FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (No 7) [2010] FCA 902

THE COURT ORDERS THAT:

1.                  The parties file and serve proposed orders to give effect to Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (No 6) [2010] FCA 704 and to these reasons within 7 days.

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                     In Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (No 6) [2010] FCA 704 (April No 6) I did not accept that service of the amended application and the second further amended statement of claim on the overseas respondents, being the eleventh and twelfth respondents (together, the APP overseas respondents), should be set aside on the basis that the Commission had not established a prima facie case.  I noted in April No 6 at [115] that the APP overseas respondents had submitted that any grant of leave to serve the application and statement of claim out of the jurisdiction should be subject to the condition that the Commission cannot seek a pecuniary penalty in respect of any alleged contravention that pre-dates 10 April 2001 because of the requirement in s 77(2) of the Trade Practices Act 1956 (Cth) (the Act) that a proceeding seeking a pecuniary penalty be commenced within six years after the contravention.  Section 77(1) of the Act empowers the Commission to ‘institute a proceeding in the Court for the recovery of a pecuniary penalty on behalf of the Commonwealth’.  This power is limited so that such a proceeding can be commenced only within six years after the relevant contravention (s 77(2) of the Act).  

2                     The application and affidavit in support that commenced these proceedings were filed on 6 December 2006.  The APP overseas respondents submit that the filing of the application was not a commencement of the proceedings because, they say, the affidavit did not comply with O 4 r 6 of the Federal Court Rules (the Rules).  The APP overseas respondents submit that it was not until a statement of claim was filed on 10 April 2007 that the proceedings were “commenced” in accordance with the Rules.  As I noted at [115] of April No 6, the Commission did not appear to have addressed this argument and I gave the Commission and the APP overseas respondents the opportunity to file submissions limited to this issue. 

Whether proceedings commenced on the filing of the application and an affidavit

3                     The APP overseas respondents contend that the affidavit filed on 6 December 2006 did not contain the material facts on which the Commission’s claim was based.  They contend that at least until such time as the Commission filed the statement of claim on 10 April 2007, an application to strike out the application would have succeeded.

4                     There is no dispute that the Federal Court has jurisdiction by reason of s 86(1) of the Act.  The dispute centres around the Federal Court of Australia Act 1976 (the FCA)and the Rules.  Section 4 of the FCA defines a “proceeding” as a ‘proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal’.  It is apparent from this definition that it applies to interlocutory matters and matters that may not be sufficient to dispose of all aspects of a dispute between the parties.  It includes, for example, preliminary discovery (Carnegie Corporation Ltd v Pursuit Dynamics plc (2007) 162 FCR 375 per French J). 

5                     Order 4 rule 1 of the Rules provides that, except as otherwise provided in the Rules, all proceedings in the Court’s original jurisdiction shall be commenced by filing an application.  It is noteworthy that O 4 r 1 thus provides that the commencement of proceedings is effected by the filing of an application alone.  Order 4 r 1(2) provides that an application shall be in or substantially in the form numbered 5 in Schedule 1.  That form relevantly contains the following statement:

On the grounds stated in the accompanying affidavit or statement of claim…the applicant claims: [Specify all final relief sought]…

6                     It is O 4 r 3 which sets out what an application must specify, namely the relief claimed by the applicant and, if the relief depends on a provision of an Act, the Act and provision.  The APP overseas respondents do not suggest that the application itself was deficient in failing to comply with the Rules.

7                     The APP overseas respondents concentrate their submissions on O 4 r 6 which deals with the affidavit or statement of claim to be filed and served with the application.  As a separate rule, O 4 r 6 relevantly provides that the applicant shall file and serve with the application either an affidavit or a statement of claim, whichever is appropriate, and further that it is the affidavit or statement of claim that must show the nature of the applicant’s claim and the material facts on which it is based (O 4 r 6(2)).  The APP respondents rely on the requirements of r 6(2).  Without an affidavit or statement of claim which complies with these requirements, they submit, the proceedings were not commenced.

8                     The application that was filed on 6 December 2006 seeks declarations, injunctions, pecuniary penalties and other orders pursuant to ss 76 and 80 of the Act and s 21 of the FCA against the respondents in respect of contraventions of s 45 of the Act and ancillary involvement in those contraventions in relation to the supply of paper products in Australia. 

9                     The affidavit in support is an affidavit of Ms Kerr (the Kerr affidavit).  Ms Kerr is an Assistant Director of the Commission with direct responsibility for the conduct of the Commission’s investigation of the matters which are the subject of the proceedings.  Ms Kerr gives evidence on information and belief from Mr Lofgren, a person who informed the deponent that he personally had participated in the arrangements or understandings that had been in place since December 2000 between manufacturers and suppliers of fine paper products, being categorised as copy paper, uncoated woodfree paper and coated paper products.

10                  The facts as stated in the Kerr affidavit are that:

(a)                Peter Lofgren, as an employee and representative of the UPM Kymmene Corporation Group of companies, attended meetings between UPM and the parties to the proceeding (comprising the first to fifth respondents and tenth to twelfth respondents).

