s tender, aided and abetted an arrangement or understanding which they have acknowledged in the agreed statement of facts as being likely to have had the effect of substantially lessening competition. The anti competitive effects arose from the conclusion of an arrangement or understanding for the purpose of fixing the price for the services of removing asbestos from, and the demolition of structures, in the asbestos and demolition market in the greater metropolitan area of Adelaide.

55 Mr D’Apollonio, Mr Turic and it follows, D & V Services, aided and abetted breaches of s 45 of the Act in contravention of s 76 of the Act.

56 Paragraph 18 of the agreed facts states:

’18. On the basis of the above, there have been contraventions of Section 45 of the Trade Practices Act by McMahons Services and SA Demolition, and it is admitted that each of the Sixth and Seventh Respondents, in their capacity as Directors of the Fifth Respondent, and the Fifth Respondent, through the Sixth and Seventh Respondents, contravened Section 76 of the Trade Practices Act as they aided and abetted the said contraventions by the First and Third Respondents in that each of them was knowingly a party to the obtaining of the Document from McMahon Services; was a party to the provision of it to SA Demolition; and subsequently had the knowledge that SA Demolition and McMahon Services would each tender in the manner set out above.’

THE TENDER DOCUMENT

57 As part of the tender process, tenderers were provided with a Request for Tender which they were required to complete. That document outlined the various obligations on tenderers and identified the terms of the tender. The framework of the tender document is important. In particular, the document identifies the tenderer’s obligations in the tender process by emphasising the requirement that each tender be prepared and submitted independently to ensure competition.

58 Part H of the Tender document required tenderers to complete a statutory declaration which, amongst other things, contained clauses to the following effect:

‘Collusive Tendering

4. Neither the Tenderer nor any of its servants or agents had knowledge of the tender price for the Project of any other tenderer prior to the Tenderer submitting its Tender for the Project.

5. Neither the Tenderer nor any of its servants or agents disclosed the tender price for the Project submitted by the Tenderer to any other tenderer who submitted a tender for the Project or to any other person or organisation prior to the close of tenders.

Cover Bidding

6. Neither the Tenderer nor any of its servants or agents provided information to any other tenderer, person or organisation, to assist another tenderer for the Project to prepare a tender known in the building and construction industry as a cover bid, whereby the Tenderer was of the opinion or belief that another tenderer did not intend to genuinely compete for the contract.

7. The Tenderer is genuinely competing for the contract and its Tender is not a cover bid.’

59 Part A of the tender document also contained a section ‘Tendering Ethics’. Clearly, the function of this section of the Tender document was to illustrate the importance of competitive tendering. Paragraph 1.19 of Part A provided:

‘1.19 TENDERING ETHICS

Each Tenderer will comply with the requirements of any Code of Practice or Code of Tendering by which the Commonwealth may from time to time agree to be bound. The Tenderer shall make enquiries to ascertain [sic] the Commonwealth has agreed to be bound by any Code of practice or Code of Tendering.

Each Tenderer shall not communicate (verbally or otherwise) or have any arrangement or arrive at any understanding with any of the other Tenderers or with any employee of any association of which the Tenderer or any of the other Tenderers is a member about the work under the Contract or any aspect of the work under the Contract. Without limitation the Tenderers will not engage in:

(a) any discussion or correspondence with such persons concerning the sum of money which they propose to tender;

(b) any collusive tendering with any of the Tenderers; or

which in any way could have the effect of reducing the competitiveness of the tender process for the work under the Contract.’

60 Paragraph 1.7.1 of Part A of the Request for Tender refers to the National Code of Practice for the Construction Industry (‘National Code’) and the Industry Guidelines for the Industrial Relations and Occupational Health and Safety Components of the National Code (‘Industry Guidelines’). The National Code and Industry Guidelines formed Part G of the Tender document. The National Code has been in existence since 1997 and applies to government contracts. It applies to the ‘construction industry’ and includes demolition work, and at the relevant time provided, inter alia:

‘INTRODUCTION

The Code emphasises the maintenance of the highest ethical standards in all construction-related activities. The core principles of the Code, supported by the practices and initiatives of each jurisdiction, are aimed at ensuring that the industry:

is client-focused and respects the rights of clients

builds relationships on a foundation of trust

observes the highest ethical principles in tendering

maintains a positive commitment to continuous improvement and best practice

supports broadly-based workplace reform

maintains high standards in occupational health safety and rehabilitation and in environmental management, and

encourages responsible industrial relations leading to economically sustainable arrangements …

…

APPLICATION OF CODE

…

The Code establishes a set of principles and standards of behaviour that is expected to apply in dealings between clients, their representatives and members of the construction industry. The private sector is to be encouraged to adopt the code on a voluntary basis.

Any party wishing to do business with governments or work on government construction projects will be required to comply with all aspects of the Code applicable to their activities:

the term “party” in the Code includes but is not limited to: clients, principal contractors, subcontractors, suppliers, consultants, employees, unions – their officials, employees and members and industry associations whilst undertaking a representative role.

