Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing NSW Ltd & Ors [1987] FCA 640

Federal Court of Australia|1987-11-19|Before: Wilcox J, Young J, Beaumont J, Foster J, Foster JJ

against the refusal by Wilcox J. to grant interlocutory injunctions in proceedings recently commenced in the Court

under Part IV of the Trade Practices Act 1974 ("the Act"). In

the principal proceedings, the applicant, Carlton and United Breweries (N.S.W.) Pty. Ltd. ("CUB (NSW)"), alleges contraventions of ss.45 and 46 of the Act by the respondents. The respondents are Bond Brewing New South Wales Ltd., formerly Tooheys Ltd. ("Tooheys"), Tooth & Co. Ltd. ("Tooth")

Ltd. In those proceedings, CUB (NSW) alleges that the respondents have engaged in unlawful "monopolization" (misuse of market power) of the New South Wales market in licensed hotels contrary to the provisions of s.46; alternatively, CUB (NSW) claims that the respondents have entered into, and

propose to implement, an agreement contrary to the provisions

On 6 May 1985, Tooth and Tooheys entered into the agreement ("the 1985 agreement") called in question in these proceedings. Under the 1985 agreement, Tooth agreed to grant Tooheys concurrent leases in respect of 248 hotels owned by Tooth and leased to hoteliers who conducted their businesses on the hotel premises. Tooheys was also granted periodic

tenancies of 12 other hotels owned and managed by Tooth.

On 8 May 1985, CUB (Nsw) and Carlton and United Breweries Limited ("CUB"), the parent of CUB (NSW), instituted proceedings in the Supreme Court of New South Wales against Tooth and Tooheys claiming that the making of the 1985 agreement was in breach of contracts made between Tooth and CUB and CUB (NSW) in August 1983 ("the 1983 contracts").

Under the 1983 contracts, the brewing business formerly carried on by Tooth was acquired by CUB and CUB (NSW) and Tooth's right to sell its hotels was restricted. CUB and CUB (NSW) sought in the Supreme Court and obtained, interim

injunctions restraining, until the final hearing of their suit, the implementation of the 1985 agreement. At first

instance, CUB and CUB (NSW) were successful. In August 1986,

Young J. found that the 1985 agreement was in breach of an implied term of the 1983 contracts and held that CUB and CUB (NSW) were entitled to appropriate equitable relief. There was no claim raised by the plaintiffs in those proceedings that Tooth or Tooheys had contravened Part IV of the Act. Proceedings on such a claim could not have been instituted by CUB or CUB (NSW) in the Supreme Court (see s.86 of the Act). It may be noted that a defence filed in the Supreme Court raised a defence of illegality based on the Act (see Carlton

and United Breweries Ltd. v. Castlemaine Tooheys Ltd.(1986) 66

A.L.R. 347). However, this defence was not pursued at the final hearing. Young J. granted final injunctions restraining

permanently the implementation of the 1985 agreement.

Appeal of the Supreme Court. In July 1987, the Court of Appeal allowed the appeal. The injunctions granted by Young J. were set aside but the Court of Appeal granted a stay of its orders until 27 July 1987. By consent of all parties, the stay was extended to 4 August 1987. On that day, CUB and CUB (NSW) applied for a continuation of the stay pending the determination of their application to the High Court of Australia for special leave to appeal. Over the opposition of

On 16 October 1987, the High Court refused leave to appeal. Later that day, CUB (NSW) commenced these proceedings. On 19 October 1987, Wilcox J. heard and

determined the claim for interim relief which is the subject

of the present application for leave to appeal. His Honour held that there was no serious question to be tried on any of the claims made in the proceedings and dismissed the

In support of the present application, it is submitted on behalf of CUB (NSW) that Wilcox J. should have found that there was a serious question to be tried, that the balance of convenience favoured CUB (NSW) and that appropriate interim restraints should have been imposed on the conduct of Tooth and Tooheys. It is submitted by CUB (NSW) that an appellate court will interfere where an error of principle has occurred and failure to correct such an error will work an

injustice (see Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. (1981) 148 C.L.R. 170; Epitoma Pty. Ltd.

v. Australasian Meat Industry Employees' Union (1984) 54

A.L.R. 730). It is said that the primary Judge erred in principle in a number of respects. It 1s claimed, inter alia, that the primary Judge failed to deal with one of the

principal contentions advanced on behalf of CUB (NSW).

