Australian Competition & Consumer Commission v CC (NSW) Pty Ltd
[1999] FCA 954
RESTRICTIVE TRADE PRACTICES - Price fixing - meeting of representatives of four tenderers (construction contractors) and of their Association representative prior to submission of tenders - alleged arrangement or understanding that successful tenderer pay "Special Fee" of $1,000,000 to Association and "Unsuccessful Tenderer's Fee" of $750,000 to each of the three unsuccessful tenderers - whether alleged arrangement or understanding likely to have effect of fixing, controlling or maintaining price - meaning of "arrangement or understanding" - meaning of "likely" - meaning of "controlling" - whether arrangement or understanding included terms that Fees be paid from proceeds of job, be taken into account in preparation of tenders and not be disclosed to client - requirement of undertaking of obligations rather than mere factual expectations for "arrangement or understanding" to be established - whether arrangement or understanding had likely effect of controlling price - whether degree of specificity required - whether degree of proximity between agreement or understanding and price required - whether price competition must be affected.
MISLEADING CONDUCT - silence - failure by tenderer to disclose to client understanding arrived at with other tenderers - whether misleading and deceptive - absence of positive representation - no "duty" or "reasonable expectation" of disclosure.
EVIDENCE - tendency evidence - allegation of price-fixing by tenderers - whether evidence relating to other projects could be used to help establish the existence of the pleaded price-fixing arrangement or understanding on particular project - need to identify relevant "facts in issue" - requirement that tendency evidence have "significant probative value".
Trade Practices Act 1974 (Cth) ss 45(2), 45A(1), 52
Evidence Act 1995 (Cth) ss 55, 97
Jones v Dunkel (1959) 101 CLR 298, referred to
Zaknic Pty Ltd v Svelte Corporation Pty Ltd (1995) 61 FCR 171, followed
Aroutsidis v Illawarra Nominees Pty Ltd (1990) 21 FCR 500, referred to
D F Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 28 FCR 597 referred to
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437, distinguished
Newton v Federal Commissioner of Taxation (1958) (PC) 98 CLR 1, referred to
British Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 1 WLR 727, referred to
Top Performance Motors Pty Ltd v Ira Berk (Qld) (1975) 24 FLR 286 (FC), followed
Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) (1979) 40 FLR 83 referred to
Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10, referred to
Morphett Arms Hotel Pty Ltd v Trade Practices Commission (1980) 30 ALR 88 (FCA/FC), referred to
Trade Practices Commission v Service Station Association Limited (1992) ATPR 41-179, distinguished
Trade Practices Commission v Service Station Association Limited (1993) 44 FCR 206 (FC), distinguished
Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 7 FCR 534 (FC), considered
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 68 FLR 70 (FC), distinguished
United States v Socony-Vacuum Oil Co (1940) 310 US 150, referred to
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 (FC), considered
Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477(FC), applied
Lam v Ausintel Investments Pty Ltd (1989) 97 FLR 458 (CA), followed
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 (FC), referred to
Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd [1999] FCA 898 (FC), referred to
Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 (FC), referred to
RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 (FC), referred to
Briginshaw v Briginshaw (1938) 60 CLR 336, referred to
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170, referred to
AUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called "TRADE PRACTICES COMMISSION") v CC (NEW SOUTH WALES) PTY LIMITED (formerly called "CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED")
[2]
BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called "TRADE PRACTICES COMMISSION")
[3]
AND: CC (NEW SOUTH WALES) PTY LIMITED (formerly called "CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED")
[4]
THE AUSTRALIAN FEDERATION OF CONSTRUCTION CONTRACTORS
[5]
The proceeding be stood over to the 22nd day of July 1999 for the making of directions for the further conduct of the proceeding.
[6]
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
[7]
BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION (formerly called "TRADE PRACTICES COMMISSION")
[8]
AND: CC (NEW SOUTH WALES) PTY LIMITED (formerly called "CONCRETE CONSTRUCTIONS (NSW) PTY LIMITED")
[9]
THE AUSTRALIAN FEDERATION OF CONSTRUCTION CONTRACTORS
[10]
REASONS FOR JUDGMENT
INTRODUCTION
1 This proceeding has been disposed of as against all but the first respondent ("Concretes") and the ninth respondent ("the AFCC") in the ways mentioned below. The AFCC is an association of construction contractors of which Concretes and the other corporate respondents were, at all relevant times, members. On 16 November 1994, the AFCC was ordered to enter an appearance by 23 November 1994, in default of which the applicant ("the Commission"), then called the "Trade Practices Commission", had leave to relist the matter with a view to seeking judgment. No appearance has been filed; nor has the leave been exercised. The present hearing has therefore been concerned only with the proceeding as between the Commission and Concretes.
BACKGROUND
2 The proceeding has already given rise to the following judgments:
Judgment Date Judge Reference
Number
28 September 1994 Hill J (1994) 125 ALR 94
1 24 November 1994 Lindgren J (1994) ATPR 41-363
2 5 May 1995 Lindgren J (1995) ATPR 41-406
3 5 May 1995 Lindgren J (1995) ATPR 41-415
4 2 August 1995 Lindgren J (1995) 58 FCR 426
5 10 August 1995 Lindgren J Unreported
6 8 September 1995 Lindgren J (1995) ATPR 41-431
7 29 July 1998 Lindgren J (1998) ATPR 41-650
[11]
3 The proceeding arises out of what the Commission alleges to have been price fixing by major construction companies and their association, the AFCC, in connection with the tenders for a project known as the "Commonwealth Offices - Haymarket" ("the Project") in contravention of the Trade Practices Act 1974 (Cth) ("the Act").
4 The Commission's application was filed on 30 August 1994 and sought the imposition of pecuniary penalties and declaratory and injunctive relief. An amended statement of claim ("the Pleading") was filed on 17 November 1994.
5 According to the Pleading, each individual respondent was at all material times employed by the corporate respondent named in the title to the proceeding immediately preceding his name. Accordingly, and so the Pleading describes them, Woollard was employed by Concretes, Duff was employed by Hollands, Palmer was employed by Multiplex, Dixon was employed by Leightons and Richmond was employed by the AFCC. I will use the same forms of reference. It is pleaded that all acts alleged in the Pleading were performed by the individual respondents in their capacities as employees of their corporate employers.
6 As noted above, the AFCC has not appeared. On 28 September 1994 Hill J stayed the proceeding in so far as it related to Mr Woollard. The remaining eight respondents, except Concretes, have withdrawn their defences and joined with the Commission in making submissions as to the level of penalty appropriate to be imposed and penalties have been imposed on them (see (1994) ATPR 41-363; (1995) ATPR 41-406; (1995) ATPR 41-415; and (1995) ATPR 41-431).
THE PLEADING
7 The following is an account of the facts as alleged by the Commission in the Pleading.
8 Concretes, Hollands, Multiplex and Leightons ("the Tenderers") carried on business as construction contractors and were members of the AFCC. On or about 11 August 1988, Australian Construction Services ("ACS"), part of the Commonwealth Department of Administrative Services ("DAS"), invited the Tenderers to submit tenders for the Project.
9 Central to the Commission's case is a meeting held in early October 1988 ("the Meeting") at which, allegedly, two arrangements were made or understandings reached. (For brevity, I will generally use the word "understanding" to signify "arrangement or understanding".) The terms in which the two understandings are pleaded are important. Paragraphs 15-24 of the Pleading are as follows:
"15. In or about September or October 1988 John Cunningham ('Cunningham') Director of Special Projects with the AFCC, for and on behalf of the AFCC, contacted the tenderers and notified them of his intention to conduct a meeting of tenderers in relation to the Haymarket project prior to the closing date for tenders. Cunningham invited an officer from each of the tenderers to attend such a meeting ('the meeting') prior to the closing of tenders and each of the tenderers accepted the invitation.
PARTICULARS
Cunningham contacted each of the tenderers by telephone.
16. It was the intention of Cunningham and of each of the tenderers respectively in setting up and agreeing to attend the meeting that each tenderer would be able to take into account, and would take into account in preparation of its tender, any matters agreed at the meeting (which Cunningham and each of the tenderers expected would include arrangements or understandings on the subjects of special fees ('Special Fee') and unsuccessful tenderers fees).
17. Prior to the meeting Richmond instructed Cunningham to propose to the tenderers that the successful tenderer should pay to the AFCC a Special Fee of $1,000,000.
18. In or about September or October 1988 the meeting took place at the premises of the AFCC at 655 Pacific Highway (cnr Christie Street) St Leonards in the State of New South Wales.
19. The meeting was attended by:
(a) Cunningham of the AFCC;
(b) Woollard of Concretes;
(c) Duff of Hollands;
(d) Palmer of Multiplex; and
(e) Dixon of Leightons.
20. At the meeting Cunningham proposed that the successful tenderer for the Haymarket project should pay an agreed amount called a Special Fee ('Special Fee') to the AFCC.
21. At or arising out of the meeting each of the tenderers, and the AFCC made or arrived at an arrangement and understanding between themselves to the effect that;
(a) each tenderer would, if its tender for the Haymarket project was accepted, pay from the proceeds of the job a Special Fee to the AFCC in the sum of $1,000,000;
(b) each tenderer would take into account in the preparation of its tender, the commitment to pay the Special Fee if successful.
(c) none of the tenderers or the AFCC would disclose to ACS the terms of the arrangement or understanding, or that a meeting of all tenderers had taken place.
PARTICULARS
(i) the arrangement or understanding was partly express and partly implied;
(ii) insofar as it was express it was oral:
(iii) as to the oral part it was constituted by the conversation at the meeting;
(iv) insofar it was implied it arose from the attendance at the meeting of Cunningham, and the representatives of the tenderers and the acceptance of the proposals put at the meeting;
(v) as to subparagraph 21(b) and (c) it was implied in order to give business efficacy to the arrangement or understanding; and
(vi) the Applicant will also rely on the inferences to be drawn from the facts set out in paragraphs 27-30 [it is not necessary to refer to the allegations made in paras 27-30].
22. After the agreement or understanding referred to in paragraph 21 had been reached Cunningham was asked to leave the room, and did so. The meeting resumed with Woollard of Concretes, Duff of Hollands, Palmer of Multiplex and Dixon of Leightons in attendance.
23. At the meeting it was then proposed that the successful tenderer should pay to each of the unsuccessful tenderers an unsuccessful tenderers fee ('UTF') in the sum of $750,000.
24. There arose from the meeting an arrangement or understanding between the tenderers to the effect that:
(a) each tenderer would, if its tender for the Haymarket project was accepted, pay from the proceeds of the job a UTF to each of the unsuccessful tenderers in the sum of $750,000;
(b) each tenderer would take into account in the preparation of its tender, the commitment to pay the UTF if successful; and
(c) none of the tenderers or the AFCC would disclose to ACS the terms of the arrangement or understanding or that a meeting of all tenderers had taken place.
PARTICULARS
(i) The arrangement or understanding was partly express and partly implied;
(ii) insofar as it was express it was oral:
(iii) as to the oral part it was constituted by the conversation at the meeting;
(iv) insofar it was implied it arose from the attendance at the meeting of the representatives of the tenderers and the acceptance of the proposals put at the meeting;
(v) as to subparagraph 24(b) and (c) it was implied in order to give business efficacy to the arrangement or understanding; and
(vi) the Applicant will also rely on the inferences to be drawn from the facts set out in paragraphs 32-35 [it is not necessary to refer to the allegations made in paras 32-35]." (emphasis supplied)
10 The terms of the "Special Fee understanding" pleaded in para 21 and of the "UTF understanding" pleaded in para 24 as understandings that the Special Fee and the UTFs would be paid from the proceeds of the job and that the Tenderers would "take into account" their commitments to pay them in the preparation of their tenders, have assumed particular importance. According to the Pleading, the Tenderers did in fact "take into account" those commitments in the preparation of their tenders.
11 ACS awarded the contract to Hollands. Richmond caused or procured the AFCC, through its National Executive Committee, to ratify and levy the Special Fee on Hollands. In or about January or February 1989, Hollands paid $200,000 or $300,000 to the AFCC as part of the Special Fee, and subsequently, over a period from 24 July 1989 to 1 February 1990, the AFCC sent a series of seven invoices of $100,000 each to Hollands which it also paid on account of the Special Fee. Each of Concretes, Multiplex and Leightons sent to Hollands a series of invoices which, in the case of Concretes and Leightons, totalled $750,000, and in the case of Multiplex with a set-off of $300,000 totalled $750,000, and represented its UTF. Hollands also paid the amounts of those invoices.
12 In the result, Hollands paid the Special Fee of $1,000,000 to the AFCC and UTFs totalling $2,250,000 to Concretes, Multiplex and Leightons - a total of $3,250,000. Each of the invoices sent by the AFCC and by Concretes, Multiplex and Leightons purported to make claims on Hollands for "consultancy services" but such services were not provided and were never intended to be provided.
13 In submitting its tender to ACS, Concretes represented to it (a) that its tender and tender price were free of collusion and fairly priced; and (b) that the tender had been prepared independently and without collusion or discussion with any of the other Tenderers.
RELEVANT PROVISIONS OF THE ACT
14 The sections of the Act relevant to the claims pressed by the Commission are ss 45 and s 45A (price fixing) and s 52 (misleading or deceptive conduct).
15 The Commission pleaded that Concretes "contravened" and "attempted to contravene" s 45 (read with s 45A) and that it was "knowingly involved" in similar contraventions by the other Tenderers, but argument has focused on the former allegation. The Pleading recognises that all four Tenderers were parties to both the Special Fee understanding and the UTF understanding but that the AFCC was a party only to the Special Fee understanding.
16 It is alleged that the making and implementation of the two understandings contravened paras 45(2)(a) and (b) of the Act, which were as follows:
"45(2)A corporation shall not --
(a) make a[n] …arrangement, or arrive at an understanding, if -
(i) ..........................................................................................
(ii) a provision of the proposed … 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[n] … arrangement or understanding, … if that provision -
(i) ..........................................................................................
(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition." (emphasis supplied)
17 Subsection 45A(1) provided, relevantly, that without limiting the generality of s 45, a provision of an arrangement or understanding was deemed for the purposes of s 45 to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision had the purpose, or had or was likely to have the effect, as the case may be, of fixing, controlling or maintaining the price for goods or services to be supplied by the parties or by any of them in competition with each other. The Tenderers were competitive with one another in relation to the supply of construction services in New South Wales.
18 Under s 76, if the Court is satisfied that a person contravened a provision of Part IV (in which s 45 occurs) or was an accessory of certain kinds to such a contravention, it may order the person to pay to the Commonwealth a pecuniary penalty. The parties agreed, however, that the present hearing was to be confined to the issue of contravention and that if I should find a contravention established, further evidence might be sought to be led relevant to relief to be granted, and, in particular, relevant to the level of any penalty to be imposed.
19 The Commission pleaded that by making the representations to ACS referred to above, Concretes, in trade or commerce, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, in contravention of the well known prohibition contained in s 52 of the Act. The Commission seeks only a declaration that Concretes did so. It is fair to say that the Commission treated this aspect of the case as relatively unimportant: it was not addressed in written submissions at all and the Commission's oral submissions relating to it occupied only fourteen lines of transcript.
