1 CATCHWORDS Trade Practices - resale price maintenance - onus of proof - "entrapment" - admissibility of evidence of agent provocateur. Trade Practices Act, 1974 ss.48 and 96 TRADE PRACTICES COMMISSION v. THE HEATING CENTRE PTY. LIMITED BRIAN BUTTERFIELD No. G165 of 1983 Beaumont, J. 19 December 1984. Sydney. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION No. G165 of 1983 BETWEEN : TRADE PRACTICES COMMISSION Applicant AND: THE HEATING CENTRE PTY. LIMITED First Respondent : BRIAN BUTTERFIELD Second Respondent Judge making order: Beaumont, J. Date order made: 19 December 1984. Where made: Sydney. THE COURT ORDERS THAT: 1. Declare that the first respondent engaged in the practice of resale price maintenance in respect of the Kent Tile Fire in contravention of 3.48 of the Trade Practices Act, 1974 in the respects alleqed in paras. 6, 7. 8. 3. lv, IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION No. 6165 of 1983 BETWEEN : TRADE PRACTICES COMMISSION Applicant AND: THE HEATING CENTRE PTY. LIMITED First Respondent AND: BRIAN BUTTERFIELD Second Respondent CORAM: Beaumont. J. DATED: 19 December 1984. REASONS FOR JUDGMENT By its statement of claim. the Trade Practices Commission claims that the first respondent. a distributor of slow combustion heaters manufactured in New Zealand and te 14. 15. 16. 17. 18, 22, 23. 24. and 25 of the Statement of Claim, 2. Declare that the second respondent aided and abetted and was knowingly concerned in the gaid contraventions. 3. Reserve costs. 4. Adjourn proceedings toa date to be fixed for the purpose of dealing with pecuniary penalties and other relief as may be appropriate. bs sold under the brand name "Kent Tile Fire". enagaqed in the practice of resale price maintenance in contravention of s.48 or the Trade' Practices Act, 1974 ("the Act"). The second respondent. the managing director of the first respondent. is said to be a party to. or a person knowingly concerned in, the contraventions alleqed. The Commission seeks pecuniary penalties pursuant to 3.76 or the Act and injunctive relief pursuant to 3.80. At the commencement of the final hearing of the proceedings, the respondents indicated that, without admissions. they were prepared to proffer undertakinas to the Court to the effect that they would not engage in the practice of resale price maintenance in contravention of tne Act. Since the events complained of took place in 1981 and 1982 and since the conduct is not said by the Commission to be continuing, it is appropriate that the Court should, in 1ts discretion. accept undertakings to this effect ain lieu of injunctive relief in the event that a contravention of the Act is established. Since, for reasons to be given. I have come to the conclusion that some of the contraventions charged against the respondent have been made out. I propose. in due course, to note formally the undertakings to be profferred. la The practice of resale price maintenance 15 alleged to have occurred in a number of distinct dealings between the first respondent. acting by and through the second respondent as its agent for the purpose, with certain retailers of slow combustion heaters. No question arises as to the authority of the second respondent to bind the rirst respondent in these matters. The first contravention alleged 1s said to arise out of certain discussions between the second respondent. acting on behalf of the first respondent, and Mr. John Lindsay, the proprietor of a retail business, "Kurraicng Hardware". carried on at Kurraiona, New South Wales. During 1981, Mr. Lindsay purchased by wholesale some 50 or 60 "Kent Tile Fires" from Bishop's Stores, a firm unrelated to the tirst respondent. with a view to their retail sale. At tne beginning of the winter season. Mr. Lindsay offered the tile fire. including its flue kit. for sale at a retail price of $750.00. As the winter season progressed and ag demand dropped, he reduced his price. In June and July 1981. Mr. Lindsay advertised a reduction of 10 per centum in the price of a number of products including the Kent Tile Fire. By an advertisement dated 22 July 1981. Mr. Lindsay offered. inter alia, the Kent Tile Fire at a price or $695.00. The advertisement contained the statement: "Save on these top name fires. You can't beat these prices! Finance arranged". an advertisement by Mr. Lindsay in the Windsor and Richmond Gazette dated 12 August 1981. stated: "ONFAIR COMPETITION The opposition today claimed that the sale of fireplaces at these prices was ruinous Nevertheless we continue to offer: (a number or fires were then offered, including the Kent Tile Fire at a price of $695.00)." A statement was made at the end of the advertisement: "Flue kits. when required, slightly extra'. Mr. Lindsay said in evidence which I accept. that this statement was not intended to apply. and was not in fact applied, to purchasers of the Kent Tile Fire. Shortly after the publication of this advertisement. Mr. Lindsay received a telephone call froma per3zon who said he was Brian Butterfield from The Heating Centre. The respondents deny that the second respondent was the person who made the call. They objected to the admissibility of this evidence on the ground that the attempt to identify the second respondent in this way wags inadmissible hearsay. (see Wigmore on Evidence, Chadbourn Revision, Vol. VII at p.760). an Two recent cases, admittedly in criminal contexts. suggest that the evidence is admiazsible. In Rk. v. kyan (1984) 55 A.L.R. 408. Street. C.J. (Cantor and Roden. Jd. concurring) referred (at p.412) to the well-established principle that either extrinsic or intrinsic indicia may authenticate a document not otherwise susceptible of direct proor, or may authenticate the authorship of a document not otherwise susceptible of direct proof. The Chief Justice thought that an analoqous principle applies to a telephone conversation. In the present case, the circumstances surrounding the challenged telephone call. especially its occurrence snortly after the appearance of the controversial advertisement, indicate that it is likely that the caller was. in fact. the second respondent. But even if circumstantial evidence were nov available. in R. v. Smith C1964] 1N.S.W.L.R. 462. 0''Brien, C.d. of Cr.D. held that an accused person may be identified by his voice and by his voice alone and that evidence of such identification 13 admissible: evidence that the voice of aperson is the voice of the accused can amount to positive identification where the witness is familiar with the voice before hearing it at the crime, or where the voice heard at the crime was very distinctive, so that the witness need not have heard the voice before the crime. It will suffice if he heard it as the voice of the accused for the first time after the crime and then noted it to have the very distinctive features of the voice at the crime. Mr. Lindsay later had a number of conversations with the second respondent. That they occurred 1s common ground, although some time elapsed betore the second conversation occurred. Mr. Lindsay said that the second respondent's accent was distinctive and that he recoanised it as the voice of the telephone caller. Having heard the evidence of the second respondent, I agree that the secon respondent. who came to Australia from New Zealand. does have a distinctive New Zealand accent. And. as has been said. the timing of the conversation, shortly after the advertisement. is also, I think. a relevant circumstance (cf. Wigmore, op.cit. at p.759). Although the second respondent hotly denied making the call. no reasonable basis could be demonstrated for suqgesting that Mr. Lindsay had any motive for fabricating such a conversation. Nor. in mv view, 15 there any room for thinking that he was mistaken about whether it occurred or not. I find that the second respondent did telephone Mr. Lindsay on or about 13 Aucust 1981. Mr. Lindsay's evidence of their conversation. which I accept. is as follows. The second respondent. having introduced himself' as Brian Butterfield of The Heating Centre, said: "Tam looking at your advertisement. I do not know what vou are trying to prove selling these fires at that price". Mr. Lindsay replied that he quessed that Bruce Rowe from Decon Lighting and Heating, a dealer of the first respondent based in Richmond, had raised the advertisement with the second respondent. Mr. Lindsay told the second respondent that "whilever I could aqet Kent Fires. which I was getting plenty of, I would continue to sell at $695 and if Bruce Rowe wanted to compete he would have to drop his price". The second respondent then said that "things were out of hand" this year but that he was "qoing to have thinas better organized" in the 1982 winter geason. Mr. Lindsay then asked Mr. Butterfield for a dealership for