UPON the First and Second Respondents having agreed a Statement of Facts and having made admissions of the First Respondent arriving at an understanding between the First and Third Respondents within the meaning of section 45(2)(a)(ii) of the Trade Practices Act 1974 ("the Act") and its implementation within the meaning of section 45(2)(b)(ii) of the Act and the Second Respondent aiding and abetting the arriving at the said understanding and its implementation, which conduct is admitted by the First and Second Respondents as constituting contraventions of respectively, section 76(1)(a) and section 76(1)(c) of the Act, the Court orders that:-
[2]
1 The First Respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to section 76 of the Act in the sum of $300,000.00
2 The Second Respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to section 76 of the Act in the sum of $35,000.00 such sum to be paid on or before 3 March 2005.
3 The First Respondent will pay to the Applicant 75% of the party and party costs of the Applicant in relation to the within action as agreed (or in the absence of agreement, as taxed) up to and including 17 June 2004.
4 FURTHER, the First Respondent gives an undertaking for a period of 5 years, whether by its directors, servants or agents or otherwise howsoever, to refrain from:
(a) making available to any company or person who supplies services in competition with the First Respondent (or in competition with any company or person with whom the First Respondent supplies services), any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the First Respondent (or any company or person with whom the First Respondent supplies services), for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;
(b) discussing with any company or person who supplies services in competition with the First Respondent (or in competition with any company or person with whom the First Respondent supplies services), any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the First Respondent (or any company or person with whom the First Respondent supplies services), for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;
(c) acting upon the receipt from any company or person who supplies services in competition with the First Respondent (or in competition with any company or person with whom the First Respondent supplies services), documents relating to the price (or a component thereof) likely to be tendered by such other company or person, for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;
(d) knowingly fixing, or aiding and abetting the fixing of, the price (or a component thereof) in any tender for the provision of demolition and asbestos removal services to any person by the First Respondent (or any company or person with whom the First Respondent supplies services), or any company or person who supplies services in competition with the First Respondent (or in competition with any company or person with whom the First Respondent supplies services), at an amount no less than a price calculated by the First Respondent (or any company or person with whom the First Respondent supplies services), or such other company or person, or agreed by them, with the intention of assisting any one of them to win the tender;
(e) organizing, attending or otherwise participating in, any meeting of representatives of companies or persons carrying on business for the provision of demolition and asbestos removal services, being a meeting held for the purpose, or for purposes which include the purpose of fixing, controlling or maintaining the prices offered or charged by such companies or persons for the provision of demolition and asbestos services.
5 FURTHER, the Second Respondent gives an undertaking for a period of 5 years, that the Second Respondent will refrain from:
(a) making available to any company or person who supplies services in competition with any company or person by whom the Second Respondent is employed or engaged, any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the company or person by whom the Second Respondent is employed or engaged, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;
(b) discussing with any company or person who supplies services in competition with any company or person by whom the Second Respondent is employed or engaged, information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the company or person by whom the Second Respondent is employed or engaged, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;
(c) acting upon the receipt from any company or person who supplies services in competition with any company or person by whom the Second Respondent is employed or engaged, documents relating to the price (or a component thereof) likely to be tendered by such other (competitor) company or person, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;
(d) knowingly fixing, or aiding and abetting the fixing of, the price (or a component thereof) in any tender for the provision of demolition and asbestos removal services to any individuals or entities by any company or person by whom the Second Respondent is employed or engaged, or any company or person who supplies services in competition with the person by whom the Second Respondent is employed or engaged, at an amount no less than a price calculated by the company or person by whom the Second Respondent is employed or engaged, or such other (competitor) company or person, or agreed by them, with the intention of assisting any one of them to win the tender;
(e) organizing, attending or otherwise participating in, any meeting of representatives of companies or persons carrying on business for the provision of demolition and asbestos removal services, being a meeting held for the purpose, or for purposes which include the purpose of fixing, controlling or maintaining the prices offered or charged by such companies or persons for the provision of demolition and asbestos services.
6 FURTHER, the directors of the First Respondent undertake to the Court that the directors of the First Respondent will at their cost, as soon as is practicable, implement a Trade Practices Corporate Compliance Program in accordance with the terms of Annexure 1 hereto.
7 FURTHER, the Second Respondent undertakes to the Court that the Second Respondent will at his cost, as soon as is practicable, attend a Trade Practices Compliance seminar in accordance with the terms of Annexure 2 hereto.
[3]
ANNEXURE 1
TRADE PRACTICES CORPORATE COMPLIANCE PROGRAM ("the Program")
The First Respondent shall appoint a Trade Practices Compliance Officer to be responsible for the implementation of the Program. The Program will be implemented within two calendar months of this Order.
The First Respondent shall ensure that The Trade Practices Compliance Officer receives training in trade practices law.
The First Respondent will ensure that the Program, including processes which the First Respondent intends to implement in order to comply with the Program, are approved by an independent external consultant with appropriate knowledge of trade practices law prior to implementation.
The First Respondent shall require the Trade Practices Compliance Officer to review:
The contents of any media and material containing training or operational information for its staff to ensure that it adequately addresses and informs about:
restrictive trade practices proscribed by Part IV of the Trade Practices Act 1974 ("the Act"), including in particular price fixing and anti-competitive collusion in the context of contracts, arrangements and understandings; and
consequences of breaching the Act.
Training and operating procedures for its staff involved in any way in quoting or tendering for work, or in organizing, attending or otherwise participating in any meetings with competitors, builders, demolishers, asbestos removalists, developers, property owners or resource recovery operators concerning matters relevant to the industrial and trading activities of such persons, to ensure that its staff are adequately informed and advised about:
restrictive trade practices proscribed by the Act, including in particular price fixing and anti-competitive collusion in the context of contracts, arrangements and understandings;
not contravening the provisions of Part IV of the Act; and
consequences of breaching the Act.
