FEDERAL COURT OF AUSTRALIA

 

Reches Pty Ltd v Tadiran Ltd

[1999] FCA 952

TRADE PRACTICES – conduct that is misleading or deceptive – termination of agency agreement – whether alleged representations about future relationship of applicant and respondent made – contracts – term of agency agreement – whether term of agreement extended, by conduct, by consent – promissory estoppel – conduct that is misleading or deceptive – whether conduct of respondent constituted misleading representation that respondent would not exercise right to terminate agency agreement – whether reasonable notice of termination given

 

Trade Practices Act 1974 (Cth) ss 51A, 52, 82, 87

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 cited

Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 cited

 

 

 

 

 

 

 

 

 

 

 

RECHES PTY LIMITED v TADIRAN LIMITED

 

NG 606 OF 1996

LEHANE J

14 JULY 1999

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 606 OF 1996

 

BETWEEN:	RECHES PTY LIMITED Applicant
AND:	TADIRAN LIMITED Respondent
JUDGE:	LEHANE J
DATE OF ORDER:	14 JULY 1999
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

1.         The respondent file and serve not later than 30 July 1999 short minutes of the orders which it contends are appropriate to give effect to the reasons published on 14 July 1999.

 

 

 

 

 

 

 

 

 

 

 

 

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 606 OF 1996

 

BETWEEN:	RECHES PTY LIMITED Applicant
AND:	TADIRAN LIMITED Respondent

 

JUDGE:	LEHANE J
DATE:	14 JULY 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1                     This proceeding arises out of the circumstances in which the respondent (Tadiran) terminated, in April 1994, an agreement by which, with effect from August 1990, it had appointed the applicant (Reches) its non‑exclusive agent in relation to sales of certain of its products in Australia (the agency agreement).  Reches claims relief under s 87 of the Trade Practices Act 1974 (Cth) and damages under s 82 of that Act; damages for breach of contract, on the footing of a repudiation by Tadiran of the agency agreement; equitable compensation for what Reches claims to have been a departure by Tadiran from assumptions or expectations created by representations or other conduct on the part of Tadiran, relied on by Reches to its detriment; and what is described as an order for restitution “of all moneys paid and work done by the Applicant on account of the continuation of the Agency Agreement since 31 December 1992”.  An outline of the facts revealed by the evidence will set the context for a consideration of those claims for relief and their basis in the facts pleaded in the statement of claim.

2                     These reasons deal with the question whether any of the breaches of duty alleged against Tadiran has been established.  An interlocutory order was made that this question be decided separately from questions relating to relief.

Factual Background

3                     Reches is an Australian company.  Its directors and shareholders are Mr Isaac Reches and his wife, Mrs Yael Reches.  Mr Reches is its principal executive officer.  He migrated to Australia from Israel in 1986 and established Reches to act as a representative for Israeli companies in defence, security, and other commercial products.  He had spent three years in the Israeli Army, followed by thirteen years in the Department of Defence; for the next fifteen years he occupied senior positions in commerce; then in 1980 he returned to the Israeli government service, in its Finance Ministry, where he remained until 1986.

4                     Tadiran is a very substantial Israeli company.  It designs and manufactures electronic equipment and systems, including communications systems.  It is a supplier to the Israeli military forces and also to the defence forces of other countries, including the United States of America.  Between 1985 and 1989 Tadiran had an office in Sydney.  The primary purpose of that office was to assist in promoting a tender, in which Tadiran was a participant, for a contract to supply electronic surveillance equipment to the Royal Australian Air Force.  The tender was unsuccessful and Tadiran closed its Sydney office in 1989.  Before doing so, however, it had registered an expression of interest in tendering for the supply, to an Australian infantry division, of an integrated communications system.  The Army designated the proposal for the supply of that equipment “Project Parakeet”.

5                     On 19 January 1990 Mr Reches wrote to Mr Yakov Shulman, then Tadiran’s director of sales and marketing for the Asian region, including Australia.  The letter followed an unsolicited telephone call by Mr Reches to Mr Shulman.  Mr Reches proposed the appointment of Reches as Tadiran’s representative in Australia.  Mr Reches and Mr Shulman corresponded about the proposal for several months.  The correspondence included negotiation about rates of commission and as to whether the agency would be exclusive.  On 26 July 1990 Mr Shulman wrote to Mr Reches enclosing a standard form of agency agreement.  On the second of the two matters which had been negotiated, Mr Shulman said:

“As we are about to start a new relation we prefer a non‑exclusive arrangement that could be modified to an exclusive one after gaining mutual confidence.”

6                     Reches’ solicitors suggested to Mr Reches that he request a considerable number of amendments to the draft agreement, several of them substantial.  Mr Reches, however, was not prepared to take that course.  He authorised a letter from the solicitors to Mr Shulman suggesting a more limited range of amendments and a few days later, on 2 September 1990, he sent a fax to Mr Shulman in which he mentioned the solicitors’ suggested amendments and added:

“These remarks are not an attempt to bargain on the terms, this can be done when the time comes.  In the meantime, we are asking for a number of amendments which are supposed to prevent misunderstandings.”

Mr Shulman accepted a few of the suggested amendments and rejected the others.  Mr Reches agreed to the document with the changes accepted by Mr Shulman and signed it on behalf of Reches; in due course it was signed by Tadiran as well.  It was stated to be “effective as of August 1990”.

7                     A number of aspects of the agency agreement are important.  Tadiran appointed Reches its non-exclusive agent in Australia.  The agency related to markets defined as “Army, Navy, Air Force, Ministry of Defence” and to particular products which were listed, together with “other products as will be agreed from time to time”.  Tadiran reserved the right to deal directly with customers, but only “on notification to and consultation with the Agent”.  Reches’ duties were to use its best efforts to promote and increase the sale and use of the products in Australia including, among other things, soliciting customers, processing orders and dealing with complaints.  Tadiran, however, retained the right to accept or reject orders and to determine contractual terms and conditions.  There were at least two provisions which sit rather oddly with the non-exclusive nature of the agency: Reches was not to sell, promote or deal in competitive products; and Reches was to receive commission on all sales of the defined products within Australia “within either the term of this Agreement or 90 days after the termination or expiration thereof, but only for products delivered within one year of the date of termination or expiration of this Agreement”.  In other words, Reches was entitled to commission on a sale whether it had procured the sale or not: so that Tadiran, apparently, would have little incentive to appoint other agents in Australia concurrently, on similar terms.  Commission was based on the FOB Israel price of products sold by Tadiran to customers in Australia; the rate of commission was six per cent on sales up to US$1,000,000 and four per cent on sales exceeding US$1,000,000.  Reches was not entitled to reimbursement for expenses incurred in performing its functions as agent.

8                     The provisions concerning the term of the agreement, and its termination, were to this effect: the agreement was for a period ending on 31 December 1991 but might be “renewed for additional periods upon agreement in writing by the parties”; there was provision for termination on sixty days’ notice by either party upon breach of a material provision by, or certain events occurring in relation to, the other; Tadiran might immediately terminate the agreement if Reches attempted to assign it or if control or management of Reches changed in a way which Tadiran regarded as unacceptable.  The agreement included the following provision for orders accepted after expiration or termination:

“The acceptance of any order through Agent after the expiration or termination hereof shall not be deemed a renewal or extension hereof nor a waiver of expiration or termination, however, such order and Agent’s conduct with regard to such order shall be subject to all the terms, conditions and limitations contained in this Agreement.”

 

The agreement was to be “governed in all respects by the internal laws of the State of Israel”.  There was no evidence of any relevant Israeli law and I assume, accordingly, that it does not differ from the law of New South Wales.

9                     Apart from Project Parakeet, the evidence lacks any precise detail of activity either by Tadiran or by Reches in relation to the promotion and sale of Tadiran’s products in Australia during the ensuing years.  A number of projects, or potential projects, are referred to in the evidence; Mr Reches gave evidence, in rather general terms, of a great deal of activity; but there is no detailed evidence about any of it.  What is clear is that during the period from August 1990 until June 1994 (when, as will appear, the termination of the agency agreement was claimed by Tadiran to have taken effect) no tenders of any consequence, apart from a tender for Project Parakeet, were successful; a few relatively small sales appear to have been made.  As for Project Parakeet itself, Tadiran entered into what was described as a teaming agreement with AWA Defence Industries Pty Ltd (known as AWADI), a subsidiary of AWA Limited.  A lengthy process of discussion and negotiation followed, involving representatives of AWADI, Tadiran and the Army and involving also Mr Reches and his consultant, Mr Stephen Hart.  In the result, AWADI was one of four companies invited, in late 1992 or early 1993, to tender; further discussion and negotiation resulted in refinement of the tender; in October 1993 AWADI was announced as the successful tenderer; contractual negotiations ensued, as a result of which a contract was entered into between the Commonwealth and AWADI in March 1994.  AWADI was, thus, the prime contractor.  Tadiran was the major supplier of equipment; it entered into a subcontract with AWADI on 22 March 1994.  The total price due to Tadiran under the subcontract was US$24,348,065.00.  It was payable by instalments upon the completion of agreed “milestones”.  The precise circumstances in which Tadiran was entitled to payments upon making “milestone claims” and “adjustment claims” do not matter for present purposes.

10                  I mentioned Reches’ consultant, Mr Hart.  Shortly after the agency agreement was entered into, Reches appointed a Mr Paul Hirshl as a consultant to Reches.  By early 1992, however, Tadiran had become dissatisfied with Mr Hirshl’s work.  In a fax to Mr Reches dated 8 January 1992 Mr Shulman wrote:

“As we are about to change the arrangements of cooperation between Tadiran and Reches Pty as already discussed, you will have to include, as part of your staff, a qualified person with technical, marketing and military experience etc.

Therefore you are kindly requested to make sure that Mr. Paul Hirshl will stop working on Tadiran projects in Australia immediately.”

Reches’ solicitors gave notice, under Reches’ consultancy agreement with Mr Hirshl, that the agreement was terminated with effect from 29 February 1992.

11                  Mr Reches, in company with Mr Shulman and Mr Pniel Fleishman (then Director of Marketing of Tadiran for Asia and Australia, reporting to Mr Shulman), interviewed Mr Hart, who was an engineer with experience in communications, had retired from the Army with the rank of Lieutenant‑Colonel, lived in Canberra and had contacts in the Australian Defence Forces.  It was decided that Mr Hart would be appointed as Reches’ consultant and Reches entered into a consultancy agreement with him on 14 May 1992.  Under that agreement Reches was obliged to pay Mr Hart a monthly consultancy fee and to reimburse him for expenses; and Mr Hart was to be entitled to twenty-five percent of any commissions received by Reches from Tadiran.

