FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Grove & Edgar Pty Ltd

[2008] FCA 1956

TRADE PRACTICES – misleading and deceptive conduct – consent declarations and disclosure orders – scope of Court’s power – Trade Practices Act 1974 (Cth) s 86C, Federal Court of Australia Act 1976 (Cth) s 21

 Federal Court of Australia Act 1976 (Cth) s 21

Trade Practices Act 1974 (Cth) ss 51AD, 86C

ACCC v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 236 ALR 665

ACCC v Goldy Motors Pty Ltd [2000] FCA 1885

ACCC v Info4PC.com Pty Ltd (deregistered) [2006] FCA 1534

ACCC v Midland Brick Co Pty Ltd [2004] FCA 693, (2004) 207 ALR 392

ACCC v Pacific Dunlop [2001] FCA 740

ACCC v Real Estate Institute Industry of Western Australia Inc [1999] FCA 18 and 1387; (1999) 161 ALR 79; (1999) 95 FCR 114

ACCC v Virgin Mobile Australia Pty Ltd (No. 2) [2002] FCA 1548

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564

Bank of Kuwait and the Middle East v Ship MV Mawashi Al Gasseem (No.2) [2007]FCA 815

BMW Australia Limited v ACCC (2004) FCAFC 167, (2004) 207 ALR 452, (2004) ATPR 42-012

Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421

Medical Benefits Fund of Australia Limited v Cassidy [2003] FCAFC 289, (2003) 135 FCR 1, (2003) ALR 402

Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No.2) (1993) 41 FCR 89

Rural Press Ltd v ACCC (2002) 118 FCR 236, 193 ALR 399

THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v GROVE & EDGAR ACN 002418108

NTD 11 OF 2008

REEVES J

19 DECEMBER 2008

DARWIN

THE COURT DECLARES THAT:

1.             During October and November 2007 the Respondent (‘Grove & Edgar’), by failing to agree in writing with two Northern Territory mango growers, namely Robert Pitts and Rebecca Horne (‘Pitts and Horne’) carrying on business under the registered business name Pitstop Produce and Donna, Stephen, Rebecca, Robert and Jonathan Mahony (‘the Mahonys’) carrying on business under the registered business name Top End Vendors (‘Top End Vendors’), the price to be paid by Grove & Edgar for the purchase of each grower’s produce either before, or immediately upon, the delivery of mangoes by such grower to Grove & Edgar, on each occasion, contravened section 51AD of the Trade Practices Act 1974.

THE COURT ORDERS THAT:

2.             Grove & Edgar:

2.1.       on or before 8 January 2009, send a letter on Grove & Edgar letterhead to each grower with whom it currently has a Horticulture Produce Agreement pursuant to the Horticulture Code of Conduct (‘the Code’) in the form of Attachment A;

2.2.       for a period of two years from the date of this order, within 7 days of the entry into any new Horticulture Produce Agreement pursuant to the Code with any grower, send a letter on Grove & Edgar letterhead in the form of Attachment A; and

2.3.       provide the Applicant within 30 days of the making of this order, with a list of the growers written to in accordance with order 2.1.

3.             The Respondent pay the Applicant’s costs of these proceedings fixed in the amount of $7,500.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

Introduction

1                     The Australian Competition and Consumer Commission (‘the ACCC’) and Grove & Edgar Pty Ltd (‘Grove & Edgar’) have agreed to settle this proceeding. To give effect to that settlement they have applied to the Court for certain final orders by consent.

2                     The consent orders involve the Court making orders:

1.                  for a declaration under s 21 of the Federal Court of Australia Act 1976 (Cth) that Grove & Edgar have contravened s 51AD of the Trade Practices Act 1974 (Cth) (‘the Act’);

2.                  under s 86C of the Act to require Grove & Edgar to send a letter to each grower with whom it currently has a Horticulture Produce Agreement, informing them of its contravention of the Act and outlining its obligations under the Horticulture Code of Conduct (‘the Code’) on or before 8 January 2009;

3.                  under s 86C of the Act to require Grove & Edgar to send the same letter, for a period of two years from the date of the order, within 7 days of the entry into any new Horticulture Produce Agreement pursuant to the Code with any grower;

4.                  under s 86C of the Act Grove & Edgar are required to provide the ACCC within 30 days of the making of the order, with a list of the growers written to in accordance with order 2 above; and