The First Respondent shall require the Trade Practices Compliance Officer to maintain a documentary record of the compliance review of:
(a) The First Respondent's training and operational media and material;
(b) The First Respondent's training and operating procedures for staff involved in any way quoting or tendering for work, or in organizing, attending or otherwise participating in any meetings with competitors, builders, demolishers, asbestos removalists, developers, property owners or resource recovery operators concerning matters relevant to the industrial and trading activities of such persons.
Such documentary record will include:
(i) a description of the media and materials;
(ii) a copy of the materials;
(iii) written advice that the relevant media and materials have been reviewed and cleared by the Trade Practices Compliance Officer (including the date on which they were reviewed);
(iv) written advice of any improvements that could be made to reduce the risks of possible contraventions of the Act that were identified by the Trade Practices Compliance Officer and the action taken to implement those improvements.
The First Respondent shall ensure that the documentary records of the compliance reviews are available to the Australian Competition and Consumer Commission to be reviewed from time to time. Such records are to be available from one week after the date of review for a period of three years after that date. Such records are to be provided to the Australian Competition and Consumer Commission within five working days of a written request for those records.
The First Respondent shall ensure that an independent external consultant with expertise in trade practices law conducts training on the Program including in relation to price fixing and anti-competitive collusion in contravention of Section 45 of the Act, to the First Respondent's staff on six occasions during the three year period following the making of this order. The first of these training programs is to be completed within three calendar months of this order and the remaining five on a six monthly basis thereafter.
The First Respondent shall retain an independent external consultant with expertise in trade practices law to provide the Australian Competition and Consumer Commission with three annual reports (being at 12 months, 24 months and 36 months following the making of this order) on the First Respondent's compliance with the Program, and these reports shall be provided to the Australian Competition and Consumer Commission within:
(a) 13 months of this order;
(b) 25 months of this order; and
(c) 37 months of this order
respectively.
The annual reports shall include the review and reporting of:
(a) The First Respondent's adherence to the Program;
(b) The implementation of the Program, its consistency with Australian Standard AS-3806 and the achievement of its objectives over the preceding twelve months; and
(c) Any recommended changes to the Program that may be necessary to ensure achievement of its objectives.
[4]
annexure 2
TRADE PRACTICES COMPLIANCE SEMINAR ("the Seminar")
The Second Respondent will attend a Trade Practices Compliance Seminar conducted by an independent person with appropriate knowledge of trade practices law within 3 months of this order.
The Seminar will address the provisions of Part IV of the Trade Practices Act 1974 ("the Act") proscribing restrictive trade practices and will, in particular, address the issue of price fixing and anti-competitive collusion in the context of contracts, arrangements and understandings.
The Second Respondent will notify the Applicant within one week of attending the Seminar of his attendance.
[5]
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
[6]
REASONS FOR JUDGMENT
1 These proceedings arise out of an understanding reached between the first and third respondents in respect of tender bids made by each of them for the awarding of a contract by the Department of Defence. The third to the seventh respondents (inclusive) have previously reached agreements with the applicant in relation both to liability and penalty for the breach of the Trade Practices Act, 1974 (Cth) ("the TPA") arising from that understanding. The agreement as to penalty was ultimately accepted as appropriate by Lander J in Australian Competition and Consumer Commission v McMahon Services Pty Ltd (No 1) [2004] FCA 1171 (Case No 1) and Australian Competition and Consumer Commission v McMahon Services Pty Ltd (No 2) [2004] FCA 1172 (Case No 2).
2 The first and second respondents have reached agreement with the applicant as to their individual liability for breaches of section 45(2) of the TPA and as to some of the terms of the orders that should be made in relation to those breaches, but have not reached any agreement as to any pecuniary penalty that should be imposed.
3 The relevant provisions of s 45(2) and 45A(1) of the TPA provide:
'45(2) A corporation shall not:
(a) make a contract or arrangement, or arrive at an understanding, if:
…
(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or
(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:
…
(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition.
45A(1) Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.
…'
4 Orders 3, 4, 5, 6 and 7 of the Orders made by me on this day are those that have been agreed by the parties. Those orders are made pursuant to s 80 of the TPA. I am not bound by the agreement of the parties. However, in my view those orders are appropriate as part of the total orders that should be made in relation to these respondents in this case.
5 The issue requiring resolution is what further orders are appropriate having regard to the admitted breaches of the TPA by the first and second respondents and, in particular, what pecuniary penalties should be imposed having regard to those breaches and to the other orders that have been agreed. For the reasons given below it is my view that the appropriate pecuniary penalty in the circumstances of this case for the first respondent's actions is $300,000 and for the second respondent's actions is $35,000.
6 Pecuniary penalties are imposed pursuant to s 76 of the TPA which provides:
'(1) If the Court is satisfied that a person:
(a) has contravened any of the following provisions:
(i) a provision of Part IV;
(ii) …
(b) …
(c) has aided, abetted, counselled or procured a person to contravene such a provision;
…
the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.
…
(1A) The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed:
(a) …
(b) for each other act or omission to which this section applies - $10,000,000.
(1B) The pecuniary penalty payable under subsection (1) by a person other than a body corporate is not to exceed $500,000 for each act or omission to which this section applies.'
…
7 The parties have agreed the following facts:
'STATEMENT OF AGREED FACTS
(For the purposes of imposition of penalty)
At all material times the first respondent, McMahon Services Pty Limited ('McMahon Services') provided demolition and asbestos removal services in the greater metropolitan area of Adelaide.
At all material times the second respondent ('Mr Bubner') was the operations demolition manager of McMahon Services and in that capacity acted as servant and agent of McMahon Services within the scope of his authority of McMahon Services.
