FEDERAL COURT OF AUSTRALIA

Cryeng Pty Ltd v Loyola [2011] FCA 956

THE COURT ORDERS THAT:

1.    The first and second respondents pay to the applicant damages in the amount of $140,000.

2.    In accordance with s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth) the first and second respondents pay to the applicant interest on the amount of damages awarded in order 1 from 1 July 2008 to the date of entry of order 1 at the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before 1 July 2011.

3.    The first and second respondents pay the applicant’s costs of the application.

4.    The cross-claim is dismissed.

5.    The first and second cross-claimants pay the cross-respondent’s costs of the cross-claim.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules

REASONS FOR JUDGMENT

Introduction

1        The applicant, Cryeng Pty Limited, (Cryeng) was incorporated on 30 November 1995. Cryeng alleges that the first and second respondents engaged in conduct that was misleading or deceptive or likely to mislead or deceive contrary to s 52(1) of the Trade Practices Act 1974 (Cth) (TPA) and s 42(1) of the Fair Trading Act 1987 (NSW) (FTA).

2        Damages in respect of such conduct may be awarded pursuant to s 82(1) TPA and s 68(1) FTA. Cryeng also seeks other relief including injunctive and declaratory relief. The third and fourth respondents have brought a cross-claim alleging breach of contract by Cryeng and claiming relief in respect of the alleged breach.

Application and statement of claim

3        In the course of preparation of the matter for trial there were many iterations of the application and statement of claim. In these reasons references to the statement of claim are to the Fourth Further Amended Statement of Claim filed on 7 September 2010. References to the application are to the Third Further Amended Application filed on 13 September 2010. The various iterations have largely been necessitated by a refinement of the claims made by the applicant and a narrowing of the issues in dispute.

Cross-claim

4        The cross-claim is brought by Mr Malcolm de Silva and Bramer Holdings Pty Ltd (Bramer). Mr de Silva was a director of Cryeng and was appointed as Executive Chairman of the company from December 2001 until 11 March 2008. Bramer is a company controlled by Mr de Silva. The cross-claim alleges that on 2 November 2007 Cryeng agreed with Mr de Silva and Bramer to retain Mr de Silva to perform professional services in addition to his duties as director for a period of 3 years and would remunerate him for such services in the amount of $200,000 per annum. The agreement (services agreement) is claimed to have been partly in writing, partly oral and partly implied. It is further claimed that Cryeng failed to pay various allowances and expenses that, under the services agreement, it was obliged to pay to Bramer in respect of Mr de Silva’s expenses in Thailand. The cross-claim alleges that Mr de Silva performed the additional duties contemplated by the services agreement but that Cryeng failed to pay the agreed remuneration, allowances and expenses.

5        Large parts of the cross-claim have been rendered otiose as a result of the claim brought by Cryeng (Thailand) Co Ltd, previously the third cross-claimant and the fifth respondent, having been settled and orders giving effect to the settlement having been made on 11 August 2010.

Key persons and witnesses in the proceeding

6        The claims made in the application and in the cross-claim must be assessed in the context of a complete breakdown in the relationships between some of the key persons who are parties to this proceeding or associated with the parties. It may therefore be helpful to give a brief outline of the background of the parties and the key persons.

Cryeng

7        Cryeng was incorporated on 30 November 1995 by Malcolm de Silva. Its business is the design and sale of cryogenic vessels. As explained by Mr de Silva in his affidavit sworn on 16 June 2010:

A cryogenic vessel is a vessel used to store liquefiable gasses at low temperatures (usually below minus 100° Celsius), so that the stored substance remains liquid. The vessels are insulated to reduce heat leakage from the atmosphere which would cause the liquids to boil. … The inner vessel is stainless steel which houses the stored substance. The outer vessel is stainless steel or carbon steel that houses insulation medium around the inner vessel. The development of the cryogenic vessel industry was assisted by the NASA space program in the USA.

8        Cryeng’s primary place of business in the period under consideration was Charles Street, St Marys in New South Wales. It also had premises in Ipswich, Queensland. Cryeng is a subsidiary of 202 Limited ACN 010 728 926 (202 Ltd) which, as from 2004 indirectly, owned 100% of the Cryeng shares.

Peter John Gilchrist

9        Mr Gilchrist was responsible for the incorporation of 202 Ltd in 1988. He is an engineer who also has the degree of Master of Business Administration from the University of Western Ontario in Canada. He became involved with Cryeng in 2003. Before that he had known Mr de Silva when they were both directors of Cryofab Industries Limited (Cryofab Industries). Mr Gilchrist and Mr de Silva both resigned from the board of Cryofab Industries in September 1993.

10        In 2003 Mr Gilchrist arranged for 202 Ltd, through its subsidiary Kemkay Pty Ltd, to purchase shares in Cryeng giving it, by around 17 December 2003, approximately a 71% interest in Cryeng. Eventually 202 Ltd became the 100% shareholder in Cryeng. Mr Gilchrist became a director of Cryeng on 9 August 2003. Mr Gilchrist’s proposal for a restructuring of Cryeng’s business model precipitated a break down in the relationship between him and Mr Loyola and Mr de Silva.

Malcolm Alexander de Silva

11        Mr de Silva was born in 1928. He graduated as a mechanical engineer from the Royal Melbourne Institute of Technology in 1953. By 1963 he was head of the Metropolitan Gas Company’s engineering department however in 1965 he moved to Pioneer Welding Holdings Limited and began his long experience with the manufacture of cryogenic vessels. In 1980 he moved to Sydney and was full-time with Cryofab Industries where he was involved in the design and development of new products including cryogenic vessels which, by 1988, were the most profitable of the company’s products. Cryofab Industries was eventually placed in liquidation and was wound up in 1997.

Bramer Holdings Pty Ltd

12        The fourth respondent, Bramer, is a company associated with Mr de Silva. At all times relevant to this proceeding Mr de Silva and his wife, Ratee de Silva between them held 51.2% of the shares in Bramer.

George Humberto Loyola

13        Mr Loyola was appointed as a director, and the Managing Director of Cryeng on 19 December 1997. He became a shareholder in 1998 and remained a director until 14 April 2008 and Managing Director to 30 April 2008. In his capacity as managing director of Cryeng Mr Loyola was responsible for preparing quotes or estimates for potential customers and generally liaising with them in relation to the work to be carried out.

14        Although Mr Loyola figures large in the events that led to this proceeding he was not called to give evidence. For present purposes, sufficient information about his duties at Cryeng can be gathered from the evidence of other witnesses. The question of what, if any, inferences should be drawn from Mr Loyola’s failure to give evidence of events in which he was intimately involved is discussed later in these reasons. see [80] et seq.

Pioneer Cryogenics Pty Ltd

15        With his wife, Nilda Elsa Loyola, Mr Loyola was responsible for the incorporation of the second respondent Pioneer Cryogenics Pty Ltd (Pioneer) on 12 March 2008 and was a director, a shareholder and the controlling mind of Pioneer from that date. According to Cryeng Mr Loyola’s purpose was for Pioneer to repair, design and manufacture cryogenic vessels in place of or in competition with Cryeng.

Philip Coghlan

16        Mr Coghlan was the company secretary and accountant for both Cryeng and Maxcon Industries Pty Ltd (Maxcon). He is also the accountant for 202 Ltd. Discrepancies between the accounts for Cryeng prepared by Mr Coghlan and those presented by Mr Loyola were instrumental in Mr Gilchrist’s decision to call for a restructure of Cryeng’s business model.

Ross Johnston

17        Mr Johnston is a director of Cryeng and of 202 Ltd. His evidence was especially relevant to the cross-claim and to the alleged services agreement between Cryeng and Mr de Silva.

Ralph Day

18        Mr Day is the managing director of Cryoquip Pty Ltd (Cryoquip), a company which, he formed in 1984. The company provides cryogenic engineering and fabrication services to the industrial gases industry in the Asia-Pacific area. It also manufactures cryogenic pumps and systems as well as components for cryogenic tank manufacturers including Cryeng. His evidence concerned representations allegedly made by Mr Loyola about Cryeng’s business. Mr Day was not called for cross-examination.

Patrick Camilleri

19        Mr Camilleri is the Deputy General Manager of Cryeng. He worked for Cryeng for a number of periods from 1998. He returned to Cryeng in May 2008 soon after Mr Loyola and Mr de Silva had left the company. His evidence also concerned representations allegedly made by Mr Loyola about Cryeng’s business after Mr Loyola had resigned from Cryeng.

Gregory Mark Johnston

20        Mr Johnston is a qualified civil engineer. He was a director of 202 Ltd and a number of its subsidiaries including Cryeng and Maxcon. He is also the Managing Director of Aquatec Environmental Ltd (Aquatec) which has a number of subsidiaries of which he is also a director. Those subsidiaries include Maxcon, Aquatec-Maxcon Pty Ltd (Aquatec-Maxcon), and Aquatec Services Pty Ltd (Aquatec). In his capacity as managing director of Aquatec, Mr Johnston was responsible for the management of Aquatec’s operations and that of its subsidiaries and for reporting in respect of them to 202 Ltd. Mr Johnston gave evidence in relation to the restructure of Cryeng and the breakdown of the relationship between Mr Loyola and Mr Gilchrist.

Adam Martin

21        Mr Martin is the Business Development Manager of Air Liquide Australia Limited (Air Liquide). His evidence related to the alleged conduct of Mr Loyola in attempting to divert business from Cryeng to Pioneer.