(b)               At these meetings UPM and the parties to the proceeding (including the APP overseas respondents) set prices for each party for geographic markets in which they or their related companies supplied paper products, which included Australia.

(c)                These meetings occurred regularly in person or by telephone.

(d)               One of these meetings occurred on 6 December 2000.

(e)                Ms Kerr states on information and belief from an unnamed source that many other such meetings occurred after 6 December 2000 and that the parties implemented the agreed prices in relation to paper products supplied by them to the Australian market.  The Commission submits that it can be reasonably inferred that this information was obtained from Mr Lofgren, based on [3] of the affidavit.

11                  The Commission submits that the Kerr affidavit met the requirements of O 4 r 6(2) but, in any event, that the proceedings were commenced by the filing of the application.  It would follow that proceedings were properly commenced by the Commission on 6 December 2006 and that the Commission is not precluded from seeking relief in respect of contraventions arising from 6 December 2000.

12                  The APP overseas respondents submit that:

(a)                Prior to 10 April 2007, in breach of O 4 r 6, the Commission failed to file and serve either a statement of claim or affidavit that showed the material facts on which its claims were based;

(b)               Proceedings were not commenced until 10 April 2007 being the date upon which the statement of claim was filed.  The APP overseas respondents submit in the alternative that proceedings were not commenced prior to 10 April 2007 in respect of claims relating to meetings that pre-date 10 April 2001; and

(c)                Certain of the meetings the subject of orders sought in the amended application do not form part of the “subject matter of the proceedings”.

13                  Three AAA Club meetings referred to in the second further amended statement of claim fall into this category, being the meetings of 6 December 2000, 23 February 2001 and 8 March 2001 (the three alleged meetings).  The APP overseas respondents note that the Commission does not seek a pecuniary penalty in respect of the meeting of 23 February 2001 in the amended application. 

14                  The APP overseas respondents note that the Kerr affidavit contains eleven paragraphs and submit that it asserts conclusions rather than material facts.  Further, such conclusions are based on information and belief, some from an unidentified source or sources.  In particular, the APP overseas respondents contend that the affidavit does not specifically state the material facts upon which the claims concerning the three alleged meetings are based.  The APP overseas respondents submit that as the Commission did not plead any material facts prior to 10 April 2007, the application could have been successfully struck out until that time.  They seem to accept that the statement of claim pleaded material facts although they have also asserted, in support of the present motion, that the second further amended statement of claim does not give rise to a prima facie case as against them.  In any event, following the logic of the submission, if an affidavit or statement of claim filed with an application purported to address all matters necessary to show the nature of the applicant’s claim and the material facts on which it is based, but was defective, the proceedings could only be said to have commenced when amended documents that resisted such attack were filed.  This would apply if, for example, the affidavit contained inadmissible material that led to gaps in the case presented, or if certain paragraphs of the statement of claim were struck out and what remained, prior to further amendment, did not disclose a cause of action.

15                  The Kerr affidavit sets out the nature of the Commission’s claim.  It contains information, in broad and very general terms, to establish that the APP overseas respondents were alleged to have entered into unspecified arrangements or understandings to fix, control or maintain prices for paper products supplied by them in Australia in contravention of s 45 of the Act.  The APP overseas respondents submit that, for so long as the relief sought by the Commission was sought on the basis of the case articulated in that affidavit, the application was liable to be struck out.

16                  The APP overseas respondents submit that under the Rules, it is not sufficient to commence proceedings by filing an application, because of the requirements of O 4 r 6.  However, the submission must go further because the Commission did file the Kerr affidavit together with the application.  The APP overseas respondents submit that if the affidavit or pleading filed with the application is insufficient to withstand an application to strike it out, the proceedings have not commenced. 

17                  The Commission does not contend that the Kerr affidavit showed the nature of its case and the material facts on which it was based sufficient to survive a strike out application.  However, the affidavit does, the Commission submits, give a sufficient basis to seek penalties for contraventions of s 45 of the Act in respect of meetings that occurred on or following 6 December 2000.

18                  First, the concept of “striking out” an application, as distinct from dismissal, is misconceived as the continuation of a proceeding depends upon the existence of an application (White Industries v Federal Commissioner of Taxation (2007) 160 FCR 298 at [48] per Lindgren J).  Further, it is not the case that the Commission simply filed an application.  The Commission complied with the Rules.  It filed an application together with an affidavit.  That affidavit did show the nature of the Commission’s claim and material facts on which that claim was based, admittedly only in the most general sense and on information and belief.  

19                  Many applications are filed in the Court which are not accompanied by an affidavit or a pleading sufficient to comply with O 4 r 6.  For example, many are filed by applicants without legal assistance.  While it may be the case that an application to dismiss the proceedings can be made on the basis that the pleading or the affidavit does not comply with O 4 r 6, that does not mean that proceedings have not been commenced on the day on which the application was filed.  Even if the Kerr affidavit did fail to comply with O 4 r 6, the proceedings commenced with the filing of the application.

