Trade Practices Commission v Tubemakers of Australia Ltd & Anor [1983] FCA 99

WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION

Oo R OD _ E R JUDGE MAKING ORDER H Toohey J. DATE OF ORDER : 20 May 1983 WHERE MADE : Perth THE COURT ORDERS THAT:

1. The first respondent attempted to contravene

The second respondent attempted to contravene s.45(2) (a) of the Act and attempted to induce other steel merchants to contravene s.45(2) (a) of the Act in the manner and on the occasions alleged in the statement of claim.

The third respondent attempted to induce the second respondent to contravene s.45(2) (a)

of the Act in the manner and on the occasions alleged in the statement of claim.

The question of the penalties to be paid by the respondents to the Commonwealth and the

WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION

CONTENTS Page Introduction 1 The Background 3 Tubemakers 5 Steel Supplies 6 The Commercial Context 8 Events of July 1982 11 The ISSCA Meeting 16 Zvents Following the ISSCA Meeting 25

In essence the case against the respondents 1s that they were involved in an attempt to bring about among ISSCA members an arrangement cr understanding *o control discounts. It 1s not tne Commission's case that

an arrangement was made or an understanding reacned,

The terms 'arrangement' and 'understanding' are not defined in the Trade Practices Act. A number of decisions tend to treat them as synonomous, as something less than a binding contract or agreement. Newton v. Federal Commissioner of Taxation (1958)

98 C.L.R. 1 at p.7; Top Performance Motors Pty. Limited v.

Ira Berk (Queensland) .Pty. Limited (1975) ATPR 40-004 at

p.17,116; Trade Practices Commission v. Nicholas Enterprises

Pty. Ltd. (1979) ATPR 40-126 at p.18,342 and Trade Practices Commission v. Email Ltd. (1980) ATPR 40-172 at p.42,370.

Practices Commission (1980) ATPR 40-157 the Full Court of the Federal Court upheld a decision of Fisher J. that there had been an 'understanding' in contravention of provisions of the Trade Practices Act. In doing so Bowen C.J., delivering the judgment of the court, said at p.42,234 :

such an 'understanding' that there be an element of mutual commitment between two or more persons in the sense that each must have accepted an obligation of the other or others. As at present advised, it seems to Me that one could have an understanding between two or more persons restricted to the conduct which one of them will pursue insofar as the other party or parties to the understanding are concerned".

"Por my part I find ut difficult tO envisage circumstances where - there would oe an understanding involving a commitment by one party without some commitment

The arrangement or understanding which it 1s aileged the respondents attempted to bring about was one in which mutual obligations would be assumed, in relation to duscounts to oe offered on the sale of steel products.

Such an arrangement or understanding was one in which there would be communication between those involved, the raising of an expectation each in the mind of the other and the acceptance of mutual obligations, something more than a mere hope as to what might be done.

It 1s true that the particulars pleaded in para. 8 of the statement of claim are in the main of action proposed to be taken unilaterally by Steel Supplies. But that is because the Commission alleges no more than an attempt by Tubemakers and Steel Supplies to contravene s.45(2) (a) of the Act and an attempt to induce others to do so. Whether there was such an attempt still remains to be answered.

I say no more at this point than that the 'arrangement' or 'understanding' pleaded oy the Commission 1s one which

1£ made or reached would answer tne meaning of those expressions

for the pecuniary penalties provided therein, not only a person who has contravened a provision of Part IV, but one who has attempted to do so and one who has induced or attempted to induce another to do so. In its terms the section draws no distinction between these categories of conduct.

The respondents mounted their attack on the allegation of attempt in a carefully formulated submission which I set out verbatim :

"For a statement which 1s relied upon to found an allegation of an attempt to contravene or an attempt to induce another to contravene, it must be a statement of a kind which, first, carries within its terms the potentiality of a basis for an arrangement or an understanding and, second, 1t made with the requisite intention that an arrangement or understanding be in fact arrived at and in the expectation that an arrangement or understanding will result from it".

In the respondents' submission each of those elements is missing in the present case. Before turning to that part of the argument 1t 1s necessary to deal with the respondents' formulation of the orinciples to be applied.

