Foster v Australian Competition and Consumer Commission - [2006] FCAFC 21 - FCAFC 2006 case summary — Zoe

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Foster v Australian Competition and Consumer Commission

[2006] FCAFC 21

Federal Court of Australia (Full Court)|2006-03-10|Before: Allsop JJ

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Source facts

Court

Federal Court of Australia (Full Court)

Decision date

2006-03-10

Before

Allsop JJ

Source

Original judgment source is linked above.

Judgment (107 paragraphs)

[1]

THE COURT: 1 This is an appeal from one of some 52 orders, including declarations and injunctions, made by a single Judge of the Court. The orders were made distributively against ten respondents. The first respondent, Chaste Corporation Pty Ltd (In Liquidation) ("Chaste") had, between October 1999 and December 2001, carried on business as a manufacturer of a weight loss tablet called "TRIMit." The other corporate respondent was the third respondent, Orlawood Pty Ltd ("Orlawood") which was the sole registered shareholder in Chaste, holding that share as trustee of the Webb Family Discretionary Trust which had been established by the second respondent, Braddon Ralph Webb ("Webb"). The learned primary Judge found that Chaste had effectively been entirely controlled by Webb and the fourth respondent, the present appellant, Peter Clarence Foster ("Foster"). His Honour also found that Chaste had engaged in resale price maintenance in contravention of s 48 of the Trade Practices Act 1974 (Cth) ("the Act"). There were findings, as well, that Chaste had made misleading and deceptive representations in relation to the buy-back of TRIMit tablets from area managers appointed as distributors to whom the tablets had been sold as stock. His Honour found at [97]; 'Mr Foster, Mr Webb and/ or Orlawood were knowingly concerned in the making of the buy back guarantee representations throughout the operations of Chaste. The representations were misleading and deceptive.' 2 Further findings were made at first instance that Chaste had made representations that were misleading and deceptive about the efficacy of TRIMit and that it had been approved by the Therapeutic Goods Administration ("the TGA"). As to Foster's knowledge of, and participation in, that conduct, his Honour found at [119]; 'Mr Foster played an active part in the misrepresentations which were made as to the efficacy of TRIMit. He scripted media and newspaper releases and provided instructions in relation to media campaigns. He provided instructions to Dr D'Alton and met with him in Fiji and Vanuatu. Mr Foster and Mr Cousins consulted on the wording of the Clinical trial brochure while in Fiji and resolved to use its publication as an antidote to an article which contained very clear criticism of any efficacy representations for HCA and Chromium as weight loss aids.' 3 The third category of conduct found to have contravened Pt V of the Act comprised representations as to the genuineness of Chaste's business and the concealment of Foster's involvement in it. The following findings under this head were made between [128]-[134] of the reasons below in relation to Foster; · 'The fact that all key personnel involved in the Chaste business knew that it was being operated according to the detailed directions and for the purposes of Mr Foster. Mr Webb, Mr McMullan, Mr Cousins, Mr Cooper and Dr D'Alton each had reason to believe that Mr Foster's purposes were not in accordance with the ordinary commercial expectations of the area managers and concealed his involvement from them.

[68]

17 Counsel for Foster in the course of his oral submissions on the hearing of the appeal drew attention to the fact that the learned primary Judge had given "no reasons as to appropriateness". However, shortly after that reference Mr Taylor accepted that ground 4 of the notice of appeal set out above had been abandoned. As we understood it, the reference to the absence of reasons was in aid of a contention that the Court's discretion had miscarried when it granted the injunction in terms of par 27 of his Honour's order. Accordingly, the exercise of discretion was said to be reviewable according to the well-known principle enunciated by Dixon, Evatt and McTiernan JJ in this passage from House v The King (1936) 55 CLR 499 at 504-505; '… … The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. …' 18 It was in that context that Counsel for Foster pointed to the absence of reasons for granting an injunction in the form of par 27 as preventing it from appearing how the primary Judge reached the result embodied in his order. However, for the reasons explained below, even accepting the absence of reasons, we are unable to regard the grant of the contentious injunction as unreasonable or plainly unjust so as to permit us to impute an error in the exercise of discretion to determine whether the terms of par 27 were appropriate. 19 The extracts from the transcript reproduced at [9]-[15] of these reasons may indicate that his Honour had proceeded on the mistaken assumption that Foster had consented to an injunction in terms of par 27. However, any such mistake, if it occurred, could be rectified by the trial Judge having recourse to O 35 r 7(2)(d) or (e) of the Rules of this Court. At all events, the suggested mistake is not relied on as a ground of the present appeal. 20 On the hearing of the appeal, Mr Taylor of Counsel for Foster candidly conceded that the power of the Court to grant an injunction in the form of that reproduced at [7] above had not been at the forefront of Foster's case at first instance. Indeed, it was only tangentially raised by the reference by Mr Savage SC to "some relevant nexus" in the second of the paragraphs from his submission which we have set out at [14] above. However, Mr Taylor, in his submissions on the appeal focused on the question of power and, as the point has been fully argued on each side, we find it convenient to deal with it at this stage of our reasons. 21 The first premise of Mr Taylor's submission was that the injunction in the terms appearing at [7] above went beyond the power conferred on this Court by s 80 of the Act. That section provides, so far as it is relevant; '(1) Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:

