FEDERAL COURT OF AUSTRALIA Australian Competition & Consumer Commission v CC (NSW) Pty Ltd (No 9) [2000] FCA 23 TRADE PRACTICES – contravention of s 45 of Trade Practices Act 1974 (Cth) – imposition of pecuniary penalty under s 76 – factors relevant to level of penalty – effect of earlier cases in which other respondents had withdrawn their defences and admitted allegations in Commission's pleading – penalties fixed in those cases on bases in some respects not applicable in light of hearing and findings in this case. Trade Practices Act 1974 (Cth) s 76 Trade Practices Commission v CSR Ltd (1991) ATPR 41-076, cited AUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called "TRADE PRACTICES COMMISSION") v CC (NEW SOUTH WALES) PTY LIMITED (formerly called "CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED") NG 574 OF 1994 LINDGREN J 21 JANUARY 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 574 OF 1994 BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called "TRADE PRACTICES COMMISSION") Applicant AND: CC (NEW SOUTH WALES) PTY LIMITED (formerly called "CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED") First Respondent PETER WOOLLARD Second Respondent HOLLAND STOLTE PTY LIMITED Third Respondent GRAHAM RONALD DUFF Fourth Respondent MULTIPLEX CONSTRUCTIONS PTY LIMITED Fifth Respondent GEOFFREY THOMAS PALMER Sixth Respondent LEIGHTON CONTRACTORS PTY LIMITED Seventh Respondent LEONARD DIXON Eighth Respondent THE AUSTRALIAN FEDERATION OF CONSTRUCTION CONTRACTORS Ninth Respondent RUSSELL NORMAN RICHMOND Tenth Respondent JUDGE: LINDGREN J DATE OF ORDER: 21 JANUARY 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The proceeding be stood over to 7 February 2000 at 9.30 am for the making of orders including orders as to costs. 2. The applicant and the first respondent by 5.00 pm on 3 February 2000 supply to the Associate to Lindgren J agreed short minutes of the orders to be made or if agreement has not by then been reached copies of short minutes of the orders for which they will respectively contend and submissions in support. 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 NG 574 OF 1994 BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called "TRADE PRACTICES COMMISSION") Applicant AND: CC (NEW SOUTH WALES) PTY LIMITED (formerly called "CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED") First Respondent PETER WOOLLARD Second Respondent HOLLAND STOLTE PTY LIMITED Third Respondent GRAHAM RONALD DUFF Fourth Respondent MULTIPLEX CONSTRUCTIONS PTY LIMITED Fifth Respondent GEOFFREY THOMAS PALMER Sixth Respondent LEIGHTON CONTRACTORS PTY LIMITED Seventh Respondent LEONARD DIXON Eighth Respondent THE AUSTRALIAN FEDERATION OF CONSTRUCTION CONTRACTORS Ninth Respondent RUSSELL NORMAN RICHMOND Tenth Respondent JUDGE: LINDGREN J DATE: 21 JANUARY 2000 PLACE: SYDNEY REASONS FOR JUDGMENT (No 9) INTRODUCTION 1 This proceeding arises out of "price fixing" by major construction companies and their association, the ninth respondent ("the AFCC"), in connection with tenders to Australian Construction Services ("ACS"), part of the Commonwealth Department of Administrative Services ("DAS"), for a project known as the "Commonwealth Offices – Haymarket" ("the Project") in contravention of s 45 of the Trade Practices Act 1974 (Cth) ("the TP Act"). As well, the Commission alleged contravention of s 52 of the Act. 2 The Commission sought the imposition of pecuniary penalties and declaratory and injunctive relief. Its case was pleaded in an amended statement of claim filed on 17 November 1994 ("the Pleading"). 3 According to the Pleading, each individual respondent was at all material times employed by the corporate respondent named in the title to the proceeding immediately preceding his name. Accordingly, and so the Pleading describes them, Woollard was employed by Concretes, Duff was employed by Hollands, Palmer was employed by Multiplex, Dixon was employed by Leightons and Richmond was employed by the AFCC. The Pleading asserts that all acts alleged in it were performed by the individual respondents as employees of their corporate employers. 4 The proceeding has been disposed of as against all but Concretes and the AFCC in the ways mentioned below. 5 On 16 November 1994, the AFCC was ordered to enter an appearance by 23 November 1994, in default of which the applicant ("the Commission" – then called "the Trade Practices Commission"), had leave to relist the matter with a view to seeking judgment. No appearance has been filed and the leave has not been exercised. 6 On 28 September 1994 Hill J stayed the proceeding in so far as it related to Woollard. 7 The remaining eight respondents, except Concretes, have withdrawn their defences and joined with the Commission in making submissions as to the level of penalty appropriate to be imposed on them. Penalties have been imposed on them accordingly. I will refer to the amounts later. 8 On 14 July 1999 I published Reasons for Judgment (No 8) relating to the hearing of the issue of contravention by Concretes ("the hearing on contravention"). Those Reasons have been reported as (1999) 165 ALR 468 ([1999] FCA 954). I concluded that Concretes had contravened s 45(2)(a)(ii) and (b)(ii) of the TP Act. The present reasons relate only to the penalty to be imposed on Concretes. THE PLEADING 9 I gave an account of the Pleading in Reasons for Judgment (No 8) and will not repeat it here. Of present significance, however, is that the Commission alleged that at a meeting held in early October 1988 two understandings were reached. They were a Special Fee understanding and an Unsuccessful Tenderers' Fee ("UTF") understanding. The Special Fee understanding was reached by Concretes, Hollands, Multiplex, Leightons ("the Tenderers") and the AFCC in the first part of the meeting. It was, according to the Pleading, to the effect that the successful Tenderer would pay to the AFCC a Special Fee of $1,000,000 from the proceeds of the Project; that the Tenderers would take this commitment into account in the preparation of their tenders; and that none of the Tenderers or the AFCC would disclose to ACS the terms of the Special Fee understanding or the fact that the meeting had taken place. The UTF understanding, reached in the second part of the meeting after Mr Cunningham, Director of Special Projects with the AFCC, had departed, was, again according to the Pleading, to the effect that the successful Tenderer would pay to each of the three unsuccessful ones a UTF of $750,000 from the proceeds of the Project; that the Tenderers would take this commitment into account in the preparation of their tenders; and that none of the Tenderers would disclose to ACS the terms of the UTF understanding or the fact that the meeting had taken place. 