TRADE PRACTICES COMMISSION v NICHOLAS ENTERPRISES PTY. LTD.

TRADE PRACTICES COMMISSION v NICHOLAS ENTERPRISES PTY. LTD. SATURNO HOLDINGS PTY. LIMITED REX FREEHOLD PTY. LIMITED MORPHETT ARMS HOTEL PTY. LIMITED LION BUS CO. PTy. LIMITED MERIT NOMINEES PTY. LIMITED

SOUTH AUSTRALIA DISTRICT REGISTRY ) No. G3 of 1978 ) )

SATURNO HOLDINGS PTY. LIMITED Second Defendant REX FREEHOLD PTY. LIMITED Third Defendant

MORPHETT ARMS HOTEL PTY. LIMITED Fourth Defendant LION BUS CO. PTY. LIMITED Fifth Defendant

GENERAL DEVELOPMENT CORPORATION PTY. Seventh Defendant LIMITED

This matter was called on for argument on 5 November 1979 on the two matters of pecuniary penalties and restraining orders

and on 6 November 1979 for argument on the question of costs.

Counsel for the plaintiff sought an injunction against the Royal Oak and the Morphett Arms restraining them from contravening 8.45 of the Trade Practices Act 1974 ("The Act") in the manner which has been the subject of these proceedings. He put forward

a draft form of restraining order which has been considered by

At the commencement of the hearing on 5 November 1979

junior counsel for the Royal Oak sought leave to withdraw from

the proceedings on the ground that his instructions and those

of his leader and instructing solicitors had been terminated.

The granting of leave was not opposed by counsel for the plaintiff and he withdrew. In consequence I have not heard any further evidence from the Royal Oak on the matter of pecuniary penalty

nor had any submissions on the matters of restraining ozders,

Counsel for the Morphett Arms submitted that at was not appropriate to grant an injunction but he had no instructions to proffer an undertaking in lieu of a restraining order. In my opinion, after taking inte account his submissions, it 18s proper to grant an injunction against both the Royal Oak and the Morphett Arms. I consider appropriate the form of injunction put forward by the plaintiff, wath some manor amendments which

On the question of pecuniary penalties, I am directed by 3.76 of the Act to determine the appropriate amount in respect of each act or omission after having regard to all relevant matters including certain speciiied matters. In respect of each of them, the Royal Oak and the Morphett Arms, I have found two contraventions, namely arriving at the relevant understanding

and giving effect to that understanding. However, the plaintiff

did not seek the award of a separate penalty in respect of each

of these contraventions, and 1n my opinion this is a proper attitude in that the contraventions arise out of the same

conduct. In this case s.76(3) of the Act has relevance.

The specific matters to which my attention is directed by 8.76 can be paraphrased as follows: (a) the nature and extent of the contravening act and the loss or damage in consequence of that act. (b) the circumstances in which the act took place. (c) whether the person contravening has been found to have engaged in any similar conduct. In respect of matters (a) and (b), I have before me the very considerable eviden @ in the proceedings, together with additional evidence tendered by the Morphett Arms. As to (c) there 1s no suggestion that either of the defendants has been found to have

Counsel for the Morphett Arms put further evidence before me for the purpose of establishing the unprofitability of selling packaged beer at 15 to the dozen and the relatively small profit margin on a sale of 14 to the dozen. Two witnesses were put forward on this point, namely Mr. Palmer, to whose activities extensive reference was made in the main proceedings, and Mr. Calman, an experienced retailer of liquor. I accept their evidence but I am not persuaded that, in the words of counsel, "no very

Submissions, based both on the evidence in the proceedings and

the additional evidence, were made on behalf of the Morphett Arms

on the appropriate penalty. Reliance was placed on the fact that

1t was a suburban hotel and that it could not be said to have had

a substantial proportion of the market. It was contended that the circumstances of the contravention establish that its conduct was not dictated by predatory motivations or by a desire to make an unfair profit at the expense of the public. Moreover I was reminded that the Morphett Arms did not engage in the practice of advertising and in particular in advertising itself as a discounter of

packaged beer. Taking into account these matters and the minimal profit margin, 1t was submitted that the appropriate penalty was

at the lower end of the scale. Support for this contention was sought from the fact that at the time when the contravention occurr- ed a number of other hotels reduced their discount to the same