Before the primary Judge and before us, CUB (NSW) relied primarily on s.46 of the Act. In its present form (it was amended on 13 May 1986, with effect from 1 June 1986), it provides:

"46.(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of -

(a) eliminating or substantially damaging a competitor of the corporation or of a

body corporate that is related to the corporation in that or any other market;

(b) preventing the entry of a person into that or any other market; or

(3) In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the Court shall have regard to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market 1s constrained by the conduct of -

(a) competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or

(b) persons to whom or from whom the body corporate or any of those bodies

corporate supplies or acquires goods or services in that market.

(a) a reference to power is a reference to market power;

(b) a reference to a market 1S a reference to a market for goods or services; and

power, or to conduct, in that market either as a supplier or as an acquirer of

Wilcox J. considered the claim that s.46 had been contravened by reference to 1ts form at the time of entry into the 1985 agreement. As has been noted, s.46 was amended in 1986. A number of significant amendments were then introduced. For instance, in its form before the 1986 amendments, s.46(1) applied to a corporation "in a position

substantially to control a market for goods or services."

From 1 June 1986, the section applied to a corporation that "has a substantial degree of power in a market". In each case what was or is prohibited is the taking advantage of that

Wilcox J. said that there was evidence that each of Tooth and Tooheys was in a position substantially to control the market for leases of hotels. If it were relevant there was evidence, his Honour said, that Tooheys was, as at May 1985, in a position substantially to control the market for wholesale beer. The primary Judge also said that there was evidence that Tooheys had the purpose of substantially damaging CUB (NSW) and of preventing it from engaging in competitive conduct, whether in the hotel lease market or the New South Wales wholesale beer market. However, Wilcox J. held that by entering into the 1985 agreement, neither Tooth nor Tooheys took advantage of any power held by either of them in relation to the market. His Honour said that from Tooth's point of view, the arrangement was "simply an advantageous commercial dealing". From Toohey's point of view - ",..the position was that this company desired to obtain control of the Tooth hotels. But its means

of doing so was to provide cash benefits now, and in the future, and to transfer to Tooth [a] wine distribution company. I do not see Tooheys' position as being any different from that of any other company, having no existing involvement in the hotel market in New South Wales, but being perhaps a manufacturer of beer elsewhere in Australia or even overseas, which might decide to come into the New South Wales hotel market and to purchase leases of hotels in order that it might better influence licensees to sell its beer. It seems to me that, in the present case, a critical element in s.46 is lacking."

It 1S now submitted by CUB (NSW) that his Honour failed to address its real argument. That argument, involving two different markets, is as follows: (1) Upon conclusion of the 1985 agreement, Tooheys will have a substantial degree of power in the New South Wales hotel market; (2) Tooheys proposes to take advantage of that power by using improper "influence" over its tenants for purposes which include a purpose of substantially damaging CUB (NSW) and a purpose of deterring or preventing CUB (NSW) from engaging in competitive

It will be remembered that s.46(1)(a) can apply where a corporation having a substantial degree of power in a market, takes advantage of that market power for the purpose of damaging a competitor of that corporation in that market or

any other market. Central to the case sought to be made by

CUB (NSW) is the influence claimed to have been exerted or likely to be exerted by Tooheys over its tenants, or its prospective tenants. This influence is described by CUB (NSW)

'(a) the community of interest between a brewer "landlord" and his hotel licensee tenant;

(b) the power to renew or fail to renew a periodic tenancy or a lease;

(x) the lessee has acquired or agreed to acquire the landlord's products; (y) the lessee has acquired or agreed to

acquire competing products which are competitive with the landlord's products; {(d) the power to determine the nature and extent of any signage affixed on or about the lessee's hotel premises;

(e) the power to provide or inhibit the provision of finance to the lessee to assist in the acquisition, conduct or development of its business;

(f£) the power to approve, assist or hinder any capital improvements to the hotel premises the subject of the lease;

