Bradken Limited v Norcast S.ár.L

Introduction 5 On 19 March 2013, the primary judge (Gordon J) published reasons for judgment in favour of the respondent against the appellants in the first significant decision involving cartel conduct under Pt IV Div 1 of the Competition and Consumer Act 2010 (Cth) (CC Act): Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235. Orders were made to give effect to those reasons on 28 March 2013: Norcast S.ár.L v Bradken Limited (No 3) [2013] FCA 283. 6 The appeal from those orders was listed for hearing commencing on 4 November 2013. 7 The Full Court on 30 October 2013 was asked to make orders by consent under s 25(2B) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) disposing of the appeal to the Court in the following terms: 1. that the appellants' appeal be allowed without any adjudication on the merits of the appeal; and 2. that declarations 1-10 and orders 11-14 made by the Federal Court on 28 March 2013 in the Fast Track Proceeding be set aside in their entirety, and in lieu of them the following judgment is given and orders made: 1. The application is dismissed. 2. Each party bear its own costs of this proceeding. 3. that the funds deposited by the appellants into an interest bearing account set up and controlled by the Federal Court of Australia pursuant to Division 2.5 of the Federal Court Rules 2011 (Cth), in accordance with order 13.2 of the orders made by the Court on 28 March 2013, be paid out to the First Appellant, Bradken Limited, together with any interest accrued on those funds; and 4. that there be no order as to the parties' costs of the appeal proceeding. 8 After hearing the parties, and the ACCC intervening by leave, the Court stated that it was not prepared to make those orders. It indicated it would publish reasons for its decision in due course. 9 These are the reasons for that decision. 10 The Court notes that the appeal did not proceed in any event. Following the Full Court's decision on 30 October 2013, the parties reached a different agreement to resolve the issues between them by consent. On 1 November 2013, the parties secured the orders in terms of (2) and (3) in [7] above under Rules 39.05(f) and 39.11 of the Federal Court Rules 2011 in the original jurisdiction of the Court, and then, in effect simultaneously, discontinued the appeal, with no order as to costs. It should be stated at the outset that this method of consensual settlement, clearly available under the Rules, was always available to the parties. The parties (especially such sophisticated commercial clients, advised by such highly experienced lawyers) should be taken to have been aware at all times of the availability of the use of Part 39 to set aside the orders in the original jurisdiction. The parties, however, invoked the appellate jurisdiction of the Court - to have the appeal allowed and have orders by an appeal court (by consent) set aside the orders at first instance. It was that course that this Court was not prepared to undertake, for the reasons that follow.

The primary judgment 11 The primary judge found that the first appellant, Bradken Limited (Bradken), had entered into a bid rigging arrangement with Castle Harlan, Inc (Castle Harlan) by 8 March 2011 whereby Castle Harlan agreed to bid for Norcast Wear Solutions, Inc (NWS) and Bradken agreed not to do so, and had thereby contravened s 44ZZRJ of the CC Act, and further that Bradken, by giving effect to that arrangement between 8 March 2011 and 6 July 2011, had contravened s 44ZZRK of the CC Act. Castle Harlan also contravened s 44ZZRJ of the CC Act and, by giving effect to that arrangement between 8 March 2011 and 6 July 2011, contravened s 44ZZRK of the CC Act. Declaratory orders were made accordingly. In addition, Bradken was declared to be a person involved within the meaning of s 75B of the CC Act in the contraventions by Castle Harlan. 12 The second appellant, Nicholas Greiner, and the third appellant, Brian Hodges, were at all material times the Chairman of the Board of Directors of Bradken, and its Managing Director respectively. They were found to be persons involved within the meaning of s 75B in the contraventions by Bradken and Castle Harlan, and declarations were also made on that topic. 13 The second set of findings, and consequential declaratory orders, concerned Bradken engaging, in the period late February 2011 to 6 July 2011, in misleading or deceptive conduct, or conduct likely to mislead or deceive, in trade or commerce in contravention of s 18 of Sch 2 to the CC Act, that is s 18 of the Australian Consumer Law (ACL), by its silence about the bid rigging arrangement and about its cooperation with Castle Harlan for the purpose of acquiring NWS and the back to back sale arrangement between them. Castle Harlan was found to have engaged in the same contravening conduct, as well as contravening s 18 of Sch 2 by representations made on 12 or 13 May 2011 and 27 May 2011. Bradken was declared to be a person involved in the contravention by Castle Harlan, and both Mr Greiner and Mr Hodges were found to be involved in the contraventions by Bradken and Castle Harlan. 14 The appellants were ordered to pay the respondent damages of US$22,400,000 and interest and costs. There was also a stay order, pending any appeal, and an order requiring provision of security for the costs of any appeal.

The power to make the proposed orders 15 The appellants, with the support of the respondent, invited the Court to make the proposed orders in exercise of the power in s 25(2B)(b) of the FCA Act. 16 Section 25(2B) of the FCA Act relevantly provides that: A single Judge (sitting in Chambers or in open court) or a Full Court may: … (b) make an order by consent disposing of an appeal to the Court (including an order for costs); … Pursuant to s 25(2BB), and as the appeal had already been assigned to a Full Court, the Full Court considered it appropriate for it to hear and determine the application. 17 The hearing of the application took place in open Court on oral, as well as written, submissions. Section 25(2C) provides that: The Rules of Court may make provision enabling matters of the kind mentioned in subsection (2B) to be dealt with, subject to conditions prescribed by the Rules, without an oral hearing either with or without the consent of the parties. 18 The appellants had applied under Rule 36.41(1)(g) of the Federal Court Rules 2011 for their application to be dealt with without an oral hearing, as it was to be made with the consent of the parties. However, the Court did not accede to that request, given the significance of the conduct as determined by the primary judge and the fact that the Court was not of the view that it would make the orders, without further assistance.

Consideration 19 There is some room for debate about the circumstances in which the Court's power to allow an appeal by consent under s 25(2B) is enlivened. 20 For present purposes, it is not necessary to enter further upon that debate. Senior counsel for the appellants was content for the Court to proceed upon the basis that the Court must be satisfied that there is appellable error: Telstra Corporation Limited v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64 (Telstra). The Full Court, after reviewing relevant authorities at [40]-[50] concluded at [51] that it was under a "duty to be satisfied, as a condition of the exercise of its power to allow an appeal by consent, that there was an appealable error". The Court in Telstra accepted that the satisfaction may be derived by a process less than hearing the full appeal. 21 In Commonwealth Bank of Australia v Walker (2012) 289 ALR 674 (Walker), Perram J (with whom Rares and Flick JJ agreed) said of that conclusion at [4]-[5]: That statement, however, needs to be understood in the context of their later statement at [52]-[54], which appears to proceed on the basis that demonstration of an arguable appealable error is all that is required. This test was applied by a later Full Court in Citigroup Pty Ltd v Mason (2008) 171 FCR 96; 250 ALR 7; [2008] FCAFC 151 at [3]-[7] (Citigroup), and it is upon that basis that it seems to me appropriate to proceed. It was not explicitly argued before this court that it should now depart from the Full Court's reasoning in Telstra, and we have not heard argument as to its correctness. In that circumstance there is no reason to depart from it. 22 In Telstra at [54] the Full Court concluded that "without descending into the merits of the appeal, there is sufficient basis for the existence of error by his Honour to enliven the power of the Court to allow this appeal". Their Honours then explained why they were so satisfied. 23 It is therefore neither necessary nor appropriate to explore the correctness of that approach. The observations in Citigroup Pty Ltd v Mason (2008) 171 FCR 96 at [8]-[15] (Mason) about whether the decision in Telstra should be followed do not need to be considered. In Mason, when applying that test, counsel and the Court also proceeded on that basis. The Court notes that in Mason at [7] the Court as then constituted made the orders only because of the concession made by senior counsel [for the respondent] that arguable appellable error of law was established. That observation should be read in the context that nevertheless the responsibility of the Court is to make such an assessment, albeit no doubt assisted by the submissions of counsel. 24 In each of Walker and Telstra the appeal issue was relatively straightforward. An application for pre-trial discovery had been unsuccessful. In each, the parties to the appeal satisfied the Court that arguable appellable error was made out, and that an order for pre-trial discovery should be made. In Mason, the appeal set aside an order for payment of particular unpaid annual leave entitlements under the Annual Holidays Act 1944 (NSW) and dismissed the application for that entitlement, having regard to the Workplace Relations Act 1996 (Cth) which, by the Workplace Relations Amendment (Work Choices) Act 2005, provided that it operated to the exclusion of the State Act. It is easy to understand, in such circumstances, why the Court, once it was satisfied of arguable appellable error, exercised its discretion to make the orders sought by consent. 25 The appeal in this matter is considerably more complex. 