10 Hollands was the successful Tenderer. Richmond caused or procured the AFCC, through its National Executive Committee, to ratify and levy the Special Fee on Hollands. The AFCC sent invoices for instalments of the Special Fee to Hollands which paid them. Similarly, each of Concretes, Multiplex and Leightons sent to Hollands invoices for instalments of the UTFs and Hollands paid the UTF of $750,000 to each of Concretes, Multiplex and Leightons (totalling $2,250,000). Each of the invoices sent by the AFCC and by Concretes, Multiplex and Leightons purported to make claims on Hollands for fees for "consultancy services" but such services were not provided and were never intended to be provided by Hollands. FINDINGS IN REASONS FOR JUDGMENT (No 8) 11 As explained in Reasons for Judgment (No 8) I was not satisfied on the evidence that the Special Fee understanding had been arrived at. Rather, I concluded that on the evidence the Special Fee of $1,000,000 was unilaterally imposed by the AFCC on the Tenderers as a means of raising revenue from its members. 12 I did find, however, that each Tenderer undertook to the others that if it was the successful Tenderer, it would pay a UTF of $750,000 to each unsuccessful Tenderer. I did not find that each Tenderer undertook to the others that it would take this commitment into account in the preparation of its tender price or, if it should be the successful Tenderer, that it would pay the UTFs out of the proceeds of the job. I did conclude, however, that each Tenderer had an independent expectation that as a matter of fact each Tenderer would do both of those things. 13 Although the independent expectations to which I have just referred were not part of the understanding arrived at by the Tenderers, this did not, in my view, foreclose the question whether that understanding, limited in the manner mentioned though it was, satisfied the terms of s 45 of the TP Act. Section 45(2)(a) and (b) provided relevantly as follows: "45(2)A corporation shall not - (a) make a[n] … arrangement, or arrive at an understanding, if - (i) … (ii) a provision of the proposed … arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantiallylessening competition; or (b) give effect to a provision of a[n] … arrangement or understanding, …if that provision - (i) … (ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition." Section 45A provided, relevantly, that a provision of an understanding was deemed " … for the purposes of [s 45] to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision … [was] likely to have the effect … of fixing, controlling or maintaining … the price for … goods or services … to be supplied … by the parties … or by any of them … in competition with each other." The Tenderers were competitive with one another in relation to the supply of construction services in New South Wales. 14 I concluded that the UTF understanding was in fact likely to have the effect of controlling the price to be charged to ACS. More particularly, I stated as follows: "[199]I infer that the UTF understanding was likely to have the effect of controlling, by way of increasing, by $2,250,000 or by a substantial part of that sum, the price that ACS would be charged for the Project. The Tenderers knew many of the matters referred to above, including their mutual undertakings of secrecy and the fact that none of them would readily pay UTFs totalling $2,250,000 out of the profit on the Project and would prefer to pass it on to ACS. Extent of price increase [200] Notwithstanding my conclusions above as to what I infer was more likely than not, I do not know for certain that the price charged to ACS was a particular amount (such as, $2,250,000) higher than what it would otherwise have been. [201] In the absence of the UTF understanding, would the Tenderers have taken into account tendering costs in the calculation of their tender prices? If so, what would the effect of their doing so have been on their tender prices? Which Tenderer would have been the successful one? How would its price for the project have compared with Hollands' actual tender price? How was the cost of unsuccessful tendering treated by the Tenderers prior to the introduction of the practice with which this case has been concerned? The evidence before me does not touch on these questions at all. In the absence of such evidence, I do not infer that unsuccessful tendering costs would have been reflected in the tender prices at all. (Analogous questions can be asked on the hypothesis that the Special Fee was not levied.) [202] It is open to Concretes (and to the Commission) on the hearing on penalty to lead evidence directed to establishing the extent to which the UTF understanding in fact caused ACS to be charged a higher price than that which it would have been charged in its absence." 15 Neither the Commission nor Concretes has attempted on the present hearing on penalty to lead evidence of the kind described in the last paragraph. Penalties previously imposed on respondents 16 As noted earlier, other respondents have come to a settlement with the Commission which has led to the imposition of penalties on them in accordance with the terms of their respective agreements. In some instances there has also been an agreed order for payment of costs. The following table shows the amounts of penalties and costs ordered to date: Respondent Penalty imposed Costs ordered Date of Reference imposition & order Richmond Special Fee 24.11.94 (1994) ATPR 41-363 ("SF") $10,000 UTF [Not applicable] Hollands SF $150,000 $25,000 5.5.95 (1995) ATPR 41-406 UTF $250,000 Duff SF $25,000 5.5.95 (1995) ATPR 41-415 UTF $25,000 Multiplex SF $250,000 $75,000 8.9.95 (1995) ATPR 41-431 UTF $250,000 Palmer SF $25,000 8.9.95 (1995) ATPR 41-431 UTF $25,000 Leightons SF $250,000 $75,000 8.9.95 (1995) ATPR 41-431 UTF $250,000 Dixon SF $12,500 8.9.95 (1995) ATPR 41-431 UTF $12,500 CONSIDERATION AND SUBMISSIONS Penalties imposed on other respondents 17 When the contravention occurred, the maximum penalty prescribed was $250,000 for each act or omission to which s 76 applied: see the then s 76(1) of the TP Act. I found one contravention of s 45(2)(a)(ii) (the reaching of the UTF understanding) and 45(2)(b)(ii) (the implementation of the UTF understanding) aided in each case by s 45A(1). Subsection 76(3) provided that if the same conduct constituted two or more contraventions, not more than one penalty may be imposed. The parties have proceeded on the basis that this provision applies so that only one penalty may be imposed in respect of the reaching of the UTF understanding and its effectuation. I will proceed accordingly. 