Parrys Department Store (W.A.) Pty Ltd v Simpson Ltd [1983] FCA 236

under Trade Practices Act to be evidence - meaning of "supplied"

Trade Practices Act 1974 ss. 4F(b), 48, 77, 82, 83, 96(3), 96(7), Federal Court Rules Order 11 rule 13(3)

PARRYS DEPARTMENT STORE (W.A.) PTY. LTD. v. SIMPSON LIMITED

Respondent ORDER JUDGE MAKING ORDER : Toohey J. DATE OF ORDER : 15 September 1983 WHERE MADE : Perth

The respondent Simpson Limited pay to the applicant Parrys

Department Store (W.A.) Pty. Ltd. the sum of $160,000

The respondent pay the applicant's costs of the application

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION

The Essence of the Claim Parrys' Organization Simpson's Organization

The Business Relationship Between Parrys and Simpson

Simpson's M.A.P. Policy Events at Riverside Hotel The Closing of Parrys' Account

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION

THE CLAIM The applicant, Parrys Department Store (W.A.) Pty. Ltd. ("Parrys"), carries on business as a retailer of a wide range of

goods including domestic electrical appliances. The respondent, Simpson Limited ("Simpson"), manufactures and selis throughout Australia various domestic electrical appliances including washing machines, clothes dryers, electric upright ranges and electric

wall ovens. The company used to be known as Simpson Pope Ltd.

Parrys claims damages for Simpson's alleged breach of

s.48 of the Trade Practices Act 1974, a section that reads:

"RK corporation or other person shall not engage in the practice of resale price maintenance".

Section 48 is within Part IV - Restrictive Trade Practices. Section 82 provides that a person who suffers loss or damage by conduct of another done in contravention of a provision of Part IV may recover the amount of the loss or damage by action against that other person or against any person involved in the

Section 82(2) permits an action under that section to be commenced "at any time within 3 years after the date on which the cause of action accrued". In its defence Simpson pleads that in so far as a cause of action upon which Parrys relies arose more than three years before the commencement of these proceedings, any

The application was lodged on 14 October 1980. As will appear, the breaches of the Act relied upon by Parrys are continuing breaches and Parrys acknowledges that it cannot succeed

against Simpson except in respect of those occurring after 14

Section 96 in effect defines resale price maintenance by

prescribing various acts which, if done by a corporation,

constitute engaging in the practice of resale price maintenance. Those acts are set out in sub-s.(3) and Parrys relies specifically

"(a) the supplier making it known toa 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;

(b) 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;

(d) the supplier withholding the supply of goods to a second person for the reason that the second person -

(i) has not agreed as mentioned in paragraph (a); or

(ii) has sold, or is likely to sell, goods supplied to him by the supplier, or goods supplied to him by a third person who, directly or indirectly, has obtained the goods from the supplier, at a price less thana price specified by the supplier as the price below which the goods are not to be sold;

(£) 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 person as the price below which the goods are not to be sold."

Section 96(7) provides that a reference in any of those paragraphs to the selling of goods at a price less than a price

specified by the supplier shall be construed as including

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

(b) the displaying of goods for sale at a price less than a price specified by the supplier as the price below which the goods are not to be displayed for sale; and

(c) the offering of goods for sale ata price less than a price specified by the supplier as the price below

Pursuant to the same sub-section, a reference in those paragraphs to a 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".

By reason of s.4F(b) of the Act a person is deemed to

have engaged or to engage in conduct for a particular purpose or a

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

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

The operation of s.96 is amplified by the provisions of s.98(1) whereby, for the purposes of paras. (d) or (e) of s.96(3), a supplier shall be deemed to withhold the supply of goods to

"(a) the supplier refuses or fails to supply those goods to, or as requested by, the other person".

Two other sections of the Act need to be mentioned; each

By reason of s.100, where it is established that the defendant has acted, in relation to the plaintiff, as mentioned in paras. (a), (b), (c) or (d) of s.98(1); and during a period ending immediately before the time when the defendant so acted, the defendant had been supplying goods of a kind withheld to the plaintiff or to another person in carrying on a similar business; and during the period of 6 months immediately before he acted the defendant became aware of a matter or circumstance capable of constituting a reason referred to in paras. (d) or (e) of s.96(3) for the defendant's so acting, then subject to sub-s.(2) it is presumed, unless the contrary is established, that that matter or

circumstance was the reason for the defendant's so acting.

Sub-section (2) of s.100 provides that the preceding sub-section does not apply "where the plaintiff establishes the

matter mentioned in paragraph 98(1)(b) or (c) but the terms disadvantageous to the plaintiff. or the less favourable treatment of the plaintiff, consisted only of a requirement by the defendant as to the time at which, or the form in which, payment was to be

made or as to the giving of security to secure payment".

Section 83 provides that in a proceeding against a person under s.82, a finding of fact by a court made in proceedings for an offence under certain sections of the Act, including s.77, "is prima facie evidence of that fact and the

finding may be proved by production of a document under the seal

In an application brought by the Trade Practices Commission against Simpson Pope Limited, judgment was entered against the respondent in proceedings under s.77 of the Act. The application, being No. G10 of 1979 in the Federal Court of Australia, New South Wales District Registry, General Division, is reported in (1980) 30 ALR 54; (1980) ATPR 40-169, Parrys relies upon some of the findings made by Franki J. in those proceedings for the purposes of the present application. That is

Parrys' claim against Simpson arises in this way. For Many years it has been a buyer of Simpson products. It has sold these products through a number of outlets. Between 1964 and 1980 it had four stores, one at West Perth, one Victoria Park, one at

Midland and one at Fremantle. It now has eight stores.

Between March 1977 and March 1978 Simpson made known to Parrys that it (Simpson) had adopted a minimum advertised price policy known as "M.A.P.", the effect of which was that any retailer advertising Simpson products at prices below those specified by Simpson from time to time would not receive advertising subsidies and other allowances ordinarily paid by Simpson to its retailers. By that conduct, it is said, Simpson induced Parrys not to advertise Simpson appliances at prices less

On or about 1 February 1978 Simpson made known to Parrys that it (Simpson) would not supply its products to Parrys unless Parrys agreed not to advertise for sale those appliances at less than specified prices. Parrys contends that between 17 March 1978 and 11 August 1980 Simpon withheld the supply of electrical appliances to it because it had not agreed not to advertise for sale those appliances at less than specified prices. It further alleges that between those dates Simpson withheld the supply of electrical appliances to Parrys because the latter had advertised for sale or was likely to advertise for sale those appliances at

Parrys claims that as a consequence of Simpson's conduct, it has suffered a serious financial loss, now quantified at $564,250. It will be necessary to examine this claim in detail later in these reasons. For the moment it is sufficient to note that it is based on a loss of profit said to have been suffered by

Parrys by reason of its restricted advertising and its inability

to obtain Simpson products, a loss of profit relating not only to those appliances but also to other products the sale of which was

affected by Parrys' inability to stock Simpson goods.

For the most part Simpson admits the formal allegations in the statement of claim but those allegations upon which a contravention of s.48 is based are denied. Apart froma plea of limitations, the defence does no more than admit, not admit or deny the contents of the pleading. Such an approach is contrary to the requirements of Order 11 rule 13(3) of the Federal Court Rules and is particularly unhelpful in a case of the complexity of this one. But the applicant took no step to clarify the issues so enlightenment had to wait cross-examination of the applicant's

witnesses and an opening by the respondent's counsel.

More than 20 witnesses gave evidence during the hearing of this application. Most were or had been employed by one or other of the parties and it may be useful to indicate now the

position within each organization of the more important witnesses.

Parrys' principal witness as to the events giving rise to the withholding of the supply of Simpson products was Edward Patrick Finucane, its general manager since 1973 and an employee of the company since 1966. Geoffrey Dean Rummer was in 1977 and 1978 Parrys' merchandize manager and, as such, took part in some of the conversations relating to the closure of Parrys' account

with Simpson. Peter David Cruskall was, at the time of the

closure of the account, creditors' manager for Parrys and, as will

appear, it was a telephone conversation between him and a representative of Simpson that was one of the reasons offered by Simpson for the closure of the account. Kingsley Rex Wellington is the executive manager of Parrys Esplanade Limited, the holding company for the applicant. He joined Parrys on 1 October 1978, at which time Simpson had ceased to supply. Mr. Wellington was concerned in the preparation of information in support of the applicant's claim for damages and in the formulation of that claim. Mr. Kevin Parry, the applicant's managing director, had

some conversations with representatives of Simpson following the

closure of Parrys'' account but he did not give evidence.

At the material times Simpson's managing director was Mr. Uhrig. He did not testify, a matter for comment since there was evidence that it was he who made the decision to close Parrys' account or at any rate authorized the taking of that action. In the earlier proceedings, to which reference has been made and in

which Mr. Uhrig gave evidence, Franki J. concluded:

"In my opinion, the withholding of supply by Simpson was either the result of a decision by Mr. Marshall or, alternatively, the result of a recommendation by Mr. Marshall, and the approval of that recommendation by Mr. Uhrig". (30 ALR at p.552)

At the time of the closure of Parrys' account Mr. Marshall was general manager of Simpson's appliance distribution, a national position based in Adelaide. Christopher Noel Acton

worked for Simpson between 1971 and 1978. In 1977 and 1978 he was

national sales manager, with the responsibility of liaising with state managers and having a direct concern with major accounts in each State. It may be noted that there was no State manager for

Western Australia. Conversations Mr. Acton had with Mr. Finucane

featured prominently in the evidence relating to the closure of

Robert Gordon Taylor worked for Simpson for many years until 1979. During his last few years with the company he was credit manager in Western Australia with the responsibility of processing payments from Simpson's debtors and following up overdue accounts. Before his retirement last year, Bernard George Hudson was area manager for Simpson in the Perth city area. He had dealings with Parrys going back over 20 years and his duties included obtaining orders from Parrys as well as other retailers. Dawson James Wheatley was, between July 1972 and July 1979, the state sales manager for Simpson in Western Australia. He was Simpson's senior employee in the marketing division in this State and reported directly to Mr. Acton. Mr. Wheatley participated in some of the conversations relating to the closure of Parrys' account and indeed the letter of 17 March 1978 formally closing the account bore his signature. But the actual decision to close

the account was made in Adelaide and Mr. Wheatley was opposed to

THE BUSINESS RELATIONSHIP BETWEEN PARRYS AND. STMPSON

retailer, deriving 1ts profit from its large volume of sales.

It is a member of United Buying Associates Limited, a non profit organization comprising some 140 retailers throughout Australia. Its function is to negotiate on behalf of its members, by reason of the volume of purchases 1t commands, rebates and other benefits from manufacturers. The activities of the organization do not preclude individual members from making their

Through United Buying Associates, Parrys received from Simpson a long term incentive, amounting to a rebate of purchase price if a prescribed number of purchases was made during the

Parrys had secured from Simpson several other benefits in the form of allowances and rebates, most if not all of which I understood to have been negotiated independently of United Buying Associates. There was a short term incentive related to quarterly turnover, a key customer allowance in the form of a percentage of the purchase price of certain products, and an advertising subsidy. The advertising subsidy took the form of an undertaking by Simpson to meet a proportion (generally one half) of the costs incurred by Parrys in the advertising of Simpson products, particularly on the occasion of Parrys' two major sales in May and

A letter written by Simpson to Parrys on 3 December 1976 suggests that these various allowances would be met in the form of payments by Simpson. But in practice the benefits were set off

against moneys due by Parrys to Simpson on its trading account.

It was common ground that Parrys' purchases of Simpson products fell in 1977 as against 1976. For the financial year 1975/1976 those purchases amounted to $447,393. For the year 1976/1977, they amounted to $391,110. For the year 1977/1978 they amounted to only $154,345 though it must be remembered that

Although it was common ground that purchases were decreasing during this period, there was disagreement between the parties as to why it was happening. Parrys attributed it to Simpson's minimum advertised prices policy or M.A.P. policy. The evidence for the existence and operation of this policy came mainly from Mr. Finucane. I accept Mr. Finucane as a witness of truth and as someone with a good recollection of events notwithstanding that they occurred some 6 years ago. Mr. Finucane gave evidence before Franki J. in 1980 and it is apparent that his

According to Mr. Finucane, in March 1977 there was a conversation between him and Mr. Wheatley at Parrys' office in West Perth. Earlier in the year Mr. Wheatley had told Mr. Finucane that Simpson had a policy relating to its prices and that it wanted Parrys to advertise its products at particular prices that it made known. Several witnesses stressed that it was the advertised prices with which Simpson was concerned. If thereafter Parrys or any other retailer chose to lower its price for a

particular customer, that was a matter for the retailer.

At the discussion in March, Mr. Finucane said to Mr.

"Look, Dawson, we do not go along with your M.A.P. policy. It is going to drop turnover down, and in some cases it is going to cause some retailers liquidity problems".

Parrys' concern was that as a low margin retailer it wanted to be able to advertise Simpson products at prices that would attract the public, rather than at prices no more competitive than those of other retailers. Mr. Wheatley's answer

was that another manufacturer had succeeded with such a policy and

"We are trying to put profitability into retailers and it could be that those who

He mentioned in particular the key customer and advertising allowances. The conversation ended with Mr.

"There is no way we will go along with such a scheme".

Mr. Wheatley had only the vaguest recollection of the events of 1977 and 1978. He did not deny Mr. Finucane's account of the conversation in March 1977 and indeed largely confirmed it by speaking in a general way of discussions relating to payment by Simpson for advertisements pursuant to arrangements that included

"Because we, as a company, were contributing towards the cost of the ad we thought that we should be able to see what, and have a part in what, was going to appear in the advertisement when it finally came out".

Mr. Wheatley agreed that 1f a retailer was not prepared to advertise at Simpson''s recommended prices, he stood to lose any

It is apparent from Simpson's own documents that it had a policy aimed at ensuring that retailers did not advertise Simpson products below prices thought by it to be necessary to achieve orderly marketing and profitability for retailers in general. Usually it was referred to as a price point advertising policy. A memorandum dated 17 October 1977 from Mr. Acton to State sales managers set out a list of "recommended retail advertised prices"; a letter dated 28 October 1977 from Mr. Acton to Mr. Cumming of NARTA, a buyers organization, noted that Simpson was "working on keeping the advertised prices up"; and there was tendered in evidence a document emanating from Simpson dated 24 January 1978 and containing a list of recommended retail

More than that, an inter-office memorandum dated 27 January 1977 described Norman Ross Discounts as "the first

customer to break our price point policy ...". The memorandum

"As a consequence we have withdrawn our advertising support and strategic allowances for February as we promised all key customers, and we should take advantage of this by informing all key customers of the action we have taken; at the same

time re-inforcing our story and our determination to succeed in achieving higher retail prices and higher retail margins on our products". Another inter-office memorandum, dated 2 September 1977 from Mr. Acton to area managers put the matter beyond doubt, if

"T 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 benefits he may be entitled to ...".

It may be that Simpson did not have, by that name, an M.A.P. policy, but I am satisfied that in 1977 and 1978 it required retailers to adhere to a policy of advertising Simpson products at prices recommended by Simpon and that those retailers who did not adhere to the policy were threatened with the loss of and ran the risk of losing any contribution by Simpson to

advertising costs and perhaps the key customer allowance as well.

Parrys did not accept Simpson's price point advertising policy and, according to Mr. Finucane, the company began to limit its advertising of Simpson products. This aspect requires some examination but I am satisfied that Simpson, through Mr. Wheatley,

attempted to induce and did induce Parrys not to advertise for

sale at prices less those specified by Simpson and that in doing

so Simpson engaged in the practice of resale price maintenance as defined in s.96(3)(b) of the Trade Practices Act read with sub-s.(7) of that section.

The impact of Simpsons's price point advertising policy was not that Parrys discontinued advertising Simpson products. Rather it restricted its advertising where the policy operated and at times concentrated on 'specials', such as superseded models, where Simpson was not so concerned that its policy be observed. At other times Parrys simply ignored the policy, as in the West Australian of 10 June 1977 where it advertised certain Simpson clothes dryers and washing machines at prices below what Mr. Finucane described as MAP prices. In the catalogue for its October 1977 sale, Parrys adhered to MAP prices though it would

rather have advertised at lower prices to attract more customers.

It will be necessary to consider later the loss, if any, Parrys suffered by reason of Simpson's conduct in the matter of

As mentioned earlier, Parrys and Simpson have offered conflicting accounts of the circumstances leading to the withdrawal of supplies on 17 March 1978. I propose to look at events at the Riverside Hotel and Lodge in Mounts Bay Road early in February 1978 as those events played a significant part in the

It was Parrys' practice from time to time to hold what was described as a seminar, to which manufacturers with whom it dealt were invited. The object was to enable Parrys to discuss its performance with each manufacturer and to make some plans for the ensuing year. Simpson representatives had been invited to attend late in the afternoon of 1 February 1978 or thereabouts. For Parrys, Mr. Finucane, Mr. Rummer and (for a short time) Mr.

Congerton were present. Mr. Acton and Mr. Wheatley represented

Iam satisfied that Mr. Finucane's evidence represents the fullest and clearest description of what occurred. He was corroborated by Mr. Rummer. Mr. Wheatley's recollection was quite vague and to the extent that there was a difference in the accounts given by Mr. Finucane and Mr. Acton, I prefer the evidence of the former. The discussion opened with Mr. Finucane complaining that a national advertising campaign by Simpson in 1977, using high retail prices, had been unattractive to the consumer and made Simpson look uncompetitive compared with other manufacturers. Mr. Finucane also commented that Parrys did not go along with the M.A.P. policy because it made the company look like everybody else and for that reason it had lost turnover. There was no evidence of any response by the Simpson representatives to

"T believe you have got 100 clothes dryers in stock. Every retailer in Perth knows that you've got' then. What are you going to do with them?"

This was a reference to the balance of a stock of clothes dryers Parrys had bought from Simpson in December 1976. Mr. Acton insisted that Parrys advertise the dryers at $129. Mr. Finucane refused on the ground that -Ehe dryers were a superseded model, that Parrys had bought them at a special price and that it intended to seil them at a special price. The discussion became somewhat heated and then . in Mr. Finucane's words, "right out of the blue" Mr. Wheatley said "Your December account is overdue". Mr. Finucane replied he would look into the matter as soon as possible. As will appear, Simpson was from time to time unhappy about delay in payment of Parrys' account, but I accept that until this moment Simpson had made no formal complaint to Parrys about

Mr. Acton then said that he wanted to buy the clothes dryers back. Mr. Wheatley said that in that event, he could have them for $100,000 but he did not really want to sell them. He added "I am sick and tired of this conversation. Let's go up to the Mayfair for a beer". This was a reference to the Mayfair Tavern in West Perth. Mr. Finucane took Mr. Acton to the tavern;

Mr. Rummer took Mr. Wheatley to his car and joined the others a

As a result of Mr. Acton's repeated references to the dryers, there had been no discussion at the Riverside Hotel of the subjects for which the meeting had been arranged. At the Mayfair Tavern Mr. Acton once again brought up the question of the dryers

and, after a time, it being clear that no agreement would be

reached on this matter by the two companies, Mr. Finucane said in regard to Parrys' expressed intention to sell the dryers ata

"What are you going to do if we do what you are saying? Would you cut us off?"

To this Mr. Acton answered "Yes, I will". Mr. Finucane then said that he would have no option but to goto Trade Practices because what Mr. Acton was doing was illegal. To this

"I don't care. You might win but f would be the Robin Hood of the industry".

I am quite satisfied that although the reference to cutting off Parrys originated with Mr. Finucane, Mr. Acton left

him inno doubt that Simpson would take this course if Parrys advertised the clothes dryers at a price unacceptable to the

These findings substantially accord with the conclusions

There the matter rested so far as Parrys was concerned until on Monday 20 March 1978 it received from Simpson a letter dated 17 March, signed by Mr. Wheatley. The letter was short and,

"When trying to collect payment for appliances delivered in December and prior, our Credit Officer was advised that you were no _ longer buying from us and we would have to wait for payment until the account was reconciled.

In view of your actions and our own customer rationalization programme to reduce distribution costs, we have closed your account.

Much evidence was given by Simpson representatives as to the circumstances leading to the writing of that letter and as to the reason for closing Parrys' account. I shall refer to that evidence but first continue with Mr. Finucane's account of what

Even before going to the evidence from Parrys and from Simpson, it may be said that on any view of the facts it wasa curious letter to write. Parrys had been a customer of Simpson for many years. Turnover figures produced by Simpson in the course of the hearing showed that during the financial years ended 30 June 1972 to 30 June 1977 Parrys was Simpson's third largest customer in Western Australia. Even if the contents of the letter were correct, Simpson's failure to give Parrys any prior warning of the action it proposed and, in particular, the failure of anyone in authority at Simpson to get in touch with Mr. Parry or Mr.

On receipt of the letter Mr. Finucane rang Mr. Wheatley to say that he did not understand what was happening. Mr. Wheatley replied that Parrys' office manager had told Simpson's accountant that Parrys was no longer doing business with Simpson. In addition Simpson had embarked on a rationalization programme of which Parrys was part. As will appear, the decision to close the account was made against the advice of Mr. Wheatley who signed the letter of 17 March 1978 reluctantly and only onan express

Mr. Finucane discussed the matter with Mr. Parry and then rang Mr. Marshall, only to be told again that Simpson had a rationalizaton programme "and you happen to be part of it. It is as simple as that". Although Mr. Parry did not give evidence, it is apparent that he had discussions with Mr. Acton but that they proved fruitless. On 20 April 1978 Mr. Parry wrote to Mr. Marshall asking whether Simpson would "review the situation". The response was a letter dated 2 May in which Mr. Marshall confirmed

that Simpson had closed Parrys'' account and that it had no intention of reversing this decision. The letter went on to point out that the white goods industry in Australia was extremely competitive and that Simpson was seeking to make savings by increasing volume through fewer outlets, hence the customer rationalization programme. Mr. Marshall added that Parrys had an unsatisfactory payment record and that on no occasion since July 1977 had its account been paid in accordance with the 30 day trading terms granted by Simpson and that a cheque for the December purchases had not been received until 28 March. It is

"When payment of your December account was being discussed with your people we were told that you would be doing no more business with us and we would have to wait until Ehe account was reconciled. Your purchases in January, February and March confirm that you had withdrawn support. Under these circumstances and in the light of our customer rationalization programme we can no longer justify carrying the account".

The letter concluded with the statement that Simpson did not specify prices as part of its supply of products or assistance with the cost of advertising; "... any discussions that have taken place have amounted to no more than advice or guidance on our part". That statement hardly accords with what Mr. Wheatley had told Mr. Finucane and is quite inconsistent with Simpson's

Mr. Finucane gave uncontested evidence that during 1978 and 1979 he encountered Mr. Acton, Mr. Marshall and Mr. Lawrence, Simpson's national marketing manager, and that from time to time he raised with those persons the matter of a resumption of supply by Simpson to Parrys. He received no satisfactory reply. In July 1979 he went to Adelaide, expressly to seek a resumption of trading. In the presence of Mr. Acton and Mr. Lawrence, he asked whether Simpson would now resupply Parrys. Mr. Lawrence replied that the company's solicitor had advised against such a course before the hearing of a Trade Practices prosecution listed for

hearing in October 1979. In fact the hearing did not take place

until 1980, being the proceedings to which reference has been made

and which culminated in the judgment of Franki J. on 18 July 1980.

Late in 1979 Simpson took over the Malleys organization and, for reasons that were never adequately explained, it was

content to provide Parrys with these products. When Mr. Finucane put to Mr. Acton that Simpson was supplying Parrys with Malleys' products, why not its own, Mr. Acton replied "That is out of my

In July 1980 Mr. Finucane instructed a Parrys' buyer, Mr. Fitzgerald, to place an order with Simpson for some $60,000 worth of its products. Shortly thereafter, Mr. Madigan, whom Mr. Finucane believed to be a_i senior Manager in the Simpson organization, telephoned him to say that the company could not accept the order. Nevertheless, within 2 or 3 weeks, the order was supplied and in August 1980 Simpson resumed the sale of its products to Parrys. Whether the resumption was a result of the decision of the Trade Practices prosecution was not made clear; it

Although Simpson argued that events at the Riverside Hotel and Mayfair Tavern played no part in the closure of Parrys' account, I am satisfied that Mr. Acton left Mr. Finucane in no doubt, and intended to leave him inno doubt, that if Parrys advertised the clothes dryers at a price unacceptable to Simpson,

Simpson would withhold further supplies from Parrys.

The conversation with Simpson's credit officer, referred to in its letter of 17 March 1978, came about in this way. Mr. Taylor was Simpson's credit manager in Western Australia with duties that included processing payments from debtors and following up overdue accounts. Parrys was on the normal 30 day basis, but in Mr. Taylor's experience, that company did not pay its accounts within that time. He spoke of having to visit Parrys from time to time to collect payment. The complaint was of delays

In early 1978 Mr. Taylor's contact at Parrys was Mr. Cruskall. There was a delay in payment of Simpson's December 1977 account and Mr. Taylor had cause to ring Mr. Cruskall several times about payment. On a date, identified by Mr. Taylor as early in March 1978, he telephoned Mr. Cruskall to ask when a cheque would be available for the December 1977 account. Mr. Taylor had difficulty in remembering the precise words used by Mr. Cruskall but recalled him saying that Parrys was not going to buy from Simpson any more. He thought that Mr. Cruskall used the words "closing our account" but was rather vague as to how exactly that had been put. Although it was suggested to Mr. Taylor in cross-examination that Mr. Cruskall had been speaking in a joking or light hearted way, Mr. Taylor said that he took the remark seriously. That he did so is supported by the fact that he immediately reported the conversation to Mr. Wheatley. I accept

Mr. Taylor's evidence that he took the matter seriously.

Mr. Cruskall placed the telephone conversation at the

end of February 1978. His account was that he had heard a rumour

that Simpson was not supplying Parrys because of a disagreement over the clothes dryers and that, when asked by Mr. Taylor about

payment of the December 1977 account, he replied as a joke:

"Do not be like that, Bob, or we will have to close your account".

Whatever Mr. Cruskall may have intended by this remark,

it assumed considerable significance in what followed.

The timing of events is of some importance. According to Mr. Wheatley, it was on 17 March 1978 that Mr. Taylor reported his conversation with Mr. Cruskall. It was not that Mr. Wheatley purported to have a clear recollection of that date, rather that the letter closing Parrys' account was written on the same day as Mr. Taylor spoke to him. Later that day Mr. Wheatley passed on Mr. Taylor's report to Mr. Acton during a telephone conversation which, Mr. Wheatley recalled, was initiated by Mr. Acton on some other subject. Although Mr. Taylor reported Mr. Cruskall's remarks as having been made seriously, clearly the latter had no authority to terminate dealings between the two companies. It is significant that Mr. Wheatley made no attempt to contact Mr. Parry or Mr. Finucane that day; it is even more significant that neither

Following the conversation between Mr. Wheatley and Mr. Acton, the latter sent to the former a telex containing a letter to be sent to Parrys under Mr. Wheatley's signature. The telex letter is in terms identical with those in the letter of 17 March

1978. Mr. Wheatley argued against the sending of the letter as he

wished to discuss the situation with Parrys. One can understand that he was therefore opposed to such a letter bearing his

signature. But Mr. Acton was adamant both that the letter should

be sent and that it should bear Mr. Wheatley's signature.

During the course of Mr. Wheatley's cross-examination there was produced a draft letter prepared by Simpson in the terms of the letter of 17 March. The draft bears a handwritten notation, identified by Mr. Wheatley as the handwriting of Mr.

"This letter went to Parrys today. As it is quite possible Kevin Parry will ring Adelaide Messrs. Uhrig and Metcalf should know".

The notation carries Mr. Marshall's initials and the date 17 March. If indeed Parrys had decided to close its account with Simpson, why should Mr. Marshall expect that Mr. Parry would

If Mr. Wheatley's account of what took place is accepted, Simpson moved with indecent haste to close Parrys' account. But in some respects Mr. Wheatley's evidence is at

Before I turn to that evidence, it is desirable to interpose a reference to the testimony of Mr. Hudson and to assess what part, if any, those matters played in the closure of Parrys' account. As already mentioned, Mr. Hudson was at the time of his

retirement last year, area manager for Simpson. He had worked for

that company for 21 years and his dealings with Parrys went back to 1960. At least once or twice a week he called at Parrys to obtain orders for the purchase of Simpson products. In January 1978 Mr. Hudson called at Parrys'' West Perth store and spoke to a young man (unidentified) who was taking the place of the departmental manager with whom Mr. Hudson usually dealt. The young man told Mr. Hudson "I don't think I'll be doing anything with Simpson products". Me. Hudson thought this most unusual because of Parrys' dealings with Simpson over many years but he did not follow it up at the time. He received no orders personally from Parrys in January, February or March. I accept Mr. Hudson's evidence that he received no orders but it is a fact that in January and February Parrys did place orders with Simpson

Shortly after this conversation, and still in January 1978, Mr. Hudson called on Mr. Fitzgerald, the manager of Parrys' kitchen department. He asked Mr. Fitzgerald about planning for the month's order and Mr. Fitzgerald replied "We'd better leave it for the moment". Unfortunately this evidence was not put to Mr. Fitzgerald in the course of cross-examination. Mr. Hudson continued to call on Parrys without success, a fact that he

While I have no reason to doubt Mr. Hudson's evidence, I find it curious that he did not take the opportunity, while at Parrys, to speak to Mr. Parry or Mr. Finucane. He had known these men for many years and the evidence suggests that Mr. Finucane at

least was generally on the premises. It may be that Mr. Hudson

had some precise ideas about his own authority and that he felt

the appropriate thing to do was what he in fact did, report the matter to Mr. Wheatley. For his part, Mr. Wheatley said he did

I return now to the testimony of Mr. Acton. The main point of departure between his evidence and Mr. Wheatley's, concerning the closure of Parrys' account, was that according to the former some time elapsed between Mr. Wheatley's report of the Taylor/Cruskall conversation and the decision to close the account. The implication was that one had nothing to do with the other. Mr. Acton said that he reported that phone conversation to Mr. Marshall. As to the closing of the account, Mr. Acton said he believed that to have been the decision of Mr. Uhrig, Simpson's managing director. He, Mr. Acton, made a recommendation to Mr. Marshall, only in the sense that "if they were closing our account and we were rationalizing we might as well throw them in the rationalization programme at the same time". IT have already mentioned Simpson's programme of rationalization, described by Mr. Acton as an attempt to cut down the number of accounts' to be serviced so as to reduce the cost of Simpson's sales force and to concentrate on afew large accounts. Mr. Acton disclaimed any connection between the events at the Riverside Hotel and Mayfair

Tavern on the one hand and his recommendation on the other.

Asked whether he made any attempt to find out why Parrys

was closing its account, Mr. Acton replied that he expected

discussions to be going on between Parrys and Simpson in Western Australia. However, he did not suggest that any such discussions

On 6 April 1977 Mr. Marshall wrote to Mr. Finucane to inform him of an organizational change Simpson was making. The letter concluded with the hope that Mr. Finucane would agree that the proposal was "a constructive move in continuing to develop our valuable Parrys account". In evidence Mr. Marshail agreed that this reflected his view of Parrys' account in April 1977 but he

said that thereafter the account tended to deteriorate and that in the second half of 1977 Parrys' figures "dropped away alarmingly". On the other hand the business of some other retailers in Western Australia was increasing. Mr. Marshall was also concerned that Parrys' promotional activities seemed to focus on a special model or one that was superseded, in other words that Parrys was promoting products of relatively low volume and reduced profit margin. Mr. Marshall was irritated by Parrys' proposal to "dump the dryers at avery low price". The picture painted by Mr. Marshall was that by early 1978 Parrys' business with Simpson was falling, the sort of business Parrys was doing was not welcomed by Simpson and personal relationships between senior personnel in the

Mr. Marshall referred to a telephone call from Mr. Wheatley in the second half of February 1978 in which Mr. Wheatley said "there had been some sort of a blow-up and he raised with me the suggestion or recommendation that the Parrys accounts should

be closed". According to Mr. Marshall, in the course of that

conversation Mr. Wheat ley mentioned the Taylor/Cruskall conversation which had taken place afew days earlier. Mr. Marshall then looked at Parrys' record of purchases and at certain other matters including Parrys' performance in the payment of its account. He concluded that "we were not going to be able to develop the Parrys account along the lines we were looking for in the long term and that the relationship between the two companies was poor. It seemed to me, the evidence pointed to the fact that Parrys had already made the same decision for themselves and I came to the conclusion we should close the account". Having reached that conclusion Mr. Marshall spoke to Mr. Uhrig who endorsed his decision, Mr. Uhrig first having received an assurance from Mr. Marshall that the account was not being closed for resale price maintenance reasons. Later Mr. Marshall said that there was a delay of two weeks or so between the Taylor/Cruskall conversation and Mr. Wheatley's report of it to

hin. Later still he returned to his original estimate of a few

Like Mr. Acton, Mr. Marshall placed the report of the Taylor/Cruskall conversation some time earlier than 17 March 1978. It is possible that Mr. Wheatley received Mr. Taylor's report earlier than 17 March and that he related it to Mr. Acton before that date. But I am satisfied that Mr. Acton and Mr. Marshall in turn learnt of the conversation no more than a few days before 17 March. I do not accept that there was a period of some weeks during which Simpson was considering Parrys' position and that at the end of that time a decision was made to close the account.

Mr. Acton's telexed message to Mr. Wheatley on 17 March has a note

of urgency about it and Mr. Marshall's comments on the draft letter serve to establish that the letter was drafted, the telex sent and the letter siqned by Mr. Wheatley all on the one day. It seems to me more likely that these events took place on the day Mr. Wheatley reported the conversation to Mr. Acton or within a very short time thereafter. Ido not accept that Mr. Wheatley recommended to Mr. Marshall that Parrys' account be closed. While Mr. Wheatley's evidence was quite vague as to detail, I am satisfied that he enjoyed a friendly relationship with Mr. Finucane and other senior staff in Parrys, that he was opposed to the account being closed without an attempt to find out from Parrys'' senior officers what was happening and that he was unhappy

with Mr. Acton's direction that he sign the letter.

It is apparent from Mr. Marshall's evidence that the matter of the clothes dryers was plaguing him as it was plaguing Mr. Acton. I think too that Mr. Marshall was concerned about Parrys' advertising emphasis on "specials", as he was concerned with Parrys' reduced purchases over the last six months or so. Nevertheless, I do not accept the attempts by Mr. Marshall and Mr. Acton to demonstrate that Parrys fell into the rationalization

programme on which Simpson had embarked. That programme was largely aimed at eliminating small customers, the value of whose purchases was outweighed by the cost of servicing their accounts; at any rate that cost made the accounts unprofitable. On any view, Parrys was in 1978 still a major customer of Simpson. If Simpson was concerned in March 1978 at Parrys' slow payment of accounts, this was a situation which had existed for a long time

without formal complaint. Overshadowing all these considerations

18 the quite extraordinary failure on the part of Simpson to explore the Taylor/Cruskall conversation and its failure to make

any approach to Mr. Parry or Mr. Finucane before writing the

I am satisfied that although the state of Parrys' account and the nature of its purchases may have been a source of some unhappiness to Simpson and may even have played some part in its decision to close the account, a substantial reason for the closing of the account and the withholding of supply was that Parrys was likely to advertise Simpson products for sale ata price below that required by Simpson. In particular I find that Parrys' expressed intention to sell the clothes dryers at a price unacceptable to Simpson was the catalyst for the decision to close the account. Simpson seized upon the Taylor/Cruskall conversation as a convenient, but in my view quite unjustified, opportunity to

The fact that Parrys was not a willing party to the cessation of supply is evidenced by the action it took on receipt of the letter of 17 March 1978, in particular discussions had between Mr. Parry and Mr. Finucane with representatives of Simpson, the many attempts made by Parrys to place orders after March 1978 and the substantial volume of business done by it with

Simpson after supplies were resumed in August 1980.

SECTION 83 ~- FINDING IN PROCEEDINGS TO BE EVIDENCE

Section 83 of the Trade Practices Act provides a useful

means by which a finding of fact by a court in proceedings under

ss.77, 80, 80A or 81, or for an offence against s.79, where a contravention of a provision of Part IV or Part V of the Act has been found against a person, may be used as evidence in a

The section is likely to be of most value where a party seeks to avoid calling evidence on a matter the subject of a finding of fact by the court in other proceedings. Where the matter is canvassed again by the parties through evidence, the usefulness of a finding of fact as prima facie evidence diminishes. The court is not relieved of the obligation to make its own findings, particularly where credibility is in issue and where the witnesses whom it has heard are not identical with those who testified in the other proceedings. I have therefore found it necessary to reach my own conclusions on matters that were canvassed before Franki J. in the prosecution under the Trade Practices Act. However, there is no inconsistency between his Honour's findings and mine and, on matters going to contraventions

by Simpson of the Trade Practices Act, we have reached

CONTRAVENTIONS BY SIMPSON OF TRADE PRACTICES ACT For the reasons given I find that the respondent engaged

(i) between 14 October 1977 and 17 March 1978 inducing the applicant not to advertise Simpson appliances at prices less than those

(ii) between 17 March 1978 and 11 August 1980 withholding the supply of Simpson appliances to the applicant for the reason that the applicant had not agreed not to advertise for sale Simpson appliances at prices less than

reason that the applicant had advertised for sale and was likely to advertise for sale such

In making these findings I have rejected a submission by Mr. Clayton, counsel for the respondent, that the reference to 'goods supplied' in s.96(3)(b) of the Act is a reference to goods already held by the person supplied at the time of the inducement. In other words, the argument runs, there can be no finding that Simpson induced Parrys not to sell below specified prices, except in regard to stock held when the inducement was made; the paragraph has no operation on goods not yet supplied. In arguing for that conclusion, counsel contrasted para.(f) of s.96(3) which

speaks of 'goods supplied, or that may be supplied'.

In Mikasa (N.S.W.) Pty. Limited v. Festival Stores (1972) 127 C.L.R. 617, concerned with s.66B(2)(d)(ii) of the Trade

Practices Act 1966 which was the counterpart of s.96(3)(d)(ii) of the current legislation, a majority of the court held that 'goods supplied' meant not only goods supplied in the past but also those to be supplied. fin Dick Smith Electronics Pty. Ltd. v. Chojna &

Ors. (unreported decision delivered 5 June 1981), Deane J. thought

it arguable that the view taken of 'goods supplied' in the Mikasa

case was applicable to s.96(3)(d)(ii) and to s.96(3)(b).

In my view, the decision of the majority in the Mikasa case concerned a provision so close in its terms and context to

s.96(3)(b) that I should apply it to the present legislation.

There remains for consideration the difficult question

of determining the damages to which the applicant is entitled.

Section 82 of the Trade Practices Act permits a person who suffers loss or damage "by conduct" of another done in contravention of a provision of Part IV to recover the amount of the loss or damage. In earlier decisions of this court - Brown v. Jam Factory Pty. Ltd. (1981) 35 ALR 79, Mister Figqins Pty. Ltd.

v. Centrepoint Freeholds Pty. Ltd. (1981) 36 ALR 23 and Hubbards Pty. Ltd. v. Simpson Ltd. (1982) 41 ALR 509 - the view has been taken that although s.82 does not in its terms require a causal connection between the conduct constituting the contravention and the loss or damage suffered, there must be some causal connection between the two. The applicant did not seek to arque against this

approach, with which I agree and which I propose to follow.

Hubbards, like Parrys, was one of the companies in respect of which the Trade Practices Commission prosecuted Simpson in the proceedings to which more than one reference has been made in these reasons. Hubbards Pty. Ltd. v. Simpson Ltd was an

action by Hubbards to recover damages under s.82 of the Act by

reason of Simpson's closure of its account. Lockhart J. followed

Fox J. in Brown v. Jam Factory Pty. Ltd. and Northrop J. in Mr.

Figgins Pty. Ltd. v. Centrepoint Freeholds Pty. Ltd. by

approaching the assessment of damages on the footing that a claim

under s.82 is more akin to tort than to contract. His Honour said

"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 s48 had not occurred with the position it was in as a result of the contravention".

Neither party dissented from that approach in the present case and again I propose to follow it. While there are features of Hubbards' claim resembling those of Parrys', there were some aspects of the assessment in Hubbards' case resolved by concessions made by Simpson. No concessions have been made in

these proceedings and the issue of damages was fought as strongly

Parrys' approached the assessment of damages in this way. Tt first sought to determine the market share of Simpson appliances that it could reasonably have expected to achieve during the period July 1977 to June 1981, making an adjustment to give effect to the limitation of three years demanded by s.82(2).

