Commerce Commission v Visy Board Pty Ltd

• Jurisdiction: New Zealand
• Judge: Stevens J
• Judgment Date: 31 August 2012
• Neutral Citation: [2012] NZCA 383
• Docket Number: CA312/2011
• Court: Court of Appeal
• Date: 31 August 2012

Between

Commerce Commission

Appellant

and

Visy Board Pty Limited

Respondent

And Between

John Roderick Stephen Carroll

Appellant

and

And Commerce Commission

Respondent

[2012] NZCA 383

Court:

Arnold, Stevens and Wild JJ

CA312/2011

CA351/2011

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal from a High Court decision which dismissed most of appellant's application to set aside protests to jurisdiction by respondent — respondent supplied corrugated fibreboard packaging to Australian and New Zealand companies — appellant alleged respondent was engaged in cartel conduct in breach of s27 Commerce Act 1986 (“CA”) (arrangements substantially lessening competition prohibited) — respondent admitted breaches of Trade Practices Act 1974 in Australian proceedings — whether there was an act done in New Zealand pursuant to r6.27(2)(j)(i) High Court Rules (when service allowed without leave — any act done or occurred in New Zealand) — whether respondent carried on business in NZ under s4 CA (application of Act to conduct outside NZ) — whether appellant acted through its NZ subsidiary so as to attract liability under s90(2) CA (conduct by servants or agent).

Counsel:

F M R Cooke QC, B Hamlin and R J Hart for Appellant in CA312/2011 and Respondent in CA351/2011

A R Galbraith QC, S C Keene and S A Cunliffe for Respondent and Cross Appellant in CA312/2011

S J Mills QC and W K Blennerhassett for Appellant in CA351/2011

JUDGMENT OF THE COURT

A The appeal in CA312/2011 is allowed.

B The cross appeal by the respondent in CA312/2011 is dismissed.

C The respondent in CA312/2011 must pay the appellant costs for a complex appeal on a band A basis and usual disbursements.

D The appeal by the appellant in CA351/2011 is dismissed.

E The appellant in CA351/2011 must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

F The following orders are consequential upon the outcome of the appeals:

• (a) If the Commission files and serves a third amended statement of claim, restricted to pleading those causes of action against Visy Board that we have determined can proceed, and to those causes of action against Mr Carroll that Heath J determined can proceed, then the Commission's applications to set aside the protests to jurisdiction shall be granted. The third amended statement of claim shall be filed and served on or before 28 September 2012.

• (b) If a third amended statement of claim complying with order (a) is not filed and served on or before 28 September 2012, the Commission's applications to set aside the protests to jurisdiction will be dismissed.

• (c) The case is remitted to the High Court for further case management.

G By consent the confidentiality orders made by Heath J in the High Court are to continue provided however that such orders are varied by order of this Court to the extent only that the reasons set out in this judgment may be published in the news media. Any application to vary or set aside such orders is to be made to the High Court.

REASONS OF THE COURT

(Given by Stevens J)

Table of Contents

	Para No
A cartel extending to New Zealand?	[1]
Some more background	[6]
Jurisdiction – applicable principles	[13]
Generally	[13]
High Court Rules	[15]
Section 90(2)(b) of the Act	[19]
Section 4 of the Act	[22]
The High Court judgment	[35]
Overarching understanding – application to New Zealand	[40]
Acts done or occurring in New Zealand	[48]
The Goodman Fielder understanding	[50]
The Mainland understanding	[59]
The apple box price understanding	[68]
The Fonterra understanding	[74]
Overarching understanding	[86]
Jurisdiction concerning the further understandings	[87]
Coca-Cola understanding	[88]
The Inghams understanding	[94]
The PPCS/Richmond compensation understanding	[97]
The Huhtamaki understanding	[100]
Jurisdiction under s 4	[104]
Carrying on business in New Zealand	[104]
Visy Board NZ a division of Visy Board	[106]
Visy Board involvement in operations in New Zealand	[109]
Visy Board dealing direct with New Zealand customers	[111]
Customers' perspective	[112]
Visy Board staff visit New Zealand	[115]
Visy Board communicating in New Zealand	[117]
Visy Board acting on behalf of Visy Board NZ	[118]
Industry practice	[119]
Affects a market in New Zealand	[121]
Appeal by Mr Carroll	[127]
The pleadings against Mr Carroll	[128]
High Court judgment	[132]
Submissions for Mr Carroll	[133]
Our evaluation	[136]
Limitation question	[139]
Result	[149]

A cartel extending to New Zealand?

