FEDERAL COURT OF AUSTRALIA

Australian Consumer and Competition Commission v Launceston Superstore Pty Ltd [2013] FCA 297

THE COURT ORDERS THAT:

1.    The applicant’s interlocutory application dated 21 December 2012 be dismissed with costs as agreed or taxed.

2.    The first to sixth and the eighth to eleventh respondents be removed as, and cease to be, parties to the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Background

1    On 19 November 2012 the applicant (“ACCC”) filed an Originating Application and a Statement of Claim in the New South Wales Registry of the Court seeking various forms of relief against Launceston Superstore Pty Ltd (“first respondent”) and other companies named in the Schedule to the Originating Application and trading under the “Harvey Norman” name in various places in different States of Australia. The names of the second to eleventh respondents, the names under which, and the places from which, they trade are set out below:

2    On 21 December 2012, the ACCC filed an interlocutory application seeking leave to continue the proceeding against the first respondent and the second to eleventh respondents (together the “respondents”) pursuant to Rule 9.05(1)(b)(iii) of the Federal Court Rules 2011 (“the Rules”).

3    On 7 March 2013, the ACCC filed a notice of discontinuance as against the eighth respondent, which apparently had gone into liquidation.

4    At a directions hearing held the same day, I indicated that I was disposed to deal with the ACCC’s interlocutory application on the papers, consisting of two affidavits of Mr Trevor Cheung filed in support of the interlocutory application, the first sworn 21 December 2012 and the second sworn 18 February 2013; four affidavits of Mr Simon Griesz filed in opposition to the interlocutory application each sworn on 4 February 2013, one in respect of each of the sixth, seventh, ninth and tenth respondents; an affidavit of Mr Deegan Fitzharris filed in opposition to the interlocutory application sworn on 4 February 2013 in respect of the first, second, fourth and eleventh respondents; two affidavits of Mr Philip Beazley filed in opposition to the interlocutory application each sworn on 11 February 2013, one in respect of the third respondent and one in respect of the fifth respondent; written submissions received from the ACCC in support of the interlocutory application; written submissions received from the first, second, fourth and eleventh respondents, written submissions received from the third and fifth respondents and written submissions received from the sixth, seventh, ninth and tenth respondents, all opposing the application.

5    All the respondents represented at the directions hearing consented to my dealing with the application on the papers but, at the request of the ACCC, I deferred a decision until their counsel could confer with his leader and stood the directions hearing over to the following day. Later on 7 March 2013 my chambers received a communication indicating that the ACCC also agreed to that course, thus obviating the need for a resumed directions hearing the next day.

6    No party has pressed for reasons to be given but the two firms of solicitors respectively representing the first, second, fourth and eleventh respondents and the sixth, seventh, ninth and tenth respondents have submitted that reasons may be helpful in providing guidance on an important issue of principle in relation to the conduct of multi-party prosecutions. I agree and have, therefore, reduced my reasons to writing.

Conclusion

7    For a number of reasons set out below, I am not prepared to grant the leave sought by the interlocutory application which must be dismissed with costs. I propose to order the removal of all the respondents, other than the seventh respondent, a company trading as Harvey Norman AV/IT Superstore Gordon, at Gordon in New South Wales, as parties to the proceeding. I propose to do this because, so far as I can ascertain, only it and one other of the respondents are trading in New South Wales; the balance are trading in other States of Australia and, without agreement, any proceeding of this kind, by a regulator such as the ACCC, should not be brought in a registry of this Court other than in the registry of a State in which a respondent is trading. Norton Rose, lawyers for the ACCC, assert in their letter dated 25 January 2013 (p 7 of the affidavit of Mr Trevor Cheung sworn 18 February 2013) that it should be relatively simple to accommodate joint case management because every respondent chose to appoint counsel based in Sydney. With respect, that has occurred as a consequence of the ACCC commencing the proceeding against every respondent in the New South Wales registry of the Court.

