ra pumade = Judgement No. Th aves . oe TRADE PRACTICES - power of Federal Court to accept undertakings - applications for injunctions and damages - alleged contravention of s.46 - grain transport services - alleged predatory pricing by State Government Rallways Commission —- motion for order discontinuing application on mutual undertakings by parties - undertakings reflecting anti-competitive agreement - limits on power to accept undertakings ~ discretion to reject in public interest - request for restriction of publication of parties to grain transport contract - request rejected. Trade Practices Act 1974 s.46, s.80 Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CER 150. Trade Practices Commission v Milreis Pty Ltd (No.2) (1978) 32 FLR Visy Board Pty [td v Trade Practices Commission [1984] ATPR 40-435 Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-Stock Corporation (No.2) (1980) 44 FLR 455 Water Conservation and Irrigation Commission (NSW) v Browning (1974) 74 CLR 492 Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR WAG 126 of 1986 OD TRANSPORT PTY LTD v THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION FRENCH J. PERTH 10 March 1987 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION eee eee eer Ko. WAG 126 of 1986 BETWEERN : OD TPAMSPORT PTY LTD Applicant and THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION Respondent MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 10 March 1987 WHERE MADE: Perth THE COURT ORDERS THAT: 1. The Court declines to accept the undertakings proffered by the parties and otherwise makes no order. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION wwerwr NO. WAG 126 of 1986 BETWEEN: OD TRANSPORT PTY LID Applicant and THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION Respondent CORAM: FRENCH J. 10 MARCH 1987 REASONS FOR JUDGMENT The parties to these proceedings have resolved their differences and have come to court seeking an order that, subject to undertakings to be given to the court by each of them, the application be discontinued with no order as to costs. The guestion for the court is whether the undertakings proferred can be accepted. On 22 December 1986 OD Transport Pty Ltd filed an application claiming damages and injunctive relief against the Western Australian Government Rallways Commission for alleged contravention of s.46 of the Trade Practices Act 1974. 2. Broadly speaking the contravention was said to have arisen from predatory pricing on the part of the respondent in the provision of services for the transport of grain from farms to ports in the south west of Western Australia. The background to the proceedings 18 set out in the Reasons for Judgment on the applicant's claim for interlocutory relief which was dismissed on 24 December 1986. Directions were given on that day which, among other things, required that the applicant file and serve its statement of claim on or before 9 January 1987 and the respondent 1ts defence, on or before 23 January. The matter was at that time relisted for further directions on 6 March. A statement of claim and defence have been filed. The Pleadings The applicant carries on the business of transporting goods by road in Western Australia including the transport of grain for farmers from their farms to ports in Western Australia for export. 3. The respondent also carries on, among other things, the business of transporting qrain from farms to ports in Western Australia by road and rail. The market for the transport of grain in Western Australia 1s said, in the statement of claim, to be governed by a Land Freight Policy formulated by the Minister of Transport, the effect of which is to divide the market geographically into two areas, a regulated area currently serviced by rail and a deregulated area, through which there is no rail service. The statutory underpinning for that policy is referred to in the reasons for judgment on the claim for interlocutory relief. The applicant alleges that the respondent has a substantial degree of power in the market in the regulated area because 1t has, in that part of the state, an effective monopoly over the commercial transport of grain from farms to ports. Its share of market for commercially transporting grain to ports in both regulated and deregulated areas is alleged to amount to about 73% of the entire market. Further, it 1s contended that the respondent has access to extensive resources in the regulated area including locomotives, grain wagons and other rolling stock, workshops and depots, communication and signal facilities, railway track and a substantial labour force and that 1t 1s able to and does operate at a loss. 4. In October 1986, according to the statement of claim, the Minister, after calling tenders, awarded the applicant contracts to transport grain from off-rail CBH road bins in various locations falling within the deregulated area. In addition the applicant says it transports grain from farms to off-rail road bins and from farms to ports in the deregulated areas. The applicant and respondent are said to be competitors in the market in the deregulated area. The applicant pleads that the respondent has taken advantage, and unless restrained intends to continue to take advantage, of its substantial degree of power in the regulated Market for the purpose of:- (a) Eliminating or substantially damaging the applicant's business in the deregulated market. (b) In the alternative, deterring or preventing the applicant from engaging in competitive conduct in the deregulated market. one Particulars of these allegations are set out as -- ——_—~—f.oll-ows :- "(a) In or around November and December 1986 the Respondent offered, and continues to offer, to transport grain from farms in the deregulated area (b) (c) (d) (e) (£) (g) the contract pursuant to which the applicant transports grain from 5. via rail heads in