Federal Court of Australia

Gold Titan Pty Ltd v Lopez [2021] FCA 918

ORDERS

THE COURT ORDERS THAT:

1.    By 4 pm on Thursday 12 August 2021, after conferral, the parties provide a timetable for the provision of draft orders to give effect to the reasons provided and further written submissions on the relief that should be granted.

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

ORDERS

THE COURT ORDERS THAT:

1.    In accordance with the timetable agreed in proceeding NSD 1924 of 2019, the parties provide draft orders giving effect to the reasons provided.

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

REASONS FOR JUDGMENT

ABRAHAM J

1    These two proceedings, which were heard at the same time, arise from the formation and dissolution of a trading relationship between Gold Titan Pty Ltd, trading as Evagroup (Evagroup), and Cemimax Australia Pty Ltd (Cemimax or Cemimax Australia) during 2018 and 2019. Evagroup is a floor product wholesaler, which in 2018 and 2019 was a reseller of Cemimax products. Nicholas Lopez was employed by Evagroup from 1 April 2019 until his resignation, which took effect on 12 August 2019. Mr Lopez immediately established the business Imperial Flooring Australia Pty Ltd (Imperial Flooring), which sold Cemimax products. John Titus was at the relevant time, the national sales director for Cemimax.

2    In NSD 1924 of 2019, Evagroup brings an action with respect to what it contends was “a concerted campaign” by the four respondents, Nicholas Lopez (first respondent), Imperial Flooring (second respondent), Cemimax (third respondent), and John Titus (fourth respondent) “to destroy its business as a reseller of Cemimax products, and transfer that business to Imperial Flooring” in the period when the relationship was coming to an end.

3    Evagroup advances three claims against the respondents, being:

(1)    an alleged misuse of confidential information (being an Evagroup customer list) by Mr Lopez and Imperial Flooring;

(2)    breaches of the Australian Consumer Law in relation to Imperial Flooring’s website and certain emails sent by Mr Lopez in his capacity as director of Imperial Flooring, with Mr Lopez aiding, abetting, counselling or procuring the contraventions by Imperial Flooring; and

(3)    defamation claims against Cemimax and Mr Titus alleged to have arisen out of two conversations between Mr Titus and persons in the flooring industry.

4    In NSD 482 of 2020, Cemimax brings an action against Evagroup in relation to an invoice (the Invoice) it raised for Cemimax products which were supplied to Evagroup in the closing days of the trading relationship.

5    For the reasons below, I find that:

(1)    Mr Lopez breached his contractual obligation of confidentiality, and that he and Imperial Flooring have breached their equitable obligation of confidence by using the Evagroup Customer List;

(2)    Imperial Flooring and Mr Lopez breached s 18 of the Australian Consumer Law, by the making of certain statements on its website, and in unsolicited emails to potential customers;

(3)    Evagroup has not established any claim for defamation; and

(4)    there is no proper basis for Evagroup to offset the Invoice to Evagroup for Cemimax products it purchased from Cemimax on 31 July 2019.

6    Before addressing the claims it is appropriate, given the common factual substratum, to consider the factual background to both claims.

Factual overview

7    The product relevant to these proceedings is “leveller”. Leveller is a preparation liquid or semi-liquid spread across floors to even out floor surface imperfections before the finished flooring, such as timber boards, are laid.

8    In 2007, Evagroup was established as a floor product wholesaler by Mr Peter Yates who has held the position of principal and managing director since its inception. Over time, Evagroup expanded its business to become a stockist and supplier of all the products required to undertake flooring works, including flooring leveller, primer and adhesives.

9    In February 2018, Mr Titus was the national sales director of Cemimax Australia, and was setting about importing Cemimax flooring products to Australia from China for the first time. Mr Yates and Mr Titus had known each other professionally prior to 2018. In 2018, they had discussions which led to the two companies establishing a trading relationship.

10    Although there is an issue as to details of the relationship, uncontroversially, the agreement reached included the following:

(1)    Evagroup would act as both a logistic supporter for the importation of Cemimax products, and as a reseller;

(2)    the products would be ordered by Cemimax but shipped directly to Evagroup’s premises at Yennora, where Evagroup would unpack containers of product and store the material in its warehouse;

(3)    when a sale of that product was made, Evagroup would pick the products necessary to fulfil the order and either ship them to the customer, or make them available for the customer to collect from Yennora;

(4)    Evagroup would only raise a charge for its logistical services when the product was moved from its warehouse to the customer, at which time Evagroup would invoice Cemimax $1.70 per unit; and

(5)    in acting as a reseller of Cemimax products, Evagroup obtained orders for the products, and when it made a sale it notified Cemimax, who raised an invoice for the wholesale cost of the goods. The logistics charge on those goods was then set off against that wholesale price.

11    Relevantly, Cemimax product sold by Evagroup included DL55, an internal floor leveller, and DL59, the premier floor leveller, the latter being a more expensive product.

12    As explained below, the relationship between Mr Titus and Mr Yates deteriorated in 2019.

13    In February 2019, Mr Yates looked to employ a sales manager for the first time. At the suggestion of Mr Titus, he interviewed Mr Lopez. Mr Yates understood that Mr Lopez had no prior involvement in the flooring industry, having come from a company that supplied diesel. Nonetheless, Mr Yates employed Mr Lopez. The terms of Mr Lopez’s employment were set out in his Letter of Engagement dated 8 March 2019, which at cl 8 relevantly included a confidentiality clause that he was not to “use or disclose confidential information relating to the business of the employer, including but not limited to client lists, trade secrets, client details and pricing structures”.

14    Approximately seven weeks into Mr Lopez’s employment, on or around 20 May 2019, Mr Yates gave Mr Lopez access to an electronic Excel spreadsheet containing a list or database of what he described as customer details maintained by Evagroup (the Evagroup Customer List). An issue in dispute in these proceedings is whether this constituted a customer list. Accordingly, the reference to the Evagroup Customer List at this stage is for convenience. It is Mr Lopez’s conduct in respect to that Evagroup Customer List which is the subject of the confidential information claim.

15    On 9 August 2019, Mr Lopez resigned from Evagroup giving just one week’s notice, and although that meant he remained employed until 16 August 2019, it appeared to be common ground that Mr Lopez and Mr Yates orally agreed on Monday, 12 August 2019, that that would be his last day of work (although this appears to have occurred at Mr Lopez’s suggestion).

16    Mr Lopez immediately established the second respondent, Imperial Flooring. Australian Securities and Investments Commission (ASIC) records reflect that Imperial Flooring Pty Ltd was established on 12 August 2019, and that Mr Lopez was the sole director, company secretary and minority shareholder, with the majority shareholder being 3 Smith Pty Ltd. On or about 21 November 2019, 3 Smith Pty Ltd sold its shares in Imperial Flooring to Mr Lopez, and from that date he has been the director and sole shareholder of that company.

17    Although the exact sequence and timing of the creation of Imperial Flooring and the events leading to it was in issue, it began operations, a website was created, and the business reached out to potential customers. This included Mr Lopez, on behalf of Imperial Flooring, sending a large number of unsolicited emails to potential customers touting for business. This included emails sent on 9 September 2019 to a number of Evagroup’s customers whose details are on the Evagroup Customer List. The terms of the emails include the following:

Dear Customers,

Imperial would love to talk to you about our floor preparation products and how we can help support you in future projects.

Imperial Flooring Australia are priced the best in the market with locations in Sydney and Soon to open Wollongong warehouse in 3 weeks; storing minimum 50,000 bags at one time.

Gaining fast traction over the years in the Australian market, a small portion of our projects can viewed via this link www.imperialflooringaustralia.com.au/projects

Data sheets can be downloaded via: https://www.imperialflooringaustralia.com.au/floor-preparation

18    It is alleged that Mr Lopez used the information in the Evagroup Customer List to send these emails. Together, statements on the Imperial Flooring website and in such emails are the foundation of the alleged breaches of the Australian Consumer Law.

19    Mr Yates became aware of the existence of Imperial Flooring on 15 August 2019. At 6.07 pm he received an SMS from David, the state manager of Bostik stating:

Hi Peter. I hope you are well. Are you sharing the supply of Cemimax in NSW? I've seen another supplier offering the same brand ..."

20    Mr Yates responded at 6:11 pm: "Only us and cemimax". At 6.14 pm David sent Mr Yates a link to Imperial Flooring’s website.

21    After receiving the SMS from David, Mr Yates received telephone calls from two other clients/suppliers, asking if there was another reseller of Cemimax products.

22    The Imperial Flooring website was operating from at least 15 August 2019. Screenshots of the Imperial Flooring website at that time, exhibited to Mr Yates’ affidavit, show that it described itself as a “Wholesaler & Commercial Flooring Supplier”, “a partner of Cemimax Australia”, and its “number 1 distributer”. On the website, the address given for Imperial Flooring was that of Cemimax’s warehouse. Although, in cross-examination, Mr Lopez challenged that the screenshot was of Imperial Flooring’s website at that time (on the basis that it must have been a later time), I note that no challenge was made to Mr Yates’ evidence on that topic in Mr Lopez’s affidavit, and nor was Mr Yates challenged in cross-examination about the accuracy of his assertion as to the date he recorded that screenshot, or the provenance of the exhibit.

23    From about 15 August 2019, Mr Yates received telephone calls from Evagroup’s customers asking him whether Mr Lopez still worked there. A number of customers forwarded to Mr Yates emails they had been sent by Imperial Flooring, the email recited at [17] above, being one such email. It is apparent from the dates on the original emails sent by Imperial Flooring, which were forwarded to Evagroup, that they were sent on 9 September 2019, with one exception being an email sent on 29 August 2019. The emails contained the same content.

24    I am satisfied that at least by 15 August 2019, Imperial Flooring was running its business with a live website and had reached out to potential customers. As explained below at [61], on 16 August 2019, Mr Lopez sent an email to a potential customer, with Mr Titus carbon copied, arranging a meeting. From 19 August 2019, Imperial Flooring sent free samples of Cemimax products to potential customers and issued them invoices. On 19 August 2019, Imperial Flooring issued its first invoice for the sale of Cemimax products, with the address of the Cemimax warehouse given as Imperial Flooring’s distribution address. At least by 9 September 2019, Mr Lopez, on behalf of Imperial Flooring, had sent large numbers of unsolicited emails to potential customers touting for business (with evidence of earlier unsolicited contact, for example, the email of 29 August 2019).

25    As explained below at [97]-[99], I am satisfied that Mr Lopez was in possession of the Evagroup Customer List during his employment with Evagroup, that he retained it after his resignation and used it, including, to send the unsolicited emails on 9 September 2019 to tout for business.

26    I note that, according to ASIC records, in addition to Imperial Flooring, another Cemimax supplier, Top Level Supply Pty Ltd, commenced business on 4 July 2019. Mr Yates became aware of this company in August 2019.

27    Prior to Imperial Flooring and Top Level Supply commencing business, Evagroup was the only reseller of Cemimax products in Australia, and the only other company selling Cemimax products in Australia, was Cemimax itself.

28    On 24 September 2019, Mr Yates issued a press release (the Press Release) which he sent to all of Evagroup’s contacts on the Evagroup Customer List, which was in the following terms:

PRESS RELEASE FROM EVAGROUP AUSTRALIA

Nick Lopez was employed at Evagroup as our Sales Manager from 1st April 2019 until 12th August 2019.

