* -SUDIGMENT No. e381. CATCHWORDS Trade Practices - Trade Practices Act 1974, s.46(1)(b) - offer to take lease of specific premises - whether conduct constituted taking advantage of substantial degree of market power for purpose of preventing entry of appellants into market. JOHN NEAL WILLIAMS & ANOR. v. PAPERSAVE PTY. LIMITED No. G245 of 1987 Fox, Beaumont and Burchett JJ. Sydney Trt, fae Ne 12 October, 1987 f° oy IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G245 of 1987 ) GENERAL DIVISION ) ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN : JOHN NEAL WILLIAMS VAJILI PTY. LIMITED Appellants AND: PAPERSAVE PTY. LIMITED Respondent MINUTES OF ORDER Court: Fox, Beaumont and Burchett JJ. Date order made: 12 October 1987 Where made: Sydney THE COURT ORDERS: Appeal is dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G245 of 1987 ) GENERAL DIVISION ) ON APPEAL from a single judge of the Federal Court of Australia BETWEEN : JOHN NEAL WILLIAMS VAJILI_ PTY. LIMITED Appellants AND: PAPERSAVE PTY. LIMITED Respondent CORAM: FOX, BEAUMONT AND BURCHETT JJ. DATE: 12 OCTOBER 1987 REASONS FOR JUDGMENT EX _TEMPORE FOX J. We will deliver judgment now in this matter. This is an appeal from the decision of Sheppard J. given on 19 May 1987, dismissing an application for a permanent injunction to restrain the respondent from committing breaches of 3.46 of the Trade Practices Act 1974 ("the Act") which were alleged against it. The facts have been fully dealt with by his Honour. and his findings, except as to his final conclusion, have not been disputed. A statement of the facts can therefore be abbreviated somewhat. The respondent carries on the business of engaging in some of the steps necessary for the recycling of waste paper. Its principal activity is the recovery of waste computer printout paper. Until the end of April 1987, the first appellant, Mr Williams. was employed by the respondent as Sales Manager, his principal task being to seek out sources of supply of waste computer paper and procure contracts for its purchase. His Honour accepted evidence that the management of the respondent regarded the premises at Walsh Bay as unsatisfactory for the respondent's needs and had done so for some time. On 15 February 1986 the respondent entered into a consulting agreement with a company Jon F. Hall (Australia) Pty. Limited and one of its directors, Mr Jon hall. Part of the agreement provided that Mr Hall's company would provide his services as consultant to the respondent for 12 months. Mr Williams and Mr Hall began to contemplate leaving the respondent and setting up business on their own account in competition with it. In the result only Mr Williams pursued this course. He resigned from the respondent at the end of April. Before doing so, he took steps towards procuring premises for himself. It was common ground between Mr Bird (a director of the respondent) and Mr Williams that earlier this year Mr Bird asked Mr WilliamS to keep his eye out for premises that would be suitable for the respondent's business. His Honour accepted evidence that this was not a very clear assignment and Mr Williams said that he did little to find alternative premises for the respondent. In February 1987 Mr Williams visited premises in Camperdown and determined that they were suitable for the needs of the business that he was contemplating commencing. He said that he did not regard them as suitable for the respondent's needs because they were too small. On the first occasion that he met the agent, a Mr Altas, Mr Williams gave Mr Altas his business card which included the name of the respondent but he did not tell Mr Altas that the premises were required for his own use. Mr Williams said that he visited the premises a second time late in February or early in March accompanied by Mr Hall. Mr Williams was adamant that he informed Mr Altas then that the premises were for him personally. Mr Altas denied that but said that in a telephone conversation Mr Williams indicated that the lessee might not be the respondent but rather one of its associated companies. The lease that Mr Altas prepared showed the lessee as "JOHN WILLIAMS (CO T.B.A.)" (TO BE ADVISED). Me Bird said that he had been to the premises at Camperdown. His first visit was on the 28 April 1987 with Mr Johnson, General Manager of the respondent and Mr Hall. Mr Bird had spoken to Mr Hall earlier on that day and asked Mr Hall whether Mr Williams, whom Mr Bird knew was. resigning, had seen any suitable property. Mr Hall had told him that Mr Williams and himself had seen a property at Camperdown. Mr Bird said that he then asked Mr Hall to take him there. Mr Bird said that at the time Mr Hall told him about the premises he did not appreciate that Mr Williams was planning to lease them himself. He learnt of that matter when he spoke to Mr Altas during the afternoon of the day of his meeting with Mr Hall. During Mr Bird's visit to the premises the question of a lease being taken up by the respondent