ATCHWORODS ie] Trade practices - price fixing - submission of no case to answer - prima facile case - admissibility of directors acts against company - power of director to bind company. Trade practices —- price fixing - meaniny of "arrive at Wwe an understanding" - circumstantial evidence - object facts frorrn unven which inference of understanding might be drawn - fazlure of defendant to give evidence - parallel behaviour by defendants - admissibility of responses to s.155 notices — admissibility of darector's acts - burden of proof - relevant market - meaning of "competition" - Trade Practices Act 1974, ss.45(2)(a)(21), 45(2)(b)(12), 45(3), 45A(1), 76, 84(2), 155. TRADE PRACTICES COMMISSION v NICHOLAS EWTERPRISES PTY. LIMITED SATURNO HOLDINGS PTY. LIMITED REX_FREEBOLD PTY. LIMITED MORPHETT ARMS HOTEL PTY. LIMITED LION BUS CO. PTY. LIMITED MERIT NOMINEBS PTY. LIMITED GENERAL DEVELOPMENT CORPORATION PTY. LIMITED AGETT NOMINEES PTY. LIMITED No. G3 of 1978 CORAM: Fisher J. Adelaide 7 September 1979. eee ee ee CATCHWORDS Trade practices - price fixing - submission of no case to answer - prima facie case ~ admissibility of directors acts against company - power of director to bind company. "arrive at Trade practices - price fixing - meaning of an understanding" - circumstantial evidence - objective facts from which inference of understanding might be drawn - failure of defendant to give evidence - parallel behaviour by defendants - admissibility of responses to s.155 notices - admissibility of director's acts - burden of proof - relevant market - meaning of "competition" - Trade Practices Act 1974, ss.45(2) (a) (ii), 45(2) (b) (ii), 45(3), 45A(1), 76, 84(2), 155. TRADE PRACTICES COMMISSION v NICHOLAS ENTERPRISES PTY.LIMITED SATURNO HOLDINGS PTY. LIMITED REX FREEHOLD PTY. LIMITED MORPHETT ARMS HOTEL PTY. LIMITED LION BUS CO. PTY. LIMITED MERIT NOMINEES PTY. LIMITED GENERAL DEVELOPMENT CORPORATION PTY. LIMITED AGETT NOMINEES PTY. LIMITED No. G3 of 1978 CORAM: Fasher J. Adelaide 7 September 1979 ~ , FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. of Action S.A. G3 of 1978 TITLE OF ACTION: Trade Practices Commission Plaintiff - and - Nicholas Enterprises Pty. Limited lst Defendant Saturno Holdings Pty. Limited 2nd Defendant Rex Freehold Pty. Limited 3xd Defendant Morphett Arms Hotel Pty. Limited 4th Defendant Lion Bus Co. Pty. Limited 5th DefendantMerit Nominees Pty. Limited 6th Defendant f General Development Corporation 7th Defendant Pty. Limited Agett Nominees Pty. Limited 8th Defendant Dates of hearing: 12, 13, 14, 15, 22 September 1978 23, 24, 25, 26, 27 October 1978 t ' H 7, #8, 21 December 1978 6, 7, 8 February 1979 2, 3, 4, 5, 6, 9, Date reasons for judgment delivered: 7 September 1979. Counsel for Trade Practices Comm21ssion: Solicitor for Trade Practices Commission: Counsel for Nicholas Enterprises Pty. Ltd: Solicitors for Nicholas Enterprises Pty. Ltd: Counsel for Saturno Holdings Pty. Ltd: Solicitors for Saturno Holdings Pty. Ltd: 10, April 1979. \ Mr. A.V. Russell t Alan R. Neaves : Mr. H.C. Williams Q.c. with Mr. C. Eaton Griffin Hume & Co - Eaton & Associates : Mr. H. Lambert Lambert & Solomon b Counsel for Rex Freehold Pty. Ltd. and Mr. J.R. Mansfield Morphett Arms Hotel Pty. Ltd: Solicitors for Rex Freehold Pty. Ltd. Alderman Lee Wilson and Morphett Arms Hotel Pty. Ltd: & Mansfield. Counsel for Lion Bus Co Pty. Ltd, Mr. E. Johnson Q.C. Merit Nominees Pty. Ltd, General with Development Corporation Pty. Ltd, Mr. I.F. Edgley and Agett Nominees Pty. Ltd: Solicitors for Lion Bus Co Pty. Ltd, Povey Waterhouse & Merit Nominees Pty. Ltd, General Basheer. Development Corporation Pty. Ltd, and Agett Nominees Pty. Ltd: Signed: Pl 4, itn . Associate Dates: 7. Ff. 77: IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY No. G3 of 1978 GENERAL DIVISION BETWEEN: TRADE PRACTICES COMMISSION Plaintiff - and - NICHOLAS ENTERPRISES PTY. LIMITED First Defendant SATURNO_ HOLDINGS PTY. LIMITED Second Defendant REX FREEHOLD PTY. LIMITED Third Defendant MORPHETT ARMS HOTEL PTY. LIMITED Fourth Defendant LION BUS CO. PTY. LIMITED Fifth Defendant MERIT NOMINEES PTY. LIMITED Sixth Defendant GENERAL DEVELOPMENT CORPORATION PTY. Seventh Defendant LIMITED AGETT NOMINEES PTY. LIMITED Eighth Defendant CORAM: Fisher J. 7_ September 1979. REASONS FOR JUDGMENT In this matter proceedings were commenced by the Trade Practices Commission ("the Commission") by writ 1ssued on 10 April 1978 wath statement of claim annexed naming as defendants Nicholas Enterprises Pty. Limited ("the Royal Oak"), Saturno Holdings Pty. Limited ("the Norwood"), Rex Freehold Pty. Limited ("the Rex"), Morphett Arms Hotel Pty. Limited ("the Morphett Arms"), Lion Bus Co. Pty. Limited, Merit Nominees Pty. Limited, General Development Corporation Pty. Limited and Agett Nominees Pty. Limited {all four of whom are collectively described as "the Old Lion"). It was pleaded and admitted that the first named defendant carried on business as a retailer of liquor from licensed premises namely, the Royal Oak Hotel 123 O'Connell Street, North Adelaide, the second named defendant from licensed premises namely, the Norwood Hotel 97 The Parade, Norwood, the third named defendant from licensed premises namely, the Rex Hotel 172-174 West Beach Road, Marleston, the fourth named defendant from licensed premises namely, the Morphett Arms Hotel 138 Morphett Road, Glengowrie, and the fafth, sixth, seventh and eighth named defendants from licensed premises namely, the Old Lion Hotel Jernangham Street, North Adelaide. The endorsement on the writ 1s limited to a claim for recovery of pecuniary penalties pursuant to s.76 of the Trade Practices Act 1974 ("the Act") and anjunctions pursuant to s.80 of the Act. The statement of claim 1n summary alleges what are in substance contraventions of s.45 of the Act (though without specifically referring to that section) contending that the defendants other than the Norwood on 22 November 1977 made an arrangement or alternatively arrived at an understanding which had the purpose or effect of substantially lessening competition and that on or about 5 December 1977 they gave effect to such an understanding. As to the second named defendant, the Norwood, it was contended that this defendant and the first named defendant on or about 1 December 1977 made such an arrangement or understanding. The essence of the arrangement or understanding as alleged was that the hotels operated by the defendants would on or about 5 December 1977 fix the allowance offered to the public on * each purchase of twelve 740 mls. bottles of beer at tio such bottles of beer. It was common ground that in respect of the defendants this amounted to a reduction in the allowance for each purchase of twelve bottles from three bottles to two bottles for each such purchase. I will return to deal in greater detail with the allegations in the pleadings and the relevant legislation after I have covered the facts. Until the year 1976 1t appears to have been the practice of the Licensing Court of South Australia in granting a license to impose a condition that the licensee refrain from selling beer at less than a specified minimum price. In that year the Full Court of the Supreme Court in the case of Young v Farrah and Nicholas Enterprises Pty. Ltd. (1976) 13 S.A.S.R. 444 held that such a condition was not validly imposed by the Licensing Court. Consequent upon this decision the practice of what 1s generally called "the discounting of beer" became a very prevalent if not universal practice at least 1n the metropolitan area of Adelaide. This discounting generally appears from the evidence to have been conducted on the basis of varying the number of bottles of beer sold for the price of one dozen bottles. There was no uniformity in the number sold for the price of the dozen, although the price of the notional dozen (i.e. more than a dozen in fact being offered) appears to have varied by only a few cents. Moreover the quantum of the discount or allovance varied depending upon whether the beer sold vas brewed by the West End or Southwark Brewery conducted by The South Australian Brewing Company Ltd or Cooper's Brewery conducted by Cooper & Sons Ltd. On 22 November 1977 a luncheon was held at Cooper's Brevery. Evidence as to the happenings at that lunch was given by Mr. W.T. Cooper, ("W.T. Cooper") the managing director of Cooper & Sons Ltd, and Mr. Tremaine, ("Tremaine") an employee of the Old Lion who was involved in the conduct of the Old Lion Hotel. This evidence 1s somewhat vague and 1s indeed very thin but as far as 1t went there was no conflict between W.T. Cooper and Tremaine as to what occurred there. W.T. Cooper was called at the outset of the hearing by the Commission and Tremaine was called by the Old Lion after I had found a case to answer. W.T. Cooper gave evidence to the effect that his brevery held frequent luncheons which were entirely un the nature of social gatherings. These luncheons were held in an entertainment room built for this purpose. At the relevant time these luncheons were held regularly, and invitations were extended to friends and associates of Cooper's Brevery and members of the liquor industry. On the occasion in question 2t was an informal lunch for a group of hoteliers. Present were two additional employees of Cooper's Brewery, Mr. K.A. Cooper and a Mr. Moore. The guests were Tremaine, whom W.T. Cooper said he knew as manager of the Old Lion Hotel, Mr. Kevin Palmer ("Palmer") whom W.T. Cooper stated to be associated with a number of hotels including the Rex and the Morphett Arms Hotels, and Mr. Peter Farrah, ("Farrah") Mr. Laurie Evans and Mr. Phillip Evans who were associated with the Royal Oak Hotel. W.T. Cooper said that he thought a Mr. Bressington was also present. Tremaine's managing director (Mr. Sangster) was unable to attend, and Palmer had been invited at about 10.00 a.m. on the day in question. W.T. Cooper said that there was talk at the lunch concerning the sale of packaged beer and that there was considerable discussion concerning the state of the market. As this conver- sation is the basis of the Commission's case in respect of the arrangement or understanding alleged between all defendants other than the Norwood it is desirable that I set it out 1n full. W.T. Cooper's evidence in chief on this topic is as follows: "MR. RUSSELL: Do you remember what was said about the selling of bottles of beer at so many to the dozen?... I cannot : be specific. What was the substance of what was said?... I can say that a number of comments were made about the unprofitability of becr at 16 to the dozen, where there 1s some 13¢ gross profit before any wages or anything else are put to the cost of handling that beer, and there was obviously some consensus of opinion on that point. From what people said, they appeared to be agreeing about that?... I would say that 1s correct. What else did you hear said about marketing the beer?... There was one comment - and again I cannot say who made it - that the sooner the industry was back to at least 14 to the dozen it would be better for the industry in general. Was any specific comment made about anyone who proposed such a move?... I have tried to think that over; there could have been, but I really could not swear to it. Are you saying you cannot remember any specific person saying anything?... I believe that one may have said 'Look, I believe ve will drop back to 14 to the dozen'. There again, I don't ; know quite how to explain it, these luncheons are very casual. People are obviously enjoying themselves and all sorts of conversations take piace. I want to be helpful but I really can't sort of specifically state yes, that somebody said that, than on such and such a date he would do something. Do you remember any date at ali being mentioned?... I believe there was a date early 1n December. There was some talk of 1t but in fact I could not swear to it." W.T. Cooper additionally said that at the time of the lunch it was the practice of hotels to give a certain number of bottles of beer free with each purchase at the normal retail price of one dozen 740 mls. bottles, and that the number sold for the price of a dozen varied from 13 up to 16. He said that in his opinion the practice was initiated by a hotel in Sturt Street in 1975 and had continued in Adelaide since that date at Levels verying from 13 up to 16 to the dozen. Moreover he believed that at the time of the lunch the large majority of the metropolitan hotels would have been engaged in some form of discounting. Tremaine's evidence in chief as to the happenings at the Lunch 1s as follows: "MR. JOHNSTON Q.C.: At the table, was the dzuscussion, generaliy speaking, a discussion involving the whole table or was 1t fragmented into discussions between this one and that one, or was there some of each?... Coopers luncheons tend to be a bit of a bucks party. They are fairly light hearted luncheons Discounting was generally a subject wherever I went then and wherever I go now, and particularly so at the Coopers luncheon because we had been promoting their product so strongly that most of the industry believed we were on some sort of secret subsidy. I think that was thrown at me that day in a light-hearted manner. Did the question of discounting come up on that day in general terms? I am asking you the question in general terms... Yes, I am sure in general terms. Is at your recollection that somebody was having a shot at your hotel on this question of giving 16 to the dozen of Coopers?... Yes, someone did make a remark. During that discussion on discounting, whatever it was, did Farrah say something and, if so, what did he say, as you remember it?... He indicated he 'vould be reducing his bonus discount to 14 to the dozen the first week 1n December. Did you say anything in reply or comment on that statement?... No, I did not. Do you recollect anybady else saying anything in reply or commenting on that statement?... No, I do not. I now want to put to you one or two topics. Did anybody at that luncheon say anything at all on this subject matter, namely, speaking to the other hoteliers or the owners of other liquor outlets on the subject of discounting, or on the specific subject of Farrah's intimation that he was going to come back to 14?... I do not recollect anything. Did any other person present, either 1n conjunction with what Farrah said or separate from Farrah, say anything about what his hotel was going to do in the way of discounting, either by changing 1ts policy or not changing its policy?... No. Did you say anything about what the Old Lion was going to do?... I made no comment. After the luncheon, where did you go?... Back to the Lion Hotel. What did you do?... I went to Sangster's office to advise him of the remark made by Farrah." This part of the evidence of Tremaine was not challenged in ' cross-examination by counsel for the Commission, Further evidence confirmatory of the fact that Farrah made the statement at the lunch that his company was to commence an ' allowance of 14 bottles to the dozen on 5 December 1977 and that r' there was no significant response from other persons present ; appears from the answers to notices served pursuant to s.155 of the Act, in particular those given by Farrah and Tremaine. 