Hubbards Pty Ltd v Simpson Ltd [1982] FCA 82

Federal Court of Australia|1982-04-23|Before: Franki J, Lockhart J

Trade Practices ~ damages - respondent supplies electrical goods

to distributors and retailers - applicant conducts discount retail shops ~ applicant seeks damages pursuant to s. 82 of the Act based on Simpson having engaged in the practice of resale price maintenance contrary to s. 48 of the Act - whether causal connection required between the conduct constituting the contravention and

the loss or damage - whether to apply principles of tort or of contract in assessing damages - whether Court has power to award interest in respect of damages as part of the judgment.

Supreme Court Act J935 (S.A.) s. 30 Cc THE TRADE PRACTICES ACT 1974 HUBBARDS PTY. LIMITED and SIMPSON LIMITED

IN THE FEDERAL COURT OF AUSTRALIA ) }NO. G 20 OF 1980

ORDERS JUDGE MAKING ORDERS: LOCKHART J. WHERE MADE: AT ADELAIDE DATE OF ORDERS: 23 APRIL 1982

There be judgment for Hubbards Pty. Limited in the sum

of fifty-two thousand three hundred and seventy-three dollars ($52,373.00)

Sampson Limited pay the costs of Hubbards Pty. Limited of

IN THE FEDERAL COURT OF AUSTRALIA ) )NO. G 20 OF 1980

The applicant, Hubbards Pty. Limited ("Hubbards") sues the respondent Simpson Limited ("Simpson) for damages pursuant

to s. 82 of the Trade Practices Act 1974 ("the Act") based on

Simpson having engaged in the practice of resale price maintenance contrary to s. 48 of the Act.

Simpson is a large supplier of electrical goods to distributors and retailers in various States of Australia.

Hubbards is a discounter conducting six retail shops in South Australia. Hubbards is advertised as "The Discount King". It sells a wide range of goods to the public including electrical goods and furniture. The case concerns electrical goods which are known in the trade as white goods - in particular, washing machines, clothes dryers, ranges (stoves, cook tops ana wall ovens) and dishwashers.

Hubbards purchases its white goods from various manufacturers and distributors including Simpson. Simpson is a market leader in South Australia in the sale of washing

machines, clothes dryers and ranges, but not dishwashers.

Hubbards was formed in 1927 by three men whose descendants are the present shareholders. Hubbards first traded with Simpson in 1946 but not, it seems, for very long and it reopened its account with Simpson in 1952. Hubbards then traded continuously with Simpson on a large scale until late 1978 when Simpson unilaterally closed the account.

The circumstances in which the account was closed and the relevant events leading up to the closure are set out in the

reasons for judgment of Franki J. in Trade Practices Commission

v. Simpson Pope Limited (as Simpson was then known) 1980 A.T.P.R. 40-169. In that action, the Commission sued Simpson alleging that it contravened s. 48 of the Act by doing certain acts in relation to Hubbards, Parry's Department Store (W.A.) Pty. Limited, and John Finns Discount Stores Pty. Limited. .

Franki J. held that Simpson had contravened s. 48 of the Act in certain respects to which I shall refer in a moment.

It is common ground that Franki J. made findings of fact which are prima facie evidence in the proceeding before me, and that those findings are to be treated as having been proved for the purposes of s. 83 of the Act which provides:-

by a court made in proceedings under section 77, 80, 80A or 81, or

for an offence against section 79, in which that person has been found to have contravened, or to have been involved in a contravention of, a provision of Part IV or V is prima facie evidence of that fact and the finding may be proved by production of a document under the seal of the court from which the finding appears."

Before turning to the relevant portions of Franki J.'s judgment it is necessary that I set out the sections of the Act and the paragraphs of the amended statement of claim in the

proceedings before Franki J. which are referred to by his Honour in

Section 96 (3) sets out the acts which constitute resale price maintenance. Section 96 (3) (a),(b),(d) and (f£) provide :-

The acts referred to in sub-sections (1) and (2) are the following:

the supplier making it known to a second person that the supplier will not supply goods to the second person unless the second person agrees not to sell those goods at a price less than a price specified by the supplier;

the supplier inducing, or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier;

the supplier withholding the supply of goods to a second person for the reason

or indirectly,has obtained the goods from the supplier, at a price less than a price specified by the supplier as the price below which the goods are

(f£) the supplier using, in relation to any goods supplied, or that may be supplied, by the supplier to a second person, a statement of a price that is likely to be understood by that personas the price below which the goods are not to be sold."

"(6) For the purposes of sub-section (3), anything done by a person acting on behalf

of, or by arrangement with, the supplier shall be deemed to have been done by the supplier."

"(7) A reference in any of paragraphs (3) (a) to (e}), inclusive, including a reference in negative form, to the selling of goods ata price less than a price specified by the supplier shall be construed as including references to -

(a) the advertising of goods for sale ata price less than a price specified by the supplier as the price below which the goods are not to be advertised for sale;

and a reference in paragraph (3) (da), (e) or (£) toa price below which the goods are not to be sold shall be construed as including a reference to the price below which the goods are not to be advertised for sale,

to the price below which the goods are not to be displayed for sale and to the price below which the goods are not to be offered for sale."