18 The Commission submits that it is appropriate that the maximum penalty of $250,000 be imposed. 19 In support, the Commission refers to the levels of penalty imposed on Hollands, Multiplex and Leightons. Hollands was the first corporate respondent to withdraw its defence and to join with the Commission in making submissions. Although the penalty imposed on it in respect of the UTF understanding was the maximum of $250,000, it received the benefit of a "discount" of $100,000 in respect of the Special Fee understanding. The reasons supporting the overall level of penalty of $400,000 rather than $500,000 in that case are set out at (1995) ATPR 41-406 at 40,498-40,500. Counsel who appeared for Hollands in that proceeding adopted the submission of senior counsel for the Commission which I set out in those reasons. In summary, the mitigating factors were: 1. Hollands' withdrawal of its defences and cooperation at an early stage with consequential saving of expenditure of public money and court time; 2. Hollands' agreement to assist the Commission in its inquiries; 3. A change in the ownership and management of Hollands and the new management's determination that the company would not contravene again and its high level of cooperation with the Commission; 4. The "reimbursement" of the Australian Government in respect of the UTFs paid by Hollands to the unsuccessful Tenderers on the Project and received by Hollands as an unsuccessful tenderer on other projects. The "joint" submission in that case continued (at 40,499): "Even allowing for these ameliorating factors, the contraventions clearly justify, as Holland Stolte fully accepts, the imposition of the penalties agreed by the parties. Holland Stolte positively submits that the Court should not impose any lower penalties. It acknowledges that the Commission would have wished to make extensive submissions on penalty and would have sought penalties of a considerably higher order had the proposed penalties not been, as they are, actively supported by Holland Stolte. ……………………………………………………………………………………………. The Commission accepts that it was an essential element in the decision of the company to withdraw its defence that it had received an indication from the Commission that if it did so, the Commission would urge the Court that the penalties should be as submitted and no more. In return, Holland Stolte urges the Court that the agreed penalties, and no lesser amount, should be imposed. ……………………………………………………………………………………………. No additional penalty is sought in relation to the other contraventions made out, but the Court is entitled to take them into account in satisfying itself that the penalties agreed between the parties are appropriate." 20 The reasoning section of my Reasons for Judgment in that case commenced (at 40,499): "The facts of the alleged contraventions by Hollands were not proved before me by evidence. Rather, the hearing proceeded on the basis that Hollands no longer traversed, for the purpose only of the fixing of penalty, the allegations made by the Commission in its amended statement of claim: see Order 11 r 13(1) of the Federal Court Rules. Accordingly, although it is necessary for me in fixing the amount of the pecuniary penalty payable by Hollands to refer to the relevant 'facts' of the case, it must be understood that the basis for these 'facts' is the Commission's allegations in its pleadings and Hollands' non-traversal of them for the limited purpose of the quantification of pecuniary penalty and granting of other relief." I said: "The inference is that the tenders submitted, including Hollands', were $3,150,000 more than what they would have been but for the arrangements or understandings. This was, of course, a gross imposition on the Commonwealth and so upon the people of Australia. The corruption of market forces to the detriment of the Commonwealth and the public deserves strong condemnation." The effect of O 11 r 13(1) on the withdrawal of Hollands' defence was that the Commission's allegations of fact in its pleading were deemed to have been admitted by Hollands. I also referred to the fact that it was possible, on the pleaded facts, to find many more than one contravention constituted by the Special Fee understanding and one contravention constituted by the UTF understanding, although I noted that if the same conduct constituted two or more contraventions, subs 76(3) of the TP Act required that not more than one penalty be imposed. Hollands' withdrawal of its defence (and its express admission) constituted an admission that the Special Fee understanding and the UTF understanding contained price fixing provisions to which s 45A of the TP Act applied and also contained an exclusionary provision contrary to s 45(2)(a)(i) of the TP Act; that Hollands had contravened ss 52, 53(aa) 53(e) and 55A of the TP Act; and that Hollands had, in respect of each of the Special Fee understanding and the UTF understanding, contravened ss 45(2)(a)(i) and 45(2)(a)(ii), aided by s 4D and by s 45A of the TP Act, and ss 45(2)(b)(i) and 45(2)(b)(ii), aided by s 4D and by s 45A, of the TP Act. 21 Subsequently, Leightons, Multiplex, Dixon and Palmer similarly withdrew their defences, admitted the allegations made in the amended statement of claim and joined with the Commission in making submissions as to the level of penalty to be imposed. By the withdrawal and admission, each of Leightons and Multiplex made admissions similar to those that had been made by Hollands in the earlier proceeding. 22 The submissions made jointly by the Commission, Leightons and Multiplex ((1995) ATPR 41-431 at 40,849) were generally similar to those which had been made jointly by the Commission and Hollands with two exceptions: first, it was not suggested that there should be a discount for early cooperation; second, Leightons and Multiplex admitted that the Special Fee understanding and UTF understanding "had a very serious effect on competition" whereas there had been no submission to that effect in relation to Hollands. (Hollands did admit that the contraventions alleged and admitted "were serious and occurred in an important industry") ((1995) ATPR 41-406 at 40,498). 23 Concretes submits that it follows from the above that the penalties imposed on Hollands, Multiplex and Leightons took into account a wider range of contraventions than the two particular contraventions, arising out of the same conduct, that I have found Concretes to have committed. The Commission, on the other hand, submits that the penalties imposed on Hollands, Leightons and Multiplex followed a consideration by the Court of the facts and circumstances of the contraventions which were essentially the same as those in the present case. It submits that for Concretes to receive anything less than the maximum penalty would be inappropriate and would "put at risk the future willingness of respondents to cooperate with the Commission and thereby save the Court's valuable time". 