The Federal Court has ruled that Toll Holdings Ltd (Toll) has breached undertakings provided to the ACCC. The case clarified for the ACCC, and companies that give undertakings to the ACCC, the approach of the Federal Court when interpreting these undertakings.

Toll gave undertakings to the ACCC in relation to its acquisition of stevedore Patrick. In the wake of the subsequent ACCC investigation into the takeover, Toll undertook to allay the ACCC’s concerns by divesting certain interests and businesses. A variation to these undertakings occurred in 2007 when the ACCC consented to Toll splitting into two separately listed entities—Toll and Asciano. Toll provided an undertaking to the ACCC that it would not ‘share’ or ‘second’ management or employees with Asciano. However, by June 2007 Toll Personnel, a subsidiary of Toll, began to hire out personnel to both Toll and to Asciano.

Toll argued that it had not ‘shared’ its employees because no personnel worked simultaneously for Toll and Asciano and that it was only possible to ‘share’ an employee where two employers are simultaneously employed by the same person.

The court rejected Toll’s arguments. Justice Gray found that terms such as ‘sharing’ did not require an employee to have an employment contract simultaneously with both Asciano and Toll Personnel. His Honour drew an analogy with a cake which could be shared by two people eating separate pieces.

This case is significant because of the way in which the undertakings were interpreted by the Federal Court. Toll and the ACCC submitted that the undertakings ought to be construed in a similar manner to a commercial contract. Toll argued that such a construction would take into account reference to circumstances known to Toll and the ACCC at the time the undertaking was entered into, would adopt a plain meaning of the words used, and have reference to its purpose or object. Toll argued that when construed in this way it had not breached its undertakings.

Justice Gray held that undertakings should be regarded as statutory instruments and are to be construed by reference to the same principles of construction as a legislative document. His Honour held that undertakings are to be given statutory force and effect by virtue of section 87B of the TPA. The meanings of words contained within undertakings could not be modified by reference to facts only known to the parties to the undertaking. Justice Gray said that this was important for public policy reasons; it is essential that members of the public can rely on the fact that undertakings have been given and be confident that their terms are interpreted consistently.