5.                  that Grove & Edgar pay the ACCC’s costs of these proceedings fixed in the sum of $7,500.

materials relied on

3                     In asking the Court to make these consent orders the parties have relied on the following materials:

a.                   the Further Amended Statement of Claim filed by the ACCC on 5 November 2008. This document sets out the particulars of Grove & Edgar’s various alleged breaches of the Act;

b.                  the Amended Defence to the Further Amended Statement of Claim filed by Grove & Edgar on 24 November 2008 in which Grove & Edgar admits all of the relevant facts pleaded in the Further Amended Statement of Claim including the alleged breaches of the Act;

c.                   the affidavits of Stephen and Donna Mahony sworn on 19 September 2008 and Robert Pitts sworn on 23 September 2008 which give evidence about the consignments of mangoes that were delivered to Grove & Edgar without first agreeing in writing the price to be paid for those consignments; and

d.                  the documents in the Tender Book filed by the ACCC which include the notices under s 155 of the Act served on Grove & Edgar, its response to those notices and various documents relating to the consignments of mangoes that are at the heart of these proceedings.

Background and Factual Findings

4                     I have reviewed all these materials. Before recording the relevant findings of fact in relation to Grove & Edgar’s breaches of the Act and the Code, I will briefly set out some details of the regulatory regime that underlies these proceedings.

5                     The Code is a prescribed mandatory industry code for the purposes of s 51AE of the Act under the Trade Practices (Horticulture Code of Conduct) Regulations 2006 (‘the Regulations’): see Regulation 4. It came into effect on 14 May 2007.

6                     According to the Explanatory Statement (Select Legislative Instrument 2006 No 376) issued by the Minister in relation to the Regulations, the Code was introduced “to improve the clarity and transparency of transactions between growers and wholesalers of fresh fruit and vegetables”. To achieve these ends the Explanatory Statement states that the Code is intended to address, among other things, a lack of clarity about when a wholesaler is trading as an agent or as a merchant when dealing with growers; and a failure to invest in written documentation of trade, including written transaction information and written trading agreements.

7                     Under cl 6 of the Code a trader (which is defined in clause 3 to mean an agent or a merchant) and a grower (which is defined in clause 3 to mean a person who grows his or her horticulture produce for sale) may only trade in horticulture produce (which is defined in clause 3 to include unprocessed fruits), if they have entered into a Horticulture Produce Agreement as described in the Code. Mangoes are obviously unprocessed fruits and therefore horticulture produce within the terms of the Code.

8                     Critical to these proceedings cl 25 of the Code requires that the price that is to be paid by a merchant for the purchase of a grower’s produce must be agreed in writing either before, or immediately upon, delivery of the produce to the merchant.

9                     I now make the following findings of fact.

10                  Grove & Edgar is a corporation and is a trader (within the terms of the Code) conducting business at the Sydney markets. In the course of its business, it purchased horticulture produce, including mangoes, from growers for the purpose of wholesale supply in Australia.

11                  During the period 14 May 2007 to 21 February 2008, Grove & Edgar traded with 17 mango growers in the Northern Territory. Of these 17 growers, 14 had entered into agreements with Grove & Edgar prior to the commencement of the Code and the other three growers entered into agreements with Grove & Edgar after its commencement.

12                  Robert Pitts and Rebecca Horne (‘Pitts and Horne’) owned and operated a property 40 kilometres south of Darwin under the registered business name Pitstop Produce. In the course of their business they grew mangoes for sale and were a ‘grower’ within the meaning of the Code. On 19 October 2007 Grove & Edgar entered into a Horticulture Produce Agreement under the Code with Pitts and Horne for the supply of mangoes. On or about 20, 21 and 22 October 2007, Pitts and Horne dispatched a number of consignments of mangoes, totalling approximately 1175 trays, to Grove & Edgar. These consignments were delivered to Grove & Edgar on or about 25 and 26 October 2007. On or about 16 November 2007 an amount of $20,258.90 less freight and levy charges was paid to Pitts and Horne for those consignments. There had been no price agreed to in writing between Grove & Edgar and Pitts and Horne prior to, or immediately upon, the delivery of these consignments.