Analysis and Consideration

8    First and foremost, Rule 9.05(1) of the Rules, of which Rule 9.05(1)(b)(iii) forms part, does not, in its terms, accommodate an application of the kind sought. Rule 9.05(1) exists to enable a party to apply to the Court, in advance, for an order “that a person be joined as a party to the proceeding” and, in the case of Rule 9.05(1)(b)(iii), “if the person is a person who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings”. Neither Rule 9.05(1), nor its constituent parts, contemplates an application for an order that, a proceeding commenced against a number of persons, be continued against them.

9    Had the ACCC commenced the proceeding against one of the respondents, it could have applied to the Court for an order pursuant to Rule 9.05(1)(b)(iii) to join the other 10 respondents as parties to the proceeding; alternatively, it could have commenced 11 separate proceedings and applied to the Court for an order that the other 10 proceedings be heard together with the first.

10    The ACCC is not to be afforded any benefit in the consideration of its application by virtue of having commenced a single proceeding against 11 respondents without first obtaining an order from the Court. I have considered this application as if there is currently one respondent to this proceeding and that the ACCC is seeking to join 10 (now nine) new persons as respondents or, in the alternative, to have all the cases heard together.

Rule 9.05(1)(b)(iii)

11    Rule 9.05(1)(b)(iii) provides as follows:

(1)    A party may apply to the Court for an order that a person be joined as a party to the proceeding if the person:

…

(b)    is a person:

…

(iii)    who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings.

ACCC bears the onus

12    The ACCC bears the onus to persuade the Court that:

(1)    A claim against any respondent is a dispute related to a claim against any of the other respondents for the purposes of Rule 9.05(1)(b)(iii); and

(2)    if they are, the Court should exercise its discretion to order that any of the respondents should be joined as parties to this proceeding.

What is a “dispute”?

13    Each respondent accepts that if it contests the allegations against them then a dispute will arise. If there is a dispute in a claim, it will be a defence by a respondent of some or all of the allegations made against it by the ACCC. The allegations against each respondent concern conduct that the respondent is alleged to have carried out in breach of ss 18 and 29 of the Competition and Consumer Act 2010 (Cth) (“ACL”).

What is the meaning of “related”?

14    The ACCC refers to the definition of “related” in the Macquarie Dictionary (online edition) viz.,

1.    associated; connected.

2.    allied by nature, origin, kinship, marriage, etc.

15    The Macquarie Dictionary (Revised Third Edition) relevantly defines:

(a)    “associate” to mean:

1.    to connect by some relation, as in thought.

2.    to join as a companion, partner, or ally.

3.    to unite; combine. ...

4.    to enter into a league or union; unite.

5.    …

6.    a partner in interest, as in business or in an enterprise or action.

(b)    “connect” to mean:

…

6.    to become connected; join or unite.

Sensis Pty Ltd v Bivami Pty Ltd [2012] FCA 1365

16    The ACCC in its submissions refers to the decision in Sensis Pty Ltd v Bivami Pty Ltd [2012] FCA 1365. In that case:

(1)    Both Bivami’s dispute and AETL’s dispute arose out of the same facts, concerning a lease of land;

(2)    AETL had purchased the relevant land from Bivami and replaced Bivami as the lessor under the lease;

(3)    in both Bivami’s dispute and AETL’s dispute, the Court would need to construe the same provisions of the lease;

(4)    paragraphs 24 and 25 of the judgement relevantly state:

24.    For the following reasons, however, I consider that AETL should now be joined as a party under rule 9.05(1)(b)(ii) and/or (iii). First, as Mr Newlinds SC pointed out, the call was made by Bivami in accordance with its obligations under clause 18 of the contract of sale. Bivami has no interest in making the call otherwise than to comply with its contractual obligations to AETL. I agree that, in those circumstances, there will be no genuine contradictor to the applicants’ claim unless AETL is joined. To date, Bivami has taken a limited role in the proceedings. In my view, such joinder is necessary in order to ensure that all issues in dispute in the proceedings are able to be heard and finally determined in a proper manner.

