Black & White Cabs Pty Ltd & Ors v Regent Taxis Limited [2019] QSC 50

SUPREME COURT OF QUEENSLAND CITATION: Black & White Cabs Pty Ltd & Ors v Regent Taxis Limited [2019] QSC 50 PARTIES: BLACK & WHITE CABS PTY LTD ACN 054 497 353 (first applicant) AND BWTM PTY LTD ACN 103 545 035 (second applicant) AND P2P TRANSPORT LIMITED ACN 617 760 899 (third applicant) v REGENT TAXIS LIMITED ACN 009 705 113 (respondent) FILE NO/S: BS No 525 of 2019 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 13 February 2019 DELIVERED AT: Brisbane HEARING DATE: 12 February 2019 JUDGE: Jackson J ORDER: The order of the court is that: 1. The application is dismissed. CATCHWORDS: TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – RESTRICTIVE TRADE PRACTICES – MISUSE OF MARKET POWER – SUBSTANTIAL DEGREE OF POWER – whether a prima facie case for breach of s 46 or s 47 of the Competition and Consumer Act existed – where proof of substantial lessening of competition not sufficient -- 1 of 9 -- 2 Competition and Consumer Act 2010 (Cth), s 46, s 47, s 80. Australian Competition and Consumer Commission v Colgate- Palmolive Pty Ltd (No 4) (2017) 353 ALR 460, cited COUNSEL: V Brennan for the applicants D Savage QC and B Kidston for the respondents SOLICITORS: GRT Lawyers for the applicants Ellem Warren Lawyers for the respondents JACKSON J: [1] This is an application for an interlocutory mandatory injunction, for the respondent to continue to provide taxi booking and dispatch services to the first applicant, and a prohibitory injunction to restrain the respondent from refusing to provide those services to the applicants’ taxis that are part of the respondent’s Gold Coast Cabs taxi fleet. [2] The central questions for decision are whether the applicants have demonstrated a prima facie case of breach of contract, or contravention of section 46, or section 47, of the Competition and Consumer Act 2010, by reason of the respondent’s refusal, or threatened refusal, to supply part of the taxi booking and dispatch services to the first applicant, that it otherwise supplies to taxis in its fleet, if the applicants’ taxis acquire taxi booking or dispatch services from a competitor of the respondent, and whether the balance of convenience favours the grant of an interlocutory injunction. [3] The respondent is an unlisted public company with 337 issued shares, owned by 199 shareholders. Each of the shares corresponds to a taxi service license. Those licenses are issued by the State Government, and are limited to a particular geographical area. The first applicant leases 158 taxi service licenses for the Gold Coast taxi service area. [4] The respondent holds a booking entity authority, and operates a taxi booking and dispatch network, pursuant to that authority, on the Gold Coast. Its principal business is the provision of taxi booking and dispatch services to taxi operators on the Gold Coast, for a fee. The respondent operates under the business name “Gold Coast Cabs”. The taxi operators to which it provides its taxi booking and dispatch services are mostly branded with Gold Coast Cabs livery. However, the respondent also has an agreement with Yellow Cabs, to provide Yellow Cabs branded taxis with its taxi booking and dispatch services. Approximately 10 per cent of the taxis to which the respondent supplies those services are branded as Yellow Cabs. [5] Prior to March 2018, the respondent provided its taxi booking and dispatch services to an entity that carried on business as Black and White Taxis. From March 2018, the respondent has provided its taxi booking and dispatch services to the first applicant, in substitution for that entity. The services were provided, pursuant to a monthly invoicing and payment arrangement. There was and is no formal contract. Currently, the respondent provides taxi booking and dispatch services to 357 taxis that operate in the -- 2 of 9 -- 3 Gold Coast taxi service area. Of those, 157 are affiliated with, or owned by, the applicants. [6] The taxi booking and dispatch services supplied by the respondent may be broken into different classes of work, as follows: (a) “call work” - where a customer calls a telephone number, and deals with an operator or system that takes the customer’s call and dispatches a taxi, to convey the customer to the destination; (b) “contract work” - provided under an agreement between the respondent and companies or government agencies, often as a result of a tender process; (c) “account work” - under which, the respondent accepts a booking from a customer and dispatches a taxi to carry out the job, but the payment for the job is made under a debtor account, charged on a periodic basis; (d) “executive work” - where the respondent dispatches an executive driver, rather than a less experienced driver; or (e) “taxi booking application work” - where a customer uses a computer software application to book a job and the respondent dispatches a taxi to carry out the job, excluding a book for hire service. [7] Some of the services so provided are classified or treated as “priority bookings work”. They include contract work, account work, and executive work. [8] The first applicant is a public company listed on the ASX. By August 2017, it had commenced installing its own booking and dispatch network in some of the applicants’ taxis. The first applicant’s network and the