Decision
31 The need to plead material facts is not in dispute, nor is the requirement that the pleading convey to the respondent the case that party has to meet, nor is the proposition that, if the statement of claim discloses no reasonable cause of action or has a tendency to cause prejudice, embarrassment or delay, the whole or part of it may be struck out.
32 Visa's primary submission is that the proceedings against it should be dismissed on the basis that no reasonable cause of action is disclosed, there is no real question to be tried and that Spotwire's case is clearly unsustainable within the test in General Steel and Allstate.
33 The statement of claim asserts that, by reason of the Membership Agreement, the Visa Members have agreed with each other to be bound by the Visa Rules, relevantly those set out in paragraph 7(c) of the pleading. In the alternative, there is alleged an arrangement or understanding between the Acquiring Members, who are competitive with each other, not to offer or provide services to Merchants whose details have been listed on the TIMF by any of the Acquiring Members and remain listed. While the totality of the written material is not in evidence or set out in the statement of claim, Spotwire's pleading is that the Membership Agreement and the Visa Rules, properly construed, are sufficient for the purposes of s 4D(1)(a).
34 To the extent that Spotwire is alleging an agreement between the Acquiring Members to be bound by a common set of rules where the consideration is the mutual promise that they will be bound, Spotwire seems to be alleging an agreement outside the Membership Agreement. If so, there has been no pleading of material facts to support such an agreement. To the extent that Spotwire is relying upon common Visa membership, it does not plead communication or knowledge, actual or imputed.
35 The relevant time for determining whether there is an exclusionary provision is when the contract, arrangement or understanding is made. If all of the requirements of s 4D are not present at this time, it will not contain an exclusionary provision even if a missing requirement is subsequently fulfilled: Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at 266-267; South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 ('South Sydney') at 477; Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607 at 615-616.
36 The prohibited purpose must exist at the time that the alleged exclusionary provision comes into effect. Further, the class of persons who are the object of that provision must be identified by all parties to the provision at that time and must be 'aimed at specifically' (South Sydney (at 477)).
37 In News Limited, the Full Court dealt with the question of the nature of an arrangement or understanding and the distinction between those concepts and a hope or expectation. The Court cited, with approval, the explanation of Ryan J in Stationers Supply, where his Honour considered whether the entry by a number of newsagents into identical advertising membership agreements with Newspower (Victoria) Pty Ltd was a contravention of s 45(2)(a)(i) of the TPA. In considering whether there was any understanding between newsagents to which Newspower (Victoria) was also a party, Ryan J observed that, while there must have been an expectation that other newsagents would participate in the 'Newspower' arrangements, that did not carry with it an understanding, arrived at between newsagents, to enter into membership agreements. As His Honour said, (at 61): 'it is necessary to establish something more than a hope or expectation that a certain outcome will occur before the Court can find that an understanding exists'. Evidence is necessary for this. In News Limited, a finding that the clubs had no more than a hope or expectation that others would execute the relevant agreements would have been insufficient to infer a horizontal agreement out of the series of vertical agreements.
38 Justice Lindgren discussed the meaning of 'arrangement or understanding' in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (1999) 92 FCR 375 at 406 - 409.In each of the cases there considered, consistent with Newspower, something more than mere hope or expectation was necessary. What was considered essential was either acceptance of mutual rights and obligations or intention that conduct will operate as an inducement or a meeting of minds; generally there was communication between the parties to the arrangement or understanding.
39 As was pointed out by the Court in News Limited (at 572), it may be possible to infer an arrangement or understanding from a series of individual agreements, as in Re British Slag Ltd's Application, British Basic Slag Ltd v Registrar of Restrictive Trading [1963] 1 WLR 727 ('Re British Slag') . As Diplock LJ pointed out in Re British Slag (at 746), what must be shown is a 'meeting of minds' and mutuality so that each party 'would regard himself as being in some degree under a duty' with respect to mutual conduct. In Re British Slag, on the evidence, there was an inducement to each member to enter into the same vertical contract. In News Limited, consideration of the circumstances and context in which the agreements were executed, together with evidence of communications among representatives of the individual clubs, led to the conclusion that there was a common understanding. Similarly, in Hughes, evidence established an expectation that different parties would abide by decisions reached and that there was an assumption of obligations on the part of the different clubs.
