Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd [1999] FCA 281

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd [1999] FCA 281 PRACTICE & PROCEDURE – pleading – amendment – application to amend statement of claim after twenty hearing days and near close of applicant's case – whether amendment raised a factual case not yet pleaded – relevant factors to take into account – justice – delay in proceeding – prejudice whether adjournment required to allow respondents to investigate new claims – consideration of effect of adjournment on individual respondent. AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v AUSTRALIAN SAFEWAY STORES PTY LIMITED & ORS VG 762 of 1996 GOLDBERG J MELBOURNE 18 MARCH 1999 IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 762 of 1996

BETWEEN: AUSTRALIANCOMPETITIONANDCONSUMERCOMMISSION

Applicant

AND: AUSTRALIAN SAFEWAY STORES PTY LIMITED

(ACN 004 319 939)

First Respondent

GEORGE WESTON FOODS LIMITED

(ACN 008 429 623)

Second Respondent

MARK JONES

Third Respondent

BERNIE BROOKES

Fourth Respondent

JUDGE: GOLDBERG J

DATE: 18 MARCH 1999

PLACE: MELBOURNE

RULING ON APPLICATION BY APPLICANT TO AMEND STATEMENT OF CLAIM 1 The applicant has applied by notice of motion filed and served on 16 March 1999 to amend its statement of claim in the terms to which I shall refer. The application was foreshadowed by counsel for the applicant on Friday 12 March 1999 on which date a copy of the proposed amendments was supplied to the respondents and to the Court. The trial of the proceeding commenced on 9 February 1999 and 12 March 1999 was the twentieth day of the hearing. By that date the applicant, with one exception, had called all the witnesses it proposed to call and such witnesses as were required for cross‑examination had been cross‑examined. On 12 March 1999 I adjourned the hearing to 17 March 1999 on which date the remaining witness to be called by the applicant was called and such further documents as the applicant wished to tender as part of its case were tendered. Thereupon I heard the application for the amendment of the statement of claim. The applicant sought to amend pars 7, 12, 16D, 16E, 17D, 17E, 18D and 18E of the statement of claim and those amendments were not opposed by the respondents. However, the respondents did oppose the application to amend the statement of claim by adding proposed pars 19AA, 19CC and 19EE. Those paragraphs are in the following terms: "19AA Further or alternatively, Safeway has taken advantage of the said substantial degree of power in the wholesale market, alternatively attempted to take advantage thereof, for the purpose of deterring or preventing Tip Top from engaging in competitive conduct in the wholesale market in dealing with retailer customers other than Safeway, Coles or Franklins ('independent retailers') upon such terms as Tip Top would otherwise choose in that Safeway has refused to acquire bread from Tip Top in the following circumstances: (a) Tip Top sold generic bread (Eureka) to Bob's I.G.A and the Cool Store (independent retailers) and discounted proprietary bread (Mighty White) to Bob's I.G.A.; (b) That bread was not at any relevant time acquired and/or ranged by Safeway; (c) The independent retailer in each case then sold the bread at a retail price less than Safeway's then retail price for proprietary or Home Brand bread ('grocery bread') sold by it; (d) Safeway, in each case, purported to request Tip Top to supply Safeway with proprietary branded bread then being acquired or ranged by Safeway at the same price as that at which Tip Top sold the bread to the independent retailer; (e) Safeway informed Tip Top that, in the absence of such an agreement, it would not acquire any proprietary branded bread from Tip Top whilst the independent retailer sold the bread at retail prices below Safeway's retail price for grocery bread; (f) Safeway in making the purported request knew that Tip Top would not agree because supply in accordance with the request would, as Safeway well knew, destroy or damage the goodwill attached to the proprietary branded bread. (g) Whilst the independent retailer sold the bread at a retail price less than Safeway's then retail price for grocery bread sold by Safeway, Safeway did not acquire any proprietary branded bread from Tip Top; (h) By reason of the matters referred to in sub‑paragraphs (a) to (g) hereof, Safeway sought to deter or prevent Tip Top from i supplying generic or discontinued proprietary bread to independent retailers upon terms which permitted the independent retailers to sell such bread at a retail price less than the retail price for grocery bread sold by Safeway; ii competing with Buttercup and Sunicrust for increased market share in the wholesale bread market particularly with independent retailers. … 19CC Further or alternatively, Safeway has taken Safeway has taken advantage of the said substantial degree of power in the wholesale market, alternatively attempted to take advantage thereof, for the purpose of deterring or preventing Sunicrust from engaging in competitive conduct in the wholesale market in dealing with retailer customers other than Safeway, Coles or Franklins ('independent retailers') upon such terms as Sunicrust would otherwise choose in that Safeway has refused to acquire bread from Sunicrust in the following circumstances: (a) Sunicrust sold generic bread (Westend, Local Bake or Thwaites) to Westend Foodtown, Goldy's Tuckerbag and Costa's fruit market. (independent retailers); (b) That generic bread was not at any relevant time acquired and/or ranged by Safeway; (c) The independent retailer in each case then sold the generic bread at a retail price less than Safeway's then retail price for proprietary or Home Brand bread ('grocery bread') sold by it; (d) Safeway, in each case, purported to request Sunicrust to supply Safeway with proprietary branded bread then being acquired or ranged by Safeway at the same price as that at which Sunicrust sold the generic bread to the independent retailer; (e) Safeway informed Sunicrust that, in the absence of such an agreement, it would not acquire any proprietary branded bread from Sunicrust whilst the independent retailer sold the generic bread at retail prices below Safeway's retail price for grocery bread; (f) Safeway in making the purported request knew that Sunicrust would not agree because supply in accordance with the request would, as Safeway well knew, destroy or damage the goodwill attached to the proprietary branded bread. (g) Whilst the independent retailer sold that generic bread at a retail price less than Safeway's then retail price for grocery bread sold by Safeway, Safeway did not acquire any proprietary branded bread from Sunicrust; (h) By reason of the matters referred to in sub‑paragraphs (a) to (g) hereof, Safeway sought to deter or prevent Sunicrust from (i) supplying generic bread to independent retailers upon terms which permitted the independent retailers to sell such bread at a retail price less than the retail price for grocery bread sold by Safeway; (ii) competing with Tip Top and Buttercup for increased market share in the wholesale bread market particularly with independent retailers. … 19EE Further or alternatively, Safeway has taken Safeway has taken advantage of the said substantial degree of power in the wholesale market, alternatively attempted to take advantage thereof, for the purpose of deterring or preventing Buttercup from engaging in competitive conduct in the wholesale market in dealing with retailer customers other than Safeway, Coles or Franklins ('independent retailers') upon such terms as Buttercup would otherwise choose in that Safeway has refused to acquire bread from Buttercup in the following circumstances: (a) Buttercup sold generic bread (Quadara and Black and Gold) to I.G.A., Mr. Quadara and Cheapa (independent retailers); (b) That generic bread was not at any relevant time acquired and/or ranged by Safeway; (c) The independent retailer in each case then sold the generic bread at a retail price less than Safeway's then retail price for proprietary or Home Brand bread (grocery bread) sold by it; (d) Safeway, in each case, purported to request Buttercup to supply Safeway with proprietary branded bread then being acquired or ranged by Safeway at the same price as that at which Buttercup sold the generic bread to the independent retailer; (e) Safeway informed Buttercup that, in the absence of such an agreement, it would not acquire any proprietary branded bread from Buttercup whilst the independent retailer sold the generic bread at retail prices below Safeway's retail price for grocery bread; (f) Safeway in making the purported request knew that Buttercup would not agree because supply in accordance with the request would, as Safeway well knew, destroy or damage the goodwill attached to the proprietary branded bread. (g) Whilst the independent retailer sold that generic bread at a retail price less than Safeway's then retail price for grocery bread sold by Safeway, Safeway did not acquire any proprietary branded bread from Buttercup; (h) By reason of the matters referred to in sub‑paragraphs (a) to (g) hereof, Safeway sought to deter or prevent Buttercup from (i) supplying generic or discontinued proprietary bread to independent retailers upon terms which permitted the independent retailers to sell such bread at a retail price less than the retail price for grocery bread sold by Safeway; (ii) competing with Tip Top and Sunicrust for increased market share in the wholesale bread market particularly with independent retailers." 2 I turn to a summary of the relevant principles that need to be considered in this area. Order 13 r2(2) of the Federal Court Rules requires that: "[a]ll necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding ..." 3 Although the question whether an amendment should be allowed is a matter for the discretion of the trial judge, justice is the paramount consideration to be taken into account in determining an application for amendment: State of Queensland v JL Holdings Pty Limited (1997) 189 CLR 146 at 155 per Dawson, Gaudron and McHugh JJ. See also Ketteman v Hansel Properties Ltd [1987] AC 189 at 220 per Lord Griffiths. It is also relevant to take into account whether the consequence of allowing an amendment will be to prolong the hearing and the conclusion of the proceeding longer than what would otherwise occur if the amendment was not allowed. In Ketteman v Hansel Properties Ltd (supra) Lord Griffiths said at 220: "… justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxiety occasioned by facing new issues, the raising of false hopes, and a legitimate expectation that the trial will determine the issues one way or the other. " 4 The effect on a personal