25.    Secondly, and related to the first point, AETL seeks leave to file a cross-claim against Universal in which it seeks an order that Universal deliver to it a bank guarantee in the amount of $936, 000. Briefly stated, the proposed cross-claim will rely on various correspondence in June 2006 and July 2007, the effect of which according to AETL is that a request was in fact made by it under clause 19.2 of the lease for a substitute bank guarantee to be provided in its favour and for a higher amount than the banker’s undertaking. AETL says that Universal also promised that it would obtain a replacement bank guarantee in AETL’s favour. As will be developed below, it is this correspondence which ties at the heart of AETL’s contention that there was a material non-disclosure before Rares J. Although there are proceedings on foot in the New South Wales Supreme Court between AETL and Universal, it seems to me that the proposed cross-claim could conveniently be heard and determined in the context of the proceedings here and thereby avoid any further multiplicity of proceedings.

(5)    I agree with the respondents’ submissions that the key reasons for the Court ordering a joinder under Rule 9.05(1)(b)(iii) were that the matters set out in sub-paras (1) to (3) above created a strong enough connection to establish that the two disputes were related and to warrant a joinder. As a matter of commercial reality it was not possible for there to be a dispute concerning all of the issues without all of the parties being party to the one proceeding.

17    There are significant factors distinguishing that case from the present proceeding, including:

(1)    Each claim against a respondent is in respect of a separate set of facts which is entirely separate from, and not in any way connected with, the set of facts in a claim against any other respondent;

(2)    each claim against a respondent is in respect of a separate set of facts which does not arise out of the set of facts in a claim against any other respondent;

(3)    there can be no common question of fact because the facts in one claim are different from the facts in each other claim;

(4)    there is no question of law, let alone a common question of law, which arises in any of the claims. As to that:

(i)    the question as to whether a respondent’s conduct contravened the ACL is not a question of law. It is just the application of the provisions of the ACL to the facts. That does not mean that any contentious common question of law will arise;

(ii)    there is no question about the meaning or construction of ss 18 or 29 of the ACL; and

(iii)    the ACCC has not identified any contentious question of law;

18    In fact, the only relevant similarity between the claims is the ACCC itself and the Act invoking the Court’s jurisdiction.

Administrative Notice NSW 4

19    The ACCC asserts in para 15 of its submissions that the Administrative Notice NSW 4 (“NSW Notice”) issued on 2 August 2011 “expressly deals with what constitute ‘related’ proceedings”.

20    Paragraph 2 of the NSW Notice states that: “The purpose of this Administrative Notice is to set out arrangements to assist with allocation of related proceedings to the same docket judge”.

21    While the heading of para 4 of the NSW Notice reads: “What are related proceedings?”, the actual text of para 4 relevantly states: “Circumstances where it may be appropriate for related proceedings to be listed before the same judge...”, not “circumstances where proceedings may be considered to be related...”.

22    This indicates that the NSW Notice:

(a)    Applies when there are “related disputes” and provides examples of where it may be appropriate to list “related disputes” before the same judge;

(b)    does not indicate the meaning of “related” or when disputes are “related”.

Whether the claims are “related disputes”

23    Each claim against each respondent is not related to a claim against any other respondent for the reasons set out in [24] to [29] below.