In early November 2000, the Commonwealth Department of Defence issued a request to tender to various companies, including McMahon Services, for the removal of asbestos from, and the demolition of, structures at the Marlu Curu site, at Salisbury, South Australia ('the Request for Tender').
The sixth and seventh respondents, Fernando D'Apollonio ('D' Apollonio') and Vlado Turic ('Turic') were at all material times directors of the fifth respondent DCD Enterprises Pty Limited trading as D&V Services ('D&V Services'). At all material times D&V Services provided demolition and asbestos removal services in the greater metropolitan area of Adelaide. McMahon Services had engaged D& V Services on numerous projects. Mr Bubner and McMahon Services were well acquainted with D' Apollonio and Turic by reason of their long business relationship.
McMahon Services prepared a tender in response to the Request for Tender and for that purpose:
5.1 made various calculations and estimates for the purpose of preparing the tender of McMahon Services; and
5.2 Mr Bubner spoke with D' Apollonio and Turic about McMahon Services appointing D& V Services as its subcontractor for the component of the works the subject of the Request for Tender involving the removal of asbestos.
In early November 2000 each and both of Mr Bubner and McMahon Services knew that a Request for Tender had also been issued to SA Demolition & Salvage Pty Limited ('SA Demolition'). At all material times SA Demolition provided demolition services in the greater metropolitan area of Adelaide.
In about the middle of November 2000, Turic visited the office of McMahon Services and was handed a piece of paper with writing on both sides. That piece of paper was handed to Turic by Mr Bubner in his capacity as the demolition operations manager of McMahon Services and was a photocopy of 'Tender Schedule B - Summary of Proposed Contract Price' to the Request for Tender ('the Photocopy Document'). The Photocopy Document contained figures written by Mr Bubner. When it was handed to Turic the total figure on the Photocopy Document was $2,488,600. That figure exceeded the various calculations and estimates referred to in paragraph 5.1.
Mr Bubner provided the Photocopy Document to Mr Turic knowing that D& V Services, through D' Apollonio and Turic, had informed Mr Bubner that D& V Services was proposing to quote a price to SA Demolition to perform the asbestos removal part of the Request for Tender as a subcontractor for SA Demolition.
At no stage did either Mr Bubner or McMahon Services have any discussion with either SA Demolition or its director, the fourth respondent ('Mr Parentes') but knew of SA Demolition.
[7]
(b) discussing with any company or person who supplies services in competition with the First Respondent (or in competition with any company or person with whom the First Respondent supplies services), any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the First Respondent (or any company or person with whom the First Respondent supplies services), for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;
[8]
(c) acting upon the receipt from any company or person who supplies services in competition with the First Respondent (or in competition with any company or person with whom the First Respondent supplies services), documents relating to the price (or a component thereof) likely to be tendered by such other company or person, for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;
[9]
(d) knowingly fixing, or aiding and abetting the fixing of, the price (or a component thereof) in any tender for the provision of demolition and asbestos removal services to any person by the First Respondent (or any company or person with whom the First Respondent supplies services), or any company or person who supplies services in competition with the First Respondent (or in competition with any company or person with whom the First Respondent supplies services), at an amount no less than a price calculated by the First Respondent (or any company or person with whom the First Respondent supplies services), or such other company or person, or agreed by them, with the intention of assisting any one of them to win the tender;
[10]
(e) organizing, attending or otherwise participating in, any meeting of representatives of companies or persons carrying on business for the provision of demolition and asbestos removal services, being a meeting held for the purpose, or for purposes which include the purpose of fixing, controlling or maintaining the prices offered or charged by such companies or persons for the provision of demolition and asbestos services.
[11]
5 FURTHER, the Second Respondent gives an undertaking for a period of 5 years, that the Second Respondent will refrain from:
(a) making available to any company or person who supplies services in competition with any company or person by whom the Second Respondent is employed or engaged, any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the company or person by whom the Second Respondent is employed or engaged, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;
[12]
(b) discussing with any company or person who supplies services in competition with any company or person by whom the Second Respondent is employed or engaged, information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the company or person by whom the Second Respondent is employed or engaged, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;
[13]
(c) acting upon the receipt from any company or person who supplies services in competition with any company or person by whom the Second Respondent is employed or engaged, documents relating to the price (or a component thereof) likely to be tendered by such other (competitor) company or person, for the provision of demolition and asbestos removal services to individuals or entities seeking tenders or quotations for the provision of such services;
[14]
(d) knowingly fixing, or aiding and abetting the fixing of, the price (or a component thereof) in any tender for the provision of demolition and asbestos removal services to any individuals or entities by any company or person by whom the Second Respondent is employed or engaged, or any company or person who supplies services in competition with the person by whom the Second Respondent is employed or engaged, at an amount no less than a price calculated by the company or person by whom the Second Respondent is employed or engaged, or such other (competitor) company or person, or agreed by them, with the intention of assisting any one of them to win the tender;
[15]
(e) organizing, attending or otherwise participating in, any meeting of representatives of companies or persons carrying on business for the provision of demolition and asbestos removal services, being a meeting held for the purpose, or for purposes which include the purpose of fixing, controlling or maintaining the prices offered or charged by such companies or persons for the provision of demolition and asbestos services.
[16]
6 FURTHER, the directors of the First Respondent undertake to the Court that the directors of the First Respondent will at their cost, as soon as is practicable, implement a Trade Practices Corporate Compliance Program in accordance with the terms of Annexure 1 hereto.
7 FURTHER, the Second Respondent undertakes to the Court that the Second Respondent will at his cost, as soon as is practicable, attend a Trade Practices Compliance seminar in accordance with the terms of Annexure 2 hereto.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Selway.