12                  Mr Hart’s appointment was the occasion of an amendment and extension of the agency agreement.  Mr Reches had previously asked Mr Shulman whether Tadiran would be prepared, to any extent, to fund the expenses which Reches incurred as agent; Mr Shulman had responded that Tadiran would not do so.  On Mr Hart’s appointment Mr Reches renewed the request.  Upon returning to Israel, Mr Fleishman wrote to Mr Reches, on 5 March 1992, to inform him that Tadiran was prepared to advance US$3,000 per month together with a further sum of up to US$500 for expenses.  Those sums were to be offset against future commissions on transactions exceeding US$1,000,000.  On 18 March 1992 Tadiran sent to Mr Reches a form of letter agreement to give effect to that arrangement and to extend the term of the agency agreement to 31 December 1992.  There is no signed copy of that letter agreement in evidence, and there is no evidence that it was in fact signed; indeed, the evidence suggests that both parties were, during 1992 and into 1993, somewhat confused about whether in fact the agreement had been extended.  It is common ground, however, that the agency agreement was amended and extended as the letter agreement provided.

13                  By August 1992 it was becoming apparent that if the AWADI bid were to have a serious prospect of success it would need to be keenly priced.  During that month Mr Shulman and Mr Reches had some conversations about the level of Reches’ commissions: particularly, about a proposal by Mr Shulman that Reches should agree to a reduction in the commission to which it would be entitled on Project Parakeet sales, if the bid were successful.  According to Mr Reches’ affidavit evidence, the substance of what Mr Shulman said to him was this:

“Isaac, look we want to win Parakeet, you are getting a lot of money out of it.  You don’t need to get rich in the one project.  Help us to reduce the price on Parakeet and win the bid.  You have all of the future ahead of you with us.  You are part of our team, let’s do this together.  You don’t have to see this as the end of the world because other projects are coming.  We will be able to compensate you in other projects so it is not important.  You’ll make it up in the future.”

14                  Mr Reches, according to his account, responded:

“Yes, alright, I am willing to take my share in your effort to win Parakeet, as long as we can agree on a satisfactory compromise.”

A finding as to the terms of this conversation is crucial to the outcome of the case, and I shall return to it later in these reasons.  For the present it is sufficient to record that Mr Shulman firmly denied that he said anything about contracts other than Parakeet or about the future of Reches’ agency; he accepted that the discussion proceeded on the basis that, if the bid for Project Parakeet was successful, Reches would earn commission on the resulting sales.  Mr Shulman deposed that, during the August 1992 conversations with Mr Reches, he said the following things:

“Tadiran is very keen to win the project however there must be a profit in it for us.  …  Based on our experience with [the unsuccessful tender preceding the closing of the Sydney office] superior technical capability is not sufficient to be awarded the project.  The price must be the lowest offered.  …  The commission rates payable to you under the agency agreement are too high for  a contract this large.  The high costs of this tender, including your commission, make it uncompetitive.  …  I am discussing with AWADI the costing of the tender and seeking from them a reduction in their costs and profit margin.  …  The amount of the commission payable to Reches on the project will still be a very large amount because of the large contract price involved.  …  To increase the prospects of successfully tendering for the project, it will be necessary for the price to be reduced, which will involve lowering the total cost of the contract.  …  The contract price can be reduced by you reducing your commission.  …  Even at a reduced rate of commission, you will still make a lot of money out of the contract.”

15                  There followed, over a little more than a year, correspondence and discussions as to a revised scale of commissions.  The first letter in the series was sent by Mr Reches to Mr Shulman on 18 August 1992.  Like much of the correspondence in evidence, it was written in Hebrew.  There was some controversy at the trial over some aspects of the translation of certain of the correspondence from Hebrew to English.  In the end, however, no issue remained as to the meaning of any of the important items of correspondence.  What follows is an English translation, on which both parties based submissions, of the letter of 18 August 1992:

“Dear Yakov,

Referring to our conversation of Monday 18.8 on the matter of the commissions on the Parakeet Project.

Whilst you, in your arguments, centred on one large project, I considered this project as part of an overall series of tens of projects, which we have been handling daily over a long period.  Only recently we started to receive financial compensation which is very helpful to us, but this still does not cover all the expenses.

I estimate my overall financial contribution until now at $50,000, and all of us still do not know when this deficit will be covered.  All of us hope that the deficit will be covered in the future from commission payments, incidentally – Steve’s share of the commissions is 25%.

I agree that we have to return to cutting down expenses in this project, but a proper way must be found to compensate us for reducing the commissions.  I therefore suggest increasing the commission at the lower levels and reducing at the higher levels.

I presume that this arrangement would be included in the existing agreement.  The following is a table of the proposed commissions:

Table of proposed commissions:-

1)         up to 1 million US$     8 percent

2)         up to 3 million US$     7 percent

3)         up to 5 million US$     6 percent

4)         up to 7 million US$     5 percent

5)         up to 9 million US$     4 percent

6)         up to 11 million US$   3 percent

7)         up to 12 million US$   2 percent

                                                                        Sincerely Isaac”

16                  Mr Shulman’s reply is important also.  It included the following:

“In reply to your letter of 18.8.92, my situation and attitude are absolutely different.

With respect to Parakeet, there is no intention to cut back expenses.  The purpose is to submit a winning offer and according to our approach, in addition to the need for it to be technically superior, it must be the cheapest.  Thus, every component must be adjusted accordingly.  We decided to go with a minimum profit and I hope that Awadi also will go this way.

The commission must be according to the services and the effort, and the general wish to win.  Therefore, it certainly must be minimal.

In addition to this, the commission must be adjusted to the size of the contract and the services which you, as agent, can provide for the benefit of the project.  It must naturally also be fair.  Therefore, taking into account the extent of the proposal, the appropriate commission is 2% as I suggested to you and I understand that this is indeed acceptable to you.

It is naturally possible to do this by upgrading the contract and, at the same opportunity, to fix a fuller table of volumes and commission percentages.”

Mr Shulman proceeded to list a scale of commissions which, he said, appeared to him reasonable and acceptable.  He added that the parties might reach a special agreement in relation to a particular contract, should the circumstances require it.  Mr Reches responded promptly, on 24 August.  He dissented from the proposition that his approach and Mr Shulman’s were “completely different”.  He accepted that a cheaper proposal had to be submitted and agreed that it was appropriate for him to contribute to that.  He did not, however, regard it as “prudent” to “adjust the commission to the services provided for a specific project”.  Instead, he suggested a scale of commissions which was somewhat more generous to Reches than that proposed by Mr Shulman.

17                  From that point the discussions, on Tadiran’s side, were conducted by Mr Fleishman.  Indeed, from the end of 1992 Mr Shulman, though he remained Mr Fleishman’s immediate superior, seems to have ceased to play any significant part in Tadiran’s dealings with Reches.  The precise course of the discussion between Mr Reches and Mr Fleishman does not emerge clearly from the evidence.  In the latter part of 1993 there was some discussion between them, perhaps initiated by Mr Fleishman, of a possibility that the monthly payments by Tadiran to Reches (of up to US$3,500) would no longer be offset against future commissions payable by Tadiran to Reches.  In any case, it had been announced in October that AWADI was the successful tenderer for Project Parakeet.  Mr Fleishman wished to ensure that finality was reached as to Reches’ entitlement to commission.  On 29 November he sent the following terse note to Mr Reches under the heading “Commission and Representation” (again, using a translation accepted by the parties as substantially correct):

“Further to our conversation in this matter, which was discussed, this is our decision:

1.         The commission will remain as previously determined –

6% up to 1 million

5% within 1 – 2 million

4% within 2 – 5 million

3% within 5 – 10 million

2% over 10 million

2.                  Tadiran will not carry on taking off from future commissions due to you the monthly retainer.

3.                  Until the end of January 1994, Tadiran will decide about the arrangements in Australia as requested from the results of Parakeet and the marketing plans in the future.”

18                  The rates of commission thus “decided” were in some respects slightly more generous than those proposed by Mr Shulman in August 1992 but less so than those which Mr Reches had proposed.  Mr Reches replied to Mr Fleishman on 1 December 1993 indicating dissatisfaction about the “gigantic disparity” between commissions calculated in accordance with the table in the agency agreement and those calculated under Mr Fleishman’s scale.  “Next week”, he wrote, “I will write to you everything in greater detail”.  There is no evidence that he did so.  It may be added, however, that it was specifically contended, on behalf of Reches, that I should find that the agency agreement was varied on 29 November 1993 to eliminate the provision (resulting from the March 1992 amendment) for the deduction from future commissions of the monthly amounts paid to Reches by Tadiran.

19                  There is no doubt that Mr Fleishman’s letter was intended as a variation of the provisions governing the relationship between Tadiran and Reches: that is, those of the agency agreement.  There had been no formal written extension of the agreement after 31 December 1992.  Mr Fleishman’s evidence was that that was not the result of any design on Tadiran’s part but was simply a product of his own “negligence” or “mismanagement”. But throughout 1993 Reches continued to act as agent and Tadiran treated Reches as its agent.  That continued into 1994, although, once again, there was no written extension of the kind which the agreement contemplated.

20                  Mr Shulman’s evidence was that he regarded Reches as a satisfactory agent and that he expected that the agency relationship was likely to continue.  Though Mr Shulman and Mr Reches had not met until shortly before the time when Mr Reches first wrote to Mr Shulman suggesting the agency, the evidence of each of them was that they became, and throughout the period of the agency remained, friends.  Mr Reches’ relationship with Mr Fleishman was rather different.  Mr Fleishman gave evidence that during a visit to Sydney in February 1993 he said to Mr Reches, among other things:

“When we are dealing with future major projects I think it will be necessary for Tadiran to deal with a representative in addition to, or instead of, you.”

Mr Reches’ account of that conversation, given in cross‑examination, was, to say the least of it, confusing.  All that I need say about it at present is that Mr Reches accepted that Mr Fleishman made a remark substantially to the effect of that which I have quoted and that, in making the remark, Mr Fleishman was being critical of him.  Mr Reches wrote to Mr Fleishman on 3 March with what he described as a proposal for the further development of the existing relationship between Reches and Tadiran, should the Project Parakeet tender be successful.  The proposal had these elements:  Reches would manage the affairs of Tadiran in Australia under a company or business name “Tadiran Australia”; once Project Parakeet commissions started to flow, the monthly payments by Tadiran to Reches could cease, but a new scale of commissions would need to be agreed; the head office in Australia should be in Canberra and Mr Hart should be employed to manage it; the Sydney office, managed by Mr Reches, would increase its staff; “suitable employees or consultants” could be engaged by Reches to promote Tadiran’s interests (he suggested four names, two of them those of very senior military officers, one recently retired and the other shortly to retire).  Mr Reches concluded:

“Obviously these proposals depend very much upon Tadiran’s intentions for its business in Australia.

