FEDERAL COURT OF AUSTRALIA JCDecaux Australia Pty Ltd v Adshel Street Furniture Pty Ltd [2002] FCA 562 PRACTICE & PROCEDURE – pleading – amendment – application to amend statement of claim near close of applicant's case –– amendment partly based upon new document produced by respondents after trial commenced – whether amendment raised a case not yet pleaded – relevant factors to be taken into account – whether prejudice to respondents of a type incapable of being met by appropriate costs orders and case management principles – whether amendment futile – applicant's claim "fairly arguable". Trade Practices Act 1974 (Cth) ss 4A, 46(2), (3) Corporations Act 2001 (Cth) s 9 Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 at 140 referred to Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 at 61-62 referred to Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 applied Ketteman v Hansel Properties Ltd [1987] AC 189 at 220 referred to Australian Competition and Consumer Commission v Australian Safeway Stores [1999] FCA 281 referred to Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 referred to Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 referred to JCDECAUX AUSTRALIA PTY LIMITED (ACN 078 716 793) v ADSHEL STREET FURNITURE PTY LIMITED (ACN 008 081 872) and PUBLIC TRANSPORT CORPORATION V139 of 2000 WEINBERG J 6 MAY 2002 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V139 OF 2000 BETWEEN: JCDECAUX AUSTRALIA PTY LIMITED (ACN 078 716 793) APPLICANT AND: ADSHEL STREET FURNITURE PTY LIMITED (ACN 008 081 872) FIRST RESPONDENT PUBLIC TRANSPORT CORPORATION SECOND RESPONDENT JUDGE: WEINBERG J DATE OF ORDER: 6 MAY 2002 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The applicant be granted leave to file and serve a fourth further amended statement of claim in the terms sought. 2. The applicant pay the respondents' costs thrown away by reason of the application for leave to amend, including the costs of and incidental to the notice of motion dated 19 April 2002. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V139 OF 2000 BETWEEN: JCDECAUX AUSTRALIA PTY LIMITED (ACN 078 716 793) APPLICANT AND: ADSHEL STREET FURNITURE PTY LIMITED (ACN 008 081 872) FIRST RESPONDENT PUBLIC TRANSPORT CORPORATION SECOND RESPONDENT JUDGE: WEINBERG J DATE: 6 MAY 2002 PLACE: MELBOURNE INTERLOCUTORY JUDGMENT APPLICATION BY APPLICANT TO AMEND STATEMENT OF CLAIM background 1 These proceedings involve claims brought by JCDecaux Australia Pty Limited ("JCDecaux") against Ashel Street Furniture Pty Ltd ("Adshel") under Pts IV and V of the Trade Practices Act 1974 (Cth) ("the Act"). JCDecaux's claims against Adshel under Pt IV are contained in pars 159 to 203 of the third further amended statement of claim ("the statement of claim") filed in these proceedings a short time before the commencement of the trial. Essentially JCDecaux claims that Adshel's exclusive arrangements with the Public Transport Corporation ("the PTC"), and with various councils, entered into during the period 1997 to 1999, are anti-competitive, and should be struck down under Pt IV. Paragraphs 196 to 203 contain a claim that Adshel misused its market power in contravention of s 46(1). These paragraphs are directed solely at Adshel and relate to the period from July 1999 to February 2000. 2 By notice of motion dated 19 April 2002, JCDecaux has applied to amend its statement of claim. Originally, it proposed to introduce several new paragraphs concerning what may loosely be termed "aggregation". It sought to rely upon the fact that Adshel was supposedly related to a number of companies within what I will describe as the "APN Group". Those companies are APN News & Media Pty Ltd ("APN"), Buspak Advertising Group Pty Ltd ("Buspak"), Cody Outdoor Pty Ltd ("Cody"), and Australian Posters Pty Ltd ("Posters"). JCDecaux sought to add the words emphasised in bold to par 159 of its statement of claim: "159. APN: (a) owns 50% of the issued share capital of Adshel and is and was at all material times the holding company of Adshel within the meaning of s 9 of the Corporations Act; Particulars Return filed by Adshel with the Australian Securities and Investment Commission (b) owns 100% of the issued share capital of Buspak Advertising Group Pty Ltd ACN 001 899 690 (Buspak); (c) owns 100% of the issued share capital of Australian Posters; and (d) owns 52% of the issued share capital of Cody Outdoor Pty Limited ACN 059 604 278 (Cody Outdoor); (A reference hereafter to the APN Group is a reference to Buspak, Australian Posters, Cody Outdoor and Adshel).)" 