the regulated area to ports. The Applicant describes this service as a ""paddock-to-port" service. The prices at which the Respondent offered and continues to offer its total paddock-to-port service are less than its actual cost of providing that service. In the alternative to (b) the prices at which the Respondent offered and continues to offer its paddock-to-port service do not reflect (i) its actual cost of the road to rail head component of that service and/or (ii) its actual cost of the rail head to port component of the service. In the further alternative the prices at which the Respondent has offered and continues to offer its paddock~-to-port service are less than the prices at which a person or trading corporation engaged in the transport of grain solely in the deregulated area could offer an equivalent service transporting grain by road without making a loss. the prices at which the Respondent has offered and continues to offer to transport grain by rail from rail heads in the regulated area which are close to the deregulated area are less than the prices at which the Respondent offers to transport grain over similar distances from rail heads in the regulated area, distant from the deregulated area, to ports. The Respondent is only able to provide its paddock-to-port from by (sic) relying upon facilities in the regulated area in which it effectively has a monopoly and from revenue derived from those facilities and by reason of the fact that it 1s able to and does run at a loss. The grain which the Respondent intends should be transported by 1ts paddock-to-port service 1s grain which would otherwise be transported via the CBH 'off rail road bins' serviced by the Applicant." The statement of claim does not make clear the nature of CBH off rail road bins to ports nor the way in which, applicant's returns from its performance of the contract would be affected by the respondent's activities. tnt ry mee Atk ve be 6. It concludes with an alleqation that the applicant has suffered loss and damage and seeks relief by way of damages and injunctions. The final in the following terms:- An order that the Respondent, its directors, servants agents or otherwise, be restrained: (a) (b) from supplying or offering to supply transport services for the haulage of grain from within areas other than regulated areas (as regulated by the Department of Transport) to ports or any part of such transport services at prices lower than the lowest net price (after taking znto account any discounts, allowances, rebates or credits allowed by the Applicant or persons related to the Applicant) at which the Applicant has since October, 1986 supplied or hereafter supplies or offers to supply any such transport services or at prices lower than the lowest net price (after taking into account any discounts, allowances rebates or credits allowed by the Applicant, persons related to the Applicant or others) for which any such transport services could be obtained in part from the Applicant and in part from others since October, 1968 or offers to supply any such transport services at prices lower than the aggregate of: (i) the actual cost to the Respondent of transporting grain from farms in areas other than the regulated areas by railheads operated by the Respondent; and (ii) the prices charged by the Respondent as published in the Government Gazette of Western Australia on 5 December 1986 of transporting grain from railheads operated by the Respondent to ports; from offering or entering into any agreement, arrangement or understanding in respect of any supply by the Respondent to any purchaser of the said transport services to pay or allow injunctive relief sought by the applicant is My 7. "WT wae w any discounts, allowances, rebates or credits either without restraint or upon the happening Rev. of a contingent event or events which would Bo have the effect that after the allowance of i any such discounts, allowances, rebates or credits the net price to the purchaser would . be lower than: - (1) the lowest price (after taking into account any discounts, allowances, : rebates or credits offered or allowed by the appJicant) at which the Applicant has since October 1986 supplied or hereafter te supplies or offers to supply any such tc transport services; or i i. (11) the lowest net price (after taking into BS account any discounts, allowances, pe rebates or credits allowed by the Applicant, persons related to the Applicant or others) for which any such transport services could be obtained in part from the Applicant and in part from others since October, 1986; ree + ae ot (ii1) the aggregate of: (aa) the actual cost to the Respondent of transporting grain from farms in areas other than regualted areas to railheads operated by the Respondent; and (bb) the prices charged by the Respondent . as published in the Government re Gazette of Western Australia on 5 : December 1986 of transporting grain from railheads operated by the Respondent to ports." wy _—_—— By 1ts defence the respondent pleads that on its proper ig . construction the Trade Practices Act does not apply to it or E O° regulate 1ts conduct in that - ies i "(a) In terms of the Government Railways Act 1904 or - otherwise the Respondent:- sae4 (b) (c) 8. (1) 1S an instrumentality or agent or authority or emanation of the Crown in right of the State of Western Australia; (ii) represents the Crown in right of the State of Western Australia and 1s entitled to all rights, powers, privileges and immunities thereof; The Trade Practices Act 1974 does not bind the Crown in right of the State. The Respondent is not a trading corporation within the meaning of the Trade Practices Act 1974." Apart from that pleading the defence constitutes a bare denial of each and every allegation contained in statement respondent of claim apart from that which pleads' that common seal. March