Section 4F (b) provides:- "4P, For the purposes of this Act - (a)...

(b) a person shall be deemed to have engaged or to engage in conduct for a particular purpose or a particular reason if -

(i) the person engaged or engages in the conduct for purposes that included or include that purpose or for . reasons that included or include that reason, as the case may be; and

(ii) that purpose or reasons was or is a substantial purpose or reason."

Paragraphs 18 to 24 inclusive of the amended statement of

claim in the proceedings before Franki J. provide as follows:-

"18, In and between the months of December 1977 and March 1978 the defendant through its servants or agents aforesaid C.J. Wiles and W. D. Marshall respectively made it known to Hubbards through its servants or agents Peter Lochhead Reid and Jack Raymond Hubbard that the defendant would not supply Simpson products to Hubbards unless Hubbards agreed not to sell such products at e-prtiee prices less than a-priee prices specified by the defendant.

On or about 27 February 1978 the defendant through its servants or agents aforesaid Christopher Noel Acton and C.J. Wiles attempted

to induce Hubbards through its servants or agents Peter Lochhead Reid and Jack Raymond Hubbard not to sell one of the range of Simpson products, namely a washing meehine machines described as "model 23-124", at a-priee prices less than a price specified by the defendant.

27 February 1978 the defendant through its servants

of Simpson products, namely e washing maehtne machines described as a "model 23-124", a statement of

price that was likely to be understood by Hubbards through its servants or agents, Peter Lochhead Reid and Jack Raymond Hubbard as the price below which such Simpson products were not to be sold.

On or about 6 March 1978 the defendant through its servants or agents aforesaid, Christopher Noel Acton and C. J. Wiles attempted to induce Hubbards through its servants or agents Peter Lochhead Reid and Jack Raymond Hubbard not to advertise and sell certain Simpson products, namely, respectively, clothes dryers and washing machines, at prices less than the prices specified by the defendant.

Further to paragraph 21 hereof, on or about 6 March 1978 the defendant through its servants or agents, Christopher Noel Acton and C. J. Wiles used

in relation to certain Simpson products, namely, respectively, clothes dryers and washing machines, statements of prices that were likely to be understood

by Hubbards through its servants or agents, Peter Lochhead Reid and Jack Raymond Hubbard as the prices below which such Simpson products were not to be respectively advertised for sale and sold.

From on or about 1 December 1978 the defendant has withheld the supply of Simpson products to Hubbards for the reason that Hubbards had not and has not agreed not to advertise and_sell Simpson products at a~-priee prices less than a-priee prices specified by the defendant.

Further to paragraph 23 hereof, from on or about 1 December 1978 the defendant has withheld the supply of Simpson products to Hubbards for the reason that Hubbards had advertised and sold or was likely to advertise and sell Simpson products at a-priee prices less than a~priee prices specified by the defendant."

I turn now to his Honour's findings;and shall set out such of them as are relevant to the proceeding before me including his findings of fact.

"I will be referring to the following persons who, at various relevant times, occupied positions with Simpson. Mr. Uhrig joined Simpson in 1974 and has been Managing Director since June 1975. Mr. Maddigan became General Manager of the appliance division, apparently for the whole of Australia, some time before November 1978 and he had previously been in another position with Simpson. Mr. Marshall, at the relevant time, was General

of electrical appliances. Mr. Marshall left Simpson

been, at one time, the National Sales Manager under

Mr. Marshall and in November 1978 he was the Branch Manager for South Australia and apparently also for Western Australia. Mr. Wheatley was immediately responsible to Mr. Acton in relation to the state (sic) of Western Australia only. He held the position of Sales Manager of the appliance division for that state (sic). He was dismissed by Simpson. Mr. Wiles, who

is now retired, was Sales Manager for South Australia. Mr. Wright was an officer involved in product management and at one time was manager in Sydney. Mr. Hemmer was a representative of Simpson in New South Wales. Mr. Rayner was an officer of the company who was said to

be responsible, inter alia, for advising the sales staff about the Act....

In relation to Hubbards, acts by Wiles and Marshall in and-between the months of December 1977 and March 1978 are alleged in par. 18, acts on or about 27 February 1978 by Acton and Wiles are alleged in pars. 19 and 20 and acts on or about 6 March 1978 by Acton and Wiles are alleged in pars. 21 and 22 and the withholding of the supply of Simpson products from on or about 1 December 1978 is alleged in pars. 23 and 24 and all are alleged to be in contravention of the Act...

It was common ground that, at least at some time in the past, a policy known as the 'minimum advertised price' policy ('M.A.P.') prevailed in certain sections of the trade in relation to white goods. This policy was one whereby efforts were made to ensure that retailers did not advertise goods below a specified price. I am satisifed that this policy was one adhered to by many of the senior executives of Simpson for a considerable period. For example, in an inter- office memorandum dated 27 January 1977, from Mr. Wright to all area managers a complaint was made about the advertising of a retailer and the memorandum dealt with the subject 'Price Point Advertising Policy' and read:

'The first customer to break our price point policy was Norman Ross Discounts (see attached ad, - Sunday Telegraph January 23rd.).

for February as we promised all key customers,

and we should take advantage of this

Please ensure that you carry out this informing process as promptly as possible.'