I have no difficulty with the proposition that a statement relied upon to found an allegation of attempt must

carry within its terms the potential for an arrangement

or an understanding. A statement raje quite unsr.ceraily

of intention to do something' or to refrain from doing something, with no suggestion express or implied that otners might act in the same way,is hard to visualise as an

attempt to make an arrangement or arrive at an understanding for the control of discounts on the sale of steel products. But I cannot accept so readily the other characteristics referred to in Mr. Maicolm's formulation.

The question of intention is something to be dealt with later in these reasons. But it is, I think, introducing an unnecessary and unwarranted element into tne notion of attempt to suggest that there must be an expectation, as un the present case, that an arrangement or understanding will result. It may be that counsel was not submitting that expectation was an element additional to that of intention, rather that expectation was an aspect of untention. But in either case its introduction is both unnecessary and confusing. If intention 1s an essential

ingredient of attempt under the Trade Practices Act and the

necessary intention has been demonstrated, why snould there be an expectation that an arrangement or understanding

will result? As Professor Howard points out in Australian

"Conviction of attempt 1s not precluded by reason only of the fact that what D is attempting 1s under tne circumstances impossible, put the meaning of 'impossible' in this context is far Irom clear".

commit an offence though achievement of the offence is

aun the circumstances not possible, I see no reason why

there must be an expectation in the mind of the person

charged that he will achieve his object as well as having the intention to achieve it. If, on the other hand, no intention is necessary for an attempt to contravene s.45(2) of the Trade Practices Act, there can be no justification

for demanding an expectation that the conduct prescribed

Pleading Evidence & Practice 36th Ed. para.4104 1s apposite

" .. the actus reus necessary to constitute an attempt is complete if the orisoner does an act which is a step towards the commission of the specific crime, which is ummediately and not merely remotely connected with the commission of it, and the doing of which cannot reasonably be regarded as having any other purpose than the commission of the specific crime".

Counsel for the respondents conceded that s.45(2) of the Act "contains an absolute prohibition on the conduct in question". That concession was rightly made. Although s.45 1s within Part IV of the Act, so that the

reasoning that lead the Full Court of this court in

Darwin Bakery Pty. tid. v. Sully (1981) ATPR 40-230

to conclude tnat mens rea was not an element in an offence against s.53 of the Act 1S not directly applicable, she prohibitions in Part IV are absolute and not dependent upon establishing mens rea on the part of the offender.

Nevertheless, in the respondents' submission, when s.76 requires the court to be satisfied that there has been an attempt to contravene a provision of Part IV, the principle of the common law that an attempt :involves the formation of an intention to achieve a result is equally applicable. And, runs the argument, when tne person said to have attempted to contravene a provision of Part IV 1s a corporation, the attribution of a mental state to that corporation must be determined in accordance with the principles laid down by the House of Lords in Tesco Supermarkets Ltd. v. Nattrass (1972) AC 153.

There are several steps in this argument and they need to be taken one at a time. In ordinary parlance, to say that a person has attempted to do something means that he has acted with the purpose of bringing about that which he is said to have attempted. Questions may arise as to what precisely must be proved to establish attempt

to commit an offence but the principle that proof of intent

When 1t 1s sought to hold a corporation reenonsibdle for the actions of its officers, the respondents submitted, the appropriate test is not to ask whether the officer was acting in the course of his employment. Rather

the court should apply the principles inherent in the Tesco

case. The respondents acknowledged that the immediate

question for the court in that case was whether the appellant had taken all reasonable precautions and exercised all due

diligence to avoid the commission of an offence under the

Trade Descriptions Act 1968 of England. Nevertheless,

they said, in arriving at a decision on that question

the members of the House of Lords enunciated certain

principles which make clear the basis on which corporations

are held criminally responsible for the acts of their

propositions. A corporation must act through living persons but the person who acts 1s not speaking or acting for the company. He is acting as the company and the mind which directs his acts is the mind of the company. The

question is not one of vicarious liability. In the words

of Viscount Haldane L.C. in Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. (1915) AC 705 at p.713 :

«.. a corporation 1s an abstraction. It has no mind of its own any more than it has a body of its own;

its active and dzrecting will must consequently be sought in the person of somebody who for some purposes

who is really the direcizag mind and wili of the corporation, the very ego and centre of the personality of the corporation".