(g) the power to control the manner and extent to which maintenance of the said hotel premises is undertaken;

(h) the power to influence the ability of the lessee to sell the business 1t conducts at the hotel with or without' the

(1) the power to determine whether to sell the freehold to the hotel premises to the tenant;

The primary relief now sought by CUB (NSW) in its claim under s.46(1)(a) is not directed at the conclusion of the 1985 agreement. What 1t seeks to restrain, both pending a final hearing and permanently, is the exertion by Tooheys of improper influence over the tenants of Tooth's hotels. It is this apprehended conduct of Tooheys in the hotel market which, CUB (NSW) claims, will be engaged in for the purpose of damaging CUB (NSW) in the beer market. The injunction

"A, An Order restraining [Tooheys] whether by itself, its servants or agents or howsoever otherwise from directly or indirectly inducing or attempting to induce any lessees of the [Tooth] hotels... not to acquire [CUB (NSW)]'s products or to reduce their acquisition of [CUB (NSW)]'s products by threats, promises or representations that, or to the effect that, any failure to so act will result in them suffering detriment by reason of the exercise of any of the rights, powers or privileges which may be gained or exercised by [Tooheys] under by reason of or as a consequence of the May 1985 Agreements...."

Wilcox J. does not appear to have dealt with this particular argument, assuming it was put to him. His Honour approached the matter on the footing that CUB (NSW)'s complaint under s.46 was fTooheys' entry into the 1985 agreement. It 1s true that CUB (NSW) then sought, and still seeks, in the alternative, to restrain the conclusion of the 1985 agreement. But its principal claim, at least before us, was based on its allegation that upon becoming concurrent lessor, Tooheys would exert improper influence over its tenants and would thus damage CUB (NSW) in the beer market. It is this charge of improper influence upon which CUB (NSW)

It is not easy for us to determine from the transcript of the proceedings before Wilcox J. whether this particular argument was put to his Honour. But, for reasons which will appear, it is not necessary for us to decide whether it was or not. In our opinion, even 1f£ it be assumed in favour of CUB (NSW) that a "serious" question of fact or law arises under s.46(1)(a), leave to appeal should not be granted on this aspect of the application for interlocutory relief for discretionary reasons. In other words, assuming, without deciding, that CUB (NSW) could demonstrate that a "serious" question, of fact or law or both, arises on the s.46 claim, the question of the balance of convenience remains; and no useful purpose would be served in granting leave to appeal on the question whether Wilcox J. erred in holding that no serious question arose, if, as a matter of discretion, an interlocutory injunction should be refused in any event. We

The grant of injunctive relief, interim or final, is, of course, discretionary. Delay by an applicant in instituting or in prosecuting a claim for an injunction may be a ground for refusing relief, even at a final hearing. Where an interim aunjunction is sought on the basis that' the applicant need show only a "serious" question of fact or of law, delay in seeking that relief is an important discretionary consideration (see Meagher, Gummow and Lehane, Equity - Doctrines and Remedies, 2nd ed., para. 3606, p.758). Although delay is a traditional equitable defence to the grant of any injunction, in proceedings under the Act, the public interest may also have to be taken into account (see, for

example, World Series Cricket Pty. Ltd. v. Parish (1977) 16

A.L.R. 181 per Bowen C.J. at pp.189-90; R v. Judges of the

Federal Court of Australia and McDowell Pacific Ltd.; Ex

parte Pilkington A.C.I. (Operations) Pty. Ltd. (1978) 142 C.L.R. 113 per Mason J. at p.128; Taperell, Vermeesch and

Harland, Trade Practices and Consumer Protection, 3rd ed. at p.119). There is, of course, a public interest in promoting competition in the market place. But it would not seem that this aspect of the public interest would be placed in jeopardy if interim relief were now to be refused. It is common ground that the parties compete vigorously in the beer market. Moreover, this is essentially private litigation between two major brewers where the subject matter of their dispute is

approximately one per cent of the State beer market.