1 The respondent, Visy Board Pty Ltd (Visy Board), and Amcor Ltd (Amcor Australia) are the major suppliers of corrugated fibreboard packaging (CFP) in the Australian market. In November 2007 Visy Board and three of its senior executives (including the appellant, Mr Carroll) admitted in proceedings brought in the Federal Court of Australia by the Australian Competition and Consumer Commission (ACCC) participation in cartel conduct between Visy Board and Amcor Australia extending for almost five years. 1 As a result Heerey J granted declarations and

imposed pecuniary penalties of $36 million on Visy Board and $500,000 on Mr Carroll. The Judge found that the cartel conduct involved was “inherently likely to cause loss”. 2 He said that this was conduct: 3

… run from the highest level in Visy, a very substantial company. It was carefully and deliberately concealed. It was operated by men who were fully aware of its seriously unlawful nature.

2 These findings were based on an agreed statement of facts (ASOF) detailing the nature of the CFP market in Australia, the nature and scope of an overarching understanding between the two competitors and the conduct giving rise to the 69 contraventions of the Trade Practices Act 1974 (Cth) by Visy Board and 49 contraventions by Mr Carroll. 4 The significance of these contraventions is illustrated both by the size of the pecuniary penalties imposed and the importance of the CFP market in general. Heerey J observed: 5

Every day every man, woman and child in Australia would use or consume something that at some stage has been transported in a cardboard box. The cartel in this case therefore had the potential for the widest possible effect.

3 A critical question arising in this appeal is whether such cartel conduct was extended by the parties to a market in New Zealand. A proceeding has been brought by the Commerce Commission alleging that Visy Board and Mr Carroll, among others, contravened provisions of the Commerce Act 1986 (the Act). As both of these parties are based in Australia, the Commission was required to serve the proceedings (first launched in November 2007) in Australia. Protests to the jurisdiction of the New Zealand High Court followed. At issue therefore is whether the Court has jurisdiction to hear and determine the alleged contraventions of the Act.

4 The protests to jurisdiction were heard by Heath J, who dismissed significant parts of the Commission's application to set aside such protests by Visy Board and

Mr Carroll. 6 Only two central allegations made by the Commission were allowed to continue. Otherwise the protests to jurisdiction were upheld. The Commission has appealed against the upholding of the protests by Visy Board. There is a cross-appeal by Visy Board against the ruling that the two central allegations were allowed to continue. 7 Mr Carroll has appealed against the decision not to uphold the protest by him in respect of the central allegations. There is no appeal by the Commission against the upholding of the protest on the other causes of action against Mr Carroll

5 We begin by detailing the broad background facts. We then expand upon the possible avenues by which the Commerce Commission may establish jurisdiction. Those are r 6.27(2) of the High Court Rules (HCR), and ss 90 and 4 of the Act. We then consider the facts relating to the CFP markets in New Zealand, as ascertained from the ASOF filed in the Federal Court proceeding, the second amended statement of claim filed in the New Zealand proceeding, 8 the affidavits filed by the Commission and the annexed exhibits. Finally, we consider which, if any, of the jurisdictional avenues apply in relation to each cause of action. The issues before us turn largely on our assessment of the evidence said to support the Commission's claims.

Some more background

6 The customers of both Visy Board and Amcor Australia include a number of major customers who themselves transact business on both sides of the Tasman. They include well known companies like Lion Nathan Ltd, Goodman Fielder Ltd and Coca-Cola Amatil Ltd, conveniently referred to as trans-Tasman purchasers of CFP. Both Visy Board and Amcor Australia have New Zealand subsidiaries, Visy Board (NZ) Ltd (Visy Board NZ) and Amcor Packaging New Zealand Ltd (Amcor NZ) respectively. There are three major suppliers of CFP in New Zealand, the Visy Board interests, the Amcor interests and Carter Holt Harvey Ltd (CHH).

Mr Carroll was the general manager of Visy Board from early 2000 until December 2004; previously he had been the general manager of Visy Board NZ

7 In the late 1990s there had been a price war in Australia for the supply of CFP products. Competition between Visy Board and Amcor Australia was intense resulting in depressed prices and low margins for both suppliers. As a result of a series of private meetings in Melbourne between January and April 2000 involving Mr Debney, the chief executive of Visy Board, and Mr Brown, the managing director of Amcor Australia, a market sharing and price fixing agreement was entered into. In the Federal Court judgment this agreement...