I am keen to turn our extensive efforts over a considerable period of time to a continuing and developing relationship, which will see Tadiran become a major participant in the Australian defence industry.”

21                  Mr Reches wrote a further letter, on 14 April 1993, adding to his proposals: he suggested means of breaking into what he called the Australian civilian market and proposed (urging a view contrary to one which Mr Fleishman had expressed) that it would be to Tadiran’s advantage to seek to make smaller sales as a means of gaining a reputation which would assist it in future bids for large contracts.

22                  The proposals in Mr Reches’ two letters were not warmly received.  At some time before the middle of 1993, Mr Fleishman wrote a note to Mr Israel Dranov, then Tadiran’s Vice President of Marketing, in which he wrote, referring to Mr Reches’ suggestions:

“This is a very naive project, but out of respect, I do not wish to reject it out of hand, and I have promised that I will present and study it.  …  As regards continuing working, we do not have a better solution for handling current matters and for keeping in the picture and to know what is going on.  …  In my opinion, we need to look at Reches as an office of Tadiran which is employing a consultant (although it seems to me that it was a mistake on our part not to employ Steve directly), and which exposes the market to us, and only in cases of very complex projects will we employ another agent.  …”

Mr Fleishman’s evidence, in summary, was that in his view Mr Reches was good at making administrative arrangements, but unsatisfactory as an agent: he simply (Mr Fleishman said) acted as a conduit for reports from Mr Hart, to which he added nothing of his own.  Mr Fleishman also gave evidence that both Mr Dranov and the President of Tadiran, Mr Meltzer, expressed to him unfavourable views about Reches’ performance.

23                  Evidently, those negative views came to be shared by Admiral Amiram Rafael, who succeeded Mr Dranov as Vice President of Marketing in about June 1993.  That was not immediately evident to Mr Reches.  On 30 July 1993 Admiral Rafael wrote to Mr Reches announcing his appointment and that of Mr Shulman as his deputy and confirming that Mr Fleishman would remain Reches’ point of contact.  The letter concluded, “I do believe that by this change and with your continuous support Tadiran will increase its sales for the benefit of all of us”.  Mr Fleishman gave evidence, however, of discussions which he had with Admiral Rafael during the latter part of 1993 in which at least two possible courses of action were discussed: one was the termination of the agency; another was its replacement by a different arrangement under which Reches might be retained in an administrative role, rather than a directly marketing one.  Mr Fleishman and Mr Reches met in Sydney in February 1994.  Mr Reches agreed that Mr Fleishman said two things to him: first, that Wagtail (another military project then under active consideration) was a very large contract and that Tadiran wanted to make sure that it was properly represented but had not yet made a decision; and secondly, “as I told you in my letter at the end of last year, Tadiran is looking at our representation in Australia”.  Shortly after that, in early March, Mr Reches met Admiral Rafael and Mr Fleishman at an aerospace show in Singapore.  There is some dispute about what exactly was said; the meeting was a short one and it was agreed that there would be a further meeting, in Israel, in April.

24                  On 8 March Mr Reches wrote to Admiral Rafael.  His letter began:

“I refer to my letters to Mr Pniel Fleishman dated 3 March 1993 and 14 April 1993 (copies enclosed) and to our discussions held during the exhibition in Singapore.

I understand that you are currently reviewing Tadiran’s involvement in Australia and the role I have to play and that you generally believe that your agents should have an engineering and technical background.

I do not believe that such a background is required for the role that I have to perform.  I have proven during the period of my involvement that what is required in Australia is not a person with technical expertise but a person who has the capacity to manage and administer Tadiran’s affairs and who has the contacts and established network that I possess.  The practical aspects of the business can be performed by the engineers and technicians that I can engage and co‑ordinate.

I understand that more than 90% of Tadiran’s agents around the world are non‑technical but like me, engage other people to provide the technical assistance required.

It is a rare blend of talents that allows a technical person to be a good marketing and administration person.  As you know my predecessor in Australia was Alex Larst.  He was a technical person who specialised in a particular field.  Accordingly he only really worked in that specialised area and did not deal with the other types of tenders issued in Australia.

When I was appointed in his place it was understood that I was not a technical person but that I was able to manage Tadiran’s business affairs here and would engage the technical assistance required.

Since I was appointed there has been a significant saving to Tadiran.  Whereas Alex Larst’s operations cost Tadiran approximately $250,000 per annum, my costs have been minimal and in addition I have opened up new avenues for Tadiran in Australia.

For more than the first year of our relationship I didn’t receive any financial assistance from Tadiran but in that time I would have expended about $50,000 of my own money.  After that time Tadiran commenced to pay me $3,500 per month but only as an advance against commission.  Even this amount did not cover my total expenses.  This arrangement was therefore much more cost effective for Tadiran.”

Mr Reches went on to refer to his earlier proposals and to benefits which he claimed to have brought to Tadiran.  He said that he wished to appoint “three more technically capable people” and a lobbyist, on a basis which would not require any further financial commitment from Tadiran.  He concluded:

“Finally I was happy to see that even Steve Hart has endorsed the present structure and believes that it is the best for Tadiran’s purposes even though he stood to gain from an alteration to the structure.  This is a good gauge on the value of the structure and on the integrity of Steve.

My commitment to Tadiran has already been proved by my agreeing to accept a 30% reduction in commission in respect of Parakeet.  This arrangement was made during my discussions with Mr Y Schulman in response to his advice that it was necessary to cut costs in order to obtain the Parakeet deal.  He said that in a relationship such as ours, which is committed to a long future, sacrifices like this were necessary, but that the benefits over the long term would make up for them.  On the basis that our relationship is to be long term I agreed to the arrangement.

I look forward to meeting with you in Israel during the holidays to discuss these matters and to discuss with you another problem which we have been facing constantly in regard to the ways tenders are prepared by the various divisions within Tadiran.”

 

25                  Mr Reches met Admiral Rafael and Mr Fleishman in Admiral Rafael’s office on 7 April 1994.  The previous evening Mr Reches had dined with Mr Shulman who, on being asked whether Mr Reches might expect bad news, had replied that he knew of none (the evidence makes it clear that Mr Shulman had not been informed of what was to occur).  The meeting was short.  There is some dispute as to what was said but it is clear at least that Admiral Rafael informed Mr Reches that the agency was terminated but that Reches would receive the commission on Project Parakeet to which it was entitled and should continue to do what remained to be done by it in relation to that project.  There was also some discussion – apparently inconclusive – about Tadiran’s proposal to engage Mr Hart directly.  On 10 April Mr Reches wrote to Mr Meltzer, seeking an appointment to discuss the termination.  On 1 May Mr Meltzer responded that the decision to terminate the agency had been made after consultation with him but that he was prepared to meet Mr Reches.  On 19 May Admiral Rafael wrote to Mr Reches as follows:

“This is to confirm your April 13, 1994 conversation with myself and Pniel Fleishman in which he advised you of our intent to terminate your services as Tadiran’s representative in Australia, effective June 12, 1994, subject to the terms of our agreement.”

Mr Reches responded in a letter dated 24 May 1994.  He drew attention to two errors in Admiral Rafael’s letter: the meeting took place on 7 April and the announcement of the termination was made not by Mr Fleishman but by Admiral Rafael.  Mr Reches went on to state that termination required proper written notice under the agreement and that Tadiran could terminate the agreement only for one of the causes specified in it: none of those causes had arisen; accordingly, Tadiran was unable to terminate the agreement.  In due course Tadiran replied asserting, in effect, that as the term of the agreement had come to an end it could be terminated at any time.

26                  Meanwhile, and finally, Mr Reches met Mr Meltzer in late May.  Mr Reches prepared, and memorised, a note of what he wished to say to Mr Meltzer and his evidence – there is no reason to doubt it – was that when they met he said substantially what he had written down.  Mr Reches began by saying that what Tadiran had done was illegal.  He proceeded to recount some of the history.  He asserted, in substance, that he had brought benefits to Tadiran at virtually no cost to it: “I agree that maybe I am not a man with charisma, however I am a man who is doing the day to day hard work and at the end of the day I am supplying the goods more than you ever expected”.  He referred to his proposals for adding to the Australian representation which he provided, without any additional financial commitment from Tadiran.  The second-last paragraph of his note reads:

“Prior to submitting the Parakeet tender, Shulman explained to me that I too have to make a contribution to the chances of success and I have to reduce my commission.  He justified his request on the basis that in the future we were expecting large projects and the relationships between us will continue for many years.  I agreed to reduce my commission entitlements because I saw the future potential.”

Reches’ claims

27                  That somewhat lengthy account of the facts enables me to describe quite shortly the claims which Reches presses against Tadiran.  The first group of claims is to the effect that, either by agreement or by estoppel, the agency agreement was extended to 31 December 1994.  There is also a claim that Tadiran engaged in misleading and deceptive conduct, contravening s 52 and s 51A of the Trade Practices Act, in relation to the renewal of the agreement.  Specifically, Reches pleads that Tadiran after 31 December 1992 continued to conduct itself as if the agency agreement had been renewed for further periods ending respectively on 31 December 1993 and 31 December 1994 and that Reches as a result believed that the agreement had been so renewed, refrained from taking steps to ensure that it had been renewed, refrained from making efforts to negotiate alternative agency agreements with other suppliers and continued to spend money to its detriment and for the benefit of Tadiran.

28                  Specifically, the conduct which Reches alleges against Tadiran and claims to have relied upon, was that Tadiran:

“(a)     Upon enquiry by the Applicant in March 1993 about the renewal of the Agreement, failed to say that it had not been renewed and said that the Respondent believed that it had been renewed;

(b)       Continued through its representatives Mr Fleishman, Mr Shulman and Mr David, to visit Australia on a regular basis and give instructions to the Applicant concerning the subject matter of the Agency Agreement;

(c)        Accepted from the Applicant its time effort and expenditure in arranging the accommodation, visiting arrangements, business meetings, entertainment, cars and the provision of office facilities in relation to its representative’s journeys to Australia;

(d)       Stated to the Applicant that the Respondent’s representatives on their regular visits to Australia, were comfortable to continue being looked after by the Applicant in relation to the subject matter of the Agency Agreement;

(e)        Offered accommodation and entertainment to Reches at restaurants and within the homes of the principals of the Respondent in Israel; and

(f)        Continued to accept communications from the Applicant about the progress of his work under the Agency Agreement and about his contacts with the Department of Defence.

