Australian Competition & Consumer Commission v FFE Building Services Limited

REASONS FOR JUDGMENT WILCOX J: 1 The matter before the Court is a notice of motion filed on 12 September 2003 by the third respondent to this proceeding, Premier Fire Protection (NSW) Pty Limited. The applicant in the principle proceeding, Australian Competition and Consumer Commission ('ACCC'), seeks relief against the third respondent in the form of one or more appropriate declarations and injunctions and pecuniary penalties. 2 The application made by the notice of motion is framed in the alternative. The first order sought is that the proceeding be dismissed as against the third respondent. The alternative order sought is that the applicant have leave to maintain its proceedings against the third respondent, but only on condition that the applicant indemnify the third respondent in respect of all costs incurred by the third respondent in the defence of the proceeding and in respect of any pecuniary penalties which the Court may order. 3 The basis of the application for dismissal is simply that the third respondent was deregistered shortly after the commencement of this proceeding. The circumstances surrounding the deregistration are set out in an affidavit by Gordon Frederick Stalley, a director of the third respondent. Mr Stalley is also the director of some other companies which have a similar name. 4 It is not necessary to set out all of the material in Mr Stalley's affidavit. It is sufficient to note that the third respondent commenced trading in 1987 with Mr Stalley as its Managing Director. The third respondent ceased to trade in 1999. At that time, two new companies, which had been brought into existence by Mr Stalley, commenced trading. Those two companies were Premier Fire Protection Services (NSW) Pty Limited and Premier Fire Services (NSW) Pty Ltd. Mr Stalley deposed that the reason for incorporating and trading under the new companies, was to divide the operations of the old company into two separate divisions. Apparently one company was to deal with service and maintenance operations and the other was to deal with the installation of fire protection systems. By reason of the commencement of the two new companies, it was decided to discontinue the old company, that is, the third respondent. 5 I am satisfied on Mr Stalley's evidence that the decision to discontinue the operations of the third respondent, and ultimately to cause it to be deregistered, was a bone fide decision made for commercial reasons. The decision had nothing to do with prospective litigation against that company by ACCC. 6 However, it appears that it was not until the year 2002 that deregistration action was taken. The circumstances are referred to by Mr Stalley in his affidavit. It was necessary to delay until certain debts were collected and liabilities paid by the third respondent. Mr Stalley instructed his accountant to proceed with the necessary action but there seems to have been some delay in this happening. In the meantime, on 11 April 2002, ACCC issued a notice under s 155 of the Trade Practices Act 1974 (Cth) ('Trade Practices Act'), requiring the third respondent to provide certain information in respect of the contraventions alleged in the proceeding that was subsequently commenced on 31 May 2002. 7 In responding to the s 155 notice, the third respondent indicated the possibility of deregistration action. Apparently, the deregistration application form was signed by Mr Stalley on 24 May 2002, at which time he certified, as was necessary, that the company was not a party to any legal proceedings. That was true on that day. The form was signed by the company accountant and submitted to Australian Securities and Investment Commission on 28 May 2002. 8 On the following day, 29 May 2002, Mr Stalley attended an interview with two officers of ACCC in which he was asked questions about the events which constituted the alleged contraventions. In the course of that meeting, reference was made to the possibility of deregistration. A file note of the meeting prepared by one of the two ACCC officers, Tarnya Guest, records a statement by Mr Stalley about plans to proceed with deregistration 'unless we say stop or something'. 9 Mr Stalley was recorded as saying that he left this side of things to his accountant but believed it was not a formal liquidation. He added: 'we are just going to deregister the company, the accountant said it might take a few months and has to be listed in the Government gazette or something.' 10 Ms Guest further recorded that at the end of the interview, her colleague, Mr Nick Ellis, indicated that the matter had to be considered by the ACCC as to: 'where to proceed ie court action, we would prefer if he did not do anything with the company (ie deregister it) and he would hear from us.' 11 In evidence, Mr Stalley said he did not recall that last recorded comment; but I gather he does not deny the earlier statement attributed to him of plans to proceed with deregistration. 12 It is unfortunate that there was not a greater degree of frankness, on both sides, at the time of this conversation. On the one hand, it would have been desirable for Mr Stalley to have informed the ACCC officers that, only a few days earlier, he had signed the necessary document to allow the application for deregistration to proceed and that his understanding was that the application had been, or would shortly be, made. On the other side of the record, I think it is a fair criticism of the ACCC officers that, at an interview only two days before the proceeding was actually commenced, they did not expressly say that a proceeding would be likely to be commenced in the near future. It must have been likely, if not certain, on 29 May 2002, that there would be a proceeding in which Premier Fire Protection (NSW) Pty Limited would be joined as a respondent. 