counsel for the applicant The Undertakings the the 1s a body corporate with perpetual succession and a When the matter came on for further directions on 6 informed the court that the parties had resolved their differences and that they sought a consent order in the following terms:- "UPON the Respondent undertaking that:- (a) (b) Until 30 June 1989 1t will not by its servants, agents or howsoever solicit or engage in the business of hauling grain by road and rail from farms in the areas of Lakes and Dunn Rock other than for the persons listed 1n the Schedule hereto. Until June 1991 it will not by its servants, agents or howsoever otherwise solicit or engage in the business of hauling grain by road and rail from 9. farms in the areas of Gnowangerup Castwards and Nyabing/Pingrup other than for the persons listed in the Schedule hereto. AND UPON the Applicant undertaking that:- (a) Until June 1989 it will not by its servants, agents or howsoever otherwise solicit the business of hauling grain from farms in the areas of Lakes and Dunn Rock owned, possessed or controlled by the persons listed in the Schedule hereto or otherwise induce those persons to breach their contracts with the Respondent. {b) Until 30 June 1991 it will not by its servants, agents or howsoever otherwise solicit or engage in the business of hauling grain bv road and rail from farms in the areas of Nyabing and Pingerup other than for the persons listed in the Schedule hereto. The Court orders that: 1. The application be discontinued. 2. Each party bears its own costs." In addition a direction was sought restricting publication of the names of the persons listed in the schedule. The Power of the Court to Accept the Undertakings On being asked whether the Court had power to accept the undertakings proffered, counsel responded, in effect, that the undertakings were a matter for the parties to decide. The acceptance of an undertaking by the court is the exercise of a power and is akin to the grant of an injunction against the party giving the undertaking. Its breach enforceable by proceedings for contempt. one, re cere op 10. It 18 a power that was considered by the tigh Court in Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150. There it was held that as an undertaking is given in lieu of an injunction and 1s enforceable in like manner, the principles governing the grant of an injunction by a court must guide it in deciding whether it should accept an undertaking. In the joint judgment of Gibbs CJ, Stephen, Mason and Wilson JJ at 165 1t was said:- "Limitations which affect the court's jurisdiction or power to grant a final injunction must be observed in the acceptance of an undertaking when it 1s offered as a substitute for a final injunction. The court cannot escape such limitations by the expedient of accepting an undertaking in lieu of an injunction. The court cannot put itself in the position of enforcing conduct which it has no capacity to command or compel. No doubt the Federal Court has power to accept an undertaking at an interlocutory stage when the undertaking 1s reasonably related to the orderly procedure of the court or to the subject matter of the litigation, as Deane and Fisher JJ observed, even though 1t 1s not in a form which falls within section 80. But, with great respect to their Honours, this does not justify the conclusion that the | court has power to accept an undertaking by way of final disposition of the case when the court lacks power to make a final order in that form and the effect of the undertaking 1S to restrain conduct which the court has no power to restrain. In general the court must, in deciding whether it will accept from a defendant an undertaking to which the plaintiff takes no exception, be guided by the principles which apply to the making of a consent injunction, principles which we have already discussed." In discussing those principles their Honours stated that the parties by consent cannot confer power upon the court to make orders which the court lacks power to make. Specifically, in relation to consent injunctions under s.80 of the Trade Practices Act:- ll. "The parties by consent cannot confer power upon the court to make orders which the court lacks power to make. As we have seen, the relevant jurisdiction of the court in relation ta the granting of an injunction 18s limited to the hearing and determination of actions in which application 1s made for the making of orders under section 80(1) restraining a person from engaging in conduct of a specified kind. The orders made (which were the orders sought) restrained the defendants from engaging in conduct that does not necessarily constitute a contravention of Pt IV. The paragraphs are not limited to restraining the defendants from making an arrangement or arriving at an understanding or giving effect to an arrangement or understanding where the arrangement or understanding has the purpose or would have or be likely to have the effect of substantially lessening competition or restraining the defendants from engaging in conduct giving effect to such a provision. The orders therefore lack the essential feature which distinquishes conduct amounting to a contravention of Pt. IV from conduct which does not amount to such contravention." At the time of that decision s.80 of the Trade Practices Act which defined and limited the power of the court to grant injunctions in proceedings for contraventions of the Act provided as follows:- The court may, on the application of - (a) the Minister, (b) the Commission; or (c) subject to sub-section (1A) - any other person grant an injunction restraining a person from engaging 1n conduct that constitutes or would constitute - (dad) a contravention of a provision of Part IV or V; stood, the court's power to grant injunctions was limited to injunctions which restrained persons from engaging 1n