(g)       Continued to pay the Applicant the monthly advance of $3,500.00 described in paragraph 11 hereof;

(h)       Was made and remained aware that the Applicant was continuing to expend money to its detriment in the belief that the Agency Agreement had been renewed.”

29                  Of those matters, Tadiran does not admit (a), (d) or (h); it admits the other matters.  It does not admit the reliance pleaded by Reches; it denies that by its conduct it agreed to renew the agreement, engaged in misleading or deceptive conduct, is estopped from denying the agency agreement was renewed or has waived the provisions of the agency agreement requiring an extension to be in writing.  Tadiran says that after 31 December 1992 the agency continued on the terms of the agreement but, as there had been no written extension for a particular term, it did so on the basis that the agreement was terminable by either party on reasonable notice.  Of course, what happened in relation to 1993 does not matter except so far as it casts light on what happened in relation to 1994: it is not in dispute that the agency agreement remained on foot throughout 1993; indeed, until June 1994.

30                  The second group of claims is based principally upon representations alleged to have been made by Mr Shulman in his conversations with Mr Reches in August 1992.  The representations alleged to have been made by Mr Shulman on behalf of Tadiran were that:

“(a)     He believed both the Applicant and the Respondent wished to win the Parakeet Project from the Department of Defence;

(b)       It would be desirable for both the Applicant and the Respondent that the Applicant’s commission on the Parakeet Project be reduced to make the bid more competitive;

(c)        It would assist the Respondent to reduce the tender price on Project Parakeet and therefore improve the Respondent’s prospects of being successful in the tender if the Applicant agreed to a reduction in commission.

(d)       The Applicant had all of the Applicant’s business future ahead of him with the Respondent;

(e)        The Applicant did not need to make all his commission monies in the one project;

(f)        The Applicant was and would continue to be part of the Respondent’s business team; and

(g)       Despite any proposed reduction of commission on the Parakeet project, the Applicant would not suffer, because commission on other projects would be forthcoming from the Respondent by which he would be fully compensated for the present reduction in commission.”

31                  Tadiran admits (a), (b) and (c); it denies the others.  Reches then alleges that the representations were repeated or confirmed in later negotiations for the reduction of Reches’ commission and that:

“On or about 29 November 1993 and as a result of the conduct described in paragraph 17 and 18 hereof, a revised commission structure in variation of Clause 4(a) of the Agency Agreement described in paragraph 6(c) above was agreed between the Applicant and the Respondent, such that the Applicant would accept a quantum of commission on the basis of 6% up to $1 million in sales, 4% between $1 million and $5 million, 3% between $5 million and $10 million, and 2% for more than $10 million in sales (hereinafter referred to as ‘the Commission Reduction’).”

32                  Reliance is also pleaded; it is said that Reches:

“(a)     Believed that any reduction in commission on the Parakeet project would be compensated for not only in projects then currently being negotiated on behalf of Tadiran but also from future projects which would arise in the course of the continued Agency Agreement.

(b)       Assumed subject only to termination for cause as described in paragraph 6(h) hereof that the Agency Agreement would continue in the long term, for at least ten years from August 1992 or for as long as would be required to compensate the Applicant for his agreed discount of commission on the Parakeet project if longer than ten years.

(c)        Believed that unless the Applicant accepted the Respondent’s proposal for the Commission Reduction that the future of the Respondent’s business in Australia and the continuation of the Agency Agreement with the Applicant could be put in jeopardy.

(d)       Refrained from attempting to negotiate alternative agency arrangements with suppliers other than the Respondent.

(e)        Believed that the Applicant was valued as a skilled agent of the Respondent.”

33                  Thus, Reches claims (and, of course, Tadiran denies), Tadiran is estopped from asserting that the agency agreement was terminated at any time before the end of ten years from August 1992 or (if later) the date on which Reches recovered commissions equivalent to those which it had foregone by agreeing to the reduction in the Project Parakeet commissions.  It may be mentioned, in passing, that there is a difficulty in understanding precisely what that means, and there may be a logical difficulty about it as well, but I shall come to those matters later.  It is also said that the representations alleged were misleading and deceptive because at the time the reduction in commissions had been agreed to Tadiran had decided to terminate the agency agreement, was contemplating and planning the way in which it would so, had formed the opinion that others would be better qualified to act as agent than Reches, had already had discussions with Mr Hart about the possibility that he might take over as agent and knew that Reches would not have agreed to reduce its commission if it had been aware of those matters.  Reches relies on s 51A of the Trade Practices Act: it alleges that Tadiran had no reasonable ground to make the representations attributed to it.  Reches claims to have suffered loss and damage by working on Project Parakeet and other projects for the benefit of Tadiran, spending its own funds in acting as agent, refraining from negotiating other agency agreements, accepting the reduction in commission and borrowing money to finance the expenses of the agency.

34                  I mentioned in general terms, at the beginning of these reasons, the relief sought by Reches.  Because these reasons concern breach of duty only, it is unnecessary to deal with them in detail.  It may be mentioned, however, that the relief sought under s 87 of the Trade Practices Act is an order varying “so much of Clause 12(a) of the Agency Agreement as provides for renewal on a year to year basis and substituting therefore [sic] a term of ten years commencing on 1 September 1992”; in the alternative, a declaration is sought that from 1 September 1992 the agency agreement had effect as if it had been so varied.  The restitution order sought is based on a claim of unjust enrichment: the allegation is that, in the circumstances alleged, Tadiran has been unjustly enriched at the expense of Reches by Reches continuing after 31 December 1992 to perform work and expend money under the agency agreement.

Reches’ claims: submissions and reasoning

(a)        Representations alleged to have been made by Mr Shulman

35                  The August 1992 conversations, and their aftermath, are the basis of Reches’ principal  and most substantial claims.  It is convenient to deal with them first.

36                  It will be recalled that Mr Reches’ evidence was that Mr Shulman said to him that Mr Reches had all his business future ahead of him with Tadiran; that he did not need to make all of his commission in one project; that he would continue to be part of Tadiran’s business team and that, even if the commission on Project Parakeet were reduced, the reduction would be made up when Tadiran won other projects.  Mr Reches strongly maintained that evidence in cross‑examination.  Equally, subject to one matter which loomed large in submissions and to which I shall return, Mr Shulman firmly maintained his denial.  Whereas Mr Reches professed a clear recollection of the discussions (and clearly they were discussions of great importance from his point of view), Mr Shulman’s recollection, unsurprisingly, was considerably less complete.  He recalled, in cross‑examination, very little detail.  His lack of recall extended to much of the detail of the surrounding circumstances: he could not, for example, remember the amount to which the Project Parakeet tender was reduced or the respective contributions of AWADI and Tadiran to the reduction.  Mr Shulman’s evidence that he did not make promises or representations as to the future was based largely on what he claimed to be a practice based on firmly held views as to what was proper.  The effect of this evidence is, I think, best summed up in the following passage:

“You actually believed at the time, Mr Shulman, that [Mr Reches] would continue to be the agent for Tadiran for some years to come, didn’t you? – Yes.

There wasn’t the slightest reason for you not to include a reference to that subject in the conversation was there? – No, this is not the way I do business.

But it was your genuine belief at the time, as you said earlier, wasn’t it? – Yes.

Well, why would you not include that, or that subject matter, within the conversation? – Because as I said this is not the way I do business or negotiate.  I can’t promise something which is in the future which I am not responsible for.  …

But short of you making a personal promise on behalf of Tadiran that he would definitely be the agent for as long as you could anticipate, there are ways that you could raise that subject short of making a promise, aren’t there? – Yes.

And your only, in effect, moral or business prohibition about this subject was making a promise personally that you could not fulfil, that he would be the agent for many years to come? – It’s not only personal, it’s also on behalf of the company.  It was the company policy that agreements are for one or two years.

But there is not the slightest reason though, short of making a definite promise on behalf of Tadiran, that you could not have referred to an expectation that he would be most likely the agent for many years to come? – I have not referred to [sic].

 

But there is no reason against your business principles that you have described, why such an expectation could not have been raised? – It was not raised by me.  …

But what is the difficulty, from a business point of view, in such negotiations for your – or why do you personally feel a difficulty about saying something like, ‘You are likely to be the agent for some years to come, you will earn us [sic] back in other projects’? – Because that would be a lie.

But even short of a promise simply to say it was a likelihood you say that would be a lie? – Promising something which is against the company policy or against my way of doing business would be a lie.

But you genuinely believed as a matter of objective reality that he was likely to be the agent for some years to come, didn’t you? – For some years it is reasonable, yes.

What’s wrong with saying that?  That is the truth so far as you understood it, isn’t it? – Because – for I believe it is wrong.  A wrong promise and I wouldn’t do it.

But if you had a genuine objective expectation that he would be the agent for years to come, what’s wrong with saying just that? – Because that’s a wrong – that’s promising something which is not correct.”

37                  After some questions about the friendly relationship between Mr Shulman and Mr Reches, the exchange proceeded:

“It was a relationship where there was a degree of – a sense of mutual fairness in the discussions which were taking place? – Yes.

I suggest to you that in that context of mutual fairness you said to him words to the effect, you’ve got – there is the future? – As I said, it is against my way of doing negotiation.

Did he raise the subject of the future? – I don’t remember.

You don’t remember either way? – Right.

You can’t say here that the subject of what might happen in the future was not discussed, can you? – I can because this is against the way I do business for a long time, for years.”

Then, after some questions and answers about some other projects which looked promising in August 1992:

“But that was your expectation, wasn’t it, that there were other good opportunities out there for Tadiran? – My expectations were that Tadiran has a lot of opportunities in Australia and we’ll win a lot of projects in the future, yes.

There is no reason for you not to mention that subject to Mr Reches in this conversation, was there? – There was, as I mentioned before, it is not the way I conduct negotiations and business.

Just let me understand this, Mr Shulman, you say that it’s not your way to do business to make promises that you can’t deliver on but is what is wrong with referring to a likelihood that something might occur though not a guarantee? – Because that would be promising dreams.”

