FEDERAL COURT OF AUSTRALIA

Transerve Pte Ltd v Blue Ridge WA Pty Ltd [2015] FCA 953

THE COURT ORDERS THAT:

1.    The proceeding be dismissed.

2.    The Court will hear from the parties as to any consequential orders and costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    Sometimes it is best to start near the end.

2    On 29 March 2012, at a fourth and last site meeting at Surabaya in Indonesia, Mr Alan Mackenzie purported to terminate a subcontract that he, on behalf of Blue Ridge WA Pty Ltd, had earlier made with Transerve Pte Ltd to construct accommodation units for the Roy Hill mining project in Western Australia.

3    Subsequently, Blue Ridge constructed the required accommodation units for the mining project.

4    How these events came about is at the heart of the matters in issue in this proceeding.

5    In short, the applicants contend that in the course of termination of the subcontract and itself constructing the accommodation units, Blue Ridge “expropriated” the subcontract and thereby caused the applicants to suffer financial loss.

6    The applicants identify three central issues concerning Mr Mackenzie, in relation to their complaints, namely, whether Mr Mackenzie personally engaged in unconscionable conduct, or in misleading and deceptive conduct, or interfered with contractual relations.

7    As explained further below, because Blue Ridge went into liquidation prior to the trial of this proceeding, at trial Mr Mackenzie was the only respondent against whom the applicants sought relief.

8    Mr Mackenzie denies all claims against him, says Blue Ridge, by him, was entitled to terminate the subcontract, and says that at no time did he or Blue Ridge act unconscionably, or engage in misleading or deceptive conduct, or interfere with contractual relations.

9    On 20 December 2011, a little more than three months before the purported termination, Roy Hill awarded Blue Ridge the head contract for the design and supply of 476 accommodation units for the Roy Hill mining project, to be fabricated in three separable portions, the first being for 233 units.

10    On 22 December 2011, Roy Hill provided Blue Ridge with the layout requirements, which were forwarded by Blue Ridge to Mr Geoffrey Leembruggen at Leembruggen Butler Pty Ltd in Perth, Western Australia, which company at material times acted as Transerve’s agent. While not an officer of the company, Mr Leembruggen was authorised by Leembruggen Butler to represent it in all material dealings with Blue Ridge.

11    On 23 December 2011, Blue Ridge forwarded a copy of the notice of award provided by Roy Hill to Transerve in Singapore, and to Leembruggen Butler in Perth. The notice contained drawings, comments and handwritten amendments.

12    Confirmation of the award of the subcontract by Blue Ridge to Transerve and Leembruggen Butler followed soon after on 4 January 2012, with the formal subcontract executed on 16 January 2012 in favour of Transerve alone; as was always the intention.

13    The award of the subcontract followed dealings over more than two months between Blue Ridge, Leembruggen Butler and Transerve.

14    In October 2011, when Blue Ridge had been invited by Roy Hill to tender for the head contract, Mr Mackenzie met with Mr Leembruggen to discuss the project.

15    On 17 October 2011, Mr Mackenzie provided Mr Leembruggen and his daughter, Ms Natasha Butler, a director of Leembruggen Butler, with quotation drawings.

16    On 20 October 2011, Ms Butler emailed the pricing for four-man, three-man and two-man units, based on the quotation drawings, to Mr Mackenzie.

17    On 24 October 2011, the Blue Ridge tender was accepted for consideration by Roy Hill.

18    By about 16 November 2011, Blue Ridge had requested that Mr Leembruggen provide a delivery schedule. Mr Leembruggen that day emailed to Mr Mackenzie a new quote for three-man and four-man units.

19    Mr Leembruggen had explained to Mr Mackenzie in the course of those dealings that Transerve would be the subcontracting party. On 5 December 2011, Ms Butler, Mr Leembruggen and Mr Robert Liu and Mr Baharudin Paiman of Transerve, met with Mr Mackenzie in Perth.

20    On 7 December 2011, Roy Hill notified Mr Mackenzie that bank guarantees would be required from Blue Ridge under the head contract, if awarded, and that the first progress payment under the head contract would be made upfront upon submission of the bank guarantees. In particular, Roy Hill told Blue Ridge that all bank guarantees under the head contract were to be issued by Blue Ridge.

21    That notification was also forwarded to Mr Leembruggen by Blue Ridge. It was understood at material times that the subcontract, if awarded, would be “back to back” with the head contract, reflecting the terms of the head contract, so that similar bank guarantees obligations would apply between the parties to the subcontract.

22    On 7 December 2011, Mr Leembruggen emailed Mr Mackenzie outlining Transerve’s financing arrangements for any subcontract through Bank DKI in Indonesia, and confirmed a final price of $73,000 for each of the four-man units.

23    On 8 December 2011, Transerve confirmed the offer from Blue Ridge for a subcontract to manufacture and supply 233 accommodation units – being the first separable portion under the proposed subcontract.

24    By mid-December, Mr Mackenzie and Blue Ridge understood that PT Mulya Surya, an Indonesian company based in Surabaya, would be engaged by Transerve to manufacture and supply the units.

25    On 14 December 2011, Mulya provided a confirmation letter from Bank DKI to Mr Mackenzie confirming bank guarantees would be issued to Mulya for the purpose of satisfying Transerve’s obligations under any subcontract.

26    At this point a decision concerning the award by Roy Hill of the head contract was imminent.

27    On 14 December 2011, Mr Mackenzie for Blue Ridge received annexure Part A to the proposed head contract from Roy Hill, which he forwarded to Mr Leembruggen requesting that he sign off on it and explaining some additional engineering costs.

28    Mr Leembruggen that day confirmed to Mr Mackenzie that Transerve had suitably qualified personnel and that it would produce a product in accordance with the Building Code of Australia (BCA) and Australian Standards.

29    On 16 December 2011, Mr Mackenzie advised Mr Leembruggen, via email, that “Leembruggen Butler” (that is to say, Transerve) would get the project.

30    Then, on 20 December 2011, Roy Hill indicated it would award the head contract to Blue Ridge.

31    Following that, as explained above, on 22 December 2011, Roy Hill provided Blue Ridge with the layout requirements, which were forwarded by Blue Ridge to Mr Leembruggen the same day. On 23 December, Roy Hill sent the notice of award to Blue Ridge and Blue Ridge forwarded a copy of the notice of award, with drawings, comments and handwritten amendments, to Transerve.

32    There was much activity following these events, as one would expect, given that the contracts provided for the manufacture and supply of the first 50 units of the first separable portion of 233 units by 31 March 2012.

33    On 27 December 2011, Mr Mackenzie and Mr Philip Richardson, an employee of Blue Ridge, met with Mr Leembruggen.

34    On 31 December 2011, Mr Leembruggen again met with Mr Mackenzie and Mr Richardson. Mr Mackenzie was then about to go on holidays and thereafter was overseas until 21 January 2012. Mr Richardson was to be Blue Ridge’s contract manager in his absence. Further meetings followed, involving Mr Leembruggen, Ms Butler, Mr Richardson, and Mr Suharto of Mulya.

35    On 4 January 2012, Blue Ridge confirmed that Transerve had been appointed to manufacture and supply the units in accordance with the notice of award. While it stated in its written notice that both Transerve and Leembruggen Butler had been awarded the subcontract, it was understood, and later clarified, that Transerve was the sole contracting party.

36    By its notice dated 4 January 2012, from Mr Richardson of Blue Ridge, Blue Ridge advised:

This is to advise that Blue Ridge has accepted and appointed Transerve PTE LTD/Leembruggen Butler Pty Ltd (exclusive agents for Transerve) to manufacture and supply the abovementioned accommodation buildings as per the attached Notice of Award for the agreed price of $73,000 per 14.4 x 4.2m 4 Person Staff Quarter.

All terms and conditions are back to back with Roy Hill Purchase order.

37    It was well understood by all parties at that point that the necessary finance to carry out the required manufacture under the head contract and subcontract and payments to be made thereunder would be facilitated by the provision of an initial bank guarantee of 10% of the relevant contract sums – by Blue Ridge providing bank guarantees in that regard under the head contract to Roy Hill, and by Transerve providing similar bank guarantees to Blue Ridge under the subcontract. As noted above, Mulya had earlier confirmed to Blue Ridge it would supply the required bank guarantees to satisfy Transerve’s contractual obligations in this regard. This was never an issue for Blue Ridge.

38    On 12 January 2012, Mulya raised a bank guarantee for 10% of the contract sum through Bank DKI and presented it to Blue Ridge (first bank guarantees).

39    On 13 January 2012, Blue Ridge inquired of Mr Leembruggen as to the status of the architectural drawings.

40    On 16 January 2012, Blue Ridge and Transerve formally concluded the subcontract between them for Transerve to manufacture and supply the 233 accommodation units as per the first separable portion of the Roy Hill award.

41    By letter dated 16 January 2012 from Mr Richardson of Blue Ridge to Mr Robert Liu of Transerve, Blue Ridge advised Transerve that it had accepted and appointed Transerve to manufacture and supply the units “as per the attached Notice of Award” for the agreed price of $73,000 per unit, with the following bullet points noted:

•    Payment milestones back to back with Roy Hill payment terms to Blue Ridge

•    Delivery dates as per Roy Hill letter of intent to Blue Ridge.

•    Taxes – Transerve to deliver CIF Dampier excluding all taxes.

•    Insurance – 20M public liability as submitted by Leembruggen Butler.

42    The letter concluded by confirming that all terms and conditions were back to back with the Roy Hill purchase order.

43    Relevantly, for both the head contract and the subcontract, by annexure Part A, item 12, supplier’s security was dealt with. By (b) the amount or maximum percentage of the contract sum was stated as follows:

Bank Guarantees;

•    1 x 10% Bank Guarantee; to be held as a Performance Guarantee

•    2 x 10% Bank Guarantee; to be held as an advance payment bond, 1st supplied on initial payment. 2nd supplied on second payment

Delivery delay of completed units by the Purchaser shall not prevent the release of the above listed Bank Guarantees.

44    By cl 24.1, and item 32 of Part A, as modified for the purposes of the subcontract, Transerve was entitled to the first progress payment in the sum of $1,700,900, upon the provision of the first 10% bank guarantee to be held as a performance guarantee.

45    By item 33 of Part A, the period for payment under cl 24.1 of the head contract was stated to be 30 days from the date on which a correctly rendered and fully substantiated invoice was submitted. Item 33 further provided that substantiation of invoices was to consist of approval by the purchaser’s representative of attainment of the claimed milestone.

46    On 16 January 2012, Mr Leembruggen, Ms Butler and Mr Richardson met in Perth, with Mr Mackenzie participating in the meeting by telephone from Scotland.

47    On 17 January 2012, a kick-off meeting was held between Blue Ridge, Roy Hill and Mr Leembruggen.

48    From that point on, Leembruggen Butler was actively engaged in Perth on behalf of Transerve in doing what appeared to be required to perform the subcontract, at least at the Perth end. On 18 January 2012, it received preliminary findings regarding BCA compliance.

49    On 20 January 2012, Transerve forwarded drawings of the floor layout to Blue Ridge, which returned them to Transerve with comments.

50    On 21 January 2012, Mulya provided an official English translation (dated 16 January 2012) of the first bank guarantees to Blue Ridge, as requested.

51    On 21 January 2012, Mr Leembruggen forwarded to Blue Ridge the final architectural drawings. Blue Ridge then requested a date to inspect a prototype or mockup of the units.

52    On 23 January 2012, Mr Leembruggen proposed that the inspection of the mockup take place on 8 or 9 February 2012.

53    On 24 January 2012, Transerve received confirmation that the drawings complied with the BCA requirements.

54    Between 24 January and 10 March 2012, Transerve issued a number of technical queries (TQs) to Blue Ridge. It expected these to be passed to Roy Hill and responded to in a timely manner.

55    On 31 January 2012, following provision of the first bank guarantees, Transerve issued an invoice to Blue Ridge for the first progress payment under the subcontract.

56    That day, Mr Mackenzie advised Mr Leembruggen that the first bank guarantees were unacceptable to National Australia Bank (NAB) in their current format.

57    In relation to the first bank guarantees, Blue Ridge sought from Transerve a letter of transfer, following a request by NAB, which documentation was then provided by Transerve to Mr Mackenzie.

58    Construction activity nonetheless continued apace. On 1 February 2012, there was a meeting between Ms Butler and Mr Richardson to finalise the inspection and test plan. Blue Ridge that day notified Transerve by Leembruggen Butler that the supplier list needed to be amended.

59    On 6 February 2012, Roy Hill requested an update from Blue Ridge regarding the provision of its bank guarantees (second bank guarantees) to Roy Hill under the head contract.

60    That same day, Blue Ridge requested Transerve to provide a progress report on the project.

61    On 8 February 2012, in accordance with the earlier request, the first site inspection of the mockup took place in Surabaya, at the premises of Mulya, attended by representatives of the parties and Mr Bob Gill, an inspector engaged by Roy Hill. Mr Gill made a report which marked certain manufacturing specification points to be on “hold” which was subsequently provided to Blue Ridge.

62    The next day, 9 February 2012, a kick-off meeting took place in Surabaya attended by those same representatives of Roy Hill, Blue Ridge, Transerve, Leembruggen Butler and Mulya.

63    That same day, Roy Hill wrote to Blue Ridge giving notice of non-conformance with the head contract due to Blue Ridge’s failure to provide the second bank guarantees to Roy Hill.

64    On 13 February 2012, as a result of the 8 February first site inspection, Transerve produced a procurement register which identified the expected delivery dates of the first 50 units being 31 March 2012.

65    It also that day wrote to Blue Ridge requesting payment of the first progress payment under the subcontract.

66    Also that day, as a result of dealings between Mr Mackenzie and Mulya, initiated by Mr Leembruggen, Mulya arranged the second bank guarantees to enable Blue Ridge to respond to the notice of non-conformance issued by Roy Hill on 9 February 2012. This was done on the basis that Blue Ridge would pay Mulya an arrangement fee of $230,000. As discussed below, while there is no dispute about the essence of this bank guarantee agreement, there is dispute as to when the arrangement fee was to be paid by Blue Ridge: whether immediately on provision of the second bank guarantees, or when they were accepted by Roy Hill.

67    On 14 February 2012, Blue Ridge provided an audit or inspection report to Transerve.

68    On 18 February 2012, Transerve advised Blue Ridge that due to the fact that drawings would need to be redone, following the comments received, there may be an impact on the overall timing and cost of the project.

69    On 21 February 2012, Transerve submitted final structural drawings to Blue Ridge.

70    That day, Mr Mackenzie emailed Mr Robert Liu at Transerve advising that the second bank guarantees had been submitted to Roy Hill.

71    The next day, 22 February 2012, Ms Butler received an English language translation of the second bank guarantees and passed it on to Blue Ridge.

