Wright Rubber Products Pty Ltd v Bayer AG

Federal Court of Australia|2008-10-10|Before: Tracey J

REASONS FOR JUDGMENT 1 There are before the Court notices of motion, filed by the second, third and fifth respondents, seeking orders that all or part of the applicant's statement of claim be struck out. In the alternative, the notices seek orders that the applicant provide further particulars of the statement of claim. It will be convenient to refer to the third ("Chemtura") and fifth ("Chemtura Australia") respondents collectively as "the Chemtura respondents" and the second respondent as "Bayer Australia". The first, third and fourth respondents will, at various points in these reasons, be identified, collectively, as "the foreign respondents". 2 The proceeding is brought by the applicant as a representative party on behalf of group members who were Australian purchasers of "rubber chemicals" or "rubber products". It is alleged that they were forced to pay higher prices for these products because of a global cartel arrangement to which the foreign respondents were party together with other manufacturers and suppliers of rubber chemicals. The cartel arrangement was said to have been entered into in or about July 1995. 3 The grounds relied on by the respondents in support of their strike out applications fall into two broad categories. They are that the applicant has: · Failed to identify with sufficient precision the group members whom it wishes to represent; and · Failed to plead sufficient material facts to establish a cause of action.

GROUP DEFINITION 8 A critical element of the pleading in any action brought under Part IVA of the Federal Court of Australia Act 1976 (Cth) ("the FCA Act") is the identification of the group members to whom the proceeding relates. In paragraph 4 of the statement of claim the applicant identifies the group members as follows: "The group members to whom this proceeding relates … are all those persons who purchased Rubber Chemicals or products containing Rubber Chemicals ("Rubber Products") during the Cartel Period and who: (a) were at all relevant times ordinarily resident in or carrying on business in Australia; (b) paid at least five thousand Australian dollars (AUD$5,000.00) in the Cartel Period for Rubber Chemicals or Rubber Products; (c) are not Justices or Registrars of the High Court of Australia or the Federal Court of australia; and (d) are not a Respondent in this proceeding or an entity related to such a person within the meaning of the Corporations Act 2001." Elsewhere in the statement of claim the terms "Rubber Chemicals" and "Cartel Period" are defined. 9 In paragraph 3 "Rubber Chemicals" are defined as being "chemicals used as quality and/or productivity enhancers in the manufacture of rubber and rubber products including antidegradants, accelerators, non sulphur vulcanising agents and retarders …" 10 The "Cartel Period" is identified, in paragraph 3, as being the period between 1 July 1995 and 31 December 2001. 11 The respondents raise a number of objections to the applicant's attempt to define the represented group. They are principally concerned with what they contend is the vagueness and lack of clarity of the definition and the potential for an extremely large number of persons unknowingly to fall within its terms. 12 A party which commences representative proceedings must clearly identify the group members to whom the proceeding relates: see s 33H(1)(a) of the FCA Act. Group members who do not wish to be bound by the outcome of the proceeding must have the opportunity to opt out: see s 33J of the FCA Act. It is, therefore, necessary that the group be defined with sufficient clarity to ensure that persons know whether they are or are not caught by the group definition. 13 The need for precision in the framing of group definitions in representative proceedings was explained by Sackville J in Petrusevski v Bulldogs Rugby League Ltd [2003] FCA 61. His Honour said: "19 In determining what s 33H(1)(a) of the Federal Court Act requires, it is important to consider why it is necessary to describe or identify the group members in a representative proceeding. One reason, as the High Court observed in Wong v Silkfield, is to enable the Court to determine whether the requirements of s 33C have been satisfied. Unless the group member is adequately described or identified (although not necessarily named or counted: s 33H(2)), it may be difficult to ascertain, for example, whether the claims of all the group members give rise to a substantial common issue of law or fact. 20 Another reason for describing or identifying group members is to enable group members to decide whether or not to opt out of the representative proceeding pursuant to s 33J(2) of the Federal Court Act. If a person who is a group member does not opt out of the proceedings he or she will be bound by the judgment. (Section 33ZB requires the judgment in a representative proceeding to "describe or otherwise identify the group members who will be affected by it" and provides that the judgment binds any such persons other than any person who has opted out.) The failure by a group member to opt out of representative proceedings may therefore be attended by serious consequences, although of course the litigation might also produce advantages for that group member. 