In our opinion, CUB (NSW)'s delay in bringing these proceedings is, of itself, a sufficient reason for declining to grant an interlocutory injunction. Put differently, the failure by CUB (NSW), without reasonable excuse, to institute this action with some measure of expedition is, we think, a

decisive factor against the grant of the urgent, interim

True it ais that CUB (NSW) proffers the usual undertaking as to damages as a condition of the grant of interlocutory relief. But, for reasons which we will give, this undertaking may not adequately compensate Tooheys for the prejudice that 1t would suffer if restricted in its activities in the manner contemplated in the relief (order A) now sought. It may also be accepted that the Supreme Court injunction restraining Tooth and Tooheys from implementing the 1985 agreement was in force until recently. Yet this does not properly excuse CUB (NSW) from its failure to act on its claims under the Act until after the High Court had refused 1t leave to appeal in the other litigation: the Supreme Court proceedings involved quite different issues and, in any event,

CUB (NSW) was not there seeking to restrain the improper

influence now alleged against Tooheys (see Carlton & United

Breweries Ltd. v. Tooth & Co. Ltd. (1986) 7 IPR 581 at

Assuming 1n CUB (NSW)'s favour, as we will, that we should look at the question of discretion de novo, that is to

say, as 1f the discretion to grant interim relief were ours

(see Minister for Aboriginal Affairs v. Peko Wallsend Ltd.

(1985) 66 A.L.R. 299 at pp.314-5), the practical impact of the grant of interim relief at this stage should be considered. In thas connection, it 1s important first to estimate the period over which the "interim" restraint would operate. It would seem probable that, if now granted, an interlocutory injunction (or its equivalent in the form of stays in the event of appeal) could remain in force for as long as two years. The present litigation, on any view, is complex. At the heart of 1t lies an investigation of two markets - the New South Wales hotel and wholesale beer markets. It is plain that, even if expedited, the final hearing could not take place in less than three months from now. A realistic estimate of the time required by all parties to prepare properly for a final hearing, bearing in mind that, most, 1f not all, parties will probably call expert evidence, is at least six months. Moreover, it may be expected that the final hearing would occupy at least 4 weeks. The trial judge would probably reserve his decision. During all this time, the interim injunction now sought would run. Let it then be assumed that the trial judge were to dismiss the claim for final relief and to dissolve the interim injunction. It is likely that CUB (NSW) would then appeal to a Full Court. The appeal could probably not be ready to be heard within a further six months. It is likely that, pending the hearing of the appeal, CUB (NSW) would seek a stay of the order dissolving the interim injunction. If the appeal failed, an application for leave to appeal to the High Court is likely, together with an application to stay further the order

Secondly, the scope of the interim injunction should be considered. If interim relief were now granted restraining Tooheys in the terms or to the effect of order A, it 1s difficult to imagine how, under such a_e wide-ranging restriction, Tooheys could safely communicate with its tenants at all about the products of CUB (NSW). Certainly, Tooheys would be at risk of contempt proceedings in any attempt to promote its own products with its tenants: the "threats, promises or representations" in the order sought could be

On these assumptions, which we think may reasonably be made, Tooheys would be subjected to a_ substantial prohibition restricting it in its dealings with its tenants

To be weighed against this prejudice is the undertaking as to damages. Often this will prevent injustice being done at the interlocutory stage. But the undertaking may not adequately compensate Tooheys if order A were now made as an interim injunction. If successful at the final hearing, Tooheys would have to demonstrate the necessary causal connection between the restraint and any loss of custom (see

Air Express Ltd. v. Ansett Transport Industries (Operations)

Pty. Limited (1981) 146 C.L.R. 249). To demonstrate this

nexus 1n a competitive commercial context may be difficult.