After his resignation, Nick Lopez immediately set up Imperial Flooring as a Cemimax Reseller.

Most of our Customers would be aware of this already as Nick continues to harass them, continually calling or emailing ALL of them, and for this reason Nick will have an upcoming date with a Federal Judge in Federal Court.

Feel free to email back to peter@evagroup.com.au the email sent by Mr Lopez from Imperial Flooring at 1:45 on Monday 9 September regarding Cemimax Leveller.

John Titus from Cemimax Australia openly praises Mr Lopez for how quickly he has managed to grow his Customer base which you would all agree approx 300 or so Customers in 2 days is quite an achievement for anyone even Mr Lopez.

In regards to Cemimax products, we currently hold enough stock to last us until the end of the year but have made the decision to discontinue the product which will be replaced with a better formula product due for release to the market early November.

Rest assured we have plenty of stock to serve all our Customers requirements until the new product is launched which is guaranteed to be an excellent and exciting new product for the Commercial Flooring Market.

For nearly 20 years we have looked after our Customers and I would like to take this opportunity to say “Thank you” for the loyalty being shown of late.

We will continue to supply the best products, best price and best service, that is our Promise.

Please feel free to contact me for anything you need as we always endeavour and will always continue to endeavour to look after all of our Customers.

Warmest regards,

Peter Yates Director – Evagroup Australia

29    Mr Yates accepted that he made up the reference in that press release to 300 customers as, by that stage, he had only contacted about a tenth of his customers on the Evagroup Customer List. The basis for some of the other statements is not clear and there was no cross-examination about that. There is no basis in the evidence for them.

30    As noted above, the relationship between Mr Titus and Mr Yates deteriorated in 2019.

31    In or about mid-June 2019, Mr Titus informed Mr Yates that Cemimax had a new warehouse and that the Cemimax stock which was being stored with Evagroup (as a result of the logistics agreement referred to above at [10]), would now be moved to that warehouse. At that time, Mr Titus provided Mr Yates with a new Cemimax distributor pricelist. A soft copy was then emailed to him on 12 June 2019. Mr Yates was unhappy with the new prices, alleging they were higher than had earlier been agreed. As explained further below at [71], although Mr Titus claimed that the prices were reduced, in practical terms, that was not so.

32    As a result of the disagreement about pricing, on 24 June 2019, Mr Yates visited Cemimax in China to ask if Evagroup could deal directly with them. Cemimax China agreed to deal directly with Evagroup at the 2018 prices. Mr Yates appeared to make these arrangements with a Ms Chen (who is now deceased). Evagroup purchased stock through Cemimax China for about six weeks from July 2019 until about mid-August 2019, when the supply stopped. At this time, Evagroup was storing stock of Cemimax’s DL59 product, and Evagroup agreed with Cemimax Australia that it would purchase this stock at a reduced rate (being the price applicable to the DL55 product). This forms part of the stock in Cemimax’s invoice number 0256, which is the subject of Cemimax’s claim against Evagroup.

33    The third and fourth respondents, Cemimax and Mr Titus, seek payment of invoice 0256 (the Invoice), issued on 30 July 2019 in the amount of $358,443.25 together with interest and costs of this action. The Invoice relates to flooring products and identifies six types of product: DL55, DL59, DP60 (in 5kg and 20kg quantities) and DP80 (again in 5kg and 20kg quantities).

34    Cemimax’s national sales director, Mr Titus, had involvement with Imperial Flooring from at least 16 August 2019, when he was copied into an email exchange sent by Mr Lopez to Mr Wang confirming a meeting between Mr Lopez, Mr Wang and Mr Titus. In 2019 (as explained below at [204]-[205] the date and circumstances are unclear), Mr Titus spoke with Mr Wang of Style Timber and Mr El-Saj of Richard Crookes Constructions concerning Cemimax products and warranties, and in doing so referred to Evagroup. What he said to them, whether it was defamatory, and if so, whether the statements were on behalf of Cemimax, is the foundation of the defamation claim.

35    Against that background I turn to the evidence.

Evidence

36    The Court Book contained a large number of documents, the majority of which were admitted into evidence subject to my rulings on the objections.

37    The following affidavits, subject to the rulings on the objections, were read by the applicant, with the exhibits tendered:

(1)    the affidavit of Peter James Yates dated 27 January 2020;

(2)    the affidavit of Peter James Yates dated 30 April 2020;

(3)    the affidavit of Peter James Yates dated 8 July 2020;

(4)    the affidavit of Magdalena Rousseau dated 23 January 2020;

(5)    the affidavit of Magdalena Rousseau dated 28 April 2020;

(6)    the affidavit of Magdalena Rousseau dated 3 July 2020; and

(7)    a second affidavit of Magdalena Rousseau dated 3 July 2020.

38    In addition to the affidavit evidence, Evagroup tendered two documents which had been produced by the respondents as a result of a notice to produce. The first was a document entitled “Imperial Flooring Mobile List” (Exhibit A11) and a document entitled “Info” “Imperial Flooring Mobile List” (Exhibit A12). I also provisionally admitted the Supplementary Court Book on the basis that the parties would direct me to relevant material in that book in their closing submissions.

39    Finally, it is apparent that the applicant had intended to call two further witnesses, Mr Cardelli and Mr Wang. The Court was informed at the outset of the proceedings that Mr Wang was no longer to be a witness, as he was not willingly available. Mr Cardelli did not appear at Court as he had been expected to. As their affidavits were not read, no reliance can be placed on that material. In respect to Mr Wang the respondents contended that a Jones v Dunkel inference ought to be drawn, which I address when dealing with the defamation claim.

40    I note that shortly before the hearing, and after the evidence was filed, the applicant changed solicitors and counsel.

41    The following affidavits, subject to the rulings on the objections, were read by the respondents with the exhibits tendered:

(1)    the affidavit of Nicholas Sebastian Lopez dated 10 March 2020;

(2)    the affidavit of Nicholas Sebastian Lopez dated 30 April 2020;

(3)    the affidavit of Nicholas Sebastian Lopez dated 22 May 2020;

(4)    the affidavit of Courtney Tran dated 29 April 2020;

(5)    the affidavit of Courtney Tran dated 5 May 2020;

(6)    the affidavit of Courtney Tran dated 13 May 2020;

(7)    the affidavit of Dory Bejjani dated 28 April 2020;

(8)    the affidavit of Steven Underwood dated 29 April 2020;

(9)    the affidavit of Mitchell Smith dated 29 April 2020;

(10)    the affidavit of Nigel Romaniszym dated 28 July 2020;

(11)    the affidavit of David Milsted dated 9 March 2020;

(12)    the affidavit of David Milsted dated 28 April 2020;

(13)    the affidavit of John Jabro dated 9 March 2020;

(14)    the affidavit of John Jabro dated 28 April 2020;

(15)    the affidavit of John Titus dated 10 March 2020; and

(16)    the affidavit of John Titus dated 28 April 2020.

42    As is apparent, a large number of documents were admitted into evidence. The parties helpfully prepared a table recording my rulings on objections and a bundle of marked up affidavits reflecting those rulings. I have had regard to both of those documents.

Witnesses

43    At this stage I will address the three principal witnesses who gave evidence.

Peter Yates

44    Mr Yates was generally an honest witness. Nevertheless, there are features of his evidence which detracted from his reliability on certain topics. It was apparent from the manner in which Mr Yates gave evidence that he is angry at what he perceives to be egregious conduct against him, and became frustrated at times during cross-examination when his evidence was challenged or when a proposition was put to him inconsistent with what he believes to be the facts. This resulted in him, on occasion, being argumentative and failing to answer the question being asked. Rather, he repeated what he wanted to say on the topic. On occasions his answers were self-serving, in that they were an attempt to justify aspects of his evidence. Aspects of his evidence presuppose that certain events occurred. Mr Yates’ belief as to what occurred, who is to blame and his entitlement to compensation permeates his evidence. Although Mr Yates may genuinely believe certain events occurred, that does not necessarily render his account reliable. These features affect my ability to rely on some aspects of his evidence, where it is not supported by other evidence. The issue is not whether Mr Yates believed events occurred, but importantly, whether the applicant had established by admissible and reliable evidence, that certain events occurred.

Nicholas Lopez

45    Evagroup submitted in relation to the evidence of Mr Lopez, inter alia, that:

There were several notable issues with the evidence given by Mr Lopez. His affidavit and oral evidence are contradicted by documentary evidence. He refused to make concessions – at first combatively, then by retreat to his almost universal response of I don’t recall – where there was unambiguous evidence contrary to his position. When he was given the opportunity to explain the contradictions Mr Lopez did little more than shrug.

46    That description is apt.

47    It is only necessary to refer to two specific examples which clearly reflect this approach. These examples, given the topics, also demonstrate that the issue with Mr Lopez was not just one of reliability but also credibility. These topics relate to setting up Imperial Flooring (the timing of and related events), and whether he had and used the Evagroup Customer List after leaving its employ. These topics are at the heart of the proceedings and ones which Mr Lopez would have been acutely aware were significant, as these proceedings were instituted only shortly after he commenced Imperial Flooring (and which were preceded by correspondence from Evagroup’s lawyers to Imperial Flooring raising the topics in these proceedings).

48    In relation to Evagroup’s Customer List, Mr Lopez denied using any list from Evagroup to source the email addresses for emails sent by him on behalf of Imperial Flooring on 9 September 2019. In cross-examination the following exchange occurred:

Q:     What I’m asking you, to be absolutely clear, please, is do you say to her Honour that you got the email addresses that you used on 9 September by some or all of the methods that you’ve described here in 28?

A:     Correct. We used multiple methods, correct. Many methods since the beginning of Imperial Flooring Australia.

Q:     Do you say to her Honour that you didn’t get the email addresses that you used on 9 September simply by copying them holus-bolus - - -?

A:     That’s correct.

 Q:     from Mr Yates’ information?

 A:     That’s correct.

49    The reference to [28] in the preceding exchange is to Mr Lopez’s affidavit of 10 March 2020, which addressed that aspect of Mr Yates’ affidavit dated 27 January 2020, asserting customers had received unsolicited communications from Imperial Flooring and Mr Lopez. Paragraph [28] was relevantly in the following terms:

[28]     I refer to paragraph 144. Upon starting my business, I conducted my own market research and contacted people in the flooring industry with the objective of getting the second respondent's name into the market place so that other businesses could recognise it and become familiar with it in an attempt to generate business. I utilised the following methods to assemble this list:

28.1     Firstly, I carried out google searches using search terms such as "flooring Sydney" to find other businesses that I did not remember exactly (such as Peter Kelly's Flooring, Fab Floors, Embelton's Floors - I remembered these businesses because I made frequent attempts to secure sales from them) or may have never had contact with before and collected email addresses from those websites. Appearing at pages 40-41 and marked annexure "NL-7" is a copy of a screenshot of an example search I conducted.

28.2     Occasionally, I would call the phone number listed on these websites to get the email for the specific contact person within that business or I would call if there was no email address listed on the website.

28.3     In the course of speaking to people who I contacted using the methods above, I also said words to the effect of "do you know anyone else who might be interested in my products that I can reach out to?" and would collect additional email addresses and telephone numbers from my network that way;

28.4     Further, Mitchell Smith, the director of 3 Smith (Imperial Flooring's major shareholder at the time), provided me with contact details for a number of potential customers who I could contact such as Precision Flooring and Flash Flooring. Similarly, John provided me with the contact details for a number of potential customers who I could contact such as Floor Cover, Mr Carpets and Harvey Norman Commercial, A1 Commercial Flooring, Tony Di Milia Flooring. While Imperial Flooring and Cemimax both sell Cemimax products, Cemimax usually supplies directly to large contractors, whereas Imperial sells the products to flooring contractors, builders, flooring stores, renovators, retailers and online.

