Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd

THE COURT ORDERS THAT: The proceeding stand over for further orders. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT 1 On 31 January 1995 Burchett J delivered judgment in proceedings between the Trade Practices Commission and the present first three respondents, imposing penalties and granting other relief for breach of s 45 and s 45A of the Trade Practices Act 1974 (Cth) ("the Act") (Trade Practices Commission v TNT Australia Pty Ltd Ors (1995) ATPR 41-375 ("the TPC proceeding")). Amongst the relief granted were injunctions, to operate until 31 December 1998, to restrain the respondents to those proceedings from engaging in conduct such as that involved in that case. 2 On 21 July 1995 Multigroup Distribution Services Pty Limited ("the applicant") filed a summons in the Supreme Court of South Australia against TNT Australia Pty Limited, Ansett Transport Industries (Operations) Pty Limited, Mayne Nickless Limited and J McPhee & Son (Australia) Pty Limited and filed a statement of claim in those proceedings on the same day. The relief claimed in the summons was: "The relief set out in the Statement of Claim annexed hereto." The statement of claim alleged breaches of ss 45(2)(A), 45(2)(b) and 46 of the Act, together with common law conspiracy, relying upon the same general facts as in the TPC proceeding. The relief sought was: "28 The plaintiff claims: 28.1 Damages; 28.2 Account of profits; 28.3 Interest; 28.4 Such further or other orders as the Court may think fit; and 28.5 Costs." 3 On 10 October 1995 the proceeding was transferred to this Court by an order of the Supreme Court of South Australia. 4 Following proceedings to strike out the statement of claim (see Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522) an amended statement of claim was filed, dated 25 October 1996, in which the relief sought was as follows: "30. The Applicant claims: 30.1 Damages; 30.2 Account of profits; 30.3 Interest; 30.4 Such further or other orders as the Court may think fit; and 30.5 Costs." 5 On 3 February 1997 a further amended statement of claim was filed, which included the following claim for relief: 30. The Applicant claims: 30.1 Damages; 30.2 Account of profits; 30.3 Interest; 30.4 An order restraining the Respondents from offering to supply or supplying express freight transportation services to organisations or entities known by them to be customers of the Applicant on terms more favourable than the terms for the time being offered or proposed to be offered to other customers of the Respondents for the same or substantially similar transportation services; 30.5 Such further or other orders as the Court may think fit; and 30.6 Costs." 6 It is necessary to ascertain what is said in the statement of claim about the relevant time of contraventions. In par 9, which alleges the contravening arrangements or understandings, it is pleaded that: "… from a date or dates currently unknown to the Applicant, but at least since 1987 … and thereafter have continued until a date currently unknown to the Applicant …" Paragraph 10 pleads (in the alternative): "… in the period between January 1987 and April 1987 (inclusive) in the case of the First, Second and Third Respondents … arrived at an understanding, and the Fourth Respondent made or entered into the same arrangement or understanding after October 1987 …" Paragraph 11 pleads (in the alternative): "… in the period between June 1987 and December 1987 (inclusive) in the case of the First, Second and Third Respondents …each of those Respondents made an arrangement, or alternatively arrived at an understanding, and the Fourth Respondent made or entered into the same arrangement or understanding after October 1987 …" Paragraph 12 pleads (in the alternative): "… in the period between January 1988 and December 1988 (inclusive), each of the Respondents, … made an arrangement …" Paragraph 13 pleads (in the alternative): "… in or about November 1990, each of the Respondents … made an arrangement …" Paragraph 17 pleads that: "From time to time since at least 1 January 1987 in the case of the First, Second and Third Respondents … have given effect to the arrangements … and from time to time after October 1987 the Fourth Respondent has given effect to the same arrangement …" Paragraphs 20 , 24 and 26 in effect allege that the conduct of the respondents continues to cause loss and damage as particularised in par 28. 