3 JCDecaux also sought to introduce a new par 163A. It was originally proposed in the following terms: "163A. At all material times Buspak, Australian Posters, Cody Outdoor and Adshel were parties to a contract, arrangement or understanding pursuant to which: (a) each of them would not seek to compete against each other to acquire the rights to display Outdoor Advertising Products used or likely to be used by each other; (b) each of them would limit participation in the supply of Outdoor Advertising Products to pre-determined market segments." 4 JCDecaux sought to rely upon these two amendments, together with several others consequential upon them, in support of its claim that Adshel had a "substantial degree of power" in various markets which it identified in par 196 of the statement of claim. 5 It is important to note that the statement of claim did not plead s 46(2) or (3) of the Act. Those sections are in the following terms: "Misuse of market power 46. … (2) If: (a) a body corporate that is related to a corporation has, or 2 or more bodies corporate each of which is related to the one corporation together have, a substantial degree of power in a market; or (b) a corporation and a body corporate that is, or a corporation and 2 or more bodies corporate each of which is, related to that corporation, together have a substantial degree of power in a market; the corporation shall be taken for the purposes of this section to have a substantial degree of power in that market. (3) In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the Court shall have regard to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of: (a) competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or (b) persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market. …" jcdecaux's opening 6 The trial of this proceeding commenced on 3 April 2002. During the opening of JCDecaux's case, Mr Bannon SC submitted that his client would rely upon what he described as the "aggregation" of Adshel and the APN Group in support of its claim that Adshel had taken advantage of its "substantial degree of power" in a market in contravention of s 46(1). He foreshadowed that JCDecaux would rely upon ss 46(2) and (3) of the Act, and would invite the Court to conclude that Adshel was "related to" other entities within the APN Group. 7 At the conclusion of the opening, Mr Garde QC, on behalf of Adshel, objected to the manner in which the case had been opened. He claimed that the Pt IV allegations, as detailed by Mr Bannon, departed significantly from JCDecaux's statement of claim. correspondence between the parties 8 On 16 April 2002, JCDecaux's solicitors sent a letter by facsimile to Adshel's solicitors. In that letter the following paragraph appeared: "We confirm that the Applicant alleges, in relation to its s 46 claim, that the First Respondent's market power in the outdoor advertising market, in each of its geographic dimensions, arises by reason of aggregation of the power of the First Respondent and corporate members of the APN News & Media Limited group participating in the outdoor advertising markets by: (a) the operation of s 46(2) of the Trade Practices Act; and/or (b) contracts, arrangements or understandings between the First Respondent and corporate members of APN News & Media Limited group participating in the outdoor advertising markets." 9 On 19 April 2002, Adshel's solicitors replied to that letter stating that JCDecaux could not amend its pleadings through correspondence and informing its solicitors that any application for leave to amend the statement of claim would be strongly resisted. That in turn resulted in the filing of the present notice of motion. adshel's opposition to the application for leave to amend 10 Adshel relied upon an affidavit sworn by Bronwyn Lincoln, a partner at Freehills, its solicitors, in opposition to the notice of motion. It was Ms Lincoln's opinion that the effect of the proposed amendments was to change the case against Adshel, and also to introduce a series of allegations concerning the companies within the APN Group. None of those companies, save for Adshel, were parties to this proceeding. She said that, if leave to amend were granted, it might be necessary to join them as respondents. It was implicit in her affidavit that this would necessitate a lengthy adjournment of the trial. 11 Ms Lincoln also said that Adshel's defence had been prepared upon the basis of the claims made against it in the statement of claim. Aggregation had not been an issue, and had not been specifically addressed. Adshel's witnesses had prepared their affidavits upon the basis of the existing statement of claim. They had not addressed matters of aggregation. Most importantly, Rhonda Smith, Adshel's economic expert, had proceeded upon the basis that aggregation had not been pleaded, and was not an issue. 