Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd

GENERAL DIVISION NSD 2394 of 2006

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: APRIL INTERNATIONAL MARKETING SERVICES AUSTRALIA PTY LTD (ACN 106 134 472)

ASIA PACIFIC RESOURCES INTERNATIONAL HOLDINGS LTD (SINGAPORE)

REASONS FOR JUDGMENT 1 By notice of motion the applicant ('the Commission') seeks leave to serve on five companies and four individuals in Singapore and one company in Indonesia the amended application and the second further amended statement of claim in these proceedings, pursuant to O 8 r 3 and O 8 r 4 of the Federal Court Rules. The persons in the foreign countries whom it is sought to serve are in two groups: companies and individuals associated with the APRIL Group of companies ('the April foreign respondents') and companies and an individual associated with the APP Group of companies ('the APP foreign respondents'). 2 The April foreign respondents are: (a) April Fine Paper Trading Pte Limited (Singapore), a company incorporated in Singapore, being the second respondent ('April FPT'); (b) Asia Pacific Resources International Holdings Ltd (Singapore), a company incorporated in Singapore, being the fourth respondent ('April Holdings'); (c) April Management Pte Ltd (Singapore), a company incorporated in Singapore, being the fifth respondent ('April Management'); (d) Lo Su Shang James, an individual resident in Singapore, being the seventh respondent; (e) Dennis Lim Hock Keng, an individual resident in Singapore, being the eighth respondent; (f) Gus Choo, an individual resident in Singapore, being the ninth respondent. 3 The APP foreign respondents are: (a) APP Ventures Pte Ltd (Singapore), a company incorporated in Singapore, being the tenth respondent ('APP Ventures'); (b) Asia Pulp & Paper Company Ltd (Singapore), a company incorporated in Singapore, being the eleventh respondent ('APP Singapore'); (c) PT Indah Kiat Pulp and Paper Tbk (Indonesia), a company incorporated in Indonesia, being the twelfth respondent ('Indah Kiat'); (d) Sunil Sood, an individual resident in Singapore, being the fifteenth respondent. 4 The Commission does not presently press an application for leave to serve the fourteenth respondent, Koopthavonrerk Chirawood. 5 Order 8 rules 3(2) and (3) of the Federal Court Rules provide: (2) The Court may give leave to a party to serve an originating process on a person in a foreign country in accordance with a convention or the law of the foreign country, on such terms and conditions as it considers appropriate, if the Court is satisfied that: (a) the Court has jurisdiction in the proceeding; and (b) the proceeding is of a kind mentioned in rule 2; and (c) the person seeking leave has a prima facie case for the relief claimed by the person in the proceeding. Note The law of a foreign country may permit service through the diplomatic channel or service by a private agent. (3) The evidence on an application for leave under subrule (2) must include the following: (a) the name of the foreign country where the person to be served is or is likely to be; (b) the proposed method of service; (c) a statement that the proposed method of service is permitted by: (i) if a convention applies - the convention; or (ii) in any other case - the law of the foreign country. 6 Order 8 rules 4(1) and (2) of the Federal Court Rules provide: (1) The Court may give leave to a party to serve a document issued by the Court (other than an originating process) on a person in a foreign country in accordance with a convention or the law of the foreign country, on such terms and conditions as it considers appropriate. Note The law of a foreign country may permit service through the diplomatic channel or service by a private agent. (2) The evidence on an application for leave under subrule (1) must include the information mentioned in paragraphs 3(3)(a) to (c). 7 The Commission relies upon the following material in support of its application for service out of the jurisdiction: (a) Affidavits of Timothy William Scott, an officer of the Commission, filed 20 March 2009, 28 April 2009 and 30 April 2009; (b) Affidavits of Katrina Mary Close, a solicitor employed by the Australian Government Solicitor, filed 20 March 2009 and 30 April 2009; (c) Affidavit of Tan Chuan Thye, as to mode of service in Singapore, filed 24 March 2009; (d) Affidavit of Rambun Tjajo, as to mode of service in Indonesia, filed 20 March 2009; (e) Affidavit of Nils Peter Löfgren, filed 31 March 2008; (f) The Commission's Preliminary tender bundle, filed 1 April 2008; (g) The Commission's supplementary volumes to Preliminary tender bundle, filed 24 March 2009 and 30 April 2009; (h) The Commission's outline of prima facie case against the April foreign respondents, filed 23 March 2009 and updated 28 April 2009; (i) The Commission's outline of prima facie case against the APP foreign respondents, filed 23 March 2009 and updated 28 April 2009; (j) The Commission's chronology of proceedings, filed with its submissions on 20 March 2009; (k) The Commission's written submissions filed 20 March 2009; and (l) Transcripts of proceedings heard on 19 April 2007, 14 June 2007 and 21 December 2007.