Kent Tile Fires for the Hawkesbury region. The second respondent refused the request, saying that he was "happy with the way the situation was running with Decon". Towards the end of 1981 or in eariv 1982. Mr. Lindsay received through the mail. apparently unsolicited. a dealer newsletter published by the first respondent dated 12 December 1981. Mr. Gindsay has. in fact. lost the copy of the document he then received but he identified another copy as the document he received. The newsletter enclosed the first respondent's new price list. effective from 11 January 1982. The newsletter foreshadowed a promotional programme for 1982. The first respondent. inter alia, also indicated that it would restrict the number of authorised dealers in each area "so all get the maximum effect in their patch". The Kent Tile Fire was priced as follows: "Kent Tile Suagested Wholesale Authorised Fire (no oe.» retail 1 offs ... dealer flue) 660 561 495 Tile Flue 140 119 85..." Kit (Prices were stated to be ex-store, Svdney.) In March or April 1982, Mr. Lindsay went to the first respondent's premises at West Ryde and spoke with the second respondent. He asked the second respondent fora distributorship in the Richmond area. The request was refused. Mr. Lindsay was told that the first respondent was satisfied with the existing dealer 'Decon Lighting and Heating). Mr. Lindsay then 3aid that he realised that he had discounted in the past but that, if he got a dealership, he would not discount anymore and would "stick with" the retail price as indicated on the price 11s3t. The second respondent replied that there were two conditions he would insist on for anyone to have access to his product. One was that the retail price as indicated on the price list was adhered to. Mr. Lindsay said that the second respondent pointed at the retail price indicated on a copy of the first respondent s price list and said: "That is what vou will sell at. If any dealer sells my produce that is the price you will 3ell it for". (In this connection. Mr. Lindsay explained that the second respondent indicated the prices of $660.00 for the Kent Tile Fire and $140.00 for its flue kit previously mentioned.) Mr. Lindsay said that he then indicated to tre second respondent that he would not discount anymore and that he "would play the game according to (the second respondent s) rules and stick with it". According to Mz. Lindsay, the second respondent then stated that Bruce Rowe was selling his business at Richmond and that it was up to the second respondent to decide who to appoint as the new distributor. Mr. Lindsay asked the second respondent to consider him as a candidate for the dealership. The second respondent said that he would consider whether he would appoint Mr. Lindsay to the Richmond dealership but that, in the meantime. Mr. Lindsay should just keep buying from Decon. picking the fires up from Mr. Rowe and paying Mr. Rowe for them. io, There is documentary evidence which I accept that, as from 9 February 1982, Mr. UGindsav acquired Kent Tile Pires from Decon.' It is common gqround that the first respondent did not 3ell any Kent Tile Pires to Mr. Lindsay: the point of departure between the parties 15s the first respondent's reason or reasons for its declining to supply Mr. Lindsay with the product. I shall return to this aspect later. There were later telephone conversations between Mr. Lindsay and the second respondent. On one occasion. Mr. Lindsay said that he endeavoured to expedite the first respondent's decision on the Richmond dealership by informing the second respondent that he had been approached by another tile fire manufacturer to sell "Jalco" tile fires - a brand oriqinating, it seems, from Western Australia. The second respondent warned him that he would be "finished" if he sold an opposition product. On a later occasion, Mr. Lindsay telephoned the second respondent and asked whether any decision had been made on the Richmond dealership. The second respondent swore at him and said: "You move too fast for me. I am not prepared to deal with anyone like you. You put Jalco on the floor." ll. The second respondent's version orf his conversation with Mr. Lindsay at the premises of the first respondent in March or April 1982 differed from Mr. Lindsay's evidence. According to the second respondent. Mr. Lindsay said that he could not get supply from his previous source. Something "had gone bad" with his arrangements and he could no longer buy from Decon. The second respondent then indicated that, if Bruce Rowe would or could not supply. Mr. Lindsay could probably buy Kent Tile Fires from other dealers in Sydney or from the dealer at Penrith. Mr. Lindsay then offered him cash to buy the product on the footing that Mr. Rowe would never know apout the transactions. According to the second respondent, Mr. Lindsay then said that if the first respondent would not supply him with Kent Tile Fires. ne would "put in Jalco". The second respondent said that ne then swore at Mr. Lindsay and demanded that he leave tne premises. The second respondent denied that any reference was made in this conversation to prices. discounting or the price list. It would seem that, when first qiven. Mr. Lindsay's evidence was confused as to the date upon which the discussion with the second respondent about the price 11st took place. In cross-examination. Mr. Lindsay conceded that the conversation took place later than he first believed. His recollection was not assisted by the loss of the newsletter he said he received. He further conceded in cross-examination that he and the second respondent must have been discussing a price list subsequent to the list or which he originally qave evidence. These concessions were frankly made and Mr, Lindsay impressed me az an honest and. in the end, reliable witness. (I will deal later with the legal consequences which flow from the circumstance that the subject of the conversation between Mr. Lindsay and the second respondent was later than Mr. Lindsay first supposed. ) On the other hand, the second respondent did not give a favcurable impression as a witness. In particular. his denial of the occurrence of the first telephone conversation with Mr. Lindsay reflected poorly upon h:s credibility. Further, the objective circumstances of tne case. especially the respondents' own newsletters, tend to confirm Mr. Lindsay's version as accurate. For instance, the dealer newsletter dated 1 March 1982 contained the revealing statement "PRICE CUTTING - WE URGE YOU IN THE STRONGEST POSSIBLE TERMS TO MAINTAIN YOUR SUGGESTED RETAIL PRICE. Selling fires 13 an expensive exercise and vou need a decent marqin"". One fundamental consideration in resolving this contlict of evidence 1s that the Kent Tile Fire was a highly successful product. The second respondent impressed me as a confident person. capable of taking full advantage in the market place of a qood product. It was in 13. the respondents' commercial interests to keep the price of the Kent Tile Fire as high as the market would stand. I find that the respondents intended to engage in the practice of resale price maintenance with this object in mind. The respondents raise a number of specific defences to this branch of the case put against them. First, they say that there has been no resale price maintenance because there has been no refusal or withholding of supply. The suggestion is that. at all times, Mr. Lindsay could obtain supplies through Mr. Rowe who was an aqent of the first respondent. It tis further submitted that s.48 does nec preclude a supplier for reasons of marketing strateav. restricting his channels of distribution. In my opinion. none of these considerations provide an answer to the Commission's claims with respect to the respondents' dealings with Mr. Lindsay. For one thing, Mr. Rowe was not in any sense the "agent" of the first respondent. As a retailer owning and opérating his ow business. it is not possible to treat a sale by Mr. Rowe as a sale made on behalf of the rirst respondent in the absence of specific authority conferred in that behalf. No such authority could be suggested here (see International Harvester Company of Australia Proprietary Limited v. Carrigan's Hazeldene Pastoral Company (1958) 100 C.L.R. 644 at pp.652-3). 