7 Then followed: "Concealed Fraud 27. At all material times prior to 25 July 1994, the Respondents concealed the fact that the arrangements and understandings had been entered into and given effect for the purpose of depriving their competitors and customers of that knowledge by: (a) denying liability in the TPC proceedings at the time of the filing of defences by the Respondents in those proceedings; (b) the instructions given by officers of the Respondents at the various meetings to the effect that the arrangement or understanding must be kept secret; (c) instructions given by officers of the Respondents in relation to the destruction of documents including diaries of officers of the Respondents; (d) internal correspondence within the Respondents, including internal memorandum of the Third Respondent dated 5 August 1982 from Mr Ian Williamson, National Manager AirFreight - Jetspress to the persons named in that memorandum; and (e) communications between the Respondents or their solicitors and the Applicant or its solicitors, including: (i) Letter dated 17 August 1976 from Messrs Davis King & Company, solicitors to Messrs Booth & Boorman, solicitors; (ii) Letter dated 1 November 1976 from Messrs Davis King & Company, solicitors to Messrs Booth & Boorman, solicitors; (iii) Conversation between Mr P Brown and Mr F Gardiner on 7 September 1987 (iv) Letter dated 12 April 1988 from Mr JR Cribb to Mr GJ Poche and subsequent facsimiles and telephone conversations between managers of the Applicant and Mr JR Cribb; (v) Letter dated 19 April 1988 from Mr WT Bytheway to Mr GJ Poche and subsequent telephone conversations between Mr Webber and Mr GJ Poche, including a telephone conversation on 28 April 1988; (vi) Letter dated 21 April 1988 from Mr GP Farrell (Snr) to Mr GJ Poche; (vii) Letter dated 21 December 1988 from Mr JR Cribb to GJ Poche; (viii) Letter dated 19 June 1989 from Mr GC Bolton to Mr GJ Poche; (ix) Meeting between Mr GC Bolton and Mr GJ Poche on 1 August 1990 at Mascot Airport, Sydney; and (x) Meeting between Mr P Brown and Mr GJ Poche on 2 August 1990 at Mascot Airport, Sydney. Loss and Damage 28. By reason of the matters alleged in paragraphs 20, 24 and 26 the Applicant has suffered loss and damage consisting of: (a) the loss of customers; (b) the restriction of the Applicant's ability to win customers and increase market share; (c) the artificial suppression of the level of rates able to be charged by the Applicant; (d) the deprivation and limitation of the ability of the Applicant to offer competitive rates to customers of the Respondents; (e) the restriction on the ability of the Applicant to obtain access to economies of scope and scale; (f) the reduction and limitation of the profits of the Applicant; (g) the restriction of the financial resources available to the Applicant; (h) additional costs and expenses incurred by the Applicant; (i) the restriction of the growth of the Applicant's business; (j) the suppression of the value of the goodwill of the Applicant; and (k) the restriction of the value of business of the Applicant. PARTICULARS The Applicant is unable to quantify the loss and damage suffered as a result of the conduct of the Respondents at this stage. The Applicant alleges that the effect of the conduct of the Respondents, up at least until the time the First to Third respondents withdrew their defences in the TPC proceedings on 25 July 1994, on the profitability of the Applicant expressed as a percentage of sales was to suppress the profits of the Applicant to a level which were lower than that which would have been applied in the market where the Respondents did not engage in such conduct. By way of example, during the period ending 30 June 1988 the Applicant's profits expressed as a percentage of sales was 6.5%. Similar levels of profitability were maintained up until the period ending 30 June 1994, but during the period ending 30 June 1995, which is approximately one year after the Respondents withdrew their defences in the TPC proceedings, the Applicant's profitability expressed as a percentage of sales increased to 13.2%. The Applicants loss and damage will be quantified in a report or reports of an expert firm of accountants which will be filed in due course." 8 Reference is made in various parts of the statement of claim to a schedule alleging 181 incidents, all but a handful of which occurred prior to 21 July 1992. It is also pleaded that advantage will be taken of s 83 of the Act to rely upon findings of fact made in the TPC proceeding. Whilst there will, no doubt, be an issue about that, it appears from His Honour's judgment that, for the purpose of that proceeding, the relevant agreements were made between 1987 and 1990 and that the effect of them was operative between 1987 and mid-1991. 