conduct amounting to a contravention of a provision of Part IV or V or some accessorial participation 12. (ce) attempting to contravene such a provision; (£) aiding, abetting, counselling or procuring a person to contravene such a provision; (g) anducing or attempting to induce a person, whether by threats, promises or otherwise to contravene such a provison; (hk) being tn anyway, directly or indirectly knowingly concerned in or party to, the contravention by a person of such a provision; or (}) conspiring with others to contravene such a provision." As iS apparent from the text of sub-s.80(1) as it then contravention. Various amendments were made to s.80 1n 1983 as a result of which the sub-section then read:- Subject to sub-section (1A), where, on the application of the Minister, the Commission or any other person, the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute - (a) a contravention of a provision of Part IV or Vi (b) attempting to contravene such a provision; (c) aiding, abetting, counselling or procuring a person to contravene such a provision; in a contravention or proposed 13. (d) a iunducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; (e) being in any way, directly or indirectly, knowingly concerned in or party to, the contravention by a person of such a provision; or {f) conspiring with others to contravene such a provision, the Court may grant an injunction in such terms as the Court determines to be appropriate." Sub-section (4) as amended provided:- "(4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised - (a) whether or not 1t appears to the court that the person intends to engage again, or to continue to engage, in conduct of that kind; (b}) whether or not the person has_ previously engaged in conduct of that kind; (c}) whether or not there 1s an imminent danger of substantial damage to any person if the first mentioned person engages in conduct of that kind." Sub-section (5) has similar provisions in relation to the power of the court to grant mandatory injunctions. In the light of the decision in the Thomson case, the 1983 amendments extended the range of undertakings which the court Might accept in proceedings brought under the Trade Practices Act. bopmeee 'ogre 14. However, an observation by Woodward J. in a judgment given not long after the amendments suqagested there were still some difficulties in the way of consent orders. In Visy Board Pty Ltd v Trade Practices Commission [1984] ATPR 40-435, his Honour dismissed an application under the Administrative Decisions (Judicial Review) Act for an order of review of a decision of the Commission discontinuing proceedings brought under s.50 of the Trade Practices Act. Those proceedings had 1unvolved claims for injunctive relief to restrain the proposed acquisition of the fibre board manufacturer, Fibre Containers Limited, by the paper manufacturer, APM Investments Pty Ltd. The application under the Judicial Review Act was brought by Visy Board, a competitor of APM. In his reasons for judgment at 45,098 his Honour said:- "In the event the TPC sought only discontinuance, no doubt because sec. 80(1) of the TP Act did not permit a consent judgment unless the court could be satisfied that the facts justifying it had been established - and this was not possible without an extensive hearing." His Honour did not elaborate on the nature of the facts that would have to be established to justify the grant of the consent order under s.80. That section was however further amended in 1986. That part of the amendment relevant for present purposes 1s the introduction of a new sub-section (1AA) which provides:- ' 15. "(1AA) Where an application for an injunction under sub-section (1) has been made, whether before or after the commencement of this sub-section, the Court may, 1£ the court determines 1t to. be appropriate, grant an injunction by consent of all the parties to the proceedings, whether or not the Court 1S satisfied that a person has engaged, or 1s proposing to engage, 1n conduct of a kind mentioned in sub-section (1)." This new provision came into effect on 13 May 1986. The Explanatory Memorandum circulated by the Attorney General with the Trade Practices Revision Bill 1986, offered the observation that the new sub-section:- ",.,..makes it clear that in the absence of an admission of liability the court can grant consent injunctions 1f£ the court considers it to be appropriate without holding a hearing of the matter." In a decision given before that amendment came into effect Spender J. in Trade Practices Commission v Olympic Productions and Publications Pty Ltd [1986] ATPR 40-670, accepted undertakings in lieu of injunctive relief although there was no admission that the respondents had engaged in the relevant conduct. His Honour in doing so relied upon a passage from the joint judgment in the Thomson case at 164 where 1t was said:- "In deciding whether consent orders sought are 1n conformity with legal principle the Court is entitled to treat the defendants' consent as involving an admission 1A. of all facts necessary or appropriate to the granting of the relief sought." In the present case the respondent by its counsel expressly stated that there was no admission on 1ts part that there had been any contravention of the Act. In such a case the consent cannot be treated as an implied admission. The implication 1S expressly negatived. But the force of the 1986 amendment is that no such implied admission 1s necessary, for the court may grant a consent injunction "whether or not the Court 1s satisfied that a person has engaged or 1s preparing to engage in conduct of a kind mentioned in sub-section {1)." So in the present case, it 1S not necessary for the court to enquire whether the respondent has at any time contravened or proposed to contravene s.46 of the Trade Practices Act. In spite of this the following conditions must in my opinion, be fulfilled before the court can accept the undertakings which are proffered:- 1. They must be within power in the sense that the court could grant an injunction in like terms. 