EVIDENCE
Introduction
20 The Commission's evidence was largely documentary and circumstantial. It led no testimonial evidence at all from any of the four Tenderers' representatives who were the only persons allegedly present at the second part of the Meeting, that is, from Woollard, Duff, Palmer or Dixon, and I am asked to infer that the alleged UTF understanding was reached on the basis of admissions made by Concretes and circumstantial evidence. In relation to the Special Fee understanding allegedly reached in the first part of the Meeting, the Commission led direct testimonial evidence from John Leslie Cunningham ("Cunningham") alone. Cunningham was "Director, Special Projects" of the AFCC and in that capacity he reported to Richmond, who was the National Executive Director of the AFCC. In addition, the Commission again relied on admissions made by Concretes and circumstantial evidence.
21 Some of the circumstantial evidence on which the Commission relied was tendency evidence. This was evidence directed to establishing an "industry practice" according to which Special Fees and UTFs were payable and paid on large construction projects. This evidence was largely, but not entirely, documentary. Concretes objected to all evidence relied on as tendency evidence.
22 The Commission's documentary evidence was contained chiefly in two lever arch folders which became Exhibit A2 and were arranged under tabs 1 to 11, according to their provenance. On the hearing, some of these documents were admitted into evidence without objection, some were admitted over objection and I deferred ruling on the remaining ones or admitted them provisionally subject to Concretes' objection and pending delivery of these Reasons. For reasons that will appear below, I have concluded that all evidence relied on by the Commission as tendency evidence, that is, as showing a tendency of Concretes, the other Tenderers and the AFCC to reach understandings of the kinds alleged, is rendered not admissible by s 97 of the Evidence Act 1995 (Cth) ("the Evidence Act"). This includes evidence of admissions by Concretes in so far as they were relied on for that purpose, even where admitted into evidence on the hearing. But admissions that were admitted on the hearing remain in evidence for other purposes. I have attached to these Reasons a list of the documents that were contained in Exhibit A2 and of my rulings on them which will, I hope, make the position plain.
23 Concretes submits that I should infer from the Commission's failure to call direct testimonial evidence from any of Duff, Palmer, Dixon or Woollard, that their evidence would not have advanced the Commission's case; cf Jones v Dunkel (1959) 101 CLR 298. In support, it relies on certain documents that it tendered to show that those witnesses were available to the Commission. I turn to those documents now.
24 As part of the settlements reached between the Commission and Hollands, Multiplex and Leightons, each of those three Tenderers undertook to co-operate with the Commission in relation to its proceeding against Concretes. More precisely, in the case of Multiplex and Leightons, the undertakings, expressed in letters dated 31 August 1995, were to co-operate by making available to the Commission upon reasonable request, any document or class of document sought by the Commission which the Tenderer concerned was reasonably able to produce, and to make available for interview by the Commission's legal advisers any employee nominated by the Commission. In the case of Hollands, the undertaking was evidenced by a letter dated 20 April 1995 from the Australian Government Solicitor and was an undertaking "to make available, to assist the Commission in its enquiries, appropriate personnel and all relevant documents". Moreover, in consideration of an indemnity given to him by the Commission's predecessor, Woollard undertook, if the Commission so required, to provide it with a signed statement of his knowledge of facts surrounding discussions and arrangements in or about September and/or October 1988 between building companies and the AFCC in relation to Special Fees and/or UTFs in respect of the Project, and undertook to give evidence of the facts in court (see (1994) 125 ALR 94 at 97 and 98-99, which the parties agreed I should treat as evidence before me).
25 Concretes led no testimonial evidence but tendered certain documents, correspondence between its solicitors and the Commission's solicitor, including the documents to which I have just referred.
26 The Commission submits that I should not draw a Jones v Dunkel inference against it because it cannot be reasonably expected to call Concretes' "co-conspirators". Indeed, it submits that a Jones v Dunkel inference should be drawn against Concretes on account of its failure to call any testimonial evidence to deny the allegations made against it. So far as concerns Woollard who represented Concretes at the Meeting, however, it is common ground that he had ceased to be a director and employee of Concretes prior to the hearing before me. The Commission also conceded that witnesses from the other three Tenderers were "equally available" to both parties. Concretes submits that it was entitled to choose not to lead testimonial evidence from its officers or employees based on its assessment that the evidence admissible against it would not prove contravention of the Act.
27 I do not draw a Jones v Dunkel inference against either party. I regard the Tenderers' representatives who attended the Meeting as being as much within one party's power as the other's. Nor do I think that a Jones v Dunkel inference should be drawn against Concretes in respect of its failure to call officers or employees to establish that the fees were not "passed on". It is not obvious that they could have said anything relevant and cogent because, on one view, the case put by Concretes is consistent with its having in fact included the fees as "loadings" in the calculation of its tender price. More generally, I think that Concretes was entitled to put the Commission to proof of its case which, it must be remembered, is one for a penalty.
Cunningham's testimonial evidence
28 Cunningham was responsible for organising, when he considered appropriate, meetings of tenderers on various large projects. His uncontradicted evidence, which I accept, is that the term "Special Fee" was a term applied to fees levied by the AFCC on successful tenderers on a variety of projects at the approximate rate of 0.5 per cent to 0.75 per cent of the estimated total value of the project.
29 Cunningham states that he first became aware of the Project in about July or August 1988. At that time he spoke with Duff whom he knew as the Chief Executive of Hollands. He asked Duff whether there were any projects coming up which might lend themselves to a "Special Fee" for the AFCC. Duff replied that there were a couple, one of which was the Project which was a major undertaking with a price probably around $200,000,000. Duff told Cunningham that he could "probably put $1,000,000 on it". This sum is 0.5 per cent of $200,000,000. Duff told Cunningham that the Tenderers were: Hollands, Multiplex, Leightons and Concretes. When Cunningham returned to Sydney, he looked up the Project in a publication by "Cordells". From this he learned that the client was the "Construction Group" within the Administrative Services Department of the Commonwealth; that the estimated "value" of the Project was approximately $131,000,000; that the closure date for tenders was 21 October 1988; and that the Tenderers were the four companies mentioned.
30 Cunningham telephoned the Tenderers. He spoke to Dixon, whom he knew from previous dealings to be an estimator at Leightons; Palmer, whom he knew from previous dealings to be a director of Multiplex; and Woollard, whom he knew from previous dealings to be a director of Concretes. He said to each of them words to the following effect:
"Hello it is John Cunningham here. I'm telephoning to organise a tenderers' meeting in relation to the Haymarket project. I understand that your company is a tenderer."
He suggested a range of times for the meeting.
31 In October 1988, Cunningham attended a meeting at the AFCC office at Pacific Highway, St. Leonards, New South Wales. Duff, Palmer, Dixon and Woollard also attended. The first fifteen minutes or so were spent in general discussion about the Project, after which, according to Cunningham's affidavit, he or Duff said:
"[T]he special fee for this tender will be $1,000,000."
In cross-examination, Cunningham said that it was probably he rather than Duff who said those words. There was no evidence to the contrary and I accept that Cunningham said them. Cunningham added:
"It is a $200,000,000 job. At 0.5% to 0.75% it is at the lower end of the range."
Each of Duff, Palmer, Dixon, and Woollard nodded his head or said words to the effect of:
"OK" or "Fine".
Cunningham then left the meeting.
32 Concretes submits that the evidence to which I have just referred shows a unilateral imposition of the Special Fee by the AFCC through Cunningham, not an "arrangement or understanding" between the four Tenderers. I will say more of this submission later.
33 In his affidavit, Cunningham states:
"15. I did not agree, at the meeting or at any other time, on behalf of the AFCC nor to my knowledge did any other person on behalf of the AFCC at the time of the meeting or at any other time agree to provide any particular services for payment of the $1,000,000 special fee referred to above.
16. To the best of my knowledge no particular services were provided by the AFCC to the successful tenderer." (emphasis supplied)
34 In cross-examination, Cunningham agreed that he had not intended to convey by this paragraph that the AFCC had not rendered any services to the Tenderers but merely that it had not rendered any specifically related to the Project.
35 Concretes submits that the AFCC was entitled to levy, and did levy, the Special Fee on the Tenderers as a means of funding the services it provided to its members generally.
Tendency evidence - documents relating to all other projects
36 There are four classes of document, each of which relates to all the other projects to which the Commission refers. The first two classes also relate to the Project.
(i) The schedule provided by Concretes to the Royal Commission
37 On 30 May 1991, the Royal Commission wrote to Concretes in relation to its hearings into aspects of tendering practices within the building industry, and, in particular, in relation to what it called in the letter "Special Fees" and "Unsuccessful Tenderers Fees". The letter asked Concretes to provide a schedule listing the "projects in which [Concretes] was a Tenderer, whether successful or not, in respect of which any arrangement for payment of tender fees was made [or] a special fee was payable" (emphasis supplied). The letter stated that the schedule should include the following:
"(a) the name of the project;
(b) date of submission of tender;
(c) the name of successful tenderer;
(d) the name of unsuccessful tenderers;
(e) the amount of unsuccessful tenderer fees;
(f) the amount of the special fee;
(g) the name of each contractor who submitted a cover bid;
(h) details of each tender fee believed to have been paid; and
(i) contract value of the project, (if known)."
38 In response, Concretes supplied a schedule to the Royal Commission headed "TENDERS SUBMITTED FOR WHICH CONCRETE CONSTRUCTIONS (NSW) WAS A TENDERER". The schedule included information in relation to the Project and other projects. I will set out below a slightly modified version of relevant entries relating to the Project and the other projects on which the Commission relies. Clearly, the schedule must be read with the Royal Commission's letter to which it responds. I have incorporated in the schedule, in the form of notes, material from the Royal Commission's letter of request to explain the column headings.
[12]
PROJECT DATE1 OTHER TENDERERS2 CONTRACTOR 3 MEETING HELD AT MBA FEE 4 AFCC FEE MBA/AFCC FEE RTC 5 NO TOTAL RTC's RTC to CCL6 REIM. RECEIVED7 REMARKS
Oceanic Hotel, Coogee 7 Apr '90 Multiplex Concretes ? - $200 000 - $200 000 5 $1 000 000 N/A N/A $200 000 paid to AFCC
Hutcherson $200 000 paid to AFCC ex gratia
Stuart
Sabemo
Hollands
News Limited, Chullora 24 Apr '90 Leightons Concretes AFCC - - $500 000 $100 000 5 $500 000 N/A N/A Fee to be reimbursed to client
Sabemo or
Thiess MBA
Hollands ?
Edwards
Airport Central 29 May '89 Multiplex Concretes AFCC Nil $750 000 - $750 000 2 $1 500 000 N/A N/A Fee no longer applicable due to renegotiated price
Hollands
Commonwealth Bank Refurbishment 28 Apr '86 Leightons Leightons MBA $250 000 - - $250 000 3 $750 000 $250 000 $200 000 $50 000 unpaid
Baulderstone
1 other
Metro Plaza North Sydney 26 Sep '88 Girvan Girvan AFCC - - $1 000 000 $500 000 4 $2 000 000 $500 000 $100 000 Girvan in liquidation
Multiplex $400 000 unpaid
Hollands
Leightons
Commonwealth Offices - Haymarket 29 Oct '88 Hollands Hollands AFCC Nil $1 000 000 - $750 000 3 $2 250 000 $750 000 $750 000
Multiplex
Leightons
Newcastle Hospital 2 Sep '86 Hollands McCloy-Hutcherson MBA $200,000 Nil - $500,000 5 $2,500,000 $500,000 $140,000 $360,000 unpaid
Leightons
White
Citra/Doran
McCloy-Hutcherson
St George Building Society 13 Apr '87 White Hutcherson/IVM MBA $250,000 Nil - $250,000 3 $750,000 $250,000 $250,000
Hutcherson/IVM
Leightons
[13]
1 of submission of tender
2 i.e. in addition to Concretes
3 i.e. the successful tenderer
4 special fee payable to The Master Builders' Association of New South Wales. In none of the eight cases was a Special Fee payable to both the AFCC and the MBA: it was said to be payable only to one or the other
5 RTC = "Reimbursed Tenderer's Costs" ("RTC" and "UTF" can be treated as being synonymous for present purposes)
6 UTF (or RTC) payable to Concretes (clearly, this column is not applicable where Concretes was the successful tenderer)
7 amount of UTF (or RTC) received by Concretes
[14]
39 The content of the schedule constitutes admissions by Concretes. The importance of this document should not be underestimated: read with the Royal Commission's letter, it includes admissions by Concretes in relation to the Project: that the Tenderers were the tenderers; that Hollands was the successful Tenderer; that there was an arrangement for payment by the successful Tenderer of a Special Fee of $1,000,000 to the AFCC; that there was an arrangement for payment by the successful Tenderer of a UTF of $750,000 to each of the three unsuccessful Tenderers; that in this connection there was a meeting of some kind at the offices of the AFCC; and that Hollands paid Concretes the whole of Concretes' UTF of $750,000.
(ii) The AFCC's Cash Flow Forecasts in respect of Special Contract Fees
40 The second document relating to projects (including the Project) is one produced by the AFCC. It comprises eleven pages headed "CASH FLOW FORECASTS - SPECIAL CONTRACT FEES". The first page refers to the "most likely" position for 1989-1990. The remaining pages are in some cases for 1990/91 and in others for 1991/92. They are variously headed "DREAMTIME", "WORST", "M[OST] LIKELY" and "BEST". I admitted into evidence, as well as the entries in these documents relating to the Project, those relating to the News Limited, Chullora project on which the Commission relies on the ground that they might be relevant to complete the evidentiary picture relating to that project, part of which appeared from admissions made by certain officers of Concretes in respect of that project in a conversation referred to below. But as appears later, my final ruling is that none of the AFCC's Cash Flow Forecast sheets are admitted other than those relating to the Project.
41 I will describe the entries relating to the various projects below.
(iii) Documents produced by Concretes relating to other projects for which it was a tenderer
42 The third group of documents relating to the other projects comprises miscellaneous invoices and documents evidencing the making of payments. Documents of that kind in respect of the Project were also produced and were admitted into evidence. It will be recalled that Concretes was the successful tenderer on the Oceanic Hotel, Coogee, News Ltd, Chullora, and Airport Central projects (three projects) and that it was an unsuccessful tenderer on the Commonwealth Bank Refurbishment, Metro Plaza, North Sydney, Newcastle Hospital and St George Building Society, Kogarah, projects (four projects) (as well as on the Project itself). Documents of Concretes were sought to be relied on by the Commission with a view to establishing payments by Concretes as a successful tenderer and to Concretes as an unsuccessful tenderer on the respective projects. I will also refer to those documents below.
(iv) AFCC Service Fee Estimates 1988-1989
43 There is an AFCC document headed "SERVICE FEE ESTIMATES 1988-89" which, under the heading "ANTICIPATED", records, inter alia, the following:
"C'wealth Offices
(Bruno) $1,000,000 $100K per month
from Nov 1988
Telecom Haymarket
(all AFCC members) $1,000,000 $100K per month
from Dec 1988"
The Commission did not seriously press the other entries in the document. On the hearing, I admitted provisionally the two entries set out above. Dennis Richard Eagar ("Eagar"), who was at relevant times Deputy Executive Director of the AFCC, gave evidence that the second entry related to the Project.
Tendency evidence - the documentary evidence relating to each other project
44 Unfortunately, in order to deal with the evidence relating to other projects, it is necessary that I describe it in some detail.