26 As the appellants' outline of submissions shows, each of the significant conclusions of the primary judge are challenged. The overview describes the contentions as follows: The Appellants' primary contention is that the bid rigging arrangement findings were reached on the basis of errors of reasoning and inference. The findings were incompatible with the primary facts as found by the learned trial judge, particularly the findings that: (a) Norcast took active steps to exclude Bradken from the NWS sale process; (b) Bradken concluded that it had been excluded from the NWS sale process; (c) in light of that conclusion, Bradken informed Castle Harlan of the NWS sale process at a time when Castle Harlan was not a participant in the sale process and was unaware of the sale process; and (d) Bradken never sought to acquire NWS in the sale process conducted by Norcast but ultimately reached agreement with Castle Harlan on the acquisition of NWS from Castle Harlan. In light of those findings there was no basis for concluding that Bradken and Castle Harlan were likely to be in competition with each other in relation to the acquisition of NWS or to infer that Bradken made an arrangement with Castle Harlan containing a provision that Bradken would not bid for NWS. The finding that Bradken contravened s.18 by not disclosing to Norcast its dealings with Castle Harlan, including the "back to back" sale arrangement, is wrong in legal principle. The finding erroneously equates silence in business dealings with deception. On the basis that it had been excluded from the NWS sale process and having no dealings or communications with Norcast, there was nothing deceptive in Bradken pursuing a commercial transaction with Castle Harlan to acquire all or part of NWS from Castle Harlan without disclosing its actions to Norcast. The finding that Castle Harlan contravened s.18 by not disclosing to Norcast its dealings with Bradken is wrong for the same reasons. The findings that Castle Harlan made misleading representations to Norcast in contravention of s.18 were not supported by the evidence. Castle Harlan's identified misleading conduct was not engaged in in trade or commerce within Australia or between Australia and places outside Australia. Further, the identified misleading conduct was engaged in outside Australia and the evidence did not support the finding that Castle Harlan carried on business in Australia. The evidence did not support the finding that Bradken, Greiner and Hodges had any knowledge of the identified representations, let alone gave instructions or participated in any other way in any such conduct. The judgment contains other errors of law and fact which are detailed below. However, the errors to which the above primary contentions refer are dispositive of the appeal, and it is unnecessary to address all other errors. The Appellants do not, in these submissions, address every error of fact in the judgment, but confine their submissions to errors that are relevant to the findings of contravention. 27 Each of those matters is then addressed in detail. 28 There are submitted to be four errors in her Honour's construction of s 44ZZRD. They are developed in detail later in the submissions. There are then said to be "errors of reasoning and inference" upon which the primary judge concluded the existence of a bid rigging arrangement between Bradken and Castle Harlan, including "two fundamental errors". The first was that Bradken and Castle Harlan were, or were likely to be, in competition for the acquisition of NWS, and the second was that the various communications (set out at length in the primary judgment) pointed firmly to the conclusion of the arrangement as found. They are directed to findings of fact made by the primary judge. The submission then addresses four other asserted factual errors, which as expressed, relate to matters of evidence the primary judge referred to and rejected. There is a separate section asserting that the factual conclusion that Mr Greiner and Mr Hodges were each knowingly involved in those contraventions was in error. The issue of damages is also separately addressed. 29 The appellants' submission on the alternative basis of liability, namely misleading or deceptive conduct, is in part related to the contentions about the bid rigging foundation for liability. That is because, it is said, there can be no failure to disclose the bid rigging arrangement if it did not exist. The detailed submissions then assert that the primary judge erred in concluding that Bradken's failure to disclose its dealings with Castle Harlan were designed to deceive the respondent, and further erred in failing to consider whether Bradken's secrecy was likely to cause error or misconception on the part of the respondent, and thirdly erred in concluding that Bradken's silence involved the representation that Bradken was not involved in Castle Harlan's acquisition of NWS. To attack the conclusions of knowing involvement by Bradken, Mr Greiner and Mr Hodges in misleading conduct by Castle Harlan, there is a detailed submission that the primary judge's findings involved much the same errors as referred to above but they require a detailed factual assessment of extensive documentary material as Castle Harlan was, of course, dealing directly with the respondent. There are further submissions that the factual findings that the conduct of Castle Harlan was in trade or commerce, and that it carried on business in Australia, are also in error. There are also submissions that none of Bradken, Mr Greiner or Mr Hodges was involved in the conduct of Castle Harlan if it did amount to misleading or deceptive conduct. They too involve analysis of the factual material. 