28.5     I also took down the contact details of people who contacted me with enquiries. Some people indicated that they were referred to me by word-of-mouth or that they found my contact details online.

50    The obvious similarities between the email addresses to which his cold email of 9 September 2019 was sent and the contents of the Evagroup Customer List, established that statement was plainly incorrect. It was a bulk email sendout, with it going to multiple addresses. The 9 September 2019 emails were sent to email addresses in the same order and with the same quirks as they appear in the Evagroup Customer List.

51    There was not only patent correlation between email addresses and with the order in which they appeared, but it went as far as what letters in the email addresses were capitalised. That is, the combination of upper and lower case in the email addresses accorded entirely with that in the addresses as recorded in the Evagroup Customer List. Moreover, emails on 9 September 2020 were sent to addresses in the Evagroup Customer List which could not possibly be directed at Imperial Flooring obtaining customers. It is only necessary to refer to three of the examples put to Mr Lopez in cross-examination, to illustrate this point. First, an email was sent to accounts@evagroup.com.au, which was an email address sandwiched between the same email addresses in the 9 September 2019 email as it was in the Evagroup Customer List. This is obviously an email address for Evagroup’s accounts, and plainly not a potential customer. When Mr Lopez was cross-examined as to why he had sent an email to Evagroup, he said “I don’t recall why, it must be a mistake”. Second, the email of 9 September 2019 was also sent to zoeebert@cemimax.com.au, although Cemimax would plainly not have been considered a potential customer by Imperial Flooring, if it had been, Ms Zoe Ebert, the accounts executive at Cemimax Australia, would not have been the target Cemimax employee for sales. Third, the inclusion of an email address of a wife of a roofing contractor, even though Imperial Flooring was not selling roofing products.

52    During his cross-examination Mr Lopez was also asked:

Q:    I’m going to suggest to you that if we had continued this comparison infinitely, we would have found that, with one single exception, and I’ll come it in a moment, every one of the addresses on the copy of exhibit E, that’s the yellow and grey document, is also found in the list on pages 2090 of the court book, in the same sequence and with the same capitalisation – that’s the same choice of capital letters and lower case letters. Are you in agreement with that or do you wish to continue any further searches yourself?

A:     I wish to disagree, sir.

Q:     You don’t agree that that is – that we would find that if we continue this process?

A:     You would not find every email address, no. I do not agree.

Q:     Is that because you know that there is one exception, which is that Mr Yates’ own email address appears in the list of exhibit E, and you deliberately removed that when you copied across into your email of 9 September so that he wouldn’t know what you were doing?

A:     No, I disagree. I do not recall.

Q:     And do you say to her Honour that there will be other differences between the exhibit E list of email addresses and the list on 9 September?

A:     Again, I don’t – I have not looked into it. So no, I don’t agree.

Q:     Well, I have to be fair to you; that’s my obligation. And I’m going to give you the opportunity now. Tell us if you would like to take some time now, in the witness box, to look further through that list, either on your own or with my assistance, and whether you believe you would be able to identify differences if you did that?

A:     Again, what do you want me to say?

53    When cross-examined about those examples, Mr Lopez did not have any explanation for the emails, and repeatedly answered that he did not remember where he got the address or why an email was sent to that address. Even in the face of the evidence, Mr Lopez did not concede the obvious. Indeed he was asked:

Q:     Is there ever going to be a degree of coincidence between the two lists, Mr Lopez, that will persuade you that that’s what you’ve done?

A:     No. I don’t know.

54    Evagroup submitted that the responses given in cross-examination in relation to this topic are some of “the clearest examples of disingenuous and untruthful answers”. That can be accepted.

55    Before leaving this topic, I note that Mr Lopez also distanced himself from knowledge of the Evagroup Customer List during his cross-examination on the topic of the coincidence of the addresses:

 Q:     When did you last cease to have a copy?

A:     Again, I don’t remember having – remember having access to it, so, it was not something that we handled like every day, or anything like that, it was – so I can’t recall, no.

56    This is to be contrasted to his earlier evidence. For example, as Evagroup correctly submitted that, at the outset of his cross-examination, when asked about the Evagroup Customer List, Mr Lopez “boasted that during his employment at Evagroup he added the contact details of 150-200 customers”.

57    Given the coincidence between the Evagroup Customer List and emails sent by Mr Lopez, the respondents’ counsel in closing submission did not advance a submission against a finding that the Evagroup Customer List was used.

58    As to setting up Imperial Flooring, Mr Lopez gave evidence that he did not take any steps toward setting up the business while he was still employed at Evagroup. He said that he set up Imperial Flooring on the weekend immediately prior to Monday 12 August 2019. Nor, according to his evidence, had he planned to set up Imperial Flooring before resigning from Evagroup on Friday 9 August 2019. Mr Lopez’s evidence was that he and Mr Mitchell Smith conceived the idea of Imperial Flooring, agreed on a corporate structure and organised Mr Smith’s business, Prep Solutions’ investment, as well as researched potential clients, over the course of the preceding weekend without any prior planning. For example, the following evidence was given:

Q:     When did you first think that you would call your business Imperial Flooring?

A:     It happened pretty fast, I will be honest with you. It happened very, very fast. So I had an investor, which was Prep Solutions, that supported us. And he was – it was his backing and, you know, we made a decision, you know, pretty quickly after it.

…..

 Q:     With no idea of setting up Imperial Flooring?

A:     No. it was probably over the weekend, it was – obviously the name was done within an hour.

59    Mr Lopez gave notice of his resignation to Evagroup on 9 August 2019, expecting to work his seven days’ notice period. However, on 12 August 2019 he and Mr Yates agreed that it would be his last day. The weekend immediately prior to Monday 12 August 2019, when Mr Lopez said he was conceiving and setting up the business, he was still an employee of Evagroup. Moreover, the evidence established that a document entitled “Imperial Flooring Mobile List” was created by the author “Nick Lopez” on 8 August 2019 at 10:34 am, before he had resigned.

60    In this context, Mr Lopez’s evidence that he did not start making contact with, or sending free samples to, and invoicing potential customers of Imperial Flooring until the end of August is inconsistent with the documentary evidence. Mr Lopez sent an email to Mr Jinxi (Jack) Wang, a potential customer of Imperial Flooring, on Friday 16 August 2019. Additionally, from 19 August 2019 Imperial Flooring was sending out free product samples to potential customers and issued invoices reflecting this. As noted above, the first invoice was issued on 19 August 2019.

61    Also in that vein, Mr Lopez’s evidence was that he did not discuss the possibility of Imperial Flooring operating as a reseller of Cemimax products with Mr Titus until “[p]robably around the early 20th [of August 2019]”. Yet there is an email exchange between Mr Lopez and Mr Wang, copying in Mr Titus on 16 August 2019 at 10.11am confirming a meeting between Mr Lopez, Mr Wang and Mr Titus. Imperial Flooring’s first invoice, which was issued on 19 August 2019, has its Sydney Distribution Centre listed at the same address as Cemimax’s warehouse. The address given for Imperial Flooring on its website, is Cemimax’s warehouse. Mr Lopez’s evidence in cross-examination as to the state of the Imperial Flooring website at its inception, must be considered in that light.

62    The applicant’s evidence as to the timing and manner in which Imperial Flooring was set up is not only inconsistent with other evidence before the Court, including documentary evidence created contemporaneously with the events, it is also implausible.

63    These further examples in relation to the evidence of Mr Lopez reflect that his evidence cannot be accepted unless it is against his interest or corroborated by other evidence. I do not accept his evidence on topics at the very heart of these proceedings. His continued denials in the face of documentary evidence reflects that he was prepared to deliberately give false, misleading and self-serving evidence, rather than the truth. I find that his repeated resort to claiming he could not remember, when being cross-examined on topics adverse to him, was disingenuous. This reflected the general tenor of Mr Lopez’s evidence. Contrary to the respondents’ contention, this assessment cannot be confined so as to reflect only on the assessment of Mr Lopez’s credit in relation to his use of the Evagroup Customer List, but applies more generally to his evidence. I do not accept the respondents’ submission that I should find that Mr Lopez was mistaken in his evidence, as opposed to lying.

John Titus

64    Although a more polished witness, features of Mr Titus’ evidence were also problematic for him.

65    The applicant submitted Mr Titus’ evidence about contentious matters should be treated with great caution, except where it is corroborated or against his interest. The applicant relied on examples in respect to three topics, which was said to illustrate this.

66    The respondents submitted that the criticisms of Mr Titus are wholly unjustified and that he “gave his evidence calmly, directly, and responsively”. It was submitted that Mr Titus’ oral evidence was consistent with the documentary evidence and there is no reason not to accept him as a reliable witness.

67    While I accept the respondents’ description that Mr Titus gave his evidence calmly, I do not accept that his evidence was given directly and responsively. Rather, at times he was evasive and defensive. His answers reflected an approach whereby he appeared to always be on alert as to the direction of the line of questioning, and what use may be made of any answer before formulating his response.

68    At times Mr Titus attempted to distance himself from events. As the applicant submitted, his evidence in relation to his involvement in the establishment of Imperial Flooring is contradicted by the documentary evidence. For example, Mr Titus’ evidence was that he did not collaborate with Mr Lopez to get Imperial Flooring up and running until “later on”. This was referenced by him to a meeting he first had with Mr Lopez and Mr Smith about the possibility of Imperial Flooring being a reseller of Cemimax products. However, as previously explained, an email exchange sent by Mr Lopez to Mr Wang on 16 August 2019 (as a potential customer) confirmed a meeting between Mr Lopez, Mr Wang and Mr Titus. Mr Titus also gave evidence that he did not discuss the possibility of Imperial Flooring operating out of Cemimax’s warehouse with Mr Lopez until some months after. This is in a context where, at least by 15 August 2019, Imperial Flooring was up and running with a live website which listed Cemimax’s warehouse as its address. Moreover, as described above, an invoice issued by Imperial Flooring on 19 August 2019 to a customer for the sale of Cemimax products, listed Cemimax’s warehouse as the address of Imperial Flooring’s Sydney Distribution Centre.

69    On a different topic, Mr Titus’ evidence was that Mr Yates and Evagroup would retain the large volume clients under the agreement between Evagroup and Cemimax Australia, although his affidavit evidence was that Cemimax Australia would sell to the “major guys” and Evagroup to “the minor guys”.

70    The respondents did not appear to challenge the applicant’s use of the above examples.

71    At times Mr Titus did not concede, or only reluctantly conceded, what appeared to have been relatively straight forward propositions which he appeared to perceive as against his interests. For example, in relation to whether the new Cemimax Australia pricing structure for Evagroup introduced in July 2019 constituted a price increase to Evagroup, Mr Titus refused to accept that proposition until the exact figures were laid out during cross-examination. Mr Titus then agreed that the effective price of DL55 imposed on Evagroup under the new pricing structure was $15.95 per bag and acknowledged he was aware that Evagroup commonly sold DL55 for $16.00 per bag. As the applicant contended, this is in the context where the new pricing structure was not applied to Top Level Supply’s purchases from Cemimax Australia, as Cemimax invoices to Top Level Supply show that it bought DL55 for $15.00 per bag plus GST. This is capable of giving rise to the inference that the new pricing structure was intended to render Evagroup unable to compete in the market. Despite this, and in that context, Mr Titus avoided answering the question on whether the new pricing structure would affect Evagroup’s ability to compete for larger sales.

