Accc v Baxter Healthcare Pty Ltd

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: Gleeson CJ,Gummow,Hayne,Heydon,Crennan JJ.,Kirby J.,Callinan J.
• Judgment Date: 29 August 2007
• Neutral Citation: [2007] HCA 38,2007-0829 HCA A
• Docket Number: S56/2007
• Date: 29 August 2007

Australian Competition and Consumer Commission

Appellant

and

Baxter Healthcare Pty Limited & Ors

Respondent

[2007] HCA 38

Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ.

S56/2007

HIGH COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Baxter Healthcare Pty Limited

Statutes — Interpretation — Trade Practices Act 1974 (Cth) (‘the Act’) — First respondent negotiated with and formed contracts with State and Territory governments for the supply of medical products in circumstances where State and Territory governments were not carrying on a business — Trial judge found that, but for the application of derivative Crown immunity, the first respondent had contravened ss 46 and 47 of the Act in relation to pre-contractual conduct — Whether the provisions of ss 46 and 47 applied to the conduct of the first respondent — Nature and extent of available relief.

Statutes — Operation and effect of statutes — Crown immunity — Derivative immunity — Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd (1979) 145 CLR 107 — Whether the presumption of Crown immunity creates a presumption against legislation having an incidence in legal effect upon the Crown — Whether the presumption of Crown immunity creates a presumption against legislation affecting Crown ‘freedoms’ or governmental, commercial or political ‘interests’ — Whether the Commonwealth, States and Territories are manifestations of the Crown — Whether Crown immunities apply as such to the Commonwealth, States and Territories — Whether different notions of governmental immunity are suggested or required by the Australian Constitution.

Constitutional law (Cth) — Crown immunity — Whether Crown immunity is applicable without modification to the Commonwealth, States and Territories provided for in the Constitution.

Words and phrases — ‘bind’, ‘derivative Crown immunity’, ‘incidence in legal effect’.

Constitution, ss 1, 61, 71, 73, 74, 75, 78, 79, 114.

Trade Practices Act 1974 (Cth), ss 2, 2A, 2B, 4L, 6, 46, 47, 51, 87, 87A.

Representation

L G Foster SC with A I Tonking and J S Gleeson for the appellant (instructed by Australian Government Solicitor)

D M Yates SC with I S Wylie for the first respondent (instructed by Blake Dawson Waldron)

R J Meadows QC, Solicitor-General for the State of Western Australia with J C Pritchard for the second respondent (instructed by State Solicitor's Office (WA))

C J Kourakis QC, Solicitor-General for the State of South Australia with G F Cox and S A McDonald for the third respondent (instructed by Crown Solicitor's Office (SA))

M G Sexton SC, Solicitor-General for the State of New South Wales with S J Gageler SC and N L Sharp for the fourth respondent (instructed by Crown Solicitor for New South Wales)

1. Appeal allowed.

2. Set aside the orders of the Full Court of the Federal Court of Australia made on 24 August 2006.

3. Remit the matter to the Full Court of the Federal Court of Australia for further consideration in accordance with the reasons of this Court.

4. Respondents to pay the appellant's costs of the appeal to this Court. The costs of the proceedings to date otherwise to be in the discretion of the Full Court of the Federal Court of Australia.

1 Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. The issues in this appeal are whether, upon the true construction of the Trade Practices Act 1974 (Cth) (‘the Act’), ss 46 and 47 of the Act apply to conduct of a trading corporation in, or in connection with, negotiations for, entry into, or performance of, a contract with a State or Territory government where the government's conduct is not in the course of carrying on a business, and, if so, what remedies are available in a case of contravention. Sections 46 and 47 bind the Crown in right of a State or Territory so far as the Crown carries on a business, either directly or by a government authority (s 2B). Yet it is argued that when a corporation, in the course of carrying on its business, negotiates for, enters into, or performs a contract with a State or Territory government which is not itself carrying on a business, ss 46 and 47 do not apply to the corporation. That is said to be a form of derivative immunity, recognised and applied by this Court in 1979 in Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd1. This argument was accepted by Allsop J at first instance in the Federal Court of Australia 2, and by the Full Court of the Federal Court 3 (Mansfield, Dowsett and Gyles JJ) on appeal. The appellant appeals against the decision of the Full Court. The Act has changed in significant respects since 1979. All parties accept that, ultimately, the question is one of construction of the Act. That is the way in which the case was conducted and decided at first instance, and in the Full Court, and it is the basis upon which the case was argued in this Court.