2. They must be "appropriate" in the minimum sense of conforming with the public interest. 3. They must be formulated with the degree of precision that 1s necessary for the grant of injunctive relief. Fy "4, 17. As to the first point, the effect of the 1983 amendment to sub-s.80(1) was to free the power conferred by the section from the constraint that the injunction granted under 1t must restrain a person from engaging in conduct that constitutes or would constitute a contravention of Part IV or V or one of the species of accessorial participation there listed. The dyscretion of the court in formulating the terms in which a final injunction may be granted under sub-s.80(1) 1s as wide as the phrase "as the court determines to be appropriate". That 1s not an unlimited discretion and must at least be confined by reference to the scope and purposes of the Act - Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492, 505; Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR 1 at 23. The general scope and purpose of Part IV of the Act has been described in the following way which I respectfully adopt: ",...It contains provisions which proscribe and regulate agreements and conduct and which are aimed at procuring and maintaining competition in trade and commerce." - Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-Stock Corporation (No. 2) (1980) 44 FLR 455 at 460 per Deane J. The proposed undertakings reflect an agreement between the parties that goes well beyond restraints on conduct that might contravene s.46. 18. Indeed 1t 1S an agreement which in its area of operation, substantially prevents the parties from engaging in competition with each other. It 12S an agreement so far foreign to the general scope and purpose of the Act as to render 1t, in my opinion, beyond the power of the court to accept the undertakings that would give effect to that agreement. If my view of the power of the court to accept the undertakings 1S wrong, then in any event I would not consider 1t appropriate to accept them. The concern of the court in relation to proceedings under the Trade Practices Act must lie not only with the interests of the parties but also the public interest- World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 186 and 203-4. One application of that general statement may _ be expressed in the proposition that the Act 18 concerned with competition rather than competitors. The undertakings in my opinion, reflect a concern with the positions of the parties as competitors rather than the process of competition, a concern which does not give adequate, if any, weight to the public interest. 19. In summary the following features of the proposed undertakings stand out and in my opinion warrant their rejection by the court as a matter of discretion:- lL. The extent to which the respondent's undertakings restrain conduct which could not on any view constitute a contravention of s.46. 2. The linkage of the respondent's undertaking to an undertaking by the applicant of similar width. 3. The obviously anti-competitive character of the agreement underlying the undertakings and its conflict with the general objects of the Act. The parties have also requested a direction from the court restricting publication of the names contained in the schedule which is referred to in the undertakings. Section 50 of the Federal Court Act does not appear apposite as there is no question of restricting publication of evidence or the name of any witness. Quite apart from any suggestion as to the source of the court's power to make an order of the kind suggested, no justification was offered for the order sought, and 1n my opinion there is none. In conclusion I wish to say that I respectfully agree with Franki J. at first instance in the Thomson case reported as Trade Practices Commission v Milreis Pty Ltd (No. 2) (1978) 32 FLR 234 at 243 where his Honour said:- 20. "I do not think it as the function of the court to impede a settlement between parties leqally represented and presumably well able to understand and evaluate the desirability of agreeing to a settlement nor do I think it 1s the function of the court to refuse to give effect to terms of settlement by refusing to make orders or to accept undertakings where those orders or undertakings are within the court's jurisdiction to make and are otherwise unobjectionable." That statement enunciates perhaps most relevant factors and as a point of departure is an appropriate guide provided that the assessment of what 1S unobjectionable gives due weight to the public interest as expressed in the provisions of the Trade Practices Act. In the circumstances of this case, for the reasons I have already outlined I cannot accept the undertakings proposed or the directions sought. I certify that this and the preceding 19 pages are a true copy of the Reasons for Judgment of his Honour Mr Justice French. Associate: Lijorth bonolenen Date: /0 March , /76 7. dome e owe smery 21. Counsel for the Applicant: Mr P. Tottle instructed by Messrs. Robinson Cox Counsel for the Respondent: Mr G. Tannin instructed by the State Crown Solicitor Date of Hearing: 6 March 1987 Date of Judgment: 10 March 1987 See ere TG Per A ATOM © ree & Se are x Site eT —" - OFF OF IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION NO. WAG 126 of 1986 BETWEEN: OD TRANSPORT PTY LTD Applicant and THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION Respondent CORRIGENDA Amendment to the Reasons for Judgment of his Honour Mr Justice French delivered 24 December 1986: Page 23, line 22 insert after "RA" the word "Furphy"". Cadth Me rolurpon, Associate to Mr Justice French Date : /2 Miarerr [4 7.