[17]
Associate:
Dated: 4 November 2004
Counsel for the Applicant: R Layton QC with N Wilson
[18]
Solicitor for the Applicant: Norman Waterhouse
[19]
Counsel for the First and Second Respondents: W J N Wells QC with J M Cudmore
[20]
Solicitor for the First and Second Respondents: Cosoff Cudmdore Knox
[21]
No Appearance for or on behalf of the Third to Seventh Respondents
At the time when he handed the Photocopy Document to Mr Turic, Mr Bubner understood that Mr Turic, with Mr Bubner's approval, would request SA Demolition to complete its Request for Tender for a total figure similar to or equal to the figure of $2,488,600 written on the Photocopy Document. At that time Mr Bubner and therefore McMahon Services knew it was McMahon Services intention to tender at a price which was in fact lower than the figure on the Photocopy document.
On 15 November 2000 McMahon Services completed and through Mr Bubner submitted its tender in response to the Request for Tender at a price of $2,392,096.
At the time the tender was submitted in paragraph 11, as a consequence of the matters in paragraph 10, Mr Bubner understood, and therefore McMahon Services understood that SA Demolition would submit its tender for a total figure similar to or equal to the figure of $2,488,600 and Mr Bubner knew and therefore McMahon Services knew that McMahon Services would submit its tender at a figure that was lower than the figure in the Photocopy document and that SA Demolition would not be successful ahead of McMahon Services in winning the tender.
The tender prepared by McMahon Services in response to the Request for Tender nominated D& V Services as its subcontractor for the removal of the asbestos component of the works the subject of the Request for Tender.
By reason of the matters referred to above
14.1 there was an understanding between McMahon Services through Mr Bubner and SA Demolition that, in response to the Request for Tender, SA Demolition would tender at a price equal to or similar to the price specified on the Photocopy Document and that McMahon Services would tender at a lower price.
14.2 McMahon Services gave effect to the provision of the understanding by submitting the tender referred to in paragraph 11 above.
McMahon Services acknowledges that the conduct referred to above constituted the understanding referred to in paragraph 14 above, and acknowledges that the provisions of the understanding (and to which McMahon Services gave effect) were likely to have had the effect of substantially lessening competition (because they were likely to have had the effect of fixing and/or controlling the price for the services of removing asbestos and demolition for the project which was the subject of a Request for Tender in the asbestos and demolition market in the greater metropolitan area of Adelaide) in contravention of section 45 of the Trade Practices Act (1974).
Mr Bubner acknowledges, in his capacity as the operations demolitions manager of McMahon Services, that by reason of his conduct referred to in paragraphs 6, 7, 8, 9, 10 and 11 he aided and abetted the contraventions by McMahon Services in contravention of section 76 of the Trade Practices Act (1974).'
8 The parties are agreed that penalty should be imposed on the basis of these agreed facts.
9 There are several things to be noted about the agreed facts:
(a) The agreed facts seem broadly similar to those agreed by the parties before Lander J in Case No 1 and Case No 2. However, there is some difference between them, particularly in relation to the respective roles of the parties in reaching the understanding as to price. I bear those differences in mind in determining the appropriate penalty in this case;
(b) The agreed facts include some primary facts and some factual conclusions. Not all primary facts are included. For example, there are no facts which would explain why Mr Bubner reached the understanding that he did reach as to what SA Demolition would do. Plainly something further occurred. Someone said something to someone at SA Demolition and Mr Bubner expected or was informed that that would occur. I note that apparently some information was put before Lander J in relation to this matter. It is not before me. Whilst it is obvious that the facts before me are incomplete, it is not possible to conclude from those facts how the understanding was actually reached or who instigated it. It is nevertheless agreed that there was such an understanding.
(c) There is no agreement as to the extent of the agreed facts, or what use should be made of the facts that are agreed. As discussed below, in this case there was an argument as to whether Mr Bubner knew that his actions were unlawful or improper and a good deal of material was put to the Court in an attempt to establish that fact. Both parties denied that I could take account of the material put by the other because the issue was "covered" by the agreed facts. For the reasons given below, I do not think that this causes a problem in this case, save for the time spent arguing about the question. However, it does point to a general problem in the use of agreed facts in these contexts which should be noted.
These cases involve the imposition of a civil penalty, not a criminal one. Obviously there are similarities in the relevant processes: see, for example, the comments in the joint judgment in Weininger v The Queen (2003) 212 CLR 629 (Weininger) at 638 that sentencing is a "synthesis of competing features" rather than "syllogistic process". Notwithstanding some of the submissions made to me in this case, the same comments are true of the imposition of a pecuniary penalty under the TPA.
However, those similarities should not mislead that the process is identical. The practices and procedures to determine facts for the purposes of imposing a criminal sentence are the subject of specialised rules and procedures. There are many examples. One obvious one is that it is not usually necessary for facts to be "proved". Another is that the Court is not necessarily bound to accept the statements or evidence put forward by one or other party, even where such statements or evidence is not contested: see Weininger at 635-637. In criminal proceedings a superior court in imposing sentence usually has sworn depositions on the Court file upon which the Court can rely. Obviously enough the criminal onus of proof upon the prosecution significantly affects the approach taken by a sentencing court in fact finding.
Those specialised rules in relation to criminal sentencing have no necessary application to the imposition of civil pecuniary penalties. Even in the criminal context problems often arise as to the extent and effect of the agreement reached. However, in a civil context the facts relied upon by either party in relation to the imposition of penalty need to be proved. This can be done by agreement: see s 191 of the Evidence Act, 1995 (Cth). But in a civil context such an agreement cannot be supplemented by reference to sworn depositions on the court file, nor can the agreement be considered in the context of the criminal onus of proof. An agreement as to facts, necessarily implies an agreement that at least some other "facts" which one or other party might otherwise seek to prove are not to be taken into account. For example, where it is agreed that the parties reached a particular understanding it would normally be implicit that no other or further understanding was reached. But this is not necessarily so. Consequently it seems to me that where facts are agreed for the purpose of imposing penalty under the TPA, the agreement should specify what matters are covered by the agreement and what matters are not. Where a party seeks to prove a fact that is not agreed that must be done in the ordinary way.
