Independent Consumer and Competition Commission v Freedom Apex Ltd [2025] PGNC 229; N11388 (24 July 2025)

N11388

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

OS 64 OF 2023 (COMM/IECMS)

INDEPENDENT CONSUMER AND COMPETITION COMMISSION
Plaintiff

V

FREEDOM APEX LIMITED
Defendant

WAIGANI: ANIS J
2025: 5 June, 24 July

CONSUMER & COMPETITION LAW – purported breach of s.81(1)(a) of the Independent Consumer and Competition Commission Act 2002 (as amended to date) – commercial lease agreement and agreement to purchase store goods – whether the transactions had constituted an acquisition - whether the total value of the acquisition exceeded K50,000,000 to constitute breach of s.81(1)(a) and attract a penalty fee of K750,000 under s.81(7) – consideration - ruling

PRACTICE AND PROCEDURES – definition of ‘acquire’ and ‘assets’ under s.44 of the Independent Consumer and Competition Commission Act 2002 (as amended to date) – definition express – ‘acquire’ include purchasing goods and leasing properties – ‘assets’ include intangible asset such as leasing of properties

Overseas Case Cited:
Vodafone Hutchison Australia Pty Ltd v. Australian Competition and Consumer Commission (ACC) [2020] FCA 117

Counsel:
A K Puk, for the Plaintiff
H Pora, for the Defendant

DECISION

24^th July 2025

1. ANIS J: The trial for this matter was conducted on 5 June 2025. I reserved my ruling to a date to be advised.

2. This is my ruling.

BACKGROUND

3. The plaintiff is a body corporate that is established under the Independent Consumer and Competition Commission Act 2002 (ICCC Act/Act). According to the preamble of the ICCC Act, its purpose is stated as follows:

Being an Act to provide for the establishment of an Independent Consumer and Competition Commission the functions of which include the promotion of competition and fair trading, the regulation of prices for certain goods and services, and the protection of consumers’ interest, and for related purposes

4. Upon receiving information, the plaintiff conducted an internal investigation into a business dealing that the defendant was involved in. It later filed this proceeding after it was convinced that the defendant may have breached provisions of the ICCC Act. Its complaint against the defendant concerns a lease and related sale of goods arrangement (Transaction/Acquisition) that was had between the defendant and a third party called Dae Won Trading Ltd (Dae Won). The Transaction was in 2 parts, that is, it constituted a lease agreement for leases of Dae Won’s 8 properties (Lease Agreement) and a Payment Schedule over inventory goods (i.e., wholesale and retail household consumer goods) on these properties (Agreement to Purchase Store Goods). The Lease Agreement was entered on 21 December 2021 and the Agreement to Purchase Store Goods was entered on 30 November 2021.

5. The plaintiff asserts that the defendant failed to notify it of the acquisition as required under s.81(1)(a) of the ICCC Act. Section 81 was amended by Independent Consumer and Competition Commission (Amendment) Act 2018. The new s.81(1)(a) and (7) reads,

81. COMMISSION MAY GIVE CLEARANCE FOR BUSINESS ACQUISITIONS.

(1) A person who proposes to acquire assets of a business or shares shall give the Commission a notice seeking clearance for the acquisition if -

(a) the transaction value of the proposed acquisition exceeds the value of K50,000,000.00; or

......

(7) A person who refuses or fails to give notice to the Commission under Subsection (1) shall pay the Commission a default penalty of K750,000.00. [Underlining mine]

RELIEF

6. The plaintiff seeks the following relief in its Originating Summons filed 24 November 2023 (OS):

1. A declaration that the Defendant contravened Section 81(1)(a) of the Independent Consumer and Competition Commission Act 2002 (ICC Act), by failing to give notice of the Lease Agreement, dated 21 December 2021 and the Payment Schedule, dated 30 November 2021, between the Defendant and Dae Won Trading Limited, to the Plaintiff prior to execution.
   
2. A declaration that the Lease Agreement, dated 21 December 2021, and the Payment Schedule, dated 30 December 2021, between the Defendant and Dae Won Trading Limited are separate but related transactions, totaling to the accumulated sum of K79,394,391.21.
   
3. A declaration that the accumulated transaction value, set out in the Lease Agreement, dated 21 December 2021 and the Payment Schedule, dated 30 December 2021, between the Defendant and Dae Won Trading Limited, exceeds the value of K50,000,000.00.
   
4. A declaration that the Defendant is liable for the default penalty of K750,000.00, payable to the Plaintiff, pursuant to Section 81(7) of the ICC Act, on the basis of the Defendant’s contravention of Section 81(1)(a) of the ICCC Act.
   
5. Costs be in the cause.

......

EVIDENCE

7. The parties tendered their evidence without the benefit of cross-examination. The plaintiff tendered a total of 3 affidavits. They were marked as Exhibit P1 (Affidavit of Steven Sugl filed 4 December 2023), Exhibit P2 (Affidavit of Brazilai Dominic filed 4 December 2023) and Exhibit P3 (Affidavit of Jason Sirue filed 27 June 2024).

8. The defendant tendered 1 affidavit which was marked as Exhibit D1 (Affidavit of Xiong Lin filed 13 May 2024).

ISSUES

9. The main issues for consideration, in my view, are (i), whether the Agreement to Purchase Store Goods was part of the Lease Agreement, (ii), if so, whether the defendant committed an offence under s.81(7) of the ICCC Act and (iii), if so, what penalty should be ordered against the defendant?

TRANSACTION/ACQUISITION

10. The existence of the 2 contracts (i.e., the Lease Agreement and the Agreement to Purchase Store Goods) is not in dispute. Evidence adduced also confirms the material facts in that regard. Copies of the Lease Agreement and the Agreement to Purchase Store Goods are attached as annexures D and E respectively to Exhibit P2.

11. What became apparent during closing submissions is that if the total value of the Lease Agreement for the period of 10 years is added with the total value of the goods purchased under the Agreement to Purchase Store Goods, the total value would exceed K50,000,000. This then brings me to the question, which is, whether the 2 dealings should be regarded as a single transaction or acquisition, or whether they should be treated separately as submitted by the defendant. The parties are at odds with the issue.

12. I note the submissions of the parties in that regard.

13. I will address the matter this way. The defendant submits the Lease Agreement did not qualify as an “acquisition” within the meaning of the ICCC Act. However, it concedes that the Agreement to Purchase Store Goods constituted an acquisition as defined under the Act. As such and given that the total value of the purchase of stocks under the Agreement to Purchase Store Goods was K14,257,591, which is less than K50,000,000, it submits that it did not breach s. 81(1)(a) of the ICCC Act.

14. The terms ‘acquire’ and ‘business’, are defined under s.44 of the ICC Act as follows:

44. INTERPRETATION.

(1) In this Part, unless the contrary intention appears –

“acquire” –

(a) in relation to goods, includes obtain by way of gift, purchase or exchange and take on lease, hire or hire purchase; and

(b) in relation to services, includes accept; and

(c) in relation to interests in land, includes obtain by way of gift, purchase, exchange, lease or licence;

“arrive at” in relation to an understanding, includes reach and enter into;

“assets” includes intangible assets;

“authorization” means an authorization granted by the Commission under Division 4;

“business” means any undertaking –

(a) that is carried on for gain or reward; or

(b) in the course of which –

(i) goods or services are acquired; or

(ii) any interest in land is acquired or disposed of,....

(Underlining mine)

15. Let me begin by saying that s.18(1)(a), in my view, is express. It states that a person who proposes to acquire an asset of a business shall give the plaintiff a notice seeking clearance of the acquisition if the proposed transaction value of the acquisition exceeds K50,000,000. And s.44 defines ‘acquire’ to include (i) purchase of goods and (ii) ‘a lease’ where it concerns interest in land. And the term ‘asset’ as defined by the Act includes ‘intangible asset’ such as a lease.

16. The undisputed facts show that the Lease Agreement was signed on 21 December 2021. It had a tenure of 10 years from 1 December 2021 to 20 November 2031. The fixed rental per month for the 8 properties is K380,000 inclusive of GST. If we calculate K380,000 x 12 months x 10 years, it will come to a sum of K45,600,000. This quantified sum is not disputed by the parties. Turning to the purchase of the inventories in the 8 properties, the total value was K14,257,591 (inclusive of interest). Again, this assessed sum is not disputed by the parties. If we combine the value of the 2 agreements, the total value will exceed K50,000,000 in the sum of K59,857,591, and that is without taking into account the other factor, namely, the projected rental increase per year in the Lease Agreement which is contested.

17. Based on the above calculations and given that a ‘lease’ is also expressly defined as an acquisition under the ICCC Act, the defendant’s argument that the Lease Agreement is not an acquisition is baseless and shall fail. Without that argument and given the concession by the defendant in regard to the Agreement to Purchase Store Goods, the total value of the 2 agreements has exceeded K50,000,000.

18. But this is not the end of the matter. I turn to the second contention raised by the defendant, which is that the 2 contracts were separate and should not be treated as a single transaction. If they are treated and assessed as separate transactions by the plaintiff, it would mean that the total value of each transaction would be less than K50,000,000 and therefore no notice under s.81(1)(a) is or would be required.

19. To assist me answer this question, I make the following observations:

• The 2 agreements were signed within a month;
• The Agreement to Purchase Store Goods is directly linked to the Lease Agreement;
• The inventories purchased by the defendant from Dae Won were located within the 8 properties that were leased by Dae Won to the defendant;
• The Agreement to Purchase Store Goods is worded in such a manner to make it superior to the Lease Agreement. For example, clause 2 states:
  

“If Freedom Apex Limited doesn’t pay monthly installments, freedom Apex Limited gives their (sic) consent to any action taken by Dae Won Trading Limited. The action will be immediate close (sic) all (sic) rental stores, eight of them. This action will overrule the Commercial Lease Agreement sign (sic) between Dae Won and Freedom Apex. Also, Freedom Apex allows (sic) to disposal (sic) of any all (sic) stocks to sell and recover any amounts owe to Dae Won Trading.” (Underlining mine)

• The Agreement to Purchase Store Goods appears as a security or a guarantee agreement that is given by the defendant to Dae Won, that if in the event the defendant defaults or fails to pay Dae Won the monthly instalments as agreed to fully settle its debt of K14,257,591 which is owed to Dae Won, Dae Won would be at liberty to either cancel the Lease Agreement or take possession of the store goods from its 8 leased properties and sell them to recover its debts;
• It appears certain that the 2 agreements constituted or were part of a single acquisition by the defendant over Dae Won’s assets and store goods;
• The defendant had wanted to lease the 10 or 8 properties of Dae Won; these properties had trading goods in them; obviously the intention was to essentially take over the daily business of Dae Won at these properties and operate them; and because there were stocks or trading goods kept at the warehouses of the properties, the parties had to sign the Agreement to Purchase Store Goods so that the defendant would pay Dae Won for the stocks;
• The arrangement appears straightforward in that regard.
  

20. With these considerations, I find the actions of the defendant to constitute an acquisition within the meaning of s.81(1)(a) of the assets of the business of Dae Won. To facilitate the acquisition, the parties entered into the 2 agreements including others that may not have been disclosed at this hearing. Given that, the total value of the acquisition, without regard to the projected rental increase, is K59,857,591. The acquisition value exceeds the prescribed limit under the Act of K50,000,000. Thus, it means the defendant was required to give notice under s. 81(1)(a). It is not disputed that no such notice was given by the defendant to the plaintiff at the material time. Therefore, and consistent with the plaintiff’s submission, it will attract a default penalty fee of K750,000 as stipulated under s.81(7) of the ICCC Act.

OTHER MATTERS

21. Given the above findings, I see no reason to proceed further to determine whether any projected rental increases in the Lease Agreement are applicable and should be computed and added onto the total value of the rental payments for 10 years.

22. The plaintiff also makes reference to the case of Vodafone Hutchison Australia Pty Ltd v. Australian Competition and Consumer Commission (ACC) [2020] FCA 117. The case is of persuasive value. That said, it is, in my view, inapplicable to this case because the question of whether the acquisition will substantially lessen competition did not arise in the present matter. The present matter never got to the stage where the issue may be raised. The defendant in the present case did not give notice of its acquisition under s.81(1)(a) in regard to its business dealings with Dae Won, thus, the central issue was limited to whether the 2 agreements constituted an acquisition and whether the total value of the acquisition exceeded K50,000,000 which would make the defendant liable under s.81(7) to pay a penalty of K750,000.

SUMMARY

23. In summary, the defendant is liable for the orders sought by the plaintiff in its OS.

COST

24. An order for cost in cases such as this is discretionary.

25. In the OS, the plaintiff sought an order for cost as to be in the cause. What this means is that whoever wins in the substantive matter should be awarded the cost of the proceeding. I am therefore minded to award cost to follow the event, that is, on a party/party basis to be taxed if not agreed.

ORDERS

26. I make the following orders:

1. A declaration that the Defendant contravened Section 81(1)(a) of the Independent Consumer and Competition Commission Act 2002 (ICCC Act), by failing to give notice of the Lease Agreement, dated 21 December 2021 and the Payment Schedule, dated 30 November 2021, between the Defendant and Dae Won Trading Limited, to the Plaintiff prior to execution.
   
2. A declaration that the Lease Agreement, dated 21 December 2021, and the Payment Schedule, dated 30 N ovember 2021, between the Defendant and Dae Won Trading Limited are separate but related transactions, totaling to the accumulated sum of K59,857,591.
   
3. A declaration that the accumulated transaction value, set out in the Lease Agreement, dated 21 December 2021 and the Payment Schedule, dated 30 November 2021, between the Defendant and Dae Won Trading Limited, exceeds the value of K50,000,000.00.
   
4. A declaration that the Defendant is liable for the default penalty of K750,000.00, payable to the Plaintiff, pursuant to Section 81(7) of the ICCC Act, on the basis of the Defendant’s contravention of Section 81(1)(a) of the ICCC Act.
   
5. The defendant shall pay the plaintiff’s cost of the proceeding on a party/party basis which may be taxed if not agreed.
   
6. Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly

________________________________________________________________
In-house counsel: Independent Consumer & Competition Commission
Henry Pora: Lawyers for the Defendant