14. In mv opinion, ror a wholesaler of goods to decline to supply goods but instead merely to refer a retailer such as Mr. Lindsay to' another retailer in the hope of his obtaining supply of product is capable of constituting a refusal by the wholesaler to supply goods within the contemplation of 3.96(3) of the Act. The first respondent. az awholesaler of goods. was naturally prepared to deal with the trade at wholesale prices, yet Mr. Lindsay, although a member of the trade. was forced to deal with Mr. Rowe or any other retail outlet which was prepared to deal with him at prices marked up for retail sale. Clearly. Mr. Lindsay waz financially disadvantaged on this account. For instance. on 9 February 1382. Mr. Lindsay purchased from Mr. Rowe two Kent Tile Fires at a price of $592.00 each: on 29 April 1982, he purchased from that source three such fires at a price of $610.00 each. In each case. the prices paid by Mr. Lindsay were in excess of the wholesale going rate at the time for a retail outlet with which the respondents were willing to deal. In the end, the question. one of fact, is whether the first respondent's refual to supply goods to Mr. Lindsay was gomething done for a reason which included. as a substantial and operative reason. the reason that Mr. Lindsay had sold or was likely to sell or had advertised or was likely to advertise. Kent Tile Fires at a price less than that specified bv the first respondent. In my opinion. 15. both a refusal to supply and the existence of the proscribed reason have been established in Mr. Lindsay s case. It is submitted on behalf of the respondents that Mr. Lindsay's real obiective was to achieve the status of an authorised dealer of the first respondent rather than merely to acquire product from the first respondent. No doubt. the authorised dealership was Mr. Lindsay's preferred position but. if that was not available. there was every reason, financial and otherwise, why he should wish to acquire product from the first respondent at wholesale prices rather than seek the goods at another retail outlet who would ce likely to be a competitor. It may well be that tne respondents and Mr. Rowe wished to maintain territorial boundaries in the dealer network and that this was a factor in the dealinas which took place between the respondents ard Mr. Lindsay. Nonetheless, the existence of the reason proscribed by 3.96(3) of the Act was to the forefront of the dealings which took place between the parties. I infer that it was a substantial and operative reason for the refusal to supply Mr. Lindsay. In my opinion. 3.48 was contravened accordingly (see Ron Hodgson (Holdings) Pty. Limited v. Westco Motors (Distributors) Pty. Limited (1980) 29 A.L.R. 307 at p.321). 16. It 13 true, as the respondents submit. that the second respondent appears to have generated a personal dislike of Mr. Lifdsay. But. since, in mv view. that animosity grew largely out of Mr. Lindsay's stated policy of discounting, this circumstance can hardly assist the respondents. The respondents also argue that. because of the conflict between Mr. Lindsay and the second respondent as to the content and. in one case. the occurrence of the conversations relied on by the Commission, in the application of the rigorous standard of proof in a case such as this. I should dismiss Mr. Linday'3 assertions. I accept that, although the civil standard of the balance of probabilities is appropriate. in reaching conclusions and drawing interences, the Court should be mindful of the seriousness of the allegations, having regard to the penalties involved (see Trade Practices Commission v. Mobil Oil Australia Limited (1984) A.T.P.R. 40.482 per Toohey. J. at p.45,529 and the cases there cited). Nonetheless. as has been said. I found Mr. Lindsay to be a truthful witness and, with one exception. reliable. The exception concerned the date of his visit to the premises of the first respondent when the price list was discussed and. consequently. the date of that price list. On the whole. I think that little, if anything, of substance turns on this lapse of memory. In my view, what is, in the end. significant is the second respondent's approach to his price list in point of principle. Whether it is a particular price list which was then discussed does' not seem to me to be nearly as important as the impression the second respondent then sought to convey in making it clear. as forcefully as he could. that he was stipulating that his "suggested" retail prices were to be adhered to. The second respondent clearly intended his remarks to apply to the first respondent's price lists issued from time to time. As a matter of law, the Court has construed the notion of specified price for present purposes to include a price not specified in precise terms but within a ranoe of a particular figure or otherwise having an element of approximation. Equally, a price may be specified by reference to some standard well known to the parties. from which a price may be ascertained (see Mobil Oil], 3upra. per Toohev. J. at p.45,525). Even applying the more rigorous standards of proof mentioned. I am satisfied that. where they are in conflict. I should prefer the evidence of Mr. Lindsay to that of the second respondent. In any event. there 1s documentary evidence emanating from the respondents in the form of the dealer's newsletter dated 1 March 1982, cited earlier, condemning price cuttind. This, material more than adequately confirms Mr. Lindsay 3 evidence that the respondents set out to qive him the most explicit impression that they would not tolerate discounting of their products. 18. In the result. I make the following findings on this aspect of the proceedinas: l. That in or about March 1982. the first respondent. by its aqent, the second respondent, made it known to Mr. Lindsay that the first respondent would not supply gocds. namely the Kent Tile Fire. to Mr. Lindsay unless Mr. Lindsay agreed not to gell those goods at a price less than a price specified by the first respondent. namely the first respondent's suggested retail price: see 3.96(3)(a) (Statement of Claim para.6). 2- That the same conduct also fell within s.96(3)(b) as an inducement to, or an attempt to induce. Mr. Lindsay not to advertise the Fire for sale at a price less thar a price specified by the first respondent, namely the first respondent's suggested retail price: see also s.96(7)(a) (Statement of Claim para.7). I accept, in this connection. that in the case of an attempt, an intention to bring about the required result 15 necessary (see Mobil 011, supra. per Toohev, J. at pp.45,529-30). Although I have made a separate finding on the point here and elsewhere because the statement of claim alleges distinct contraventions., the circumstance that the conduct relied on in 30me cases is the Same will. in accordance with the course of authority on the question, be taken into account on penalty. At any rate, tor the purpose of fixing a pecuniary penalty, the 19. respondent's conduct. when viewed a3 a whole, may be 3een as the engagement in the proscribed practice of resale price maintenance during' the period in question rather than a series of isclated contraventions. 3. The same conduct also constituted an inducement to. or alternatively. an attempt to induce. Mr. Lindsay not to sell the Fire at a price less than a price specified by the first respondent, namely the first respondent's suggested retail price: see 3.96(3)(b) (Statement of Claim para.8). 4. The game conduct also constituted a statement of a price that was likely to be understood by Mr. Lindsay as the price below which the fire was not to be sold: see $.96(3)(£) «Statement of Claim para.3). S. The same conduct. coupled with the conversation on or about 13 August 1981. also constituted a withholding of the supply of the Fire from Mr. Lindsay for the reason that he had sold. or was likely to sell. the Fire at a price less than a price specified by the first respondent as the price below which the said goods were not to be sold. namely the first respondent 's suggested retail price: see $.96(3)(d) (11) (Statement of Claim para.10). 20. 