High Court of Australia|1986-12-02

Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72; (1986) 162 CLR 395 (2 December 1986)

CASTLEMAINE TOOHEYS LTD v. WILLIAMS & HODGSON TRANSPORT PTY. LTD. [1986] HCA 72; (1986) 162 CLR 395

Gibbs C.J.(1), Wilson(2), Brennan(3), Deane(4) and Dawson(5) JJ.

GIBBS C.J.: This appeal from the Full Court of the Federal Court raises for decision a narrow question concerning the effect of s.47 of the Trade Practices Act 1974 (Cth), as amended ("the Act"). Sub-section (1) of s.47 provides that subject to that section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing. The subsequent sub-sections of s.47 then go on to define or describe that practice. The sub-sections which call for consideration in the present case are sub-ss.(6) and (7) which (so far as material) read as follows:

on the condition that the person to whom the

corporation supplies or offers or proposes to

supply the goods or services ... will acquire goods

or services of a particular kind or description

directly or indirectly from another person.

(7) A corporation also engages in the practice of

exclusive dealing if the corporation refuses -

for the reason that the person ... has not

acquired, or has not agreed to acquire, goods or

services of a particular kind or description

directly or indirectly from another person."

Section 47(13) provides, inter alia, that in that section -

"(a) a reference to a condition shall be read as a

reference to any condition, whether direct or

indirect and whether having legal or equitable

force or not, and includes a reference to a

condition the existence or nature of which is

ascertainable only by inference from the

conduct of persons or from other relevant

circumstances".

A number of expressions which appear in s.47(6) and (7) are defined in s.4(1), but the only definition that need be mentioned is that of "acquire", which unless the contrary intention appears, includes, in relation to services, "accept". By s.4C it is provided that in the Act, unless the contrary intention appears, inter alia -

"(c) a reference to the supply or acquisition of

goods includes a reference to the supply or

acquisition of goods together with other

property or services, or both;

(d) a reference to the supply or acquisition of

services includes a reference to the supply or

acquisition of services together with property

or other services, or both".

2. The appellant is a company which supplies throughout Queensland beer which it brews at Milton in Brisbane. The arrangements which it makes with retailers (such as hotel licensees) for the supply of the beer vary from place to place. In some places in southern Queensland retailers may buy direct from the brewery. This case is concerned with the supply to retailers within the area which the appellant, for distribution purposes, regards as its North Queensland area. In that area the appellant maintains regional depots at Rockhampton, Mackay, Townsville and Cairns. Retailers within the North Queensland area have, subject to certain exceptions which will be mentioned, a choice of two methods, and two methods only, of acquiring the appellant's beer. The retailer may either take delivery from one of the appellant's regional depots in North Queensland or he or she may arrange for the beer to be delivered to the retailer's premises from the brewery at Milton. In the latter case, however, the appellant insists (subject to the exceptions to be mentioned) that it arrange for the delivery of the beer. In fact, the appellant arranges for the delivery to be made by its "preferred carrier", which at present is Queensland Railfast Express ("QRX"). That carrier arranges for the beer to be carried partly by rail and partly by its own transport. There are certain commercial advantages for the appellant in ensuring that as a general rule one carrier only carries the beer from Milton to the retailers in North Queensland but that circumstance is of no particular relevance.

3. There is a disadvantage entailed in buying beer from a regional depot. The learned primary judge, Wilcox J., described the situation as follows:

"Licence fees in Queensland are calculated as a

percentage of the cost to the licensee of

purchasing the liquor which is retailed. If a

retailer purchases beer from the (appellant's)

depot at, say, Townsville, his or her licence fee

is calculated by reference to the cost of that

purchase; which cost reflects the fact that the

(appellant) has incurred expense in transporting

the beer from Brisbane to Townsville. If, on the

other hand, the licensee purchases ex Brisbane, the

licence fee is calculated upon the basis of the

Brisbane price; the costs of freight and insurance

being disregarded, apparently on the basis that

those are delivery costs rather than part of the

cost of the beer itself."

