JUDGMENT No. wmne2Q2eul 24... IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION wesw NO. VG413 OF 1992 BETWEE N: TRADE PRACTICES COMMISSION Applicant and SIMSMETAL LIMITED First Respondent and NORMET INDUSTRIES NOMINEES PTY. LTD. Second Respondent and PETER WRIGHT Third Respondent and LINDSAY DAVIS Fourth Respondent and PAUL JAMES SAILAH Fifth Respondent and MICHAEL BAKER Sixth Respondent CORAM: LEE J. : 9 NOVEMBER 1994 PLACE: MELBOURNE EMPORE R: INS FOR MENT The applicant, the Trade Practices Commission ("the T.P.C."), on behalf of the Commonwealth, instituted proceedings under s.76 of the Trade Practices Act 1974 ("the Act") for the recovery of pecuniary penalties for alleged contraventions of sub-paras.45(2)(a)(i), 45(2)(a)(ii) and 45(2)(b)(ii) of the Act by the corporate respondents and the third to sixth respondents as natural persons who are either employees or officers of the corporate respondents. The T.P.C. also applies for injunctive relief under s.80 of the Act to restrain future contraventions of the Act by the respondents for a period of three years. The proceedings arise out of arrangements between the first respondent, Simsmetal Limited ("Simsmetal"), and the second respondent, Normet Industries Nominees Pty Ltd ("Normet") (together, the "corporate respondents") who carried on business as metal merchants and recyclers of scrap metal in Victoria. The corporate respondents were in competition with each other for the purchase of ferrous scrap metal, including metal from derelict car bodies throughout Victoria and the border regions of New South Wales and Victoria. From August to September 1991, in contravention of sub-paras.45(2)(a)(ii) and 45(2)(b)(ii) respectively, the corporate respondents arrived at and gave effect to a price fixing and market sharing arrangement which related to the purchase of derelict motor car bodies. At the same time, in contravention of sub- para.45(2)(a)(i), the corporate respondents agreed to exclude a competitor, Commercial Metal Corporation, from the market for the purchase of derelict car bodies. The corporate respondents admitted that the price fixing and exclusionary arrangements involved contraventions of the Act. The non-corporate respondents also admitted that they committed offences under s.79 of the Act by being directly or indirectly, knowingly concerned or party to the alleged contraventions. The T.P.C. and the respondents have reached agreement as to the appropriate penalty to be imposed and the extent of the injunctive relief to be granted. The question of what constitutes an appropriate penalty in a given case is ultimately a question for the Court to determine. As recognised by Lockhart J. in Trade Practices Commission v Hymix Industries Pty Ltd, (unreported, Federal Court of Australia, 25 August 1994), the practice of suggesting to the Court the appropriate penalty to be imposed for contraventions of the Act is not uncommon and further, for public interest considerations, it is a practice which should not be dissuaded (see: The Commerce Commission v New Zealand Milk Corporation Ltd [1994] 2 NZLR 730). The facts would appear to give rise to serious contraventions of the Act. The pecuniary penalties to which the parties have agreed are significantly less than those which could be expected to apply to the same conduct since amendments to the Act which increased the level of the range of penalties. The figures suggested to the Court as the appropriate penalties indicate, however, that the approach adopted by the parties in fixing those figures is not dissimilar to the approach that would have been adopted by the Court had it been necessary for the Court to undertake the penalty fixing exercise itself. I agree with the reasoning of Lockhart J. in Hymix that no useful purpose is served by the Court stating whether the penalties to which the parties have agreed are the size of which the Court itself would have imposed. The main tenet of the Act is the promotion of competition between parties engaging in trade or commerce. The primary purpose and regulatory effect of pecuniary penalties is to deter parties in the market from engaging in conduct which would be antithetical to the promotion of competition (see: Trade Practices Commission v Stihl Chain Saws (1978) ATPR 40-041 at 17,891). I am satisfied that the penalties which have been agreed by the