6. The second respondent aided and abetted and was knowinaly concerned in the foregoing contraventions. The Commission alleges further contraventions of '3.48 of the Act arising out of certain dealings between the respondents and Burnina Lod Fireplace Specialists Pty. Limited ("the Burning Log"). At all material times, that company manufactured and distributed by retail open and slow combustion tireplaces. It also sold. by retail, fireplaces manufactured by others. Its principal place of business was at Revesby. N.S.W. but it operated a number of its own retail outlets in several States and the A.C.T.. In 1982, Mr. Jon F. Walsh. the company's national sales manager, in consultation with Mr. Cor Van Roy, its national marketing manager, decided to approach the first respondent with a view to adding the Kent Tile Fire to the range of products offered for retail sale by the company. In March 1982, Mr. Walsh made telephone contact with the first respondent. Shortlv thereafter, he cailed at the first respondent''s premises at West Ryde. He there met the second respondent who introduced him to Mr. Russell Palmer as an employee of the first respondent. During the course of the discussion which ensued. the second respondent informed Mr. Walsh that the first respondent would not permit the Burning Log to have the Kent Tile Fire merely for the purpose ot qenerating floor traffic. Mr. Walsh assured al. the second respondent that he was very 3ericus about selling the product. According to Mr. Walsh. the second respondent then said: ' "If you entertain the idea of discounting the product. I would find a million and one ways of stopping supply." Mr. Walsh said that he thereupon assured the second respondent that the Burning Log "were very serious about that ... and ... would do our very best to sell the product". I find that Mr. Walsh's intentions on thi3 account were honourable, despite a submission to thea contrary now put on behalf of the respondents. In his cross-examination. senior counsel for the respondents suqgested to Mr. Walsh that at no time did the second respondent ever threaten him that he would cut off supply if he discounted. Mr. Walsh reiected the suggestion. although he agreed with counsel that the Burning Lod discounted other lines. Counsel put to Mr. Walsh that there was mention, in the conversation at the first respondent's premises, of using the Kent Tile Fire as a loss leader. It then put to Mr. Walsh- that "there was no discussion about discounting". Aaqain. Mr. Walsh denied the suagqestion. bo bo When the second respondent gave his evidence in chief with respect to this discussion. he denied making the statement attributed to him by Mr. Walsh threatening to cut otf supply if Mr. Walsh discounted. But. stanificantiv, I think. he conceded that discounting was then discussed to some extent at least. His version. so far as material. was given in chief as follows: "IT said that we at the West Ryde shop do not discount as we cannot compete or be seen to be competing with our dealers because it leaves a dirty taste in their mouth. I told him that if they ever dumped our product we would cut them off, if they ever told anyone that their open fire hoods were better than our slow combustion units I would cut them off, and also I said that if they used our product as a loss leader, which is a fairly predominant form of advertising zn the heating trade. I would cut them off. ... I did make a remark that while we did not discount they would get plenty of competition from Flash, which was ome of the other heating centres. would give them plenty of competition. ... We finished our trading talk and then we went on to talk for a couple of hours just about the heating industry in general. Mr Walsh was picking my brains on slow combustion fires and I was picking his on the retail organizations they do. We then went back to the shop, which was about a hundred yvards away, and I gave him a price list. some brochures and an open day credit account form." From my observation of Mr. Walsh in the course of his evidence. I formed the view that he was an honest witness and, with one exception, to be dealt with later, 23. reliable. Whilst the second respondent's version of his conversation with Mr. Walsh dirfers from the evidence of Mr. Mr. Walsh, there 1s some similarity ain the two versions. Yet on essential details. the respective versions diverae: according to the second respondent, the fundamental consideration was the loss-leadering aspect. whereas Mr. Walsh said that the second respondent warned him against discounting in specific terms without mention of "dumping" or loss-leadering. I have found that I cannot rely on the second respondent's evidence without qualification. Where his evidence conflicts with that of Mr. Walsh, I prefer Mr. Walsh''s version. I reject the second respondent's testimeny to that extent. I find that a conversation took place in about the first week of March 1982 between Mr. Walsh and the second respendent in the terms described by Mr. Walsh and set out abcve. As a result of this conversation, [I find that: (a) In March 1982, the first respondent, by its aqent, the second respondent, made it known to the Burnina Log that the first respondent would not supply the Kent Tile Fire to the Burning Loa unless it aqreed not to gell those qoods at a price less than a price specified by the first respondent. namely the first respondent's suqgested retail price: see 3.96(3)(a) (Statement of Claim para.14(1)). et. eer) In March 1982, the first respondent. by 1ts agent. the second respondent. induced or alternatively attempted to induce the Burning Log not to advertise the Fire for sale at a price less than a price speciried by the first respondent. namely the first respondent's suqgested retail price: see 3.96(3)(B) and 3.96(7)(a) (Statement of Claim para.i5(2)). (c) In March 1982, the first respondent. bv 1ts agent. the second respondent. induced or alternativelv attempted to induce the Burning Log not to sell the Fire at a price less than a price specified by the first respondent. namely the first respondent's suqgested retail price: see $.96(3)(5° (Statement of Claim para.16(1)). (da) In March 1982, the first respondent, by its agenc. the second respondent. used in relation to goods that may be supplied by the first respondent to the Burning Log, namely the Fire, a statement of a price that was likely to be understood by the Burning Log as the price below which the said goods were not to be sold: see $.96(3)(f) (Statement of Claim para.17(1)). (e) The second respondent aided and abetted and was knowingly concerned in each of these contraventions. 25. The Commission alleges a further contravention of 3.48 by reason of certain statements 3aaid to have been made by the second respondent at a meeting between represen- tatives of the first respondent and representatives of the Burning Log on 8 March 1982. The meeting took place at the Burning Log 3 premises at Revesby. The second respondent. Mr. Leslie F. Tremain and Mr. Palmer represented the first respondent. The Burning Log was represented by Mr. Van Roy and, for some of the time. Mr. Walsh. According to Mr. Van Roy, the second respondent said at the meeting that "on the question of pricing, there was to be a no discount situation". Mr. Van Roy said that the second respondent mentioned that problems had been encountered in this area in New Zealand but they had "finally got the system right" and added "we ar? only interested in people who are not involved in discounting". A query by Mr. Van Roy as to the legality of this practice apparently brought no response from the first respondent's representatives. A copy of the first respondent's price list was handed to Mr. Van Rov. The second respondent explained that the first respondent's prices had increased. Inter alia. the first respondent's "suggested retail price" for the Kent Tile Fire was discussed. A price of $697.00 for the Fire (without flue kit) was tndicated to Mr. Van Rov by the second respondent. According to Mr. Van Koy, the second respondent then explained: "that represents the new leqal price column for the Kent Tile Fire with no flue". to fon . Mr. Walsh said that although he was not present during the whole of the meeting. he recalled the second respondent's inforfiing Mr. Van koy that he "would not tolerate the discounting side": that he felt that there was no need to discount the product and that there was "plenty for everybody". He confirmed that Mr. Van Rov's questioning the leaality of what was proposed failed to draw anv response. The second respondent denied the substance of these allegations. Instead, he said. all that happened was that he informed the meeting that he would "fire any of my starf who discounted at my shops". there was a joking reference co the second respondent's reputation as a discounter in New Zealand and a discussion about changes in the first respondent 2 recommended retail price and wholesale prices of the Kent products, including the Kent Tile Fire. Mr. Tremain denied that any reference to discounting was made by the second respondent at the meeting. To this extent. his evidence accorded with none of the other witnesses, not even the description of the meeting by the second respondent. Mr. Tremain said that he had not turned his mind to the events in question until shortly before he gave evidence. I think that the likely explanation of the discord between Mr. Tremain's evidence and that of the other witnesses is that Mr. Tremain's ty "I recollection was faulty. In other words, I think that the real contest on this aspect of the case lies between the competing versions 'ot Messrs. Walsh and Van Rov on the one hand and the second respondent on the other. Although not decisive of the present question, I note that the respondents did not s3eek to call Mr. Palmer. It was suqagested that. for other reasons, he mav have been hostile to the respondents and that he was difficult to locate. I am not persuaded that the respondents adequately explained their failure to call Mr. Palmer but it is unnecessary to pursue the point further since I have formed the view that. to the extent that there is any contlict between them, ! prefer and accept the evidence of Mr. Walsh to that of the second respondent. I have some reservations about Mr. Van Rov's evidence, especially in light of his lack of candour with the Court in respect of the timing of a proposed overseas visit at about the time he was called to aqive evidence. However, Mr. Van Roy was substantially corroborated by Mr. Walsh on the important parts of the discussion now relied upon. Mr. Van Roy's evidence 15 further confirmed by his handwriting on the price list which was tendered. On the whole. therefore, I accept the evidence of Messrs. Walsh and Van Roy and reject the second respondent's version of the meeting. I make the same findings in respect of this meeting as I have made in the case of the earlier discussion between Mr. Walsh and the' second respondent '(Statement of Claim paras.l4ii) and (11). 