In respect of the Royal Oak I do not have the benefit of any evidence or submissions directed specifically to the matter of penalty. In my opinion, crucial matters here are that the Royal Oak was "the market leader" and the largest discounter, which fact was extensively advertised. It took the initiative in propounding the relevant understanding and it had, as the largest discounter, the most to gain from an adoption by others of that understanding. It was obviously acting very much in its own anterest in taking that initiative and had much more to gain from the carrying into effect of the understanding than had the Morphett

Against the matters relied upon by counsel for the Morphett

Arms I have to consider the obvious seriousness with which the

legislature views contraventions of the Act in that 1t has imposed a maximum penalty on corporations of $250,000. The penalty which

I impose must be such as to deter other persons, corporate or otherwise, 1n the commercial world from entering into arrangements or understandings which lessen competition, though the fact that these proceedings have been extensively publicized in the daily press will doubtless assist in deterring others from infringing

the Act. Additionally, I must bear in mind that a director of each of the defendants attempted to persuade other retailers to join

in the understanding and thereby to preserve the competitive

Although I have decided that a significant penalty 1s appropriate, I am inclined to accept the submission of counsel for the Morphett Arms that the contraventions warrant penalties at the lower end of the scale. Evidence was before the court to the effect that in the relevant market there were at the time 526 liquor outlets, of varying sizes. The relevant understanding was proved to have existed between two of them, one a market leader and the other a suburban hotel with basically a local clientele. It 1s difficult to determine what effect the understanding had on the market generally, particularly in the light of the news item in the Advertiser newspaper. It is easy to envisage other

understandings which would be much more pernicious in character

In my opinion an appropriate pecuniary penalty in the case of the Morphett Arms is $5,000 and in the case of the Royal Oak

The question of the appropriate orders for costs raises in the circumstances of the matter a number of difficulties. These difficulties are accentuated and the impact of my orders becomes more apparent when it is appreciated that the hearing of the action extended over some 23 sitting days. Counsel for all parties other than the Royal Oak and the Norwood made lengthy submissicns on what each contended should be the appropriate orders, and there was little common ground other than in respect of the costs of the Norwood. Counsel for the plaintiff conceded that there was no answer to the submission of the Norwood that it should have its costs of the proceedings. This must be so in view of the latter's contention at the beginning of the hearing that there should be a separate trial of the plaintiff's claim to the effect that it reached an understanding with the Royal Oak at the Norwood lunch

The conflicting claims can be summarised as follows. The plaintiff concedes the raght of the Norwood to costs, claims costs against the unsuccessful defendant, the Royal Oak, claims costs against the successful defendants the Old Lion or alternat- - ively claims that there should in respect of these defendants be no order as to costs, concedes its obligation to pay costs to the Rex but limited to one half of 1ts costs, and claims costs against the Morphett Arms. In respect of its claim to costs against the Royal Oak and the Morphett Arms, the plaintiff's contention is that 1t should have its costs of the proceedings against these two defendants, which defendants should be jointly and severally liable for the costs awarded against them, The plaintiff does not claim against the unsuccessful defendants the

costs awarded against 1t in favour of the successful defendants

or that the costs of the successful defendants should be paid by those who were unsuccessful and thus I am not asked to make

orders commonly described as "Bullock" or "Sanderson" orders.

As to the defendants, I have no submission on costs from the defendant the Royal Oak and a conceded claim for costs by the Norwood. The Old Lion defendants contend that as successful defendants they should not be ordered to pay the costs of the unsuccessful plaintiff but rather that the latter should pay their full costs. The Morphett Arms contention was that it should only be ordered to pay a specified portion of the plaintiff's costs, or alternatively, if it and the Royal Oak had to bear the whole or a substantial part of the plaintiff's costs, its obligation should be limited to one half of such costs 1.e. a separate obligation for half rather than a joint obligation in respect of the whole. Counsel for the Morphett Arms suggested that the liability of the Morphett Arms to pay costs should have set off against it the Rex's entitlement to costs, and that in any event I should have regard to the amount of time involved in hearing

There are no provisions in the Act which touch upon the question of costs, and thus s.43 of the Federal Court of Australia Act has application. It 1s in the following terms:

"(1) The court or a judge has jurisdiction to award

costs 1n all proceedings before the court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.

