Australian Competition and Consumer Commission v Turi Foods

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 974 of 2011

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AUSTRALIAN CHICKEN MEAT FEDERATION INC (ABN 24 077 883 026)

JUDGE: TRACEY J DATE: 22 november 2013 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 In Australian Competition and Consumer Commission v Turi Foods (No 5) [2013] FCA 1109 I granted various forms of relief against the second ("Baiada"), third ("Bartter") and fourth ("ACMF") respondents for contraventions by them of the Trade Practices Act 1974 (Cth) ("the TPA") and the Australian Consumer Law ("the ACL") which appears in Schedule 2 to the Competition and Consumer Act 2010 (Cth) ("the CCA"). 2 The Australian Competition and Consumer Commission ("the ACCC") sought its costs of the proceeding on the usual basis. Baiada and Bartter sought an opportunity to make their submissions on costs after the Court had published its reasons relating to relief. It has since become apparent that this request was made because an offer by these respondents to settle the proceeding before trial had been rejected by the ACCC. The ACMF sought an order that the ACCC's costs be apportioned between the respondents and that it should not be ordered to pay more than 10 per cent of those costs. 3 The ACCC, Baiada, Bartter and the ACMF have all made written submissions in support if their respective positions on costs. 4 The ACCC has maintained its contention that it is entitled to a costs order in its favour on a party-party basis. It accepted that an apportionment of its costs between Baiada and Bartter and the ACMF was appropriate but made no submissions as to the quantum of that apportionment. 5 Baiada and Bartter's principal submission was that the ACCC should bear its own costs after 19 January 2012 which was the date on which the ACCC had rejected a settlement proposal which had been made by Baiada and Bartter on 22 December 2011. They further contended that they should only be required to pay 50 per cent of the ACCC's costs incurred prior to that date, not including costs incurred in relation to the application insofar as they related to the prosecution of the ACCC's case against the first respondent ("Turi Foods"). 6 Alternatively, Baiada and Bartter submitted that they should only pay 20 per cent of the ACCC's costs of the proceeding. 7 Baiada and Bartter further contended that the ACMF should pay 50 per cent of any costs orders made against the respondents. 8 The ACMF maintained its original stand that it not be required to contribute more than 10 per cent of any costs liability which the Court might be minded to impose on the respondents.

BAIADA AND BARTTER'S SUBMISSIONS CONCERNING ACCC'S COSTS 9 Baiada and Bartter accepted that the Court has an unfettered discretion in determining appropriate costs orders, that, ordinarily, costs will follow the event, and that, in the absence of special circumstances, a successful litigant will ordinarily be entitled to its costs. They submitted that the circumstances of the present proceeding were such as to warrant a departure from this norm. They advanced five reasons which, they submitted, supported this contention. There was some overlap between these reasons. 10 The reasons were that the ACCC had: not, in substance, achieved a significantly better result than the terms of the offer it rejected; not warned them that it would commence this proceeding; been unsuccessful in significant aspects of its case relating to liability; abandoned a number of its claims for relief; and "fallen well short" of the relief claimed in its application.

The rejected offer 11 On 22 December 2011 Baiada and Bartter offered to settle the proceeding on the basis that they would: pay a pecuniary penalty of $200,000; consent to the making of declarations in a form then proposed by the ACCC; agree to the making of an injunction restraining their impugned conduct for a period of three years; and publish corrective advertising in a national newspaper. 12 Although Baiada and Bartter advised the ACCC that they reserved the right to rely on the terms of their offer in relation to costs, the offer was not expressed to be a Calderbank offer. Nor was it said to be founded on the provisions of Part 25 of the Federal Court Rules 2011 (Cth) ("the Rules"). In their written submissions Baiada and Bartter did not seek to invoke Calderbank principles or to rely on Part 25 of the Rules. 13 As I understand Baiada and Bartter's submissions, they go no further than contending that a consideration, to be brought into account in determining whether a departure from the "usual rule" is warranted, is that the ACCC could have achieved a substantially similar result without the need for a trial had it been disposed to accept their offer. 14 When all aspects of the offer are compared with the orders made following trial, it may be accepted that the outcome achieved by the ACCC was not "significantly better" than that which had been on offer before trial. That said, the ACCC was successful in obtaining an order for a $400,000 pecuniary penalty to be imposed on Baiada and Bartter. This was double what they were prepared to pay before trial although considerably less than what the ACCC had asked the Court to impose. No orders for injunctions or corrective advertising were made because the ACCC elected, after the liability stage of the trial, not to press for those forms of relief. The declarations made by the Court reflected the findings made following trial and were, as a result, more specific than those which the ACCC had sought at the time at which the settlement offer was made. Both the ACCC and Baiada and Bartter had a measure of success. In particular, the ACCC obtained a much higher pecuniary penalty than Baiada and Bartter were prepared to offer; Baiada and Bartter, on the other hand, avoided various forms of ancillary relief, some of which they had been prepared to agree to. My overall impression is that the ACCC can be regarded as having achieved somewhat more at trial than Baiada and Bartter were prepared to concede in their offer to settle. The ACCC's refusal of the offer cannot be regarded as being unreasonable.