45 The Commission relied on evidence relating to other projects, designated as "Oceanic Hotel, Coogee", "Metro Plaza, North Sydney", "News Limited, Chullora", "Airport Central", "Commonwealth Bank Refurbishment", "Newcastle Hospital" and "St George Building Society, Kogarah".
Oceanic Hotel, Coogee project
46 In respect of this project, Concretes advised the Royal Commission that there was an arrangement for payment of a Special Fee of $200,000 to the AFCC and an arrangement for payment of a UTF of $200,000 to each unsuccessful tenderer; that it (Concretes) was the successful tenderer and that Multiplex, Hutcherson, Stuart, Sabemo and Hollands were the five unsuccessful tenderers; that it (Concretes) had paid the Special Fee of $200,000 to the AFCC, an additional $200,000 to the AFCC ex gratia, and to each of the five unsuccessful tenderers, a UTF of $200,000 making total of $1,000,000.
Special Fee
47 According to the AFCC's "DREAMTIME" 1990/1991 forecast revised on 9 July 1990 it was to receive $25,000 in each of July, September and November 1990 and January 1991 - a total of $100,000 for the year. According to the AFCC's "WORST" 1990/91 forecast revised on 6 February 1991, it was to receive $300,000 in February 1991 - $200,000 better than its "DREAMTIME" forecast for the same period. The two amounts total $400,000, the amount Concretes says it paid. According to the "BEST" 1990/91 forecast, revised on 6 February 1991, the AFCC was to receive $300,000 in February 1991. According to the AFCC's "WORST" 1991/92 forecast revised on 6 February 1991, it was to receive $400,000 in June 1992. According to the "M[OST] LIKELY" 1990/91 forecast, revised on 6 February 1991, the AFCC was to receive $300,000 in February 1991.
48 This evidence is confusing. While the first two yearly totals aggregate $400,000, the total amount Concretes told the Royal Commission it paid to the AFCC, none of the figure seems to represent the $200,000 referred to as the AFCC's fee of which Concretes informed the Royal Commission. It is not even certain whether the totals should be aggregated.
49 According to a Concretes internal file note of a meeting between Richmond of the AFCC and Messrs White and Cooper of Concretes, the following was agreed:
"$200,000 Oceanic Hotel
via KBH ex gratia : Payable 3 months
that is 10/12/90
............................................................................................
$200,000 Oceanic Fee to AFCC : Payable 10/11/90"
This evidence is consistent with Concretes' response to the Royal Commission.
50 There are in evidence two invoices from the AFCC to Concretes, both dated 1 February 1991 for $200,000, and both being in respect of:
"Contractual & Industrial Services for NSW projects 1990/91 financial year."
51 Again, the total of $400,000 is the total amount Concretes told the Royal Commission it paid to the AFCC. Other documents show that Concretes paid the AFCC in respect of this project $200,000 on 4 February 1991 for AFCC fees, and $200,000 on 8 February 1991 for "Contractual & Industrial Services" - again, a total of $400,000. I infer that the two invoices and the two payments were for the Special Fee of $200,000 and the ex gratia payment of $200,000 of which Concretes informed the Royal Commission and which are referred to in the internal file note mentioned above.
UTFs
52 On 27 April 1990, Sabemo Pty Ltd invoiced Concretes $50,000 "for the hire and delivery to site [Oceanic Hotel, Coogee] of builders plant and equipment all as advised". There are three further invoices of the same date, identically worded and for the same sum. That is, on 27 April 1990 Sabemo invoiced Concretes for a total of $200,000. It will be recalled that according to the information which Concretes gave to the Royal Commission, $200,000 was the amount of the UTF payable by Concretes to each of the unsuccessful tenderers, Multiplex, Hutcherson, Stuart, Sabemo and Hollands.
53 There is an undated invoice from Stuart Bros Pty Ltd to Concretes for "hire of shedding, compressors, overhead gantry materials" for $204,300 less a discount of $4,300 "as agreed". Although this invoice for $200,000 (the UTF payable by Concretes to Stuart Bros Pty Ltd) is, within Exhibit A2, among the Sabemo and AFCC invoices to Concretes for this project, it does not refer to the project.
[15]
According to Mr Bird, at one point during the meeting the following exchange took place between himself and Mr Denny:
[16]
"[Mr Bird]: So where was the $1 million in your tender costings?
[Mr Denny]: Partly in the establishment costs and partly spread throughout the schedule of rates."
[17]
During the meeting, Mr Bird made handwritten notes of the conversation as it progressed. He annexed a copy to his affidavit. Mr Bird's handwritten notes included the following:
[18]
"Indust Practice 50 yrs"
"~ 2 out 20-40 tenders'
< 5% usually major projects
lge. costs compiling Tender.
Reasons supporting tendering expense
Lot tenders called by client for finance"
"Re News Job.
AFCC called a meeting
& put fee $500,000
& $100,000 each
Tenderer as cost
of compiling Tenders."
"Fee either into prelim section
& call fees
OR
as C.D [Chris Denny] says
Part into estab. costs
& part throughout the rates."
85 Later the same day, Mr Cooper asked Mr Bird to prepare minutes of the meeting and to send them to him (Mr Cooper). According to Mr Bird, again on the same day, Friday 24 May, he sent a memo to his superior, Mr Muscat, reporting on the meeting. The memo included the following:
"Summary of Matters Discussed.
C.C.L. factored an extra $1 million into their tender.
2. The $1 million was hidden partly in establishment costs, and partly throughout the schedule of rates.
C.C.L. has not paid any money to the other contractors at this stage.
4. It has been industry practice over the last 50 years for major tenderers to enter into agreements where the successful tenderer pays the tendering costs of the unsuccessful tenderers. As an example, The Australian Federation Of Construction Contractors (A.F.C.C.) called a meeting of prospective tenderers about a new job and put an A.F.C.C. fee of $500,000 on the job for itself, and $100,000 to each of the tenderers towards the cost of compiling tenders. C.C.L's latest legal advice is that this practice is not legal from a trade practices point of view. There would not be one big contractor that is not party to this practice.
5. The A.F.C.C. and M.B.A. published rates on levies for construction jobs are insufficient to cover their normal running costs. Most of the major companies are now with The A.F.C.C. The tendering fees are usually hidden in the preliminary section of the tenders.
6. C.C.L. would normally factor in the above tendering costs in around 5% of their major projects, as there is a large cost associated with preparing tenders, and a lot of tenders are called by clients purely to arrange financial transactions."
86 The following Monday 27 May, or partly on Friday 24 May and partly on Monday 27 May, Mr Bird had minutes typed up of the meeting based on the handwritten notes he had made during it and on his own recollection of the conversation, which, he said, was at that time "very clear". He stated that in preparing the typed minutes, he supplemented and clarified his handwritten notes, and that the typed minutes, a copy of which was also annexed to his affidavit, were an accurate record of the substance of what had occurred at the meeting. The minutes included the following (he said that "GB" referred to himself, Gary Bird, "JC" referred to John Cooper, and "CD" referred to Chris Denny):
"Matters Discussed.
1 C.C.L. Response to Allegations
1.1 G.B. Handed J.C. & C.D. a copy of an article titled "Public money in building rort" which appeared on page 7 of the Metro edition of The Daily Telegraph Mirror on the 23.5.91. He asked C.C.L. to comment if there was any truth in the article.
1.2 C.D. admitted C.C.L. and other tenderers had been involved in a scheme to pass $1 million tendering costs on to News Ltd.
1.3 J.C. advised :
(i) The passing on of tendering costs to clients has been an industry practice for the last 50 years; and
(ii) C.C.L. adopts this practice in less than 5% of their jobs, and it usually occurs on major projects; and
(iii) One of the reasons supporting the passing on of the tendering costs to clients is that a lot of clients put builders to the expense of tendering just so the client can obtain finance; and
(iv) C.C.L's latest legal advice is this industry practice may not be legal from the trade practices point of view.
2. Involvement Of The Australian Federation Of Construction Contractors (A.F.C.C.) In News Limited's Job.
2.1 J.C : The A.F.C.C. called a meeting of the main tenderers to discuss The News Ltd. Job and set fees.
2.2 J.C. : The A.F.C.C. set the fees at $500,000 for the A.F.C.C. and $100,000 for each tenderer as the cost of compiling the tenders. There is no big construction organization that does not take part in this practice. The A.F.C.C. and the M.B.A. publish rates which successful tenderers pay to cover the A.F.C.C. and M.B.A. running costs. However these published fees are nowhere near sufficient to cover running costs.
2.3 .................................................................................................................
3. Incorporating The $1 Million Fee.
In response to a question by G.B, C.D. advised the $1M fee was partly contained in the establishment costs, and partly spread throughout the schedule of rates."
On or about Monday 27 May, Mr Bird forwarded a copy of the minutes to Mr Cooper who did not indicate to Mr Bird that he had not received the document or that the minutes were inaccurate.
87 In cross-examination, Mr Bird agreed that his affidavit was based on the typed minutes. Concretes draws attention to the fact that the minutes did, but that the handwritten notes did not, mention "passing on" and that none of the documents referred to a pre-arrangement for "passing on".
88 Following negotiations, Concretes repaid the sum of $1,000,000 to News Limited. Concretes' cheque for $1,000,000 was accepted on behalf of News Limited on the following conditions which were set out in Concretes' covering letter of 23 July 1992:
"1. That payment is in full and final satisfaction of all and any alleged claims made in relation to certain tendering practices at or about the time of the submission of our original tender;
2. That the payment is without admissions as to the lawfulness or otherwise of those practices and is made as a commercial gesture of goodwill between us;
3. That the terms of our resolution of this matter shall remain confidential between us and shall not be disclosed to any third party."
Tendency evidence - the law
89 Subsection 55(1) of the Evidence Act provides:
"55. (1)The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding."
Concretes' first submission is that the evidence relied on by the Commission as tendency evidence does not pass this statutory test of relevance.
90 Subsection 97(1) of the Evidence Act is as follows:
"97. (1)Evidence of the character, reputation or conduct of a person, or a tendency that a person has or had, is not admissible to prove that a person has or had a tendency (whether because of the person's character or otherwise) to act in a particular way, or to have a particular state of mind, if:
(a) the party adducing the evidence has not given reasonable notice in writing to each other party of the party's intention to adduce the evidence; or
(b) the court thinks that the evidence would not, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value."
The Dictionary in the Evidence Act provides that:
"Probative value of evidence means the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue."
Clearly, the definition takes in the language of s 55(1). The "probative value" of evidence can therefore be conceived of as the "extent of relevance" of evidence or the "extent to which evidence is rationally probative of the existence of a fact in issue".
91 By the time of the hearing, para (a) of s 97(1) no longer presented a difficulty. Concretes' second submission is that the evidence on which the Commission relies as tendency evidence is made inadmissible by the operation of s 97(1)(b). Section 97(1)(b)'s notion of "significant probative value" has been held to mean something more than the mere relevance to which s 55(1) refers but something less than "substantial" probative value: see the criminal cases, R v Lockyer (1996) 89 A Crim R 457 at 459; R v Lock (1997) 91 A Crim R 356 at 361; R v AH (1997) 42 NSWLR 702 at 709; R v Fordham (Hunt CJ at CL, Smart J, Howie AJ, 2 December 1997, unreported) at 15 (Howie AJ). The expression "significant probative value" in s 97(1)(b) was considered by Lehane J in the civil proceeding, Zaknic Pty Ltd v Svelte Corporation Pty Ltd (1995) 61 FCR 171 at 175-176. His Honour thought that because the expression called for more than mere statutory relevance, it was permissible to turn for guidance to cases decided before the Evidence Act came into force. After referring to the cases, two of which are noted below, his Honour concluded:
"It is clear ... that where in reported cases evidence of this kind has been admitted, it has been, as a matter of commonsense, clearly and strongly probative of the relevant fact in issue: ... " (at 176)
(See too FAI General Insurance Co Ltd v McSweeney (1998) 10 ANZ Insurance Cases 61-400 at p 74,406).
92 In Aroutsidis v Illawarra Nominees Pty Ltd (1990) 21 FCR 500, which pre-dated the Evidence Act, the relevant fact in issue was whether certain representations had been made. The applicants sought to lead evidence of representations made to two other persons. That evidence was objected to on the ground that it was not logically probative of the fact in issue. Hill J allowed the evidence to be led subject to the objection. His Honour reviewed the authorities and concluded that the evidence should be rejected on the ground that it was not logically probative of the terms of the particular conversation between the relevant respondent and the applicants.
93 In D F Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 28 FCR 597, which also pre-dated the Evidence Act, the relevant "fact in issue" was again whether particular representations had been made. The applicants alleged that an officer of the respondent Bank had made certain representations, mainly oral, on the faith of which they had entered into foreign currency loan agreements with the Bank. They sought to lead evidence of "similar" statements made to three other individuals by the same officer. Gummow J drew attention to the fact that for the purpose of the general law principles governing the admissibility of "similar fact evidence", it is first necessary to understand when "facts" are to be treated as "similar". His Honour distinguished between similarity in wider and narrower senses and pointed out that two facts may have a common feature and so be similar in a wide sense, yet not be similar in a narrower sense because the feature is irrelevant to the purpose of the enquiry at hand. His Honour said:
"Facts similar, in the narrow meaning, to the fact in issue will be relevant thereto in the legal sense; it is only when this kind of relevance has been found that the question arises as to whether such similar facts, though relevant, are not admissible because of the operation of the exclusionary rule or discretion restricting the admissibility of 'similar fact' evidence ... " (at 605)
Emphasising that the dealings by the officer with customers varied according to the circumstances and that it was necessary for the applicants to establish the specific representations made to them, his Honour disallowed the evidence of what the officer had said to other customers as not being legally relevant.
94 Although both Aroutsidis and Lyons were decided under the general law, as Lehane J observed in Zaknic, such cases provide guidance as to the construction of the expression "significant probative value" in s 97(1)(b).
95 Aroutsidis, Lyons and Zaknic were civil cases, whereas the others noted above decided under s 97 were criminal. The same principles apply in both classes of case, but in practice "similar fact" or "tendency" evidence, while always considered carefully before being admitted, seems to have been admitted even less readily in criminal cases than in civil ones. The present case is not criminal: contravention of s 45 is not declared to be an "offence" and s 76 empowers the Court to order payment of a "pecuniary penalty" not a "fine". Accordingly, the legislature intended that the civil rather than the criminal standard of proof apply. On the other hand, it cannot be ignored that the section provides for payment of substantial pecuniary penalties to the Commonwealth, and, to this extent, can be seen as "quasi-criminal".
96 Concretes finally submits that if I should conclude that the evidence relied on by the Commission as tendency evidence is relevant and is not rendered inadmissible by s 97, yet I should, in the exercise of my discretion, exclude it under s 135 of the Evidence Act. That section provides, relevantly, as follows:
"135. The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:
(a) be unfairly prejudicial to a party; ... "
Conclusion on tendency evidence
97 If the evidence tendered by the Commission as tendency evidence fails to meet the relevance test laid down in s 55 of the Evidence Act it is not admissible, and if it does meet that test it is admissible unless s 97 or s 135 lead to a different result: see s 56 of the Evidence Act.
