FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Admiral Mechanical Services Pty Ltd [2010] FCA 348

THE COURT DECLARES THAT:

Making

1.       The Thirtieth Respondent (“Roche”) in respect of each of the following, which involved the supply of commercial and industrial air conditioning and mechanical services to builders and owners of various kinds of commercial and industrial buildings in Western Australia (“Builders and Owners”), made or arrived at, on behalf of the Ninth Respondent (“Haden”), arrangements or understandings in relation to the following tenders that Haden would submit for the supply of such services:

1.1.    Miscellaneous Arrangements or Understandings in relation to the following projects:

1.1.1.     UWA Anatomy;

1.1.2.     UWA Law Library;

1.1.3.     Murdoch University Elicos Building;

1.1.4.     Bayswater Aquatic Centre;

1.1.5.     Subiaco Redevelopment Railway Tunnel and Station;

1.1.6.     24 Kings Park Road;

1.1.7.     Perth Concert Hall;

1.1.8.     UWA CTEC;

1.1.9.     1 - 3 Eyre Street Belmont;

1.1.10.   CSIRO - Petroleum and Minerals - Bentley;

1.1.11.   Armadale Hospital (Health Campus);

1.2.    the Subsequent AMCA Members Arrangements or Understandings identified in paragraph 5 of the Agreed Statement of Facts; and

1.3.    Table Arrangements or Understandings in relation to the following projects:

1.3.1.     Bunbury Centrepoint Shopping Centre;

1.3.2.     Park Royal Extensions;

1.3.3.     UWA Large Animal House;

1.3.4.     UWA Winthrop Hall;

1.3.5.     Sir Charles Gairdner Hospital G Block Level 6;

1.3.6.     Murdoch Community/SJOG Hospice;

1.3.7.     Carnarvon Regional Hospital Theatre & CSSD Upgrade;

1.3.8.     Commonwealth Bank - Forrest Chase;

1.3.9.     Sir Charles Gairdner Hospital/QE2 Chiller No 2;

1.3.10.   Murdoch University Education and Humanities;

1.3.11.   Murdoch - Vet & Bio;

1.3.12.   Murdoch Loneragan;

1.3.13.   Nickol Bay Hospital - Chillers Replacement;

1.3.14.   Curtin University Building 310 Health Services One; and

1.3.15.   St John of God Murdoch,

each of which arrangement or understanding contained a provision or provisions that:

1.4.    was an exclusionary provision or were exclusionary provisions as the case may be, within the meaning of section 4D of the Act, in that the provision or provisions had the purpose of preventing, restricting or limiting the supply, or the supply on particular conditions, of commercial and industrial air conditioning and mechanical services to particular Builders or Owners or particular classes of Builders or Owners, by all or any of the parties to the relevant arrangements or understandings; and

1.5.    had the purpose, effect or likely effect of fixing, controlling or maintaining, the price for commercial and industrial air conditioning and mechanical services supplied or to be supplied by all or any of the parties to the relevant arrangements or understandings, in competition with each other,

and constituted contraventions of sections 45(2)(a)(i) and 45(2)(a)(ii) of the Trade Practices Act 1974 (Cth) (“the Act”) by Haden, and knew of the essential elements of the contraventions of the Act by Haden as referred to in paragraphs 1.3 and 1.4 above, that were constituted by the making of the arrangements and understandings referred to in paragraphs 1.1 and 1.2 above and accordingly was, directly or indirectly, knowingly concerned in or party to, the relevant contraventions of the Act by Haden.

Giving effect

2.       Roche, on behalf of Haden:

2.1.    in respect of the Subsequent AMCA Members Arrangements or Understandings referred to in paragraph 1.2 above, by making or arriving at Table Arrangements or Understandings in relation to the following projects, namely:

2.1.1.     Bunbury Centrepoint Shopping Centre;

2.1.2.     Park Royal Extensions;

2.1.3.     Murdoch University Education and Humanities;

2.1.4.     Murdoch Vet & Bio;

2.1.5.     Murdoch Loneragan;

2.1.6.     Nickol Bay Hospital - Chillers Replacement;

2.1.7.     Curtin University Building 310 Health Services One; and

2.1.8.     St John of God Murdoch,

engaged in conduct constituting giving effect to, on behalf of Haden, the provision concerning the making or arriving at of Table Arrangements or Understandings (the “Making Provision”) of the Subsequent AMCA Members Arrangements or Understandings as referred to in paragraph 1.2 above;

2.2.    in respect of the projects listed in paragraphs 1.1 and 1.3 above, engaged in conducting giving effect to, on behalf of Haden, a provision of each such arrangement or understanding (the “Designated Tenderer Provision”) by agreeing with the other parties to the arrangements or understandings as to which of them would be the designated tenderer for the particular project to which such arrangement or understanding related, with the Designated Tenderer Provision:

2.2.1.     being an exclusionary provision within the meaning of section 4D of the Act, in that the Designated Tenderer Provision had the purpose of preventing, restricting or limiting the supply, or the supply on particular conditions, of commercial and industrial air conditioning and mechanical services to particular Builders or Owners or particular classes of Builders or Owners, by all or any of the parties to the relevant arrangement or understanding; and