72    That same day, Mr Leembruggen and Mr Walter Liu followed up Mr Mackenzie regarding signed drawings in order to proceed with construction and to complete the mockup.

73    At that time, the first progress payment under the subcontract had, on the face of the subcontract, become due and payable by Blue Ridge on 1 March 2012, that date being 30 days after the issue of the invoice for that progress payment on 31 January 2012, as provided by item 33 of Part A.

74    On 1 March 2012, the second site meeting at Mulya’s premises in Surabaya occurred, which was attended by representatives of Blue Ridge, Transerve and again by Mr Gill. Ms Butler and Mr Leembruggen were present at the site but did not participate in the meeting. There were concerns expressed about how advanced the mockup was.

75    On 3 March 2012, Transerve wrote to Blue Ridge outlining its concerns, following this meeting, including about the fact that the first progress payment had not been paid and that it still did not have approved-for-construction (AFC) drawings from Blue Ridge.

76    On 6 March 2012, Blue Ridge emailed Leembruggen Butler, Mulya and Transerve attaching a tersely worded report of Mr Mackenzie outlining his concerns following the meeting of 1 March 2012.

77    On 7 March 2012, Transerve, harbouring its own concerns about Blue Ridge’s performance of the subcontract, wrote to Blue Ridge noting that it could not proceed with construction in the absence of AFC drawings and answers to TQs.

78    That same day, without the knowledge of Transerve, Leembruggen Butler or Mulya, Mr Mackenzie met, at his request, with representatives of Roy Hill. Mr Mackenzie raised the possibility of Blue Ridge fabricating the second and third separable portions of the head contract in place of Transerve, citing Blue Ridge’s concerns about the ability of Transerve to perform the subcontract.

79    Coincidentally, that same day Transerve, by Mr Walter Liu, emailed Mr Mackenzie requesting an urgent meeting involving Blue Ridge, Mulya, Transerve and Roy Hill.

80    The next day, 8 March 2012, Mr Mackenzie advised Mr Liu by email that Roy Hill would not be involved in any such meeting.

81    That same day, the third site meeting occurred at Surabaya, attended by representatives of Blue Ridge (on this occasion by Mr Craig Mackenzie, Mr Mackenzie’s nephew), Transerve, Mulya, Mr Leembruggen and, again, Mr Gill.

82    Then on 9 March 2012, Mr Mackenzie advised Transerve that it had no chance of getting contracts for the second and third separable portions.

83    That same day, Mr Mackenzie provided a submission to Roy Hill regarding Blue Ridge’s proposition that Blue Ridge should take over the second and third separable portions of the head contract.

84    On 12 March 2012, Transerve again followed up Blue Ridge regarding AFC drawings and payment of the first progress payment.

85    Mr Mackenzie emailed Mr Walter Liu of Transerve the same day, advising of the need for Transerve to continue work on the mockup unit.

86    The next day, 13 March 2012, Mr Mackenzie again met with representatives of Roy Hill in Perth. Again, this was without the knowledge of the applicants. During this meeting Mr Mackenzie raised the prospect of Blue Ridge performing all work under the subcontract, including the work then being undertaken by Transerve under the subcontract on the first separable portion.

87    From that point onwards, until the purported termination of the subcontract by Mr Mackenzie, for Blue Ridge, just over two weeks later, at the fourth and final site meeting at Surabaya, events went quickly downhill.

88    On 15 March 2012, Transerve provided a daily report to Roy Hill and Blue Ridge concerning the completed mockup.

89    That same day, Mr Mackenzie provided a proposal to Roy Hill for fabrication of the full scope of the first separable portion by Blue Ridge, again without the applicants’ knowledge, and thereby effectively cutting Transerve out of the works.

90    On 16 March 2012, Blue Ridge nonetheless requested that Transerve confirm the forecasted completion dates for the first 50 units. Transerve replied that they could not estimate a date until they received signed drawings and a written commitment as to when the first progress payment would be paid, but would likely require 10 days to get the remaining items to site, plus 30 days for production of the 50 units.

91    Roy Hill wrote to Mr Mackenzie the same day, confirming receipt of his proposal for Blue Ridge to take over construction of all the units and scheduling a meeting for 18 March 2012.

92    On 19 March 2012, Roy Hill, without the applicants’ knowledge, conducted an audit of Blue Ridge’s facilities in Perth.

93    On 20 March 2012, Blue Ridge issued “Contract Direction No 1” to Transerve and Leembruggen Butler requiring them to “suspend” contract works due to Transerve’s alleged non-performance and failure to meet the delivery schedule; and it then arranged the site meeting of 29 March 2012.

94    On 21 March 2012, Roy Hill wrote to Blue Ridge, again without the applicants’ knowledge, proposing terms on which Blue Ridge could be engaged to manufacture all units. Mr Mackenzie for Blue Ridge accepted Roy Hill’s terms the following day, 22 March.

95    The next day, 22 March 2012, Mr Walter Liu of Transerve wrote to Roy Hill advising Transerve had received Contract Direction No 1 to suspend works from Blue Ridge.

96    On 26 March 2012, Transerve wrote to Blue Ridge giving formal notice under the subcontract alleging that Blue Ridge was in breach of the subcontract by virtue of its failure to pay the first two progress payments.

97    On 27 March 2012, in advance of the proposed fourth site meeting on 29 March 2012, Blue Ridge requested Roy Hill to provide a “cancellation letter” to Transerve. When such a letter had not been provided by 29 March, Blue Ridge renewed its request to Roy Hill. On 29 March, Roy Hill emailed Mr Mackenzie indicating that such a cancellation letter would not be provided, and stating, in effect, that Blue Ridge’s dealings with its subcontractor were its own affairs, not Roy Hill’s.

98    Then, on 29 March 2012, everything came to a head – and an end – at the fourth site meeting in Surabaya. This meeting was attended by Mr Mackenzie, Mr Craig Mackenzie and Mr Richardson of Blue Ridge, Mr Walter Liu and Mr Baharudin of Transerve, Mr Leembruggen and Ms Butler of Leembruggen Butler, and Mr Suharto of Mulya. No Roy Hill representative was present. Mr Mackenzie purported to terminate the subcontract on the basis that the mockup offered by Transerve was of no use to Blue Ridge or Roy Hill.

99    The next day, 30 March 2012, Roy Hill wrote to Blue Ridge confirming acceptance of the proposal to fabricate the first separable portion of the head contract at Blue Ridge’s facilities in Perth.

100    On 2 April 2012, Transerve wrote to Blue Ridge rejecting the purported termination of the subcontract and notifying its intention to continue performing under the subcontract, and demanding payment of the first and second progress payments it then claimed were due under the subcontract, totalling AUD3,401,800.

101    The next day, 3 April 2012, Mulya wrote to Blue Ridge, requesting payment of monies allegedly owing to it.

102    On 10 April 2012, Blue Ridge wrote to Transerve formally terminating the subcontract and advising that Roy Hill had cancelled its contract with Blue Ridge.

103    It was in these broadly stated factual circumstances that Transerve, Mulya and Leembruggen Butler commenced this proceeding against Blue Ridge and Mr Mackenzie in 2012.

104    After the proceeding was commenced, Blue Ridge went into voluntary liquidation. Subsequently a court-appointed liquidator was appointed by the Court on the application of Transerve. The claims against Blue Ridge are no longer pursued by the applicants. A cross-claim against Transerve, made with the voluntary liquidator’s leave, was withdrawn following the appointment of a court-appointed liquidator.

105    Consequently, at trial, pursuant to the third amended statement of claim, the applicants sought relief against Mr Mackenzie only, alleging he is liable to each of them personally for contraventions of the Australian Consumer Law (ACL) (which is Sch 2 to the Competition and Consumer Act 2010 (Cth)) and as a person involved in contraventions of the ACL by Blue Ridge. They allege Mr Mackenzie engaged in misleading and deceptive conduct, unconscionable conduct, was involved in similar contraventions by Blue Ridge, and also that he interfered with contractual relations. Mr Mackenzie denies all claims against him.

106    The key issues in the proceeding are whether:

(1)    Mr Mackenzie made misleading precontractual representations to the applicants about Blue Ridge’s financial capacity and experience;

(2)    Mr Mackenzie made misleading second bank guarantees representations to the applicants that the second bank guarantees had been accepted by Roy Hill and/or were acceptable to Roy Hill;

(3)    Mr Mackenzie made misleading Roy Hill termination representations to the applicants in relation to the termination of Blue Ridge’s contract by Roy Hill;

(4)    Mr Mackenzie and Blue Ridge engaged in unconscionable conduct in purporting to terminate and terminating the subcontract;

(5)    Mr Mackenzie interfered with contractual relations; and

(6)    if Mr Mackenzie is liable to the applicants, the applicants have established loss and damage as claimed.

Did Mr Mackenzie make the alleged financial capacity and experience representations prior to the making of the subcontract?

107    By [9A], [9B] and [9C] of the statement of claim the applicants plead that:

9A.    Prior to entry into the Subcontract pleaded in paragraph 9 below. MacKenzie and Blue Ridge represented to the Applicants that:

9A.1    Blue Ridge had the financial capacity to raise the bank guarantees that would be due to Roy Hill under the Main Contract; and

9A.2        Blue Ridge had the necessarv experience and competence to perform its obligations under the Main Contract and Subcontract;

(together, the Precontractual Representations)

Particulars

The representations were made by Alan Mackenzie to Geoff Leembruggen in oral discussions from 17 October 2011 to 27 December 2011.

9B.    Transerve was induced to enter into the Subcontract in reliance on the Pre-Contract Representations.

9C.    The Pre-Contract Representations were false.

108    At [45.1] of the statement of claim, Transerve alleges that by reason of the misleading and deceptive conduct pleaded in [9A] to [9C] (amongst other conduct pleaded) it suffered loss and damage:

45.1.1    by losing the opportunity to perform the remainder of its obligations under the Subcontract, and so losing the opportunity to obtain profits from the performance of the Subcontract;

45.1.2    further and alternatively, by continuing to perform its obligations under the Subcontract, pleaded at paragraph 9 above, and incurred costs that it would not otherwise have incurred in the amount of not less than $623,787.64;

109    It may be said that the lost opportunity to perform the subcontract referred to in [45.1.1] is not obviously referable to the precontractual representations plea; although the loss and damage referred to in [45.1.2] arguably is.

110    At [45.2] of the statement of claim, Mulya pleads that it suffered loss and damage as follows:

45.2.1    loss of the opportunities that otherwise would have been available to it to obtain amendment of the Second Bank Guarantees so that they were acceptable to Roy Hill;

45.2.2    lost the opportunity that otherwise was available to it to negotiate a refund of the administration fee for the Second Bank Guarantees;

45.2.3    incurring liabilities to suppliers that it would not have incurred had it known that the Second Bank Guarantees had not been accepted;

45.2.4    continuing to perform its obligations under the subcontract that it had with Transerve which it would not otherwise have done; and

45.2.5    costs in the amount of $1,206,300.51;

111    None of the loss and damage complained of by Mulya immediately appears to be referable to the precontractual representations plea, save for [45.2.4], but rather appears to relate to the second bank guarantee representations pleading, which is dealt with further below.

112    Leembruggen Butler pleads, at [45.3], that it suffered the following loss and damage by reason of the misleading and deceptive conduct pleaded in [9A] to [9C]:

45.3.1    by continuing to perform its obligations under the agency agreements that it had with Transerve and Mulya, pleaded at paragraphs 11 and 12 above, and thereby incurring costs that it would not have incurred; and

45.3.2    costs in the amount of $303,494.59.

113    Mr Mackenzie says that it is uncontroversial that he was the sole director of Blue Ridge at material times and, in its dealings with Transerve and other parties, represented Blue Ridge in his capacity as a director of the company and not as its alter ego, and so cannot be found liable for anything he may have represented on behalf of the company.

114    Mr Mackenzie also questions whether Leembruggen Butler (or Mr Leembruggen) was the agent of Transerve or Mulya at material times, as pleaded.

115    Mr Mackenzie denies in any event that the pleaded representations were made.

116    Further, Mr Mackenzie contends that Transerve carried out its own due diligence and satisfied itself as to Blue Ridge’s financial capacity, experience and competence and so any representations that were made by him prior to entry into the subcontract did not induce Transerve to enter into the subcontract.

117    The question of what loss or damage, if any, suffered by the applicants in relation to the precontractual representation plea is a question raised by Mr Mackenzie in his defence.

118    Section 18 of the ACL provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

119    In this proceeding, it is not in question that the alleged representations, as indeed other pleaded representations, if made, were made in trade or commerce.

120    If the representations were indeed made, the primary questions are by whom they were made and to whom they were made and whether they were representations that were misleading or deceptive or likely to mislead or deceive.

121    The proscription of such conduct applies to a “person”, not just a corporation, and so a director of a company, such as Mr Mackenzie, may be found liable for contravening s 18 notwithstanding that he is a director of a company on whose behalf, ostensibly, he was acting. In other words, the mere fact that a person purportedly made representations on behalf of the company, whether as a director or otherwise, does not immunise them from an allegation that they contravened s 18.

122    In Australian Securities and Investments Commission v Narain (2008) 169 FCR 211; [2008] FCAFC 120, an officer of a listed public company who was instructed to send a statement to the Australian Stock Exchange (ASX) that proved to be misleading was found by the primary judge not to be liable because his involvement in the matter was “ministerial, as an organ of the company” or “an agent” of Mr Narain, who had authorised the officer to send the statement.

123    The primary judge found that Mr Narain may have been engaged personally in the conduct of the preparation and drafting of the release, but he was not personally engaged in sending it to the ASX. That conduct was engaged in by the company and the person who transmitted the release to the ASX, who was not Mr Narain (at [7]). On appeal, Finkelstein J, however, considered that Mr Narain was, on the facts, responsible for the publication of the release to the ASX (at [19]).

124    Similarly, Jacobson and Gordon JJ, in a joint judgment, considered Mr Narain was personally liable for the contravention by having authorised another person to send the announcement to the ASX. While their Honours considered that the other officer’s actions were “ministerial, as an organ” of the company or as an agent of Mr Narain, Mr Narain’s participation was a different order in that he participated in the preparation and drafting of the announcement, adopted and approved the contents, as well as authorised and directed its transmission to the ASX (at [98]-[99]).

125    At [97], their Honours made the point that the authorities establish that it is a question of fact in each case whether all the elements of a contravention are made out.

126    Their Honours also emphasised, by reference to Houghton v Arms (2006) 225 CLR 553 at [40]; [2006] HCA 59 (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ) and Standard Chartered Bank v Pakistan National Shipping Corp (No 2) [2003] 1 AC 959 at [20] (Lord Hoffman), [39]-[40] (Lord Rodger); [2002] UKHL 43, that the status of a person as an employee or director of a company does not divest him or her of personal liability for wrongful acts committed in that capacity including under provisions such as s 52 of the former Trade Practices Act 1974 (Cth) – to which s 18 is the successor – and other statutory analogues.