Fact Finding

22        The primary actors in the circumstances that gave rise to this proceeding are Mr Gilchrist, Mr de Silva and Mr Loyola. The former two gave evidence but, as mentioned above, Mr Loyola did not. There was no suggestion that he was not available. To the contrary, the decision not to call him was apparently made at a late stage. Affidavits sworn by Mr Loyola were filed but, in the event, were not read. The possibility that the respondents would not call Mr Loyola was communicated to Mr Lee of counsel, who appeared for the applicant, during the fourth day of the hearing. Mr Lee made it quite clear that, in his view, such a decision would have great significance and, should this be the case, he would be inviting the Court to draw adverse inferences against all the respondents. The decision was confirmed and, true to his word, Mr Lee made robust submissions, both orally and in writing.

23        The decision not to call Mr Loyola (there being no question as to his availability) invites inferences adverse to the claims made by the respondents. At the very least it gives rise to the inference that Mr Loyola’s evidence would not have assisted the respondents: Jones v Dunkel (1959) 101 CLR 298. It also follows that an inference, which is available on the evidence and which would be unfavourable to the respondents, receives some support from the failure to call a witness who, in the circumstances of the case, might reasonably have been expected to be able to give material evidence. Ultimately, whether such an inference should be drawn depends on all the circumstances of the case. The relevant principles were comprehensively summarised by Owen J in The Bell Group Ltd (In Liq) v Westpac Banking Corporation [No 9] [2008] WASC 239 at [1004]-[1022]. I will return to their application in this case later.

Cryeng profitability

24        Minutes of Cryeng board meetings over many years show that the financial position of the company was a constant cause for concern. For instance, the minutes of 1 December 2000 refer to the need for an immediate injection of capital in the amount of $120,000 as well as an additional $130,000 in February 2001. The Board minutes of 5 June 2003 note “the continued need for additional equity to improve the company’s Debt/Equity ratio” which was said to be a significant reason for the company being refused overdraft finance and other loans unless supported by personal guarantees. Concern about the company’s cash position was again expressed in the minutes of 18 February and 9 June 2004 and the position was noted as “tight” in the August and November 2004 minutes.

25        In the 2004 annual report for 202 Ltd the Chairman’s Review refers to Cryeng as having had “a disappointing first year under our ownership” but adds, “The order book is encouraging with limited competition currently in the repair and construction of containers throughout the world”. The reports for the following two years (2005 and 2006) were optimistic, predicting better growth for Cryeng, however the optimism was not well founded and cash flow and profitability for Cryeng remained a problem.

26        After a meeting with Cryeng directors on 5 October 2007, Philip Coghlan, company secretary and accountant for Cryeng as well as other companies in the 202 Ltd group, expressed some concerns about the Cryeng accounts and communicated those concerns to Mr Gilchrist. The accounts showed a profit before tax of $204,261. Mr Coghlan said that the profit and loss statement prepared by Mr Loyola was typical of the records that were presented to the Cryeng board. He said that these records do not have “the final revenue and cost of goods sold”, adjustments which are determined from the completed Work in Progress Schedule Report. When adjusted to take account of these factors Mr Coghlan’s review of the audited accounts showed that there was actually a pre-tax loss of $313,766.

27        On 15 October 2007 Mr Gilchrist sent an email about the two sets of accounts to Mr Loyola and copied it to Mr de Silva. He said:

Phil [Coghlan] showed me a set of accounts last week that differ materially from the ones you have been showing us. I am surprised you did not raise this issue at the last board meeting. Please call me on this.

In cross-examination Mr de Silva said that he could not remember receiving this email and that if he had received it he would have been concerned. Mr Gilchrist remembered sending the email but could not remember if Mr Loyola had telephoned him as requested. There was, however, an email response from Mr Loyola on 17 October 2007, also copied to Mr de Silva, in which he said:

Peter,

I am surprised at your statement. One of my first remarks when the June accounts were tabled was that they do not agree with Phil’s accounts as they have been amended by a number of journal entries in 2006 and in September 2007, including the writing off “Intellectual Property” for around $138,000. Malcolm made a few comments about it. Only P&L for July and August have been prepared as it was agreed that a Balance Sheet will be prepared when Phil completes the reports for 2007 and a “final” Stock & WIP is known.

28        At the hearing Mr Gilchrist said that he did not consider the discrepancy between the Loyola and Coghlan financial records as an indication of any dishonesty but assumed it was attributable to different accounting methods. It is not necessary for me to consider further the differences between the records prepared by Mr Loyola and Mr Coghlan. For present purposes what matters is the fact of the difference and that it prompted Mr Gilchrist to action. In cross-examination he said that when he saw Mr Coghlan’s accounts his mind immediately turned to the fact that “this company had made no money for four years. I’d been made promises year after year, and it was time to do something about it”.

29        Mr Gilchrist said that he was embarrassed that he had not done something before. The accounts confirmed his view that Cryeng’s business model was flawed. It was the same business model that had been unsuccessfully used at Cryofab Industries and involved the marketing, design and manufacture of cryogenic vessels being combined in one company. In his affidavit of 22 April 2010 he said:

I considered it was flawed because it did not make the most efficient use of the manufacturing facilities and workshop staff because the volume of the work was inconsistent. Accordingly, I believed more effective economies of scale could be achieved by separating the manufacture of the cryogenic vessels from their marketing and design. I considered that the manufacturing of the vessels should be undertaken in a workshop which would be available to manufacture other products and thus ensure that staff and equipment were being deployed more constantly and effectively.

30        Mr Greg Johnston also remembered the different approaches taken by Mr Coghlan and Mr Loyola in relation to Cryeng accounts. He remembered a conversation that he had with Mr Gilchrist in which Mr Gilchrist expressed concern about the future of Cryeng if changes were not made soon. It is not entirely clear when that conversation occurred but it seems to have been in late September or early October 2007.

Restructure proposals

31        Mr Gilchrist put his proposal for a restructure to all the directors of Cryeng in an undated memorandum that was apparently sent at some time between 15 October and 8 November 2007. Mr de Silva responded to this proposal in a memorandum dated 8 November 2007 although it appears from the minutes of the board meeting of 14 November 2007 that Mr de Silva’s response had not been received by that date.

32        It would seem that a restructure of Cryeng was being considered by Mr Loyola as well as Mr Gilchrist. In his memorandum Mr Gilchrist referred to a restructuring proposal tabled by Mr Loyola at the meeting on 5 October 2007. Details of Mr Loyola’s proposal were not in evidence, however, Mr Gilchrist dismissed it as “impractical” saying:

Cryeng is not in a position to fund the equipment required and does not have the skills base or culture to diversify into general fabrication. It also does not address the unacceptable risks that directors are taking in regard to workshop safety.

33        In his own proposal Mr Gilchrist drew an analogy between the new arrangements he was proposing for Cryeng and the relationship between Aquatec-Maxcon and Maxcon. Maxcon is an engineering company which is part of the 202 Ltd group of companies. The restructure proposed by Mr Gilchrist involved the manufacturing carried on by Cryeng at the St Marys and Ipswich plants being brought under the management of Maxcon. Thus Cryeng would be using subcontractors for its manufacturing in both Australia and Thailand. The proposal also involved the transfer of all Cryeng factory, estimating and purchasing staff to Maxcon’s payroll so that Cryeng could concentrate on sales, engineering and product development for cryogenics in Australia.

34        Mr de Silva was strongly opposed to Mr Gilchrist’s suggestions and set out his response in writing. His response, dated 8 November 2007, set out his objections clearly. He rejected the appropriateness of the analogy with the Aquatec-Maxcon and Maxcon relationship which, he said, involved the fabrication of distinctly different products. He also said that the proposal would remove entirely the need for the role of the Cryeng board, and would result in conflicts of interest for the person (Mr Peter Grbin) in charge of Maxcon.

35        The competing proposals for restructuring Cryeng’s business put forward by Mr Gilchrist and Mr de Silva were considered at a board meeting of Cryeng on 19 November 2007 Mr Gilchrist’s amended proposal, “Mark 2”, sets out the proposed roles for “Cryeng”, “202/Aquatec Environmental Limited” and “subcontractors” and also some “transition arrangements”. The proposal states the role of Cryeng as follows:

-    Prepare tenders costs for cryogenic work in Australia, NZ and the Pacific in conjunction with sub contractors (see 6 below)

-    Prepare drawings for contracts

-    Determine whether to use Cryeng (Thailand) or Maxcon as sub contractor.

-    Manage the contracts

-    Carry out approved R and D

    At paragraph 6 of the proposal the role of subcontractors is stated as follows:

-    Preparation of fabrication prices as requested by Cryeng for tender preparation.

-    Provision of manufacturing schedules for Cryeng

-    Purchasing of materials for vessels

-    Manufacturing of vessels to Cryeng specifications, drawings and timetable.

-    Maxcon will treat Cryeng as a long term liaison [sic] partner as it has Aquatec-Maxcon since 1987. As such, Maxcon will carry out its subcontract role at a gross margin of 15% of Cryeng selling price.

-    Maxcon will provide an interim Sydney workshop manager to implement safety standards and begin general fabrication. Maxcon will subsequently select a permanent Sydney work shop manager.

Gilchrist restructure proposal accepted

36        Present at the meeting on 19 November were Mr de Silva (Chairman), Messrs Gilchrist, Loyola and Theuma (Directors) and Mr Grbin (by invitation). With some amendments Mr Gilchrist’s proposal was accepted. The restructure took effect from 1 February 2008. It was summarised in Mr Gilchrist’s affidavit as follows:

Cryeng’s manufacturing operations were subcontracted to [Maxcon], and Cryeng would carry on with the marketing and design of cryogenic vessels. Cryeng’s workshop manager and trades assistants became employees of Maxcon and Maxcon manufactured vessels ordered by Cryeng for a fee with the use of Cryeng’s designs and other intellectual property.

37        In the annual report of 202 Ltd for 2007, the Chairman’s Review (dated 10 December 2007) refers to the restructure in these terms:

During 2007 Cryeng and Aquatec functioned in a joint cooperative way. The Board has decided that both businesses will be better served having the fabrication under one controlling management structure in Australia with Aquatec taking over the Cryeng manufacturing facility. This will allow Cryeng to concentrate more on its core skills in the development and improvement of the cryogenic market without the burden of the specialised management needed for fabrication.