It appears that there were about twenty to twenty-five Area Managers. -

On 2 September 1977, another inter-office memorandum was issued by Mr. Acton to Area Managers. It set out certain recommended prices which were said to be 'the lowest acceptable retailer advertised prices'. The memorandum included the following:

'I would like you to be fully aware that if any retailer advertises under the following

prices, then he automatically does not get advertising subsidy or any special henefits he may be entitled to...

Would you all ensure that your retailers are aware of these prices anc exert any influence you can without comprorising yourself, or the company, to ensuring these types of prices

so that we can put orofitability into the Simpson Brand."

On 17 October 1977 Nr. Acton again issued a circular to the State Sales Managers referring to recommended advertised prices for retailers which Followed discussions with the Executive of N.A.R.T.A an organisation of certain buyers. It included the following:

'Would you keep me informed of any disruptive activity ana action taken

so that I am able to keep the Executive fully informed'.

Mr, Jhrig in evidence accepted that it was inconceivable that Mr. Marshall did not know about M.A.P. at axound this time...

I pass now to consider che allegations in relation to Habbards. Just before Christmas ir. 1977 tir. Wiles saie to Mr. Reid, the General Manager of Nubbards, "...we are about to walk away from you. It 1s just not good enough. What are you coing to do abouz your prices? They are too low". I am satis- fied that in its context this conversaticn was within s. 96 (3) (a) as extended by s. 96 (7) as alleged in par. 18.

On 27 February 1978, iir. Wiles said to Mr. Hebbard and Nr. Reid in the presance of Mr. Acton, "Your prices are too low. We want you to lift them to the going price in the market place". Mr. Wiles then specified a particular price which he wantea Hubbards to charge for a particular model. Mr. sacton mentioned that Simpson was rationalisin its distribution system in accordance with certain eriteria and when Mr. Hubbard said that he noped Hubbards satisfied that criteria Mr. Acton said "ilubbards fit the profile". Again Mr. Wiles was not called. I am satisifec that this conversation was Within s. 96 (3) (b) ae alleged in par. 19 of the statement of claim because 1t was an attempt to induce Eubbards not to sell certain rachines at a price less than that specified by Simpson.

I am also satisfied that this statenent was within s. 96 (3) (4%), as alleged ir par. 20

On 6 March 1978 Mr. Acton, in the presence of Mr. Wiles, made a request to Mr. Hubbard and Mr. Reid that Hubbards lift their prices to those which he alleged were operating in the market place at that particular time. He asked that the advertised price for dryers be raised to a price specified by Simpson. I am satisfied that this was an attempt to induce Hubbards not to advertise or sell Simpson products at prices less than those specified by Simpson as alleged in par. 21 of the statement of claim and that it was within s. 96 (3) (b) as extended by s. 96 (7).

I am also of the opinion that this request was within s. 96 (3) (£) as extended by s. 96 (7) as alleged in par. 22.

On 10 March 1978 Mr. Marshall met Mr. Hubbard and Mr. Marshall said that he should warn Mr. Hubbard that Simpson was about ready to walk away from it and that it had been causing Simpson a lot of concern in the market place, and that they were getting a bit tired of Hubbards not listening to them regarding price. Mr. Marshall also said that he had heard that, at a 'manufacturer's product night', Mr. Reid had made statements that Hubbards would sell at whatever price Hubbards liked. Mr. Marshall said that '...if that report was true then these were pretty ill advised and dangerous statements to make in view of the current strained relationship between Hubbards and Simpson'.

In August 1978 the Commission served a notice under s. 155 of the Act upon Simpson. On 28 November 1978 Mr. Acton, as Branch Manager for South Australia, on behalf of Simpson, sent a letter to Hubbards saying, inter alia, 'We advise that as from 1 December 1978 we will no longer have an Appliance Trading Account for your Company'. It was also said that this was part of a programme of 'national distribution rationalisation .--in order to bring about economies in our selling and distribution expenses'. The letter also stated that Simpson appliances could be obtained through a could be obtained through a named wholesale distributor. In response to this letter Mr.Hubbard wrote to Mr. Uhrig, and also to the Chairman of Simpson. In the letter to the Chairman Mr. Hubbard said 'It is obvious that we will be disadvantaged and may have a prima facie case under the resale price maintenance section of the Trade Practices Act'. No satisfactory reply was received to either letter. The letter of 29 November 1978 from Mr. Hubbard to Mr. Uhrig contained a paragraph 'In view of our two companies long association I feel that a better explanation should be forthcoming or I shall be forced to the conclusion that your company's

objective is control of the market place and the level of selling price on your products.'