…’

61 The definition of ‘party’ in the National Code is widely expressed and includes subcontractors. On the agreed facts, in accordance with the agreement between McMahon Services and SA Demolition, D & V Services was nominated as the subcontractor to McMahon Services to undertake the asbestos removal work. D & V Services were listed on the tender document completed by McMahon Services as a ‘specialist contractor’ for the asbestos removal component of the tender. A D & V Services company profile was also attached to McMahon Services tender.

62 Clause 8 to Part G also provided:

‘8. NATIONAL CODE OF PRACTICE FOR THE CONSTRUCTION INDUSTRY

8.1 The Contractor must, and must ensure that its subcontractors:

(a) comply with; and

(b) otherwise at all times act consistently with,

the requirements and other provisions of the [National Code] and the [Industry Guidelines] of the [National Code] in the performance of the Contractor’s Activities.’

63 The National Code sets out National Principles which reiterate the onerous obligations upon contracting and the rights and responsibilities of parties subject to the National Code. In particular, the National Code sets out principles of competitive behaviour which reflect the rationale underlying s 45 of the Act:

‘Competitive Behaviour

Principles of ethical behaviour must be adhered to by all parties, at all times, and at all levels. Tendering processes must be conducted with commitment, honesty and fairness. Anti-competitive behaviour or any other practice which denies other participants legitimate business opportunities are unacceptable. These practices are inconsistent with the establishment and maintenance of ethical business practices which must underlie good working relationships between a client and a service provider and between service providers.

…

[T]enderers must not engage in any form of collusive practice and must be prepared to attest to their probity…

…

These principles apply to all parties in the contractual chain thus the terms ‘client’ and ‘tenderer’ are interchangeable at each link in the chain. For example, a contractor will act as a client when seeking tenders for subcontract packages.’

All jurisdictions emphasise that collusive tendering, participation in price-fixing cartels for either service or supplies, “bid shopping” or any other practice which seeks to limit competition, are specifically prohibited.’

64 ‘Prohibited practices’ include ‘agreements between tenderers to fix prices or conditions of contract’, as well as ‘any meeting of tenderers to discuss tenders …’, ‘any assistance to any tenderer to submit a cover tender (that is, a tender submitted as genuine but which has been deliberately priced in order not to win the contract or commission)’.

65 The National Code is formulated to encourage competition and competitive tendering.

66 Paragraph 1.7.2 of Part A required a tenderer to execute an undertaking of compliance in accordance with Schedule J of the tender document. The undertaking was to be signed by an individual in the case of an individual tenderer or by a director in the case of a corporate tenderer.

67 D & V Services did not complete a tender document itself because it was not a tenderer and was listed only as an asbestos removal subcontractor.

68 The respondents’ counsel, Mr Lane, argued that Mr Turic had not read the tender document and that Mr D’Apollonio had only read the document in a cursory fashion. Mr Lane also submitted that D & V Services, Mr D’Apollonio and Mr Turic had not previously been a party to any government or quasi government contract. They have been involved in redevelopments arising out of such contracts but have only participated in any redevelopment or asbestos removal as a subcontractor.

69 It is not necessary, in order to establish contravention of the Act, that a respondent be shown to have had knowledge that they were infringing the Act: Rural Press Ltd v Australian Competition and Consumer Commission (2002) ATPR 41-883. The conduct which the respondents to this hearing have admitted engaging in undoubtedly infringed the principles of competition enshrined in the tender document. Ms Layton submitted that there could be little doubt that the respondents were aware of the contents of the Request for Tender. She said that even if the respondents were not aware that their conduct may have infringed the Act, they certainly would have known that their conduct was wrongful. D & V Services had previously been involved in government contracts which, according to the ACCC, were in some way governed by the National Code.

70 I agree with Ms Layton’s submission and find that Mr D’Apollonio and Mr Turic were aware that their conduct was wrongful and were aware of each of the elements necessary to establish that they were aiding and abetting an arrangement or understanding: Rural Press Ltd v Australian Competition and Consumer Commission (2003) 203 ALR 217 at 231. Indeed, paragraph 18 of the agreed facts, at [56] of these reasons, shows that so much is admitted.

THE RELEVANT MARKET

71 The ACCC submitted that the market that McMahon Services, SA Demolition and D & V Services were in competition with each other in was the market for the provision of demolition and asbestos removal services in the greater metropolitan area of Adelaide, including Salisbury.

72 I accept the market is as submitted by the ACCC.

THE OBJECT OF PART IV OF THE ACT

73 The object of the Act and, in particular, Part IV of the Act, is to enhance the welfare of Australians through the promotion of competitive trading: s 2. Part IV of the Act must be interpreted having regard to that object: Boral Besser Masonary Ltd v Australian Competition and Consumer Commission (2003) 77 ALJR 623. Part IV proscribes certain conduct because, as a general rule, that conduct is contrary to the public interest in maintaining competitive markets.