[95]

24 The amendment which led to s 80 being reformulated in substantially the terms set out at [21] above came into force in 1983. The Explanatory Memorandum which accompanied the Bill for the amending Act recited; 'The effect of the amendment is to widen the courts power to grant injunctive relief which is at present generally limited to restraining a contravention of the Act. The amended provision will enable the court to grant more effective injunctive relief, including mandatory injunctions and other injunctive relief. [Statute Law (Miscellaneous Provisions) Act (No 1) 1983 (No 39, 1983), Explanatory Memorandum]' 25 To similar effect, the perceived deficiencies in s 80 as it existed before the amending Act were described as follows in the then Attorney-General's Second Reading Speech in support of the amending Bill; 'This power is seriously inadequate. First it merely enables the Federal Court to enjoin a person from doing that which he is already under a legal obligation not to do. Secondly, the Federal Court's power effectively to prevent repetition of the conduct is restricted - in proceedings for breach of an injunction it could be necessary to prove all the elements of a contravention (including, where applicable, the effect on competition). Thirdly, the Federal Court is not able to make orders corrective of the results of the contravention (except in the case of corrective advertising provided for in s.80(A)). [Statute Law (Miscellaneous Provisions) Act (No 1) 1983 (No 39, 1983), Second Reading, 18 May 1983].' 26 Although he acknowledged that the 1983 amendments had given the Court a wider power to grant injunctions than had previously been conferred by s 80, Mr Taylor for Foster contended that the power does not extend to completely prohibiting what would otherwise be lawful activity. It was sought to support that contention by reference to this observation by Merkel J in Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 203; 'First, the power is confined by reference to the scope and purpose of the TPA and in particular s 80. It is within the scope and purpose of s 80 to grant injunctive relief which is designed to prevent a repetition of the conduct for which the relief is sought.

[98]