98 The first task under both s 55 and s 97 is to identify the "fact in issue in the proceeding" in relation to which the evidence is tendered. The Australian Law Reform Commission ("ALRC") in its "Interim Report No 26 on Evidence", explained the statutory test of relevance in the following terms:
"The definition requires a minimal logical connection between the evidence and the 'fact in issue'. In terms of probability, relevant evidence need not render a 'fact in issue' probable, or 'sufficiently probable' - it is enough if it only makes the fact in issue more probable or less probable than it would be without the evidence - i.e. it 'affects the probability'. The definition requires the judge to ask 'could' the evidence, if accepted, affect the probabilities. Thus, where a judge is in doubt whether a logical connection exists between a fact asserted by evidence and a 'fact in issue', he should hold that the evidence is relevant if satisfied that a reasonable jury could probably find such a logical connection. An indirect connection with a matter in issue is sufficient ... ." (vol 1 para 641, pp 350-351)
In a footnote to this passage, the ALRC stated:
"The expression 'fact in issue' should be interpreted as referring to the issues in the proceedings defined by substantive law and pleadings ... "
99 The "fact in issue in the proceeding" in relation to the Special Fee understanding is, under para 21 of the Pleading, whether at or arising out of the Meeting "each of the tenderers, and the AFCC made or arrived at an arrangement and understanding between themselves" to the effect of the matters set out in subparas (a), (b) and (c) of para 21(set out earlier). Similarly, the "fact in issue in the proceeding" in relation to the UTF understanding is, in terms of para 24, whether there arose from the Meeting "an arrangement or understanding between the tenderers to the effect" of the matters set out in subparas (a), (b) and (c) of para 24 (also set out earlier). The "fact in issue in the proceeding" is not, for example, necessarily limited to the question whether the words which Cunningham testified were spoken at the first part of the meeting, were in fact spoken. The speaking of those words was a primary fact sought to be proved from which I am asked to draw an inference as to the existence of the fact in issue as defined in the Pleading.
100 Each piece of evidence in relation to the other projects must be assessed against the statutory test as it applies to a fact in issue in the sense just mentioned. Because I have concluded that none of that evidence passes the "significant probative value" test of s 97, I do not find it necessary to decide whether it passes the threshold test of relevance laid down in s 55. I will assume that it does.
101 Section 97 endorses the common law's healthy scepticism in relation to similar fact evidence. The evidence relied on by the Commission as tendency evidence in the present case is evidence in relation to the other projects found in: the admissions made by Concretes in the schedule of information which it furnished to the Royal Commission; the AFCC's Cash Flow Forecast sheets; the internal documents of Concretes in relation to invoicing and payment in respect of other projects; the AFCC's Service Fee Estimates 1988-1989; and the testimony of Mr Bird of the admissions made by officers of Concretes in relation to the News Limited, Chullora project. None of this evidence went to the primary facts by which the arrangements or understandings in respect of other projects were made or arrived at. Perhaps the strongest of this body of evidence comprises the admissions made by Concretes to the Royal Commission and Mr Bird's evidence of his conversations with Messrs Cooper and Denny of Concretes.
102 I accept that the evidence establishes a practice in the construction industry of the payment of Special Fees to the AFCC and UTFs to unsuccessful tenderers in respect of substantial construction projects. But I think that this evidence does not, either by itself or having regard to the other evidence adduced by the Commission, have significant probative value in relation to the precise question whether, at the Meeting in early October 1988 the AFCC and the Tenderers reached the Special Fee understanding and the Tenderers reached the UTF understanding, involving in each case, at base and at least, mutual commitments or undertakings that each Tenderer would, if the successful one, pay the fees (see below). Therefore I reject the evidence relating to other projects in so far as it is relied on for the purpose mentioned.
103 Further observations can be made about the AFCC's Cash Flow Forecast sheets, the Concretes documents relating to invoicing and payment, and the AFCC's Service Fee Estimates for 1988-1989. The AFCC's Cash Flow Forecast sheets represent some unidentified person's forecast, on various bases, of receipts by the AFCC of Special Fees from construction projects. The forecasts are confusing. They seem to be characterised by internal inconsistencies and in some respects do, and in other respects do not, sit well with the terms of the arrangements of which Concretes informed the Royal Commission.
104 Similarly, Concretes' internal documents in relation to invoicing and payment in respect of the other projects are, on their face, not suggestive of the understandings pleaded. So far as the documents themselves reveal, the services described in the invoices may have been rendered, and such payments as are proved, may have been made for those services.
105 I do not overlook the fact that s 97 permits me to take into account other evidence adduced by the Commission in deciding whether the evidence presently discussed has significant probative value. But it seems inappropriate to make the initial assumption that the Special Fee understanding and the UTF understanding as pleaded were arrived at and then to admit the invoices on the basis that in conformity with that assumption, they are to be taken as meaning what they do not say.
106 Finally, in relation to the AFCC's Service Fee Estimates 1988-1989, I reject all entries other than that for the Project ("Telecom Haymarket") for the reasons I gave above in relation to the AFCC's Cash Flow Forecast sheets.
107 If I had been of the view that the evidence relied on as tendency evidence, to which I have referred, had significant probative value, I would have exercised my discretion under s 135 not to admit it on the ground that its probative value is "substantially outweighed by the danger that the evidence might: ... be unfairly prejudicial to [Concretes]". While the present proceeding is not a criminal one, the Commission seeks imposition of, no doubt, a substantial penalty on Concretes. In these circumstances, I am required to resist any temptation to find, on the basis of evidence of an industry practice, including Concretes' own participation in that practice on other occasions, that at the Meeting, Concretes arrived at the two pleaded understandings in respect of the Project.
108 Finally, if I had admitted the body of evidence in question, I would have given very little weight to it: it would have been of little persuasive effect in relation to the specific issues of fact which I am called upon to determine.
109 As noted earlier, the admissions made by Messrs Cooper and Denny in relation to the News Limited, Chullora project that I admitted into evidence on the hearing, remain in evidence for such purposes as they may serve other than proof of the reaching of the understandings at the Meeting.
The evidence of the Special Fee understanding and findings in relation to it
110 The evidence of the alleged Special Fee understanding and UTF understanding must be understood in the light of the timing of events. Tenders for the Project were invited from the Tenderers on 11 August 1988, they closed on 28 October 1988 and Hollands' tender was accepted on 1 February 1989. Accordingly, the Meeting took place a few weeks before tenders closed.
111 The evidence of the alleged Special Fee understanding is found in the uncontradicted testimonial evidence of Cunningham to which I have referred previously; the admissions Concretes made to the Royal Commission; and documents evidencing invoicing of the sum of $1,000,000 by the AFCC and payment to it by Hollands of that sum in respect of the Project.
112 I have given an account of Cunningham's evidence earlier which I accept.
113 That evidence is consistent with the schedule which Concretes supplied to the Royal Commission in response to its request dated 30 May 1991, which I construe, in the light of the terms of that request, as an admission by Concretes that there was a meeting held at the premises of the AFCC at which an arrangement was made for payment of a "Special Fee" of $1,000,000 by the successful Tenderer to the AFCC and that Hollands was the successful Tenderer.
114 There are in evidence copies of seven invoices from the AFCC to Hollands over a period from 24 July 1989 to 11 January 1990, each for $100,000. They are expressed to be for the "Fourth [Fifth, Sixth, Seventh, Eighth, Ninth or Tenth] Instalment of Service Fee on Haymarket Commonwealth Building". The last of the seven was expressed to be for the "Tenth and final Instalment of Service Fee on Haymarket Commonwealth Building". Each invoice bore a notation that it had been paid on a date specified. Four remittance advices from Hollands to the AFCC are in evidence. They are in respect of $100,000 each and are in respect of the AFCC's invoices dated 3 August, 7 September, 11 December 1989 and 11 January 1990. I infer that the AFCC invoiced Hollands for three instalments of $100,000 each prior to the invoice for the fourth instalment dated 24 July 1989, and that they, like the other seven instalments, were paid by Hollands to the AFCC. I also infer that the ten instalments were instalments of the Special Fee of $1,000,000 referred to in Cunningham's evidence and in Concretes' response to the Royal Commission.
115 These conclusions are not inconsistent with the AFCC's Cash Flow Forecast of income from Special Fees for 1989/90 on the "M[OST] LIKELY" basis, revised as at 9 July 1990. Apparently that "forecast" was an account of what had become, by 9 July 1990, historical fact (there was no Cash Flow Forecast on any other basis). For the Project, instalments of a Special Fee are recorded as received in sums of $100,000 in each of the months of August, September, October and November 1989, $200,000 in December 1989 and $100,000 in February 1990 - a total of $700,000. Nor are the conclusions mentioned inconsistent with the AFCC's "SERVICE FEE ESTIMATES 1988-89" document, which stated the Service Fee on the Project as $1,000,000 payable by monthly instalments of $100,000, although the anticipated commencement of payment "from Dec 1988" may have been a little optimistic.
116 In the result, I find, subject to an issue to be dealt with later, that at the first part of the Meeting, the AFCC through Cunningham, Concretes through Woollard, Hollands through Duff, Multiplex through Palmer and Leightons through Dixon arrived at an understanding that each of the four Tenderers would, if its tender for the Project was accepted, pay a Special Fee to the AFCC in the sum of $1,000,000. I also find, on the basis of Cunningham's testimony, that the AFCC did not provide consultancy or any other services to Hollands specifically for or relating to the Project, as distinct from the general services which it provided to Hollands in common with other members of the AFCC, including the other Tenderers.
117 In view of my resolution in favour of Concretes of another issue to be discussed later in relation to the alleged Special Fee understanding, I need say nothing further here about the other elements of it which the Commission has pleaded.
The evidence of the UTF understanding and findings in relation to it
118 The evidence relating to the UTF understanding is found in the admissions which Concretes made in the schedule it provided to the Royal Commission; the records relating to the invoicing of Hollands by the other Tenderers and payments to them by Hollands and, in effect, a non-response by Concretes to a certain notice issued by the Commission.
119 I construe the schedule which Concretes supplied to the Royal Commission in the light of its request dated 30 May 1991 as an admission by Concretes that at a meeting held at the premises of the AFCC an arrangement was made by Concretes, Hollands, Multiplex and Leightons as Tenderers for the Project, that the successful Tenderer would pay a UTF of $750,000 to each of the three unsuccessful Tenderers; that Hollands was the successful Tenderer; and that the whole of Concretes' UTF of $750,000 was paid to it by Hollands.
120 I turn now to the documents relating to the invoicing for, and payment of, the UTFs. These documents include three invoices dated 31 August, 4 September and 31 October 1989 from Concretes to Hollands for $250,000 each (a total of $750,000) for "Consultancy Services on New Commonwealth Offices Haymarket" and three corresponding remittance advices from Hollands to Concretes.
121 There are three invoices from Leightons to Hollands dated 19 April, 4 August and 31 October 1989 for $250,000 each (a total of $750,000) for "Consultancy Services - Haymarket Commonwealth Offices" (the description on the second continues "to 19/7/89" and the description on the third continues "to 19/10/89") and three corresponding remittance advices from Hollands to Leightons. As well, there are three Journal Coding Forms of Leightons referring to the receipt of the three amounts of $250,000 from Hollands.
122 Finally, there are documents relating to the invoicing by, and payment to, Multiplex. In this case, the total picture is not presented by the documents in evidence. Those documents include two invoices from Multiplex to Hollands for "Consulting Fees and Advice as agreed", one dated 15 August 1989 for $200,000 and the other dated 26 September 1989 for $250,000. This last one bears handwriting "Last Payment to M'plex". These two amounts total only $450,000. There are two remittance advices from Hollands to Multiplex corresponding with the two invoices in evidence. The Commission submits that the shortfall of $300,000 may be explained by reference to a set-off of a liability which Multiplex had to Hollands. This is, of course, conjecture.
123 As noted earlier, the Commission also relies on non-production of documents by Concretes. On 23 April 1993, the Commission gave to Concretes a notice under s 155 of the Act requiring production of certain classes of documents and on 10 August 1995 in this proceeding I ordered that Concretes give discovery of categories of documents described in the order, except documents previously produced pursuant to the s 155 notice. An effect of the s 155 notice and the order was to require production of any documents that evidenced, concerned, or related to the provision of consultancy services by Concretes to Hollands to which the three invoices issued by Concretes to Hollands related. Concretes conceded, in effect, that it had not produced or discovered any such documents other than the invoices issued by Concretes and Hollands' remittance advices to which I have already referred above.
124 I find that Concretes did not provide "consultancy" or other services to Hollands for or relating to the Project. I infer that Leightons and Multiplex did not do so either and that all three unsuccessful Tenderers were paid UTFs of $750,000 each in respect of the Project.
125 I infer on the basis of Concretes' admission to the Royal Commission, the invoicing of Hollands by the unsuccessful Tenderers in respect of the Project and payment by Hollands to them, and the non-supply of services by the unsuccessful Tenderers to Hollands notwithstanding the suggestions otherwise in their invoices to it, that at the second part of the Meeting the four Tenderers, acting through their representatives, made an arrangement or arrived at an understanding to the effect that each undertook to the three others that it would, if successful, pay to each of them, in respect of the Project, a UTF of $750,000.
126 I will discuss later the question of the other pleaded elements of the UTF understanding.
[19]
REASONING
The scope of the Pleading
127 There was much debate before me as to the scope of paras 21 and 24 of the Pleading. In each case, the pleaded effect of the understanding is described in subparas (a), (b) and (c) of the paragraph which were set out earlier. While the particulars assert that the understanding was partly express and oral and partly implied, they do not identify any of (a), (b) and (c) as having been exclusively express and oral or exclusively implied. They do, however, assert that effects (b) and (c) were implied in order to give business efficacy to the understanding. But this does not exclude the possibility that effect (a) was partly implied from the matter in particular (iv) set out earlier. It is consistent with the particulars that the express and oral part of the understanding was no more than that the successful Tenderer would pay the fees, and that the other three pleaded elements were implied, that is, (a) that it would pay the fees from the proceeds of the job, (b) that each Tenderer would take into account its commitment to pay the fees in the preparation of its tender, and (c) that the Tenderers and the AFCC would not disclose to ACS the terms of the understandings or that the Meeting had taken place.
128 The expression "take into account" is a general one. Asked for its precise meaning, the Commission, through its solicitor, replied to Concretes' solicitors prior to the hearing:
"The expression means that each tenderer would include in its calculations of costs and outgoings in relation to the job the commitment to pay the [relevant fee] if successful."
129 I do not think that pleaded element (b) necessarily signifies that the whole of the fee was to be passed on. Rather, I think it signifies simply that each Tenderer would pay the whole of the fee out of the proceeds of the particular job rather than as a general business overhead. It might do so by passing the whole of the fee on to ACS by including it as an additional cost of the Project (a "loading") to be reflected in an increased tender price, but it might also do so by paying it out of what would otherwise have been the Tenderer's profit on the Project, or by partly passing it on and partly paying it out of profit.
Sections 45 and 45A in general
130 I accept Concretes' submission that the "price" to which s 45A refers is, in the context of the facts of the present case, the price for the Project as a whole. The evidence does not suggest that separate "prices" were charged for individual components of the Project. Therefore, the question raised by paras 21 and 24 under s 45A is whether the pleaded elements (a), (b) and (c) of the Special Fee understanding and the UTF understanding had the purpose, or had or were likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining, of the price to ACS of the Project as a whole. Contrary to the Commission's submission, I do not think that the definition of "price" in s 4 of the Act as including "a charge of any description" militates against the view which I have expressed.
131 I find it sufficient in dealing with the issue of contravention to treat the case as one under the "likely to have the effect" limb and will discuss the meaning of "likely" later.