24 In substance, Concretes accepts that corporations guilty of similar contraventions should incur similar penalties and that "[t]here should not be such an inequality as would suggest that the treatment meted out has not been even-handed" (cf NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295 (Burchett and Kiefel JJ) citing the criminal law case, Lowe v The Queen (1984) 154 CLR 606). It submits, however, that it is not to be treated as guilty of similar contraventions to those of which Hollands, Multiplex and Leightons were taken to have been guilty. 25 I accept that there are the following points of distinction between the earlier two cases and the present one: · Unlike Concretes, Hollands, Multiplex and Leightons admitted an accompanying contravention in relation to the Special Fee understanding. · Unlike Concretes, Hollands, Multiplex and Leightons admitted, in effect, that it was part of the Tenderers' mutual commitments that they would "add on" the UTFs and the Special Fee in the calculation of their tender prices. · Proved contravention of s 45(2)(a)(ii) and s 45(2)(b)(ii) only by reason of the deeming provision of s 45A is different from admitted contraventions of the whole of s 45(2)(a)(i) and (ii) and s 45(2)(b)(i) and (ii) (importing admissions, not only of "price fixing", but also of "exclusionary provisions" and of an actual substantial lessening of competition) coupled with admissions that the accompanying circumstances gave rise to contraventions of s 52 and the criminal prohibitions contained in ss 53(aa) and (e) and s 55A. · In the case of the contraventions by Multiplex and Leightons, there was an admission that the Special Fee understanding and the UTF understanding "had a very serious effect on competition" but I have not made such a finding in this case and indeed, the ACCC abandoned the allegation in the amended statement of claim of an actual substantial lessening of competition, relying only on the deeming effect of s 45A. · At least Leightons and Multiplex (and perhaps Hollands) settled in response to a threat by the Commission to press for penalties for the numerous possible contraventions to be found pleaded in the amended statement of claim and a settlement arrived at in that context is different from a finding of a UTF understanding leading to two contraventions arising out of the same conduct as the present case has been treated as involving. 26 I think that there is force in Concretes' submission that the finding of, in substance, one contravention presents a picture on the issue of penalty which is not identical with that with which I was faced in the earlier proceedings. This is not to suggest that there was anything untoward in the arrangement made by the Commission with Hollands, Multiplex and Leightons that they withdraw their defences and so admit the allegations of fact made in the amended statement of claim, and expressly admit all contraventions pleaded. But I do not accept the Commission's submission that I should impose no less penalty on Concretes because to do otherwise might dissuade other contraveners of the TP Act from "cooperating" in the future as Hollands, Multiplex and Leightons did. The submission is tantamount to a submission that Concretes should be penalised on a basis shown to be false in order to encourage corporations charged with contravention of the TP Act by the ACCC in the future to submit to a similar injustice. While the Commission's submission relating to the saving in expenditure of public monies and in court time has an obvious attraction, it would be unjust if Concretes were to be deprived of the benefit of its lawyers' assessment of its position in relation to the charges against it, which I have, at least in part, sustained. Purpose of penalty 27 Whether punishment in addition to deterrence is a purpose of the imposition of penalties under s 76 for contravention of a provision of Part IV of the TP Act, has been much discussed: see Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 (FCA/French J) at 52,151-52,154; Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 (FCA/Burchett J) at 40,167; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (FC) at 290-295 (Burchett and Kiefel JJ), 299 (Carr J); Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 (Goldberg J) at 240-242; Australian Competition and Consumer Commission v Alice Car & Truck Rentals Pty Ltd (1997) ATPR 41-582 (FCA/Mansfield J) at 44,048-44,049; Australian Competition and Consumer Commission v Cromford Pty Ltd (1998) ATPR 41-618 (FCA/Lockhart J) at 40,764; Australian Competition and Consumer Commission v McPhee & Son (Australia) Pty Ltd (1998) ATPR 41-628 (FCA/Heerey J) at 40,890-40,892. The issue has also been the subject of academic comment: see Corones (1996) 24 Aust. Bus L. Rev. 160; Allgrove (1996) 4 TPLJ 104; Colvin (1997) 5 TPLJ 262. I choose not to add to the discussion and proceed on the basis accepted by both the Commission and Concretes that the prime, if not the only objective, of the pecuniary penalties is deterrence: deterring the contravenor from repetition (specific deterrence) and deterring others who might be tempted to contravene from doing so (general deterrence). 28 In relation to specific deterrence, Concretes submits that it is already virtually certain that it will not transgress again. It points to the facts that: · it cooperated early and fully with the Royal Commission into Productivity in the Building Industry in New South Wales ("the Royal Commission" – see later); · the legal issue on which liability turned was one on which reasonable minds might differ; · Concretes gave an undertaking to the Commonwealth not to repeat conduct of the kind in question; · repetition is highly unlikely because of Concretes' cumulative experience of the Royal Commission hearings, an inquiry by the New South Wales Crime Commission, failed committal proceedings against it, the irritation of governments with Special Fee and UTF understandings; · the s 155 examination of Concretes' officers; and · the present proceedings themselves, all over the last nine years. To this may be added the alienation of clients, one of which, Metroplaza Pty Limited, sued Concretes and other construction companies for damages (see Metroplaza Pty Ltd v Girvan NSW Pty Ltd (In liquidation) (1993) ATPR 41-241) – the case was settled. 