Visy Paper Pty Limited & Ors v ACCC S209/2002 [2002] HCATrans 614 (3 December 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S209 of 2002

B e t w e e n -

VISY PAPER PTY LIMITED

First Appellant

WILLIAM GUTHRIDGE

Second Appellant

STEVEN RICHARDS

Third Appellant

and

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Respondent

GLEESON CJ

McHUGH J

GUMMOW J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 3 DECEMBER 2002, AT 10.16 AM

Copyright in the High Court of Australia

MR N.J. YOUNG, QC: May it please the Court, I appear with my learned friend, MR M.H. O'BRYAN, for the appellants. (instructed by Minter Ellison)

MR B.R. McCLINTOCK, SC: May it please the Court, I appear with my learned friend, MR V.F. KERR, for the respondent. (instructed by the Australian Government Solicitor)

GLEESON CJ: Yes, Mr Young.

MR YOUNG: If the Court pleases, this appeal concerns the operation of section 45 and section 47 of the Trade Practices Act and, particular, the construction and operation of section 45(6).

The essential background is that Visy and Northern Pacific Paper - and if the Court pleases I will try and call it NPP - had been in a vertical supplier relationship from September 1995 under an agreement of 19 September 1995. The ACCC's case was that by proffering a number of proposed contracts, six in number, each of which contained a non-compete clause, Visy had attempted to contravene section 45(2)(a)(i) and had as well attempted to induce NPP to contravene the same subsection. The basis of the allegation was that each non-compete clause was alleged to constitute an exclusionary provision within the meaning of section 4D of the Act and that section creates a per se liability, a contravention, when applied by section 45(2)(a)(i).

The ACCC contended that section 45(6) had no application. Before the trial judge, Justice Sackville, his Honour dismissed the application on the basis that section 45(6) applied so as to take the relevant actions in proffering those contracts containing those clauses outside section 45. A majority in the Full Court, comprising Justice Hill and Justice North, allowed an appeal, held that section 45(6) did not operate and, therefore, held that the relevant provisions of section 45(2)(a) had been contravened by Visy. It also held that two individuals had contravened the Act by attempting to induce NPP to contravene section 45(2)(a)(i).

Can I take the Court to several passages in the judgments which identify key findings. Firstly, as to the scope of the clauses. There was no disagreement between the trial judge and any of the members of the Full Court. I take the Court, in the appeal book at page 666, to several passages - - -

KIRBY J: Could you, at some stage convenient in your argument, take us to the legislation because I read the decisions below but I am not sure that I entirely understand how the legislation fits together.

MR YOUNG: Yes, your Honour.

KIRBY J: I do understand the issue, but I would like to look very closely at the legislative text.

MR YOUNG: Yes, of course, your Honour. At page 666 can I draw the Court's attention, without reading it, to the first sentence of paragraph 112 and then to paragraph 114 across to the next page, 667, five lines down and further to paragraph 115, especially at lines 17 to 22, commencing with the sentence:

But here it is entirely in accordance with the commercial realities -

The Full Court majority endorsed those conclusions of the trial judge. Can I take the Court to the Full Court majority judgment at pages 708 and 710. Firstly, paragraph 55 at 708, then - I said 710 but can I go next to 709 to paragraph 59, probably down to line 31, and finally to 710 paragraph 60. In paragraph 60 the Full Court majority said that the clauses should, in effect, be characterised as encompassing both a condition relating to the acquisition of goods or the provision or services.

HAYNE J: Do you say that that double characterisation is open or appropriate?

MR YOUNG: Yes, your Honour, we always accepted at every stage, notwithstanding what appears in the Full Court judgment, that the clause or the condition, depending on whether you view it from the viewpoint of section 45 or 47, prohibited both acquiring goods, acquiring waste from a Visy customer or supplying services to a Visy customer or both.

HAYNE J: What is the service supplied?

MR YOUNG: The service supplied is the collection and removal of waste.

HAYNE J: Why is that any more than, relevantly, the mirror of the acquisition of goods?

MR YOUNG: Because often the person with the waste paid Visy to come and collect and remove it.

HAYNE J: Why does the way in which the market leads to one paying the other, rather than vice versa, affect the characterisation?

MR YOUNG: It does not necessarily and the Full Court made that point. It does not necessarily affect it, but any approach to the question has to take account of the nature of the transaction and the nature of the commercial agreement relating to it. Here you had all varieties, that is to say, no payment either way, payments one way or the other, pure collection of waste and in other cases you actually had a sale transaction in respect of waste. But for present purposes, your Honour, we would say that four judges - - -

KIRBY J: In terms of economic analysis, taking away the goods for a fee, would be a separate service, one would think?

MR YOUNG: Yes, it would, your Honour, yes.

KIRBY J: This Act has to operate in a market and therefore attracts an economic analysis, I would have thought?

MR YOUNG: Yes, your Honour, and often operates in respect of transactions that have both aspects, an acquisition of goods and a supply of services.

GLEESON CJ: How many clauses were there?

MR YOUNG: There were six clauses, your Honour - - -

GLEESON CJ: How many attempts were there?

MR YOUNG: That, I think, is left for further resolution. It is not precisely addressed in any of the judgments, that is, the trial judge or the Full Court.

McHUGH J: It is not easy to fit this notion of attempt in with criminal law theory about attempts?

MR YOUNG: Yes, your Honour, we agree, and Justice Conti made that point in the Full Court, but I am afraid that is water under the bridge for the appellants, your Honour. We did not appeal that adverse aspect of Justice Sackville's finding.

KIRBY J: That is a point made by the Full Court?

MR YOUNG: It is, yes.

KIRBY J: By the majority?

MR YOUNG: Yes.

KIRBY J: So Justice Conti's comment is a plea to the future that parties in your position might choose to litigate that issue?

MR YOUNG: Yes, your Honour.

KIRBY J: You do not seek to raise it again in this Court?

MR YOUNG: No, we took the view that we are not in a position to do so. Can I turn then to the key findings made by the courts at each level in relation to construction. Justice Sackville, firstly, could I go to 668.

KIRBY J: Is it logical to look at the key findings relevant to construction before we know what we are searching for? I am very sorry about this.

MR YOUNG: I simply thought it was a matter of convenience to the Court to identify the passages in the judgments. They do assist to identify the issues that led to the difference of view, but I am quite happy to go straight to the legislation and deal with it.

KIRBY J: It is up to you but it would seem to me to be logical, first, to know what you are looking for and then to look at what judges find.

MR YOUNG: If your Honour please.

GLEESON CJ: Why do you not just give us a reference to the paragraphs in the judgments you are intending to refer to so that we can make a note of them.

MR YOUNG: Yes, your Honour. In Justice Sackville the two key passages are at paragraph 118 at appeal book 668 and at paragraph 125 to 126 at appeal book 670.

GLEESON CJ: Yes.

MR YOUNG: In the Full Court majority two key passages are at paragraphs 71 and 75 at pages 713 and 714 and in Justice Conti the passages are at paragraphs 80 to 82 at page 717.

GLEESON CJ: Thank you.

KIRBY J: I was not, of course, seeking to stop you taking the Court to those passages. I was just wanting to know what the legislative framework is before I looked to what judges found the framework meant in this case.

MR YOUNG: I did not take it otherwise, your Honour. Can I turn, then, to Part IV and section 45. It is our submission that Part IV, as a whole, discloses a clear policy intention that exclusive dealing conditions should be regulated by section 47 and not by section 45 and that includes, in particular, the per se prohibition in sections 45(2)(a)(i) and (2)(b)(i). That intention, in our submission, is a particular manifestation of a broader scheme that operates throughout Part IV which is to take certain specified kinds of conduct outside section 45 altogether and to make special provision in relation to those classes of conduct with a view to those more particular provisions applying exhaustively to the relevant classes of conduct and to the exclusion of section 45.

It is not only section 47 that receives that treatment. It is section 45B, section 48, section 50 and its related party transactions. I point to provisions that achieve that objective: firstly, section 45(5). It provides that the section "does not apply to or in relation to", which are words of wide import, and then several categories are given - section 45B, section 48 in subsection (c), section 50 acquisitions are excluded from the reach of section 45 by subsection (7) and related party dealings are excluded by subsection (8).

Most, if not all, of those excisions from section 45 are expressed in broad language. One phrase that repeats itself is the phrase "to or in relation to" which this Court has said are words that are exceptionally wide. Their precise application obviously depends on the context, but they generally connote any connection of any kind and not necessarily a direct one.

It is our submission that the accepted construction of section 45(6) until the effect of the Full Federal Court's decision is analysed was that section 45(6) prevented overlap between section 45 and section 47 by drawing a clear and definite - not variable, but a clear and definite line of demarcation between the two provisions.

KIRBY J: What do you say is the economic or political theory behind the scheme? It has been altered in the course of its history.

MR YOUNG: We say this, your Honour - and I will focus on the relationship between section 45 and 47 for the moment - section 47 is concerned essentially with either supply on condition or acquisition on condition within a vertical relationship. The Act looks to the substance of the dealing to identify what in substance was the condition that was being imposed. It does not have to be a legal condition and it can be simply a condition inferred from the substance of the relationship and the dealing between the parties, but section 47 is concerned to deal exhaustively with situations of supply on condition or acquisition on condition and to apply to them a test of substantial lessening of competition in all cases other than third line forcing, if I can put that to one side under 47(6) and (7).

The judgment made by Parliament is that within a vertical relationship where goods are being supplied from one level to another in the distribution chain it is appropriate to apply a test of substantial lessening of competition. Section 45 deals with a broad range of situations and it has carved out of it that more specific governmental policy in relation to supply or acquisition on condition within a vertical relationship.

Likewise, Parliament has taken the view, for instance, that section 50 that applies a test of substantial lessening of competition to mergers and acquisitions of shares or assets should deal exhaustively with that subject matter and section 45 should not cut across it. So, in essence, in our submission, section 45(6) reflects a judgment that a more particular set of provisions and standards are to be applied to particular kinds of dealings because an economic judgment has been made about what is the appropriate test in that context.

KIRBY J: Why would that be so, would you just explain? Is there something in the second reading speech, is there, that explains why in the market that would be so?

MR YOUNG: There is some material in the Swanson Committee Report which led to the 1977 amendments which gave rise to the current structure of 45(6) and 47 which helps to explain that.

KIRBY J: The Parliament did not accept all of the recommendations of the Swanson Committee.

MR YOUNG: No, but it is evident that it did accept quite a few of the recommendations about vertical relationships in section 47, including the ones I particularly had in mind. I do not know if it is all that convenient but can I give the Court a reference to the relevant paragraphs of the Swanson Committee Report. The paragraphs in question dealing with exclusive dealing are at paragraphs 4.105 and 4.106 at page 31 of the print I am looking at.

KIRBY J: At 4.106 they deal undiscriminatingly between obtaining goods or services.

MR YOUNG: That is so, yes. The history of section 47 is originally it only dealt with supply on condition. Section 47(4) and (5) that deal with acquisition, where the acquirer imposes a condition upon his supplier, were only added in 1977.

KIRBY J: Where in the statutory language does the discrimination arise of goods and services?

MR YOUNG: It arises really in 47(4) and (5), and it is not so much a distinction between goods or services, but between supplying and acquiring. Section 47(4) deals with conditions imposed by:

A corporation . . .

which -

(a) acquires, or offers to acquire, goods or services -

that is (a) and (b), and then it deals with a condition:

on the condition that the person from whom the corporation acquires or offers to acquire the goods or services -

and I will skip some words -

will not supply goods or services, or goods or services of a particular kind or description to any person, or . . .

(c) to particular persons or classes of persons -

The oversight or the gap is not so much a distinction between goods or services, but rather that when 47(4) refers to a condition being imposed by someone acquiring goods, it is limited to a condition that the person from whom the acquisition is made, "will not supply" - not that it will not supply or acquire goods or services, but rather "will not supply goods or services".

So hence, if a condition is imposed on a supplier that you, the supplier, as a condition of my acquiring your goods will not supply goods or services to someone else, that falls within section 47(4) because that aspect of the condition which proscribes a supply of goods or services.

GLEESON CJ: Now take a brewery tie arrangement with a hotel, so that the brewery supplies beer to the hotel on condition that the hotel will not acquire beer from anybody except the brewer. That would fall within section 47, would it not?

MR YOUNG: Yes, that would fall within section 47(2).

GLEESON CJ: Now suppose the brewer also makes it a condition of the contract that the hotel will not resupply beer to a third party.

MR YOUNG: Yes, that still falls within section 47(2)(e) or (f).

GLEESON CJ: Now suppose the brewer supplies beer to a large hotel chain on condition that the hotel chain will not go into the brewing business.

MR YOUNG: Well, one would need to investigate - - -

GLEESON CJ: I mean, on the additional condition.

MR YOUNG: Yes, your Honour. One would need to investigate substantively what your Honour's last condition means, in substance and in commercial effect. If, "will not go into the brewing business" will mean, "will not supply goods or services or resupply certain goods or services", that would fall within aspects of section 47. If it does not involve a condition on the supply or acquisition of goods or services, but is some other prohibition, that may fall outside 47 simply because it is not a condition on supply or acquisition of goods or services and otherwise fall within section 45.

GLEESON CJ: I was only trying to think of a contract that contained a series of, if you like, independent conditions, one of which was plainly an exclusive dealing arrangement and another which was not.

MR YOUNG: In our submission it is not easy. That is because 47 through 47(13), that gives a wide meaning to "condition", fastens on any condition that conditions, supply or acquisition of goods or services. There is a gap that this case exposes in 47(4) in that the condition imposed on the supplier was only imposed in terms of, "You shall not supply". It did not deal with, and overlooked to deal with, the situation of, "You shall not acquire from one of my customers".

Now, how and why it is so that section 47 omits to deal with the condition that "You shall not acquire" and limits itself to a condition that "You shall not supply" is unclear because both conditions would seem to have, or be capable of having, similar anti-competitive consequences. But that is the legislation we are left with. In our submission, it is a very important - - -

KIRBY J: But is it fair to say that when one is construing the legislation, the paradox that you have just drawn attention to, given the scheme, purpose and national economic objective of the legislation, is something that one would take into account in resolving any ambiguity?

MR YOUNG: Yes, definitely, your Honour, and we will make submissions about the legislative history and what we say is the purpose disclosed by it.

GLEESON CJ: Does it not make it a little difficult to rely on legislative purpose where there is an apparent and inexplicable gap in the legislative purpose?

MR YOUNG: No, for this reason, your Honour, that the condition that was in substance imposed here by these non-compete clauses did prohibit the supply of services. Four judges have said that and there is no cross-appeal or cross-contention. Therefore, if that is the condition, the simple question is, would imposing that condition fall within 47(4), being a condition identical to the non-compete clauses that are alleged to be the exclusionary provision? The simple answer to that question is this: yes, imposing a condition that prohibits the supply of services as well as the acquisition of goods where the acquisition of goods slips through 47(4) is of no moment because the condition nonetheless prohibits the supply of services to persons who are customers of Visy. Therefore, to impose that condition is to impose a condition within the meaning of section 47(4) on acquisition. That is the simple answer to the question.

GLEESON CJ: But when you use an expression like "slips through", that seems to indicate that you cannot fully rationalise the scheme of section 47. That might produce the consequence for which you contend in the end, but it makes it a bit difficult to endeavour to solve the problem of construction by reference to a scheme that cannot be rationalised.

MR YOUNG: As I endeavoured to say, not entirely, your Honour, because insofar as the scheme exists, it is a scheme that says imposing a condition on the supply of services is within 47(4). If you demand it as a condition of acquiring waste from NPP, that they agree to a condition that they "will not supply" services, that falls squarely within 47(4) and within the identifiable regime and - - -

HAYNE J: But your characterisation that seems to be accepted that you can characterise some aspects of these transactions as the supply of services, other aspects as the acquisition of goods, stems, does it not, from the root that the tangible item is to one party in these several transactions, waste. To other parties, it is of value and it can be a contract for the supply of services in the sense of "We're getting rid of your waste". Otherwise it would, would it not, always be an acquisition of goods?

MR YOUNG: There may be an acquisition of waste involved in it, your Honour, but we are talking about a condition imposed on a dealing with a customer for the purposes of section 47 and what the customer may be requiring is the service, or what he may be getting is the service - indeed, what he may be paying for is the service. Now, your Honour, we do not accept this dual characterisation in, I think, the same sense that your Honour puts it to me. We accept that the condition governs both situations, but that is where it begins and ends from our perspective. We do not accept that it is appropriate, then, to take a single condition and dissect it into different fields of potential operation and to say that section 45 can operate to the complete exclusion of 47 if any of those fields falls outside section 47(4), even though many of them fall inside.