72    I note also that the respondents did not challenge that evidence referred to by the applicant.

Claims

73    It is appropriate to commence consideration of the claims with the 2019 proceedings filed in this Court.

2019 proceedings

Breach of confidence

74    This claim is brought against Mr Lopez, on the basis of a breach of his employment contract and of an equitable obligation of confidence, and against Imperial Flooring on the latter basis.

75    As noted above, Mr Lopez’s employment contract contained in cl 8 a confidentiality clause, in the following terms:

Confidentiality

By accepting this letter of offer, you acknowledge and agree that you will not, during the course of your employment or thereafter, except with the consent of the employer, as required by law or in performance of your duties, use or disclose confidential information relating to the business of the employer, including but not limited to client lists, trade secrets, client details and pricing structures.

76    Mr Lopez signed his employment contract on 14 March 2019 which acknowledged his acceptance of the terms and conditions.

77    This claim relates to what has been described as the Evagroup Customer List, with which Mr Lopez was provided a hard copy and an electronic copy. The electronic copy was in the form of an Excel spreadsheet, which was given to Mr Lopez on about 20 May 2019. The document, on its face, plainly lists clients and contains client details, and I do not take the respondents to suggest otherwise. However, the Evagroup Customer List also contains some details of organisations or persons who are not customers, accurately described by the applicant as “email addresses such as those of Mr Yates and one of his Evagroup colleagues, or of suppliers to Evagroup such as Cemimax itself, or of a former landlord of Evagroup”. It also appears to contain the details of some businesses with whom Evagroup had hoped to make a sale but where no sale eventuated.

78    The real issue in this claim is whether the presence on the list of persons who are not strictly customers of Evagroup, renders it such that the document cannot be characterised as a client list, and therefore disqualifies it from protection as confidential information.

79    In summary, the applicant contended that the Evagroup Customer List falls within the definition in cl 8 of the employment contract and the presence of those other details does not alter that characterisation. The respondents submitted that a “client list” or “client details” which do not relate to Evagroup’s business do not fall within the contractual definition of confidential information, and likewise, a document which in substance (and not merely in title) cannot properly be described as a “client list”, does not fall within the definition.

Legal principles

80    The relevant principles applying to confidentially clauses in employment contracts were summarised in Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458; (2012) 299 ALR 621 (Zomojo) by Gordon J at [179] as follows:

[179] The relevant principles to be applied in determining the validity of cl 9 of the Service Agreement may be summarised as follows:

1.    an obligation can be imposed by contract to keep information confidential and that obligation can extend to cover subject matter which is not protected by an equitable duty of confidence: Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 329, 335 and 340-341; Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [34]-[36], [38], [46], [48], [50], [51], [77], [87], [92], [102], [118], [134] and [140] and Reed Business Information Pty Ltd v Seymour [2010] NSWSC 790 at [36];

2.    employers are entitled to protect by contractual covenant the use of information that is the result of work, experimentation and expense: Exchange Telegraph Company Limited v Central News Limited [1897] 2 Ch 48 at 53-54; AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515; Interfirm Comparison (Aust) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104 at 117; Industrial Furnaces Ltd v Reaves [1970] RPC 605 at 617 and International Scientific Communications Inc v Pattison [1979] FSR 429 at 434;

3.    the know-how, or knowledge of how to solve particular problems or the knowledge of methods not necessarily shared by others, acquired by an employee during his or her employment, while ordinarily not protected by equity, is capable of being protected by a contractual covenant: Printers & Finishers Ltd v Holloway (No 2) [1964] 3 All ER 731 and 735-736; Wright at 329; Commercial Plastics Ltd v Vincent [1965] 1 QB 623 at 642 and Milwell Holdings Ltd v Johnson (1988) 12 IPR 378 at 391-3;

4.    a contractual restraint upon the use of confidential information or know-how may be enforceable provided it is reasonable, in the sense of being necessary for the adequate protection of the interests of a party: Brightman v Lamson Paragon Ltd (1914) 18 CLR 331 at 335 and Reed Business Information at [36];

5.    whether a restraint is reasonable is a question of law and not of fact: Attorney-General (Cth) v Adelaide Steamship Co Ltd (1913) 18 CLR 30 at 35; Buckley v Tutty (1971) 125 CLR 353 at 377; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 317-318; Drake Personnel Ltd v Beddison [1979] VR 13 at 19 and Cream v Bushcolt Pty Ltd (2004) ATPR 42-004 at [23] and [30];

6.    in determining whether a restraint is reasonable the court should consider what is necessary to protect the legitimate interests of the person asserting the restraint in the circumstances of the case, assessed from the date of making the contract and making the best possible estimate of probabilities and contingencies then foreseeable: Amoco at 318; Drake Personnel at 25; Woolworths Ltd v Olson [2004] NSWCA 372 at [40] and Reed Business Information at [36]; and

7.    where, as here, the restraint concerns confidential information, the circumstances to be considered by the Court include:

7.1    the extent to which the information is known outside the business;

   7.2    the skill and effort expired to collect the information;

7.3    the extent to which the information is treated as confidential by the employer;

   7.4    the value of the information to competitors;

7.5    the ease or difficulty with which the information can be duplicated by others;

7.6    whether it was made known to the employee that the information was confidential; and

7.7    whether the usages and practices in the industry support the claim of confidentiality.

81    The respondents did not contend that the clause is invalid as a restraint of trade, and there is no suggestion that the clause was unreasonable or that it did not give rise to an obligation of confidence. There was also no suggestion that the applicant was not entitled to protect such information in cl 8, rather the submission was directed to the fact that in this case the Evagroup Customer List or the client details recorded were said not to be confidential so as to attract any protection. The issue relates to the characterisation of the Evagroup Customer List.

82    Before addressing the contractual basis of this claim it is appropriate to refer to the legal principles in relation to the equitable breach of the duty of confidence.

83    The equitable jurisdiction to grant relief against an actual or threatened abuse of confidential information, not involving any tort or breach of contract or fiduciary duty is based on an obligation of confidence arising in the circumstances of the case: Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1990) 22 FCR 73; (1990) 95 ALR 87 (Smith Kline & French Laboratories) at 120-121. “[E]quity will grant relief in personam not to disclose or use information other than for the purpose for which it was communicated if the nature of the information and the circumstances in which it was communicated call for that confidence to be respected by reference to notions of conscience”: Crown Resorts Ltd v Zantran Pty Ltd [2020] FCAFC 1; (2020) 374 ALR 739 at [25], citing Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) [1984] HCA 73; (1984) 156 CLR 414 at 437–438; Commonwealth of Australia v John Fairfax & Sons Ltd [1980] HCA 44; (1980) 147 CLR 39 at 50–52; Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104 at 117–119; Lord Ashburton v Pape [1913] 2 Ch 469 at 475; Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215; Coco v AN Clark (Engineers) Ltd (1968) 1A IPR 587; [1969] RPC 41 at 47; Talbot v General Television Corporation Pty Ltd [1980] VR 224 at 230.

84    Before an equitable obligation of confidence with respect to information arises, an applicant must establish the following four elements: Optus Networks Pty Ltd v Telstra Corp Ltd [2010] FCAFC 21; (2010) 265 ALR 281 (Optus) at [39], citing Smith Kline & French Laboratories at 87.

(1)    the information must be identified with specificity;

(2)    it must have the necessary quality of confidence;

(3)    it must have been received in circumstances importing an obligation of confidence; and

(4)    there must be an actual or threatened misuse of the information without consent.

85    First, the information must be identified with specificity and not merely in global terms: Corrs Pavey Whiting & Byrne v Collector of Customers (Vic) (1987) 14 FCR 434 at 443; Smith Kline & French Laboratories at 81.

86    Second, the information itself must have the necessary quality of confidence. This is a question of fact having regard to a range of various factors: Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 334; Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 165 IR 148; (Del Casale) at [40]. These factors (often arising in an employment context) include:

(1)    the extent to which the information is known outside the business;

(2)    the skill and effort expired to collect the information;

(3)    the extent to which the information is treated as confidential by, for example, the employer;

(4)    the value of the information to the applicant and its competitors;

(5)    the ease or difficulty with which the information can be duplicated by others;

(6)    whether it was made known, for example, to the employee that the information was confidential; and

(7)    whether the usages and practices in the industry support the claim of confidentiality.

87    Third, the information must have been received by the respondents in such circumstances as to import an obligation of confidence: Smith Kline & French Laboratories at 87. In Coco v AN Clark (Engineers) Ltd [1969] RPC 41, Megarry J said at 47-48:

It seems to me that if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence. In particular, where information of commercial or industrial value is given on a business-like basis and with some avowed common object in mind, such as a joint-venture or the manufacture of articles by one party or the other, I would regard the recipient as carrying a heavy burden if he seeks to repel the contention that he was bound by an obligation of confidence ... I doubt whether equity would intervene unless the circumstances are of sufficient gravity; equity ought not be invoked merely to protect trivial tittle-tattle, however confidential.

88    This was applied in Del Casale at [104], and the cases cited therein at [105]; cf: IPC Global Pty Ltd v Pavetest Pty Ltd (No 3) [2017] FCA 82; (2017) 122 IPR 445 at [210], do not establish a different test. It is an example of the application of the principles to the particular facts in that case as to how the circumstances imported an obligation of confidence.

89    Fourth, there must be an actual or threatened misuse of the information without the owner’s consent: Smith Kline & French Laboratories at 87.

Consideration

Breach of employment contract

90    The issue of whether the Evagroup Customer List is protected by cl 8 directs attention to the construction of the clause and the Evagroup Customer List.

91    Mr Lopez signed an employment contract on 14 March 2019. By signing that contract he accepted the terms contained therein, including cl 8.

92    For the reasons given below, properly understood, the Evagroup Customer List, given to Mr Lopez on about 20 May 2019, and added to thereafter, constitutes a “client list” within cl 8. The reference to client in cl 8, given the nature of the business, refers to a customer. Although details on the client list may also fall within the term “client details” within cl 8, there is a difference in the concepts. The Evagroup Customer List itself has a separate status. It is the assemblage or compilation of that client data in a readily usable form.

93    It is plain that the concept of “client list” in cl 8 is not a term of art.

94    I accept Mr Yates’ evidence as to the creation, content, purpose and handling of the Evagroup Customer List, and the circumstances in which Mr Lopez had access to it during his employment with Evagroup.

95    The evidence established, and it was not seriously pressed as an issue, that the Evagroup Customer List was compiled over 12 years by adding details of customers to the database from time to time. Mr Yates’ evidence was that Evagroup had obtained many referrals by word of mouth over the 12 years, with approximately one third of Evagroup’s business coming from referrals from persons in the industry and other customers. He estimated that approximately 75 percent of Evagroup’s customers were repeat customers. Mr Yates described it as “highly confidential” and giving “Evagroup a competitive advantage including because it is a marketing tool and it facilitates streamlined and mass communication with customers”.