132 The terms of s 45A(1) do not limit the means by which an understanding may be shown to be likely to have the effect of fixing, controlling or maintaining a price: all that is required is that there be the necessary link between the described understanding and that likely effect. Clearly, likelihood is to be assessed when the agreement, arrangement or understanding is made or arrived at.
133 The notion of "fixing, controlling or maintaining" in s 45A(1) of the Act has been discussed in several cases which are reviewed in Heydon Trade Practices Law at [4.750] - [4.920]. As the learned author observes, "[t]o fix prices is the most precise case" ([4.780] at p 2223). It has been said that "to maintain a price assumes that it has been fixed beforehand": Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437 (Lockhart J) at 449. The contrary is, however, arguable: it is arguable, for example, that it would "maintain" a price not yet fixed at a minimum level if all tenderers were to reach an understanding that a component sufficiently influential on price was to be included in their tender prices. I need not pursue this issue because it seems to me that the notion of "controlling" a price best fits the case pleaded and because the present case could not be one of "fixing" or "maintaining" the price to be charged to ACS while not one of "controlling" it. In saying this, I do not decide that the present case could not be one of "fixing" or "maintaining": it is simply unnecessary for me to decide the question. Again, Heydon observes that there may be no distinction between the words "control" and "maintain" and that it is perhaps even incorrect to split the expression "fix, control or maintain" at all, except by reference to the fact that price-fixing has been found to be more "traditionally observable" ([4.810] at p 2224).
134 I will have occasion later to discuss in some detail the meaning of the notion of "controlling" a price in the context of the facts and the parties' submissions in the present case.
The meaning of "arrangement or understanding"
135 In Newton v Federal Commissioner of Taxation (1958) 98 CLR 1 the Privy Council was concerned with the expression "[e]very contract, agreement, or arrangement" in s 260 of the Income Tax and Social Services Contribution Assessment Act 1936 (Cth), and expressed the opinion (at 7):
"that the word 'arrangement' is apt to describe something less than a binding contract or agreement, something in the nature of an understanding between two or more persons - a plan arranged between them which may not be enforceable at law." (emphasis supplied)
Clearly, the scope of ss 45(2) and 45A(1) with which I am concerned extends beyond legally enforceable agreements, that is, contracts.
136 In British Basic Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 1 WLR 727, the English Court of Appeal had to consider the meaning of the expression "any agreement or arrangement, whether or not it is or is intended to be enforceable" in s 6 of the Restrictive Trade Practices Act 1956 (UK). It was argued that the trial Judge had erred in holding that an arrangement within the meaning of the expression exists when, by communications between the parties, "each has intentionally aroused in the other an expectation that he will act in a certain way." It was submitted that the expression also required "that there must be mutuality in the acceptance of rights and obligations". In the Court of Appeal, Willmer LJ said (at 739):
" ..., I think it is highly significant that Parliament did not see fit to include any definition of 'arrangement.' I infer from this that it was intended that the word should be construed in its ordinary or popular sense. Though it may not be easy to put into words, everybody knows what is meant by an arrangement between two or more parties. If the arrangement is intended to be enforceable by legal proceedings, as in the case where it is made for good consideration, it may no doubt properly be described as an agreement. But the Act of 1956 clearly contemplates that there may be arrangements which are not enforceable by legal proceedings, but which create only moral obligations or obligations binding in honour. This seems to me to be entirely consistent with the dictum of Upjohn J. to which I have already referred. Nor do I consider that there is any inconsistency between that and the view expressed by the judge in the present case. For when each of two or more parties intentionally arouses in the others an expectation that he will act in a certain way, it seems to me that he incurs at least a moral obligation to do so. An arrangement as so defined is therefore something 'whereby the parties to it accept mutual rights and obligations.'"
In the same case, Diplock LJ said that there were many ways in which arrangements might be made and (at 747):
"[I]t is sufficient to constitute an arrangement between A and B, if (1) A makes a representation as to his future conduct with the expectation and intention that such conduct on his part will operate as an inducement to B to act in a particular way, (2) such representation is communicated to B, who has knowledge that A so expected and intended, and (3) such representation or A's conduct in fulfilment of it operates as an inducement, whether among other inducements or not, to B to act in that particular way." (at 747)
137 In Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286, a Full Court of this Court had to consider the expression "a contract, arrangement or understanding to the extent that it is in restraint of trade or commerce" in the then s 45(2)(b) of the Act. Smithers J referred to Newton and British Basic Slag and said (at 291) of the expression "arrangement", that by parity of reasoning with British Basic Slag:
" ... the existence of an arrangement of the kind contemplated in s.45 is conditional upon a meeting of the minds of the parties to the arrangement in which one of them is understood, by the other or others, and intends to be so understood, as undertaking, in the role of a reasonable and conscientious man, to regard himself as being in some degree under a duty, moral or legal, to conduct himself in some particular way, at any rate so long as the other party or parties conducted themselves in the way contemplated by the arrangement."
His Honour added:
"Where the minds of the parties are at one that a proposed transaction between them proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a particular course of conduct, it would seem that there would be an understanding within the meaning of the Act."
138 In Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) (1979) 40 FLR 83, Fisher J considered the notion of a "contract, arrangement or understanding" in the context of s 45 of the Act. After setting out certain passages from the cases, his Honour concluded (at 89):
"A significant feature of each of the above passages is the emphasis placed upon the necessity for each of the parties to have communicated with the other, for each to have raised an expectation in the mind of the other, and for each to have accepted an obligation qua the other. These are in my opinion the essential elements of the requisite meeting of minds." (emphasis supplied)
(His Honour appears to have seen the words "arrangement" and "understanding" as synonymous in the present context, as Toohey J seems to have done in Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 32.)
139 On appeal in the Nicholas Enterprises case (see Morphett Arms Hotel Pty Ltd v Trade Practices Commission (1980) 30 ALR 88), the Full Court expressed agreement with Fisher J's statement and application of the relevant principles of law subject to one qualification: the Court thought it possible to have an understanding restricted to the conduct which one of the parties to it would pursue "without any element of mutual obligation, in so far as the other party or parties to the understanding are concerned" (at 91-92). It was not, however, necessary for their Honours to reach any final view on this question which has since been left open, although the view has been expressed that in an arrangement or understanding where one party assumes an obligation, a reciprocal obligation would commonly be assumed by the other party or parties; see Trade Practices Commission v Email Ltd (1980) 43 FLR 383 (Lockhart J) at 395-397; Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 5 FCR 140 (Fox J) at 144; Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 (FC) at 230-231 (Lockhart J), 238 (Spender and Lee JJ).
140 The present case does not raise the issue of the undertaking of an obligation by one Tenderer and not by the others: the positions of all four Tenderers were relevantly identical.
141 The cases require that at least one party "assume an obligation" or give an "assurance" or "undertaking" that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party. In the present case, for example, each individual who attended the Meeting may have expected that as a matter of fact the others would return to their respective offices by car, or, to express the matter differently, each may have been expected by the others to act in that way. Each may even have "aroused" that expectation by things he said at the Meeting. But these factual expectations do not found an "understanding" in the sense in which the word is used in ss 45 and 45A. The conjunction of the word "understanding" with the words "agreement" and "arrangement" and the nature of the provisions show that something more is required. With respect, the first passage set out above from the judgment of Smithers J in Top Performance Motors, although addressing the term "arrangement", seems to me to describe appropriately that further necessary element of the "understanding" to which the provisions refer.
142 The following questions now arise:
In relation to the Special Fee, was there an "arrangement or understanding" at all or a levy imposed unilaterally by the AFCC?
What commitments, obligations, assurances or undertakings (including unenforceable ones) if any, did each Tenderer make, assume or give in favour of the others?
Were the Special Fee understanding and UTF understanding likely to have the effect of controlling the price to be charged to ACS for the Project?
These questions are interrelated in some respects.
In relation to the Special Fee, was there an "arrangement or understanding" at all or a levy imposed unilaterally by the AFCC?
143 Concretes submits that Cunningham's statement "the special fee for this tender will be $1000 000" was a stipulation made on behalf of the AFCC to which the Tenderers submitted, rather than an "offer" or "invitation to treat" out of which an "arrangement" or "understanding" within s 45A of the Act could arise.
144 The AFCC is an association of employers that was registered as an organisation of employers under the Conciliation and Arbitration Act 1904 (Cth) on 22 October 1976 and as an Industrial Union of Employers under the Industrial Arbitration Act 1940 (NSW) on 21 October 1988. It had Rules dated June 1988. The objects for which it was established were stated in Rule 2. These may be summarily described as the provision of a wide range of services in the interests of its members. Rule 3 provided that the AFCC consisted of
"an unlimited number of employers who carry on business as construction contractors in the construction contracting industry."
Rules 5 and 11 were as follows:
"RULE 5:
All employers admitted to membership of the Federation shall be deemed to have accepted and be bound by these Rules."
RULE 11:
The Federation may from time to time set specific fees to be payable in respect of contracts won by members. This power may be exercised to [sic - by] the Executive Committee on behalf of the Federation."
145 As members of the AFCC, the Tenderers were bound by Rule 11.
146 The nature of "Special Fees" appears from minutes of the annual general meetings of the AFCC held on 14 November 1986 and 6 November 1987 together with the testimony of Cunningham and Eagar. The nature of Special Fees and the Tenderers' membership of the AFCC formed the background, known to those present at the Meeting, to the discussion which took place at it.
147 According to the minutes of the annual general meeting held on 14 November 1986, the Honorary Treasurer of the AFCC, Mr Kelly, referred to the AFCC's "increased reliance on service fees". He described them as being levied on particular projects. I infer that they are the "Special Fees" to which Cunningham and Eagar referred and with which I am concerned. Mr Kelly raised the matter of the discretion to levy such Fees. Naturally, it would be in the interests of a successful tenderer that any Special Fee that it had to pay be kept to a minimum. That is, in this respect there was a tension between the interests of a successful tenderer and those of the general membership. Therefore, according to Mr Kelly, it was necessary that the position be clarified as to who had power to impose a Special Fee on successful tenderers. The minutes record in the following terms the passing of a resolution on his motion:
"[T]he membership of AFCC hereby resolves that the National Council may charge separate service fees on particular projects at its discretion and may delegate such power to the Executive Committee or to one or more of the Branch Committees."
148 The case as pleaded by the Commission is consistent with this evidence. According to para 36(c) of the Pleading, subsequent to the Meeting:
"Richmond caused or procured the AFCC by its National Executive Committee to ratify and levy the Special Fee of $1,000,000 on Hollands."
149 The minutes of the annual general meeting held on 6 November 1987 reveal other sources of the AFCC's revenue, namely, "subscriptions" and "contract fees. Both subscriptions and contract fees differed from Special Fees in that they were "standard" fees set by an annual general meeting for a financial year and applied according to their terms to members throughout the year. (If it is necessary in order to support this finding to admit the attachment to Agenda Item 9 dealt with at the annual general meeting (page 42 of Exhibit A2) I would admit it.) Special Fees, on the other hand, were "special" in that they were applied at discretion to particular projects, apparently only large ones.
150 Both Cunningham and Eagar testified that the range of Special Fees imposed was 0.5 per cent to 0.75 per cent of the estimated total value of a project.
151 In summary, a Special Fee was a levy made by the AFCC at its discretion on successful tenderers in respect of particular projects; it supplemented the AFCC's revenue derived from subscriptions and contract fees for the funding of the services it provided to its members generally; and the AFCC had come to rely increasingly on Special Fees for that purpose.
152 Another reason why I find that the purpose of Special Fees was to fund the AFCC for services provided by it to its members generally is that successful tenderers would not have paid them to the AFCC for it to use otherwise than in pursuit of its objects and we know from Cunningham that the AFCC did not agree to provide any particular services for the Special Fee of $1,000,000 and did not in fact provide services to the successful Tenderer in respect of the Project.
153 In my view, the proper analysis of what happened in the first part of the Meeting is that Cunningham was seeking the Tenderers' acquiescence in the amount of $1,000,000 for a Special Fee so that he could report back to his superiors at the AFCC that there would be no resistance to a levy in that sum.
154 Cunningham was able to announce to the Tenderers, not only
"The special fee for this tender will be $1000 000"
but also, in order to persuade them to acquiesce in that amount, he could say
"It is a $200 000 000 job. At 0.5% to 0.75% it is at the lower end of the range."
155 The Tenderers did not question the AFCC's right to levy a Special Fee on the successful Tenderer or raise an issue as to any services to be rendered by the AFCC for that Fee: they already understood that the AFCC was entitled at its discretion to levy a Special Fee on the successful Tenderer to help fund the provision of services generally to its members. The only matter on which they might have wished to be heard by the AFCC was the amount, and Cunningham was able to allay any disquiet they may have felt in that respect.
156 My analysis above of what happened at the first part of the Meeting has implications for questions 2 and 3 below as they relate to the Special Fee. First, either there was no understanding at all in relation to the Special Fee or there was only one that the Tenderers would not offer resistance to the amount of $1,000,000. But this is not the understanding pleaded. Second, on the assumption in favour of the Commission that the word "likely" in s 45A refers only to a "real" or "not remote" possibility (see below), I do not think that an understanding so described was likely to have the effect of controlling the price that ACS was to be charged. If anything was likely to have that effect, it was the actual levying of the fee by the AFCC. The supposed understanding that the Tenderers would not resist was causally too remote from the charging of the price.
157 For the reasons mentioned above, I do not think that the Commission's case is made out in relation to the Special Fee understanding.
[20]
(The Tender Business Paper recommended acceptance of the lowest fixed lump sum price of Hollands of $159,968,732.59, subject to certain reductions which gave a revised tender price recommended for acceptance of $159,530,912.59.)
192 Sixth, in any event, I do not think that the likelihood of the UTFs' controlling the price is to be assessed by comparing the amount of $2,250,000 with the tender prices alone: a more appropriate comparison is between that amount and the amount of expected profit.
193 There is no evidence of the level of profit being calculated by the other Tenderers but Concretes' "Tender Summary" dated 28 October 1988 shows that it was applying a 5 per cent profit margin to its estimate of the cost to it of carrying out the Project. That document showed a net total "building cost" of $132,998,852 to which a 5 per cent margin was applied giving a profit of $6,649,942, and a total of "other costs" of $32,244,006 to which again a 5 per cent profit margin was applied giving a profit of $1,612,200. In the result, the "tender total" figure was $173,505,002 (according to the ACS "Tender Business Paper" dated 9 January 1989 referred to earlier, Concretes' fixed price tender was ultimately in fact a little lower at $169,180,000).
194 The UTFs totalling $2,250,000 may be compared with the profit figure which, calculated at 5 per cent on a tender price of $169,180,000, was $8,459,000. In my opinion, a tenderer would not readily absorb fees totalling $2,250,000 in a profit of $8,459,000 ($2,250,000 is 26.6 per cent of $8,459,000). Rather than do that, a tenderer would probably have increased the amount of its tender price so as to cover, in whole or in substantial part, the UTFs of $2,250,000.
195 There is no evidence of the level of profit which the other Tenderers were expecting to make. But the fixed lump sum tender prices were within the fairly narrow range of $159,968,732 to $173,400,000. Even if one were to assume a level of expected profit substantially greater than that of Concretes, it is more likely than not that a cost as large as $2,250,000 would not have been borne by a Tenderer out of its expected profit but would have been passed on to ACS, in whole or in substantial part, by being taken into account as an additional cost of the Project in the calculation of its tender price.