1 will be dealing in greater detail with these notices and the answers thereto and questions of admissability later 1n these reasons. Subsequently Farrah went to the Norwood Hotel and there had ' lunch with Mr. Leon Saturno ("Leon Saturno") who together with his brother manages that hotel. There was some uncertainty as b to the date of this lunch but I am prepared to accept the evidence of Leon Saturno that it occurred on Friday 2 December 1977. Farrah an answer to the s.155 notice directed to him said that at the luncheon he informed Leon Saturno that his company was to commence an allovance of 14 bottles to the dozen as of 5 December 1977. Farrah stated that Leon Saturno replied "that's interesting". Leon Saturno answered his s.155 notice and gave evidence at the hearing substantially to the same effect. He confirmed that the words used by Farrah were that his hotel was "going to 14 to the dozen on Monday" and that his reply was "that's interesting". He denied that there was any further discussion on the topic and in particular that he gave any indication to Farrah as to what his hotel proposed to do. Saturno was asked in cross-examination ° whether he believed that Farrah, having made the statement concerninc , reduction in allowance, expected that the Norwood would do the same. iis response vas as follows: "T do not really know about that. I noticed the advertising an@ the whole sort of build up at that time. Then Peter Farrah comes out and makes a statement. Therefore, it all ties 1n pretty well. It does not necessarily mean we get on that well that we would follow him. In most cases we are trying to beat him possibly." Leon Saturno's evidence on this conversation was unshaken in cross-— examination, and I must accept that he gave no indication of his intentions to Farrah apart from his statement that Farrah's proposed actions were interesting. The witnesses called by the defendants deposed to the fact that at the time there were many rumours concerning the future of discounting, and that price changes were invariably made by the andustry at this time of the year. On 30 November 1977 the following item appeared in the Advertiser Newspaper: "BEER MAY BE '14 TO DOZEN'... Hotels selling cut-price beer are expected to reduce their discounts from Monday. ' Liquor industry sources said yesterday the 15 to the dozen discount would drop to 14. It 1S understood the three big discounters, the Norwood Hotel, Lion Hotel and Royal Oak, have made an agreement to lower the discount. The average price for 14 to the dozen 1s expected to be about $8.95." There 1s no evidence before me as to the sourse of this news item. Leon Saturno was subjected to strong cross—-examination on the topic but he firmly denied that he gave any information to the Press and in particular to tvo named journalists. There is no evidence which in any way casts doubt on his denials. The news item 1s of course not evidence of the truth of its contents as against any of the defendants. It's relevance 1s that 1t is a possible explanation of how it came about that so many hotels in addition to the defendants each changed the amount of their allowance to 14 to the dozen on 5 December 1977. Subsequent to the lunch of 22 November 1977 Palmer engaged an certain activities. The evidence on these matters was taken subject to objection by all defendants and ultimately I must determine its admissability against all or any of the defendants, However Palmer was not called to deny or to give his explanation of any of the evidence or his conduct. At the end of November or early December 1977, but in any event prior to 5 December 1977, Palmer called on a Mr. Ritchie the managing director of a company which conducted the Central Provision Stores. He had previously by telephone made an appointment' to see Mr. Ritchie, describing himself both then and at the meeting as operator or licensee of the Morphett Arms Hotel. Mr. Ritchie stated the conversation as follows: "MR. RUSSELL: At the meeting what did he say?... He told me a number of hotel operators had reached an agreement about changing the then 15 to the dozen discount on beer to a rate of 14 to the dozen. This was to be effective on a certain date. Do you remember what date that was?... I think 5 December. What did you say to that?... He invited my company to part— icipate and I replied that we could not participate. Did you say why?... I particularly remember mentioning the Trade Practices Act." Later: You told Mr, Palmer that you would not participate. Did he say anything to that?... He expressed his disappointment. When you say he expressed his disappointment can you remember what he said?... He expressed his disappointment and hoped we would change our mind and agree to the reduction in the bonus from 15 to 14." Mr. Rutchie also said that Palmer rang him again several days later and asked whether he, Mr. Ritchie, had changed his mind, to whach 10. he replied in the negative. In cross-examination Mr. Ritchie confirmed that Palmer had 1ndicated that he was involved with the Morphett Arms Hotel, that he might have mentioned the name of other hotels but that he could not remember, and that he was uncertain as to the capacity in which Palmer said he was involved with the Morphett Arms Hotel. The hotels put to Mr. Ritchie as hotels which might have been mentioned by Palmer were hotels with which Palmer had a personal involvement and were other than the hotels conducted by the defendants in these proceedings. Mr. Ritchie said that Palmer had mentioned a number of hotels, he thought by name, which proposed to do something by a certain date, but that he could not recall the number or the specific names. The Morphett Arms Hotel was not specifically mentioned as one of the hotels which would reduce its discount but he said; "I would have assumed that was one of the hotels". There 1s evidence that subsequentiy Palmer made another visit, this time to the licensee of the Aurora Hotel, Hindmarsh Square, Adelaide with whom he had a conversation. The date of the conversation 1S somewhat uncertain, but the licensee, Mr. Richards, fixes 1t as a Wednesday early in December 1977. It appears that the visit was subsequent to Monday 5 December 1977, as 1t would have to be if the day 18S correctly fixed as a Wednesday early 1n December, and the only doubt 1s therefore whether it was the first or second Wednesday. At the time of the conversation Mr. Richards was selling bottled beer at the rate of 15 to the dozen and he continued to do so to the time of his evidence. The essence of the conversation with Palmer was stated by Mr. Richards an his evidence in chief as follows, and was not challenged an any way: il. "MR. RUSSELL: Mr. Richards, what did Mr. Palmer say then ! when he first saw you; I think this was early in December 197727... He made reference to having called in to the hotel the previous day when I was absent. ' Was this about 12 December?... Wednesday morning, 1f£ I ' remember correctly. We made comments about some of the signs we had. Can you try as nearly as you can to relate it as the , conversation went. He said who he was and made some i reference to being there yesterday. What did you say to that?... I suggested my brother-in-law had passed that message on. What did he say?... He said, 'Yes, I have come back to see you'. He said, 'I noticed you have got signs 15 to the dozen!, which I had pinned to the wall of the hotel. I said 'Yes'. What did that 15 to the dozen relate to?... All bottles of ' beer and ales. ' Did you say anything other than yes?... I said, 'Mine are still 15 to the dozen'. Did Mr. Palmer say anything to that?... He said, 'You may be aware that the trend 1s to go to 14 to the dozen'. The comment was then 'I am still 15'. Mr. Palmer said, 'I am tied up with a few hotels and we have agreed that the Situation 18 ludicrous; economics do not allow it and we should be back to 14'. My comment was that I was not interested; I was 15 and that is where I was staying. I did ask who the 'we' referred to. The answer was not given, in the sense that he was tied up with several hotels himself. Do you remember him mentioning any particular hotel?... No, the only hotel mentioned was the Morphett Arms which 1s in fact the one he was tied up with hamself directly. I did not ask him what hotels he was tied up with, to be quite honest. Was anything else said?... Not specifically pertaining to that, not that I can recall. We had mentioned this 14 and the fact I was going to stay 15. That basically was the . conversation." I should indicate at this stage that I do not see that this evidence can be used by the Commission against any defendant other than the Morphett Arms. Its use against that defendant I consider iun detail later. 12. The Commission called as part of its case two officers of its department in Adelaide who gave evidence as to enquiries made by them of hotels and liquor outlets on 30 November 1977 in consequence of the news item in the Advertiser Newspaper of that date. They also testified as to happenings at hotels in respect of the price of packaged beer prior and subsequent to 5 December 1977. There was also much evidence on topics such as market Jeadership, quantities and prices of packaged beer sold at various times by, and the market shares of, each of the hotels in question. However none of this has in the circumstances any relevance to the principal question in issue, namely the existence of the alleged arrangement or understanding, and no counsel placed any reliance on it in final addresses. On the topic of market leadership evidence to the effect that the Royal Oak was the market leader could well have been of significance 1f I was dealing with a concentrated industry, an industry to which the well known United States concept of "anterdependence"could have been applied. However in my opinion the liquor retailing industry was fragmented, and there was no evidence that there was such a relationship between the various outlets as would lead to an expectation that others would "follow the leader". There were at the relevant time 526 hotels and other iiquor outlets in the metropolitan area of Adelaide. The Commission made a survey of 286 of these outlets prior to 5 December 1977 and ascertained that 60 were selling packaged beer at the rate of 15 or more to the dozen. These 60 outlets comprised 36 hotels and 24 laquor stores. There was much diversity of allowance amongst the balance, all of whom were selling at a rate of less than 15 13. to the dozen. MOreover there was no standard price but a variation of only a few cents if more than 12 to the dozen was offered. Alternatively there was a substantial price discount af the sale was on the basis of 12 bottles to the dozen. Of these 36 hotels, 23 of them (including the defendants' 5 hotels) reduced the allowance © 14 to the dozen on 5 December 1977 and 7 subsequently made a similar reduction. The price of this notional dozen varied between $8.95 per dozen and $9.00 per dozen which price differed only slightly if at all from that charged prior to the reduction. Of the other 24 laquor outlets surveyed 22 of them were selling prior to 5 December 1977 at the rate of 14 to the dozen, whilst the remaining 2 sold at 12 to the dozen, but the price was reduced to $7.20 per actual dozen. On 5 December 1977, 18 of these outlets changed to 14 to the dozen at a price of $9.00 per dozen. ec The Commission tendered much evidence as to the advertisements inserted in the daily newspapers by the defendants both prior and subsequent to 5 December 1977. I will deal with the advertisements of each hotel at the time I deal with the case raised for and against them individually. The questions in and answers to the s.155 notices served on the defendants and subsequently on Farrah, Leon Saturno and Tremaine were all tendered in evidence and received subject to a number of objections, to which I will later refer. In essence the answers did not go beyond the facts which I have found proven above, at least in respect of all answers other than those given by Tremaine. He gave in evidence certain explanations of his answers after I had found a case to answer. 