Case: Australian Petroleum Pty Limited v Australian Competition and Consumer Commission (1997) 73 FCR 75
Outcome: cited
consenting to the variation, the Commission has also accepted assurances from Toll that Toll will not act in a manner which is inconsistent with the intent of the variation; namely, that Toll and Asciano will only ever have dealings with each other that are at arms [ sic ] length and on normal commercial terms. Additionally, the Commission consents to the variation on the basis that Mr Mark Rowsthorn, Asciano, the Asciano directors and the Toll directors offer undertakings to ensure that Asciano and Toll are in effect wholly separate entities. The relevant operative provisions of the undertaking as varied are found in cl 2.9. So far as they relate to this proceeding, the provisions of cl 2.9 are as follows: Between the Restructure Date and 31 March 2011 Toll will: ... (h) not enter or give effect to a contract, make or give effect to an arrangement or reach or give effect to an understanding which would in effect allow Toll to: (i) share management or employees with Asciano; (ii) second management or employees to or from Asciano; or (iii) subject to sub-clause (g) above, share in any profits or revenues of Asciano; (i) not enter or give effect to a contract, make or give effect to an arrangement or reach or give effect to an understanding which would in effect allow Asciano to: (i) share management or employees with Toll; (ii) second management or employees to or from Toll; or (iii) subject to sub-clause (g) above, share in any profits or revenues of Toll; (j) not enter or give effect to a contract, make or give effect to an arrangement or reach or give effect to an understanding with Asciano unless the terms of the contract, arrangement or understanding are: (i) on an arm's length basis and non-exclusive terms consistent with these Undertakings; and (ii) approved of in advance by the board of Toll and only approved of if the board of Toll is satisfied in good faith after due inquiry that the contract, arrangement or understanding with Asciano is considered arms [ sic ] length and bona fide to be in the best interests of Toll The varied undertaking also include provisions about their interpretation, found in cl 19.2, in the following terms: (b) In the interpretation of a clause of these Undertakings, a construction that would promote the purpose or object underlying these Undertakings (whether that purpose or object is expressly stated in these Undertakings or not) shall be preferred to a construction that would not promote that purpose or object. (c) In the interpretation of these Undertakings, material not forming part of this Undertaking, including the Commission's Public Competition Assessment of May 2006, may be considered: (i) to confirm the meaning of a clause is the ordinary meaning conveyed by the text of the clause taking into account its context in these Undertakings and the competition concerns intended to be addressed by these Undertakings and the clause in question; or (ii) to determine the meaning of the clause when the ordinary meaning conveyed by the text of the clause taking into account its context in these Undertakings and the purpose or object underlying these Undertakings leads to a result that does not promote the purpose or object underlying these Undertakings. (d) In determining whether consideration should be given to any material in accordance with clause 19.2(c), or in considering any weight to be given to any such material, regard shall be had, in addition to any other relevant matters, to: (i) the effect that reliance on the ordinary meaning conveyed by the text of the clause would have (taking into account its context in these Undertakings and whether that meaning promotes the purpose or object of these Undertakings); and (ii) the need to ensure that the result of these Undertakings is to restore or maintain competition, thereby preventing any competitive harm that may arise as a result of Toll's acquisition of Patrick or the Restructure. (e) In performing its obligations under these Undertakings, Toll will do everything reasonably within its power to ensure that its performance of those obligations is done in a manner which is consistent with promoting the purpose and object of these Undertakings. Construing the undertaking The applicants advanced the contention that the undertaking ought to be construed in a similar manner to a commercial contract, so that its terms would be construed by reference to the surrounding circumstances known to Toll Holdings, Toll Personnel and the ACCC at the time they were entered into, as well as by reference to the plain meaning of the words used in the undertaking and the purpose or object of the undertaking. The ACCC accepted that the ordinary principles in relation to the construction of contracts, particularly agreements to settle legal proceedings, should apply by analogy to the interpretation of the undertaking. These would include evidence of surrounding facts or circumstances known to both parties. These propositions are difficult to accept. Undertakings given pursuant to s 87B of the Trade Practices Act are given statutory force and effect by that section. They are properly to be regarded as statutory instruments, made under the Trade Practices Act . See Australian Petroleum Pty Limited