38        The Cryeng board minutes of 28 January 2008 note that the transfer of manufacturing operations from Cryeng to Maxcon was to be effective from 1 February 2008. Mr Gilchrist said in cross-examination that this was in fact achieved by the end of February at which time there were only 3 staff left at Cryeng and that by 1 May there were no staff except for himself.

Relations within Cryeng

39        During the early years of Mr Gilchrist’s relationship with Cryeng (between 2003 and early 2008) Mr Gilchrist did not involve himself in the day to day operations of Cryeng. He said that during this time he attended board meetings and that he had occasional conversations with Mr Loyola and Mr de Silva. Board meetings were held in Cryeng’s premises in Sydney. They were chaired by Mr de Silva who handwrote the minutes and, sometimes, gave them to Mr Loyola to be typed after the meeting. According to Mr Gilchrist he left it to Mr de Silva and Mr Loyola to run the business. He said he had complete trust in them and that Mr de Silva had “a lifetime of experience in the industry and knew far more about it than I did”.

40        It is not clear if there were cracks in Mr Gilchrist’s relationship with Mr Loyola and Mr de Silva before the discrepancy between the records of Mr Loyola and Mr Coghlan focused Mr Gilchrist’s attention on Cryeng’s financial position. It is clear, however, that the controversy about the company’s future which preceded the adoption of Mr Gilchrist’s restructure proposal was damaging. This much appears from the minutes of a meeting held on 14 November 2007 which record a “Grievance Session” at which, among other things, the discrepancy between the Loyola and Coghlan accounts was discussed. Another grievance discussed was “Mr Malcolm de Silva’s failed Business Plan exemplified by Cryofab’s failure 18 years ago, stated as a one product line Design, Manufacture and Sell Cryogenic vessels”. Under the heading “Response” it is said that the “Grievance as stated is complete nonsense …”. There was also a reference to Mr Loyola’s,

deep concern at the criticisms being directed at him by Mr Peter Gilchrist which included being accused of improper conduct, misleading the board, providing false or inaccurate information, causing overhead to increase unnecessarily, etc. degenerating into personal insults which had been circulating among St Mary’s [sic] personnel and resulted in a written response being generated, plus Mr Peter Gilchrist’s statements that the company was insolvent.

41        Mr Gilchrist, supported by Mr Ross Johnston responded that there was nothing personal and that he was prompted only by concern for the company’s profitability and financial position. Despite Mr Gilchrist’s protests it is tolerably clear that frustration on all sides had poisoned relations between people involved in Cryeng and Cryeng Thailand. Mr de Silva described the relationships at the time of the discussions of the services agreement as “corrosive and dysfunctional”.

42        An email dated 10 February 2008 from Mr Loyola to Sayan Nak-Yoo, who was an officer or employee of Cryeng Thailand, refers to “our revenge” being not only to get Mr Gilchrist out of Thailand “but out of the cryogenic industry all together”. There were also a number of such emails in which Mr Nak-Yoo made derogatory and vindictive comments about Mr Gilchrist to both Mr Loyola and Mr de Silva without either of those gentleman remonstrating with him or attempting to moderate his language if not his views. Relationships further deteriorated in the early months of 2008.

43        For a short time after Mr Gilchrist’s restructure proposal was accepted Mr de Silva and Mr Loyola remained in their respective positions as executive chairman and director, and managing director of Cryeng. Mr de Silva’s position as a director of Cryeng was terminated on 11 March 2008 and Mr Loyola on 15 April 2008. In a letter dated 10 April 2008 addressed to the directors of Cryeng, Mr Loyola confirmed his intention to resign as an employee as from 30 April 2008. He stated that his resignation had been brought about “by the conduct of 202 Limited and Mr Peter Gilchrist” whose actions had made his position “intolerable”.

MISLEADING AND DECEPTIVE CONDUCT

44        Cryeng alleges that Mr Loyola and/or Pioneer made representations that were misleading and deceptive or likely to mislead and deceive customers of Cryeng and that as a consequence it suffered loss or damage. These representations are the Cessation of Business Representation and the Successor Representation (together the Representations). The Representations are described below.

Alleged cessation of business and successor representations

45        It is alleged, in paragraph 31N of the statement of claim, that in March and April 2008 Mr Loyola made representations to customers of Cryeng to the following effect:

a.    Pioneer Cryogenics had been or was about to be established;

b.    He had resigned or was going to resign from [Cryeng] and manage Pioneer Cryogenics;

c.    All or most of the persons relied upon by [Cryeng] to manufacture its products had ceased or would cease to be employed in that role and instead had been or would be employed by Pioneer Cryogenics;

d.    [Cryeng] was no longer in the business of design, marketing, manufacture, or supply of cryogenic vessels. (Cessation of Business Representation)

46        Cryeng claims in paragraph 31R that on about 2 May 2008 Mr Loyola and/or Pioneer wrote to all Cryeng’s customers, or to a significant number of them, and that these letters:

a.    Stated that Loyola had resigned as an employee of [Cryeng] effective 30 April 2008;

b.    …

c.    Amounted to or conveyed a representation that Pioneer Cryogenics was the successor to [Cryeng] and had been established with the approval and participation of [Cryeng] and/or its employees (Successor Representation);

d.    Amounted to an attempt to solicit future business for Pioneer Cryogenics from customers of [Cryeng]

Representations alleged to be misleading and deceptive

47        Paragraph 31ZL of the statement of claim says that the Representations were misleading and deceptive or likely to mislead and deceive for the following reasons:

a.    In relation to the Cessation of Business Representation [Cryeng] remained and remains in the business of design, marketing, manufacture and supply of cryogenic vessels.

b.    …

c.    In relation to the Successor Representation, Pioneer Cryogenics was not conducting the business of [Cryeng] and did not have the approval, permission or participation of [Cryeng] …

Abandoned Claims

48        In the statement of claim the applicant also listed three other representations that Mr Loyola and/or Pioneer are alleged to have made. They were representations that Cryeng had been neglecting the interests of its customers (Client Neglect Representation); that Pioneer and or Loyola owned certain designs and drawings which actually belonged to Cryeng (Design Property Representation); and that Cryeng designed and/or manufactured cryogenic vessels on behalf of Pioneer (Affiliation Representation). In the course of the trial Cryeng abandoned the claims made in respect of these representations. This decision was explained in written submissions provided at the end of the hearing:

It is commonsense that in a case that involves oral and covert communications, an applicant has difficulties in obtaining information as to the exact circumstances of what occurred except by relying on third parties to assist. The third parties may not be able to be identified, and even if identified, do not have an obvious interest in becoming embroiled … in a dispute between potential suppliers. Much depends on exploring the extent and context of dealings in cross-examination of the alleged contravener. Given Mr Loyola’s decision [not to give evidence] and irrespective of what in fact occurred … Cryeng accepts that the evidence now left before the Court is insufficient to maintain the Design Property Representation, the Affiliation Representation and the Client Neglect Representation.

The Representations - evidence

49        The evidence in support of Cryeng’s claims concerning the Cessation of Business and the Successor Representations is such that the two representations must be considered together. The evidence is largely about Mr Loyola’s conduct after relations within Cryeng had broken down but before he left the company as well as shortly after his employment ceased. It comes not only from Mr Gilchrist and other officers and employees of Cryeng but also from representatives of Cryeng’s customers. There is documentary support for the allegations made by Cryeng, some of which was obtained on subpoena and some of which is exhibited to relevant affidavits.

50        A large part of the most telling documentary evidence consisted of records from the laptop which Mr Loyola retained when he left Cryeng. The laptop was eventually produced to Cryeng’s solicitors, after considerable resistance by Mr Loyola, pursuant to subpoena served on Mr Loyola’s son to whom it had been given.

51        Other evidence was given by former clients of Cryeng, in particular by Ralph Day of Cryoquip Pty Ltd and Adam Martin of Air Liquide. Cryeng served subpoenae on many of its clients and supporting documents were obtained pursuant to a subpoena served on Air Liquide. Subpoenae, in the same terms, were also served on a large number (at least 19) of other clients of Cryeng. In relation to one subpoena which was representative of all, Mr Pesman, counsel for Mr Loyola and Pioneer, made the following submission:

If your Honour looks to the documents the subject of the subpoena, your Honour will see that any possible document touching on anything that Mr Loyola said to anyone in April 2008 was the subject of this subpoena. Whatever complaints the applicant may have about what Mr Loyola did with documents, there’s no complaint advanced about what any of the recipients of these documents did. One may infer very safely that the complete documentary record has been examined, because both correspondent parties of the documents have produced these documents on subpoena, and not a single document confirmatory of the cessation of business representation is tendered. I invite your Honour to draw the obvious inference, that is because there is none.

This submission is discussed below at [56].

52        Cryeng claims that both representations were made to divert business from Cryeng to Pioneer. As already noted Pioneer was incorporated on 12 March 2008 and at all times Mr Loyola was its controlling mind. Although Mr Loyola remained a director of Cryeng until about 15 April 2008 and his resignation from the company did not take effect until 30 April of that year, the evidence shows that at least from mid April 2008 he was soliciting business for Pioneer from Cryeng customers. In particular he was issuing quotations for the supply by Pioneer of a variety of cryogenic tanks and equipment.

53        During April and May 2008 Mr Loyola sent letters addressed to Cryeng’s customers advising them that he was leaving Cryeng. An example is the letter dated 18 April 2008 from Mr Loyola to Mr Steve Abbott of Coregas Pty Ltd advising that he had resigned from Cryeng as from 30 April 2008. He added,

My responsibility to the company’s customers has been foremost in my mind during the last couple of weeks and I am hoping your work (please see attached schedule) will be available to be picked up prior to my departure.