14. At the end of the plaintslf{'s case there was a submission ef no case to answer by each of the defendants. For the reasons given on 21 December 1978 I found there was a case to answer in respect of each of the defendants other than the Rex. The Royal Oak elected to call no evidence. Leon Saturno was as abovementioned called on behalf of the Norwood, the Old Lion called Tremaine and the Morphett Arms called one of its directors Mr. King. I have set out the evidence upon which the Commission primarily relies to establish the essential elements of the alleged offences of contravention by the defendants of s.45 of the Act. It is necessary now to consider the relevant portions of the legisation. Section 45 was substantially amended in 1977, but was in the form belowmentioned at the relevant times. The amendments were only of significance in illustrating particular arguments. Section 45 1n so far as it is relied upon in these proceedings 1s in the following terms: "(1) ..- (2) A Corporation shall not - (a) make a contract or arrangement, or arrive at an understanding, 1f - (1)... (22) a provision of the proposed contract, arrange- ment or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or (b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, , before or after the commencement of this section, L£ that provision - (2)... (22) has the purpose, or has or is likely to have the effect, of substantially lessening competition. 15. (3) For the purposes of this soctzon and scction 45A, \ 'competition', in relation to a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed sontract, arrangement or under- standing, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services." The Commission also relied upon the provisions of s.45A(1) as assisting in the proving of its case. It 1s as follows: "(1) Without limiting the generality of section 45, a provision of a contract, arrangement or undecstanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition 1f the provision has the purpose, or has or 1s likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a dzscount, allowance, rebate or eredit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other." Taxrning again to s.45(1) the word "corporation" is defined as meaning inter alia a trading corporation formed within the limits of Australia. There was no dispute that each of the defendants was a trading corporation. As I have mentioned the principal matter in issue 1s whether the evidence is sufficient to establish the existence of an arrangement or understanding. The argument before me ultimately came down to whether I could fand that the parties or any two or more of them had arrived at an understanding. 16. The nature of an arrangement or understanding in the context of the Act (albeiat under s.45 prior to its amendment in 1977) was discussed by the Full Court of the Australian Industrial Court an Top Performance Motors Pty. Ltd, v Ira Berk (Queensland) Pty. Ltd, (1975) 5 A.L.R. 465 an particular per Smithers J. at p.469. Considerable reliance was placed by that Judge on the decision of the Court of Appeal 1n Re British Basic Slag Ltd'd Agreements hoe2| 2 All E.R. 807. The dicta of Daplock L.J. (as he then was) at p.819 was adopted by Smithers J. as stating the essential elements of an arrangement or understanding and such dicta and indeed the whole of the reasoning of Diplock L.J. was subjected to detailed examination before me. Notwithstanding the differences between the English legislation there under consideration, and the amendments to s.45 since the Ira Berk decision, it was generally accepted that this was the most relevant case law. Counsel for the plaintiff however presented a strong argument on the necessary features of the concept of a "meeting of minds" to which I shail refer in due course, In the British Basic Slag case, supra the Court of Appeal unanimously dismissed an appeal against the decision of Cross J. (as he then was) which decision 1S reported at Cis62] 3 All B.R. 247.: It was conceded before me that the essential], informality of an arrangement as stated by Willmer L.J. at p.814 substantially coincided with the view of the majority of the High Court of Australia in Federal Commissioner of Taxation v Lutovi Investments Pty. Ltd. (1978) 78 A.T.c. 4708 at 4712. Waillmer L.d. was in fact referring to an arrangement and not an understanding but his conments are equally 1f not more appropriate and applicable to an understanding under the Australian legislation. He expressed his view as follows in the British Basic Slag case, supra at p.814. 17. "To deal first with the meaning of the subsection, I think ' it as highly significant that Parliament did not see fit to include any definition of 'arrangement'. I infer from this that it was intended that the word should be construed in its ordinary or popular sense. Though it may not be easy to put 1t into words, everybody knows what 1s meant by an ' arrangement between two or more parties. If the arrangement . 1s intended to be enforceable by legal proceedings, as in ' the case where it 1s made for good consideration, it may no doubt properly be described as an agreement. But the statute clearly contemplates that there may be arrangements which are not enforceable by legal proceedings, but Which create only moral obligations or obligations binding 1n honour... For when each of two or more parties intentionally arouses in the others an expectation that he wili act in a certain way, it seems to me that he incurs at least a moral obligation to do so. An arrangement as so defined is there- fore something 'whereby the parties to 1t accept mutual rights and obligations'." , These last two sentences of Willmer L.d. and the emphasis therein on common expectations and mutual obligations, 1f£ applacable' ' to the concept of arrangement or understanding pursuant to s.45 of the Act, are of much significance in this present matter. The corresponding passage in the judgment of the High Court in Lutovi's case, supra relates to provisions of the Income Tax Assessment Act 1936 and appears in the joint judgment of Gibbs and Mason Jd. at p.4712. Murphy J. expressed his agreement with that judgment and the relevant passage is as follows: "In the context of sec.260 an arrangement 18 something less than a binding contract or agreement, something in the nature of an understanding which may not be enforceable at . law (HNevton v Federal Commissioner of Taxation at p.7). A similar view has been taken of an arrangement falling within sec.80B(5) (see K. Porter & Co Pty. Ltd. v Federal Commissioner of Taxation 74 A.T.C. 4093 at p.4100 and Federal Commissioner of Taxation v Students World (Australia) Pty. Ltd. (1978) 78 AlT.c.- 4040). It is, however, necessary that an arrangement should be consensual, and that there should be some adoption of it. But in our view 1t as not essential that the parties are committed to it or are bound to support it. An arrangement may be informal as well as enforceable and the parties may be free to withdraw from 1t or to act inconsistently with it, notwithstanding their adoption of it." 'y 18. The High Court was hearing an appeal from the judgment of the Full Court of the Federal Court reported in (1978) 78 A.T.Cc. 4289 in which Bowen C.J. drew attention to the abovementioned passage from the judgment of Diplock L.J. We also indicated that a number of cases, including the British Basic Slag case, supra had been referred to by counsel and in resgect of them said at p.4292: "Except that the cases referred to emphasize that the common expectations of parties to an arrangement arouse mutual moral obligations, I do not regard these cases as taking the matter very much further." These concepts, be they of mutual awareness, common expectations or mutual obligations,were secon by Diplock L.J. as essential features of an arrangement and the necessary elements of the required meeting of minds. He said in the British Basic Slag case, supra at p.819: "tarrangement' 1s not a term of art; and in s.6(3) of the Act I agree with my lords that 1t bears the meaning that an ordinary educated man would ascribe to at. It involves a meeting of minds because under s.6(1) it has to be an arrangement 'between two or more persons' and, since 1t must be an arrangement 'under which restrictions are accepted by two or more parties' 1t involves mutuality in that each party, assuming he 1S a reasonable and conscientious man, would regard himse2lf as being in some degree under a duty whether moral or legal to conduct himself in a particular way or not to conduct himself in a particular way as the case may be, at any rate s> long as the other party or parties conducted themselves in the way contemplated by the arrangement. No necessary or useful purpose would be served by attempting an expanded and comprehensive definition of the word _ 'arrangement' in s.6(3) of the Act. Cross J. saidl1962_| 3 All E.R. at p.255...'all that 1s required to constitute an arrangement not enforceable in law 1s that the parties to 1t shall have communicated with one another 1n some way and that as a result of the communication each has intention-— ally aroused in the other an expectation that he wiil act in a certain way'," A significant feature of each of the above passages is the emphasis placed upon the necessity for each of the parties to have communicated with the other, for each to have raised an expectation in the mind of the other, and for each to have accepted an obligation qua the other. These are in my opinion the essential elements of the requisite meeting of minds. That a meeting of minds 1s an essential feature of s.45 of the Act was the view of Smithers J. 1n the Ira Berk case, supra with whose reasons Evatt J. expressly agreed. This was a decision of the Full Court of the Australian Xndustrial Court. After citing the first paragraph of the last mentioned passage from the judgment of Diplock L.J., Smithers J. said at p.469: "Section 45 1s not in the same terms as s.6 of the Restrictive Trade Practices Act 1956 which 1s the section ' referred to in these remarks, but by parity of reasoning 1t would follow that the existence of an arrangement of the kand contemplated in s.45 1s conditional upon a meeting of the minds of the parties to the arrangement in which one of them is understood, by the other or others, and intends to be so understood, as undertaking, 1n the role of a reasonable and conscientious man to regard himself as being in some degree under a duty, moral or legal, to conduct himself in some particular way, at any rate so long as the other party or parties conducted themselves an the way contemplated by the arrangement. It seems to me also that an understanding must involve the meeting of two or more minds. Where the minds of the parties are at one that a proposed transaction between I them proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a particular course of conduct, 1t would seem that there would be an under- standing within the meaning of the Act." At the outset therefore it 1s necessary to examine the i evidence for the purpose of determining whether the parties or any of them arrived at an understanding. If such a finding can be made, 1t will then be necessary to determine whether the under- standing 1s such as contemplated by s.45. It is accepted that there well may be no or no sufficient direct evidence of an express arrangement or understanding but that it may be possable to infer 20. a the relevant understanding from carcumstantial evidence. I am of opinion that there 1s positive evidence before me which goes a considerable part of the way towards establishing the existence of an understanding. Accordingly the plaintiff does not have to rely upon deduction from circumstances for every element in the conclusion necessary for its success. It 18 to the extent that such evidence does not go all the way, and is deficient in itself to prove an understanding that I must fall back on circumstantial evidence and inferencesto be drawn therefrom. The occasion of the meeting of minds 1s alleged by the pleadings to have been the Cooper's lunch in respect of all defendants other than the Norwood and the lunch at the Norwood Hotel in respect of the Norwood. Subsequent to the lunches there is the parallel behaviour of the defendants in raising their prices in similar manner on Monday 5 December 1977, However, the direct evidence of the two lunches 1s defacient for the purpose of establishing an understanding. I fand that at the Cooper's lunch and in the presence and hearing of Farrah, Tremaine and Palmer there was a very significant discussion, the very type of discussion which one could anticipate would be the forerunner to the reaching of an arrangement or understanding. There was discussion concerning the sale of packaged beer and the state of the market for that product. In particular there was discussion concerning the unprofitability of the existing level of discounting, and as W.T. Cooper says, "there was obviously some consensus of opinion on that point." Moreover a comment was made by a person whom W.T. Cooper could not name, , that the sooner the 1ndustry was back to 14 to the dozen the better | 