respondent’s network are not integrated. They operate separately using separate devices. If both networks are available to a taxi driver, the driver can utilise either, or both, to receive bookings. [9] The priority bookings work provided by the respondent is made pursuant to contacts that the respondent has secured to supply taxi services to the Gold Coast City Council, the Department of Veterans’ Affairs, the Department of Transport, the Newlife Church, and others. The priority bookings work makes up approximately 5.67 percent of the total jobs undertaken by Gold Coast Cabs taxis. [10] The first applicant’s network is competing for priority bookings work. It recently secured a contract, or contracts, to supply taxi services to the RACQ. The first applicant allocates its priority bookings work, as well as other bookings through its network, only to those taxis that have the first applicant’s network installed. [11] By November 2018, a question, or dispute, arose where one in five of the priority bookings work jobs being allocated by the respondent were being rejected by drivers of taxi cabs on the respondent’s network, thereby delaying customer pickups. [12] In December 2018, the respondent requested that taxi operators in Gold Coast Cabs fleet to inform it whether they had a second dispatch system. The first applicant declined to inform the respondent as to which of its taxis had been fitted with the first applicant’s network. -- 3 of 9 -- 4 [13] On 28 December 2018, the respondent issued a memorandum, advising that it would cease dispatching priority bookings work to taxis that had a second dispatch system. From that date, the respondent ceased dispatching priority bookings work to the first applicant’s taxis. [14] On 14 January 2019, the applicants commenced this proceeding by originating application. [15] On 18 January 2019, the respondent gave an interim undertaking to resume provision of all dispatch services, including the priority bookings work, until 12 February 2019, and directions were made for the hearing of this application, for an interlocutory injunction. [16] The applicants’ claims for a final, and interlocutory injunctions, are based on three causes of action. [17] First, that the respondent is in breach of a term of the contract made between the first applicant and the respondent that the respondent would provide taxi booking and dispatch services to the first applicant, for each of the applicant’s taxis, including the classes of work, identified as contract work, account work, executive work, and taxi booking application work. All, or most, of those classes of work, are included in the respondent’s classification of priority bookings work. The first applicant alleges that it was a term of the contract between the first applicant and the respondent, that the first applicant would pay the respondent a base fee of $825 per month, exclusive of GST, for each of the applicant’s taxis, which used, inter alia, those services. The first applicant alleges that between 28 December 2018, and 18 January 2019, the respondent refused, or otherwise failed to provide the first applicant with the services that constituted the priority bookings work. By not providing the first applicant’s drivers any dispatches for contract work, account work, executive work and taxi booking application work, the first applicant alleges there was a breach of contract by the respondent, and claims a permanent injunction to restrain the respondent from refusing to provide taxi booking and dispatch services to the first applicant, including the priority bookings work. [18] Second, the applicants allege that there is a Gold Coast taxi booking and dispatch services market, for taxi booking and dispatch services, used by customers located on the Gold Coast, that are provided to the Gold Coast taxi operators, within the Gold Coast taxi service area. As and from December 2018, the applicants allege the existence of a market in which the respondent, B&W Cabs, Ingogo, GoCatch, and GM Cabs, all supply taxi booking and dispatch services into the Gold Coast taxi service area, that are substitutable for the respondent’s taxi booking and dispatch services, and in competition with one another. The applicants allege that the respondent had a substantial degree of power in the market, because its services are used by all Gold Coast taxis, and no other competitor’s service is used in more than 30 percent of all Gold Coast taxis, or has alone, or in combination, the respondent’s market share of taxi booking and dispatch services on the Gold Coast. [19] The applicants allege that it was the respondent’s substantial purpose to provide its taxi booking and dispatch services to the first applicant, only on condition that the first applicant would not use its taxi booking and dispatch service on the Gold Coast, or a market competitor’s booking and dispatch service. Further, the applicants allege that it was the respondent’s purpose to control which of the market competitors are to be permitted by the respondent to compete in the market. In addition, the applicants allege -- 4 of 9 -- 5 that the respondent’s conduct has, or is likely to have the effect, that Gold Coast taxi operators, including the first applicant, will be more likely to subscribe to the respondent’s taxi booking and dispatch services, to the exclusion of