(2) Except as provided by any other Act, the award of costs 1S 1n the discretion of the court of judge."

In these terms s.43 18 in pari materia with s.40 of the Supreme Court Act and Order 65 rule 1 of the Rules of the Supreme Court 1n each instance of South Australia. Bray C.J., dealt with this unfettered discretion in Cretazzo v Lombardi (1975) 13 S.A.S.R. 4 at p.1l, a decision of the Full Court of the Supreme Court of South Australia. He also in the passage which I cite referred to two other matters which are relevant to the issues before me, namely the right to order a successful party to pay its unsuccessful opponent's costs and the right to deprive a successful party of his costs on particular issues. The relevant passage 1S as follows:

"Order 65, rule 1 provides generally that all costs shall

be in the discretion of the court or judge, subject to a proviso irrelevant for the present purpose. Time and again attempts have been made to fetter that general discretion by the imposition of judge-made rules. Time and again those fetters have been released by appellate courts. I think the guiding principle still stands as it left the House of Lords in the famous case of Donald Campbell & Co

v Pollak 927) A.C.732, that the general discretion 1s absolute and unfettered, except that 1t must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation

I should mention, however, two more particular questions which have been specificaliy dealt with.

The first 1s that there was once an idea that a successful party, though he might be deprived of his costs, could

not be ordered to pay his opponent's costs. As a matter

of fact, the so-called rule never applied to successful plaintiffs. There was a time, however, when it did apply to wholly successful defendants: Dicks v Yates (1881) 18 Ch. D.76. %It has now been held, however, that the rule when it existed was founded on the practice of the old Court of Chancery and that its existence disappeared in England after the enactment of s.5 of the Suprene Court of Judicature Act 1890: Knight v Clifton [197] ch.700 per Russell L.J.

at pp. 709-710. The South Australian counterpart of that section is s.40 of the Suyreme Court Act 1935-1974, which

for the present purpose 1S in indistinguishable terms and which reads:

'Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to

eetgrrane by whom and to what extent such costs are to be 1a.

It follows, therefore, that there 1s now jurisdiction to order a successful party, even a wholly successful party

and whether plaintiff or defendant, to pay his opponent's costs 1n part or in whole. Of course, it by no means

follows that it would be a judicial exercise of the discretion to do so and it may well be that in many cases

it would not, since there must be some reason for departing from the settled practice whereby the successful party receives his costs from his opponent; see Donald Campbell

& Co v Pollak [21927] A.c.732, per Viscount Cave L-C, at p,812.

The next matter 1s this. A successful party who has failed on certain issues may well not only be deprived of his own costs of those issues, but ordered in addition to pay his opponent's costs of them, and in this context 'issue' does not mean a precise issue in the technical pleading sense, but any disputed question of fact or, in my view, of law: Foster v Farquhar 1893) 1 Q.B.564, per Bowen L.J. as he then was, at p.570. In fact in that case the plaintiff, who succeeded to a substantial extent, was deprived of has costs and ordered to pay the defendant's costs in relation tc certain specific disputed items of special damage on which he failed. Moreover it has been held by the House of Lords that the support of an extravagant claim by fraudulent acts or evidence may be good cause for depriving a successful plaintiff of his costs: Huxley v West London Extension Railway Company (1889) 14 App.cas 26."