127    Their Honours noted that in Cleary v Australian Co-Operative Foods Ltd (No 2) (1999) 32 ACSR 701 at [54], [56] and [57]; [1999] NSWSC 1062, Austin J found the case before his Honour was not one where the directors acted “merely as a corporate organ, binding the corporation but not binding themselves individually”. By passing resolutions each director individually authorised the chairman and management team to communicate to others on his behalf. The directors’ conduct of distributing materials gave rise to a finding of misleading and deceptive conduct.

128    It may also be said, at this point, that the fact that the applicants do not proceed against the company, now in liquidation, does not have the effect of relieving a person who has contravened a relevant provision of the ACL from being found to have been involved in the contravention by the company: see Matheson Engineers Pty Ltd v El Raghy (1992) 37 FCR 6 at 9 (French J).

129    The applicants therefore contend that not only may Mr Mackenzie be found directly liable for contravening s 18 of the ACL for making the precontractual representations pleaded, he might also be found liable as a person “involved” in the alleged contravention of Blue Ridge, for the purposes of s 236 of the ACL. In the latter case, however, the applicants accept a proviso that Mr Mackenzie must first be found to have had actual knowledge of the essential elements constituting Blue Ridge’s contravention (as required by Yorke v Lucas (1985) 158 CLR 661 at 670; [1988] HCA 65), that is, he knew of the representations made by Blue Ridge, although it is not necessary that he knew that the particular conduct was unlawful. They say this knowledge is established by the evidence.

130    I accept that the fact Mr Mackenzie was a director, indeed the sole director, of Blue Ridge does not automatically immunise him from liability for contravention of s 18 (or other relevant provisions of the ACL discussed below) if, as a matter of fact, all the elements of alleged contravention are made out.

131    On the facts of this case, it cannot reasonably be suggested that Mr Mackenzie acted merely as a corporate organ, not binding himself individually. He engaged in direct negotiations as the sole director of Blue Ridge with representatives of Leembruggen Butler and was actively engaged in the negotiation of a subcontract and, subsequently, upon the award of the subcontract, contract management. He attended site meetings, wrote emails and sent texts. He was, personally, intricately involved with the company and took complete responsibility for all dealings under consideration. It is unnecessary to find that Mr Mackenzie was the “alter ego” of the company in order to establish his personal liability under s 18 (or other relevant provisions) of the ACL, although he should also be considered to have been that.

132    The question of the claimed agency arrangement between Leembruggen Butler, Mulya and also Transerve then arises. First, it is difficult to see how Mulya can rely on representations made by Mr Mackenzie to Mr Leembruggen. While Mr Leembruggen plainly acted for Leembruggen Butler at material times and for Transerve, I do not accept that Mr Leembruggen or Leembruggen Butler was relevantly acting as the agent for Mulya at the time of these precontractual dealings, or indeed at any other material time, save as discussed below in relation to the second bank guarantees representations.

133    The only evidence given to support a more general agency was that of Mr Leembruggen that Mulya and Leembruggen Butler had entered into a memorandum of understanding in about October 2011. But when taken in cross-examination to that document, which was unsigned, Mr Leembruggen could not explain why he had said that there was a signed memorandum, although he believed there was. A signed memorandum was never produced. Ms Butler gave evidence that there was no signed memorandum of understanding.

134    Mr Leembruggen, in cross-examination, was taken to a letter dated 27 October 2012, well after the events in issue, which was provided by Mulya to Leembruggen Butler appointing it as agent, but it plainly was incapable of supporting an agency arrangement as of and about September/October 2011.

135    Ms Butler gave evidence to the following effect, namely, that the document dated 27 October 2012 was given at that time in respect of Leembruggen Butler’s agency arrangement with Mulya after the termination of the subcontract and that the company only became agents for Mulya in late 2012 and not before then.

136    In effect, in the course of the trial, counsel for the applicants conceded no agency arrangement could be established involving Mulya prior to October 2012, at least as a general proposition.

137    There is little evidence upon which the Court can properly found an inference that at material times in the precontractual period, Leembruggen Butler (or Transerve for that matter) were acting as the agent of Mulya. No representative of or witness for Mulya was called to give evidence in the proceeding, and no explanation was provided as to why that was so.

138    In all the circumstances, the Court is unable to accept a submission that Mr Leembruggen or Leembruggen Butler acted as the agent of Mulya at the time of the pleaded precontractual representations.

139    In those circumstances, the apparent claim for damages for the misleading and deceptive conducted pleaded at [9A] to [9C] must necessarily fail so far as Mulya’s claim is concerned. Mulya do not rely on any evidence of the making of the pleaded representations apart from Mr Leembruggen’s. Accordingly, in the absence of an agency arrangement between Mulya and Leembruggen Butler at material times, Mulya has no claim against Mr Mackenzie in respect of the alleged precontractual representations. There is, in effect, nothing to link Mr Mackenzie to Mulya.

140    The claims of Transerve and Leembruggen Butler, however, so far as the precontractual representations are concerned, stand on a different footing. I accept that Mr Leembruggen acted as the agent of Transerve and was the relevant representative of Leembruggen Butler at material times, including in the precontractual dealings. Mr Leembruggen’s representation of Leembruggen Butler is not seriously in contest and, in any event, cannot be doubted.

141    As to an agency arrangement between Leembruggen Butler and Transerve, Mr Mackenzie submits, however, that the document said to exhibit that agency (tab 5 of the trial bundle) was not in fact an agency agreement between those parties. He observes it was in fact an appointment by Leembruggen Butler as agent by Transerve Cabins Pte Ltd, a separate legal entity, and that in cross-examination Mr Leembruggen said there was no official agency agreement between the relevant parties.

142    Mr Mackenzie also notes that when asked in cross-examination what the commercial arrangements were between Transerve and Leembruggen Butler to act as agent, Mr Leembruggen gave evidence that it was a commission structure, whereby Leembruggen Butler would receive 45% and Transerve 55% on the sum of $10,000 to be earned on each unit produced.

143    As Mr Mackenzie submits, it may be contended the arrangement was not in fact one of agency but shared profits, and a finding that there was no agency as pleaded would be consistent with the opening of counsel that Leembruggen Butler had entered into a joint venture partnership with Transerve.

144    In my view, however, whatever the commission or profit sharing arrangements between Leembruggen Butler and Transerve truly were, Leembruggen Butler was represented to be the agent of Transerve in the course of dealings between Mr Mackenzie, on behalf of Blue Ridge, and Mr Leembruggen and Ms Butler of Leembruggen Butler.

145    Mr Leembruggen in his evidence-in-chief said he and Mr Robert Liu of Transerve agreed that Leembruggen Butler would become the Australia “sales agent” for Transerve. Mr Leembruggen said that in his first meeting on 17 October 2011 with Mr Mackenzie he represented that Leembruggen Butler was the agent for Transerve and could potentially fill the role that Mr Mackenzie had identified, being an entity with which to subcontract in order to fulfil the contract with Roy Hill. There is no doubt that Mr Mackenzie and Blue Ridge were aware of Transerve, as Mr Mackenzie (according to Mr Leembruggen whose evidence on this point I accept) asked Mr Leembruggen whether he could provide Transerve’s financials, which were subsequently provided. Again, Mr Leembruggen said that he told Mr Mackenzie that Leembruggen Butler was the agent for Transerve and Transerve would have to be named as the subcontractor. That is of course exactly how events unfolded. Indeed, in Blue Ridge’s letter of 4 January 2012 confirming the award of the subcontract, Blue Ridge expressly identified Leembruggen Butler as the exclusive agent of Transerve.

146    Based on this evidence, I have no hesitation in finding that, as a matter of fact, Leembruggen Butler was the disclosed agent of Transerve at material times in its dealings (through Mr Leembruggen and Ms Butler) with Blue Ridge, and that Blue Ridge (and Mr Mackenzie) were well aware of that agency.

147    The next question is whether the pleaded precontractual representations were made to Transerve and Leembruggen Butler. I have difficulty in finding that the representations as pleaded were made. While accepting assumptions might well have been made by Transerve and Leembruggen Butler about Blue Ridge’s relevant capacities, that is, in this case, a different proposition from finding the representations were made as alleged.

148    As Mr Mackenzie points out by reference to Watson v Foxman (2000) 49 NSWLR 315 at 318-319, where spoken words are relied upon to prove a representation they should be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that the representation was made. Precise evidence concerning spoken words is lacking in Mr Leembruggen’s evidence which is that relied on by Leembruggen Butler and Transerve. While Mr Walter Liu gave evidence, he was not involved in any precontractual negotiations.

149    The evidence of Mr Leembruggen in cross-examination establishes that Leembruggen Butler and Transerve sought the financial statements of Blue Ridge to satisfy Transerve as to the financial position of Blue Ridge, both in relation to a proposed acquisition by Transerve of Blue Ridge discussed early on, and in relation to the project generally by way of due diligence. Mr Leembruggen’s evidence was that he was not really interested in the financial statements and passed them on to Transerve. Mr Leembruggen gave evidence that they were satisfied with a letter stating projected jobs coming up and “we were just confident that he [Mr Mackenzie] was really quite financial”. Mr Leembruggen gave evidence that he accepted the financial viability of Blue Ridge on the basis of what he saw in the yard and what he had been told prior to seeing any figures. Ms Butler, in cross-examination, said that the fact that Roy Hill had entered into a head contract gave Leembruggen Butler comfort about Blue Ridge’s financial position and that she was happy with the projects that were in the pipeline.

150    As Mr Mackenzie submits, as part of its own due diligence Transerve satisfied itself as to the financial capacity of Blue Ridge and as to its necessary experience and competence. No witness was called from Transerve who could talk about the due diligence undertaken or what factors it relied upon in entering into the subcontract. Mr Walter Liu did not give such evidence.

151    In the circumstances, I am not satisfied that the pleaded representations have been proved. While representations need not be express, and may reasonably arise from all the circumstances of a case and what was said and done during negotiations, I do not consider what was said and done in the relevant period of negotiations conveyed the precontractual representations pleaded. Apart from anything else, there was no circumstance in which Mr Mackenzie was, in effect, called on to vouch for Blue Ridge’s financial capacity or experience. All there is, is general evidence of dealings between Mr Mackenzie and Mr Leembruggen over an extended period between 17 October 2011 and 27 December 2011 from which the representations are said to arise. The inexactness of what was said or done by them in this period, taken with the general tenor of the applicants’ evidence, does not permit the Court to conclude the representations alleged were conveyed.

152    In those circumstances, the claim for damages made by the applicants based on the pleaded precontractual representations must fail.

Did Mr Mackenzie make the second bank guarantees representations?

153    By [38] of the statement of claim it is alleged that prior to 18 April 2012, Mr Mackenzie and Blue Ridge represented to the applicants that:

(1)    the second bank guarantees were acceptable to Roy Hill or had been substantially accepted by Roy Hill and only minor details needed to be resolved; and

(2)    there was no dispute that Blue Ridge owed the sum of $230,000 to Mulya pursuant to the bank guarantee contract between Blue Ridge and Mulya.

154    The applicants plead that by reason of the second bank guarantees representations they were led to believe that the second bank guarantees had been accepted or substantially accepted and only minor details remained left to resolve; further, that there was no dispute that Blue Ridge owed $230,000 to Mulya and that Blue Ridge had paid $165,020 as part payment of the outstanding amount under the bank guarantee agreement, which representations were false, misleading or deceptive and so Mr Mackenzie or Blue Ridge contravened s 18 of the ACL.

155    It is not in dispute that item 12 of Part A of the head contract, set out above, was a term of the subcontract.

156    I also find it was a further term of the subcontract, by virtue of cl 24.1 of the head contract and item 32 of Part A, modified in order to be incorporated into the subcontract, that Transerve would be entitled to the first progress payment of $1,700,900 upon the provision of the bank guarantee to Blue Ridge.

157    The first bank guarantees obtained by Mulya on behalf of Transerve were provided to Blue Ridge in English language form on 21 January 2012.

158    Blue Ridge by Mr Mackenzie, in an email to Mr Leembruggen dated 31 January 2012, indicated that NAB, its bank, had advised that the bank guarantees were unacceptable “in their present format” and he attached a document advising that NAB were looking for a letter of credit under internationally recognised terms and not under Indonesian law as at present.

159    On 31 January 2012, a “confirmation letter” issued by Bank DKI confirmed that if Mulya was to default the bank would make payments directly to Blue Ridge. That was provided to Blue Ridge and addressed to Mr Mackenzie.

160    No issue was raised by Blue Ridge concerning the acceptability of the first bank guarantees obtained on account of them being obtained from Bank DKI by Mulya.

161    That same day, 31 January 2012, Transerve provided Blue Ridge with an invoice for the first progress payment, “milestone claim number 001”, in the amount of $1,700,900 in accordance with the subcontract term mentioned above. There was no suggestion on behalf of Blue Ridge at that point that it was not liable to pay that sum to Transerve.

162    By 6 February 2012, Transerve was concerned about the payment of the first progress payment. By an email of that date from Mr Walter Liu of Transerve to Mr Richardson of Blue Ridge and copied to others, including Mr Leembruggen, it was noted that the first bank guarantees were issued the previous month by Mulya “and the team hopes to receive first progress payment within the month in order to meet our cashflow commitments”. The email further stated:

Please note PT Mulya is requesting a letter from Blue Ridge to Transerve stating that ‘all payment milestones for this project shall be back to back with Roy Hill payment terms’ and to provide the bank account details set up for this project. Likewise, Transerve has prepared a similar letter to PT Mulya. (Geoff [Leembruggen] can confirm this is true)

163    As it transpires, on 6 February 2012, Roy Hill, by Ms Monique De Villiers, emailed Mr Mackenzie and Mr Richardson at Blue Ridge concerning the second bank guarantees due under the head contract from Blue Ridge to Roy Hill and asking for “an update on the progress of the bank guarantees”.

164    Three days later, by letter dated 9 February 2012, Ms De Villiers on behalf of Roy Hill wrote to Mr Mackenzie giving notice that Blue Ridge “has not conformed” to two conditions of the head contract, being item 6, supplier’s submission, and, relevantly, item 7, security, and stated:

As per Clause 3.1 of Part A Item 12, a 10% bank guarantee is due twenty business days after Date of Contract, nominally 20th January 2012 and an additional 10% bank guarantee is due thirty-five business days after Date of Contract, nominally 13th February 2012. Further to sub-clause 24.1 and Part A Item 32, an invoice for the first milestone cannot be submitted until receipt of both bank guarantees.

The letter stated that Roy Hill would appreciate “urgent action” in rectifying the above non-conformance issues.