29 In relation to general deterrence, Concretes also submits that it is unnecessary to seek to achieve this by the imposition of a penalty on it since the building industry must by now be fully aware of the attitude of the authorities and clients to the practices in question following the Royal Commission, the prosecution, these proceedings in which Hollands, Multiplex and Leightons have made admissions resulting in the imposition of substantial penalties, the civil action for damages mentioned above, and the clarification of the legal position as a result of Reasons for Judgment (No 8) on contravention. 30 In reply, the Commission encourages me to apply the joint judgment of Burchett and Kiefel JJ in NW Frozen Foods but does not, with respect, specifically address Concretes' submission that it and others have already been deterred from contravention so that there is no longer scope for deterrence to operate. 31 I accept that it is unlikely that Concretes will, in the foreseeable future, again contravene the TP Act in the manner in which it has. Notwithstanding this, it seems to me that there remains some role for specific deterrence and a substantial role for general deterrence to play. 32 Memories fade and the imposition of a pecuniary penalty and the official opprobrium attached will serve to remind Concretes' officers for all the longer period of time that it does not pay to contravene the TP Act. General deterrence might be non-existent if a penalty were not to be imposed. Other persons might know nothing more than the fact that Concretes "got off" without penalty. Affidavit evidence filed since delivery of Reasons for Judgment (No 8) on contravention 33 Since Reasons for Judgment (No 8) on contravention were delivered on 14 July last, Concretes and the Commission have each filed an affidavit relating to penalty. The affidavits are not controversial and the deponents were not cross-examined. 34 The affidavit sworn 22 September 1999 of Paul Richard McCann of Concretes' solicitors proves as follows. 35 On 18 July 1990 the Governor of New South Wales appointed the then Mr Roger Vincent Gyles QC (now Justice Gyles of this Court) (the "Royal Commissioner") sole Commissioner to inquire into three identified practices within the building industry in New South Wales. In July and August 1990 the Royal Commissioner called for submissions and information relevant to the terms of the inquiry and wrote to 265 companies and organisations connected with the building industry, including Concretes, seeking submissions. Shortly after August 1990 Mr McCann met with three senior officers of Concretes, none of whom remains an employee of Concretes, to discuss the notice received from a Royal Commissioner. The Assistant to the Managing Director told Mr McCann shortly afterwards that Concretes had agreed to cooperate with the Royal Commissioner fully and actively and that this information had been relayed to the Royal Commissioner. Mr McCann was told subsequently that the Managing Director of Concretes had met with the Royal Commissioner and furnished information to him. 36 On 3 May 1991, the Honourable Kevin James Holland QC (the "Second Royal Commissioner") was issued with Letters Patent requiring him to inquire into: "[t]he existence of collusive conduct and practices in or in relation to tendering for building contracts in New South Wales from 1 January 1986 to date and continuing." 37 Concretes identified Woollard, who was then a qualified quantity surveyor and Concretes' Chief Estimator as the person having the most intimate knowledge of the identified practices described and as the person with whom Mr McCann was to work in dealing with the Second Royal Commissioner. Mr McCann and Woollard met with officers of the Royal Commission over several weeks prior to the commencement of formal hearings before the Second Royal Commissioner, for the purpose of producing records relating to Special Fees and UTFs and for the purpose of preparing a statement. 38 Public hearings relating to Special Fees and UTFs were conducted before the Second Royal Commissioner over a period of thirty-one days, between 20 May 1991 and 9 September 1991. Because of the cooperation of Woollard and Concretes and their profile in the building construction industry, the Commission concentrated much of its efforts on Woollard's evidence. He appeared before the Commission on 11, 12 and 13 June 1991 when he was questioned at length by counsel assisting the Commission, Mr J M Stowe QC, as well as by counsel retained by "consumers" of services provided by construction contractors. His evidence was publicised widely and daily. The major metropolitan and Australia-wide newspapers, such as the Sydney Morning Herald and The Australian Financial Review, contained headlines which were damaging to Concretes' reputation. That publicity created the perception that Concretes was alone in engaging in the practices the subject of the Second Royal Commissioner's inquiry. 39 Shortly after the conclusion of Woollard's evidence, the Second Royal Commissioner made the following statement: "Mr Woollard, I should acknowledge that the Commission is grateful for the great deal of co-operation that it has had from Concrete Constructions and, in particular, I would like to acknowledge the trouble and time that you personally have put in to assisting the Commission with its inquiries and investigations. That completes your evidence … ." 40 Subsequently, on 19 July 1991, near the closure of all the evidence, the Second Royal Commissioner made the following statement: "It should perhaps be made clear that the companies from whose representatives evidence was called comprise only a small proportion of the large number of contractors shown to have been involved in such projects in New South Wales since 1 January 1986. Evidence available to the Commission indicates that more than 70 contractors have tendered on projects in respect of which arrangements for the payment of either special fees or unsuccessful tenderers' fees have been made since that time, and it was plainly impractical, having regard to the time constraints upon the Commission, to call evidence from more than a representative sample of the contractors involved. It seems, therefore, appropriate to state publicly that the selection of those contractors from whose representatives evidence has been called doesn't necessarily imply any assessment by those who have been investigating this topic on behalf of the Commission that the contractors selected have a heavier involvement in the practice or an involvement more worthy of criticism or exposure than those who have