(d) In this case it is clear that some facts that could be expected to be relevant to sentencing are not within the agreed facts. This includes matters such as the financial position of the first and second respondents, the background to the tender sought by the Department of Defence and so on. Relevant documents relating to these issues were tendered by consent and I have relied upon them to the extent discussed below.
10 Subject to relevance, I have taken account of all matters put to me by both parties. Subject to relevance, I am satisfied as to the following further facts:
(a) Neither the first nor the second respondent has otherwise been found liable for breaches of the TPA.
(b) The request for tender issued by the Department of Defence (and referred to in par 3 of the Statement of Agreed Facts) required tenderers to complete a statutory declaration that there had been no collusive tendering, "cover bidding" or exchange of information between tenderers. The request for tender also required tenderers to comply with a Code of Practice which had been agreed by all Australian Governments in 1997. That Code also prohibited collusive tendering and other anti-competitive behaviour. These documents are more fully described and set out in Case No 1 at [57]-[66]. In this case the relevant declarations and other documents were signed by Mr Bubner on behalf of the first respondent.
(c) The first respondent was a "significant" body in the relevant market being the market for demolition and asbestos removal services in the greater metropolitan area of Adelaide. It was a significantly larger "player" in the relevant market and was significantly more experienced than the third respondent, which was the other party to the understanding.
(d) The "profit" expected to be realized by the first respondent from the contract for which it tendered was around $136,000. That "profit" was also intended to meet a proportion of the fixed overheads usually borne by the first respondent.
(e) There were two other tenderers for the contract. Both tendered at a higher price than the first respondent. It is not alleged that either of those tenderers was involved in or knew of any arrangement or understanding between the first and third respondents.
(f) The first respondent was the successful tenderer at the price it quoted.
(g) The tender submitted by the third respondent pursuant to the understanding was described by the Department of Defence as a "poor submission". The Department referred to matters other than just the price tendered by the third respondent, such as the provision of inadequate information in the tender. It also noted that the past performance of the third respondent had been on "smaller projects".
(h) The first respondent had been insured by HIH Insurance in relation to tortious and other liabilities for events occurring during the period of the insurance. This included any liability of the first respondent to those affected by asbestos. Following the collapse of HIH Insurance the shareholders and directors of the first respondent and of other associated companies re-organised the manner in which the businesses formerly performed by the first respondent were to be conducted in future. What this essentially involved was the removal of the assets of the first respondent and a reduction in the business carried on by it. In 2000/2001 the first respondent had a turnover of nearly $23 million and a after tax profit of approximately $620,000. In June, 2001 retained profits and dividends of $1.89 million were paid to shareholders. The net assets of the first respondent as at June, 2002 were $562,029. As at June, 2004 the net assets were $60,689. In 2003/2004 the company made a trading loss of $259,309. Apparently it remains in business by reason of discretionary cash injections derived from its shareholders.
After the reorganization in 2001 much of the business formerly conducted by the first respondent was thereafter conducted by another company with similar shareholders and directors. The first respondent no longer carries on significant business in South Australia.
Notwithstanding the limited assets now available to the first respondent, it continues to attract significant contracts in Western Australia from the Western Australian government, apparently (it is claimed) because of its good reputation with that government. It is one of only a small number of persons licensed to carry out asbestos removal in that State. The shareholders and directors intend to keep the first respondent trading, at least for the time being, so as to fulfill its existing contracts in Western Australia and to tender for more of them in that State.
The affidavit made by Mr McMahon dated 19 August, 2004 records that the reason for the restructure of the business was 'to protect assets and provide a more flexible and tax effective structure'. Obviously the assets being protected were those that were then paid out to the shareholders together with the ongoing business which appears to have been taken by the associated company. Those assets were being protected from future claims for events that would otherwise have been covered by the HIH policy but in relation to which the first respondent was uninsured as a result of the collapse of HIH. The affidavit also records that there are currently two "asbestos claims" against the first respondent in relation to this period and that the first respondent "has met, and continues to meet, the legal fees of defending those claims. The directors of [the first respondent] intend to negotiate, through its lawyers, resolution of outstanding common law claims which have been brought against it."
(i) The second respondent had significant experience in the relevant market, including experience in supervising the submission of tenders for work of the relevant kind.
(j) The second respondent is now employed by a "hiring" company. It would appear that he has been hired by that company to work with a "McMahons" company, but whether this is a permanent arrangement, or only one that has applied on occasion, is not clear on the information before me. As at 30 June, 2004 he had net assets of $112,725 and a "taxable" income of $60,500 per annum.
11 There are a number of decisions of this Court which discuss the appropriate principles for determining what pecuniary and other penalties should be imposed under the TPA. A number of those cases are helpfully summarised by Lander J in Case No 1 at [82]-[93]. It is unnecessary for me to repeat them.
12 Some of the submissions made to me in this case do suggest, however, that some of the discussion in some of those cases may have been misunderstood. As I suggested in Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 (4WD) at 557 [216]:
"… As a general proposition the TPAleaves it to the market place to ensure efficient and appropriate commercial outcomes. What the TPAattempts to achieve is to ensure that the market operates fairly - but it does so by establishing norms in relation to the market processes, not market outcomes. Consequently it does not ensure that a particular person will obtain the best price or the best agreement. It does not even ensure that that person will obtain a fair agreement. What it does do is seek to ensure that that person has a fair opportunity to obtain that which the market should, over time, deliver (at least according to the philosophy on which the TPAis based). The relevant 'public interest' must be understood in the context of the role of the TPAin establishing normative processes in relation to the operation of the whole market: see Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd [2002] FCA 1548."