15¢41) and (il). 16:1) and (11) and 17(1) and (itd). The Commission also alleges that the respondents engaged in resale price maintenance in certain dealings with the Burnind Loa in May or June 1982. Mr. Walsh first said that in late May or early June 1982. he sought to order 26 Kent Tile Fire units from the second respondent. (It later was conceded by Mr. Walsh that this order. as distinct from an earlier order for 20 units. was not given until late June 1982.) According to Mr. Walsh. the second respondent tnen claimed that he was getting "flak" from dealers that the Burning Lca was discounting. Mr. Walsh says that. in response. he denied the dealers' claims but admitted that the Burning Log was offering an "incentive" of $70.00 for the usual installation charge of $135.00. The explanation given was that since the technical staff retained bv the Burning Log for this purpose were very capable and thus able to carry out the installation in less time than normal. the Burning Loq was able to pass this saving on to the consumer. According to Mr. Walsh. the second respondent replied as follows: 29. "T willl accept your explanation at this stace but if I hear anv more flak. you had better watch it. I will not tolerate discounters, no matter how big you are." Because there is some confusion in the evidence as to the exact date upon which the order for the 26 units was given by Mr. Walsh it will be necessary to return to the detail of this aspect of the proceedings later. In summary, the respondent's case on this issue is that there was an initial order placed by Mr. Walsh for 20 units and that only at a later date was an order placed by him for 26 units, by which time the respondents were justified in withholding supply because, by then. the Burning Log was "putting" down and copying the respondents' product. The question of timing apart. Mr. Walsh's version of the conversation with the second respondent i3 corroborated by a memorandum Mr. Walsh sent to his sales staff dated 18 May 1982: " *x*xAMOST URGENT AND IMPORTANT+*~* I have been advised by the Kent Fire people that they have received complaints from their distributors that Burning Log are discounting Kent Fires. UNDER NO CIRCUMSTANCES IS ANY BER OF OUR SALES STAFF TO SHOW OR GIVE A DISCOUNT ON ANY KENT UNIT. THE UNIT PRICE MUST BE SHOWN AT FULL RETAIL PRICE ON EVERY ORDER AND QUOTATION FORM. An incentive offer to the customer 13 being made by Burning Loq by offering Installation at HALF PRICE for a single storey situation. A sample Quotation form is attached for your guidance. THE ABOVE INSTRUCTIONS MUST BE STRICTLY ADHERED TO" There can be no dispute that the Burning Log was, at about this time. offering prospective purchasers of the Kent Tile Fire an "incentive" in respect of the cost of installation of the Fire. For instance. an advertisement by the Burning Log in early July 1982 offering free installation of the Fire was tendered. (The price of th Fire was there shown as $697.00 - the flue kit was priced at $140.00 - a total of $837.00.) Another advertisement at about this time offered to instal the Kent Tile Fire at halt price. It is the Commission's case that. at about this time. the first respondent ceased supplying the Fire to the Burning Loq. The respondents sav that their reason for withholding supply was the Burning Loq's abuse of their product. It 1s suggested that the Burning Log was "dumping" the Fire but. siqnificantly, no attempt was made to establish the specific evidentiary foundation for a loss-leadering defence (see Trade Practices Commission v. Orlane Australia Pty. Limited (1984) 1 F.C.R. 157). On the other hand, there can be no doubt that. at this time, executives of the Burning Log held the view that the Kent Tile Fire was not desiqned to consume Australian timber. It was later conceded that this view was insupportable. Nonetheless, although of doubtful relevance for present purpose, it did appear that other complaints about the Fire raised by the Burning Log may have been justified. I need make no finding on the point save to refer to correspondence in late June and early July 1982 between the Burning Log and Kent Heating Limited in New Zealand dealing with. inter alia, the problem of a creosote build-up in some Kent Log and Tile Fires. This in turn led to some correspondence from the respondents to the Burning Log which is important. On 2 August 1982, the second respondent wrote to the Burning Log: "Your letter to Kent is noted. we like vourselves are most concerned that you are having problems with our fires. Your remarks that these all appear to have been installed by your own installers --- hence the service calls. We. as responsible distributors are most concerned to find out the unique problem that only your company is having with our fires that none ot our sixty four dealers are having. Would lead us to believe the problem is somewhere within your organisation either sales or installation. Every heater we sell has full instructions and a very good manual on creosote and how to avoid it by running the heater properly. We suggest you give us the name and addresses of 32. your problem heaters and we will be delighted to personally call on all of them to assertain how & why they happen and particularly why the problem 13 unique to Burning Lbdg. We would also like to take the Kent Representatives around these installations so they can see for themselves the problems you are having. If our heaters and flues are in fact at fault the Heating Centre will be deliqghted to not only reimburse you with all vour service fees any faulty units or flues will be totally replaced free of charge. Simply give us the names and addresses and if possible the phone numbers of your clients we will action immediately." On 16 August 1982, Mr. Robert C. Butterfield. the second respondent's brother and general manager of the first respondent. wrote to the Burning Log in these terms: "We have not received a reply to our letter of the second instant to enable us to investigate the cause of the complaints to which you refer in your letter to Kent. As our highest priority is to protect the name of Kent as Australia's finest solid fuel burner, we must insist on ascertaining whether the fault is in the heaters, the flues, the installation, or the instruction qiven to the customers. As the incidence rate 1s abnormally high in your case we suspect that the root of the problem lies with vour installers or your sales staff. Until such time as we have the information to solve your problem, the likelihood of further complaints and expense for yourselves and or us is considerable. Accordingly until vou supply us with the information requested in 33. our earlier letter, we regret that we must cease supplying you in order to protect the products excellent reputation. I. should' also mention that many of our dealers have mentioned that customers have been told by your salesmen that 'Kent fires are shoddy and nothing but trouble'. Our experience with thousands of satisfied customers is quite to the contrary, and we would appreciate an instruction to your Salesmen to desist in this attitude - at least until we have ascertained where the blame for your problems lies." In my opinion, the statement of reasons for withholding supply made in the penultimate paragraph of Mr. Robert Butterfield's letter should not be accepted at face value at least so far as they might suggest that the matter there raised was the only reason for withholding supply. It is true. a3 the respondents submit. that the relationship between the first respondent and the Burning Loq must ce viewed in the perspective that they were in competition with each other in some sections of the market 30 that Burning Log may well have had some motive for "putting down" the Kent Tile Fire. At the same time, the executives of the Burning Load had a keen appreciation of the commercial success of the Kent Tile Fire and were anxious to cbtain supplies of the product for the profit margins 1t offered to retailers. The more important consideration. not mentioned in the correspondence. was the circumstance that the Burning Log was discounting the Kent Tile Fire among other lines. In addition to the "incentives" offered in connection with installation costs. there was unchallenged evidence that. for instance. in May 1982 the Burning Log offered discounts to single retail purchasers in the order of a ten per centum deduction on the first respondent's "suggested retail price". Although it was not normal fcr the Burning Log to discount in any random fashion. 