For this reason it is the practice of retailers who purchase beer in large quantities to resort to a regional depot only in times of emergency. Retailers with small turnovers are in a different position; for them, the convenience of being able to take small deliveries from a nearby depot as supplies are required may outweigh the disadvantage of an increased licence fee.

4. The exceptions to which reference has already been made were found by Wilcox J. to be minor; the appellant will allow the beer to be carried from the brewery to some of the smaller towns in the area (apparently towns which QRX is not able conveniently to service) by another carrier, or by rail, or by the retailers themselves. Subject to these exceptions, the appellant will not permit a retailer from within the North Queensland area to take delivery of beer from the brewery at Brisbane. It will sell beer which is to be delivered from the brewery to such a retailer only under a contract in accordance with which the engagement of a carrier and the transportation of the beer are arranged by the appellant. In the words of Sweeney J. in the Full Court, the appellant "will sell beer to them ex Brisbane if, and only if, they will agree to purchase it as part of a package, made up of the beer, insurance and freight, and pay the cost of the package deal to it". In such a case the buyer is invoiced for a total price, although, on the invoice, freight (which is included in the price) is shown separately. Under these contracts the property in the beer does not pass until delivery. Any insurance of the beer while in transit would of course be solely for the benefit of the appellant.

5. The respondent is a carrier which wishes to carry the appellant's beer to North Queensland and which claims that it is precluded from doing so by the arrangements which have been described. It claims that those arrangements amounted to exclusive dealing within s.47. Wilcox J. accepted this argument and granted an injunction and gave judgment for damages in favour of the respondent. This decision was upheld by the Full Court by a majority (Sweeney and Lockhart JJ., Fox J. dissenting).

6. It was submitted on behalf of the respondent that a retailer who bought beer which was delivered to the retailer's premises by QRX acquired, in the sense of accepted, the services of QRX because the retailer received the benefit of those services even though there was no contractual arrangement between the retailer and QRX. It was further contended that the services of QRX were forced on the retailer, since as a matter of commercial reality the retailer had to accept the terms offered by the appellant. It was said that in these circumstances the appellant supplied the beer on condition that the retailer acquired the services of QRX.

7. The questions raised by these submissions are not without difficulty. It is clear enough that it was not a condition of the supply of beer to retailers generally in North Queensland that it be delivered by QRX. Retailers might, if they wished, purchase from the regional depots in North Queensland and some retailers did. There were commercial advantages in buying the beer from Brisbane, but it was not right to say that in reality a retailer was forced to accept delivery by QRX. However, when a retailer wished to have the beer delivered from the brewery, the appellant required, as a prerequisite to granting supply, that the appellant itself should arrange delivery. The appellant supplied the beer on that condition.

8. However, the condition was not that the retailer should accept the services of QRX. The condition was that the appellant should arrange the carriage of the beer and should deliver it to the retailer, not at the brewery, but at the retailer's premises or some other place in North Queensland. In other words the condition was that the appellant would deliver the beer which it sold to its destination in North Queensland. It was of course clear that if the appellant had itself carried the beer there would have been no exclusive dealing within s.47. The position was not altered when the appellant arranged for a third person to carry on its behalf. In those circumstances the services were acquired by the appellant and not by the retailer. No doubt in a loose sense the retailer received a benefit from the services, but in truth what the retailer acquired was the beer and not the services of the carrier. Certainly there was no condition that it should acquire (even in the sense of accept) those services.

9. There can be no doubt that if the condition is that the services should be provided to the corporation which is alleged to be engaged in the practice of exclusive dealing there is no contravention of s.47(6). The decision of the Federal Court in Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd. [1978] FCA 50; (1978) 36 FLR 134; 22 ALR 621 is distinguishable from the present case. In that case a building society made the practice of imposing, in respect of loans made to its members, a requirement that the property mortgaged to secure repayment of the loan be insured with a particular nominated insurer. It was held by a majority that there was a contravention of s.47(6). There the contract of insurance conferred rights on the borrower, and not merely on the building society, and those rights came within the definition of "services" in the Act. However Deane J., at p168; p650 of ALR, said:

"It was not contended on behalf of the

commission that any contravention of s.47 would be

involved if the condition as to insurance was

restricted to coverage of the interest of the

relevant applicant, as mortgagee, in the mortgaged

property. It would seem a condition which was so

limited would not be within s.47(6) for the reason

that it would relate to acquisition of the relevant

services by the applicant itself through the member

as its agent. The issue between the parties is

whether the consideration or requirement is within

s.47(6) to the extent that it requires insurance in

respect of the interest of the member."