It was said by Mr. Uhrig in evidence that the letter of 28 November 1978 implemented a decision which he had made upon the recommendation of a committee headed by Mr. Maddigan. As with Parrys, the argument was advanced that the decision was made by Mr. Uhrig and was not based upon any consideration of resale price maintenance. Hubbards, at the relevant time, was a large retailer and again I am satisfied that the withholding of supply was the result of a decision either by Mr. Maddigan or, if Mr. Uhrig's evidence is accepted, of a decision by Mr. Uhrig, based on a recommendation by Mr. Maddigan. However, I find it impossible to accept the evidence of Mr. Uhrig, whom I do not regard as an entirely satisfactory witness, in relation to this matter which took place some months after the notice which had been received from the Trade Practices Commission had come to his attention. Mr. Uhrig said that Mr. Rayner had the responsibility for preparing material in answer to the notice under s. 155. Mr. Uhrig's evidence did not disclose when he first knew that resale price maintenance existed in the Company. However, it appears from his evidence that prior to December 1978 Mr. Rayner had told him that he was 'concerned about what he was finding and... there appeared to have been statements made to retailers verbal and in writing, that were counter to our policy'. Mr. Uhrig said that he was not certain but he thought it probable that he knew of Mr. Rayner's concern before 28 November 1978. Prior to that date, Mr. Maddigan had, Mr. Uhrig said, asked for approval for the termination of the account and told him that a complaint to the Commission could be expected. Notwithstanding this, Mr. Uhrig made only a cursory enquiry of Mr. Maddigan whether any question of resale price maintenance was in fact involved and, upon receiving the answer that 1t was not, took no further steps to ascertain the position, notwithstanding the statement by Mr. Hubbard in his letter of 29 November 1978.

It is also remarkable that Mr. Uhrig said that he had not made any specific complaint to either Mr. Marshall or Mr. Acton when he ascertained the true state of affairs that existed in relation to resale price maintenance other than anything said by him in any general discussions which took place with officers of the Company. I am satisfied that the withholding of supply to Hubbards was for a reason

waich included as a substential reason that Hubbards was likely to advertise and sell

Simpson products at prices less than those speciZied by Simpson as alleged in par. 24

was aware of this when he was a party to IJubbards' account being closed. I am also satisfied that par. 23 oi the statement of claim has been made out...

It is likely that some loss or damage was suffered by Parrys and Huwobards as a result of the acts of Simpson. So far no proceedings have been instituted by either of these companies under s. @2 of the Act for damages or uncer s. 00 seeking an injunction. It 1s also probable that sone members of the public paid more for certain of Simpson's products becaase of the act of that company than they otherwise would have done, and 1t is probable that the public has suffered some monetary loss. There is no suggestion that any proceedings under Part WI have been taken nrevioisly against Simpson. I have had regard to the nature and extont of those acts alleged in the statement of claim which I have found to have been established and to all relevant ratters.

I consider that at all relevant times resale price maintenance was a well established policy of many of the executive staff of Simpson. I consider the breaches of s. 48 serious breaches which were not of an isolated nature. The withhclding of supply to Parrys and Hubbards

were very serious contraventions of the Act and I have had particular regard to this in the nenaltics which I have fixea...

Hubbards is at present obtaining supplies of Simpson goods pursuant to an arrangement which it has with another retailer in Adelaide and there is no evidence that this is unsatisfactory."

Franki J. ordered that Simpson pay to the Commonwealth |

by way o= penalty in respect cf the contraventions of s. (a) $30,000.00 in respect of the contravenzions in relation to Parry's Departinent Store (W.2.) Pty.

(b) $30,000.00 in relation to Hubbards Pty. Limited; and (c) $5,000.00 in relation to John Finns Discount Stores Pty. Limited.

It is in these circumstances that Hubbards seeks to recover from Simpson under s. 82 the amount of the loss or damage which it asserts it suffered by the conduct of Simpson.

The only witness who gave evidence before me was Jack Raymond Hubbard, the managing director of Hubbards. Mr. Hubbard has worked for Hubbards since 1949 and has been managing director since 1961. He was in the witness box for over two and a half days. His credibility was not challenged by the respondent; although his reliability was questioned as to a few matters. Mr. Hubbard impressed me as a truthful and reliable witness and I accept his evidence.

Hubbards claims that it suffered four heads of loss or damage by the conduct of Simpson that contravened s. 48. Although the section does not in terms require causal connection between the conduct constituting the contravention and the loss or

damage, I agree with Fox J. in Brown v. Jam Factory Pty. Limited

(1981) 35 A.L.R. 79 and Northrop J. in Mister Figgins Pty. Limited

v. Centrepoint Freehold Pty. Limited (1981) 36 A.L.R. 23 that

there must be some causal connection between the two.

The Jam Factory and Mister Figgins were cases based on

contraventions of s. 52 of the Act. Both Fox J. and Northrop J. held that the correct way to approach the assessment of damages in claims under s. 82 based on contraventions of s. 52 is to apply the principles affecting torts. Northrop J. likened such claims

to actions for deceit; hence the preference for assessing damages

based on the principles of tort rather than contract. The present case is not necessarily of the same character. The contravention by Simpson was that it engaged in the practice of resale price maintenance, and the primary act which constituted that contravention was the closure of Hubbards' account. Whether the claim by Hubbards under s. 82 is akin to tort or contract 1s not an easy question; but it 1s common ground that this does not matter here as the damages claimed by Hubbards would fall within the tests applicable to either tort or contract. Although I see considerable force in the view that the claim in the present case has close analogy to damages for breach of contract, I prefer to follow Fox J. and Northrop J. and approach the assessment on the footing that the claim is more akin to tort. In my opinion the correct way to consider the assessment of damages in this case is to compare the position in which Hubbards might have been expected to be if the contravention of s. 48 had not occurred with the position it was in as a result of the contravention.