Some persons in a company (directors and managers for instance) are sufficiently senior to represent the directing mind and will of the company and to control what 1t does. Others may be simply subordinates and will not act as the company unless the directors have delegated some part of their functions of management, giving to the delegate full discretion to act independently of instructions.

While the criminal liability of a corporation may now be regarded as depending upon whether the acts in question were carried out by persons representing the directing mind and will of the company rather than upon tests related to conduct in the course of employment, the important question for tne purpose of these proceedings is whether such a test is appropriate for s.76 of the

Trade Practices Act. It 1s to that question I now turn.

There are a number of sections of the Trade Practices Act that deem something done by a person acting on behalf of a corporation to have been done by the corporation itself. Some of these orovisions have been discussed in

Commissioner of Trade Practices v. Caltex O11 (Australia)

Pty. Ltd. (1974) ATPR 40-000 and Trade Bractices Commission v.

Bata Shoe Co. of Australia Pty. Led. (1980) ATER 40-1é:.

But those decisions do not answer the particular yucstions arising in these: proceedings.

The section on which most argument turned was s.84, in particular sub-s.(2). Section 84 1s within Part VI - Enforcement and Remedies. Sub-section (1) provides that where, in respect of any conduct engaged in by a body corporate to which a provision of Part V - Consumer Protection applies, it 1s necessary to establish the intention of the body corporate, it 1s sufficient to show that a servant or agent of the body corporate by whom the conduct was engaged in had that intention. Sub-section (1) is not directly relevant in the present case which is concerned with conduct to which Part IV applies. But it is of some importance in that, where intention 1s involved, 1t imposes a different test to

Bowen C.J. in Universal Telecasters (Qid.) Ltd. v. Guthrie (1978) ATPR 40-062 at p.17,637 although his Honour was

not obliged to consider the respect in which s.84 (1)

had altered the position. Sub-section (1) does not require that the intention be that of someone possessing the directing mand and will of the corporation. It is 'sufficient' 1f that person oe a servant or agent, though that is not to say that questions of authority may not

However it 1s sub-s.(2) with whicn I am concerned. It is set out early in tnese reasons. In Universal Telecasters Bowen C.J. regarded that sup-section also as altering the position as 1t was discussed in Tesco; but again it was unnecessary for his donour to pursue tne point.

In the present proceedings counsel suggested that the court should look at the law as it stood before the

Trade Practices Act (in the applicant's submission, on

the basis of traditional concepts of agency; in the respondents' submission, having regard to the organic theory) and then consider whether the Trade Practices Act had made any difference to that law.

Such an approach is not always an appropriate way of approaching a novel piece of legislation as is the Trade Practices Act. Such legislation may contain ambiguities, it may leave gaps, it may use expressions that make it appropriate to resort to previous law.

But 1f 1t 1s clear in its terms and is intended to be exclusive, there is no warrant for reading into it notions and concepts borrowed from earlier decisions.

In my view s.84(2) 1s not intended to be an exhaustive statement of corporate responsibility under the Trade Practices Act. It deems certain conduct "to have been

engaged in also by the body corporate" (emphasis added) so that

that conduct by the director, agent, servant or ccner person becomes as well conduct by the body corporate. It does not seek to make a corporation vicarlously responsible;

consistently with the theory expressed in Lennards Carrying

Co. Ltd. and Tesco, conduct of those persons is conduct

of the corporation. I agree with the opinion expressed by Morling J.

in Trade Practices Commission v. Queensland Aggregate

Pty. Ltd. (1982) 44 ALR 391 at p.404 that s.84(2) "is not expressed to take effect to the exclusion of the common law" and that it "appears to disclose a legislative intention to extend, rather than limit, the liability of corporations for the actions of others". I would however read that last comment in the light of what is said in the preceding paragraph of these reasons. Morling J. found it unnecessary to deal with a

submission by the respondents that the phrase "on behalf of a body corporate" in s.84(2) necessarily implies benefit to the body corporate. His Honour commented at p.405:

(1979) ATPR 40-104 at p.18,952 Franki J. thought that the

words may not lend themselves to any general statement and that the answer to a question whether conduct was engaged in on oehalf of a body corporate must depend upon the circumstances of the particular case. He

to apply to a wholly unauthorised statement, made by a bystander

with the implied consent of a servant of a corporation conducting reta1l stores who was employed

