420 CATCHWORDS Trade practices - interim injunctions - principles - whether prima facie case or serious question to be tried. Trade practices - whether union of employees a financial corporation - whether union party to arrangement among companies - whether exclusionary provision - whether purpose of agreement to exclude specific persons. Restraint of trade - economic restriction - whether employment contract unlawful. Trade Practices Act 1974 s. 80(2), s. 45, s. 45E, s. 75B, s. 80(1), s. 4D. Beecham Group Ltd. v. Bristol Laboratories pty. Ltd. (1968) 118 C.L.R. 618 World Series Cricket Pty. Ltd. v. Parish (1978) 16 A.L.R. 181 Transport Workers Union of Australia (New South Wales Branch) v. Leon Laidely Pty. Ltd. (1980) 43 F.L.R. 168 American Cyanamid v. Ethicon Ltd. £19753 A.C. 396 The Australian Coarse Grain Pool Pty. Ltd. v. The Barley Marketing Board of Queensland (1982) 52 A.L.J.R. 425 Epitoma Pty. Ltd. v. Australasian Meat Industry Employees' Union (1984) 54 A.L.R. 730 Tableland Peanuts Ptv. Ltd. v. The Peanut Marketing Board [19843 58 A.L.J.R. 283 c ..! A. and Others v. Hayden (2nd May 1984, unreported) Dawson iS -2- State Superannuation Board v. Trade Practices Commission (1982) 150 L.L.R. 282 R. v. Federal Court of Australia; Ex parte Western Australian National Football Leaque (1979) 143 C.L.R. 190 Re British Basic Slag Ltd.'s Agreement £19633 2 All1.E.R. 807 Top Performance Motor Pty. Ltd. v. Ira Berk (Queensland) Pty. Ltd. (1975) 5 A.L.R. 465 Trade Practices Commission v. Nicholas Enterprises Pty. Ltd. (1979) 26 A.L.R. 609 Morphett Arms Hotel Pty. Ltd. v. Trade Practices Commission (1980) 30 A.L.R. 88 Eastham v. Newcastle United Football Club Ltd. £19641 1 Ch. 413 BULLOCK AND OTHERS v. FEDERATED FURNISHING TRADE SOCIETY OF AUSTRALASTA AND OTHERS GRAY J. 26TH NOVEMBER 1984 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISTON BETWEEN : VG No. 284 of 1984 GARRY FRANCIS BULLOCK, JOHN SKILBECK, GRAHAM JAMES HARKNESS and WILLIAM BARLOW Applicants THE FEDERATED FURNISHING TRADES SOCIETY OF AUSTRALASTA, L. KYRIACOU, A. FINDLAY, R. SHUGG, ALVONNE NOMINEES PTY. LTD., (trading as A.F. CARPET DISTRIBUTORS), COLONY CARPETS PTY. LTD., R.G. CARPET AGENCIES PTY. LID., CARPET WHOLESALERS (VIC.) PTY. LTD., OTTO FLOORS PTY. LTD., JASON CARPETS COMMERCIAL PTY. LTD., and GURIAN PTY. LTD. (trading as MYER TEALE) Respondents CORRIGENDA Amendment to the judgment of the Court of 26th November 1984. Page 1, line 2: Page 7, line 23: For "s. DATED: 6th December 1984 For ""puursant" substitute the word "pursuant". 45(E)(1)(a)" substitute "s. 45E(1)(a)". S.d. HOWELLS ASSOCIATE TO JUSTICE GRAY IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY _ GENERAL DIVISION _ BETWEEN JUDGE: GRAY J. DATE: 26TH NOVEMBER 1984 www ww VG No. 284 of 1984 GARRY FRANCIS BULLOCK, JOHN SKILBECK, GRAHAM JAMES HARKNESS and WILLIAM BARLOW Applicants THE FEDERATED FURNISHING TRADES SOCIETY OF AUSTRALASIA, L. KYRIACOU, A. FINDLAY, R. SHUGG, ALVONNE NOMINEES PTY. LTD., (trading as A.F. CARPET DISTRIBUTORS), COLONY CARPETS PTY. LTD., R.G. CARPET AGENCIES PTY. LTD., CARPET WHOLESALERS (VIC.) PTY. LTD., OTTO FLOORS PTY. LITD., JASON CARPETS COMMERCIAL PTY. LTD., and GURIAN PTY. LTD. (trading as MYER TEALE) Respondents EX TEMPORE REASONS FOR JUDGMENT This is, in substance, -.an application. for an. interim injunction puursant to -s. 80(2).of the Trade Practices Act 1974. The applicants allege contraventions of ss. Act, as well as alleging common law restraint of trade. 45 and 45E of that Some argument has taken place as to the proper approach to an application of this nature. In Beecham Group Ltd. v. Bristol Laboratories Pty. Ltd. (1968) 118 C.L.R. at 618, the High Court of Australia laid down guidelines for courts faced with the task of deciding whether interlocutory injunctions should be granted. These guidelines involved first, looking to see whether a prima facie case has been made out, in the sense that, if the evidence remains as it is, there is a probability that at the trial the applicant will be held entitled to relief. The second stage is a consideration of where the--balance of convenience lies. This approach has been taken by the Full Court of the Federal Court of Australia in several cases, notably World Series Cricket Pty. Ltd. v. Parish (1978) 16 A.L.R. 181, Victoriran Eqq Marketing Board v. Parkwood Eqqs Pty. Ltd. (1978) 33 F.L.R. 294 and Transport Workers Union of Australia (New South Wales Branch) v. Leon Laidely Pty. Ltd. (1980) 43 F.L.R. 168. Each of these cases involved a claim for interim injunction under the Trade Practices Act 1974. In England, the House of Lords has adopted an approach to the granting of injunctions by a court of equity expressed in different terms. In American Cyanamid v. Ethicon Ltd. [1975] A.C. 396, their Lordships held that the inquiry at the first stage is limited to whether there 15 a serious question to be tried; the court should proceed: immediately to.consider the balance of convenience:if' such @& serious 'question exists. «+ From - time to time it has been said that there may be no real difference between this approach and that adopted by the High Court in the Beecham case. See, for instance, the judgment of we aes Deane J. in Leon Laidely at pages 178 and 179. Nevertheless, successive