respondent of the continuation of a proceeding over a long period of time was adverted to by the Appeal Division of the Supreme Court of Victoria in the context of an application to dismiss a claim for want of prosecution in Bishopsgate Insurance Australia Ltd (In Liquidation) v Deloitte Haskins & Sells (unreported, Brooking, Tadgell and Ormiston JJ, 9 September 1994). Tadgell and Ormiston JJ, with whom Brooking J concurred, said at 52: "Where a claim is made against individuals relating to their probity or their competence, especially their professional competence, and the claim is for many millions of dollars, then it is not hard to infer that defendants against whom such allegations are made are under a heavy burden. When that burden is not merely deferred but then unjustifiably drawn out over many years, it is easier still to infer serious prejudice of the relevant kind to a defendant … But where a claim extends beyond mere casual negligence to actually reflect upon the competence or probity of a defendant, especially when that competence or probity is critical to the defendant's future livelihood, then the delay in bringing an action on for hearing will properly be held to impose severe additional prejudice on a defendant. This is particularly the case in claims alleged in professional negligence, although such a description is not to be confined merely to the negligence of accountants, solicitors, doctors and the like for it is relevant to any person in respect of whom an unfavourable finding will be likely to place at risk his or her capacity to earn a living." 5 Another relevant consideration to take into account when an application to amend a pleading is sought is to consider the consequence of the amendment. If the amendment will require an adjournment of the proceeding, it is a matter to take into account whether the efficient disposition of business in the court will be disrupted. However, case management efficiency should not be allowed to prevail over what is otherwise required by the dictates of justice. In State of Queensland v JL Holdings Pty Limited (supra) Dawson, Gaudron and McHugh JJ said at 155: "Case management, involving as it does the efficiency of procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties. In taking an opposite view, the primary judge was in our view in error in the exercise of her discretion." 6 I turn to the submissions. In broad terms the applicant says that the amendments are designed to make express that which might otherwise be implicit in pars 19AA, 19C and 19E of the existing statement of claim, namely, that Safeway's conduct had the purpose of deterring or preventing each plant baker engaging in competitive conduct in the wholesale market with its competitor plant bakers insofar as Safeway engaged or attempted to engage in the exclusive dealing alleged in each of those existing paragraphs. For reasons to which I shall refer, I am not satisfied that the issue raised by the amendments is implicit in those paragraphs. 7 The applicant says that it only became apparent to its counsel during the course of the cross‑examination of the applicant's witnesses that it was Safeway's case that each plant baker was asked to supply Safeway with proprietary branded bread at the same cost price as the bread, being discounted by the independent retailer, was supplied to that independent retailer by that baker. 8 The applicant says that the evidence establishes that in each case such a request was unacceptable to the plant baker and the applicant seeks to allege by the amendments that the making of such an unacceptable request, on pain of deletion of the plant bakers' products from the relevant Safeway store, during a period of discounting had the purpose of preventing or deterring the plant baker, of whom the request was made, from competing in the Victorian wholesale bread market for market share in what the evidence establishes was a volatile market. 9 The applicant says further that it was only when Messrs Linton and Cooper from Sunicrust were cross-examined that it started to become apparent that it was Safeway's case that in every case a deletion was preceded by a request for proprietary bread at generic bread prices. The applicant says that this was not apparent from the Safeway outline of contentions and did not finally become clear until Messrs McDowall and McLeish were cross-examined. Although counsel advised the applicant in late February 1999 that consideration should be given to an amendment of the statement of claim, it was only in the week commencing 8 March 1999 that counsel were able to review the statement of claim collectively. 10 On 11 March 1999 counsel gave the applicant's solicitor a draft of the proposed amendments and instructions were given to counsel on the following day, 12 March, to make the application for leave to amend the statement of claim. The applicant does not seek to adduce any further evidence in relation to any of the amendments. The applicant submits that the amendments do not raise any new factual issues and will not prolong the trial. 11 These propositions are contested by the respondents who contend that new factual issues have been raised that the amendment has been sought some time after it must have become apparent to the applicant that the amendments were in its view necessary; that they will be prejudiced if the amendments are made and if the amendments are allowed they will need a period of up to two months in order to prepare themselves to meet the amended case. In short, Mr Bathurst submitted that the amendments raised an entirely new case which was not implicit in the present statement of claim. 