96    The Evagroup Customer List was deliberately compiled for the purposes of the business. The details on the Evagroup Customer List, according to Mr Yates’ evidence were kept confidential. The Evagroup Customer List is not public and access is only given to employees of Evagroup who require it to perform their employment duties. The Evagroup Customer List and details therein are not given to any third party, including Cemimax, even if that third party is supplying product to Evagroup for a project. All employees of Evagroup are instructed to include all customer details for every sale made, including cash sales. Those customers include flooring and non-flooring customers. Some of Evagroup’s suppliers were also included in the Evagroup Customer List. Mr Yates, and Evagroup’s financial accountant were included on the Evagroup Customer List, the evidence establishing this was so as to ensure that they received copies of all correspondence sent to customers and suppliers including all pricing, mailouts and deals including those with Evagroup’s suppliers.

97    Mr Lopez was provided with a hard copy and an electronic copy of the Evagroup Customer List for the purpose of the performance of his duties as national sales manager of Evagroup. Despite commencing employment on 1 April 2019, Mr Lopez was not provided access to the list until about 20 May 2019. Mr Lopez was emailed an Excel spreadsheet with the information and used that to populate the mail merge program, MailChimp, for the purposes of mailing customers. Mr Lopez transferred the information to a more readily usable form. The electronic version of the Evagroup Customer List is now contained in MailChimp and is updated from time to time. It is password protected and only certain employees are given that password.

98    During the period of Mr Lopez's employment, access to MailChimp was limited to Mr Lopez and Mr Yates. Mr Lopez gave Mr Yates his password for MailChimp on Monday 12 August 2019, the last day of his employment.

99    I am satisfied that after Mr Lopez ceased his employment with Evagroup he used the Evagroup Customer List to, inter alia, send unsolicited emails to clients of Evagroup, to tout for business for his newly established company, Imperial Flooring. For the reasons given above at [48]-[57], Mr Lopez’s evidence denying that proposition is rejected.

100    A consideration of the Evagroup Customer List reflects that, as the applicant submitted, the vast majority of the names appearing in it are persons or entities in the building industry, in particular flooring and roofing companies. That is evident from the details on the list. It is also plain that the information is not generic in that many of the email addresses relate to a particular person, from which it can be inferred that these were the applicant’s contact persons. In my view, that the Evagroup Customer List may also include the details of some non-customers (for example some companies to whom Evagroup had contacted and hoped to make a sale, which had not eventuated), or that it contained Mr Yates and details of other Evagroup colleagues, or Evagroup’s former landlord, does not prevent or detract from the Evagroup Customer List being properly characterised as a client list or as containing client details.

101    The respondents made a submission that, if the Evagroup Customer List is confidential because it might include a potential client as opposed to a current client, it would have an “improper chilling effect on competition of prohibiting contact with anyone on Evagroup’s misdescribed customer list”, and would effect Mr Lopez’s capacity to carry on his business. That submission cannot be accepted. It mischaracterises the obligation of confidentially. The obligation was not to use the applicant’s confidential information, being Evagroup’s Customer List, and therefore it was not to contact customers via the list or via the details provided in the list. That constituted the obligation that has been breached. Properly understood, there is no chilling effect. There was nothing to prevent the respondent doing his own research, for example, on the internet for flooring businesses, or obtaining the names of contacts from other people. However, as explained above, while Mr Lopez could have done that, he chose to use the convenience of Evagroup’s Customer List.

102    The diverse type of information which may be considered as confidential in this context is illustrated by the information the subject of argument in Roger Bullivant Ltd v Ellis and others [1987] IRLR 491 (an appeal against the failure to issue an injunction against the use of information by the defendants). There, the confidential commercial information the plaintiffs had was a card index system listing consulting engineers, local authorities and architects who have or can refer business to them, and lists other trade contacts. Injunctions against the defendants, who were former employees were granted. It was accepted that the information was confidential. As the Court concluded, the value of the card index to the defendant was that it contained a ready and finite compilation of the names and addresses of those who have bought or might bring them business and contained the names of particular individuals to be contacted. It was concluded that while some details might have been publically available, the Court was not convinced the defendant would have been able to contact anywhere near all those he did during the particular time period. The information in that case was therefore treated as confidential.

103    Mr Lopez identified an advantage to himself in using the Evagroup Customer List rather than reassembling it from first principles, which reflects that the information is of value in this business context.

104    The applicant understood the Evagroup Customer List to be a client list or as containing client details and that it was confidential, with steps put in place to limit access to it. I am satisfied that is also how Mr Lopez understood it, as he added such client details to it as part of his employment with Evagroup. Any suggestion to the contrary cannot be accepted. Mr Lopez would have been aware of the clause as he had only signed the employment contract, including cl 8, relatively shortly before he left that employment.

105    It is important to recall that this aspect of the claim is looked at through the prism of the employment contract. The confidentiality clause expressly refers to a “client list” and “client details” as confidential, and the employee is not to use or disclose such information without the consent of his employer or in the performance of his duties. The contract imposes upon Mr Lopez the obligation not to disclose that information. The nature of the information on the Evagroup Customer List, taking into account the types of considerations referred to in Zomojo, reflects that the Evagroup Customer List and clients’ details contained therein are confidential. The Evagroup Customer List has the necessary elements of confidence, and importantly for the claim of breach of contractual confidentiality, falls within the description provided in cl 8 of the contract.

106    Contrary to Mr Lopez’s submission (and that of Imperial Flooring in relation to the equitable breach of confidence), it is not necessary for the applicant to lead evidence in respect to each entry on the Evagroup Customer List to establish that the entry relates to a current client or that the details recorded could not be obtained elsewhere. The respondents submitted that an entry could only relate to the business, and therefore was only confidential if the applicant established in relation to each entry that there was a “direct, real and continuing relationship” with Evagroup. This aspect of the respondents’ submission focussed on the phrase “relating to the business” in cl 8. That phrase must be considered in the context in which it appears, and the nature of the contract. Leaving aside the obvious practical difficulties with the application of that submission, (for example, the meaning of “continuing relationship” in the context of the nature of this business), the submission does not take into account that, as explained, “client list” has a separate status. There is nothing in the contract which would confine the meaning to that contended for. Rather, the business involves supplying products to customers, which includes, inter alia, not only supplying products, but marketing of those products. Information used by Evagroup to advance that would necessarily fall within the concept of “relating to the business” of Evagroup. From the content, purpose, method of compilation and confidentiality with which the Evagroup Customer List was held, and the use to which it was put, it is plain that it “related to the business” of Evagroup.

107    Moreover, the respondents’ approach is artificial and does not accord with the authorities which focus on the characteristics of the information, and not the characterisation of the information, with relevant considerations including the way in which the business compiled, protected and used the information. The submission also does not address the circumstance where, as here, the allegation is based on the advantage a former employee obtained in being able to contact the volume of potential clients with the speed at which he did, absent the use of the Evagroup Customer List. The applicant’s claim is put on the basis of a springboard advantage being obtained by the respondent.

108    The evidence of Courtney Tran, the solicitor for the respondents, also does not advance their case in respect to whether the Evagroup Customer List was confidential within the meaning of cl 8. Her evidence was led to address or respond to the evidence of the solicitor for the applicant, Magdalena Rousseau. However, what Ms Rousseau set out to do was to negative the proposition that all of the information on the Evagroup Customer List was publicly available and she did that by entering the email addresses from the Evagroup Customer List into the search box on Google to see whether the information came up on the first page. That, in itself, was an artificial exercise. As the respondents pointed out, that says nothing about whether the information is on some other page of that website. However, Ms Rousseau’s evidence was only directed to the proposition that Mr Lopez could have quickly gathered the information in the Evagroup Customer List from his own searches, as suggested in his affidavit evidence. It does not go to the objective confidentiality of the Evagroup Customer List or to the characterisation of the Evagroup Customer List as being confidential or otherwise, principally because that is not what Mr Lopez in the end says he did. Moreover, as became apparent from the cross-examination of Ms Tran, her search always commenced with information in the Evagroup Customer List, such as the names and the email addresses. The search did not start with a blank canvas. It did not therefore attempt to determine whether the information on the Evagroup Customer List could be generated. It did not involve an attempt to identify all the email addresses that could be gathered in respect to people who might buy flooring products, without the use of the Evagroup Customer List.

109    Although the applicant accepted that some names and email addresses contained in the Evagroup Customer List were capable of being identified from public sources, there is no suggestion in the evidence that the whole list, in its convenient form of a collection of entities and key contacts likely to be interested in flooring supplies, is available in any public forum. The evidence of Ms Rousseau demonstrates that the details of very many of the entries on the Evagroup Customer List are not available from public sources by any simple search.

110    Indeed, even though the searches conducted by Ms Rousseau and Ms Tran are not a true replication of a process that a person would need to undertake if they did wish to obtain the same information from public sources, their evidence reflects the complexity and difficulty involved in reconstructing even a partial list, without access to the confidential information.

111    It may be accepted, as the respondents submitted, that some clients are published on Evagroup’s website. This is in the form of some testimonials by customers as to Evagroup’s services. That is not atypical for such a website. However, it does not follow from that that the Evagroup Customer List is not confidential. The Evagroup Customer List is a separate entity, and has a separate significance and benefit to Evagroup, from an individual client’s name. That a small number of clients have identified themselves through testimonials on the website does not, by itself, result in Evagroup’s Customer List as a whole losing any confidentiality that it has.

112    The applicant has established that the Evagroup Customer List is confidential, that Mr Lopez retained the Evagroup Customer List after he left Evagroup’s employment and used the list in the manner contended: see for example the discussion at [90]-[105] above.

113    The respondents contended that the list of emails blind carbon copied (the BCC List) into the 9 September 2019 emails (which was the basis of Mr Lopez’s cross-examination referred to above at [52]-[53]) only relates to part of the Evagroup Customer List, estimating it contains approximately 25 percent. The respondents submitted that I should not be satisfied that any more of the Evagroup Customer List than revealed in the BCC List was used, particularly in circumstances when this evidence was produced by Imperial Flooring in answer to a notice to produce. I do not accept the use of the Evagroup Customer List was so limited. Mr Lopez does not suggest he only used some of the details on the list, rather he denied having and using the Evagroup Customer List (in the face of clear evidence to the contrary). Moreover, the respondents’ submission that the use was so limited is implausible. There is no logical basis why the use would be so limited, particularly given Mr Lopez had used the Evagroup Customer List as he did, and given his obvious purpose of doing so. Moreover, as noted above at [23], a number of persons from the Evagroup Customer List were sent unsolicited communications by Imperial Flooring, some of whom forwarded the emails they received to Mr Yates. All the emails are in the same terms, and all but one were sent on the same date as the email with the BCC List. Nonetheless, not all of those emails forwarded to Mr Yates are to addresses on that BCC List, although all are on the Evagroup Customer List. It can readily be inferred the Evagroup Customer List was used by Mr Lopez to a greater extent than the BCC List.

114    I am satisfied that the applicant has established that Mr Lopez has breached his contractual obligation of confidentiality in cl 8 of his employment contract.

Implied obligation under the employment contract

115    Given my findings above, it is unnecessary to consider this aspect.

Equitable breach

116    This aspect of the applicant’s claim is directed against Mr Lopez and Imperial Flooring.

117    Customer lists can constitute information that is confidential to an employer and are entitled to protection. Although it may be accepted that not all customer lists are confidential, for example: Advanced Fuels Technology Pty Ltd v Blythe & Ors [2018] VSC 286 at [178]-[179]; Robb v Green [1895] 2 QB 315: Weldon & Co Services v Harbinson [2000] NSWSC 272 at [67]-[72].