2.2.2.     having the purpose, effect or likely effect of fixing, controlling or maintaining, the price for commercial and industrial air conditioning and mechanical services supplied or to be supplied by all or any of the parties to the relevant arrangement or understanding, in competition with each other,

and knew of the essential elements of the contraventions of sections 45(2)(b)(i) and (ii) of the Act by Haden constituted by the giving effect to of the Designated Tenderer Provision referred to above and accordingly was, directly or indirectly, knowingly concerned in or party to, the relevant contraventions of sections 45(2)(b)(i) and (ii) of the Act by Haden;

2.3.    in respect of the Miscellaneous Arrangements and Understandings and Table Arrangements or Understandings made or arrived at in relation to the following projects where Haden was not selected as the designated tenderer, namely:

2.3.1.     UWA Law Library;

2.3.2.     Murdoch University Elicos Building;

2.3.3.     Bayswater Aquatic Centre;

2.3.4.     Subiaco Redevelopment Railway Tunnel and Station;

2.3.5.     24 Kings Park Road;

2.3.6.     Perth Concert Hall;

2.3.7.     1 - 3 Eyre Street Belmont;

2.3.8.     CSIRO - Petroleum and Minerals - Bentley;

2.3.9.     Armadale Hospital (Health Campus);

2.3.10.   Bunbury Centrepoint Shopping Centre;

2.3.11.   Park Royal Extensions;

2.3.12.   UWA Large Animal House;

2.3.13.   Sir Charles Gairdner Hospital G Block Level 6;

2.3.14.   Murdoch Community/SJOG Hospice;

2.3.15.   Carnarvon Regional Hospital Theatre & CSSD Upgrade;

2.3.16.   Commonwealth Bank - Forrest Chase;

2.3.17.   Murdoch University Education and Humanities;

2.3.18.   Murdoch - Vet & Bio;

2.3.19.   Murdoch Loneragan;

2.3.20.   Nickol Bay Hospital - Chillers Replacement;

2.3.21.   Curtin University Building 310 Health Services One; and

2.3.22.   St John of God Murdoch,

gave effect to a provision of such arrangement or understanding (the “Tendering Provision”) by tendering above the designated tenderer’s tender price, or at or above the cover price or cover price range advised by the designated tender, with the Tendering Provision:

2.3.23.   being an exclusionary provision within the meaning of section 4D of the Act, in that the provision had the purpose of preventing, restricting or limiting the supply, or the supply on particular conditions, of commercial and industrial air conditioning and mechanical services to particular Builders or Owners or particular classes of Builders or Owners, by all or any of the parties to the relevant arrangement or understanding; and

2.3.24.   having the purpose, effect or likely effect of fixing, controlling or maintaining, the price for commercial and industrial air conditioning and mechanical services supplied or to be supplied by all or any of the parties to the relevant arrangement or understanding, in competition with each other,

and knew of the essential elements of the contraventions of the Act by Haden  constituted by the giving effect to of the Tendering Provision referred to above and accordingly was, directly or indirectly, knowingly concerned in or party to, the relevant contraventions of sections 45(2)(b)(i) and (ii) of the Act by Haden; and

2.4.    Roche, on behalf of Haden, in respect of the Miscellaneous Arrangements and Understandings and Table Arrangements or Understandings made or arrived at in relation to the projects below, where Haden was selected as the designated tenderer, namely:

2.4.1.     UWA Anatomy;

2.4.2.     UWA CTEC;

2.4.3.     UWA Winthrop Hall; and

2.4.4.     Sir Charles Gairdner Hospital/QE2 - Chiller No. 2,

gave effect to a provision of such arrangement or understanding (the “Cover Price Provision”) by:

2.4.5.     advising each of the parties to the arrangement or understanding of either its own tender price, a cover price or a cover price range; and

2.4.6.     tendering at a price at or below that tender price, or below the cover price or the cover price range,

with the Cover Price Provision:

2.4.7.     being an exclusionary provision within the meaning of section 4D of the Act, in that the provision had the purpose of preventing, restricting or limiting the supply, or the supply on particular conditions, of commercial and industrial air conditioning and mechanical services to particular Builders or Owners or particular classes of Builders or Owners, by all or any of the parties to the relevant arrangement or understanding; and

2.4.8.     having the purpose, effect or likely effect of fixing, controlling or maintaining, the price for commercial and industrial air conditioning and mechanical services supplied or to be supplied by all or any of the parties to the relevant arrangement or understanding, in competition with each other,

and knew of the essential elements of the contraventions of sections 45(2)(b)(i) and (ii) of the Act by Haden by the giving effect to of the Cover Price Provision referred to above and accordingly was, directly or indirectly, knowingly concerned in or party to, the relevant contraventions of sections 45(2)(b)(i) and (ii) of the Act by Haden.