21. ut would be for the andustry in general. It was against this background that W.T. Cooper said he heard someone, again unnamed, say that he believed "we will drop back to 14 to the dozen". W.T. Cooper said that he believed a date early 1n December was mentioned and that there was "some talk of it". This evidence was supplemented by the evidence of Tremaine, who stated that 1t was Farrah who made the statement concerning the reduction in the allowance, indicating that he would be reducing his "bonus discount" to 14 to the dozen the first week in December. Tremaine confirmed that this statement was made by Parrah in the course of a general discussion on discounting. In reliance upon this evidence I would fand that by making this communication of his intention to reduce the allowance in the farst week of December Farrah raised an expectation in the minds of the other persons present. Moreover it was an exoectation of a very significant nature, namely that, against the background of the agreed unprofitability of dascounting and the desirability of the andustry in reducing the amount of the allowance, one of the largest discounters proposed to make a specified reduction of the allowance on a nominated date. By arousing their expectations in this way, Farrah placed himself, in the terminology of Diplock L.d, "in some degree under a duty, whether moral or legal, to conduct himself in a certain way". Ilowever before the alleged understanding 1s established it 1s necessary for each of the other parties antentionally to arouse an expectation in the mind of Farrah. As I read the transcript there is no direct evidence that any of the other persons present acted 1n such a way as could be calculated to ce N 22. arouse in the mind of Farrah an expectation that that other person |1 ' would also act in a certain way. It 1s 1n this area that in respect, of each of the defendants the plaintiff has to rely upon deduction from circumstances to establish an essential element of its case, namely the element of commitment by each of the other defendants to the Farrah proposal. A like situation arises as far as the Norivood 1s concerned. There is again evidence that in a discussion on 2 December 1977 concerning discounting generally in the liquor industry, Farrah made the statement that the Royal Oak Hotel would be reducing its allowance from 15 to 14 bottles to the dozen on the following Monday. Such a statement raised the relevant expectation in the mind of Leon Saturno, but there 1s no positive evidence that he did or said anything to indicate what he proposed to do, and thus to raise an expectation in the mind of Farrah as to his future conduct. However the arousal of such an expectation in the mind of Farrah may be inferred from c1rcumstantial evidence. In Porter's case, supra Mahoney J. at p. 4099 emphasizes that the words "enter into a contract, agreement or arrangement" indicate an element of commitment, one to the other, necessary to satisfy the statutory requirement. Having stated that this element of commitment may arise from express statement or actual representation, he goes on to say at pp.4099-4100: "In the absence of such a statement or actual representation, the element of commitment to the course of conduct may be inferred or amplied from the dealings between the parties. The question whether any such anference or implication should be drain in the present case, was, as I understand the argument, the main dafference between the parties in the present case." 23. ' This dAieta is very mich jn point in the matter hefore me, Mahoney J's reference to the necessity for an element of commitment coincides with my view that the arousal of an expectation 15 an essential feature. His statement that the element of commitment may be anferred not merely from dealings but from dealings between the parties highlights the fact that communication of the commit-— , ment to the course of conduct 1s necessary. This necessity for communication was emphasized by Cross J. in the British Basic Slag case, supra, in the passage cited by Diplock L.J. set out above. Moreover, as in the case before Mahoney J., the question before me 1s whether the necessary element of commitment on the part of the defendants other than the Royal Oak or any of them can be inferred or implied. Turning to the evidence, apart from the happenings at the two lunches, for the purpose of determining whether 1t can be inferred that any of the defencants committed themselves to the course of conduct which I find was at least impliedly proposed by Farrah, 1t D will be generally appropriate to deal separately with each defendant, 1f only because much of the evidence is not admissable against r i all defendants. However each of the defendants did in fact decrease its allowance on 5 December; in other words they engaged an parallel action. This 1s significant circumstantial evidence a from which the existence of an understanding might be inferred. But as doubtless 1s true with all circumstantial evidence, the drawing of the relevant inference 1s seldom irresistible. As is the case here, 1t is frequently possible for another explanation of the facts to be given in evidence, for example that the reduction in the allowance was dictated not by commitment to an understanding but by ordinary commercial considerations. However 24. failure to explain the reasons For and circumstances of the parallel reduction encourages the tribunal to feel thal at is "less unsafe to make" the requisite finding; see per Zelling J., 1n Thorogood v Warren (1979) 20 S.A.S.R. 156 at 159. The Commission in the farst instance served upon each of the Gefendants other than the Old Lion a notice pursuant to s.155 of the Act directed to the defendants seeking information in the nature of answers to questions in the notice. The questions were in standard form. The notice which vas doubtless directed to the Old Lion was addressed to "Kevin Lane, Agent Nominee, Old Lion Hotel". I deal separately with this notice later in my reasons. The defendants responded in writing to the notices and in each instance complied with the requirements of s.155(1)(a) that the anformation be furnished "by writing, signed... in the case of a body corporate, by a competent officer of the body corporate". A particular objection to the admissability of these responses was raised by counsel for the Royal Oak and I deal with it in the succeeding paragraph. At the time I ruled that the responses were admissible but only against the corporate body prowiding the information. Subsequently to the receipt of these responses the Commission served further notices upon three of the persons who signed as "competent officers" and who had each been personally present at one or other of the lunches. These persons were Farrah, Leon Saturno and Tremaine, and the questions which were answered dealt primarily with happenings at the lunches. In respect of these responses there were further objections on the ground that there was no or no sufficient evidence from which I could infer authority to speak on behalf of the bodies corporate. I ruled that in the then state of the evidence of the position each held in his company, combined with the fact that each had been held out ; by hzs company as " a competent officer", there was sufficient evidence from which I could infer that each had authority to speak 25. on behalf of his company in respect of happenings at the respective lunches. There was of course further evidence on the part played by Leon Saturno and Tremaine in the management of the particular defendants, and as to Tremaine,objection was pressed again by counsel for the Old Lion in his final address. I should now refer to a particular objection raised by counsel for the Royal Oak, namely that the responses, in this case the answers, having been given under compulsion of law are not evidence against the defendants. He cited in support of his submission the case of Ex parte Gerard & Co. Pty. Ltd. (1944) 44 S.R. (N.S.W.) 370 and in particular Jordan C.J. at p.376. In Fraser Henleins Pty. Ltd. v Cody 70 C.L.R. 100 Latham C.J. referred to the fact that in the former case the answers were made under compulsion as a ground for distinguishing that case from the matter before him. However in my opinion the fact that Lipman, a director and manager of a section of the business of the appellant company in Ex parte Gerard, supra gave the answers under compulsion was not a factor which by itself determined that his answers were not properly receivable in evidence against his company, but rather as indicating that the answers were given in circumstances outside of the ordinary course of his limited authority. The Learned Chief Justice referred to this fact in identifying the answers under consideration, but thereafter, as I read the case, neither referred again to this fact nor placed any reliance thereon as a basis for his decision. The fact of compulsion did not conclude the question of admissability but rather was one circumstance which established that the manager was acting outside of his authority. In respect of the answers given by Tremaine, Leon Saturno and Farrah to the notices addressed to them there was evidence from which 26, I was and still am prepared to infer that each such person had authority to make the admissions on behalf of the defendant with whom he was associated. There is as I have said subsequent evidence which 18 relevant on this question of authority, and no subsequent evidence that they or any of them exceeded their authority. Subject to what I have to say later in respect of the notice addressed to "Kevin Lane, Agent Nominee, Old Lion Hotel" I am of opinion after ' consideration of the arguments presented before me that the answers to' the s.155 notices addressed to the companies are adinissions binding on the companies whose officers gave the responses. However they are evidence only against the particular company and not against any 1 other defendant. Being admissions this evidence is receivable against the other \ parties only if iat can be said to relate to something done in further-! ance of the common purpose (Cross on Evidence 2nd Australian Edition p.519; Trapodi v R. (1961) 104 C.L.R. 1 at p.6). The making of admissions was no part of the common purpose on any view. Also I do not see that the provisions of s.84(2) of the Act are relevant on this oint being restricted to "acts" performed on behalf of companies and Pp iP not extending to "admissions". Having been admitted in evidence against the particular defendant . making the admission, the question arises as to the use which can be | made in favour of that defendant of self-serving statements. I refer to the conflict of judicial and text book opinion on this topic ' discussed in Lopes v Taylor (1970) 44 A.L.J.R. 412 especially per Menzzres J. at p.417, and Gibbs J. at p.421. However it seems to be generally accepted that I am not obliged to attach the same weight to , all parts of the admission. In this particular matter the problem is | doubtless resolved for me in that in tvo instances the self-serving statements *=re corroborated on oath and in the other instance in 27. determining the weight to be attached I can have regard to the failure' of the maker of the statement to give evidence. Additional evidence in respect of the Royal Oak is to be found in the answers to the s.155 notices addressed to that company and Farrah. Each of these answers refers to the happenings at the two lunches and the answers of Farrah personally are restricted to such happenings. They are confirmatory of the evidence recounted to date as is the evidence Leon Saturno gave of the Norwood Hotel lunch and Tremaine of the Cooper's lunch. There 15 also evidence from which I can infer that the Royal Oak was the largest discounter (in fact it sO! advertised itself). Without doubt Farrah on behalf of the Royal Oak by his statement committed his company to reducing its allowance on 5 December 1977 an the context of a discussion where the statement was virtually an invitation to others to do likewise. Moreover in the laght of the consensus of opinion on the unprofitability of the current allowance and the statement that "the sooner the industry was back to 14 to the dozen the better", Farrah must have had an expect-— ation that it was probable that the other hotels represented at the lunch or at least some of them would follow his hotel. However no prior conduct was proved as a basis for a submission that such conduct r warranted this expectation. It 1s significant that his statement followed the discussion concerning the state of the industry, (and did not initiate the discussion) and thus takes colour from what had gone before. Farrah's visit to the Norwood Hotel, in company with the same representatives of the Royal Oak who had attended the Cooper's lunch, on the last weekday prior to the date of the alteration where he \ repeated the statement in the same context of the state of the dis- counting business 1s to me confirmatory of a desire to influence other people, and particularly large discounters such as the Norwood, to Follow his Lew 28. When this evidence 1s combined with the fact that all of the hotels, to representatives of each of which he made his statement, an fact did make the alteration on 5 December, 1977 it seems to me that there are objective facts on the basis of which the inference that there was a meeting of minds between the Royal Oak and one or more of the other defendants is open to be drawn. There 1s of course the statement of Farrah in his s.155 answers to the effect that the verbal response from Leon Saturno,Tremaine and Palmer was in each instance non-committal. However I do not attach a great deal of weight to this self-serving statement (except to the extent that it 18 corroborated) in that 2t 1s not made on oath nor subjected to cross-examination. In any event a verbal response is not the only way a commitment could have been communicated. The fact that Farrah did not himself give any explanation of his conduct makes it "less unsafe" for me to draw an anference. I refer to what I have to say subsequently in respect of the farlure of Palmer to give evidence and do not repeat it here. Counsel for the plaintiff strongly argued that it was not essential in proving an understanding for the evidence expressly or by inference to establish the element of commitment on the part of anyone other than Farrah. He said that the presence of the words "arrived at" inserted by the 1977 amendment indicated that mutuality need not necessarily exist between the so called parties to the understm ding. It was in his submission sufficient for him to establish that Farrah placed himself under an obligation to other persons, and that those other persons subsequently in his absence and without his knowledge arrived at an understanding with him, which understanding was not required to be communicated to Farrah. Inherent in this submission is the fact that whilst Farrah 29. 