The overarching agreement and the individual AAA Club meetings
79 The overarching agreement is pleaded at [46] of the statement of claim:
As at 6 December 2000 the AAA Club members, including within the APRIL Group the second to fifth respondents, and within the APP Group, APP Australia and the tenth to twelfth respondents, had made an arrangement or arrived at an understanding (the AAA Club agreement) containing provisions that:
46.1 each of the AAA Club members, including within the APRIL Group, the second to fifth respondents, and within the APP Group, APP Australia and the tenth to twelfth respondents, would meet in person or by telephone regularly, approximately monthly;
46.2 that in each meeting the AAA Club members would report their knowledge of, and discuss, the prevailing market conditions, the sales volumes achieved and prices charged by the members of their Group for sales of folio and cut-size paper in regions in which they supplied, including the Australian Paper market; and
46.3 that in each meeting the AAA Club members would agree prices at which the members would, until further agreement, supply folio and cut-size paper products for sales or the bulk of sales in particular geographic markets (average prices), including the Australian Paper market (including by agreements to maintain existing prices as reported or previously agreed, to increase reported prices by identified margins, or to set prices by reference to the prices of one of the AAA Club members in a particular market);
Particulars
In this pleading the expression "Agreed Prices" refers to the average prices agreed at a particular meeting for the supply of folio and cut-size paper in the Australian Paper market by members of the AAA Club.
46.4 that each of the members of the AAA Club would:
46.4(a) take steps to ensure that their Group priced and supplied folio and cut-size paper so their average prices would achieve the applicable agreed prices in the geographic markets to which they supplied, including the Agreed Prices for the Australian Paper market;
46.4(b) monitor the prices at which folio and cut-size paper was supplied by the other Club members in regions including the Australian Paper market;
46.4(c) inform other AAA Club members of failures by other groups to price and supply folio and cut-size paper so as to achieve the applicable average prices in the geographic markets to which they supplied, including the Agreed Prices for the Australian Paper market;
46.4(d) keep secret from other persons, including customers in the Australian Paper market, the existence of the AAA Club agreement and meetings and the fact of the agreements reached in relation to prices at those meetings.
Particulars
The agreement to be inferred from the matters alleged in paragraphs 53-174 below, which are relied on as overt acts in performance of the agreement and from the evidence of Lofgren paragraphs 53-54, and 78-170.
80 The APP overseas respondents submit that the Commission has not discharged the requirements for service of the amended application and the statement of claim because not all of the pleaded contraventions have been established. They say that it is necessary for the Commission to establish a prima facie case for each head of relief sought. Alternatively, they submit that, as a matter of discretion, if a prima facie case has only been made for one contravention, the Commission should not be permitted to serve the amended application and the statement of claim out of the jurisdiction.
81 As Gray J noted in West at [8], the Full Court in Bray was divided on the issue of whether the former O 8 r 2(c) (in terms identical to the current O 8 r 3(2)(c) which was considered in West) should be construed as a requirement that an applicant has a prima facie case in respect of every cause of action in the proceeding or only a prima facie case in respect of the relief sought in the application even if that relief was sought by reference to alternative causes of action which did not bring the proceeding within one of the kinds referred to in the former O 8 r 1. The majority held that it was sufficient that there was a prima facie case for the relief sought on the basis of any of the causes of action relied upon (the Full Court in Bray at [36]-[37] per Carr J; at [171]-[193] per Branson J).
82 In West,Gray J concluded that the requirements of O 8 r 3(2) were satisfied only in relation to one set of statutory claims. His Honour concluded that, with respect to the relief sought on the basis of contravention of s 52 of TPA and on the basis of contract, the applicant did not have prima faciecase for that relief. His Honour acknowledged that the proceeding as a whole might fall within O 8 r 2 but declined to exercise his discretion to permit service out of jurisdiction because of the small number of claims for which a prima faciecase had been made out. That is not the situation in this case.