any competitor’s taxi booking and dispatch services, with the consequence that there will be a substantial lessening of competition in the Gold Coast taxi and dispatch services market. [20] Under section 46(1), of the Competition and Consumer Act, a corporation that has a substantial degree of power in a market, must not engage in conduct that, inter alia, has the purpose of substantially lessening competition, or is likely to have the effect of substantially lessening competition in that market. It may be assumed that the market is one for the supply and acquisition of taxi booking and dispatch services in the Gold Coast taxi service area, and that the respondent has a substantial degree of power in that market. Under section 47(1) and (2) of the Competition and Consumer Act, subject to section 47, it is provided that a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing, and that a corporation engages in that practice, inter alia, if it supplies or offers to supply services on the condition that the acquirer, or proposed acquirer, will not acquire services of a particular kind or description, directly or indirectly, from a competitor of the corporation. By section 47(10), subsection (1) does not apply to the practice of exclusive dealing, unless, inter alia, the conduct has or is likely to have the effect of substantially lessening competition. [21] It is not disputed, for the purposes of this application, that by the 28 December 2018 memorandum, the respondent offered to supply, and thereafter supplied, the priority bookings work, part of its taxi booking and dispatch services, to the first applicant, and others, on condition that the acquirer not also acquire taxi booking and dispatch services from the respondent’s competitors. The question agitated between the parties on the hearing of this application, as to whether there is a prima facie case of contravention, of either section 46, or section 47(1), is whether the respondent’s conduct, in refusing to supply priority bookings work to the applicants’ taxis, or other cabs that utilise another taxi booking and dispatch service, has the effect, or is likely to have the effect, of substantially lessening competition in that market. [22] The applicants submit that because an operator must choose between the respondent’s taxi booking and dispatch services, as supplied for the priority bookings work, and its competitors’ taxi booking and dispatch services, the respondent’s conduct is likely to have the effect of substantially lessening competition, by operators subscribing for the respondent’s services, to the exclusion of the competitors’ taxi booking and dispatch services. [23] A pithy description of the assessment of whether there has been, or is likely to be, a substantial lessening of competition, appears in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 4) (2017) 353 ALR 460. Wigney J said this: “In assessing whether there has been a substantial lessening of competition, a ‘with and without’ or ‘but for’ approach or test is generally applied: the Court considers the likely state of competition in the relevant market ‘with’ the relevant conduct (here, the making of an arrangement, or arrival at an understanding, including the Aligned Transition Provisions) and compares it with the likely state of the market ‘without’ or ‘but for’ the conduct. The -- 5 of 9 -- 6 hypothetical market without the impugned conduct is commonly referred to as the ‘counterfactual’. The test is not a ‘before and after test’, although ‘as a matter of fact, the existing state of competition in the market may throw some light on the likely future state of competition in the market absent the impugned conduct’. Conduct ‘has the effect of lessening competition in a market only if it involves a reduction in the level of competition which would otherwise have existed in that market but for the conduct in question’. In Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd, Smithers J explained the relevant inquiry in the following terms: ‘To apply the concept of substantially lessening competition in a market, it is necessary to assess the nature and extent of the market, the probable nature and extent of competition which would exist therein but for the conduct in question, the way the market operates and the nature and extent of the contemplated lessening. To my mind one must look at the relevant significant portion of the market, ask oneself how and to what extent it would have been competition therein but for the conduct, assess what is left and determine whether what has been lost in relation to what would have been, is seen to be a substantial lessening of competition… Accordingly, in my opinion, competition in a market is substantially lessened if the extent of competition in the market which has been lost, is seen by those competent to judge to be a substantial lessening of competition. Has competitive trading in the market been substantially interfered with?’ The comparison should be conducted having regard to commercial realities and normal commercial practices, as opposed to theoretical models. The focus is not on the effect of the conduct on particular competitors, but rather its effect on the state or condition of the market generally. The word ‘lessening’, in this context, should be construed qualitatively, as opposed to quantitatively, and involves forming judgments about the likely impact of the conduct on the market in general. Section 4G provides that references to the ‘lessening of competition’ shall be read as including preventing or hindering competition. The phrase ‘preventing or hindering’ should be given a broad construction. A ‘substantial’ effect is one that is ‘substantial in the sense of meaningful or relevant to the competitive process’.” [24] In quoting those paragraphs, I have omitted the citations. [25] In the present case, the applicants do not make any submissions by reference to any of these principles. Their case is that the threshold of a prima facie case is sufficiently crossed by having regard to the strength of the respondent’s position in the market in terms of market share and the logical effect upon taxi operators of being put to the choice between the respondent’s taxi booking and dispatch services for priority bookings work and the products of its competitors. -- 6 of 9 -- 7 [26] The respondent submits that: (a) the applicants bear the onus of proof to establish the market effect; (b) the priority bookings work relates to 5.76 percent of the total jobs, including rank and hail work; (c) the first applicant is able to deploy its booking and dispatch services in competition with the respondent’s services in relation to the priority bookings work; (d) there is no evidence as to whether any of the taxis in the fleet to which the respondent supplies services will elect not to deploy the booking and dispatch services of a competitor in preference to losing access to the respondent’s taxi booking and dispatch services for priority booking work; and (e) having regard to the scope of the services affected by the decision not to dispatch priority bookings work to taxis using another taxi booking and dispatch service, the applicant has not demonstrated a prima facie case of a likely effect that is substantial in the sense of meaningful or relevant to the competitive process. [27] The applicants did not address any separate submissions as to whether the respondent’s conduct had the purpose of substantially lessening competition as opposed to the likely effect of doing so. [28] The first applicant’s breach of contract case depends on proof of the alleged contractual return. The first applicant does not allege an express contractual term. It alleges that the term arises on the proper construction of or impliedly under the contract made by conduct comprising: (a) the first applicant’s request for the services; (b) the respondent’s provision of the services, including those for the priority bookings work; (c) the respondent’s monthly invoicing for the services; and (d) the first applicant’s payment of the invoices over a less than 12 month period. [29] The first applicant submits that it follows that, from month to month, the respondent agreed to provide the services, including the priority bookings work, during the period of the contract. The first applicant submits that while the contract remains on foot the first applicant is entitled to and the respondent obliged to performance of that term. [30] The first applicant must show a prima facie case that it is entitled to a final injunction at trial to compel the respondent’s performance of the alleged term as a condition of being entitled to an interlocutory injunction pending trial, in order to preserve the status quo. [31] The respondent makes a number of powerful points in answer to the first applicant’s claim that it is entitled to a final injunction. Only two of them need be mentioned. First, although there is a discretion to grant a final injunction in aid of a contractual right to performance, a ground for refusing injunctive relief is that damages are an adequate remedy. Second, even if the alleged term is a term of contract between the parties, the contract is one that is either terminable at will or upon reasonable notice and a reasonable period would be unlikely to be more than a month or so, given that the informal contractual relationship is less than a year old and is based on a monthly service provision and billing cycle. -- 7 of 9 -- 8 [32] However, it is unnecessary to analyse the first applicant’s breach of contract case further on the question of a prima facie case in order to decide the present application. [33] The applicants case of contravention of section 47 of the Competition and Consumer Act depends on establishing that the respondent engaged in the practice of exclusive dealing within section 47(1) and subsection (2) of the Act and that one of the requirements in relation to a substantial lessening of competition under section 47(10) is satisfied, so as to entitle the applicant’s to a final injunction at trial, restraining the contravening conduct under section 80 of the Competition and Consumer Act. [34] For the purposes of this application for an interlocutory injunction upon their claim under section 47, the applicants must establish a prima facie case that they will be entitled to a final injunction at the trial. As previously discussed, it may be accepted that the applicants have established a prima facie case of a contravention of section 47 if they can establish to that standard that the respondent’s conduct has the purpose of or is likely to have the effect of substantially lessening competition. I proceed on that