Failure to warn 15 It was common ground that the ACCC did not give notice to Baiada and Bartter of its intention to commence the proceeding. Once the proceeding had been commenced Baiada and Bartter ceased to publish the impugned advertisement and ceased producing packaging which had on it the impugned representations. In these circumstances Baiada and Bartter contended that the ACCC should have abandoned its claim for injunctive relief prior to trial. The claim was not abandoned until submissions were heard relating to appropriate relief. 16 The ACCC was under no obligation to forewarn Baiada and Bartter that it was about to commence the proceeding. Although the advertisements had been discontinued prior to trial there was evidence that the impugned representations continued to appear on some old packaging in which chicken products were presented for purchase in retail outlets. In these circumstances this consideration carries very little weight. The ACCC was entitled to press for injunctive relief even if Baiada and Bartter had voluntarily desisted in publishing its "free to roam" claim. It was entitled to do so to guard against the possibility of repetition. Its decision, made during the course of the hearing relating to relief, not to press for injunctions, was made because of the Court's earlier finding that chickens raised in barns were "free to roam" during some, but not all, of their growth cycle. This made the framing of an appropriate injunction extremely difficult. Certainly an injunction, in the terms originally sought, could not have been made consistently with my findings.

Failure of causes of action 17 At trial the ACCC was unsuccessful in making good its claims of contravention of ss 55 of the TPA and 33 of the ACL. It was, however, successful in establishing contraventions, by the respondents, of ss 52 and 53(a) of the TPA and the equivalent provisions in the ACL. 18 It is well established that it may be appropriate to depart from "the usual rule" that costs follow the event where an applicant has unsuccessfully pursued certain discrete issues but has nonetheless been successful in prosecuting other causes of action: see Roadshow Films Pty Ltd v iiNet Limited (No 4) (2010) 269 ALR 606 at 610-613 (per Cowdroy J) and the authorities collected by Crennan J in Dias Aluminium Products Pty Ltd v Ullrick Aluminium Pty Ltd (No 2) (2005) 225 ALR 569 at 570. Although, at times, it has been said that the discretion to apportion costs should only be exercised in the most exceptional circumstances (see, for example, Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201 at 208), "[t]he current trend appears to favour apportionment in appropriate cases without such cases necessarily being classified as 'exceptional'" (at 613). Earlier in his judgment, Cowdroy J had cited, as an example of the circumstances in which apportionment might be appropriate, the statement of Jacobson J in Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd (No 2) [2010] FCA 277 at [15] that "a party who seeks to run every issue in a case that could be conducted more economically takes the risk that it will have to bear the wasted costs but the same applies to an unsuccessful respondent." 19 One important consideration which has been influential in determining whether an applicant who has successfully pursued some, but not all, pleaded causes of action at trial should only have a portion of his or her costs, has been the amount of time spent at trial in dealing with the unsuccessful claims. In Commissioner of Australian Federal Police v Razzi (No 2) (1991) 30 FCR 64 at 69 Wilcox J said that: "… I do not think that courts should be reluctant to recognise the existence of exceptional cases. In these days of extensive court delays and high legal costs the courts should use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. If parties come to realise that they will not necessarily recover the whole of their costs, even though they have successfully raised a discrete issue, they are likely better to consider whether the raising of that issue is a justifiable course to take." 20 Similarly, in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-2 a Full Court (Gummow, French and Hill JJ) said that "where a considerable part of the trial is taken up in determining issues upon which a party fails, it is a proper exercise of the discretion to reduce the costs allowed to that party." Such an approach gave effect to what their Honours perceived to be a community demand "for greater economy and efficiency in the conduct of litigation …". 21 The ACCC's allegation that Baiada, Bartter and the ACMF had contravened ss 55 of the TPA and 33 of the ACL were advanced at trial relying on the same evidence which supported the ACCC's allegations of contraventions of ss 52 and 53(a) of the TPA and the equivalent provisions in the ACL. That evidence was found, as a matter of statutory construction, to be inadequate to bring the various impugned representations within the reach of ss 55 and 33. Submissions relating to these allegations occupied a relatively short time. This was not a case in which the applicant chose to pursue disparate causes of action in the hope that one or more might succeed thereby substantially and unnecessarily extending the length of the trial. The ACCC's case relating to the alleged contraventions of ss 55 and 33 was arguable and clearly related to the claims on which it was successful. 22 In these circumstances I do not consider that the ACCC's failure to succeed on one of its claims is a good reason to depart from the usual rule.