165    Neither this notice of nonconformance nor its substance was immediately supplied or communicated to any of the applicants at the time it was received by Blue Ridge.

166    However, the applicants, or at least Leembruggen Butler and Mr Suharto at Mulya, soon enough became aware of the problem Blue Ridge had in providing Roy Hill with the required second bank guarantees. It appears that the issue was discussed during the site visit in Surabaya on or about 8 February 2012. Given that the notice of nonconformance from Roy Hill to Blue Ridge was dated 9 February 2012, perhaps the discussion in question took place after that. In this regard, in his email dated 13 February 2012, Mr Mackenzie thanked Mr Leembruggen and Mr Suharto (and Mr Krisno of Mulya) “for your assistance during our visit last week”. Mr Mackenzie also advised them that he had met with “our client” – Roy Hill – that morning and referred also to discussions with Mr Leembruggen that day regarding Roy Hill’s requirements for the bank guarantees. He thanked all concerned “for your patience, understanding and assistance in arranging new BG’s being 2 off at 5% and 1 off at 20%. We understand this will take 3>5 days to complete”.

167    Mr Mackenzie further noted that:

On acceptance of the new Bank Guarantees by Roy Hill, Blue Ridge agree to pay your facilitation fee of $230k and will immediately raise the invoice for 10% of the contract price to Roy Hill. This amount should be payable by them in 30>35 days in accordance with their terms.

168    That email followed an email earlier in the day on 13 February 2012 from Mr Leembruggen to Mr Mackenzie, Mr Suharto and Mr Krisno in which he advised the Mulya representatives that Mr Mackenzie had accepted their offer to assign a bank guarantee to Roy Hill and that Mr Mackenzie would forward a copy of how the new bank guarantee should read.

169    Mr Leembruggen in that email further stated that:

BR will pay Mulya A$230,000 as cost incurred. Please proceed with the change immediately. Alan [Mackenzie] will also send you an email confirming this transaction and he will also submit a letter stating that on receipt of the bank guarantee, Blueridge will immediately submit their invoice for the first 10% and he will show that the payment should be made in approx. 30 days from submission of his invoice.

170    Just before that, on 11 February 2012, Mr Leembruggen had emailed Mr Walter Liu at Transerve and Mr Suharto at Mulya acknowledging their assistance and seeking to reassure them about the carrying out of the project “as one unit”, indicating he would be meeting with Blue Ridge regarding the bank guarantee “which I believe is holding up payments”.

171    There is little doubt that, through the initiative of Mr Leembruggen, the cooperation of Mulya was obtained in order to help progress performance of the head contract and the subcontract. In that email, Mr Leembruggen advised Mr Walter Liu and Mr Suharto that he would “be having a very frank discussion with Alan Mackenzie re his companies (sic) nonperformance in this matter”. He added that he would need the support of each of them.

172    Consequently it is clear that the applicants became aware of the problems that Blue Ridge had encountered in providing the requisite second bank guarantees to Roy Hill under the main contract.

173    On 13 February 2012, Mr Walter Liu of Transerve both wrote to and emailed Mr Richardson, copying Mr Mackenzie into the email, reminding Blue Ridge of the “status of our 1st milestone payment per Roy Hill Contract …”. The letter requested Blue Ridge to provide:

(1)    a copy of “similar guarantees submitted to Roy Hill per back to back arrangement”;

(2)    a letter to Transerve stating that all “payment milestones shall be back to back with Roy Hill payment terms” and to provide the bank account details set up for this project (Mr Liu noted that Transerve had prepared a similar letter to Mulya); and

(3)    information as to the “Status of Roy Hill Contract issuance”.

174    Ultimately, by 21 February 2012, Mulya arranged the second bank guarantees in the name of Blue Ridge from DKI Bank, paid an administration fee of $230,000 in the course of doing so, and provided these second bank guarantees in their untranslated format to Blue Ridge.

175    On 21 February 2012, Mr Mackenzie sent an email to Transerve, Mulya and Leembruggen Butler stating that the second bank guarantees and Blue Ridge’s invoice for its first progress payment had been provided to Roy Hill.

176    At that point, work on the subcontract proceeded, albeit on the understanding that signed drawings and answers to TQs had still not been supplied.

177    In that regard, on 22 February 2012, Mr Leembruggen had emailed Mr Mackenzie, Mr Walter Liu and others stating, amongst other things, that they did not have signed drawings or an interior furniture list and exterior wall clad approvals. That same day Mr Walter Liu emailed Mr Mackenzie and others agreeing with Mr Leembruggen’s comment and stating that:

We need confirmation in writing to proceed based on the submitted drawings/documents as AFC.

(Emphasis in original.)

178    Mr Mackenzie responded by email dated 22 February 2012, stating “Comments understood and appreciated, however …”, then mentioning a range of questions suggesting that there were delays he was not responsible for and they were things that should not hold anything up at that stage. He emphasised the need for the mockup to be advanced in order to identify issues or material changes of a minor nature.

179    Mr Mackenzie also said he was promised invoices from suppliers the previous week and noted that any items for the mockup coming from Perth must be airfreighted that week.

180    Mr Mackenzie concluded his email, not by taking a backward step, but by stating:

Let me remind everyone that liquidated damages apply to this project and repairs or material replacement in the Pilbara will cost you at least ten times that of doing it right the first time.

181    The next day, 23 February 2012, Mr Mackenzie emailed Mr Leembruggen, Mr Walter Liu and others stating, in relation to the second bank guarantees provided by Blue Ridge to Roy Hill, as follows:

A few questions from their commercial people re the BG’s submitted. I note the originals have arrived and on their way to BR per E-mail from Natasha [Butler].

182    That same day, Mulya, via Ms Butler, provided Blue Ridge with the certified translated versions of the second bank guarantees.

183    About this same time, emails about construction of the units kept flowing between the parties, principally Mr Mackenzie and Mr Richardson, on the one hand, and Mr Walter Liu and Mr Leembruggen, on the other. There were also continuing meetings. By 23 February 2012, Mr Walter Liu and Mr Leembruggen were, between themselves, expressing considerable concern about not having received signed drawings and also about progress with the second bank guarantees. Mr Leembruggen plainly considered that Mr Mackenzie was avoiding him. There was also a question of urgently sending goods from Perth to Surabaya, which needed to be paid for by someone.

184    On 24 February 2012, just before a weekend, Mr Leembruggen was in communication with Mr Mackenzie, by a series of SMS text messages, about the payment of the bank guarantee arrangement fee of $230,000. Mr Leembruggen told Mr Mackenzie that Mr Suharto at Mulya was expecting an email from Mr Mackenzie, at the latest by the next day, to indicate that he would pay the $230,000 immediately after issue of the bank guarantee. In one of the text messages Mr Leembruggen stated:

The email has just got to be clear that he will get paid once it is issued. I confirm that he had made the payment on your behalf as the bank director would not initiate the new BG without it. I hope u appreciate how difficult it is to do things like this.

Mr Mackenzie replied by asking:

Did you get my e-mail confirming payment?

Mr Leembruggen responded stating he had not but would read it when he got back to the hotel. Mr Leembruggen later texted Mr Mackenzie again indicating that he had spoken to Mr Suharto and had asked him to send an email “to authorize me to pay for products to be sent to Sby [Surabaya] from Australia using part of the $230,000 from yourself”. Mr Leembruggen stated he would gather invoices and forward them to Mr Mackenzie as soon as possible, noting that “[w]e might just need a deposit for now and the rest on Mon if possible”. Mr Mackenzie responded to that text by stating “Ok”. Mr Leembruggen replied by thanking Mr Mackenzie. Mr Leembruggen then asked Mr Mackenzie whether he had “got the PO [purchase order] number from RH [Roy Hill]”. Mr Mackenzie responded, “Not yet, still hopeful for PM”. Mr Leembruggen asked for the “PO number by today”. Plainly, Mr Leembruggen (and Mulya) considered that the issuing of the purchase order would signify acceptance of the second bank guarantees by Roy Hill and that the first progress payment could be expected to flow down the contract line to Blue Ridge, Transerve and Mulya soon after.

185    On 27 February 2012, following the weekend, Mr Mackenzie indicated to Mr Leembruggen by SMS text, “No PO yet. Now we need to register as a supplier with them to get on their system! It just goes on and on!”. Mr Leembruggen immediately responded by text saying Pak Harto from Mulya was “disappointed. He works really hard to get the BG in five days for u and now he is waiting for a PO number and a supplier registration ……?? Alan it is out of hand I can see things boiling over here. U need to sort this out!!!!!”. Mr Mackenzie immediately replied by text:

Calm down, we are registered it’s only the change of address and the bank details, standard practice.

Mr Leembruggen answered immediately that the matter cannot “go on and on” and pointed out that Mr Mackenzie’s original text had said that he needed to “register”, not “change a address”. Mr Mackenzie replied saying that he did not want to play with words and:

The details are purely for the accounts department, nothing more.

186    That same day, plainly responding to Mr Leembruggen’s exhortations, Mr Mackenzie emailed Ms De Villiers at Roy Hill stating that “we really need to get some quick responses on these items and the delay in getting the PO details in particular is concerning”. He added that “we really need to get this simple reference in order that we can show good faith to our manufacturer and suppliers, given the materials already ordered and the expenses to date”.

187    Ms De Villiers replied indicating that she required a copy of all outstanding TQs to be re-sent and she would provide a response to all the next day.

188    By separate email that day, in respect of the purchase order (PO) issue, Ms De Villiers advised Mr Mackenzie:

The issue of the purchase order has not and will not delay payment to you or affect progress as per the contract. The purchase order is merely a reference number in SAP to track payments to you. The first payment milestone in the contract is on submission of bank guarantees and the delay in that has caused the delay in payment to you.

The bank guarantees are currently under review from the Roy Hill Finance and Legal teams to check their alignment with the contract terms and conditions. I will respond to you shortly with comment.

189    The next day, 28 February 2012, the question of the payment to ElectSales, for the goods urgently needed in Surabaya, was pursued by Tan Beng Seng at Leembruggen Butler who sent an email to Mr Mackenzie attaching an invoice in the sum of $130,213.09 together with the bank account details of ElectSales for payment.

190    Mr Mackenzie replied that he had just made arrangements with “Jason”, followed by a further email stating that it was “sorted”.

191    On 29 February 2012, Blue Ridge says it paid $10,000 to ElectSales towards the invoiced expense, not the full amount.

192    It is in these particular circumstances, which might be called frenetic, that the applicants allege Mr Mackenzie and Blue Ridge represented to them that the second bank guarantees “were acceptable to Roy Hill or had been substantially accepted by Roy Hill and only minor details needed to be resolved”, and also that “there was no dispute that Blue Ridge owed the sum of $230,000 to Mulya pursuant to the bank guarantee contract”.

193    Mr Mackenzie submits that the applicants have not adduced evidence to prove that Mr Mackenzie and Blue Ridge as a fact made a representation that the second bank guarantees were “acceptable to Roy Hill”. I accept that submission. The real question is whether they represented that the second bank guarantees “had been substantially accepted by Roy Hill and only minor details needed to be resolved”. Mr Mackenzie submits that the documentary evidence suggests something different and that Ms Butler said in cross-examination that this was never represented to Leembruggen Butler.

194    Ms Butler accepted, as a director of Leembruggen Butler, that Mr Mackenzie and Blue Ridge never said that the bank guarantee was accepted, at least not “expressly”. She added that she “knew that they weren’t rejected”. She said that she did not know what status they were – if they were in with the legal department. She said, “we weren’t getting any feedback as to what changes needed to be made…”.

195    It was put to Ms Butler that Leembruggen Butler knew that the second bank guarantees had not been accepted, whether substantially or otherwise, and that it did not matter whether they had been substantially accepted or not, because Roy Hill had not “ticked off” and Leembruggen Butler knew that. Ms Butler replied saying that she “knew that. I think it’s a difficult – because with this situation there was never anything expressly said, so a lot of stuff that we did we were working off actions”.

196    In my view, it is difficult to conclude, on the basis of this evidence, that Mr Mackenzie represented that the second bank guarantees had been substantially accepted by Roy Hill and only minor details needed to be resolved.

197    While Mr Mackenzie, as a result of his communications with Ms De Villiers, understood that Roy Hill’s consideration of the second bank guarantees had been delayed, because of Blue Ridge’s delay in submitting them, and that the documents would have to be considered within Roy Hill to ensure that they aligned with the head contract obligations, that is not exactly what Mr Mackenzie represented to Mr Leembruggen and through him to Transerve.

198    In passing, I should note that, at this point, Mr Mackenzie must also have appreciated that Mr Leembruggen was representing Mulya’s interests in relation to the payment of the $230,000 arrangement fee and was reporting back to Mr Suharto at Mulya on progress with the second bank guarantees – which I infer he did appreciate. It is reasonable, therefore, to find, as I do, that in relation to these particular pleaded representations, Mr Leembruggen of Leembruggen Butler were agents of Mulya at material times.

199    But what exactly was represented?

200    As noted above, on 27 February 2012, Mr Mackenzie told Mr Leembruggen, when pressed, that everything was registered and the only things that needed to be arranged were change of address and bank details “purely for the accounts department, nothing more”. That, of course was about the “PO” – purchase order. But it seems to have been understood by all concerned in these exchanges – Mr Leembruggen and Mr Mackenzie – that the issuing of the purchase order and the acceptance of the bank guarantees went hand in hand. Mr Mackenzie was aware at that point, from what Ms De Villiers had told him, that the finance and legal departments of Roy Hill were checking whether the bank guarantees were in alignment with the terms of the head contract. Mr Mackenzie was plainly putting a less concerning “spin” on the delay by referring just to the “PO” and putting off Mr Leembruggen, Transerve and Mulya. He knew there was delay with the bank guarantees, but was anxious to avoid conveying any sense of concern about acceptance by Roy Hill of the bank guarantees.

201    Mr Mackenzie emphasises that the evidence given on behalf of the applicants was to the effect that they were aware that the second bank guarantees had not been accepted by Roy Hill. Mr Walter Liu gave evidence that Transerve had not been given notice that the second bank guarantees had been substantially accepted. Those words were not used. Ms Butler conceded that the second bank guarantees had not been accepted. Mr Mackenzie submits she also accepted they had not been substantially accepted.

202    It certainly may be said that express words to the effect that the second bank guarantees had been “substantially accepted” was not given. The question is whether the conduct of Mr Mackenzie pleaded gave rise to a representation to that effect: whether, for example, saying that a change of address and bank details was all that was required “purely for the accounts department, nothing more” conveyed that there was in fact substantial acceptance, subject to those things happening.

203    Mr Mackenzie contends that the SMS text communications (tab 273 of the trial bundle) do not assist and the text in which Mr Mackenzie told Mr Leembruggen that the details were “purely for the accounts department, nothing more” could not not be taken to suggest that the second bank guarantees had been substantially accepted by Roy Hill. No reference was made to Roy Hill at all in that SMS exchange or what position they had adopted in relation to the second bank guarantees.