was discussed with Mr Altas. Mr Bird said that he made the decision to take the lease at Camperdown premises the following day. He took sole responsibility for it but consulted some of his colleagues about it. Mr Bird said that he considered that it was clear that Mr Williams looked at the premises for the respondent because that is what Mr Altas told him when he first me him at the premises. Mr Altas corroborated this evidence. His Honour found that the relevant market need not be defined qeographically, but was probably the market for the collection and treatment of waste computer paper in the inner Sydney metropolitan area. He found that the respondent has approximately 60 per cent of the relevant market and that that gave the respondent a substantial degree of power in the market within the meaning of that expression in s.46 of the Act. His Honour bore in mind that infringement of s.46 may expose the infringer to liability for a penalty; s.76, and that the appellants allegations were therefore a matter of some gravity. His Honour decided that he should not accept Mr Bird's evidence that he decided to take a lease of the Camperdown premises for purposes wholly unconnected with Mr Williams' projected entry into the market. In his Honour's opinion it was a case where disbelief of Mr Bird's evidence as to his purposes entitled the Court to draw an inference that he did have as one of his purposes the prevention of Mr Williams' entry into the market or the deterrence or prevention of his engaging in competition therein. Under s.4F of the Act it is sufficient if the alleged conduct is engaged in for purposes which include a purpose that would make the conduct unlawful and that purpose is a substantial purpose. His Honour held that a substantial purpose for Mr Bird's wishing to take a lease of the Camperdown premises was to frustrate Mr Williams' entrv into the market. In relation to Mr Bird's evidence that he thought that Mr Williams looked at the premises on behalf of the respondent. his Honour found it difficult to believe that a business man of Mr Bird's capacity did not conclude that Mr Williams wanted the premises personally, knowing that Mr Williams wanted to go into business on his own, that Mr Williams had visited the premises six or eight weeks beforehand and that Mr Williams had made no mention of the premises to him. His Honour also decided to reject Mr Altas's evidence that Mr Williams did not tell Mr Altas that the premises were for Mr Williams personallv. His Honour found that the use of Mr Williams' name in the lease followed by the indication that the lease would be taken in the name of a company to be advised, was more consistent with the company being controlled by Mr Williams than by the respondent. His Honour therefore concluded that at all material times Mr Bird knew that Mr Williams required the premises for the purpose of establishing a business which would be run in competition with the business of the respondent and that Mr Bird decided to take a lease of the premises for purposes which included the purpose of either preventing the entry of Mr Williams into the market or deterring or preventing him from engaging in competitive conduct in the market. However, his Honour reached the conclusion that the appellants did not demonstrate that the respondent was taking advantage of its power in the market for any of the proscribed purposes. The purposes found to exist in the present case are specified by s.46(1)(b) & (c), but the evidence was held not to have established that the respondent was taking advantage of its power in the market to achieve either of then. His Honour said it took advantage of information which it obtained rather than its position in the market. His Honour found that the conduct of the respondent could as easily have been committed by a company having little Market power. He also found that the lessor of the premises offered the same terms to the respondent as to Mr Williams. He found that. although it was not completely clear, the lessor was probably attracted to the respondent because it believed 1t was more likely to be financially secure. At the time the matter came before his Honour the lease was still on offer. The appellants and the respondent both had signified their willingness, or desire, to accept it. We were told on the hearing of this appeal that the lease was no longer available, at least to the appellants, and they did not wish to pursue their case in respect of it. This meant that the case was argued before us on the footing of the qeneral relief claimed and any other relief available. No point was taken in relation to this matter and we have continued to hear the appeal as if it were an appeal against the refusal of the injunction. The central point of the case is shortly stated although we were told that it was of qreat importance. In my view, on the facts, the point which arises is not of that significance. It is whether the respondent, having a _ substantial