83 In Harris v the Commerce Commission [2009] NZCA 84,the NZ Court of Appeal was considering whether the overseas parties were 'necessary or proper parties' to the proceedings (appeal allowed but not on this point). In order to succeed, the plaintiff needed to show that there was a good arguable case on the merits. Interestingly the Court of Appeal noted at [73] that the various claims were related, in that an overarching understanding was alleged, together with a number of specific understandings arising out of that overarching understanding. All of the understandings related to market manipulation of the timber preservatives market and all involved substantially the same players. Accordingly, the Court of Appeal considered that it would be sufficient to establish a good arguable case in relation to one claim to allow all to proceed. Their Honours said at [70] that the causes of action were related and that if a good arguable case was found on one it was appropriate to permit the other causes of action to proceed as well, and that '[t]o adopt the very narrow approach advanced by the appellants seems to us wrong in principle and, in practical terms, to be artificial and wasteful of court resources'. In saying that, the Court acknowledged that the position may be different where the causes of action do not arise out of the same sequence of events so that they are largely independent of each other, or where one cause of action can be shown to be certain to fail (at [71]). Neither of those qualifications apply here.
84 The parties agree that a prima facie case is made out where, on the material before the Court, inferences are shown to be open which, if translated into findings of fact, would support the relief claimed by the Commission. The APP overseas respondents emphasise, however, that there must be material before the Court which is capable of supporting a finding of fact ultimately at trial. They emphasise that it is not permissible to "plug" evidence missing with respect to one meeting with evidence of another meeting. They submit that each meeting must be looked at separately and not by reference either to another meeting or to the "systems evidence" as to what routinely occurred at meetings.
85 The APP overseas respondents point out that it is necessary to find a meeting of minds of the relevant participants authorised to enter into the contract, arrangement or understanding and submit that the Commission has not proved that, at the individual meetings, the meeting of minds by a person on behalf of each of the APP overseas respondents had been established. They say that the overarching agreement cannot be established unless each and every one of the individual agreements is established and that together they support the overarching agreement. The APP overseas respondents maintain that the use of the overarching agreement to fill gaps with respect to the individual meetings is impermissible, as the argument for doing so is "circular".
86 The APP overseas respondents submit that if the individual meetings are not established to have given rise to contraventions of the TPA, then the individual allegations with respect to the overarching agreement in [46] of the statement of claim cannot be supported, nor can the relief as sought in the amended application. They submit that it is impermissible to use the overarching agreement to infer participation in particular meetings, or to infer the procedures followed or the specific subject matter discussed at particular meetings, because that overarching agreement has no life of its own. In any event they submit that, even considering the evidence from Mr Löfgren, there is no evidence to support [46.3] of the pleading, so that the overarching agreement fails as a tool to support what happened at those individual meetings where there is no evidence that prices were agreed. In other words, the APP overseas respondents submit that the overarching agreement is an artificial construct. This forms a key basis of their submissions.
87 The first declaration sought in the amended application is in respect of the overarching agreement. The Commission's case is that the calling of regular meetings was a giving effect to the overarching agreement as pleaded in [46] of the statement of claim. On the pleadings, the overarching agreement has a separate life and is the basis for separate relief sought.
88 The overarching agreement is alleged to have been in effect as at 6 December 2000 (the occasion of the first specific AAA meeting alleged). There is evidence from Mr Löfgren as to the existence of the AAA Club in September 2000. There is also evidence of Mr Löfgren from which it can be inferred that an arrangement was in place between the members of the AAA Club to meet regularly to discuss the pricing of pulp paper, that is the overarching agreement, which continued throughout 2001-2003 and into 2004.
89 The alleged overarching agreement had the following key features:
1. The AAA Club members included, relevantly, APP Australia, APP Singapore and Indah Kiat.
2. The members would meet in person or by telephone regularly, approximately monthly.
3. At each meeting the AAA Club members would report the prices they had charged for sales of folio and cut-size paper, including in Australia.
4. At each meeting the AAA Club members would agree to increase prices of folio and cut-size paper or to maintain existing prices, including for Australia.
5. Each of the members of the AAA Club would take steps to ensure that they priced and supplied folio and cut-sized paper in accordance with the agreements reached at AAA Club meetings.
6. Each of the members of the AAA Club would monitor the prices at which folio and cut-sized paper was supplied by other Club members, including in Australia.
7. Each of the members of the AAA Club would inform other AAA Club members of failures by other members to supply paper into the Australian market in accordance with the agreements reached at AAA Club meetings.
8. Each of the members of the AAA Club would keep secret from other persons the existence of the AAA Club agreements and meetings.
90 The Commission's case is that the necessary inferences for the above findings are available from the evidence of Mr Löfgren and from the holding of regular meetings, together with:
· what is reported to have occurred at some of those meetings;
· the monitoring and reporting of the implementation of what was agreed at the meetings;
· evidence and communications proximate to the meetings that give rise to a clear inference that the meetings were not just ad hoc or random; and
· the evidence that supports the existence of that arrangement from at least September 2000.