not been selected. Two companies have perhaps experienced more such attention in this way than others, namely W McNamara Pty Limited and Concrete Constructions Group Pty Limited. In the case of W McNamara Pty Limited, its representatives spent a relatively long time giving evidence, simply because the Metro Inn project on which that company was the successful tenderer happened to be the first project chosen for examination and as the first project chosen, was examined in greater detail than the others. Concrete Constructions Limited received more protracted attention than other contractors, not because the Commission singled it out for attention, but, rather, as a result of that company, more than any other company which has been involved in this investigation, having actively assisted the Commission by the provision of detailed statements and schedules and by its assistance in identifying and collating relevant documents. As I say, it would be quite wrong to suppose that those companies to which I have referred were singled out from others on the basis of any greater impropriety or greater questionable practices having existed than the other participants involved in these practices." (emphasis supplied) 41 The Second Royal Commissioner released his report on 23 March 1992. Subsequently the New South Wales and Commonwealth Governments sought and were paid in full by Concretes the amounts of all UTFs received by it on all State and Commonwealth building projects. As well, State and Commonwealth Governments sought and were given various forms of undertaking, substantially to the effect that Concretes would not again participate in Special Fee or UTF arrangements. 42 In addition, several of Concretes' employees were examined over a period of many weeks before the New South Wales Crime Commission ("the Crime Commission") preparatory to a prosecution of Concretes. The New South Wales Director of Public Prosecutions prosecuted Concretes, in substance for cheating and fraud relating to UTFs on the project known as "Oceanic Hotel Stage 2" at Coogee (the proceeding was dismissed at committal following a lengthy hearing). 43 Woollard was examined in a proceeding commenced by the Commission pursuant to s 155 of the TP Act preparatory to the commencement of the present proceeding. 44 There was considerable evidence in Mr McCann's affidavit relating to the issue of the unlawfulness of the UTF understanding. Until the delivery of Reasons for Judgment (No 8) on 14 July last, there had been debate as to whether s 45A can apply where the controlling of price is not actually part of those mutual commitments that constitute the contract, arrangement or understanding in question, and is only the effect or likely effect of them. I held that it can. Concretes submits, however, and I accept, that there was a body of reasonable legal opinion to the contrary. I turn now to the evidence of this. Its relevance is that the present case was far from one in which it was obvious that Concretes was contravening the TP Act by reaching the UTF understanding and in which it was obvious that Concretes should follow the course that Hollands, Multiplex and Leightons took in relation to the UTF understanding. 45 In the submissions, dated 21 November 1991, of counsel assisting the Royal Commission, Messrs J M Stowe QC and P M Hall QC, the following passages appeared: "3.6.1 Analysis of Evidence The critical issue in relation to special fees is as to whether or not there was an agreement, express or implied, or alternatively an arrangement or understanding arrived at between the tenderers and the Associations to pay special fees upon the basis that they would be added into the tender price of each tenderer, thus eliminating any competitive advantage that would otherwise exist in the absence of unanimity between them. Both Association[s'] representatives refused to acknowledge the existence of what would amount to collusion to inflate prices by agreed amounts." "4.5 EVIDENCE OF AGREEMENT TO ADD ON The critical question in a consideration of UTF's as a collusive tendering practice, is whether the tenderers, in agreeing that each will pay a fee to the others in the event of his tender being successful, also mutually agree that the aggregate value of the UTF's will be added to their respective tenders before they are submitted to the principal. The first head of agreement – the agreement by each tenderer to pay a fee to the others if successful – does not of itself contain any collusive element and is of no direct concern to the principal. It is the second head of agreement which carries a UTF agreement into the area of collusive tendering and which is the source of any illegality involved in the practice." (emphasis supplied) Likewise, in written submissions dated 24 January 1992 which Mr McCann made on behalf of Concretes to the Royal Commission, he said: "Obligation to Add On For the practice to be collusive there had to be evidence of an ancillary agreement between the tenderers to 'add on' the agreed RTCs[reimbursed tenderer's costs] in the individual tenders. As inconceivable as it obviously appeared to the Commission, Woollard's consistent contention was that where an RTC was deemed appropriate at the meeting of tenderers the only commitment reached between the parties was a follows: 1. that the fee would be paid by the successful tenderer to the unsuccessful tenderers; and 2. it was a matter for each individual tenderer as to whether or not such a fee was to be included in their tender. ……………………………………………………………………………………………. There was, in substance, no evidence before the Commission of any agreement to 'add on' an RTC. The best evidence that the Commission could obtain was a belief or an expectation … that such would happen … ." (emphasis supplied) 46 Mr McCann states that this submission of his, so far as the legal consequences of UTFs were concerned, "mirrored both the written and oral advice [he] had given to Concrete Constructions on a number of occasions during the course of the Royal Commission". Due to inadvertence on the occasion of a relocation of his firm in 1994, the relevant files were apparently destroyed and other files have been stored in such a fashion that has made retrieval impossible. I have no hesitation in accepting his evidence that he gave the advice described to Concretes. 