12s required to have placed himself under an obligation to the other parties to the alleged understanding, it was not necessary for them to have placed themselves under an obligation to him. In presenting this submission there was in counsel's submission a clear difference between the making of an arrangement which required mutual obligations and the arrival at an understanding which did not, Mr. Russell pressed strenuously this submission but he was unable to draw my attention to any authority in support. He acknowledged that this construction was contrary to the views expressed in the Ira Berk case, supra but very properly used the subsequent amendment of s.45 an an attempt to distinguish that case. As I have said he based this argument on principles of statutory construction, the deletion of the words "entered into" and substitution of the words "arrived at" by the 1977 amendment of s.45(2). Additionally by that amending act "arrived at" by s.4 "includes in relation to an understanding; reach or enter into". It 185 to my mind significant that the words "entered into" which were simultaneously deleted by s.45(2) are repeated in the definition. Moreover the additional vord "reach" 1s included. Prima facie 1n my opinion an understanding 1s reached by two persons each with the other and there 1s no suggestion that it can be unilateral. Wathout doubt the amending of s.45(2) subsequent to the Ira Berk decision is significant and is an important factor an deciding what 1s entailed in "arriving at an understanding". However 1n my opinion it does not assist the interpretation contended for by lir. Russell. He desires to remove from the notion of arriving at an understanding the element of mutual obligations, which obligations are in my view of the authorities 30. the essential feature of an understanding and not of the means whereby the understanding is "made", to use a neutral expression. The essential elements of an understanding are the same, whether it be reached, arrived at or entered into. Moreover there can not be, on the authorities, an understanding unless each has aroused in the other an expectation, and I do not see how A can arouse an expectation in the mind of B unless there is some form of communication verbal or otherwise flowing from A to B. In my opinion by making the amendment subsequent to the Ira Berk decision the most that can be said is that the legislature intended to expand the means whereby an understanding could be achieved. It did not have in mind altering the essential features of an understanding, one of which is the necessity for communication, Rather it sought to emphasize that the method of achieving the necessary meeting of minds was ammaterial. It may well be that the notion of "entering into an understanding" postulates the concept of this occuring at a particular moment of time between two persons in each others presence whereas an understanding may be arrived at over a subsequent period when for example by a series of acts the proposal 1s adopted by the other party. However in my view it continues to be necessary for the adoption of the proposal to be made known in some way to the proposer, othervwise the latter will be unaware whether an understanding has been achieved. Until the proposer becomes aware, I do not see how any expectation can in the ordinary course be raised in his mind as to how the adopter will act. I exclude of course the situation in which pre-existing circumstances such as price leadership or anterdependence are such that the proposer has some grounds for assuming that once he proposes, his proposal will be adopted unless 31. he 1s notified to the contrary. In my opinion therefore Mr. Russell's submission is unacceptable and I must review the evidence for the purpose of determining whether commitment on the part of all or any of the other defendants has been proved positively or inferentially. Moving now to the position of the Norwood, I consider what evidence 1S avazrlable from which I might infer that it arrived at an understanding with the Royal Oak to reduce its allowance and that on 5 December 1977 1t gave effect to such an understanding. As I have found, there 1s no direct evidence that at the lunch on 2 December 1977 it committed itself to the reduction mentioned by Farrah or raised any expectation in the mind of Farrah that 1t would reduce on that day. In the answers of the company and Leon Saturno to their respective s.155 notices they confirm in effect that the reply of Leon Saturno to Farrah's statement was non- ' committal. I reach therefore the situation that there was in effect! | an invitation on the part of Farrah to Leon Saturno to arrive at and subsequently give effect to an understanding to reduce the allowance on the necessary Monday. But there is no diréct evidence of any commitment on the part of Leon Saturno. However the ' tr Norwood did in fact on the Monday reduce its allowance in conformity; I with the Royal Oak. These are objective facts from which it 1s ; open to me if I consider 1t appropriate to draw the inference that an understanding was reached at the lunch and that on 5 December 1977 the Norwood gave effect to that understanding. However, in this instance there was additional evidence placed before me, and in particular Leon Saturno gave evidence that he 32. did nothing to raise an expectation in the mind of Farrah and that the reduction of Lhe allowalice Was dictated by commercial consider- ations and not an understanding with Farrah or anyone else. Leon Saturno denied on oath that he did or said anything which could have raised or was intended to raise Farrah's expectations. This evidence confirms the unsworn statement of Farrah that he merely said "that's interesting" and no more. There 1S no reason for me not to accept this evidence. In addition he gave evidence that 1t was the practice of himself and his brother to watch advertisements in both newspapers and television and also signs outside hotels for the purpose of ascertain- ing their prices. He said he was aware on 2 December 1977 of the Royal Oak's advertisements to the effect that a change 1n respect of beer prices was in the offing, and that such was to be expected at that particular time of the year. He said that he and his brother an consultation had by 30 November 1977 made a decision to change their prices but they had not decided upon the date or amount of the change, The fact that the Norwood Hotel inserted an advertisement in the Advertiser Newspaper which appeared on 1 December 1977 which for the first time contained the statements "Beat the Christmas rush" and "Time 1S running out on beer discounts" 1s confirmatory of this evidence of Leon Saturno. It 1s also significant that this advertise— ment appeared prior to the luncheon with Farrah. There wags also evidence from Mr. Weir, an officer of the Commission, of a visit to the Norwood Hotel on 30 November 1977. In reply to his question, two employees in the drive-in bottle department indicated that beer was selling at fifteen to the dozen, but would be fourteen to the dozen on the next Monday. In my opinion this evidence is admissible in that the employees were acting within 33. the scope of their employment in answering enquiries as to the price of beer. It confirms that a decision had been made prior to the lunch with Farrah. The statement of one of the employees that "all hotels are doing it" is 1n my opinion inadmissible against the Norwood, , in that there 1s no evidence that the employee had authority to make such an admission which 1s prima facie outside the scope of his employment. On 5 December 1977 the Norwood Hotel did not reduce the dascount forthwith upon the opening of the hotel, but at approximately 11.00a-.m., ' Prior to that time a telephone check was made of a number of hotels as to the allowance they were making,and Leon Saturno and his brother drove to a fev.' of the larger discounting hotels to check their allowances. I accept this evidence of Leon Saturno as supplying an alternative and plausible explanation of his parallel behaviour and as establishing the existence of another inference which could be drawn from the facts, which other inference is consistent with his contention that he was not a party to an understanding with Farrah. Turning to the evidence against the Morphett Arms, I have already referred to the presence of Palmer, a director of that company and with other hotel interests, at the lunch, and his visits to Mr. Ritchie and Mr. Richards. There are also the responses to the s.155 notice directed to that defendant, which do not greatly assist (except to the extent that one answer 1s as belowmentioned defective). The Morphett Arms did not at the relevant time engage in advertising in the newspapers. There was evidence given by Mr. King ("King"),a darector of the Morphett Arms and the person who made the responses on its behalf. Palmer did not give evidence. At the time of the submission of no case to answer I was of opinion that there was insufficient evidence from which I could anfer that Palmer being merely a director and secretary of the 34. Morphett Arms, could speak on behalf of that company. There was no evidence that he had any 1nvolvement in an executive capacity or in the making of day to day decisions. However I was of the opinion at that time that the acts of Palmer in making the visits and extend-' ing the anvitations were acts undertaken on behalf of the Morphett Arms. I set out in my reasons my tentative grounds for making this finding ,and after hearing further evidence and much argument on s.84 (2) and its proper construction I confirm that finding. In my opinion s.84(2) can also be used for the purpose of making a finding that the Morphett Arms was present at the Cooper's lunch on 22 November 1977, 1n the person of Palmer. It was a lunch to which people were invited in consequence of their interests in the liquor andustry, and there was no suggestion that any guest was anvited for any other reason. Admittedly Palmer had an interest in hotels other than the Morphett Arms, but there 21s no basis for a finding that he left that particular hat at home when he attended the lunch. In the absence of evidence from him, 1t 1s reasonable to infer that, 1t being a lunch of people interested in the liquor industry, he was there because of his involvement with a number of hotels, including the Morphett Arms Hotel. In consequence of the construction I have placed on s.84(2) it 1s nothing to the point that his action 1n being present may not have been authorised by the company or known to King. However in my opinion there is by virtue of the evidence of King justification for a finding that Palmer was sufficiently involved in the management of Morphett Arms to have authority to speak on its behalf, particularly on matters of pricing. That company employed a manager in the Morphett Arms Hotel, and its board of directors comprised, King and his wife,and Palmer and his wife. There is no suggestion that Mrs. King or Mrs. Palmer were 'y 35. other than non-executive directors and there was no managing director. The manager was not a director and was subject to instructions from King and Palmer, who was also the secretary. King's evidence was to the effect that decisions were made by ham and Palimer and that they had informal discussions together four to five times each week. In particular he said that they discussed matters relating to discounts in the hotel trade three or four times a week. In so far as the management of the company's activities was by its articles of association vested 1n the board of directors, this management was conducted by these two directors except to the extent that such Management was delegated to the manager of the hotel. The manager did not have the right to f£1x prices. Such decisions were made by the' two directors in consultation with him. Palmer was certainly actually. concerned in the management of the company, at least in respect of pricing, which activity would include the granting of discounts and allowances. In these circumstances I am