91 The evidence, including evidence from Mr Löfgren, supports the occurrence of AAA Club meetings on or about:
· 6 December 2000
· 23 February 2001
· 8 March 2001
· 27 April 2001
· 13-15 June 2001
· 14 August 2001
· 28 September 2001
· 16-23 October 2001
· 24-26 November 2001
· May 2002
· 24 July 2002
· 29 August 2002
· 6-8 October 2002
· 14-27 January 2003
· March/early April 2003
· April 2003
· May 2003
· late May/June 2003
· July/August 2003
· 7 November 2003
· 16 January 2004
The Commission's case is that those individual meetings occurred pursuant to the overarching agreement which was in place. These are the 21 AAA meetings referred to in the statement of claim.
92 I do not accept that the overarching agreement as pleaded is an artificial construct. The use of such an overarching agreement said to be implemented by subsequent acts is not circular as alleged by the APP overseas respondents (see for example Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) (2007) 244 ALR 673 at [41]-[47] per Heerey J). There is repeated reference in the evidence to the "AAA Club". There is evidence that meetings did occur between competitors in the industry. They occurred on a regular basis. They were the subject of group emails. Emails before and after the meetings, as well as evidence of what occurred at the meetings, included references to the pricing of paper and whether it should be raised or maintained. It cannot be said, nor is there any evidence to suggest, that they were social meetings or that there was any matter other than the pricing of pulp paper that those participants regularly met to discuss.
93 The APP overseas respondents submit that the Commission's case depends on the attendance at individual meetings of Messrs Chirawood and Sood. The APP overseas respondents point out that Mr Löfgren only says that Mr Chirawood attended "almost" all meetings, which means, they say, that the evidence cannot be used to place Mr Chirawood at any particular meeting. The APP respondents point out that there is only evidence to support the attendance of Mr Löfgren at 8 of the specific AAA meetings now alleged to have given rise to separate contravening arrangements. The APP overseas respondents point out that even if the evidence is sufficient to establish that Mr Chirawood was connected with Indah Kiat as at March 2002, the only meeting for which they accept there may be sufficient evidence to establish that he attended and that an agreement was reached, is the meeting of 8 March 2001. At the time of that meeting, there is not sufficient evidence, they submit, to connect Mr Chirawood with either of the APP overseas respondents. Indah Kiat contends that each of the 19 AAA meetings needs to be considered individually and that Mr Chirawood's employer at the time of each meeting must be established.
94 The Commission seems to accept that, at this stage, there is only 1 AAA meeting for which there is presently sufficient evidence, by reference only to the evidence directly related to that meeting, to establish, separately, a contravention of the TPA at that meeting. For example, the APP overseas respondents have demonstrated, with respect to the other meetings, either that it cannot be shown that Mr Chirawood or Mr Sood was definitely present at that particular meeting, or that the outcome of that meeting is not apparent from the totality of the evidence directly related to that meeting.
95 The Commission relies upon Mr Löfgren's evidence in two ways. First that he establishes a practice or a system that occurred at the meetings of the AAA Club. The Commission relies upon Mr Löfgren's evidence as evidence of a system by regular and repeated performance of acts which might permit an inference as to what occurred on a particular day. The Commission says that if there is evidence of an invariable practice to discuss specific matters, it assists in support of an inference that that matter was discussed on a particular occasion. Secondly, the Commission relies upon Mr Löfgren's evidence in relation to what occurred at specific AAA meetings.
96 Mr Löfgren described the system or practice in relation to the conduct of all AAA Club meetings he attended, set out in part as follows:
· 'The discussion at the AAA Club meetings were always about either maintaining existing prices, or increasing target prices... I did not reach any price agreements with the other mills outside of the AAA Club processes.'
· 'At some of the meetings I attended, we reached agreement that the market was not moving, and that the existing target prices were to remain valid for a further period. If a particular region was not discussed, that was because there was no need or opportunity to move the prices.'
· 'If the agreement reached was to increase target prices, there was also agreement as to the timing of the participants' announcements of the increase, and the date from which the increase would have effect. When I started attending meetings, the arrangements were for the participants to announce the new prices on the same day as each other, and to apply the increases from common dates. In the course of the progress of the meetings, however, this changed as a result of participants stating that it might look suspicious to customers if they received price increase letters from all of us on the same day... For example, we typically agreed that price increases were to be announced within a week of the meeting, for making or shipments from a date a few weeks away. UPM Changshu followed a standard timeframe for price increases...'