13                  Donna, Stephen, Rebecca, Robert and Jonathan Mahony (‘the Mahonys’) owned and operated a property 150 kilometres south of Darwin under the registered business name Top End Vendors. In the course of their business the Mahonys grew mangoes for sale and were a ‘grower’ within the meaning of the Code. On 19 October 2007 Grove & Edgar entered into a Horticulture Produce Agreement under the Code with the Mahonys for the supply of mangoes. On or about 29 October 2007, the Mahonys dispatched a consignment of 18 trays of mangoes which was delivered to Grove & Edgar on or about 5 November 2007. There had been no price agreed to in writing prior to, or immediately upon, the delivery of this consignment.

14                  On or about 6 November 2007 the Mahonys despatched a second consignment of 53 trays of mangoes which was delivered to Grove & Edgar on or about 12 November 2007. There had been no price agreed to in writing prior to, or immediately upon, the delivery of this second consignment.

Submissions

15                  Both the ACCC, and Grove & Edgar made detailed written submissions in support of the consent orders. I have considered those submissions and summarised below the principles relevant to my consideration of these consent orders.

Relevant principles

16                  In deciding whether to make these orders I must consider the content and scope of the Court’s powers to make orders by consent for declarations under s 21 of the Federal Court Act 1976 (Cth) and for disclosure orders under s 86C of the Trade Practices Act 1974 (Cth).

17                  On the first, there is little doubt that the Court has a wide discretionary power to make declarations of right under s 21 of the Federal Court of Australia Act 1976 (Cth): see Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 (‘Forster’)  at 437-438; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 (‘Ainsworth’) at 581-582 and Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No.2) (1993) 41 FCR 89 (‘Tobacco Institute’) at 99.

18                  When the Court is asked to make declarations of right by consent it is required to scrutinise the orders sought to satisfy itself that it has the power to make those orders and to ensure, after due consideration, that they are appropriate: see ACCC v Real Estate Institute Industry of Western Australia Inc [1999] FCA 18; (1999) 161 ALR 79 at [1] and [17], ACCC v Virgin Mobile Australia Pty Ltd (No. 2) [2002] FCA 1548 at [1] and BMW Australia Limited v ACCC (2004) FCAFC 167, (2004) 207 ALR 452, (2004) ATPR 42-012  ( ‘BMW’ ) at [35]. On this aspect it should be noted that there is a long held view that a declaration, being a judicial act, should only be made on evidence and not simply on admissions or deemed admissions: see Bank of Kuwait and the Middle East v Ship MV Mawashi Al Gasseem (No.2) (2007) FCA 815 at [10] per Mansfield J and the cases referred to therein, particularly the observations of Kiefel J in ACCC v Dataline.Net.Au Pty Ltd [2006] FCA 1427, (2006) 236 ALR 665.

19                  The strictures mentioned above mean, among other things, that the Court has to ensure that the declaration sought is directed to determining a legal controversy and not to answering abstract or hypothetical questions: see Ainsworth at 582. Further the Court is required to ensure that the party seeking the declaration has a real interest in seeking that relief: see Forster at 437 and Ainsworth at 582. And, finally, the Court has to ensure that there are sufficient consequences flowing from the making of the declaration that it is appropriate for it to exercise its discretion to do so.

20                  This latter aspect may include the public interest in having such a declaration made to indicate the Court’s disapproval of particular conduct, assist in clarifying the law on a particular matter, or assist to inform consumers about a particular matter of concern: see Medical Benefits Fund of Australia Limited v Cassidy [2003] FCAFC 289, (2003) 135 FCR 1, (2003) ALR 402 (‘MBF’) at [50] - [52]; ACCC v Info4PC.com Pty Ltd (deregistered) [2006] FCA 1534 at [8], ACCC v Goldy Motors Pty Ltd [2000] FCA 1885 at [30] and [34]; Tobacco Institute at 99-100, ACCC v Midland Brick Co Pty Ltd [2004] FCA 693; (2004) 207 ALR 392 at [21] and ACCC v Pacific Dunlop [2001] FCA 740 at [59]-[69].

21                  However, the Court should not impede settlements by refusing to give effect to the terms of settlements made by the parties where the proposed orders are within the Court’s jurisdiction and appropriate. Thus, the Court should be slow to substitute its own view of the orders or undertakings for those which have been agreed by the parties as part of the terms of settlement: see ACCC v Real Estate Institute Western Australia (above) at [22], ACCC v Virgin Mobile Australia Pty Ltd (No. 2) (above) at [2] and ACCC v Info4PC.com (above) at [18].