47 Finally, the Second Royal Commissioner's report "Collusive Tendering: Report of Inquiry" stated: "The absence in any particular case of proof of an agreement to add on leaves the question of whether the agreement to pay, of itself, would contravene s45(2). In section 16.5.4 of this report the conclusion was reached, for the reasons there given, that where there was an agreement to pay there was a high degree of probability that in one way or another the fees, in whole or in part, would be added on by all tenderers so as to be passed on to the client. The question is whether it would be open to conclude, therefore, that an agreement to pay would be likely to have the effect of substantially lessening competition or of fixing or controlling the price in virtually the same way as an agreement to add on would do. It must be considered doubtful that an affirmative answer could be given to this question because the lack of an express or implied agreement to add on leaves the agreement to pay having only an influential and indirect operation upon the degree of competition between the tenderers and the pricing of their tenders." (emphasis supplied) 48 Following the Report, the Australian Government Solicitor ("AGS"), on behalf of the Commonwealth, wrote to Concretes seeking repayment of UTFs allegedly paid to Concretes in connection with the Project. As well, the AGS sought a statutory declaration from an officer of Concretes in relation to other Commonwealth projects on which Concretes had tendered by select tender in the preceding six years. The statutory declaration was, in substance, to the effect that other than as disclosed to the Commonwealth, Concretes had not entered into any Special Fee understanding or UTF understanding in relation to those other projects. 49 On 16 September 1992, Concretes replied enclosing its cheque for $750,000 representing a refund of the UTFs paid to it by Hollands on the Project and enclosing a completed form of statutory declaration, but insisting that its legal advice was that it had not acted unlawfully because there had not been an agreement to add on Special Fees or UTFs to the price. The letter concluded by affirming that Concretes no longer participated in the practices in question and was prepared to provide appropriate assurances on any future projects. 50 Finally, Mr McCann's affidavit shows that Concretes paid $325,169.84 as legal costs on the proceeding before the Crime Commission and $222,611.61 for legal costs on the committal hearing in connection with the prosecution of Concretes relating to the Oceanic Hotel Stage 2 project – a total of $547,781.45. In addition, it will have to bear its legal costs of the present proceeding and will have to pay some part of the Commission's. 51 For the Commission, an affidavit sworn 26 October 1999 of Daniel Roland, a principal solicitor employed in the office of the AGS in New South Wales, was read. It was directed to showing that far from cooperating or taking any steps to minimise the complexity or cost of the present proceeding, Concretes had contested the matter at every point. On 6 October 1994, its solicitors had written to the AGS a thirty-six page letter containing, in 271 paragraphs, requests for particulars of the Commission's statement of claim filed on 30 August 1994. On 19 October 1994, the AGS sent an eighteen page reply. On 30 November 1994, Concretes' solicitors wrote an eight page letter divided into 102 paragraphs requesting particulars of the Commission's amended statement of claim. On 21 December 1994, the AGS wrote a seven page letter in reply. As well, the Commission served a notice to admit facts and the authenticity of documents on 1 May 1998 and Concretes responded on 18 May 1998 by disputing every paragraph and the authenticity of every document specified in the Commission's notice. 52 The Commission submits that it was open to Concretes to make plain that there was no factual dispute but only a question of how the TP Act applied to the facts. Far from putting no facts or only limited facts in issue and dealing with the legal issues, Concretes put every fact in issue. In reply, Concretes submits that there would have had to be a trial on the facts in any event. It is difficult to be confident about this, having regard to the fact that Concretes did not attempt to cooperate with the Commission. It may have been possible for a statement of facts to be agreed upon. It would have been possible for Concretes to make clear what was the substantial issue on which the charge was to be defended. I think I should view Concretes as a respondent which, as it was entitled to do, put the Commission to proof of everything with a view to taking advantage of any defence which the evidence might reveal to be arguable. Although it cooperated with the Royal Commission, it has contested the present proceeding thoroughly. General 53 The Commission has made submissions structured around the factors identified by French J as relevant in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,151-52,154. His Honour there said that assessment of a penalty of appropriate deterrent value ought to have regard to at least the following: 1. the nature and extent of the contravening conduct; 2. the amount of any loss or damage caused; 3. the circumstances in which the conduct took place; 4. the size of the contravening company; 5. the degree of power it has, as evidenced by its market share and ease of entry into the market; 6. the deliberateness of the contravention and the period over which it extended; 7. whether the contravention arose out of the conduct of senior management or at a lower level; 8. whether the company has a corporate culture conducive to compliance with the TP Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; 9. whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention. Section 76 of the TP Act requires the Court to have regard to the first three of these factors and, in addition, to the further factor whether the person has previously been found by the Court to have engaged in any similar conduct. 