of opinion that Palmer had authority to speak on behalf of the Morphett Arms 1n respect of those activities of the company relating to prices, discounts and allowances. Palmer gave no evidence of this authority and King did not deny it. In these circumstances I am of opinion that the statements made by Palmer in his ainterviewswith Mr. Ritchie and Mr. Richards are admissible as evidence against the Morphett Arms. These statements are thus additional objective facts which support the drawing of the relevant inference. The position therefore is that Palmer was present at the lunch as a director of the Morphett Arms,and sufficiently involved in management to make statements or lake actions prima facile binding on the company. There 1s no evidence from him as to the 36. part he played at the lunch. There is the evidence from Tremaine that no other person made any verbal response. However a verbal response is not the only method open to Palmer to raise an expectation in the mind of Farrah. This evidence recounted to date, and in particular Palmer's admissions in the interviews that certain companies had made an agreement to reduce the allowance on 5 December 1977, combined wath the fact that the Morphett Arms reduced its allowance on that day, provide sufficient objective facts from which the relevant inference might be drawn if there 1s no acceptable explanation. A further significant fact is the failure of Palmer to give evidence, and in this regard I would refer to the statements of Cockburn C.J. in McQueen v Great Western Railway (1875) L.R. 10 Q.B. 569 at p.574 and Menzies J. in Jones v Dunkel (1959) 101 C.L.R. 298 at p.312. There 12s no explanation why Palmer failed to give evidence and thus I am entitled to infer that his evidence would not have helped the Morphett Arms case. This anference 1S particularly appropriately dravn when the facts are peculiarly within the knowledge of the silent party (Tozer Kemsley & Millbourn (A'Asia) Pty. Ltd. v Colliers Interstate Transport Service Ltd. (1956) 94 C.L.R. 384 per Fullagar J. at p.403. King as mentioned above gave evidence as to the manner in which the Morphett Arms made its decision to reduce its allowance. He recounted that it was a joint decision of himself and Palmer and that they discussed the matter on a number of occasions. He said, however, that he was not aware of the happenings at the Cooper's lunch nor that Palmer had made a visit to Mr. Ritchie and proposed making a visit to Mr.Richards. This I find very hard to accept in the absence of corroboration (which was available but not availed of) 37. particularly as King indicated how closely he and Palmer worked together. Moreover the answer to the fifth question in the s.155 notice signed by King on behalf of the company is defective in that 1t necessitated King making enquiries of officers of the company. This question,in so far as relevant,enquired whether since 1 November 1977 any officer of the company had any communication with any officer of a retail iiquor outlet concerning the price of beer supplied by the company, the retail liquor outlet or any other outlet, the discount or allowances of those bodies or any proposed changes to the prices, discounts or allowances. King stated in his response that he had no communication of the nature referred to and that he was not aware of any such communication on behalf of the company. It appears he either failed to make enquiries or 1f he did he either secured no information or failed to pass the information on to the Comm2ssion. I also find the evidence of King unsatisfactory when he attempted to recount the enquiries made (or directed to be made) prior to the making of the change on 5 December 1977. Additionally, I can not accept King's explanation concerning the making of the change as supplying a reasonably plausible alternative explanataon. I am not prepared to find that the change by the Morphett Arms was dictated only by commercial considerations and without reference to the activities of Palmer. I turn nov to the evidence which relates to the involvement of the Old Lion. Tremaine, general manager of the hotel until 1 July 1977 and still closely involved in management thereafter, was present at the Cooper's lunch and he heard Farrah's intimation as to what his hotel proposed to do. In consequence there 1s no 38. doubt that an expectation was raised in the mind of Tremaine. In fact Tremaine said in evidence that he left the lunch in a state of enthusiasm about Farrah's comment, Again there 1s no direct evidence that Tremaine at that lunch committed himself to follow Farrah's proposal, or gave any indication at all as to what action his hotel would take, 1f any. In suppoct of this there is W.T. Cooper's evidence to the effect that he did not hear any response from other persons at the lunch. This evidence accords with that given by Tremaine durang the hearing to the effect that he did not reach any understanding with Farrah at the lunch or at any other time. Howaver I treat Tremaine's evidence with considerable caution. He stated that he had given incorrect answers to the first s.155 notice but, as will subsequently appear, I am not satisfied with his explanation. His justification for the making of the statement which he no. contends to be false, and which in effect he called 'fan intelligent lie", does not ampress me in the least. The first s.155 notice answered by Tremaine was directed to, "Kevin Lane, Agent Nomznee, Old Lion Hotel, Jernangham Street, North Adelaide. S.A. 5006". This notice was answered by Tremaine and signed by him as "general manager of the Old Lion Hotel". It was contended that these answers were not binding on the Old Lion defendants in that the notice was not directed to them and Tremaine had no authority to answer on their behalf. I accepted the notice and the answers subject to objection at the time of tender. Counsel for the Old Lion submitted chat although early in the proceedings I had andicated that on the evidence then before me I was prepared to infer that Tremaine had authority to bind the Old Lion by his ansvers, Tremaine's evidence should have satisfied me that he did not have actual authority. In my opinion the further evidence confirmed rather than denied my earlier finding. There 1s evidence 39. upon which I am entatled to find, and I do find, that the answers of Tremaine are binding on the Old Lion defendants. There was evidence establishing that Kevin Lane, to whom the notice was L directed and upon whom 1t was served, was the nominee of these defendants pursuant to s.55 of the Licensing Act consequent upon a notice of re-entry having been given. He was also the night manager in charge of the dining-room, the underground Dar and two main bars. Kevin Lane brought the notice to Tremaine, who told the court that he undertook to effect the reply as over the years he had generally handled any dealings or correspondence with the Licensing Court, the City Council or other statutory bodies. There was evidence as to the involvement of Tremaine in the management of the hotel and in decision making, although he did not have the final say subsequent to the appointment of Mr. Sangster as managing director. In the absence of other evidence I am entitled to find that he , had authority to answer these questions and that he was a competent person to sign on behalf of the defendants. There was no evidence ; from the managing director or any other director denying Tremaine's , competence or authority or disavowing the response as the response of all the companies who comprise the Old Lion defendants. For the reasons given earlier when I was considering s.155 notices generally, I find that Tremaine's answers to the second s.155 notice directed to him personally are binding on the Old Lion defendants to the extent that they refer to happenings at the Cooper's lunch. In answer to questions 5 and 6 of the first s.155 notice directed as I have found to the companies Tremaine answered as follows: "During recent months the Shareholders of this Company have been concerned regarding the long term impact of discounting on the liquor industry. As such, there have been a number of meetings at our own Management and Directors level to discuss this issue. 40, On or about Movember 22nd, the writer attended a social luncheon at Coopers Brewery (this 185 a regular event for members of the industry) and, on this occasion, one of the guests present was a Mr. Peter Farrar (sic) of the Royal Oak Hotel. In conversation Farrar advised that his company had made the decision to reduce thelr discounting operation to 14 to the dozen the first week in December but did not express any reason why. On my return to the Lion Hotel. I advised my Managing Director, Mr. Howie Sangster, of the decision made by the Royal Oak and we decided that this would be an ideal opportunity to reduce our discounting arrangement. Accordingly, we re-scheduled our advertising ~ effective Monday, December 5th and reduced our 'bonus bottles' to 14 to the dozen on all beer products." In his evidence before the court Tremaine said that the unformation in the last two paragraphs was not correct and that a firm decision nad been made to change the discounting rate early an November. That decision having been made, the relevant advertising copy, he sazd, had been changed. His explanation was that he belzeved the enquiry related almost entirely to the newspaper story of 30 November 1977 1n which he said he placed no credence. He said that unfortunately he had placed very Little significance on the Trade Practices Commission's enquiry because he assumed it hung entirely on the newspaper story so "it tended to be an antelligent answer to get them off my back". Such irresponsible behaviour does no credit to him or the Old Lion, and there is much justification for treating his subsequent evidence with caution 1f not suspicion, In general I am not prepared to accept his evidence unless 1t is either corroborated or confirmed by oral evidence or other material before me. This other material comprises advertising both in newspapers and on television and the contemporan- eous instructions given to the advertising agents. To some extent this confixms Tremaine's evidence to the effect that the Old Lion had made some decisions prior to the Cooper's lunch to aoe 41, reduce the discount, but I must confine this fandzng to Cooper's beer. To make this finding does not mean that I accept without reservation either Tremaine's statement in the s.155 response or his evidence given in court as to when and what decision was made to change the rate of discount. Neither story is wholly acceptabie. It seems to me after considering all the evidence that it is more likely that the true position is that the Old Lion had made a decision prior to the Cooper's lunch to change at least its Cooper's allowance early 1n December, but probably had made no firm decision in respect of West End or Southwark Beer. It's television advertisement to the effect that its offer of 16 to the dozen of Cooper's beer "closes 3.12.77" is confirmatory of this being the case. The instructions for the television advertisement an this form bear date 17 November 1977 as the date upon which they were typed. These instructions were given to the television station on 18 November 1977 for televising 1n the week commencing 20 November 1977. Whether the advertisement was in fact shown before the Lunch on 22 November 1977 1s unclear on the evidence. After hearing of the intentions of the Royal Oak, Tremaine returned "with enthusiasm" to report to his managing director that the latter company would also be reducing its allowance and at approximately the same time. The Old Lion 1n consequence decided to reduce its allowance for West End and Southwark products and that the allowance for all its packaged beer would be 14 to the dozen. This decision was made on the day of but subsequent to the Cooper's lunch. It seems to me that this 1S evidence which, albeit with some hesitation, I should accept as going at least some distance towards explaining the parallel behaviour of the O1d Lion on 5 December 1977 an reducing its allowance. One further matter should be mentioned. It was alleged that the understanding between the defendants other than the Norwood was arrived at at the Cooper's lunch. The plaintiff did not plead that 1t occurred on any Jater date and there 1s no evidence of any communication between the Old Lion and the Royal Oak subsequent to the lunch. In the circumstances there can be only one question, namely whether Tremaine reached an understanding with Farrah at the Cooper's lunch. This inference I am not prepared to draw in the circumstances that Tremaine has given evidence and been subjected to cross-examination and there 1s corroborative evidence of his contention that a decision had been made prior to the lunch to make a change. I have set out the circumstantial evidence in respect of each group of defendants. The question now arises for consideration in respect of each of the defendants whether I am prepared to draw the inference that it 1n some way raised an expectation in the mind of Farrah, and thus arrived at an understanding with him. It seems accepted that the requisite degree of satisfaction is the civil test, namely the balance of probabilities. However I accept the submission of counsel for the defendants, and not disputed by counsel for the plaantiff, that I should pay regard to the gravity of the matters 1n issue on the ground that the graver the allegation the