HAYNE J: Accepting that you reject the notion of dissection, how do you understand the dissection to be made? What do you understand the putative division to be?

MR YOUNG: What we say is this, your Honour, that one needs to appreciate that section 45 operates on provisions, and their mere inclusion in the contract arrangement or understanding for present purposes, or - and it is not this case - conduct by way of giving effect to a provision. On the other hand, section 47 has a slightly different subject matter, namely, the imposition of conditions on supply or acquisition. It is not concerned with provisions as such or dissection of their text or drafting; it is concerned with what condition is substantively imposed on a dealing. The dealing we are concerned with here is the dealing ultimately between the customer, who wants his waste removed, and NPP. That is the dealing in respect of which it is alleged Visy was seeking to impose a condition by proffering these clauses.

So the first question is - and all the cases on section 47 turn on this - you need to identify the scope of the condition. What in substance is the true condition imposed? Here the ACCC alleges that the provision for the purposes of section 45(2)(a)(i) is the non-compete clause. That must mean, when you turn to section 45(6), that the provision referred to in the third line of 45(6) is the same provision, that is, the provision that is alleged to be the exclusionary provision. Then the simple question becomes, if that non-compete clause were to be imposed as a section 47 condition, would the case fall within section 47(4)? The answer is, we would submit, yes.

GLEESON CJ: Is part of the problem in this case that the supply of services and the acquisition of goods are simply two aspects of the one transaction as distinct from two separate kinds of conduct?

MR YOUNG: That may be part of the issue, your Honour, but it is not the entirety of it for this reason, that we are concerned here with the "making" limb of section 45(2) or, indeed, we are concerned with attempting to make. We are not concerned with actual conduct that might arise had the contract been made. So we are concerned with attempting to make.

GLEESON CJ: Well, take that aspect of NPP's business or possible business that, as I understand the facts, might consist in NPP simply acquiring wastepaper from the sort of people who might, on behalf of the local council, pick it up from outside my gate. Now, as far as I am concerned, somebody is providing me with a service because it is rubbish. The council might be paying somebody to do it, and I am in turn paying rates to the council, but the people who collect it from outside the front gates in the neighbourhood might then all take it to NPP, might they not?

MR YOUNG: They might, yes, your Honour.

GLEESON CJ: So NPP is not in any sense providing any service in respect of that paper, is it?

MR YOUNG: Let me assume in the example your Honour gives me that that is so. There is no service being provided. It is simply acquiring the paper from some intermediary.

GLEESON CJ: And Visy are seeking to persuade, if this is an attempt, NPP to enter into an agreement that they will not agree to acquire paper like that from anybody who is already a supplier to Visy.

MR YOUNG: That is so, your Honour, but whether that approach to that party is made, in your Honour's example by way of acquiring waste, or if we assume that your Honour was a Visy customer, by way of providing a service to your Honour. The difference is this, that under the first limb we are concerned with making, and we are concerned with the imposition of a condition designed to catch both acquisition of waste and supply of service. That is its breadth and that is its purpose.

If and when there is actual conduct engaged in later on, after the agreement is made, it is not as if the actual conduct falls outside the Act. You fall down to the second limb of section 45(6) and you look at the conduct that occurred and you ask separately of the conduct, the transaction your Honour gives me from the intermediary, is that conduct itself which, on the assumption I am given, is a pure acquisition of waste, is that within 47(4), and the answer may be no.

When you get to the actual conduct you test each act or dealing on its own merits as to whether it falls within 47 or not. If it does fall within 47, then that conduct may give rise to a "giving effect" situation under the second limb of 45(6), but that has nothing to do with the imposition of the original condition which was designed to prohibit both classes of transaction, service and goods. There is a tendency to confuse the actual situation where conduct occurs which falls within the words in 45(6):

this section does not apply to or in relation to the giving effect to a provision . . . by way of:

a) engaging in conduct -

with the opening words of section 46 which deal with a situation where the making is under the microscope and the question is whether the making of a clause that contains a condition designed to prohibit both things falls within 47(4).

Now, Justice Sackville analysed the bipartite character or structure of section 45(6) in that fashion. The Full Court did not. They tended to confuse the two, with respect to their Honours, and appear to have approached the matter really on the basis that if their construction of the first part of section 46 is not adopted, then any conduct of this kind will hereafter fall outside the scope of the Act.

GUMMOW J: Well, so what? If the Full Court decision stands, it goes back for pecuniary penalties, does it not?

MR YOUNG: Yes, your Honour.

GUMMOW J: And you are liable for $10 million, are you not, section 76?

MR YOUNG: Yes, and individuals are liable for other amounts.

GUMMOW J: Yes.

KIRBY J: Yes, but if it does not stand, the clause which is itself described as non-competition falls outside the discipline of the Act.

MR YOUNG: No, your Honour, the clause was never made.

KIRBY J: Well, the intended cause. I mean, we are talking here in all six contracts.

MR YOUNG: The intended clause would fall within section 47 and would be subject to a substantial lessening test which - - -

GLEESON CJ: Is it not common ground in this case that there was neither the purpose nor the effect of substantially less than competition?

MR YOUNG: It is common ground and was from the outset. So, therefore, this is really a case that says this proposed clause has no impact on competition or no substantial lessening, either purpose or likely effect. We seek to attack it and to make the corporation and certain individuals liable for pecuniary penalties.

GUMMOW J: Why should we fine people $10 million for this conduct which has no anti-competitive effect, in the absence of clear words?

MR YOUNG: Yes, your Honour. That is the effect of the Full Court's decision and it is arrived at, your Honour, in our submission, by a construction of section 45(6) which really has this consequence: if, when you are contemplating making a contract, you can hypothesise any form of future conduct that might fall outside section 47 even though nine-tenths of the anticipated conduct will fall within it, if you can anticipate any conduct that would fall outside it, then section 45(6) does not apply at all and you are guilty of a per se breach by proposing a draft of contract to that effect. That is the consequence of the decision and it arises because it is a - - -

GUMMOW J: Now, what is said to be the policy that favours the opposite conclusion? What is the policy that supports, per se, prohibition in this Act?

MR YOUNG: In this Act?

GUMMOW J: Yes.

MR YOUNG: The policy that supports section 45(2)(a) - - -

GUMMOW J: It is rather hard to find.

MR YOUNG: - - - is identifiable, your Honour. Justice Sackville referred to that. In all events, he referred to the Tradestock decision. I cannot immediately turn to the passage. I will find it in a moment, but what his Honour said is that the per se prohibition in 45(2)(a) exists because Parliament has made a judgment that if you have a section 4D arrangement between competitors of each other but has the purpose or effect of restricting supplier acquisition to a particular person, so, in effect, you have something of a boycott arrangement, that is, per se, regarded as being of sufficiently anti-competitive content, purpose or effect to warrant per se prohibition.

KIRBY J: This is to discourage you from even entering or contemplating entering such arrangements?

MR YOUNG: Yes, but the premise to section 4D is that it is an arrangement between competitors.

GUMMOW J: Is it, at basis - this may come out of the American cases actually - an evidentiary idea?

MR YOUNG: It is essentially an evidentiary idea in that - I think we gave the Court a reference to some of the cases.

GUMMOW J: It is so likely to be the case that you do not need to get into the minutiae of proof.

MR YOUNG: That is so and in the US cases it is restricted to very clear cases that are said to be per se and it has never been extended to vertical distribution arrangements even where there is some potential for the manufacturer to engage in direct competition with its own distributor by selling into the same territory, for instance. It has never been extended in the US cases to essentially vertical arrangements like that that might admit of some direct selling by the manufacturer in competition with its own distributor.

KIRBY J: The 10 million is, of course, the maximum amount.

MR YOUNG: Yes, it is.

KIRBY J: The extent that any fine were imposed would presumably vary with the culpability and potential impact of any arrangement, if ever made.

MR YOUNG: Yes.

KIRBY J: And presumably at that stage too the consideration that Justice Conti mentioned at the end of his reasons would also be - - -

MR YOUNG: Granted all that, your Honour, it is nonetheless a serious matter - - -

GUMMOW J: You have some businessman sitting in your chambers and you have to give him advice. You cannot say it might not be $10 million.

MR YOUNG: I was going to say granted all that Justice Kirby put to me it is nonetheless a serious consequence for a corporation and individuals to be found liable for contravention in these circumstances.

KIRBY J: On one view that is exactly what Parliament meant: a serious consequence because it is defending serious purposes of the national Parliament and of the economy.

MR YOUNG: But here, your Honour, we had an express concession that there was no substantial lessening either purpose or effect.

KIRBY J: Yes, but that is not conclusive of the issue. I take it you do not say it is conclusive?

MR YOUNG: No, we do not.

KIRBY J: It is one of those indications that we have to take into account.

MR YOUNG: Yes.

Can I just turn briefly in the context of this issue about statutory purpose and intention to what Justice Sackville concluded. First, at paragraph 108 at page 665, his Honour in the preceding paragraphs has set out the statutory history of the provision, including the reference to the Swanson Committee Report. I have gone to paragraph 108 because it is a convenient place to find the words of the 1986 explanatory memorandum. The 1986 Act introduced the words "but for the operation of subsection 47(10)" into section 45(6). The consequence was to excise from 45(6) exclusive dealing conduct whenever it fell within the definitional provisions of section 47 that defined the practice regardless of whether or not it was ultimately held to constitute a contravention by virtue of failing the substantial lessening of competition test in section 47(10), but the explanatory memorandum said this:

3. This amendment extends the operation of the exclusion in sub-s 45(6) so that it prevents s 45, and in particular its prohibition on exclusionary provisions from applying to arrangements which, while coming within the definition of exclusive dealing in s 47, do not contravene that section because they do not have the purpose or the effect of substantially lessening the competition.

The conclusion Justice Sackville drew about legislative intention appears at paragraph 127, page 670. Referring to the explanatory memorandum I have just read, his Honour said at the top of 671:

suggests that the intent of s 45(6) is to prevent the prohibition imposed by s 45(2) on exclusionary provisions from applying to arrangements which come within s 47.

If we put aside the result their Honours reached and its impact for one moment, seem to treat section 45 and 47 as mutually exclusive, can I go to page 711 in the majority judgment, paragraph 65. I will not read it all. I draw attention to the first sentence. At 712 I draw attention to the last sentence of that paragraph and the next paragraph:

The purpose of s 45(6) is, inter alia, to remove from s 45(2)(a)(i) conduct which constitutes exclusive dealing within s 47 and apply to that conduct the purpose or effect on competition test -

Then paragraph 66:

It is obvious, therefore, that s 45(2)(a)(i) and s 47 are mutually exclusive.

Now, that identification of the provision sits oddly with her Honour's conclusion, which appears to be that 45(6) admits of some pro rata operation that applies section 45 to a condition to some extent and otherwise applies section 47 to the condition to some extent. That is the whole dual character argument. That of course is not the result produced because as soon as you identify one aspect that falls outside 47(4), even though other aspects are entirely within it, the entire making or attempted making of that contract is governed by section 45. There is no pro rata application at all.

So, in our submission, their Honours have effectively reversed the statutory intention as disclosed by the scheme, the Swanson Committee Report and the 1986 explanatory memorandum. So that rather than section 47 being in the hierarchy, the provision that is to govern this sort of conduct, the effect of their construction is that section 45 will always govern the making of contracts even if aspects of the conditions fall squarely within section 47.

KIRBY J: Is there an anchor for that reasoning in the substitution of the characterisation formula "by reason that" for the previous formula "in so far as" which appears to enlist a quantification or - - -

MR YOUNG: No, your Honour. As we put in our written submissions, "by reason that" are words that ordinarily connote a causal nexus. They normally mean "because". What cannot be done is - - -

KIRBY J: It does not say "by reason only".

MR YOUNG: No, it does not, but nonetheless it does signify some kind of causal connection. In context, your Honour, we would say that phrase in 45(6) really is directing one back to the reason why the provision in question constitutes a contravention of section 45(2) in the first place. In other words, your Honour, if one goes back to 45(2) for the moment - and can I try and explain what we say about the structure of 45(6).

Section 45(2) has two limbs, making a contract which is prohibited if it contains two classes of provision and, secondly, giving effect to a provision if that provision is of one or other of the two classes. So when 45(6) - and may I say that the provision that the ACCC built its case on was the whole of the non-compete clause in the terms in which it was expressed in each of the profit contracts.

KIRBY J: There is no difference relevantly between the different contracts?

MR YOUNG: No, there is not. Then one turns to 45(6) and it starts off at what I call the first limb or the first part by saying:

The making of a contract . . . does not constitute a contravention of this section by reason that the contract . . . contains a provision.

In our submission, "by reason that the contract . . . contains a provision" is simply a reference back to the fact that the reason why the making constitutes a contravention is by reason of the fact that it contains either the provision identified in (a)(i) or the provision identified in (a)(ii). So one could read the opening words of 45(6) more fully as to say:

does not constitute a contravention of this section by reason that the contract . . . contains a provision -

of the kind referred to in subsection (2)(a)(i) or (ii).

KIRBY J: Why do you resist the formula which the Full Court accepted or at least which the respondent was advancing and the Full Court acknowledged "if" and "in so far as"? They properly warned that you have to be careful not to take your eye off the actual language of Parliament, but - - -

MR YOUNG: Grammatically, your Honour, "if" and "in so far as" cannot be substituted for "by reason that". Simply, that is really not construction, in our submission, that is simply assertion - - -

KIRBY J: But both formulae require a characterisation. It is the classical problem of causation that has occupied courts for ever and somebody has to make an allocation and, ultimately, that is us..

MR YOUNG: Yes. But can I just elaborate my point. "By reason that" can be given its ordinary grammatical meaning without doing any damage to the provision, but you certainly cannot, we would say, substitute "in so far as" for "by reason that" because if you look around in surrounding provisions, where "in so far as" is intended it is used and it is not used in this provision.

KIRBY J: Where is an example? You have been - - -

MR YOUNG: Section 45(5)(c) and 45(7), in two places in 45(7), but also used in 45(1) and it was previously used in the forerunner of section 45(6).

KIRBY J: Yes, I think that is an important argument in your favour.

MR YOUNG: Yes, but can I give your Honour a second reason, that is that one should construe a provision such as 45(6) so that the two limbs, the two parts of it, operate in harmony and that is a general principle of construction that this Court has referred to on a number of occasions. If we turn our attention to the second limb, which seeks to operate in a compatible way in respect of the "giving effect" limb of 45(5), it says:

This section does not apply to or in relation to -

they are very wide words.

the giving effect -

that is defined very widely in section 4(1) -

to a provision of a contract . . . by way of:

(a) engaging in conduct that contravenes -

Now, if one applies the second part of 45(6), one would reach the opposite conclusion to that reached by the Full Court, that is to say, if you act in accordance with a contract that contains a condition of the kind here impugned simply by accepting waste from NPP that NPP has collected, and that is all you are doing, you are acting in accordance with it, which is one of the defined meanings of "giving effect", section 45(6) says:

this section does not apply to or in relation to -

that conduct. The words "to or in relation to" mean it is not possible to divide up the condition into different aspects of operational features and to say, "Well, what it really means is that 45(6) applies to or in relation to that conduct of acting in accordance with the contract to the extent that the clause has one possible field of operation but otherwise this section does not apply."

The words "to or in relation to" are of such ambit as to indicate that if any relevant condition falls within section 47(4), you stop there; you do not take the further step of dividing it up into potential fields of operation so as to say that 45 applies to it to some extent, but not to some other extent. That is denied by the words "to or in relation to".

GLEESON CJ: Mr Young, where it operates, 45(6) negates the effect of section 45(2).

MR YOUNG: It does.

GLEESON CJ: What affect does it have on the operation of section 45(1)?

MR YOUNG: I think the answer is none, your Honour, because section 45(1) is historical. It deals with a contract that has been made before the commencement of section 45(6), that is before the 1977 amendments, so there is no question of proscribing the making. That has already happened in history.

KIRBY J: Section 45(1) would be largely spent now, one would think.

MR YOUNG: Yes, your Honour.

GLEESON CJ: But at one stage the meaning of 45(6) had to be understood, together with the meaning of 45(1), presumably.

MR YOUNG: Yes, but then it was in a very different form, your Honour, because 45(2) did not deal with provisions; it dealt with contracts in restraint of trade. All these provisions were recast fundamentally in 1977 and I can take the Court to the comparison of 1974 and 1977, because it does have a bearing on what the Full Court did, but essentially, section 45 pre-1977 proscribed contracts in restraint of trade, and the equivalent of section 45(6) was 45(5)(a), which took out of section 45 a contract in so far as the contract was of a kind referred to in section 47. Section 47 was quite limited dealing only with supply on condition and there was no equivalent pre-1977 of section 4D; there was no, per se, illegality test. So the sorts of problems we have to grapple with simply did not exist pre-1977.

HAYNE J: Can I take you back to the argument you have just made about the second half of 45(6).

MR YOUNG: Yes, your Honour.

HAYNE J: You say that that reinforces what otherwise would follow from the first half.

MR YOUNG: Yes.

HAYNE J: Can I just understand it. The view against you is that there are operations of the non-compete provision, which could fall or would fall outside 47, are there? Is that part of the point against you?

MR YOUNG: If one understands operations as being future conduct might occur, yes, your Honour.

HAYNE J: And the second half of 45(6) revolves around giving effect to a provision by way of engaging in conduct contravening.

MR YOUNG: Yes.

HAYNE J: If the premise for the argument against you were right, that there could be future conduct falling outside 47, but compelled by the non-compete provision, what, if anything, does that say about the argument that you have made about symmetry of the two halves of 45(6)? You place chief weight on "to or in relation to", I understand that.

MR YOUNG: Well, your Honour, it comes back to the proposition that Justice Sackville advanced which the Full Court did not deal with, which is that under this bipartite structure, the second limb deals with conduct, as and when it is engaged in, and when you have a particular piece of conduct, you examine that piece of conduct to see whether that conduct involved the imposition of a condition within 47. If it did, then section 45 does not apply.

If you have a species of conduct that for some reason falls outside section 47, it is separately tested under the second limb, and that is what is permitted by the second limb. That fact - let us assume it is a realistic possibility - does not affect our argument or the argument I was putting about harmony, your Honour, for this reason, that we are at the stage of attempted making of a contract. All you have is the non-compete clause, in its scope, as drafted.

If you assume that Visy says to NPP, "I will acquire your waste if you agree to a condition in identical form to the non-compete clause." The only question under the first limb, if we are dealing with conduct, would be, is that conduct by insisting on that condition of identical scope to the non-compete clause engaging in conduct that falls within 47? The answer is, yes, it falls squarely within 47(4). Is there any room then for a pro rata operation of 45(6) that applies 45 to that condition to some extent but not to some other extent? The answer is, no, there is no scope at all when you take that condition for a differential application of section 45(6). It is precluded by the width of the words "to or in relation to", it is precluded by the width of the words "giving effect", and it is precluded by the width of the words "engaging in conduct".

So if we stick to the same condition, the second limb demonstrates that the Full Court's conclusions about the first limb must be wrong, otherwise discordancy is introduced into the scheme of the section, and that answer is not addressed by taking some other and different form of conduct that is presumed to be entirely outside section 47, discrete conduct, no other aspects to it, and saying, "Well, let's apply the second limb to it."

Can I fortify that argument by just drawing the Court's attention to the definition of "giving effect" in section 4(1). Giving effect:

in relation to a provision . . . includes do an act or thing in pursuance of or in accordance with or enforce or purport to enforce.

Now, our learned friends like to fasten on the words "enforce" because their written submissions refer to an injunction to restrain NPP from acquiring goods from a competitor of Visy. Now, that, of course, would be conduct down the track and, if it occurred, it would be separately assessed. But "give effect to" when you look at the condition in fact imposed includes doing "an act or thing in pursuance of or in accordance with". So, doing "an act or thing in pursuance of or in accordance with" would simply be not approaching Visy customers in any way, and so you would not be able to ascertain whether the non-approach involves some attempt to acquire goods or an attempt to provide services. "Give effect" is defined very broadly, and the basic way one would expect that this condition would be given effect would simply be by NPP collecting waste, supplying it to Visy, and not approaching Visy's customers. So in respect of those non-approaches, it is impossible to dissect that sort of conduct in the way in which the Full Court suggests is appropriate.

Can I, while I am on that point, just draw the Court's attention, because it is important to what Justice Sackville said about "give effect" at page 668 and 669. First, at paragraph 120, his Honour draws attention to the broad definition of "give effect". I will not read that passage. Then, at paragraph 123 on the next page his Honour rejected an argument advanced on behalf of the NCC that 45(6) could not apply at all because not all elements of the practice of exclusive dealing were found within the non-complete clause itself, you had to look at other parts of the contract. His Honour rejected that argument and in the last few words his Honour said this, at line 31:

"Giving effect to" an exclusionary provision such as the non-competition clause in the ECAs encompasses acting in accordance with the clause and with any contractual provision constituting the quid pro quo for that clause.

So, in our submission, if you take those words "acting in accordance with", to act in accordance with this condition would fall squarely within 47(4).

GLEESON CJ: Your argument about the mutual exclusiveness of sections 45 and 47 seems to come to the proposition, does it, that if a provision involves a contravention of section 47, section 45 has nothing to do with it?

MR YOUNG: Can I deal with the thrust of your Honours question by slightly rephrasing it because we have this dichotomy between "provision" in 45 and "condition in" 47. We would accept this, your Honour, that if the imposing of the provision could be characterised as offering to acquire goods on condition that NPP not approach, et cetera, as per the non-compete clause, then it is taken wholly outside of section 45 and the intention of Parliament is that it should be dealt with entirely by section 47 even if it is possible to hypothesise that some particular conduct by way of enforcement or by way of implementation of that clause in due course might be confined simply to the acquisition of waste and therefore not of and by itself be section 47 conduct.

GLEESON CJ: Does that mean that the practical effect of 45(6) is that if a provision involves a contravention of section 47 then you apply section 45 as though the contract did not include that provision?

MR YOUNG: In effect, yes, your Honour, section 45 will not apply to that provision. Section 45 only applies under 45(2) if the contract contains the provision. Expressed in extreme terms, your Honour, the other side's argument is that if any potential operation of a proposed clause might fall outside 47, then 47 can never apply to its making. It is governed entirely by section 45. That is the effect of the Full Court's decision. It is demonstrable in their order. Even though this was a dual character clause, there is a breach of section 45 by attempting to make it and the fact that the clause had some other character that is in section 47 does not excuse you from the contravention.

That is the consequence of the other side's argument. It is an argument founded on a proposition that it should have a pro rata construction or meaning placed on it "in so far as", but the consequence is for the making limb it can never operate.

GLEESON CJ: Pro tanto actually.

MR YOUNG: Yes, your Honour is right. The pro tanto operation, but for the making limb, that can never be delivered. Making is a single action. It is either in section 45 or section 47. Attempted making likewise.

CALLINAN J: Is it your submission then that if the contract contains a provision which is within section 47, albeit that it may contain all sorts of other provisions, then the contract is outside 45(6), the whole contract.

MR YOUNG: The making of the contract, your Honour, being a contract that contains a section 47 condition will be outside section 45, but let me hasten to add, your Honour, we are dealing with sections that focus, not on the contract as a whole, but on the provision.

CALLINAN J: But once you focus on the provision, and if that provision is there, then the whole of the contract is outside 45(6), is it not?

MR YOUNG: Your Honour, the contract is only within 45 in the first place because it is alleged that it contains a provision that triggers 45(2)(a)(i) and so if we look at 45(6), your Honour, the provision referred to is the provision that assumedly brings the contract within section 45 in the first place and the assumption that 45(6) is drafted on is that there is a provision that otherwise, but for this section, will fall within section 45(2). That provision was alleged to be here the non-compete clauses.

Now, taking those provisions, the question we say you ask yourself is treating those provisions as conditions that Visy is seeking to impose on NPP as a condition of acquiring waste - so translating it into the language of section 47 - would the imposition of such a condition fall within 47 and if the answer is yes to a large extent, but not wholly, it matters not, but if the answer is yes, then 45(6) first limb operates to excise the imposition of that condition and the provision from the reach of section 45.

GLEESON CJ: What do you say about the Full Court majority's proposition that if the drafter of this contract had taken the trouble to spell out separately each aspect of this prohibition there would not have been any doubt that the second aspect of it would have contravened section 45?

MR YOUNG: We say this, your Honour. That proposition is not worthy of any weight for these reasons. First, the allegation was here that the exclusionary provision was the non-compete clause in each of the contracts, so it is the ACCC that has identified the provision in their pleadings and in their entire case, not some provision that did not exist but could have been redrafted. They have identified the provision and it is a provision of a particular scope, catching both services and goods.

Secondly, when one turns your focus away from the provision they identify as the 4D provision to section 47, the question is whether that provision viewed as a condition on acquisition would fall within section 47 and the section 47 case is a legion that says everything for the purposes of applying section 47 depends entirely on what is the scope of the condition in fact imposed.

Let me take Castlemaine Tooheys, the decision in this Court. The Court held that there was no section 47 condition because the delivery service for the beer was in fact paid for, arranged and acquired by the brewery. There was no condition being imposed on the purchaser that you must acquire transport services. The economic effect was the same because the cost of transport was added to the delivered price of the beer. It could have been rephrased differently, and had it been rephrased as a condition that the purchaser shall not only acquire the beer but shall pay for and acquire transport services from QRX, the whole outcome of the case would have been different. The High Court made that point. Section 47 turns on the particular condition that is in substance imposed.

The Court has been handed a copy of the case. Can I just point to the passages for the Court's assistance? Firstly, at page 400 at the last paragraph in the judgment of Chief Justice Gibbs, continuing across to the next page at the very top, so 400 to 401. Next, in the judgment of Justice Wilson, page 402, last paragraph. Next, in the judgment of Justice Brennan, page 405 at about point 3 on the page at the commencement of a large paragraph and on the same page, the last three lines, going across to the top of 406. Those judgments refer to Justice Deane's judgment in the Ku-ring-gai Building Society Case. The case again made the same point, that for the purposes of section 47 everything really swings on what in substance is the condition that is being imposed.

The same approach is apparent in the recent decision of Justice Goldberg in ACCC v Australian Safeway Stores Pty Ltd. We have only copied for the Court's assistance some extracts and I will just give the paragraph references. Paragraphs 968 to 969 at 53,375 in the unwieldy CCH reference, and paragraph 982 at 53,377. The case is really only illustrative of the fact that when you turn to section 47 to see what falls within the defined practise of exclusive dealing in 47(2), (3), (4) and (5), the question is simply, what, in substance, is the condition being imposed? What is its reach, its proper scope, and on its proper scope does it fall within section 47? If it does, in our submission, 45(6) has the effect that the imposition of that condition is taken outside section 45 and 45 no longer makes the proffering of a provision in identical terms a per se contravention.

Justice Sackville answered the question that I have just posed in our favour. Can I draw attention to two passages. Page 663, paragraph 102, which is introductory, and the other passage is 668, paragraph 120, to which I have already referred the Court because of its treatment of "giving effect to". His Honour there effectively answers our question in our favour, but it is true his Honour does look to enforcement conduct rather than acting in accordance with conduct. We would say as well that if a provision restricts a supplier of waste from either supplying services or acquiring waste from any competitor of Visy simply by not approaching Visy customers, is acting in accordance with the provision.

I want to turn to the reasons the Full Court gave for their construction. Can I identify those? They commence essentially at page 712, paragraph 68. Section 45 deals with the legislative background which is in effect the first reason advanced for the construction adopted. Contrasting the 1974 version of the Act with the 1977 version, their Honours say at line 25:

There is nothing in the extrinsic materials that would suggest that Parliament intended a different result as a consequence of the 1977 amendments. Indeed, it would be remarkable if Parliament had intended a different result.

Now, that is not altogether easy to follow. First, the 1974 Act was in fundamentally different form. Section 45 proscribed a contract in restraint of trade. The overlap provision with section 47 was in a very different form, but addressed itself to kinds of contract and used the expression "in so far as", which was deleted in 1977. As well, section 47 was in very different form and there was no per se provision in section 4D. So it is not at all clear what the result was that their Honours discerned in the 1974 Act. Indeed, on one view of the 1974 Act, because it dealt with kinds of contract, it may not have had the operation their Honours assumed. In any event, everything was fundamentally altered in 1977. Therefore, it is hard to see how their Honours can draw the conclusion that Parliament intended the same result, notwithstanding it fundamentally changed the whole group of sections or, indeed, how it can be said that it would be remarkable that Parliament intended a different result. Why so when a per se prohibition is being introduced into section 45, and the whole of section 45 is being remodelled to fasten on provisions?

KIRBY J: Well, presumably what their Honours are saying is that the general purpose behind introducing the per se prohibition is a serious important national purpose and that therefore one would not assume that it is to be emasculated at birth.

MR YOUNG: But, your Honour, there remained an overlap provision; section 45(6) was re-enacted. Given now the difference post-1977 of section 45 that contains a per se prohibition overlapping with section 47's substantial lessening test, we would submit that there is all the more reason for a clear and definite line of demarcation being drawn than had previously existed and drawn, not in a pro tanto fashion, depending on speculation about what might occur in future by way of enforcement conduct, but drawn in a fixed and definite way, so that commercial parties know, when they are negotiating a contract, is this going to be governed by section 47 or section 45, with real certainty. The desirability of a certain test like that was something alluded to by the majority in Melway, as I recall it.

GLEESON CJ: Here we have a case in which it is conceded that no aspect of the non-compete clause had either the purpose or the likely effect of substantial lessening of competition. What would be the case in a situation where you had a clause or a provision that had a double aspect, that that part of it that fell within section 47 had no purpose or effect of substantially lessening competition, but that part of it that did not fall within section 47 had such a purpose or effect?

MR YOUNG: I will try and grapple with your Honour's question.

GLEESON CJ: Well, apply it to the facts of the present case. Let it be supposed that in so far as NPP were prohibited from supplying services to people, there was no anti-competitive effect, but let it be supposed that in so far as they were prevented from acquiring goods from people, there was an anti-competitive effect.

MR YOUNG: The answer, your Honour, may lie in this proposition, that is that if those dual aspects had such radically different commercial consequences, it may well have a bearing on the question of what, in substance, is the true condition being imposed within the meaning of section 47(13), disregarding legal forms, enforceability and the like, but looking at what is in substance the true condition being imposed. It may be, your Honour, that in that situation it may be found that the real condition is not that which formally appears, but only that part which has those dire commercial consequences.

HAYNE J: Let me proffer an example of that where Visy makes an agreement with Amcor, its chief rival in this business, as I would understand it, which is, "You, Amcor, (a) must not acquire, whether by contract, gift or appropriation of abandoned goods, any wastepaper from persons who are customers of Visy." That is part (a). Part (b), which may perhaps wear a different complexion is, "You, Amcor, must not take away any wastepaper from the premises of a person who is a customer of Visy", and, if you like, add on the would-be customers to flourish it a bit, but that is the core of it.

MR YOUNG: Well, what your Honour gives me is a straight section 4D situation, not falling within section 47 at all, because - - -

HAYNE J: Well, part (a) may not, but part (b) I think you would say might. No?

MR YOUNG: No, your Honour, because no condition is being imposed as a condition of a supply or acquisition relationship between Amcor and Visy. The key thing that triggers section 47 is a vertical supply acquisition relationship, that is a real one, not a contrived one, a real one, because that is the effect of the provisions of section 47. If you have a real vertical relationship, and the question is, what, in substance, is the real condition being imposed on the dealings between them, that should, we would say, accommodate the sorts of concerns that our construction would not allow the Act to work on conditions that are really being imposed.

I mean, the impact would be only to subject conduct to a substantial lessening test under section 47 rather than a per se test if section 4D is applicable, and as I said, nothing falls outside the reach of the Act. It simply falls into one basket and one test rather than another. In our submission, in the context of a vertical supply relationship where conditions are being imposed, Parliament's judgment is that substantial lessening tests should be applied. Whereas, if it is an arrangement between competitors that has no vertical supply component, section 4D and section 45 applies, and the question never arises under section 45(6).

Can I return to the second reason that their Honours give. It is in paragraph 69 and, in essence, I have essentially answered that by the answers I gave to the Chief Justice in the context of the brewery examples and the importance of the particular scope of the actual condition being imposed. To answer their Honours rhetorical question, a different result ensues as it always does under section 47 when a different condition is imposed. One result followed in the Castlemaine Tooheys Case because no condition was being imposed on the purchaser of the alcohol, but if a condition had been imposed on the purchaser of beer, that he must pay for the transport services himself, then there would be a different outcome.