The primary claim of Hubbards is that, during the period about 1 December 1978 until about 31 December 1979, it suffered loss of profits from the sale of Simpson products which it would have made if the respondent had not committed the contravention of s. 48.

The method adopted by Hubbards to compute its claim for loss was the use of lost sales of Simpson products. In my

opinion, the use of this method to determine loss or damage

caused by the contravention of s. 48 is appropriate in the present case. Hubbards presented its case by estimating the sales of Simpson white goods which it would have made during the calendar year 1979; multiplying those sales in each category of goods (e.g. washing machines) by the estimated average gross selling price during that year; then taking its profit margin of 10% of the figures thus produced. This approach was not challenged in principle by Simpson; but it did challenge the appropriateness

of applying the particular rate of 10% and various details of the claim to which I will refer later.

No Australian case bears directly on the problem; but the correctness of the approach adopted by Hubbards in calculating its claim finds general support from two American cases to which I was referred by counsel for Hubbards namely, Eastern Fire Proofing

Co. Inc. v. U. S. Gypsum Co. 1970 Trade Cases 73-342 and Locklin

Hubbards based its claim on Simpson's own sales figures. First, washing machines. Radio Rentals Limited, ("Radio Rentals") a competitor of Hubbards, sold 1929 Simpson machines in 1978 and 4081 in 1979, an increase of 2,152. John Martin & Co. Limited ("John Martin") sold 1476 Simpson machines in 1978 and 1566 in 1979, an increase of 90. Saverys Pty. Limited ("Saverys"), also a competitor, sold 548 Simpson machines in 1978 and 1069 in 1979, an increase of 521. Hubbards sold 790 Simpson machines in 1978 but only 100 in 1979, a fall of 690.

It is interesting to note that the total number of Simpson washing machines sold in South Australia in 1978 was

12,162 and in 1979 14,362, an increase of 2,200. Throughout the

industry generally in South Australia, there were sales of washing Machines of all brands in 1978 of 26,160 and in 1979 28,349, an increase of 2,189. The sales of Simpson washing machines in South Australia increased by 2,200 in 1979 over 1978; but Hubbards' competitors, Radio Rentals, John Martin and Saverys, managed to gather between them 2,763 increased sales, so that more than the whole of the increase in the sale of Simpson washing machines in that year was taken up by those three companies. Hubbards was denied the opportunity to participate in what was obviously a boom year for the other three companies in the sale of Simpson washing machines. It is plain from the evidence that those three companies were concentrating heavily on the sale of Simpson brand white goods in 1979.

Hubbards is, and has been since 1968, a member of a buying group called "National Associated Retail Traders of Australia Pty. Limited ("N.A.R.T.A."). N.A.R.T.A.'s function is to act as a buying group and to negotiate on behalf of its members. There are over thirty members in Australia of whom four are in South Australia namely, Hubbards, Saverys, John Martin and Radio Rentals. Saverys conducts a number of chain stores in the metropolitan area of Adelaide and sells electrical goods and furniture. John Martin conducts department stores in Adelaide and in its suburbs. Radio Rentals conducts a chain of electrical stores.

Other buying groups similar to N.A.R.T.A. are Retrovision and United Buyers' Association. Hubbards 1s not a member of either of those buying groups. The advantage of belonging to N.A.R.T.A.

for Hubbards was that generally 1t was able to buy products from

manufacturers at about 1% less than members of other buying groups were able to buy the same products.

Turning to clothes dryers. Radio Rentals sold 1430 Simpson dryers in 1978 and 1948 in 1979, an increase of 518. John Martin soid 1320 in 1978 and 1824 in 1979, an increase of 504. Saverys sold 291 in 1978 and 989 in 1979, an increase of 698. Hubbards sold 1260 in 1978 and only 47 in 1979, a fall of 1213. The total number of Simpson clothes dryers sold in South Australia was 10,589 in 1978 and 11,328 in 1979, an increase of 739. Yet the three members of N.A.R.T.A. in South Australia other than Hubbards were able to increase their sales by 1720, against confirming other evidence that N.A.R.T.A. members were concentrating on the Simpson brand very heavily in 1979; although 1t must be remembered that the fall in the Hubbard figures, because of the denial of supply, accounted to some extent for the increase in the sales figures of the other three N.A.R.T.A. members.

As to Simpson ranges, Radio Rentals sold 325 in 1978 and 648 in 1979, an increase of 323. John Martin sold 377 in 1978 and 430 in 1979, an increase of 53. Saverys sold 164 in 1978 and 183 in 1979, an increase of 19. Hubbards sold 502 in 1978 and 133 in 1979, a fall of 369. The total number of Simpson ranges sold in South Australia was 9,360 in 1978 and 5,914 in 1979 a fall of 3,446; yet the N.A.R.T.A. members were able to increase their sales of ranges in 1979 in what was apparently a diminishing market. In 1978 lubbards was the biggest seller of Simpson ranges of all the

As to dishwashers, Radio Rentals and Saverys were not large sellers of Simpson dishwashers. Radio Rentals sold none in 1978 and 2 1n 1979, an increase of two. John Martin sold 92 in 1978 and 123 in 1979, an increase of 31. Saverys sold 7 in 1978 and 13 in 1979, an increase of six. Hubbards sold 120 in 1978 and none in 1979, a fall of 120.