12 I consider that although the amendment is framed within the context of s 46 of the Trade Practices Act 1974 (Cth), it does raise a factual case not yet pleaded which has as one of its key integers the fact that in the case of each deletion relied upon there was a prior request by Safeway to have the relevant plant baker supply Safeway with its proprietary branded bread then currently being supplied to Safeway at the same price at which the relevant plant baker was selling the generic brand to the independent retailer. 13 There is also the integer that if the proprietary bread could not be supplied on this basis then the proprietary bread would not be acquired by Safeway during the period in which the independent retailer was selling generic bread at a price below Safeway's retail price for its bread. There is then the significant added integer that Safeway, in requesting the supply of proprietary branded bread at the same price as the generic bread was being supplied to the independent retailer, knew that the plant baker would not agree to such supply and that such supply would, as Safeway well knew, destroy or damage the goodwill attached to the proprietary branded bread. 14 I am satisfied that this is a different case, albeit an alternative one, to the present pleading, but I am also satisfied that the reason for it arises out of the cross‑examination of the applicant's witnesses. The issue which the applicant wishes to raise by way of the amendment is not found in the defence and is in my opinion only obliquely referred to in par 7 of the respondent's outline of contentions. Although Mr Bathurst submits in substance that a full understanding of the policy of Safeway should have been gleaned from the contentions, because, certainly in the case of Tip Top, Safeway did not buy generic or plain bread from it, it is not immediately clear, for example, from par 7(c) of the contentions, that Safeway was seeking the supply of proprietary branded bread at a discounted price rather than the same product as was being supplied to the independent retailer. 15 In any event, the nature and extent of the policy which apparently either may or will be the subject of evidence by Safeway only flowered fully in cross‑examination. Mr Fajgenbaum submitted that the amendments on one basis were put in reply or in anticipation because a witness statement had not been supplied by Mr Brookes consistently with a ruling I had made earlier, nor by Mr Jones, and it was not apparent from the witness statements filed to date as to how the factual case was going to be put in respect of which the amendments are sought to be raised. 16 It seems to me that having regard to the nature of the issues which have been raised it is appropriate that the amendments be allowed, so long as the respondents are not prejudiced, either in relation to the case they have to meet or the preparation of their defence. Although it was submitted in effect that there had been some delay in bringing the amendments before the court and submitting them for the consideration of the respondents, it seems to me that overall in the context of the manner in which the applicant's case has been conducted to date and the nature of the cross‑examination, it should not be concluded that there has been such delay in bringing the amendments before the court as ought to lead to the conclusion that because of the delay the amendments should not be allowed. 17 However, I turn to the issue of prejudice. Mr Bathurst, whose submissions Mr Glick adopted, initially submitted that the respondents would suffer substantial prejudice if the amendments were allowed. However, I think it is fair to say that in the course of submissions Mr Bathurst ultimately accepted, and in my view quite correctly, that the respondents were not irreversibly prejudiced so long as they were given the opportunity to investigate the issues raised by the amendments, in particular the issue whether an isolated request in a particular area, coupled with the threat of an isolated deletion, involved Safeway taking advantage of its market power in the wholesale market. 18 Mr Bathurst also submitted that the respondents needed to be given the opportunity, amongst other matters, to investigate the issue as to the effect of discounting on the goodwill and value attached to proprietary branded bread and also the extent to which such discounting of proprietary bread had occurred in the marketplace. Mr Bathurst said that this was an investigation that could be undertaken but had not yet been undertaken. 19 I should also put into the equation, when looking at the issue of prejudice, the submissions made by Mr Glick that the amendments, in substance, were directed to Mr Jones, because the applicant was submitting that it was sufficient for the purpose of attributing liability to Mr Jones that he had constructive notice of the elements of the contravention. I should say that this is a submission which Mr Glick challenges and is a matter in respect of which I express no opinion at this stage. It is a matter that will have to be considered and addressed in final submissions. What Mr Glick did submit was that if this issue of constructive notice, is to be raised, as it appears it is, the determination of that issue may be sought to be drawn from the fact that questions were not asked, matters were not put and evidence was not contradicted. He said for that reason there is prejudice unless these matters could be addressed. 