greater should be the strictness of proof required. In this regard I was referred in particular to Briginshaw v Briginshaw (1938) 60 C.L-R. 336 at pp.347, 353, and 362. Moreover it 1s perhaps of some Significance that the fines for offences under the Act are very much less than the maximum sum I am empowered to award by way of pecuniary penalties. There as one other matter, and that is whether I should be 43. prepared more readily to draw an inference 1n a civil matter. In this regard I am assisted by, and with respect adopt, the distinction referred to by Gibbs J. in TNT Management Pty. Ltd. v Brooks (1979) 23 A.L.R. 345 at p.349 between criminal and civil proceedings in the case of circumstantial evidence. I refer to the whole of the passage in the last paragraph of that page, and in particular to the extract quoted from Bradshaw v McEwans Pty. Ltd. (1951, unreported) cited in Luxton v Vines (1952) 85 C.L.R. 352 at 358 as follows: "The difference between the criminal standard of proof an its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof 1s not available, at 1s enough if the circumstances appearing in evidence give rise to a reasonable and definite inference; they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them 1s mere matter of conjecture... But if circumstances are proved in which it 1S reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, 1t 1s not to be regarded as a mere conjecture or surmise...." It seems to me therefore that in so far as these proceedings are civil in nature, I should be more prepared to draw the inference sought by the plaintiff than 1f£ they were criminal. However again it 1S appropriate that I have regard to the gravity of the matters an issue. I now turn to the objective facts upon the basis of which I am invited to draw the relevant inference against the first named defendant. They are, the making of a statement by Farrah during the discussion at the Cooper's lunch in such a way as to raise an expectation in the mind of other persons present. It was,in contradistinction to a price decrease, obviously in that defendant's aunterest that other hotels follow suit and in the context in which 44, zt was made it was virtually an invitation to them to do so. Farrah as representing the market leader was giving a lead, and his visit to Leon Saturno can be seen in this light. Whether or not Farrah and through him the first named defendant was a party to an under- standing depends upon whether or nor any other person raised an expectation in his mind. He has not given evidence to the contrary, and this 1s a matter which encourages me to draw the inference that at the lunch some person indicated his attitude. Obviously my ultimate finding 1n respect of the Royal Oak must depend on my finding as against the other defendants and I defer making the former finding until I have considered the position of the other defendants. As to the Morwood, in all the circumstances, I am not inclined to draw the relevant inference. Leon Saturno has from the witness box given not only a denial of having raised any expectation in the mind of Farrah at the Norwood lunch, but most importantly he has given a reasonably plausible explanation of the Norwood Hotel's parallel behaviour. My task is more difficult when I come to consider the Old Lion. I have already dealt at some length with the reasons why I have concern in accepting all the evidence of Tremaine if not otherwise corroborated. He told us that he did not make anything other than a non-committal reply atthe lunch,and this 1s confirmed by the evidence of W.T. Cooper. There is no evidence that he or anybody else on behalf of the Old Lion had any subsequent communication with Farrah ox the Royal Oak. There 1s of course the 01d Lion's parallel behaviour, but on balance, albeit with some hesitation, I feel that I can accept that there was before the court a reasonably plausible explanation, sufficient at least to show that the probabilities are that there was no understanding with Farrah or any other person. There 1S acceptable evidence that the Old Lion had made, prior to 22 November 1977, plans to change its allowance on Cooper's Beer (its largest discount line). In these circumstances the explanation 1s available that the only consequence of the Cooper's lunch was to encourage the 01d Lion to extend the reduction of the allowance to West End and Southwark packaged beer because of what it had heard of the intentions of the market leader. In these circumstances I am not prepared to drayv the inference that Tremaine raised an expectation an the mind of Farrah at the lunch or shortly thereafter on behalf of the 01d Lion and thus arrived at an understanding with the Royal Oak. It follows that by reducing its allowance on 5 December 1977 zt was not giving effect to an understanding. I have already referred 1n some detail to the available objective facts ian respect of the Morphett Arms. In my opinion the anference could be drawn that it arrived at an understanding with Farrah in that Palmer raised an expectation in his mind at the Cooper's lunch. The drawing of this inference against each of them could be reinforced by the subsequent conduct of each, but I do not rely upon the subsequent conduct of each as evidence against the other except in respect of the parallel conduct of reducing the allowance on the same day. As against the Morphett Arms the court has not had the benefit of a denizal by Palmer of a commitment having been reached at the lunch or heard from him on the matter of the visits, and the evidence of King if anything increases the necessity for an explanation. I find it very hard to accept King's evidence that he was not informed by Palmer of the happenings at the Cooper's lunch or of Palmer's subsequent visits to Mr. Ratchie and Mr. Richards, notwithstanding their many discussions. If he was not told anything by Palmer, that in itself needs explanation. It 1s on his own story so surprising as to be unacceptable without corroboration from Palmer. I am not satisfied that King's evidence provides a reasonably plausible explanation of the | Morphett Arm's parallel conduct. I therefore am prepared to draw the inference that the Morphett Arms did arrive at the relevant understanding with Farrah. In these circumstances my findings on this aspect of the case are that the Royal Oak and the Morphett Arms did arrive at an under- standing on 22 November 1977 and did on 5 December 1977 give effect to that understanding. I am not prepared to find that the Norwood or the Old Lion either arrived at the understanding alleged or gave effect to such an understanding. As my order ultimately must be that the plaintiff's claim against the Norwood, as well as the Old Lion, be dismissed, 1t 1s proper that I should at this stage refer to the attack which counsel for the Norwood made upon the Act, and its administration by the plaintiff and 1ts officers. This attack received some publicity in at least one da1tly newspaper. As to the policy of the legislature an enacting partacular provisions of the Act, this 1s obviously not a matter for this court or of any relevance in these proceedings. Counsel also complained of the conduct of the plaintiff and its officers in the investigation of the carcumstances of this matter and the Launching and carriage of these proceedings. It 15 proper that I should say that I see no justification for those complaints. The matter has to the extent of my knowledge been conducted with complete propriety. Having concluded that two defendants arrived at an understanding; 1t 2s necessary to determine whether it 1s such as to come within the scope of ..-45. This section is directed against understandings, t 47. a provision of which "has the purpose, or would have, or be likely to have the effect of substantially lessening competition". I shall hereafter identify this purpose or effect as "the relevant purpose". In the early stages of these reasons I set out in full s.45(3) and s.45A. Each has to be considered 1n determining whether the plaintiff has established that the understanding had the relevant purpose. In referring to the provisions of these sections or parts thereof, I have hereafter extracted only the words which have relevance to the facts of this matter. Section 45A(1) assists the plaintiff to discharge its onus in that it provides that 1f the understanding conforms with the requirements of that section 1t 1s deemed to have the relevant purpose. The first requirement is that the understanding contain a provision which has the purpose of, or has, or is likely to have the effect of ,"fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of the price for, or a discount allowance, rebate or credit" in relation to the supply of goods. These purposes and effects, which I shall refer to as "the relevant sub-purpose", all relate to price fixing whether achieved directly or indirectly. If the plaintiff establishes that the understanding has the relevant sub-purpose of price fixing it is, subject to what I say later concerning "competition between the parties", deemed to have the relevant purpose l.e. substantial lessening of competition. Counsel for the first defendant contended that the purpose or effect of the understanding was not the relevant sub-purpose of price fixing. He submitted that its purpose or effect was to change the selling base of packaged beer from 15 to 14 bottles to the dozen. 48. Wovever, 1n my opinion it was of the essence of the understanding that notwithstanding the alteration of the selling base, the price for the notional dozen would remain virtually unchanged. Thus it was, at least indirectly, a means whereby an increased price was fixed. Before me, the consequence of what was allegedly achieved by the understanding was called"the fixing of an allowance", but whether it be this, or more correctly the faxing of a price, discount or rebate is ammaterzal. The result of the understanding was to increase the price of each individual bottle of beer and thus, at the least, the effect of the understanding was the relevant sub-purpose. In my opinion the plaintiff has satisfied the first requirement of s.45A. The section hovever additionally provides that the understanding 1s only deemed to have the relevant purpose af the price fixing relates to goods supplied "by the parties to the understanding... or by any of them... in competition with each other". In this present matter 2t appears that at will be necessary to determine whether the Royal Oak and the Mocphett Arms are in competition with each other. Section 45(3) defines "competition" in s.45 and s.45A as "competition an any market in which a corporation that 15 a party to the... understanding... supplies goods". It will therefore also be necessary to derine the nature and area of the relevant market. What I have set out above in relation to s.45(3) and s.45A doubtless oversimplifies what I see as difficult questions of construction. The application of and interaction between these sections 1S not easy to determine, parti ailarly an circumstances where there are more than two parties to an understanding who are not ail 1n competition or all supplying goods in the same market. The first question 1S to determine the meaning to be attached to the words "by any of them... in competition with each other" in s.45A(1). Counsel 49, for the Morphett Arms contended that the deeming provisions of that section could have no application unless all parties to the understanding were in competition with each other. Alternatively, the section could only be availed of an respect of those parties to the understanding who were in competition. These arguments were of significance in the case of his client, as he contended 1t was not in competition with any of the other defendants. This construction of the section may well be correct, though there are in my view substantial arguments to the contrary. However the facts df this matter do not require a decision on these questions of construc- tion, as I have found only two defendants to be parties to the under- standing. As the plaintiff relied exclusively on s.45A(1) to establish the relevant purpose, 1t follows that it must prove that these two defendants were in competition with each other. Section 45(3) defines the word "competition" in s.45A as meaning "competation in any market in which a corporation that 1s a party to an understanding supplies goods". Again counsel for the Morphett Arms submitted that what the legislature had 1n mind was i a market in which ali the parties to the understanding supplied goods. He based his argument on the use of the words "a corporation that 1S a party", contending that the words "any corporation" would have been more appropriate 1f fewer than all the corporations was antended. However in my opinion,this argument is not well founded. The expression "the corporations" or "the parties to an understanding" would doubtless have been used, as it 1S in s.45A, if it was antended to cover all parties. It follows that in my opinion it 12s not : necessary that the market be a market in which all parties to the understanding supply goods. In the present matter however as there are only two parties to the understanding, for practical purposes 1t 1S doubtless necessary that they supply goods ian the same market so as to compete each with the other. 