38                  Later in the cross‑examination, Mr Shulman was asked questions about Mr Reches’ letter to him of 18 August 1992, particularly this passage:

“Whilst you, in your arguments, centred on one large project, I considered this project as part of an overall series of tens of projects, which we have been handling daily over a long period.  Only recently we started to receive financial compensation which is very helpful to us, but this still does not cover all the expenses.

I estimate my overall financial contribution until now at $50,000, and all of us still do not know when this deficit will be covered.  All of us hope that the deficit will be covered in the future from commission payments, incidentally – Steve’s share of the commissions is 25%.”

That was the context in which Mr Shulman gave evidence which was referred to in submissions for Reches as the “Shulman surprise”.  Mr Shulman accepted that it was highly unlikely that the deficit referred to would be recouped before the end of 1992 and that any recoupment would be achieved at some time after the end of 1992, when Project Parakeet materialised.  There followed a lengthy series of questions and answers, the effect of which can be seen clearly enough in the following extracts:

“Well here he was suggesting to you that a view that his expenses associated with his agency would be recouped in the years future.  Didn’t you feel any need to correct that impression on his part? – No.

Why not? – Because I was expecting him to continue to support the Parakeet project. …

He is clearly asserting is he not an expectation that the deficit will be covered from future commission payments isn’t he? – Right.

That is an assumption according to you, he had no right to make isn’t it? – No.

When you say no, do you agree with me that it is an assumption that he had no right to make is that right? – No, no, no.

You don’t agree with me? – He could make this assumption that he would recover this commission from Parakeet payments if we win the programme.

…

You say he could make that assumption, that he would have the deficit recovered from project Parakeet? – Right.

What would be the basis as you understood it for him being able to make that assumption? – Because we have just agreed to the deduction of the commission in Parakeet which has put us in a good situation of winning this programme.

But Parakeet wasn’t declared a winner for Tadiran until 13 October 1993 was it? – Right.

Well at the time you received this letter, you had no basis whatsoever to believe that he would get commission in the future sufficient to cover the deficit did you? – No, at that time we were about to submit the proposal of Parakeet and I couldn’t expect at that time it will take another year for Parakeet to materialise because of the procedures – prolonged procedures which have taken place here.

You see in your last answer when you said you expected him to get payments out of Parakeet what you were really saying, Mr Shulman, was that you had an expectation Parakeet would be successful and that he would still be the agent for years in the future to recoup the benefit of Parakeet, didn’t you?  Isn’t that right? – Yes.

I suggest to you that it is with precisely that expectation that you went into these discussions with Mr Reches in August 1992? – Regarding project Parakeet, yes.

…

I suggest to you that the whole basis of the discussions you had with him back in Australia was that that’s just what would happen, that the agency would continue into the future? – As related to Project Parakeet only.

So there was a discussion about the future but with respect to Project Parakeet only; is that right? – There was no discussion about the future; it was understood that Parakeet will take some time to implement and discussions and negotiations were about Project Parakeet commission only.

Well, what did you mean a moment ago when you said to the court that there was discussion about the future but with respect to Project Parakeet only? – Project Parakeet was not awarded at that time.  We were just submitting the proposal and there was a process for it to be received.

What was the discussion about the future with respect to Project Parakeet to which you were referring in that answer? – It was regarding the commissions that Mr Reches would be entitled if we win Project Parakeet.  Those commissions were in the future.

You had a discussion with him about that? – Of course.

What did you say to him? – I suggested that he will reduce his commission to two percent.

Nothing in the answer you’ve just given me mentions the future, Mr Shulman.  What did you say to him about the future? – As I said, that was not part of these discussions.  You are trying to put words which were not there.

Mr Shulman, you discussed the future in relation to Project Parakeet, didn’t you? – We discussed Project Parakeet which was for the future which means that the future was discussed but it was not the word future or years or anything else was not part of this conversation to – to my best knowledge.”

39                  Mr Shulman said that the discussions that he had had with Mr Reches related simply to Project Parakeet and the necessity to reduce the rate of commissions for that project.  The suggestion in Mr Reches’ letter that the scale of commissions be revised was Mr Reches’ suggestion as to a way in which Reches might be compensated for the reduction.  Mr Shulman gave this evidence:

 “What was the point as you saw it of amending his arrangements, apart from Project Parakeet? – What [was] the purpose of that? – That was his request and I have accepted it.

But behind the request is obviously an implication that the relationship will continue, isn’t it? – Yes.

Before agreeing to his request to vary the commission not just for Parakeet but for other future projects, you didn’t warn him, did you, that he should have no expectations of the relationship continuing beyond the end of the year? – There was no need, it is clearly stated in the contract.”

40                  It is useful at this stage to point out that the “deficit” referred to in Mr Reches’ letter is not a very large sum.  It is not, particularly, the difference between the commission that Reches would have earned on Project Parakeet, at the rates for which the agency agreement provided, and the commission at the reduced rate.  It was merely the estimated amount of Reches’ financial contribution to date, $50,000.  Given the size and timing of Project Parakeet, there could be nothing surprising about an expectation that that “deficit” would be recouped from commissions in the relatively near future.  Nor does the letter of 18 August provide any clear support for Mr Reches’ version of the conversation.  It suggests that the matter which Mr Reches and Mr Shulman had discussed was “commissions on the Parakeet Project”; it records that Mr Shulman was “centring” his remarks on one large project whereas Mr Reches considered (and possibly said that he considered) that project as part of an overall series.  It does not suggest that, during the conversations, there was any discussion about a general alteration of the scale of commissions.  Mr Shulman’s reply confirms that impression.  It starts with the observation that his “situation and attitude” were “absolutely different”.  It proceeds to make it clear that what Mr Shulman was concerned about was the need to win Parakeet and, accordingly, to adjust the commission for that project appropriately: “Therefore, taking into account the extent of the proposal, the appropriate commission is 2% as I suggested to you and I understand that is indeed acceptable to you”.  Mr Shulman then proceeded to observe that the object could be achieved by “upgrading the contract and, at the same opportunity, to fix a fuller table of volumes and commission percentages”: in other words, if that was the way in which Mr Reches wished to approach the matter, Mr Shulman saw no objection to doing it in that way.  Mr Shulman then offered a quick and tentative reaction to the specific proposal in Mr Reches’ letter: “I do not have here [Mr Shulman was in Korea at the time] the tables which are acceptable to us from the other experience, but what appears to me reasonable and acceptable is: …”.  The natural inference, I think, is that the more general proposal was not one which had been discussed and which Mr Shulman had had an opportunity to consider; rather, it was one which had been raised for the first time by Mr Reches in his letter.

41                  Apart from the August exchange of correspondence (including Mr Reches’ rejoinder of 24 August 1992 which does not, I think, have any particular significance for present purposes) the only documentary evidence which assists in reaching a conclusion about the terms of the August 1992 conversation comes from a substantially later period.  The exchange between Mr Reches and Mr Fleishman in late November 1993 was referred to in submissions; I do not think, however, that it adds much on this topic.  It relates to the “decision” about the amended rates of commission (and Mr Reches’ uncompleted protest) and includes the statement by Mr Fleishman that “until the end of January 1994, Tadiran will decide about the arrangements in Australia as requested [I suspect that the last two words may be a mistranslation] from the results of Parakeet and the marketing plan in the future”.  Mr Fleishman’s letter does refer to “future commissions” in its statement that “Tadiran will not carry on taking off from future commissions due to you the monthly retainer”: but, beyond reflecting an understanding that there might be commissions due at some time in the future, I do not think that carries matters very far.  Then, however, there is Mr Reches’ letter to Admiral Rafael of 8 March 1994.  That letter includes a clear assertion that Mr Shulman made, in August 1992, representations about the future:

“My commitment to Tadiran has already been proved by my agreeing to accept a 30% reduction in commission in respect of Parakeet.  This arrangement was made during my discussions with Mr Y Shulman in response to his advice that it was necessary to cut costs in order to obtain the Parakeet deal.  He said that in a relationship such as ours, which is committed to a long future, sacrifices like this were necessary, but that the benefits over the long term would make up for them.  On the basis that our relationship is to be long term I agreed to the arrangement.”

Similarly, in the note which he prepared for his discussion with Mr Meltzer, Mr Reches wrote that Mr Shulman “justified his request on the basis that in the future we were expecting large projects and the relationships between us will continue for many years”.  Tadiran did not respond to the letter to Admiral Rafael.  Both Mr Shulman and Mr Fleishman were cross‑examined about that.  Each said that he had seen the letter shortly after it was written.  Mr Shulman agreed that in his view the letter misrepresented the facts.  Mr Fleishman said that Mr Reches’ assertion was “news to him”.  Nevertheless, both Mr Shulman and Mr Fleishman gave evidence that, in the circumstances, they saw no need to respond.

42                  Senior counsel for Reches relied on the letter to Admiral Rafael and on the note prepared by Mr Reches of what he wished to say to Mr Meltzer.  He submitted also that the evidence given by Mr Reches of what he clearly recalled being said by Mr Schulman should be preferred to that of Mr Shulman, whose actual recollection was very limited (he recalled “snippets” of conversation with Mr Reches, but no more) and who based his evidence that he did not make promises or representations about the future on untestable evidence about a practice.  Senior counsel submitted also that what he characterised as the extreme position taken by Mr Shulman (that he did not, and in such a discussion with an agent never would, make any promise or representation about the future) must be taken to have collapsed entirely upon Mr Shulman’s acceptance that a discussion of making up the “deficit” out of future Parakeet commissions necessarily involved discussion of the future as, more generally, did the argument, which Mr Schulman claimed to have used, that a reduced commission resulting from an accepted tender was better than no commission, the likely result if the tender price were not reduced.  That argument necessarily involved an assumption that Mr Reches would continue as agent long enough to earn at least some commission from Project Parakeet.  And Mr Schulman conceded that he would not have attempted to persuade Mr Reches to agree to a reduction in the commission if he had not believed that Reches would continue as agent so as to receive commission on Project Parakeet sales.  Indeed, senior counsel submitted that there was support in other evidence for a proposition that, whatever might have been the future of Reches’ agency in other respects, it was always contemplated that it would continue in relation to Project Parakeet.  In this respect, Mr Reches and Mr Fleishman were in agreement about what Admiral Rafael said on 7 April 1994: Reches would receive the Project Parakeet commission to which it was entitled and should continue to do what was required to be done by it in relation to the project.  And although the agency agreement provided that Reches’ entitlement to commissions extended only to products delivered within one year after termination of the agreement, Tadiran paid Reches commissions on Project Parakeet sales (amounting in total to US$505,235.68) up to August 1996 (I understand that those commissions were calculated at the rates set out in Mr Fleishman’s letter of 29 November 1993).  Reliance was also placed on the friendship between Mr Reches and Mr Shulman and certain consequences said to flow from it.  One was that “not much had to be said to convey the idea of a continuation of the agency for a period sufficient to ensure that commissions earned on the future projects would compensate Reches for its cut on the Parakeet Project”; another was that Mr Shulman did not tell Mr Reches by how much Tadiran was reducing its component of the tender price, and Mr Reches did not ask; a third was that the friendship made it less surprising that no written record of the negotiation was kept; a fourth was that Mr Shulman wished to maintain his relationship with Mr Reches and did not wish to cause a confrontation with him.