118    That said, properly considered, I am satisfied in the circumstances of this case that the Evagroup Customer List is covered by the equitable duty of confidence. I rely on, without repeating my description of the Evagroup Customer List (its creation, content, purpose and handling, and the circumstances in which Mr Lopez had access to it).

119    The respondents’ submission focussed on the four elements identified in Optus, referred to above at [84].

120    In respect to the requirement that the information be identified with specificity, for the reasons given above at [100], it is not necessary for the applicant to identify by name or entry each of which is said to be a current client. The question is whether, as a whole, the Evagroup Customer List has the necessary elements of confidence. It is the amalgamation of the information in the Evagroup Customer List that is significant.

121    In respect to the requirement that the information have the necessary degree of confidence, the respondents’ submissions were the same as advanced in relation to the claim for breach of contractual confidentiality. For the reasons given above at [97]-[112], in my view, in the circumstances of this case, the Evagroup Customer List does contain the necessary degree of confidence.

122    In respect to the requirement that the information must be received in circumstances importing an obligation of confidence, I do not accept the respondents’ submission that those circumstances did not exist in this case. The submission that only the MailChimp account was password protected, and not the Excel spreadsheet, does not advance the respondents’ case. The unchallenged evidence was that access to it was limited to employees who required it for their employment. When the Evagroup Customer List was converted to MailChimp, access was limited by a password which was only known to Mr Yates and Mr Lopez, such that the confidential nature of the information would have been understood by Mr Lopez. His password was one of the items that Mr Lopez was to return to Evagroup on leaving its employment. Mr Lopez was the sales manager in a competitive business environment where clients and client relationships are important. It was plain that the Evagroup Customer List had been compiled over some time and reflected business relationships. After all, the respondent had recently signed an employment contract which expressly refers to client lists and client details as confidential information and were subject to an obligation of non-disclosure on that basis.

123    In respect to the requirement about the use of the information, as previously noted, Mr Lopez’s counsel during closing submissions accepted (although Mr Lopez had not done so during his evidence) that he could not make a submission against the fact that details of some of the customers had been used.

124    Mr Lopez retained the Evagroup Customer List and used information contained therein to advance the establishment of his new business, Imperial Flooring. That was not only a breach of his employment contract but also a breach of an equitable duty of confidence imposed on him.

125    As to whether the equitable duty of confidence applied to Imperial Flooring, Imperial Flooring can only have received the information from Mr Lopez who was the sole employee and director of Imperial Flooring. There is no suggestion in the evidence that anyone other than Mr Lopez was involved in the unsolicited communications of 9 September 2019 (or at any other relevant time). In the circumstances, for the reasons already given, Mr Lopez was aware of the confidential nature of the information obtained during his employment with Evagroup and had a duty of confidence. In that context, Imperial Flooring was provided with the information such as to impose an equitable duty of confidence on it. Imperial Flooring used that information to, inter alia, send the unsolicited emails of 9 September 2019.

126    I am satisfied that Imperial Flooring and Mr Lopez have breached their equitable obligation of confidence.

Misleading and deceptive conduct

127    The applicant’s claim under the Australian Consumer Law (ACL) arises out of aspects of Imperial Flooring’s website as it appeared before 4 October 2019 and the unsolicited communications sent by Mr Lopez on behalf of Imperial Flooring from at least 9 September 2019.

Legal principles

128    A person must not, in trade or commerce, engage in conduct that is misleading or deceptive, or is likely to mislead or deceive: s 18 of the ACL. To establish a claim under s 18, a party must establish three matters: first, that the conduct complained of was “in trade or commerce”; second, that the pleaded conduct conveyed the particular representations complained of: Australian Competition and Consumer Commission v Telstra Corporation Limited [2007] FCA 1904; (2007) 244 ALR 470 (ACCC v Telstra) at [14]; and third, the representations conveyed were misleading or deceptive, or were likely to mislead or deceive: ACCC v Telstra at [15].

129    For conduct to be in trade or commerce, the impugned conduct’s nature must bear a trading or commercial character. Conduct in trade or commerce includes promotional activities in relation to, or for the purposes of, the supply of services to actual or potential customers, being identified persons or merely an unidentifiable section of the public: Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 at [604].

130    Conduct is misleading or deceptive if it has a tendency to lead into error: Australian Competition and Consumer Commissioner v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 (ACCC v TPG) at [39]. There must be a sufficient causal link between the conduct and error on the part of persons exposed to it: ACCC v TPG at [39]. The causing of confusion or questioning is insufficient; it is necessary to establish that the ordinary or reasonable consumer is likely to be led into error: Australian Competition and Consumer Commission v Coles Supermarkets (Australia) Pty Ltd [2014] FCA 634; (2014) 317 ALR 73 (ACCC v Coles) at [39]. It is not necessary to demonstrate that the impugned conduct was actually misleading, it is enough if it is likely to be so: Google Inc v Australian Competition and Consumer Commission [2013] HCA 1; (2013) 249 CLR 435 at [6].

131    It is necessary to view the conduct as a whole and in its proper context. This will or may include a consideration of the type of market, the manner in which such goods are sold, and the habits and characteristics of purchasers in such a market: ACCC v Coles at [41]. In assessing advertising material, the dominant message of the material will be of crucial importance: ACCC v TPG at [45]; ACCC v Coles at [42]. Where conduct or representations is or are directed to members of the public at large, the conduct or representations must be judged by their effect on ordinary or reasonable members of the class of prospective purchasers: Campomar Sociedad Limitada v Nike International [2000] HCA 12; (2000) 202 CLR 45 at [102]; ACCC v Coles at [43].

132    If a claimant suffers loss or damage because of the conduct of another person and the conduct contravened a provision of Ch 2 or 3 of the ACL, the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention: s 236 of the ACL. A person is involved in a contravention of the ACL or in conduct that constitutes such a contravention if the person has: aided, abetted, counselled or procured the contravention; or has induced, whether by threats or promises or otherwise, the contravention; or has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or has conspired with others to effect the contravention: s 2 of the ACL. To be knowingly involved in a contravention the person must be an intentional participant and the necessary intention is based on knowledge of the essential elements of the contravention, that is, knowledge of the essential facts constituting the contravention, although it is not necessary that the person also know that the essential elements amount to a contravention: Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670.

Consideration

133    As noted above, the applicant’s claims relate to Imperial Flooring’s website, and to unsolicited emails to potential customers touting for business, sent by Mr Lopez on behalf of Imperial Flooring from at least 9 September 2019, which contained certain representations.

The Website

134    In essence, the applicant claims that from a date not known to him, but presumed to be shortly after Mr Lopez registered the domain name on 14 August 2019, until on or about 4 October 2019, the Imperial Flooring website, www.imperialflooringaustralia.com.au (the Website) included representations that Imperial Flooring had supplied the following projects: Lachlan’s Line; New Market (Randwick); The Miller (North Sydney); New Life (Darling Harbour); and Burwood Grande (Burwood). The evidence relied on as to the state of the Website, was a screenshot of the Website taken on 30 September 2019 which shows the above projects listed on the “Projects Supplied” page of the Website. Mr Yates gave evidence that he saw similar content when he visited the Website in August 2019. The applicant contended that Mr Lopez admits that each of the projects listed above appeared on the Projects Supplied page of the Website until on or about 3 October 2019. On or about 3 October 2019 Mr Lopez changed the name of the Website page from “Projects Supplied” to “Projects”. Sometime after 3 October 2019, Mr Lopez removed the photographs of the projects listed, except for Burwood Grande. Each of the projects were projects that Evagroup (and not Imperial Flooring) supplied and which predated the establishment of Imperial Flooring.

135    The applicant submitted that Imperial Flooring operated the Website in the course of its business of supplying flooring products and materials. It specifically invited traders to place orders or to contact Imperial Flooring. The applicant submitted that the respondents’ denial of this in their defences ought to be rejected.

136    Imperial Flooring contended that the applicant’s claim that five of the photographs on the Website identify projects which were supplied by Evagroup, and not by Imperial Flooring, is contrary to that fact. It submitted that Mr Lopez provided a reasonable explanation as to how the Website came to be: as a participant in the flooring products market and a seller of Cemimax products, Imperial Flooring was showing examples of where Cemimax products were supplied. It submitted that the documentary evidence, comprising of the screenshots, were insufficient to establish the claim. The screenshots objectively lack context. In respect to the first screenshot it contended that the full website’s URL was cut off, and all that can be seen is “alflooringaustralia.com.au”. The screenshot contains four words of text, and four images (a further two images being cut off on the right edge of the screenshot). It submitted that at best, a reasonable observer could divine that someone supplied something to some projects. Cemimax confirmed that Imperial Flooring is an approved reseller of Cemimax’s products. It submitted that due to the lack of context, one would be required to read in words which are not present in order to determine which proposition is correct: that Imperial Flooring supplied products to the projects identified by the images, or if the projects identified by images had been supplied with Cemimax Australia’s products. A further screenshot was said to be equally devoid of context, referencing “floor preparation projects” and a further series of images. In oral submissions, Imperial Flooring contended that “for all we know there was a huge disclaimer at the bottom of that saying that not all of these pictures depict projects which Imperial has supplied”.

137    At the outset it is appropriate to observe that although the defence pleaded a denial that the Website was operated in trade or commerce, it was properly accepted by the respondents during closing submissions that maintaining a business website is sufficient to constitute conduct in the course of trade or commerce.

138    The issue in dispute was whether the applicant had established that the impugned conduct conveyed the particular representations complained of and, if so, whether they were misleading or deceptive.

139    It may be accepted that there are limitations with the evidentiary basis of this claim, being screenshots of some pages of the Website. The quality of the evidence is in a context where Mr Yates’ evidence, which was not disputed, was that when he went back to the Website it had changed. That is not to say there were not other means to attempt to obtain evidence of the state of the Website at the relevant times. Nor that the limitations on the evidence can necessarily be overcome. Nonetheless, a number of observations can be made having regard to the evidence.

140    First, it can be accepted the Website was established as part of Imperial Flooring’s business of supplying flooring products and materials. It invited traders to place orders or to contact the second respondent. Imperial Flooring supplies products. This business (and Website) was established in a context where, as the respondents submitted, Imperial Flooring (and Evagroup) are “essentially middlemen, which are the conduit between the supplier to the building site”. The prospective purchasers would include floor installers, which businesses, it can be inferred, vary in size. It can readily be inferred, given the nature of the construction industry, that the reliability of the supplier or distributor to capably provide the needed products is imperative, because of the obvious consequences to a project if there was a failure to do so. On any project, there may be many supply and services contracts, many contractors and sub-contractors may be used, the unreliability of any one of which would have a ripple effect. That must be so, regardless of the size of the project being undertaken. It can be inferred that prospective purchasers place a premium on the reliability of the supplier or distributor of the necessary products. The photographs of projects on the Website were posted in that context.

141    Second, despite the quality of the applicant’s evidence, being screenshots, it is plain that the Website depicted in the screenshots is that of Imperial Flooring. The respondents’ suggestion in closing submissions that it cannot be established that the Website is that of Imperial Flooring does not accord with Mr Lopez’s own evidence.