204    In my view, while it may reasonably be said that the words “purely for the accounts department, nothing more” which are pleaded in [29] of the statement of claim as one of the key facts upon which the pleaded representation is based might be taken to support the pleaded representation, the content of those texts must be taken with the other communications made and, generally speaking, the context in which the various texts were exchanged. Transerve and Leembruggen Butler had been pressing Mr Mackenzie, as had Mulya through Mr Leembruggen, for news on when a purchase order (PO) would be provided by Roy Hill to Blue Ridge. It was understood, I infer, that when the purchase order was placed, it would signify that the second bank guarantees had been accepted and the head contract was being conformed with by Blue Ridge – and so they would, together, soon enough see their respective first progress payments. The applicants were aware of the problems with Blue Ridge’s bank guarantee conformity issue. Mr Leembruggen, when given various explanations about progress in the texts by Mr Mackenzie, pointed out that the answers were becoming contradictory. In context, while Mr Mackenzie was plainly evading giving a clear response, I do not consider that the particular communications made can be construed as a representation that Roy Hill had substantially accepted the second bank guarantees subject to some details being processed in the accounts department. As Ms Butler said in her evidence, Leembruggen Butler only knew the second bank guarantees had not been rejected. That is not the same as saying they had been substantially accepted, subject to paperwork.

205    The contemporaneous events surrounding relevant communications, including the insistence that the $230,000 agreement fee be paid, and the arrangements made soon thereafter for the ElectSales invoice to be paid (or partly paid as to $10,000) all go to indicate that the applicants generally were concerned that the purchase order be produced. At the very least, what Mr Mackenzie was telling Mr Leembruggen at that point plainly did not satisfy any of the applicants that the second bank guarantees had been approved (substantially or otherwise). In those circumstances it seems to me that it is not possible to say that what was done and said actually conveyed a representation to the applicants, as pleaded, that the second bank guarantees had been substantially accepted by Roy Hill and only minor details needed to be resolved.

206    I find that the first of the second bank guarantees representations – that the bank guarantees had been substantially accepted by Roy Hill and only minor details needed to be resolved – is not made out.

207    The further question is whether the second of the pleaded second bank guarantees representations is made out, namely, that there was no dispute that Blue Ridge owed the sum of $230,000 to Mulya pursuant to the bank guarantee agreement.

208    Mr Mackenzie contends that the evidence does not support the alleged representation and establishes that Mr Mackenzie made it clear that until such time as the second bank guarantees had been accepted by Roy Hill there would be no payment of the $230,000 to Mulya. He says the fact that Blue Ridge agreed to make a part payment to a supplier cannot displace the unequivocal communication that payment of the arrangement fee would only be made when the second bank guarantees had been accepted by Roy Hill.

209    In the event, I accept the submissions made on behalf of Mr Mackenzie. The evidence concerning whether or not $10,000 (or some other sum) was paid effectively as part payment of $230,000 is unclear. It is more unclear that in agreeing to assist with (some) payment towards the ElectSales invoice, Mr Mackenzie represented that the $230,000 agreement was immediately due. The exchange of correspondence concerning the timely payment of $230,000, including what Mr Leembruggen conveyed to Mr Mackenzie as to what Mulya had said about it, all indicates that there was an understanding that Mulya wanted to see early payment and that its patience was running thin, but also that Mr Mackenzie was insisting it was not formally due until Roy Hill accepted the second bank guarantees. There was, in effect, something of a commercial impasse. Mr Mackenzie seems to have appreciated the commercial importance of being seen to be doing something and acquiescing to providing some funding for the ElectSales purchase, or at least saying he would do this.

210    Having regard to what the parties actually said in writing about payment of the $230,000 fee being made on acceptance of the second bank guarantees by Roy Hill, I am not satisfied on the balance of probabilities that the other conduct and statements made by Mr Mackenzie support the pleading in [38.2] of the statement of claim that Mr Mackenzie represented there was no dispute that Blue Ridge owed the sum of $230,000 to Mulya pursuant to the bank guarantee agreement at the time that the conduct pleaded occurred. The full context of what was said and done must be taken into account.

211    Accordingly, I find this further pleaded second bank guarantees representation is not made out.

212    In those circumstances, the claim for damages made by the applicants based on the second bank guarantees representations must fail.

Did Mr Mackenzie make the roy hill termination representations?

213    The applicants plead at [39A] of the statement of claim that:

39A.    By reason of the conduct of Mackenzie pleaded at paragraphs 33, 36, 36A and 36B above, Mackenzie represented to the Applicants (Roy Hill Termination Representations) that:

39A.1     Roy Hill was considering cancelling the Main Contract in or around March 2012; and

39A.2     Roy Hill did cancel the Main Contract in March 2012 or April 2012.

214    The relevant pleadings at [33], [36], [36A] and [36B] of the statement of claim are as follows:

33.    On 20 March 2012, Blue Ridge issued a purported notice of suspension of the Subcontract:

33.1    which was signed by Mr MacKenzie; and

33.2    by which Mr MacKenzie represented to the Applicants that Blue Ridge was presently in negotiations with Roy Hill, as to proceeding with the current supply agreement, or face the possibility of cancellation, due to Transerve’s non-performance and failure to meet the delivery schedule.

Particulars

The purported notice was in writing dated 20 March 2012, titled ‘Contract Direction No 1’, and was sent to Robert Liu, Walter Liu and Lily PNG of Transerve, Natasha Leembruggen [Natasha Butler] of Leembruggen Butler, Suharto of Mulya, and Geoff Leembruggen by Mackenzie.

36.    By letter dated 10 April 2012, Blue Ridge:

36.1    advised Transerve that Roy Hill had cancelled the Main Contract with Blue Ridge for the reason that Blue Ridge had formed the view that Transerve had failed to comply with the design, material selection and delivery dates required under the Subcontract; and

36.2    purported to give formal notice to Transerve that it thereby terminated the Subcontract.

Particulars

The purported notice was in writing dated 10 April 2012 and was e-mailed by Mackenzie on 11 April 2012 to Robert Liu of Transerve, Suharto of Mulya and Geoff Leembruggen.

36A.    The letter dated 10 April 2012 pleaded in paragraph 36 above was signed by Mackenzie and the contents of that letter constitute representations made by Mackenzie.

36B.    In fact:

36B.1     Roy Hill had not cancelled the Main Contract; and

36B.2     Blue Ridge continued to undertake work under the Main Contract until at least August 2012.

215    By [39B], the applicants plead these Roy Hill termination representations were false, misleading and deceptive conduct or conduct likely to mislead or deceive in that Roy Hill was not considering cancelling the head contract in or around March 2012 and did not cancel the head contract in March or April 2012.

216    By [39C], the applicants plead that by reason of the Roy Hill termination representations they were led to believe that Roy Hill had cancelled the head contract prior to Blue Ridge purporting to terminate the subcontract and that Blue Ridge was entitled to terminate the subcontract.

217    The applicants plead that each has suffered loss and damage in the terms pleaded in [45] of the statement of claim, which has already been set out above in the course of dealing with the precontractual representations.

218    For the reasons given above in relation to the precontractual representations, I do not consider that the Roy Hill termination representations were made to Mulya, by way of any purported agency arrangement with Leembruggen Butler, and so the claim by it against Blue Ridge on this basis must necessarily fail.

219    As to whether the pleaded representations were made, Mr Mackenzie says the evidence does not support the pleading. First, he notes that Contract Direction No 1 dated 20 March 2012, which is relied on in [33] of the statement of claim, stated “BR is presently in negotiations with RH, as to the proceeding with the current supply agreement, or face the possibility of cancellation, due to your nonperformance and failure to meet the delivery schedule by Transerve”. He submits that does not support the representation alleged to have been made.

220    Secondly, in relation to the letter dated 10 April 2012, pleaded in [36] of the statement of claim, Mr Mackenzie notes that by its terms it says “on instructions from our client, we hereby give formal notice of cancellation of all overseas manufacture by Transerve relating to this project”. Mr Mackenzie submits that the letter does not in any way support the representation that Roy Hill had cancelled the head contract with Blue Ridge in March or April 2012.

221    Mr Mackenzie draws attention to the evidence given by Mr Walter Liu in cross-examination:

I can repeat it. Did Mr Mackenzie at any stage during March 2012 suggest or say anything to Transerve that Roy Hill was considering cancelling the main contract between Blue Ridge and Roy Hill?---March. Yes, I – I believe there were some comments that things were not good and in danger of losing separable portion. There were some comments like that. So there were – no. There was a – a sort of a highlight that – yes.

Did Mr Mackenzie at any time tell you, or suggest, that Roy Hill was considering cancelling the main contract?---I think by 20 March there was a letter informing us to suspend works. So that would – if I remember, the – I’m not sure if I remember it correctly. There would have been some comments of danger of losing separable portion 1 and 2. So there was – yes, I remember that there was the – yes.

222    It is submitted on behalf of Mr Mackenzie that the evidence given on behalf of Transerve is a far cry from the pleaded allegation of the Roy Hill termination representations.

223    It is submitted the relevant time for the testing of the character of a representation complained of is the date of its making, and by 10 April 2012 Roy Hill had negotiated a new contract with Blue Ridge and the head contract had come to an end.

224    Further, in and around March 2012, Blue Ridge was in negotiations with Roy Hill with a view to entering into a new contract and, by implication, cancelling the subcontract or bringing it to an end in its then form.

225    Mr Mackenzie submits the Roy Hill termination representations have not been proved to be false or misleading. He says it is not the case that Blue Ridge continued to supply the units under the head contract. The evidence, he says, unequivocally establishes that Roy Hill and Blue Ridge negotiated a new contract in that regard. Mr Mackenzie refers to the letter from Roy Hill to Blue Ridge dated 21 March 2012 (tab 402 of the trial bundle) which refers to a particular proposal dated 15 March 2012 to manufacture the unit, put to Roy Hill by Mr Mackenzie which was materially different, in substance, as to bank guarantees, payment milestones and delivery dates.

226    Mr Mackenzie submits the applicants seek to prove the falsity of the Roy Hill termination representations by inference from certain written communications which are, at best, equivocal. He says it was open to the applicants to subpoena representatives from Roy Hill and lead evidence about what Roy Hill told Mr Mackenzie, in particular, to adduce evidence from Ms De Villiers. This was not done and there was no explanation for not doing so, and accordingly in Mr Mackenzie’s submission, it is open to the Court to draw an adverse inference that the evidence of Roy Hill representatives would not support a finding that the Roy Hill termination representations were false, misleading and deceptive.

227    In particular, Mr Mackenzie says Ms De Villiers would have been able to explain and provide detail and context to her email to Mr Mackenzie dated 29 March 2012, referred to above (tab 414 of the trial bundle), and Mr Michael Mattes of Roy Hill could have explained what was meant in his letter dated 22 June 2012, in which he stated “Roy Hill did not make any representations of support or agreement to Blue Ridge in their cancellation” of the contract with Transerve (tab 462 of the trial bundle under the heading “Overseas Cancellation”).

228    Mr Mackenzie also submits that the allegation that he made the alleged representations personally was not supported by the evidence. The letter to Transerve dated 10 April 2012 was signed by him as a director of Blue Ridge on a Blue Ridge letterhead and Contract Direction No 1 was signed by him as a director on a Blue Ridge document.

229    He further submits the alleged representations did not in any way influence or induce the applicants to continue to perform under the subcontract or expend further funds in any event and that they have not, after April 2012, demonstrated that they did carry out any further work or incur further costs. He notes that by letter dated 26 March 2012 Transerve gave notice that it would suspend activities until a decision to restart was made (tab 409 of the trial bundle), and says a decision to restart was made in its letter to Blue Ridge dated 2 April 2012, eight days before the termination letter (tab 418 of the trial bundle).

230    Mr Mackenzie contends that if Transerve relied on the Roy Hill termination representations it only did so for eight days. In any event, he submits, the applicants adopted the position after 2 April 2012 that there was not a basis for Blue Ridge to terminate and accordingly they did not rely on the termination representations in doing what they did.

231    The applicants say that these representations relate to the initial six week period of the subcontract during which Mr Mackenzie maintained “the illusion of Blue Ridge’s ability to provide their required bank guarantees to Roy Hill” and controlled the information provided to the applicants as to both Blue Ridge’s inability to obtain those guarantees and Roy Hill’s response or attitude towards Blue Ridge’s failure to comply with this essential term of the head contract.

232    Further, the applicants submit that under cross-examination Mr Mackenzie admitted that at no time during the currency of the contract did he inform the applicants that he had been issued with notice of nonconformance by Roy Hill, entitling it to terminate the head contract for Blue Ridge’s failure to provide the bank guarantees. The applicants say in the absence of this knowledge they continued to perform the works the subject of the subcontract and in doing so incurred costs and expenses as established through the primary evidence. In the applicants’ submission, that evidence established that the applicants would not have performed the works and incurred the costs in question had Mr Mackenzie disclosed the true position as between Blue Ridge and Roy Hill.

233    The applicants say it is not necessary for them to show that they relied on the misrepresentations. What is necessary is a “sufficient and direct link” between the loss and damage alleged to have been suffered and the misleading and deceptive conduct: see Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177 at [31].

234    Accordingly, the applicants submit Mr Mackenzie’s conduct in “deliberately deceiving or misleading” the applicants as to Roy Hill’s termination of the head contract comprises misleading and deceptive conduct falling within s 18 of the ACL.

235    In particular, the applicants say that the evidence establishes that from January 2012 to 9 February 2012 Mr Mackenzie represented to them that the issue of Blue Ridge’s second bank guarantees was in hand and not a problem and also that from 9 February 2012 to 29 February 2012 Mr Mackenzie represented to them that the bank guarantees provided by Mulya were not a problem and just administrative issues to be sorted with Roy Hill. Further, they say that from 9 February 2012 to 17 March 2012 Mr Mackenzie represented to the applicants that he could and would pay for the bank guarantees arranged on his behalf for Roy Hill and that the bank guarantee arrangement fee had been part paid to ElectSales in relation to the essential supply of items for use in the units.

236    While I reject the submission that Mr Mackenzie cannot be held liable personally for any representations that arise from the pleaded materials, as discussed in relation to a similar submission concerning the precontractual representations, in my view the pleaded Roy Hill termination representations, founded on the material facts pleaded, are not established. In that regard, I broadly accept the submissions made on behalf of Mr Mackenzie.

