Carlton & United Breweries Ltd v Castlemaine Tooheys Ltd

The appellants, Carlton and United Breweries Ltd. ("C.U.B.") and Carlton and United Breweries (N.S.W.) Pty. Ltd. ("C.U.B.(N.S.W.)") are the plaintiffs in an action brought in the Supreme Court against Tooth & Co. Ltd. ("Tooth"), Castlemaine Tooheys Ltd. ("C.T.L."), Tooheys Ltd. ("Tooheys") and two other defendants. C.T.L. and Tooheys (which is a subsidiary of C.T.L.) are the respondents to this appeal. The proceedings arose out of two agreements made on 10 August 1983. By one of those agreements, Tooth sold to its subsidiary company, which later became C.U.B.(N.S.W.), all the assets (which did not include hotels) which at 1 July 1983 were utilized in its brewery business, for the sum of $154,500,000. By the other agreement ("the sale of shares agreement") Tooth sold to C.U.B. all the shares in the issued capital of C.U.B.(N.S.W.). The main consideration for that agreement was a guarantee by C.U.B. of the performance of the obligations of C.U.B.(N.S.W.) to pay the price under the agreement for the sale of the assets. At the time of these agreements Tooth owned about 350 hotels in New South Wales but proposed to sell off some of them and to reduce its holding to about 250. C.U.B. and C.U.B.(N.S.W.) regarded it as important that the 250 hotels be retained by Tooth, since it was believed that if the hotels were retained the tenants of the hotels would, for various reasons, be likely to buy the products of the brewery. Clauses 14 and 15 of the sale of shares agreement contained certain express terms designed to protect the brewery business and to restrict the power of Tooth to sell the hotels, and, according to par. 11 of the amended statement of claim, that agreement contained implied terms as follows:

(a) Tooth will not carry out any act or take any step which would or would tend to prevent hinder or impede the Plaintiffs from enjoying the full benefit and advantage previously enjoyed by Tooth in respect of the business;

(b) Tooth would not carry out any act or take any step that would or would tend to destroy or depreciate the goodwill of the business and in particular the custom previously enjoyed by Tooth as landlord of the hotels set out in Schedule 20 of the sale of shares agreement;

(c) Tooth would not carry out any act or take any step that would or would tend to divert or assist in the diversion of custom enjoyed by the business by Tooth as at and prior to 10th August 1983 to a competitor of the Plaintiffs;

(d) Tooth would not carry out any acts or take any steps which would prevent hinder or impede it in performing its obligations under clauses 14 and 15 of the sale of share agreement and in particular from continuing to assure CUB (NSW) the full benefit and advantage of the business.

(e) Tooth would not engage in conduct which was calculated to deprive CUB (NSW) of or destroy, depreciate or divert away from CUB (NSW) the goodwill of the business or a substantial or significant part thereof.

In May 1985 Tooth entered into an agreement to grant to Tooheys (or C.T.L.) a head lease (subject to the existing leases) of 248 hotels and apparently did grant some leases to Tooheys. The appellants, who claim that this agreement involved breaches of various terms expressed or implied in the sale of shares agreement, commenced the present proceedings claiming a declaration, injunctions, an order setting aside the agreement to grant the leases and any leases granted, and damages.

On 20 June 1985 Hodgson J. granted an interlocutory injunction, inter alia, restraining Tooth, C.T.L. and Tooheys from acting upon any agreement to grant to C.T.L. or Tooheys a head or concurrent lease or any other lease or leasehold interest in any of the hotels. One submission which was urged on behalf of the respondents in opposition to the grant of the injunction was that the terms of the sale of shares agreement which the appellants sought to enforce were invalid by reason of s. 45D(1)(a), or of the combined effect of ss. 45 and 4D, of the Trade Practices Act 1974 Cth, as amended, but his Honour rejected this submission so far as the interlocutory application was concerned.