INJUNCTION

The Court orders:

3.       An injunction restraining Roche from being directly or indirectly knowingly concerned in, or party to, the:

3.1.    making or arriving at; and/or

3.2.    giving effect to; and/or

3.3.    attempting either or both of 3.1 and 3.2 above; and/or

3.4.    inducing, or attempting to induce, either or both of 3.1 and 3.2 above,

any contract, arrangement or understanding between parties, two or more of whom are or, but for the contract, arrangement or understanding, would be in competition with each other in relation to the supply of commercial and industrial air conditioning and mechanical services in Western Australia in relation to a project let to tender by any person which contract, arrangement or understanding has one or more provisions to the following effect:

3.5.    that a party to the contract, arrangement or understanding, to be agreed upon by all the parties to the contract, arrangement or understanding will be the tenderer to submit the lowest tender price of all the tender prices submitted by the parties to the contract, arrangement or understanding for the particular project to which the contract, arrangement or understanding relates (the “Designated Tenderer”);

3.6.    in respect of that particular project, the Designated Tenderer will advise each of the other parties of: 

3.6.1.     its tender price; or

3.6.2.     a price at or above which the other party is to tender (“Cover Price”); or

3.6.3.     a price range within which the other party is to tender (“Price Range”);

3.7.    the Designated Tenderer will tender for that particular project:

3.7.1.     at a price at or below the tender price advised by it; or

3.7.2.     at a price below the Cover Price advised by it; or

3.7.3.     at a price below the Price Range advised by it;

3.8.    each of the other parties to the contract, arrangement or understanding will tender for that particular project:

3.8.1.     above the tender price advised by the Designated Tenderer; or

3.8.2.     at or above the Cover Price advised by the Designated Tenderer; or

3.8.3.     at a price within the Price Range advised by the Designated Tenderer; and

3.9.    each of the other parties to the contract, arrangement or understanding will not, in any negotiations after the party has submitted its tender, negotiate a reduction of the party’s tender price below:

3.9.1.     the tender price submitted by the Designated Tenderer; or

3.9.2.     any tender price that has been subsequently negotiated between the Designated Tenderer and the relevant person letting for tender.

4.       An injunction restraining Roche being directly or indirectly knowingly concerned in, or party to, the:

4.1.    making or arriving at;

4.2.    giving effect to a provision of;

4.3.    attempting either or both of 4.1 and 4.2 above;

4.4.    inducing, or attempting to induce, either or both of 4.1 and 4.2 above,

any contract, arrangement or understanding between parties, two or more of whom are or, but for the contract, arrangement or understanding, would be in competition with each other in relation to the supply of commercial and industrial air conditioning and mechanical services, which contract, arrangement or understanding contains a provision that has:

4.5.    the substantial purpose of preventing, restricting or limiting the supply, or the supply on particular conditions, of commercial and industrial air conditioning and mechanical services to particular builders or owners of buildings in Western Australia or particular classes of such builders or owners, by all or any of the parties to the contract, arrangement or understanding; or

4.6.    the substantial purpose, effect or likely effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the price or prices at which any of the parties to the contract, arrangement or understanding:

4.6.1.     tender for the supply of commercial and industrial air conditioning and mechanical services; and/or

4.6.2.     supply such services,

to persons (other than any of the parties to the contract, arrangement or understanding) in Western Australia.

Costs

5.         That Roche pay to the Commonwealth of Australia costs as agreed in the amount of five thousand dollars ($5,000).

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 Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                          Nicholson J delivered reasons in this matter in July 2007 in which his Honour considered the appropriate penalties and other relief for contraventions by the several respondents of the Trade Practices Act 1974 (Cth) (the TPA): Australian Competition and Consumer Commission v Admiral Mechanical Services Pty Ltd [2007] FCA 1085.

2                              As his Honour described it at [1] the contraventions were by mechanical services contractors who were in competition with each other in relation to the supply of commercial and industrial air conditioning services to builders and owners or would have been or likely to have been in such competition but for the provisions of the various arrangements or understandings into which they entered. 

3                          His Honour held over the claims for relief against Mr Martin Roche, the thirtieth respondent.  I then heard submissions by the applicant, Australian Competition and Consumer Commission (ACCC), and Mr Roche as to what penalties, if any, ought be ordered against Mr Roche.  The ACCC and Mr Roche agreed to the declaratory and injunctive relief to be ordered.  I am satisfied that this relief, set out in a minute of proposed orders, is appropriate. 

4                          For ease of reference and to put these present reasons in context I have also set out below the content of paras [508]-[530] of Nicholson J’s reasons concerning Mr Roche.

RESPONDENT 30: MR ROCHE

508.      Mr Roche worked as an estimator for the ninth respondent (Haden Engineering Pty Ltd) in Western Australia from 1985-1995, he then became the State Manager for the Building Services Division from 1996-2000.  Mr Roche’s job as an estimator for Haden was to prepare estimates for expressions of interest and requests for quotes or tenders.  It is agreed between the parties that on any occasion that Mr Roche acted on behalf of Haden he also acted in accordance with Haden’s instructions, which I take to be a reference to the instructions of more senior management within the company.

509.      Mr Roche’s conduct consisted of participating in telephone calls, attending meetings and committing Haden to making or arriving at and giving effect to the above arrangements or understandings.

510.      The following table sets out the value of the ‘designated tenderer’ arrangements or understandings that Mr Roche made or arrived at and/or gave effect to on behalf of Haden during the penalty period:

Declaration and injunctions

511.      The parties have consented to orders for declarations and injunctions against Mr Roche.  I consider that it is appropriate for these orders to be made.

Pecuniary penalty

512.      The applicant is seeking the imposition of $28 000 as a pecuniary penalty against Mr Roche for these contraventions.  The respondent claims that a penalty of no more than $5250 should be imposed upon Mr Roche.

Financial position

513.      Mr Roche’s gross income is $78 900 plus a car allowance of $15 000.

514.      Mr Roche owns:

            (a)        50 per cent of the family home (in joint ownership with his wife).  The family home is valued at approximately $690 000;

            (b)        a 50 per cent share (in joint ownership with his wife) of a share portfolio with an approximate current value of $150 000; and

            (c)        a 2006 Holden Calais motor vehicle with an approximate value of $30 000.