237    There is no doubt that at material times in March and into April 2012 Mr Mackenzie, on behalf of Blue Ridge, was considering the future of the contractual relationship between Blue Ridge and Transerve, and ultimately, having secured an understanding with Roy Hill to the effect that if the subcontract were not the means by which the units were to be manufactured, Blue Ridge could make an independent contract with Roy Hill in respect of the manufacture of the relevant units. However, I do not consider that it can be said on a proper construction of Contract Direction No 1 and/or the letter of Blue Ridge dated 10 April 2012 that the Roy Hill termination representations respectively were made. Those materials reasonably are open to other representations and do not unambiguously convey the representations pleaded. The Roy Hill position was never tested by any witness being called with knowledge of its position to remove ambiguities.

238    It is also difficult to see how whatever was represented could have caused Transerve or Leembruggen Butler any loss or damage, for the reasons submitted by Mr Mackenzie in relation to the continued lack of performance or incurred expenses following April 2012; and so the claim made by them in this regard should also fail for this reason.

239    In these circumstances, I find that the claim based on the Roy Hill termination representations must fail.

Did Blue Ridge or Mr Mackenzie engage in unconscionable conduct?

240    This issue is at the heart of the applicants’ case.

241    Section 21 of the ACL proscribes unconscionable conduct in connection with goods or services in the following terms:

21     Unconscionable conduct in connection with goods or services

(1)     A person must not, in trade or commerce, in connection with:

(a)     the supply or possible supply of goods or services to a person (other than a listed public company); or

(b)     the acquisition or possible acquisition of goods or services from a person (other than a listed public company);

    engage in conduct that is, in all the circumstances, unconscionable.

(2)     This section does not apply to conduct that is engaged in only because the person engaging in the conduct:

(a)     institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or

(b)     refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.

(3)     For the purpose of determining whether a person has contravened subsection (1):

(a)     the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and

(b)     the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.

(4)     It is the intention of the Parliament that:

(a)     this section is not limited by the unwritten law relating to unconscionable conduct; and

(b)     this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and

(c)     in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:

(i)     the terms of the contract; and

(ii)     the manner in which and the extent to which the contract is carried out;

and is not limited to consideration of the circumstances relating to formation of the contract.

242    Section 22 assists in understanding what “unconscionable” means for the purposes of s 21, in that it identifies matters the Court may have regard to for the purposes of s 21. Section 22(1) identifies relevant matters in determining whether a “supplier” has contravened s 21. Section 22(2) identifies relevant matters in determining whether the “acquirer” has contravened s 21. The matters are similar. For present purposes, matters listed in s 22(2) might be noted:

(2)     Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier), the court may have regard to:

(a)     the relative strengths of the bargaining positions of the acquirer and the supplier; and

(b)     whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and

(c)     whether the supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and

(d)     whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the supplier or a person acting on behalf of the supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and

(e)     the amount for which, and the circumstances in which, the supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and

(f)     the extent to which the acquirer’s conduct towards the supplier was consistent with the acquirer’s conduct in similar transactions between the acquirer and other like suppliers; and

(g)     the requirements of any applicable industry code; and

(h)     the requirements of any other industry code, if the supplier acted on the reasonable belief that the acquirer would comply with that code; and

(i)     the extent to which the acquirer unreasonably failed to disclose to the supplier:

(i)     any intended conduct of the acquirer that might affect the interests of the supplier; and

(ii)     any risks to the supplier arising from the acquirer’s intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier); and

(j)     if there is a contract between the acquirer and the supplier for the acquisition of the goods or services:

(i)     the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and

(ii)     the terms and conditions of the contract; and

(iii)     the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and

(iv)     any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; and

(k)     without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the supplier for the acquisition of the goods or services; and

(l)     the extent to which the acquirer and the supplier acted in good faith.

243    It is plain enough that these statutory provisions are not to be construed in some limited way by reference to the “unwritten law”, that is to say, principles of equity: see Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536 at [87]-[89]; [2011] VSCA 196 (Macaulay AJA); Tonta Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699 at [291]; [2011] NSWCA 389 (Allsop P); Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132 at [30]; [2005] FCAFC 226.

244    Further, the factors listed in s 22 plainly are not exhaustive and are intended to be an aid to the Court rather than control it: see Australian Competition and Consumer Commission v Keshow [2005] ASAL 55-142 at [97]; [2005] FCA 558; Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253; [2000] FCA 1365.

245    More generally, it has been observed that unconscionable conduct, on its ordinary and natural interpretation, means “doing what should not be done in good conscience”: see National Exchange at [33].

246    In Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168; [2013] VSCA 292, the Victorian Court of Appeal, at [48] and [49], following a review of authorities dealing with various statutory provisions corresponding to s 21, considered that a distinctive quality of unconscionable conduct is that it is unethical.

247    In Henderson v McSharer [2015] FCA 396, Gilmour J, at [847], recently considered that it was clear from a number of the authorities cited above, including Scully, that the applicants in that proceeding were required to establish some “serious misconduct, clear unfairness or unethical conduct” in order to make out their claim.

248    Traditionally, four classes of unconscionable conduct are recognised:

(1)    exploitation of vulnerability or weakness;

(2)    abuse of a position of trust or confidence;

(3)    insistence upon rights in circumstances which make the conduct harsh or oppressive; and

(4)    inequitable denial of legal obligations.

See Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 at [47]; [2002] FCAFC 4.

249    Unconscionable conduct may also comprise the exercise of a legal right in a way that amounts to unconscionable conduct: see Samton at [46]; Legione v Hateley (1983) 152 CLR 406 at 444; [1983] HCA 11 (Mason and Deane JJ).

250    In this case the applicants contend that Mr Mackenzie engaged in or was involved in the following specific unconscionable conduct either personally or on behalf of Blue Ridge, in that he:

(1)    claimed Roy Hill terminated its contract with Blue Ridge, when it had not;

(2)    deceived the applicants as to the reasons for Blue Ridge’s termination of the subcontract in circumstances where the real reason was to enable Blue Ridge to take over the works;

(3)    misled and deceived Roy Hill about the reasons for and causes of delay on the project so as to persuade Roy Hill to consider his proposal for Blue Ridge to manufacture the units in Perth;

(4)    deliberately appointed a voluntary liquidator to Blue Ridge so as to avoid liability for wrongful termination;

(5)    misled and deceived the applicants in relation to the payment for the bank guarantee arrangement fee;

(6)    failed to facilitate payment of progress payments by Blue Ridge or facilitate payment pursuant to submission of the bank guarantees (arranged by Mulya) to Roy Hill once he had negotiated an extension of time for Blue Ridge to undertake manufacture of the units in Perth;

(7)     “confected” a claim of breach by Transerve so as to facilitate Blue Ridge avoiding a termination for convenience and instead terminating for alleged breach;

(8)    wrongfully terminated by failing to give a show cause notice under the subcontract and in circumstances where he was on express notice of the invalidity of such purported termination, but persisted in the assertion so as to enable Blue Ridge to proceed with the works in Perth;

(9)    misled and deceived the applicants as to Blue Ridge’s ability to raise a bank guarantee and the status of approval of the second bank guarantees by Roy Hill, in circumstances where the applicants were chasing confirmation of Blue Ridge’s performance of its contractual obligations in relation to the second bank guarantees; and

(10)    did not facilitate or prevent Mr Gill walking up to date final drawings through Roy Hill’s approval process when the same were transmitted by Transerve to Blue Ridge on 10 March 2012, procured the nonattendance of the Roy Hill inspector on 15 March 2012, and did not bring the Roy Hill inspector to the site meeting of 29 March 2012.

251    As to (1), namely, that Mr Mackenzie claimed Roy Hill had terminated its contract with Blue Ridge, when they had not, the applicants rely on the following evidence:

    letter dated 10 April 2012 to Transerve stating “our client, Roy Hill, has now cancelled the supply order with Blue Ridge WA Pty Ltd, citing their support for our findings that Transerve Pte Ltd has failed to comply with the design, material selection and delivery dates required under the contract”;

    letter dated 22 June 2012 from Roy Hill to Mr Mackenzie stating “Roy Hill did not make any representations of support or agreement to Blue Ridge in their cancellation of this contract. Roy Hill agreed only to the fabrication of these units locally”; and

    in cross-examination, Mr Gill of Roy Hill confirmed that he did not report back to Roy Hill that Transerve should be terminated.

252    As to (2), namely, that Mr Mackenzie deceived the applicants as to the reasons for Blue Ridge’s termination of Transerve, in circumstances where the real reason was to enable Blue Ridge to take over the works, the applicants refer to the following evidence:

    Mr Mackenzie repeatedly informed the applicants that the basis for termination was Roy Hill led and due to their non-performance: see Contract Direction No 1 dated 20 March 2012, Mr Mackenzie’s email to Mr Walter Liu dated 4 April 2012 and the letter to Transerve dated 10 April 2012.

    From 7 March 2012 onwards, Mr Mackenzie engaged in a scheme to transfer manufacture of the units to Blue Ridge in Perth: see correspondence with Ms De Villiers, Mr Peter Corby and Mr Craig Campbell of Roy Hill from 13 March to 5 April 2012.

    Under cross-examination, Mr Mackenzie gave evidence that:

(a)    he never received correspondence from Mr Gill that Transerve was not capable of performing the subcontract;

(b)    he did not provide any written reports to Roy Hill about Transerve’s inability to fulfil the project;

(c)    he was selective in providing information to the applicants;

(d)    he accepted that he considered his discussions with Roy Hill about fabricating the units in Perth were not a matter for Transerve to be made aware of;

(e)    he admitted that he delayed telling Transerve that he was planning to take over the works;

(f)    his discussion with Roy Hill on 9 March 2012 was the start of renegotiation for a new contract;

(g)    as at 13 March 2012 he was already talking with Roy Hill about cancelling the subcontract;

(h)    he admitted that he was aware that Transerve continued to proceed with production in Indonesia whilst he was having discussions with Roy Hill and that he did not advise Transerve to halt their production while he negotiated the transfer of production to Perth;

(i)    by the date of the site visit on 29 March 2012, he had already agreed terms with Roy Hill for taking over the works; and

(j)    he had requested a cancellation letter from Roy Hill prior to the meeting on 29th March 2012 so that Transerve’s termination could be formalised at the meeting on that date.

253    As to (3), namely, that Mr Mackenzie misled and and deceived Roy Hill about the reasons for and causes of delay on the projects so as to persuade Roy Hill to consider his proposal for Blue Ridge to manufacture the units Perth, the applicants point out that under cross-examination, Mr Mackenzie:

    admitted that a delay in the approval of drawings could have an impact on the timing for delivery;

    admitted Transerve required documents to be properly signed off by Roy Hill and that he was responsible for obtaining the necessary approvals from Roy Hill;

    admitted to knowing that Transerve’s position was that they could not commit to a delivery date until all documentation was in place;

    later gave evidence that he disagreed with the content of an email from Mr Craig Mackenzie to the effect that the mockup needed to be approved by Roy Hill before Transerve could proceed with the real units;

    admitted to not having forwarded on to Transerve the fact that Roy Hill had asked him to submit a revised schedule for the purpose of an application for an extension of time, despite the fact that he knew that Transerve had requested an extension of time;

    claimed that he had had discussions with Roy Hill in relation to Transerve’s request for an extension of time but was unable to produce any written record of any such discussions – there is no written record, by way of email, letter, formal document transmittal or meeting minutes, formally recording Mr Mackenzie seeking an extension of time on behalf of Transerve;

    accepted that if Transerve had been granted an extension of time their baseline schedule would have shown the same number of units as he was proposing to supply to Roy Hill by the end of June 2012;

    admitted that his proposal to Roy Hill was no better than the position in relation to what Roy Hill would get from Transerve if he had asked for the same extension of time for Transerve which he obtained for Blue Ridge;

    accepted that Blue Ridge only delivered 54 units during the period April to October 2012 as Roy Hill reduced the scope of the works due to Blue Ridge’s failure to perform;

    admitted he was unable to produce any evidence that he had conveyed to Roy Hill Transerve’s concerns regarding the lack of drawing approvals;

    accepted that a design development process was undertaken following the issue of the award which gave rise to production of drawings which developed and expanded upon the award drawing and accepted that by 19 March 2012, Roy Hill had not provided approval for those drawings despite there being a requirement that those drawings be approved by Roy Hill;

    accepted that until Roy Hill had given approval those drawings could not be provided as AFC drawings;

    admitted to knowing that Transerve were concerned with the lack of approved drawings by 8 March 2012 and that he did not want Transerve communicating this matter to Roy Hill; and

    admitted that he was aware that payment had not been made by Blue Ridge in respect of shipping of goods by 16 March 2012 and that this could have an effect on Transerve’s production but acknowledged that he did not respond to any of the texts or other requests for payment from Leembruggen Butler.

254    As to (4), namely, that Mr Mackenzie deliberately appointed a voluntary liquidator to Blue Ridge so as to avoid liability for wrongful termination, the applicants refer to the following evidence:

    under cross-examination, Mr Mackenzie admitted that six months after he had made a series of very substantial transfers to himself or entities controlled by him, which were made possible as a result of Blue Ridge undertaking fabrication of the project in its Perth facility, he placed Blue Ridge into voluntary liquidation; and

    the consequential effect of this step was to stay the action for breach of contract against Blue Ridge.

255    As to (5), namely, that Mr Mackenzie misled and deceived the applicants in relation to payment for the bank guarantee arrangement fee, the applicants refer to the following evidence:

    Mr Leembruggen gave evidence that:

(a)    Mr Mackenzie approached him on or about 9 February 2012 and raised his inability to obtain a bank guarantee for provision to Roy Hill under the head contract. Mr Mackenzie agreed to Mulya raising a bank guarantee on behalf of Blue Ridge in favour of Roy Hill, on the basis that Blue Ridge met the cost of raising such a guarantee. Mr Leembruggen’s evidence-in-chief was that it was explained payment for the arrangement fee would need to be made upfront by Blue Ridge and that Mr Mackenzie agreed to this.

(b)    Subsequently, after arrangements had been made for the second bank guarantees and the fee paid, Mr Mackenzie sought to change the basis upon which payment for the bank guarantee arrangement would be made so as to make it contingent upon acceptance of the bank guarantees by Roy Hill.

    The applicants say Mr Mackenzie’s evidence under cross-examination was profoundly unsatisfactory on this issue. He gave evidence as follows:

(a)    Despite subsequently claiming the $230,000 arrangement fee as “an overseas cancellation cost” from Roy Hill, after Blue Ridge had taken over the works, he was unable to explain the basis upon which he had sought this payment from Roy Hill in circumstances where at the same time he was claiming that he had no liability to make payment of the arrangement fee on the basis that Roy Hill had not accepted the guarantee.

(b)    Blue Ridge had represented to Roy Hill that it had committed funds for payment of the sum of $230,000 to Mulya, but did not accept liability to pay that amount. At the same time, Mr Mackenzie also accepted that at no time had he in fact ever paid for the supply of goods as agreed. His evidence on this issue was confused and contradictory.