In April 1986 C.T.L. and Tooheys delivered an amended defence. By par. 9(c) of the amended defence it was pleaded that if the sale of shares agreement contained implied terms as alleged in par. 11 of the amended statement of claim the agreement "would be in restraint of trade and void, and further, the entry into of an agreement containing those implied terms or any of them, and the giving effect to of those implied terms or any of them was and would be in contravention of law". By par. 9(f)(i) it was further pleaded that if the sale of shares agreement contained those implied terms or any of them, "then for [the Supreme Court] to grant the plaintiffs any of the relief claimed by them would be further to enforce an agreement in restraint of trade and void and also to assist in continuing contravention by the plaintiffs of the law". Paragraph 9(f)(ii) alleged that "the agreements sued on by the plaintiffs or otherwise alleged by them as part of the causes of action pleaded are agreements in respect of which there is not and never has been any authorization or notification under Pt VII of the Trade Practices Act ". The particulars of par. 9 contained in the amended defence show that it is alleged that the sale of shares agreement is in breach of ss. 45 and 45D of the Trade Practices Act. It is further pleaded, by par. 9A of the amended defence, that the terms alleged in par. 11 of the statement of claim or any of them should not be implied because (inter alia) the result would be that the agreement would then contravene ss. 45 and 45D of the Trade Practices Act.

The appellants by their reply raised the question whether the Supreme Court had jurisdiction to determine the defences raised by par. 9 of the amended defence in so far as those defences arose under any of the provisions of the Trade Practices Act. Later they sought and obtained a separate hearing to determine that question and some related matters. On 19 March 1986 Hodgson J. determined that the questions raised for separate determination should be answered as follows:

(a) This Court has jurisdiction to determine the defences alleged under paragraph 9 of the Defence of the [respondents] in so far as those defences arise under or rely upon any of the provisions of the Trade Practices Act 1974.

(b) The determination of the matters, the subject of the said defences, are [sic] not exclusively within the jurisdiction of the Federal Court of Australia by reason of s. 86 of the Trade Practices Act.

(c) This Court has jurisdiction or power to refuse or decline to grant any of the relief sought by the [appellants] by reason of the said defences arising under or relying upon the Trade Practices Act.

(d) This Court ought not as a matter of discretion to refuse or decline to exercise the jurisdiction or power referred to in (c).

It is from that decision that the present appeal is brought. The appellants do not challenge the correctness of the answer in par. (c), but submit that the answer in par. (a) should be in the negative, and those in pars. (b) and (d) should be in the affirmative.

The argument for the appellants commences with the proposition that the matter raised by the defences in pars. 9(c) and (f) and 9A of the amended defence is a matter arising under the Trade Practices Act. A matter does not arise under a law of the Parliament merely because the interpretation of the law is involved, but a matter does arise under a law of the Parliament if the source of a defence which asserts that the defendant is immune from the liability or obligation alleged against him is such a law: Felton v Mulligan [1] ; L.N.C. Industries Ltd. v B.M.W. (Australia) Ltd. [2] . It is unnecessary to decide whether the source of the defences raised in pars. 9(c) and (f) and 9A of the amended defence is the Trade Practices Act, and it would be unprofitable to consider that question, since the decision depends in part on the meaning of the pleadings themselves, which are rather obscure. It may be assumed that the matter raised by those defences is a matter arising under the Trade Practices Act. However, the Federal Court is not given exclusive jurisdiction in a matter simply because it arises under the Trade Practices Act. The relevant grant of exclusive jurisdiction to that Court is made by s. 86 of the Trade Practices Act which is in the following terms:

Jurisdiction is conferred on the Court to hear and determine actions, prosecutions and other proceedings under this Part and that jurisdiction is exclusive of the jurisdiction of any other court, other than the jurisdiction of the High Court under section 75 of the Constitution. 1. (1971) 124 C.L.R. 367, at p. 408. 2. (1983) 151 C.L.R. 575, at p. 581.