515.      Mr Roche’s liabilities comprise a 50 per cent share (with his wife) of the outstanding negative balance of the National Australia Bank Home Equity facility which stands at approximately $250 000.

516.      Mr Roche is also responsible for a 19 year old son who is a full-time student at The University of Western Australia undertaking an engineering/ commerce degree.

Parity

517.      The relativity tables show Mr Roche as 13 of 16 for all arrangements and 9 of 19 for total value. 

518.      The applicant claims in regards to Mr Roche’s comparative level of involvement in the conduct that he was the only individual who participated on behalf of Haden.  I note that Mr Roche alludes in his affidavit, to which there was no objection, that his predecessor had knowledge and involvement in past collusive arrangements.

519.      Mr Roche’s counsel also submitted that if Mr Roche had remained an employee of Haden (he was made redundant for reasons other than his part in the TPA contraventions) he would have received the same leniency from the applicant that applies to Haden and its senior management.  In this regard it was also noted that Mr Roche was only involved in 7 of the 13 collusive transactions of Haden over a period of marginally less than 12 months, Haden having been involved since at least June 1995.

520.      Mr Roche also states that he was only an employee and not a senior manager of Haden and should therefore have a pecuniary penalty commensurate with other respondents who were merely employees.  This issue will be discussed in more detail below.

The deliberateness of the contravention and period it extended

521.      The applicant claims that the conduct was deliberate and undertaken voluntarily with the understanding that it was illegal.  Mr Roche intentionally kept the conduct secret from the owners and builders who put the projects to tender.  Mr Roche also notes himself that he was initially uncomfortable with what was being asked of him by the other contractors, demonstrating his knowledge of at least the possibility of illegality.

522.      As has been previously noted it was understood between all of the participants that the meetings and the existence of the arrangements or understandings were secret and should not be revealed to anyone outside the group.  There were regular communications with competitors for the purpose of making or arriving at, and giving effect to, those arrangements or understandings.

Whether contraventions by senior management or lower level

523.      The applicant submitted that Mr Roche was one of Haden’s most senior officers in the relevant market, being Western Australia.  At all relevant times Mr Roche had significant control over Haden’s relevant operations in Western Australia.

524.      Mr Roche’s counsel stressed that Mr Roche was not a principal of Haden and was merely an employee on a salary.  It was also submitted that no benefit was gained by Mr Roche from the collusive conduct of Haden and that Mr Roche should be considered an employee because he was in essence just following the instructions of the head office in NSW and did not have the freedom ordinarily held by a manager.

525.      Mr Roche in his affidavit claimed that pressure was applied to him by the Head Manager in NSW to commit Haden to the collusive arrangements; being newly appointed to the position of manager in WA Mr Roche considered that his position was tenuous if he did not comply with the demands of the NSW Manager.  The suggestion being that Mr Roche was under duress when he engaged in the infringing conduct.

526.      In my view it is the case that Mr Roche was the senior relevant manager in Western Australia.  He chose to follow instructions from head office rather than decline to act if he thought the conduct was illegal.  The responsibility cannot be avoided by him by pleading he acted under orders.

Co-operation

527.      Mr Roche has co-operated with the applicant’s investigation admitting his liability and has saved the parties and the Court the substantial time and expense associated with a contested hearing.

Past conduct

528.      Mr Roche has not previously been the subject of previous proceedings in respect of Part IV of the Act.

Determination of the pecuniary penalty

529.      The person immediately above Mr Roche in ranking of total value was Mr Redfern at $23m.  He, with engagement in 25 arrangements, has a pecuniary penalty of $45 000.  Immediately below Mr Roche in the same table was Mr Allen at $15m total value.  His pecuniary penalty was $25 000.  These considerations, viewed in the context of all relevant circumstances, would support a penalty in the range sought by the applicant.

530.      However, Mr Roche was with Haden, as to which the Court has not received any submissions.  The Court has been told that Haden will be the beneficiary of leniency, with no pecuniary penalty being sought.  If that is the case it is difficult to see why a person such as Mr Roche acting on behalf of Haden and at its instruction would not also be the beneficiary of leniency.  While Mr Roche may not have been with Haden as a manager or employee at the time of Haden’s co-operation, the action taken by Haden to co-operate could arguably accrue to all persons engaged in the making of the arrangements to which the co-operation related.  Therefore I hold over the position of Mr Roche for consideration when submissions are available concerning Haden and relating specifically to why, if that is the case, the Court should not take into account the application of leniency to Haden in fixing a pecuniary penalty for Mr Roche.

5              Accordingly the central issues are: first, whether any pecuniary penalty at all ought be ordered as against Mr Roche; and second, if a penalty is to be imposed, what should it be.

6              At [518] Nicholson J, considering the issue of parity, referred to the ACCC’s claim that Mr Roche was the only individual who participated on behalf of Haden although his Honour noted that in Mr Roche’s affidavit he had alluded, without objection, that his predecessor at Haden had knowledge and involvement in past collusive arrangements.  This allusion was to Mr Graham Myron. 

7              Senior counsel for the ACCC advised me that, for the purposes of these proceedings, the ACCC was prepared to acknowledge that, in respect to the unlawful conduct, Mr Roche had acted on instructions from within Haden.  Mr Roche deposed that he received his instructions to involve Haden in the relevant conduct from Mr Gerard Whittaker, the former managing director of Haden.  