It is unnecessary to attempt an exhaustive statement of the meaning and operation of s.84(2) of the Act. However, some propositions may be advanced with reasonable confidence. To treat the phrase as implying benefit to the body corporate is to place an unwarranted restriction on the words used and 1s to ignore the general context of s.84 which otherwise shows an intention to extend the liability of corporations. In Re Ross (1980) 54 ALJR 145 at p.149 Stephen, Mason, Murphy and Aicken JJ. stressed the many possible relationships to which the words "on behalf of" may be applied, saying of the expression :

+». 1t may be used in conjunction with a wide range of relationships, all however 1n some way concerned with the standing of one person as auxiliary to or representative of

And the words "do not necessarily zmply that the transaction was with the actual autnority of the serson represented"

Sub-section (2) of s.84 1s concerned with the conduct of persons representing a body corporate and of others acting at the direction or with the consent or agreement of those persons. It makes that conduct the conduct of the body corporate. The terminology of s.84(2), the reference to conduct by "a director, agent or servant ... or by any other person at the direction or with the consent or agreement ... of a director, agent

or servant ..." is not the terminology of Tesco with its

directing mind and will. It is more the conventional language of agency. In my view s.84(2) is an extension of the principles

expressed in Tesco and, where proceedings are brought

under Part IV of the Trade Practices Act, a corporation may be held liable either in accordance with the principles

in Tesco or by the application of s.84(2). In the latter

case questions of the nature and scope of the authority of the representative will arise. The answers will depend upon the particular circumstances. And this 1s so although proceedings under Part IV are not criminal proceedings. Counsel for the respondents submitted that where intention is an ingredient of conduct, said to be in contravention of the Trade Practices Act, s.84(2) has nothing to say. Counsel contrasted that sub-section with sub-s.(1) which deals expressly with the need to

establish the intention of a body corporate in relation

to Part V of the Act and in those circumstances ..1.cs

1t 'sufficient' to show that a servant or agent of the body corporate had the relevant intention. Sub-section (2) speaks only of 'conduct'.

Section 4(2) deals with various expressions used in the Act. Paragraph (a) reads a reference to engaging in conduct as a reference to

or the requiring of the giving : of, or the giving of, a

Counsel for the Commission argued that intention is an aspect of conduct to which sub-s.(2) 1s applicable, notwithstanding the specific reference to intention in sub-s. (1).

There 1s some force in this argument but it fails to explain the presence of sub<s.({1) and it gives a wider Meaning to the notion of conduct than the definition in s.4 allows. In my opinion sub-s.(2) 1s not concerned with a state of mind such as intention. Where that 1s a necessary ingredient of the conduct alleged, the responsibility of a pody corporate under the Act (apart

of course from proceedings to which Part V relates) must

be determined in accordance with common law principles.

not attract criminal liability, 1t does involve serious pecuniary penalties. In those circumstances

it 1s appropriate to apply the test inherent in the

If Mr. Bint's conduct evidenced an intention to bring about a contravention of s.45 of the Trade Practices Act, that was conduct for which Tubemakers must accept responsibility. That conclusion does not depend upon s.84(2) of the Act. If I am wrong in the view I have taken of the place of intention in that sub-section, the same conclusion is reached by its application.

Mr. Bint was regional manager, western merchandising division, of Tubemakers. Tubemakers' own organization chart places him within 'Top .Management'. The company's directory deals with the merchandising divisions in these words :

operations in its region". Thereafter Mr. Bint 1s shown as regional manager of the western merchandising division. True he was supject to the direction of Mr. Daniels but, subject to that

direction, he was responsible for the operations of the

Exhibit 21, a draft position summary for the position of regional manager, western merchandising division, was accepted by the respondents as a fair description of the position. It descrines the basic purpose of the position in these terms :

growth". The emphasis in the document is on profitable development of divisional activities and the effective achtevement of operating targets.

Mr. Griggs agreed that Tubemakers' price lists in the various states were fixed by the regional managers 1n conjunction with Mr. Daniels. Mr. Daniels said :

"I would regard it as my duty and right to agree on oricing policy frameworks". But in regard to discounting policy, he acknowledged "The manager would have relative freedom to act in the market- place to quote discounts that would win him business".