9 Relevant parts of pars 10 and 13 of the first, second and fourth respondents' defences is as follows: "10 … (b) says that if (which is denied) it entered into or gave effect to any arrangements or understandings as alleged, it did not conceal those arrangements or understandings or that effect had been given to those arrangements or understandings for the purposes and in manner alleged in paragraph 27 or at all; (c) says that the Applicant's only entitlement to relief is under the Trade Practices Act 1974 (Cth) and that the doctrine of concealed fraud has no application to a claim under that Act. 13. In further answer to the whole of the Further Amended Statement of Claim, the … Respondent says: (a) to the extent the Applicant claims damages or other relief in respect of any cause of action arising under the Trade Practices Act 1974: (i) insofar as the material facts relating to that cause of action were first pleaded in the Statement of Claim, any such cause of action is barred or extinguished by virtue of sections 82(2) and 87(1CA) of the Trade Practices Act 1974 to the extent that it accrued before 21 July 1992; (ii) insofar as the material facts relating to that cause of action were first pleaded in the Further Amended Statement of Claim, any such cause of action is barred or extinguished by virtue of sections 82(2) and 87(1CA) of the Trade Practices Act 1974 to the extent it accrued before 3 February 1994; …" 10 Paragraphs 16 and 21 of the defence of the third respondent are as follows: "16. In further answer to paragraph 27 of the Further Amended Statement of Claim, the Third Respondent says that even if facts to support the application of the doctrine of concealed fraud existed in the present case (which is denied) that doctrine has no application in relation to claims made under the Trade Practices Act 1974. … 21. In further answer to the whole of the Further Amended Statement of Claim, the Third Respondent says that if, which is denied, the Applicant has suffered any otherwise recoverable loss or damage: (a) as a result of contraventions of the Trade Practices Act 1974 as alleged in the Further Amended Statement of Claim, such loss or damage was first suffered more than 3 years prior to the commencement of these proceedings and any claim for damages to that extent is accordingly statute barred; (b) as a result of tortious or other conduct as alleged in the Further Amended Statement of Claim, such loss or damage was first suffered more than 6 years prior to the commencement of these proceedings and any claim for damages is to that extent accordingly statute barred." 11 The reply to the defences of the first, second and fourth respondents includes: "2. In reply to paragraph 10(c) of the Defence, the Applicant says that, by reason of the facts and matters alleged by paragraph 27 of the Further Amended Statement of Claim, the conduct of the First Respondent constituted fraudulent concealment by it of the facts giving rise to the Applicant's causes of action arising under the Trade Practices Act. 3. In reply to paragraph 13 of the Defence, by reason of the First Respondent's fraudulent concealment of the facts giving rise to the Applicant's cause of action, the statutory provisions there pleaded do not operate as a bar to or in extinguishment of the Applicant's causes of action either arising under the Trade Practices Act or at law. 4. Further, or in the alternative to paragraph 3: (a) the conduct engaged in by the First Respondent, as alleged by paragraphs 9-26 of the Further Amended Statement of Claim and particularised in the Amended Index to Pleading and Statements ("the anticompetitive conduct"): (i) was engaged in surreptitiously, with the intention that the Applicant should not become aware of that conduct; (ii) was denied by the First Respondent, and otherwise concealed, in the manner alleged by paragraph 27 of the Further Amended Statement of Claim; (iii) was conduct in respect of which the Applicant did not have sufficient knowledge to commence proceedings at an earlier time; (iv) was the conduct (or alternatively, conduct which included the conduct) in respect of which, in proceedings brought against it by the Trade Practices Commission in action No. G807 of 1992, the First Respondent: (i) withdrew its Defence, and