Full Courts of this court have preferred to express the method of approach in the terms used -in Beecham. In The Australian Coarse Grain Pool Pty. Ltd. v. The Barley Marketing Board of Queensland (1982) 52 A.L.J.R. 425, Gibbs C.J. expressed a preference for the English view. The case was not dealing with a statutory power to grant injunctions, but WwaS an exercise of the general equitable jurisdiction of the High Court of Australia. Nevertheless, a recent Full Court of the Federal Court of Australia in Epitoma Pty. Ltd. v. Australasian Meat Industry Employees' Union (1984) 54 A.L.R. 730, relying on the judgment of Gibbs C.J., followed the English view. It has been urged on me that I should aiso limit my inquiry at the first stage to whether there is a serious question to be tried. For a number of reasons I propose to follow the Beecham formula. The principles laid down in that case were the carefully considered judgment of the four members of the High Court. They relate to statutory injunctions, and this is a case concerning a statutory power to grant injunctions. Interim injunctions under the Trade Practices Act 1974 may be granted in circumstances where equity might refuse to enjoin someone: see s. 80(4) and (5). The Coarse Grain Pool case was judgment of the Chief Justice sitting alone. . It contains no detailed discussion as to the differences, if any, between the two approaches, or of the reasons for rejecting one. Indeed, the Chief Justice said, "I incline to the view taken by the House of Lords...". Although the Coarse Grain Pool case was followed by Brennan J., sitting as a single justice of the High Court in Tableland Peanuts Pty. Ltd. v. The Peanut Marketing Board [£19841 58 A.L.J.R. 283, it was 50 followed without: any detailed discussion of the issues of principle. Subsequently, in A. and Others v. ..Hayden (2nd May-- 1984, unreported), Dawson gd. sitting alone, took the view that there was no difference between the two approaches, and applied the "serious question" test. The Tableland Peanuts case and A. and Others ov. Hayden were not cases dealing with statutory injunctions. Until the matter is settled by the High Court, it --may be that Beecham remains binding on lower courts. So far as the matter depends on a conflict of decisions of the Full Court of the Federal Court of Australia, I am bound to decide which of those decisions I should follow. Until the matter is settled, I should follow the line of cases beginning with World Series Cricket, in preference to Epitoma. In Epitoma, it seems to have been assumed, rather than decided, that the Coarse Grain Pool case should be followed. No detailed reasons appear for rejecting the approach taken in earlier cases. I cannot accept -that injunctions are to be granted simply on the raising of an issue, which may be decided either way at the trial. That process is all the more to be avoided in a case which raises novel, and possibly unintended, applications of the provisions of 'the Trade Practices Act 1974, and in which = either the granting or the withholding of an :-injunction will have profound effects on what is, in truth, an industrial dispute. Unless compelled by authority to the English position, I prefer to inquire whether a prima facie case is made out, in the sense used in Beecham. JI turn now to the issues to see whether a prima facie case is made out. + Despite the large quantity of affidavit material, the facts may be stated shortly. The first respondent, which I shall call "the Union", is an organization of employees registered pursuant to the Conciliation and Arbitration Act 1904. The second, third and fourth respondents are officers of the Union. Among its members are persons who earn their livings by laying Carpet and other floor coverings. The applicants are floor covering layers and members of the Union. Typically, manufacturers of floor coverings sell to wholesalers, who sell to suppliers, Suppliers enter into contracts with persons to supply and lay floor coverings. These may involve contracts for entire new office complexes or for individual rooms in houses. In some cases, a manufacturer may supply direct to a builder, who may contract with what is known as a "work room" to have carpet made up for laying in a large building. The persons who do the laying are engaged by the carpet supplier or work room. In most cases they are said to operate as independent contractors, or as subcontractors, that is, they do not have formal contracts of employment with suppliers. The floor covering layer wiil do most of his work for one supplier, but will ssometimes-take: work trom -others.. i- . : - In recent months the Union has been attempting to prevail upon suppliers to sign a standard form agreement. This agreement contains various conditions as to remuneration and working conditions of employees. It also contains the following Clause, which is clause ll, headed "Subcontractors": "The Company agrees that sub-contracting shall conform to the following code. "(A) Contractor is the first tender on the floor covering contract, (B) When a company contracts for more than one component e.g. soft and hard floor coverings, and where the company does not possess the secondary skills within it's own work force, then the company