12 Ms Lincoln claimed that if JCDecaux were given leave to amend its statement of claim, that would have serious implications for the conduct of this proceeding. She said that additional work would need to be carried out to investigate a number of matters including the relevant markets in Australia, and in each State and Territory, the substantial degree of power in each market, competitors or potential competitors in each market, the conduct of those competitors and the persons from whom goods or services were acquired. She proffered the view that the further work required "could take several months". She also noted that the witnesses called on behalf of JCDecaux might need to be re-called for further cross-examination on the new claim. the apn group 13 When JCDecaux's notice of motion was called on for hearing, counsel for the companies within the APN Group sought leave to appear in opposition to the proposed amendments. Mr Burnside QC, on behalf of those companies, commenced by submitting that the proposed amendment to par 159 was misconceived. He submitted that APN was not Adshel 's holding company, as sought to be alleged, whether within the meaning of s 9 of the Corporations Act 2001 (Cth), or, more accurately, within the meaning of s 4A of the Act. He acknowledged that Adshel had been, at one time, a subsidiary of APN. Adshel had filed returns with the Australian Securities and Investment Commission asserting that it remained an APN subsidiary. However, he produced a letter dated 29 April 2002, sent by his instructing solicitors to JCDecaux's solicitors, which claimed that these returns were erroneous, and that APN currently owned only 50% of Adshel's issued share capital, as a joint venture with Clear Channel Pty Ltd, an unrelated company. Mr Burnside submitted that, in those circumstances, Adshel did not meet the description of a subsidiary contained in s 4A of the Act. It could not, therefore, be a "related company" for the purposes of s 46(2). He drew particular attention to s 4A(5), which provides that where a company is a subsidiary of another company, they are deemed to be "related" to each other. 14 Mr Burnside also contended that the effect of the amendments, and in particular, the proposed par 163A, would be to expose the companies within the APN Group to a finding that they had relevantly contravened s 45 of the Act. That meant that those companies ought to be regarded as necessary or proper parties to the proceeding pursuant to O 6 r 8 of the Federal Court Rules. Alternatively, those companies should at least be afforded the opportunity to seek to be added as respondents, if par 163A were introduced. 15 Mr Bannon recognised that if the APN Group's claims, as reflected in the letter of 29 April 2002, were correct, it would be futile to amend par 159 as proposed. The APN Group's contention that the Adshel returns were erroneous could easily be tested by filing evidence. Accordingly, the proposed amendment to par 159 was left upon the footing that Adshel would adduce evidence to support the assertions in the letter. 16 Mr Bannon also recognised that the manner in which the proposed par 163A was drafted might give rise to legitimate concerns on the part of the companies within the APN Group. After some reflection, a new proposed par 163A was formulated. That new paragraph was in the following terms: "163A. At all material times APN (formerly known as Australian Provincial Newspapers Holdings Limited), Australian Provincial Newspapers Limited ("APNL") (being a 100% owned subsidiary of APN) and Adshel were parties to a confidential agreement in writing dated 12 August 1997 containing, inter alia, the following clauses: (a) clause 4.2(a)(i); (b) clause 4.5; (c) clause 4.6; (d) clause 4.14; (e) clause 4.16(a)(ii); (f) clause 12.1 (which includes obligations of APN and APNL on behalf of themselves and each of Buspak, Australian Posters and Cody Outdoor); (g) clause 12.2; (h) clause 12.3; (i) clause 12.5. Particulars The agreement is express and in writing. A copy of it appears at pp 1407 to 1514 of Volume 4 of the First Respondent's Proposed Tender Bundle." 17 The confidential agreement to which par 163A, in its present form, refers ("the Adshel agreement") only came into JCDecaux's possession after Mr Bannon had completed his opening, in response to a notice to produce. As it is a confidential document, it is not appropriate that I set out its terms in any detail. It is sufficient to say that Mr Bannon foreshadowed that he would seek to rely upon it to establish that the companies within the APN Group do not compete against each other in the outdoor advertising market, as claimed by Adshel, but rather are subject to anti-competitive constraints. Mr Bannon made it clear that he would contend that the Adshel agreement provides support for a particular variant of the aggregation claim which he wishes to pursue. That is a matter to which I shall return shortly. 