2 The Act contains certain provisions concerning its application to what the Act describes as the Crown in right of the Commonwealth, the Crown in right of a State, and the Crown in right of a Territory. As is often the case, the terms in which Parliament expressed its legislative intention reflected legal doctrine expounded in earlier judicial decisions, including decisions of this Court. There was no argument that the legislation, or a relevant part of it, is constitutionally invalid, or that the Constitution, for reasons outside the provisions of the Act, dictates an outcome in favour of one side or the other. Such an argument would have required notification under s 78B of the Judiciary Act 1903 (Cth), in order to give interested Attorneys-General the opportunity to appear and make

submissions. The issue being one of statutory construction, the Court must give meaning and effect to the language of the Act.

3 Allsop J found that, but for the derivative immunity enjoyed by the first respondent, the conduct of the first respondent would have contravened s 46 in one respect and s 47 in a number of respects. He concluded, however, that the Act did not apply to, or operate in respect of, the conduct complained of and dismissed the application brought under the Act by the appellant. There was an appeal to the Full Court against the dismissal of the application. The appeal covered both the derivative immunity conclusion and Allsop J's refusal to find further contraventions. There was also a notice of contention by which the first respondent challenged the findings that its conduct fell within the terms of the prohibitions in ss 46 and 47. The Full Court did not find it necessary to deal with the notice of contention. Hence, if the appeal to this Court is allowed, it will be necessary to remit the matter to the Full Court to resolve that issue and to permit determination of the remainder of the appellant's appeal to that Court.

The conduct of the first respondent

4 The first respondent, Baxter Healthcare Pty Limited (‘Baxter’), is the Australian operating subsidiary of Baxter International Inc, a global medical products and services company incorporated in the United States of America. Baxter and its parent company specialise in critical therapies for life-threatening conditions.

5 Baxter manufactures the majority of the products it supplies within Australia at a plant in Toongabbie, New South Wales. It manufactures and supplies several different types of sterile fluid commonly used in hospitals. These relevantly include: (1) large volume parenteral (‘LVP’) fluids, used for re-hydration, the administration of drugs, resuscitation, and fluid and electrolyte replacement; (2) irrigating solutions (‘IS’), used for a number of purposes, including the washing or cleaning of wounds in surgery; and (3) parenteral nutrition (‘PN’) fluids, used for the provision of nutrition to patients. Baxter also manufactures peritoneal dialysis (‘PD’) products. PD is a form of treatment for chronic renal failure. Most PD treatments are self-administered by patients at home. The expression ‘PD products’ refers to both PD fluids and apparatus used to perform PD, such as automated PD machines and lines for fluid connection.

6 In the judgments of the primary judge and the Full Court of the Federal Court, the term ‘sterile fluids’ was defined to exclude PD fluids, although it was acknowledged that PD fluids are required to be sterile. This usage provides a convenient shorthand for contrasting LVP fluids, IS and PN fluids, as a class, with PD fluids and PD products generally.

7 Between 1998 and 2001 Baxter had the only manufacturing plant for LVP and PN fluids in Australia. Most LVP and PN fluids are bulky, water-based items. In general, transportation costs are relatively high, giving domestic producers a significant competitive advantage. Since early 1997, Baxter has supplied almost 100 per cent of LVP fluids at the wholesale level. Baxter was also the wholesale supplier of about 95 per cent of IS acquired in Australia between 1998 and 2001 inclusive.

8 PD became available to home-based patients in the early 1980s. Until 1990, Baxter was the only supplier of PD fluids in Australia. In 1990, Gambro Pty Ltd (‘Gambro’) commenced supplying PD products in Australia. Another supplier, Fresenius Medical Care (‘Fresenius’), sought to enter the PD market in Australia in about 1995. Between 1998 and 2001 inclusive, Baxter sold about 90 per cent of PD products in Australia, with Gambro and Fresenius each enjoying a small market share. As PD products are more valuable for their size and weight than sterile fluids, the competitive advantage enjoyed by domestic manufacturers over importers is less significant.

9 Between 1998 and 2001, Baxter entered into five long-term contracts for the supply of sterile fluids and PD products to public hospitals. The contracts were entered into with the relevant purchasing authorities of the second to fourth...