43                  On behalf of Tadiran it was submitted that there was no inconsistency in Mr Shulman’s evidence: there was nothing incompatible between a refusal to make promises or representations as to the likely length of the agency relationship and a negotiation about the rate of Parakeet commissions which proceeded on the assumption that, if Project Parakeet were won, Reches would earn commission.  Generally, it was submitted that I should prefer the evidence of Mr Shulman to that of Mr Reches, having regard to what were said to be a number of unsatisfactory aspects of Mr Reches’ evidence (I shall return to some of those).  Senior counsel for Tadiran relied also upon Mr Reches’ acceptance, in cross-examination, that he understood that either party might terminate the agreement once the extended term had expired.  He relied also on the terms of the correspondence exchanged between Mr Reches and Mr Shulman immediately after the August 1992 conversations.  Mr Reches’ readiness to be persuaded to refuse his commission might, it was said, be attributed to his general anxiety, evident both at the commencement and during the course of the relationship, to obtain and then retain Reches’ agency for Tadiran.

44                  I do not think the matter can be resolved by a finding that Mr Shulman dropped a hint which was sufficient to convey to Mr Reches, in the context of their friendship, that the agency relationship would continue for several years and embrace a number of projects.  There is no evidence which would support such a finding.  Mr Reches’ evidence was clear: Mr Shulman made a series of specific representations, including “you have all the future ahead of you with us”, “you are part of our team”, “you don’t have to see this as the end of the world because other projects are coming” and “we will be able to compensate you in other projects so it is not important”.  He maintained adamantly in cross-examination that Mr Shulman had said those things.  Mr Shulman equally categorically gave evidence that he had not.  Nor, I think, is it possible to resolve the issue by a finding that there was a representation that the agency, whatever happened to it in other respects, would continue for several years in relation to Project Parakeet.  Again, there is no evidence which would support such a finding and it would be odd indeed if such a possibility had, in August 1992, occurred to either party in circumstances where the agency agreement did not contemplate, and there is no evidence that anyone had previously contemplated or discussed, any such thing.  Inevitably, in my view, there are really only two possibilities: one is that Mr Shulman said substantially what Mr Reches attributes to him; the other is that Mr Shulman did not say things about the future but concentrated on Project Parakeet, using, in the negotiation for a reduction in Reches’ commission, the argument that it was better for Reches to accept a smaller commission on a successful project than to run the risk of no commission at all; and negotiating on the assumption that, if the tender were successful, Reches would earn, on the resulting sales, commission at least sufficient to make good the “deficit”.  The latter version necessarily involved the assumption that Reches’ would continue as agent until at least ninety days before Tadiran entered into a contract to sell equipment in accordance with an accepted tender.

45                  There are difficulties with Mr Reches’ evidence.  It is necessary to mention some of them though I think it is unnecessary to discuss them at great length.  More than once inconvenient detail caused difficulty with what Mr Reches saw, or wished to present (though I do not doubt that the two substantially coincided) as the true picture – in some instances, concerning matters which otherwise were quite inconsequential.  For example, Mr Reches was questioned about affidavit evidence he had given as to expenses Reches had incurred, between 1990 and 1994, in the course of its agency.  In the course of those questions, Mr Reches was asked, in relation to a claim that during 1993 he spent ninety per cent of his time working on Tadiran’s business, whether he had gone through his records and, having regard to those records, had calculated that nine tenths of his working time in 1993 was attributable to Tadiran’s business.  To that question, Mr Reches answered “yes”.  However, it soon became apparent that, in fact, he had made no calculation:

“When did you do the exercise of going through your records for 1993 and calculating that 90 per cent of your time was spent on Tadiran’s business? –

Never made any calculations.  I just knew that I’m working every day, most of the day, for Tadiran.  …

You did not carry out that exercise, did you? – What kind of exercise do you want me to do?

I don’t want you to do any exercise, Mr Reches.  I am putting to you that it is an exercise that you have not done? – You are talking to a man who works on a certain subject and at the end of the day you are asking him ‘How do you know that you spent 90 per cent of your time today on Tadiran?’  I know that I spent 90 per cent of my time.”

And a little later, referring to particular expenditures of which Mr Reches had given evidence:

“Yes, the table at the top of page 12, that those figures represent 90 per cent of the figures shown in the accounts attributable to those items, is that right? – Yes, sir.

You have simply, arbitrarily may I suggest to you, taken the figure of 90 per cent because you say that’s the amount of time you spent on Tadiran’s business? – Yes.

And you have not endeavoured by reference to any records in your company’s possession to calculate the amount that you actually spent on Tadiran’s business? – No.  It was the way you mentioned before.”

46                  Similarly, there was an exchange between Mr Reches and cross‑examining counsel about whether Mr Reches had ever agreed to a reduction in the rates of commission payable to Reches.  He gave answers which suggested variously that he never agreed to any reduction; that he agreed to reduce his commission; that he did agree to a reduction, but only in relation to Project Parakeet; and that he did not agree to any general variation in the rates at which commission was payable under the agency agreement.  But the continuing correspondence which commenced immediately after the August 1992 discussions indicates plainly, it seems to me, that there was no concluded agreement to reduce the commission payable in relation to Project Parakeet separate from the proposal to change the rates generally: Mr Reches accepted in principle that he should receive less than the initially agreed rates for Project Parakeet, but suggested (and Mr Shulman appears to have accepted in his reply written from Korea) that this should be done only in the context of a general adjustment.  In the end, the proposition contended for was that Mr Reches had agreed to reduce the Project Parakeet commission, but had not accepted a scale.  But Mr Reches’ March 1994 letter to Admiral Rafael, read in the light of the earlier correspondence, made that a somewhat difficult proposition to maintain.

47                  In fact, a good deal of time was devoted, in cross-examination, to that letter.  In his affidavit evidence, Mr Reches described it as one “defending my position as agent and defending the fact that I have no technical background”.  A reading of the letter, and an appreciation of the background circumstances to which I have already referred, indicate that that was a fair description of it.  But when that description was put to Mr Reches, he rejected it vigorously.  When it was pointed out to Mr Reches that that was the description he had used in his affidavit, Mr Reches at first appeared to accept it; but he later rejected it again: it was inappropriate to describe the letter as a defence of his position.  Of course, the terms used to describe the letter are, in themselves, of no importance.  The significance of the exchange lies in Mr Reches’ unwillingness to acknowledge what the letter itself, and its background, make clear: that when he wrote the letter, Mr Reches held fears for the future of the agency and sought to defend it.

48                  To return, then, to Mr Reches’ evidence about what was said by Mr Shulman in August 1992: Mr Reches has, of course, a strong personal interest in the outcome of the litigation; but equally, having a much closer personal interest in the matter than Mr Shulman, he had stronger cause to remember what was said than had Mr Shulman, whose interest was less direct and for whom Reches was only one of several agents with whom he dealt; and it might be thought surprising that Mr Reches would assert, both in his March 1994 letter to Admiral Rafael and in conversation with Mr Meltzer, that Mr Shulman had made representations about the future when he knew both that that was wrong and that Mr Shulman was available to Admiral Rafael and Mr Meltzer and would doubtless deny the allegation.  That, it might be thought, is particularly so in relation to the letter to Admiral Rafael, written at a time when the agency was still on foot and Mr Reches was seeking to retain it.  But my confidence in the accuracy of Mr Reches’ recollection of the conversation, as recorded in the letter and in his evidence, is diminished by the aspects of his evidence to which I have referred.  More importantly, it is diminished by a consideration of the only objective evidence there is, the correspondence.

49                  The first letter in the series, Mr Reches’ letter to Mr Shulman of 18 August 1992, was written almost immediately after the conversations.  There is a contrast between what Mr Reches now alleges and what he said in that letter.  According to his evidence, Mr Shulman said:

“You don’t need to get rich in the one project.  Help us to reduce the price on Parakeet and win the bid.  You have all of the future ahead of you with us.  You are part of our team, lets do this together.  You don’t have to see this as the end of the world because other projects are coming.  We will be able to compensate you in other projects so it is not important.  You’ll make it up in the future.”

The letter, on the other hand, recorded this:

“Whilst you, in your arguments, centred on one large project, I considered this project as part of an overall series of tens of projects, which we have been handling daily over a long period.”

50                  The later version, it may fairly be said, has Mr Shulman pressing, as his principal argument, the probability of future projects.  The version written immediately after the event, on the other hand, gives an entirely different impression: Mr Shulman speaks only of Project Parakeet; Mr Reches, by contrast, has regard to the series.  When one turns to Mr Shulman’s reply, it is plain that Mr Shulman had one matter principally on his mind, and that was Project Parakeet.  As I have mentioned, in my view the letter conveys the clear impression that the discussion of commission rates generally was simply a response to Mr Reches’ letter and that Mr Shulman saw that merely as one means of achieving the result which he wished to achieve for Project Parakeet while, at the same time, “upgrading the contract”.  It was submitted on behalf of Reches that, given the relationship between Mr Reches and Mr Shulman, one ought not expect a meticulous recording in writing of promises made by Mr Shulman; but in fact, in my view, Mr Reches’ letter is simply not consistent with what he has subsequently claimed that Mr Shulman said: his evidence is to the effect that Mr Shulman argued that Mr Reches should accept a reduced commission on Project Parakeet because other projects would come and would provide compensation.  The letter says that, by contrast with what Mr Reches “considered”, Mr Shulman’s “arguments” had to do with Project Parakeet.  If the conversation had been in the terms recounted by Mr Reches in evidence, it seems to me highly unlikely that, on the same day or shortly afterwards, he would have described it in the way he did in his letter of 18 August.