18 Once it became clear that JCDecaux no longer sought to rely upon its original version of par 163A, Mr Burnside indicated that the companies within the APN Group were no longer concerned to be heard in opposition to any of the proposed amendments. I infer that those companies no longer regard themselves as being potentially necessary or proper parties to this proceeding, and they will not seek to be added as respondents. Other evidence in opposition 19 Adshel also relied upon an affidavit of 26 April 2002 sworn by Ms Smith, in opposition to the application for leave to amend. It must be remembered that when that affidavit was sworn, Ms Smith was dealing with the original version of par 163A, and not the reformulated version. Nonetheless, some of what she had to say in her affidavit is important. 20 Ms Smith noted that the proposed amendments involved: · the aggregation of the companies in the APN Group with Adshel for the purpose of determining market power and · what she described as "the alleged non-compete agreements" as set out in the original par 163A. 21 Ms Smith said that she had been instructed to provide a critique of a report prepared by Dr Jill Walker, JCDecaux's economic expert. She recognised that Dr Walker had raised the issue of aggregating the companies within the APN Group with Adshel when assessing its degree of market power. However, given the form of the statement of claim at the time she was retained, and given her instructions that the companies in the APN Group competed with each other in the outdoor advertising market, she had given only limited consideration to the issue of aggregation. 22 Ms Smith identified a series of factors that would be relevant in determining whether the companies in the APN Group, in aggregate, conferred market power on Adshel, as alleged. She identified additional inquiries that would have to be carried out in order to evaluate that new claim. She did not provide an estimate as to the time she would require to carry out this additional work. I was informed that she is not scheduled to give evidence for another month. 23 Ms Smith was cross-examined at some length by Mr Bannon. She acknowledged that she had never been provided with the Adshel agreement prior to the preparation of her report. Indeed, she had not seen that agreement until she was cross-examined. She agreed that some clauses of the agreement required careful consideration, particularly in light of her instructions that the companies in the APN Group competed freely in the outdoor advertising market. She also acknowledged that she had been well aware that Dr Walker had raised the issue of aggregation throughout her report. JCDecaux's submissions 24 Mr Bannon submitted that upon a fair reading of the statement of claim, it was clear that JCDecaux had relied upon aggregation in support of its claim that Adshel had a substantial degree of power in each variant of the market pleaded. He submitted that the introduction of par 163A, in its reformulated version, should be regarded as nothing more than an additional basis upon which JCDecaux relied. 25 Mr Bannon maintained that it was not strictly necessary to seek leave to amend the statement of claim in order to allow the aggregation argument to be advanced. He had not originally proposed to seek such leave, but recognised that I had earlier expressed reservations about the scope of the statement of claim, and had suggested that it would be prudent that the matter be put beyond doubt. 26 Mr Bannon submitted that, throughout her report, Dr Walker had clearly raised aggregation as an important issue in this proceeding. So too had another witness called on behalf of JCDecaux, Brendon Cook. Mr Bannon noted that a number of Adshel's witnesses had gone out of their way to emphasise the fact that companies in the APN Group operated independently of each other, and that they competed freely in the outdoor advertising market. 27 Mr Bannon submitted that once it became clear from the letter of 29 April 2002 that Adshel would be contending that it had filed returns containing erroneous information regarding its status within the APN Group, and would provide evidence in support of that contention, JCDecaux would not persist with its application to amend par 159. He submitted that abandoning reliance upon ss 46(2) and (3) would significantly reduce the amount of additional work which might have to be undertaken by Ms Smith. It would also avoid the need for Adshel to obtain additional evidence to deal specifically with the matters raised in s 46(3). 