Catchwords                         CATCHWORDS

CONTRACT - Offer and acceptance by course of dealing - whether proceeding with the transaction is course of dealing - novation by substitution of a party - whether novation constituted by conduct of parties - terms - promises or representations - whether statement of intent or of proposed conduct representational or promissory - duty to promote - whether void for uncertainty - implied duty to use best endeavours to promote - breach of duty - do what is reasonable in all the circumstances - reasonableness ascertained at time of alleged breach.

TRADE PRACTICES - misleading or deceptive conduct - whether non-fulfilment of promises or predicted events can constitute misleading or deceptive conduct - whether misrepresentation of intent or of means to fulfil promises or predictions - s.51A - whether reasonable grounds for making representations as to future matters.

Fair Trading Act 1985 (Vic.) s.11

Trade Practices Act 1974 s.52, s.51A

Mooney v Williams (1905) 3 CLR 1

Brogden v Metropolitan Railway Co. (1877) 2 App. Cas. 660

Scarf v Jardine (1882) 7 App. Cas. 345

Olson v Dyson (1969-70) 120 CLR 365

Cook v Chas. E. Blanks Pty. Ltd. [1968] 3 NSWR 356

T.J. Precision Engineering Pty. Ltd. v Crane Copper & Aluminium Pty. Ltd. [1968] 3 NSWR 360

J.J. Savage & Sons Pty. Ltd. v Blakney (1969-70) 119 CLR 435

Hospital Products Limited v United States Surgical Corporation & Ors. (1984-85) 156 CLR 41

Thorby v Goldberg (1964) 112 CLR 597

Meehan v Jones (1982) 149 CLR 571

Upper Hunter County District Council v Australian Chilling and Freezing Co. 118 CLR 429

F. & G. Sykes (Wessen) Ltd. v Fine Fare Ltd. (1967) 1 Lloyd's Rep. 53

Brown v Gould (1972) Ch. 53

Sheffield District Railway Co. v Great Central Railway Co. (1911) 27 TLR 451

Terrell v Mabie Todd & Co. Lt. (1952) 69 RPC 234

Transfield Pty. Ltd. v Arlo International Ltd. (1979-1980) 144 CLR 83

R. Davis Ltd. v Tooth & Coy. Ltd. (1937) 4 All E.R 118

Global Sportsman Pty. Ltd. v Mirror Newspapers Ltd. (1984) 2 FCR 82

James v ANZ Banking Group Ltd. (1986) 64 ALR 347

VALENTINE FILMS PTY. LIMITED v TRIMEX PTY. LIMITED and MANDY JAMIN NO. VG 10/93 

MERKEL J.

MELBOURNE

7 MARCH 1996

Orders

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIAN DISTRICT REGISTRY               No. VG 10 of 1993

BETWEEN:

                  VALENTINE FILMS PTY. LTD.         Applicant

                           - and -

                      TRIMEX PTY. LTD.      First Respondent

                           - and -

                         MANDY JAMIN        Second Respondent

                      MINUTES OF ORDER

THE COURT ORDERS THAT:

1.   The proceeding is dismissed.

2.   The Applicant pay the Respondents' taxed costs of the proceeding.

Note:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ReasonsIN THE FEDERAL COURT OF AUSTRALIA

VICTORIAN DISTRICT REGISTRY               No. VG 10 of 1993

BETWEEN:

                  VALENTINE FILMS PTY. LTD.         Applicant

                           - and -

                      TRIMEX PTY. LTD.      First Respondent

                           - and -

                         MANDY JAMIN        Second Respondent

Coram:    Merkel J

Place:    Melbourne

Date:     7 March 1996

                    REASONS FOR JUDGMENT

The Facts

The Proposal

Early in 1989 Ms Carmen Hugo devised a proposal for her company, Cinematic Pty. Ltd., to produce a video on personal grooming for women.  Under the proposal the cost of the video, expected to be $36,000, was to be borne by the distributors of brands of well known products which she proposed to use in the video. Cinematic was to derive its profit from the project by marketing the video to stores and to the public.

Trimex Pty. Ltd., a company distributing beauty, skin care and cosmetic products, was invited by Ms Hugo to participate in the project. Trimex imported the well known Clarins range of beauty and skin care products from France.

Ms Mandy Jamin, the marketing manager of Trimex, became interested in participating in the video if Clarins beauty and skin products were the only products used in the video.

There were several conversations between various representatives of Cinematic and Trimex which culminated in a meeting held during the first half of 1989. At the meeting Ms Jamin informed Ms Hugo of her interest in using the Clarins range of products in the video. She also informed Ms Hugo that if the proposal was to proceed Ms Hugo's company would have to undertake sole responsibility for the cost of producing the video.

Ms Jamin stated to Ms Hugo that the video could be sold through more than 800 outlets being department stores, pharmacies and beauty parlours around Australia which carried the Clarins range of products. She indicated that Clarins products were sold from the Clarins counters in the cosmetics area of department stores such as David Jones and Myers and proposed the sale of videos from such counters. She also said that the various outlets maintained mailing lists for Clarins customers which totalled about 100,000 Australia wide. She stated that each Clarins customer spent about $1,000 per year on Clarins products and usually acquired the products which Clarins recommended. Ms Jamin offered her personal assistance with the script and the assistance of Trimex in making and promoting the video.

The prospect of access to the Clarins distribution network and Clarins consumers together with Trimex's involvement in supporting and promoting the video was sufficient to induce Ms
Hugo to drop her original proposal and to decide to finance the video project as proposed by Ms Jamin.

At a later meeting Ms Jamin stated to Ms Hugo that to assist with the promotion of the video, Trimex was prepared to offer free aromatherapy mini facial treatments to the first 5000 purchasers of the video. There was also discussion at a later time about treatment guide pamphlets being included in the video and the possibility of promoting the video in Clarins advertisements in womens' magazines.

On a number of occasions after the initial meeting with Ms Jamin, Ms Hugo requested Ms Jamin to confirm in writing the statements that she had made. I am satisfied that Ms Hugo was not prepared to agree to proceed until she received a satisfactory written confirmation of Trimex's role in relation to the project.

The agreement

The written confirmation provided by Ms Jamin to Ms Hugo was in a letter dated 27 July 1989 which was in the following terms:

     "Clarins will be pleased to be involved in the Cinematic Beauty Video on an advisory basis as well as promoting the Clarins approved beauty video throughout their beauty outlets in Australia."

In her evidence before me Ms Jamin said that the letter was a statement of "what our commitment was".

In her evidence Ms Hugo said that after receiving the letter she sought further assurances from Ms Jamin as to Trimex's role but was unable to get any further or other response from Ms Jamin.

By April 1990 little progress had been made with the script or the production of the video. Ms Hugo blamed Ms Jamin for the delays.

By a letter dated 12 April 1990 Ms Hugo stated to Ms Jamin that although she was still interested in pursuing the project she would do so only on the understanding that she was not Ms Jamin's "underling" or "lackey, whom you can talk down to".

Ms Jamin's friendly response to the letter which appeared to include the sending of flowers by way of an apology persuaded Ms Hugo to proceed with the project.

Thereafter Ms Hugo and the staff of Trimex co-operated in finalising the script, the models and the products to be used in the video.

In addition to the segments in the video on Clarins skin care products it was also decided to include a segment in the video
using the Fernand Aubrey make up range of cosmetic products, which were also distributed by Trimex.

Production of the video appears to have commenced in or about July 1990 and was completed by 22 October 1990. The cost of producing the video exceeded $90,000.00. The jacket for the video which was entitled "Beautiful Skin Beautiful You" was finalised in December 1990. The video was available for marketing and sale to the public by 18 December 1990.

I am satisfied that prior to at least April 1990 neither party had finally committed itself to the other to proceed with the video project. Whilst each party intended that ultimately it would proceed, it was not until the mutual contribution of actual resources to the project that a definite commitment to it arose.

In the case of Cinematic the contribution was made by the incurring of significant expenditure in respect of the production of the video. In the case of Trimex the contribution was technical advice and assistance, script amendments, the provision of staff and the supply of the beauty and skin care products used in the production of the video.

The evidence is not clear as to the precise date on which the commitment arose but I am satisfied that it occurred between
April and July 1990 and most likely a short time prior to the commencement of production of the video during July 1990.

By that time Ms Hugo had accepted that Cinematic was, at its own cost, to produce the video using Clarins and Fernand Aubrey products on the basis of the assurances given to her by Ms Jamin in her letter of 27 July 1989.

It was contended by the Applicant that Trimex was appointed as the exclusive distributor of the video.  However, I am satisfied that at all material times Cinematic was entitled and intended, to promote and market the video directly to such outlets as it deemed appropriate, independently of Trimex.  Ms Hugo stated as much in a letter dated 13 August 1990, in which she sought permission for filming in the Block Arcade Melbourne. Further, immediately after the video was produced, Ms Hugo commenced negotiating and ultimately proceeded with promotional television advertising, at her company's cost, for the direct purchase of the video by the public.  However, she took few other steps, preferring instead to contend that the promotional and marketing obligation was entirely that of Trimex.

Substitution of Valentine Films

From some time during the second half of October 1990, after completion of production of the video, Ms Hugo commenced to use another company, Valentine Films Pty. Ltd. for the project.

On 27 November 1990, Ms. Hugo elected to use Valentine Films as the applicant for censorship classification of the video and as the entity which would be engaged in its subsequent promotion and sale. The classification was received on 18 December 1990. In December 1990 Valentine Films incurred expenses totalling $5,989.73 to the proprietors of Channel 10 for a television advertisement of the video for sale to the public. In December 1990 Valentine Films agreed to sell and Trimex agreed to purchase 1000 of the videos for $17.00 each. Valentine Films also agreed with Trimex to provide 40 videos free of charge for use by Trimex's sales team in promoting the video.

Valentine Films delivered the videos to Trimex on about 21 December 1990. Thereafter Trimex was in a position to promote the video to Clarins outlets.

Valentine Films also paid $11,639.00 towards the cost of producing the video.

At all material times Trimex appeared to accept Ms Hugo's substitution of Valentine Films for Cinematic and asked no questions about it.

Difficulties arising in late 1990/early to mid 1991

A number of matters directly or indirectly affected the marketing and promotion of the video.

In December 1990/January 1991 there was a highly publicised cancer scare in relation to uricanic acid which was an ingredient used extensively in sun-care products including the Clarins sun-care products shown in the video. The scare resulted in the recall from shops and stores of several Clarins sun-care products which contained uricanic acid.

There was also the proposed, and then the later, introduction by Clarins of its own cosmetic range which competed with the Fernand Aubrey range shown in the video. Although Trimex set up a separate division for the Fernand Aubrey range some difficulties were perceived to arise in marketing the competing brands in the same video.

The third matter was that it was ascertained by Trimex that contrary to its earlier expectations major department stores would not permit videos to be sold from the cosmetic counters. Trimex was entitled to promote, but not to sell, the videos from the Clarins cosmetic counters at those stores.

The fourth matter was an apparent lack of enthusiasm for the video by outlets and consumers in the market place. Notwithstanding the distribution to the outlets of a flier for the video, there was little response to the video from those outlets. The fact that the television advertisement of the video by Valentine Films in December 1990 resulted in only eight video sales to the public by Valentine Films suggests that the video was not destined for success as a product in its own right.

The fifth matter was that the video was not available to Trimex for sale during the lead up to Christmas in 1990.  This meant that an ideal time for the promotion of the video had been lost.

The next matter was that Clarins decided to change its packaging for its products. Although this did not affect the attraction of the video, the older packaging used in it made it a little dated.

Finally, Ms. Hugo mistakenly assumed and asserted that Trimex was obliged to promote the product to all potential video outlets rather than just to outlets selling Clarins products.  As a consequence she took few steps to market or promote the video herself.

I shall return to the significance of these matters later in these reasons in the context of analysing whether Trimex used its best endeavours to promote the video. It suffices to say that "all the circumstances" include those set out above. The reasonableness of Trimex's endeavours are to be assessed in the light, inter alia, of those circumstances.

Trimex's promotion of the video

In January 1991 Trimex staff discussed marketing opportunities for the video.  From February 1991 the video was shown to Trimex's marketing staff at training sessions and beauty update evenings throughout Australia.  Trimex also instructed its sales teams in respect of the video. It instructed its area managers to market the videos Trimex had acquired to Clarins outlets. It also showed the video at store counters and at some workshops.

Trimex prepared a flier for the video and distributed it to its outlets as from at least May 1991. Trimex also made provision for the acquisition of the video in all of its printed customer order forms as from at least September 1991.  It also prepared free aromatherapy offers but little came of them due to the low level of demand for the video.

Trimex did not communicate directly with Clarins consumers about the video.

In the result after one year of promotion of the video by Trimex only about 30-35 of the 1000 videos it acquired from Valentine Films had been sold. By the date of the hearing before me in February 1996, Trimex still had not sold all of the 1000 videos it acquired in December 1990.

The Witnesses

The facts which I have found do not accord with the evidence adduced on behalf of either party as to the alleged representations or statements relied upon. Witnesses were compelled to rely on recollections of conversations held more than 5 years ago. There were no contemporaneous notes and little contemporaneous correspondence to assist those recollections. Such contemporaneous correspondence as existed was not fully consistent with the evidence of either of the main witnesses for each party.

Both of those witnesses, Ms Hugo for Valentine and Ms. Jamin (who was herself a Respondent) for Trimex, tended to give evidence which was self-serving. They appeared to reconstruct the relevant events to establish the respective claims or defences being put forward by them rather than as a genuine endeavour to recall and state the facts as they were at the time. It was my view that their evidence did not constitute a reliable or faithful recollection of those events.

Although other witnesses gave evidence for each party of relevant conversations those witnesses were not major participants in the conversations and, not surprisingly, did not have a detailed recall of them. At best the recollections of those witnesses were very general.

In those circumstances, to the extent that the evidence of the witnesses differs from or is inconsistent with the facts which
I have found as having been likely to have occurred, I do not accept that evidence.

The Proceedings

As a consequence of the financial failure of the video project Valentine Films issued proceedings to recover losses it alleged it suffered, including loss of profit, claiming as against Trimex, breach of contract, breach of s.52 of the Trade Practices Act (C'th)  (TPA) and s.11 of the Fair Trading Act 1985 (Vic) (FTA) as well as infringement of copyright. At the hearing the claim for infringement of copyright was not pursued.

The claims against Ms Jamin alleged that she breached s.11 of the Fair Trading Act  and was a person involved in the breaches of s.52 and s.11 respectively which were alleged against Trimex.

The Claim for Breach of Contract

The contract

The parties were in dispute over whether a contract existed, the parties to it and its terms.

The applicant contended that a contract was entered into at the first meeting between Ms Hugo and Ms Jamin early in 1989. It claimed that the contract was that Valentine Films, at its own cost, was to produce a promotional marketing beauty video
for Trimex. The relevant terms said to have been breached were terms that Trimex would:-

(a)  purchase copies of the video from the Applicant for $17.00 for on sale to Trimex's customers.

(b)  promote and market the video to approximately 100,000 mail order clients which Trimex alleged it had in Australia, all of whom spent over $1,000.00 per year on the products.

(c)  recommend the video to Trimex's mail order clients.

(d)  market the video through all of Trimex's outlets in Australia.

(e)  recommend to all beauty therapists and pharmacists who used and sold Clarins products that they market the video in their outlets.

(f)  offer to supply free of charge aromatherapy mini-facial treatments to the first 5,000 purchasers of the video or alternatively offer to supply free of charge a gift set containing three samples of the products with each video sold.

(g)  provide free of charge a Clarins facial treatment guide pamphlet with each copy of the video sold.

(h)  sell the video at workshops conducted by Trimex.

(i)  include reference to the video in advertisements contained in multi-page promotions in the New Idea and Cleo magazines at no cost to the Applicant.

The respondents contended that the only contract entered into between Trimex and Valentine Films was the agreement in December 1990 to purchase 1,000 videos at a price of $17.00 for each video.

No contract was agreed upon in any particular conversation or in any particular document. Accordingly, this is a case where an acceptance by one party of any offer made by the other is to be inferred from the course of dealing between the parties, or more particularly, the conduct of the parties in proceeding with the transaction.[1]

On the facts which I have found the parties did not commit themselves to a binding agreement until they actually proceeded with the transaction by the mutual contributions each made to it between April and July 1990.

By those dates Ms Hugo had failed to achieve any expression of commitment from Trimex other than that set out in the letter of 27 July 1989. In my opinion Ms Hugo must be taken to have accepted that any statements made by Ms Jamin on behalf of Trimex prior to that date were qualified by the terms of Ms Jamin's letter of 27 July 1989.

I am also satisfied that at the time the parties proceeded with the project in the manner set out above they intended to enter into legal relations with each other in respect of the commitments that each had undertaken to the other.

Novation - substitution of parties

In the course of the hearing it became apparent that the Applicant, Valentine Films was not incorporated until 17 October 1990, some 4 - 6 months after the making of the contract upon which it was relying.

Counsel for the Applicant primarily relied upon the doctrine of novation to justify the claim by Valentine Films for breach of contract.

In essence novation involves substitution of a new contract for one in being, by either substituting a new agreement or, a new contracting party. It need not involve the assignment of existing obligations.

The doctrine was explained by Windeyer J in Olson v Dyson in the following terms:

      In Scarf v. Jardine (1882) 7 App. Cas. 345, at p.351 Lord Selborne said novation "means this - the term being derived from the civil law - that there being a contract in existence, some new contract is substituted for it, either between the same parties (for that might be) or between different parties; the consideration mutually being the discharge of the old contract". In that sense "novation" means simply a contract between the parties to the old contract, A (in this case Dyson) and B (in this case the company); or it may be a contract between them and a new party, or parties, e.g., between A, B and C (in this case the respondent). It is in the latter sense that the word is most often used in common law countries in connexion with the transfer of debts from one creditor to another. As put in Corbin on Contracts, vol, 6, p. 189, speaking of the law in the United States:

                  "All novations are substituted contracts; and the converse is also true that all substituted contracts are novations, unless we follow the more usual custom of using the word novation only in cases where the substituted contract involves a substituted debtor or creditor as a new party."[2]

Agreement to the substitution may be implied from the conduct of the parties.[3]

As from about mid October 1990 and certainly by late 1990, Ms Hugo acting for Cinematic and for Valentine Films, and all relevant representatives of Trimex by their conduct, accepted the substitution of Valentine Films, for Cinematic, as the party contracting with Trimex in relation to the video project. Although it was contended by Counsel for the Respondents that the necessary elements of agreement on the part of Trimex were lacking, I do not accept that that was so. It is true that specifically, Trimex only agreed to acquire 1040 videos from Valentine in December 1990. However, all of those videos were acquired to meet the promotional commitment given in its letter of 27 July 1989. By its overall conduct at the time in the context of the events which preceded the purchase, I am satisfied that Trimex agreed to the purchase under an agreement which had substantially the same terms as the agreement it had previously entered into with Cinematic.

In those circumstances I am satisfied that there was a novation of the contract between Cinematic and Trimex with the substitution of Valentine Films for Cinematic at least from a date in or about December 1990.

The novation did not involve an assignment of any of the existing rights of Cinematic but had the effect that, as from the date of the substitution, any terms of the original contract relating to the promotion and marketing of the video thereafter constituted terms of the contract between Trimex and Valentine Films.

The terms

As the contract was constituted by imprecise conversations, correspondence and conduct over an extensive period it is not an easy task to ascertain its terms. The task involves three issues.

Promises or mere representations.

The first issue is whether the statements allegedly relied upon by the Applicant were promissory or merely representational. In J.J. Savage & Sons Pty. Ltd. v. Blakney[4] the High Court had to consider whether a statement made in the course of negotiations for the construction of a motor boat was promissory. In the joint judgment their Honours said:[5]

      The Full Court seems to have thought it sufficient in order to establish a collateral warranty that without the statement as to the estimated speed the contract of purchase would never have been made. But that circumstance is, in our opinion, in itself insufficient to support the conclusion that a warranty was given. So much can be said of an innocent representation inducing a contract. The question is whether there was a promise by the appellant that the boat would in fact attain the stated speed if powered by the stipulated engine, the entry into the contract to purchase the boat providing the consideration to make the promise effective...........

      When the letter which we have quoted was written, the negotiations for the construction and delivery of the boat were incomplete. On receipt of the letter there were three courses open to the respondent. He could have required the attainment of the speed to be inserted in the specification as a condition of the contract; or he could have sought from the appellant a promise - however expressed, whether as an assurance, guarantee, promise or otherwise - that the boat would attain the speed as a prerequisite to his ordering the boat; or he could be content to form his own judgment as to the suitable power unit for the boat relying upon the opinion of the appellant of whose reputation and experience in the relevant field he had, as the trial judge found, a high regard. Only the second course would give rise to a collateral warranty.............

      That the  statement actually made by the appellant was intended to have some commercial significance upon a matter of importance to the respondent can be conceded; that the respondent was intended  to act upon it, and that he did act upon it, is clearly made out. But those facts do not warrant the conclusion that the statement was itself promissory.

Earlier in these reasons I set out the details of the oral statements which in my view were made by Ms Jamin at the meetings which preceded the contract. Adopting the approach discussed above it is my view that those statements were not promissory but were merely representational. In essence the statements were merely as to proposed conduct and intent rather than promises or assurances.

The statements in the letter of 27 July 1989 stand in a different position. They were proffered as a commitment by Trimex and in my view constituted an "assurance" which was ultimately accepted by Ms Hugo as the basis for the contract between Cinematic and Trimex.[6] In that context I am satisfied that they were promissory.

Uncertainty

The next issue is whether the terms relied upon are too uncertain to be given legal effect. If so, that will raise the issue of whether an  enforceable and binding contract was entered into. The principles in relation to uncertainty are well established:-

(a)  Where essential or critical terms are expressly left for future agreement between the parties or where the language used is so obscure or incapable of any precise or definite meaning that the court is unable to attribute
to the parties any particular contractual intention, there can be no binding and enforceable obligation.[7]

(b)  Courts seek to uphold and give effect to the apparent intention of the parties particularly where the negotiations are in a commercial setting. The traditional doctrine "is that the courts should be astute to adopt a construction which will preserve the validity of the contract."[8] Further, "no narrow or pedantic approach is warranted".[9]

(c)  If the parties have acted upon their agreement the court is even more ready to uphold and give effect to it.[10]

(d)  A reasonable interpretation or meaning to the words used should be given wherever possible.[11]

This issue arises in respect of the obligation undertaken by Trimex of "promoting the Clarins approved beauty video throughout their beauty outlets in Australia".[12]

The obligation to promote as such is quite imprecise and indefinite. However, the letter was not sent in a vacuum. It was sent in the context of, and as a follow up to, the conversations held earlier in 1989 between Ms Hugo and Ms Jamin. In determining the precise content of the obligation undertaken I have had regard to the substance of those conversations and also to the principles set out above.

In that context I am satisfied that the contractual obligation undertaken by Trimex was to use its best endeavours to promote the sale of the video to the retail outlets throughout Australia which sold the Clarins range of products supplied to them by Trimex.

So understood, neither the agreement to promote or the contract entered into, is void for uncertainty.

Breach of Contract

The issue of breach requires consideration of the content of the "best endeavours" obligation of Trimex. It does not mean second best endeavours.[13]

An express obligation to use best endeavours to promote the sale of fountain pens made under Letters Patent was considered by Sellers J in Terrell v. Mabie Todd & Co. Ltd.[14] His Lordship said that:

      Their obligation was to do what they could reasonably do in the circumstances. The standard of reasonableness is that of a reasonable and prudent Board of Directors acting properly in the interests of their company and applying their minds to their contractual obligations to exploit the inventions.

In Transfield Pty. Ltd. v. Arlo International Ltd. Mason J (as he then was) said that a best endeavours clause required the use of all of the company's efforts and skills towards the selling of the licensed item

      to the extent that it was reasonable so to do in the circumstances.[15]

In R. Davis Ltd. v. Tooth & Coy Ltd.[16] giving the decision of the Judicial Committee of the Privy Council, Lord Roche said that an obligation to devote the principal part of the energies of a selling agent to pushing the sale of whisky in bulk throughout New South Wales was conditioned by

      The potentialities of the defendant company's business and by the circumstances which might arise to affect it. The obligation was to do what the defendant company itself could reasonably do, in such circumstances.

The content of the duty must be ascertained at the date of contract. However, whether it was breached is determined as at the date of breach. Consequently the reasonableness of the conduct in question is determined in the light of the circumstances prevailing at the date of the alleged breach.

In my view the Applicant has not discharged the onus of establishing that Trimex did not use its best endeavours to promote the video to its Clarins outlets.

In essence the case put by the Applicants was that although some efforts were made by Trimex the combination of the poor sales results and the general lack of awareness of the video at outlets surveyed by the Applicant, should lead me to infer that best endeavours were not used.

The Applicant's evidence was ambivalent. Its own limited marketing endeavours demonstrated the difficulty of measuring promotion by the sales made - the Applicant's television advertising only produced 8 sales. Further, a lack of sales is equally consistent with the product having no appeal to outlets or consumers, at least at the price at which it was being marketed.

The Applicant conceded that its survey evidence was to the effect that persons employed at 2/3rds of the outlets surveyed were aware of the video although 1/3 thought it was a training video. I do not place much weight on the survey. Its scope was limited. At its highest, it was put by Counsel for the applicant as a "rough" survey. The persons surveyed did not necessarily include the person responsible for the outlet or its purchases. Further, the survey was no more than a series of general enquiries made in an informal manner at a small number of outlets.

Against those matters there was direct evidence from the Respondents' witnesses as to the promotional steps taken by Trimex. The first step was to acquire 1000 videos for resale and 40 videos for promotional purposes. It then proceeded with the promotional steps which I have summarised earlier in these reasons. It is my view that those steps were reasonable in all of the circumstances. In arriving at that conclusion I have had regard to the events I have referred to earlier in these reasons as directly or indirectly impacting on the marketing and promotion of the video.

In the result, the Applicant has failed to establish breach of the term of the contract I have found to exist between Valentine Films and Trimex, that is, a duty to use best endeavours to promote the video at Clarins' outlets. In arriving at that conclusion I have not accepted that the terms pleaded by the Applicant were terms of the contract I have found to exist.

S.52 of the TPA and s.11 of the FTA

The Applicant has also relied upon the statements made by Ms Jamin at the various meetings in 1989 and if necessary 1990 as the basis for its claim that the conduct in question constituted misleading and deceptive conduct or conduct likely to mislead or deceive in breach of s.52 of the TPA and s.11 of the FTA.

Valentine Films pleaded that each of the terms relied upon by it as terms of the contract between it and Trimex were also representations made by Trimex in order to induce it to agree to produce the video.

In addition to relying upon each of the statements made as terms of the contract as set out earlier in these reasons, the Applicant also relied upon an additional representation that:

      (j)   Trimex was entitled to market and sell whatever merchandise it chose to at its counters in major department stores such as Myer and David Jones without any requirement to obtain the prior approval of those stores.

It is well established that a representation as to future conduct or events, which do not come to pass, or the non-fulfilment of a promise when the time for performance arrives, does not by those facts alone, amount to a breach of s.52 or its Victorian counterpart s.11.[17]

Something more is required. For example there may be a misrepresentation of the promisor's present intention to make good the promise or at least in the implied representation that the promisor has the means to do so.[18]

It can readily be seen that almost all of the statements relied upon in sub-paragraphs (a) to (i) (which are repeated hereunder) fall within the category of alleged promises or assurances in relation to future conduct of Trimex. In respect of those statements it was quite properly conceded by Counsel for the Applicant that the evidence does not establish that Trimex or Ms Jamin did not intend to make good or fulfil any promises or assurances they made. It was not contended that Trimex lacked the means to do so.

Recognising the difficulties arising with the case as originally pleaded, late in the proceedings, the Applicant sought to rely on s.51A of the TPA. Under that section a representation by a corporation as to future matters is taken to be misleading unless the corporation adduces evidence which establishes it had reasonable grounds for making the statement.

I turn to deal with each of the representations relied upon.

      (a)   Trimex would purchase copies of the video from the Applicant for $17.00 for on sale to its customers.

The representation in question, or more appropriately the offer, was made late in 1990 and did not breach s.52 or s.11. Trimex did agree to purchase and purchased 1000 videos from the Applicant for $17.00 for sale or distribution to its customers.

      (b)   Trimex would promote and market the video to approximately 100,000 mail order clients which it alleged it had in
Australia, all of whom spent over $1,000.00 per year on the products.

      (c)   Trimex would recommend the video to its mail order clients.

The alleged representation has two elements to it. The first is that it alleges as an existing fact that Trimex had 100,000 mail order clients all of whom spent over $1,000.00 per year on its products. I have not accepted the applicant's evidence as to that representation. Instead I have found that the representation that was made as to an existing fact was that the various Clarins outlets (which totalled more than 800) maintained mailing lists for their Clarins customers which totalled about 100,000 Australia wide. It is likely that a statement was also made to the effect that Clarins' customers each spend an average of $1,000 per year and usually acquire the products recommended to them. The evidence does not establish that those representations were untrue or false in any respect.

It is easy to recognise how Ms Hugo and Ms Buhagiar, who both gave evidence of a representation being made which was similar to that  alleged, may have misunderstood what was stated by Ms Jamin. Confusion could easily have arisen in their minds between Trimex's customers (i.e. the Clarins outlets) and Clarins customers (i.e. customers of the Clarins outlets). I am satisfied that whatever the confusion or misunderstanding may have been in that regard, it was not caused by misleading or deceptive conduct or conduct likely to mislead or deceive by either of the Respondents.

The representation which I find was made was that Trimex would promote the video to its various Clarins outlets. I have not accepted the evidence of the Applicant's witnesses that the promotion was to be directly to 100,000 mail order clients.

I am satisfied by the evidence that no breach of s.52 or s.11 has occurred in respect of any of the above representations. In so far as they relate to existing facts there is no evidence that they were not true. In so far as they were promissory they did not constitute a misrepresentation of intent or otherwise. If they are said to relate to future matters I am satisfied that the respondents have established that they had reasonable grounds for making them.

      (d)   Trimex would market the video through all of its outlets in Australia.

      (e)   Trimex would recommend to all beauty therapists and pharmacists who used and sold its products that they market the video in their outlets.

      (f)   Trimex would offer to supply free of charge aromatherapy mini-facial treatments to the first 5,000 purchasers of the video or alternatively offer to supply free of charge a gift set containing three samples of the products with each video sold.

      (g)   Trimex would provide free of charge a Clarins facial treatment guide pamphlet with each copy of the video sold.

      (h)   Trimex would sell the video at workshops it conducted.

      (i)   Trimex would include reference to the video in advertisements contained in multi-page promotions in the New Idea and Cleo magazines at no cost to the Applicant.

Each of the representations alleged is promissory or in the nature of an assurance. As such there is no basis for finding that Trimex misrepresented its intent in respect of the matters allegedly promised or assured or that it lacked the means to carry out its promises or assurances. If the representations are said to relate to future matters I am satisfied that the respondents have established that there were reasonable grounds for making them. Accordingly no breach of s.52 or s.11 has occurred in respect of these representations.

      (j)   Trimex was entitled to market and sell whatever merchandise it chose to at its counters in major department stores such as Myer and David Jones without any requirement to obtain the prior approval of those stores.

I am satisfied that Ms Jamin did make a statement to Ms Hugo to the effect that Trimex was entitled to and did arrange for Clarins products to be sold from Clarins counters at department stores such as Myer and David Jones and proposed to market the video at those counters.

In so far as the statement was one of fact I find it was true. Trimex was entitled to sell and did arrange for the sale of the Clarins' products of its choice from the counters. The parties assumed and expected that the same situation would apply to the video. However, that was not to be. When the matter was first raised with the stores at a later stage they indicated that the video should be sold through their video departments. That problem, which arose later, meant that the video could be promoted, but not sold, at the cosmetic counters of the stores. However, that fact did not make the representation as pleaded which was true when made, false.

Further, I am not satisfied that the representation as alleged led to any identifiable loss. Trimex was entitled to promote the video from the cosmetic counters and it or Valentine Films was entitled to seek to sell the videos through the video departments.

The evidence does not establish that, had the video been available for sale at the cosmetic counters, that would have led to an identifiable increase in sales.

CONCLUSION

For the reasons I have set out above the causes of action based on breaches of s.52 of the TPA and s.11 of the FTA have not been made out. I should add that even if I had found that there were misrepresentations as alleged, the issue would have arisen as to whether the alleged misrepresentations were ultimately relied upon by the Applicant in finally agreeing to produce the video. I am satisfied that the representations made at the initial meetings were relied upon by Ms Hugo in deciding that she wished to proceed with the project at that stage. However, when she finally committed herself to the project in 1990 it was on the basis of the earlier representations which had by then been qualified by the matters set out in Ms Jamin's letter of 27 July 1990. Because of the conclusions I have reached rejecting the claims of the applicant which were based on the oral representations made at the earlier meetings it is unnecessary to further consider the effect of that qualification.

For the reasons set out above I have concluded that the proceeding is to be dismissed with costs.

                                  I certify that this and the preceding 30 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel

                                  Associate:

                                  Dated:    7 March 1996

Heard:        5, 6, 7, 8, 9 14 February 1996

Place:        Melbourne

Judgment:     7 March 1996

Appearances:

Mr. C. Harrison (instructed by Liddell Odbert & Co.) appeared for the Applicant.

Ms S. Goddard (instructed by Danki Palombi Haddock Fiora) appeared for the First and Second Respondents.