respondents and the T.P.C. have a sufficient deterrent effect to counterbalance the profit apparently derived from the contravening conduct. In determining that the suggested penalty is appropriate I have given account to the fact that Simsmetal has taken some steps to better ensure that the company complies with the relevant laws in future. I have also taken into account that there was ultimately an admission of the allegations by all respondents and thereafter the respondents co-operated with the T.P.C in this matter. Those concessions by the respondents have saved the community substantial expense. The penalty to be imposed on Simsmetal for the contraventions of sub-paras.45(2)(a)(ii) and 45(2)(b)(ii) is at variance with the penalty levied at Normet for the same contraventions. The variance is proportionate to the market share held by each of the corporate respondents for the supply of all ferrous scrap metal in Victoria during 1991 and 1992 (Simsmetal supplied close to 45 per cent and Normet close to 15 per cent) and is also reflective of the part each played in forming the agreement. To that extent the difference in penalty is appropriate. The agreed penalty to be imposed on Normet for the exclusionary aspect of the arrangement is greater relative to the agreed penalty for the price fixing and market sharing arrangement imposed on both Simsmetal and Normet. I am satisfied that the relative difference is referrable to the extent to which Normet was active in promoting that contravening conduct. It is also appropriate that the agreed penalty to be imposed on the third respondent, as employee of the first corporate respondent, and fifth respondent, as employee and director of the second respondent, is at variance with the agreed penalty to be imposed on the fourth and sixth respondents for the reason that it reflects the extent to which the third and fifth respondents were directly and actively involved in the discussions and implementation of the arrangement. The agreement between the parties also provides for injunctive relief against the corporate respondents which would, by its terms, have injunctive effect on the non- corporate respondents. The question of whether or not an injunction is an appropriate form of relief together with the question of the form that the injunction should take are both Matters which are for the Court to determine. Counsel for the T.P.C submitted that as the non- corporate respondents remain in the employ of the corporate respondents and the economic considerations giving rise to the contravening conduct remain the same, there is a serious risk of the respondents engaging in the same or _ similar contravening conduct again. Although counsel submits that injunctive relief is essential in this case for the dual reason that the conduct was of a deliberate nature committed over a not insubstantial period of time and the respondents initially denied that their conduct contravened the Act, it is necessary to approach the application with caution for the reason that upon the granting of an injunction contraventions of the Act will be dealt with by the summary process of contempt rather than by way of prosecution under the Act (see: Commodore Business Machines Pty Ltd v Trade Practices Commission 92 ALR 563 at 575). I am satisfied that in the particular circumstances of this case an injunction is an appropriate form of relief. I am not satisfied however, that the injunction should have the form set out in the proposed orders. The offending conduct related to car bodies, it did not extend more broadly to the non-ferrous scrap metal market, and to that extent the terms of the injunction will be amended. The concern of counsel for the T.P.C that conditions exist for like arrangements to be made between the respondents in relation to the more general market of scrap metal is not persuasive given that the penalties agreed to between the parties and approved by the Court for contraventions relating to the more limited market of car bodies should be of sufficient deterrence to dissuade repetition of any such closely related conduct. Further, I am not satisfied that there should be any geographical limitation to the application of the injunction notwithstanding that at this time only Simsmetal has scrap metal processing operations in all States (with the exception of Tasmania). The injunction is