Sunday, 2 September 2012

Unfinished Business: The Hold Cleaning Case - Part 1 - The Investigation

Part 1: The Investigation


As stated in the final post of the Untold Story: The ACCC’s Role in the Waterfront Dispute,[1] some ACCC staff, primarily me, were quite unhappy with the settlement reached with the MUA in the Waterfront Dispute. We believed that the MUA had more or less gotten off scot-free, considering that it had engaged in a large number of blatant breaches of the TPA.

Accordingly, the first thing we did once the settlement with the MUA in relation to the Waterfront Dispute had been signed off, was pick up our pens and recommence work on our hold cleaning investigation.


As stated in an earlier Untold Story post,[2] the practice of demanding payment for cleaning out the holds of vessels had been around for a very long time. The practice started in Sydney’s Balmain in 1900 with the establishment of the Balmain Labourers Union whose members were engaged primarily in painting, cleaning, docking and undocking of vessels.

The Painters and Dockers came to prominence in 1980 when it became the subject of the Royal Commission on the Activities of the Federated Ship Painters and Dockers Union, better known as the Costigan Royal Commission.

We were very surprised to discover that this illegal practice, which had been exposed by the Costigan Royal Commission in 1984, was still continuing unabated in a number of Australian ports in 1997. The practice of either forcing vessel owners to use MUA labour to carry out necessary or unnecessary hold cleaning work or demanding payment for hold cleaning work already carried out by another cleaning company was occurring quite regularly in the bulk cargo ports in Western Australia, South Australia, Newcastle and Port Kembla.

The Investigation

Once the Waterfront Dispute was over, my Waterfront team (which by that stage consisted of my Assistant Director and me) went back to our usual job of running the Sydney Mergers and Asset Sales Branch. However, we also dug out the hundreds of pages of section 155 documents we had obtained a year before from various market participants. We resumed our painstaking review of these documents in an attempt to identify potential contraventions of the TPA.

We were quite understaffed in Mergers, so finding the time to investigate and prepare the hold cleaning case against the MUA was very difficult. The only way we could conduct our mergers work and the hold cleaning investigation at the same time, was to work on mergers until about 6pm or 7pm and then to commence the hold cleaning investigation at about 7pm each night. We would continue to work on this investigation until 11 or 12pm.

The first task was to review hundreds of pages of section 155 documents, consisting primarily of telexes and facsimiles from shipping agents and ship owners. We would try to match up the documentary evidence provided by a ship owner with the documents generated by the shipping agent in relation to the same hold cleaning demand.

The second task was to re-engage with the industry. This involved contacting various potential witnesses and explaining to them that the ACCC had decided to reopen its hold cleaning investigation. Some industry participants were unwilling to help as they suspected that our case would only result in a slap on the wrist for the MUA. Other industry participants had a higher opinion of the ACCC after the Waterfront Dispute as they had been impressed by our determination in holding out for an outcome for small business victims of the dispute.

Obviously, winning over market participants is a very important part of running any case, as you will be relying on these market participants to be your witnesses in any future litigation.

Framing the contraventions

The focus of our investigation had been on instances of primary boycotts in breach of section 45DB of the TPA. As explained in the Untold Story, this provision stated:

(1) A person must not, in concert with another person, engage in conduct for the purpose, and having or likely to have the effect, of preventing or substantially hindering a third person (who is not an employer of the first person) from engaging in trade or commerce involving the movement of goods between Australia and places outside Australia.

Our argument was that the MUA had engaged in conduct which had prevented and substantially hindered ship owners from engaging in trade or commerce involving the movement of bulk goods between Australia and places outside Australia.

While this contravention was generally quite easy to prove, the main difficulty arose in relation to proving that two MUA officers or employees had acted in concert. Often the ship owner would simply capitulate once they had received a threat from a single local MUA official. Unfortunately, we could not pursue these types of allegations because:

  • we could not prove that two MUA officials or employees had acted in concert and 
  • we could not prove that the movement of goods had been hindered or prevented.
Therefore, we had to focus our case on incidents where:
  • we could clearly identify at least two MUA officials or employees acting in concert; and
  • we could show the vessel carrying the relevant goods had been prevented or significantly hindered from sailing by the conduct of the MUA officials or employees.
ACCC staff were also keen to explore whether other provisions of the TPA could be applied to the conduct. The main section of the TPA which ACCC staff we were keen to pursue was section 60 which provided (at that time):

A corporation shall not use physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer or the payment for goods and services by a consumer.
The reasons ACCC staff were keen to use section 60 was because:
  • the section seemed to more accurately reflect the conduct which the MUA was engaging in, which was thuggish and threatening behaviour; and 
  • section 45DB had only been in the TPA since 1996 so we were unable to use it in relation to hold cleaning demands which had occurred prior to that date. However, section 60 had been in the TPA for a long time so we were able to use the section in relation to demands which had occurred prior to 1996. 
However, there were a few obstacles to using section 60 in relation to hold cleaning conduct.

The first obstacle was that the supply had to be “to a consumer”. On first glance, this did not seem to be a proper characterisation of the “transaction” between the MUA and a ship owner. However, this ended up not being a problem where the value of the transaction was less than $40,000 as such transactions were deemed to be "consumer transactions" under section 4B of the TPA. This did mean that we had to abandon potential section 60 claims in relation to hold cleaning demands where the MUA had demanded or been paid more than $40,000.

The second obstacle was that under section 60 the entity contravening the provision had to be a corporation, which the MUA was not. Therefore, the only way we could use section 60 was to rely on the extended operation of the TPA as set out in section 6.

We sought to use section 6(2)(b)(i), which extended the operation of the TPA to conduct involving trade and commerce between Australia and places outside Australia.

We also believed we could use section 6(3), which extended the operation of section 60 to conduct involving the use of postal, telegraphic or telephonic services, as long as we could prove that an MUA official or employee had used a relevant "service" to make the hold cleaning demand. In other words, we could only pursue section 60 cases where the MUA officer or employee had engaged in some part of the conduct by sending a letter through the mail, making a telephone call or even sending a facsimile.

While it took a great deal of argument to convince the ACCC’s counsel that section 60 could and should be used, they ultimately agreed to include some section 60 claims in the case against the MUA.

ACCC staff had also wanted to explore the use of section 58 of the TPA in relation to the MUA’s hold cleaning conduct. Section 58 prohibits blowing or accepting payment for a good or service when the party accepting the payment does not intend to supply that good or service.

The reason that the ACCC was interested in this provision was because of instances of the MUA demanding payment from ship owners for hold cleaning where the service had already been provided by another cleaning company. In other words, there were instances of the MUA seeking to extract payment from a ship owner even though they had used another company rather than MUA labour to clean their holds.

ACCC staff believed that as it was impossible in these circumstances for the MUA to provide the service of hold cleaning for the vessel (as the holds had already been cleaned) the MUA were accepting payment in circumstances where they knew they could not carry out the hold cleaning work. While such conduct is more appropriately described as “extortion”, we believed that we could attack this conduct under section 58 because the MUA were accepting payment for hold cleaning services when it clearly had no intention of supplying hold cleaning services.

Despite the best efforts of the ACCC to convince counsel to include a section 58 claim in our case, we were not successful. In hindsight, this was probably a good decision, as such a claim may have been seen by the court as stretching the purpose of section 58 to absolute breaking -point.

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