That statement supports the conclusion in the present case that if the services of QRX were acquired by the appellant itself there was no breach of s.47(6) and in my opinion that was the position.

10. Lockhart J. appears to have placed some reliance on the fact that the arrangements made by the appellant had the effect of lessening competition. It is made clear by s.47(10) that the question whether the conduct in question does have that effect is not relevant when one is considering sub-ss.(6) and (7) of s.47. Although the section may reveal a general purpose of proscribing practices which tend to lessen competition, that is no justification for departing from the words of the section, which significantly interferes with common law rights, and is in any case a penal provision (see s.76 of the Act). The practice whereby a seller of goods arranges for their delivery by himself or an agent is ancient and well known, and if it had been intended to render that practice unlawful that result could have been achieved by the use of clear words.

11. It was submitted on behalf of the appellant that when the appellant delivered the beer it supplied both goods and services, and that s.4C had the effect that the whole transaction was a supply of goods for the purposes of s.47(6). If that is correct, as it appears to be, it provides further support for the conclusion that I have reached, but I need not express a final view on the matter.

12. It is even more clear that there was no exclusive dealing of the kind mentioned in s.47(7). The appellant did not refuse to supply the beer to any retailer. It was always ready to supply any retailer, either by delivering it from the brewery to North Queensland, or by allowing it to be picked up from a regional depot.

13. For these reasons I consider that the practice in which the appellant engaged was not a practice of exclusive dealing within s.47. I would allow the appeal.

WILSON J.: I have had the advantage of reading the reasons for judgment prepared by the Chief Justice. I agree with those reasons and with the conclusion to which they lead. Save for the two brief observations I am about to make there is nothing that I wish to add.

2. It seems to me that the appellant's submission based on s.4C of the Trade Practices Act 1974 (Cth), as amended, ("the Act") derives added support from the definition of "services" in s.4(1) of the Act. That definition, so far as material, reads:

"'services' includes any rights (including rights

in relation to, and interests in, ... personal

property), benefits, privileges or facilities that

are, or are to be, provided, granted or conferred

in trade or commerce, ... but does not include

rights or benefits being the supply of goods ...".

The Act clearly contemplates that services may accompany the supply of goods in such a way as to constitute a single transaction properly described as a supply of goods. It follows that an act or series of acts, once characterized for the purposes of the Act as a supply of goods, cannot also be a supply of services. See Taperell, Vermeesch & Harland, Trade Practices and Consumer Protection, 3rd ed. (1983) p.163. Thus a contract for the supply and fitting of a windscreen to a motor vehicle has been held to fall within a market in which persons supply goods rather than services: Cool v. O'Brien Glass (1981) 35 ALR 445, at p 460 (upheld on appeal [1983] FCA 191; (1983) 48 ALR 625, at pp 635, 646). It may not always be easy to make the characterization, the task being to identify, from all the circumstances of the case, the precise legal obligation undertaken by the supplier of the goods.

3. Here the transactions under scrutiny encompassed no more than the supply of goods. The beer was to be supplied at the premises of the retailer. Each supply was a single transaction which could not be broken up into its several elements of sale and delivery without doing violence to the reality. Delivery to the premises was an essential and therefore inseparable concomitant of the supply of the beer. In different circumstances it might well be appropriate to characterize the delivery of the goods as the supply of a service. But not here. No question of supplying a service arises.