21 These factors suggest that it must be possible for persons who may be within the represented group to ascertain from the pleadings whether they are in fact group members. The point was made by Hedigan J in Cook v Pasminco Ltd [2000] VSC 534, at [59], in relation to similar State legislation: "It is beyond doubt that in a group proceeding the description of a group membership must be such so that it is at least possible to determine who falls within the group as described. Persons contemplated as being within the group would themselves not understand whether they were within it, unless the definition of the group is intelligible, although not necessarily exact. Members of the group are entitled to know what constitutes the essentials of the group. A decision concerning opt-out cannot be sensibly made unless it is known what it is that is being opted out from." It follows from his Honour's observations that a person must be able to ascertain from the description of the represented group whether he or she is a member of that group. 22 … 23 Clearly enough, not every description or identification of the represented group will satisfy the requirements of s 33H(1)(a) of the Federal Court Act. A useful, although not necessarily exhaustive test, is whether the description is such as to enable a person, with the assistance of a legal adviser if necessary, to ascertain whether he or she is a group member. If the description incorporates a reference to conduct alleged in the pleadings, a person or his or her adviser ought to be able, by reading the description and the relevant portion of the pleadings, to determine whether he or she is a member of the represented group. If a person cannot reasonably be expected to do this, the definition is unlikely to satisfy the requirements of s 33H(1)(a). (Emphasis added)." In that case the group was defined, in part, by reference to the pleaded conduct of the respondent. Hence his Honour's allusion, in the final paragraph quoted, to a definition incorporating a reference to conduct. The test which he propounded would have equal application to a definition which had, as one of its elements, the purchase by group members of a particular product: a person who wishes to ascertain whether or not he or she is a group member must be able, by reading the definition, to determine whether he or she has purchased such a product. 14 As presently framed the group definition includes any person who has paid at least $5,000 for "rubber chemicals" or "rubber products" in a six and a half year period. There could be multiple purchases so long as the aggregate price of those purchases exceeds $5,000. The purchases could have been made anywhere. A person seeking to determine, perhaps with the assistance of his or her lawyer, whether he or she fell within the group would have considerable, but probably not insurmountable, difficulty in deciding whether or not these criteria had been satisfied. Resort to invoices, catalogues, product statements and other documents would be needed. The real problem would lie in determining whether the items purchased were "rubber products". Some decisions would be easy: a rubber ball could readily be identified as a "rubber product". But how are potential group members to know whether an item which does not have the external appearance or texture of rubber contains "rubber chemicals"? They would, presumably, require the assistance of an expert chemist. What if the rubber item forms but a small part of a larger product? The respondents cite as examples the mud flaps on a large truck or the rubber "feet" at the bottom of table legs. Despite being asked, the applicant has not told the respondents whether, in such cases, the larger item with a small rubber part is itself to be regarded as a "rubber product" because it "contains rubber chemicals". 15 In my view a person reading the pleaded definition could not reasonably be expected to determine whether he or she had purchased items which were "rubber products" as defined in paragraph 4 of the statement of claim. The statement of claim fails sufficiently to describe or otherwise identify the group members to whom the proceeding relates. For this reason alone the statement of claim should be struck out: see Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 at 514. 16 There are, however, additional and related difficulties occasioned by the failure of the applicant adequately to define "rubber products" which affect the efficacy of other parts of the statement of claim. The applicant pleads (in paragraph 37) that Bayer Australia and Chemtura Australia were able to and did influence the price of rubber products in Australia. In paragraph 38 it is claimed that the respondents overcharged for rubber products. As a result it is alleged (in paragraph 40) that the applicant and group members suffered loss and damage as a result of having to pay more for rubber products that they would have been required to do had the respondents contravening conduct not occurred. In the absence of a clear definition of group members and a clear understanding of what is comprehended by the term "rubber products" these paragraphs are embarrassing. The respondents cannot fairly be expected to plead to them. The same problem arises in respect to paragraph 12 in which it is said that there is a national market in Australia for the supply of rubber products. 17 Before passing to other objections to the statement of claim it should be noted that the applicant has not pleaded sufficient material facts to establish that it is a member of the group which it seeks to represent.