thereby: (A) did not attempt to defend; and (B) prevented litigation by the Trade Practices Commission of the anticompetitive conduct; (ii) consented to pecuniary penalties being imposed upon it; (v) was engaged in for the purposes, and had the effect, of causing harm to the Applicant; (b) by reason of the matters set out in subparagraph 4(a): (i) it would be unconscionable for the First Respondent to seek to rely upon the statutory provisions pleaded by paragraph 13 of its Defence; and 6. the First Respondent is estopped from doing so." 12 The reply to the defence of the third respondent included: "3. In reply to paragraph 16 of the Defence, the Applicant: (a) denies that the doctrine of concealed fraud has no application to a claim under the Trade Practices Act; and (b) says that, by reason of the facts and matters alleged by paragraph 27 of the Further Amended Statement of Claim, the conduct of the First Respondent constituted fraudulent concealment by it of the facts giving rise to the Applicant's causes of action arising under the Trade Practices Act. … 5. In reply to paragraph 21 of the Defence, by reason of the Third Respondent's fraudulent concealment of the facts giving rise to the Applicant's causes of action, the statutory provisions there pleaded do not operate as a bar to or in extinguishment of the Applicant's causes of action either arising under the Trade Practices Act or at law. 6. Further, or in the alternative to paragraph 5: (a) the conduct engaged in by the Third Respondent, as alleged by paragraphs 9-26 of the Further Amended Statement of Claim and particularised in the Amended Index to Pleading and Statements ("the anticompetitive conduct"): (i) was engaged in surreptitiously, with the intention that the Applicant should not become aware of that conduct; (ii) was denied by the Third Respondent, and otherwise concealed, in the manner alleged by paragraph 27 of the Further Amended Statement of Claim; (iii) was conduct in respect of which the Applicant did not have sufficient knowledge to commence proceedings at an earlier time; (iv) was the conduct (or alternatively, conduct which included the conduct) in respect of which, in the TPC proceedings (action NG807 of 1992), the Third Respondent: A. withdrew its Defence, and thereby: I. did not attempt to defend; and II. prevented litigation by the Trade Practices Commission of the anticompetitive conduct; B. consented to pecuniary penalties being imposed upon it; (v) was engaged in for the purpose, and had the effect, of causing harm to the Applicant; (b) by reason of the matters set out in subparagraph 6(a): (i) it would be unconscionable for the Third Respondent to seek to rely upon the matters pleaded by paragraph 21 of its Defence; and (ii) the Third Respondent is estopped from doing so." 13 Preparation of the case has occupied a good deal of time, principally because of the burden of discovery. Proof of the formation of an alleged cartel some fourteen years ago, of its subsequent operation and of its effect upon the business of the applicant, as well as the defence of such a case, is a mammoth undertaking. The case is still far from ready for hearing and much evidence remains to be filed. Hearing of the proceedings has been tentatively fixed for the commencement of sittings in 2002. Whether that tentative arrangement can be met is not yet certain. Although it is not possible to make an accurate estimate of the length of hearing of the case now, it will plainly be many months. In this setting, I decided to accede to an application for the separate and early determination of several questions. Those which remain live relate partly to issues relating to time barriers and, secondly, to the claim for account of profits. I did so because of the impact that these questions have upon the management of the case from the point of view of the parties and the Court. It is desirable that in litigation on this scale all concerned should know, as far as possible, where they are going. The issues to which these questions relate have the capacity to involve months of hearing time and the necessity for considerable preparation. There are undoubtedly problems with dividing issues for separate determination, and the pendulum of fashion has swung against this procedure particularly amongst appellate judges not confronted with management of a trial (or a docket). On the other hand, the procedure is available and the decision whether to use it is one for the judge managing the practicalities of the case.