40 In Hughes, Toohey J observed (at 33) that it was a question of intention whether a resolution of the Cricket Council could constitute a contract between the constituent members. In concluding that an arrangement or understanding existed between members of the Cricket Council, his Honour found (at 35) that there was 'undoubtedly communication between the delegates to the Cricket Council at the meeting and a consideration by them'. This gave rise to an expectation in the minds of all present that the parties would abide by the decisions reached. There was an assumption of obligation and a recognition that all would abide by the rules. That was sufficient to constitute an understanding between those present, despite the fact that there was not mutual enforceability.
41 A series of vertical Membership Agreements is not, of itself, sufficient to create a contract, arrangement or understanding between the Acquiring Members. Where the Membership Agreement provides for obligations and benefits as between Visa and each Acquiring Member that is not sufficient (Stationers Supply). Nor is it sufficient that an Acquiring Member enters into the Membership Agreement in the hope or expectation that other, competitive, Acquiring Members will enter into an identical agreement, even where there may be mutual benefit (Stationers Supply). There is no allegation that there was direct or indirect contact between the CBA and other Acquiring Members on or prior to the execution of the Membership Agreement with respect to common entry into the Membership Agreement. Such direct contact could convert the Membership Agreement into one within s 4D(1)(a) of the TPA (News Limited). Spotwire does not allege any material fact outside the existence of entry into and construction of the membership documents.
42 In the present case, however, the very terms of the Membership Agreement deal not only with the obligations and practices between CBA and Visa, they also encompass by the Visa Rules pleaded in paragraph 7 of the statement of claim, obligations and practices that each Acquiring Member contracts to observe with respect to equivalent obligations and practices of other Acquiring Members. If each Membership Agreement does in fact contain identical terms and if there were more than a hope or expectation that other Acquiring Members had entered into or would enter into identical Membership Agreements it is, in my opinion, arguable that the Visa Rules, when considered in their totality, could be construed so as to give rise to the conclusion that entry into the Membership Agreement constituted a contract, arrangement or understanding between the Acquiring Members to give effect to the Visa Rules. At the least, the practices outlined in paragraph 7(c) of the statement of claim, if they obliged the Acquiring Members to honour those practices for mutual benefit and liability could, arguably, constitute a meeting of minds that, in turn, constitutes an arrangement or understanding between them.
43 It is not an entirely novel proposition that parties who enter into parallel agreements with a single third party may, by that act, have contracted with each other. An example can be seen in Clarke v The Earl of Dunraven and Mount-Earl [1897] AC 59 ('Satanita'). Lord Herschell (at 63) affirmed the reasoning of the Court of Appeal that where a number of parties, by separate contracts with a third party, undertake to be bound by common rules to the knowledge of each other, where those rules indicate a liability on the part of one to the other, a contractual obligation is created between them. In the decision of the Court of Appeal (The Satanita [1895] P 248) Rigby LJ (at 262) summarises the proposition:
'The first question is that of contract or no contract. It appears to me that all that is necessary to constitute a contract between the yacht owners is to bring home to each of them the knowledge that the race is to be run under the Yacht Racing Association rules, and that they, the one and the other, deliberately enter for the race upon those terms. In this case we have a written document, signed by each yacht owner, which, if there were any doubt at all, would render it abundantly clear that he was perfectly well aware of the bargain he was entering into. In no other way than that does it appear to me to be material.
The contract did not arise with any one, other than the managing committee, at the moment that the yacht owner signed the document, which it was necessary to sign in order to be a competitor. But when the owner of the Satanita on the one hand, and the owner of the Valkyrie on the other, actually came forward and became competitors upon those terms, I think it would be idle to say that there was not then, and thereby, a contract between them, provided always that there is something in the rule which points to a bargain between the owners of the yachts.'
44 The reasoning in Satanita provides support for the cause of action advanced. However, I note that knowledge was a prerequisite in that case and that knowledge has specifically not been pleaded in the present case.