1ts policy was to offer discounts 1f this was necesssary to match competitive quoting. Mr. Robert Butterfield's letter raises a further question. namely the point of time at which the withholding of supply first occurred. Again. on its face, the letter 15 capable of the interpretation that supply was to be withheld as from the date of the letter. that is. prospectively. In fact. withholding of supply had already occurred. In the first instance, Mr. Walsh's evidence suggested that the withholding of supply by the first respondent occurred in late May or early in June 1982. However. in cross-examination. he conceded that he was contused a3 to the timing of orders for Kent Tile Fires placed by him at about this time. [ am still not entirely satisfied with his recollection of the sequence of events which 1s. I think. a genuine effort on his part to reconstruct the situation from the existing documentation. There was tendered a written order from the Burning Lod dated 10 June 1982 for 20 Kent Tile Fires and flue kits. It ty Ww bears the notation "completed" and I think that it is reasonable to assume that. shortly after 10 June. 20 fires were supplied. Thus, it seems reasonably clear that no withholding had then occurred. However. difficulties were experienced by the Burning Log in obtaining the performance ef a subsequent order placed by 1t with the respondent for 26 Kent Tile Fires on or about 21 June 1982 (Order No. 8303). The matter wags raised by Mr. Van Roy in a telephone conversation with the second respondent in about the middle of July 1982. Mr. Van Roy said that he then explained t5 the second respondent the severity of the problems being experienced py the Burning Log with 1ts customers by reascn of its inability to supply Kent Tile Fires. Mr. van Rev asked the second respondent for an indication when 4a delivery of the fires could be expected. The second respondent said that he could give no such indication. Supply was not resumed, although shortly after the conversation, on 725 July 1982, the first respondent stated ina full page advertisement in "The Sun-Herald" newspaper that 130 Kent Tile Fires had arrived and were available for ammediate delivery. 36. The respondents, with some justification. attack Mr. Walsh's credibility on this score. His recollection of the sequence of the' events was certainly faulty. But on the critical issue of whether threats were made by the second respondent if the Burning Log discounted. Mr. Walsh 15 supported by his memorandum dated 18 May 1982. I find that conversations with the second respondent did take piace in the terms alleged by Messrs. Walsh and Van Roy. However. I further find that supply of product was not declined until late June or early July 1982. Although there 1s some force in the respondents' suggestion that friction existed at the time between the first respondent and the Burning Log. I think that 1t is reasonable to infer the major source of that tension between them was the Burning Log's habit of offering competitive quotes when the need arose. The seccnd respondent saw this as an unnacceptable form of discounting which he was not prepared to tolerate. His expression of his views on the subject was sufficiently forceful and connected in point of time with the withholding of supply which occurred to justify the inference that the Burning Log's inclination to discount was a substantial and operative reason for the respondents' refusal to supply. In short. I think that Mr. Robert Butterfield's letter dated 16 Auqust 1982 was too late to provide a camouflage for the real aqrievance felt by the respondents. 37. I therefore find that as from July 1982. the first respondent withheld the supply of the Kent Tile Fire from the Burning Log for' the reason that the Burning Log had sold or was likely to sell the fire at a price less than a price specified by the first respondent as the price below which the Fire was not to be sold. namely, the first respondent's suggested retail price: see s.96(3)(d)(11) (Statement of Claim para.18). The Commission charges a further contravention of 3.48 by the respondents by reason of certain of their dealings with Mr. Neville G. Chapple in his capacity asa director cf Golden Decors Pty. Limited, a company carrying en the business of. inter alia, retail lighting and heating at Wagga Wagga, N.S.W.. First contact between the parties occurred in 1980 when the second respondent called on Mr. Chapple at Wagga Wagga. Five Kent Tile Fires were supplied to Golden Decors Pty. Limited by the first respondent as a result of this meeting. For some time thereafter. Mr. Chapple obtained supplies of Kent Tile Fires from a source in Melbourne, being an outlet conducted by Mr. Grahame Anderson carrying on business under the name of "Wood Flame". However. in about March 1982, Mr. Chapple received in the mail. apparently unsolicited, a copy of the first respondent's dealer newsletter dated 1 March 1982 already referred to by Mr. Lindsay. As has been said. the document contained the item: 38, "PRICE CUTTING - WE URGE YOU IN THE STRONGEST POSSIBLE TERMS TO MAINTAIN YOUR SUGGESTED RETAIL PRICE. SELLING FIRES IS AN EXPENSIVE EXERCISE AND YOU NEED A DECENT MARGIN." (The "suggested retail price" for the Kent Tile Fire was indicated at $637.00 (no flue). with flue kit at $140.00.) On the front page of the newsletter, the following note appeared, apparently in the handwriting of the second respondent: "Neville Graham Anderson wont be supplying you anymore. They will have to be out of Sydney. You will be buying at bulk price (providing you have the six display units). There will only be 2 Wagga dealers - yourself and Riverina (a reference to Riverina Heating & Cooling Service Pty. Limited)." Mr. Chapple said, in evidence which I accept, that shortly after receipt of the newsletter, he telephoned the second respondent and discussed buying heaters from him rather than through Mr. Anderson. He then said in his evidence: "Also the matter of price came up a3 well as to what price we would be buving at." 39. In the context of the receipt of the newsletter, and in the absence of any denial by the second respondent of such a conversation, I think that 1t 1s reasonable to infer that the conversation proceeded upon the footina, implicit if not explicit. that Mr. Chapple and his company were to obev the dictates of the newsletter in the matter ofr the "suagested" reta1l price of the Kent Tile Fire and. specifically, were to refrain from discounting. I therefore find that in or about May 1982, the first respondent, by its agent the second respondent. maie it known to Golden Decors Pty. Limited that the first respondent would not supply the Kent Tile Fire unless Golden Decors Ptv. Limited agreed not to sell those qoods ata price less than a price specified by the first respondenc. namely the first respondent's suggested retall price: see 8.96(3)(a) (Statement of Claim para.22). According to Mr. Chapple. 