51                  Nor, in my view, is the position to be taken by Mr Shulman in evidence properly to be described as so extreme that it could not withstand the effect of his evidence about what might reasonably be expected in relation to Project Parakeet commissions.  Mr Shulman himself plainly saw no difficulty.  His evidence as to his practice was given without hesitation and confidently.  And his evidence about Project Parakeet was not prised from him: it was volunteered, with vigour and, perhaps, a degree of impatience.  There was, after all, no point in having the conversation unless there was a reasonable prospect both that the revised tender for Project Parakeet would be successful and that, if it were, Reches would earn commissions on at least some of the resulting sales.  On the other hand, there is nothing surprising about the practice of which Mr Shulman gave evidence.  He had substantial experience in dealing with Tadiran’s agents.  Tadiran had a policy of appointing agents for a short term only: one year, or on some occasions two years, but not more.  Reches’ own appointment had originally been for a little over a year and three months and, in August 1992, it had been renewed for one year.  In those circumstances, it does not seem to me at all surprising that Mr Shulman should have adopted a policy of not giving assurances about the future.  To some extent, the submission that there was an incongruity between the two aspects of Mr Shulman’s evidence was based on Mr Shulman’s acceptance of a proposition that it was reasonable to expect that the “deficit” referred to in Mr Reches’ letter might be recovered out of Project Parakeet commissions.  That submission was based, initially at least, on an understanding that the “deficit” was the difference between the reduced commission and the commission that Reches would have recovered from Project Parakeet, if the initial rates had stood.  As I have mentioned, however, in context it is clear that that was not the “deficit” referred to: the “deficit” was the amount of unrecovered expenditure which Reches claimed to have incurred.  A reading of the transcript of Mr Shulman’s cross-examination makes it clear that Mr Shulman understood “deficit” in that way.  In that context, to hold a discussion with Mr Reches on the assumption that if Parakeet were won Reches would receive commission, and sufficient commission to cover the “deficit”, was not, I think, to proceed on the basis, or to represent, that the agency would continue for any particular period or until any particular amount (except, perhaps, the “deficit”) had been recovered.

52                  Mr Shulman was cross-examined about Mr Reches’ letter of 8 March 1994 to Admiral Rafael, particularly the paragraph referring to the assurances which Mr Shulman was alleged to have given.  Mr Shulman maintained that what Mr Reches said in the letter was wrong and accepted the description “gross misstatement”.  His evidence was, however, that although he was shown the letter at a time when Mr Reches was claiming that Reches’ agency had wrongfully been brought to an end, he saw no need to correct it:

“You cannot see the slightest reason why then or even now such a statement should even be corrected on the public record for the benefit of Tadiran? – I’m correcting it now as an answer to a question.  As I said it was not important to correct it at the time to my best understanding.

Do you remember whether you turned your mind to the subject of correcting that statement? – No.”

The surprise which that might otherwise cause is, perhaps, mitigated by two matters.  One is that if in fact (as the evidence suggests) the letter was shown to Mr Shulman in the context of the meeting on 7 April and the exchange of letters that followed it, the point may not have seemed immediately important: Mr Reches did not, in his letter of 24 May 1994, refer to the alleged assurances as a reason why Tadiran was “unable to terminate the Agency Agreement” and there is no evidence that the matter was raised in the meeting of 7 April.  Secondly, and I shall return to this, it cannot be said that in other respects Tadiran dealt with the termination of the agency with careful attention to what was actually being done or with precise regard to what the legal relationship between the parties required.  Finally, senior counsel for Reches commented upon Tadiran’s failure to call Admiral Rafael; but on this aspect of the matter I do not think that is significant.  Admiral Rafael may have been the decision‑maker; but the person, and the only person, within Tadiran who knew what had been said in August 1992 was Mr Shulman.

It is impossible, of course, in a case such as the present to achieve complete confidence as to what was said in a conversation between two people whose accounts differ and where neither made a contemporaneous note of what was said.  On the evidence, however, and having regard particularly to the matters to which I have referred, I am not satisfied that Mr Shulman made the particular representations contended for, that is, that:

•        Mr Reches had all of his business future ahead of him with Tadiran;

•        Mr Reches did not need to make all his commission moneys in the one project;

•        Mr Reches was and would continue to be part of Tadiran’s business team; and

•        Despite any proposed reduction of commission on the Parakeet Project, Reches would not suffer, because commission on other projects would be forthcoming from Tadiran by which Reches would be fully compensated for the present reduction in commission.

I find, accordingly, on the balance of probabilities that those representations were not made.  Likewise, there is no basis in the evidence for a finding that Mr Shulman represented that there would be a long-term special agency with respect to Project Parakeet.  The allegations about continuing conduct – fragile in themselves, in my view, as I have mentioned – are of no significance without the underpinning of Mr Reches’ account of the August 1992 conversations: particularly, it is not said – and could not be said – that the correspondence between the parties can be read as making independently the representations pleaded.  Accordingly, so far as Reches seeks relief based on the proposition that it was entitled to a continuation of the agency for a period of ten years or until Project Parakeet was completed, its claims fail.  That is so insofar as Reches bases its claims on an alleged consensual variation of the agency agreement or on an estoppel said to arise from the August 1992 conversations; it is so equally insofar as it seeks relief under s 87 of the Trade Practices Act.

(b)        Extension of contract to 31 December 1994?

53                  It is common ground that the agency agreement was not formally renewed after 31 December 1992 but that, throughout 1993, the parties proceeded on the basis that the agency continued on the terms of the agreement (apart from the period of the agency and the variations concerning the monthly payments and rates of commission).  It is also common ground that that situation continued until 7 April 1994.  But there the common ground ends.

54                  It is evident that during 1993 there was a degree of dissatisfaction within Tadiran concerning Reches.  I have already referred to some of the evidence about that.  The evidence which Mr Fleishman gave in cross-examination is not, at least in one respect, entirely clear.  He said that he had a series of discussions with Admiral Rafael, commencing in about October 1993, concerning the agency in Australia.  He then gave this evidence:

“But the discussions you were having with Mr Rafael – firstly, what was your opinion about what should be done in relation to Mr Reches and Reches Pty Ltd and its agency in Australia in the last quarter of 1993? – My opinion was that it should be terminated.

Why? – Because I was not satisfied with what he did.”

I have referred to some of the causes of that expressed dissatisfaction.  After accepting that, a little earlier than mid-1993, his dissatisfaction had matured “into the idea that it might have to result in the termination of [the] agency” he gave the following evidence:

“A bit earlier than that an idea had formed in your mind that it was likely that you would in due course be moving to terminate his agency, is that right? – No.  I wish to explain this.

Please explain? – You can see in some of Reches’ letters to us that he envisaged himself as an administrative officer of the business of Tadiran here in Australia and I didn’t reject [sic] it but I didn’t totally reject it.  Actually I was giving to it some thought because dealing in Australia is difficult because of the distance and in fact Mr Reches offered a certain service which would be administration officer, and this is something he did very well, administrative, booking hotels, booking rented cars, fixing meetings, he did it very well and what he suggested is that should we decide to engage other consultants/agents he will be the one who will be able to co-ordinate it and you can read it in this letter very clearly.  He claimed that we will not be able to manage remotely these agents because of various reasons and he will be the one who will be co-ordinating this.  Now, I had in mind during ’93 that this may be possible so I didn’t reject it.  This is why it will not be true to say that already in mid of ’93 I had in mind that he will be terminated.  I had in mind that it may be possible that this is something that was not up to my own decision because this involved also paying some retainers, so I had to consult with my management about this, and this of course took some time.”

Mr Fleishman said that he had discussed various options with Admiral Rafael in the latter part of 1993, including terminating the agency and the “administration officer” proposal, but that he was not aware of any decision before 7 April 1994.  On 7 April, he was not aware that Admiral Rafael proposed to terminate the agency until he actually did so (nor, of course, was Mr Shulman aware that termination was imminent).  His failure to arrange the renewal of the agency agreement to the end of 1993 was due to negligence or mismanagement; it was not deliberate.

55                  Although Admiral Rafael did not give evidence, and there is therefore no evidence as to precisely when he made the decision to terminate the agency, Mr Fleishman’s evidence makes it clear that termination was a possibility which was canvassed with Admiral Rafael from October 1993.  Admiral Rafael also formed a high opinion of Mr Hart.  On 29 November, the day on which Mr Fleishman wrote to Mr Reches about the “decided” rates of commission, Admiral Rafael wrote to Mr Hart:

“It was a pleasure to meet you during your stay in Israel.  I have often been told of your profound acquaintance with the Australian market, and I was indeed impressed by your capabilities.

I am fully aware of your significant contribution to our marketing efforts.  I can assure you that Tadiran regards you as a corner stone to any of its future activities in Australia.”

56                  Mr Fleishman gave evidence that Admiral Rafael met Mr Hart again in February 1994, in Singapore, and canvassed with him the possibility that he might be appointed in place of Reches.

57                  I referred to what were accepted to be criticisms of Reches made in early 1993 and in February 1994.  But he was not expressly told that his agency was at risk.  Nor did any representative of Tadiran say to him, in so many words, that the agency agreement was, from 31 December 1992, terminable at any time, or on reasonable notice.  Mr Fleishman’s letter of 29 November 1993 did inform Mr Reches that “until the end of January 1994, Tadiran will decide about the arrangements in Australia as requested from the results of Parakeet and the marketing plans in the future”: but that, no doubt, might have been taken not as casting doubt on the continuation of the relationship but as referring to the form it might take in the future (as contemplated by Mr Reches’ own earlier letters) should Project Parakeet be successful.  Finally, Mr Reches’ affidavit evidence was that he understood that the agency agreement had been extended, though not formally in writing, first to 31 December 1993 and then to 31 December 1994.

58                  On the basis of that evidence it was submitted that I should find that the term of the agency agreement was consensually extended (the consensus to be inferred from conduct) until 31 December 1994 or, alternatively, that Tadiran was estopped from denying that it had been so extended, by the operation of the principles identified in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.  It was submitted also that Tadiran, though it intended to terminate the agency agreement, conducted itself as if that was not its intention; that amounted to misleading and deceptive conduct prohibited by s 52 of the Trade Practices Act and involved a representation as to a future matter, for the making of which Tadiran had no reasonable ground, which was accordingly to be taken to be misleading (s 51A).  Attractive as those propositions may at first sight appear, they encounter, in my view, considerable difficulties.

