Australian Competition and Consumer Commission v Liquorland (Australia) Pty Limited [2007] FCA 1339

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Liquorland (Australia) Pty Limited [2007] FCA 1339

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v LIQUORLAND (AUSTRALIA) PTY LIMITED AND WOOLWORTHS LIMITED NSD 769 OF 2003

ALLSOP J

27 AUGUST 2007

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 769 OF 2003

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

AND: LIQUORLAND (AUSTRALIA) PTY LIMITED

First Respondent

WOOLWORTHS LIMITED

Second Respondent

JUDGE: ALLSOP J

DATE OF ORDER: 27 AUGUST 2007

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. There be no further order in relation to the contraventions found to have occurred, beyond the orders made on 22 December 2006. 2. Each party pay its own costs of the application today and of its reasonable preparation from a point at which the parties expressed to each other their contentions to be advanced today. 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 NSD 769 OF 2003

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

AND: LIQUORLAND (AUSTRALIA) PTY LIMITED

First Respondent

WOOLWORTHS LIMITED

Second Respondent

JUDGE: ALLSOP J

DATE: 27 AUGUST 2007

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 In this matter, I delivered a number of judgments in 2006 and 2007, the primary judgment being published in July 2006, and which became unredacted later in that year. The primary judgment related to conduct of the second respondent, Woolworths Limited, and how it conducted itself in relation to liquor licences or variations of licences being sought by other members of the commercial public. I do not propose to repeat any substantial part of that judgment. What I propose to say today is premised on a familiarity with it. The proceeding was conducted on the basis that there would be a separate occasion on which relief should be dealt with, should I be of the view, as I was, that there had been contraventions of the Trade Practices Act 1974 (Cth) (the "Act") by Woolworths. 2 That argument about relief took place in December last year, at which time I made declarations and granted some injunctive relief and also ordered that penalties under the Act be paid to the Commonwealth. Again, I do not propose, subject to certain matters to which I will refer, to repeat what I said on that occasion. The declarations that were made dealt with the aspects of the Act that had been proven to have been contravened by Woolworths. There was also injunctive relief granted to restrain the further implementation of the agreements before the Court. What was sought in paragraph 22 of the application was broader injunctive relief, which in substance was an order to restrain contravention of the Act. 3 A more refined form of that order was put before me in December 2006, which is referred to at [28] of my reasons for judgment published on 22 December 2006. Although the form of the order pressed on that occasion and today by the Commission is not, in terms, a simple order that the Act be complied with, it has problems of a similar character. There was the problem of the three year order, which, as I understand it, is still pressed as a limitation. That, I think, reflects some hesitation by the Commission upon the reasonableness of the form of the order in perpetuity. 4 Woolworths does engage, and has for a considerable number of years engaged, in the retail sale of liquor. As I indicated in my earlier reasons, one of the aspects of the contraventions in this case was that the participants, being the senior commercial people at Woolworths dealing with liquor and the senior and experienced lawyers assisting them, approached the matter from what might be said to be their perspective of specialisation, without any lateral focus upon the Act. That lateral focus has now been squarely brought to the centre of the commercial operations of Woolworths and the legal operations of those advising them. The seriousness of the contraventions was reflected in the amount of the penalties that were imposed. I am confident that those at Woolworths, and those advising them, understand the seriousness, both of the past contravention of the Act and of any future contravention, if it were to occur. 5 The other matter that is implicit, if not explicit, in my reasons from last year is the care and delicacy of conduct that needs to be undertaken in legitimately protecting rights in the context of a litigious environment such as the Liquor Act 1982 (NSW) and the Licensing Court. It is an everyday and unremarkable proposition that litigation requires a degree of communication and co-operation between opposing parties, not, I hasten to say, for the purpose of bringing about contraventions of the Act, but sensibly and in a civilised fashion attempting, as far as possible, to resolve disputes in the commercial community to reduce costs between parties and reduce the burden of public expenditure on courts, including State courts such as the Licensing Court. That said, adherence to, and a proper understanding of, the operations of the Act is essential. 6 With that background in mind, Woolworths in 2001 instituted a protocol for the conduct of Licensing Court matters and objections. The protocol was amended in 2003. The first protocol was instituted at or about the time the Commission first made clear its view as to the past conduct. The proceedings began in 2003, but Woolworths was aware of the Commission's views as early as 2001. Those protocols have been in place during the course of the preparation of the case, during the course of the hearing of the case and since. When the question of the injunction was being debated before me, I suggested to Mr Bathurst QC, who, on that occasion, appeared for Woolworths, that it might be appropriate to get a detailed report from an experienced investigating practitioner as to compliance with the protocols that have been put in place. 7 I should say at this point that during that argument, and during the argument today, no criticism has been made of the terms of the protocols, as a sensible and appropriate means of structuring the behaviour of those participating at Woolworths, to ensure that Woolworths is able to propound and defend its legitimate rights and interests, without risking contravention of the Act. 8 I made orders in December 2006 and February 2007, for Mr Michael Daniel of PricewaterhouseCoopers Legal to prepare a report in the terms of the orders made on those days. Mr Daniel prepared a detailed report, dated 31 May 2007, with a number of annexures. His conclusions are set out in section 4 of his report: that the matters inspected by him indicated compliance with the protocols had been achieved. 