(c)    Further, Mr Mackenzie accepted that he had agreed to make partial discharge of the bank guarantee arrangement fee (at a time prior to confirmed acceptance of the bank guarantees from Roy Hill) through the payment to ElectSales of goods and materials being shipped to Indonesia for use in the units. Despite this admission, Mr Mackenzie also admitted that no such payment had ever been made whilst at the same time acknowledging that he had not responded to the applicants’ repeated enquiries following up the status of payment for those suppliers.

256    As to (6), namely, that Mr Mackenzie failed to facilitate payment of progress payments by Blue Ridge or facilitate payment pursuant to submission of the second bank guarantees to Roy Hill once he had negotiated an extension of time for Blue Ridge to undertake manufacture of the units in Perth, the applicants submit:

    There is no evidence of any enquiry or follow up on the part of Mr Mackenzie concerning Roy Hill’s approval and acceptance of the second bank guarantees submitted to it on or about 22 February 2012 following the period from 9 March 2012 when Mr Mackenzie first raised his proposal for taking over Transerve’s works.

    Under cross-examination, Mr Mackenzie was evasive and contradictory as to whether Roy Hill had ever rejected the second bank guarantees submitted. What is apparent from the documentation disclosed by Blue Ridge is that he made no attempt to follow up acceptance of the guarantees or corresponding release of the first progress payment by Roy Hill after he had submitted his proposal for transfer of Transerve’s works to Blue Ridge.

257    As to (7), namely, that Mr Mackenzie “confected” the claim of breach by Transerve so as to facilitate Blue Ridge avoiding a termination for convenience, and instead terminating for alleged breach, the applicants submit that:

    Under cross-examination, Mr Mackenzie, Mr Richardson and Mr Craig Mackenzie accepted that they had already resolved that Transerve’s subcontract would be terminated prior to review of the site and the meeting on 29 March 2012. Further, they all acknowledged that none of them had been to site from, in the case of Mr Mackenzie, 1 March 2012, in the case of Mr Richardson, since 9 February 2012, and in the case of Mr Craig Mackenzie, 8 March 2012.

    It was also accepted that there was no report from Mr Gill condemning or criticising the units. In evidence Mr Gill himself confirmed that he never reported to Roy Hill that Transerve should be terminated.

    Mr Mackenzie has not advanced any cogent evidence or made out a case establishing that there was any breach of contract by Transerve, so as to justify termination, quite apart from the fact that under cross-examination he accepted that he had never provided any show cause notice, or caused Blue Ridge to provide any show cause notice, to Transerve.

    Under cross-examination Mr Mackenzie also accepted that he knew and understood that Blue Ridge would be liable for payment of costs to Transerve under the contract if he terminated for convenience.

258    As to (8), namely, that Mr Mackenzie wrongfully terminated by failing to give a show cause notice under the contract and in circumstances where he was on express notice of the invalidity of such purported termination, but persisted in the assertion so as to enable Blue Ridge to proceed with the works in Perth, the applicants submit:

    The evidence establishes that following the notice of suspension on 20 March 2012, Transerve wrote to Mr Mackenzie on 26 March 2012 informing him that the suspension would cause delays, that proceeding with the works was being delayed by the failure to provide approved drawings, and that Blue Ridge’s breach of contract in failing to pay both the first and second progress payments had impacted Transerve’s ability to perform the works.

    Further, following the meeting on 29 March 2012 and the purported oral termination for breach, Transerve formally wrote to Mr Mackenzie on 2 April 2012 expressly putting him on notice that under the contract, Blue Ridge had no entitlement to terminate, both as a matter of fact, and as a matter of compliance with the contract.

    In the express knowledge of Transerve’s rejection of any entitlement to terminate, and in the absence of having given any show cause notice under cl 25 of the subcontract, Mr Mackenzie proceeded to issue a letter to Transerve terminating for breach on 10 April 2012, having received from Roy Hill acceptance of his proposal for Blue Ridge to fabricate the units in Perth on 30 March 2012.

259    As to (9), namely, that Mr Mackenzie misled and deceived the applicants as to Blue Ridge’s ability to raise a bank guarantee and the status of approval of the second bank guarantees by Roy Hill, in circumstances where the applicants were chasing confirmation of Blue Ridge’s performance of its contractual obligations in relation to bank guarantees, the applicants submit:

    Mr Mackenzie misled the applicants as to Blue Ridge’s ability to provide to Roy Hill the bank guarantees required under the head contract, both prior to Blue Ridge entering into the subcontract, and in the period up to 9 February 2012. Specifically, in the first six weeks of the contract, Mr Mackenzie created the impression that the provision of the second bank guarantees to Roy Hill was in hand and that the applicants should proceed with incurring liabilities and taking steps to perform the subcontract.

    In the period following 22 February 2012, up until suspension of the works on 22 March 2012, Mr Mackenzie continued to give the impression to the applicants that acceptance of the second bank guarantees by Roy Hill was imminent and that payment of the outstanding milestone sums would follow thereafter.

    At the same time Mr Mackenzie continued to press the applicants to proceed with incurring further liabilities in the performance of the subcontract, in the full knowledge that, from the period from 9 March 2012, he was then manufacturing a scheme for Blue Ridge to take over the works for Transerve.

260    As to (10), namely, that Mr Mackenzie did not facilitate or prevent Mr Gill, the inspector for Roy Hill, “walking up to date final drawings through Roy Hill’s approval process” when the same were transmitted by Transerve to Blue Ridge on 10 March 2012, procured the nonattendance of the Roy Hill inspector on 15 March 2012 and did not bring the Roy Hill inspector on 29 March 2012, the applicants submit:

    In circumstances where Mr Mackenzie accepted that from 9 March 2012 he was advancing his proposal to take over the works from Transerve, there is no evidence, by way of transmittal, email, minutes of meeting, correspondence, or other documents to establish that Blue Ridge provided to Roy Hill the up to date drawings for approval, in circumstances where Mr Gill had provided assurances that upon receipt of the most up to date drawings from Transerve he would walk them through the approval process.

    At the relevant time, Mr Mackenzie acknowledges that he was the contract administrator and as such was responsible for control and management of the flow of information and the manner in which and the extent to which Blue Ridge’s obligations to transmit and obtain approval of drawings under the subcontract were carried out.

261    The applicants submit that, aside from the specific instances of unconscionable conduct they rely on, Mr Mackenzie also engaged in a “system of conduct and a pattern of behaviour which was unconscionable” within the meaning of ss 21 and 22 of the ACL, including the following conduct:

(1)    failing to either process drawings to obtain Roy Hill approval, and/or not informing Roy Hill of the problems and delays caused by the lack of AFC drawings and answers to TQs, whilst representing to Roy Hill that Transerve was in delay and not capable of meeting the schedule and this was the reason for transferring the subcontract from Transerve to Blue Ridge;

(2)    failing to make payment to Transerve of outstanding sums (first progress payment) due under the subcontract, failing to provide any support in the performance of the contract through the use of own supplier credit terms in circumstances where he knew he had not paid the first progress payment and was representing an inability to make such a payment, whilst at the same time insisting on further purchases of equipment and supplies for use in the units by Transerve;

(3)    misrepresenting the ability of Transerve to perform the contract and meet the schedule for the purposes of inducing Roy Hill to both consider and then consent to his expropriation strategy;

(4)    misrepresenting the purpose for which Transerve wished to meet with Roy Hill and inhibiting Roy Hill and Transerve from meeting;

(5)    seeking to procure the nondisclosure of his expropriation proposal from Roy Hill to Transerve;

(6)    representing to the applicants that the bank guarantee arrangement fee had been part paid in relation to essential supply items for use in the units;

(7)    from 9 February 2012 to 29 February 2012, representing to the applicants that the second bank guarantees provided by Mulya were not a problem and just administrative issues which remained to be sorted with Roy Hill;

(8)    insisting on Transerve purchasing further materials and supplies and proceeding with construction of the units at a time when he had already negotiated for the taking over of the works and had formed the intention not to make any further payments either under the contract or in respect of the bank guarantees to Transerve and Mulya;

(9)    in circumstances where Blue Ridge’s contract had not in fact been terminated by Roy Hill, and Blue Ridge had entered into an agreement to continue manufacturing the units but in Perth, Mr Mackenzie’s refusal to take any of the equipment, materials or supplies purchased by Transerve for use in the units;

(10)    failing to administer or transmit any documentation conveyed by Transerve for lodgement with Roy Hill from 7 March 2012 onwards, and while the subcontract was still on foot;

(11)    purporting to terminate when Blue Ridge itself was in breach for failure to pay the first progress payment; and

(12)    causing Blue Ridge to terminate for default by Transerve, when he knew that Blue Ridge was in default under the contract and Transerve was not in breach for default and Blue Ridge had in any event not given the required notices or time for correcting and responding to or collecting any alleged breach required prior to a termination for default.

262    In the applicants’ written outline of closing submissions, the applicants submit that all the circumstances make Blue Ridge’s termination, and Mr Mackenzie’s role in it, unconscionable. They say Blue Ridge had no right to terminate other than for convenience. In any event, the applicants submit it is unconscionable to exercise a legal right in a way that would be harsh or oppressive. In the applicants’ submission, to bring about a termination of a contract after three months of its performance, during which no money has been paid and significant costs have been incurred by the party being terminated, where the circumstances overwhelmingly establish that the primary purpose of the termination is to enable the terminating party to take over the works for its own benefit and profit is, on any analysis, harsh and oppressive. The applicants contend that even ignoring the illegality of the exercise of such a purported legal right, this conduct is unconscionable, both under the ACL and at law, and gives rise to an entitlement on the part of the applicants for the loss and damage thereby occasioned.

263    Mr Mackenzie condenses the claims of unconscionable conduct so expressed as an allegation that he:

(1)    knew that Transerve had complied with the security requirements under the subcontract;

(2)    knew that Transerve was precluded from building the units because it had not been provided with AFC drawings and had not had TQs answered;

(3)    knew that Blue Ridge had breached the head contract;

and with the knowledge of those matters:

(4)    caused Blue Ridge to cancel the subcontract with Transerve.

264    Having regard to the loss and damage pleaded at [45] of the statement of claim (and set out earlier in these reasons in the course of dealing with the precontractual representations), Mr Mackenzie observes that it is not clear how such alleged unconscionable conduct in causing Blue Ridge to cancel the subcontract could be said to be causative of Transerve continuing to perform under the subcontract, Mulya continuing to perform under its subcontract with Transerve, and Leembruggen Butler continuing to perform under its agency agreements. He says that if the unconscionable conduct caused the subcontract to be cancelled, there was no need to continue performance after that time.

265    Mr Mackenzie denies that he acted unconscionably and says he adopted rational commercial considerations when it was obvious to him that Transerve would and could not perform. He says he reasonably considered that Transerve was in default of its obligations under the subcontract and was incapable of producing the units under the subcontract, and that he appropriately set about negotiating with Roy Hill so as to avoid a debt for liquidated damages and to preserve the good name and integrity of Blue Ridge.

266    As to the claims of Leembruggen Butler and Mulya for damages as a consequence of unconscionable conduct, Mr Mackenzie says they are misconceived and are not open to third parties.

267    Mr Mackenzie also submits that as there was no agency agreement between Mulya and Leembruggen Butler prior to late 2012 and, in any event, until after the subcontract came to an end, if the second bank guarantees representations and the Roy Hill termination representations were made, they were not made to Mulya. Further, Leembruggen Butler could not have suffered damages as alleged as a consequence of it continuing to perform the agency agreement with Mulya as there was not one in existence.

268    As to the evaluation of the conduct of Mr Mackenzie, and Blue Ridge, upon which the applicants rely in pressing their case for contravention of s 21, Mr Mackenzie submits that the s 22 factors direct the Court towards considering the conduct at issue within the commercial context in which the subcontract was negotiated and performed and that the factors involve both subjective and objective inquiries.

269    In that regard, Mr Mackenzie refers to what the Full Court of this Court said in Hurley v McDonald’s Australia Ltd (2000) ATPR 41-741 at [22]; [1999] FCA 1728, that:

For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated – Cameron v Qantas Airways Ltd (1994) 55 FCR 147 at 179. Whatever ‘unconscionable’ means in sections 51AB and 51AC, the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable – Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term ‘unconscionable’ import a pejorative moral judgment – Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 283-4 and 298.

(Emphasis in original.)

270    Mr Mackenzie submits there is a clear demarcation between conduct which is shrewd or opportunistic, and that which can properly be characterised as “unconscionable” in the sense described by the Full Court in National Exchange.

271    In particular, Mr Mackenzie submits s 22(1)(j)(iii) and (2)(j)(iii) of the ACL provide that the Court may have regard to the conduct of the supplier or acquirer in complying with the terms and conditions of the contract.

272    Mr Mackenzie also notes that in Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57; [2009] FCAFC 85, the Full Court held that in considering whether the exercise of the right to terminate a contract in that case was unconscionable for the purposes of s 51AC of the Trade Practices Act 1974 (Cth), the decision needed to be assessed independently of the other conduct and surrounding circumstances and that one could only consider matters that have a causal connection with the decision to terminate.

273    Mr Mackenzie contends that courts have held that before a promise deliberately broken can be characterised as “unconscionable”, more is required to bring such conduct within s 21. Not every deliberate breach of contract necessarily involves the moral obloquy needed for unconscionable conduct under the ACL: see Body Bronze International at [91] (Macaulay AJA).

274    Mr Mackenzie also notes that the claim of unconscionable conduct is not available against Mr Mackenzie under s 236 unless findings are made against Blue Ridge; and submits that because Blue Ridge is not a party to this proceeding, a necessary requirement of s 236 of the ACL has not been met and liability against Mr Mackenzie cannot therefore be established under s 236 of the ACL.

275    I should deal first with the submission made by Mr Mackenzie that Leembruggen Butler and Mulya can have no claim against Mr Mackenzie for unconscionable conduct under s 21 as that provision is not concerned with the effect of conduct on third parties, and is only concerned with the effect of conduct on a party to whom the respondent supplies or from whom the respondent acquires goods and services. I accept that submission about the operation of s 21: see Monroe Topple and Associates Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110 at [2] (Black CJ), [116] and [162] (Tamberlin J); [2002] FCAFC 197.

276    For the reasons given above, in the course of dealing with the precontractual representations, I accept and find, in any event, that, at material times, save in respect of the second bank guarantees representations, Leembruggen Butler and Mr Leembruggen are not shown to have acted as the agent of Mulya. As to the second bank guarantees representations, I have found above that they were not made as pleaded. On these bases, Mulya’s claims based on s 21 of the ACL must also fail.

277    Accordingly, I accept the submission that Leembruggen Butler’s and Mulya’s claims against Mr Mackenzie under s 21 of the ACL must fail.