The total number of Simpson dishwashers sold in South Australia was 684 in 1978 and 759 in 1979, an increase of 75. Simpson was not a market leader in the sale of dishwashers in South Australia.

As I said earlier, Simpson does not challenge in principle the calculation of Hubbards' loss of profits by multiplying the number of lost units by the gross selling price. However, Simpson does challenge both the number of lost units and the gross selling price adopted by Hubbards. Simpson conceded that the actual formula was one which had logical merit and that it was a permissible way to determine loss of profits, although it submitted that an alternative method was to look in more general terms at the turnover of Hubbards from year to year.

Simpson contended that the figure of 690 Simpson washing machines said to represent sales lost to Hubbards was "a little high". I do not agree.

As to clothes dryers, Mr. Hubbard gave evidence that he was able to substitute 300 Kelvinator clothes dryers during 1979 for lost Simpson dryers, so the claim for lost sales of Simpson clothes dryers was 913 not 1213. Simpson contended

that the figure of 913 clothes dryers was ""improbably high". It

was said that, as Hubbards obtained 300 dryers from an alternative source, it may have been able to obtain more if it had required them. As to this last point, I am not satisfied that Hubbards would have been able to obtain more from an alternative source than the 300 which it did obtain from Kelvinator.

Simpson pointed to the fact that Hubbards sold 1,617 clothes dryers (that is of all brands including Simpson) in 1977, 2,113 in 1978, 1,471 in 1979 and 1,640 in 1980. It was submitted that if Hubbards was able to sell an additional 913 dryers in 1979, it would have brought its total sales of dryers for that year to 2,384, being 271 units higher than the highest of the four years 1977 to 1980, that 1s the year 1978 when 2,113 were sold. It was said that there was nothing in the evidence to suggest that Hubbards would have sold more dryers an 1979 than it sold in 1978. It was said that the proper approach was to accept 1978 as a reasonable figure and to deduct the actual 1979 sales from the actual 1978 sales, making a total of 642 sales of clothes dryers lost by reason of non-supply from Simpson.

I do not accept this submission. The claim propounded by Hubbards is legitimate. In my view it is likely that Hubbards would have sold more dryers in 1979 than it sold in 1978.

As to ranges, Simpson submitted that the figure of 369, said by Hubbards to be the number of sales of Simpson ranges lost to Hubbards, should be reduced by 32 to 337. During 1979 Hubbards returned to Simpson 32 cook tops on the ground that they were of

no commercial use to Hubbards because there were no corresponding

Simpson wall ovens notwithstanding that those ovens had been ordered by Hubbards from Simpson in 1978. Simpson submitted

that the ovens would have eventually been delivered to Hubbards during 1979 and that Hubbards should have waited for them. The fact is that the ovens were not delivered to Hubbards in 1978 or January 1979. I accept Mr. Hubbard's evidence as to the commercial necessity to return the cook tops in all the circumstances. I do not deduct the 32 ranges from Hubbards" claim.

As to dishwashers, Simpson said it would accept 60 lost sales of Simpson dishwashers as a reasonable figure. It submitted that in 1980 only 118 Simpson dishwashers were sold by Hubbards when supply was not restricted, so it is unlikely that it would have sold 120 in 1979. I reject this submission. It seems to me that if 120 Simpson dishwashers out of a total of 364 dishwashers of all brands, including Simpson, were sold by Hubbards aun 1978 and if in 1980 it sold 118 Simpson dishwashers, it is quite reasonable to claim that 120 would have been sold in 1979.

Overall, I am satisfied that the number of sales which Hubbards claims it lost by reason of Simpson's contravention is a reasonable calculation. It is based essentially upon the 1978 sales, and I see no reason to challenge that as a proper base from which to measure lost sales. Indeed, there is much to be said for the view that Hubbards has been conservative in adopting this approach because it has not taken into account, at least to any great extent, the fact that in 1979 the other three South Australian members of N.A.R.T.A. were heavily promoting the sale of Simpson products and this is reflected in their sales figures

I turn now to the multiplier adopted by Hubbards, namely, the average selling prace of the relevant units. Hubbards totalled the value of the sales of each of the four classes of Simpson units for each of the financial years ended 30 June 1978, 1979 and 1980 and divided each total by the number of units sold. The average prices for each year thus obtained were then averaged over the three years. In the result, the average selling price for washing machines was $331.00, for clothes dryers $132.00, for ranges $300.00 and for dishwashers $350.00.

Simpson at first challenged the multiplier on the basis that it would be more accurate to take the actual selling price of Simpson products by Hubbards in the calendar year 1979 on the ground that it would avoid the problems brought about by inflation or different market trends in other years.