v Australian Competition and Consumer Commission (1997) 73 FCR 75 at 88-89. Such an instrument has a public purpose. Members of the public, including competitors of the person giving the undertaking, are entitled to rely on the fact that undertakings have been given, and upon their terms. So is the Court, if proceedings to enforce an undertaking are ever instituted. The meaning of the words used in an undertaking cannot therefore be modified by reference to facts known only to the party giving the undertaking and the ACCC. The words of an undertaking are to be construed by reference to the principles of construction of a legislative document, and not by reference to the principles of construction of a private contract, whether entered into in settlement of a legal proceeding or not. This means that the first step in construing an undertaking is to ascertain the ordinary meaning of the words used. The ordinary meaning will normally be ascertained by reference to dictionary definitions, although evidence may be led of the common acceptance of specific meanings in a particular trade or industry, or of the use of words as terms of art. The meaning of the words used must be considered by reference to the purpose or object of the undertaking concerned. This requirement is derived from the combination of s 15AA and s 46(1)(a) of the Acts Interpretation Act 1901 (Cth) ("the Acts Interpretation Act "), requiring that a construction promoting the purpose or object of an instrument made under an Act (other than one required to be laid before Parliament) is to be preferred to a construction that would not promote that purpose or object. In the present case, the same requirement of a purposive construction of the undertaking has been adopted expressly in cl 19.2(b) of the undertaking. Ordinarily, the purpose or object of an instrument will be ascertainable from the instrument as a whole, whether it is express or to be gathered from the terms of the instrument as a whole. By s 15AB(1) of the Acts Interpretation Act , it is permissible to have regard to material not forming part of the instrument, either to confirm that the meaning of the relevant terms is the ordinary meaning, or to resolve ambiguity. By s 15AB(3) of the Acts Interpretation Act , in considering whether to make use of such extrinsic material, or what weight is to be given to it, it is necessary to have regard to the desirability of persons being able to rely on the ordinary meaning of the terms, taking into account their context and the purpose or object underlying the instrument. Dictionary definitions of "share" and "second" Both parties resorted to dictionary definitions of the crucial words used in the undertaking. The relevant meaning of "share", found in the Oxford English Dictionary, is "To receive, possess, or occupy together with others." The Macquarie Dictionary defines "share" relevantly as "to divide and distribute in shares; apportion", or "to use, participate in, enjoy, etc., jointly." The relevant meaning of "second" in the Oxford English Dictionary is, "To remove (an officer) temporarily from his regiment or corps, for employment on the staff, or in some other extra-regimental appointment. Also transf. of employees in other occupations and employments." Similarly, the Macquarie Dictionary defines "second" as "to transfer (a military officer or other) temporarily to another post, organisation, or responsibility." The purpose or object of the undertaking Both parties were in agreement that the purpose or object of the undertaking was to promote competition. Throughout the process of varying the original undertaking from Toll Holdings on the transfer of aspects of the business to Asciano as a company independent of Toll Holdings, the ACCC's concern was to ensure that Toll Holdings did not obtain a competitive advantage in dealing with Asciano, as against any other person or corporation conducting a business similar to that of Toll Holdings and also using the services of Asciano. To this end, the undertaking was directed towards securing complete separation of Toll Holdings and other companies in the Toll Holdings group, on the one hand, and Asciano on the other hand. These matters are apparent from the recitals to the undertaking as varied, particularly recitals N, O, P and Q. It is unnecessary to have resort to any further material to ascertain the purpose of the undertaking. The proper construction of the undertaking It was also common ground between the parties that there was a failure to comply with cll 2.9(h) and (i) of the undertaking if Toll Personnel shared employees with Asciano or seconded employees to or from Asciano. This was the result of the application of the definition of "Toll" in cl 19.1 of the undertaking, by which the term "Toll" includes related bodies corporate of Toll Holdings and other entities that Toll Holdings is required to consolidate for the purposes of preparing annual financial reports. There is no doubt that Toll Personnel falls within this definition. Therefore either Toll Personnel is taken to have given the undertaking to the ACCC, or Toll Holdings is in breach of the undertaking (if Toll Personnel shared employees with, or seconded employees to or from, Asciano), because those employees are to be regarded as employees of Toll Holdings, by reason of the definition of "Toll".