8              I should emphasise that this concession made by the ACCC does not assert, nor should it be taken to be such an assertion, that either Mr Myron or Mr Whittaker were in fact involved in any contraventions of the TPA.  I likewise make no such finding. 

9              Nonetheless, for present purposes, the concession alters the position, in a significant respect, earlier adopted by the ACCC in its submissions on penalty concerning Mr Roche made to Nicholson J.

10            It seems that Nicholson J at [526] accepted Mr Roche’s assertion that he acted on such instructions.  His Honour did not identify any individual.  Rather he referred to “instructions from head office”. 

ACCC’S CORPORATE LENIENCY POLICY

11                        The ACCC’s leniency policy in 2002 was in draft form but it is accepted that the policy published in June 2003 is not materially different.

12                        I was advised by senior counsel for the ACCC that the June 2003 policy as it related to someone in the position of Mr Roche fell under Part C under Article 2.

13                        Article 2 in its totality is as follows:

2. Leniency policy for cartel conduct

2.1 Corporate leniency policy for cartel conduct

This leniency policy is to be read and interpreted in conjunction with the ‘Interpretation guidelines’ set out in chapter 3. This leniency policy only applies to civil contravention of the TPA. The leniency policy comes into effect as of 9.00am EST, 30 June 2003.

Part A.                        Corporate immunity from proceedings

1.         Subject to the requirements below, the ACCC will grant a corporation immunity from ACCC initiated proceedings where the ACCC is unaware of the alleged cartel and the corporation is the first person to disclose its existence.

2.         The corporation must meet the following requirements:

            (a)        It must give full and frank disclosure providing the ACCC with all evidence and information in its possession or available to it relating to the suspected cartel and cooperate fully, on a continuous basis and expeditiously throughout the ACCC's investigation and any ensuing proceedings.

            (b)        Its admissions and cooperation must be a truly corporate act (as opposed to isolated confessions of individual representatives).

            (c)        It must cease its involvement in the suspected cartel.

            (d)        It must not have coerced other corporations to participate in the cartel and must not have been the clear leader in the cartel.

            (e)        Where possible, it will make restitution to injured parties.

Part B.                        Corporate immunity from pecuniary penalty

1.         Subject to the requirements below, the ACCC will not make application for the imposition of a pecuniary penalty against a corporation where:

            (a)        the ACCC is aware of the alleged cartel

            (b)        in the view of the ACCC it has insufficient evidence to institute proceedings in respect of the alleged cartel

            (c)        the corporation is the first person to make an application for leniency.

2.         The corporation must meet the following requirements:

            (a)        It must give full and frank disclosure providing the ACCC with all evidence and information in its possession or available to it relating to the suspected contravention and cooperate fully, on a continuous basis and expeditiously throughout the ACCC's investigation and any ensuing proceedings.

            (b)        Its admission and cooperation must be a truly corporate act (as opposed to isolated confessions of individual representatives).

            (c)        It must cease its involvement in the suspected cartel.

            (d)        It must not have coerced other corporations to participate in the cartel and must not have been the clear leader in the cartel.

            (e)        Where possible, it will make restitution to injured parties. 

Part C.                        Leniency for corporate directors, officers and employees

1.         Subject to the requirements below, if a corporation qualifies for leniency under either Part A or Part B above, all directors, officers and employees of the corporation who admit their involvement in the cartel as part of the corporate admission will receive leniency in the same form as the corporation, as set out in Part A, paragraph 1 or Part B, paragraph 1, as the case may be.

2.         The individual must provide the ACCC with full and frank disclosure of all evidence and information in her or his possession or available to her or him relating to the suspected cartel in the form requested by the ACCC and cooperate fully, on a continuous basis and expeditiously throughout the ACCC's investigation and any ensuing proceedings.

(Emphasis added)

14                        Nicholson J at [519] stated that if Mr Roche had remained an employee of Haden he would have received the same leniency from the ACCC that applies to Haden and its senior management.  Mr Roche, as his Honour noted, was made redundant in August 2000 for reasons other than his involvement in the relevant conduct.  His falling outside the ACCC’s corporate leniency policy, at least as expressed under Article 2, is therefore an incident of a decision made by his employer Haden and beyond his control. 

TYCO’S INVOLVEMENT

15                        Mr Sam Di Scerni, the Regional Director of the Western Australian Regional Office of the ACCC, affirmed an affidavit on 3 March 2010 in which, amongst other things, he explained how the relevant conduct of Haden and Mr Roche came to the attention of the ACCC.  He stated relevantly as follows:

3.         On 26 March 2001, Tyco, through its solicitors Phillips Fox, wrote to the ACCC seeking leniency for Tyco's alleged collusive tendering conduct in the fire alarm equipment supply market in New South Wales (subsequently the subject of the Federal Court proceedings ACCC v FFE Building Services Ltd [2003] FCA 1542.

4.         Tyco advised the ACCC that it had became aware of the alleged conduct as a result of a review of its operations and implementation of a trade practices compliance program as ordered by the Federal Court in the proceedings, ACCC v Tyco [1999] FCA1799.

5.         Tyco sought leniency under the ACCC's then existing leniency/cooperation policy. The policy was broadly disseminated by ACCC Commissioners and staff and was published in the ACCC Journal, Issue 17, October 1998.