Abandonment of some claims of relief 23 As already mentioned the ACCC, after trial, did not press for orders that Baiada and Bartter implement a trade practices compliance programme, orders for corrective advertising or injunctive relief. The ACCC did not press for the implementation of a compliance programme because it accepted evidence, called by Baiada and Bartter, that an appropriate programme was already in place in the companies. The application for orders for corrective advertising were not persisted with because of the period which had elapsed since the defective representations had last been published. The circumstances in which the claim for injunctive relief was abandoned are explained above at [15]-[16].

Relief obtained "fell well short" 24 Baiada and Bartter also sought to garner support for their costs submissions by comparing the relief sought in the ACCC's application and the orders ultimately made. It may be accepted, for the reasons earlier explained, that the ACCC did not obtain the full extent of the relief sought in its original application. It is, however, to be borne in mind that it was successful in pursuing its claims for a pecuniary penalty and declaratory relief. The additional relief for which the ACCC ultimately did not press, was, at best, ancillary to the orders which were granted by the Court.

Conclusion 25 In my view the reasons advanced by Baiada and Bartter, considered individually and collectively, do not justify a departure from the usual rule that costs should follow the event. The ACCC should have its costs on the usual basis.

BAIADA AND BARTTER'S SUBMISSIONS CONCERNING APPORTIONMENT OF COSTS LIABILITIES BETWEEN RESPONDENTS 26 It remains to consider how those costs should be apportioned as between the respondents. Baiada and Bartter submitted that the costs burden imposed on them by the conduct of ACMF was such as to justify an order that ACMF pay half of any costs awarded to the ACCC. 27 Baiada and Bartter contended that the 10 per cent apportionment, proposed by ACMF, would impose a disproportionate burden on them for a number of reasons. They were that: the ACMF, like Baiada and Bartter, had cross-examined the ACCC's expert witness; the ACMF joined in and made separate submissions in support of Baiada and Bartter's no case submission; the ACMF had called one lay witness who was cross-examined. Baiada and Bartter had called two lay witnesses who were also cross-examined and whose evidence took up more time that of ACMF's witness. The time difference was, however, not great and not such as to warrant differential treatment for costs purposes; the ACCC's case against the ACMF depended, to a significant extent, on the outcome of its case against Baiada and Bartter. As a result the ACMF had a "vital interest" in the case put forward by them; the ACMF relied, in its closing submissions, relating to liability, on evidence called from an expert witness engaged by Baiada and Bartter; and the ACMF had pursued a number of arguments which were peculiar to its interests. It had pleaded defences that its conduct had not taken place "in connection with supply or promotion of supply of goods" and that it was an "information provider". It had also submitted that any pecuniary penalty, imposed on it, should be suspended. 28 The ACMF argued that it had had no choice but to appear and to deal with all of the evidence adduced during the joint hearing. It stressed, correctly, in my view, that the time devoted to its case at trial was relatively short. It did, however, as Baiada and Bartter pointed out, call evidence as part of its case and pleaded and argued defences which were not called in aid by the other two respondents. 29 Whilst acknowledging the difficulty of achieving mathematical precision in the apportionment of costs liabilities and doing the best I can to exercise the Court's discretion consistently with authority, I consider that, having regard to the matters on which each of the respondents have relied, the ACMF should bear 20 per cent of the costs to which the ACCC is entitled. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey.