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

Federal Court of Australia|1983-09-15|Before: Toohey J

ae Trade Practices - restrictive trade practices - resale price maintenance - manufacturer's minimum advertised price policy regarding sale of electrical goods - whether manufacturer

withholding supply by reason of reseller failing to agree not to

advertise goods at prices less than those specified by

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

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

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

At a glance

Court

Decision date

Before

Source

Judgment (396 paragraphs)

Cases Cited (4)