13 It is against that background that ss 45(2) and 45A(1) of the TPA are to be considered. They establish a "per se" norm of commercial behaviour. A contract, agreement or understanding by two tenderers as to the price to be tendered is "per se" unlawful. It is so because of its effect upon the whole market. There is much economic literature dealing with that effect. It has been accepted as axiomatic in US jurisprudence: see United States v Trenton Potteries Co 273 US 392 (1927); United States v Socony-Vacuum Oil Co 310 US 150 (1940); Kovacic, "Illegal Agreements with Competitors" (1988) 57 Antitrust Law Journal 517. Section 45A of the TPA, read with s 45, reflects that jurisprudence: see Kirby J in Visy Paper Pty Ltd & Ors v Australian Competition and Consumer Commission (2003) 201 ALR 414 at 427 [54].
14 Considered against that background, it is clear that the primary principle in setting a pecuniary penalty (and, indeed, other orders: see 4WD at 556 [212] and 557[216]) is the principle of deterrence. It is to ensure, so far as the imposition of penalties can do so, that similar conduct by others and by the particular parties does not recur. As has been said again and again in the cases, general deterrence of others is particularly important in relation to the imposition of pecuniary penalties.
15 Once it is understood that deterrence, and particularly general deterrence, is the primary principle in the imposition of penalty for price fixing, then at least two conclusions flow from that. First, it means that penalties for collusive price fixing will need to be substantial and significant. This is, of course, reflected in the size of the maximum penalty upon corporations of $10 million. However, it also follows logically from the principle. Collusive price fixing, particularly between tenderers is difficult to detect. Public enforcement often only occurs with "a tip from an affected party or an insider" (see Marshall & Meurer, "Bidder Collusion and Antitrust Law: Refining the Analysis of Price Fixing to Account for the Special Features of Auction Markets" (2004) 72 AntiTrust Law Journal 83 at 101). Given these difficulties and the potential for large profits from such practices there is a chance that those in the market place might be prepared to factor the risk of a low penalty into its pricing structure as a 'business cost'. That would be inimical to the statutory purpose of ensuring that the practices do not occur. The penalty must be sufficiently high that a business, acting rationally and in its own best interest, will not be prepared to treat the risk of such a penalty as a business cost.
16 Second, it means that the actual market outcome in a particular case is not necessarily an important issue in determining the appropriate penalty, except, perhaps, as a matter of aggravation. In relation to price fixing agreements, the law itself assumes that the purpose and/or the effect of the proscribed behaviour is to "substantially lessen competition": s 45A of the TPA and see Brunt Economic Essays on Australian and New Zealand Competition Law (2003) at 133. Given that assumption, it cannot be a factor in mitigation of a pecuniary penalty for engaging in price fixing that no such purpose or effect occurred in the particular case. If it is true that the uncompetitive purpose and effect did not result in a measurable or ascertainable loss to a particular individual, that is necessarily fortuitous and coincidental. It is not a matter of mitigation. Further, as already noted, the reason for the prohibition is the effect of the behaviour on the overall market, not on a particular transaction. Collusive bidding practices are unacceptable whatever their effect in a particular transaction. Those involved in them must expect significant penalties.
17 This does not mean of course, that a pecuniary penalty can be imposed which ignores the particular position of the particular party involved, or which ignores the detail of the transaction. Section 76(1) of the TPA requires that those matters be considered. As several of the cases have also indicated, the principle of general deterrence does not require that such issues be ignored. Nor does it mean that a penalty should be imposed which exceeds that which is reasonably required to serve a deterrent purpose.
18 Against this background I come to consider some of the particular submissions put by the parties as to matters said to be in aggravation or mitigation of the alleged conduct.
19 The respondent submitted that the understanding reached between the first and third respondents was of no commercial effect in this case in the sense that the price paid by the Department of Defence would have been the same in any event. For the reasons already given, in my view this is not a matter in mitigation, although it would have been a matter of aggravation if it could have been shown that there had been a significant commercial detriment in this case.
20 Further, I am not satisfied that there was no commercial effect. It is of the nature of the understanding reached that both the first and third respondents knew or expected that the third respondent's bid would not be a "serious" bid. That knowledge itself was uncompetitive: see the discussion of the uncompetitive effects of collusive tendering between tenderers in Bajari & Summers, "Detecting Collusion in Procurement Auctions" (2003) 70 Antitrust Law Journal 143 at 149. This is the point made by Lander J in Case No 1 at [102] and Case No 2 at [85]. The first respondent submits that the possibility of renegotiation referred to by Lander J was precluded by the tender process. Again that submission misses the point. The collusive understanding having been reached, it is not thereafter possible to say that it had no effect on the contract ultimately entered into by the Department of Defence. If the third respondent had submitted a real bid it may have been quite different from the one it did submit. If the first respondent had not understood that the third respondent would submit a "cover" bid, it may have taken into account the unknown possibilities of the third respondents bid in determining what bid it should have submitted. The Department of Defence would then have had four "real" bids to consider, rather than three. Even if the third respondent, acting competitively, had determined not to submit a bid, this would have been a further fact for the Department of Defence to consider. In my view the most that can be said is that there is no evidence before me of any significant commercial detriment to the person or persons subject to the alleged collusive tender. That is the same approach as was taken by Lander J.