The first matter for consideration 1S the plaintiff's claim to have its costs or a portion thereof paid by the successful defendants the Old Lion. Counsel based this submission on the untruthful answers of Tremaine to the s.155 notice which, he said, made reasonable the bringing of proceedings against the Old Lion. Moreover he contended that both this matter and the contesting by the Old Lion of issues upon which it failed unduly protracted the proceedings. In these circumstances, he argued, the unsuccessful plaintiff was entitled to the whole or portion of its costs from the successful Cld Lion defendants. He was however unable to draw to my attention any authority in support

In my opinion, although I have, 1n accordance with the

reasoning of Bray C.J., in Cretazzo v Lombardi supra, jurisdiction

in my discretion to award such costs, it 18 a discretion which I should exercise only in the most exceptional circumstances. I refer to the discussion on the point in the reasons of Russell L.J. and Sachs L.J., 1n Knight v Clifton f97]) 2 All E.R. 378 at pp.386 and 390 respectively. In my opinion those of the circumstances of the litigation which here might be considered

as exceptional (and which I discuss in greater detail hereafter) may have relevance to the claim of the Old Lion to the whole of its costs, but they are not such as to justify awarding costs in

The next contest arises in consequence of the Old Lion's claim against the plaintiff for the whole of its costs and the plaintiff's contention that thosedefendants should receive either

no costs or merely a relatively small portion thereof.

Counsel for the plaintiff relied on the decision of Lord Justice Atkin (as he then was) in Ritter v Godfrey f1920] 2 K.B.47 as establishing the three grounds upon which 1t was appropriate to deny a successful defendant the whole or part of his costs.

I refer in particular to the following passage in the reasons of that judge at p.60 of Ritter v Godfrey supra.

"In the case of a wholly successful defendant, in my opinion,

the judge must give the defendant his costs unless there 1s evidence that the defendant has

(2) has done something ccnnected with the institution or conduct of the suit calculated to occasion unnecessary litigation or expense, or

(3) has done some wrongful act in the course of the transaction of which the plaintiff complains."

I would also refer to Forbes v Samuel i913) 3 K.B.706

especially at p.739,Sutcliffe v Smith (1886) 2 T.L.R.881, Jennings

v Zilahi-Kiss and Others (1972) 2 S.A.S.R. 493 (a decision of Bray C.J.) and the ultimate paragraph of the above extract frem the reasons of Bray C.J., in Cretazzo v Lombardi supra. The general rule as stated by Lord Justice Atkin was applied by the

Supreme Court of New South Wales in Sunday Times Newspaper Co

Ltd. v McIntosh (1933) 33 S.R. N.S.W. 371 at p.377.

The circumstances connected with the litigation upon which the plaintiff relies and which in my view are relevant to the exercise of my discretion in respect of the 01d Lion defendants can be referred to briefly as they are recounted at length in my earlier reasons. Prior to the commencement of proceedings but in relation to the subject matter thereof the defendant's employee Tremaine made an untruthful statement in answering a notace under s.155. He acknowledged the untruth in the witness box but gave an explanation of the untruth and gave a further answer neither of which explanation or further answer I accepted. Sutcliffe v Smith supra, 1s authority for the proposition that where a defendant makes a mis-statement 1n circumstances where he 1S under an obligation to be truthful, which mis~statement renders an action against him reasonable, there 1s good cause to deprive him of his costs. In my opinion, the mis-statement was not so significant as to warrant depriving the Old Lion entirely of its costs, for the plaintiff did not rely exclusively on the statement as justifying proceedings. However, the mis-statement and the unsatisfactory nature of the witness's evidence are very relevant to the proportion of the Old Lion's costs that I should

Forbes v Samuel supra, and Gold v Patman and Fotheringham Ltd

(2958) 2 All E.R. 497 are authorities for the proposition that

1£ a considerable portion of the trial is taken up in determining issues upon which a defendant fails, 1t 1s a proper exercise of discretion to reduce the costs allowed that defendant. Bray C.J. in Cretazzov Lombardi supra, at p.14 was of opinion that it was proper to split costs in accordance with the success of the parties on various disputed questions of fact and law, and this view was shared on the facts of that case by Zelling and Jacobs JJ., the other members of the Full Court. In Jennings v Zilah- Kiss and Others supra, Bray C.J. allowed a successful defendant portion only of its costs. In this matter the Old Lion raised, perfectly properly, a substantial number of issues upon which it farled. I refer in particular, but not necessarily exhaustively, to the 1ssues of no case to answer, the effectiveness of service of the original s.155 notice and whether it was bound by the response of Tremaine (which latter iSsues were agitated both at the time of the submission of no case to answer and in final addresses). These issues, although perfectly properly raised, were issues upon which the Old Lion failed and they did protract