20 It seems to me that in addition to giving the respondents the opportunity to undertake such investigations as they wish to take, they would also need the opportunity to revisit the examination and cross‑examination of the witnesses to date for the purpose of considering whether they wish to recall any of them for further cross‑examination, in particular on the issue as to whether the supply of proprietary branded bread at a discounted price would destroy or damage the goodwill attached to the proprietary branded bread. Although that issue may have been touched on briefly with some witnesses in cross‑examination, I am satisfied that it has not been investigated fully. 21 Mr Bathurst submitted that it was also necessary for Safeway to consider and investigate the extent to which proprietary bread (I take it in the period, although this was not expressed, prior to and up to 1994 and 1995) had been offered at any and if so at what times, by plant bakers at discount prices. It seems to me that this is an investigation which the respondents should be given the opportunity to make. 22 Mr Bathurst informed me that this would involve the collection and consideration of scan data material from a wide range of stores and it would also involve or it might also involve the obtaining of information from retailers such as Coles and Franklins. He also informed me that consideration would need to be given to the obtaining of information on this matter from plant bakers and the respondents would also need to consider the obtaining of expert evidence on the effect on brands of discounting the price of proprietary branded bread. I also consider that the respondents should be given the opportunity, if the amendments are allowed, to revisit the witness statements that the first respondent has presently filed and also such witness statements as are in the course of preparation in the light of the proposed amendments. 23 Mr Bathurst informed me that he was instructed that it would take up to two months before the relevant considerations, inquiries and further preparation could be concluded. Mr Fajgenbaum submitted that the respondents should be able to consider the matters more immediately and said that because of the way he analysed the amendments and the evidence to date, the respondents should be able to proceed, as it were, almost immediately. I reject that submission and accept the submission that if the amendments are allowed time should be given to the respondents to carry out the exercises to which I have already referred. Mr Bathurst pointed out that witnesses who would need to be the subject of further cross‑examination included Messrs Guthridge, Gunton, Maine, Linton, Cooper, McDowall and McLeish. 24 I am conscious of the fact that these proceedings are a substantial burden on the respondents and in particular the remaining individual respondent, Mr Jones. Mr Glick submitted that the allowing of the amendments would be unjust to Mr Jones as it would mean that he would spent the best part of a year on the case in relation to issues which were said to have occurred as far back as 1994. I am conscious of the observations of Lord Griffith in Ketteman v Hansel Properties Limited (supra) to which I have already referred and also the observations in Bishopsgate Insurance Australia Ltd (In Liquidation) v Deloitte Haskins & Sells (supra) to which I have already referred. It is fair to say that Bishopsgate Insurance Australia Ltd (In Liquidation) v Deloitte Haskins & Sells (supra) was an extreme case but the considerations therein referred to nevertheless need to be taken into account. However, it seems to me that although there would be an extension of the trial of the proceeding measured by reference to the adjournment which I propose to allow, such adjournment is not in my opinion so extensive as to require me to disallow the amendments, having regard to the consequences it would have for the respondents and in particular, Mr Jones. 25 I accept that litigation of this type inevitably involves a burden on individual respondents and a measure of anxiety but, balancing as best I can the relevant requirements to do justice to all parties, having regard to the manner in which the issue has arisen, that is, it has emerged out of cross‑examination and having regard to the desirability in my opinion that the issues relevant to the contraventions alleged and to the factual substratum underlying them be resolved finally, I take the view that it is desirable that the amendments be allowed but on terms as to an adjournment. 26 I will accordingly grant the applicant leave to amend the statement of claim in the terms sought with what I understand to be some tighter drafting which has already been referred to. I propose to adjourn the further hearing of the proceeding to Monday 17 May 1999 and to reserve the costs of the application for amendment and such costs as might be incurred or arise or thrown away arising out of the adjournment. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.