21 The applicant submitted that I should impose a higher penalty than might otherwise be the case because the terms of the request for tender drew to the first and second respondent's attention the prohibition against collusive tendering. I note that Lander J referred to this aspect in Case No 1 at [69]-[70] and in Case No 2 at [27]. The first and second respondents, on the other hand, submitted that I could not have regard to the tender material and that I am required to impose a penalty on the basis that the second respondent did not know that his behaviour was unlawful. It was submitted that the second respondent could have believed that the third respondent would not have won the tender in any event and may have believed that an agreement in these circumstances was lawful. Of course, what the second respondent did, or did not believe, was not proved one way or the other.
22 It seems to me that both submissions miss the point. Once it is accepted that the major purpose of imposing penalty is deterrence then it will usually be the behaviour itself which is important, not whether the person involved knew it was unlawful. The need and reason for deterring the relevant prohibited behaviour is not somehow increased because that behaviour is also a breach of contract. On the other hand, if the person did not know the relevant act was unlawful then it is difficult to see why this would justify a smaller penalty when it would seem to suggest that penalties imposed in the past have not been sufficient to bring home both to the person involved and others in a similar situation that the law must be complied with. This is not to say that ignorance of wrongdoing will never be relevant to penalty. There may be some circumstances where a lower penalty on the basis of such ignorance might be consistent with the general principle of deterrence. So, for example, where the person involved had a very limited experience and knowledge of trade and commerce in Australia this might justify some reduction in some cases. Some of the discussion by Lander J in Case No 1 and Case No 2 would seem to have occurred in that context. There are undoubtedly a host of other instances where it would be appropriate to do so. This case is not one of them.
23 Finally, I do not accept, on the material before me, that the second respondent did not know that his behaviour was unlawful and unacceptable. It may be that the submission actually put to me went no further than saying that the second respondent did not know that his actions breached s 45 of the TPA. To that extent the submission may have been seeking to draw technical distinctions of no practical importance. Whatever the submission was meant to be, it did not identify any ground of mitigation of penalty.
24 The applicant submitted that I should treat the second respondent as the "instigator" of the unlawful conduct. In my view the facts before me are not sufficient to enable me to reach that conclusion. Certainly the second respondent handed over the document which identified the price at which the first respondent ultimately bid. However, as I have already remarked above, the facts that are before me do not reveal very much about how the understanding was reached. In my view it is not possible on the evidence before me to conclude that the second respondent was the "instigator" of the understanding. Certainly he was essentially involved in it, but so were the others that were also involved. I am unable to say that his role was greater or lesser than theirs.
25 The first respondent also put to me that it was a proper matter in mitigation of penalty that the first respondent no longer had the assets to pay any significant penalty. There are a number of cases which identify capacity to pay as a proper matter to take into account in determining an appropriate penalty. In so far as general deterrence is concerned it is difficult to see why it should be a relevant factor, although a number of cases discuss it in that context. On the other hand, general deterrence is not the only principle to be observed, even if it is the most important one. It is still necessary to take account of the individual circumstances of the particular person or body and the impact of the penalty on that person or body.
26 In relation to this issue it seems to me that some care needs to be taken in treating corporate bodies as if they were real persons. Corporate bodies are generally established for commercial purposes - they survive and exist for those purposes and may be placed into liquidation when they no longer serve those purposes. Ultimately they serve the ends of real people - be they creditors, shareholders, directors and employees. It is the effects of those orders on those real people that need to command attention.
27 This case provides a perfect example of why this is so. Those involved in the management of the first respondent have made a commercial decision to strip it of its assets and to carry on much of their future business through other companies. It is presumably in their commercial interest to keep the first respondent operating for the time being. To put a submission that in these circumstances the Court should impose a reduced penalty to reflect the reduced size of the company seems to me to involve a complete misunderstanding of the principle of general deterrence. As it was put in a similar context by Finkelstein J in Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) & Ors (2002) 190 ALR 169 at 181 [40], to impose a reduced pecuniary penalty in such circumstances "would be intolerable". Those responsible for the management of the first respondent have shown a willingness to treat the company as a commercial body intended to achieve their commercial objectives. Their decisions in that regard cannot dictate the appropriateness or otherwise of the penalty that should otherwise be imposed.
28 The first respondent then put a submission that the penalty should be reduced so as to ensure that there is as much capacity as possible in the stripped company to meet claims from future creditors, including (presumably) those affected by asbestos. Plainly enough, given the actions that those responsible for the management of the company have already taken, there is nothing this Court can do in these proceedings to protect or safeguard the position of those having present or future claims against the first respondent. Apparently they are left to rely on the generosity or otherwise of those responsible for the management of the first respondent. Nothing in the orders I propose to make will change that situation.
29 The only appropriate course is to impose the appropriate penalty for the purposes of deterrence: see Australian Competition and Consumer Commission v The Vales Wine Company Pty Ltd (1996) ATPR 41-528 at 42,776; Australian Competition and Consumer Commission v SIP Australia Pty Ltd (2003) ATPR 41-937 at 47,077.
30 The task in this case is to determine what is the appropriate penalty to impose upon these respondents in the circumstances of this case to ensure that they and others in a similar situation and in similar circumstances would be deterred from similar breaches of the TPA: see Toohey J in Trade Practices Commission v Mobil Oil Australia Ltd (1985) 4 FCR 296 at 297-298. Plainly enough that determination involves judgment and is a matter of degree. It is not a "scientific" determination. What might be the appropriate pecuniary penalty may change over time. For example, it will be affected by the judicial perception of behaviour in the market place and the effect that the TPA, and penalties imposed under it, have had on that behaviour. For these and other reasons, penalties imposed in other cases, and particularly other cases decided many years ago, are not likely to be a particularly helpful guide to the imposition of current penalties.
31 Insofar as the first respondent is concerned, the applicant says that the appropriate penalty is $750,000. It makes that submission on the basis that there were matters of aggravation in the conduct of the first respondent, namely that it knew that the behaviour was unlawful and that it instigated that behaviour. For the reasons already given, I do not think that the first respondent's knowledge of the unlawfulness of the behaviour is a matter of aggravation. I am not satisfied on the facts that the first respondent "instigated" the understanding.