to apply for a period of three years and in that period Normet may expand its operations inter-state. The Court, therefore, makes orders in terms of the minute of orders amended as indicated and duly initialled by me and dated 9 November 1994. I certify that the preceding ( 7] ) pages are a true copy of the Reasons for Judgment of his Honour Mr Justice Lee. Associate: F Puk chord pater A Newnmhr: 1494 | Counsel for the Applicant: G.A.A. Nettle Q.C. C.M Scerri Solicitor for the Applicant: Australian Government Solicitor Counsel for the First, Third & Fourth Respondents: D.G. Williamson Q.C. Solicitors for the First, Third & Fourth Respondents: Minter Ellison Morris Fletcher Counsel for the Second, Fifth & Sixth Respondents: J. Beach Solicitors for the Second, Fifth & Sixth Respondents: Price Brent Date of Hearing: 9 November 1994 Date of Judgment: 9 November 1994 SENT BY:FEDERAL COURT ALST. ;30- 1-96; 13°46 . REGISTRY 6196000425- FEDERAL COLRT:# 2/ 7 . FEDERAL COURT OF AUSTRALIA VICTORIA D:STAIGT REGISTRY Cle FILED = fer 1994 ) BETWEEN: * Applicant qT 7 First Respondent NORMET INDUSTRIES NOMINEES PTY LTD Second Respondent PETER WRIGHT Third Respondent LINDSAY DAVIS Fourth Respondent Fifth Respondent MICHAEL BAKER Sixth Respondent QRDER JUDGE: LEEJ DATE: 9 NOVEMBER 1994 PLACE: MELBOURNE IHE COURT ORDERS THAT: 1. It is declared that by making or arriving at the single arrangement which is referred to in paragraph 11 of the Statement of Claim, the first respondent, Simsmetal Limited contravened section 45(2)(a)(ii) of the Trade Practices Act 1974, AUSTRALIAN GOVERNMENT SOLICITOR AND SOLICITOR FOR T. APPLICANT Address Level 5, Block D, Benjamin Offices Chan Street, BELCO NV ACT 2617 Postal Address P.O. Box 43, BELCONNEN ACT 2616 Address for Service C/- The Office of the Australian Government Solicitor 12th Floor 200 Queen Street MELBOURNE VIC 3000 Contact Officer Michelle Painter § Telephone No. (06) 264 2948 Facsimile No. (06) 264 2933 SENT BY FEDERAL COLRT ALST. .30- 1-96 : 18-46 . REGISTRY 6136000425- FEDERAL COURT.# 3° 7 ® 2 2. The first respondent, Simsmetal Limited, pay to the Commonwealth of Australia a pecuniary penalty of $125,000 in respect of the contravention of s.45(2)(a}(ii) referred to in paragraph 1 hereof. 3. It is declared that by giving effect to the single arrangement which is referred to in paragraph 17 of the Statement of Claim, the first respondent, Simsmetal Limited contravened section 45(2)(b\ii) of the Trade Practices Act 1974. 4, The first respondent, Simsmetal Limited, pay to the Commonwealth of Australia a pecuniary penalty of $125,000 in respect of the contravention of s.45(@)(b)(ii) referred to in paragraph 3 hereof. 5. It is declared that by making or arriving at the CMC arrangement which is referred to in paragraph 20(a) of the Statement of Claim, the first respondent, Simsmeta! Limited contravened section 45(2(a)(i) of the Trade Practices Act 1974, 6. The first respondent, Simsmetal] Limited, pay to the Commonwealth of Australia a pecuniary penalty of $102,500 in respect of the contravention of s.45(2(a){i) referred to in paragraph 5 hereof. 7, It is declared that by making or arriving at the single arrangement which is referred to in paragraph 11 of the Statement of Claim, second respondent, Normet Industries Nominces Pty Ltd., contravened section 45(2)(a)(ii) of the Trade Practices Act 1974. 8. The second respondent, Normet Industries Nominees Pty Ltd., pay to the Commonwealth of Australia a pecuniary penalty of $30,000 in respect of the contravention of s.45(2)(a)(ii) referred to in paragraph 7 hereof. 9. Itis declared that by giving effect to the single arrangement which is referred to in paragraph 16 of the Statement of Claim, the second respogh >Ncintel\ Ss z e," a Oe SENT BY:FEDERAL COLRT ALST .30- 1-96. 13 46 . REGISTRY 6156000425- FEDERAL COURT: 4° 7 ® Industries Nominees Pty Ltd., contravened section 45(2)(b)(ii) of the Trade Practices Act 1974. 10. The second respondent, Normet Industries Nominees Pty Ltd., pay to the Commonwealth of Australia a pecuniary penalty of $30,000 in respect of the contravention of s.45(2)(b)X(i) referred to in paragraph 9 hereof. 11. It is declared that by making or arriving at the CMC arrangement which is referred to in paragraph 20{a) of the Statement of Claim, the second respondent, Normet Industries Nominees Pty Ltd, contravened section 45(2)(a)(i) of the Trade Practices Act 1974. 