may engage a sub-contractor to perform this secondary function. (C) It is hereby agreed that where one company Signatory to this agreement finds that it has a surplus of work, such surplus work may be contracted out to another company who is likewise a signatory to this agreement. (D) Any additional letting of work beyond this point is pyramid sub-contracting. (E) To be recognised as a contractor by the union, such contractor must be identifiable as a "Propriety Limited" company, with all persons who work on the tools of the trade covered by the Award and associated requirements." It is common ground that the provisions of clause 11 of that agreement are designed to exclude from the floor covering laying industry the use of subcontractors or independent contractors, except upon the basis referred to in the agreement. A number of suppliers have signed this agreement, in most cases because they feared that they would be banned from building sites if they did not. It is not altogether clear how bans would be imposed, but there appears to be some possibility of co-operation from building contractors, and perhaps other unions. In cases where suppliers have signed the agreement, the Union has requested written details of .all floor covering . layers -employed, and - has threatened bans on particular suppliers unless they are given. At least one meeting has been held of some suppliers in which certain changes to the terms of the agreement were proposed and at which the suppliers requested that the agreement he extended to the domestic as well as the commercial sectors of the industry. On 31st October 1984, Jenkinson Jd. granted an interim injunction to the applicants, who applied without serving the Application and affidavits on any other party. On Sth November 1984, having heard counsel for the first, second, third and fourth respondents, his Honour extended that injunction until 22nd November 1984. The hearing before me began on that date and continued on 23rd and today. I continued the injunction from day to day, save for modifying its terms on Friday, 23rd November, 50 as to exclude from its operation conduct of the respondents which was unarguably legitimate. The applicants rely on four causes of action: 1. 5s. 45(2)(a)(i) and (b)(i) of the Trade Practices Act 1974 (which I shall cail "the Act") - the making or giving effect to of a contract arrangement or understanding containing an exclusionary provision. 2. Ss. 45(2)(a)(ii) and (b)(ii) of the Act - the making or giving effect to of a contract arrangement or understanding that has the purpose or likely effect of substantially lessening competition. 3. s. 45(E)(1)(a) or 'possibly (c) of the Act - the making of a contract, arrangement or understanding containing a provision * that has the purpose of preventing or hindering a carpet supplier from acquiring or continuing to acquire services from persons from who it has been accustomed to acquire services, either altogether or on certain terms. 4. Common law restraint of trade. The evidence is uncontradicted. It shows, for the purposes of a prima facie case, that the Union and its officers who are respondents are keen to persuade suppliers to enter into agreements which will eliminate subcontracting in the floor laying industry other than in the terms of the agreements, and to enforce those agreements. The Union and its officers have actively pursued that course. For the purposes of the first two causes of action, namely, those relying upon s. 45 of the Act, Mr. Young, on behalf of the applicants, put to me that the Union itself was to he regarded as a corporation. He placed reliance upon the objects clause in the rules of the Union and upon the financial accounts of the federal office and the various branches of the Union, which were produced in evidence, such accounts having been filed with the Industrial Registrar pursuant to the Concilation and Arbitration Act 1904. Those accounts show that in the case of some branches but by no means all, and not in the case of the federal office, there is some process of investment of moneys which is going on and has gone on in the past within the Union. The interest which is derived from the investment of moneys is in some cases applied -in-. the day to day:-operations - of-the.- Union itself. z Mr. Young relied upon the decision of the High Court of Australia in State Superannuation Board v. Trade Practices Commission (1982) 150 C.L.R. 282 as establishing the principles by reference to which it is possible to determine whether a corporation is a financial corporation. The relevant passage in that case is in the judgment of the majority at pages 303 to 305. There reference is made to the earlier decision of the High Court of Australia in R. v. Federal Court of Australia; Ex parte Western Australian National Football League (1979) 143 C.L.R. 190 (known as Adamson's case) in which the court was called upon to determine upon what criteria a judgment whether a corporation is a trading corporation is made. In the Superannuation Board case the High Court adopted the same sort of criteria for determining what is a financial corporation as had earlier been adopted in determining what is a trading corporation. In substance, it is necessary to look to see whether