There was no suggestion in the evidence of Mr. Griggs or Mr. Daniels that the memorandum of 20 July 1982 covered matters outside the scope of Mr. Bint's authority. I am satisfied that in delivering the memorandum to Mr. Achterberg, in speaking to aim on 27 and 28 July and in speaking to the meeting on 239 July, Mr. Bint was for ail

relevant purposes tne directing mind and will of Tupemakers.

As well he was a servant of that company ...<, un tne events that took place, he was acting with the ostensible authority of Tubemakers.

Tubemakers is responsible for Mr. Achterberg's conduct, only in terms of s.84(2). Achterberg's actions at the meeting of 29 July 1982 were at the direction of Bint or at any rate with his consent. That consent was in my Opinion express; if not 1t was certainly implied. But Achterberg was not the directing mind and will of Tubemakers and in so far as intention is an essential element of what is alleged against that company, it 1s not responsible for Achterberg.

If at the meeting of 29 July 1982 the conduct of Mr. Achterberg evidenced an intention to bring about a contravention of s.45 of the Trade Practices Act, that was conduct for which Steel Supplies is responsible.

It was Achterberg who relevantly was the directing mind and will of Steel Supplies. Asked about the autonomy of that company's manager, Mr. Griggs replied :

"We try and give our managers ».. reasonable autonomy ... they are responsible for the running of the business ...

I would see that they would be responsible for setting the price levels, discounts - if I can use it that way -

to be used in the day to day orders as they come in".

In cross-examination Mr. Griggs agréed that Steel Supplies' pricing was in reality determined by Mr. Achterberg in consultation with his managers, and 1t was those managers who determined discounts subject to Achterberg's approval.

Although Mr. Bint had an overriding control of decisions made by Mr. Achterberg on matters of discounting, he was not and did not purport to be the directing mind and will of Steel Supplies at the meeting of 29 July. He was there in his capacity as regional manager of Tubemakers.

Whatever construction is placed on s.84(2), iat will not operate to make Steel Supplies responsible for Bint. It cannot be said that he was a person acting at the direction, or with the consent of Achterberg. It was Bint who initiated the events that took place and, in speaking at the meeting of 29 July, he did so on behalf of Tubemakers. He was not speaking at the direction of Achterberg nor in any relevant sense with his consent.

Counsel for the respondents sought to draw a distinction between the faxing of dascounts to be allowed on a day to day basis in transactions between Steel Supplies and individual purchasers and the negotiation of an agreement with other suppliers which would limit or control the amount of discount to be

allowed. In drawing that distinction and arguing that

the latter was outside the scope of authority, cennsel relied upon an implied term in Achterberg's contract of empioyment "... that he should not engage in any unlawful activity on the part of the company nor should he act on any instruction believed by him to be unlawful which was given to him". In my view the distinction cannot be maintained. It may be assumed to be an implied term in every contact of employment that the servant or agent will not act unlawfully. And that will have consequences between employer and employee. Yet unlawful conduct has not been held inevitably to be outside the scope of employment. On the contrary, if a servant or agent has authority to enter into transactions of the sort in question, it is no answer for a principal to say that in the particular

circumstances the servant or agent acted wrongfully.

Australian Brokerage Ltd. v. Australia and New Zealand

Banking Corporation Lid. (1934) 52 CLR 430 at pp.451-452. When the organic theory of corporate responsibility is to be applied there is, I think, even less room for the operation of the distinction.

The respondents submitted that s.76 of the Act is ancillary to s.45 and should be read, so far as an

undividual is concerned, as limited to the extended

operation of the Act given by s.6(2). Counsel suomitted that a contravention of s.45 may only be committed hy a corporation and that tnere was nc attempt by Tunemakers or Steel Supplies to contravene the Act.

The case against Mr. Bint is that he attempted to unduce Steel Supplies to contravene s.45(2) (a), conduct which 1f substantiated would bring ham within para.(d) of s.76(1). There was no attack upon the constitutional validity of s.76 so that the only question, so far as Mr. Bint 1S concerned, 1s wnether the allegation was sustained.