Hubbards submitted that 1t is inaccurate to adopt this approach because Hubbards' sales of Simpson products in 1979 were during an abnormal year. Hubbards was selling only small numbers of Simpson products due to the withholding of supply, and it was a year in which Simpson products were really being "cleared out". I accept this submission. I prefer the approach adopted by Hubbards. Simpson finally did not press this challenge to the multiplier; but conceded the correctness of a similar approach to the Hubbards' approach mentioned earlier; indeed one approved of by Mr. Hubbard himself in evidence namely, to total the value of the sales in each of the four classes of

Simpson units over the three year period 1 July 1977 to 30 June

1980 and divide each result by the total number of units sold in

the relevant class over the same period to obtain an average selling price. In the result, the average selling price for washing Machines was $325.00, for clothes dryers $131.00, for ranges

I prefer this lastmentioned approach and shall adopt it. Thus the calculation of Ioss 1s as follows:~ Washing machines 690 x $325.00 = $224,250.00

Ranges 369 x $300.00 = $110,700.00 Dishwashers 120 x $350.00 = $ 42,000.00

To calculate its loss of profits, Hubbards claimed 10% of the total of the figures resulting from the calculations. As the total resulting from the approach I adopt is $496,553.00, the loss under this head is $49,655.00. Ten percent was the gross profit of Hubbards in 1979 throughout the whole range of its products. It was achieved by a mark-up of 11.5% for the express purpose of achieving a profit of 103%.

Hubbards'claim that its loss of profits 1s 10% of the value of lost sales assumes that there would have been no increase in its expenses for the calendar year 1979 notwithstanding that 2092 additional Simpson units would have been sold (i.e. the sum of 690 washing machines, 913 clothes dryers, 369 ranges and 120 dishwashers).

Although prima facie an extra 2092 units would not sell

themselves, Hubbards points to its profit and loss statements

and other evidence relating to the calendar years 1978, 1979 and 1980. They show that in 1978, 5,868 washing machines, clothes dryers, ranges and dishwashers were sold by Hubbards (that is all brands including Simpson) and that the expenses involved in selling them and the many other products of various descriptions sold by Hubbards totalled $1,100,571.00. I need not set out all the heads of expense but they include among the major items; staff costs, advertising, iznsurance, interest, light and power, computer services, rates and taxes, rent, telephones, and Bankcard charges.

In 1979, 3,898 units of the four categories of goods in question were sold and the overall expenses were $1,029,716.00. In 1980, Hubbards sold 5,531 such units and the overall expenses were $1,024,499.00.

The expenses in 1980 of selling about 1600 more units than were sold in 1979 were marginally less than the expenses of 1979, notwithstanding inflation. In 1978 a substantially larger number of units was sold than in 1979 (5868 in 1978 and 3898 in 1979). Yet the expenses in those years were approximately the same.

This, together with other evidence, including the evidence of Mr. Hubbard, establishes to my satisfaction that the number of units sold has no necessary bearing on the expenses incurred in

Thus, 1£ 2092 more Simpson units had been sold by Hubbards in 1979, it does not follow that the expenses would have increased

However Hubbards does not dispute that there would have

been an increase in bank charges occasioned by the additional sales.

At the relevant time, Bankcard charges were 2% of the selling price

of Hubbards' goods and Bankcard accounted for 18% of sales. Hence the sum of $496,553.00 should be reduced by $1,788.00.

Although Simpson suggested that there should be a further deduction in a small sum by reason of increased insurance that would have been payable with increased sales, I am not satisfied that it has been established that there would have been such an increase. In any event, it would have been only a nominal figure namely, $204.00.

It was submitted by Simpson that the correct approach was not to allow a profit margin of 10% to Hubbards as the measure of its loss, but rather to apply a percentage in the order of 3% or 4% because there must have been additional expenses that would have been incurred in selling the additional Simpson goods aun 1979. TI need not set out all the particular items that were referred to in argument except to say that I am not satisfied that any case has been made out by Simpson that there would have been any increase in the expenses of Hubbards in selling the additional Simpson goods except those to which I have specifically referred.

Simpson finally submitted that the appropriate method of calculating the profit margin was to take the increase in operating profit before tax over the financial years ending 30 June 1980 and 30 June 1981 respectively and express that figure as a percentage of the increase in sales over the same period - this calculation yielding a profit margin in the range of 3% to 4%.

Simpson pointed to the fact that there was an increase

in volume from the 1980 fiscal year to the 1981 fiscal year of

about $2 million which yielded an increase in profit of only about $70,000.00. Simpson therefore challenged the assertion by I'ubbards that 1t could have made another $50,000.00 profit on sales of

about $5,000,000 in 1979. This 1s capable of a number of explanaticns, including the fact that tight financial controis

were exercised by Hubbards throughout the relevant period; inaeed, despite increased sales and volume, the major item of costs, narely, staztf costs, in fact Gecreased.

I prefer the approach adopted by Hubbards in calculating its loss.

Thus Hubbards' loss uncer this head is $49,477.00. This is the result of deducting the allowance for Bankcard charges of $1788.00 from $496,553.00 and taxing 10% of the figure thus calculatea (10s of $494,765.00 ) namely $49,477.00.

(b>) Loss of profits on sale of products other than Sirvseon

Hubbards claims that during the period from about + December 1978 until about 31 December 1979 it would also nave sold additional washing machines ang ranges of brands other tnan Sirvson if Simpsen products had been on display for sale that year. Ilubbards claims tnat it suffered a general loss of business ard loss of profits in consequence of the fact that it was unakle to have Simpson »roducts displayed for sale at its retail stores.