the financial activities of a corporation are sufficiently significant in terms of its overall operations. Various formulations of that test appear at page 304 in the Superannuation Board case. Looking beyond the "predominant and characteristic activity" is necessary and an overview of the corporation's activities is essential. The view of the former Chief Justice, Sir Garfield Barwick, was that a trading corporation is one in which "trading is a substantial and not a merely peripheral activity". Mason J. referred to trading activities forming "a sufficiently significant proportion of its overall activities as to merit its -description as .a. trading corporation". +. Murphy -J. required the-trading to be :"not insubstantial". In my view, looking at the evidence which is before me, it cannot reasonably be said that the applicants are likely to 10. succeed at the trial in establishing that the Union is a financial corporation. -The degree to which it relies upon investment income as distinct from income from contributions from members is very small. It is, in my view, clearly peripheral and insubstantial. It is no part of the overall objects of the Union to engage in financial transactions, whether for the benefit of its members or otherwise; rather its primary object is to provide industrial and other benefits from the use of contributions. The evidence is equally open to the view that it is only an excess of contributions in any particular area which is invested, and I would infer that this was done because there was really no alternative but to invest such money in interest bearing securities of some sort. Accordingly, I proceed by approaching s. 45 upon the footing that the Union is not a corporation for the purposes of the Act. It is fundamental to Mr. Young's approach to s. 45, and to both of the causes of action depending on that section on which his clients rely, that there be established an overall agreement or arrangement involving carpet suppliers generally. A reference to such an overall agreement or arrangement, described as the "overall exclusion agreement", was added to the statement of claim by amendment, for which I gave leave in the course of this hearing. . Mr. Young places reliance upon what was said by Diplock L.d. "as he then was, "in Re British- Basic: Slag: Ltd.'s Agreements £1963] -.2- All +E.R. 807, at page 819, and -on the decisions of the Australian Industrial Court and of this Court which have tended to follow the approach of Diplock L.d. Those decisions include Top Performance Motors Pty. Ltd. v. Ira Berk li. (Queensland) Pty. Ltd. (1975) 5 A.L.R. 465, especially at pages 469 and 470, in the judgment of Smithers J., Trade Practices Commission v.' Nicholas Enterprises Pty. Ltd. (1979) 26 A.L.R. 609, and on appeal Morphett Arms Hotel Pty. Ltd. v. Trade Practices Commission (1980) 30 A.L.R 88. In substance these authorities suggest that an arrangement between various persons can occur without express agreement, provided that there is some communication between them and that they each do something in the expectation that others will also do something. Mr. Young contends that in this case each of the carpet suppliers has entered into an arrangement with each of the others, because all are aware that others are entering into or intending to enter into an agreement with the Union, and ail are prepared to enter into it if the others are. He relies upon certain evidence of meetings which have been held at which the question of this agreement has been discussed. Whilst it may be that there is some overall arrangement resulting in this way between the various carpet suppliers, it is my view that the evidence does not disclose that the Union is in any way a party to that. It is in the interests of the Union only to enter into a number of individual agreements with the respective carpet suppliers. The evidence discloses that it has devoted its energies and that of its relevant officers to that end. It is, of course, invthe: interests 'of the: Union 'that ~ as many : 'carpet suppliers as possible be made parties to that agreement, but that is not to say that the Union is to be taken as pursuing one large overall agreement. Even if the reaction of the carpet suppliers to the Union offer is to enter into one overall large agreement, 12. that does not make the Union a party to such an agreement. In the absence of the Union being directly a party to the overall agreement or arrangement, Mr.- Young is forced to rely upon the provisions of 5s. 75B of the Act or of s. 80(1). In my view, the evidence does not disclose that, in relation to such an overall exclusion agreement, the Union has aided, abetted, counselled or procured the creation of such an agreement, or has induced its creation, or has been knowingly concerned or a party to it or has conspired with anybody to produce it. Accordingly, those provisions do not apply. What I have said is sufficient to indicate that I do not regard the applicants as having made out a prima facie case on either cause of action based on s. 45 of the Act. If one were to go further in relation to the first cause of action, 1t would be necessary to have regard to the definition of "exclusionary provision" in s. 4D of the Act. Section 4D(1)(b)(i) and (ii) make reference to the preventing, restricting or limiting the acquisition of services from "particular persons". In my view, none of the agreements relevant to this proceeding would fall within the definition of "exclusionary provision" in 5s. 4D. The reason for this is that in each case the agreement intends to exclude all carpet layers and not particular persons from operating otherwise than in accordance - with its 'terms. In my view, s. 4D is plainly designed to apply to provisions which exclude particular persons in the sense of persons whose identity is known or can be ascertained. It is not directed towards the exclusion of the entirety of the available body of persons who 13. could conceivably be called upon to perform or supply the relevant services. . I turn next to s. 45E-of the Act, and I propose to deal shortly with that. s. 45E is directed to preventing a first person from making a contract or arrangement or understanding with a third person to exclude a second person, where that second person is someone from whom the first person has been accustomed to acquire services. The provision is directed towards such an agreement which has the purpose of preventing or hindering the first person from acquiring the services from the second person either altogether or on certain terms. An examination of 5. 45E as a whole makes it clear the section is directed to agreements which exclude second persons whose identity is known or is Capable of being ascertained. The purpose of any of the agreements entered into by the Union and, indeed, if there is an overall exclusion agreement, of that agreement, is not to exclude from the supply of services persons who have been accustomed to supply those services. Rather, it is to exclude everybody unless the services are supplied on certain terms. This is so, whether or not one looks at the objective purposes of the agreement or at the subjective purposes of the provisions by reference to 5. 4F of the Act as modified by 5s. 45E(4). The provisions of s. 45E which tend to show the section is limited to agreements excluding specific persons.arne sub-s.(2)., unden which . it:cis possible . for the second person to consent in writing to an agreement that would otherwise fall within sub-s. (1), and sub-ss.(5) and (7), which provide, for the purposes of the section, definitions of suppliers of goods or services and persons from whom goods or 14. services are customarily acquired. I therefore reach the conclusion that it is extremely unlikely that the applicants will make out a case against the respondents at the trial based upon 5. 45E of the Act. . " The final cause of action may also be dealt with fairly briefly. It is common law restraint of trade. Mr. Young attempted to argue that the effect of the agreements, was, in some way, to restrict the right of the applicants and those like them to carry on their trade of carpet laying in the manner in which they desired to carry it on, namely, as independent contractors. The reality is, of course, that no such restriction is involved beyond the economic possibility that, if sufficient carpet suppliers enter into agreements with the Union, the carpet layers may find difficulty in obtaining enough work. At no stage will they be prevented from carrying on as independent contractors if they wish to do so. More importantiy, and more 'fundamentally, however, it seems to me that the argument starts from the wrong level. In the decision of Wilberforce J. in the Chancery Division in Eastham v. Newcastle United Football Club Ltd. £19643 1 Ch. 413, his Lordship was called upon to examine some of the earlier authorities relating to restraint of trade. The relevant passage is at pages 441 to 443. It is clear from an examination of that passage that the proper approach for a court to take when examining- an- agreement between a number of employers, or persons in the equivalent position, to determine whether it is in restraint of trade is to see whether individual contracts between an employer and an employee or their counterparts would be regarded as being in restraint of trade if --- ee 15. they contained the same or a similar provision, That was certainly the approach his Lordship took at page 442. If that approach were applied to this case it would have to be asked whether an agreement between a carpet supplier and a carpet layer which amounted to a contract of employment could be regarded as being in restraint of trade. That proposition need only be stated to demonstrate its falsity. Accordingly, I find no prospect that the applicants will succeed at the trial on the basis of restraint of trade. The resuit of this is that I find the applicants have not made out a prima facie case for the obtaining of an interim injunction. It is unnecessary for me to proceed to examine the balance of convenience, and I therefore say nothing about it. For those reasons, I make the following orders: 1. If it is necessary for me to do s0, I discharge the order which I made on Friday, Z3rd November 1984, 2. j%I dismiss the application for interlocutory relief. 3. I reserve the costs of this application. tA in tt 48 eta te Iu . ra > pase . - sr ya we ett ek &.8 & tT cay se at , 6 Tos Juugrent herein of bis Hom "Justice GARY ASSOC1ET6E