196 Seventh, the evidence shows that Concretes treated the Special Fee of $1,000,000 as a cost of the Project in the calculation of its tender price. Although this does not establish that it or the other three Tenderers similarly treated the UTFs totalling $2,250,000, it does show at least that there was nothing improbable in a Tenderer's treating fees of the size of $2,250,000 in that way.
197 Eighth, according to Mr Bird, Mr Cooper and Mr Denny of Concretes, admitted to him that Concretes "passed on" tendering costs "in about 2 of every 20 to 40 tenders ... usually on major projects", and that Concretes had passed on the smaller UTFs totalling $500,000 (and the Special Fee of $500,000) on the News Limited, Chullora project. Notwithstanding the cross-examination of Mr Bird and the absence of a reference to "passing on" in Mr Bird's memorandum to Mr Muscat which he prepared on the day of the meeting (the memorandum referred to the notion of "factoring in"), I find that those words or words to the same effect were used. That was the overall effect of Mr Bird's evidence in cross-examination which I found persuasive. Moreover, it must be remembered that the context in which the meeting took place and an explanation from Concretes was sought, was the publicised allegation that News Limited had been the victim of a "building rort" by Concretes on the Chullora project. While not conclusive, the admission by Mr Cooper and Mr Denny shows that it was in conformity with Concretes' practice on a major project such as the Project, to treat UTFs as "loadings" to be passed on to the client. I infer that it was more likely than not that the other Tenderers did likewise.
198 Ninth, the understanding that payment of the UTFs would not be disclosed to ACS facilitated a "loading" of the whole of those fees into the calculation of the tender prices. It made it possible for all Tenderers to add on the whole of the UTFs without the possibility of detection. I acknowledge that a Tenderer wishing to do so could not be sure that the others would do so too: they might choose to bear part of the UTFs themselves by "shaving their profits". But in my view, the secrecy surrounding the understanding made it more likely than not that the whole of the UTFs would be "passed on" to ACS, leaving the Tenderers' price competitive above the $2,250,000 "platform".
199 I infer that the UTF understanding was likely to have the effect of controlling, by way of increasing, by $2,250,000 or by a substantial part of that sum, the price that ACS would be charged for the Project. The Tenderers knew many of the matters referred to above, including their mutual undertakings of secrecy and the fact that none of them would readily pay UTFs totalling $2,250,000 out of the profit on the Project and would prefer to pass it on to ACS.
Extent of price increase
200 Notwithstanding my conclusions above as to what I infer was more likely than not, I do not know for certain that the price charged to ACS was a particular amount (such as, $2,250,000) higher than what it would otherwise have been.
201 In the absence of the UTF understanding, would the Tenderers have taken into account tendering costs in the calculation of their tender prices? If so, what would the effect of their doing so have been on their tender prices? Which Tenderer would have been the successful one? How would its price for the project have compared with Hollands' actual tender price? How was the cost of unsuccessful tendering treated by the Tenderers prior to the introduction of the practice with which this case has been concerned? The evidence before me does not touch on these questions at all. In the absence of such evidence, I do not infer that unsuccessful tendering costs would have been reflected in the tender prices at all. (Analogous questions can be asked on the hypothesis that the Special Fee was not levied.)
202 It is open to Concretes (and to the Commission) on the hearing on penalty to lead evidence directed to establishing the extent to which the UTF understanding in fact caused ACS to be charged a higher price than that which it would have been charged in its absence.
[21]
The issue of contravention of s 52 of the Act
203 As noted earlier, the Commission alleges, relevantly, that Concretes represented to ACS by implication and by silence that its tender was free of collusion and fairly priced, and that Concretes thereby engaged in conduct which was misleading and deceptive or likely to mislead and deceive, in contravention of s 52 of the Act. In this respect, the Commission seeks only declaratory relief.
204 The Act provides in s 4(2) that a reference in it to engaging in conduct shall be read as a reference to, relevantly, "refusing to do any act" and that a reference to refusing to do an act includes a reference to "refraining (otherwise than inadvertently) from doing that act." But as Gummow J (with whom Black CJ and Cooper J agreed) said in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, after referring to this provision (at 40):
" ... in any case where a failure to speak is relied upon the question must be whether in particular circumstances the silence constitutes or is part of misleading or deceptive conduct. The expanded meaning given by s 4(2) to 'conduct' should not distract attention from the fundamental issue in the case at hand."
205 In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477, Bowen CJ pointed out that silence may be misleading where there is a failure to mention a qualification to a prior statement or a failure to inform of a change of events which renders a prior statement misleading (at 489-490). That is, silence can be misleading because of the relationship between it and positive conduct. As the Chief Justice recognised in the same case, silence may also be misleading where it constitutes a failure to perform a "duty of disclosure" and such a duty is not limited to the categories of duty recognised at common law and in equity: it may arise from the circumstances of the particular case.
206 There has been some discussion in the authorities of the use of the notion of "duty" in the present context and a better notion to invoke is probably that of "reasonable expectation": cf Kimberley NZI Finance Ltd v Toreo Pty Ltd (1989) ATPR (Digest) 46-054 (French J) at p 53,195; Demagogue v Ramensky (1992) 39 FCR 31 (FC) at 40-41 (Gummow J); Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 (Hill J) at 114; Lawson v Ampol Ltd (1993) ATPR 41-204 (Einfeld J) at p 40,863; Warner v Elders Rural Finance Ltd (1993) 41 FCR 399 (FC) at 401-402 (Foster and Drummond JJ), 404-405 (Hill J) (see too Diane Skapinker "Silence is golden - or is it?" (1995) 69 ALJ 165).
207 In Rhone-Poulenc, above, the Court had to decide whether the respondents engaged in misleading conduct by selling a fungicide which was not registered as required under the Pesticides Act 1978 (NSW) and the Agricultural Standards Act 1952 (Qld), and which was therefore under both Acts subject to seizure from the buyers and forfeiture, and not able to be lawfully used as a fungicide. Bowen CJ and Lockhart J held that the respondents had not contravened s 52 (Jackson J dissented). Bowen CJ observed that neither the category of relationship between the parties (seller and buyer) nor the particular circumstances of the case gave rise to a duty to disclose. The respondents' conduct would not, according to his Honour, lead a buyer into error as to whether the respondents had complied with the law requiring registration as they had been silent in this respect (at 490-491). Similarly, Lockhart J contrasted the facts of the case with a hypothetical situation of the respondents' having placed on the container labels stating that the product was registered under the relevant legislation (at 505).
208 In subsequent cases also, silence has not readily been found to be misleading or deceptive. In Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458, the New South Wales Court of Appeal held that the respondents were not obliged to disclose to the appellant new facts which might improve his bargaining position in commercial negotiations at their expense. Gleeson CJ, with whom Samuels AJA and Meagher JA agreed, said (at 475):
"Where parties are dealing at arm's length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice. It would normally only be if there were an obligation of full disclosure that a different result would follow. That could occur, for example, by reason of some feature of the relationship between the parties, or because previous communications between them gave rise to a duty to add to or correct earlier information."
209 In Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 a Full Court of this Court made it clear (at 466) that s 52 "gives rise to no duty to provide information" and (at 467) that:
"[w]here the contravention of s 52 alleged involves a failure to make a full and fair disclosure of information, the applicant carries the onus of establishing how or in what manner that which was said involved error or how that which was left unsaid had the potential to mislead or deceive."
210 The relationship between Concretes and ACS was that of tenderer and client. That relationship is not of a class that gives rise to a "duty" or "reasonable expectation" of disclosure. Nor, in my opinion, did any particular circumstances of the case do so.
211 Nor do I think that Concretes' non-disclosure falsified a positive statement made by it. The "conditions of tender" for the Project stated:
"The tender Price in accordance with these Conditions of Tender shall be for a lump sum contract. The Tenderer must tender two Tender Prices. The first Tender Price is to be for a lump sum subject to adjustment for rise and fall in costs … The second Tender Price is to be for a fixed lump sum not subject to any adjustment for rise and fall in costs."
The Commission does not submit that the words of Concretes' tender in response to this invitation gave rise to a positive misrepresentation or that Concretes did or said anything to cause ACS to direct its mind to the matter of collusion or to form a positive belief in relation to that matter.
212 The implied representations contended for (in substance, absence of collusion) would apply to tenders universally. Moreover, it is difficult to see why, if the Commission's submission reflects the law, there would not be an implied representation by all parties negotiating contracts at arm's length that they have complied with all laws and disclosed all matters, non-compliance with and non-disclosure of which, would or might be detrimental to the other party. But s 52 has not been construed so broadly; cf Rhone-Poulenc above at 490-491 per Bowen CJ.
213 As Concretes and ACS negotiated at arm's length, and no special circumstances or communications can be pointed to from which a duty or a reasonable expectation of disclosure arose, I do not think that Concretes engaged in misleading or deceptive conduct as alleged. Indeed, unlike the buyers of the fungicide in Rhone-Poulenc, ACS received the full benefit of what was held out to it - a tender by Concretes to undertake the Project for the tender price without any possibility of defeasance.
214 I am not persuaded to alter the views expressed above by the decision of a Full Court of this Court given recently and since the hearing in the present case, in Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd [1999] FCA 898. In that case, the appellant promoted and sold certain "face-lift tilt-up equipment" without revealing that use of it in a certain way would or might constitute an infringement of patent. The Full Court upheld the trial Judge's conclusion that the activity of promoting and selling the equipment without warning customers of the "liability" they were being induced to incur, constituted misleading conduct. In the present case, as noted above, there was no chance of ACS's being deprived of the benefit of its contract with the successful Tenderer or of incurring any liability.
215 There is a question as to whether it would be appropriate to grant the declaration sought by the Commission. The Commission seeks no other relief in respect of the alleged contravention of s 52. In some cases it is appropriate to make a declaration of a finding of contravention in the absence of substantive relief; cf Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 (FC) at 93-101 (Sheppard J, with whom Foster J agreed), 107-112 (Hill J); RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 (FC) at 175-178 (Beaumont and Spender JJ). In view of my conclusion expressed above, I need not decide if the present is such a case.
[22]
CONCLUSION
216 In my view, the Commission has established according to the civil standard of the balance of probabilities, but bearing in mind the warning given in such cases as Briginshaw v Briginshaw (1938) 60 CLR 336 and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170, that Concretes made and arrived at an arrangement or understanding with the other three Tenderers in the second part of the Meeting that the successful Tenderer would pay a UTF of $750,000 to each of the three unsuccessful Tenderers in respect of the Project and that that arrangement or understanding was likely to have the effect of controlling the price that ACS would be charged for the Project.
217 I will list the proceeding for a date when I will give directions in relation to the hearing on penalty.
I certify that the preceding two hundred and seventeen (217) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.
[23]
Associate:
Dated: 14 July 1999
Counsel for the Applicant: Mr F M Douglas QC with Mr P R Clay and Ms P A Painter
[24]
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Respondent: Mr J D Heydon QC with Mr G O'L Reynolds
[25]
Solicitor for the Respondent: Corrs Chambers Westgarth
[26]
Date of Hearing: 6, 7, 8 October 1998
[27]
Documents within Exhibit A2, with identification of those documents or parts of documents not admissible as evidence of tendency by reason of the operation of s 97 of the Evidence Act 1995
VOLUME 1
Tab 1
1.1-1.3 (1-34) admitted
1.4 (35-42) pages 35, 36, 39 ("Service Fees") and 41 admitted
1.5 (43) entry for "Telecom Haymarket" admitted; otherwise not admitted
1.6 (44-54) entries for the Project admitted; otherwise not admitted
1.7 (55-58) not admitted
1.8 (59-65) not admitted
Tab 2
2.1 (76-77) admitted to show competitiveness
2.2 (78-80) admitted to show competitiveness
Tab 3
3.1-3.20 (81-380) admitted, except for pp 141-153 which were excluded from the tender
Tab 4
4.1-4.4 (381-425) admitted
Tab 5
5.1 (426-449) admitted
Tab 6
6.1-6.3 (450-458) admitted
Tab 7 [There is no Tab 7]
Tab 8 [There is no Tab 8]
VOLUME 2
Tab 9
9.1 (1544-1609) s 97 operates in the respect discussed in Reasons
9.2 (1610-1653) s 97 operates in the respect discussed in Reasons
Tab 10
10.1 (1654-1683) admitted
10.2 (1684-1686) admitted
10.3 (1687) s 97 operates in the respect discussed in Reasons
10.4 (1688) s 97 operates in the respect discussed in Reasons
10.5 (1689) s 97 operates in the respect discussed in Reasons
10.6 (1690-1691) admitted
10.7 (1692) line of entries relating to the Project admitted; s 97 operates on the remaining entries in the respect discussed in Reasons
10.8 (1693-1699) pages 1693-1695 relating to the Project admitted; s 97 operates on the remainder in the respect discussed in Reasons
Tab 11
11.1-11.4 admitted
Metro Plaza, North Sydney project
54 Concretes informed the Royal Commission that on this project there was an arrangement for payment of a Special Fee of $1,000,000 to the AFCC and an arrangement for payment of a UTF of $500,000 to each of the unsuccessful tenderers; that Girvan was the successful tenderer; that it (Concretes), Multiplex, Hollands and Leightons were the unsuccessful tenderers; and that Concretes had received from Girvan only $100,000 of its UTF of $500,000, leaving $400,000 unpaid, as Girvan was stated to be in liquidation.
Special Fee
55 The AFCC's "M[OST] LIKELY" 1989/90 cash flow forecast revised on 9 July 1990 showed it receiving $75,000 in August 1989 and $50,000 in each of the months of October and November 1989 and January 1990 - a total of $225,000 - a relatively small sum in relation to the $1,000,000 Special Fee advised by Concretes to the Royal Commission (one can speculate that this may have been due to Girvan's being in liquidation). There is no other entry in the AFCC's Cash Flow Forecast documents relating to this project.
UTFs
56 Concretes invoiced Girvan $100,000 on 1 May 1989, $100,000 on 1 or 31 (or both) August 1989, and $100,000 on 31 October 1989. Each invoice was in respect of "Metro Plaza, North Sydney Consultancy Services". Although the documents are not clear, there may be five rather than four separate invoices for $100,000 each. If there are five, they would give a total of $500,000, that is, the amount of the UTF referred to by Concretes in the schedule it supplied to the Royal Commission. Apparently only one invoice was paid by Girvan. This is consistent with the information that Concretes gave to the Royal Commission.
News Limited, Chullora project
57 This project was unusual in that there was testimonial evidence as well as documentary evidence relating to it. I will address the testimonial evidence later.
58 Concretes informed the Royal Commission that on this project there was an arrangement for payment of a Special Fee of $500,000 to the AFCC or the MBA and a UTF of $100,000 payable to each of five unsuccessful tenderers; that it (Concretes) was the successful tenderer and that the unsuccessful ones were Leightons, Sabemo, Thiess, Hollands and Edwards; and that the fees paid by Concretes and charged to the client (a total of $1,000,000) were to be reimbursed to the client.
Special Fee
59 The AFCC's "DREAMTIME" cash flow forecast of special contract fees for 1990-1991 revised on 9 July 1990 showed $50,000 being received for the months of September and November 1990 and January, March and May 1991 - a total of $250,000. For the "BEST" forecast for 1990/91, revised on 6 February 1991, no receipt was forecast. On a separate "DREAMTIME" forecast for 1990/91, revised on 6 February 1991, there was no entry against the News Limited, Chullora project. On a "DREAMTIME" forecast for 1991/92 and a "MOST LIKELY" forecast for 1991/92, both revised on 6 February 1991, $400,000 was forecast to be received in June 1992.