30 Finally, there is an extensive contention that the conclusions of the primary judge about loss and damage caused by the contraventions are also erroneous, and a further submission that the liability for damages should have been apportioned between the appellants and Castle Harlan. 31 The respondent in its outline of submissions for the appeal proper first describes the appeal as an attempt to have a re-trial by the Full Court on the papers. It emphasises the findings were affected by her Honour's views about the credibility of certain witnesses. It addresses in detail the submissions of the appellants. It is not necessary to go through those submissions in detail for the purpose of these reasons. But it should be noted that the respondent refers to material which it says support the findings of the primary judge. The contentions on matters of construction are also detailed. 32 The written submissions of the appellants on the application the subject of these reasons, whilst not going into the detail of the written submissions for the hearing of the appeal itself, maintain all those issues except for that relating to damages. They recite in some detail the arguments in support of the asserted errors. The respondent made no concession that arguable appellable error existed. There was no withdrawal of the submissions previously filed. 33 The proposed orders, if made, would have led to the Court allowing the appeal, and setting aside the declarations and orders made at first instance, without any substantive assessment of any of the many issues raised by the appeal, but necessarily based on a view of the existence of sufficient operative error to justify the making of the orders. 34 The judgment at first instance addressed important issues arising under ss 44ZZRJ and 44ZZRK of the CC Act. It reflected carefully considered views of a judge of the Court on a matter of general public interest, as well as on matters of particular interest to the parties. In the normal course of the appeal, the Full Court would have itself expressed views on those matters (as well as on the contested factual findings). As the appeal was not argued, it is not possible to say whether all or any of those matters would have led to the appeal being successful and the orders at first instance being set aside. But it is possible to say that it is unlikely that each of the critical findings of fact by the primary judge would have been found to have been in error and that each of the critical issues of construction and application of the legislative provisions considered by her Honour would also have been found to have been in error. But, the effect of the orders proposed to be made on this application would have led to the outcome that, in effect, all of the legal and factual conclusions of the primary judge would have had no status. 35 That concern was behind the limited intervention of the ACCC. Its focus was on preserving in the public interest, but of course to the extent it was appropriate, the determinations of the primary judge on particular legal issues. They included the extraterritoriality of the cartel conduct provisions, the meaning of "likely" in s 44ZZRB, the conduct which would constitute a "request for bids" for the purposes of s 44ZZRD(3)(c), and the question whether an arrangement may be established where (as the appellants contended at first instance and in their grounds of appeal) there exists no reciprocity of obligation between the parties to the arrangement. To state those matters is to demonstrate their significance as matters of general public interest. 36 After a careful examination of the submissions of the appellants, the Court was not satisfied of the existence of operative error. That is not to say that the grounds of appeal were not arguable. Important questions were raised by the submissions, some or all of which on full argument may have been answered in favour of the appellants. There were, however, substantial matters put to the contrary in the submissions of the respondent (in the appeal proper) and in the submissions of the ACCC. Without a concession from responsible counsel for the respondent as to the existence of error, in a case of such complexity, with a long and careful judgment of the primary judge, the Court was not satisfied, to any real degree of satisfaction on the submissions, of the existence of error. 37 The process, on the authority of Telstra, is not a formality. If the Court had been prepared to make the orders, the parties would have been entitled to tell the world that on a short application and without any adjudication on the merits, the Full Court was satisfied of error in the primary judge's reasons: cf VTAG v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 141 FCR 291 at [23]. We were not so satisfied. 38 As was pointed out, both in argument on the hearing of this application, and earlier in these reasons, there was another means by which the parties could have procured the outcome which they sought, but without seeking the imprimatur of the Full Court (in the sense explained in Telstra) about the existence of appellable error and without the implicit consequence that the error or errors were pervasive across the grounds of appeal. That means was the use of Rules 39.05(f) and 39.11. As noted, the parties have now adopted that course. It should not be thought that Telstra provides any impediment whatsoever for the settlement of appeals in the Court. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop, Justices Mansfield and Jacobson.