54 I do not think it necessary, or necessarily adequate, to consider the circumstances of the present case by reference to these ten factors as though they represented an exhaustive statutory list. I prefer to state what seem to me to be the main considerations which should influence the level of penalty in this case. They are as follows: 1. Concretes is a substantial construction company and the Project was one of substantial size. 2. It is not clear what Concretes' understanding was in or about September/October 1988 when the meeting took place as to the lawfulness or otherwise of the UTF understanding. On Friday 24 May 1991, in connection with the News Ltd Chullora Project, one or other of Mr John Cooper or Mr Chris Denny of Concretes told Mr Bird of News Ltd that Concretes' "latest legal advice" was that the practice of arranging UTFs for unsuccessful tenderers "may not be legal from a Trade Practices point of view": (1999) 165 ALR 468 at 489, para [86]. According to Mr McCann, he was advising the board of directors of Concretes at least once a month between the time of the appointment of the Second Royal Commissioner on 3 May 1991 and the date of the latter's report on "Collusive Tendering" in 1992 that Concretes' conduct had been lawful because there had been no agreement, arrangement or understanding that UTFs were added on. The evidence referred to is not evidence of what Concretes' understanding had been contemporaneously with the earlier making and implementation of the UTF arrangement. It may well be that at that time Concretes suspected that its conduct fell foul of the TP Act. 3. Neither party has led evidence directed to the question of the amount of the increase which ACS had to pay as the price for the Project as a result of the UTF understanding. It would have been open to Concretes to prove the cost of the preparation of its tender and the extent to which that cost would have been added on to its tender price, even without the UTF understanding. As senior counsel for Concretes submits, however, evidence of that kind would not have enabled calculation of the amount of any increase in price which ACS had to pay. In order to identify that amount, it would be necessary also to know the extent to which the other Tenderers would have added on their tendering costs. Evidence of that kind relating to Hollands, Multiplex and Leightons was not within the power of Concretes to lead. In the absence of any further evidence, I adhere to the inference outlined in para [199] of Reasons for Judgment (No 8) on the contravention hearing ((1999) 165 ALR 468 at 511). That is, I think that the UTF understanding was likely to have the effect that the price charged to ACS would be increased by $2,250,000 or by a substantial part of that sum, and that Concretes understood that an increase of that dimension was likely. An increase of that order was significant even in a project costing in the order of $160,000,000. 4. The making of UTF understandings in respect of large construction projects was deliberate and organised, had been carried on in the building industry for some thirty years, and, but for the Royal Commission, might still be occurring. 5. I found Concretes to have contravened on a basis which found no place in the Commission's primary submission. That submission was that the UTF understanding included a term that the UTFs would be paid from the proceeds of the job and that each Tenderer would take into account, in the preparation of its tender, its commitment to pay the UTFs if it proved to be the successful tenderer. My finding against Concretes is of a contravention which is narrower than that of which the Commissioner accused it and than the contraventions on the basis of which penalties were imposed on Hollands, Multiplex and Leightons. The narrower case was raised by the Commission only in its Outline of Submissions in Reply on the hearing on contravention. I accept Concretes' submission that "[t]he conduct of the ACCC's case in this respect highlights the novelty and difficulty of assessing whether an arrangement to pay UTFs fell within s 45A". 6. As noted earlier, my findings on the hearing on contravention were less extensive than the Commission's allegations and less extensive than the allegations admitted by Hollands, Multiplex and Leightons. 7. The evidence of Mr McCann shows that putting to one side the question of the pecuniary penalties imposed, Concretes has almost certainly suffered as a result of the Royal Commission and its sequelae, both financially and in terms of reputation, more than Hollands, Multiplex or Leightons did. 8. In order to achieve general deterrence, a sizeable penalty is called for: others tempted to contravene would not necessarily be aware of the other sufferings of Concretes to which I have referred and would probably be aware of the amount of penalty imposed alone. 55 Taking into account all of the above circumstances I think it appropriate to impose a penalty of $200,000. Costs 56 As noted earlier, pursuant to orders made previously by consent against Hollands, Multiplex and Leightons, the Commission has been paid a total of $175,000 in respect of its costs of this proceeding. Concretes submits that the appropriate order to be made now is that the Commission should have its taxed costs paid by Concretes of the proceeding save to the extent that there are already costs orders in place in favour of the Commission or in favour of Concretes, and save to the further extent that Concretes should not, as it were, have to pay the Commission again in respect of work for which that sum of $175,000 has already been paid. Concretes submits that if an unqualified order for costs were to be made, the Commission would recover significantly more than 100 per cent of its taxed costs and perhaps even more than 100 per cent of its actual costs. 57 I think it necessary to divide the Commission's costs into two classes for present purposes. One class is the costs in respect of work which was relevant to the case against Concretes alone. An example is the Commission's costs of dealing with Concretes' requests for further and better particulars and the hearings on contravention and penalty. The second class is costs relevant to all respondents. An illustration is the preparation of the application and pleading. 58 Concretes should be ordered to pay without qualification the Commission's taxed costs of the first class. In relation to the second class, Concretes should be ordered to pay the amount of those taxed costs minus the amounts already paid to the Commission by Hollands, Multiplex and Leightons. If the amount of the taxed costs of the second class is less than $175,000, the effect of the order would be that there will be no balance remaining to be paid by Concretes on account of the second class of costs. I see nothing untoward in this: the Commission cannot reasonably complain because it does not recover more than 100 per cent of its taxed costs. CONCLUSION 59 I will not make orders at this stage but will stand over the proceeding to a date for the making of orders, including orders as to costs. To that end I will make directions with a view to the bringing in of short minutes of orders on that occasion. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 21 January 2000 Counsel for the Applicant: Mr F M Douglas QC with Mr P R Clay Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr J D Heydon QC with Mr I. E. Davidson Solicitor for the Respondent: Corrs Chambers Westgarth Date of Hearing: 19 November 1999 Date of Judgment: 21 January 2000