Requirement of consensus and communication 9 min read
The High Court of Australia has handed down a significant decision, dismissing the ACCC's appeal against a ruling of the Full Federal Court in proceedings involving the Construction, Forestry and Maritime Employees Union (CFMEU) and construction company J Hutchinson Pty Ltd (Hutchinson).
The decision provides clarity on when parties are considered to have reached an 'understanding' under the Competition and Consumer Act 2010 (Cth) (CCA). While the ACCC's appeal was ultimately unsuccessful, the decision confirms that courts will closely scrutinise communications between parties when assessing whether a sufficient 'understanding' exists.
In this Insight, we summarise the judgment and implications for businesses when navigating potential industrial action.
Key takeaways
- The High Court’s ruling offers some clarification around what constitutes an 'understanding':
- Requirement of consensus: an 'understanding' requires a degree of mutual agreement or 'meeting of the minds' between parties; merely succumbing to a threat or demand is insufficient.
- Requirement of communication: an 'understanding' requires some form of communication, whether expressly or tacitly communicated by words or conduct, to establish a 'meeting of the minds'. Simply capitulating to a threat without conveying assent or commitment to conform with the threat may not be enough to establish an 'understanding' (noting that Edelman J indicated that this communication requirement may be dispensed with if the party making the threat makes this clear).
- Businesses should continue to exercise caution when responding to threats of industrial action or potential secondary boycotts.
Background
In 2016, Hutchinson, the head contractor on a construction project in Queensland, subcontracted waterproofing work to a company that did not have an enterprise bargaining agreement with the CFMEU. The CFMEU threatened industrial action unless the subcontractor was removed from the project. Hutchinson subsequently terminated the subcontract. Although the CFMEU's threat was the only reason for the termination, Hutchinson did not communicate this to the CFMEU or otherwise explicitly 'assent' to its demands.
In 2020, the ACCC initiated proceedings against Hutchinson and the CFMEU, arguing that the two had arrived at an anti-competitive understanding in contravention of sections 45E and 45EA of the CCA. These provisions of the CCA prohibit contracts, arrangements or understandings with employee organisations that prevent or hinder the acquisition of goods or services in certain situations (known as the 'secondary boycott provisions').
The ACCC succeeded in proving at trial that the parties had reached an understanding. However, the Full Federal Court overturned this as no such understanding was communicated between the parties. The ACCC successfully sought special leave to appeal to the High Court to clarify whether this 'communication requirement' was needed to prove an 'understanding' under the CCA.
The High Court dismissed the appeal, ruling that compliance with a threat, without evidence of express or implied mutual commitment, does not constitute an 'understanding' under the CCA.
Summary of judgment
Does giving in to a threat of industrial action constitute an 'understanding' under the CCA?
The majority of the High Court ruled that for the purposes of the CCA, a person who succumbs to a threat of industrial action, without express or implied communication of a commitment to act as demanded, does not form an 'understanding' with the person making the threat. The ACCC’s argument that, capitulating to another's demand under threat is sufficient to constitute an 'understanding', was found by the High Court to be too broad.
For an 'understanding' to exist, there must be a mutual commitment communicated between the parties, either explicitly or through conduct, demonstrating a consensus or 'meeting of the minds'. Unilateral action, even in response to a demand, does not automatically result in an 'understanding'. An understanding requires 'reciprocity' and that is evidenced by the communication of assent by the recipient of an offer, request or demand.
While the majority acknowledged that Hutchinson's decision to terminate the subcontractor was done to avoid the union's boycott and could even be described as 'a rational, commercial response to a threat', Hutchinson did not communicate its commitment to meet the CFMEU's demand. Therefore, no 'understanding' was formed between the two parties. The ACCC has failed to prove this essential requirement of reciprocity.
Dissenting from the majority, Steward J held that the requirement of a 'meeting of the minds' together with mutual consent is not required to establish an 'understanding' under section 45E of the CCA (that is, where it has been alleged that a party succumbed to a threat of industrial action). Steward J distinguished section 45E from other sections of the CCA (such as the cartel provisions), emphasising that its purpose is to prevent coercion in industrial matters and that it would be unrealistic to expect parties to verbalise, record or otherwise evidence their illegal conduct. Steward J instead held that for the purpose of section 45E, there is no need to establish a 'meeting of the minds', but rather, the focus should be on whether a party was pressured into changing its preferred course of action due to a threat.
What were the key facts in this finding?
Hutchinson did not provide any objective verbal or written assent to the CFMEU regarding the termination of the subcontract. In fact, prior to the termination, Hutchinson attempted to assist the subcontractor in obtaining an enterprise bargaining agreement with the CFMEU, believing this would allow the subcontractor to return to the project. Accordingly, there was no reciprocity from Hutchinson which was referable to the request or demand, which was central to establishing an 'understanding'.
Importantly, there was no evidence that Hutchinson agreed to the CFMEU's demand and made no indication to the CFMEU that the subcontract would be terminated. As such, the High Court concluded that no 'understanding' existed between Hutchinson and the CFMEU, affirming that the lack of communication and mutual commitment – ie reciprocity – between the parties meant the requirements for a prohibited understanding under the CCA were not met.
Could the outcome have been different?
The majority indicated that an 'understanding' between the parties may have been established if there was proof that Hutchinson had provided verbal or written assent to the CFMEU’s demand to terminate the subcontract.
Edelman J's judgment also suggested that the 'communication' requirement could be overcome if the CFMEU had indicated to Hutchinson that it didn't need or expect to receive any communicated response – for instance, if the CFMEU had conveyed that Hutchinson’s compliance with its demand could be assumed without direct communication. However, Edelman J noted that the ACCC did not make this submission or lead any relevant evidence in support of this notion.
The implications
The judgment demonstrates how such cases are finely balanced, with the close attention to the specific communications between the parties playing a crucial role in determining the outcome. Therefore, businesses must take care when navigating situations involving threats, demands or potential industrial action, as perceptions of actions and related communications can impact legal outcomes.