13 Be that as it may, the application for deregistration proceeded. It seems to be clear that it was not until October 2002, after deregistration had been effected, that ACCC became aware of the situation. When ACCC became aware, it made an application to the Supreme Court of New South Wales for an order to reverse the deregistration. The matter was dealt with by Registrar Berecry on 29 May 2003. Registrar Berecry referred to arguments that were put to him about the prospective injustice of restoring the third respondent to the register, being matters that were argued again, by counsel for that company, in relation to this motion. 14 In Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; 174 ALR 688, Austin J dealt with an application for restoration to the register of a company called ABB Power Transmission Pty Ltd. The application was made under similar circumstances to the application made by Registrar Berecry, in order to permit proceedings to be taken against that company for alleged breaches of the Trade Practices Act. At para 45, Austin J said: 'In my opinion the question whether it is just to join a newly reinstated company which has no assets as a party to proceedings, is a question for the court in which the proceedings have been brought. There is nothing inherently unjust about my making an order for reinstatement so as to permit questions about the proper constitution of the Federal Court proceedings to be aired.' 15 I respectfully agree with that approach. The fact that Registrar Berecry decided to restore the company to the register should not be regarded as determinative of the present application. Notwithstanding this, and considering the matter for myself, I see no injustice in allowing the action to proceed against the third respondent. Although I accept that a decision to deregister was made for reasons other than the prospect of action by ACCC, it seems to me the Registrar was correct when he pointed out that there are both advantages and disadvantages in the course taken by Mr Stalley in regard to his reorganisation of his company. The names of both of the new companies which commenced trading in 1999 contain the words 'Premier Fire Protection'. Mr Stalley plainly thought that there was a commercial advantage in using these names. This could only be because of goodwill attaching to those names. It seems to me that, as the Registrar said, there is a 'swings and roundabouts' operation here. If it is desirable to take the goodwill attaching to those names, then it seems to me it is not unfair that any opprobrium that properly attaches to those names, for example, because of any breach of the Trade Practices Act, should also be suffered by the new companies. 16 It would have been open to Mr Stalley to use different names for the new companies. Indeed, that is an option still open to him, as has been pointed out by Mr Williams, senior counsel for ACCC. This is not a case in which the new companies are under a different management than the old company. The evidence is that all the relevant companies have been controlled by Mr Stalley, either alone or in conjunction with his wife. If it matters, and I do not think it is a matter of great importance, an officer of the old company - who is himself a respondent in the principal proceeding - Allen Edward Smith, is an employee of one or both of the new companies. 17 As I see the situation, this is a case of a company reorganisation involving the same people and commercially indistinguishable names. I think, under these circumstances, it is not unfair for ACCC to be allowed to proceed against the old company and to obtain such relief as may be appropriate, if it is successful in making out one or more contraventions of the Trade Practices Act, but having regard to the factual situation as it is. 18 It may well be appropriate for declarations to be made in order to indicate the view of the Court about any contraventions which are established. Whether it would be useful to grant injunctive relief is more doubtful. The position about penalties is something that ought to be addressed only if and when that stage is reached at the hearing. An order for penalties might not be fruitful, in terms of collecting any money. However, as was pointed out by Goldberg J in Australian Competition and Consumer Commission v SIP Australia Pty Limited, (2003) ATPR 41-937; [2003] FCA 336 at para 59, this itself may not be a sufficient reason for the Court not to impose penalties. In that case, Goldberg J was dealing with a company that had gone into liquidation. That may raise issues different from a deregistration situation. I do not think it is appropriate for me to express any view about the matter of penalties in a situation like this; that is a matter best left for trial. 19 The only matter I need to decide at present is whether it is unjust to the third respondent to allow the proceeding to continue against it, either in absolute terms or without imposing the condition of indemnity that is sought in the alternative. 20 I am not persuaded that it is unjust to allow the proceeding to continue or that any condition should be imposed. The appropriate order is that the notice of motion of 12 September 2003 be dismissed with costs. I so order. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.