9 The matter was listed before me today to hear argument as to whether, notwithstanding the conclusions drawn by Mr Daniel and notwithstanding the terms of his report, I should still grant the injunctive relief sought by the Commission as set out in [28] of my reasons for judgment of 22 December 2006. 10 The reasons given by the Commission for that course are set out in their written submissions, which will remain with the Court file. Woolworths have likewise responded with written submissions which will also remain on the Court file. 11 Once again, if I may respectfully say so, I am grateful to solicitors and counsel on both sides for the quality of the assistance given. Senior counsel on both sides addressed those matters today. I do not propose to descend to all the detail that was helpfully dealt with in the written submissions and orally, but I propose to deal with the essential matters now, because I have formed a clear view as to what I should do. 12 Four particular matters were dealt with by the Commission in its submissions as follows. First, it was said that there was an apparent sufficient "flexibility" in the application of the protocol, notwithstanding Mr Daniel's views, leading to a perception of sufficient risk in the operation of the protocol sufficient to warrant the additional discipline of an injunction. Secondly, it was said that clause 7 of the protocol had been breached. Thirdly, it was said that clause 24 of the protocol had been breached. Fourthly, it was said that there had been a failure to follow the 2001 protocol in relation to the suggesting of conditions. 13 Dealing with these matters in the way in which they were put forward, I think the flexibility question is really covered by the other three. I am not satisfied that any flexibility revealed by the operation of the protocol has, of itself, created any further risk or threat of repetition of contravention of the Act. As I said earlier, the placing of a protocol of the kind that was put in place in 2001, and of the kind that was put in place in 2003, in a litigation-based environment, calls, or would call quite often, for a sensible, common sense approach by informed and honest practitioners and commercial participants. I will say something more about those underlying requirements of the parties in due course. 14 The second matter was the potential breach of clause 7 of the protocol. I do not read clause 7 of the January protocol as necessarily requiring written advice in advance. What was contemplated was that legal advice should be obtained to ensure that the objection is properly supportable. Looking at pages 107 to 109 of the report, I am satisfied that one should read subparagraph (iv) on page 109 in the context of the whole of section 3, commencing at the bottom of page 107. In that light, I think, with respect to Mr Yates' submissions, it is not warranted to conclude that there is an unreasoned assertion in subparagraph (iv). I think, from all the investigations undertaken by Mr Daniel, including his discussions with Mr Schwartz, his conclusions can be relied upon. To that end, I reject the last sentence of paragraph 13 of the Commission's submissions and I am not persuaded that the new legal regime brought in in 2004 makes it necessarily the case that the lodgement of the objections to obtain further knowledge is unnecessary. I leave to one side, as a matter for the Licensing Court, whether that course is or is not an abuse of the procedures of the Licensing Court. All I am concerned about is whether or not its continuation, in the context that Mr Schwartz discussed with Mr Daniel and over which Mr Daniel expressed his views, is likely to create an increased threat of contravention of the Act. I am not persuaded that that is the likely outcome in all the circumstances of the introduction of the protocol and the now recognition of the operation of the Act. 15 The next consideration was the apparent failure, in 13 of 43 matters, to provide a written report. This was discussed between Mr Schwartz and Mr Daniel and it appears that Mr Schwartz took the view that where matters proceeded to a fully contested hearing, or where Woolworths withdrew its objection, or where no new conditions were proposed on an existing licence, a formal report to the client was not necessary. If I may respectfully put it, there is some force in the proposition put by the Commission that whether or not there is a withdrawal of the objection, the significance of that matter may only be analysed by reference to understanding what had happened. However, in all the circumstances of the investigation of Mr Daniel here, I am not persuaded that the way the protocol has been applied creates a risk of further contravention. 16 The fourth matter is concerned with the operation of the 2001 protocol before it was amended. Attention is drawn to pages 120 and 121 of the report, which are pages that are part of appendix H. The appendix has been drawn up to have an outline of the file digested in the second column and comments on the operation of the protocol. It would be plain, I think, and consistent with common sense and an understanding of the operation of modern legal and accounting firms, that Mr Daniel was not alone in the preparation of this report and had assistance from colleagues at his firm. The terms of the report would indicate as much. But I would not infer that Mr Daniel other than carefully examined the report and all important aspects of it, including appendix H, knowing that the report would be put to the Court for the purpose of assessing whether injunctive relief was required. Mr Yates pointed to a reading of the outline of the file in relation to two matters, one of Regents Park/Berala and another at Kotara, which on one view seemed to indicate that there had been a contravention of the 2001 protocol. The author of the appendix, however, in the comments on the operation of the protocol made the unequivocal statement that there was no breach. I am not prepared to infer that there was an error in this conclusion from what is written in the précis under "outline of file". It is equally likely that there was less than complete attention to the outline of the file and without the assistance of any further cross-examination or further investigation at this hearing, I do not see that those matters substantially increase the risk of contravention. 