I have appreciated our relationship and the support you have given the company during the difficult times experienced over the past several years.

After 25 years in the industry I have made many friends with whom I hope I can maintain contact in the near future.

54        Letters in similar terms were also sent to other customers including BOC Gases Australia Ltd (Mr Greg Allen), Air Liquide Australia Ltd (Mr Paul Nield). On 4 May 2008 Mr Loyola sent an email to a large number of customers and associates of Cryeng. The email’s subject line was, “Pioneer Cryogenics – Advise [sic] to Customers”. Attached to the email, on the letterhead of Pioneer, was a letter from Mr Loyola addressed to “all customers” advising that he had left Cryeng and again referring to the company’s customers being “foremost in my mind”. The letter continued:

With the full support of our troops we have incorporated PIONEER CRYOGENICS PTY LTD and I hope we will continue to enjoy your trust and support.

55        The references to “the full support of our troops” and to continuing to enjoy the customers’ trust, support the inference that Pioneer is the successor of Cryeng with the added inference that Cryeng was closing down or was no longer in the business it had carried on to that time. That this belief was in circulation is supported by a handwritten letter from Mr Camilleri dated 3 May 2008 to Mr Gilchrist, which says:

As mentioned over the phone today, I was talking with John Biddiscome of Air Liquide a couple of days ago and he was under the impression that Cryeng was closing down.

56        In commenting on the absence of documents produced pursuant to subpoena by a large number of Cryeng clients, Mr Pesman’s submission outlined at [51] above, invites me to draw an inference from the absence of evidence in circumstances where I can only speculate as to the reason for that absence. On the other hand there is evidence from which I can infer that correspondence from Mr Loyola was sent to all customers. The fact that Mr Loyola’s letter attached to the email of 4 May was addressed to “all customers” suggests that it was sent to all customers. There may be many reasons that copies were not produced other than that the letter was not sent to those to whom it was addressed. In saying so I do not imply that the subpoenae were not conscientiously complied with. It may be, for instance, that copies were not retained for this length of time. In any event, I do not draw the inference suggested by Mr Pesman.

57        Further evidence of Mr Loyola’s conduct was given by Mr Ralph Day, the managing director of Cryoquip. In 2007 Mr Day had dealt personally with Mr Loyola on a number of occasions including in relation to a contract with Cryeng for the manufacture of a 10,000 litre tank which it then distributed to Papua New Guinea. Mr Day deposed that in early to mid-April 2008 Mr Loyola came to see him and told him that he had left Cryeng and that “a lot of the staff from Cryeng” were joining him. Mr Day asked whether Cryeng would continue to operate. Mr Loyola said he did not know and then the following conversation ensued:

Mr Loyola: Pioneer will be building all the range of cryogenic tanks so we [being Cryoquip Pty Ltd and Pioneer] can on sell tanks together and we can get vessels from you, like we did at Cryeng.

Mr Day: How long before you will be up and running?

Mr Loyola: Straight away. I am expecting an order from Air Liquide in Melbourne. I am the only one that can build cryogenic tanks.

58        It was submitted for Mr Loyola and Pioneer that this conversation could not amount to a representation that Cryeng was going out of business. That submission cannot be accepted. The clear message from the statement that “I am the only one that can build cryogenic tanks” is only consistent with a representation that Cryeng was no longer in the business of designing, manufacturing or supplying cryogenic vessels. Mr Day was not required for cross-examination and there is no reason why his evidence should not be accepted as accurate and truthful.

59        Mr Loyola’s comment that he did not know whether Cryeng would continue to operate was disingenuous and likely to mislead and deceive. Mr Loyola’s position at Cryeng, where at the time he was still employed, was such that it was reasonable to expect that he would know if Cryeng was continuing in business. In determining whether conduct is contrary to s 18 and, in this case, amounts to the representation pleaded, context is crucial. The intimation that Pioneer would be replacing Cryeng as the supplier of cryogenic vessels coming, as it did, from a person in Mr Loyola’s position would have considerable significance.

60        Mr Loyola’s reference to an order from Air Liquide in Melbourne is also significant. The evidence shows that as early as February 2008 Air Liquide had invited Cryeng to tender for the supply of a 200,000 litre Cryogenic Vacuum Insulated Storage Vessel at Air Liquide’s Botany plant. Subsequently it issued a purchase order (H955043) dated 26 March 2008 for the 200,000 litre vessel at a total costs of $620,900. The purchase order names Mr Loyola as the contact for Cryeng and includes the email address for Mr Loyola as george@cryeng.com.au. It was signed for Air Liquide by Mr Adam Martin.

61        In his affidavit sworn on 3 September 2010, Mr Martin referred to a visit Mr Loyola made to Air Liquide’s Melbourne office on or about 8 April 2008. Present at that time were Mr Paul Neild and Mr Ken Palmer and “possibly some other colleagues”. Mr Loyola said that he had resigned from Cryeng and had incorporated Pioneer. He also said that most of Cryeng’s staff would be joining him at Pioneer “including Cryeng’s vessel engineer, workshop staff/supervisor and some of its fabrication staff”. He added that he was not sure what was going to happen to Cryeng’s fabrication workshop at St Marys.

62        The written submissions for the first and second respondents conceded that Mr Loyola’s comments may have created doubts about Cryeng’s future in Mr Martin’s mind. It was submitted, however, that they did not amount to a representation that Cryeng was no longer in the business of design, marketing, manufacture or supply of cryogenic vessels. This submission is contrary to the evidence given by Mr Martin.

63        Mr Martin said he believed that when Mr Loyola gave him the information about Cryeng he did so as a representative of Cryeng and consequently believed that Cryeng would not be in a position to build the 200,000 litre vessel which Air Liquide had ordered. Moreover he had the impression that Cryeng would not be in the business of supplying cryogenic vessels in the future. Accordingly, after speaking to his supervisor and other colleagues, he told Mr Loyola that he would cancel the purchase order. This was subsequently confirmed in a letter to Cryeng dated 13 May 2008.

64        Meanwhile on 11 April 2008 Mr Loyola sent an email to Mr Martin thanking him for “the time you and Paul [Neild] took last Tuesday to discuss your requirements”. Mr Loyola attached a quotation on Pioneer letterhead for the same 200,000 litre cryogenic storage vessel for a total price of $602,500. He also recorded his appreciation for Mr Martin’s support “on behalf of Pioneer Cryogenics” and said “I look forward to a long and mutually beneficial relationship”.

65        Paul Nield was the Procurement Manager at Air Liquide. His position was senior to that of Mr Martin. Although Mr Martin did not report to Mr Nield they frequently worked together. Mr Nield was one of the recipients of the letter advising of Mr Loyola’s resignation from Cryeng; see [53] above. It was sent to Mr Nield by email on 18 April. Attached to the letter was a list of 7 vessels for Air Liquide then stored at Cryeng’s premises at Charles Street, St Marys. Mr Nield responded to Mr Loyola on the same day saying,

I have given our people a rev up about getting the vessels out of the Cryeng facility.

Please let me know what is going to happen about vessel warranty.

Mr Loyola replied:

We would certainly feel more comfortable if we see the vessels leaving before the 30/04.

In regards to warranty, Cryeng I believe will continue to operate (probably on structural work) but in any case Cryeng is now a subsidiary of an unlisted public company which will be responsible for any in warranty work.

We’ll keep you posted on this.

66        On 22 April Mr Nield again asked for a contact in relation to warranty work to which Mr Loyola replied “since 21/02/08” manufacturing had been taken over by Maxcon and gave the contact details for Mr Peter Grbin. It may be accepted that this statement was true. The evidence shows that, as a result of Mr Gilchrist’s restructure, manufacturing had moved to Maxcon since late February. However, that does not preclude the statement, taken in context, being misleading. The restructure envisaged that Cryeng would continue to take orders for cryogenic vessels and would be responsible for their supply. Without that elaboration, the statement though true was capable of misleading as a result of what was left unsaid.

67        On 2 May 2008 Mr Martin sent to Mr Loyola a revised purchase order (H955043A) addressed to Pioneer. Although it bears the same date as original purchase order sent to Cryeng, (26 March 2008), the email address is gloyola@bigpond.net.au and the telephone and fax numbers are different. On 9 May 2008, by email, Mr Loyola asked Mr Martin to reissue the purchase order dated, at the earliest, 1 May 2008. He explained that “for legal reasons Pioneer was not able to trade or operate” before that date.

68        As it happened, Pioneer’s premises were not large enough for the manufacture of a 200,000 litre vessel. Mr Loyola proposed that it be built in Thailand with the support and supervision of Pioneer however Air Liquide was adamant that the vessel be built in Australia. Eventually it cancelled the purchase order and the vessel was built by another manufacturer.

69        In opening Mr Lee commented that the size problems affecting Pioneer were not shared by Cryeng. Mr Lee’s comment is consistent with the statement in the Cryeng Chairman’s Report for 2005-2006 that:

A significant achievement during the year was the completion of four 260,000 litre vessels for Linde Engineering won by St Marys against Chinese competition and completed in leased premises and at Ipswich to the satisfaction of Linde with which company we maintain a good working relationship.

70        The same report also refers to “substantial improvements of the facilities at St Marys since the acquisition of the property at Charles St”. This evidence and the fact that Air Liquide originally sent the purchase order to Cryeng support the inference that Cryeng would have been able to meet the order. There is nothing in the evidence to suggest otherwise. Similarly there is no indication that Air Liquide would have had a problem with the actual manufacture being carried out by Maxcon. It is clear from an email sent by Mr Martin to Mr Loyola on 28 April 2008, that Air Liquide’s concern was with its ability to inspect the vessel during the manufacturing process. Mr Martin said:

As explained during our meeting in Melbourne you were awarded contract due to vessel fabrication being local so progress inspections could be made quite easily by ALA even though you were certainly not the cheapest supplier.