28 As far as "aggregation" was concerned, Mr Bannon submitted that he relied upon that concept in its secondary sense, as described by Lockhart J in Dowling v Dalgety Australia Ltd (1992) 34 FCR 109. It will be recalled that his Honour identified two separate ways in which a corporation, alleged to have contravened s 46, can be found to have a substantial degree of market power. His Honour said, at 140: "A corporation charged with contravention of s 46 must itself have a substantial degree of market power. It cannot be liable under the section on the basis of a shared position of substantial market power with another unrelated corporation. The only circumstance in which the aggregation of market power may be considered is where a corporation occupies its position of substantial market power acting through or together with its related corporations as defined in ss 46(2) and 4A(5) of the Act. In my opinion, it is permissible, however, when considering the market power of a corporation, to have regard not only to its individual power but to additional power which it has through agreements, arrangements or understandings with others. While aggregation of the market power of a number of unrelated corporations is impermissible, it is important to recognise that a corporation can gain a position of substantial market power through its agreements, arrangements or understandings with others; and market power gained through acting in concert with others must add to the corporation's individual market power. Additional market power thus gained must enhance a corporation's individual market power. An individual corporation may have, as one of the weapons in its armoury, gained through agreements, arrangements or understandings, a facility to increase its market power and this must be considered as relevant to the factual matrix involved in determining the extent of that corporation's market power in a market. In this sense jointly held power and control in relation to a market is a matter which must be taken into account when considering the individual market power of a corporation for the purposes of s 46." 29 That statement by Lockhart J was expressly approved by a Full Court in Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 at 61-62. In a joint judgment, Lockhart and Gummow JJ added, at 62: "It is accepted by all parties that the congeries of circumstances comprising a substantial degree of power in a market may include the benefit enjoyed by the corporation in question from agreements (which would include partnerships), arrangements and understandings, whether or not legally binding upon other parties. The advantages or benefits so enjoyed by the corporation are to be considered with other relevant circumstances in determining the existence of market power and the substantiality of the degree of power." 30 Mr Bannon submitted that upon the assumption that the evidence that Adshel had foreshadowed regarding the ASIC returns was forthcoming, he would not seek to argue that aggregation of the market power of what would be regarded as "unrelated corporations" was permissible. However, he would rely upon the reformulated par 163A, and in particular the Adshel agreement, to establish that Adshel had gained a position of substantial market power through its "agreements, arrangements or understandings" with others. In other words, he would rely upon the second limb of Lockhart J's analysis in Dowling. 31 Mr Bannon summarised JCDecaux's case for being granted leave to amend its statement of claim by noting the following matters: · the reformulated par 163A was little more than an additional factor to be relied upon in support of a claim that Adshel had gained a position of substantial market power through its "agreements, arrangements or understandings" with others. It was not a new and discrete claim, as Adshel contended. · Adshel was not able to demonstrate any prejudice arising out of the proposed amendments that could not be met by appropriate orders as to costs, and by proper case management. There was no longer any suggestion that these amendments would necessitate an adjournment of the trial. · the Adshel agreement had only come into JCDecaux's possession after the commencement of the trial. · that agreement gave rise to a claim that was fairly arguable, based upon its proper construction, and the law as stated by Lockhart J in Dowling. · case management principles were a relevant consideration, but could not be used to prevent a party from litigating an issue which was fairly arguable: Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146. That was particularly so in a case such as the present which was of a commercial nature: Ketteman v Hansel Properties Ltd [1987] AC 189 at 220. adshel's submissions 32 Mr Garde opposed the application for leave to amend the statement of claim upon three bases. 