17 The legal principles upon which I should operate in considering the exercise of discretion as to whether to grant the injunction sought are not controversial. Section 80 of the Act gives wide and flexible power to the Court to order injunctions to protect the public and to protect individuals in the public, including litigants. Here the litigant is a Commonwealth authority charged with the responsibility of protecting the interests of the public. I have already made orders restraining Woolworths from implementing the impugned agreements. What is now sought is a more general order to ensure that no contravention of the Act occurs by conduct of a character that was the subject of precise impugning in relation to the episodes with which I have dealt. Hence, the order sought, as reflected in [28] of my 22 December 2006 reasons, attempts to fasten upon contracts, arrangements or understandings with an applicant for an off-licence, retail licence or an hotelier's licence which has legal effect independently of proceedings in the Licensing Court and which was made or arrived at for a substantial purpose of preventing, restricting or limiting the supply of take-away liquor by Woolworths to particular persons or classes of persons, or substantially, lessening, preventing or hindering competition in a market. 18 Though there is some greater specificity than a mere order of the Court not to contravene the Act, is it not far away from such a general prohibition. Courts in the past have indicated an unwillingness to make such orders unless the circumstances are such as to make such general orders appropriate. In BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452, the Full Court made clear at [36] certain limitations upon injunctions for the future. Those statements were qualified by what the Full Court said in Foster v Australian Competition and Consumer Commission 149 FCR 135 at [34]. 19 The facts in Foster 149 FCR 135 were a universe away from the facts in this case, but the width and power of injunctive relief under s 80, illustrated in Foster 149 FCR 135, also illustrates why injunctive relief of a general character can be given; that is, because of the existence of intention, threat or risk of the public being either misled or subjected to a contravention of the Act. In Foster 149 FCR 135, as the evidence revealed, the threat was from someone who, in a virtually serial fashion, had engaged in conduct to mislead the public. Here, as I have earlier said, a serious contravention has occurred and significant penalties have been imposed. Those involved in the specific transactions have been protected. The question is, should an order be made in the general terms sought to protect the public generally from the kind of conduct over which the litigation ranged? I am satisfied that the second respondent, Woolworths, placed into its business operation protocols which were designed to prevent contraventions of the same kind occurring again. No criticism of the protocols has been made. If they are applied honestly and diligently, they should avert the kind of difficulty that arose in the events that were the subject of the main judgment. 20 The honest and diligent conduct of the protocol will no doubt be very well understood by those who advise Woolworths in their operations in the liquor industry. Mr Schwartz gave evidence before me, and I made comments in my main judgment accepting his evidence. He struck me as, if I may respectfully say so, a competent and diligent solicitor. The consequences to Woolworths, and to him personally, of any intentional departure from the requirements of the Act in the undertaking of Woolworths' liquor business would be plain, as they would be plain to those executives of Woolworths who are now charged with the responsibility of advancing Woolworths' interests in this field. I think the likelihood is that those involved with Woolworths, including their lawyers, understand what needs to be done to avoid the risk of further contravention. As I have indicated from my review of the criticisms of the Commission of the report, I think the report is sufficient for me to conclude that the operation of the protocol is likely to reduce, and perhaps eliminate, the risk of contravention in the future. Such risk as there is, I think, is not sufficient to warrant orders of the general character that are proposed. Orders of that character would turn any asserted later contravention into a contempt proceeding, which is one of the reasons why courts tend not to make such orders. 21 In all the circumstances, given the terms of Mr Daniel's report and the terms of the protocols, I am not prepared to grant any further general injunctive relief as sought by the Commission and as contained in [28] of my reasons of 22 December 2006. 22 Therefore, subject to hearing the parties, my order for today would simply be that the Court makes no further order in relation to the contraventions found to have occurred beyond the orders made on 22 December 2006. 23 Argument has taken place about the order for costs of the argument today and for its preparation. Mr Daniel prepared his report on 31 May 2007. No doubt there was discussion between the legal advisers for Woolworths and the Australian Government Solicitor about further relief. I think up to some reasonable point – it is difficult to identify without taking up an unnecessary amount of time – order 6 made on 22 December 2006 should cover the matter. The point at which I think it is reasonable that that not be the case is once the parties' contentions that were put forward in this application were made clear. The parties may be able to agree upon that. 24 My view is that the need for this argument has arisen because of Woolworths' contraventions. However, after a reasonable opportunity for discussion of Mr Daniel's report, I think the matter assumed the status of an independent legal controversy, although one brought about by the contraventions of Woolworths. In those circumstances, the order that I would propose is as follows, with such guidance as the taxing officer is able to receive from what I have said, each party pay its own costs of the application today and of the reasonable preparation of the application today from a point at which the parties expressed to each other their contentions to be advanced today. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop.