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Law Society Northern Territory

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Issue no. 1

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Law Society Northern Territory

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51 B A L A N C E M A R C H 2 0 1 8 The facts were complex and detailed and, given the focus of this case note is on penalties, it will suffice to give a basic summary. The respondents were related corporate entities involved in the manufacture and distribution of cement and concrete materials in Queensland. The proceedings concerned decisions to enter into or amend contracts with power station operators to acquire their supply of flyash. Flyash, a by-product of the burning of fossil fuels, was produced by the power stations. If it was of sufficient quality, it could be used as a partial substitute for cement in the production of concrete. The trial judge held that the relevant contracts with the power stations contained provisions that had the purpose, or had or were likely to have had the effect, of substantially lessening competition in the relevant markets. It was held that, by making each of those contracts, Pozzolanic Industries Pty Ltd (PIPL), a company related to Cement Australia, had committed separate contraventions of s 45(2)(a)(ii) of the then Trade Practices Act 1974 (Cth) (TPA) and that, by giving effect to those provisions in certain instances, PIPL and other respondents had contravened s 45(2)(b)(ii) of the TPA. Some respondents were also found to have been knowingly concerned in the contraventions. The trial judge ultimately imposed penalties totalling $17.1m against Cement Australia and companies in its group. Some of the penalties were imposed separately and some were imposed jointly and severally on the companies in the Cement Australia group. The specific issues in the appeal were at [10]: A. whether the primary judge erred in law in assessing and imposing a single joint and several penalty on two respondents; B. whether the making of and giving effect to the provisions of each of the contravening contracts ought to be separately penalised or treated as a single course of conduct; C. whether the primary judge erred in his treatment of issues of market harm and financial benefits; and D. whether the penalties imposed by the primary judge were manifestly inadequate as they were not of appropriate deterrent value. On the joint and several issue, the Full Court held that s 76(1) of the CCA does not allow for the imposition of a single joint and several penalty against multiple respondents (at [376]). This conclusion was reached through an orthodox application of statutory construction (at [377]). The Full Court also said at [385] that the general principles governing the assessment and imposition of penalties also supported their interpretation. The deterrent effect of a penalty at a personal level is potentially lessened if one party is able to avoid paying any portion of that penalty at all. This is not necessarily ameliorated by the respondents suggestion that deterrence would be sufficiently achieved at the level of the corporate group. Accordingly, the Full Court held that the trial judge erred because he was not empowered under s 76(1) of the CCA to fix a joint and several penalty (at [391]). The next issue in the appeal concerned the course of conduct principle, which seeks to ensure that an offender or contravenor is not punished or penalised twice for what is essentially the same conduct (at [393]; see also [421]). In the appeal there was not a dispute about the nature of the course of conduct principle. It was a dispute about whether the facts of the case supported the application (or non-application) of the principle in relation to certain contracts. Relevantly, the trial judge regarded the making of and giving effect to one particular contract as one course of conduct, however, he did not treat the making of and giving effect to the other contracts as single courses of conduct. The Full Court at [425]) was mindful that the application of the course of conduct principle requires an evaluative judgment in respect of the relevant circumstances. (Their Honours held that the trial judge erred where he regared the making of, and giving effect to, a particular contract as constituting a single course of conduct stating at [431]: We consider that the course of conduct principle must be informed by the particular legislative provisions relevant to these proceedings. In particular, we consider that weight must be given to the fact that the legislature has deliberately and explicitly created separate contraventions for each of the making of, and giving effect to, a contract, arrangement or understanding that restricts dealings or affects competition: ss 45(2)(a) and 45(2)(b). The question of market harm and the expected and actual benefits said to be causally connected to the contravening conduct was the next issue considered by the Full Court (at [443]-[565]). The ACCCs grounds of appeal on these issues were fully rejected. The final issue in the appeal was the quantum of penalties to be imposed (in light of the ACCCs success on certain grounds) and whether the penalties imposed by the trial judge were manifestly inadequate. At trial and on appeal, there was a canyon between the parties. At trial the ACCC contended for total penalties of $97m while the respondents submitted appropriate penalties were in the order of $4m (at [316]). This gulf between the parties hardly narrowed in the appeal (at [575]-[577]). The Full