KIRBY J: But what their Honours seem to be saying is that if this is the purpose of the Parliament, that it would be remarkable if it could be avoided in such a simple fashion. They say that clearly in 70?

MR YOUNG: Their Honours do not identify what they say the intention of the Parliament was.

KIRBY J: Per se provisions seem to suggest an important purpose is being postulated?

MR YOUNG: No, their Honours are dealing, though, with the whole of section 45(6) which applies not just when you have a per se provision, but when you have a substantial lessening provision. That was the point of my remark, your Honour, that the provision referred to in section 45(6) is the provision which assumedly triggers 45(2), and that can either be the per se provision or a substantial lessening provision. You have to apply section 45(6) to both categories, and that is revealing about Parliament's intention. We move away from the per se provision, and you have a provision of a contract arrangement or understanding that has the purpose or likely effect of substantial lessening competition. What this Act says is that if that provision is also a condition on supply or acquisition within the meaning of 47(4), section 45 does not apply to it at all. You go to section 47. Notwithstanding that ultimately they apply the same test, section 47 operates to the exclusion of section 45. So when their Honours speak about Parliament's intention, and in paragraph 70 about a national legislative policy, they do not really identify what the policy is, save perhaps for when they go on and speak about this pro tanto operation in the next paragraph.

We would say that what Parliament intended is that when you are about to make a contract, you should know with certainty whether it is going to be entirely governed in respect of a particular provision by 47 or 45.

KIRBY J: I can understand that argument, but in so far as Parliament uses the words "by reason that" and thereby attracts a task of characterisation, unfortunately it is never going to be absolutely certain. It is not mathematical. There is a judgment involved.

MR YOUNG: Can I turn to that in a moment, your Honour? Can I turn to the third argument which is the "dual character" argument that their Honours advance for the construction they favour?

GUMMOW J: Where do we find that?

MR YOUNG: Paragraphs 70 and 71 at 713, your Honour. The expression "dual character" is, I think, their Honours. The argument below had been about dual operation. In paragraph 70 they speak about Parliament's intention of a national legislative policy without identifying what it is that supports the pro tanto operation.

KIRBY J: I think they identify it reasonably clearly. They are saying that your theory allows escape from what they deem to be an important national legislative policy because the Parliament has taken the trouble to incorporate it in the Act, amending the Act for that purpose, and that it is just difficult to conceive that that can then be circumvented by simple formulation of the contract.

MR YOUNG: Your Honour, there is no circumvention because the provision in question is alleged to be the exclusionary provision, the entirety, as set out in the contract. The question then simply is taking the provision they allege to be the exclusionary provision, would giving effect to that provision, that is, would imposing a condition on supply or acquisition in the exact terms of that same provision fall within section 47(4)?

GLEESON CJ: Now, when you come to apply the substantial "lessening of competition" test under 47, do you apply it to all aspects of the provision in its operation?

MR YOUNG: You apply it to that which is identified to be the substantive condition imposed on the dealing.

GLEESON CJ: In the present case, for example, suppose there were an issue about substantial lessening of competition. Would you look at the anti-competitive effect, if any, on that aspect of the provision concerning acquisition of goods?

MR YOUNG: Yes, your Honour, you would. Well, because it is one condition and you look at the anti-competitive effect of the condition once it falls within section 47(10) and 47(10)(b) also refers to engaging in:

other conduct of the same or a similar kind -

so, it is far from clear to us, your Honour, that when you apply a substantial lessening test, you would, in reverse as it were, sever part of the condition simply because that part of the condition is not that which attracts the operation of 47(4).

KIRBY J: Could their Honours in 70, by referring to the "national legislative policy", be reflecting the approach of Justice Hely in the South Sydney Rugby League Case which is quoted at the top of the next page, that is to say, to secure the harmony between the two parts of the section you adopt that classification?

MR YOUNG: No, not in their Honour's case, your Honour, because they never addressed the operation of the second part of the section. It is our argument that their conclusion introduces discordancy between the second limb and the first limb. Their Honours never really approached the second limb at all. They did not discuss the bipartite structure and they did not draw a distinction between the way in which the second limb applies to conduct and the way in which the first limb applies to the making of the contract. That is evident in paragraph 71, if I can turn to that for a moment. At line 20 their Honours say this:

This is because we are of the view that the words "by reason that" can and do here bear a meaning -

unidentified, we interpolate -

that would operate to apply the provisions of s 47 (to the exclusion of s 45(2)(a)(i)) to the making of a contract which contains a provision falling within s 47 but continue to apply s 45(2)(a)(i) to the making of that contract other than so far as the terms of a provision of that contract fall within s 47. After all, s 47 does not apply to each and every provision of the contract . . . but only to an exclusionary provision which falls within s 47 -

Now, there are a lot of difficulties with their Honours' language. In the first place, section 45(6) does not apply section 47. Section 47 simply applies of its own force to the imposition of a condition. All that 45(6) does is to limit or prevent 45 operating at all. Secondly, 47 does not really apply to provisions at all; it applies to substantive conditions imposed on dealings by way of acquisition or supply.

Thirdly, their Honours' conclusion is unworkable. Section 45(6) does not ever apply the provisions of section 47 to the making of a contract, nor does it continue to apply section 45 to the making other than so far as the terms of the contract fall within section 47. If in the case of making a contract or attempted making, you have a single action, making or attempted making, you cannot divide that up according to the dissection of some particular clause in the contract.

It is either going to be governed by section 45 or by 47, so there is no, in effect, pro tanto result that is produced by this construction. That is the theory, but the answer is, rather than continuing to apply 45(2) to those aspects of the provision that would otherwise be in 47, the effect of the construction is that section 45(2) applies to make the attempted making a contravention regardless of the fact that aspects of the operation of the provision would ordinarily fall within section 47.

In our submission, with all due respect to their Honours, what their Honours say about "by reason that" at the end of the day is simply assertion. Their Honours do not interpret those words. Their Honours really do not, in effect, give them any definite meaning. Their Honours simply state a result and a result that is, in any event, unachievable in the context of the first limb of section 45.

In contrast, in our submission, Justice Sackville's judgment reveals a careful review of legislative history of the relevant authorities, of the different language and expressions used in the various provisions, of the relationship between the first limb and the second limb and of a relationship between sections 45 and 47. It produces a sensible result.

Their Honours refer to Justice Hely's judgment in South Sydney but, as appears from the two passages they quote, his Honour in an interlocutory judgment ventured two possible views. One was that "by reason that" means "if and in so far as". The other was that, if viewed from one perspective, the conduct would be within section 47. That is enough. So his Honour's interlocutory judgment is, in our submission, equivocal at the end of the day.

I should as well refer to Justice Conti's dissenting judgment. His Honour, like Justice Sackville, thought that the legislative intention disclosed by careful review of the part, was that there should be no pro tanto operation. His Honour expressed that view in paragraph 80 at page 717. At line 17, his Honour inferred from the legislative history and a consideration of the section in its context:

that in circumstances involving restraints having a dual character, such as the present, what I would describe as the practical task of establishing a purpose or effect or likely effect of substantially lessening competition within s 47(1) was intended by the legislature to be a pre-requisite.

HAYNE J: Do you support that reasoning, Mr Young?

MR YOUNG: We support the reasoning to this extent, your Honour, that is that section 46 does not call upon one to dissect a provision or a condition in section 47 language into different potential fields of operation and to try and make section 45(6) apply differently to the different fields of operation.

HAYNE J: Does anything - sorry.

MR YOUNG: I was going to say that the converse of that that Justice Conti is addressing is really that if you go down that path at all, the dissection, it really indicates that even if it is possible to dissect a particular condition so that one aspect of its operation might fall outside 47, the intention of the legislature is that that should not lead to the exclusion of 47 and the application of section 45, rather, the reverse. It is sufficient to attract 45(6) and to exclude 45, but a substantial field of operation of the provision is within section 47, even if some aspect is not.

HAYNE J: Does anything in your submission turn on the fact that 45(2) is the general prohibition, "Thou shalt not relevantly make a contract containing an exclusionary provision"? Section 45(6) is a qualification to that general prohibition, is it not?

MR YOUNG: Yes, it is, your Honour.

HAYNE J: Is it open to say that the qualification thus provided for is engaged only if the provision wholly falls within 47, which seems to be what this language of dissection stems from?

MR YOUNG: Your Honour, as I said, that is what it comes down to at the end of the day. It is a contention that - not the whole of the provision, but the whole of the potential future operations of the provision will always in every case fall - I will rephrase it. The contention is that if you can find one potential future operation of the clause or one potential future category of conduct under or in pursuance of the clause that might fall outside section 47, even though the rest and the usual anticipated course of performance is squarely within section 47, that in effect defeats section 45(6), it excludes 47 because section 45(6) is defeated, and it casts everything back into section 45. That is the effect of what has been said. It produces an workable situation in relation to the making of a contract. When you are making a contract you will have a draft of a potential clause or condition in front of you.

HAYNE J: But the first port of call is, is it an exclusionary provision, is it not?

MR YOUNG: Yes.

HAYNE J: Section 45(2) would invite attention first, and that is a matter which could be answered with some certainty, is it not?

MR YOUNG: Yes, because you ask the question whether it is between competitors and whether it has a purpose or effect of restricting the supply or acquisition of goods being the same goods that they are competing in.

HAYNE J: But the unworkability would fall away if it were a sufficient answer - I understand you to say it is not a sufficient answer, but if it were a sufficient answer to say, "Well, exclusionary provisions, if you have made one, prima facie that is barred by 45(2)." Now, unless you can show that you fall within the qualification to 45(2), being 45(6), namely that the provision is wholly within 47, then 45(2) bites. That is the essence of the argument against you I would understand.

MR YOUNG: Yes, your Honour.

HAYNE J: What is the answer to it?

MR YOUNG: Two steps. First, qualification perhaps understates the effect of section 45(6). It says "this section does not apply".

HAYNE J: Well, "this section does not apply" "by reason". The making does not constitute "by reason".

MR YOUNG: Yes, there is a reason but the effect of it is "this section does not apply". It is not as if it had applied at some stage but there is qualification. It simply does not apply.

GUMMOW J: Wait a minute. Where do you get that from?

MR YOUNG: It says:

The making of a contract . . . does not constitute a contravention of this section -

and then certain reasons are given -

and this section does not apply.

GUMMOW J: Yes.

MR YOUNG: I am drawing attention to the scheme of subsections (5), (6) and (7) for instance. Two of those - - -

HAYNE J: But "this section does not apply" is to do with "the giving effect", is it not?

MR YOUNG: No.

HAYNE J:

this section does not apply to or in relation to the giving effect to - - -

MR YOUNG: No, that is true of the opening limb of 45(6). I was answering your Honour more broadly by the scheme of the section and looking at the opening words of 45(5) and 45(7). It is only a small point, your Honour, but the scheme seems to be 45 does not apply at all to certain specific classes of conduct.

HAYNE J: I understand that, yes.

MR YOUNG: Then it is a question of identifying what it is that is said to otherwise bring the conduct or the provision within section 45 and whether the excision, the exclusion, is triggered. If the exclusion is a 47(4) condition, why would you not simply ask this question, "Would imposing this condition on acquisition be within section 47(4)?" And if the answer to the question is "Yes", it does not matter that there is some other potential operation of the provision that if you fastened on that subset of the provision as it were, that dissected out portion of the provision, you would answer the question differently.

HAYNE J: Does it then follow from this aspect of the argument that even if the contract had been phrased, "NPP shall not collect", et cetera, and there had been a definition which read, "collect means (a) acquire the good, (b) take away"?

MR YOUNG: No, you may get a different answer, your Honour, because if the allegation is that what contravenes section 45 is not the prohibition on providing collection services but a different prohibition on actually acquiring goods, you ask yourself the same question, in our submission. You would say, would the provision that is alleged to trigger section 45, if imposed as a condition on acquiring goods under section 47, would that fall within 47? And the answer may be "no" if we are dealing with a different condition.

HAYNE J: It is not apparent to me, Mr Young, and the difficulty I am having is that if your argument is right I do not see for the moment why, if it is right, it would not apply to the agreement where collect is divided into the two aspects of acquisition of goods, and that troubles me.

MR YOUNG: The answer to your Honour's question would be, presumably, in that situation - I am making this assumption - the provision alleged against us would be a different provision. If I do not make that assumption I would give your Honour the same answer.

HAYNE J: Yes.

MR YOUNG: But if it is what is alleged against us is a different provision and it is alleged that a different condition is relevant to the application of section 47, you may get a different answer. But the only case put against us ever was that the condition or the provision was the entirety of the non-compete clause, encompassing both, and if that is the condition, we would say the question that Parliament intends to be asked by the language used in section 45(6) is a relatively simple one, "Would imposing a condition identical to the provision fall within section 47?" And, if the answer is "Yes", it is not affected - - -

GUMMOW J: It is not just 47, it is "would, or would but for the operation of section 47(10)".

MR YOUNG: Yes, that is what I mean by my clumsy expression, your Honour, that it is not "would be a contravention of section 47", because of the words "would but for the operation of section 47(10)". The effect of the 1986 amendment that introduced those words was that taken out of 45(6), if the conduct would fall within the description of the practice of exclusive dealing in the definitional provisions of (1), (2), (3), (4), (5), (6) and (7) and so on, regardless of whether - - -

GUMMOW J: I just wonder if those awkward words in 45(6) are not some attempt to get the mind around the two halves of 45(2)(a).

MR YOUNG: With respect, we agree with that, your Honour. We think the awkwardness is attributable to two things: one, the two different parts of 45(2)(a), and his Honour Justice Sackville made this point. It refers to "by reason that" it "contains a provision". It is a shorthand word of referring back to by reason of there being a provision either in the form of (a)(i) or (a)(ii) and then the awkwardness is contributed to by the fact that 45 is aimed at provisions, 47 is aimed at imposing conditions on supply or acquisition - - -

GUMMOW J: But if you rewrote 47 to take out (10), which on one way of looking at this you are doing, how would that work?

MR YOUNG: All it would change, your Honour, would be that you would only get the benefit of the exception if you satisfied two conditions: first, that the imposed condition was exclusive dealing as defined in 47(2), (3), (4), et cetera and, secondly, if applying a "substantial lessening" test you contravened that test and thereby contravened section 47. So you get the comfort of being governed by 47 - or 47 governs where there is a contravention of 47, was the old formula. That has been altered in 1986. Section 47 governs, not just when there is a contravention, but when you engage in the practice of exclusive dealing as defined, whether or not what you are doing is substantial lessening within section 47(10).

GUMMOW J: Yes, but it is postulating a form of section 47 on one branch of subsection (6) which does not exist, namely by per se 47, by stripping out subsection (10).

MR YOUNG: No, we would doubt that, your Honour, because section 47 has, we would put aside third line forcing. It has always had a competition testing it.

GUMMOW J: For all subsections? Why just get rid of subsection (10) - - -

MR YOUNG: Well, subsection (10) governs all subsections other than (6) and (7).

GUMMOW J: It does, yes. So what is the significance of postulating 47 without subsection (10) and then comparing that with this contravention of 45?

MR YOUNG: Well, the concern was that you did not have the benefit of the exclusion of 45(6) for exclusionary dealing conduct. You only had an exclusive dealing conduct if it ultimately transpired that it resulted in contravention. There is an article by Justice Callaway, before his appointment, that addressed what was thought to be a deficiency in section 45(6), namely, that the protection for exclusive dealings should be wider. Justice Callaway's article - I will give the Court a reference - was in 54 ALJ 200.

GLEESON CJ: Is the idea that the protection should extend to cover exclusive dealing that is kosher?

MR YOUNG: Yes. So kosher exclusive dealings should not be caught by section 45, especially when post-1977 there had been introduced a section 4D per se provision that potentially overlapped with the vertical dealings that were intended to be dealt with by section 47.

GLEESON CJ: Mr Young, what did Justice Conti have in mind at page 716, line 23, where he said "that the former restriction . . . here, the quid pro quo for the latter" restriction?

MR YOUNG: I think the answer may be this, your Honour, that the two parties, NPP and Visy, were from 1955 in a vertical supply relationship under which NPP provided Visy with the whole of its stocks of waste. It was like an exclusive acquisition contract. The context in which the non-compete clauses were proffered consisted of a proposal by Visy to NPP "that you should become an exclusive agent and get a franchise territory", and one of the reasons for the non-compete clause being proffered was that NPP was to become a franchisee, effectively the exclusive collector, in a designated geographic area, of Sydney. So the quid pro quo for the restraint, the non-compete clause, was the establishment of an exclusive franchise arrangement between NPP and Visy for a particular territory, but reserving to Visy the right to go on dealing with some of its established customers in that territory.

That context is lost a little when one has this allegation that, "This is a section 4D provision, even though you are substantially in a vertical relationship, because of the possibility that Visy may be competing with you for waste, to some extent, out there", so that when you look at it purely in section 4D terms, you lose the context. Then when you translate section 47, as the Swanson Committee said, the intention was that section 47 should govern exclusive franchises to the exclusion of section 45, because you are looking there at supply and acquisition relationships and the imposition of the condition.

All we can say, your Honour, is that his Honour seems to be of the view that by fastening solely on the actual provision, by asking the pro tanto question, "Is any possible future operation of that outside section 47?", that is an approach which probably loses sight of the broader picture of what the Act is trying to do when it has section 45 dealing with one category of conduct, you have an anti-overlap provision that prevents section 45 applying, to section 47 substantially vertical exclusive franchise conduct.

The actual quote that his Honour takes from Justice Sackville's judgment was directed to a slightly different argument which was that section 45(6) had no application at all because you could not find all of the integers of section 47 within the four corners of the non-compete clause; you had to go to other clauses of the contract to get the supply and acquisition relationship. It seems to us his Honour is adapting what Justice Sackville set about in rejecting that argument to the broader context of, in a sense, criticising this approach of dissecting a particular clause.

GUMMOW J: You have to read these dissection argument which seem a bit verbally excessive with section 47(13)(a), have you not?

MR YOUNG: Section 47(13) tells you to look at the substance and not the form.

GUMMOW J: Yes.

MR YOUNG: To look at the commercial reality and not the legality. That is what we say, your Honour; we are not saying you go away from 47(13). You ask yourself, "What in substance is the condition being imposed". There is no artificiality about that, just as four judgments found there was no artificiality about the desire to impose a condition that prevented the provision of services as well as the acquisition of waste. That was the real condition that was sought to be imposed. If that is so, it is artificial, in our submission, to attempt to dissect the condition further. Not only that, it produces, in our submission - - -

GUMMOW J: What do you mean by "the condition"?

MR YOUNG: By "the condition" I mean the non-compete provision.

GUMMOW J: Yes, a collection of words found in a particular passage of a document.

MR YOUNG: Yes. Your Honour, that is all we have because we never got down to an actual circumstance where this condition was in fact imposed on dealings.

GUMMOW J: Yes.

MR YOUNG: We have, in terms of section 45, an attempted making of a provision, and you have only those words.

KIRBY J: But that seems an empty complaint because Parliament has regarded the matter as so serious as to prohibit attempts.

MR YOUNG: Yes, your Honour, but my point is it is artificial to dissect the clause because that is all the parties ever discussed. His Honour found that it was intended to apply both to the provision of services and to the acquisition of waste. In the Full Court all members endorsed that. They said it was genuinely designed to that end.

KIRBY J: It did, after all, go through six contracts.

MR YOUNG: Yes. In the face of those findings and those circumstances, why accede to an argument that you further dissect the operation of the clause? The parties never did. They did not want to. They did not intend to. Unless there is anything else I can assist the Court with, those are our submissions.

GLEESON CJ: Thank you, Mr Young. Yes, Mr McClintock.

MR McCLINTOCK: Your Honours, the policy lying behind the sections of the Act and the explanation of how in fact they mesh together is really simple. It is that horizontal restraints between competitors are necessarily bad; vertical restraints are not necessarily so. That is the reason why section 45(2)(a)(i) is framed in the way it is and the reason why section 47 operates, so to speak, as an exception on the prohibition in section 45.

The situation here was that this was an agreement between two competitors. They both had been operating in the market in Sydney to acquire supplies of wastepaper. In fact, for what this is worth, at the time of the attempts to enter into the contracts, NPP was, in fact, only in the business of buying paper, that is, it was acquiring goods. It was not in fact supplying services at the time, although of course the clause, as both the trial judge and the Full Court found against us, is wide enough to encapsulate both types of conduct. When one considers the actual nature of the arrangement here and the evident intention on the part of Visy to stop a competitor competing with it, one asks the question, "What is the economic benefit in conduct of that sort?" The answer is, as a matter of fact, none, and that is the answer that the legislature has in fact given here.

The question of the application of section 45(6), though, to this contract can unfortunately perhaps only be resolved by close textural analysis of that provision itself in the background of the other parts of section 45 and section 4D itself. Could I take your Honours to, in fact, section 45. I will not trouble your Honours with section 4D, your Honours will be familiar with that. It prohibits arrangements between competitors limiting or having the purpose of limiting - - -

GUMMOW J: The first question is, does Mr Young's client fall within 45?

MR McCLINTOCK: Yes, your Honour, that is correct and - - -

GUMMOW J: How does it fall within 45?

MR McCLINTOCK: That was a matter that was conceded below, your Honour. I will take your Honour to section 4D. Section 4D was - I am sorry, it was not the subject of appeal below, I should say. Section 4D(1) provides that:

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 . . . to be arrived at, between person any 2 or more of whom are competitive with each other -

Visy and NPP were competitive here in the market for the acquisition of wastepaper -

(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 persons -

and it was acquisition of goods from or services of particular persons or - - -

GUMMOW J: Goods or services?

MR McCLINTOCK: I am sorry "acquisition of goods", not services -

from particular persons or classes of persons; 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 -

GUMMOW J: Do not just read out (ii). Was it the whole of (ii) or which parts of (ii)?

MR McCLINTOCK: In relation to (i), it was "acquisition of goods. In relation to (ii) it was "the supply of . . . services . . . to particular classes of persons . . .

by all or any of the parties to the contract -

and that, of course, was NPP.

GLEESON CJ: The "particular classes of persons" being people who were already dealing with Visy?

MR McCLINTOCK: Already dealing with Visy.

GLEESON CJ: Or in negotiation with them.

MR McCLINTOCK: Or in negotiation with Visy. For what it is worth, your Honours can find an example of one of the non-competition clauses. I have picked the last one appearing on page 623 of volume 3, that is the same volume as Mr Justice Sackville's judgment is in. It is clause 8, headed "Non-Competition" and it says this:

While Northern Pacific Paper is selling waste to Visy, Northern Pacific Paper must not collect, approach or make any attempt or offer to collect waste from persons who are customers of Visy or with whom Visy has entered into discussions or negotiations to become a customer.

GLEESON CJ: So if Woolworths had an arrangement with Visy under which Visy took away all those cardboard cartons, then NPP would not approach Woolworths?

MR McCLINTOCK: Exactly, your Honour.

KIRBY J: Even though NPP might be able to offer a better deal for the price.

MR McCLINTOCK: Absolutely, your Honour. In fact, there was evidence that NPP was actually approaching customers of Visy and offering them a better deal.

KIRBY J: They were a bit desperate, as I read the facts. They were in a very perilous situation. Visy was trying to terminate their agreement in a shorter time and then they would be out on their limb.

MR McCLINTOCK: Yes, although that may not matter. That probably more affects the issues of attempt and those issues rather than the issues of construction.

KIRBY J: I only raise it because it shows these are real issues in a marketplace.

MR McCLINTOCK: This was a real issue. Visy was quite determined, on the evidence, to stop NPP dealing with its customers because NPP was offering them a better deal. On the other hand, Visy had the obligation under the 1995 agreement to acquire the paper from NPP itself. But it was a real world, as your Honour Justice Kirby says to me, and there was a real intention on the part of Visy to stop a very irritating competitor from competing with it for paper. One can see it throughout the correspondence. One can see it in the litigation that Visy brought against NPP in the commercial division of the Supreme Court. One can see it in the correspondence. One can see it in the conversations.

GLEESON CJ: Was the reason for the concession that this did not involve a substantial lessening of competition because of the state of competition that existed between Visy and Amcor?

MR McCLINTOCK: That is the answer, your Honour, although it would be going too far to say that we conceded there was no substantial lessening. We did not make any case based on the fact that there was a substantial lessening or there was any purpose of that effect, but there was certainly a purpose to stop this competitor.

GLEESON CJ: Yes, but the Act is not about competitors, it is about competition, and was it because of the state of market competition between Amcor and Visy that approach was taken?

MR McCLINTOCK: Yes, your Honour. There were two behemoths in the market. There was Visy and Amcor. One has to say that realistically speaking NPP, while it was an irritant, was a very small competitor and one taken overall, however one defines the market - and probably its geographically Sydney - one could not have said with NPP going, given Amcor, that there would be a substantial lessening of competition.

GUMMOW J: Now, there was no question on section 4D(2)?

MR McCLINTOCK: No, there was not, your Honour. There was no issue of related corporations and so on. It fell within 4D(1). If one then goes to 45(2), your Honours will see that 45(2) - this is significant because, as your Honours have pointed out to my learned friend, the division in 45(2) is in effect replicated in 45(6). Section 45(1), as has been pointed out, is historical. Section 45(2) says:

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 -

So on any view of it, the six non-compete clauses were - or Visy was breaching section 45(2)(a)(i), or would have breached it if the contracts had been entered into, and the attempt issue has of course been resolved in our favour. Subsection (ii) provides:

a provision of the proposed contract, arrangement or understanding has the purposes, or would have or be likely to have the effect, of substantially lessening competition; or -

in (b) - I only take your Honours to (b) for the purposes of later explicating section 45(6) -

(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 purposes -

and so on there.

There are two distinct concepts there which, in fact, to a certain extent, are replicated as between section 45 and 47. Some of the difficulties with section 45(6) come because of the - and I suppose this is obvious to your Honours - difficulties of meshing, so to speak, two different concepts. Section 45, relevantly, is a prohibition on making a contract. Section 47 is, relevantly, a prohibition on engaging in a category of specific practices which are defined as "exclusive dealing" and obviously the legislature has intended that some breaches, or some matters, shall be dealt with under section 47, but it is always difficult to carve out, by way of an exception, when one is dealing with different kinds of activity and conduct. That explains some of the difficulties in phraseology when I come to section 45.

If I could take your Honours to section 45(6) now, first, to rebut a couple of points raised by the appellant. It does need to be read, if I may say so, as a whole, if only to understand that the only relevant part for present purposes is the first leg of section 45(6). It provides:

The making of a contract, arrangement or understanding does not constitute a contravention of this section by reason that the contract, arrangement or understanding contains a provision -

Now, so far, the words, in effect, replicate section 45(2)(a)(i). Then it changes because of the need to mesh into section 47 and it comes down to conduct or an activity rather than the making of a contract -

the giving effect to which would, or would but for the operation of subsection 47(10) or 88(8) or section 93, constitute a contravention of section 47 -

That is the first leg and that is the part that is intended, in effect, to operate in relation to section 45(2)(a). The second leg - and this is obvious, may I say - - -

GUMMOW J: Subsection (2)(a)(i) and (ii)?

MR McCLINTOCK: Subsection (2)(a)(i) and (2)(a)(ii). The remainder of section 45(6) operates in relation to section 45(2)(b), because 45(2)(b) starts with the words "give effect to" there and this part of section 45(6) says:

and this section does not apply to or in relation to the giving effect to a provision of a contract, arrangement or understanding by way of -

and then it sets out the conduct there. There is, in fact, no symmetry and there is no intended symmetry between the first leg of 45(6) and the second leg of 45(6). The reason why is that they are dealing with quite different concepts, the concepts that come from section 45(2)(a) and (2)(b). This can be seen, in fact, inherent in the first part of 45(6), because section 45(6), as has been pointed out in the judgments below, operates on a hypothetical basis. It says:

by reason that the contract . . . contains a provision the giving effect to which would -

So one is talking there - because section 45(2)(a) prohibits making a contract, there has to be a hypothesis erected or posed because section 47 is dealing with conduct. Hence the hypothesis of the giving effect to the provision would - - -

GUMMOW J: Well, you were at 45(2)(a)(i) and that contained a provision the giving effect of which would not have constituted a contravention of 47.

MR McCLINTOCK: My submission is that the provisions here, if they were given effect to, would not, or would not necessarily, have given rise to a contravention of section 47(4). Section 47(4) is, in fact, the only part of section 47 that could conceivably have any application here.

HAYNE J: The point which I understand you seek to make is this, is it not? Section 4D was engaged for two reasons: it had a purpose of limiting acquisition of goods; it had a purpose of limiting supply of services.

MR McCLINTOCK: Yes.

HAYNE J: Because it had those two purposes, you make the transition from the purpose of the provision in 4D to what is described in 45(6) as "giving effect to", which can have two aspects. It is not wholly within 45(6) therefore it is still within 45(2). That is what it comes to, does it not?

MR McCLINTOCK: That is what it comes to. Your Honours, I have to say I have looked at these words - this is the third occasion I have looked at them and like so many words of statutes they start dancing in front of one's eyes like sugar plum fairies - but the provision is very simple. There is no ambiguity in it, in my respectful submission. When one actually understands the words being used and the concepts behind them it is quite clear what is going on.

The word "provision", it could include, it could mean as the majority in the Full Court pointed out, it could mean a clause which is the provision or the meaning contended for by my learned friend, but that would be a very peculiar meaning in the context of a statute like this. Secondly, it is not the meaning that one would think is the primary or principal meaning of the word "provision". "Provision" means something which is provided. I was probably wrong in putting to the trial judge that it meant "discrete legal obligation" as your Honours will have seen, but the only reason I was wrong was because arrangements and understandings do not have legal obligations in them. The meaning suggested by the Full Court here for the word "provision" which is another way of expressing the words "that which is provided" was, in effect, a prohibition on particular conduct.

Here, in this case, there was a dual operation - if the clauses has been found against me - it did prohibit, but it did prohibit the acquisition of goods. Acquisition of goods is not on any view of it within section 47, therefore it remains within 45. If one construes the word "provision" like that, for the reasons given ultimately by Mr Justice Hely in South Sydney, and I am aware it was only an interlocutory decision but I adopt it as part of my argument - - -

GUMMOW J: Now, the contravention of 47 that is being spoken of in the fourth line - - -

MR McCLINTOCK: Is your Honour using the - - -

GUMMOW J: Just go to 45(6) again.

MR McCLINTOCK: Certainly, your Honour.

GUMMOW J: Where it says:

contains a provision the giving effect to which would . . . constitute a contravention of section 47.

It means 47(1), does not it? That is the prohibition , is it not?

MR McCLINTOCK: Section 47(1) is the prohibition, yes, your Honour, and I am sorry, your Honour, I was wrong in saying "prohibition" - contravention of section 47(4). It is the conduct referred to in 47(4) which, of course, as your Honour says is prohibited by 47(1).

GUMMOW J: But then there is some segmental inquiry invited by the reference to the other subsection?

MR McCLINTOCK: Yes, to 47(10)?

GUMMOW J: Yes.

MR McCLINTOCK: Yes, but again, it seems clear that the legislation - - -

GUMMOW J: You cannot reach a conclusion about 47(1) without having regard to 47(10), can you?

MR McCLINTOCK: Except that the reference in 45(6) to 47(10) is operating by way of an exclusion from the exclusion, or a qualification on a qualification. It is, in effect, saying, do not worry about section 47(10), because if the conduct is within section - this is putting it slightly imprecisely - if the conduct is within section 47(4), you do not have to worry whether there is a substantial lessening of competition under section 47(10). That is what it is saying there. That is, in my submission, how section 45(6) and the reference to section 47(10) is there intended to operate.

GLEESON CJ: Is that a convenient time?

MR McCLINTOCK: It is, your Honour.

GLEESON CJ: We will adjourn until 2.15.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.17 PM:

GLEESON CJ: Yes, Mr McClintock.

MR McCLINTOCK: Thank you, your Honour. I wish to take your Honours to section 47(4) to complete going through the relevant provisions but before I do could I just say one further thing about the background to this case and the reason for the peculiarities, and there are some peculiarities in the case. The peculiarities arise for two reasons which are in fact related. The first is, here, the nature of this industry, the collection of waste which has the dual character itself in that waste is in some cases valuable in the hands of the person who has it but also a detriment in the hands of the person who has it or generates it and therefore there is a dual operation, that is, the provision of the service of taking it away and the acquisition of the goods in question which, of course, is talked about in each of the judgments below. But equally, here, the peculiarities arise because of the arrangements between the particular parties here.

The arrangement between Visy and NPP was in fact both a horizontal arrangement, that is they were competitors, but prior to the propounded contracts there was also the vertical arrangement of the acquisition of goods by Visy from NPP and that leads into the dual operation, those two factors, of the two contracts.