We maintain the vessel to be fabricated locally, please confirm.

71        In April 2008 Mr Loyola also sent additional quotations for Pioneer to provide goods to Air Liquide. Two quotations were sent on 12 April and on 14 April Mr Loyola provided a quotation for 6 cryogenic customer stations to Air Liquide.

72        On 12 April 2008 Mr Loyola, on the letterhead of Pioneer, sent a quotation to Mr Sukhdev Singh of BOC Australia Limited for 3 vertical buffer tanks, two being for gaseous helium and one for nitrogen gas storage. On the same day he also sent to BOC a quotation for a vertical cryogenic customer station priced at $280,000. A further quotation was sent to BOC on 24 April 2008.

73        Mr Gilchrist testified that after Mr Loyola resigned he arranged to have all emails sent to Mr Loyola at Cryeng diverted to his email account. It was in this way that Mr Gilchrist first learnt of the purchase order to Pioneer for the 200,000 litre Cryogenic Vacuum Insulated Storage Vessel referred to above. Mr Gilchrist said that this was the first time that he became aware that Mr Loyola had set up a rival company. Mr Gilchrist also referred to evidence of other quotations and correspondence with Cryeng customers which was obtained from Mr Loyola’s laptop and of which there was no record in Cryeng’s files.

74        Mr Gilchrist also described conversations he had with Mr Singh of BOC Australia in which Mr Singh expressed concerns about Cryeng’s continuing commitment to manufacturing cryogenic vessels. He described a visit that Mr Singh and another senior executive of BOC made to Cryeng’s premises in late May or early June 2008. Mr Gilchrist assured them that Cryeng was still manufacturing cryogenic vessels and took them on a tour of the factory floor.

75        Evidence given by Mr Greg Johnston and Mr Camilleri supports Cryeng’s submissions that in late April and early May 2008 Cryeng customers were seeking reassurance as to Cryeng’s continuing in business. In addition to those already mentioned, Mr Camilleri referred to an enquiry from Reed Constructions.

76        Mr Johnston referred to a conversation with Mr Singh of BOC in early May 2008. Mr Singh asked if Cryeng was still in business and did it intend to continue in the cryogenics business. Mr Johnston said, “We definitely are” to which Mr Singh responded “I was told you weren’t”.

77        Mr Loyola’s diary entry for 22 April 2008 records at 9.00 am “Ring S. Singh/Greg Allen” Mr Johnston deposed that at that time he had been receiving telephone messages to call clients such as BOC and that he tried to get more information before calling back. On 22 April at 1:28 pm he sent an email to Mr Loyola as follows:

Please email me a copy of the advice sent out to clients about the changes at Cryeng. Please also advise the list of recipients.

I am receiving queries from clients like BOC and would like to be in a position to properly respond.

I would appreciate this by return.

78        Mr Johnston received no response to this email from Mr Loyola. It was submitted for Cryeng that evidence from Mr Loyola’s diary supports the inference that Mr Loyola had contacted Mr Singh on 22 April 2008 and that he was responsible for Mr Singh’s impression that Cryeng was not continuing in business. I accept that the inference is available and that, in the absence of evidence from Mr Loyola, that it should be accepted.

79        At about that time Mr Gilchrist and Mr Camilleri embarked on a tour of Cryeng’s customers. They visited Supagas NSW, Supagas Victoria, Air Liquide Australia’s headquarters in Melbourne and Cryoquip. Mr Gilchrist also referred to a conversation he had with Mr Chris Day of Coregas in which Mr Day said that Coregas was unsure about Cryeng’s capabilities. Mr Gilchrist took Mr Day to Cryeng’s workshop in Sydney to show him the ongoing manufacture of cryogenic vessels.

The Representations - consideration

80        In this case material aspects of the evidence brought on behalf of Cryeng were not challenged. Where that evidence is not inherently improbable, or there is no other reason to doubt its credibility, then it should be accepted Precision Plastics Pty Limited v Demir (1975) 132 CLR 362 at 370-1 per Gibbs J. The failure of Mr Loyola to give evidence is perhaps the most striking aspect of the comparative absence of challenge to Cryeng’s evidence. As counsel for Cryeng put it:

Mr Loyola, notwithstanding he has been in this hearing room for every minute of this case, has not walked the eight metres into the witness box.

81        As Mr Loyola was intimately involved in all aspects of the circumstance on which Cryeng bases its application for relief and its defence to the cross-claim it is reasonable to expect that he would have information and explanations material to the issues in this proceeding. In the absence of his evidence it was difficult for the respondents to challenge much of the evidence brought by Cryeng. The evidence concerning the services agreement is discussed below in connection with the cross-claim.

82        In relation to the application brought by Cryeng there was little if any challenge to the evidence of Mr Day, Mr Martin, Mr Greg Johnston, Mr Coghlan and Mr Camilleri. Mr Gilchrist’s evidence was also largely unchallenged and to the extent that it was challenged, it was not shaken. I find that, when considered in context, the evidence of these witnesses is not inherently improbable and there is no reason why I should not accept it.

83        The written submissions for Loyola and Pioneer accepted that the content of Counsel’s observation about Mr Loyola’s failure to give evidence is correct but submitted that the inference is not correct. They submit that because Cryeng agreed not to press the pleaded cases in relation to Mr Loyola’s various duties as an employee and the need for Mr Loyola to explain or contradict anything evaporated. In the light of the evidence about Mr Loyola’s activities during April 2008, that submission cannot be accepted. Submissions were also made about the failure to give evidence of other persons who might be expected to have information relevant to the claims made by Cryeng. I shall return to that submission later. It is with Mr Loyola that I am presently concerned.

84        As mentioned earlier, in a proceeding whether there is any inference that can derive support by the application the principle of Jones v Dunkel depends on the evidence in the proceeding and the circumstances of the case. At this point, given Mr Loyola’s failure to give evidence, it is necessary to discuss, with some particularity, the application of the principles in Jones v Dunkel in this proceeding. Counsel for Cryeng evinced no doubt that in this case there were inferences to be drawn from the evidence that were unfavourable to Mr Loyola and which, because of his failure to give evidence, should be more readily accepted. In considering this possibility I am conscious of the distinction to which Windeyer J adverted in Jones v Dunkel between rational inference and mere conjecture: (1959) 101 CLR 298 at 319-320; Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 at [53]; Hesse Blind Roller Company Pty Ltd v Hamitovski [2006] VSCA 121.

85        Cryeng submitted that on the evidence before the Court it should be concluded that “Mr Loyola chose not to give evidence because it became obvious to him that he would be pressed on his discreditable dealings in the relevant period and that he had deliberately, while still a director of Cryeng, set out to harm Cryeng’s business”. Cryeng based this submission on a number of factors including Mr Loyola’s reluctance to produce his laptop and the false information he provided about what might have been on the laptop, the date of incorporation of Pioneer, and the date when Pioneer commenced its trading activities.

86        Mr Loyola’s statement, conveyed through his solicitors (without any suggestion that the solicitors knew the statements were false), that all the information on his laptop had been “printed and hard copies filed in the respective client files” was shown to be incorrect. Among other things, a record of the Air Liquide purchase order for a 200,000 litre storage vessel which was not in the company files was discovered on the laptop. Other documents obtained from the laptop also put the lie to Mr Loyola’s statement that the information on the laptop had only been used in conducting business for Cryeng. Similarly, the statement that Mr Loyola had deleted all information on the laptop pertinent to the period up to and including 30 April 2008 was less than the complete truth. It omitted to state that, after Mr Loyola’s son had damaged the computer by spilling water on it, the hard drive had been transferred to Mr Loyola’s new laptop.

87        Counsel for Cryeng also referred to the email dated 9 May referred to at [67] above in which Mr Loyola requested Air Liquide to issue a purchase order dated 1 May 2008 “at the earliest” to replace that dated 26 March 2008. This, it was submitted, was a clear indication that Mr Loyola was quite conscious of his own wrongdoing in seeking business for Pioneer, contrary to the interests of Cryeng while he was still acting as the manager of Cryeng.

88        The evidence also supports Cryeng’s claim that Mr Loyola led at least some of Cryeng’s customers to believe that Cryeng was not continuing in the business of supplying cryogenic tanks and equipment and that, in some sense, Pioneer was Cryeng’s successor in this line of business. In at least one case this conduct led to an order placed with Cryeng being cancelled with consequent loss to Cryeng. I accept Mr Gilchrist’s evidence, discussed below, that he was unaware of much of Mr Loyola’s conduct until he saw documents which had been retrieved from the laptop.

89        The fact that some of the statements made by Mr Loyola might have been literally true is not inconsistent with them being misleading. As I have earlier remarked, in such circumstances context is crucial. The fact that Cryeng might sub-contract aspects of its business does not mean it was no longer engaged in that business. Indeed Mr de Silva agreed that it was accurate for Cryeng to describe itself as a “manufacturer of large scale vacuum insulator storage vessels” notwithstanding that some manufacturing was being done in Thailand by Cryeng (Thailand) Co Ltd.

90        In earlier iterations the statement of claim alleged that Mr Loyola’s conduct in seeking to divert business to Pioneer and induce Cryeng’s employees to join Pioneer was in breach of his fiduciary duty to Cryeng. It also alleged accessory liability on the part of Pioneer. The applicant did not persist with those claims which were deleted from the final version of the statement of claim. In his final submissions, Mr Pesman all but conceded that his clients would have had some difficulty in defending such a claim. However, he cautioned the Court not to elevate its “disapproval of what Mr Loyola may or may not have been doing in that period into finding the representations proved”.