4. The second observation relates to the significance that attaches to s.47(10) of the Act. That sub-section is referred to in the judgment of the Chief Justice. Its effect is to limit the application of the section in the case of exclusive dealing of the kind referred to in sub-ss.(2), (3), (4) or (5) or pars.(8)(a) or (b) or 9(a), (b) or (c) to a situation where the conduct in question has the purpose or effect of substantially lessening competition. There is no mention of sub-ss.(6) or (7). The effect of the omission is to give added weight to the proscription of the conduct described in those sub-sections. That type of exclusive dealing, described as third line forcing and explained in the judgment of Lockhart J., is prohibited whether or not it has any impact on competition. But the fact remains that the capacity of the sub-sections to have a broader operation does not suffice to bring the present case within their reach.

BRENNAN J.: Castlemaine Tooheys Limited is the brewer of Fourex beer. Its brewery is at Milton, a suburb of Brisbane. The beer is distributed throughout the State of Queensland and elsewhere. The brewer supplies beer at special prices to the licensees of premises in the State licensed under the provisions of the Liquor Act 1912-1985 (Q.). The licensees whose premises are in or near the major cities in North Queensland are offered beer at a particular price at the depots which the brewer maintains in each of those cities or at a different price if the beer is delivered at their premises by a carrier ("QRX") selected by the brewer.

2. The annual licence fees payable by licensed victuallers under the Liquor Act are calculated on the gross amount paid or payable for liquor purchased by licensees for the licensed premises during the 12 months ended on 30 June in the preceding year: Liquor Act, s.18(1). When a licensee buys beer at a depot in a North Queensland city the price that is paid for the beer includes an undifferentiated component which covers the brewer's cost of transport. That component is thus included in the amount paid for the beer upon which the licence fee is calculated. If the licensee buys the beer for delivery at his premises by QRX, the brewer issues an invoice differentiating between an amount representing the sum charged for the beer at the brewery door at Milton, and an amount representing the cost of transport and insurance of the beer in transit. In calculating the annual licence fee, the cost of transport and insurance is apparently excluded and the calculation is made on the sum charged for the beer at the brewery door. The cost of transport and insurance which is charged to the licensee represents the cost incurred by the brewer in securing the transport services of QRX and in insuring the beer transported. The licensee acquires no property in the beer until its delivery at his premises. He has no interest in the insurance of the beer and he is not a party to the contract under which the brewer secures the services of QRX to transport it. The brewer is unwilling to supply beer direct from its Milton brewery to North Queensland licensees except on the terms stated; but the brewer is willing to supply and supplies beer to licensees at its North Queensland depots, leaving the licensee to make his own arrangements for delivery of the beer by any means or by any carrier selected by the licensee.

3. Wilcox J. at first instance and the majority of the Full Court of the Federal Court on appeal held that the supply by the brewer of beer delivered by QRX to the premises of the respective North Queensland licensees constituted a practice of exclusive dealing falling within s.47(6) of the Trade Practices Act 1974 (Cth) ("the Act"). The relevant provisions of s.47(6) are:

" A corporation also engages in the practice of

exclusive dealing if the corporation -

(a) supplies, or offers to supply, goods ...;

on the condition that the person to whom the

corporation supplies or offers ... to supply the

goods ... will acquire ... services of a

particular kind or description directly or

indirectly from another person."

By s.4 of the Act "supply" is defined to include -

"(a) in relation to goods - supply (including

re-supply) by way of sale, exchange, lease,

hire or hire-purchase; and

(b) in relation to services - provide, grant or

confer".

In the Federal Court, it was held that North Queensland licensees were supplied with beer from the Milton brewery on condition that they accept transport services from QRX. The force of their Honours' reasoning is manifest and I do it no disrespect by failing to elaborate its steps. Much depends on the starting point of the analysis and, in stating the views which have led me to a contrary conclusion, the points of departure will sufficiently emerge.

4. The sale of beer by the brewer to the licensees is a supply by way of sale. The supply by way of sale occurs at a licensee's premises when the beer is delivered. There is no supply by the brewer to a licensee at the brewery door in Milton. When QRX picks up the beer at the brewery door, there is no sale; no appropriation of beer to an agreement for sale; no transfer of property in the beer. QRX takes possession of the beer under its contract with the brewer; the brewer is the bailor, the carrier its bailee.