The Cartel Arrangements 18 The applicant alleges that the foreign respondents were parties to what was described as a "global cartel arrangement" (paragraph 14) and "periodic global cartel arrangements" (paragraph 16). It is contended that, in entering into these arrangements, the foreign respondents had acted in a manner that would give rise to contraventions of s 45(2)(a)(i) and (ii) of the Trade Practices Act 1974 (Cth) ("the Act"). Reliance was placed on the deeming provisions in ss 4D and 45A(1) of the Act. Those provisions are in these terms: "45(1) … (2) A corporation shall not: (a) make a contract or arrangement, or arrive at an understanding, if: (i) the proposed contract, arrangement or understanding contains an exclusionary provision; or (ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or (b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision: (i) is an exclusionary provision; or (ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition. (3) For the purposes of this section and section 45A, competition, in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services. …" 19 Section 45A(1) provides that: "Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, 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, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other." 20 The term "market" is defined in s 4E, (in the absence of a contrary intention) to mean: "a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services." 21 Section 4D deems certain provisions to be exclusionary provisions for the purposes of s 45(2)(a)(i) and various other provisions of the Act. It provides: "(1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if: (a) the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and (b) the provision has the purpose of preventing, restricting or limiting: (i) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of person; or (ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions; by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate. (2) A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first-mentioned person or body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates." 22 The discrete causes of action arising under sub-paragraphs (i) and (ii) of s 45(2)(a) of the Act are not pleaded separately. Rather they are rolled up, in a confusing way, in paragraphs 14 and 15 of the statement of claim. In paragraph 14 the applicant alleges that the foreign respondents agreed to do certain things. Some of those things (such as the conduct identified in paragraph 14(b)) is the type of conduct which might lead to a contravention of s 45(2)(a)(i); some of the conduct (such as that identified in paragraph 14(a)) might be thought to constitute a contravention of s 45(2)(a)(ii); and some of the conduct (such as that falling within paragraph 14(d)) might be relied on to support either or both causes of action. 23 Paragraph 15 alleges that the provisions of the global cartel arrangement had various purposes and effects, picking up the language of ss 4D and 45A of the Act. No attempt is made to discriminate between the various provisions of the global cartel arrangement in order to enable the respondents to understand which parts of the arrangement are relied on to support the applicant's price fixing case and which are said to be relied on in relation to the exclusionary provisions case. 24 These paragraphs are embarrassing and should be struck out. 25 Paragraphs 16 and 17 relate to the periodic global cartel arrangements. They follow the same pattern as paragraphs 14 and 15 and are, for the same reasons, embarrassing. They should also be struck out.

Identification of the markets 26 The markets in which the respondents are said to compete (or would compete but for the cartel arrangements) are identified in paragraphs 12 and 13 of the statement of claim. 27 In paragraph 12 the applicant pleads that there was a national market in Australia for the supply of "rubber chemicals" and "rubber products". This market is defined as "the Australian market." 28 In paragraph 13 the applicant pleads that the foreign respondents were, at relevant times, (or would have been but for the impugned arrangements) in competition with each other and others "throughout the world, including in Australia" and competitive with each other and with other persons "throughout the world, including Australia …". 29 It is necessary for the purposes of a cause of action founded on s 45(2)(a)(ii) for there to be an identified market in Australia: see ss 4E and 45(3) of the Act. Paragraph 12 appears designed to allege the existence of such a market for the supply of "rubber chemicals" and "rubber products". Paragraph 13(a) would seem to suggest that there also exists a worldwide market for the supply of "rubber chemicals" (but not "rubber products"). Such a pleading does not sit comfortably with the provisions of s 45(3) which, when read with s 4E, confine the relevant market, in relation to a cause of action pleaded under s 45(2)(a)(ii) to a market in Australia. The respondents are left to guess as to what market or markets are alleged by the applicant to be the arena in which competition is said to occur between respondents for the purposes of its price fixing case. The problem is compounded because the respondents are also left to guess about the products in relation to which it is said that they compete in "the Australian market". Elsewhere in the statement of claim, there are allegations that the respondents supplied "rubber chemicals" in the Australian market (see, for example, paragraphs 18 and 26) despite the market being one for "rubber chemicals" and "rubber products". At other points (for example, in paragraph 38) it is implied that "rubber products" were also supplied in the defined market. These inconsistencies are apt to cause confusion and give rise to embarrassment. 30 The pleadings in paragraphs 12 and 13(a) are at best confusing and, at worst, contradictory. They should be struck out.

