Litigation and Dispute Resolution

The statutory demand and incorporated associations: trump card or joker?

5 June, 2018

On 25 March 2022, the Australian Competition and Consumer Commission (ACCC) obtained orders in the Federal Court against Australasian Food Group Pty Ltd, trading as Peters Ice Cream (Peters) for engaging in the practice of exclusive dealing in contravention of section 47(1) of the Competition and Consumer Act 2010 (Cth) (the Act). The practices in question related to an agreement (Distribution Agreement) with PFD Food Services Pty Ltd (PFD) for the distribution of single serve ice cream products sold in Australian petrol stations and convenience stores between 21 November 2014 to around December 2019.

The Federal Court ordered that Peters pay a penalty of $12,000,000, a contribution to the ACCC’s costs and that Peters establish, and maintain for at least three years, a program for ensuring future compliance with the Act.

The background to Peters’ conduct

Peters is one of the largest suppliers of single serve ice cream products in Australia, and owns brands such as Connoisseur, Drumstick, Maxibon, Frosty Fruits and Life Savers. Peters also manufactures products in collaboration with brands such as Allen’s, Cadbury, and Nestle.

PFD is an Australian based food distributor, with a national distribution network for dry, frozen and chilled products. Between 2014 and 2019, PFD’s network offered distribution to at least 90% of postcodes throughout Australia to petrol and convenience retailers such as Woolworths Petrol, Coles Express, Caltex and 7-Eleven.

On 21 November 2014, Peters and PFD entered into the Distribution Agreement for Peters’ single serve ice cream products on the condition that PFD would not, without Peters’ prior written consent, sell or distribute single serve ice cream products that competed with Peters’ in the areas to which the Distribution Agreement applied.

In November 2020, the ACCC commenced proceedings in the Federal Court against Peters alleging that, among other things, Peters’ Distribution Agreement hindered/prevented entry and expansion by competitors within the market of single serve ice cream products.

Specifically, the ACCC alleged that, by way of Peters’ exclusive dealing conduct, new entrants into the market, such as Bulla, and competitors, such as Unilever Australia (Holdings) Pty Ltd trading as “Streets”, were prevented new entry and expansion into the single serve ice cream market.

We provide a summary of the ACCC’s allegations here.

The legal position

Under section 47(1) of the Act, a company shall not, in trade or commerce, engage in the practice of exclusive dealing.

Exclusive dealing arises where a company supplies, offers to supply, goods or services, or offers to give a discount in relation to the supply of goods or services, on the condition that the supplier:

  1. will not, or will not to a certain extent, acquire or re-supply goods or services directly or indirectly from a competitor of that company; or
  2. in the case where the company supplies or would supply goods or services, will not, or will not to a limited extent, supply goods or services, or supply goods or services of a particular kind or description:
    • to a particular persons or classes of persons; or
    • in particular places or classes of places.

However, a company’s conduct will only contravene section 47(1) of the Act if it can be established that that company’s conduct had the purpose, or likely effect of substantially lessening competition.

The scope of section 47 is remarkably broad, in that any condition, whether direct, indirect, or one existing by inference only, may satisfy the requirements of exclusive dealings.

The findings of the Federal Court – key takeaways

Justice Moshinsky of the Federal Court declared, in favour of the ACCC, that Peters had engaged in conduct which contravened section 47(1) of the Act.

Ordinarily, the maximum pecuniary penalty for a company which breaches section 47 of the Act is $10,000,000 – see section 76(1A). However, where the Court determines that the infringing company has obtained a “reasonably attributable” benefit, that penalty can be up to 3 times the ordinary value (i.e. $30,000,000). The maximum penalty for individuals is $500,000.

As is apparent, the Court found that Peters had obtained a reasonably attributable benefit from its Distribution Agreement, but the pecuniary penalty was on the lower end of the potential maximum available.

It is important to ensure that your businesses practices (including contractual agreements) are not anti-competitive as the ACCC imposes significant penalties for breaches of the Act. The ACCC’s investigations are not limited to exclusive dealing and anti-competitive behaviour

McCabes has experience in advising clients in relation to their obligations under the Competition and Consumer Act 2010 (Cth). Please contact our Litigation and Dispute Resolution team if any of the issues raised in this article apply to you.

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Litigation and Dispute Resolution

Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
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Government

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). 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