footing, notwithstanding that there are some features of the alleged market that were not analysed by the parties’ submissions, including that the alleged market has more than one set of customers. The parties’ submissions focused on the customers comprising taxi operators who acquired the respondent’s taxi booking and dispatch services. However, the respondent’s customers also comprise those who made contracts with it in relation to the booking of taxi cabs. So the market is multi-dimensional. [35] As to a substantial lessening of competition, in the absence of evidence as to any actual effect on competition, the applicant is unable to establish that there has been any effect of that kind to date. Accordingly, the question is whether the applicants have established a prima facie case that there is a likely effect of substantial lessening of competition. [36] There is a paucity of evidence on this subject as well. At this stage, neither side of the record has adduced any expert evidence that would inform the answer to the question. The respondent submits that the absence of any evidence of likelihood forecloses the answer to the question as a failure to establish a prima facie case. The applicants submit that at this early stage of the proceeding, no more is required to cross the prima facie case threshold than they have done. If it were required, to establish a prima facie case, that the Court must be satisfied that if the evidence remained the same, the applicant would succeed in their claim for final relief on the balance of probabilities, I would conclude that the applicants have not established a prima facie case. [37] But that is not what is required. Where the likely requirements of proof at a trial are substantial and it is not reasonable to expect a party to have been able to collect all or most of the strands of proof by the time of the hearing of an application for an interlocutory injunction, the degree of proof that may be required to establish a prima facie case may be affected. Notwithstanding that, in my view, there are real reasons to doubt the strength of the applicant’s case that the respondent’s conduct is likely to have the effect of substantially lessening competition in the alleged market. Were the evidence to remain the same, in my view, that case would fail. [38] It is against the possibility that the applicants may be able to gather additional evidence on this element of its competition causes of action, based on the logic of its contention that taxi operators may choose not to use a competitor’s taxi booking and dispatch services in order to maintain access to the respondent’s service in respect of priority -- 8 of 9 -- 9 bookings, that the question of a prima facie case of contravention of section 47 must be decided. In the end, in my view, this question is finally balanced. But I conclude that the applicants’ proof up to this point is not sufficient. [39] Because the requirement of substantial lessening of competition is also an element of contravention of section 46 of the Competition and Consumer Act, it follows from my conclusion on that question in relation to the contravention of section 47 that the applicants have not demonstrated a prima facie case of contravention of section 46 because their proof in relation to that question, up to this point, is not sufficient. [40] Because I have concluded that the applicants have not made out a prima facie case for contravention of section 46 or section 47, it is unnecessary to consider the balance of convenience in relation to the grant of an interlocutory injunction on those causes of action. [41] It remains to consider that question on the first applicant’s claim for an injunction to restrain the respondent’s alleged breach of contract. In my view, the balance of convenience favours not granting the interlocutory injunction sought. First, it is likely that damages will be an adequate remedy, although the first applicant submits that there are questions that may make any assessment of the damages complex. [42] Second, more importantly, the timetable of proposed interlocutory steps sought by the applicants towards the trial of the proceeding show that a trial is not likely for several months, at least. An interlocutory injunction until then would have the effect of compelling the respondent to continue to supply the applicants with taxi booking and dispatch services beyond the period or term of the contract between them if the respondent were to give notice terminating the contract. The applicants submit that the respondent has not given that notice up until the present time, so the contract remains on foot. The respondent submits that he has not done so to date because that would arguably amount to a breach of the undertaking he gave to the court to continue to supply all service to the applicant’s taxi cabs until the hearing of this application. [43] Third, although to maintain a status quo would not be likely to cause the respondent significant loss or damage pending trial, nor do I consider that to refuse an injunction would be likely to cause significant loss or damage to the applicants. [44] Overall, therefore, in my view, the balance of convenience favours not granting an interlocutory injunction until trial. Accordingly, the order that I will make is that the application is dismissed. -- 9 of 9 --