74 Deane J said in Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat and Live-stock Corporation (1980) 29 ALR 333 at 340:

‘The general purpose and scope of the Part can be described by saying that it contains provisions which proscribe and regulate agreements and conduct and which are aimed at procuring and maintaining competition in trade and commerce. Broadly speaking, those provisions either control or proscribe the making of certain contracts or arrangements or the reaching of certain understandings, the giving or extracting of certain covenants in relation to land, the engaging in conduct involving a secondary boycott, engaging in the practices of monopolization exclusive dealing or resale price maintenance, engaging in predatory price discrimination, and the increasing of market share by means of take-over or merger. The primary constitutional heads of legislative power are the corporation power (Constitution, s 51(xx)) and the trade and commerce power (Constitution, s 51(i)) and the relevant legislative controls and proscriptions contained in Pt IV are largely directed to conduct or agreements, arrangements or understandings in trade or commerce or involving a foreign, trading or financial corporation.’

75 In Australian Competition and Consumer Commission v FFE Building Services Ltd [2003] FCA 1542, Wilcox J said of s 45 at [22]:

‘That section is a major element in the Act’s armoury of provisions dealing with restrictive trade practices. It is now generally recognised that restrictive trade practices are inimical to a healthy competitive economy. Moreover, the collusive [tendering] arrangements…not only had the potential to deprive building contractors, and their clients, of the lowest available price for fire protection services in relation to the particular job; but also had a tendency to undermine the entire tender system in the industry.’

76 The imposition of price floors and ceilings through arrangements stifles the intense price rivalry that characterises competition. Interference of that kind in a competitive market is highly undesirable and is contrary to the public interest. In Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (1998) ATPR 41-628 at 40,891 Heerey J said that ‘[p]rice fixing, and in particular the kind of collusive bidding which was attempted in the present case, is a form of cheating.’

77 It is for those reasons that arrangements or understandings controlling or fixing prices have been deemed by s 45A of the Act to have the purpose or effect of substantially lessening competition. That provision reflects the broad policy of the Act which assumes that economic detriments flow from an absence of competition and in particular, in that section from price fixing.

78 Section 45A(1) assumes that there can be no justification for a contract arrangement or understanding of the type identified in that subsection. The Act deems the contract arrangement or understanding to have the purpose or effect of substantially lessening competition. It can be compared with less rigorous restrictions in the Act which recognise that arrangements could have legitimate justification or may otherwise be favourable to competition: Visy Paper Pty Ltd v Australian Competition and Consumer Commission (2003) 201 ALR 414 at [54], [59] per Kirby J.

79 Offences of this nature are difficult to detect and often difficult to prove. Where an arrangement or understanding is alleged, the circumstances giving rise to the arrangement or understanding are likely to be clandestine and covert: see eg Trade Practices Commission v Carlton United Breweries Ltd (1990) 24 FCR 532 at 541, in respect of conduct contravening s 46.

80 Involvement in a price fixing arrangement must therefore be regarded seriously.

PENALTY

81 Sections 76 (1A) and (1B) of the Act prescribe the maximum penalties payable by corporate and individual contraveners respectively. Those sections provide:

‘(1A) The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed:

(a) for each act or omission to which this section applies that relates to s 45D, 45DB, 45E or 45EA - $750,000; and

(b) for each other act or omission to which this section applies - $10,000,000.

(1B) The pecuniary penalty payable under subsection (1) by a person other than a body corporate is not to exceed $500,000 for each act or omission to which this section applies.’

82 The maximum penalties set out in those sections were enacted by the Trade Practices Legislation Amendment Act 1992 (Cth). Prior to those amendments, the maximum penalties under s 76 were $250,000 for a corporation and $50,000 for a person other than a corporation. The increases reflect the legislature’s view of the serious detriments of anti competitive behaviour and are indicative of the strong censure that contraventions of Pt IV warrant: Trade Practices Commission v Axive Pty Ltd (1994) ATPR 41-368 at 42,795.

83 At the hearing, I was provided with a table of recent cases relating to admitted breaches of Pt IV and the penalties applied in those cases to assist me in determining the appropriate penalties.

84 The concept of parity when all other things are equal requires that like cases be treated alike and that penalties be imposed consistently and equally: Trade Practices Commission v Axive Pty Ltd at 42,795; Australian Competition and Consumer Commission v ABB Transmission & Distribution Ltd (No 2) (2002) ATPR 41-872. However, penalties handed down in other cases can provide only some guidance as to what is appropriate in the case before the Court: Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763; Australian Competition and Consumer Commission v FFE Building Services Ltd.

85 Penalties in any other case can only be the most general guide in considering the appropriate penalties in this case because each case must be decided on its own peculiar facts: Trade Practices Commission v Annand and Thompson Pty Ltd (1987) ATPR 40-772 at 48,394. However, it will be important to ensure that the penalties imposed on the respondents’ properly reflect each of the respondents’ involvement in the contravention.