Jurisdiction 8 Pursuant to s 19 of the Federal Court of Australia Act 1976 (Cth) ('the Federal Court Act'), the Court has such original jurisdiction as is vested in it by laws made by the Parliament. 9 Jurisdiction under the Trade Practices Act 1974 (Cth) ('the Trade Practices Act') is conferred by s 86(1) of the Trade Practices Act. Jurisdiction is also conferred on the Court by s 39B(1A)(c) of the Judiciary Act 1903 (Cth) ('the Judiciary Act'). In addition, the Commission submits that, as it is an emanation of the Commonwealth and is seeking injunctions and declarations, jurisdiction is further conferred by s 39B(1A)(a) of the Judiciary Act, in so far as the proceedings relate to alleged contraventions of the Trade Practices Act and the Competition Codes of New South Wales, Victoria, Queensland, Western Australia and South Australia ('the Codes'). 10 The Commission also relies upon accrued jurisdiction over alleged contraventions of the Codes as they form part of the same "matter" as the proceedings under the Trade Practices Act.

Order 8 rule 2 11 Order 8 rule 2 provides that, subject to O 8 r 3, an originating process may be served on a person in a foreign country in a proceeding which consists of, or includes, any one or more of the kinds of proceeding described in the Table to O 8 r 2. 12 Item 13 of the Table relevantly provides for a proceeding in relation to the construction, effect or enforcement of an Act. In the amended application the Commission seeks to enforce the Trade Practices Act by seeking declarations pursuant to s 21 of the Federal Court Act, injunctions under s 80(1) of the Trade Practices Act and pecuniary penalties pursuant to s 76 of the Trade Practices Act arising from alleged contraventions of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Trade Practices Act. 13 Item 18 of the Table provides for a proceeding 'properly brought against a person who is served, or is to be served, in Australia, if the person to be served has been properly joined as a party'. The Commission relies upon the joinder of the remaining respondents who are parties to the proceeding and who are alleged to be 'parties to the same cartel of conduct'. 14 This proceeding is of a kind described in Item 13 of the Table to O 8 r 2. It is sufficient for the grant of leave if any one of the causes of action falls within an item in the Table to O 8 r 2 (Webster Computer Systems Pty Ltd v Fujitsu Ltd [2007] FCA 825 at [11] and [12] per Conti J). 15 The Commission relies upon other items listed in the Table to O 8 r 2. It is not necessary for the purposes of this application to consider those further.

Prima facie case for the relief claimed 16 The Commission needs to establish a prima facie case for the relief claimed. As the application for leave to serve outside the jurisdiction is interlocutory in nature, hearsay evidence is admissible (Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 at [58]). 17 It is not necessary to establish a prima facie case for the relief sought pursuant to each of the causes of action relied upon. It is sufficient if a prima facie case for the relief sought is made out for any one of the causes of action relied upon (Bray at [47]-[55] per Carr J and [176]-[190] per Branson J). 18 The question is whether, on the material before the Court, facts are established or inferences are open which, if translated into findings of fact, would support the relief claimed. The reference in these reasons to the evidence and conclusions should be understood as referring to what the evidence establishes and what conclusions may be drawn at a prima facie level. The material relied upon by the Commission is in the form of untested allegations and evidence but it is appropriate to proceed on the basis of them in order to assess whether facts are established and inferences can be drawn which would establish a prima facie case (Beluga Shipping GmbH & Co KS "Beluga Fantastic" v Headway Shipping Ltd (No 2) (2008) 251 ALR 620 at [32] per Rares J).