50. But all that the plaintiff 1s required in my opinion to establish, ' for the purposes of s.45(3) 1s a market in which either the Royal Oak or the Morphett Arms 1s supplying goods. The word "market" 1s defined in s.4E of the Act as follows: "AE, For the purposes of this Act "market" means a market in Australia and when used ain relation to any goods or services includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first mentioned \ goods or services." It is generally accepted that there are in fact two markets, the product market and the geographic market. The definition indicates that the product market includes goods that are substitutable for the particular products under consideration. It was contended , before me, albeit sonewhat faintly, that I should find that in respect of beer there 1S some cross elasticity with, for example, champagne and other wines. However in my opinion, in the context of this matter, it could not be said that wines are substitutable for: packaged beer. The product market 1s packaged beer. This expression "packaged beer" was universally accepted and used by all parties ' and witnesses in the proceedings before me as appropriate to describe bottles of beer sold by way of a dozen or notional dozen. Perhaps the expression relates to the fact that a true dozen 1S invariably encased 1n a cardboard carton, with the number allowed by way of discount usually being inserted through holes in the top of the carton. However the expression seems to be accepted usage in the hotel trade, and was in fact used in the condition imposed on the grant of the licence which was before the Full Court in Young v ' Parrah & Ors, supra. Bray C.J. was also mystified by the expression "packaged beer" as he acknowledged at p.447 of that case. "I find the phrase a difficult one. The word "packaged" seems to connote some sort of wrapping, yet it 1s difficult to think that dzscount prices would be acceptable if the bottles were sold in the primitive nudity of glass but not a —- gq oe - —- eo ee | | 1f they were concealed from the public gaze by a | decent garment of brown paper." | The geographic market 1S not so easy to determine, though it was not a significant issue before me and none of the defendants adduced evidence directly to counter that of the plaintiff. Their evidence was rather directed to the question whether or not particular hotels were in competition with each other. A geographic market can be considered in the present case as an area in which hotels operate as retailers of liquor and wnich 1s accessible to a substantial proportion of purchasers. The Trade Practices Tribunal considered the concept of market zn some detail in re Queensland Co-operative Milling Association Ltd. (1975-6) 8 A.L.R. 481 at p.517 where the members said: "A market 1s the area of close competition between firms or, putting 1t a little differently, the field of rivalry between them... Within the bounds of a market there is substitution - substitution between one product and another, and between one sourse of supply and another, 1n response to changing prices. So a market 1s the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, ££ given a sufficient price incentive." i That Tribunal, consisting of Woodward J., President and Mr. J.A. Shipton and Prof. M.D. Brunt, was considering a market fr goods | in relation to s.50 of the 1974 Act, but the comments are equally applicable here. The Tribunal, this tame consisting of Northrop J., President and ilr. J.N. Walker and Prof. B.L. Johns, further considered this question in re Howard Smith Industries Pty. Ltd. (1977) 15 A.L.R. 645 where they said at p.662: ".,. a market represents a range of goods or services which are good substitutes for one another in satisfying the buyers requirements of a particular type. If there isa variation in the relative prices of the goods or services " 52. offered for sale in a given market, then buyers can be expected readily to switch their custom from one seller to another or from one product to another." These comments were considered by Northrop J. in Trade Practices Commission v Ansett Transport Industries (Operations) Pty. Ltd. & Ors' (1978) 20 A.L.R. 31 at pa35-37 and adopted by him. With respect, I also adopt this approach. In my view, the geographic market in which the Morphett Arms competes is not restricted to its sphere of activity or the lamit of 1ts actual sales. In the Queensiand Co-operative Milling Association case, supra, the Tribunal referred to the market as "the field of : actual and potential transactions...". In re Howard Smith Industries supra, the relevant market for tug—-boat services wase@gery port in Australia, even though no company operated in every state. Similarly zn the Ansett case, supra. the relevant market for rental cars was found to be Australia wide. The evidence was that there were 3 or 4 companies which operated on an Australia-wide basis, and many others whose activities were restricted to a town or a regional area. Northrop J. found that within the market, the national operators carried on their business throughout Australia, while the local operators carried on their business within limited areas of Australia. He found that in all areas within Australia there was substitut- ability for the services provided by the national operators and the local operators in the local area, and that competition existed } between the national and local operators in the areas 1n which the latter operated, between the local operators themselves and of course between the national operators themselves. The primary evidence defining the outer boundaries of the relevant geographic market was given by Mr. Skinner, the gencral 53. manager of Coles Stores 2n South Australia and the Northern Territory, and a person experienced in marketing. He was called by the plaintiff and stated as his opinion that a liquor outlet anywhere in the metropolitan area would be accessible generally to the public who live in that area, and would be in competition with other outlets selling in that area. He supported this opinion by drawing attention to the mobility and preparedness to travel of the people of Adelaide. This view received support from extracts from the publication of the Australian Bureau of Statistics based ' on the 1971 census which indicated the large number of people { who travel to various sections of the metropolitan area on the way to or from work, and the sections in which these commuters reside. Mr. Skinner said that as the manager of a liquor outlet in the city he would be concerned about the prices advertised by the Morphett Arms, a suburban hotel, as well as the prices of the other near city hotels. He also stated that in his opinion a buyer would travel |. up to 10 kilometres to obtain an extra bottle of beer for the price of a dozen. ' The defendants did not put forward any independent witnesses for the purpose of defining the relevant geographic market. Counsel for the Morphett Arms was not prepared to accept that as far as that hotel was concerned the market in which it operated was the metropolitan area. He supported his contention by reference to portion of the evidence of Mr. Ritchie, Tremaine and King, and in due course I will refer to this evidence. However, to my mind thas evidence 1s more relevant to the question whether the Morphett Arms 12S in competition wath the Royal Oak. In any event on my construction of s.45(3) the area in which the Morphett Arms operates 28 immaterial. In my opinion for the purposes of s.45(3) the market in which the Royal Oak supplies its goods is the metropolitan area and I so find. : The final matter for consideration is whether the Royal Oak and the Morphett Arms are in competition in the market of the metropolitan area. Counsel for the Morphett Arms strongly contended that on the evidence I should not find that his client was in f competition with the Royal Oak. There was as mentioned earlier no evidence tendered by the Royal Oak on the question of its competition with the Morphett Arms. In the circumstance that the Royal Oak 1 1s the largest retailer of discount beer, with substantial advertising, in newspapers distributed throughout the State and in particular the metropolitan area, it would appear to be competing with all liquor outlets in the metropolitan area including the Morphett Arms. Such a view 1s confirmed by the mobility of the people of that area and the fact that the Royal Oak 1s on the periphery of the city ' square mile. The evidence to which counsel for the Morphett Arms pointed as supporting the contrary fanding was given by Mr. Ritchie, Tremaine and King. Mr. Ritchie was asked what he considered to be the extent of his competition, that is from which hotels and 1 retail storekeepers might he attract custom and to whose prices ' might he respond, His opinion was that he considered his outlet to be competing in a local market of some 4 miles in diameter. It is perhaps significant to appreciate that the retail outlet with L which Mr. Ritchie 1S associated 1S primarily a grocery store situated in a suburb, ! Tremaine gave evidence to the effect that at the relevant time he did not know what allowance the Morphett Arms was making, and 55. that although he "as concerned gesecaily to know the price at which other hotels were selling beer, he was not concerned about the Morphett Arws. King stated that the competition to the Morphet Arms was drawn from surrounding areas only, his main competitor being a bottle shop on the Auzac Highway. He also expressed the opinion that the Morpheit Arms was in no significant competition with the Royal Oak. Counsel for the Commission pointed to the evidence of Mr. Skinner to which I have already referred, and in particular his opinion that a person would travel 10 kilometres for an extra bottle of beer. It was accepted that the distance between the Morphett Arms and the Royal Oak Illotels 1s 12 kilometres. King also said that the anformation that he gained from a newspaper article that the Norwood, Old Lion and Royal Oak Hotels were reducing their discount was a very important factor in motivating the Morphett Arms to move. He seems therefore to be conceding that if he increased his price and the Royal Oak did not, he could lose custom to that hotel. That this concession is probably correct is confirmed by the fact that Palmer visited a city hotel, the Aurora, in an effort to persuade that hotel to reduce its allowance to 14 to the dozen. It 1s further confirmed by the evidence of Mr. Skinner that a person would be prepared to travel up to 10 kilometres foc an extra bottle of beer, which tendency would be applicable to persons living as close as 2 kilometres from the Morphett Arins Hotel as the greater part of the area betiveen that hotel and the Royal Oak Hotel 1s within a distance of 10 kilometres from both hotels. There is also the evidence from King that "local competition 1s more important than, for instance, say competition 10 miles avay", which andicates that he acknowledged the possibility of competition from an outlet 10 miles from the Morphett Arms. yee ewe ee wr one 56. It 1S 1n my opinion more appropriate to see most of the evidence of King as going to the amount of competition he actually experiences in relation to the Royal Oak in circumstances where there 1s little, if any, price differential. Although he does not see the Morphett Arms Hotel as being 1n a position, or in any way attempting to draw custom from the immediate vicinity of the Royal Oak Hotel, he concedes what I would see as being the position otherwise disclosed by the evidence, namely that he could lose custom to the Royal Oak Hotel or any large city daiscounter if 1t was selling at a lower price. In this regard I would draw attention again to the words of the Trade Practices Tribunal in re Queensland Co-operative "So a market 1s the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, 1f£ given a sufficient price incentive." (my underlining), The findings in the Ansett case, supra provided a useful analogy to the present matter. The relevant geographic market is wees the metropolitan area of Adelaide. Within that market, some suppliers,. namely the large city or near-city discounters, including the Royal Oak, operate throughout the metropolitan area, while others are restricted in their activities to more limated areas, In any suburh or other limited area, there 1s competition between the suppliers aun that area, such as existed between the Morphett Arms and the bottle shop on the Anzac Highway, but there 1s also competition in that area bet'veen the local suppliers, such as the Morphett Arms, and those suppliers, such as the Royal Oak, who supply goods throughout the metropolitan area. This latter competition may only become apparent to management if there is "sufficzrent price incentive", 57. In the circumstances I am of opinion that the Royal Oak and the Morphett Arms are 1n competition with each other and thus the plaintiff is entitled to rely upon the provisions of s.45A to establish that the understanding has the relevant purpose. I therefore find that each of them,the Royal Oak and the Morphett Arms, has contravened the provisions of s.45(2)(a)(11) and s.45(2)(b)(i2). I do not propose to enter any formal judgment at this stage but ultimately to make one order encompassing all matters in issue in respect of all defendancs. I now stand the mat ex over toa date to be fixed to allow an op vortunity for evidence to be put befure me on the question of pecuniary penalties and for argument on matters of p-nsalty, znjunction and costs. i certify that this and the 46 preceding pages are a true copy of the Reasons tor Judgment of Mr. Justice Fisher. 4) A has Dated 7 Senne 7 . , 'warn