6.         That policy offered leniency, including full immunity in appropriate circumstances, where a corporation or an individual came forward with valuable and important evidence of a contravention of which the ACCC was otherwise unaware or had insufficient evidence to initiate proceedings; provided full and frank disclosure; undertook to cooperate fully throughout the ACCC's investigation; and was not the ringleader nor had compelled or induced any other corporation or person to take part in the conduct.

7.         On 23 July 2001, the ACCC wrote to Tyco informing it that after consideration of Tyco's earlier conduct as identified in the ACCC v Tyco [1999]proceedings and Tyco's market share in the New South Wales fire alarm equipment supply market, that it would not offer complete immunity to Tyco. The ACCC offered, instead, that subject to Tyco meeting certain conditions, the ACCC proposed to institute proceedings against Tyco seeking various orders including declarations and injunctions but would refrain from seeking a pecuniary penalty against Tyco and its current employees. Further, the leniency offer was limited to Tyco and its current employees.

8.         The ACCC also advised Tyco that the offer of leniency was conditional upon, amongst other things, Tyco conducting a review of its conduct nationally with a view to identifying possible contraventions of Part IV of the Trade Practices Act and reporting the outcomes of that review to the ACCC.

9.         On 21 November 2001, Tyco, through its solicitors Phillips Fox, wrote to the ACCC accepting the offer of leniency.

10.       On 21 December 2001, Tyco wrote to the ACCC advising that it had conducted a national review of Tyco's activities as required under the leniency agreement and that the review had revealed that there were instances of separate conduct in three States which may raise concerns under the Trade Practices Act. The conduct in Western Australia related to the Western Australian commercial air conditioning installation and mechanical services market (WA air conditioningmarket). Subsequent ACCC inquiries could not uncover sufficient evidence on which to institute proceedings in relation to the alleged conduct in the other two States.

11.       In relation to the WA air conditioning market conduct, Tyco reported that certain of its subsidiaries, namely Haden Engineering Pty Ltd (Haden), T O'Connor, and Designair, both before and to a more limited extent after they were acquired by Tyco, may have been involved in cover pricing and tender allocation conduct with competitors during a period from at least January 1996 to September 2000. The information also indicated that during the relevant period the Tyco individuals primarily responsible for preparing and finalising tenders were Mr Graham Myron and Mr Martin Roche. Neither Mr Myron nor Mr Roche was employed by Tyco at the time Tyco sought leniency from the ACCC.

12.       Tyco requested leniency for these occurrences of conduct on the same basis as that granted in respect of the conduct in the New South Wales fire alarm equipment supply market.

13.       On 22 February 2002, the ACCC wrote to Tyco advising it that leniency would be granted to Tyco, including its current employees with respect to the instances of State based conduct, including that in the WA air conditioning market, on the same basis and conditions as that granted in respect of the New South Wales fire alarm equipment supply conduct. The ACCC requested that Tyco comply with the requirement for full and frank disclosure and provide the ACCC with all the relevant information relating to the instances of alleged conduct.

14.       At the time the ACCC granted leniency to Tyco, in relation to the WA air conditioning market conduct, Tyco did not nominate any former employeesfor whom leniency would be sought, and there was no evidence available to suggest that any current Haden employees were involved in the alleged collusive conduct.

15.       If it had been otherwise, and the ACCC had been able to subsequently establish that Haden directors or employees had been involved in the alleged collusive conduct, they would not have been granted leniency unless they had agreed to cooperate fully with the ACCC; had provided full and frank disclosure; and had not been a ringleader nor had compelled or induced any other corporation or person to take part in the conduct.

16.       In April and May of 2002, Tyco, through its solicitors Phillips Fox, provided the ACCC with information obtained from its internal interviews with current Tyco employees regarding the conduct in the WA air conditioning market.

17.       In June 2002, staff from the ACCC's Western Australian office interviewed those employees who were either estimators or at a mid-level operational level. On the basis of the ACCC interviews and, in part on the earlier information provided by Tyco, the ACCC concluded that while the current Tyco employees were aware of certain behaviours which were suggestive of collusive tendering conduct, there was no evidence to indicate that the employees themselves were involved in the alleged conduct or that they had direct knowledge of the alleged conduct. The ACCC also concluded that the employees were not aware of any involvement by senior Haden management outside of Western Australia in the alleged conduct

18.       The ACCC could not uncover any evidence from the interviews to indicate that Mr Myron had been involved in any collusive tendering conduct in the WA air conditioning market. Mr Myron was not interviewed by the ACCC in 2002, or later, because there was no prima facie basis upon which to interview him and, in any event, he had ceased employment with Haden in 1999.

19.       The ACCC ascertained that Mr Myron transferred from Haden in Western Australian to Haden in New South Wales in 1996, and had left Haden in 1999, and also that Mr Roche had ceased employment with Haden in around August 2000.

20.       Information obtained from the interviews did, however, indicate that Mr Martin Roche was the person most likely to have been involved in any collusive tendering conduct in that the interviewees indicated that Mr Roche was responsible for the tender pricing decisions; sometimes altered final tender prices to increase margins by amounts considered unusually high by the company's estimators; regularly attended meetings with other competitors at the Air Conditioning & Mechanical Contractors Association (AMCA); and was the subject of rumours that he was involved in collusive conduct.