The prima facie case against the April foreign respondents 19 The Commission's case is that individuals employed within the APRIL Group and representing each of April FPT, April Holdings and April Management attended meetings of a club called the AAA Club at which price fixing agreements were made, being arrangements or understandings within the meaning of the Trade Practices Act and the Codes. 20 The AAA Club refers to an alleged loose association or club, the members of which were the APRIL Group, the Advance Agro Group and the APP Group, as well as the Thai Paper Group and the UPM Group. The case made by the Commission is that the primary object of the AAA Club was to discuss and reach consensus about prices at which each group of companies would supply paper products in various markets, including Australia. 21 The Commission relies upon what it calls an "overarching agreement" to fix or maintain prices and, in addition, subsidiary agreements reached on individual occasions to fix or maintain prices, in contravention of the two limbs of s 45(2) of the Trade Practices Act. The overarching agreement, the provisions of that agreement and its implementation are pleaded in the second further amended statement of claim. The second further amended statement of claim also describes the individual meetings that occurred, what took place at the meetings, who was present and what action was taken in response. 22 The Commission points to evidence of the implementation of the overarching and individual agreements in Australia as well as communications that it says, when properly understood, constitute conduct in Australia in contravention of the Trade Practices Act. 23 The Commission relies on s 6 of the Trade Practices Act to extend the operation of s 45 to natural persons if their conduct relates to trade with Australia. This would make the liability of the individual respondents direct and not ancillary to that of the corporate respondents. There was some discussion of the availability of that section in Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (2007) ATPR ¶42-210. 24 The Commission points to the various positions of employment of the individual April foreign respondents, the structure of the APRIL Group's operations, the nature of the meetings and the arrangements entered into to infer that the individuals were present on behalf of each of April FPT, April Holdings and April Management and that the relevant conduct was engaged in on behalf of those corporate respondents. 25 Annexed to these reasons (Annexure A) is a chart provided by the Commission of the structure of the APRIL Group and the position of the individual April foreign respondents within that structure. The evidence supports the conclusions drawn in the chart as to the relationship of the corporations and individuals named. The evidence also provides the basis for an inference that Mr Lim and Mr Choo were officers of April FPT, April Holdings and April Management in the capacity of being very senior sales and marketing executives with regional, if not worldwide, responsibilities, so that the conduct of the individuals is attributable to those corporations. 26 On the evidence, the conclusion can be drawn that April FPT carried on business in Australia until the formation of the first respondent, April International Marketing Services Australia Pty Ltd ('April Australia'), in August 2003. The Commission contends that April FPT carried on business directly in Australia. After that time there is evidence that raises at least an inference that April FPT continued to play a role in the conduct of the Australian company sufficient to constitute the carrying on of business in Australia. The evidence also establishes at a prima facie level that April Management controlled the price at which folio and cut-size paper was supplied to customers in Australia by April FPT and April Australia sufficient to constitute carrying on business in Australia. In addition, the evidence establishes that April Holdings gave directions concerning sales terms under which folio and cut-size paper were supplied to customers in Australia by April FPT and/or April Australia and that it carried on business in Australia through the agency of either or both of April FPT and April Australia. 27 The evidence regarding Mr Lo concerns his participation in AAA Club meetings and the reporting of those results to Mr Lim. Mr Lo was employed by April FPT until approximately June 2001 and occupied the position of General Manager, Sales & Marketing. There is evidence of Mr Lo's knowledge and actions concerning the levels of pricing in the Australian paper market pursuant to the overarching agreement and of arrangements and understandings in relation to price made by agreement at individual meetings. 28 The APRIL Group was generally represented at the AAA Club meetings or conference calls by one or more of Messrs Lo, Lim, Choo, Kelvin Tan and Kadiman Mansoer. There is evidence of the conduct of individual meetings. The evidence supports a prima facie case of contraventions by April FPT, April Holdings and April Management whereby, through their participation in the AAA Club and the specific AAA Club meetings, and the arrangements made or understandings arrived at in relation to prices at those meetings, each contravened s 45(2)(a)(ii) of the Trade Practices Act. At the least the evidence supports, at a prima facie level, contraventions by Messrs Lo, Lim, and Choo in being knowingly concerned in or party to, or aiding, abetting, counselling and procuring the contraventions of s 45(2)(a)(ii). Similarly, the evidence supports, at a prima facie level, contraventions of s 45(2)(b)(ii) of the Trade Practices Act in the giving effect to agreements which contravene s 45(2)(a)(ii) of the Trade Practices Act. In respect of the contraventions, the evidence suggests direct knowledge and action by Messrs Lo, Lim and Choo.