86 The purpose of imposing a penalty under s 76 is deterrence, both specific and general: Trade Practices Commission v CSR Ltd (1991) ATPR 41-076.

87 In Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 298, Toohey J said:

‘ The seriousness with which the legislature views a contravention of Pt IV of the Act may be found in the maximum penalty of $25,000 in the case of a body corporate. 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. The range of penalties imposed in cases of resale price maintenance may be gauged from the schedule prepared by counsel for the applicant. This shows penalties as low as $3,000 (Trade Practices Commission v Gorenje Pacific Pty Ltd (1983) ATPR 40-430) and as high as $120,000 (Trade Practices Commission v Pye Industries Sales Pty Ltd (1978) ATPR 40-089). Clearly much depends on the deliberateness of the offender’s conduct, the extent to which resale price maintenance has been carried on and the damage caused to anyone by that conduct. At the same time one must not lose sight of the fact that s 76 of the Act is not directly concerned with compensation; that is the role of s 82. There is the wider public interest in ensuring that the provisions of the Act are observed.’

88 In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission, a majority in the Full Court (Burchett and Kiefel JJ; Carr J not agreeing) said that the purpose of imposing penalties under s 76 of the Act did not include punishment. More recently, some doubt has been expressed as to the width of that statement: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36. I will proceed upon the basis that the penalties to be imposed in this case should not include any amount to reflect punishment for two reasons; first, because I am bound to follow the decision and; secondly, because, in any event, this is not a case for punishment.

89 In Trade Practices Commission v CSR Ltd, French J said at 52,152-52,153:

‘The assessment of a penalty of appropriate deterrent value will have regard to a number of factors which have been canvassed in the cases. These include the following:

1. The nature and extent of the contravening conduct.

2. The amount of loss or damage caused.

3. The circumstances in which the conduct took place.

4. The size of the contravening company.

5. The degree of power it has, as evidenced by its market share and ease of entry into the market.

6. The deliberateness of the contravention and the period over which it extended.

7. Whether the contravention arose out of the conduct of senior management or at a lower level.

8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.

9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.

The first three factors are all expressly mentioned in s. 76. They can be regarded as measures of the scope and impact of the conduct and it is conducive to deterrence that the greater the significance of these elements, the heavier the penalty should be.’

90 In Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375, Burchett J, after referring to French J’s dicta, said at 40,169:

‘Certain further principles of law require specific mention. In Trade Practices Commission v. Allied Mills (supra) at ATPR 43,182; ALR 258, Sheppard J. drew attention to the approached followed by Kitto J. in Vogel (supra), where he did not impose substantial penalties for each of a number of breaches arising out of the one plan or arrangement, but had regard to the proper total penalty. The adoption of such an approach, as Sheppard J. recognized, is consistent with that adopted in the criminal law (Vogel being a criminal case), where a court imposing penalties for a number of related offences does not allow the total penalty to exceed what is proper for the entire criminality involved: the totality principle discussed in McDonald v The Queen (1994) 48 FCR 555. The Court should follow the same course in assessing civil penalties in a case of the present kind. It was accordingly appropriate, as the parties submitted, to select certain only of the contraventions for the imposition of penalties, taking others into account, but not imposing separate penalties in respect of them.

It was also, in my opinion, appropriate to give weight to the fact that the respondents had saved the community the burden of litigating a lengthy and expensive case by withdrawing their defences and admitting the allegations. The saving in costs alone, quite apart from the matter of the time and energies of officers of the Trade Practices Commission which can now be devoted to other tasks, was agreed to be extremely large. In Trade Practices Commission v. Carlton United Breweries (supra), Northrop J. said (at ATPR 51,500; FCR 542):

“In the present case, weight is given to the fact that CUB has admitted the contraventions alleged. In doing this it has made public its acceptance of the fact that it has contravened s 46(1) of the Trade Practices Act. It has not forced the Commission to engage in long and expensive litigation to prove the contravention in court. It has not taken every technical point to avoid liability. These are important considerations in proceedings alleging breaches of Pt IV of the Trade Practices Act.”’

91 Both matters which Burchett J thought were relevant in assessing the appropriate pecuniary penalty arise out of the criminal law. They are principles applicable in a consideration of penalties under s 76 even though a contravention of Part IV is not a criminal offence and a s 76 penalty does not include a component for punishment. The first requires the Court to stand back from the penalty to be imposed to determine whether the penalty would crush the party to be sentenced and whether, in those circumstances, the penalty should be thereby reduced. The totality principle requires the Court imposing the penalty, having first considered the individual offences or in this case contraventions, to stand back from the penalty to decide whether the total penalty is appropriate having regard to all of the circumstances. The sentencing Court must not punish the person to be sentenced twice. It must look at the totality of the criminal behaviour and ask itself what is the appropriate sentence for all the offences. The second, which also applies in the criminal law where a party has entered a guilty plea, requires the Court to reduce the sentence which it would otherwise impose because a guilty plea recognises some contrition and remorse on the part of the accused person, and indicates a willingness to cooperate in the administration of justice by relieving the State, including both the prosecuting authority and the Court, from the cost of the inquiry into the accused’s guilt: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission at 291. The discount which is offered as a result of the plea takes into account a number of factors. Two are relevant here. First, whether the plea is entered at the first available opportunity and, if so, the discount is greater. The later the plea is entered usually the lower the discount. Secondly, whether the plea is any more than recognition of the futility of defending the charge. Usually, however, some discount is given even when the plea is late and even where the prosecution case is very strong because an accused person is always entitled to put the State to the expense of a trial.

92 Both principles are relevant to an assessment of the appropriate penalty. The first principle recognises that the assessment of all of the integers must not in the end give rise to any more than an appropriate penalty. The second recognises the public interest of having parties recognise their unlawful actions and encourages those parties to settle with the prosecuting authorities as soon as possible.

93 In Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996) ATPR 41-515 Heerey J identified further matters; similar conduct in the past; the financial position of a respondent; and the deterrent effect of the proposed penalty.

The Nature and Extent of Contravening Conduct

94 I have set out in some detail the fifth, sixth and seventh respondents’ involvement in the contraventions. The fifth, sixth and seventh respondents were, on the ACCC’s case, the intermediaries through which the arrangement or understanding between the first and third respondents was carried into effect. The sixth and seventh respondents were called in to assist the fourth respondent and more particularly the third respondent to price a tender in response to the Request for Tender. There is no suggestion that when they were engaged their role was anything but that. They did not initiate the arrangement or understanding or, at least, there is no evidence they did. They became involved in the arrangement when the seventh respondent attended McMahons Services offices. It is not clear how he came to be there, but when he was there he was given the document which subsequently was handed to the sixth respondent and then Mr Feleppa and the fourth respondent. They were the conduits by which the arrangement or understanding was reached.

95 I have set out above the obligations imposed on tenderers by the Request for Tender itself. I have also noted that D & V Services were not themselves a tenderer but were nominated as a subcontractor on both McMahon Services tender and SA Demolition’s tender. Mr Lane submitted that Mr D’Apollonio and Mr Turic did not have knowledge of the contents of the Request for Tender. That submission contradicted the ACCC’s case which was that the sixth and seventh respondents were aware of the contents of the Request for Tender and, in particular, the obligations for competition. None of the parties sought to lead evidence on this topic but Mr Lane submitted that I should accept his clients’ submission. During his submissions, the following exchange took place:

‘HIS HONOUR: Well, what do I do, if on the one hand Ms Layton says your clients were aware and you on the other hand say they weren’t aware? How do I resolve that? Do I have a disputed facts hearing?

MR LANE: If your Honour is troubled by that, you will have to because my instructions are quite categoric on that. They did not read it. They were not aware of the conditions. Now, my retort would be for my learned friend to point to evidence that they were aware. My understanding is that it is an inference that she would invite the court to hear, that is all.’

96 I think his submission is correct. If this were a criminal matter and I was hearing sentencing submissions I would, in the absence of evidence, ordinarily accept a submission in mitigation provided, of course, the submission did not contradict the guilty plea or the verdict. Ms Layton did not seek to lead any evidence to support her submission. She did not seek a disputed facts hearing or any hearing of that kind. That is no criticism of the ACCC. Frankly, I would not have expected the ACCC to seek such a hearing when the penalties have been agreed. In those circumstances, I am disposed to accept Mr Lane’s submission that his clients were not aware of the contents of the Request for Tender. However, it was accepted by Mr Lane that ‘as a matter of commonsense they ought to have understood the need for proper competition between competing tenderers’. That concession was rightly made.

97 Moreover, the National Code applies to all those wishing to work on government construction projects, including subcontractors. The respondents had an obligation to be familiar with that Code. The obligations enunciated in the tender document are not therefore irrelevant. In my opinion the ethical restrains set out in that document ought to be taken into account in devising an appropriate penalty.

The Amount of Loss or Damage Caused

98 Quantifying the amount of loss or damage caused is, and so it is in this case, often difficult. The McMahon Services tender was in the sum of $2,392,096. The other two tenderers, apart from the first and third respondents who are not involved in these proceedings in any capacity and were not parties to the arrangement or understanding, submitted tenders of $2,420,000 and $2,585,000. McMahon Services tender was therefore the lowest tender. All tenders exceeded the Department of Defence’s pre-tender budget estimate of $1.9 million. It was argued that because McMahon Services was the lowest tender, and because the two tenderers not parties to the impugned arrangement submitted higher tenders, that the Department of Defence suffered no loss or damage as a consequence of the collusive tendering arrangement or understanding between the first and third respondents.

99 It is a relevant consideration that the two other tenderers submitted tenders higher than the first and third respondents.

100 However, it is likely that if the third respondent had put any reliance whatsoever upon Mr Feleppa’s assessment, its tender would have been less and significantly less than the first respondent’s.

101 It is not possible, on the evidence, to say how much less an untainted third respondent tender would have been. Nor is it possible to say whether a lower tender by the third respondent would have been accepted, because, in any event, the Department of Defence considered McMahon Services to be the most suitable contractor for the redevelopment. Moreover, the Department described the SA Demolition as ‘a poor submission and their capacity to undertake the job was questioned’. It was felt that they represented a very high risk to the project. There is, therefore, no point on speculating on those matters.

102 Ms Layton submitted that the Department of Defence had lost an opportunity to negotiate a lower contract price as a result of the collusion. She argued that, had SA Demolition put forward a genuine tender, the contract price supplied by it was likely to be lower than McMahon Services. In that event, even if the Department of Defence considered McMahon Services to be a better contractor, the tender may have provided a platform from which post tender negotiations could have been undertaken with McMahon Services. I agree with that submission. However, that lost opportunity is also not quantifiable.

103 The absence of loss or damage, however, is not ordinarily considered to be a mitigating factor: Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115; Australian Competition and Consumer Commission v Roche Vitamins Pty Ltd [2001] FCA 150; Australian Competition and Consumer Commission v Simsmetal Ltd (2004) ATPR 41-764; cf Australian Competition and Consumer Commission v Cromford Pty Ltd (1998) ATPR 41-618 at 40,764. If it were, contraveners who were efficiently detected and shut down would have grounds upon which a reduction in penalty would be warranted, irrespective of the gravity of the contravention. The ACCC would effectively be disadvantaged by the effective performance of its statutory duties.

Financial Benefit to the Contravenor

104 D & V Services stood to be retained as McMahon Services subcontractor for the asbestos removal component of the redevelopment in the event that McMahon Services were the successful tenderer, as they ultimately were. Shortly after the commencement of the redevelopment by McMahon Services, D & V Services undertook the asbestos removal as a subcontractor, for which they received $175,000.

105 It is not clear what the profit component of that work was. There is no evidence to suggest that there are any other advantages which may accrue to D & V Services in the future.

Participation of Senior Management

106 The corporate structure of the fifth respondent and its business D & V Services is similar to a partnership. The company is run by Mr D’Apollonio and Mr Turic who bring different skills and abilities to the company. They are the directing mind and will of the company and at the time of the impugned conduct, were the sole shareholders. As part of McMahon Services tender document, a company profile for D & V Services was attached. That company profile described Mr D’Apollonio’s role as follows:

‘[D’Apollonio] is largely responsible for direct liaison with most of our clients, providing quotations and advice to clients on the best way for them to handle their asbestos removal needs. He is also largely responsible for the business development side of our company.’

107 Mr D’Apollonio has more involvement in the day to day management of the company and its business, including the procurement of sub contracting work and the preparation of any relevant documentation.

108 Mr Turic has a more hands on role within D & V Services. In respect to Mr Turic, the company profile provides:

‘[Turic] is largely responsible for the overseeing of on-site asbestos removal activities and co-ordination of these activities with our administration.’

109 Of course, Mr D’Apollonio and Mr Turic are responsible for the corporate conduct of the fifth respondent and the way in which it conducts its business. As its only directors, Mr D’Apollonio and Mr Turic are the mind and will of the company.

110 They were also both involved in the aiding and abetting of the collusive arrangement and penalties are sought against them individually. Although Mr Turic maintained that he had no knowledge of the contents of the draft tender, he was the person responsible for providing the draft tender to Mr D’Apollonio. On the agreed statement of facts, Mr D’Apollonio and Mr Turic then provided the document to Mr Feleppa at the meeting at which Mr Parentes was present. They requested Mr Feleppa, with the approval of Mr Parentes, to insert the figures contained in the draft tender into SA Demolition’s tender document. The agreed statement of facts also indicates that at the time the draft tender was provided to Mr Feleppa, Mr D’Apollonio and Mr Turic believed that the total price to be included in the McMahon Services tender would be less than the price to be included in the SA Demolition tender.

111 Mr D’Apollonio and Mr Turic knew that requesting Mr Feleppa to insert the figures from McMahon Services draft tender into SA Demolition’s tender would mean that SA Demolition would not be successful ahead of McMahon Services. They were also aware that they stood to be nominated as McMahon Services subcontractor for the asbestos removal component of the redevelopment and that for that purpose, they had agreed a subcontract fee with McMahon Services of $175,000. For those reasons, the fifth respondent contravened Part IV and so also did its directors.

112 They will suffer a penalty because of what they did and, being the only directors, what they caused the fifth respondent to do. The fifth respondent will suffer a penalty because of what its only directors did and caused it to do.