142    Mr Lopez gave evidence in his affidavit of 10 March 2020 at [21] and [23]:

[21]    I refer to paragraph 123-125 [of Mr Yates’ affidavit]. I confirm that prior to receiving the applicant’s letter of demand dated 3 October 2019, the second respondent’s website which included images of each of the named projects under the “projects supplied” tab. I intended that the website be interpreted as examples of projects where the Cemimax products have been supplied, rather than to mean that they were projects that Imperial Flooring had supplied to. Accordingly, after receiving the letter, I changed the name of the tab from “projects supplied” to just “projects.”

[23]     I refer to paragraph 126-127 [of Mr Yates’ affidavit]. I removed the photographs of the projects referred to in paragraph 123(a), except Burwood Grande because Imperial Flooring was supplying that project at the time. I kept the photographs of the project referred to in paragraph 123(b) for the same reason.

143    His evidence in cross-examination on the topic was as follows:

Q:     In about the first part of September 2019, on the website of Imperial Flooring Australia, did you have content of a similar nature to this that said “projects supplied” and then depicted a series of photographs?

A:     Possibly, yes. Yes.

Q:    I see. So help me with this, because I’m not familiar with this. You can do this in various ways, can’t you? You can either put a link in so that the viewer who clicks is taken straight to Cemimax website, or you can port the content across and locate it on the Imperial Flooring website. Do you know which one was done?

A:     There was no link – I’m not sure if that was link there. But the project webpage didn’t have any links to go into Cemimax, no. We had their branding as far as logos.

Q:     But you do recall and agree that a photograph depicting a project known as Lachlan’s Line appeared under the heading Projects Supplied in about the first part of September 2019?

A:     Yes, correct. And when we got a letter, we took it off straight away. Because we were obviously again – we were endorsing Cemimax products. It wasn’t the Cemimax website. And all we were doing was promoting the brand.

Q:     You didn’t work on the Lachlan’s Line project yourself?

A:     No, no. No, no, Cemimax did.

Q:     What about the Newmarket project at Randwick?

A:     No, I didn’t work on that project either.

Q:     When you were at Evagroup, you had contact with that project, did you not?

A:     No, no.

Q:     What about the New Life project at Darling Harbour?

A:     Possibly yes. I went to that site once, yes.

Q:     On behalf of Evagroup?

A:     Yes, yes.

Q:     And you were aware that they were supplying goods to that project?

A:     Yes.

Q:     Including floor levellers that they sourced from Cemimax?

A:     Yes.

Q:     And the Burwood Grand site at Burwood?

A:     Correct. That was the site that I won through Orsil. Correct, yes.

Q:     And this is correct too, isn’t it, that in September 2019 the company Imperial Flooring Australia Pty Limited had not supplied any products to any of the sites that I have mentioned to you, Lachlan’s Line, Newmarket, New Life, or Burwood Grand?

A:     No, we supplied Burwood Grand, but we supplied Prep Solutions.

Q:     Prior to September 2019, you say you had supplied Burwood Grand?

A:     Prior two thousand – when you say prior, before?

Q:     Yes.

A:     Well, I’m pretty sure we started supplying Burwood Grand end of August. I think the last week of August and beginning of September.

Q:     And

A:     It would be in our evidence with invoices that shows the project Burwood Grand.

Q:     Yes. And you wanted to put these photographs of ..... on your website, didn’t you, to give the impression that Imperial had a track record of being successful in winning major projects and then supplying them and taking them to completion?

A:     That’s incorrect. It was a partnership with Cemimax, and we were endorsing Cemimax. And we were building our brand around the Cemimax brand.

Q:     You wanted people who looked at this, and were considering buying from Imperial, to believe that others had chosen Imperial as their supplier and that others had been satisfied with the outcome?

A:     Again, what I’ve just said. We were endorsing Cemimax brand and building our brand around the Cemimax brand.        

144    Third, it follows that although the applicant’s evidence is limited to screenshots, there is other evidence which also establishes that the screenshots were from Imperial Flooring’s website. The photographs were on the Website’s projects page (initially under the heading “projects supplied” and later “projects”) and were ultimately removed, save for Burwood Grande, as Imperial Flooring was supplying that project at the time. It was not in dispute that the other projects listed above which were removed by Mr Lopez, were not supplied by Imperial Flooring. Rather, Mr Lopez’s evidence was that they were projects supplied by Cemimax, and that was what was being promoted in September 2019. It follows that, the respondents’ oral submission that at best all a reasonable observer could derive from the screenshot is that someone supplied something to some projects, cannot be accepted. It does not accord with Mr Lopez’s evidence. There is no proper basis for limiting consideration of the applicant’s claim to the evidence of the screenshot alone.

145    Fourth, in that context, there is also no basis for the respondents’ oral submission that “for all we know there was a huge disclaimer at the bottom of that saying that not all of these pictures depict projects which Imperial has supplied”. Given the basis of the claims and the evidence, including Mr Lopez’s cross-examination on the topic of the Website and this claim, it would have been expected if such a disclaimer appeared on the Website, he would have said so. Moreover, in the context where the respondents provided an explanation as to how the Website came to be, as a participant in the flooring products market and as a re-seller of Cemimax products, it would have been expected that there would be evidence to show that Imperial Flooring’s Website expressly stated the examples provided were examples of projects where Cemimax products had been used, if that had been stated on the Website. So too, if there was any other content on the Website which indicated that the projects were those of Cemimax, or that these were not projects supplied by Imperial Flooring, or that the use of the photographs was in any way confined. The evidence of Mr Lopez on this topic, recited above, was not the subject of any re-examination. Indeed, there was no re-examination of Mr Lopez on any topic.

146    Fifth, the photographs on the Website were under the heading “projects supplied”. Accepting that it does not expressly say “projects supplied by Imperial Flooring”, by the same token, it does not say “projects supplied by Cemimax”. As noted above, if there had been any disclaimers, or identification on the Website that those projects were supplied by Cemimax and not Imperial Flooring, one would have expected evidence to that effect.

147    It may be accepted that there was Cemimax branding on the Website, the degree of which is unclear due to the limitations of the evidence.

148    In a context where Imperial Flooring is promoting its business, the inference that is likely to be drawn is that those projects were supplied by Imperial Flooring. The representations on the Website must be judged by their effect on ordinary or reasonable members of that class of prospective purchasers to whom the conduct is directed. The parties did not address on the characteristics of the class of prospective purchasers. Nonetheless, given the nature of the business as described, for example in [140] above, it is directed to persons who are looking to source products to undertake flooring works. This would include persons ranging from floor installers through to persons involved in any work or project requiring such products, and would range from large scale projects to individual operators. Given the nature of the business, the prospective purchaser would be looking for a supplier of products who is reliable. If the ordinary or reasonable prospective purchaser was looking at the Website with a view to determining whether this was a company whom it was safe to do business with on a project, including major projects (in the context described above at [140]), the impression given by the “projects supplied” page is that Imperial Flooring had supplied those projects. That impression is false. The existence of Cemimax branding, even if throughout the Website, does not detract from that. It does not support the alternative interpretation that to the ordinary or reasonable members of the class of prospective purchasers, Imperial Flooring was promoting Cemimax products by showing projects of Cemimax, but not Imperial Flooring. The respondents did not suggest there was any particular characteristic of such a prospective purchaser which would support that interpretation. Rather, the likely inference being drawn is that Imperial Flooring supplied those projects using Cemimax products.

149    The representation has the necessary quality of being (at least) likely to mislead or deceive.

150    Although the respondents may have been building their brand around Cemimax and were endorsing Cemimax, that does not alter the inference to be drawn from the Website and the effect on ordinary or reasonable members of that class of prospective purchasers.

151    It may be accepted, as the respondents contended, that the project page was not the first page of the Website, but would involve further accessing of the Website. That said, users of the Website are likely to be looking for a potential product supplier, and therefore if they are assessing Imperial Flooring as a potential supplier they are likely to access the “projects supplied” page.

152    On 3 October 2019, Evagroup, through its solicitors complained to the respondents about the misleading nature of this page of the Website. As a result, on 3 October 2019 Imperial Flooring made an amendment to the Website. Initially, instead of adding the words “by Cemimax”, the respondent removed the word “supplied”, so that the heading was simply “projects”. Sometime after 4 October 2019 Imperial Flooring removed those projects which it had not supplied.

Unsolicited communications

153    The applicant contended that since at least 9 September 2019, Mr Lopez has sent, on his and Imperial Flooring’s behalf, communications to the applicant’s customers and others (the Unsolicited Communications).

154    The communications relied upon by Evagroup are, inter alia, emails sent on 9 September 2019 (described above at [17]). The emails are pro forma, in that the same email is sent to a number of potential clients, with the relevant portion of the email for this claim being:

Gaining fast traction over the years in the Australian market, a small portion of our projects can viewed via this link www.imperialflooringaustralia.com.au/projects

155    The representations relied on are: first, that Imperial Flooring had been gaining fast traction over the years in the Australian market; and second, that a small portion of their projects could be viewed online, with a hyperlink to the Website. It was contended that “our projects” refers to Imperial Flooring’s projects. The applicant contended that the effect of the representations was, and was intended, to give the impression to customers that Imperial Flooring had a record of winning and fulfilling orders for major development projects. That impression was false, and a person led to form that impression would be led into error. Each of the representations has the necessary quality of being (at least) likely to mislead or deceive. It was submitted that the Unsolicited Communications were sent to potential customers of Imperial Flooring in order to promote and market the business with the objective of gaining customers, and that the denial in the defence to the contrary should be rejected.

156    The respondents submitted that the first representation contained in the Unsolicited Communication is a mere advertising puffery and that puffery is an expected part of business which does not attract liability for misleading and deceptive conduct: Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17 (Overlook v Foxtel) at [119]. The respondents submitted that in any event, the statement is unquantifiable. They submitted that there would at least need to be evidence of the (relevant) Australian market over the past (unspecified) number of years in order to assess its truthfulness, before then considering how one measures “fast traction”, and that if the statement could be quantified (which Evagroup would need to do in order to make good their claim of misleading or deceptive conduct), that might be a factor in favour of finding it an actionable representation: Byers & Ors v Dorotea Pty Ltd [1986] FCA 593; (1986) 69 ALR 715. They submitted that given the essentially meaningless worth of the phrase, there is no basis to find the statement to be misleading or deceptive.

157    The respondents submitted that the second representation suffers the same fatal problem as the Website representations: there is no context provided by Evagroup. It submitted that the Website as at the date the Unsolicited Communications were made is not in evidence. The Unsolicited Communications were made on about 9 September 2019, by which time Imperial Flooring had been incorporated for about a month, and had already begun invoicing customers. By 9 September 2019 Imperial Flooring had sent out at least 19 invoices to at least 10 different clients. It was submitted that this was at least some level of market penetration which could reasonably be referred to as “traction” in the market. It was submitted that it is entirely plausible that the link referenced in the Unsolicited Communication referred to clients of Imperial Flooring. Absent evidence of the contents of the link, the balance of the wording in the second Unsolicited Communication representation bears no meaning which can be interpreted as misleading or deceptive. As there is no evidence of what the Website said at the date in question, the Court cannot accept any assertion that the Website in question contained anything misleading or deceptive in nature.