The prima facie case against the APP foreign respondents 29 The Commission's case is that individuals employed within the APP Group and representing each of APP Ventures, APP Singapore and Indah Kiat attended meetings of the AAA Club at which price fixing agreements were made, being arrangements or understandings within the meaning of the Trade Practices Act and the Codes. The Commission relies upon the positions of employment of the individual APP foreign respondents to infer their presence on behalf of each of APP Ventures, APP Singapore and Indah Kiat, together with the structure of the APP Group's operations and the nature of the meetings and arrangements entered into. 30 Annexed to these reasons (Annexure B) is a chart of the "APP Corporate Respondents Hierarchy" together with references to the evidence relied upon to support the conclusion that each of Mr Chirawood and Mr Sood was an employee, servant or agent of the corporate entities. Mr Chirawood occupied the position of Sales Operation Head and Regional Director; Mr Sood occupied the position of Business Development Manager and Marketing Executive. The evidence supports a prima facie case that they acted on behalf of the APP Group which included APP Ventures, APP Singapore and Indah Kiat. APP Singapore was the ultimate holding company of the Australian operations of the APP Group. Asia Pulp & Paper Australia Pty Ltd ('APP Australia'), the entity through which the APP Group supplied paper in Australia, was dependent upon APP Singapore and other companies in the APP Group. 31 The Commission's case is that, between December 2000 and February 2004, each of the three foreign companies participated in making price fixing agreements with competitors in relation to the supply of paper to customers in Australia in contravention of s 45(2)(a)(ii) and gave effect to price fixing agreements in relation to the supply of paper to customers in Australia in contravention of s 45(2)(b)(ii), by operation of s 45A of the Trade Practices Act and the Codes. In relation to Mr Sood, the Commission says that he directly participated in making the price fixing agreements, that he gave effect to those agreements and that he was knowingly concerned in or party to, and aided abetted, counselled and procured, the contraventions. 32 The evidence concerns the membership of the APP Group in the AAA Club. The evidence is that the APP Group was generally represented at the AAA Club meetings or conference calls by one or more of Mr Chirawood, Mr Sood and Suresh Kilam. The Commission's evidence concerns the conduct of Mr Sood and Mr Chirawood in acting on behalf of the APP Group to give and implement directions or determinations as to the price for the supply of folio and cut-size paper by the APP Group in various markets, including the Australian paper market. Decisions were then communicated to Mr George, the thirteenth respondent, who was one of the directors of APP Australia. The communication was between Mr George, Mr Sood and Mr Chirawood with Mr Sood or Mr Chirawood directing Mr George as to pricing decisions. The Commission's evidence indicates that the prices charged in Australia by Mr George on behalf of APP Australia were set outside Australia. 33 The Commission submits that the evidence establishes either expressly or by inference that the conduct which occurred took place with the consent of persons relevantly authorised by the corporate respondents. That is, the evidence indicates that Mr George, Mr Chirawood and Mr Sood by their conduct in Australia attract the operation of the Trade Practices Act directly. In addition, they attract the operation of the Trade Practices Act on the corporate entities, as it can be inferred that those entities consented to their conduct. 34 Mr Kilamis variously described as a member of the Executive, Compensation and Audit Committees and the Executive Director, Marketing of the parent company, APP Singapore. The Commission relies upon Mr Kilam's position in the APP Group as well as his position as a Director of the Australian subsidiary to draw the conclusion that, by s 84(2) of the Trade Practices Act, the relevant conduct in Australia had the consent of APP Singapore and that the conduct is deemed to be that of APP Singapore. 35 As to APP Ventures, the evidence relied upon by the Commission is its link in the corporate chain, positioned between APP Singapore and the Australian subsidiary and the fact that there is some evidence that sales by the Australian subsidiary were made on behalf of APP Ventures, described as the "parent company" but, from that evidence, this may be for tax purposes. 36 In relation to Indah Kiat, the Commission submits that the evidence establishes that Indah Kiat was the operating entity of the Indah Kiat mill in Indonesia, which was controlled by APP Singapore and manufactured paper products including folio and cut-size paper for supply to Australia. Pricing policies for the paper supplied by Indah Kiat were set by the corporate marketing division of the APP Group.

