Kadkhudayan v W D & H O Wills

THE COURT: 1 From 1976 until 1998 the appellants operated a shop under the name "Bantam Chicken Shop", and in the course of that business sold cigarettes to retail customers. In 1994 the appellants established the "Bantam Tobacco Shop" where cigarettes were sold to wholesale and retail customers. Until at least 1996, the business conducted by the appellants was successful. 2 The respondent ("Wills") is a manufacturer and supplier of cigarettes which supplied cigarettes to the appellants. More than 28 per cent of the cigarettes sold by the appellants were supplied by Wills. The appellants were significant clients of Wills in South Australia. 3 Wills had a practice of making promotional payments to retailers of its cigarettes. Such promotional payments consisted, for some time, of the provision of free stock, and, thereafter, of price rebates or payments. The appellants used promotional payments received as a retailer both to reduce the retail price at which they sold cigarettes, and to subsidise the price charged to wholesale customers. 4 It appears to have been common ground at first instance that in December 1993 the appellants had been told by Wills that promotional payments would not be provided to a retailer who sold Wills' cigarettes at a price less than Wills' invoiced wholesale price ("Wills' price"). Apparently, promotional payments were not made to the appellants between August 1993 and December 1993 as Wills told them that "anybody who undercosts will not be given promotions" but promotional payments were made to the appellants by Wills between December 1993 and November 1995. 5 Wills' defence admitted that in November 1995 the appellants were told by Wills that Wills "was not going to run promotions with any retailers who were selling cigarettes under Wills' wholesale price" and that because the appellants' selling price was under Wills' price, Wills would not provide "the current promotion" to the appellants. 6 Some promotional payments were made to the appellants by Wills between November 1995 and May 1996 but in May 1996 promotional payments to the appellants from Wills ceased. The appellants were informed that Wills had decided not to provide promotional payments to retail vendors who sold and promoted Wills products at less than Wills' price. The primary judge found that, in effect, the appellants were told they would have to increase the prices of promoted products if they wished to receive promotional payments. Wills' position was that it would not support retail sales made at a price below Wills' price. 7 A delicatessen business known as "Fourth Avenue Deli" was conducted adjacent to the Bantam Tobacco Shop. The appellants believed that Wills and other cigarette manufacturers provided Fourth Avenue Deli with cigarettes at discounted prices, enabling it to sell cigarettes at less than the retail prices charged by the appellants. The appellants complained to Wills about the low prices charged by Fourth Avenue Deli, which, the appellants contended, were supported by promotional payments given by Wills and other suppliers. 8 In about September 1996 Wills told the appellants that it would arrange for Fourth Avenue Deli to increase its prices on all cigarettes in October 1996 and the appellants were to do the same. In September and October 1996, the appellants were given promotional payments by Wills for a short period, apparently in anticipation of the implementation of this arrangement. The arrangement was not implemented. Some further promotional payments were made to the appellants between November 1996 and January 1997. 9 In September 1996, the appellants complained to the Australian Competition & Consumer Commission ("the ACCC") about the conduct of Wills in the manner of its trade with the appellants' business. The information supplied to the ACCC in support of that complaint disclosed the arrangement in respect of cigarette prices made between the appellants, Wills and Fourth Avenue Deli in September/October 1996. 10 In due course proceedings were instituted by the ACCC against Wills and the proprietor of Fourth Avenue Deli seeking penalties for an alleged contravention of s 45 of the Trade Practices Act 1974 (Cth) ("TPA") by an alleged arrangement or understanding made between those parties to lessen competition by fixing the price of cigarettes sold by Fourth Avenue Deli and the appellants. 11 In February 1998, Wills formally admitted in that proceeding that it had attempted to contravene s 45 TPA in the manner alleged, and submitted to the imposition of a penalty of $250,000 in respect of that conduct. 12 By July 1998 the business of the appellants had collapsed, and the appellants had lost their assets and livelihood. 13 The appellants contended at first instance that the conduct on the part of Wills outlined above constituted engaging in retail price maintenance contrary to the provisions of ss 48 and 96 TPA so as to expose Wills to a liability to the appellants in damages under s 82 TPA. The primary judge found that the appellants' claim in this respect failed. Had his Honour reached a different conclusion, his Honour was of the opinion that the loss suffered by the appellants by reason of Wills' conduct "could have been assessed" at $250,000. 14 The appellants also claimed at first instance that in March and April 1997 Wills established a new system for the distribution of Wills' products to retailers by nominating wholesalers to carry out that function in place of Wills. The appellants were invited to apply for appointment as a nominated wholesaler and did apply. They were not appointed as a wholesaler and in July 1998 were informed by Wills that Wills would no longer supply the appellants with Wills' products and that the appellants would have to purchase those products from a wholesaler nominated by Wills. The alternative case put forward by the appellants was that Wills constructed the revised system of distribution to exclude the appellants as a wholesaler, and to damage their business in contravention of s 46(1)(c) TPA. That claim also failed. 15 The primary judge accepted that the action of Wills between 1997 and 1998, in altering its trading terms, had a material effect on the appellant's business by reason of the level of commitments the enterprise had undertaken before those changes were implemented. The primary judge said that Mr Kadkhudayan, who appeared on his own behalf and on behalf of his wife, regarded Wills' conduct in that respect as unfair and, therefore, provided him with an entitlement to an order for relief from the Court. The case of the appellants at first instance was presented accordingly. The primary judge also said Mr Kadkhudayan did not appear to understand the issues raised by the Statement of Claim, apparently prepared by a legal practitioner, and, indeed, asserted that orders in his favour could be made by the Court if the appellants showed that Wills had "done something wrong". For reasons to which it will be necessary to return, although the primary judge dismissed the proceedings, he directed that there should be no order as to costs.