This claim 1s difficult to establish by 1ts very nature. I am satisfied that with a business sucn as HNusbards, "The Discount King", 1t must have been placec 1n a disadvantageous position compared with its competitors in 1979 when throughout most of tnat year it did not have Simpson white goods available to it; and

ait must be remembered that Simpson was a marxet leader except 11

Mr. Hubbard gave evidence, which I accept, to the effect that sales of washing machines were lower in 1979 than in 1978 by 775, of which 690 were Simpson washing machines, that is there was a loss of 85 washing machines of other brands. He attributed the fall in the sales of brands other than Simpson to "...not having a wide enough assortment on the floor and customers therefore seeking to go elsewhere where they could see a full range and therefore compare different features".

The evidence establishes that the average price for which washing machines, other than the Simpson brand, would have been sold in 1979 was $423.00.

As to ranges, Mr. Hubbard gave evidence that Hubbards could have solid 311 additional ranges of brands other than Simpson, in particular the brands Malleys, Westinghouse and Chef. The evidence establishes that the average price for which ranges,other than the Simpson brand, wou 1d have been solid in 1979 was $313.00.

No claim is made under this head in respect of clothes dryers or dishwashers because Hubbards could have substituted to some extent with other brands of dryers and because the calculaticns of loss under (a) in respect of dishwashers was made on the basis that the loss could be made good entirely by Simpson.

The loss of profit was 10% as it was under claim (a). Therefore the loss which I allow under this head is $13,330.00. Simpson sought to answer this claim on the basis that the loss was reflected in the loss claim under (a). I reject this submission. The loss claimed under this head is essentially different from the claim under (a).

Counsel for Simpson submitted that "the sale of washers was 85 others to 690 Simpson or about one-eighth in very rough terms. The sale of other ranges is alleged to be 311, which compares with 369 Simpson ranges. The evidence is that the market share that Simpson had of washers was higher than the market share they had of ranges, so that 311 cannot be correct. 85 is the correct figure for washers. "

I am satisfied from Mr. Hubbard's evidence that 1t is likely that Hubbards would have sold 311 ranges of other brands notwithstanding the point relied on by Simpson. Hence, Hubbards has established its claim under (b).

This claim is made on the basis that during 1979 Hubbards suffered loss because it did not obtain advertising subsidies from Simpson which would have been paid to Hubbards if Simpson had not withheld the supply of goods.

Hubbards submits that if it had been able to purchase Simpson products from Simpson in 1979 in the quantities mentioned under claim (a), Simpson would have paid Hubbards advertising

During 1978 the ratio 1n which Hubbard's advertising was subsidised by Simpson was $3.00 paid by Simpson for each $1.00 paid by Hubbards.

Therefore, so the argument goes, 1f£ Hubbards had received $14,000.00 1n subsidies from Simpson in 1979, Hubbards would have expended one third of that amount namely, $4,667.00 from its own funds. Hubbards' net loss is estimated at $14,000.00 less $4,667.00 namely, $9,333.00.

Simpson submits that this argument is misconceived because the $9,333.00 would have been spent by Hubbards in advertising products. I accept this submission of Simpson and reject this claim of Hubbards.

Hubbards puts this claim on an alternative basis namely, if at had sold Simpson products in 1979 in the quantities mentioned in claim (a), it would not only have made further profits, and obtained the advertising allowances themselves which would have been paid by Simpson to Hubbards; but Hubbards would have placed more advertisements in the press of Simpson and other products and would thus have enabled Hubbards to put its name further before the public and sell not only Simpson products but other products including white goods. Mr. Hubbard gave evidence that subsidised advertising did constitute a commercial advantage to Hubbards.

The principal difficulty I feel about this claim is that there is no reliable material before me on which I can compute damages. Indeed, it is conceded by Hubbards that even if a figure could be ascertained it would not be large in amount. The claim is too imprecise and general to enable an amount to be allowed and I

think in all the circumstances there should be no damages awarded

The value of Hubbards" business is said to have been diminished in consequence of the conduct of Simpson.

It was conceded by counsel for Hubbards that 1f it is entitled to recover under (a) it cannot recover under (dad). In view of my findings under (a) there is nothing that can be recovered under (d).

Hubbards propounded a claim for interest on the amount of damages to be awarded under s. 82.

The claim is based on s. 30C of the Supreme Court Act 1935

(S.A.) (as amended) which confers power on the Supreme Court of South Australia to award interest in respect of damages as part of the judgment. It is said that this power is applicable to these proceedings by virtue of s. 79 of the Judiciary Act 1908 (as amended).

Commonwealth of Australia & Anor. (1975) 49 A.L.J.R. 338, Mason J. held that s. 94 of the Supreme Court Act 1970 (N.S.W.) did not apply to the proceedings before his Honour, being an action commenced in the High Court in its original jurisdiction, so as to empower the High Court to award interest in respect of damages as part of the judgment, primarily because in his Honour's view at p. 340:-

"...s. 79 does not operate to pick up and apply in proceedings in the High Court a provision such as

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Judgment (265 paragraphs)