Although supplies were resumed in August 1980 the claim was

projected until the end of that financial year, Parrys' argument being that the effects of non supply continued at least until June

This determination of market share was arrived at by calculating the average market share held by Parrys of Simpson products sold in Western Australia. With a qualification, to which I shall refer later, the average was calculated by reference

to Parrys' market share for the 3 complete financial years before

This average was then compared with the market share achieved by Parrys in the year ended 30 June 1982, the first

Once there had been determined the market share Parrys could reasonably have expected to achieve during the period of non supply and the time during which Parrys was regaining its share of the market, that percentage was applied to total sales effected by

Simpson in Western Australia during the period of the claim.

A deduction was then made from the projected sales of actual sales by Parrys of Simpson products so as to arrive at an estimate of the number of units that Parrys would have sold had Simpson not ceased trading and had it, not earlier applied its

It was then necessary to determine the dollar value of

the lost sales. This was done by obtaining the average purchase

price of Simpson products for the year ended 30 June 1977 (the last year of normal trading) and the average cost of those products for the year ended 30 June 1981 (the first almost

Having determined the number of units likely to have been sold and the average cost per unit, a calculation was then

made of the gross profit Parrys would have achieved if these units

Working onan average mark up on cost of 11%, that percentage was applied to the total estimated purchases at cost

No reduction was made for overhead expenditure or for

In addition an estimate was made of rebates lost during

The calculation of Parrys'' loss on this basis was made by dames William Robertson, a chartered accountant and a partner

A further claim was made by Parrys for the effect on sales of other products by reason of the company being able to sell Simpson products. This was on the basis that during the period supply was withheld there was no substitution of profit

from an increase in the sale of other products. This head of

damage was calculated froma graph prepared by Mr. Wellington, comparing Parrys' turnover during the period in question with the growth rate of comparable goods imported into Australia from overseas and interstate. This produced a Figure considerably greater than that said to represent Parrys' loss on the sale of

strenuously contested by Simpson and it is necessary to look at the evidence in some detail. To understand the evidence, some reference must be made to a classification of products adopted by

Parrys for its own purposes and referred to by various witnesses

The expression white goods is well understood in the retail trade to refer to refrigerators, washing machines, freezers, dishwashers and clothes dryers. For its own purposes Parrys adopted a classification of electrical goods into Majors I, Majors II and Majors III. None of these categories had any precise correspondence with the appliances Parrys was buying from Simpson but the category of Majors II was an integral part of Mr. Wellington's graph, thereby adding further complications to an already involved calculation.

The term majors was explained by Mr. Wellington as relating to high ticket items, large electrical items in contrast with such things as frying pans and kettles. It is a reference

both to size and dollar value. The category Majors I includes

television sets and microwave ovens. The category Majors II embraces white qoods - washing machines, clothes dryers, refrigerators, freezers and dishwashers. The category Majors III includes air conditioning units, heaters, stoves and lawn mowers. The appliances bought by Parrys from Simpson fell into Majors II

Although Simpson appliances were not withheld until after 17 March 1978, Mr. Robertson's calculations began with 1 July 1977, making an allowance for the limitation period. This still left a period from October 1977 until March 1978 for which the same approach was adopted as for the succeeding period. But the loss Parrys is said to have suffered during that earlier time is by reason of its inability to advertise Simpson appliances in the way it wished. In my view it is not appropriate to treat the time preceding 17 March 1978 in the same way as the period thereafter. It is necessary to lock at just what did happen

during those earlier months. I shall return to this matter later.

Mr. Robertson agreed that his approach was essentially one of mathematical calculation in the light of information furnished to him by Parrys. It did not purport to have regard to

market forces except to the extent that the statistical

Mr. Robertson took the four principal products purchased

by Parrys from Simpson. Clothes washing machines and clothes

dryers lay within the Majors II classification; electric upright ranges and electric wall ovens lay within Majors ITI. A comparison of Parrys' market share of Simpson products for the three years ended 30 June 1977 with the year ended 30 June 1982

Products Average Actual 1982 Clothes washing machines 13.11 14.47 Clothes dryers 19.90 14.20 Electric upright ranges 11.12 8.36 Electric wall ovens 10.46 9.46

In arriving at an average, Mr. Robertson disregarded figures relating to electric upright ranges for 1977 on the ground that the percentage of the market 2.82% was not representative; hence for that appliance the average was arrived at with reference only to 1975 and 1976. He had reservations about some of the

other figures but thought it preferable not to alter his approach.

Mr. Robertson then applied the average market share to the period of non supply (including the months October 1977 to March 1978), having regard to the total sales made by Simpson in

Western Australia during that period. From the result he deducted

actual sales by Parrys of Simpson products so as to arrive at an estimate of the number of units that would have been sold by

To determine the dollar value of these lost sales, Mr.

Robertson's first approach was to obtain the average purchase

price of the products in question for the financial year ended 30 June 1977 and also the average cost of those products for the year

ended 30 June 1981. This produced the following picture.

Appliance Average cost as Average cost as 30 June 1977 30 June 1981 $ 8 Clothes washing machines 304 284 Clothes dryers 116 122 Electric upright ranges 328 306 Electric wall ovens 336 355

In Hubbards Pty. Ltd. v. Simpson Ltd. the method adopted

to arrive at the dollar value of lost sales was to add the value of the sales of each of the four classes of Simpson appliances for each of the financial years in question and divide that sum by the total number of units sold. At the time Mr. Robertson began to prepare his report, that information was unavailable; an interrogatory directed to the respondent to provide the relevant information had not been answered. Subsequently the information was furnished and an approach adopted by Mr. Robertson in accordance with the Hubbard case. The difference in calculation

Having determined the number of units expected to have been sold by Parrys during the periad of non supply and the average cost price of each unit, Mr. Robertson was able to calculate the gross profit Parrys would have achieved had the units been sold. He did this on the basis that Parrys' average

markup on all white goods was 11%, a percentage he applied to the

total estimated purchases at cost. A summary of those

Appliance 8 Clothes washing machines 122,786 Clothes dryers 34,094 Electric upright ranges 47,706 Electric wall ovens 37,503 242,089

As mentioned earlier Mr. Robertson worked on the basis that there would have been no reduction in overhead expenditure through Parrys' inability to sell Simpson products and that the only additional cost attributable directly to the additional sales was commission payable on bankcard sales. On the basis that about 10% of all Parrys' sales were made on bankcard, on which a

commission of 1.5% was payable, this cost was estimated at $3,500.

Mr. Robertson then made an estimate of rebates Parrys was likely to receive had it continued trading with Simpson. This is a somewhat involved calculation, having regard to long term incentives and short term incentives, a rebate structure that Simpson altered on 1 January 1980. The calculations are set out

in Mr. Robertson's report and it is enough for present purposes to

Lost rebates 17 March 1978 to 1 January 1980 $ 43,111

Allowing for the adjustment of $337, consequent upon the provision of further information, Mr. Robertson's estimate of Parrys' claim, excluding loss of sales of non Simpson products,

Loss gross profit on Simpson goods $ 241,752 Lost rebates 50,321

Mr. Robertson did not attempt an estimate of Parrys' loss of sales of non Simpson products by reason of its inability to stock Simpson products, other than to say that he had examined the graph prepared by Mr. Wellington and that if the assumptions on which it was based were proved correct, the figures reflected

in the graph were consistent with those assumptions.

Mr. Robertson's method of approach and the figures used to arrive at his estimate were criticized by two witnesses. One was Francis George Jarrett, professor of economics at the University of Adelaide, and the other' was Peter Emile Steidl, senior lecturer in management studies at the University of

Adelaide. Both are persons with considerable qualifications and

of considerable experience, both subjected Deloitte Haskins and Selis' report and Mr. Wellington's graph to close analysis and

both were impressive in the manner in which they gave evidence.

Professor Jarrett was critical of Mr. Robertson's statistical procedures, in particular his approach to "outlyers", that is statistics which seem to fall way outside the norm. An example was Mr. Robertson's disregard of the figures for electric upright ranges in 1977 on the ground that they were not representative. I accept Professor Jarrett's criticism which has

some bearing on the averages arrived at by Mr. Robertson.

Professor Jarrett pointed out that average market shares for any period must reflect trading conditions during that period, hence their use in projections must be treated with caution since the period to which they are applied may not reflect those conditions. This is particularly true of consumer durables which, in Professor Jarrett's words, "has always been volatile from year to year". Nevertheless, Professor Jarrett followed Mr. Robertson's approach, adopting figures which he thought more

In particular Professor Jarrett saw no reason why the nine months' trading from 1 July 1977 until 17 March 1978 should be disregarded or, perhaps more accurately, why it should be assumed that Parrys' share of the Simpson market during that period would have been the average of the preceding three years. In Professor Jarrett's view, which I accept, it is more

appropriate to determine Parrys' average market share over the

years 1975 to 1978, an average of 11.38% arrived at in the

Furthermore, Mr. Robertson assumed, as Professor Jarrett had to assume on the information available to him, that at the time supply was interrupted on 17 March 1978 Parrys was not holding any stock of Simpson products. To the extent that the company was holding Simpson appliances, there was no loss or at any rate a reduced loss until this stock was exhausted. There were no precise stock figures for 17 March 1978. Figures were tendered showing stock held by Parrys of Simpson products in January and in June 1978. The way Professor Jarrett approached this was to ask that his revised estimates be treated as upper limits. In so doing he had regard not only to the possibility of stock on hand but also to the fact that the estimate of lost sales assumed no substitution of other brands for Simpson products and also reflected an over estimate of the capacity of the market to

absorb additional units in 1977/1978 and 1980/1981.

Professor Jarrett produced evidence to show that retail sales fell in real terms in 1977/1978 and 1978/1979 from their levels in the preceding two years. Hence, while the interruption of supply by Simpson from March 1978.to August 1980 may have contributed to some loss of sales by Parrys, the major contributing factor was, in his opinion, a general decline in the retail demand for categories of goods reflected in Parrys'

commodity range. The recovery in retail demand began in 1979/1980

and continued strongly for 1980/1981 and 1981/1982 as is indicated

Putting these considerations to one side for a moment and adopting Professor Jarrett's estimate of lost sales, and

applying to that a mark up of 11%, the picture is as follows.

Clothes washing machines ($827,141) $ 90,985 Clothes dryers ($192,431.50) 21,167 Electric upright ranges ($201,933.50) 22,212 Electric wall ovens ($199,894) 21,988

Professor Jarrett did not direct his attention to the

question of expenses, fixed or variable, or the matter of rebates.

Dr. Steidl launched a much more fundamental attack on Parrys' approach to lost sales of Simpson products. In his view it was necessary to look at the significance of the Simpson brand in relation to Parrys' total business so as to determine what impact the withdrawal of this particular brand might have. Much of Dr. Steidl's evidence was directed at the claim for damages reflected in Mr. Wellington's graph and I shail confine my attention, at this stage, to so much of his testimony as is

relevant to the claim for lost sales of Simpson products.

Dr. Steidl produced figures to demonstrate that in 1976/1977 Simpson products accounted for only 1.05% of Parrys' sales and that in the West Perth store the total of Majors II

category accounted for only 4.96% of the available floor space. Dr. Steidl also referred to newspaper advertising by Parrys during

January to June 1977 to show that Simpson products were not

Dr. Steidl also analysed Parrys' electrical sales for its West Perth, Victoria Park and Midland outlets, being the only outlets open well before March 1978. From this information he arrived at a conclusion that after an increase in the percentage of electrical sales to total sales in 1975/1976, the percentage declined, stabilized, then declined further in 1978/1979 where it stabilized until 1981/1982. The purpose of this exercise was to demonstrate that, well before Simpson withdrew its products, there was a downward trend in Parrys' percentage of electrical sales to total sales. Dr. Steidl also sought to demonstrate that there was no causal relationship between Parrys' purchase of Simpson products and its sales of electrical goods. For instance in 1977 where there was a percentage increase of 25.9% in electrical sales, there was a decrease of 13.4% in the purchase of Simpson goods. It was a further part of Dr. Steidl's thesis that neither a decrease nor an increase in Simpson sales of Majors II poducts

In applying Dr. Steidl's thesis, it may be accepted that in the period preceding March 1978 there was a reduction in Parrys' purchase of Simpson appliances. Dr. Steidl attributed this to a deliberate decision on the part of Parrys not to buy Simpson goods. In one sense this is undoubtedly so but it is

important not to overlook Parrys' contention that Simpson's

threats reqarding advertising subsidies were causing it to restrict its advertising of Simpson products and their purchase. It is impossible to quantify this aspect with any attempt at precision but it is a matter to be taken into account. I do not accept Simpson's submission that Parrys had decided to deal no more with it. The submission runs counter to Parrys'' many attempts to purchase Simpson products after March 1978. It 1s also a significant consideration that with the resumption of supply in August 1980, Parrys' purchases of Simpson products

I can find little justification for extending Parrys' loss in respect of Simpson goods much beyond the point where supply was resumed. It may be acknowledged that some time would have elapsed before Parrys' advertising made it apparent that it was once more stocking Simpson appliances. But simply to apply to the period August 1980 to June 1981 the same approach as during the period when supply was entirely interrupted is, I think,

I am satisfied that the general approach taken in Deloitte Haskins and Sells' report is an appropriate one whereby to measure Parrys' loss for the period March 1978 to August 1980, with the qualifications referred to by Professor Jarrett and with some further discounting to have regard to the factors mentioned by Dr. Steidl. It is not appropriate fbr the period October 1977 to March 1978. Dr. Steidl analysed the trend in Parrys' purchases of electrical goods (excluding Simpsons) between 1974 and 1978 and

found a consistent pattern that continued over the period October

1977 Eo March 1978. In other words it did not change in the way he would have expected if Simpson's price point advertising policy made any impact. I accept Dr. Steidl's analysis and his conclusion, save that in the light of Mr. Finucane's evidence some damages are warranted under this head. The statement of claim confines this aspect to Parrys' advertising for its October 1977

An attack was made by Simpson on Parrys' alleged mark up of 11%. This attack was warranted to some extent, having regard to overhead and variable expenses. Mr. Rowe, a chartered accountant, analysed the gross profit percentages achieved by Parrys on Majors I, II and III. No records relating solely to Simpson goods were available. Mr. Rowe concluded that for the period 1 July 1976 to 30 dune 1981 Parrys achieved a mark up of 6.73% and that this was the only reasonable indication for Simpson products. Some of Mr. Rowe''s assumptions were challenged but I am satisfied that the mark up likely to be obtained by Parrys on Simpson goods is closer to 7% than 11%. It is not possible to substitute another percentage with any confidence; I treat this

It would be idle to suggest that an assessment of damages in regard to lost sales of Simpson products can have any claim to precision. But adopting Mr., Robertson's approach and making the qualifications demanded by the evidence of Professor Jarrett and Dr. Steidl and the other matters to which I have referred including rebates, I am of the opinion that the sum of

$120,000 is a reasonable estimate of this head of damage.

Part of Parrys' claim is for the sum of $272,588 (a revision of the earlier claim of $342,588), said to be an estimate of the company's loss between October 1977 and June 1981 in respect of products other than Simpson's, the sale of which was lost by reason of Parrys' inability to supply Simpson products. It appears in the form of a qraph prepared by Mr. Wellington, a

graph that I, and I suspect other witnesses, found somewhat

The claim is arrived at in this way. It takes Parrys' sales of Majors II appliances from 1975 until 1981 and plots those sales on a graph. For the period July 1977 to June 1981 it plots a further line reflecting the growth rate in Western Australia of the sale of white goods or Majors II. That line is plotted by reference to percentage increases and the result is designed to show that for the years in question there was a dramatic increase in the sale of white goods in Western Australia but, so far as Parrys was concerned, a drop in sales between 1977 and 1980 and

some upturn from 1980 onwards, though not commensurate with the

As with the claim in respect of Simpson goods, this claim does not extend beyond June 1981.° It is said by Parrys to be an arbitary cut off point and that the claim may well continue

What is at first sight startling about this part of

Parrys' claim is that it is about twice the amount claimed in

respect of failure to obtain Simpson goods themselves and that it reaches its highest point in June 1981 when there had beena resumption of supply for some 12 months. Parrys acknowledges that these implications may seem curious but contends that they are the inevitable result of a deprivation of Simpson products at a time when there was a substantial 1uncrease in the sale of white goods

The claim makes a number of assumptions. To begin with, it derives from a comparison of Majors II appliances but seeks to apply the result to washing machines, clothes dryers, ranges and wall ovens, the first two of which fall within Majors II but the second two of which fall within Majors III. As counsel for the respondent pointed out in the course of his final address, there was evidence from Mr. Wellington that Simpson sales comprised

about 15.5% of Parrys' Major II sales and about 6% of Majors III. In counsel's submission, "the Simpson 15.5 per cent is being asked to account for the trading success or lack of success of all of the other commodities in Majors II. If there is an increase in refrigerators or freezers, or a decrease in those items, that is going to affect the calculation which is said to relate to the availability of Simpson washing machines and clothes driers. Having regard to the small proportion that Simpson bears to the whole, the calculation, in my submission, just cannot be

The approach also assumes that there is a correlation and a constant correlation between movements in the sale of white

goods in Western Australia and Parrys' share of those sales. And,

of course, it assumes accuracy in the percentage increases in the

sale of white goods in this State. Those percentage increases are

1976/1977 + 5.1% 1977/1978 + 1.03% 1978/1979 + 2.70% 1979/1980 + 17.02% 1980/1981 + 20.9%

There is a further and quite basic assumption inherent in this claim and it is that by stocking Simpson appliances Parrys is able to attract customers who, whether or not they buy a Simpson product, will in many cases buy other goods. These other goods need have no connection with a Simpson product or only a connection of the most general kind in the sense that, having been attracted to Parrys to buy a Simpson appliance, the customer may be persuaded to buy some other household item. This phenomenon was described variously by witnesses as on-selling and

Several witnesses, now or formerly in the employ of

Parrys, gave evidence of the popularity of Simpson appliances and

There was evidence from Mr. Urquhart, a marketing consultant, that "something in the order of $0.37 is spent on impulse so that the consumer going into premises can be encouraged to increase his purchase by anything up to and including $0.37 in the dollar". Mr. Urquhart also spoke of on-selling as relating specifically to a product or as arising from more general circumstances. He instanced the purchase of a television set and the likelihood of persuading the customer to buy video equipment. More generally he spoke of a person buying a refrigerator and being persuaded to purchase other items related to the home. So far as impulse buying is concerned, it was pointed out by Mr. Watson, another marketing consultant, that most of the studies in this area have been done in relation to foodstuffs in supermarkets and in variety stores. T accept Mr. Watson's comment, which appears to be self-evident, that impulse buying is related to lower priced items. In his view, on bigger ticket items, "it would go down to almost negligible proportions". I aiso accept Mr. Watson's evidence that once supplies are resumed, ground can be rapidly made up with advertising and that the task of

quantifying loss then becomes extraordinarily difficult.

I accept, as I have said, that Simpson is and was a popular brand, that some customers are and were attracted to Parrys because it stocked Simpson appliances, that during the period of non supply some customers who might otherwise have gone to Parrys did not go and that this deprived Parrys of some profit they would have gained through on-selling or cross-selling. But the evidence does not persuade me that the loss is capable of any

precise quantification or that it was a substantial loss.

Although this part of the claim begins in July 1977, Parrys did not then have a system which permitted the isolation of Majors II praducts from those in other categories. It was not until the financial year July 1977/1978 that such a dissection was maintained by Parrys. It was therefore necessary for Parrys to arrive at its starting figure of $3,981,000 by reference toa percentage derived from a later period. Professor Jarrett criticized this approach on the basis that it incorporated into the base year any change in composition of total sales - relatively more or relatively less Majors II - in later years and that by projecting forward the base figure there was an increase in the estimated loss due to the interruption of supply. Professor Jarrett said that the logic of establishing a base in this way was unclear, since there were 9 months actual trading before the interruption of supplies and that there were unsold stocks of some Simpson products to be traded during the period

"Given the downturn in the real demand for Majors II, which [I have already documented, a more accurate basis for any subsequent projection would be Parrys' actual sales of $3,628,000",

However this again raises the problem of whether any loss of trading between July 1977 and March 1978 was due to

Professor Jarrett subjected the graph to a very detailed

analysis and I accept his criticisms to be well founded though it

is unnecessary to refer to them in any detail. One criticism he did make was that, in relation to the measurement of growth in white goods in Western Australia between 1977 and 1981, the graph confused sales and imports. The basis of this criticism was that the percentage increases were derived from figures provided by the Australian Bureau of Statistics showing imports of white goods

into Western Australia from overseas and interstate.

At a later stage of the hearing the respondent called an officer of the Australian Bureau of Statistics to show just how these figures were arrived at. Without referring to that evidence in any detail, it is apparent that, all other considerations

aside, there is no precise correlation between the value of

As Professor Jarrett pointed out, even if it be accepted that imports into Western Austrtalia are closely related to sales, the market for Majors II declined during 1977/1978 for all the "big ticket" items (freezers, refrigerators, washing machines and dishwashers). The sole exception was clothes dryers, the cheapest of the five categories. The market declined even further in 1978/1979 save for clothes dryers. In 1980/1981 there was a recovery in the Majors [I market with strong rises in two "big ticket" items, a fall in dishwashers and a strong rise in clothes

dryers. There is much force in Professor Jarrett's comment that:

"...- ait seems that a reasonable explanation of the observed movement in Parrys' actual sales from 1976/7

to 1980/1 is more related to fiuctuations in the real demand for

Majors II rather than a 'flow on' from the non supply by Simpson".

I accept Professor Jarrett's criticism of the sum of $1,731,000 said to be Parrys' reduced sales of non Simpson

products for the year ended 30 June 1981. As he pointed out:

"To suggest that the shortfall of $1,731,000 was solely due to non- supply by Simpsons is to ignore:

(i) the 11 months of actual trading in Simpson products

(iv) the influence of price changes on any value figures

I. spoke earlier of the apparently startling situation that in this part of the claim the greatest loss is said to have occurred twelve months after the resumption of supply. T have

therefore considerable sympathy with Professor Jarrett's comment:

"If, for whatever reasons, Parrys' market share falls and the rate of increase in Parrys'' sales is below the industry average, then the graph would suggest that, in perpetuity, the whole of the difference between the top of the red line and Parrys' actual sales - even though ten years after the renewal of supply by Simpson - is to be attributable to the curtailment of supply by Simpsons in March 1978".

The reference to the top of the red line is a reference to the percentage increases in the sale of white goods in Western

Dr. Steidl too was very critical of the way in which this part of the claim had been formulated. He thought that it ignored the impact of new retail outlets opened by Parrys and

evidence given in the course of the hearing that the market became

more competitive after 1977/1978. Dr. Steidl was also of the opinion that Parrys' approach to this part of the claim ignored the scope for the substitution of brands other than Simpson,

In approaching this aspect of damages, I bear in mind what was said by Lord Diplock in Mallett v. McMonagle (1970) AC 166 at p.176:

"The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be

contrasted with its ordinary function in civil actions of determining what was. In

determining what did happen in the past the court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in. the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards".

Once it is accepted that on 17 March 1978 Simpson wrongfully withheld the supply of its products to Parrys and that it continued to do so until August 1980, notwithstanding repeated requests for supply from Parrys, it follows that Parrys is entitled to some damages in respect of what is an accepted phenomenon of retailing, the concept of on-selling or cross~selling. I do not accept the graph or the method of approach inherent in it as a proper basis for assessing this part of the claim. I do not accept that this part of the claim can properly begin to run while Parrys held adequate stocks of Simpson goods to meet the demand (which it did until well into 1978) or that it can continue for any appreciable time after the resumption

It has not been demonstrated that damages under this head exceed those for the loss of sales of Simpson products themselves. At best the former is but a proportion of the latter. Doing the best I can, without the benefit of precise figures, I am

of the opinion that $40,000 would be adequate compensation.

In total then, Parrys is entitled to recover from Simpson the sum of $160,000 by way of damages. Simpson must pay the costs of the application though L shall hear from counsel

whether there is a need for any particular orders in this regard.

I certify that this and the fiftyeight preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Toohey