1n evidence which I also accept, the second respondent telephoned him in about June 1982 and the following conversation occurred: "To the best of my recollection. Brian said, 'We are qetting tired of the problem we are having in Waqga with the discountina'. I replied it was very difficult to maintain a price, a suggested retail price, and sell heaters. The conversation flowed. He remarked. if the discounting did not stop. he would appoint another dealer in town and stop supplying us and supply him. I said I would +0. try to sell at the reccommended retail price, but what was he going to do about the others. He said h€ would fix that. ..." Mr. Chapple further said. in evidence which aaain I accept. that during this conversation. the second respondent said that he was "sick and tired" of the discounting in Wagga and that if Golden Decors Pty. Limited did not charade at the recommended price, $837.00, as shown in the price list. he would find another dealer. or they would have their supply cut off. The second respondent admitted having a number of telephone conversations with Mr. Chapple but ne did not accept the main thrust of his evidence. Instead. the second respondent said that their conversations were devoted to Mr. Chapple's complaints about the price "wars" that were then being conducted in Wagga Wagga. Although advertisements by Golden Decors Pty. Limited at the time tJune to Auqust 1982) offering reduced prices were tendered, it may be that the second respondent's recollection of the events was influenced by a note received by him from Mr. Chapple some time after 27 June 1983 complaining about the size of discounts off the retail price of the Kent Tile Fire then being offered bv Riverina Heating & Cooling Service Ptv. Limited. The note enclosed a copy of an advertisement by Riverina Heating & Cooling Service Pty. Limited dated 27 July 1983 stating that inthe case of, inter alia, the Kent Tile Fire. the suagested retail price 41. was $3950.00. yet the asking price was only $750.00, including flue, thus offering a saving of $200.00. In his note to the second respondent. Mr. Chapple said: "This add (sic) mav be of interest to you. It certainly makes us look silly advertising $100 off Tiles Fires, plus a waste of money. It is killing your sales here". Even if such a communication had occurred 12 months earlier. I am not persuaded that it would have assisted the respondents' case. In any event. I think that 1t is too far removed in time from the conversations now relied on by the Commission to be capable of throwing any light on tne questions which presently arise. The respondents also seek to find some comfort in evidence given by Mr. Gary Gurtner. a witness called by the Commission. Mr. Gurtner was the managing director of Riverina Heating & Cooling Service Pty. Limited. He said that in a telephone conversation with the second respondent in about April 1982. he asked for the 3gole Kent dealership (presumably in Wagga Waqga) "as the prices were being cut to pieces by the other opposition stores". The second respondent declined the sale dealership proposition. saying that he would continue to supply the three retail outlets (in Wagga Wagqa) at the same prices. da. In my opinion. this evidence 15 at best equivocal from the respondehts' standpoint. Although the second respondent apparently failed to warn Mr. Gutner against discounting. he made it clear that. 1n terms of wholesale pricing, he would not differentiate between the dealers. More importantly, it does not necessarily follow from Mr. Gurtner s falrlure to give evidence of the sort of warning given to Mr. Chapple, by the second respondent. that Mr. Chapple's evidence should be rejected. In fact, evidence was qiven by the second respondent that, 1n about Mav or June 1982. he handed out an explicit warning on the subject of complaints about discounting to both Messrs. Chapple and Gurtner. According to the second respondent, he told bozch gentlemen tnat he would "cut them all off" if they did net stop "bothering" him "with these stupid things". He woud "bang their heads together and cut off supply". Mr. Chapple impressed me as an honest witness. I prefer his evidence to that of the second respondent where they are in conflict. The second respondent's version of the events 13 illuminating insofar as 1t shows the aggressive nature of the stance he was prepared to take when threatened with the discounting of his product. I have come to the conclusion. on the whole of the evidence. including the March 1982 newsletter. that the second respondent did threaten to withhold supply from Mr. Chapple if he discounted. I make the following rindings in this connection: (1) That in or about June 1982, the first respondent. by its agent, the gzecond respondent. made it known to Golden Decors Pty. Limited that the first respondent would not supply it with the Kent Tile Fire unless Golden Decors Pty. Limited aaqreed not to sell those qoods at a price less than a price specified by the first respondent, namely the first respondent 3 recommended retail price: see $8.96(3)(a) (Statement of Claim para.23). (2) That, in or about June, 1982, the first respondent. by its agent, the second respondent, induced cl alternatively attempted to induce Golden Decors Pty. Limited not to sell the Fire at a price less than a price specified by the first respondent, namely the first respondent's recommended retail price: see 3.96(3)(b) (Statement of Claim para.24). (3) That in or about June 1982. the first respondent, by its agent, the second respondent. used in relation to the Fire a statement of price that was likely to be understood by Golden Decors Pty. Limited as the price below which the 44, acods were mot to be sold: see §.96(3)(f) (Statement of Claim para.25). (4) That the second respondent aided and abetted and was knowingly concerned in such contraventions. The statement of claim also made allegations of resala price maintenance in respect of certain dealings between the respondents and Hipotu Pry. Limited (Statement of Claim paras.26 to 31 inclusive). At the commencement of the hearing, the Commission announced that it did not press these alleqations. Finally, the Commission alleges contraventions of 3.48 in respect of certain dealings said to have taken place in July 1382 between the respondents and Marstep Pt. Limited. At all material times. Marstep Pty. Limited carried on business from a head office at North Parramatta. N.S.W. under the name of "The Black Baron". It engaged in the retail sale of. inter alia, 30lid fuel heaters, stoves. fire places and accessories. The allegations are pleaded as follows: "34. At all material times Claude Morris zavattaro of 27 Roberta Street. Grevstanes (Zavattaro), was and was known by the respondents to he. a servant of Marstep holding the position of qroup manager. 45. 35. On or about 9 July, 1982 the first respondent by 1t3 servant or agent the second respondent acting on 1ts behalf. made 1t known to Marstep that the first respondent would not supply goods, namely, the Kent Tile Fires, to Marstep unless Marstep agreed not to sell those goods at a price less than a price specified by the first respondent. PARTICULARS A conversation on or about 9 July. 15382 between the second respondent as managing director of the first respondent and for and on its behalf and Zavattaro. 36. On or about 9 July. 1982 the first respondent by ita servant or agent the second respondent actinqg on its behalf. offered to enter into an aqreement with Marstep for the supply of goods to Marstep, namely The Kent Tile Fires. being an agreement one of the terms of which would be that Marstep would not sell the said goods at a price less than a price that would be specified by the first respondent. PARTICULARS The applicant repeats the particulars set out in paragraph 35 hereof. 27. On or about 9 July, 1982 the first respondent by its servant or agent the second respondent acting on its behalf. used in relation to goods that may be supplied by the first respondent to Marstep, namely The Kent Tile Fires. a statement of a price that was likely to be understood by Marstep as the price below which the said goods were not to be sold. PARTICULARS The applicant repeats the particulars set out in paragraph 35 hereor." In sgupport of this part of its claim. the Commission called Mr. Gavattaro and Mr. Brian J. McVev, a director of Marstep Desiqn Pty. Limited and an associated 46. company, Enterprise Distributors Pty. Limited, tc which reference will be made later. The course of their evidence was complicated by the circumstance that much of 1t was given on the voir dire extending over some days. The voir dire arose because the respondents objected to the admissibility of Mr. Zavattaro's evidence on the grounds that it was unfairly obtained. In short, it was suqqested that the situation wag one of "entrapment" in which Mr. Zzavattaro played the role of the agent provocateur (cf. Bunning v. Cross (1978) 141 C.L.R. 54). Further. it was submitted that this was a "trap" order situation, the guidelines for which were not observed (see Bryant v. Keith Harris & Co. Limited (1980) 33 A.L.R. 437). Betore dealing with the conversation relied upon in the statement of claim between Mr. Zavattaro and the second respondent on 9 July 1982, some background matters should ze mentioned. In the first place. Enterprise Distributors Pty. Limited was the distributor in New South Wales of the "Jalco" heater. As has been s3aid in connection with Mr. Lindsay's evidence, Jalco was a rival product of the Kent Tile Fire. The evidence of the second respondent given in that earlier context shows the intensity of his feelings on the question of the "Jalco" product. His attitude was fully reciprocated by the management of "The Black Baron". Mr. McVey made no attempt in his evidence to conceal his hostility to the Kent products. Given that background. it was unfortunate that, although acting with honourable intentions. the officers of the Commission investigating complaints against the first respondent chose. Mr. McVev as their channel ot communication. The reason for this choice was shown in a memorandum on the subject written by Assistant Commissioner Mr. B.L. Coombs dated 25 June 1982: "I enclose a copy of an ECR from WA recording a complaint of exclusive dealing conduct by Kent Heating Ltd. You are already inquiring into allegations of rpm by the same company (ref ECR 2383) and I understand you will be conducting a retailer survey in connection with that inquiry. 