278    Mr Mackenzie makes a further submission, however, that there was no trading or commerce as between Transerve and Mr Mackenzie in connection with the supply or possible supply of goods or services as contemplated by s 21. I reject that submission. By the subcontract, Transerve undertook contractual obligations to supply the units and in the first instance was to supply 50 such units by the end of March 2012.

279    The question remains whether Mr Mackenzie engaged in the unconscionable conduct alleged, either personally or as a person involved in the conduct of Blue Ridge, for whom he acted as sole director at material times.

280    In light of the findings I have made above to the effect that the precontractual representations, the second bank guarantees representations and the Roy Hill termination representations have not been made out, it follows that a number of the specific instances of unconscionable conduct alleged against Mr Mackenzie or Blue Ridge are either substantially weakened or not made out. The specific conduct relied on by the applicants and mentioned at [250(1), (2), (5), (9)] may be said to fall into this category. I say substantially weakened because it may be that notwithstanding I have found that a pleaded representation is not made out, the general conduct relied upon for the purposes of those representation pleadings remains relevant or of some relevance to the specific claims of unconscionable conduct referred to above at [250] or to the general systems and patterns of conduct and behaviour referred to above at [261].

281    To the extent that the applicants and Transerve in particular attempt to rely on so much of the course of dealings between Transerve, including by its agent Leembruggen Butler (by Mr Leembruggen), and Blue Ridge and Mr Mackenzie, from before the notification that the subcontract would be awarded to Transerve, on around 16 December 2011, through to the events that occurred after the contractual relationship between Transerve and Blue Ridge plainly was at an operational end as of 10 April 2012, when Blue Ridge wrote to Transerve formally terminating the subcontract, and then beyond, including the appointment of the voluntary liquidator of Blue Ridge and Blue Ridge’s and Mr Mackenzie’s conduct thereafter, a number of observations should be made.

282    The first is that, in my view, for the purposes of determining whether s 21 of the ACL has been contravened in the present circumstances, the actions by which Blue Ridge appointed a voluntary liquidator and the company’s and Mr Mackenzie’s conduct thereafter may be considered, at least in the circumstances of this case, to be of little assistance in determining whether conduct at material times during the subsistence of the subcontract, prior to its formal termination by Blue Ridge, was relevantly unconscionable. That is not to say that later conduct, including the appointment of a voluntary liquidator to a respondent company and other behaviour subsequent to the termination of the contract, may not be probative in relation to an earlier unconscionable conduct allegation. It is to say, however, that in my opinion, in the circumstances of this case, the steps taken on behalf of the company in relation to its liquidation after the event of the termination, and the company’s and Mr Mackenzie’s behaviour in the conduct of the head contract then in place between Roy Hill and Blue Ridge, are equivocal when it comes to assessing whether the earlier conduct relied upon was unconscionable conduct.

283    In very broad terms, as already noted, the applicants say that Mr Mackenzie’s conduct, including causing Blue Ridge to be put into voluntary liquidation once claims for damage and loss were made against it by the applicants, following the termination of the contract, was, in effect, all part of a grand design to “expropriate” the subcontract and to replace Transerve in the performance of the subcontract, so that Blue Ridge obtained the benefits of that subcontract and not Transerve. No doubt the placing of Blue Ridge into voluntary liquidation can be seen, especially in the context of a dispute between a company and Transerve, as a cynical exercise designed to frustrate recovery of any judgment debt Transerve and the other applicants may have obtained against the company. But, in this case, I do not place any other significance on that conduct. It is not conduct from which I consider I should draw inferences in relation to the earlier impugned conduct.

284    In this case, I simply do not consider that the Court is able to discern any relevant plan or design in the conduct of Blue Ridge and Mr Mackenzie before the termination of the subcontract. The subsequent placement of Blue Ridge into voluntary liquidation does not supply the unconscionable characterisation to the pre-termination conduct complained of.

285    In relation to the question of the conduct relied on by the applicants in the early period of dealings between the relevant parties, I also consider that there is little that can be properly relied upon to make out a case of unconscionable conduct by Blue Ridge and Mr Mackenzie.

286    By that I mean to say, in the precontractual negotiations, the dealings between those relevant parties and persons may be considered commercially unexceptional. Mr Leembruggen met Mr Mackenzie. The identity of Transerve was introduced into the dealings. The fact that Mulya would be subcontracted by Transerve in Surabaya to manufacture the units was disclosed. There was even a question whether Blue Ridge had a business that Transerve might be interested in acquiring. The parties and individuals, at arm’s length, relying on usual practices, as far as the evidence discloses those practices, negotiated with a view to being in a position to make a viable bid for the construction of the accommodation units to Roy Hill.

287    I have found above that the precontractual representations pleaded were not made. Nothing in the precontractual period suggests any basis for a finding of unconscionability. The parties bargained from positions of relatively equal strength. The terms of the subcontract ultimately negotiated were not unbalanced and indeed were to be expected in the circumstances. The subcontract was always understood to be one that would be back to back with the Roy Hill award, if successful, to Blue Ridge. There is no evidence of any undue influence, pressure or unfair tactics being used by Mr Mackenzie against Mr Leembruggen, for example, or Transerve more directly. There is nothing to suggest that the conduct and the subcontract itself were any different from what one would expect in a similar transaction with some other party. No applicable industry code was disregarded. There is no question of failure to unreasonably disclose conduct or risks. The terms of the subcontract were openly negotiated between the parties. There was no unilateral right of either of the parties to the subcontract to change its terms or conditions. At all material times leading up to the notification that Transerve would get the subcontract, there is nothing to suggest that the relevant parties acted otherwise than in good faith. In other words, there is nothing in the particular matters identified in s 22(1) or (2) that suggests that in the precontractual period up to the making of the subcontract there was anything done that should not have been done in good conscience or that was unethical, or that exploited any vulnerability or weakness, or abused any position of trust or confidence or involved an insistence upon rights in circumstances that made that insistence harsh or oppressive or otherwise denied any legal obligations.

288    Indeed, nor can it be suggested, in my view, on the evidence set out above, including in the broadly stated factual account and the discussion of the circumstances in relation to each of the pleaded representations above, that there was any conduct that could be described as unconscionable conduct up to and including 7 March 2012, when Mr Mackenzie met with representatives of Roy Hill to discuss the possible fabrication by Blue Ridge of the second and third separable portions of the head contract in place of Transerve.

289    In saying that, I intend to include the conduct that the applicants seek to impugn concerning the second bank guarantees. I have found above that those representations were not made out.

290    The reference to those representations also relates to more generalised complaints, such as those made in [250(6)], that Mr Mackenzie failed to facilitate progress payments under the subcontract. I will leave aside for the moment the further question of facilitating payment pursuant to the submission of the Mulya-arranged second bank guarantees to Roy Hill once Mr Mackenzie had “negotiated an extension of time for Blue Ridge to undertake manufacture of the units in Perth”.

291    So far as the second bank guarantees, as they have been called above, are concerned, I am unable to infer that either Blue Ridge’s default in satisfying the security term of the head contract with Roy Hill, in that regard, or its subsequent actions, through Mr Mackenzie, in obtaining the assistance of Mulya to supply guarantees from Bank DKI in Indonesia to satisfy that security term, has any unconscionable character to it. The email correspondence of 13 February 2012, referred to above in the course of discussing the second bank guarantees representations, rather suggests that Mr Mackenzie was grateful for the intervention of Mr Leembruggen and especially Mr Suharto of Mulya in obtaining those guarantees. They were supplied to Roy Hill apparently in good faith.

292    Further, when pressed by Mr Leembruggen, on behalf of Mulya, for payment of the $230,000 arrangement fee, Mr Mackenzie obviously felt under some pressure and, as noted above, wrote to Ms De Villiers of Roy Hill on 13 February 2012 and received responses from her. That conduct does not bespeak any lack of good conscience at that point. That Mr Mackenzie did not share the full details of that response, the fact that he had been told by Roy Hill that there was a delay in accepting those second bank guarantees because he had delayed in submitting them, and the other information about the significance of the purchase order, does not, in my view, indicate a lack of good conscience in Mr Mackenzie’s conduct at that point, but rather a simple unwillingness to fully disclose everything that had been conveyed to him by Roy Hill. I infer that he failed to do that not out of some grand design to take over the subcontract at that point, but in order to avoid inflaming what he understood to be a difficult situation any further.

293    At that point it is also very plain from the exchange of emails that while Blue Ridge was being pressed for the first progress payment under the subcontract by Transerve, Blue Ridge by Mr Mackenzie was also insistent that the work under the subcontract proceed. I infer from the evidence referred to that all parties, at that point, while appreciating the commercial risks that they were presented within this unsatisfactory state of affairs, were prepared to press on with the contract nonetheless. While Transerve had lodged its invoice for the first progress payment of $1,700,900 on 31 January 2012 and required, for example, as at 6 February 2012, a letter from Blue Ridge stating that all payment milestones would be back to back with Roy Hill payment terms and for bank account details to be set up for the project, contract implementation went forward.

294    There was a strong desire by Transerve to obtain AFC drawings and over the period, as discussed further below, it kept requesting approved drawings. It also demanded answers to TQs. That is also dealt with further below. But the frustrations of Transerve in that regard do not, of themselves, or at this point with any other probative evidence, suggest the failure of Blue Ridge or Mr Mackenzie to cause the provision of AFC drawings and answers to TQs was conduct lacking in good conscience. There is no evidence, for example, that enables the Court to infer that the failure to provide approved drawings or to answer TQs was concerted conduct designed to set up Transerve and Mulya to fail to produce a mockup that met the approval of Roy Hill’s inspector and Mr Mackenzie. At least, on the balance of probabilities, I do not draw that conclusion.

295    Whether or not the failure to provide AFC drawings and answers to TQs after 7 March 2012, when Mr Mackenzie was talking to Roy Hill about Blue Ridge manufacturing the accommodation units, is unconscionable is further considered below.

296    But at least up to that point there is, in my opinion, no case to be made that Blue Ridge and Mr Mackenzie had, in those respects, engaged in conduct that could be described as unethical or unconscionable.

297    As noted above, on 7 March 2012, Mr Mackenzie met with representatives of Roy Hill. He discussed the possibility of Blue Ridge fabricating the second and third separable portions of the head contract in place of Transerve.

298    At the time that meeting occurred, the second site meeting in Surabaya had been held on 1 March 2012 and a third site meeting was planned to be held (and then was held) on 8 March 2012 at Surabaya. That third meeting was not attended by Mr Mackenzie, but was attended by his nephew, Craig Mackenzie.

299    As at 7 March 2012, the first progress payment under the subcontract had become due and payable and on 3 March 2012 Transerve wrote to Blue Ridge outlining concerns, after the second site meeting, that included the fact the first progress payment had not been paid. It also was pressing for AFC drawings.

300    Immediately after that, on 6 March 2012, Blue Ridge by Mr Mackenzie wrote to Leembruggen Butler outlining construction concerns following the meeting of 1 March 2012.

301    It may be seen then that, as of 7 March 2012, Blue Ridge and Mr Mackenzie were generally concerned about the state of contract performance. Transerve wanted to see their first progress payment as well as AFC drawings, and Blue Ridge and Mr Mackenzie were complaining about construction concerns. As of 6 March 2012, however, when Mr Mackenzie wrote to Leembruggen Butler about those construction concerns, and on 7 March 2012 when he received a letter from Transerve to Blue Ridge noting it could not proceed with construction in the absence of AFC drawings and answers to TQs, Mr Mackenzie had already arranged a meeting with Roy Hill.

302    It is reasonable to infer that Blue Ridge and Mr Mackenzie were considering options at that point.

303    It is, however, also important to remember that the second bank guarantees, which had been provided by Blue Ridge (with the assistance of Mulya) around 21 February 2012, had not been resolved, in the sense that while they had been submitted, a first progress payment had not been received. No doubt from Transerve’s point of view the expectation was that the Mulya-arranged second bank guarantees provided by Blue Ridge to Roy Hill would shortly see the payment of the first progress payment under the head contract to Blue Ridge and the consequent flow on first progress payment under the subcontract from Blue Ridge to Transerve. But as of 7 March 2012 that had not happened.

304    In his witness statement, provided as evidence-in-chief, Mr Mackenzie says that by email dated 20 February 2012, Blue Ridge raised with Transerve the concerns of Roy Hill about Transerve’s ability to make delivery of the units on time and the need to strictly adhere to the specifications and advice regarding material selection.

305    He says that at about 20 February 2012, Transerve forwarded a production schedule indicating that the testing and manufacture of the first batch of 50 units would be finished by 20 March 2012, the second batch of 50 by 8 April 2012, the third by 28 April 2012 and the fourth by 18 May 2012, with the final, fifth batch being completed by 6 June 2012.

306    He says that Transerve provided an engineer’s certified copy of the unit plans which confirmed delivery dates to be: first batch by 5 April 2012, second batch by 5 May 2012, third batch by 5 June 2012, fourth batch by 7 July 2012, and the fifth batch by 6 August 2012.

307    He says Blue Ridge notified Roy Hill of these delivery schedules.

308    He says that on 22 February 2012, Mr Leembruggen confirmed that the mockup was not approved due to incorrect materials having been supplied and as a result of Transerve’s failure to provide necessary information regarding material used in the manufacture of the building.

309    He further says that after Roy Hill had inspected the mockup he was advised by Mr Gill that the mockup was rejected as the insulation was substandard and the gyprock, fittings and distribution board were all rejected.

310    He says that he then sent an email on 23 February 2012, advising Transerve that they could not vary the items and materials specified by Roy Hill and that the bank guarantees had not been accepted by Roy Hill. He also requested details of various material selections of the outstanding purchase orders.

311    Mr Mackenzie says that on 1 March 2012, with Roy Hill’s representative, he inspected the units’ construction at Surabaya and it was apparent that not one unit had been completed nor had the mockup been completed. He considered there was no prospect of the 50 units being constructed on time.

312    He said that following that second site visit he prepared a memorandum of his observations which was distributed to Transerve.

313    The materials charting the sequence of events described by Mr Mackenzie are all produced in evidence and tend to confirm the picture painted by Mr Mackenzie’s evidence.

314    In cross-examination, Mr Mackenzie was challenged, but did not accept that the inability of Transerve to produce a satisfactory mockup was due to limitations in supply of materials that prevented this happening.

315    Mr Mackenzie insisted that the items including external wall cladding did not stop the mockup from being completed. In fact, he insisted that the wall cladding was actually on the mockup.

316    In cross-examination, however, Mr Mackenzie accepted, begrudgingly perhaps, that Transerve was seeking confirmation in writing to proceed based on submitted AFC drawings.

317    Mr Mackenzie did not necessarily accept, however, that the things that Transerve was then requesting had to be provided as part of the project. Mr Mackenzie answered that:

The whole idea of the mockup is for the client to look at it and for him to have the opportunity to make changes that he may wish to do at that time.