KIRBY J: Could you just explain those two?

MR McCLINTOCK: The dual operation or the two - - -

KIRBY J: No, vertical and horizontal in this context.

MR McCLINTOCK: In this context, your Honour, the pre-existing arrangement under the1995 arrangement was, first, Visy was a competitor to go and buy paper from customers, as the phrase was even though they were selling, of NPP. That is horizontal notionally. They are two competitors in the same industry. At the same time, NPP was entitled to sell product to NPP for it to on-sell or process in its own way, which partakes of the vertical there. Could I take your Honours then to section 47 - - -

GLEESON CJ: Just before you pass from that practical aspect of it.

MR McCLINTOCK: Certainly.

GLEESON CJ: I have been trying to work out what Justice Conti had in mind, in the passage I asked you about before. It may be related to what you just said. Maybe what he was saying was Visy was saying to NPP, "We will accept supplies of product - paper - from you but we're not going to do so on the basis that you intercept our lines of supply and sell to us at a profit paper we're already getting from our own other sources of supply."

MR McCLINTOCK: Or could already get.

GLEESON CJ: Yes.

MR McCLINTOCK: Your Honour, it is hard to know because his Honour spoke elliptically in paragraph 79 of the judgment on page 716, what he was getting at, but, with respect, we would suggest it was not that. I assume that that is the passage to which your Honour the Chief Justice was referring.

GLEESON CJ: Yes.

MR McCLINTOCK: Your Honour, the key seemed to us to be in the quote from Justice Sackville and in particular the last four lines of that quote there, which is clearly enough where his Honour Justice Conti got the reference to quid pro quo. If I take your Honours through it, your Honours will see Justice Sackville started off by saying:

In order to determine whether "giving effect to" an exclusionary provision would contravene s 47, it is necessary to take into account the terms of the contract, arrangements or understanding of which the provision forms part. Had Visy and NPP entered into an Exclusive Collection Arrangement (ECA) containing a non-competition clause, NPP's agreement not to collect waste products from Visy's customers would have been inextricably linked with Visy's obligation to acquire goods or services from NPP under the exclusive arrangements provided for in the ECA. In other words, the contract of which the non-competition clause formed part made it clear that the quid pro quo for the restraint imposed by that clause in NPP was Visy's promise to acquire goods or services from NPP. "Giving effect to" to an exclusionary provision such as the non-competition clause in the ECAs encompasses acting in accordance with the clause and with any contractual provision constituting the quid pro quo for that clause.

That is what his Honour seems to be saying; that is what Justice Conti seems to be saying, by picking up on the references to what Justice Sackville said there. The difficulty is that that is, at least, not necessarily the case when one applies section 45(6) with the reference to "giving effect to the provision" in question.

GLEESON CJ: Well, suppose Visy said to NPP, "We presently get a lot of paper from Woolworths and that is good business for us. We are willing to accept supplies from you, but we are not going to do so if we find ourselves in the position of having to accept from you paper that you have acquired from Woolworths and are on-selling to us at a profit."

MR McCLINTOCK: Which is, in effect, what they did do. That is a breach of section 45(2)(a)(i), because it is an agreement between competitors to limit the acquisition of goods. Once one has the notion of competition or competitors in the area - and that was determined in our favour below - an agreement like that would be a breach of section 45(2)(a)(i), it would not be saved, we would say, by section 45(6). Implicit in what your Honour has put to me is that there is an agreement by NPP not to buy paper from that particular customer, that particular supplier.

GLEESON CJ: In other words, "You can be our supplier, but you cannot be our supplier and our competitor at the same time."?

MR McCLINTOCK: Yes. Well, perhaps, with respect, a better way of putting it is to say, "If you are a competitor, you cannot cease being a competitor by us paying you to supply goods on condition that you do not compete with us."

GLEESON CJ: Or, "You have to make up your mind whether you want to be a supplier or a competitor."

MR McCLINTOCK: Well, with respect, your Honour, no. If you are already a competitor, you are within 4D and once you are within 4D, the prohibition applies.

GLEESON CJ: They were already a competitor, were they, at the time of these attempts?

MR McCLINTOCK: Yes, they were. That was an issue determined by Justice Sackville in our favour from which no appeal was brought by Visy to the Full Court and my learned junior can give your Honour a - - -

GUMMOW J: That is a critical fact.

MR McCLINTOCK: Absolutely, absolutely critical fact. But as there was no appeal from it, it appears in - I can probably turn it up fairly quickly. But it appears in, yes, page 672 of the appeal book under the heading "WERE NPP AND VISY COMPETITIVE?" and the finding appears on page 674 at the end of paragraph 138:

It is difficult to see how, on the objective evidence, any conclusion is open other than that NPP was competitive with Visy in the relevant market between February and April 1997.

If your Honours continue down to paragraph 140, it says this:

Visy proffered the ECAs to NPP at various times between October 1996 and January 1997. The position during this period was that NPP would have resumed its competitive activities, had Mr Lurie formed the view that the negotiations with Visy had broken down. On the hypothesis that NPP and Visy reached final agreement on the terms of one or other of the ECAs, it is likely that NPP would have been competitive with Visy but for the exclusionary provision (the non-competition clause) continued in the hypothetical contract.

This was an attempt to take out a competitor by Visy. Could I then take your Honours to section 47. Your Honour Justice Gummow has pointed out to me that section 47(1) is the relevant prohibition but, of course, section 47(4), which is the only applicable provision, defines exclusive dealing relevantly. I should say here, as my learned friend suggested this morning, that it was in some way relevant - that NPP's activities under a contract was in some way relevant. That is something that is reflected in paragraph 11 of the reply submissions. For reasons that I will explain in connection to section 45(6), it is only Visy that can give effect to the relevant provision, and the reason why is that it is only Visy who is referred to as the transgressor, so to speak, in section 47(4). Section 47(4) provides:

A corporation -

that is obvious that that is Visy in this case -

also engages in the practice of exclusive dealing if the corporation:

(a) acquires, or offers to acquire, goods or services; or

(b) acquires, or offers to acquire, goods or services at a particular price;

on the condition that the person from whom the corporation acquires . . . related to that body corporate will not supply goods or services, or goods or services of a particular kind or description, to any person, or will not, or will not except to a limited extent, supply goods or services, or goods or services of a particular kind or description:

(c) to particular persons or classes of persons -

The significance, of course, obviously enough, is that nowhere in section 47 is there an "acquire/acquire" prohibition. There is no - - -

McHUGH J: What is the policy reason for the difference between a prohibition against supplying goods and services to a third party and not applying to the acquisition of goods?

MR McCLINTOCK: Your Honour, the policy reason seems to have been - it worked like this. It had been pointed out to the Swanson Committee that the pre-existing legislation, because it was a blanket ban, worked hardship in a number of cases, one of which was the franchise situation and what happened was to remedy the perceived hardship in relation to matters such as franchises, it was decided they would excise them from the 45 blanket per se prohibition and apply a substantial lessening of competition prohibition under section 47.

If one goes through here, section 47(4) is the reverse of franchising that you get with - section 47(3), for example, is a classic franchising situation where one offers to supply or refuses to supply goods and so on unless - 47(2) equally is a classic franchising situation there.

I have to say that one is not entirely clear precisely what kind of commercial conduct section 47(4) was directed towards. It is clear that the other provisions were directed towards franchising and one thinks that it may have been the reverse of the franchise situation there but, in any event, there is no prohibition in section 47 at all on acquiring or offering to acquire goods on condition that the person from whom the goods will not acquire from anywhere else.

GLEESON CJ: Just a minute, 47(4) would cover a case, would it not, where a corporation that carries on a Ford dealership in a particular area says to Ford the supplier, "We will be your Ford dealer in the area providing you do not provide another Ford dealer in the street next door"?

MR McCLINTOCK: Indeed, your Honour. In those circumstances, it is the reverse of the franchisee situation. It is looking at it from the perspective of the franchisee dealing with the franchisor, whereas (2) and (3) look at it from the perspective of the franchisor, or the distributor, like the manufacturer, like Ford, looking down like that. But there is nothing in the section that applies section 47 to the "acquire/acquire" situation. The policy reason may be simply that it was thought that the conduct in (2), (3) and (4) was less malign and therefore could be protected by a "substantial lessening of competition" test whereas it was not thought that in relation to any other aspect of section 45(2). It has to be said that these sections have to a certain extent grown like topsy over the years.

KIRBY J: They certainly have. I mean, I really feel for business people trying to struggle with these things.

MR McCLINTOCK: Your Honour, I do not think too many - - -

KIRBY J: Please not get into it, Mr McClintock, because I think it is very hard to defend the complexity of this legislation.

MR McCLINTOCK: Your Honour, I do not think too many counsel would have much difficulty in advising a client who came to them and said, "Look, I want to pay one of my competitors not to compete with me because the shoe of competition is pinching rather hard and I don't like it", I do not think too many counsel in Sydney, at least, would have any difficulty saying, "Well, that is a breach of section 45(2)(a)(i).

KIRBY J: What about Melbourne?

HAYNE J: You really are trying to persuade and seduce the Court, are you not, Mr McClintock?

KIRBY J: Or Adelaide?

MR McCLINTOCK: There was no intended - I apologise, your Honours.

HAYNE J: That makes it worse.

KIRBY J: Do not go there, Mr McClintock.

MR McCLINTOCK: I see Justice Callinan has not picked on me.

HAYNE J: His Honour is much more polite than I am, Mr McClintock.

MR McCLINTOCK: Your Honours, that takes me back from section 47(4) to the points I wish to make about section 45(6) and, as I said - - -

McHUGH J: But it does lead me to ask you this question: assuming they took the view that there is no right answer to the issue posed in this case, why should I not construe 45(6) in accordance with the principle that you give a restricted interpretation to statutory provisions which impose penalties as opposed to giving it a liberal construction to accord with section 2 of the Act?

KIRBY J: Is that still a principle of construction? Does that survive the purpose of construction?

MR McCLINTOCK: Sir Harry Gibbs said 20 years ago that it is not, in this Court. I do not recall the name of the authority now but I was looking at it last week in connection with another matter.

KIRBY J: I thought we were all children of Kingston v Keprose, now?

MR McCLINTOCK: We are all children of Kingston v Keprose, or the minority judgment in Kingston v Keprose, your Honour.

McHUGH J: But as Justice Kirby pointed out in Daniels only a few weeks ago, you do not cut down on rights unless the legislation makes it clear.

MR McCLINTOCK: The first answer to your Honour's question to me is this legislation is clear. There are difficulties of application but there are no real difficulties - - -

McHUGH J: Certainly the construction that has been put on the words "for the reason that by the majority" does not seem to me to be a very clear interpretation of it, particularly when you look at the subsections alongside it.

MR McCLINTOCK: Your Honour, if one looks at the - seeing your Honour has raised it I will take it out of order. First, if one looks at the sections alongside it, the words "in so far as" are used in quite different contexts there. Second, my learned friend has not ever pointed to a reason or to a meaning that the words "by reason of" or "by reason that" have here. It was common ground below at first instance that they did not mean "caused". If they do not mean "caused" they can only mean "if and in so far as". When one looks at it, when one thinks about it the words "by reason that" do mean "if and in so far as". They do cater for the pro tanto operation. It is a breach - - -

HAYNE J: I do not know why you embrace this pro tanto notion, Mr McClintock. It seems to me to be absolutely fatal to your argument. There is no question of pro tanto construction, as I understand the central contention that you would seek to make. It is that this is a qualification on an otherwise general prohibition. The qualification is either met or it is not met. There is no question of pro tanto, no question of severance. But you have launched into this pro tanto notion. If you go down that path you are doomed.

MR McCLINTOCK: Your Honour, it is not pro tanto in terms of the legislation. It is attempting to use the words pro tanto in relation to the clause itself because the clause does have a dual operation.

HAYNE J: That is standing the question of construction on its head, and that is where the Full Court's reasons seem to have some difficulty. Instead of starting at the beginning which is 45(2), everybody wants to leap in to 45(6).

MR McCLINTOCK: Your Honour, I hope I have started at section 45(2)(a) because it is the foundation of my case, that this is an exclusionary provision between competitors which is a violation of section 45, and unless the appellant who pleaded section 45(6) can get itself into section 45(6), we succeed. Could I then go to the other words of the section which have been under consideration and obviously may I say what I am putting - the words are all obviously related, the one to the other. I put before the luncheon adjournment the construction that we rely upon of the word "provision". It simply means as we said something that is provided. It is an obligation. Here, in these contracts relevantly - - -

McHUGH J: I must say I have never given it any deep thought, but for 20 years or more I have taken the view that it was simply a reference to a clause. I understand that - - -

MR McCLINTOCK: Your Honour, it cannot be a reference to a clause simply because of where it appears. The words are:

the proposed contract, arrangement or understanding contains an exclusionary provision.

Understandings do not contain clauses, nor for that matter do arrangements. Equally, contracts may not contain a clause. It might be an oral contract which is not susceptibly and divided up like that. The legislature apparently had this in mind. There is a definition of "provision" in section 4 of the Act, but it is a limited one. It is in relation to understanding. It says:

provision, in relation to an understanding, means any matter forming part of the understanding.

Now, the legislature there, we would submit, was not drawing a distinction between "provision" in relation to understanding and "provision" in relation to contract or arrangement. What it was doing was making clear because understandings are not subdivided in the way that contracts are - - -

McHUGH J: Yes, but that just illustrates the difficulty, does it not? Understandings are not divided up into containing provisions, whatever view you take about the meaning of "provision". An understanding is an understanding.

MR McCLINTOCK: Yes, your Honour, but one has to deal with a legislative provision which says "an understanding containing a provision", in effect, and one has to operate on the basis that there is such a thing as an understanding which has a provision in it and it talks about any part of the understanding in the definition there and that would do for the definition which we advance in relation to "provision" in relation to contract or arrangement. Superficially, the rationale of saying "provision" means "clause" may be appealing but it cannot work in relation to those three words there. It cannot necessarily work in relation to contract, they do not necessarily contain clauses. What they do contain is individual obligations or prohibitions and it is to which the word "provision" in this subsection refers. That is in a sense or in essence the same meaning as the legislature has given to the word "provision" in relation to "understanding".

GLEESON CJ: The problem is that taken at a superficial level, the statement in the opening part of subsection (6) is a truism. It says:

The making of a contract . . . does not constitute a contravention of this section by reason that . . . contains a provision -

that contravenes section 47. Of course it does not. It contravenes Section 45 by reason that it contains a provision within subsection (2) of section 45, so it is obviously doing something other than stating the blindingly obvious.

MR McCLINTOCK: Yes, your Honour, it is what used to be called a "deeming provision". It says conduct which is within section 47, crudely - - -

GUMMOW J: Yes, but they had anathema pronounced on them at some stage in the light of the section.

MR McCLINTOCK: They did, your Honour, and by the courts I believe.

GUMMOW J: We.....broad uplands of new drafting. We are now in a bog.

MR McCLINTOCK: A Serbonian bog, your Honour. But that is what this provision means. That is what it is. It deems conduct that would otherwise be within section 45 not to be within 45 because it is within 47.

HAYNE J: Again, is that what it is doing or is its meaning elucidated by inverting the order of its drafting? If it read, "if the contract", et cetera, "contains a provision the giving effect to which would", et cetera, "the making of that contract does not for that reason constitute a contravention of 45.

MR McCLINTOCK: That is the meaning we would - - -

GLEESON CJ: Will you accept a slight alteration to that, saying "does not on that account constitute a contravention of section 45"?

MR McCLINTOCK: That is another way of adding the words "in so far as".

GLEESON CJ: What is the difference between saying that and saying "does not on that account alone constitute a contravention of section 45"?

MR McCLINTOCK: Because the "alone" makes the critical and decisive difference because if it does not say "alone" there is scope for applying it in the way that we suggest, which is to part of the operation of the provision or for the clause and not to the other part, that is so that the prohibition on the acquisition of goods still stands as a violation of section 45 whereas the acquisition that the prohibition on the supply of services is saved from that consequence by section 47 or by 45(6).

Your Honours, the words "by reason that", in our submission, do mean exactly what we say they mean; that is, the concept is, if because giving effect to the contract is in section 47, therefore it is not within section 45. If it is, then the converse applies. There is, we would submit, no difficulty in those words and in construing them the way that we urged upon the Full Court and the Full Court accepted.

The other words which, necessarily, have to be paid attention, are, of course, "giving effect to which would", because that directs one's attention to, of course, the actual operation or the hypothetical ways in which the clause could be applied, and as I submitted earlier, it looks to what Visy itself would do in these circumstances. There are various ways that it could be applied, but one, for example, the example we gave in the submissions below, is that if, for example, Visy found out that NPP was buying paper from competitors, it could presumably apply for an injunction to restrain that.

Now, "giving effect to", in that way, seeking in injunction to restrain the acquisition of paper, would not constitute a contravention of section 47, because it is not the practice of exclusive dealing. If one construes "would", as we suggest as meaning "would necessarily", and that is what "would" actually does mean, one reaches the same result be a slightly different route. That is that for it to be within 47 the "giving effect to" must be a breach of section 47 and there is scope here, great scope, for that not to occur in this case.

Your Honours, I have taken the issues out of the order that I intended to, but, in fact, I have dealt with, subject to one thing, which is to give your Honours the references to what Mr Justice Hely said in South Sydney and adopt it. There is very little left, in fact, for me to say.

KIRBY J: Is there any academic commentary or any law review commentary on this case?

MR McCLINTOCK: No, your Honour, there is not.

GUMMOW J: Too hard.

MR McCLINTOCK: Well that is why your Honours made special leave.

KIRBY J: I suspect his Honour is right.

MR McCLINTOCK: There is no academic commentary on the area. The only authority are the two decisions below and Justice Hely, in the South Sydney's litigation, which was an interlocutory - - -

KIRBY J: But his Honour really does not resolve it; he specifically does not and he says one thing and then he says another thing, which is a bit different.

MR McCLINTOCK: Yes, but it is fairly clear which view was his Honour's instinctive view about the matter.

KIRBY J: Well that appears to have been what the majority in the Full Court found.

MR McCLINTOCK: And it is reported at [1999] FCA 1710; 169 ALR 120 and the particular passage is at [135] to [136], but it is the passage that appears in paragraph [92], where his Honour was dealing with a submission by, in relation to section 45(6), where his Honour, after quoting Mr Gee's submission, said:

I do not agree. No sensible purpose would be achieved by construing the opening words in that way. The construction proposed produces a lack of harmony between the two parts of the section. The expression "by reason that" has a meaning equivalent to "if and in so far as". If the expression is read in that way, there is harmony between the two parts of the section, and the legislative intention of subjecting exclusive dealing to section 47 regulation, rather than regulation under section 45, is effectuated.

GUMMOW J: Justice Hely was like Janus; he faced both ways.

MR McCLINTOCK: Your Honour, he - - -

GUMMOW J: There is nothing wrong with that; it is an interlocutory motion.

MR McCLINTOCK: Your Honour, he tipped his hat one way, your Honour, but he was really facing the way that his Honour sets out in that passage there and we would, in any event, adopt that as putting - - -

GLEESON CJ: As Justice Gummow points out, I thought you were supposed to face both ways on an interlocutory motion, except to the extent to which it was absolutely necessary not to do otherwise.

MR McCLINTOCK: Indeed, but his Honour was compelled to resolve on a tentative basis issues because of the serious question issue, although he determined that case on - he denied the injunction on the balance of convenience basis.

CALLINAN J: Mr McClintock, there are some notes and brief discussions. There is one in the June Trade Practices Law Journal volume 10 at page 123 and there is another one in the Trade Practices Law Bulletin volume 17, September-October 2001. So there is some brief discussion in those.

MR McCLINTOCK: I am not familiar with either of those, your Honour, but I would anticipate from the dates that they refer to the decisions below in this case and probably take the matter, as result, no further.

Finally, your Honours, the last point I would wish to make is this, that if the proposition raised against us is correct, the consequence is that by clever drafting one could take what would otherwise be a section 45 breach out of the purview of that section. Here, as the majority below pointed out, if this clause had been expressed as two clauses, this debate would never have arisen. If it had even said "prohibiting collecting paper", prohibited in subclause (a), it prohibited acquisition of paper for consideration, and then subclause (b) prohibited the supply of services of taking away wastepaper gratis, the consequence would be that the first provision, prohibiting the acquisition of paper, would clearly be a breach of section 45 and there would be no argument that it would be caught by section 47.

There is, in fact, in our submission, nothing strange or peculiar in breaking the clause down into the discrete components that it had in light of the actual conduct of the parties at the time they were attempting to make these provisions. There were circumstances - NPP in fact was buying paper from Visy competitors at the time. We would say that the construction urged against us puts a premium on clever drafting and, indeed, if taken to its logical corollary, if there were one insignificant provision in the contract that dealt with the acquisition of services, whereas the remainder of the contract dealt with prohibited acquisition of goods, as a logical corollary of my friend's argument, it would end up being saved by section 47. That is the point that is made on page 669 of Mr Justice Sackville's judgment, which I do not think I need to take your Honours to, where he talks about - - -

GUMMOW J: What do you say about paragraph 93 of Justice Sackville's judgment?

MR McCLINTOCK: Is that paragraph 93?

GUMMOW J: Yes, on page 661. I mean, what do you point to as the critical wrong approach by the trial judge? Is it the starting point there?

MR McCLINTOCK: Your Honour, there is nothing wrong with what his Honour said in paragraph 93 on page 661. There is no question that section 45 - I suppose "intended to prevent overlap" probably is not the right way of putting it. It is intended to excise out of the section 45 ban certain types of conduct, "exclusive dealing" conduct which does not involve arrangements between competitors. So on looking at it we would join issue with "intended to prevent overlap" because rather, we would say, it is intended to, as I said, excise out certain types of conduct from the section 45 ban and apply the "substantial lessening of competition" test to them, but, subject to that, I would not disagree with what appears in 93.

GUMMOW J: Where did he go wrong, as you see it, just following the chain of his reasoning?

MR McCLINTOCK: He went wrong - - -

GUMMOW J: It appears to be very tightly composed, very precisely written.

MR McCLINTOCK: If your Honours go forward to paragraph 118, that is where the error appears. If I take your Honours through it:

there is no warrant for notionally breaking up the alleged exclusionary provision into what Mr McClintock described as "discrete legal obligations".

As I said to your Honour, I was probably wrong in using the word "legal", but discrete prohibitions or discrete parts of the agreement there is a warrant.

GUMMOW J: I think the problem may be, Mr McClintock, that Mr Justice Sackville did not have put to him the basic construction of 45(6) that Justice Hayne was debating with you earlier this afternoon.

HAYNE J: And that is apparent from what appears at paragraph 82 of his Honour's reasons where we get this "if and in so far as" notion floated in the Commission's submissions.

MR McCLINTOCK: That was how we did put it below.

McHUGH J: Do you object to a formulation of 45(6) which would, in effect, say "The making of a contract does not contravene this section because the contract contains a provision that if given effect, would or would but for the operation of 47(10) contravene section 47"?

MR McCLINTOCK: Your Honour, the difficulty with that is that in so far as it uses the word "provision" it does not take the matter any further from the existing formulation of section 45(6) itself.

McHUGH J: But I use the words "because" instead of "by reason of".

MR McCLINTOCK: If "because" was framed in that way, we would say it has the same operation as the operation we contend for. Because it breaches section 47 it does not breach section 45.

McHUGH J: On your case, the making of this contract is a breach of section 45 and then if effect was given to the acquisition part of the clause then it could breach 47(1)?

MR McCLINTOCK: No, with respect, your Honour, no. If effect was given to the acquisition part of the clause, it would not be a breach of section 47(1) because there is no - section 47, in no part, relevantly prohibits acquisition of goods. So a contractual clause that said, "NPP shall not acquire goods from any competitor of Visy", will always be within section 45 and will never be within section 47, in the circumstances and that is the reason why we are here, because in so far as the clause has that operation that we say that it remains - using the phrase in a slightly sloppy way - within section 45(2)(a)(i).

GLEESON CJ: Well, your proposition is that the presence in the contract of an exclusive dealing provision does not immunise the contract from scrutiny under section 45?

MR McCLINTOCK: Yes.

GLEESON CJ: Except to the extent of the exclusive dealing provision?

MR McCLINTOCK: Yes, except to the extent of the exclusive dealing provision, and except to the extent that it is an exclusive dealing provision within section 47. One starts off with an exclusionary provision under section 45 and then, as your Honour the Chief Justice has said to me -

asked the question whether it is exclusive dealing, and to the extent that it is, it would be dealt with under section 47 - - -

McHUGH J: I am not sure about this "to the extent". On your argument it is either in or it is out, is not it, so if it is not taken out, the fact that it has a provision in which would otherwise be protected by 47(10) may not assist the person who makes the contract?

MR McCLINTOCK: I am not sure I understand your Honour's reference to 47(10)?

McHUGH J: What I am saying to you is, if you read 45(6) as simply saying that the making of a contract is not within the section because of so-and-so, but the contract is otherwise within the section for the reasons that you give in relation to the 47(4) argument, then the whole contract is caught, is not it? I mean, you want to read it down.

MR McCLINTOCK: Your Honour, the criterion of section 45(2) and 45(6) - 45(2) is the making of a contract. It is excised out from section 45(2) if giving effect to that provision would constitute a contravention of section 47. I am not sure that I have understood the point of your Honour's question.

McHUGH J: I do not think I made myself clear. What I am saying to you is, prima facie, this contract is caught by 45(2)(a)(1).

MR McCLINTOCK: Yes.

McHUGH J: Right. Your opponent says, "We escape by virtue of 45(6)". Now, if the words "by reason that" mean "because" then, on your argument, the contract still remains within 45, does it not?

MR McCLINTOCK: Yes.

GUMMOW J: All of it.

McHUGH J: All of it.

MR McCLINTOCK: All of it.

McHUGH J: Yes.

MR McCLINTOCK: The making of it, yes.

McHUGH J: Yes.

MR McCLINTOCK: The act of making the contract remains with the section.

GLEESON CJ: What your opponent says is, "We escape by reason of the 45 section because the provision that would otherwise have fallen within section 45(2)(a)(i) is a provision that falls within 47 and there is only one provision".

MR McCLINTOCK: To which our answer is twofold. There is two provisions: acquisition of goods, supply of services and that depends upon - I will not rehearse the arguments I have already put to your Honours about the meaning of the word "provision" - and upon the meaning of the words "giving effect to which would" and if one poses the question "Would necessarily" how would, giving effect to that provision - and for that purpose it could be either - it could be my friend's argument - how would it necessarily give rise to the practice of exclusive dealing?

If it is done by Visy writing a letter to NPP saying, "We have heard that you have been buying paper from our customers in breach of your contract. Stop it", that is not engaging in the practice of exclusive dealing and therefore it would not be giving effect to it in such a way as it would constitute a contravention of section 47. That, in my submission, is the answer to what your Honour the Chief Justice put to me as to my learned friend's argument.

GLEESON CJ: Do you accept that you could have a provision of a kind referred to in section 45(2)(a)(i) as an exclusionary provision which is also a provision, the giving effect to which would contravene but for 47(10), 47?

MR McCLINTOCK: Could there be any such thing, your Honour?

GLEESON CJ: One provision. Could you have one provision which is both a provision that falls within the meaning of 45(2)(a)(i) as an exclusionary provision and at the same time is a provision, the giving effect to which would or would but for the operation of subsection (10) contravene section 47?

MR McCLINTOCK: On our definition of "provision", no. It must always be - - -

GLEESON CJ: So that is what the argument all comes down to, does it not, whether in this case there is one provision or two provisions?

MR McCLINTOCK: Yes. That could be put in different ways. It could be put as to the meaning of the words "by reason that". The questions are all related. Your Honour, I am not suggesting it is an easy question but it can be shortly stated. It is either, what does the word "provision" mean? Does it mean a clause in the contract? Answer no - we give no. Or does it mean a part of the contract or an obligation or a prohibition under the contract, or arrangement or understanding? What is the operation of "by reason that"? Does it mean "in so far as"? What is the operation of "giving effect to which would"? All these are different ways of stating really the same question in relation to this. We would say that the language is relatively clear for the reasons I have given to your Honours, which I do not propose to waste your Honours' time by repeating them. They are set out in our submissions and I put the ones I wish to flag orally here in relation to "provision".

If I may say so, your Honours, what is the logic of saying that "provision" means "clause" as opposed to that which is provided? It enables very easy evasion of the words of the section because all one has to do is inject in an element of providing a service when one really intends to prohibit the acquisition of goods by a competitor. It would be a very strange construction if it could be so easily evaded. For that reason and the primacy, we would say, of the ban on exclusionary provisions in section 45(2)(a)(i) we would say that the better reading of this section is the reading given by the majority of the Full Court.

McHUGH J: If you treat 45(6) as a proviso - - -

MR McCLINTOCK: Which it is.

McHUGH J: Well, that might get you into some trouble because you might then read it, "provided that the making of a contract does not constitute a contravention of this section if it contains a provision" et cetera.

MR McCLINTOCK: Yes, your Honour, if I say so with respect, that does not take the debate any further because it relies upon the same concepts, the same words, "provision" and so on, although it does make clearer that it is an exception to a general prohibition in section 45(2)(a)(i).

McHUGH J: No, but it does seem to indicate that if the contract, arrangement or understanding contains a provision, "the giving effect would . . . constitute a contravention of section 47", then 45 has nothing to say about the contract.

MR McCLINTOCK: On the premise, yes. It depends upon the construction of the words that are actually used in that formulation, your Honour. Unless there is anything further which your Honours wish to raise with me, those are our submissions.

GLEESON CJ: Yes, Mr Young.

MR YOUNG: Your Honour, can I deal firstly with my learned friend's answer to the Chief Justice's questions towards the end. The answer our learned friend gave to the questions was firstly that our conclusion, or the case we contend for, did not follow because here there were two provisions and in the end our learned friend asserted that everything in the end turns on his contention that there cannot be a provision which both constitutes an exclusionary provision and where the "giving effect to" of that provision would fall within section 47.

Now, our learned friend's arguments are not only wrong as a matter of construction of the Act, but they are not open to him in the way in which this case was pleaded and has hitherto been presented. The only case ever made, both in pleadings and in argument, was that there was an exclusionary provision consisting of the entirety of the non-compete clauses.

Can I take the Court to the pleadings and to the judgments at volume 1 of the appeal book - perhaps it is good we made some use of volume 1 - page 10 paragraph 20 alleges the provision, and that is the only provision we have ever been concerned with. It is pleaded in terms of the language and the clauses and it is particularised as:

The provision was in clause 3.2(a) and (b)-

not put in terms of a dichotomy between acquiring waste and supplying services of collection; it is pleaded in the language of clause.

Likewise, when the pleading is made in relation to the two further supply agreements, paragraph 28:

a provision that NPP not collect, approach . . . to collect -

the provision was in clause 9(a). Further, paragraph 39, the last supply agreement, similarly:

The provision was in clause 8.

Justice Sackville, paragraph 117, in the judgment at 667, particularly the last few lines on the page, and that leads to his Honour's statement that there is no warrant for breaking it up into "discrete legal obligations".

I also refer back to his Honour's description of the way in which the ACCC put its case, page 655, paragraph 76, first and second bullet points, competitive both in relation to:

the acquisition of waste paper and for the supply of waste paper removal services -

and it was:

The non-competition clauses in the draft agreements -

that were the exclusionary provisions. The Full Court approached the matter in the same way, page 705, paragraph 45.

GLEESON CJ: Does it amount to this, Mr Young, that you say that having regard to the nature of the business involved, the business of the individual parties to this contract and the relations between them, the non-compete clause was at one and the same time, both an exclusionary provision and an exclusive dealing provision?

MR YOUNG: Yes, that is the way in which we put it, your Honour, and therefore, because of the first aspect of that, it is, unless the proviso or the exception applies on the findings made by the trial judge within section 45, but section 45 never applies to it, because section 45(6) operates to take the whole of that condition outside section 45.

HAYNE J: Do you accept that it is an exclusionary provision having the two aspects identified by Mr McClintock, namely, the purpose of limiting acquisition of goods and the purpose of limiting supply of services?

MR YOUNG: Given the trial judge's findings, yes, your Honour. In other words, we originally contested that, but it was found against us.

HAYNE J: Yes, and that is how it concluded?

MR YOUNG: Yes, but, your Honour, the twin purposes may be the reason why it qualifies as a section 4D provision, an exclusionary provision, but those purposes then cease to have any real relevance to the application of the crossover provision. The purposes may be the reason why it gets into section 45 prima facie, but thereafter, the question is simply, would the giving effect to that provision by way of conduct fall within section 47?

HAYNE J: Can I just delay you there about that transition from 4D speaking of "purpose" to 45(6) speaking of "giving effect to"?