24    There are many factors to indicate that the claim against each respondent is not related to a claim against any other respondent in this proceeding, including:

(1)    Those referred to in [17] above;

(2)    each respondent owns and operates its own retail business independently from each other respondent;

(3)    each respondent had no involvement in the transactions or events alleged in the Statement of Claim in respect of any other respondents;

(4)    each respondent has no knowledge of the transactions or events alleged in the Statement of Claim in respect of any other respondents;

(5)    for each claim there will be different witnesses, for both the ACCC and the relevant respondent and there is nothing in the ACCC’s submissions to suggest otherwise;

(6)    the application of the relevant statutory provisions of the ACL in each claim will vary depending upon the factual findings in each claim;

(7)    to the extent there are common facts pleaded, namely that each respondent:

(i)    Is a franchisee of a subsidiary of Harvey Norman Holdings Limited (“HNHL”);

(ii)    carries on a retail business of selling electrical products;

(iii)    carries on its business using a trading name which includes the words “Harvey Norman”,

those facts are in fact irrelevant to the proceeding and in any event will not be disputed and so no question of fact (in dispute) will arise in respect of those matters.

25    In response to para 21 of the ACCC’s submissions:

(1)    The fact that each respondent:

(i)    Is a party to a franchise agreement with a subsidiary of HNHL;

(ii)    operates a business using a trading name which includes the words ‘Harvey Norman’;

(iii)    has entered into a franchise agreement which includes obligations to comply with the ACL,

does not mean that the alleged conduct of one respondent is in any way connected with the alleged conduct of another respondent, especially having regard to [24(2)] to [24(4)] above and the facts that:

(iv)    Each respondent is an independent franchisee of a subsidiary of HNHL; and

(v)    no respondent is a subsidiary of HNHL;

(2)    there is no pleaded or substantiated basis for the assertion that any of the facts referred to in sub-para (1) above is material to any factual, substantive, or procedural issue arising in this proceeding;

(3)    none of the matters raised in sub-paras 21 c. to e. of the ACCC’s submissions are pleaded in the Statement of Claim;

(4)    the ACCC does not explain how any of these matters will be relevant to any questions the Court will have to decide in a trial;

(5)    there are no allegations against HNHL, Yoogalu Pty Limited or any franchisor;

(6)    there is no allegation that any respondent has engaged in the conduct the subject of this proceeding pursuant to some policy or directive issued by HNHL, a franchisor, or any other subsidiary of HNHL.

26    The fact that the ACCC is a common party to each claim arises only because it is the regulator empowered to enforce the ACL. However, the ACCC was not involved in the facts of any of the claims.

Parity

27    The ACCC states in para 24 of its submissions that “[i]f the contraventions alleged are established, the Court will also be required to consider issues of parity between respondents in determining any penalty that may be imposed”. While correct, that is no ground to find that the disputes are “related” and should be joined in a single proceeding.

28    This Court often considers the amount of penalties imposed in similar circumstances in other cases when deciding on the amount of the penalty to impose. It is unnecessary to join each claim to a single proceeding to enable the Court to consider issues of parity.

Federal Court Rule 9.07

29    The ACCC makes reference to Rule 9.07 in paras 1 and 42 of its submissions. That rule relevantly refers to a proceeding not being defeated because a party has been improperly joined. The application of that rule to the present proceeding may apply in so far as it relates to a respondent not removed as a party, but does not extend in so far as the present proceeding relates to respondents who have been improperly joined and are removed.

Principles guiding the exercise of the discretion under Rule 9.05(1)(b)(iii)

30    If the Court was to determine that any claim against a respondent was related to a disputed claim against any other respondent in this proceeding, then the respondents submitted that the Court should not exercise its discretion under Rule 9.05(1)(b)(iii) to order a joinder for the reasons set out in [31] to [47] below.

31    I agree with the respondents’ submissions that the general principles guiding the exercise of the Court’s discretion under former Federal Court Rule O 6 r 2(b) are relevant to guiding the exercise of the Court’s discretion under Rule 9.05(1)(b)(iii).

32    In Robin Bishop v Bridgelands Securities Ltd and John Hyla Preston [1990] FCA 410, the Court stated at [14]:

(a)    Regard should be had to the “desirability of limiting, so far as practicable, the costs and delay of the litigation”;

(b)    “differences between the evidence intended to be relied upon in support of the claims … [may] make it inexpedient to join the claims”.