113 Any penalty imposed upon the fifth respondent is in fact a penalty upon the sixth and seventh respondents because they are, in truth, the fifth respondent. The penalties have to be understood in those circumstances.

The Size of the Contravening Company

114 In determining the appropriate penalty to be imposed upon the fifth respondent, a relevant consideration is its size and its capacity to meet any penalty imposed: Australian Competition and Consumer Commission v SIP Australia Pty Ltd (1999) ATPR 41-702. The fifth respondent’s capacity to pay any penalty in this case must be measured by reference to the capacity of the underlying business D & V Services.

115 The fifth respondent’s profitability has increased dramatically over the last few years. So, also, has its assets increased. As at 30 June 2003 it had net assets of $1,178,673. I set out a summary of its financial performance and its assets:

	1999/2000	2000/2001	2001/2002	2002/2003
Gross Income	$2,333,181	$2,183,858	$3,629,974	$4,026,478
Operating Profit (before tax)	$(42,744)	$236,111	$490,488	$674,402
Net Assets	$(63,246)	$200,161	$484,271	$1,178,673

116 It is also liquid. Its current assets exceed its current liabilities by $462,074. It has $1,197,281 in various cash resources. It is in a position to pay the type of penalty contended for by the ACCC.

COMPLIANCE SCHEME

117 Another relevant factor is the presence or not of a compliance scheme or other measures which indicate a willingness to re-assess and re-define appropriate corporate conduct: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission. D & V Services is a relatively small business and does not have the structure of a public corporation. It has not been practicable to have a compliance program of the type which is often employed in public companies and large proprietary companies. There was no evidence before me that such a scheme would be considered.

118 However, the sixth and seventh respondents have undertaken to attend a Trade Practices Compliance seminar in the future. I think these proceedings and that seminar will focus the respondents’ minds on their obligations under Part IV of the Act.

previous similar conduct

119 The respondents have not previously attracted investigation by the ACCC (cf Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763) or any other corporate watchdog.

The Level of Co-operation by D & V Services, D’Apollonio and Turic

120 As I mentioned at the outset of these reasons, these proceedings were commenced by the ACCC on 24 January 2003. The respondents filed a defence on 11 April 2003. In a formal interview in March 2002, the sixth and seventh respondents denied any wrongdoing at all. In June and August 2002 the sixth and seventh respondents were examined under s 155 of the Act. It is apparent that they did not immediately acknowledge their involvement in the unlawful arrangement or understanding. I accept that this may in part be because the respondents did not, when examined, consider that they had aided and abetted a proscribed arrangement, although as I have mentioned, their experience in the industry was such that it is difficult to accept that they were not aware that collusive tendering was at the very least improper.

121 Ms Layton pointed out that whilst some allowance should be made for the respondents agreeing to settle the dispute, any discount for that degree of co-operation would not exceed 20 per cent. In particular, Ms Layton pointed out that no serious settlement discussions were had until December 2003. At that stage, the hearing of the principal matter was listed for 8 March 2004. The settlement was not reached until late January / early February 2004.

122 When Mr Lane came to make his submissions, the penalties had been agreed but his clients were keen to ensure that I was satisfied that those penalties were appropriate. Therefore, he addressed the relevant matters in some detail. He submitted that in assessing the willingness of the respondents to settle, account should be taken of the late amendments made by the ACCC to the pleadings. He argued that until the Statement of Claim was amended it was difficult for the respondents to enter into a commercial settlement because it was not until later that they were aware of the true nature of the arrangement or understanding. He also submitted that there were private discussions between the parties which were instigated by the respondents which resulted in amendments to the pleadings which obviated the need for his client to bring a strike out application or any application for particulars. He said that demonstrated a further willingness to cooperate. Mr Lane suggested that a discount in the nature of 25-30 per cent would more accurately reflect the cost and time savings which the settlement had achieved.

123 I think that the respondents would be entitled to some discount for their cooperation. They were the first parties to reach a settlement with the ACCC and may have been the catalyst for others settling. I think, however, the ACCC’s assessment of the discount is to be preferred to the respondents. I will apply a discount rate of 20 per cent.

Suggested Penalties

124 As I have said during the hearing, the parties indicated an in principle agreement. The penalties are not high. I was concerned that they might be too low. However, in the end result, I am persuaded, particularly having regard to the size of the fifth respondent and the impact those penalties will have on its only two directors, that the penalties are within a permissible range. The agreement was that penalties should be assessed:

1. DCD Enterprises Pty Ltd - $65,000.

2. Mr D’Apollonio and Mr Turic - $30,000 each.

125 The parties, however, agreed that the assessed penalties should be discounted. The discount to be applied is 20 per cent. Applying that discount, the penalties to be imposed are:

1. DCD Enterprises Pty Ltd - $65,000.

2. Mr D’Apollonio - $24,000.

3. Mr Turic - $24,000.

126 I therefore make the following orders:

1. The fifth respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $52,000.

2. The sixth respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $24,000.

3. The seventh respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 76 of the Act in the sum of $24,000.

I note the undertakings given by the fifth respondent:

The fifth respondent gives an undertaking for a period of five years, whether by its directors, servants or agents or otherwise howsoever, to refrain from:

(a) making available to any company or person who supplies services in competition with the fifth respondent (or in competition with any company or person with whom the fifth respondent supplies services), any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the fifth respondent (or any company or person with whom the fifth respondent supplies services), for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;

(b) discussing with any company or person who supplies services in competition with the fifth respondent (or in competition with any company or person with whom the fifth respondent supplies services), any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the fifth respondent (or any company or person with whom the fifth respondent supplies services), for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;

(c) acting upon the receipt from any company or person who supplies services in competition with the fifth respondent (or in competition with any company or person with whom the fifth respondent supplies services), documents relating to the price (or a component thereof) likely to be tendered by such other company or person, for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;

(d) knowingly fixing, or aiding and abetting the fixing of, the price (or a component thereof) in any tender for the provision of demolition and asbestos removal services to any person by the fifth respondent (or any company or person with whom the fifth respondent supplies services), or any company or person who supplies services in competition with the fifth respondent (or in competition with any company or person with whom the fifth respondent supplies services), at an amount no less than a price calculated by the fifth respondent (or any company or person with whom the fifth respondent supplies services), or such other company or person, or agreed by them, with the intention of assisting any one of them to win the tender;

(e) organizing, attending or otherwise participating in, any meeting of representatives of companies or persons carrying on business for the provision of demolition and asbestos removal services, being a meeting held for the purpose, or for purposes which include the purpose of fixing, controlling or maintaining the prices offered or charged by such companies or persons for the provision of demolition and asbestos services.

I note the undertakings given by the sixth and seventh respondents:

Each of the sixth and seventh respondents give an undertaking for a period of five years, that either individually or together, they will refrain from:

(a) making available to any company or person who supplies services in competition with any company or person by whom the respective respondent is employed or engaged, any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the company or person by whom the respective respondent is employed or engaged, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;

(b) discussing with any company or person who supplies services in competition with any company or person by whom the respective respondent is employed or engaged, information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the company or person by whom the respective respondent is employed or engaged, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;

(c) acting upon the receipt from any company or person who supplies services in competition with any company or person by whom the respective respondent is employed or engaged, documents relating to the price (or a component thereof) likely to be tendered by such other (competitor) company or person, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;

(d) knowingly fixing, or aiding and abetting the fixing of, the price (or a component thereof) in any tender for the provision of demolition and asbestos removal services to any individuals or entities by any company or person by whom the respective respondent is employed or engaged, or any company or person who supplies services in competition with the person by whom the respective respondent is employed or engaged, at an amount no less than a price calculated by the company or person by whom the respective respondent is employed or engaged, or such other (competitor) company or person, or agreed by them, with the intention of assisting any one of them to win the tender;

I note the further undertaking of the sixth and seventh respondents:

The sixth and seventh respondents undertake to the Court that the sixth and seventh respondents will at their cost, as soon as is practicable, attend a Trade Practices Compliance seminar of the following kind:

1. The sixth and seventh respondents will attend a Trade Practices Compliance seminar conducted by an independent person with appropriate knowledge of Trade Practices law within three months of this order.

2. The seminar will address the provisions of Part IV of the Trade Practices Act 1974 (Cth) proscribing restrictive trade practices and will, in particular, address the issue of price fixing and anti-competitive collusion in the context of contracts, arrangements and understandings.

3. The sixth and seventh respondents will notify the applicant within one week of attending the seminar of their attendance.

4. Whenever quoting or tendering for work, in preparing contracts or agreements, and in making arrangements, the sixth and seventh respondents will check the terms of the quote, tender, contract or agreement, or aspects of the arrangement, to ensure that they do not contravene the provisions of Part IV of the Act.

5. In organising, attending or otherwise participating in any meetings with competitors, builders, demolishers, asbestos removalists, developers, property owners or resource recovery operators concerning matters relevant to the industrial and trading activities of such persons, the sixth and seventh respondents will ensure that the subject matter of any such meetings do not contravene the provisions of Part IV of the Act.

I certify that the preceding one hundred and twenty-six (126) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.

Associate:

Dated: 9 September 2004

Counsel for the Applicant:	Ms R Layton QC with Mr N Wilson

Solicitor for the Applicant:	Norman Waterhouse

Counsel for the First Respondent:	No appearance

Counsel for the Second Respondent:	No appearance

Counsel for the Third Respondent:	No appearance

Counsel for the Fourth Respondent:	No appearance

Counsel for the Fifth, Sixth and Seventh Respondents:	Mr S Lane

Solicitor for the Fifth, Sixth and Seventh Respondents:	Meister Belperio Clark

Date of Hearing:	6 May 2004

Date of Judgment:	9 September 2004

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