In my opinion, after taking into account the matters referred to in the preceding two paragraphs, 1t 1s appropriate that the plaintiff be ordered to pay to the Old Lion one third of its taxed

The Rex along with the other defendants submitted no case to answer and I found in favour of the Rex. That defendant is

obviously entitled to its costs against the plaintiff. Notwith-

standing the submission of its counsel, who was also counsel

for the Morphett Arms, that I consider these two defendants together and in effect set off the Rex's entitlement against

the Morphett Arms' obligation, in my view I should respect their separate corporate existence. However, in determining whether the Rex 1s entitled to the whole or portion only of its costs, the fact that it was represented by the same solicitors and the same counsel as the Morphett Arms is important. Counsel for the plaintiff supported his submission that the Rex should receive only one half of its costs by reference to Beaumont v Senior & Buil [i903] 1 K.B. 282 and Ellingsen v Det Skandinaviske Compani and Others fi019) 2 K.B. 567. In my opinion, to apply the reasoning of these authorities 1s to achieve a just result, and

the order should be that the Rex receive one half of its costs.

Further difficulties arise in respect of the claim for costs by the plaintiff against the Royal Oak and the Morphett Arms, Counsel for the plaintiff contended that his client should have its full costs against the two defendants, There was no submission by the Royal Oak. Counsel for the Morphett Arms firstly argued that the costs of the plaintiff should be less than its full costs being reduced to reflect the time taken in presenting its unsuccessful claim against the Norwood arising out of the Norwood lunch. Reference was also made to the plaintiff's unsuccessful submission that as a matter of law mutual obligations were not essential to an understanding. In my opinion, neither of these matters warrants any reduction in the plaintiff's costs. The greater part of the evidence in respect of the Norwood lunch had, because it involved the activities of Farrah, relevance to the

ultimate finding of an understanding, a relevance of the same

nature as Palmer's activities in visiting Richards and Ritchie. As to the plaintiff's unsuccessful submission on the point of law, in the circumstance that it was necessary to consider exhaustively in law the scope of the concept of an understanding, it did not take such an amount of time as to warrant reducing the

However, counsel also argued that the proportion of the plaintiff's costs which his client and the Royal Oak, either jointly or separately, should pay should be reduced to reflect the time taken and costs incurred by the joining of the Old Lion. With this submission I am prepared to agree. Where a successful plaintiff's costs are increased by the joinder of other defendants and the allegations against them, the unsuccessful defendants should not have to shoulder the increased burden; Mt.Gambier Co-operative Milling Society Ltd v Williams [192i] s.A.s.R. 185, This principle is not applicable in this case as far as the case against the Norwood is concerned, for the reasons set out abceve. But 1t is applicable in this instance because the case against the O1d@ Lion can be seen as disengaged at least to a substantial extent from the case against the Royal Oak and the Morphett Arms. In the circumstances I think the proportion of the plaintiff's costs which the Royal Oak and the Morphett Arms bear should be

Counsel for the Morphett Arms' next contention, namely that there should be separate orders for the plaintiff's costs doubtless was founded upon his concern that the absence of the

Royal Oak and its counsel indicated that for some reason that

defendant might not be in a position to meet its share of the plaintiff's costs. There was no evidence to support his concern, but 1t was understandable as this was a possible explanation

of the withdrawal of instructions of the Royal Oak's counsel

and solicitors. The Morphett Arms' contention was that a designated proportion of the plaintiff's costs should be ordered to be paid by each of them, the Morphett Arms and the Royal Oak; an other words that each be severally liable for a specified portion of the plaintiff's costs as ordered, and not jointly liable to the plaintiff for the whole of those costs. During argument I was attracted to what appeared at that stage to be the justice of this argument. However counsel was not able to refer to authority to support his submission nor to any reported case in which such an order was made. My researches have been equally unsuccessful. Upon more mature consideration of the sub» m2zssion I am of opinion that I should not accept it. The plaintiff as the successful party 1s prima facie entitled by way of indemnity to its costs of the action, and 1f one of the unsuccessful defendants is unable or unwilling to meet its share of the obligation, the misfortune should be that of its "partner in crime" and not of the plaintiff. In so far as I have been able to find any authority, it 1s in favour of the contrary proposition to that propounded by counsel on behalf of the

Morphett Arms. I refer to Dansk Rekylriffel Syndikat Aktieselskab v Snell {1908} 2 Ch.127 at p.138 where an order was made against

defendants jointly 1n circumstances where one became bankrupt during the proceedings. In my opinion the conventional order

that the two defendants pay the plaintiff's costs should stand.

I have considered the further proposition that as between itself and the Royal Oak, the Morphett Arms' liability to contribu: should be for a lesser proportion that the Royal Oak. A basis for this submission was a review of the actual amount of time that the court was engaged 1n considering exclusively the Morphett Arms' case and the fact that by arrangement its counsel was not present on the last two days of hearing of counsel's addresses. However weight must be attached to the fact that a number of submissions, lengthy and otherwise, of other counsel were adopted by counsel for the Morphett Arms. Moreover even though it was not represented before the court on the final days of the hearing it was vitally interested 1n the arguments, particularly those of counsel for the Royal Oak. If his submissions had been accepted, not only would his client have succeeded, but the plaintiff's claim against the Morphett Arms would perforce have had to be dismissed. Finally, on the matter of calculating the amount of time the court was concerned 1n exclusive consideration of the Morphett Arms' case, at must be borne in mind that, at least by virtue of the fact that it called no witnesses, less time was spent 1n considering

It 1S my opinion that the defendants the Royal Oak and the Morphett Arms should pay to the plaintiff three quarters of its costs of the proceedings, the same to be taxed if not agreed. The plaintiff for its part should pay to the defendant Norwood its costs, to the defendant the Rex one half of its costs, and to the Old Lion defendants one third of their costs of the

proceedings, in each instance the costs to be taxed 1f not

On 21 December 1978 I made an order dismissing the submissions of all defendants other than the Rex of no case to answer, Thereafter the Rex remained before the court merely for the purpose of making submissions at the conclusion of the proceedings in respect of 1ts costs. It 1S appropriate that I now formally dismiss the claim of the plaintiff against the

1. The plaintiff's clazms against the defendant Saturno Holdings Pty. Limited, the defendant Rex Freehold Pty. Limited and the defendants Lion Bus Co. Pty. Limited, Merit Nominees Pty, Ltd., General Development Corporation Pty. Limited, and Agett Nominees Pty. Limited are dismissed,

2. That judgment be entered in favour of the plaintiff in respect of its claim that the defendants Nicholas Enterprises Pty. Limited and Morphett Arms Hotel Pty. Limited have each contravened s.45 (2)(a)({11) and s.45 (2)(b) (121) of the Trade Practices Act 1974,

3. That the defendant Nicholas Enterprises Pty. Limited and the defendant Morphett Arms Hotel Pty. Limited and each of them be restrained from making a contract or arrangement or arriving at an understanding with each other or any other retaller of 740 millilitre bottles of beer which has the purpose or has or is likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of the price for or a discount allowance rebate or credit in relation to the sale of

That the defendant Nicholas Enterprises Pty. Limited pay a pecuniary penalty of $8,000 to the Commonwealth.

That the defendant Morphett Arms Pty. Limited pay a pecuniary penalty of $5,000 to the Commonwealth.

That each of the lastmentioned two defendants pay the amount of its pecuniary penalty to the District Registrar of this court within 21 days of this date.

That the plaintiff pay to the defendant Saturno Holdings Pty. Limited its taxed costs of these proceedings.

That the plaintiff pay to the defendant Rex Freehold Pty. Limited one half of its taxed costs of these proceedings. That the plaintiff pay to the defendants Lion Bus Co. Pty. Limited, Merit Nominees Pty. Limited, General Development Corporation Pty. Limited and Agett Nominees Pty. Lamited one third of their taxed costs of these proceedings.

That the defendants Nicholas Enterprises Pty. Limited

and Morphett Arms Hotel Pty. Limited pay to the plaintiff

three quarters of its taxed costs of these proceedings.

That there be liberty to all parties to apply to such extent

as 1S necessary to work out the tezms of these orders.