33    In Cheque One Pty Ltd v Cheque Exchange (Aust) Pty Ltd (in liq) [2002] FCA 593, the Court stated at [20] and [21] that where there should be separate hearings of various claims, this will be a factor against ordering a joinder.

34    In Knight v Beyond Properties Pty Ltd & Ors (No.2) (2006) FCA 192 the Court stated at [30] that the inconvenience of a respondent having to “participate in a hearing in which a substantial number of issues and a substantial part of the evidence would be of no concern of theirs, it must be weighed against the inconvenience to an applicant of having to prove [the common aspects of its claims] in separate proceedings”.

35    In CBI Contractors Pty Ltd v Abbott [No.2] [2009] FCA 1129 the Court stated at [32] that:

The Court’s task in giving leave is to identify the advantages and the disadvantages to the parties as a whole in terms of the efficient use of the Court’s resources, having regard to the commonality of issues raised by each claim and to the Court’s ability to case manage the proceedings so as to minimise disadvantages.

36    If the Court was to find that there are related disputes, the respondents submitted that, for the reasons set out in [17], [18] and [23] to [28] above, the relationship between each claim is not material to any factual, substantive or procedural issue arising in this proceeding and for that reason the Court should not exercise its discretion to order a joinder under Rule 9.05(1)(b)(iii).

37    The ACCC asserts in para 30 of its submissions that having one proceeding will result in an efficient use of the Court’s resources, especially in pre-trial case management and in any hearing, after the trial, to determine what relief should be ordered.

38    However, the ACCC in paras 31 to 35 and 39 of its submissions also seems to concede that separate trials are likely to be appropriate for each respondent. This makes it difficult to accept the ACCC’s assertion that a joinder will result in an efficient use of Court resources.

39    Further, there is no good reason why one respondent should be involved in any way in the hearing of evidence and submissions concerning another respondent’s alleged contraventions when there are different and unconnected facts and different witnesses in each claim.

40    The claim against each respondent is straight forward. The Court will make the usual simple directions to prepare each claim for trial in matters of this type.

41    As the set of facts in each claim is separate from, and unconnected with, the set of facts in each other claim, it is difficult to envisage how pre-trial case management in one claim will be aided or simplified by being tied to the pre-trial case management of another claim.

42    At any hearing after a trial to determine what relief the Court should order, the ACCC would make general submissions on the relevant statutory provisions of the ACL applicable to each claim where a contravention is proved. The ACCC can, however, make those submissions in writing to the Court at the end of each trial.

43    The ACCC has not suggested that there is any significant common question of law to be argued in the claims against all the respondents.

44    There will be submissions the ACCC will wish to make relating specifically to the conduct of each respondent (proved to be a contravention), however those submissions, by their very nature, will be relevant only to the specific respondent concerned.

45    The ACCC contended in para 30 of its submissions that one proceeding will result in costs savings for the parties by eliminating “multiplication of effort, paperwork and time by the parties”.

46    It is unclear how there will be any such costs savings for a respondent. The respondents submitted that a joinder will most likely significantly increase, rather than reduce, each of their costs. They submitted that the simplest, and least expensive, procedure for a respondent will be one which does not require it to be concerned or involved with the ACCC’s case against any other respondent. I agree.

47    The respondents submitted that the factors against joinder referred to above clearly outweigh any possible costs savings that the ACCC might achieve. I agree. In fact the order sought for the ACCC will involve the proceeding being more lengthy, complex and expensive for all concerned.

The ACCC’s alternative course

48    It is implicit in what I said at [7] above that if I was minded to dismiss the ACCC’s interlocutory application, as I am, I am not prepared to embrace the ACCC’s alternative at paras 42 and 43 of its written submissions as to the future case management of this proceeding, namely, that following a reconstitution of all the proceedings they all be case managed together in the one docket. There is no benefit to the respondents collectively, or any of them individually, in having the claims against them case managed out of Sydney along with other claims in which they have no involvement or interest.

Associate:

Dated:    8 April 2013