The effect of s. 86, considered in the light of the background provided by ss. 75-77 of the Constitution, was discussed in Philip Morris Inc. v Adam P. Brown Male Fashions Pty. Ltd. [3] , where Mason J. said:

The content of federal jurisdiction, described in ss. 75 and 76 of the Constitution, is expressed in terms of "matters". The federal jurisdiction which s. 86 confers on the Federal Court in the present case is jurisdiction in relation to "matters" arising under a law made by the Parliament (Constitution, s. 76(ii)). Because s. 86 refers to "actions, prosecutions and other proceedings under this Part" and Pt VI provides for actions, prosecutions and proceedings in which penalties and fines may be imposed and injunctions and damages awarded (see ss. 76, 77, 79, 80 and 82), s. 86 is a law which defines the jurisdiction of a federal court with respect to "matters" mentioned in s. 76(ii) pursuant to s. 77(i) and makes that jurisdiction exclusive of that which belongs to the States pursuant to s. 77(ii). That does not mean that the section confers on the Federal Court, and makes exclusive, jurisdiction in all matters which arise under the Trade Practices Act. The section confers jurisdiction only in those matters which answer the description which the section itself contains. That this is so has been recognized more than once by judgments in this Court. In Thomson Australian Holdings Pty. Ltd. v Trade Practices Commission [4] , it was said: Section 86 is not a self-contained grant of jurisdiction; it operates by reference to proceedings for which provision is made elsewhere in Pt VI [of the Trade Practices Act], proceedings which are described in terms of the particular relief which the court is empowered to grant. Section 86 therefore grants a jurisdiction which is specifically linked and limited to proceedings for relief sought under Pt VI. The section does not set out to give the Court jurisdiction to hear and determine proceedings for any other relief 1. (1981) 148 C.L.R. 457, at pp. 506-507. 2. (1981) 148 C.L.R. 150, at p. 162.

Further, in Stack v Coast Securities (No. 9) Pty. Ltd. [5] , Gibbs C.J. referred to Fencott v Muller [6] , where it was said that the jurisdiction conferred by s. 86 upon the Federal Court which was material in that case was jurisdiction arising under ss. 52 and 82 of the Trade Practices Act, and continued:

To be precise, jurisdiction is conferred on the Federal Court by s. 86 to hear and determine only those matters arising under the Trade Practices Act which answer the description of "actions, prosecutions and other proceedings under this Part", viz. Pt VI. There is no provision in the Act which confers jurisdiction on the Federal Court in matters arising under Pt IV or Pt V as such, and it has rightly been held that matters arising under those Parts, and not also arising under Pt VI, are within the jurisdiction of the State courts This passage either accords or is not inconsistent with the judgments delivered in that case by the other members of the Court (except possibly Murphy J.). Mason, Brennan and Deane JJ., after a review of the authorities, said that the first limb of s. 86 "confers jurisdiction on the Federal Court to determine the non-federal aspects of a single justiciable controversy of which the issues raised under the Act form an integral part" [7] . Their Honours continued: There are two constituent elements in the jurisdiction which is thereby conferred: the first element comprises the federal issues which arise for determination under the federal law, e.g., the issues which arise in these cases under ss. 52, 53(aa) and 53A of the Act and damages for contravention; the second element comprises the non-federal issues, the suggestion here being that the issues arising in the actions for specific performance in the Supreme Court are non-federal aspects of a single controversy of which the federal issues form an integral part. For want of a better term it is convenient to refer to this second element as "accrued jurisdiction". They went on to consider the extent to which jurisdiction is made exclusive by s. 86 and concluded that the reference in s. 86 to "jurisdiction" which is made exclusive should be read as a reference to the jurisdiction conferred, other than to accrued jurisdiction [8] ; in other words, the second limb of s. 86 does not make the accrued jurisdiction of the Federal Court exclusive. It clearly appears from this judgment, and is indeed obvious, that there can be no accrued jurisdiction unless there are federal issues which that Court has jurisdiction to entertain. Wilson and Dawson JJ., consistently with this view, said [9] : The jurisdiction of the Federal Court which is made exclusive is the hearing and determination of claims for the penalties or relief for which Pt VI provides. 1. (1983) 154 C.L.R. 261, at pp. 276-277. 2. (1983) 152 C.L.R. 570, at p. 602. 3. (1983) 154 C.L.R., at p. 294. 4. (1983) 154 C.L.R., at pp. 295-296. 5. (1983) 154 C.L.R., at p. 306.