33 First, he submitted that the s 46 claim had already been the subject of a number of amendments since it was first introduced. JCDecaux had provided no evidence to explain why aggregation, in either of its forms, had not been specifically pleaded at an earlier time. 34 Second, he submitted that Adshel would suffer some prejudice if leave to amend were granted. Ms Smith, in particular, would be required to undertake additional work in order to meet the new allegation. Other evidence might also need to be obtained and adduced. He said that Adshel had a timetable in place for calling its witnesses which could not easily be adjusted, as two of its witnesses would be coming from overseas. For that reason, it would not be practical, at this stage, to seek an adjournment of the trial. However, he would reserve his right to seek such an adjournment at a later time if that proved necessary. 35 Third, and perhaps most fundamentally, he contended that it would be futile to grant leave to amend because the argument sought to be advanced by JCDecaux was "hopeless". He explained in some detail why the construction of the Adshel agreement for which Mr Bannon contended was not open. 36 Mr Hargrave QC, on behalf of the PTC, also opposed the application for leave to amend. He was content to adopt Mr Garde's submissions. conclusion 37 I have given careful consideration to each of the matters raised by Mr Garde. I accept that there may be circumstances in which an applicant will be refused leave to amend his or her statement of claim notwithstanding a willingness to pay costs, and the absence of any prejudice. That point has not yet been reached. 38 Mr Garde's claim of prejudice was only faintly argued. Very fairly, he conceded that, if leave to amend were granted, there would be no need, as matters presently stand, for the trial to be adjourned. Costs were not an issue as Mr Bannon conceded that any costs thrown away by reason of the amendments should be borne by the applicant. 39 The principles in Queensland v JL Holdings tell strongly in favour of the grant of leave to amend. I note that in Australian Competition and Consumer Commission v Australian Safeway Stores [1999] FCA 281, Goldberg Jgranted the ACCC leave to amend its statement of claim although the motion seeking such leave was not filed until the twentieth day of the hearing. By that date, the ACCC had called all of its witnesses. His Honour adjourned the further hearing of the proceeding for a period of two months to allow the respondents time to meet the new case pleaded against them. Fortunately, I am not faced with anything like that situation. 40 I have taken careful note of Mr Garde's submission that the Adshel agreement does not bear the construction for which JCDecaux contends. That is a submission which it is difficult to resolve at this stage. I have not been taken through the entire agreement, which is a long and complex document. It may be that in its interpretation, there will be reliance upon implied terms and conditions. It is also possible that I will be asked to consider the admissibility of evidence of surrounding circumstances to assist in interpreting clauses that may be regarded as ambiguous: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 and Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289. I am not persuaded that the construction placed upon the agreement by Mr Bannon is untenable. It seems to me, to adopt the language of JL Holdings, that it is "fairly arguable". Of course, that is not to say that the construction for which Mr Garde contends will not ultimately prevail. 41 In these circumstances, I will grant JCDecaux leave to amend the statement of claim in the terms sought. I will order that the applicant pay the first and second respondents' costs thrown away by reason of the amendment, such costs to be taxed in default of agreement. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. Associate: Dated: 6 May 2002 Counsel for the Applicant: Mr A. Bannon SC and Mr A. Payne Solicitors for the Applicant: Gilbert and Tobin Counsel for the First Respondent: Mr G.H. Garde QC, Mr C. Harrison and Mr P. Zappia Solicitors for the First Respondent: Freehills Counsel for the Second Respondent: Mr K. Hargrave QC and Mrs C. Kenny Solicitors for the Second Respondent: Phillips Fox Counsel for APN News & Media Pty Ltd, Buspak Advertising Group Pty Ltd, Cody Outdoor Pty Ltd and Australian Posters Pty Ltd Mr J. Burnside QC and Mr S. O'Bryan Solicitors for APN News & Media Pty Ltd, Buspak Advertising Group Pty Ltd, Cody Outdoor Pty Ltd and Australian Posters Pty Ltd Corrs Chambers Westgarth Date of Hearing: 30 April and 1 May 2002 Date of Judgment: 6 May 2002