Australian Competition & Consumer Commission v FFE Building Services Limited [2003] FCA 330 | Case summary

REASONS FOR JUDGMENT 1 The Australian Competition and Consumer Commission (the ACCC) alleges that: (1) FFE Building Services Ltd (FFE), Tyco Australia Pty Ltd (Tyco), Australian Fire Services (SA) Pty Limited and Australian Fire Services Pty Limited (together, AFS) and On-Line Fire Protection Pty Ltd (OFP) (together, the corporate respondents) and two other corporate entities each of which is now in liquidation (the other providers) at material times, carried on business including the tendering for supply and installation of fire protection, detection and suppression devices and equipment in buildings and other structures; the supply of fire protection, detection and suppression devices and equipment for reward; and the design and/or installation of fire protection, detection and suppression devices and equipment for reward (called "fire protection services") to public and private sector businesses in South Australia; (2) in the period 1992 to about mid 1997, the corporate respondents and the other providers met between 90-100% of the demand for fire protection services in South Australia in a market which it calls "the Fire Protection Systems Market"; (3) in about 1992, the corporate respondents (other than OFP) and the other providers attended a meeting at which those attending entered into a contract arrangement or understanding not to compete with each other in tendering for the sale and supply or installation of fire protection services where the value of the proposed tender was in excess of $50,000, and to share the market for the provision of fire protection services between them by agreeing from time to time which of them was to submit the lowest tender (the Arrangement); (4) shortly thereafter, OFP agreed to become party to the Arrangement; (5) the parties to the Arrangement then between 1992 and 1997 met regularly to agree, in relation to potential contracts for the supply of fire protection services, which of them would be the "allocated tenderer" and so would submit the lowest tender, and the other parties to the Arrangement who tendered would do so at a higher and agreed figure; (6) the parties to the Arrangement also between 1992 and 1997 met from time to time to agree, in relation to certain potential contracts for the supply of fire protection services, upon one of them tendering below cost or in some other way so as to exclude or limit the opportunities for entities who were not parties to the Arrangement from entering, or increasing their share in, the market. It is not necessary for present purposes to refer to the specific meetings, or to the specific contracts, referred to in the statement of claim. 2 The ACCC then asserts that each of the corporate respondents was a party to the Arrangement, and to some one or more of the specific agreements referred to. It alleges further that the corporate respondents contravened s 45(2)(a)(i) and (ii) of the Trade Practices Act 1974 (Cth) (the TP Act) by entering into the Arrangement, and contravened ss 45(2)(b)(i) and (ii) of the TP Act by giving effect to the arrangement, including by entering into the various specific agreements particularised. 3 The relief sought in the application against each of the corporate respondents includes injunctive relief to restrain them from engaging in such conduct for a period of time in the future, pecuniary penalties (except against Tyco) for the contraventions of the TP Act which have occurred since 17 October 1996, and declarations that each has contravened the TP Act as alleged. The application also seeks "findings of fact for the purposes of s 83" of the TP Act. In addition, orders are sought that the corporate respondents implement a trade practices compliance program, and for costs. 4 For present purposes it is not necessary to refer to the allegations against the personal respondents or the relief which the ACCC seeks against them. 5 Section 77(2) of the TP Act explains why pecuniary penalties are sought only in respect of contraventions since 17 October 1996. The application was issued on 17 October 2002. Section 77(2) imposes a six year time limit on proceedings claiming pecuniary penalties under s 76. There is no time limit on proceedings seeking injunctive or declaratory relief. 6 The ACCC has given the corporate respondents (other than Tyco) notice under O 15 r 1 of the Federal Court Rules that it requires discovery of "all documents relevant on the pleadings". FFE by motion, and OFP, seek orders under O 15 r 3 of the Rules that discovery should be limited to documents relevant to matters alleged in the pleadings that occurred after 17 October 1996. OFP formally objected to discovery other than of documents relevant to the matters alleged in the pleadings that occurred after 17 October 1996 because no relevant cause of action can be maintained for the period to 17 October 1996, and no "real relief" is sought against OFP for conduct, acts or omissions prior to 17 October 1996. 7 Order 15 r 3(2) empowers the Court to make such orders as are necessary to prevent unnecessary discovery. Order 15 r 15 of the Rules directs the Court not to make an order for discovery unless satisfied the order is necessary at the time. 8 On 3 December 1999, O 15 r 2 of the Rules dealing with the extent of the obligation to give discovery came into force. It includes subrule (3) in the following terms: "Without limiting rule 3 or 7, the documents required to be disclosed are any of the following documents of which the party giving discovery is, after a reasonable search, aware at the time discovery is given: (a) documents on which the party relies; and (b) documents that adversely affect the party's own case; and (c) documents that adversely affect another party's case; and (d) documents that support another party's case; and (e) documents that the party is required by a relevant practice direction to disclose." Subrule (5) provides some direction as to what constitutes a reasonable search for documents. On the same date, Practice Note 14 concerning discovery was issued. It indicates that general discovery will not be ordered as a matter of course, and discovery will ordinarily be limited to the documents required to be disclosed by O 15 r 2(3). 9 Reading Entertainment Australia Pty Ltd v Birch Carroll & Coyle Ltd [2002] FCAFC 109 involved complex and extensive allegations of contraventions of provisions of Pt IV of the TP Act. An issue arose in the course of management of the proceedings about the discovery of particular categories of documents by the respondents. The docket judge refused to make certain specific discovery orders. The Full Court (Beamont, Carr and Tamberlin JJ) gave leave to appeal from the refusal, and allowed the appeal. It ordered that discovery of some, but not all, of the disputed categories be referred back to the docket judge for further consideration. Separate judgments were delivered, and Carr J dissented as to the remittal of the issues with respect to certain categories of documents. However, the general principles as to discovery expressed by Beaumont J were expressly endorsed by Tamberlin J at [116], and Carr J did not demur in relation to them. They therefore provide a convenient and authoritative source of the relevant principles. Beaumont J at [63]-[71] discussed at some length the general principles and modern practice governing discovery. In particular, at [70] his Honour quoted with approval the summary of the position under the Rules as amended in 1999 by the editors of Butterworths, Practice & Procedure of the Federal Court at [40.760]. I approach the present issue guided by those principles. 10 In Trade Practices Commission v CC (NSW) P/L (1995) 58 FCR 426 at 436-437 Lindgren J considered the meaning of the word "necessary" in O 15 r 15 of the Rules. His Honour said that it involves the Court being satisfied that the discovery sought is necessary in the interests of a fair trial, or for the fair disposition of a case. Hence, where one party and not the other is likely to have documents relating to a matter in question, he regarded it as prima facie "necessary" that discovery be ordered, subject to the well-established exception that discovery should not be a mere "fishing expedition". It is not suggested here that the ACCC's request for discovery is a mere fishing expedition, that is an attempt simply to discover whether a case exists: Nestle Australia Ltd v Federal Commissioner of Taxation (1986) 10 FCR 78 per Wilcox J at 82-83. 11 Counsel for FFE submitted that the measure of necessity in O 15 r 15 as explained by Lindgren J in that case should be adopted. No counsel contended that it was inappropriate to do so. I proceed on that basis. However, I note that O 15 r 2 of the Rules in force at the time of that decision was its unamended form, so it provided for discovery of documents relating to any matter in question, rather than the present form of O 15 r 2(3). The traditional description of discoverable documents, as considered e.g. in The Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Co (1882) 11 QBD 55; and Mulley v Manifold (1959) 103 CLR 341 is no longer current. The purpose properly served by the procedure for discovery of documents is of course the same, but the understanding of what is necessary to achieve that purpose may now be somewhat different and in many instances more confined. 12 It is plain, and the ACCC accepts, pecuniary penalties may not be ordered against the corporate respondents under s 76(1) in respect of any contravention of s 45 of the TPA, if any are established, which occurred before 17 October 1996. I also consider that there is no utility in the ACCC securing findings of fact under s 83 in respect of any contraventions of the TP Act before 17 October 1996 (or indeed before 17 October 1999). Section 83 relevantly permits findings of fact in proceedings under s 80 for injunctive relief to be used as prima facie evidence in proceedings for compensatory damages under s 82 or under s 87(1A), but such proceedings must be instituted within three years of the accrual of the cause of action: s 82(2) and s 87(1CA)(b) respectively. I note that the time limit specified in s 87(1CA) was altered to six years, but only in respect of conduct engaged in after the commencement of the amendment on 15 December 2001: Trade Practices Amendment Act (No.1) 2001 (Cth), Sch 1[3] items 20-21 and items 31-32. 13 What then of the claims for injunctive and declaratory relief? Counsel for FFE submitted that any established contraventions of the TP Act relating to a period prior to 17 October 1996 should not have real relevance to whether to grant injunctive relief. In Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 1893 ("Berbatis No.2"), French J declined to grant injunctions restraining conduct of the kind in which (he had earlier found) the respondent had engaged in contravention of s 51AA of the TP Act. The contraventions had occurred between May and October 1996, and the judgment finding the contraventions established was given earlier in September 2000: Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 1376; (2000) ATPR 41-778. His Honour made declaratory orders in relation to the established contraventions. He declined to grant injunctive relief because the offending conduct had occurred some four years previously, there was no significant risk of a repetition of the conduct concerned, and as a "weighty factor" the difficulty of expressing with precision the terms of injunctive relief in relation to the unconscionable conduct which had taken place in the particular circumstances. Hence, as his Honour said in "Berbatis No.2" at [9], injunctions "would serve no useful purpose and would present some difficulty in compliance and therefore enforcement". 14 The significance of the decision, according to the submission of counsel for FFE, is its adoption of conventional principles for determining whether injunctive relief should be granted in the case of contraventions of the TP Act. In "Berbatis No.2"French J at [5] (referring to ICI Australian Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 (ICI Australian) at 256-257 per Lockhart J, and at 268 per French J) said factors relevant to the exercise of the discretion whether to grant injunctive relief under s 80 of the TP Act are: "(a) whether or not it appears to the Court that the person intends to engage again or to continue to engage in contravening conduct; (b) whether or not the person previously engaged in conduct of that kind; and (c) whether or not there is an imminent danger of substantial damage to any person if the first mentioned person engages in conduct of that kind." Such factors guided Hill J as a member of the Full Court in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc. (No.2) (1993) 41 FCR 89 at 113 to his decision not to grant injunctive relief . 15 This is not a case where, if the alleged contraventions are made out, the Court would have difficulty in framing injunctive relief in sufficiently specific terms to be clear and enforceable. 16 Moreover, because the injunctions sought are in the nature of "public interest injunctions", the absence of one or more of the factors generally required by traditional equitable principles does not of itself lead to the injunction being refused: see e.g. ICI Australian at 256-257 per Lockhart J. The public interest may warrant the making of an injunction notwithstanding the contravenor is not likely to engage in the contravening conduct again: Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 300 per Toohey J; see also s 80(4)(a) of the TP Act. 17 Even if it be accepted that FFE and OFP, if they contravened the TP Act as alleged between 1992 and 1997, are not likely to do so in the future, I nevertheless consider the ACCC has an arguable case that the Court should grant injunctive relief of the nature sought in the application. It may be relevant to the Court's exercise of its discretion whether such contravening conduct as it may find to have occurred took place over such a lengthy period as alleged. I acknowledge that the elapse of time since the alleged contraventions will be a relevant discretionary consideration tending against the making of injunctive orders. So too will be any structural or management changes in either FFE or OFP. FFE has in fact undergone substantial structural changes. On 20 November 1996, its issued shares were transferred from James Hardie Industries Ltd to Chubb Australia Ltd, a wholly owned subsidiary of Chubb Security Holdings Australia Ltd, and on 10 December 1999 its issued shares were further transferred to MSS Security Services Pty Ltd, also a wholly owned subsidiary of Chubb Security Holdings Australia Ltd. I have had regard to those facts in reaching my decision on the present issue. 18 I am also satisfied that the ACCC has a reasonably arguable case that, if the contraventions alleged between 1992 and 1997 are established (as distinct from the contraventions alleged from 17 October 1996), it may be appropriate for the Court to grant the declaratory relief sought in the application. It does not follow from the time limitations imposed in s 77(2) and s 82(2) and 87(1C) in respect of certain types of remedy, so that those remedies may not be granted in respect of contraventions prior to 17 October 1996, that declarations in respect of proven contraventions prior to that date should not be made. It is not possible to accept, at this point in the proceedings, that there may be no utility in such declaratory relief. 19 In addition to those considerations, the making of the Arrangement as alleged is directly relevant to the causes of action asserted in the statement of claim for the period after 17 October 1996. The contraventions alleged after that date involve giving effect to the Arrangement. It is a critical part of the case of the ACCC that the Arrangement be established. If it is not, the context in which the conduct alleged after 17 October 1996 will be assessed may be quite different. It is not suggested that the allegations by the ACCC about the significance of events prior to 17 October 1996, but in particular as to the making of the Arrangement in 1992, are in any sense contrived to extend the scope of inquiry in the proceedings beyond that which is legitimate. 20 I therefore undertake the balancing exercise of determining the necessity of the disputed area of discovery by weighing the relevance and importance of the disputed discovery sought against the burden of complying with the discovery as sought by the ACCC in the light of those considerations. 21 There is no evidence indicating that the burden of giving discovery as sought by the ACCC extending over the period covered by its allegations would impose any particular burden upon FFE or OFP. Nor is there evidence, for instance, that persons who might reasonably readily identify discoverable documents are no longer available to FFE or to OFP so the task of identifying discoverable documents would be difficult and prolonged by being undertaken by uninformed persons. I am prepared to infer that a significant burden would be imposed upon each of them by giving such discovery, as it will involve inspecting records over a considerable period of time. But I am not prepared to infer, in the absence of evidence, that identifying the potentially relevant documents would be oppressive or unduly onerous, so that in the circumstances no discovery of documents prior to 17 October 1996 should be ordered. 22 Although I have come to the view that some further discovery should be ordered in respect of events prior to 17 October 1996, I do not think the wide discovery sought is necessary. 23 I propose to limit the nature of the documents to be identified by reference to the particular conduct alleged in the statement of claim, including its schedules. The ACCC has not persuaded me that general discovery is necessary in respect of the period prior to 17 October 1996. That would impose upon FFE and OFP the obligation to discover any document which may fairly lead to a train of inquiry which may directly or indirectly enable one party to advance its case, or which may damage the case of its opponent: see Peruvian Guano Co at 62-63. Given the nature of the relief which is now available to the ACCC in respect of contraventions prior to 17 October 1996, and in the absence of any particular factors which indicate such wide discovery is necessary, some more confined order is all that I consider should be made. 24 The making of the Arrangement is alleged to have taken place on a particular occasion, apart from the later joinder of OFP to the Arrangement. I think discovery should be confined to the documents directly relating to or referring to that occasion. I do not now see sufficient benefit in obliging FFE and OFP to search for and discover all documents which, in the "general discovery sense", might touch upon either of those respondents making or giving effect to the Arrangement between 1992 and 17 October 1996. Conceivably that could involve every document for every tender over $50,000 contemplated by either of them over that period. Documents which might lead one way or the other to a line of inquiry about the existence or giving effect to the Arrangement would be discoverable. It is presently not necessary for such detailed discovery. It may be that circumstances may change. Each respondent should give discovery of documents which it intends to adduce in its case. For example, if FFE set out to show that a significant number of tenders were made by it entirely independently of the other corporate respondents, or that it declined to tender on a number of occasions independently of the other corporate respondents, further discovery may be necessary so its proposed evidence could be put into context and could be tested. I do not consider that point is presently reached. 25 Paragraphs 28, 29, 32, 33 and 34 of the statement of claim assert that numerous meetings took place during the period 1992 to 17 October 1996 pursuant to the Arrangement at which specific steps were agreed to be taken in relation to particular tenders and in other circumstances. Not all of the meetings or specific agreements are identified (see pars 28.1, 29, 32 and 34). Not all of the attendees are identified (see par 28.6). In my view, having regard to the elapse of time and to the extent of the specified allegations in Sch 1 (par 29), par 32.4, and Sch 2 (par 34), it is presently not necessary in the interests of securing a fair trial or for the fair disposition of the case that general discovery should be ordered to be made by FFE or by OFP for the period prior to 17 October 1996 in relation to all the general allegations in pars 22 to 37 of the statement of claim. The interests of justice will be properly served by a more limited obligation of discovery upon those parties in relation to the allegations in pars 22-37 of the statement of claim, in so far as those allegations refer to the period of time prior to 17 October 1996. 26 The solicitor for OFP deposed to being instructed by OFP that it has "no further documents" in its possession, custody or power relating to the subject matter of these proceedings prior to 17 October 1996. I place no real weight upon that affidavit in undertaking the balancing exercise required. I do not understand what is conveyed by the reference to "no further documents". The affidavit asserts that the tenth respondent (Mr Rowe) was summonsed under s 155 of the TP Act on 25 March 2002 to produce documents in terms which are generally now reflected in the statement of claim, and on 11 April 2002 to produce documents and to be examined in relation to those matters. Mr Rowe is alleged in the statement of claim to be a director of OFP and involved in its tendering for contracts for the provision of fire protection services. It is unclear what, if any, documents he then produced to the ACCC. The affidavit of the solicitor does not assert compliance with O 15 r 6 and Form 22, or that any search has been conducted by OFP (see O 15 r 2(5)). 27 I note also that the ACCC has apparently made some arrangement with Tyco about its role in these proceedings recorded in a document called a "Leniency Agreement". The ACCC was asked to discover it on 12 March 2003. It has not yet been discovered. I do not infer from the circumstances that the ACCC should therefore be able to identify with precision the documents, or classes of documents, which exist. Even if Tyco has informally given to the ACCC extensive discovery, I am not persuaded that documents of the character which I propose to order FFE and OFP to discover in respect of the period prior to 17 October 1996 are thereby not necessary to be discovered, or should not be discovered having regard to the interests of justice and the economic and efficient disposition of the proceedings. 28 I accordingly order that FFE and OFP, in addition to giving discovery of documents relevant to the matters alleged on the pleadings after 17 October 1996 in the statement of claim, do give discovery of documents in the following categories: (a) documents which are directly relevant to "the First Meeting" as defined in par 22 of the statement of claim, including any record of the first meeting prepared by a person who attended the first meeting, any report by a person who attended the first meeting about what transpired at the first meeting, any document which records or notes any arrangement or undertaking or which records or notes a procedure which might be followed in the future by reference to anything which occurred at the first meeting, and any document which considers whether to, or the terms upon which, a tender will or may be made and in which reference is made to the first meeting; (b) any document of the nature referred to in (a) which relates to the participation or proposed participation of OFP in the Arrangement; (c) any document which is a record of any of the persons named in par 28.6 of the statement of claim of a meeting at which any other of those persons attended or is a report of events which occurred at any such meeting and which relates to the provision of fire protection services; (d) any document which was directly prepared or directly considered for the purposes of determining whether to tender, and if so upon what terms, and any tender submitted, in respect of the projects named in Schedule 1 to the statement of claim; (e) any document which is directly relevant to the allegations in par 32.4 of the statement of claim; (f) any document which was directly prepared or directly considered for the purposes of determining whether to tender, and if so upon what terms, and any tender submitted, in respect of the projects named in Schedule 2 items 4, 5, 6, 8, 9 and 10 to the statement of claim; (g) any document which is directly relevant to the meetings which occurred on 9 May 1996 or 23 June 1996 (as alleged in par 37.1 and 37.2 of the statement of claim). 29 I note that the other projects referred to in Sch 2 and pars 37.3-37.5 of the statement of claim fall within the period in respect of which FFE and OFP acquiesce in providing general discovery. 30 Before formally making the orders for further discovery which I propose, I will give the parties the opportunity of speaking to their particular terms.

Australian Competition & Consumer Commission v FFE Building Services Limited

At a glance

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Judgment (18 paragraphs)

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Legislation Cited (1)

Cases Cited (10)