As has been said, a claim under s.46 could not have

been advanced by CUB (NSW) in 1ts Supreme Court suit. But it

could have commenced the present proceedings much earlier. The amendments to s.46 were in force by 1 June 1986 and at the latest, by July 1987, CUB (NSW) knew the result of the Court of Appeal decision. It must have appreciated by September 1986 (Young J.'s decision was in August 1986) that there was at least a possibility that the Court of Appeal would set

It is said on behalf of CUB (NSW) that to have instituted these proceedings earlier may have caused costs to be thrown away on Litigation which was of academic significance only. This assumes that the appeal from the decision of Young J. would be dismissed. The uncertainties of any litigation indicate that such an assumption could not reasonably be made. More important, as has been said, the improper influence now alleged on the part of Tooheys was not the equity in suit in the Supreme Court. The cause of action there was different: 1t was grounded on an alleged contractual right of pre-emption said to have contained an implied term which was breached by entry into the 1985 agreement. Moreover, it is not suggested here that the cost of instituting these proceedings earlier was a prohibitive

factor, financially, so far as concerned CUB (NSW).

In truth, the present case may be seen as involving an election on the part of CUB (NSW). It elected to press first its claims in the Supreme Court and to defer the institution of proceedings under the Act in this Court.

Having elected to defer the commencement of these proceedings,

CUB (NSW) should not, in our view, be granted, on an urgent basis, the discretionary remedy of an interim injunction of the kind now sought. It could be expected that an application for relief under the Act, if made in, say, August 1986, would have been disposed of by this time. It is hardly necessary to point to the different cases required to be made by an applicant on a final, as distinct from an interlocutory, application. In the latter case, an applicant need only show a prima facie case or a "serious" question to be tried. It would be unjust to permit CUB (NSW) to obtain, on a prima facie or "serious" question basis only, an injunction which although interim, could hamper Tooheys in its trade fora considerable time when the proceedings could have been instituted, say, 15 months ago and the matter decided by now

It follows, in our view, that even 1f a serious question to be tried on the s.46 1ssue could be demonstrated, and we express no opinion on that matter, there are strong

discretionary reasons why an interim injunction should be refused in respect of this claim. We refuse leave to appeal

Before Wilcox J., and before us, CUB (NSW) advanced another argument to justify the grant of interim relief. The claim was based on s.45(2) of the Act. Relevantly, 1t

(a) make a contract or arrangement, or arrive at an understanding, if -

(iz) a provision of the proposed contract, 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 contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision -

(i1) has the purpose, or has or is likely to have the effect, of substantially lessening competition."

CUB (NSW) contends that the 1985 agreement has the purpose, and the likely effect, of substantially lessening competition in the New South Wales wholesale beer market. Wilcox J. found that, if the 1985 agreement was carried into effect, it was likely that sales equivalent to one per cent of the total New South Wales wholesale beer market would be diverted from CUB (NSW) to Tooheys. Before us, CUB (NSW) argued that the figure should be closer to two per cent. Wilcox J. took into account the importance, in a capital-intensive industry, of marginal production = and Marginal profit, but held that there was -

",...no evidence to suggest that, if one per cent of the market was diverted from Carlton to Tooheys, this would limit Carlton's ability to compete on the New South Wales market. No evidence has been given, for example, to show that such a loss would cause the operations of the applicant in New South Wales to become uneconomic, causing it to abandon

the New South Wales market, and therefore resulting in a lessening of competition in that market."

Before us, CUB (NSW) did not seriously challenge his Honour's conclusion. We agree with Wilcox J. that CUB (NSW) has not demonstrated that any "Serious" question arises under s.45(2). Even if it did, the discretionary considerations already mentioned would apply here also. We refuse leave on

Finally, as has been noted, before Wilcox J. and before us, CUB (NSW) sought, in the alternative, an interim injunction restraining the completion of the 1985 agreement. This relief was not strongly pressed before us. As has been said, the primary relief now sought is order A, which is directed at the improper influence alleged against Tooheys. However, it 1S now said that, on a quia timet basis, the Court should urgently intervene and prevent completion of the 1985 agreement and, in this way, prevent Tooheys from putting itself in a position where 1t could then exert improper influence over the tenants of the Tooth hotels. This should be viewed as a claim, in substance, for an interlocutory restraint, guia timet, against the use of the "tools of influence"; and, as has been said, there are powerful discretionary considerations why Tooheys should not, at such a

late stage, be subjected to an interim restraint of this kind.

I certify this and the Zduenlegr Uv) preceding pages to be a true copy of the Reasons for Judgment of the Court.

Counsel for the Applicant: Solicitors for the Applicant:

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