2. The WA complainant has stated that the retailers inN.S.W. who were pressured by Kent to give up selling Jalco products reported the fact to Jalco NSW's distributor. Mr Brian McVey of Enterprise Distributors, 9 Leonard Street Hornsby and he should therefore be in a position to provide the names of the retailers concerned. 3. Would you please contact McVey to obtain the names of these retailers and include them in your survey so that threshold inquiries on both the exclusive dealing and the rpm complaints are carried out simultaneously." At about this time, Mr. Coombs had spoken with another officer of the Commission. Mr. Malcolm J. Finger who was also called to give evidence on the voir dire. Mr. Finger's notes of his investigation show that he commenced his enquiries on or about 20 May 1982. His notes show that. 48. on 17 June 1982 and. it would seem shortly thereatter,. he spoke twice on the telephone with Mr. Coombs: "Note: Lindsay Coombs rang to asx that Svdney office delay RPM enquiries until W.A. 'exclusive dealing' complaint is received by C.0. Would propose that Sydney survey cover both aspects. M.J.F. 17/6 Note: Lindsay Coombs rang - suggested Sydney office approach Brian McVey of Enterprise Distributors Ltd. - 476 1565, McVev 1s the NSW distributor for Jalco fire places - local competition against Kent. Has market information and details of retailers who have been threatened by Kent (cut off supply) if they stock Jalco. Perth ECR to be forwarded wnen copy is available. M.J.F." In early July 1982, Mr. Finger was in contact with Messrs. McVey and Zavattaro. Mr. Finger's notes include a summary of information provided by Mr. McVey. The summary contains the sub-heading "Telephone conversations - 5 and 9 July 1982". So far as material, the summary states: "lL. In response to Mr. Bird's complaint lodged with the Commission s Perth Office (refer WA.ECR441. 10.6.82.) I rana McVev to arrange an interview appointment to obtain information on - 49. The Australian fireplace market. . Bird's allegation that Kent was enqaaing in exclusive dealing by refusing to supply retailers who also stocked Jalco. . Names. of retailers who have had problems with Kent. ... 3. McVey said that many retailers had complained about the exclusive dealing of Kent but when he has asked them to put something in writing they all 'invariably go to water . Two other areas of complaint concern - Resale Price Maintenance . Scare tactics re. alleaed breach of patent laws by Jalco. ... 5. He said that he would do some 'ringing around' and call back in a few davs time with names and telephone numbers of retailers who miczht be prepared to talk to the Commission. o. McVey rang on 9.7.82 to advise that the following retailers should be able to assist in Commission enquiries - . John Lindsay, Kurrajong Hardware. (045) 731268. Mr. Lindsay has been unable to obtain supply since advertising Kent at discount prices. . Charles Bishop, Bishop Stores. 231 3672. Unable to obtain supply, possibly because of RPM reasons. - Bar-B-Q3 Galore - McVey believes tnat this rirm attempted to obtain supply but because firm i3 a 'known discounter'., could onlv gecure supply on certain conditions. Apparently a letter exists re. these conditions, Barbecue Bazaar - Peter Eden. 920 5110. . Ertendly Fireplaces - Franz Velzen. (062) 805583. 50. Threats to cut off supply have been made by N.S.W. distributor because firm also stocks Jalco. - Ace Mowers - Albury. (060) 253552. As above. 7. I asked McVey whether he knew of the existence of Kent price lists. He said that he believes the N.S.W. distributor. Brian Butterfield (Seven Hills Heatina Centre) circulates on DEALERS NEWSLETTER which contains price information ...' In a further note dated 22 July 1982, Mr. Finger said. inter alia: "Mc VEY' S DEALINGS WITH KENT' S N.S.W. DISTRIBUTOR. McVey said that he had been in contact with Brian Butterfield recently re. possible supply of Kent. . He said that Butterfield knows he isa Jalco stockist. . Butterfields (oral?) reponse was that he was prepared to supply, BUT - No stock available until November. "82. . McVey would have to provide an assurance that he wouldn't discount. . I arranged to meet McVev at his Black Baron outlet. Church St. Nth. P'matta on Tuesday, 3.8.82." Sl. Aqainst that background. I return to the evidence of Mr. Zavattaro. He said that. in the middle of June 1982, after discussing the matter with Mr. McVev. 1t was decided that he should approach the first respondent with a view to obtaining supplies of the Kent Tile Fire. He experienced difficulty in making telephone contact with the second respondent. It is possible that. recognising himas a competitor, the 3econd respondent was not concerned to return his telephone calls. He said that. ultimately, on 9 July 1982. he made telephone contact with the second respondent. He described their conversation in these terms, so far as material: "I would have stated that I was Claude cavattaro from the Black Baron. His first Statement to me was, why are you contacting us? He mentioned that he had been in touch with our company some eighteen months prior seeking our company to act as agents for Kent products and we had knocked him back. I had no knowledge of that conversation so I said. well, the reason why I am calling you is we have had quite afew enquiries about Kent tile fires andI wanted to see what the possibility was of negotiating a supply agreement. I asked him whether he would be in a position to supply us. He said to me, ves, however he could not do at that particular time, that his current stocks were committed and that he had back orders and that he would not be ina position to have stock until November of that vear. Then [I said to him, would vou be prepared to supply us in November? He said. yes, he would he prepared to do so. However, we would have to meet his agents obliaations. I asked him what those obligations were. He said we S2. would have to qive an undertaking not to discount the particular product anc sell at the same price as his other aqents did. At that point... he then asked for a written undertaking ... that we would not discount The second respondent flatly cenied having any conversation with Mr. Gavattaro. It 15 clear from Mr. Finger's notes, which I accept as entirely accurate, that on 9 July 1982, the day of the alleged conversation with the second respondent. Mr. McVey and Mr. Finger were in contact with each other with a view to obtaining evidence against the respondents. True it is that. evenif this were a criminal case, the material now relied on would, subject to the discretion to exclude on grounds of unfairness. be technically admissible: see Bunning v. Cross. supra. Whilst. therefore, the conversation is admissible. the circumstances under which the evidence was obtained were such that I propose to give it only nominal weight. Although I have made other adverse findings on the credit of the second respondent, I am of the view that in the factual contest between him and Mr. Zavattaro on the question of whether the conversation alleged to have taken place dia, in fact. occur. I should find that the Commission has not discharged the onus which is appropriate in proceedings to recover a pecuniary penalty. in Ces} I find that the alleaqations made in paras.35. 36 and 27 of the statement of claim have not been sustained. I propose making the following orders: 1. Declare that the first respondent engaged in the practice of resale price maintenance in respect of the Kent Tile Fire in contravention of 3.48 of the Trade Practices Act, 1974 in the respects alleged in paras. 6, 7, 8. 9, 10, 14, 15. 16, 17. 18. 22, 23, 24. and 25 of the Statement of Claim. 2. Declare that the second respondent aided and abetted and was knowingly concerned in the said contraventisns. 3. Reserve costs. 4. Adjourn proceedings to a date to be fixed for the purpose of dealing with pecuniary penalties and other relief as may be appropriate. | certify that this and the 5-2 preceding pages are a true copy of the reasons for judgment herein of The Honourable Mr Justice Beaumont. Aroce2 JE "7 Associate Dated (GF "De IGRA-