degree of power in the market and its substantial purpose being to frustrate the appellants' entry into the market by offering to take the lease, it was "taking advantage" of its power. I agree with the learned judge that it is not shown that they did. The offer to take the lease. or for that matter, the taking of the lease, was not shown to be the taking advantage of any market power. So far as appears the respondent took a step which was not an exercise. or taking advantage of, the power it had in the market. The case has been put firmly in a variety of way by counsel for the appellants, but the arguments fail to recognize that a corporation which has market power does not take advantage of it whenever it is placed in juxtaposition with a competitor, and acts adversely to it. While a company having substantial power ina market is perhaps not free todo therein. or in relation thereto, all that another person or corporation, without that power, may be free to do, the forbidden area must be related to the market and the market power, so that it can be seen that the market power is taken advantage of for one of the stated purposes. Here we simply have a corporation which handled 60 per cent of the collection and treatment of waste computer paper, seeking to take a lease with no added special features, except a knowledge that a potential competitor also wanted the lease. In my view the appeal should be dismissed with costs. I certify that this and the seven (7) preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Fox. Associate: S) otras Date: 12 October 1987 IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G245 of 1987 ) GENERAL DIVISION ) ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: JOHN NEAL WILLIAMS VAJILI PTY. LIMITED Appellants PAPERSAVE PTY. LIMITED Pd Zz Oo Respondent CORAM: Fox, Beaumont and Burchett JJ. DATED: 12 October 1987 EX TEMPORE REASONS FOR JUDGMENT BEAUMONT J. I agree with the reasons and orders proposed by Fox J. In my opinion, there was no evidence that the respondent took advantage of its substantial degree of market power in the relevant market for the purpose of preventing the entry of the appellants into the market within the meaning of s.46(1)(b) of the Trade Practices Act 1974. The relevant market was the recovery of waste computer printout paper. The conduct of the respondent complained of was the offer to take a lease of specific premises. In making that offer, the respondent apparently represented to the prospective lessor that it was of good financial standing. Its substantial purpose in offering to 2. take the lease was to frustrate the entry of the first respondent, a potential competitor, into the relevant market. But nothing was done here by the respondent to use, let alone, take advantage of its market power. I certify that this and the preceding page 1s a true copy of the Reasons for Judgment herein of his Honour Mr~—Justice Beaumont. —— & FAR 'Associate Dated: 12 October 1987 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G.245 of 1987 wwe ew wv GENERAL DIVISION ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: JOHN NEAL WILLIAMS VAJILI PTY. LIMITED Appellants AND: PAPERSAVE PTY. LIMITED Respondent CORAM: Fox, Beaumont and Burchett JJ. DATE: 12 October 1987 EX-TEMPORE REASONS FOR JUDGMENT BURCHETT J. Reading sub-s.(4)(a) into s.46(1), the provision 1s: "A corporation that has a substantial degree of market power in a market shall not take advantage of that power for the purpose" (of any of the effects specified in paras. (a), (b) and (c)). Some day the Court will be required to examine the lines laid down by this section, and to establish with some precision what 1t is to take advantage of market power 1n a market. But in the present case, in which there 1s no challenge to the findings of fact of the learned judge at first instance, the facts do not suggest anything more than an attempt to pre-empt the appellant in the obtaining of a lease of one of the numerous properties in 2. the Sydney area capable of employment in the relevant activity. The taking of that lease involved no utilization of any aspect of the market power possessed by the respondent. It was not even shown that the respondent offered a higher - let alone an inappropriately higher - rental than that offered by _ the appellant, or otherwise exerted in any way its financial capacity, 1f that alone could properly be regarded as an aspect of market power. It is not necessary to explore the boundaries of the section because, wherever they could conceivably be drawn, this case would be outside them. I agree with the orders proposed. I certify that this and the preceding one (1) page are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Burchett. Copa Gralg Associate Dated: 12 October, 1987. Counsel for the Appellants: C.A. Sweeney Solicitors for the Appellants: J.C. Behm & Associates Counsel for the Respondent: G.S. Hosking Solicitors for the Respondent: McCaw Johnston Date of hearing: 12/10/87