· 'The process…was that a table was created based on the announced prices. The host went through these country by country, and asked "is it possible to increase prices?" If there had been no erosion, this was measured from the previous target price, otherwise it would be based on where the mills' reported prices were. Consensus was usually reached with difficulty.'
· 'The previous list of target prices remained in force until changed.'
97 Mr Löfgren described the practice of reporting paper prices:
The meeting participants then discussed in turn the "bulk of trade" prices each mill claimed they had achieve for sales of paper over the period since the last meeting…
The prices were reported by each participant by country and product, that is, reel, folio and cut-size paper. When reporting their actuals, some participants had lists or notes of prices that they referred to.
The prices reported were usually put up in a matrix table on the whiteboard or butchers paper at meetings, so that they could be seen by all participants.
Mr Löfgren also said that participants challenged one another's reported pricing.
98 Mr Löfgren's handwritten notes of specific AAA Club meetings support the inference or conclusion that APP paper prices were reported by Mr Chirawood during the 14-27 January 2003 and May 2003 AAA Club meetings; by Mr Sood during the late May/June 2003 meeting; by Mr Chirawood and/or Mr Sood during the July/August 2003 meeting; and by Mr Chirawood and/or Mr Sood during the 7 November 2003 meeting.
99 The Commission points to the evidence which gives specific examples of price increases implemented by APP Australia after the AAA Club meetings of:
· 28 September 2001,
· 24-26 November 2001,
· May 2002,
· 24 July 2002 and
· 16 January 2004.
100 There is also evidence of specific examples of price monitoring before or after AAA Club meetings of:
· 28 September 2001,
· 16-23 October 2001,
· 24-26 November 2001,
· May 2002,
· 24 July 2002,
· 29 August 2002 and
· 23 January 2003.
101 As to the inferences that can be drawn about what occurred at specific AAA meetings, the Commission submits:
· The question is whether the inference arising from a specific meeting is available and that the inferences should be drawn from the whole of the evidence.
· Inferences are available from the evidence of Mr Löfgren as to who generally attended on behalf of APP. For example, Mr Löfgren said that Mr Chirawood attended almost all of the meetings and that at most there were only one or two when Mr Chirawood was not there. It follows, the Commission submits, that there is a reasonable inference that Mr Chirawood was at any particular meeting. In any event, from the email traffic, it is apparent that Mr Chirawood and Mr Sood were intimately involved in the implementation of the AAA Club meetings, as they were both invariably copied in to the emails.
· Inferences arise from the evidence concerning the occurrence of specific AAA Club meetings during the period, the agreements that were made at them and the implementing acts that occurred proximate to them.
· If, for example, there were five meetings where factor A, factor B and factor C occurred and then a sixth meeting where it is shown that factor A and factor B occurred, one can infer that factor C also occurred. Such inferences are available from the facts and from all of the available evidence, including the systems evidence.
· The evidence about individual meetings is consistent with and supported by Mr Löfgren's evidence of the system and the dates of other meetings.
· The evidence concerning the system or practice at AAA Club meetings is capable of supporting the inference that the overarching agreement existed during the period December 2000 to January 2004. This inference is supported by direct evidence of the existence of an overarching agreement in the note of the AAA Club meeting which occurred on 8 March 2001:
If APP continue to sell to Thailand, AA and TPC [Advance Agro and Thai Paper Company - other AAA Club members] will stop the Club Meeting as it is against the Club agreement.
102 In looking at the whole of the evidence relied upon by the Commission, I am satisfied that the Commission has established a prima facie case as follows. There was a AAA Club and it met on a regular basis pursuant to an arrangement or understanding between the members of that Club who were competitors in the pulp paper market. Prior to those meetings information was gathered as to current prices in different countries of pulp paper and the action or pricing by competitors who were not members of the AAA Club. Prices of bulk paper were discussed at the meetings and reports given from each member as to the prices in the various countries including Australia. The members agreed on future pricing; that is, whether it would increase or be maintained. Each member agreed to apply that agreed pricing in, inter alia, Australia. It follows that the agreements reached at the meetings were as part of the overarching agreement, implemented in Australia. That implementation was monitored in Australia and reported back at the next individual meeting.