59                  First, I do not think that the evidence, to which I have referred in some detail, provides a foundation for an inference that Tadiran had decided, in 1993, to terminate the agency.  Particularly, I do not think that such an inference can properly be drawn simply from evidence that termination was an option under discussion in the latter part of the year, that officers of Tadiran were dissatisfied with Reches or that Admiral Rafael had expressed enthusiasm for the work of Mr Hart.  That being so, Reches is not assisted by the fact that the decision‑maker, Admiral Rafael, was not called (Jones v Dunkel (1959) 101 CLR 298 at 308 per Kitto J and at 312 per Menzies J).  I come to that conclusion more readily because the process by which the termination was brought about gives no indication of a long, premeditated and carefully considered plan.  Mr Shulman did not know what was to happen.  More importantly, I see no reason why Mr Fleishman’s evidence that, though not surprised by what Admiral Rafael said, he had not been told what was to occur, should not be accepted: there is no apparent reason why Mr Fleishman would not have told the truth about that.  And it may fairly be said that the termination was bungled.  I have mentioned that the evidence about what was said on 7 April 1994 given by Mr Fleishman substantially coincides with Mr Reches’ version.  Mr Reches said that the crucial words spoken by Admiral Rafael were:

“Starting this minute you are not anymore our agent for Australia.  However, you will have to continue working on projects that we will ask you to continue working on.  Meanwhile, we are asking that you continue working on Parakeet.”

Mr Fleishman’s version was:

“We have decided to terminate your agency in Australia.  Now that we have won Parakeet you will receive the commission to which you are entitled for that Project, however, you will have to continue whatever work needs to be done to finalise the Project.”

Mr Fleishman’s version does not record the words “starting this minute”, but equally does not indicate any period of notice.  Both versions incorporate a somewhat obscure reference to work to be done on Project Parakeet.  What was said on 7 April was not confirmed in writing for more than a month.  Admiral Rafael’s letter of 19 May got the date of the meeting and the principal speaker wrong and gave a version of what was said which differed significantly from the versions given by Mr Fleishman and Mr Reches: the effective date of 12 June appeared for the first time, and there was no mention of further work to be done on Project Parakeet, or of Reches’ right to receive commissions.

60                  In those circumstances, I cannot find that a decision to terminate the agency was made during 1993.  Probably it does not matter precisely when it was made in 1994, but the evidence strongly suggests that it was made very shortly before it was implemented.

61                  Secondly, Mr Reches appeared to accept plainly, in cross-examination, that once the initial term of the agency agreement expired it might, in the absence of a written extension, be terminated by either party, so that he regarded it as important to obtain a formal extension.  That evidence, however, was qualified to the extent that Mr Reches said also that he was not concerned about the situation, being “sure and happy with the relationship”.  He then, however, gave the following evidence in relation to the position after the end of 1993:

“You had [no] reason to understand that your agency agreement had been extended beyond the end of 1993? – I believed it has been extended.

You had no reason to believe that, did you?  - I had all the reasons to believe it because things were going regularly, nothing changed.

Nobody ever told you that the agreement had been extended beyond the end of 1993? – That’s true.

The only thing that had happened was that nobody had actually communicated that the agreement was going to come to an end? – That’s true.

It just carried on as before, that’s right, isn’t it? – Yes.

And that meant that once it got [past] the end of December 1993 you understood that either of the parties to it could bring it to an end? – Yes.”

62                  That contrasts with Mr Reches’ affidavit evidence, which was to the effect that he believed that the agreement had been extended for each of the years 1993 and 1994 and also that, because of the representations which he alleged had been made by Mr Shulman, he believed that the agreement would continue for a substantial period into the future.  It was submitted on behalf of Reches that the cross-examination stopped short of the essential question and dealt in subjunctives rather than indicatives.  I am not sure that I understand that, unless the suggestion was that the real issue was not whether Tadiran could terminate the agreement but whether it would do so (or had indicated that, though it could, it would not).  There is, nevertheless, an obvious inconsistency between evidence of a belief that the agreement had been extended to the end of 1994 and the exchange which I have quoted.

63                  Thirdly, however, and most importantly, once the alleged representations of August 1992 are removed from the picture, and it is accepted also that there is no basis for a finding that Tadiran had already decided, during 1993, that the agency should come to an end, it is not easy to see what it is in the conduct of Tadiran that amounts to misleading or deceptive conduct or gives rise to a Waltons v Maher estoppel.  The starting point is, I think, necessarily the contract.  Both parties accept that throughout 1993 and until at least 7 April 1994 there was a contract between them the terms of which were the same as those of the agency agreement as it had been in force up to 31 December 1992, with the exceptions I have mentioned.  Tadiran submits that the contract was terminable on reasonable notice.  Reches submits that there should be inferred from the actions of the parties an agreement that the contract was to continue from year to year: that is, presumably, it could be terminated (otherwise than for cause) only by notice of some duration, taking effect at the end of a calendar year.

64                  Reches relied on “custom”.  But the initial term (August 1990 to 31 December 1991) had been extended once only, for one year.  The agreement did not specify any particular period for which it might be extended, but left the matter open.  And the evidence was that Tadiran’s practice was to grant agencies for short periods only: one year or, at the most, two years.  I do not think that there is evidence of a custom or practice between the parties which supports an inference that it was agreed between them that the agreement would, in the absence of notice to the contrary, be “rolled over” from year to year.  The more natural inference is, it seems to me, that from 31 December 1992 the agreement was one of indefinite duration, terminable on reasonable notice: the contract is, I think, analogous to the continuing agency contracts of indefinite duration referred to in Chitty on Contracts, 25^th ed 1983, par 2316.

65                  The question then becomes, in my view, whether any conduct of Tadiran during the relevant period was misleading or deceptive, in the sense that it conveyed a representation or suggestion that Tadiran would refrain, for any particular period, from exercising its contractual right to terminate the agency.  Certainly, the concluding paragraph of Mr Fleishman’s letter of 29 November 1993 might be taken as a clear suggestion that Tadiran would take no action before the end of January 1994.  But in my view it goes no further than that.  Apart from matters on which I have already made findings, the evidence discloses no other conduct which is appropriately characterised in that way.

66                  There are two final matters.  One relates to the question whether Reches should be taken to have accepted the scale of commissions proposed in Mr Fleishman’s letter of 29 November 1993.  The other relates to the question of reasonable notice.  As to the former, I have mentioned Mr Reches’ evidence on the subject.  I think the proper conclusion on the evidence, particularly having regard to Mr Reches’ letter of 8 March 1994 to Admiral Rafael, is that Reches did accept the proposed scale, albeit reluctantly.  Additionally, Reches’ contention that the agreement was amended on 29 November 1993, so that monthly advances were not to be deducted from future commissions, is hardly consistent with a proposition that the scale of commissions was not accepted: plainly Mr Fleishman was not making two separate offers to Reches, either of which might be accepted independently of the other.  There was one offer: either it was accepted, or it was not.  What was put on behalf of Reches is consistent only with the proposition that it was indeed accepted.  In any event, the statement of claim asserts that Reches did indeed accept the scale of commissions but would not have done so but for the conduct of Tadiran of which it complains, including (but not exclusively) what Mr Shulman was alleged to have said in August 1992.  But, given my finding that it has not been established that Tadiran has infringed s 52 of the Trade Practices Act or by its conduct given rise to an estoppel against it, the position that remains is simply that from 29 November 1993, or shortly thereafter, the contract between the parties incorporated the terms set out in Mr Fleishman’s letter.

67                  Tadiran by its defence alleged, correctly as I have found, that after 31 December 1992 the agency agreement was terminable by either party upon the giving of reasonable notice to the other.  Tadiran also claims that by oral notice given to Mr Reches on 7 April 1994, Tadiran gave notice of termination of the agency agreement, taking effect on 12 June 1994; and Tadiran denies the allegation that it repudiated the agreement.  Reches submitted that, if the agreement were terminable on reasonable notice, reasonable notice had not been given.  In the absence of a reply to Tadiran’s defence, Tadiran submitted that it was not open to Reches to contest the reasonableness of the notice given.  Reches submitted that, once the defence had been filed, the parties were at issue, including on the question of reasonable notice, and no reply was necessary.  The argument on this matter did not go beyond those competing assertions: particularly, there was no argument about what, in the circumstances, reasonable notice would have been.  For reasons which are already apparent, the evidence does not establish that what was said on 7 April amounted to the giving of notice of termination, effective on 12 June.  That proposition appeared for the first time in the somewhat delayed, and allegedly confirmatory, letter from Admiral Rafael.  Because of the very limited attention given in argument to this aspect of the matter, I should perhaps say no more than this: it may be that what was said by Admiral Rafael on 7 April 1994 amounted to a repudiation of the agreement; if the later letter were to be treated as notice, notice of slightly more than three weeks is hardly likely to be thought reasonable; but whatever might be the boundaries of reasonable notice in the circumstances, it is hardly likely that a notice expiring on 31 December 1994 would not be reasonable (and Reches accepted in argument that such a notice would be reasonable).  If notice had been given expiring on 31 December 1994, then commission would have been payable, at the rates set out in Mr Fleishman’s letter of 29 November 1993, on deliveries made on or before 31 December 1995 in respect of sales made no later than ninety days after 31 December 1994.  Unless I misunderstand the pleadings and the evidence about the commissions which have been paid to Reches, Tadiran has paid to Reches at least the amount of commissions which it would have been obliged to pay had the agreement been terminated with effect from 31 December 1994.  If that is right, it may well be that any damages recoverable, if Tadiran repudiated the contract, are nominal only.

Conclusion

68                  Given my conclusions as to the contract between the parties, there is no scope for a claim based on unjust enrichment: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 255.  Thus, unless there are questions which need to be agitated, arising out of the matters I have just tentatively discussed, my reasons and conclusions have the result, as a matter of substance, that the litigation should be decided in Tadiran’s favour.  The only order which I make, however, is that Tadiran not later than 30 July 1999 file and serve short minutes of the orders which it contends are appropriate to give effect to these reasons.  Unless the form of the orders is agreed (in which case it may be appropriate to deal with the matter, in accordance with the Rules, in chambers) the matter may be set down, by arrangement with my associate, for any necessary argument.

I certify that the preceding sixty-eight (68) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.

Associate:

Dated:              14 July 1999

Counsel for the Applicant:	Mr M J Slattery QC with Mr J M Hennessy
Solicitor for the Applicant:	Packer & Austin
Counsel for the Respondent:	Mr M Walton SC with Ms E A Collins
Solicitor for the Respondent:	Marshall Marks Kennedy
Date of Hearing:	21-23 December 1998 and 8 February 1999
Date of Judgment:	14 July 1999