91        Mr Pesman’s warning is appropriate and I have carefully considered my conclusion with it in mind. This is not a case where the representations are made in precise and unequivocal language. As I have several times remarked the message conveyed by Mr Loyola’s words and actions on behalf of himself and Pioneer was significantly influenced by the context in which the conduct occurred. In considering a similar problem in Reiffel v ACN 075 839 226 Ltd (2003) 132 FCR 437, Gyles J quoted, at 478, the remarks of Lord Halsbury in Aaron’s Reefs Ltd v Twiss [1896] AC 273 at 280-281:

But I must protest against it being supposed that in order to prove a case of this character of fraud, and that a certain course of conduct was induced by it, a person is bound to be able to explain with exact precision what was the mental process by which he was induced to act. It is a question for the jury.

…

It is said that there is no specific allegation of fact which is proved to be false. Again I protest, as I have said, against that being the true test. I should say, taking the whole thing together, was there false representation? I do not care by what means it is conveyed – by what trick or device or ambiguous language: all those are expedients by which fraudulent people seem to think they can escape from the real substance of the transaction. If by a number of statements you intentionally give a false impression and induce a person to act upon it, it is not the less false although if one takes each statement by itself there may be a difficulty in shewing that any specific statement is untrue.

92        The evidence adduced by Cryeng supports its claim that Mr Loyola, both personally and on behalf of Pioneer, made the business cessation representation and the successor representation. I am satisfied that those representations were misleading and deceptive or likely to mislead and deceive. They were capable of inducing, and did in fact induce, error: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198. As such Mr Loyola’s conduct and that of Pioneer were in breach of s 52 of the TPA and s 42 of the FTA respectively.

Causation and loss

93        Before any question of remedies can arise it is necessary for Cryeng to show that it is the conduct found to have been in breach of the statutory prohibition that has caused its loss or damage.

94        I have recently expressed my views as to causation in this context in De Bortoli Wines Pty Limited v HIH Insurance Limited (in liq) [2011] FCA 645 at [47]-[59] and do not propose to repeat those comments here. It is sufficient to note two points.

95        First, in determining whether loss is caused by contravening conduct, the context in which the question arises must be considered: see De Bortoli at [51]-[[53]. Secondly, it is well established that the contravening conduct need not be the sole cause of the loss: Henville v Walker (2001) 206 CLR 459 at [14] per Gleeson CJ, [59]-[61] per Gaudron J, [106]-[109] per McHugh J and [163] per Hayne J and De Bortoli at [58]-[59].

96        There is however, an important requirement to be met before any causation can be attributed: the claimant must show that it suffered a loss: see generally, and in particular in relation to loss of an opportunity to obtain a commercial benefit, Sellars v Adelaide Petroleum NL (1994) 179 CLR 332. Against the first and second respondents, Cryeng claims damage to its commercial reputation and the damaged occasioned by the loss of the contract with Air Liquide discussed above. I shall consider each head of damage in turn.

Damage to Cryeng’s commercial reputation

97        The proposition that compensation can be awarded for damage to reputation is hardly controversial. In Brabazon v Western Mail Ltd (1985) 8 FCR 122 at 129 Toohey J commented that in his view the words “loss or damage” in s 82 of the TPA were wide enough to include injury to reputation: see also Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500 at 525 per Wilcox J.

98        Cryeng claims that the representations made by the first and second respondents damaged the commercial reputation of Cryeng. In support it points to the enquiries made about Cryeng’s future and the requests to inspect its premises to assess its capacity to carry on business. In this regard Cryeng’s written submissions note that Mr de Silva admitted that Cryeng’s commercial reputation was “important in this industry” and that the good reputation it had up to early 2008 was of real value.

99        While the evidence might be described as flimsy, I nevertheless accept that the misleading conduct of the first and second respondent caused damage to the applicant’s reputation. Determining the amount of compensation to be awarded in respect of that loss is more problematic. In this case I doubt that the damage was very severe or long lasting. Although Cryeng suffered losses in both 2008 and 2009 it appears from the evidence of Mr Camilleri that Cryeng is now profitable.

100        Mr Gilchrist and Mr Camilleri acted quickly to contradict both representations including by embarking on a tour of Cryeng’s customers. No evidence was submitted as to the costs of that exercise although, presumably those costs could have been documented. That being so it is not appropriate to include any estimate of those costs in an award of damages.

101        Mr Pesman submitted that in the absence of evidence showing an effect on Cryeng’s income it was not possible for the Court to compensate Cryeng for any impact on its commercial reputation. In oral submissions he contended that Cryeng had made no real effort to prove its loss. Mr Pesman conceded that the loss did not need to be proved precisely but submitted that Cryeng had to make some effort in that regard.

102        Mr Lee argued that the closest analogy is to defamation cases in which juries and judges have for years been obliged to quantify the apparently unquantifiable. His approach is consistent with that of Wilcox J in the Flamingo Park case where his Honour said, at 525:

Any assessment of damages for loss of reputation must necessarily be made with a broad brush; as in a defamation case a court can do not more than fix a sum of money which, in the whole of the circumstances, appears to be proportionate to the damage which has been incurred. The greater the reputation, the more vulnerable it is to damage.

103        In Typing Centre of NSW Pty Ltd v Northern Business College Ltd (1989) 13 IPR 627 at 641 Wilcox J returned to the issue and accepted that a misleading publication must have affected the goodwill of the applicant’s business. His Honour held that in determining the extent of the loss the court should have regard to “the nature of the statements made by the respondents and to the manner and extent of their publication”.

104        The difficulties in determining the appropriate amount of damages in such a case were recognised by French J, as the Chief Justice then was, in FAI General Insurance Co Ltd v RAIA Insurance Brokers Ltd (1992) 108 ALR 479 where his Honour said, at 509:

Doing the best I can on what is extremely exiguous material I think it appropriate that I award damages in the sum of $15,000. In arriving at this award I have accepted that it is open to award damages for vindication of commercial reputation under s 82.

In support of the conclusion in the last sentence his Honour referred to Brabazon, Flamingo Park and Typing Centre of NSW.

105        In this case I am satisfied that some provision should be made. The applicant submitted that an award in the amount of $100,000 was appropriate. I think this amount is too high taking into account the relatively confined sphere in which Cryeng, by the nature of its business, would have a commercial reputation, the nature of the reputation and the clarity with which, unlike much defamatory material, the misleading representations could be corrected. I have concluded, also doing the best I can with scanty evidence, that the amount of $50,000 would be an appropriate award of damages.

Air Liquide purchase order

106        In relation to the order cancelled by Air Liquide, the first and second respondents conceded that if the Court found that the cessation of business representation had been made and that it was misleading, “the Court should conclude that conduct caused Air Liquide to cancel the order”. There is, however, no concession as to how the amount of the loss should be calculated.

107        Cryeng contended that its profit on the contract would have been in the order of 12.5% to 15% of the contract price which was $620,900. This is consistent with Mr Camilleri’s estimate that the profit to Cryeng would have been between $77,612.50 and $93,135. In his affidavit of 18 August 2010 Mr Camilleri said that when he was Works Manager at Cryeng and was required to provide a quotation to a customer he would allow for a 12.5% to 15% profit margin. He said:

I copied this method of quoting from previous written quotes. I observed Mr Loyola quoting in this format.

108        It was submitted for Mr Loyola and Pioneer that these cost estimates were not a reliable guide after the restructure of Cryeng which was operative from February 2008. The point was made in the written submissions as follows:

[F]rom that date Maxcon “manufactured vessels ordered by Cryeng for a fee” whereas previously Cryeng had been a stand-alone manufacturer. It follows that whatever Cryeng’s experience in relation to margin was prior to 2008, the experience does not provide a guide to actual outcomes from 2008 forward. Accepting Mr Camilleri explained that one feature of the new regime was to transfer risk to Maxcon, the fact is that Cryeng recorded substantial losses in each of the years ended 30 June 2008 and 30 June 2009. There is no evidence explaining how that occurred.

109        The fact that the restructure transferred manufacturing risk to Maxcon would seem, in my view, to be equally likely to increase Cryeng’s profit on an order such as the Air Liquide order. Whether that would have led to Cryeng’s quotations allowing for a lower profit margin is mere speculation as would be any attempt to explain Cryeng’s lack of profitability in the 2008 and 2009 tax years. Indeed, were one to speculate it would not be unreasonable to include the possibility of losses being attributable in part to Mr Loyola’s conduct. In any event Mr Camilleri’s evidence on cross-examination and on re-examination gave no basis for suggesting that Cryeng had moved away from preparing its quotations in the manner described by Mr Camilleri.

110        It is reasonable to assume from the efforts that Mr Loyola made to have the purchase order transferred from Cryeng to Pioneer that he must have viewed the order as potentially profitable. Similarly Mr de Silva said several times in his cross-examination that the Air Liquide order was “a good order” and agreed that it was a valuable commercial opportunity.

111        In estimating the amount of Cryeng’s loss I am not prepared to assume that in relation to this order Cryeng would have allowed for a profit margin at either extreme end of its usual range. In all the circumstances I would allow an amount rather closer to the top end of the range and have concluded that damages in the amount of $90,000 are appropriate.

THE SERVICES AGREEMENT - CROSS-CLAIM AND APPLICATION

112        Paragraph 7 of the application in this proceeding seeks that the services agreement be declared null and void. Under the cross-claim the third and fourth respondents seek damages for breach of contract as well as damages to the date of judgment.

113        As mentioned above, the cross-claim pleads that the services agreement is partly in writing, partly oral and partly implied. To the extent that the services agreement is said to be oral it is said to have arisen from a discussion between Messrs Gilchrist, Theuma, Loyola and de Silva which took place on 2 November 2007. To the extent that it is in writing, it is said to be comprised of a document signed by Mr Loyola on behalf of Cryeng and by Mr de Silva and dated 2 November 2007. It is also said to be partly implied by operation of law arising from the fact that prior to 2 November 2007 Cryeng had paid various allowances and expenses in respect of Mr de Silva’s travel to Thailand.