27 Counsel for Foster also referred to ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 where Gummow J observed, at 267; 'Section 80(1) confers upon the court the power to grant an injunction where it is satisfied that a person has engaged or is proposing to engage in conduct that constitutes or would constitute conduct of the description in pars (a)-(f). The power of the court to grant an injunction is controlled by the words "in such terms as the Court determines to be appropriate".' 28 However, that passage does no more than indicate what is obvious from the structure of s 80(1) in its present form, namely that the Court's satisfaction that the respondent has engaged in, or is proposing to engage in, one or other of the forms of conduct identified in pars (a) to (f) enlivens the power to grant an injunction "in such terms as the Court determines to be appropriate." The appropriate terms of an injunction in a particular case are not, as a matter of construction, limited by reference to the conduct in which the Court has been satisfied the respondent has engaged or is proposing to engage. That is made doubly clear by the express provisions of s 80(4). 29 It is true that in the paragraph immediately following that quoted at [27] Gummow J in ICI v Trade Practices Commission went on to indicate his view of the range of the terms which the Court might determine to be appropriate after it had attained the satisfaction mandated by the earlier words of s 80(1). His Honour continued; 'Thus, the terms of the injunction will not be "appropriate" if, on its face, it operates upon a range of conduct some of which does, but some of which does not, have the relationship required by s 80 with contravention of the Act. The injunction should not prohibit conduct falling outside the boundaries drawn by s 80: see Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 161. The same limitation applies to mandatory injunctive relief. It is, in my view, no support for the grant of an injunction which, from the outset, has an operation outside the boundaries of s 80, to say that it is open for the party enjoined to apply under s 80(3) to vary the injunction so as to bring its operation wholly within proper limits. The party in question should not be placed under any such obligation in the first place.' 30 His Honour's reference to terms having "an operation outside the boundaries of s 80" is no more than a paraphrase of the actual words of the subsection "such terms as the Court determines to be appropriate." That paraphrase, we consider with respect, does not illuminate the amplitude which should be given, as a matter of construction, to the grant of power. In our view, a more helpful guide to resolving the question of construction is afforded by this observation, also from ICI v Trade Practices Commission, of Lockhart J (with whom French J agreed) at 256; 'In my opinion subss (4) and (5) are designed to ensure that once the condition precedent to the exercise of injunctive relief has been satisfied (ie contraventions or proposed contraventions of Pt IV or V of the Act), the court should be given the widest possible injunctive powers, devoid of traditional constraints, though the power must be exercised judicially and sensibly.' 31 This approach of Lochkhart J accords with the view often expressed by the High Court that discretions or powers entrusted to Courts should be read liberally for the relevant statutory purpose, without making implications or imposing limitations not found in the express words: Australian Memory Pty Ltd v Brien (2000) 200 CLR 270 at [77] and see generally for the cases Hewlett Packard v GE Capital (2003) 203 ALR 51 at [187]. 32 French J had earlier made the following observation to the same effect in OD Transport Pty Ltd v WA Government Railways Commission (1987) 13 FCR 500 at 508; '… the effect of the 1983 amendment to s 80(1) was to free the power conferred by the section from the constraint that the injunction granted under it must restrain a person from engaging in conduct that constitutes or would constitute a contravention of Pt IV or V or one of the species of accessorial participation there listed.

[104]

34 It will readily be seen that the facts in BMW v ACCC were far removed from those of the present case. Their Honours' remarks clearly went to the exercise of a discretion in formulating an injunction under s 80 in appropriate terms. They were not concerned with whether there was power to grant an injunction in the terms favoured by the primary Judge. Moreover, their Honours clearly implied that BMW's contravention of s 65C had been solely in the past. By contrast, the evidence and the findings at first instance in the present case gave rise to a real fear that Foster would, unless restrained, commit further conduct of the same general kind. Hence, it was appropriate in the words used at the end of [36] which we have just quoted from BMW v ACCC, for the terms of the injunction to "be cast more widely, in order to catch conduct of any kind [sc. similar to the established contravention] threatened or intended." 35 In our view, the need, suggested by the authorities, for a nexus between the contravention of the Act which the Court has found and the terms of the restraint which it then decides to impose is a specific reflection of Lockhart J's insistence that the power be exercised "judicially and sensibly." It goes to the appropriateness of the relief contemplated by the concluding words of s 80(1), not to the extent of the power to grant it. If the Court considers that a complete prohibition, whether permanently or for a specified period, on a respondent's engaging in a particular field of commercial activity or industry is required to protect the public from conduct of the kind which constituted the contravention, s 80 is wide enough to support such a prohibition as a matter of power. This analysis of s 80 conforms, we consider, with that recently undertaken by Goldberg J in Australian Competition and Consumer Commission v Dermalogica Pty Ltd (2005) 215 ALR 482 at 504 [110]. 36 Mr Taylor for Foster appeared tacitly to acknowledge that, unless he established the first premise of his argument, namely that the power conferred by s 80 is limited to preventing a repetition of the precise contravention alleged in the instant case, the present injunction would be defensible as cast in terms which it was open to the Court below to determine to be appropriate. At all events, it was not seriously argued on the appeal that the evidence at first instance and the findings of the learned primary Judge were incapable of supplying an appropriate nexus with the contentious injunction in the terms in which his Honour granted it. In those circumstances, it is not to the point that individual members of this appellate Court, if deciding the matter for themselves at first instance, might have formulated the injunction differently. 37 It should also be noted that no ground of appeal raised, and no argument was addressed to, the wording of the order in question, should the substantive question of power be decided (as we have) against the appellant.