The legal reasoning for the outcome in the Galati (spudshed) Case

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Who were the parties to this dispute?

The parties to the dispute were the Potato Marketing Corporation of Western Australia (PMC), a statutory body created under the Marketing of Potatoes Act 1947 (WA) and Mr Tony Galati, as first defendant along with an associated company Galati Nominees.

The PMC regulates the domestic potato market to ensure that the production of potatoes in WA remains viable. The PMC is able to do this by forecasting the demand of the local market and then allocating the production of this amount amongst a number of registered growers for each “period” and the amount that can be sold by each agent.

Mr Galati is registered grower of potatoes in WA. Galati Nominees takes delivery of potatoes, as an agent for the PMC, from Mr Galati and then sells them predominately to “Spudshed” supermarkets and Coles supermarkets.

What were the issues in dispute?

The central issue in the proceedings was whether the PMC could obtain an injunction restraining the production of potatoes by Mr Galati and furthermore the selling of those potatoes by Galati Nominees. The injunction was argued to be necessary as Mr Galati had been and was continuing to produce an amount of potatoes in excess of the amount he was allocated by the PMC.

What did the PMC Contend?

The PMC argued that Mr Galati was currently and was continuing to harvest an amount of potatoes that substantially exceeded the amount he was allowed. Mr Galati was entitled to plant and harvest 1,918 tonnes of potatoes in one period and 1,049 in the following period. However Mr Galati harvested 3,008 tonnes of potatoes in that first period, with the possibility of harvesting  3,635 tonnes of potatoes in the second period.

The PMC contended that Mr Galati and Galati Nominees needed to be restrained from harvesting and selling the extra amount of potatoes, as it undermined the PMC’s statutory functions and was contrary to the agreement in place between the parties.

What did Mr Galati contend?

Galati Nominees argued an extensive list of reasons in opposition to the injunction being granted. The first argument was that the PMC had not complied with the agreement in place between the parties that required mediation to be the first dispute resolution process undertaken. The second argument and third arguments were in regards to the relevant clauses of the agreement not being of a contractual nature. Specifically it was argued that the agency agreement was of a statutory and not contractual nature. Further if the second argument was to be rejected, the relevant clauses of the contract could not be considered of a contractual nature as it was not supported by consideration.

The fourth and fifth arguments concerned why injunctive relief should not be granted to the PMC. This was argued on the basis that if the relevant clauses were to be determined to be of a contractual nature they were contrary to s 45(2) of the Competition and Consumer Act 2010 (Cth), and therefore injunctive relief should not be given. Furthermore injunctive relief was not necessary, as the PMC could simply terminate the agency arrangement it had with Galati Nominees.

The final argument raised by Galati Nominees was that there was no evidence of any negative effects the production of the extra potatoes would have on the potato market.

Why did the defence put forward by Mr Galati and Galati Nominees fail?    

The Court found against each and every argument put forward by Galati Nominees. It found that the PMC had abided by the contract, as they were allowed to apply for injunctive relief from the Court at any time. Furthermore it was found that the relevant clauses of the contract were of a contractual nature.

The Court further found that the agreement was not contrary to s 45(2) of the Competition and Consumer Act 2010 (Cth). This was found due to the fact “careful and detailed analysis of the market” would need to be undertaken, along with expert evidence would be necessary to determine the issue. However the only evidence given throughout the hearing was assertions made by Mr Galati himself. These were not considered an “adequate basis for drawing the conclusion” the agreement would lessen competition or be a basis for finding that no negative effects would result from the production of the extra potatoes.

Where to from Here?

It is likely that Mr Galati will appeal this decision. However even if this does not occur, the campaign he has run has been incredibly successful. The success can be measured by the fact the State Government has announced that the PMC will be abolished after the 2017 State election. This would mean there would be no restrictions in place as to how many potatoes growers, such as Mr Galati could harvest.

References

Potato Marketing Corporation of Western Australia -V- Galati [2015] WASC 430

Banks, A. 2015. “Push to speed potato moves”. The West Australian. Available at;https://au.news.yahoo.com/thewest/countryman/a/30149111/push-to-speed-potato-moves/

Shepherd, B. 2015. “Spud King Tony Galati defiant over injunction on potato growing restrictions”. ABC News Online. Available at; http://www.abc.net.au/news/2015-11-11/spud-shed-boss-tony-galati-suffers-court-blow-in-potato-row/6931166

Photohttp://resources3.news.com.au/images/2015/04/20/1227312/115999-67b0aaa8-e71c-11e4-89ed-b4fe05f20e0a.jpg

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