114        At the hearing the cross-claimants effectively abandoned the claim of oral and implied terms in the agreement and rely only on the signed document. In doing so they also abandon the claim that Bramer is a party to it. The document names only Cryeng and Mr de Silva as parties. Bramer is mentioned only in connection with the payment of Mr de Silva’s remuneration. It states:

The agreed remuneration package of $A200,000 per annum shall be paid on a monthly basis in parts, by way of monthly retainer to Bramer Holdings and monthly remittances from Cryeng Pty Limited – St Marys and Cryeng (Thailand) in proportions agreed by the parties during the first year.

115        The applicant submits that “as pleaded” the services agreement could not have come into existence. Mr de Silva readily conceded that there was no oral agreement on 2 November. He said that the allegation dated from the original claim which was made in the County Court in Victoria and had been prepared by a Victorian lawyer in his absence. The written submissions in support of the cross-claim stated unequivocally that “Mr de Silva does not rely on any oral discussions or implied terms”.

116        As the cross-claim depends for its success on establishing that a valid agreement arose from the agreement of the parties and the execution of the document by Mr Loyola, for Cryeng and by Mr de Silva the circumstances in which that document came to be need to be established. This exercise is made more complex by the fact that Mr Loyola, who was intimately involved in the matter, did not give evidence.

117        Mr de Silva was responsible for the incorporation of Cryeng in November 1995 and, at first, was the majority shareholder in the company. He became its executive chairman and held that position until March 2008. Mr de Silva was also heavily involved in the cryogenic industry in Thailand where he formed a joint venture between Cryeng and the Sutee Steel Company (Sutee Steel) by way of a joint venture company, Cryeng Sutee Co Limited, which was incorporated in Thailand in 2000. In support of the joint venture Mr de Silva frequently travelled to Thailand.

118        In about 2003 Mr de Silva negotiated an end to the joint venture and arranged that Sutee Steel should transfer its shareholding in Cryeng Sutee to Langsuan House. Cryeng Sutee changed its name to Cryeng (Thailand) Co Limited and Mr de Silva became its chairman. Mr de Silva continued to develop the business of Cryeng in Thailand and by the end of 2004 he was spending 3 out of every 4 weeks in Thailand.

119        By September 2007 Mr de Silva was holding monthly meetings of the Cryeng board. In his affidavit of 16 June 2010 Mr de Silva recounted a discussion which he had with Mr Gilchrist in September 2007. He asked, “How long do you want me to keep pursuing things at Cryeng?” When Mr Gilchrist responded, “As long as you like”, Mr de Silva said that he wanted “to get away from the day to day activity in Australia”. It appears from the evidence that Mr de Silva was contemplating shifting the main focus of his interest to Asia, mainly to Thailand. At some stage in 2007 (Mr de Silva thought it was before the 5 October board meeting) he raised the possibility of setting up cryogenic vessel manufacturing in India.

120        A meeting of the Cryeng board was held on 5 October 2007 at the company’s premises at St Marys. The minutes of that meeting record that in addition to Mr de Silva, Mr Loyola and Mr Gilchrist, present at the meeting were Mr Eugene Vaiciurgis and Mr Ross Johnston. Mr Vaiciurgis appears on the minutes of that meeting as a director however Mr de Silva and Mr Gilchrist agreed that this was an error and while Mr Vaiciurgis attended the meeting he was not a director. Mr Johnston is noted as attending “by invitation”. He said that he was there in his capacity as a director of 202 Ltd. There was no dispute as to those present at the meeting however there is considerable disagreement between accounts of what occurred given by Mr de Silva, Mr Gilchrist and Mr Johnston. Neither Mr Loyola nor Mr Vaiciurgis gave evidence.

121        Mr de Silva said that at the meeting on 5 October 2007 he tabled a typed service agreement, unsigned and with the remuneration amount not stated and that he read aloud from that document. Accounts of what happened at that meeting differ. Mr Johnston said that no document was tabled; although Mr de Silva had documents in his hand he did not table the document. Mr Johnston agrees that Mr de Silva spoke for a short time and may have read (briefly) from the documents he was holding. Mr Gilchrist also denied that the agreement was tabled.

122        It may be that the disagreement stems from different understandings of what is involved in “tabling” a document. It seems clear, and is consistent with Mr de Silva’s approach to minutes, that the copies of the service agreement which Mr de Silva had at the meeting were not made available to those present nor was the copy from which he read passed around for perusal.

123        Apparently the document contained a reference to the possibility of manufacturing in India as Mr de Silva said that a comment was made (he was not sure by whom) that India was a place of interest and that “otherwise this is a routine matter”. He quotes Mr Gilchrist as saying that the proportion to be paid by each company needed to be determined. Mr de Silva said that nothing was resolved “beyond that Mr Loyola and Mr Gilchrist would deal with the allocation issue”, apparently this was the proportionate responsibility of Cryeng and Cryeng (Thailand) for payment of the proposed remuneration.

124        In his affidavit Mr de Silva said that Mr Gilchrist and Mr Johnston left as soon as the meeting was finished however he stayed on and had some discussions with Mr Loyola and Mr Vaiciurgis. In his oral evidence he expressed some uncertainty as to whether the meeting with Mr Loyola and Mr Vaiciurgis occurred after the 5 October meeting or after a previous meeting. In any event, during that discussion Mr de Silva says he suggested $100,000 per annum be the remuneration specified in the agreement but that Mr Loyola said it was not enough “for people doing expat work”. According to Mr de Silva someone else suggested settling on $200,000. This is inconsistent with the accounts given by Mr Gilchrist and Mr Johnston both of whom say that Mr de Silva himself suggested the amount of $200,000 at the meeting.

125        Mr de Silva says that he had his wife type the amount of $200,000 into the agreement and signed the document, as did Mr Loyola. A copy of the agreement signed by Mr Loyola on behalf of Cryeng and by Mr de Silva was tendered at the hearing. Mr de Silva said he did not recall the circumstances of his signing the agreement other than that it occurred before 14 November 2007. The date of 2 November 2007 appears under Mr Loyola’s signature.

126        As signed, the agreement provides for Mr de Silva’s retention for 3 years from November 2007 and, for the first year, for him to continue as the company’s chief executive responsible for Cryeng (Thailand). He is said to have specific responsibility for overseas business development including for exploring the possible establishment of a manufacturing operation in India. The agreement continues:

During the 2nd and 3rd years the day to day responsibilities shall be reduced and the contractual commitment shall assume the form of retainer covering an entitlement of time which may be extended by mutual agreement as proposed for retaining the professional services of Board members.

Remuneration

The agreed remuneration package of $A200,000 per annum shall be paid on a monthly basis in parts, by way of monthly retainer to Bramer Holdings and monthly remittances from Cryeng Pty Limited – St Marys and Cryeng (Thailand) in proportions agreed by the parties during the first year.

During the 2nd and 3rd years the method of payment will be as mutually agreed and will depend on the circumstances prevailing at the time.

All statutory entitlements shall accrue and traveling [sic] business expenses shall be re-imbursed at cost.

127        Mr Gilchrist says that the first time he saw the alleged agreement was in late May or early June 2008. Cryeng had received a letter from Mr de Silva’s solicitor enclosing the agreement that he wanted Cryeng to honour. He then obtained the minutes of the 5 October meeting. Those minutes state:

An agreement covering the services of the Chairman was tabled and accepted in principal [sic]. G Loyola and P Gilchrist to discuss allocation of remuneration.

128        According to Mr Gilchrist the Cryeng board had not approved the agreement or authorised Mr Loyola to execute it on its behalf. He remembered that the issue was raised by Mr de Silva at the meeting of 5 October and that Mr de Silva had said that he thought he should be paid $200,000 a year for the rest of his time with Cryeng. Mr Gilchrist said there was no discussion at the 5 October meeting as to any additional duties that Mr de Silva would perform to warrant the increase in his remuneration. He understood that Mr de Silva was simply wishing to have his remuneration increased. In his affidavit of 22 April 2010 Mr Gilchrist records the following conversation that he had at the meeting with Mr Loyola:

Mr Gilchrist: In view of the poor cash position of Cryeng and its poor profit record, is Cryeng in a position to increase its payments to Mr de Silva?

Mr Loyola: No

Mr Gilchrist: You and I had better discuss this before the next board meeting.

Mr Loyola: I agree.

Mr Gilchrist said that despite this conversation he had no further discussions of the proposal with anyone and it was not raised at any other board meeting.

129        The copy of the minutes tendered was annotated by hand written underlining as above and a hand written note, “Not so. No meeting”, was emphasised by vertical parallel lines. Mr Gilchrist said the annotations were made by him when he first obtained the minutes. On cross-examination he said that he clearly remembered that item from the meeting of 5 October because he was very angry at the proposal. Mr Gilchrist said that the proposal was embarrassing and that initially there was a pause but then he thought of a way to diffuse the issue which was to say to Mr Loyola “Well, you and I should go away and discuss this”.

130        According to Mr Gilchrist this approach quickly removed the item from the agenda and there was no discussion. For this reason there was no formal rejection. Until May 2008 Mr Gilchrist thought that the matter had gone away not, as was suggested, because it was a routine matter left for Mr Loyola to attend to but because Mr de Silva “was so embarrassed by his outrageous demand that he’d dropped it”. Mr Gilchrist unequivocally rejected the suggestion that Mr de Silva had indicated that he was going to resign unless the additional remuneration was agreed.