Conclusion on prima facie case 37 I am satisfied that in the case of each of the respondents, except for the tenth respondent, APP Ventures, the evidence demonstrates a prima facie case in respect of at least one or more of the causes of action relied on for the relief sought by the applicant in the amended application. In particular, I am satisfied that there is a prima facie case against those respondents for contraventions directly or indirectly of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Trade Practices Act.

RESIDUAL DISCRETION 38 The thirteenth respondent, Mr George, submits that service outside the jurisdiction should not be permitted. He submits that: · The Commission made a deliberate forensic decision to delay the application for such service. · There will be actual and presumed prejudice to Mr George if leave is granted due to extensive further delay. Mr George points to the fact that the proceedings were commenced on 6 December 2006 and to the delays occasioned by the process of seeking documents under subpoena. Mr George submits that the Commission's reason for obtaining the "best evidence available" before seeking to establish a prima facie case was unwarranted in the absence of an assertion that the material earlier obtained was in fact insufficient. · There is a likelihood of further delay due to interlocutory disputes arising from such service. 39 The Commission relies upon the way in which the proceedings have been conducted to date. The Commission's solicitors did write to the solicitors for the first respondent, April Australia, on 8 January 2007 inquiring whether that firm had instructions to accept service on behalf of April FPT, April Holdings, April Management, Mr Lo, Mr Lim and Mr Choo. The solicitors replied that they did not have such instructions. On 2 February 2007 the Commission's solicitors sent letters by facsimile to each of those corporate April foreign respondents inquiring as to whether each would consent to service without leave of the Court. By an email response, a Mr Lim (not the eighth respondent) stated that April FPT and April Management did not consent to service. A further email was sent to that Mr Lim seeking a response on behalf of April Holdings but no response was received to that email. 40 The Commission's solicitors then delivered copies of the originating process together with covering letters addressed to each of the corporate April foreign respondents at the premises of April Australia. Those documents were subsequently returned. 41 As to the APP foreign respondents, on 19 December 2006 the Commission's solicitors wrote to the then solicitors for Mr George inquiring whether that firm had instructions to accept service on behalf of APP Ventures, APP Singapore, Indah Kiat, Mr Chirawood and Mr Sood. By reply, those solicitors stated that the firm did not have instructions. 42 The Commission points to the various applications by other respondents to strike-out the statement of claim and the attitude of at least some of those respondents that, until the strike-out applications were dealt with, the Commission should not have access to the documents that it sought. For example, counsel for Mr George expressed the opinion at a directions hearing on 19 April 2007 that the pleading argument had to come before the subpoenas and the subpoenas had to come before the application for leave to serve out of the jurisdiction. The state of the pleadings was not finalised until February 2009. 43 The Commission submits that it was not appropriate to seek leave to serve out of the jurisdiction until pleading questions had been resolved. It submits that there was a consensus on the part of the respondents who had filed appearances that it was appropriate to ensure that the pleading was in order before an application was made to serve the remaining respondents out of the jurisdiction. This was to avoid further time being wasted and further costs being incurred perhaps unnecessarily. In any event, the Commission submits, the time between the commencement of proceedings and this application was not as a result of acts or omissions of the Commission that were not appropriate in the circumstances. 44 The Commission points out that, in fact, time has not been wasted because the Commission has, substantially, filed its evidence. The Commission has obtained some of the documents that it sought but has not obtained access to all of the documentation. The Commission has chosen to make this application despite not having all of the documents that it seeks. The Commission has complied with directions of the Court, subject to consent agreements for an extension of time. 45 In any event, the Commission submits that the question of discretion is not the overriding consideration in the grant of leave to serve outside the jurisdiction. It relies on what was said by Finkelstein J in Brookfield Multiplex Limited v International Litigation Funding Partners PTE Ltd [2008] FCA 1769at [7] to the effect that, if the conditions provided for in O 8 r 3 are satisfied, it usually follows that leave to serve outside the jurisdiction will be granted. As it was put by Black CJ and Finkelstein J in Humane Society International Inc v Kyodo Senpaku Kaisha Ltd (2006) 154 FCR 425 at [3], if the required conditions for leave are fulfilled, leave should be given in the absence of some countervailing consideration. Their Honours said at [10] that, provided the jurisdiction of the Court is engaged by an action in respect of subject matter with which the Court can deal, the action is instituted by an applicant who has standing, the action is not oppressive, vexatious or otherwise an abuse of process and the Court can assume jurisdiction over the defendant, the Court cannot refuse to adjudicate the dispute. Their Honours continued at [11] to express the opinion that it would be 'curious and anomalous if matters that could not be raised in answer to the appellant's claim by a defendant served within the jurisdiction could nevertheless be taken into account when deciding whether to allow service out of the jurisdiction'. 46 While there has been delay, no course available in this complex litigation was necessarily perfect in terms of time management. The parties consented to the progress of the matter in terms of the order in which steps were to be taken. At least, they did not suggest an alternative course. The delay has not all been occasioned by acts of the Commission. Disputes over the pleadings have taken a substantial amount of time as have questions of access to documents. The result, however, is that the Commission's evidence is substantially complete so that the overseas parties to be served will have the opportunity to understand the case made against them. 47 I am not satisfied that the timing of this application was a deliberate forensic decision on the part of the Commission as submitted by Mr George. The delay between the commencement of the proceedings and the filing of this notice of motion is not a sufficient reason to refuse to make the orders sought.