Giving effect to the arrangements in Australia 31 Paragraphs 18 to 25 plead that the foreign respondents gave effect to the global cartel arrangement and the periodic global cartel arrangements in australia (paragraphs 18 to 23), thereby contravening both paragraphs (i) and (ii) of s 45(2)(b) of the Act (paragraph 24) and that, as a result the applicant and group members suffered loss and damage (paragraph 25). These paragraphs plead the applicant's case in the most general terms. Again, there is a rolling up of two causes of action. Some conduct is, for example, pleaded in paragraph 18 that would seem to amount to price fixing; other types of conduct involve the imposition of an exclusionary provision and yet, (in paragraph 24), as already noted, this conduct, collectively, is said to give rise to contraventions of both sub-paragraphs of s 45(2)(b) without any attempt being made to specify which conduct is relied on in respect to which cause of action. 32 There is a notable absence of material facts needed to establish this part of the applicant's case. In paragraph 19(b), for example, it is alleged that each of the foreign respondents: "imposed on its respective Australian Respondent additional operational procedures and restrictions by which the Foreign Respondent could require the Australian Respondent to act consistently with the Global Cartel Arrangement or the Periodic Cartel Arrangements as in place from time to time." 33 In paragraph 20 it is pleaded that the operational procedures and restrictions referred to in paragraph 19(b) were addressed to unnamed persons in Australia, were intended to be received by unnamed persons in Australia and were "received in Australia". In paragraph 21 it is pleaded that the imposition of the operational procedures and restrictions was conduct, engaged in by the foreign respondents, in Australia. No material facts are pleaded to identify the "additional operational procedures and restrictions" which were said to have been imposed on Australian subsidiaries or to identify the means by which and the terms in which they were said to have been imposed. 34 In paragraphs 26 to 36 the applicant alleges that Bayer Australia and Chemtura Australia engaged in the same proscribed conduct that is alleged against the foreign respondents (paragraph 26). The applicant alleges that the two Australian companies engaged in this conduct pursuant to the global cartel arrangement and the periodic cartel arrangements (paragraph 27). In an attempt to establish that the two Australian companies acted in accordance with the cartel arrangements the applicant alleges that they did so: · At the direction or with the consent or agreement of one of the foreign respondents (paragraph 31); and/or · As agent of one of the foreign respondents (paragraph 33). In the alternative it is alleged that any respondent who did not contravene the act by direct conduct was nonetheless involved in like contraventions by one or more of the other respondents in accordance with s 75B of the Act (paragraph 36). 35 No attempt is made to plead any material facts concerning the directions which it is said caused the Australian companies to engage in price fixing or to impose exclusionary provisions. It is not alleged that the Australian respondents were party to the cartel agreements or even that they were aware of the provisions of those agreements. The terms or substance of the alleged directions from foreign respondents are not pleaded. 36 The material facts needed to establish that any one of the Australian companies was the agent of one of the foreign respondents is lacking. There is the bare allegation of agency and no more. This is not sufficient to forge the nexus between the alleged cartel agreements and the implementation of their terms by the Australia companies: see State Bank of Victoria v Parry (1990) 2 ACSR 15 at 30; Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549 at 556; cf Industrial Equity Limited v Blackburn (1977) 137 CLR 567. 37 The applicant's attempt to rely on s 75B of the Act must fail in the absence of a pleading of intentional and knowing participation by a respondent in any alleged contravention of the Act: see Yorke v Lucas (1985) 158 CLR 661 at 669-670. This aspect of the pleading also suffers from an absence of specificity: it identifies conduct, for the purposes of s 75B, as being any of the conduct, alleged to have been undertaken by the foreign respondents or the Australian companies, to which reference is made in any or all of some 22 paragraphs of the statement of claim.

CONCLUSION 38 The statement of claim should be struck out. It cannot be saved by amendment. As this is the first occasion on which the Court has considered and ruled on the respondents' objections, the applicant should, if it is so advised, have the opportunity to replead. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY.

Associate: Dated: 10 October 2008 Counsel for the Applicant: Mr I Wylie

Solicitor for the Applicant: Maurice Blackburn Pty Ltd

Counsel for the Second Respondent: Mr C Moore

Solicitor for the Second Respondent: Baker & McKenzie

Counsel for the Third and Fifth Respondents: Mr P Crutchfield

Counsel for the Third and Fifth Respondents: Mallesons Stephen Jaques

Trade Practices Act 1974(Cth)s 4D, 4E, 45(2), 45(3), 45A(1), 75B

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