131        The minutes of the Cryeng board meeting of 14 November 2007 record that the minutes of the previous meeting (this is the meeting of 5 October) were read but they do not record that the minutes were confirmed. It is difficult to know how much significance to attach to this omission. On cross-examination Mr Gilchrist accepted that the meeting referred to was that of 5 October and that he did not object to what was read however he said that he did not take much notice of the minutes being read as “I trusted these people”. Mr Gilchrist also said that, whatever Mr de Silva read out, he did not believe that item 5 of the minutes was read out because it was clearly incorrect – the implication being that he would have paid attention to such a comment. He said that Mr de Silva’s custom was to prepare minutes of board meetings, have them typed up and then read the minutes aloud at the next meeting before seeking the meeting’s approval of those minutes. The minutes were not distributed before or after the meeting nor, apparently, were copies made available at the meeting. Mr Gilchrist commented several times that this practice meant that he does not know if Mr de Silva actually read all of the minutes.

132        On cross-examination Mr de Silva confirmed that it was his practice not to circulate minutes but to ensure that the minutes are read out and a resolution approving the minutes confirming the minutes. He said that it was his invariable practice at every meeting to ask the meeting, “May I sign these minutes as a true and faithful record of the meeting?” Once approved Mr de Silva would then sign the minutes as having been confirmed. Mr Lee took Mr de Silva through the minutes of a number of meetings of both Cryeng and Cryeng (Thailand) all of which stated that the minutes of the previous meeting were “confirmed” or “approved”. He then agreed that the only occasion on which he had not followed that practice was in relation to the minutes of the meeting of 5 October. Given Mr de Silva’s evidence as to his “invariable” practice in confirming minutes and his concession that if the minutes had been approved this would have been recorded, there must be doubt that this occurred.

133        In my view there can be little confidence in the minutes of the 5 October meeting. Not only are they inconsistent with the evidence of Mr Gilchrist and Mr Johnston, they also contain a number of undoubted errors. The date of the meeting is stated to be 15 October when it is agreed on all sides that it was actually 5 October and Mr Viaciurgis is listed as a director when he was not. The inconsistencies and errors have greater significance when coupled with the apparent failure to confirm the minutes.

134        Further doubt is cast on Mr de Silva’s evidence by evidence conflicting with his account of the creation of the agreement. The “properties” record of the soft copy of the services agreement document obtained from the word processing system on which it was created shows that the document was created on 30 September 2007, was modified only once and that modification occurred on 30 September 2007. This evidence is inconsistent with Mr de Silva’s statement that the proposed amount remuneration ($200,000) was arrived at after that meeting. It supports the accounts of Mr Gilchrist and Mr Johnston that the sum was mentioned at the meeting.

135        Mr Gilchrist admitted that by the time he received the solicitor’s letter about the services agreement in May 2008 his relationship with Mr de Silva had completely broken down. It is possible, as Mr Marshall of counsel put to Mr Gilchrist during cross-examination that Mr Gilchrist’s anger about the proposed services agreement was of later origin than the 5 October meeting and owed more to the breakdown of his relationship with Mr de Silva and Mr Loyola than to indignation about the remuneration proposal. While this explanation may account, at least in part, for Mr Gilchrist’s palpable anger it does not resolve the inconsistencies in the evidence about what occurred at the meeting on 5 October 2007. In any event given that the breakdown in the relationship between the parties was bilateral, it is as likely to have affected Mr de Silva as Mr Gilchrist. In the absence of evidence to support such an explanation I am not disposed to accept it.

136        Finally the fact that Mr de Silva’s remuneration did not in fact increase from November 2007 as provided for in the agreement supports this conclusion. At the very least one would have expected some enquiry to have been made before the solicitor’s letter of May 2008 had that been the case. In the absence of any evidence from Mr Loyola as to why increased payments had not been made one can only conclude that there was no basis for such increase. It is not in dispute that Mr Loyola’s signature appears on the signed agreement dated 2 November 2007 however the evidence does not support him having either actual or ostensible authority to sign the agreement on behalf of Cryeng. Mr de Silva was present at the meeting of 5 October and, on his own account involved in the preparation of the agreement for signing. It is not possible that he was misled into believing that Mr Loyola had authority.

137        In summary, it is not in dispute that the issue of Mr de Silva’s future remuneration was raised at the meeting on 5 October. I accept the evidence of Mr Gilchrist and Mr Johnston that at the meeting Mr de Silva asked for an increase in his remuneration to $200,000. I do not accept his evidence that this amount was not proposed until after the meeting. While I accept that the meeting did not reject the proposal for an increase and an agreement for the continuation of Mr de Silva’s services for another three years, I do not find that the agreement was approved whether in principle or otherwise. One director, Mr de Silva says the agreement was approved, in principle. One director, Mr Gilchrist says it was not approved. The only other director at the meeting, Mr Loyola, has not been called to give evidence.

138        In circumstances where the document was not shown to those in the meeting it is inherently unlikely that the agreement would have been approved without at least some consideration of its terms. In my view Mr Gilchrist’s explanation that he and Mr Loyola would need to discuss the matter before any decision was made is the more likely account. This is also consistent with the evidence of the document properties and that given by Mr Johnston as well as Mr Gilchrist. I therefore conclude that the cross-claim must be dismissed.

139        Cryeng tendered evidence and made submissions adverse to the credit of Mr de Silva. The submissions focused on Mr de Silva’s involvement with Pioneer and also on allegedly false accounts given in a witness statement in connection with proceedings brought in Thailand. It has not been necessary to make any overall determination about Mr de Silva’s credit. I have found Mr Gilchrist’s account of the circumstances in which the proposed services agreement was considered as the more convincing and on that basis reject Mr de Silva’s account.

140        At the hearing it was submitted that the cross-claim should also be dismissed on the independent ground that it was not possible for the Cryeng board to approve Mr de Silva’s remuneration. The argument is based on Article 71 of Cryeng’s constitution which provides that a director may not vote in respect of a contract in which he is directly or indirectly interested and, if he does vote, that vote is not to be counted. Given that I have found that the agreement was not approved by the board of Cryeng; that Mr Loyola did not have authority to sign it on behalf of the company; and that Mr de Silva was aware of the lack of authority, it is not necessary for me to make a decision on this point.

REMEDIES

141        In its application Cryeng sought a declaration that the services agreement be declared null and void. I do not see any utility in such a declaration. In dismissing the cross-claim I have made clear my finding that no such agreement was entered into by Cryeng. No further interest would be served by making a declaration which, in my view is neither desirable or necessary.

142        At one point it was suggested that Mr de Silva had provided the services contemplated in the services agreement and a claim in quantum meruit was foreshadowed. The suggestion was not pressed and no claim in quantum meruit was made. Therefore it is only necessary to order that the cross-claim be dismissed with costs.

143        For reasons given above I have concluded that the applicant should be awarded damages in the amount of $140,000 being $50,000 for damage to its commercial reputation and $90,000 in respect of the loss occasioned in respect of the Air Liquide purchase order. The applicant also seeks interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).

144        Section 51A(1)(a) provides for interest to be awarded “on the whole or any part of” the amount of an award of damages “for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered”. The respondents made no submission in relation to the time from which any interest should be payable or the rate of such interest. Cryeng seeks interest on and from 1 May 2008. As the evidence which has led me to conclude that the representations of which Cryeng complains includes letters sent by Mr Loyola after 1 May 2008 interest should not run from that date. I am satisfied that the cause of action would have arisen at a later date and in the circumstances I am of the opinion that 1 July 2008 would be an appropriate date.

145        In GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited (2003) 201 ALR 55 at [7] Finn J summarised the usual practice of this Court in awarding interest pursuant to s 51A:

No rate of interest is fixed or prescribed by the section and the court has not, by practice direction or otherwise, sought to provide guidance on what might be considered an appropriate rate to be applied. Though the matter is, and remains, one of judicial discretion, the usual practice that has been followed in applying s 51A has been to adopt the rates of interest applied by the Supreme Court of the state or territory in which this court is dealing with the matter: Namol Pty Ltd v A W Baulderstone Pty Ltd (No 2) (1993) 47 FCR 388; Kettle Chip Company Pty Ltd v Apand Pty Ltd (No 2) (1998) 83 FCR 466; H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795; McCormick v Riverwood International (Aust) Pty Ltd [2000] FCA 32; unless there is evidence that those rates are penal or not commercial: EMCL Pty Ltd v ESANDA Finance Corp Ltd [1999] FCA 978. The practice itself is one from which there has been occasional departure: see eg White Industries (Qld) Pty Ltd v Flower & Hart (No 2) (2000) 103 FCR 559.

146        Since the decision in Marconi, the practice to which Finn J referred has found its way into the Federal Court Practice Note CM 16 which provides that in respect of the period from 1 July to 31 December in any year practitioners and litigants should expect the rate of interest to be “the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced”. This is the same rate as is provided in Practice Note No SC Gen 16 of the Supreme Court of New South Wales. There being no reason to depart from the usual practice in this case the rate specified in the practice note should apply.

147        The applicant also sought relief in the nature of corrective advertising. At the hearing Mr Lee did not press the point although he did indicate that depending on the findings of the Court he might wish to make submissions on the point after the delivery of these reasons. No commitment was given that he would be permitted to do so. These proceeding were commenced on 28 November 2008 and since that time Cryeng appears to have overcome the difficulties of its past. In the circumstance I cannot see that corrective advertising would be other than counterproductive. As Mr Pesman submitted the representations were not made by way of public advertisements and Cryeng, if so inclined, could easily circulate a copy of the reasons for judgment or an extract to its customers.

148        Neither party made any submissions as to costs. I see no reason why costs should not follow the event in the usual way. Cryeng has been successful in the claims in its application that it pressed and in its defence to the cross-claim. The first and second respondents should bear Cryeng’s costs of the application and the third and fourth respondents should bear the costs of the cross-claim.

Associate:

Dated:    23 August 2011