No matter of the kind described in s. 86 of the Trade Practices Act is embraced within the proceedings in the present case. Neither the appellants nor the respondents seek any relief under Pt VI. There is no action, prosecution or proceeding under that Part. The jurisdiction that the Supreme Court is exercising is not that jurisdiction which is conferred on the Federal Court by s. 86. The fact that the controversy could possibly result in the institution of an action or other proceeding under Pt VI does not deprive the Supreme Court of jurisdiction, as Stack v Coast Securities (No. 9) Pty. Ltd. demonstrates.

The appellants sought to support the argument that the Supreme Court lacked jurisdiction by submitting that the Trade Practices Act is a code and that the only consequences which flow from any contravention of the provisions of the Act are those for which the Act itself provides. Mr. Merkel, for the appellants, relied on a passage from the judgment of Wilson J. in Philip Morris Inc. v Adam P. Brown Male Fashions Pty. Ltd. [10] :

It will be observed that the jurisdiction which the Federal Court derives from this Act is wholly statutory. Parts IV and V create the duties and obligations, and Pt VI is an exhaustive enumeration of the remedies that are available in the event of a contravention of any of the provisions of those Parts. The Act provides a code which neither requires nor permits resorts to any other law in the determination of the rights, duties and liabilities which it creates. However, in that passage Wilson J. was dealing with the question, then the subject of controversy, of the nature and extent of accrued jurisdiction and in that context was elucidating the scope of the jurisdiction expressly conferred on the Federal Court to deal with actions, prosecutions and other proceedings under Pt VI. His remarks do not support the view that a Supreme Court which is exercising its ordinary jurisdiction to give relief for a breach of a contract loses that jurisdiction once it is alleged that the making or the performance of the contract is prohibited by the Trade Practices Act. It is most unlikely that the Parliament intended so inconvenient a result. Moreover, the Act itself provides no support for such a view. A number of sections clearly contemplate that the contravention of a provision of the Act may have legal consequences other than those provided by Pt VI, which might affect the grant of remedies by courts other than the Federal Court; those sections show that it was not intended that Pt VI should state exhaustively the consequences attaching to a contravention of a provision of Pt IV or Pt V. It suffices to mention the provisions of ss. 45(1), 45B(1), Div. 2A of Pt V, 87(5) and 163A. The argument which Mr. Merkel has advanced is inconsistent with the view taken by the Federal Court in Trade Practices Commission v Milreis Pty. Ltd. [11] , where it was accepted that the ordinary consequences which the common law attaches to illegality would flow from a breach of s. 45(2) of the Trade Practices Act: see particularly 29 F.L.R., at pp. 150-152, 158-162, 168; 14 A.L.R., at 630-631, 636-640, 645-646. The provisions of s. 87 which were discussed in that case have been amended since the decision was given but the amendments do not affect the question now under consideration. The provisions of the Trade Practices Act are part of the law of Australia and a Supreme Court, in the exercise of its jurisdiction, is bound to give effect to them, and it is not deprived of jurisdiction simply because it is called on to do so. 1. (1981) 148 C.L.R., at p. 543. 2. (1977) 29 F.L.R. 144; 14 A.L.R. 623.

For these reasons the determination of the matters the subject of pars. 9(c) and (f) and 9A of the amended defence was not exclusively within the jurisdiction of the Federal Court and the Supreme Court had jurisdiction to determine them. It is not clear that the answer in par. (c) of the learned judge's decision correctly expresses his opinion, but since that question was not argued it need not be discussed. If the Supreme Court did have a discretion to refuse or decline to exercise its jurisdiction to give effect to the defences under the Trade Practices Act (which to say the least is doubtful), it was correct in concluding that it ought not, as a matter of discretion, refuse or decline to do so.