METHOD OF SERVICE 48 Order 8 rules 3(3) and 4(2) require that the evidence in support of an application for leave to serve out of the jurisdiction must include the following: (a) the name of the foreign country where the person to be served is or is likely to be; (b) the proposed method of service; and (c) a statement that the proposed method of service is permitted by a convention (if applicable) or the law of the foreign country. 49 The Commission has adduced evidence setting out the information available to it as to the present location of each of the persons to be served and searches as to the registered offices of each of the corporate respondents: · The proposed method of service is by private agent in Singapore and Indonesia. · The proposed method of service in Singapore is permitted by the laws of Singapore and a convention does not apply. · The proposed method of service in Indonesia is permitted by the relevant convention between Australia and Indonesia and is not inconsistent with the laws of Indonesia.

CONCLUSION 50 The Commission has satisfied the requirements for leave to serve the amended application and the second further amended statement of claim outside Australia on each of the second, fourth, fifth, seventh, eighth, ninth, eleventh, twelfth and fifteenth respondents as set out in the orders sought in the notice of motion. On the basis of the evidence filed in support of the notice of motion, the Commission has not established a prima facie case against the tenth respondent. It is appropriate to make the orders sought other than a grant of leave to serve the tenth respondent. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett.

Associate: Dated: 9 July 2009 Counsel for the Applicant: Mr J Sheahan SC, Mr D Godwin and Ms V Priskich

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the 13th Respondent: Ms S Karunakaran of PricewaterhouseCoopers Legal

Solicitor for the 13th Respondent: PricewaterhouseCoopers Legal

ANNEXURE A [Note: On the chart Mr Devanesan's name is misspelt] ANNEXURE B