5. Once it is appreciated that the beer transported by QRX is supplied by the brewer to a licensee only at the licensee's premises, it is impossible to suppose that the transport services rendered by QRX are acquired by the licensee. The beer supplied at the licensed premises may be described as "delivered beer" to distinguish it from beer at the brewery door, but the delivery services supplied by QRX are acquired by the brewery, not by the licensee. The licensee acquires only delivered beer. It must be remembered that in the Act unless a contrary intention appears -

" a reference to the supply or acquisition of goods

includes a reference to the supply or acquisition

of goods together with ... services ..."

(s.4C(c)).

As the supply of delivered beer is a supply of goods and as "services" are defined to exclude "rights or benefits being the supply of goods" (s.4(1)), the supply of delivered beer cannot be "services". The licensee acquires no services, either from the brewer or from QRX.

6. Section 47(6) applies only when there are two contracts or arrangements: the first, between the corporation which supplies and the person who acquires goods or services; the second, which may be made directly or indirectly, between the person who acquires those goods or services and a third person. Here there is no contract or arrangement, whether direct or indirect, between a licensee who acquires delivered beer from the brewer and QRX pursuant to which the licensee acquires delivery services from QRX. From start to finish QRX's contract or arrangement is with the brewer alone. In so far as the licensee derives a benefit from the delivery of beer to his premises, he acquires that benefit from the brewer and not from QRX. It is submitted that a person may acquire services simply by accepting them, and that a licensee accepts delivery services by QRX. But a licensee does not accept any services from QRX; the licensee accepts the delivered beer supplied to him by the brewer. If it were legitimate (and it is not) to distinguish between the beer supplied and the delivery services, nevertheless the licensee would accept both the beer and the delivery services from the brewer under the contract of sale of the beer. The brewer does not seek to force licensees to accept the services of a carrier nominated by the brewer. The brewer simply asserts its right to choose the carrier to deliver its beer to the point of sale at the licensee's premises in discharge of its obligation to the licensee to deliver the beer there. The position is no different from what it would be if the brewer's own employees delivered the beer.

7. The facts of this case are quite different from those which fell for consideration in Re Ku-ring-gai Co-operative Building Society (No.12) Ltd. [1978] FCA 50; (1978) 22 ALR 621; 36 FLR 134. In that case, co-operative building societies required their members to whom moneys were advanced on mortgage to effect policies of insurance with nominated companies to cover the respective interests of the mortgagor and the mortgagee in the mortgaged property. The mortgagor took out a policy with a nominated insurer. The practice was held to contravene s.47. If the insurance had been effected by the mortgagee rather than the mortgagor to cover only the mortgagee's interest in the mortgaged property rather than the interests of mortgagor and mortgagee - a situation which would have been analogous to the present case - the decision may well have been different: see per Deane J. at pp.650, 652; pp.168,171.

8. In this case there is no condition of supply by the brewer that the respective licensees should acquire any services from QRX. There is no acquisition of services, directly or indirectly, by the respective licensees from QRX. There is no contract or arrangement between a person acquiring goods supplied by a corporation and a third person. The provisions of s.47(6) are not satisfied.

9. The appeal should be allowed. The order of the Full Court of the Federal Court should be set aside and in lieu thereof it should be ordered that the appeal to the Full Court be allowed with costs, the judgment of Wilcox J. be set aside and judgment be entered for the appellant (the respondent in the original proceedings) with costs.

DAWSON J.: I agree in the judgments of the Chief Justice and Wilson J.

Set aside the judgment and order of the Full Court of the Federal Court and order that the appeal to that court be allowed with costs. Further order that the judgment and order of Wilcox J. in the Federal Court be set aside and that in lieu thereof there be judgment for the respondent at first instance (Castlemaine Tooheys Limited) with costs including all reserved costs.

Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72;

At a glance

Court

Decision date

Source

Judgment (55 paragraphs)

Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72; (1986) 162 CLR 395 (2 December 1986)

Parties

Legislation Cited (2)

Cases Cited (5)