12, The second respondent, Normet Industries Nominees Pty Ltd., pay to the Commonwealth of Australia a pecuniary penalty of $40,000 in respect of the contravention of s.45(2)(a)i) referred to in paragraph 11 hereof. 13. It is declared that by engaging in the conduct which is referred to in paragraph 24a), (b) and (c) of the Statement of Claim, the third respondent, Peter Wright, was directly or indirectly, knowingly concerned in, or party to, the contravention referred to in paragraph 1 hereof. 14. The third respondent, Peter Wright, pay to the Commonwealth of Austcalia a pecuniary penalty of $50,000 in respect of the contravention referred to in paragraph 13 hereof. 15. Itis declared that by engaging in the conduct which is referred to in paragraph 25 of the Statement of Claim, the fourth respondent, Lindsay Davis, was directly or indirectly, knowingly concerned in, or party to, the contravention referred to in paragraph | hereof, 16. The fourth respondent, Lindsay Davis, pay to the Commonwealth of Australia a paragraph 15 hereof, SENT BY:FEDERAL COLRT ALST. .30- 1-96 ; 18°47 . REGISTRY 6196000425- FEDERAL COURT, # 5" 7 2 : 17. Itis declared that by engaging in the conduct which is referred to in paragraph 26 of the Statement of Claim, the fifth respondent, Paul James Sautah was directly or indircetly, knowingly concerned in, or party to, the contravention referred to in paragraph 7 hereof. 18. The fifth respondent, Paul James Sailah, pay to the Commonwealth of Australia a pecuniary penalty of $50,000 in respect of the contravention referred to in paragraph 17 hereof. 19, Itis declared that by engaging in the conduct which is referred to in paragraph 27 of the Statement of Claim, the sixth respondent, Michael Baker, was directly or indirectly, knowingly concemed in, or party to, the contravention referred to in paragraph 7 hereof. 20. The sixth respondent, Michael Baker, pay to the Commonwealth of Australia a pecuniary penalty of $10,000 in respect of the contravention referred to in paragraph 19 hereof. 21, The first respondent, Simsmetal Limited, be restrained unti) 9 November 1997 whether by its directors, servants or agents or otherwise howsoever from: (a) making or arriving at; (b) giving effect to; or (c) attempting to make or arrive at any contract, arrangement or understanding with any other person who is or would otherwise be likely to be in competition with the first respondent which contains a provision that: (i) has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaiping of, ~y, A ' ad SENT BY:FEDERAL COLRT ALST. .30- 1-96 : 15-47 : REGISTRY 61360004254 FEDERAL COURT.# 67 7 & : the price paid for derelict car bodies acquired, or to be acquited, in Australia by the first respondent from any person; (ii) has the purpose of preventing, restricting or limiting the acquisition of derelict car bodies in Australia by the first respondent from particular persons or classes of persons either absolutely or in particular circumstances or on particular conditions. 22. The second respondent, Normet Industries Nominees Pty Ltd., be restrained until 9 November 1997 whether by its directors, servants or agents or otherwise howsoever, from: (a) making or arriving at; (b) giving effect to; or (c) attempting to make or arrive at any contract, arrangement or understanding with any othcr person who is or would otherwise be likely to be in competition with the second respondent which contains a provision that: (i) bas the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price paid for derehct car bodies acquired, or to be acquired, in Australia by the second respondent from any person; (ii) has the purpose of preventing, restricting or limiting the acquisition of derelict car bodies in Australia by the second respondent from particular persons or classes of persons either absolutely or in particular circumstances of on particular conditions. 23. The first respondent, Simsmetal Limited, pay to the Applicant the suin-bf oy sy $55,000 in respect of the Applicant's costs of this proceeding. ; i t SENT BY:FEDERAL COLRT ALST. .30- 1-96. 13.47 ; REGISTRY 6136000425» FEDERAL COLRT;+ 7/ 7 ed 24. The second respondent, Normet Industries Nominees Pty Ltd., pay to the Applicant the sum of $50,000 in respect of the applicant's costs of this proceeding. Date entered: © December 1994