21.       The ACCC had no information indicating that any Haden director was involved in or was aware of the alleged collusive conduct, nor that any Haden employee, other than Mr Roche, was involved in, or aware of, the alleged collusive conduct.

16                        Mr Di Scerni then deposed to his dealings with Mr Roche.  The two met in late August 2002.  Mr Di Scerni says, without descending to any specific allegations, that he “outlined the allegations which had been raised about the collusive conduct …”.  I take this to be no more than his repeating to Mr Roche what the ACCC had been told by Tyco, namely that Haden, amongst others, “may have been involved in cover pricing and tender allocation conduct with competitors during a period from at least January 1996 to September 2000.”

17                        He provided Mr Roche with a draft copy of the ACCC’s leniency policy.  He asked Mr Roche to cooperate in return for leniency from the ACCC.  Mr Roche did not respond. 

18                        It is the case that Mr Roche did not cooperate until March 2004 when Mr Roche voluntarily submitted to a substantive interview at the Western Australian office of the Australian Government Solicitor, which was acting for ACCC.  Mr Roche made certain admissions in that interview as to his direct involvement in the collusive tendering conduct.  It was at this time that he asserted that Mr Whittaker, his immediate superior, had directed him to engage in the relevant conduct. 

19                        Mr Whittaker, when interviewed by the ACCC, denied any such involvement.

20                        Mr Roche had in the previous year, in May 2003, been served with a notice under s 155(1)(a) and (b) of the TPA.  These notices are not in evidence.  Mr Roche responded to them on 18 June 2003.  Likewise the response is not in evidence.

21                        The ACCC before me submits that not only did Mr Roche not cooperate between August 2002 and March 2004 but that he lied to the ACCC as to his non-involvement.  This is supported, the ACCC submits, by what Mr Di Scerni deposes at [35]-[42] as follows:

35.       On Friday 30 August 2002, I returned a call from a Mr Andre Sweidan who identified himself as a solicitor from KPMG Legal.

36.       Mr Sweidan said he had been consulted by Mr Roche following Mr Roche's discussion with me and had been assured by Mr Roche that he (Mr Roche) did not have any information that would be of use to the ACCC so Mr Roche was declining to attend any further interviews.

37.       I asked him whether Mr Roche was saying that he didn't want to talk to the ACCC period or that Mr Roche was saying that he didn't have any information or knowledge about possible breaches of the Trade Practices Act.

38.       He said that Mr Roche told him that he was not aware of any breaches having occurred.

39.       I said that it appeared the Mr Roche was saying that he attended AMCA meetings with his competitors on a monthly basis, and sometimes more regularly, for a period of 4 years and yet nothing happened in any of those meetings which raised any concerns under the Trade Practices Act.

40.       He said that Mr Roche was, in fact, saying just that.

41.       I said that if Mr Roche did not want to cooperate and talk to the ACCC, there were other options available to the ACCC.

42.       He said he and Mr Roche were aware of the ACCC's section 155 powers but they didn't think that would lead to anything. He added that if a s155 Notice was issued, could he be contacted as Mr Roche's legal representative.

22                        Mr Roche swore an affidavit in response to that of Mr Di Scerni, on 10 March 2010.  As to the matters involving Mr Sweidan he deposed:

60.       I recollect meeting with Mr. Andre Sweidan of KMPG Legal at the offices of Direct Engineering Services in Malaga.  We discussed my meeting with Mr. Di Scerni.  Although I cannot recall the exact details of our discussions the topics included the Leniency Policy, s 155 Notices and the Haden/Tyco allegations against me.

61.       I recall that I told Mr. Sweidan that I was concerned that the ACCC seemed to think I played a major role in the alleged collusive contact and that I had available to me some evidence that would assist them with their enquiries.

62.       I also outlined to Mr. Sweidan the circumstances of my redundancy from Haden in August 2000 and how I had left the office without my personal possessions or any other items that might be described as evidence.

63.       Mr. Sweidan said he was of the opinion that the ACCC appeared to have no real evidence to act on and that it would he better for me to respond to a s155 Notice, which offered some protection, should the ACCC chose to issue one. He also said that the ACCC had some strict rules to adhere to in conducting their enquiries and could not issue a s 155 Notice without sufficient grounds to do so.

64.       After getting some understanding of the issues from Mr Sweidan, it is my recollection that I asked him to contact Mr. Di Scerni and advise him that I had no evidence in my possession to provide to the ACCC and that it was my preference to be issued with a s 155 Notice.

65.       I was not present when Mr. Sweidan contacted Mr. Di Scerni and so can make no comment on Mr. Di Scerni’s account, at paragraphs 35 to 43 of his affidavit, of what was said.

23                        There was no cross-examination on either of these affidavits each of which was admitted without objection.  I cannot resolve the differences which emerge as between the affidavits.  Mr Roche should, in proceedings such as this, be given the most beneficial reading of matters put against him.  It seems to me that, in approaching the matters this way, there is clearly room to conclude that Mr Di Scerni may have misunderstood Mr Sweidan.  When Mr Roche referred to not having any evidence he was, at least arguably, referring to physical evidence.  I think this is a fair reading of Mr Roche’s written evidence at [62]-[64].

24                        I do not regard Mr Roche, who acted on legal advice, as adopting an uncooperative attitude.  He foreshadowed that he would respond to a s 155 notice.  He had no computer or other records to provide to the ACCC.  They were in the possession of Haden.  He cooperated fully in the substantive interview in May 2004.  