60 By an internal Concretes memo dated 29 June 1990, John Cooper stated to Paul White that "a sum of $500,000 was ... included for AFCC in our News Limited bid". The memo continued:
"Regarding News Limited, the amount is $0.5 million - we have received no service for it ... . I will meet with Cunningham and renegotiate the fee for News Limited.
The Estimating Department has now been instructed not to include any special fee provisions, either incoming or outgoing."
(Concretes submits that this evidence supports its contention that the Special Fee was a charge for services rendered by the AFCC).
61 An internal Concretes file note dated 2 July 1990 apparently of a meeting between John Cooper (of Concretes), Phil McWilliams unidentified and Cunningham (AFCC), stated:
"With regard to News Limited - since this was basically a schedule of rates job how do we agree a fee? John Cooper suggested we might see a fee of $200,000 being acceptable.
AFCC to check with their internal records and come back - probably by Wednesday 4 July 1990."
UTFs
62 Other documents show that on 15 November 1990 Leightons invoiced the successful tenderer, Concretes, $40,000 for "Consulting Service News Ltd Chullora 1st & 2nd Progress Claim" and within Concretes' records that invoice was allocated to the Sydney Print Complex. It will be remembered, however, that according to the information supplied by Concretes to the Royal Commission, the UTF on this project was $100,000.
Airport Central project
63 Concretes told the Royal Commission that on this project there was a meeting at the office of the AFCC at which an arrangement was made for payment of a Special Fee of $750,000 to the AFCC and an arrangement was made for payment of a UTF of $750,000 to each of two unsuccessful tenderers; that it (Concretes) was the successful tenderer, that Multiplex and Hollands were the unsuccessful tenderers; and that the "fee" (which, in light of documents discussed below apparently refers to the Special Fee), was "no longer applicable due to renegotiated price".
Special Fee
64 According to the AFCC's "M[OST] LIKELY" forecast for 1989/90, revised on 9 July 1990, the AFCC forecast receiving no fees on this project. According to its "DREAMTIME" forecast for 1990/91, revised on 9 July 1990, it predicted receiving for that year $100,000 in each of the months of October, November and December 1990 and January and February 1991. For the year 1991/92, there are "DREAMTIME", "M[OST] LIKELY" and a second "DREAMTIME" forecast in evidence. According to the "DREAMTIME" forecast for 1991/92, revised on 9 July 1990, the AFCC forecast receiving $50,000 in each of the months of July and October 1991 and January and April 1992 - a total of only $200,000.
65 By an internal Concretes memo dated 29 June 1990, Mr Cooper advised Mr White that it had come to Mr Cooper's notice that $750,000 had been included as an AFCC fee in Concretes' bid for Airport Central and that since the project had been tendered for more than a year earlier and was subsequently renegotiated with no reference to the original tender, he (Mr Cooper) could see no entitlement on the AFCC's part to be paid. He advised Mr White that the "Estimating Department" had been instructed "notto include anyspecial fee provisions, either incoming or outgoing".
66 An internal Concretes file note dated 2 July 1990 referred to a meeting between Mr Cooper of Concretes, a Mr Phil McWilliams, and Cunningham over the question of the AFCC's fee payable in respect of the Airport Central project in which Concretes' position was that in view of the change to a "screwed down" negotiated fixed price job, the sum of $750,000 should not be payable to the AFCC. According to the note, Mr Cunningham had suggested that there was an agreement that if the contract became a "negotiated" one, $500,000 rather than $750,000 would be the AFCC's fee. The file note continued:
"CCL suggested that we could not afford anything - AFCC suggested perhaps postponing/deferring the fee to acceptable long term payments or wait for another job that could afford it."
67 Finally, there is in evidence a file note of a meeting attended by Messrs White and Cooper of Concretes and Richmond at which it was agreed that Concretes should make an ex gratia payment of $250,000 by 30 June 1992 "[t]o cover changed Airport Central condition".
UTFs
68 On 11 October 1990, Hollands invoiced Concretes for $200,000 for "Consulting Services (Airport Central)" from July 1990 to October 1990; on 5 November 1990 Hollands invoiced Concretes for $50,000 for "Consulting Services (Airport Central)" for November 1990; on 5 December 1990 Hollands invoiced Concretes for $50,000 for "Consulting Services (Airport Central)" for December 1990; on 14 January 1991 Hollands invoiced Concretes for $50,000 for "Consulting Services (Airport Central)" for January 1991; and on 8 February 1991 Hollands invoiced Concretes for $50,000 for "Consulting Services (Airport Central)" for February 1991. The total of these invoices was $400,000, that is, $350,000 short of the $750,000 referred to by Concretes in the schedule which it provided to the Royal Commission. On two of the invoices the words "PAY AS SUB CONTRACT" are stamped. There are also two documents allocating invoices to this particular project.
Commonwealth Bank Refurbishment project
69 Concretes advised the Royal Commission that at a meeting held at premises of the MBA, it was arranged that on this project a Special Fee of $250,000 was payable to the MBA and a UTF of $250,000 was payable to each of three unsuccessful tenderers; that Leightons was the successful tenderer and that the unsuccessful ones were Concretes, Baulderstone and one other unidentified company; and that Leightons had paid to Concretes $200,000 of the $250,000 UTF payable to it, leaving $50,000 unpaid.
Special Fee
70 The AFCC's Cash Flow Forecast sheets do not include any fee payable to it in respect of this project.
UTFs
71 There are documents in evidence showing that Concretes invoiced Leightons for "Consultancy Services" in respect of the "Commonwealth Bank" for a sum of $50,000 on each of 17 May 1988 and 8 February 1989, and $150,000 on 9 November 1989. The first of these invoices was apparently paid on 28 June 1988, the second on 16 May 1989, and the third, as to $100,000 only, on 2 January 1990, leaving a balance of $50,000 outstanding. This is consistent with what Concretes had told the Royal Commission.
Newcastle Hospital project
Concretes told the Royal Commission that there was a meeting at the MBA premises when an arrangement was made that on this project a Special Fee of $200,000 would be payable to the MBA and a UTF of $500,000 would be payable to each of five unsuccessful tenderers; that "McCloy-Hutcherson" was the successful tenderer and that Concretes and four other construction companies, Hollands, Leightons, White and Citra/Doran, were unsuccessful tenderers; and that of the UTF of $500,000 payable to Concretes, McCloy-Hutcherson had paid only $140,000 leaving $360,000 unpaid.
Special Fee
72 There is in evidence an MBA document relating to a meeting of representatives of the tenderers on the Newcastle Hospital project. The document does not refer to any fee payable to the MBA or to UTFs payable to unsuccessful tenderers. I admitted the document into evidence as demonstrating only that Hollands, Concretes and Leightons were in competition with each other in the construction services market. (Concretes did not submit that I should not find that the Tenderers were in competition in that market.)
73 Naturally, the AFCC's Cash Flow Forecast sheets do not refer to this project.
UTFs
74 Other documentary evidence shows that Concretes invoiced K B Hutcherson Pty Ltd $180,000 on 31 October 1989 for "Consultancy Services on McCloy-Hutcherson Joint Venture Newcastle Hospital"; that the total amount due by the Hutcherson-McCloy Joint Venture to Concretes was $500,000; that Concretes had received $140,000 of which $70,000 was attributed to K B Hutcherson leaving that company owing $180,000 of $250,000; that Concretes invoiced McCloy-Hutcherson Pty Ltd for $160,000 on 6 September 1989 for "Consultancy Services on Newcastle Hospital Project"; and that on 21 April 1989 Concretes invoiced McCloy-Hutcherson Pty Ltd for $140,000 for "Consultancy Services on Newcastle Hospital Project."
St George Building Society, Kogarah project
75 Although neither party referred to this project on the hearing or in written submissions, the Commission did not state that it did not rely on it and I presume that it still does so.
76 Concretes advised the Royal Commission that on this project there was a meeting at the MBA premises when an arrangement was made for payment of a special Fee of $250,000 to the MBA and a UTF of $250,000 to each of three unsuccessful tenderers; that the successful tenderer was K B Hutcherson Pty Ltd and that there were three unsuccessful tenderers namely, Concretes, White and Leightons; and that Concretes had received its UTF of $250,000 from Hutcherson.
Special Fee
77 Naturally, the project is not shown in the AFCC's Cash Flow Forecast sheets.
UTFs
78 Documents produced by Concretes show that it invoiced Hutcherson on 6 September 1989 for $50,000 for "Consultancy Services on St George Building Society Kogarah" and that "IVM/KBH Joint Venture" paid that amount on 1 November 1989; that Concretes invoiced Hutcherson $50,000 on 8 February 1989 and that IVM/KBH Joint Venture paid that amount on 9 May 1989; and that Concretes invoiced Hutcherson $50,000 for "Consultancy Services" on 17 May 1988 and that IVM/KBH Joint Venture paid that amount, apparently on 22 September 1988. Of course, these amounts total only $150,000.
Mr Bird's evidence in relation to the News Ltd, Chullora project and industry practice
79 The Commission read an affidavit of Gary Norman Thomas Bird sworn 6 January 1998. That affidavit recounted admissions made to him by officers of Concretes and was directed, at least in part, to establishing that on the News Limited, Chullora project, Concretes, the successful tenderer, had been party to an understanding with competing tenderers for the inclusion in tenders of a Special Fee and UTFs. The admissions also went to the existence of an industry practice and to how Concretes treated the fees in the preparation of its tender for that project. In his affidavit, Mr Bird also provided direct evidence of certain matters touching the News Limited, Chullora project.
80 It is convenient to recall that Concretes informed the Royal Commission that on the News Limited, Chullora project, there were arrangements for payment of a Special Fee of $500,000 to the AFCC or the MBA and a UTF of $100,000 to each of the five unsuccessful tenderers; that it (Concretes) was the successful tenderer and that it (Concretes) was to reimburse the fees totalling $1,000,000 to its client (this was an implied admission that Concretes had paid the Special Fee and the UTFs).
81 Mr Bird's evidence was to the following effect. The News Limited, Chullora project was the construction for News Limited of its Sydney print complex at Chullora. From about February 1980 until 30 June 1994 Mr Bird was employed in various managerial roles by News Limited and from about June 1989 until he retired in 1994 he was Project Manager in respect of the project. The head building contract for the project was for about $108,000,000. Six construction companies submitted tenders. (Concretes informed the Royal Commission that it submitted its tender for the News Limited, Chullora project on 24 April 1990.) Six companies, Concretes, "A W Edwards", Leightons, Hollands, Sabemo Pty Ltd and Thiess Contractors Pty Ltd submitted tenders "in a 'Schedule of Rates' format". On 27 June 1990 a "letter of intent" was forwarded to Concretes on behalf of News Limited and subsequently a formal contract was entered into and Concretes commenced work.
82 On 25 January 1991 Ross Coulthart from the television programme "A Current Affair" informed Mr Bird by telephone that someone had alleged that News Limited had been "ripped off" by the tenderers who had added $1,000,000 to their tender amounts: $500,000 for the MBA and/or the AFCC and $500,000 for the unsuccessful tenderers.
83 In February 1991 Mr Bird was contacted by staff of the Royal Commission who sought information about the project which he provided. In May 1991 he wrote to the Royal Commission advising of his conversation with Mr Coulthart. On 23 May 1991 he read an article in the "Daily Telegraph Mirror" about collusive tendering by construction companies and a particular reference to the News Limited, Chullora project. Mr Bird telephoned John Cooper, the New South Wales General Manager of Concretes, and read to him an extract from the newspaper article. They arranged to meet the following day.
84 On Friday 24 May 1991, Mr Cooper, together with Steve Paine, a Works Manager employed by News Limited, met with Mr Cooper and Chris Denny, a director of Concretes. Mr Bird handed Messrs Cooper and Denny a copy of the newspaper article. According to Mr Bird's affidavit, the following exchange took place:
"[Bird]: I'd like your comments as to whether there is any truth to the article.
[Denny]: Yes, there was an agreement between us and the other tenderers to pass on $1 million tendering costs to News Limited." (emphasis supplied)
According to Mr Bird's affidavit, at various points in the conversation Mr Cooper said words to the following effect:
"The passing on of tendering costs has been an industry practice for the last 50 years. There is no big construction organisation that doesn't take part in it. We only do it in about 2 out of every 20 to 40 tenders - in less than 5% of our jobs. It is usually on major projects."
and
"One of the reasons for passing on the tendering costs to clients is that a lot of clients put builders to the expense of tendering just so they can obtain finance."
and
"The AFCC called a meeting of the main tenderers to discuss this job and set the fees. The AFCC set the fees at $500,000 for itself and $100,000 for each tenderer as the cost of compiling the tenders. The AFCC's and the MBA's published rates which successful tenderers have to pay aren't sufficient to cover their running costs, so this is how they raise their running costs." (emphasis supplied)
What commitments, obligations, assurances or undertakings (including unenforceable ones), if any, did each Tenderer make, assume or give in favour of the others?
158 I find that each Tenderer undertook to the others that if it succeeded, it would pay a UTF of $750,000 to each unsuccessful Tenderer.
159 I do not, however, find that each Tenderer undertook that it would take its obligation to pay the UTFs (or, for that matter, the Special Fee) into account in calculating its tender price, or, if it should be the successful Tenderer, that it would pay them out of the proceeds of the job. On the evidence, the mutual undertakings did not extend to those matters, neither of them was of any interest to the Tenderers, and the Tenderers did not concern themselves with them. The other Tenderers would not have regarded themselves as having a cause for complaint if one of their number did not take them into account when calculating its tender price or if the successful Tenderer did not pay them out of the proceeds of the job.
160 I think, however, that each Tenderer had an independent expectation that as a matter of fact each of the others would, if successful, pay the UTFs (and, for that matter, the Special Fee) out of the proceeds of the job and would take its commitment to do so into account in the calculation of its tender price. I think this because the Tenderers knew most of the facts to which I will refer later in support of my conclusion that the UTF understanding (and the levy of the Special Fee) was likely to have an effect on price.
161 The alternative possibility to be considered is that each Tenderer had an independent expectation that the Tenderers would treat the UTFs as "general overheads". So treated, they would be passed on to clients generally by being built into the Tenderers' rates of charge. According to this view, each Tenderer would take into account its commitment to pay the UTFs in the preparation of its tender only indirectly and to an extent not touched on in the evidence, in the form of the level of its general rates of charge that it applied in calculating its tender price. However, the whole of the UTFs would not be paid "from the proceeds of the job".
162 But independent expectations of either kind mentioned are not part of an arrangement or understanding within s 45A; there must be a consensus: cf the cases noted earlier on the meaning of "arrangement or understanding" and Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437 (Lockhart J) at 448. There was not a consensus that the successful Tenderer would pay the UTFs from the proceeds of the job or that each Tenderer would take its obligation to pay them into account when calculating its tender price, and therefore those elements did not form part of any understanding reached at the Meeting.
163 I infer, however, from the terms of the unsuccessful Tenderers' invoices to Hollands, that it was an element of the UTF understanding that none of the Tenderers would disclose to ACS the terms of that understanding or that the Meeting had taken place. If I had found the Special Fee understanding proved, I would also have inferred from the terms of the AFCC's invoices to Hollands similarly in relation to that understanding.