I accept, as already indicated, that there was no attempt to contravene s.45 unless those involved nad the relevant intention, that is that they acted with the purpose of bringing about a result - in this case an arrangement or understanding that had the purpose or would have or be likely to have the effect of substantially lessening competition. The respondents did not contend that an arrangement or understanding whereby the discounts to be offered by steel merchants would pe controlled was not a contravention of s.45(2}).

The respondents argued that the conduct of Achterberg went no further tnan an unilateral statement of what Steel Supplies intended to do. In their submission the publication of a price list oy Steel Supplies, even

with the addition of a statement of tne dzscounts "he

company was prepared to allow, coulc not be seen us an attempt to arrive at an arrangement or understanding about prices. They agreed that objective circumstances from which inferences might be drawn could properly be taken into account but said this must be weighed against the subjective intention of the persons whose conduct was the subject of inquiry.

With much of this submission there can be no argument. But it 1s by no means the entire picture. There can be no doubt that the meeting of 29 July 1982 was called for a special purpose. It was called on the initiaative of Mr. Bant in a situation where competition between steel merchants, in partacular the so called aggressive conduct of Steel Supplies, was a matter of concern to the merchants. While neither Mr. Daniels nor Mr. Griggs knew in advance of the meeting, I think that Mr. Griggs' remarks to Mr. Bint, relayed to Mr. Achterberg, were the catalyst for what happened thereafter.

Mr. Bint's memorandum to Mr. Achterberg emphasised that profitability lay in the improvement of margins and that margins had' fallen away because of competition. It was not a document intended only for consumption by Achterberg. At the meeting between Bint and Achterberg on 27 July and at the meeting between Bint, Achterberg and

Symes on 28 July. Bint stressed that steps. taken by

Steel Supplies were likely to be followed by ot..-- merchants. And it 1s clear that these statements

were made in the context that a meeting of merchants

was to take place on 29 July. The conclusion is, I think, unevitable that Mr. Bint spoke in terms of what the meeting of 29 July was to be told. That is confirmed by what he said at that meeting, including the statement recalled by Mr. Towns that agreement should be reached

on discounts because it was impossible to operate at current orices. The letter Mr. Bint wrote to Mr. Daniels on 13 September 1982 lends support to the proposition that Bint was seeking agreement on discounts even 1f later realised that he may have gone too far.

I am satisfied that by his conduct Mr. Bint attempted to brang about an arrangement or understanding the purpose or likely effect of which was substantially to lessen competition. That was conduct for which Tubemakers and Mr. Bint must accept responsibility.

I am also satisfied that by nis memorandum to Mr. Achterberg, and the discussions he had witn him thereafter, Mr.Bint attempted to induce Steel Supplies through Mr. Achterberg to bring about such an arrangement

or understanding. That 1s conduct for which Tubemakers

I am further satisfied that by his statements at the meeting of 29 July Mr. Bint attempted to induce the merchants present to reach an understanding or make an arrangement that discounts would be controlled. That 1s conduct for which he and Tubemakers must accept responsibility.

As to Mr. Achterberg, whatever doubts he had about the likelihood of the other merchants acting on his statements at the meeting of 29 July, ne did not make those statements as "full of sound and fury, signifying nothing". He was, in my view, seeking to give effect to the need for agreement stressed by Mr. Bint at the earlier meetings. He may indeed have gone further than Mr. Bint had expected him to go. And undoubtedly he had misgivings immediately after the meeting. But I am satisfied that in speaking as he did he attempted to bring about an understanding or agreement whereby discounts would be controlled and that he attempted to induce other steel merchants to do likewise. That was conduct for which Steel Supplies must accept responsibility.

1. That the first respondent attempted to contravene

s.45(2) (a) of tne Act and attempted to induce otner

steel merchants co contravene s.45(2) (a) of the Act

2. That the second respondent attempted to contravene s.45(2) (a) of the Act and attempted to induce other steel merchants to contravene s.45(2) (a) of the Act as alleged in the statement of claim.

3. That the third respondent attempted to induce the second respondent to contravene s.45(2) (a) of the Act as alleged in the statement of claim.

The question of the penalties to be paid by the respondents

to the Commonwealth and the question of other relief sought

by the applicant will be adjourned to a date to be fixed.

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