25                        These proceedings were instituted in December 2004.  As Nicholson J said at [527] Mr Roche has cooperated with the ACCC’s investigation admitting his liability and has saved the parties and the Court substantial time and expense associated with a contested hearing.  This finding merely reflects the statement of agreed facts at [59] and [60] which are as follows:

CO-OPERATION

59.       Since the contravening conduct has been discovered, Roche has substantially cooperated and assisted the Commission with its investigations by participating in a section 155(1)(c) interview and voluntarily providing further information as requested by the Commission.

60.       Further, Roche has now admitted liability to the contravening conduct.

26                        I do not consider that the ACCC should now be heard to say otherwise.  The ACCC ought not be permitted to resile from its agreement as to the facts which formed the basis, in part, of Mr Roche’s admission of liability.  The effect of the ACCC’s submissions before me was an attempt to override the agreed facts in this respect.  Accordingly, I propose to approach the question of penalty upon the basis of the agreed facts on the question of cooperation.

Penalty

27                        I share the concerns expressed by Nicholson J at [530].  The position is that if a pecuniary penalty is imposed on Mr Roche he will be the only person associated with Haden to be so treated.  The ACCC did not seek such orders against Haden or any of its directors, officers or employees.  Haden was said to have cooperated fully and to have made full and frank disclosure.  This cooperation, according to Mr Di Scerni’s written evidence at [17] was:

In June 2002, staff from the ACCC’s Western Australian office interviewed those employees who were either estimators or at a mid-level operational level.  On the basis of the ACCC interviews and, in part on the earlier information provided by Tyco, the ACCC concluded that while the current Tyco employees were aware of certain behaviours which were suggestive of collusive tendering conduct, there was no evidence to indicate that the employees themselves were involved in the alleged conduct or that they had direct knowledge of the alleged conduct.  The ACCC also concluded that the employees were not aware of any involvement by senior Haden management outside of Western Australia in the alleged conduct.

28                        However, for whatever reasons, no-one who was a director of Haden at the times of the alleged contraventions was interviewed by the ACCC or received a s 155 notice.  Mr Whittaker although interviewed received no such notice.  Mr Myron was neither a recipient of such a notice nor was he interviewed by the ACCC. 

29                        The consequence is that no pecuniary penalty is sought against Haden.  Nor is any penalty sought against Tyco Australia Pty Ltd, notwithstanding that it was involved in the conduct complained of for a period of marginally less than 12 months.

30                        The ACCC submits that if no pecuniary penalty is imposed then this may have adverse implications for its leniency (now immunity) policy.  I do not accept this.  The draft leniency policy provided to Mr Roche, as I observed, is not in evidence.  If the actual policy which is before me is in the same terms as the draft then it may be seen that it was not in force in August 2002 when Mr Roche first met with Mr Di Scerni.  It is expressed to come into effect only on 30 June 2003.  There is no evidence that Mr Roche was told when the draft was to become actual policy.

31                        Further, I do not think that a reasonable person would consider it as other than fair that there be parity of treatment as between a person in the position of Mr Roche and both the company which, at the material times of the contraventions, employed that person as well as with that company’s directors, officers and other employees.  I cannot think that this will or even may have any erosive effect on the immunity policy of the ACCC.  I regard, as an artificial distinction, the fact that Mr Roche was no longer an employee of Haden when that company was extended leniency by the ACCC.

32                        Furthermore, there is a clear pathway within the ACCC’s then leniency policy for a case such as this.  Although not referred to in written or oral submissionsI note that under Article 3 of the ACCC leniency policy for cartel conduct, entitled “Interpreting the leniency policy” the following, relevantly, is contained at Article 3.9.

3.9       Former employees and uncooperative employees

When an application for leniency is made by a business any offer of leniency will also extend to its cooperative directors, officers and employees.

Former employees involved in a cartel are not specifically covered by the corporate leniency policy.  However, in appropriate cases the ACCC may extend an offer of corporate leniency to former employees.  In making such a decision the ACCC will have regard to all the relevant circumstances, including whether the applicant company is interested in protecting its former employees and whether it has an ability to secure their cooperation. 

33                        There is no evidence one way or the other as to whether Haden was “interested” in protecting” Mr Roche.  Irrespective of whether Haden had an ability to secure Mr Roche’s cooperation the agreed fact is that he did cooperate.  This provides a further reason why the leniency policy of the ACCC will not be exposed to risk in the event that no pecuniary penalty is ordered against Mr Roche.

34                        The matter of parity and thereby justice is the important question.  In my view, it would not be just that only Mr Roche, who substantially cooperated and assisted the ACCC with its investigations, should suffer a pecuniary penalty.  This is particularly so when, according to the statement of agreed facts at [1], on any occasion that Mr Roche acted on behalf of Haden he also acted in accordance with and pursuant to the instructions of Haden.  It would, in my opinion, be quite unjust in those circumstances that although Haden is not subject to any pecuniary penalty Mr Roche should be.  

35                        Mr Roche should not regard this result as a vindication of his involvement.  It is not. 

36                        For these reasons I decline to order any pecuniary penalty against Mr Roche.  It is, as I earlier observed, appropriate to make relevant declaratory and injunctive relief in respect of him as well as costs as agreed between him and the ACCC.

37                        There will be orders accordingly.  

Associate:        

Dated:         13 April 2010