Were the Special Fee understanding and UTF understanding likely to have the effect of controlling the price to be charged to ACS for the Project?
The meaning of "likely"
164 Of the word "likely", Lockhart J said in Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437 at 445:
"The word 'likely' is susceptible of various meanings. It may mean 'probable' in the sense of more likely than not or more than a fifty per cent chance. It may mean a real or not remote possibility. There are other possible meanings."
His Honour did not need to decide between competing meanings, although he rejected the view that in the expression "likely to have the effect, of substantially lessening competition" in s 45(2) of the Act, the word meant a mere possibility, whether real or not.
165 Senior counsel for Concretes has fairly drawn my attention to the fact that the word "likely" has been held to refer to a real or not remote chance or possibility in the former s 45D of the Act in Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331 (FC) at 346-348 per Deane J; in s 52 of the Act in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 (FC) at 87; and in s 4D of the Act in News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 (FC) at 565. He submits, however, that the same construction should not be given to the word in s 45A(1) for the following reasons:
"It would be productive of injustice if parties to an understanding containing a provision which had no more than the real possibility in the future of having an effect of fixing a price were to be treated as liable in the same way as parties to an understanding containing a provision which had a purpose of price fixing demonstrated on the balance of probabilities, or an actual effect of price fixing demonstrated on the balance of probabilities. ... . Section 45A is a deeming provision and what is deemed is a substantially anti-competitive purpose, effect or likely effect. To construe s 45A as applying to understandings containing a provision having no more than the real possibility of price fixing ... is to produce [a] result wholly disproportionate to the substantive prohibition to be found in s 45(2)(a)(ii). The disproportion is even more marked where, [as] on the ACCC's case, an agreement as to the component of a price is alleged to be price fixing."
166 The Commission contends that the Court should be slow to accept this submission and should be strongly disposed to give the word "likely" in s 45A the same meaning as has been given to it in the former s 45D and in ss 52 and 4D.
167 Like Lockhart J in Radio 2UE, I do not find it necessary to decide between the parties' submissions in the present respect because, in any event, for the reasons appearing below, in my view it was more likely than not on the evidence that the UTF understanding would have the effect of controlling the price to be charged to ACS for the Project.
The notion of "controlling" a price
168 The word "control" is not defined in the Act. Its natural or ordinary meaning is "to exercise restraint or direction over" (The Macquarie Dictionary) or "to exercise restraint or direction upon the free action of" (The Oxford English Dictionary) a person or thing. There are degrees of control and there may be control although the "restraint" or "direction" is not total. An arrangement or understanding has the effect of "controlling price" if it restrains a freedom that would otherwise exist as to a price to be charged.
169 Concretes submits that the notion of "fixing, controlling or maintaining" price involves a degree of "specificity" as to price and a degree of "proximity" between the arrangement or understanding and price. I accept that an arrangement or understanding which no one intends, and is not objectively likely, to have any effect on price, but which, by reason of unforeseeable supervening circumstances has had that effect, is not caught. But, with respect, I do not find the general proposition relied on by Concretes determinative of the present case. Of course, I accept that "likelihood" is to be assessed as at the time when the arrangement is made or the understanding is arrived at.
170 In support of its submission, Concretes refers to Trade Practices Commission v Service Station Association Limited (1992) ATPR 41-179 (Heerey J); on appeal (1993) 44 FCR 206 (FC). In that case the allegation was that the respondent petrol retailers had come to an arrangement or understanding with each other and with their association, the first respondent, to increase their profit margins by "in the order of 10 per cent or approximately 6.5 [cents per litre]" over those which had been charged over the previous six month period.
171 It is important to understand the factual context. Due to circumstances which I need not discuss, existing profit margins (retail price minus "rack" price) in the Sydney metropolitan market had sunk to as low as 3 cents per litre and even less. The petrol retailers were in dire financial straits. Statements were made to them as a group to the general effect that continuation of discounting would be suicidal and that they should fix their profit margins realistically after calculating how much money they needed to stay in business.
172 At first instance, Heerey J held that there was no relevant "arrangement or understanding". In the context of the discussion of that issue, his Honour said ((1992) ATPR 41-179 at 40,453):
"In appropriate circumstances of course there may be an arrangement to fix, control or maintain prices notwithstanding that there is no agreement to charge literally identical prices; cf, in the context of s 96, Trade Practices Commission v Mobil Oil Australia Ltd ... (1984) 3 FCR 168 at 183 and the authorities there cited. However, some features of the retail petrol market point against such a conclusion in this particular setting. Here, one might think, precise price is a critical factor. The motorist customer, at any rate in a metropolitan area, usually has the mobility to choose between competing prices. The blandishments of television advertising notwithstanding, the customer may perceive no benefit in buying one brand as against another. Small differentials in price may be critical in determining a decision to purchase. The fact that movements in the recommended price between 16 July and 31 October were almost always by one or two cpl steps suggests a market in which fine adjustment of price is important.
Therefore in the Sydney metropolitan retail petrol market an arrangement or understanding to increase margins 'in the order of 10 per cent or approximately 6.5 cpl' as against those which had obtained over the previous six month period (in itself a notably vague starting point) may lack the degree of certainty inherent in the concept of fixing, controlling or maintaining prices.
I am of course not dealing with a striking out application. The ultimate issue remains whether there was an arrangement or understanding to fix, control or maintain prices. But the definitional problems I have mentioned rather highlight the difficulty of establishing that an arrangement or understanding of the proscribed kind occurred in such a market." (emphasis supplied)
173 A Full Court of this Court dismissed an appeal: (1993) 44 FCR 206. Lockhart J, with whom Spender and Lee JJ agreed, set out the above passage and said (at 228):
"His Honour did not find that there could never be transgression of s 45, aided by s 45A, unless there was an agreement or understanding as to a particular price in the sense of a precise price. His Honour specifically recognised that there may be a relevant arrangement to fix, control or maintain prices notwithstanding there is no agreement to charge literally identical prices. What his Honour said was that on the facts of this case a decision as to price is a critical factor because of the reasons which he gave and to which I have referred. In short, small differences in price may be critical to a motorist in determining from which service station petrol will be purchased. A motorist probably attaches no particular loyalty to any specific brand as against another. The movements in the recommended price between 16 July and 31 October were almost always by 1 or 2 cpl steps. This suggested to his Honour a market in which fine adjustment of price is important.
I perceive no error in those statements of his Honour; in my opinion they are correct. I reject the argument that his Honour was saying that in the absence of an arrangement or understanding as to a specific price there could never be a transgression of s 45, aided by s 45A." (emphasis supplied)
174 The facts of the case were special. I do not think that the passages set out, when read in context, signify that in all cases where a market is characterised by a high degree of price competition, an agreement, arrangement or understanding will not be caught by s 45A unless it fixes a price or price increase with some specificity. (Concretes points to evidence in ACS' documents that there was a downturn in the workload of construction companies with consequential keenness of price competition favourable to ACS here.) Rather, I think that Heerey J was making the point (to which the Full Court also drew attention) that, in the special circumstances of the market with which he was concerned as one characterised by very fine differences in the prices being charged by competitors for the same product and an absence of brand loyalty, coupled with the vagueness of the alleged arrangement or understanding, it was unlikely that the respondents had come to an arrangement or understanding within s 45A, involving, as it would have done on the facts, the assumption of mutual obligations.
175 In Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 7 FCR 534, a Full Court of this Court apparently accepted that an arrangement or understanding between petrol retailers to raise their prices by "four or six cents a litre" was within s 45A. (I say "apparently" because there was also evidence that a specific price was mentioned by one of the retailers and it is not clear whether the Court acted on the basis that the arrangement or understanding was one for that price or for the increase in price. It may, of course, have been that the Court did not see that the distinction would lead to any difference in result.)
176 I do not think that some specificity as to price is a necessary element of the notion of "controlling" price within s 45A. To insist on such a requirement would be to introduce an unauthorised general limitation on the notion and would allow the statutory prohibition to be easily circumvented - a result that cannot have been intended and should not be lightly accepted.
177 On the assumption in favour of Concretes that the concept of controlling price involves a degree of proximity between the arrangement or understanding and the price charged or to be charged, in my view that requirement is satisfied in the present case, even though the UTF understanding did not encompass some of the elements contended for by the Commission. True, the UTF understanding was, but was no more than, that the successful Tenderer would pay a UTF of $750,000 to each of the three unsuccessful Tenderers. But the question that arises is simply the factual one whether, on the evidence, that limited understanding was likely as at the time of the Meeting to have the effect of controlling the price to be charged to ACS. In my opinion, on the evidence before me and for reasons mentioned later, it was, and, if it should be relevant, the Tenderers understood that it was.
178 Concretes also submits that because the supposed UTF understanding left the Tenderers with a great deal of freedom as to the price which they would charge, it did not have the effect of controlling price competition and therefore did not fall within the terms of s 45A. It seems to me, however, that putting to one side de minimis cases, the degree of control, although relevant to penalty, is not relevant to the issue of contravention. I do not consider the degree of control here to have been de minimis.
179 It may be suggested that support for Concretes' present submission is to be found in Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 62 FLR 437 ("Radio 2UE"). In that case the applicant, an AM radio station, complained about an arrangement by which the respondents, two commercial FM radio stations operating in the same market as the applicant, issued a "combined Sydney FM rate card" inviting advertisers to advertise on both stations at the combined rates of charge shown on the card. Those rates were in fact simply aggregates of the rates charged by the respective respondents, who remained free to change their own individual rates.
180 At first instance, Lockhart J held that the arrangement did not infringe s 45 (read with s 45A). His Honour said (at 448):
"It is important to distinguish between arrangements (I use this expression for convenience to encompass also contracts and undertakings) which restrain price competition and arrangements which merely incidentally affect it or have some connexion with it. Not every arrangement between competitors which has some possible impact on price is per se unlawful under the section.
Nor in my view was s 45A introduced by Parliament to make arrangements unlawful which affect price by improving competition. It is fundamental to both ss 45A and 45 that the relevant conduct, in purpose or effect, substantially lessens competition or would be likely to do so. If competition is improved by an arrangement I cannot perceive how it could be characterized as a price fixing arrangement within the ambit of those sections. This case is an example in my view of such an arrangement. Later cases will doubtless provide other examples. If competitors make an arrangement to establish a better market by, for example, forming an organization through which they operate by exchanging information in ways that make prices more competitive, I do not see how such an arrangement is, per se, prohibited by s 45A.
My approach to the construction and operation of s 45A is generally in accord with the approach taken by the courts of the United States of America in decisions under the Sherman Act. They reflect the concern of those courts to carefully consider the relevant conduct before characterizing it as an arrangement in restraint of price competition and they distinguish between arrangements which directly or indirectly restrain price competition and those which merely incidentally affect it: see Board of Trade of the City of Chicago v United States (1918) 246 US 231 and United States v Socony-Vacuum Oil Co Inc (1940) 310 US 150." (emphasis supplied)
Lockhart J's decision was affirmed on appeal:(1982) 68 FLR 70. The Full Court said (at 72):
"In our view the word 'fixing' in s 45A takes colour from its general context and from the words used with it - 'controlling or maintaining' - and not every determination of a price, following discussion between competitors, will amount to a price 'fixing'. There must, we believe, be an element of intention or likelihood to affect price competition before price 'fixing' can be established. This will often be a matter of inference, requiring no direct evidence for it to be established." (emphasis supplied)
The Full Court did not have to decide, however, and left open the question whether Lockhart J was correct in asserting that a price-fixing arrangement with a net advantageous effect on competition would not constitute a contravention of s 45. That question does not arise in the present case: Concretes does not submit that the supposed UTF understanding improved competition or might have done so.
181 The passages set out above were not intended to signify that in every case of alleged fixing, controlling or maintaining of price, it must be shown that the agreement, arrangement or understanding had, or was likely to have, the effect described in s 45 (a substantial lessening) in relation to price competition. So to require would be to ignore the plain "per se" nature of s 45A. Heydon has suggested that the words highlighted in the passage from the Full Court's judgment were probably not meant to be anything more than a paraphrase of the statutory words "has the purpose, or has or is likely to have the effect ... of fixing, controlling or maintaining ... the price for ... goods ... supplied ... by the parties to the contract ... in competition with each other" (op cit [4.800] at 2224).
182 An agreement, arrangement or understanding that has the effect of fixing, maintaining or controlling price will have some effect on price competition, although not necessarily the effect of eliminating or even substantially lessening it. The effect of controlling price, even without a substantial lessening of price competition, can form the foundation of a deemed contravention of s 45 of the Act. As Douglas J said in United States v Socony-Vacuum Oil Co (1940) 310 US 150 (n 59 at 225-226):
"Price-fixing agreements may or may not be aimed at complete elimination of price competition. The group making those agreements may or may not have power to control the market. But the fact that the group cannot control the market prices does not necessarily mean that the agreement as to prices has no utility to the members of the combination. The effectiveness of price-fixing agreements is dependent on many factors, such as competitive tactics, position in the industry, the formula underlying price policies. Whatever economic justification particular price-fixing agreements may be thought to have, the law does not permit an inquiry into their reasonableness. They are all banned because of their actual or potential threat to the central nervous system of the economy."
The Commission had a choice here of establishing a contravention of s 45 in relation to price by proving either, in terms of s 45, an effect or likely effect of substantially lessening price competition, or, in terms of s 45A, an effect or likely effect of fixing, maintaining or controlling price.
183 In my view, the UTF understanding, to the extent that I have found it proved, was likely to have the effect of controlling the price to ACS if, as a matter of fact, each Tenderer was likely, if the successful one, to pay the UTFs out of the proceeds of the job and to take them into account in calculating its tender price. It is necessary now to turn to these questions.
On the evidence, was the UTF understanding likely to have the effect of controlling the price to be charged to ACS for the Project?
184 As I have already indicated, in my view it is not enough for the Commission to establish, as it has pleaded, that the UTF understanding was likely to have the effect of controlling a component of the price: it must establish that it was likely to have the effect of controlling the overall price.
185 The following considerations lead me to conclude that the UTF understanding was likely to have that effect.
186 First the Meeting took place between the time when the identity of the Tenderers was known and the closing date for tenders (28 October 1988).
187 Second, the UTFs were called "fees" and were treated by the Tenderers in the invoices and payment records as one would expect a cost of the Project to be treated.
188 Third, according to the information furnished by Concretes to the Royal Commission, the purpose of UTFs was to reimburse unsuccessful tenderers their wasted cost of tendering for the particular project in question.
189 Fourth, the client in respect of a particular project derives the benefit of the tendering process on that project and the cost of tendering can reasonably be expected to be greater or less according to the size and complexity of the client's project so there are elements of obviousness and comparative equity in expecting that the particular client bear the cost of tendering associated with its project.
190 Fifth, even in relation to the tender prices, the sum of $2,250,000 is not insignificant and having regard to the fact that other costs of a comparable size incurred in relation to the Project were taken into account in the calculation of at least Hollands' and Concretes' tender prices, I infer that all Tenderers would probably treat the UTFs as a cost to be treated similarly.
191 A Tender Business Paper dated 9 January 1989 of ACS included entries for "Tender Estimate" and "Tenders Received" as follows:
"3. Tender Estimate $160,000,000
Lump Sum subject to R&F $180,000,000
Fixed Price