22                  On the second, the Court has the power under s 86C of the Act to make compliance orders. That power is to be used protectively and not punitively: see MBF at [49]. It is a power that is intended to be used in the public benefit: see the cases referred to in [20] above. However the Full Court of this Court has held that the power under s 86C does not extend to the appointment of an external auditor to audit a compliance program: see BMW at [43] - [50]. Further, Mansfield J has expressed reservations about making such an order under s 80 of the Act: see Rural Press Ltd v ACCC (2002) 118 FCR 236, 193 ALR 399 (‘Rural Press’) at [33]. It should be noted that neither of these cases involved consent orders and such orders have been made under s 80 of the Act by other judges of this Court: see the cases referred to in BMW at [43] – [47].

consideration and Conclusion

23                  Taking into account the findings I have made on the critical facts in this matter and the principles set out above, I consider the proposed consent orders are within the Court’s jurisdiction and are appropriate orders to make in the circumstances. In reaching this conclusion I have had particular regard to the matters set out in the following paragraphs.

24                  First, based upon the affidavit evidence and the admissions made by Grove & Edgar, I consider there is clear evidence before me of the breaches of the Act and the Code by Grove & Edgar by taking delivery of the various consignments of mangoes without agreeing a price in writing prior to, or immediately upon, the delivery of those consignments. I therefore consider there is a real legal controversy in this case, that the ACCC has a real interest in seeking the relief it does and that sufficient consequences will flow from making the declaration.

25                  Secondly, I consider the consent declaration incorporates the critical facts which constitute these breaches.

26                  Thirdly, I consider the consent compliance orders under s 86C of the Act are in the public interest because they will, among other things, assist to ensure compliance with the Code. In this respect I consider it is important to note that the Code has only been in effect for about 18 months and the promulgation of these orders in the manner proposed at this early stage of its operation will serve to reinforce the need for agents and growers to familiarise themselves with its terms and ensure that they comply with it. As well, it will serve to inform agents and growers about one of the critical requirements of the Code that was breached in this case i.e. the need to agree a price in writing prior to, or immediately upon, the delivery of any produce. This, all the more so, where that requirement was one of the means by which the Code was intended to produce its stated purposes of achieving greater clarity and transparency of transactions between growers and agents.

27                  Finally, I consider order 2.3, which requires Grove & Edgar to provide to the ACCC a list of the growers that have been written to in accordance with order 2.1, is appropriate in the circumstances mentioned above. This is so, first, because it is a consent order and, secondly, because, in any event, I consider it is an order that requires Grove & Edgar to disclose information that it has, or will have, in its in its possession, which I consider falls within the terms of s 86C(2)(c) of Act. Conversely, I do not consider that an order that is being made by consent; that does not involve a system of monitoring Grove & Edgar’s compliance with the Court’s orders over a lengthy period of time; and that, instead, involves the once off provision of information to the ACCC, is akin to an order for the appointment of an external auditor of the kind that was disapproved by the Full Court in BMW re s 86C,or doubted by Mansfield J in Rural Press re s 80.

28                  For these reasons I propose to make the consent orders proposed by the parties.

Associate:

Dated:         19 December 2008

ATTACHMENT A

[On Grove & Edgar letterhead]

Dear grower

This letter is to let you know that in 2008 the ACCC took legal action against Grove & Edgar in the Federal Court of Australia in relation to alleged contraventions of the Trade Practices Act 1974 for breaches of the mandatory Horticulture Code of Conduct (the Code).

The Federal Court declared that Grove & Edgar contravened the Code because we failed to agree in writing with two Northern Territory mango growers the price to be paid for each growers produce either before or immediately upon delivery of their produce to us.

We have agreed with the ACCC to send you this letter to let you know that, as we trade with you under the Code, we are aware of our obligation to, and we will:

• make agreements with you in writing with regard to amounts to be paid by us to you for your produce either before or immediately upon delivery of your produce to us; and
• ensure that we agree with you an amount for your produce which will not be a range of prices,

so as to ensure our compliance with the Code.

Further information regarding the Code and your rights and obligations can be obtained by contacting the ACCC Infocentre on 1300 302 502.

Regards,