20                  The continuation of a proceeding depends on the existence of an application (White at [48]).  The APP overseas respondents accept that the proceedings do not cease to exist when a statement of claim is struck out.  That, in my view, conflicts with their position that an application filed with an inadequate affidavit or statement of claim is not the commencement of proceedings.  Their answer, that when a statement of claim is struck out leave to re-plead is frequently granted which takes effect from the date that the statement of claim is first filed by reason of O 13 r 3A(1)(b), is not the point.  If anything, this supports the Commission’s position that the date proceedings commence is not determined by the adequacy of the supporting statement of claim or affidavit.

Whether the Commission’s case is limited to the matters in the affidavit filed with the application

21                  In the alternative, the APP overseas respondents submit that the subject matter of the proceedings is confined to what was articulated in the affidavit filed and served with the application.  The APP respondents point out that the Kerr affidavit did not deal specifically with the three alleged meetings of 6 December 2000, 23 February 2001 and 8 March 2001.  They submit that it was only when the meetings on those dates were first articulated that it can be said that they formed part of the Commission’s claims against the APP overseas respondents.  They submit that, in that sense, the proceedings in respect of those particular claims were only commenced on or after April 2007, by which time the claims for pecuniary penalties based on those material facts and allegations were statute barred. 

22                  The Kerr affidavit specifically states that many other meetings occurred after the meeting of 6 December 2000.  It refers to information from Mr Lofgren that it was at such meetings and conferences that the parties, including the APP overseas respondents, as manufacturers and suppliers of paper products, made arrangements or came to understandings to set agreed prices for each party for geographic markets including Australia in which they or their related entities supplied paper products.  Ms Kerr also states as a material fact on information and belief that the parties implemented the prices agreed at meetings after 6 December 2000 in relation to paper products sold by them to the Australian market, thereby contravening the Act.  That is sufficient to encompass the dates of each of the three alleged meetings.  That is sufficient for the Commission to have commenced proceedings for declarations and penalties in relation to those meetings in the original application, which refers to meetings from 6 December 2000 and thereafter.

Whether the Commission is entitled to rely on the statutory limitation period

23                  The APP overseas respondents rely upon the fact, which is not in dispute, that the Commission filed the application and the Kerr affidavit when it did in an attempt to avoid the consequences of the six year limitation period in s 77(2) of the Act, at a time when its investigation of the alleged contraventions was incomplete and ongoing.  This was done in order to preserve the right to claim pecuniary penalties in respect of AAA Club meetings which occurred on and after 6 December 2000.

24                  The APP overseas respondents contend that it is contrary to the public interest to permit the Commission to take advantage of the filing just within the period of limitation fixed by the Act.  They rely upon the High Court’s decision in Brisbane South Regional Authority v Taylor (1996) 1286 CLR 541 at 555 where McHugh J observed that limitation periods should not be seen as an arbitrary cut off point unrelated to the demands of justice or the general welfare of society.  The High Court there considered extension of limitation periods and the effect on a respondent arising from, for example, loss of relevant evidence, the right of people to order their affairs in the knowledge that claims can no longer be brought and the public interest in requiring disputes to be settled as quickly as possible (at 552).  In this case, the proceedings were filed the day before the limitation period provided for in the Act.  As the High Court noted in Brisbane South at 555, a limitation period in a statute reflects the Legislature’s judgment of the date after which there is a chance of an unfair trial.  Apart from the fact that there is no evidence of any particular unfairness or prejudice to the APP overseas respondents by reason of the proceedings being brought immediately prior to the expiration of the limitation period, the fact is that the limitation period had not expired.  The Commission was within its rights to file at that time.

25                  The proceeding is not an abuse of process.  As was observed by Merkel J in Laing v Victoria (2005) 144 FCR 462 at [15], the proceeding ‘has not been issued for some collateral advantage nor is it being used to obtain some advantage for which it was not designed.  Rather, the proceeding has been issued for the purpose of ensuring that the relief sought can be obtained if and when the applicant has determined that [it] has the evidence available to establish the cause of action upon which [it] has relied’.

26                  These are complex proceedings in relation to meetings alleged to have occurred outside Australia by, relevantly to this motion, overseas entities which allegedly supplied products into the Australian market and controlled the Australian corporate respondent APP Australia Pty Ltd, which reported to the APP overseas respondents and implemented their directions (April No 6).  The APP overseas respondents submit that to allow the Commission to preserve an entitlement to a pecuniary penalty in respect of the alleged AAA Club meetings would be against the public interest.  Nothing has been advanced by those respondents to support that contention or to support a submission that it outweighs the public interest in the Commission proceeding to seek to establish the case against the APP overseas respondents in respect of alleged contraventions of the Act.  If the Commission’s case is not made out, the APP overseas respondents will be entitled to orders in their favour and will not face the pecuniary penalties that they seek to have disallowed.

27                  The proceedings were properly commenced by the filing of the application and the Kerr affidavit on 6 December 2006.  The Commission is accordingly entitled under s 77(2) of the Act to seek the pecuniary penalties in respect of the contraventions which are alleged to have occurred on or after 6 December 2000.

Associate:

Dated:         23 August 2010