32 But for the issue of parity (discussed below) I would have thought that a pecuniary penalty of at least $500,000 would be an appropriate penalty upon the first respondent having regard to the circumstances of the first respondent and the circumstances of the breach. I refer, in particular, to the size of the first respondent in the particular market, to the size and extent of the work tendered for, and to the expected profit from obtaining that work. On the other hand, I take particular note that this was the first breach of the TPA by the first respondent, that the undertaking did not involve all tenderers, that there is no evidence before the Court of any measurable impact of the collusive understanding upon the price paid by the Department of Defence, that there is no information before the Court to suggest that collusive price fixing practices are widespread in this market and that the first respondent reached an agreement as to liability with the applicant with consequent savings in costs. I also refer to the voluntary training program in relation to TPA compliance subsequently adopted by the first respondent and to the other orders to which it has consented.
33 As already noted, whilst deterrence, and particularly general deterrence, is the principal consideration in relation to pecuniary penalties for price fixing, it is not the sole consideration. One other principle that needs to be taken into account is that of parity: see NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 141 ALR 640 at 648; Case No 2 at [56]. For the reasons already given, parity may not be of any great assistance in relation to cases decided on other facts and/or some time ago. In this case, however, parity is of some importance because the other parties involved in the same collusion have been separately dealt with by Lander J in Case No 1 and Case No 2. In Case No 1 a pecuniary penalty of $52,000 was imposed on the fifth respondent. The fifth respondent was the "intermediary" between the first and third respondents. Although the size of the penalty had been agreed between the fifth respondent and the applicant, Lander J accepted that the penalty was appropriate (at [17]). It is noted that the penalty included a 20 per cent discount for co-operation (at [123]). In Case No 2 a pecuniary penalty of $65,625 was imposed on the third respondent. The third respondent submitted a "cover" bid pursuant to the understanding. Again the size of the penalty had been agreed, but was accepted by Lander J as an appropriate penalty (at [127]-[128]). The penalty included a discount for its agreement (at [118]-[121]).
34 There are several relevant features that distinguish the issues considered by Lander J from those before me. They include:
(a) At the time that the undertaking was entered into the first respondent was a more significant player in the relevant market than either the third or fifth respondents;
(b) At the time that the undertaking was entered into the first respondent was a significantly bigger company than either the third or fifth respondents;
(c) At least to some extent the facts before Lander J were different from those before me. Lander J accepted that the "initiative" for the understanding came from the first and second respondents (see Case No 2 at [72]). To that extent it was accepted that the third and fifth respondents did not initiate the understanding. On the case before me there is no basis for reaching any conclusion as to who initiated the understanding.
(d) The first respondent benefited from the understanding in the sense that it tendered for and won the contract on the understanding that the third respondent would bid at a higher price.
(e) There was evidence before Lander J of the effect that any orders against the third and fifth respondents would have against the employees, shareholders and directors of those companies. Lander J took those matters into account in imposing penalty. Apart from the submission in relation to future claimants against uninsured liabilities, there is no evidence before me as to the effect of any pecuniary penalty upon real persons. For the reasons given above it is inappropriate to take those matters into account in relation to the first respondent.
(f) The first respondent accepted liability and agreed the facts in relation to penalty at a substantially later date than the other respondents. Although some discount needs to be made in relation to its agreement, that discount should be substantially less than Lander J allowed in relation to the fifth respondent and should even be less than that allowed for the third respondent.
35 Taken together these various matters suggest that the penalty that should be imposed upon the first respondent should be substantially greater than that which was imposed by Lander J upon the third and fifth respondents. Nevertheless, they also suggest that the penalty of $500,000 which I think would be appropriate on the basis of deterrence should be reduced so as to achieve parity with the other penalties already imposed in this matter.
36 Taking all of the above into account I think that a penalty of $300,000 should be imposed upon the first respondent.
37 In relation to the second respondent the applicant seeks a penalty of $100,000. It does so on the basis that the second respondent instigated the understanding. For the reasons already given I am not satisfied that he did so. Lander J imposed the following penalties on the other individuals involved in the understanding: in Case No 1 a pecuniary penalty of $24,000 on each of the sixth and seventh respondents and in Case No 2 a pecuniary penalty of $35,000 on the fourth respondent. Leaving aside the question of instigation, the second respondent was significantly more experienced that the other individuals involved. He was also working for the largest of the companies involved in the relevant market. His agreement to resolve the matter by agreement was made later than the other respondents and consequently any discount should be less. On the other hand he has considerably less assets than does the fourth respondent (see Case No 2 at [98]).
38 Taking all of the above into account I think that a pecuniary penalty of $35,000 should be imposed on the second respondent.
39 I will hear the parties as to the time for payment of these penalties.
40 Together with the other orders agreed by the parties, I make the following orders:
1 The First Respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to section 76 of the Act in the sum of $300,000.
2 The Second Respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to section 76 of the Act in the sum of $35,000 within such time as the Court deems appropriate.
3 The First Respondent will pay to the Applicant 75% of the party and party costs of the Applicant in relation to the within action as agreed (or in the absence of agreement, as taxed) up to and including 17 June 2004.
4 FURTHER, the First Respondent gives an undertaking for a period of 5 years, whether by its directors, servants or agents or otherwise howsoever, to refrain from:
(a) making available to any company or person who supplies services in competition with the First Respondent (or in competition with any company or person with whom the First Respondent supplies services), any information, costings or budget estimates relating to the price (or a component thereof) likely to be tendered by the First Respondent (or any company or person with whom the First Respondent supplies services), for the provision of demolition and asbestos removal services to any person seeking tenders or quotations for the provision of such services;