MR YOUNG: Yes.

HAYNE J: Given the definition of "give effect to", is it or is it not legitimate to take account of the purposes in deciding what acts or things could be done in pursuance of or in accordance with the relevant provision?

MR YOUNG: Your Honour, that is where we say the logic leaps ahead out of the first limb of section 45(6) and into the second limb to examine putative conduct because, at the stage of negotiation of these conditions being discussed, the question really only is, would giving effect to that condition amount to exclusive dealing within section 47? Forget about ways and means as to how it might be enforced, whether a letter is written, whether an injunction is sought and so forth, most of those would be irrelevant to section 47, but simply ask the question, if on day two, the day after the contract is made, this question arises - NPP goes and collects waste from non-Visy customers and supplies the waste to Visy. Visy accepts the waste on the footing that the contract is being implemented, that is, NPP is acting in accordance with a contract by not approaching Visy customers.

The other side's argument would have it that on day X minus one, that is the day before the contract is made, the proffering of that condition is totally governed by section 45 as an exclusionary provision, but on day two, the day after the contract is made, the consequence would be that the acceptance of waste on that condition would be governed by section 47 if you apply the second limb, and not by section 45.

Nothing has changed except you have gone from the preliminary stage of proffering a condition in the context of negotiations as a step towards making a contract, to the first day afterwards when you are accepting waste on that condition. The reason why you get the diverse results, according to the other side, is that the first limb has an operation different to the second limb and produces a different result, although in substance nothing different has happened.

On the second day, the second limb applies and it says "this section does not apply to or in relation to the giving effect to" that condition by imposing a condition on acquisition that non-competitors not be approached; "to or in relation to" must have the consequence that you do not seek to break up the clause in its potential field of operation. You simply look at what happened. If all that happened was that the condition was imposed as part of the acceptance of waste, the second limb operates. Section 47 applies to the exclusion of section 45. It would be absurd if a different result obtains two days earlier when they are discussing the proposed contract.

GLEESON CJ: I realise that by reference to the Castlemaine Tooheys Case and others, you say the following question does not arise, but if you had two separate clauses in this contract, clause 5 saying NPP will not provide paper collection services for anybody and clause 6 saying NPP will not buy paper from anybody or acquire paper from anybody, what would your argument be then?

MR YOUNG: My argument would be this, your Honour, applying the same examples I just gave. If we move to the actual implementation step, you would ask the question, what condition is substantively being applied or imposed upon the actual acceptance of the waste?

GLEESON CJ: Condition 6 - - -

MR YOUNG: And if it is condition 6, and you find that the relevant condition is not within section 47, then that actual conduct would remain in section 45, but if substantively you found the condition being imposed was one that fell squarely within section 47(4), 47(4) would apply. So you test each particular action or piece of conduct to determine whether it is inside or outside section 47.

GLEESON CJ: So your argument really does depend upon the inappropriateness of hypothesising a break-up of the provision?

MR YOUNG: It does, your Honour, but to return to our learned friend's point, we say the only question is whether the exclusionary provision they alleged, which was not part, it was simply the entirety of the non-compete by seeking to collect clause. The simple question you ask, when you go to 45(6) is, would the imposition of that condition on supply or acquisition be within section 47, and there is no occasion to break it up, because you have no more than one compendious condition which is the condition on which the parties are talking about contracting. If and when they engage in different conduct, or if and when they impose some different condition, then surely you would test section 45 and section 47 against the particular condition alleged. We do not have two conditions alleged against us. There has only ever been one, and it has been then finessed with his argument about dissecting it as a matter of construction into discrete legal obligations.

GLEESON CJ: You may have to go a step further. You may have to say there has only ever been one and there is no suggestion that insofar as it bears an aspect of exclusive dealing, that is merely colourable.

MR YOUNG: Exactly. We have Justice Sackville's findings in our favour in that regard. I took the Court to some of them. I did not go to paragraph 119. This deals directly with the colourable drafting point, rejects it squarely in the context of this case. It is at page 668, particularly if the Court reads from line 18 onwards to the end of the paragraph. Again, the same approach would apply and this was our submission in the context of section 47, one of commercial realism, that is paragraph 121. In each respect his Honour found squarely and it was never challenged:

there was nothing artificial or commercially unrealistic about the non-competition clause -

aimed at collection encompassing both acquisition of waste and supply of services.

GLEESON CJ: I am not suggesting for a moment that this is a correct argument, but has anyone at any stage of the proceedings so far suggested as a possible approach to this problem that where you have a provision that is at one and the same time an exclusionary provision and an exclusive dealing provision, there might be a task of characterisation involved in assigning that provision to the regime of either section 45 or section 47?

MR YOUNG: Your Honour, as we understand it, the idea of dissecting into discrete legal obligations was something advanced by the ACCC which the Full Court described as a process of characterisation. In our submission, it is not, because that is not really seeking to identify the condition that was actually imposed. I mean, take the Castlemaine Tooheys Case; the question was, what sort of condition is it? Is it a condition being imposed on the purchaser of beer, requiring him to do something, or is it simply a condition that the brewery was saying, "I will sell you delivered beer and I will pay the delivery costs and I don't require you to do anything except pay this price". So there is a question of characterisation in the Castlemaine Tooheys sense, but we would urge that that is something different than an attempt to look ahead, hypothesise ways and means of giving effect, and try and find one that is not thought to be within section 47.

GLEESON CJ: I suppose the whole scheme of the relationship between 45 and 47 proceeds upon an assumption that a provision can both fall within 45 and 47 and 45(6) is to resolve the problem of what happens then.

MR YOUNG: Yes, absolutely and moreover, can I add to that, your Honour, that the concluding words of 45(6) make it clear that it is contemplated that the "giving effect to" of an exclusionary provision can occur by way of engaging in section 47 conduct, looking particularly at paragraph (a). There is a bit of a dichotomy between the language of "engaging in conduct" and "giving effect" and 47 talking about imposing a condition on supply or acquisition, but 45(6) is quite clear in contemplating that section 47 conduct could not only fall within 45 and not only be an exclusionary provision, but that `giving effect to" an exclusionary provision might be section 47 conduct. That is squarely contemplated.

HAYNE J: That would have arisen in this case had Visy agreed to buy paper from NPP on condition that NPP not collect from or provide collection bins to customers of Visy.

MR YOUNG: But that is indeed what the clause did, not collect from customers of Visy.

HAYNE J: Collect in the narrow sense, not collect in the broader industry sense, that is, physically collect.

MR YOUNG: No, physically in the broader industry sense were the effect of the findings of Justice Sackville.

HAYNE J: I understand that.

MR YOUNG: That is, the word was used not artificially but because it was the language of the industry by the joint process of services and acquiring waste.

HAYNE J: I understand that. But if the clause were restricted to the provision of service, it would be both exclusionary and a 47, would it not?

MR YOUNG: The answer to your Honour's question is yes, but we say just so as well, yes, when the same clause indiscriminately covers both.

HAYNE J: I understand that you go on, yes.

MR YOUNG: Yes. There seems to be an assumption in our learned friend's submission that somehow if our arguments are accepted heinous conduct is not brought to account under the Act. Now, as I endeavoured to put, that is not so. The consequences only of accepting our submission that the single act of making is either all in section 45 or all in section 47. There is none of this pro tanto construction that attempts to straddle the two and, with respect, that argument is misconceived about pro tanto.

But the hierarchy of the sections, in our submission, is to the contrary of what our learned friend submitted. Our learned friend submitted that section 4D is to be regarded as the provision having primacy, that is to say that when section 45(2)(a)(i) proscribes the making of an arrangement that contains an exclusionary provision, efforts are to be made in construction to ensure that as many cases as possible are caught by section 4D rather than being addressed by other specific sections. Now, in our respectful submission, that is to invert the statutory scheme. Can I give - - -

McHUGH J: Just before you go on.

MR YOUNG: Yes, your Honour.

McHUGH J: You said a moment ago it is either governed by section 45 or by 47. What do you say about paragraph 69 in the Full Court's judgment where they test it by two separate clauses?

MR YOUNG: We apply exactly the same - - -

McHUGH J: Do you say the same thing, that it is either governed by 45 or 47; even that situation?

MR YOUNG: Yes, your Honour. We would say this. The starting point is to identify what is alleged to be the exclusionary provision, or what is found to be the exclusionary provision. Now, if it is one clause and that clause has no section 47 operation at all, then 45(6) will not apply. It will be governed by section 45.

GLEESON CJ: I thought that in the examples that I gave you involving clause 5 and clause 6, you agreed that clause 6 would be covered by section 45 and clause 5 would be covered by section 47.

MR YOUNG: Yes, your Honour. All I am saying, I think, to his Honour is that you would test each clause according to what is alleged to be the exclusionary provision or what is found to be the exclusionary provision and it is that provision that you then ask the question: would giving effect to that provision fall within section 47?

GLEESON CJ: That involves the proposition, which may be perfectly correct, that there is a difference between having two provisions in a contract, one of which contravenes section 45 and one of which is covered by section 47, and having one provision in a contract which is at one and the same time an exclusionary provision and an exclusive dealing provision.

MR YOUNG: Your Honour, the way we would answer that is to say this, that it really depends upon what is alleged to be the exclusionary provision and it is not a question of clauses. We say it is the non-compete clauses here because that was the case made against us. They did not have to allege it that way. They could have alleged the provision was some kind of term drawn from the contract as a whole, they could have alleged it was one particular aspect of these clauses or, in the example your Honour gives me, they could allege it was clause 5 but not clause 6. Depending on what is alleged to be and what is found to be the exclusionary provision, you then go to 45(6) and it is the identical provision which must then be tested against the operation of section 47.

We maintain the answer I gave to your Honour the Chief Justice but it is not a question of formalistically being tied to clauses. Provision can be construed realistically, as Justice Sackville said, so can condition, but it is a question of what is alleged to be the exclusionary provision.

McHUGH J: But leaving aside the pleading point upon which you rely, why can you not approach the case on the basis that you give the word "collect", for example, a distributive operation so that it covers a 45 provision and a 47 provision.

MR YOUNG: With respect, your Honour, that is what we have done. We do not seek to dissent from the findings of Justice Sackville in the Full Court that it is a compendious clause that covers both activities. That does not alter the fact that it is the whole of the condition in both its aspects that are alleged to be the exclusionary provision. It is then the whole of the provision that you ask the question of, "Would the imposition of a condition in those same terms fall within section 47?" It should either be answered absolutely yes or no. It either falls within 47 or it does not. It is no real answer to the statutory question to say it is possible to envisage some mode of enforcement of this clause that would not fall within section 47.

GLEESON CJ: I am not clear enough about the facts to know the answer to this, but is it the case that for one, that there are at least some circumstances in which the one particular activity on the part of your client, that is taking people's waste, would constitute both the provision of services and the acquisition of property?

MR YOUNG: Yes. We would say there are many instances where that would be the case.

HAYNE J: As, for example, by supplying bins?

MR YOUNG: Yes, that is a commonplace. Great big receptacles are supplied to many large industrial customers and emptied on a regular basis, so equipment supply, that is a regular occurrence, and people come along and empty the bins regularly. There was evidence about that in this case. So there was no doubt that services were supplied as an integral part of the activity.

I was about to make two points about the alleged primacy of the section 4D aspect of section 45. The points are these; the crossover provision, the anti-overlap provision in section 45 predated the introduction of section 4D. Section 45(5) preferred the application of section 47 to 45 before we had any kind of per se exclusionary provision. What happened when section 4D came along is, that like other section 45 provisions that contravened because they had the purpose or effect of lessening competition, 4D was subjected to the same excision provisions, no difference, and Parliament intends that the excision provision should operate in the same way for 4D provisions as for other provisions.

It is really an indication that the suggested primacy in section 4D was the outcome to be preferred is really not the statutory scheme. The statutory scheme is that section 47 in the hierarchy should deal with the sorts of conditions that it defines as constituting exclusive dealing.

I wanted then to go to your Honour Justice Hayne's construction, if I may, to which Justice McHugh, I think, added perhaps an amendment, I am not sure. Can I ask the Court to turn to our written outline of submissions, if I may, simply as a vehicle to make a point about this, page 9, paragraph 51? Our attempt to make more intelligible the grammar and syntax of the provision is, as we apprehend it, not dissimilar to Justice Hayne's formulation.

We adopted that formulation because, in our submission, it is unnecessary to do any violence to the ordinary meaning of the words "by reason that". They can readily bear the meaning of "because" which in the - there is a decision of Justice McHugh I will give the Court in a moment which addresses the meaning of "by reason that". It does not affect our approach to the section if "by reason that" is read as "because" or simply left in its form as "by reason that". The syntax is made more comprehensible simply by inserting the word "if" giving effect to that provision "would", in lieu of the more cumbersome phrase "the giving effect to which would" without changing any meaning at all. As we would understand it, what your Honour Justice Hayne did was to invert the provision by saying if giving effect to - - -

HAYNE J: No, if the contract contains a provision for "giving effect to which would", the making does not.

MR YOUNG: Yes. Well, in our submission, we could readily accept that amendment if the contract contains a provision, which, of course, is the entrée to 45(6) anyway, the giving effect to that provision would fall within section 47, then the making does not constitute a contravention. It would be a more understandable form of drafting.

HAYNE J: Now, the drafting I had suggested had, and the Chief Justice suggested one or two alternatives to it, "does not for that reason", "does not on that account", "does not on that account alone constitute a contravention". Now, what do you say about those several - - -

MR YOUNG: Well, we would say that to add the words "on that account alone" or "for that reason only" is really to rewrite the clause, but it probably does not make any difference in the end to our argument, because all we do is to insert the words "if" in lieu of the more cumbersome participle "giving effect to which". So it simply asked the questions, or if, or would, giving effect to it fall within section 47(4)? There is no need to add a gloss "for that reason only" or "on that account only", because had something like that been intended, you would have seen something similar in the second limb of 45(6) and you would have seen language that makes that plain, as indeed you find language in 4D itself, "if and only if", that makes it plain. That is really to change the burden of the clause.

The reason I say it makes no difference is still this, that if you ask the question, "Would imposing this condition on acquisition in a vertical relationship in section 47 fall within the provision?", the answer is, "Yes", whether you add the words "by reason only that" or "for that reason only" or "on that account only". We would urge that those words ought not to be added because that really is changing the effect of the first part of 45(6) and doing so inconsistently with the wide meaning obviously intended when you get to the first act of implementation in the second limb of 45(6).

Again, to add the word "only" would seem to be driven by a view that somehow section 4D is to be given pSrimacy in a statutory scheme so that it applies where possible to the exclusion of section 47 and we submit that is an inversion. Why should that follow when exactly the same test for overlap is applied to substantial lessening provisions by 45(6) as applies to section 4D provisions?

Can I turn to one other matter or two other matters I want to raise. The first deals with vertical versus horizontal relationships to which our learned friend addressed some submissions. Can I make this point: the Swanson Committee paragraphs to which I referred expressed the view that conditions on acquisition as well as conditions on supply should be governed exclusively by section 47 and that section 45's operation over them should be excised, were the words of the Swanson Committee.

They then went on to deal with exclusive franchises. Now, most exclusive franchises reserve to a manufacturer the right to sell directly into his distributor's territory. Distributors are frequently given exclusive geographic territories. If our learned friend's argument is right, those commonplace commercial dealings that are now regarded as governed by section 47 would all be per se infringements of 45(2)(a) because you cannot restrict a distributor from dealing with particular people in circumstances where the manufacturer has a right to sell directly into the same marketplace. He would say they are competitors to that extent; therefore, section 45(2)(a)(i) governs. Competitors cannot make arrangements restricting who they will sell to, geographically or otherwise, and once a competitor always a competitor, you can never cease to be a competitor and move into a vertical relationship governed by section 47. So our learned friend's construction has, in our submission, far-reaching consequences because when all is said and done and accepting the findings of the trial judge that there was here some degree of competition with customers, at all stages NPP was selling all of its waste to Visy and so they were not really competing for the waste. If anything, it was simply, as the Chief Justice put it, an issue about NPP seeking to divert what would otherwise be Visy customers through its hands and then back to Visy for the sake of NPP making a margin because of the good prices it was getting under its 1995 vertical supply agreement.

Now, if this is a section 4D case, then it would have far-reaching implications for most exclusive franchises. Unless there is something further I can assist the Court with, those are our submissions.

GLEESON CJ: Thank you. We will reserve our decision in this matter and will adjourn until 10.15 on Thursday.

AT 3.41 PM THE MATTER WAS ADJOURNED