45 The terms 'arrangement' and 'understanding' describe something less binding than a contract, although there must have been a meeting of minds of those who are parties to it and a consensus as to what is to be done and not merely a hope as to what might be done (Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 ('Amcor')). In Amcor (at 359-360), Sackville J observed:
'An arrangement or understanding for the purposes of s 45(2) of the TP Act is apt to describe something less than a binding contract or agreement: Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 5 ALR 465; 24 FLR 286 at 290-1 (Aust Ind Ct, FC) per Smithers J. However, in order for there to be an arrangement or understanding for the purposes of s 45(2), there must be a meeting of the minds of those said to be parties to the arrangement or understanding. There must be a consensus as to what is to be done and not merely a hope as to what might be done or happen: Trade Practices Commission v Email Ltd (1980) 43 FLR 383 at 385 (Lockart J); Ira Berk at FLR 291 per Smithers J. Ordinarily, an arrangement or understanding involves communication between the parties arousing expectations in each that the other will act in a particular way: Email at 395. There is no necessity for an element of mutual commitment between the parties to an arrangement or understanding, although in practice such an arrangement or understanding would ordinarily involve reciprocity of obligation: Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 at 230-1; 116 ALR 643 per Lockhart J.'
46 An arrangement has also been characterised as something 'whereby the parties to it accept mutual rights and obligations' (Re British Slag per Willmer LJ (at 739)). While it may not be necessary to establish mutual obligations, the terms of the Visa Rules could arguably be construed so as to provide for mutual obligations with respect to the TIMF, although it is not suggested that there was any communication between the Acquiring Members.
47 The question is whether it is arguable that the existence and construction of the Membership Agreement and Visa Rules 'convert' a series of vertical agreements entered into by the banks into a contract, arrangement or understanding between the banks.
48 The Visa Rules as set out in paragraph 7 of the statement of claim could be construed as giving rise to obligations that are only mutual as between an Acquiring Member and Visa and only enforceable by Visa. Such a construction and the absence of evidence of some meeting of the minds of the Acquiring Members would lead to a conclusion that there was no contract, arrangement or understanding within s 4D. A meeting of minds may, however, be established by establishing a consensus between the Acquiring Members which in turn may, for example, be inferred from circumstantial evidence, parallel conduct and/or inference (Trade Practices Commission v Email Ltd (1980) 43 FLR 383). While there is difficulty for Spotwire in establishing such a case, it is not unarguable and, in my opinion, Spotwire is entitled to argue such a case based upon the construction of the whole of the Membership Agreements, including the whole of the Visa Rules and such evidence as it chooses to rely upon.
49 It would not be appropriate, in the absence of the Visa Rules to form any final opinion as to their effect. I have accepted, for this notice of motion, that they have in part the effect as pleaded. Similarly, I have accepted that, as pleaded, the Membership Agreements and the Visa Rules applicable to each of those agreements, contain identical terms.
50 There are different considerations for the first Acquiring Member to enter into the Membership Agreement. At the time of entry, it would be difficult if not impossible to establish a contract, arrangement or understanding with other Australian banks who were not already Acquiring Members. Indeed, it was conceded by Mr Gibson that, if the CBA were the first Australian bank to enter into the Members Agreement, s 4D would not apply to that agreement. It is not clear from the pleading, which alleges that the CBA was an Acquiring Member at all material times and that it was the entry into the Membership Agreement that caused the alleged contravention of the TPA, whether the CBA was the first such Australian Acquiring Member. If that were the case, on the basis of the present pleading, the statement of claim should, in my opinion, be struck out. In any event, these allegations are inconsistent and embarrassing and should be repleaded. This seemed to be accepted by Mr Gibson.
51 If the CBA were not the first Australian Acquiring Member, it cannot be said that it is unarguable that entry into the Membership Agreement was within s 4D(1)(a). Much depends on the construction of the Visa Rules and the applicant being able to establish, by evidence and/or by reason of implications arising from the Visa Rules, that the requisite contract, arrangement or understanding existed between the CBA and other Acquiring Members.
52 The pleading as it stands is, in my opinion, deficient and fails to plead material facts and, as I have noted, internally inconsistent. The existence of a contract, arrangement or understanding between the Acquiring Members, arising by reason of express or implied terms of the Membership Agreement is not unarguable. The circumstances in which the requisite conclusion could be reached cannot be said to be closed. It must be said, however, that in circumstances where knowledge, actual or imputed, is not pleaded, the prospects of success are not strong.
53 Accordingly, I am of the view that it is not appropriate to make orders under Order 20 rule 2. This part of the statement of claim is liable to be struck out under Order 11 rule 16. Spotwire should be given leave to replead.