158    The respondents submitted that the correct context in this case is that, if one accepts Evagroup’s case, Mr Lopez was sending an email to (at least some) people engaged in the flooring industry, including to customers of Evagroup. It submitted it would be likely that some of those recipients had dealt with Mr Lopez during his time working for Evagroup. Such customers, receiving an email signed off with the words “Nick Lopez Managing Director” would connect Mr Lopez to Evagroup, and from that knowledge could well assume that Imperial Flooring was a new business. That connection was made entirely clear by 24 September 2019, on which date Evagroup issued a press release confirming Mr Lopez worked for Imperial Flooring.

159    It may be accepted that statements alleged to have been misleading and deceptive must be considered and assessed in their context and that in commercial dealings, mere puffery in relation to goods or business may not engage such provisions: Overlook v Foxtel at [119]; Schindler Lifts Australia Pty Ltd v Debelak & Ors [1989] FCA 439; (1989) 89 ALR 275.

160    A representation that a business is “gaining traction” may well be no more than puffery. However, that is not all that was said, and nor does it address the applicant’s submission that “the effect of the representations was, and was intended, to give the impression to customers that Imperial Flooring had a track record of winning and fulfilling orders for major development projects”.

161    The two representations can be considered together, as that is the context in which they were made. The juxtaposition of the representations is such that it strengthens the contention that it was intended to give the impression to customers that Imperial Flooring had a track record of winning and fulfilling orders for major development projects. That assertion is incorrect.

162    In respect to the Unsolicited Communications of 9 September 2019, the representations refer to the projects on the Website as “our projects”. Given the context in which that representation was made, the obvious inference is that it is a reference to projects supplied by Imperial Flooring. I note that those emails are promoting Imperial Flooring. Despite the significance of the word “our” to the claim, the respondents did not address that aspect of the email. Certainly, the respondent did not suggest any other interpretation. This email is directed to potential customers of Imperial Flooring, touting for their business.

163    The email directs the attention of potential customers to Imperial Flooring’s Website and, in particular the projects page. As at the time the email was sent the respondents were asserting that they had supplied projects, and this was only a small portion of them. While it is correct that there is no evidence as to the precise state of the Website at the time the emails were sent, which includes 9 September 2019 (and later instances), there is evidence as referred to above, including from Mr Lopez as to the state of the Website up until 3 October 2019. Mr Yates’ evidence was also that the projects on the screenshot he took on 30 September 2019 were also on the Website when he looked at it in August 2019. He was not challenged on that. The projects listed as “projects supplied” which included those listed above at [134], were not supplied by Imperial Flooring but were projects of Evagroup.

164    For the reasons previously given in respect to the Website, I am satisfied that the applicant can establish what was viewable on the Website linked in the emails sent before 30 September 2020. However, the state of the Website after that time is unclear.

165    I am unable to accept the submission advanced by the respondents that some of the potential customers may have known him through his work with Evagroup, and would have known Imperial Flooring is a new business. Even leaving aside that he only worked for Evagroup for a very short period of time (which affects the number of customers he may have interacted with), nothing about the email reflects this is a new business. His presence at the business does not, of itself, necessarily reflect that. Indeed, the impugned sentence, which includes the phrase “over the years in the Australian market” supports that conclusion.

166    I am satisfied that Imperial Flooring has breached s 18 of the ACL by the representations contained on its Website and those in the Unsolicited Communications, and that Mr Lopez was party to the contraventions.

Defamation

167    The applicant’s claim for defamation had narrowed by the conclusion of the hearing. Evagroup claimed that its reputation has been damaged by the conduct of Mr Titus, as an agent for Cemimax and Imperial Flooring, in making defamatory statements to two of Evagroup’s customers. There are no positive defences pleaded to this conduct. A live issue also exists as to whether the applicant has standing to bring this claim. Ultimately, given the state of the evidence, the applicant’s claim was dependent on what was said to be admissions by Mr Titus in cross-examination.

Legal principles

168    The applicant bears the onus of proving, on the balance of probabilities, that the alleged defamatory meanings or imputations were conveyed by the publication in question.

169    The principles for determining defamatory meaning were recently summarised by Wigney J in Rush v Nationwide News Pty Ltd (No 7) [2019] FCA 496 (Rush) at [72]-[85]. There was no suggestion of error in this collection of principles on appeal to the Full Court of the Federal Court: Nationwide News Pty Ltd v Rush [2020] FCAFC 115; (2000) 380 ALR 432. Although those principles related to a publication in writing, they are nonetheless applicable to oral representations, with the listener being the relevant audience.

170    The applicant placed particular reliance on the following principles.

171    Whether or not the matter conveys a defamatory meaning is determined from the perspective of the “ordinary reasonable person”. This hypothetical individual is a person of average intelligence, not avid for scandal but equally, prone to a degree of loose thinking and capable of reading between the lines: Rush at [74]-[77]. In some cases, the natural and ordinary meaning of the words may be obvious from the direct or literal meaning of the words themselves. More often than not, however, the question turns on what implications or imputations the ordinary reasonable person would understand were conveyed by the words: Rush at [76].

172    The determination of what an ordinary reasonable reader would read into or imply from the words complained of is often a matter of impression: Rush at [82]. The publisher’s intended meaning, and the meaning actually understood by individual readers of the matter complained of, are irrelevant: Rush at [84]-[85].

173    The meaning that an ordinary reasonable person would attribute to the matter may be influenced by its overall tone or tenor. Each alleged defamatory imputation has to be considered and construed in the context of the entire publication: Rush at [79]; Australian Broadcasting Corporation v Wing [2019] FCAFC 125; (2019) 271 FCR 632 at [168]-[171]; Greek Herald Pty Ltd v Nikolopoulos [2002] NSWCA 41; (2002) 54 NSWLR 165 at [18]-[27].

174    As to whether a statement is defamatory, the test is whether a statement would have the effect of lowering the plaintiff’s reputation in the eyes of right-thinking members of the community: Radio 2UE Sydney Pty Ltd v Chesterton [2008] NSWCA 66; Rush at [67]. In respect of a corporation as a plaintiff, this lowering of the reputation must be regarding matters that would tend to damage the corporation in the way of its business, having regard to financial and commercial considerations by which a corporation is ordinarily assessed: Feo v Pioneer Concrete (Vic) Pty Ltd [1999] VSCA 180; [1999] 3 VR 417 see also Derbyshire County Council v Times Newspapers Ltd [1993] AC 534; [1993] 1 All ER 1011.

Preliminary matters

Amendment

175    At the outset it is appropriate to note that during the second morning of the hearing the first, third and fourth respondents sought to amend their defence to rely on qualified privilege under s 30 of the Defamation Act 2005 (NSW), justification under common law and under s 25 of the Defamation Act, and contextual truth under s 26 of the Defamation Act. These topics were first referred to in these proceedings in the respondents’ written opening filed on 4 September 2020, just before the hearing was listed to commence on 8 September, although at that stage there was then no application to amend the pleadings. When the issue of the absence of the necessary pleadings to rely on these topics was raised by the applicant on the first day of the hearing, the respondents said they were not in a position to indicate whether an amendment would be sought. It was not until the second day of the hearing, it being listed for four days, that the application was made. It was opposed by the applicant. The respondents submitted that there was no prejudice caused by the amendment because it was just a matter of fitting the pleadings around the existing affidavits. That is, from the respondents’ perspective, no further evidence would be needed.

176    The relevant principles for leave to amend are conveniently summarised by Burley J in University of Sydney v ObjectiVision Pty Ltd [2016] FCA 1199 at [62]-[67]. The onus is on the party seeking leave to amend to persuade the Court that such leave should be given: Dye v Commonwealth Securities Limited (No 2) [2010] FCAFC 118 at [17].

177    I refused the application, except in relation to two limited matters not the subject of objection by the applicant. In short, this was because of the timing of the application and the nature of the amendments sought, in a context where there was no explanation for the delay in making the application. Although the respondents were given opportunities to address the issue of an explanation for that delay and to lead any evidence in support, they chose to proceed without doing so: Aon Risk Services Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 (Aon) at [108]. I accepted that the applicant would be prejudiced by the amendments and that there would be an inevitable delay in resolution of the proceedings: Aon at [100], [102]. Although the respondents submitted that no further evidence was required, that was only from their perspective. In that context, I note also that the applicant made a number of submissions as to the adequacy of the amended pleadings, including that in many respects it did not satisfy the requirements of proper pleadings for these defences. The respondents’ submission, that there was “nothing wrong with the particulars” and that it was a matter for final submissions, was of limited assistance in advancing the respondents’ case for amendment, on which they bore the burden.

Standing

178    The applicant submitted that it had standing to bring the claim for defamation as it was an excluded corporation: s 9 of the Defamation Act. It submitted that the evidence established that Evagroup, as at the date that the matters complained of were published (being November 2019) employed less than 10 employees, and was not in a holding company/subsidiary relationship with another corporation, nor a public body for the purposes of the Defamation Act: s 9(2)(b). The applicant relied on the evidence of Mr Yates said to be to the effect that at no time during its operations has Evagroup ever employed more than five people, which it submitted was confirmed by Mr Milsted, Mr Lopez and Mr Titus during their respective cross-examinations. In relation to whether Evagroup is related to another corporation, the applicant relied on an ASIC extract for Evagroup, dated 15 November 2019. The applicant also submitted that the respondents raised no positive case that Evagroup failed to meet any of the elements of the definition of an “excluded corporation” and that the Court will be more readily satisfied that that onus has been discharged when there is nothing to which the respondents can point to suggest that the question was ever in real doubt.

179    The respondents’ contended that Evagroup had not established that it had standing to bring the defamation claim. They submitted that this has been a live issue since the filing of the defences, and a matter for Evagroup to prove. They submitted that other than Mr Yates’ cross-examination, there is no direct evidence, and no documentary evidence of how many employees Evagroup had at the relevant time, and that there is no basis to accept Evagroup’s submission that Messrs Titus and Lopez’s recollections are evidence of how many people worked at Evagroup.

180    For the reasons relied on by the applicant, it has established that it is able to bring the action in defamation. That said, the quality of the evidence on this topic, and the manner in which proof of this was established, gave rise to an unnecessary issue. This is in a context where the applicant could (and should) have easily and simply led clear and direct evidence on the topic.

The claims

181    As noted above, this claim was narrowed by the time the hearing had concluded. The representations remaining in this claim are that Mr Titus: first, on or about 12 November 2019 as an agent for Cemimax, made the statement that Cemimax products sold by Evagroup would not be protected by any warranty from Cemimax (and that this occurred during a telephone call between Mr Wang of Style Timber Flooring and Mr Titus); and second, that on or about 13 November 2019, made the statement that the Cemimax products sold by Evagroup will not be protected by any warranty from Cemimax (and that this occurred during a telephone call between Mr El-Saj, the contract administrator of Richard Crooke Constructions and Mr Titus).

182    Evagroup conceded in opening that it did not press the pleaded imputations alleging that the applicant is a thief, is untrustworthy and engages in unscrupulous business practices. Evagroup also conceded that there was no basis on which to press either the first or second representation complained of (as described in the preceding paragraph) against Mr Lopez and Imperial Flooring. The concessions made by the applicant, which had the effect of withdrawing a number of alleged imputations substantially changed the nature of the allegations made.

Submissions

183    It was submitted that as Mr Titus is the director of Cemimax and the representations were made in conversations about Cemimax products to potential Cemimax customers, the corporate entity consented to each of the conversations, or at least that Mr Titus was acting within the scope of his employment or agency with Cemimax.

184    It was submitted that Mr Titus acted as an agent for Imperial Flooring in his conversations with Mr Wang. It was also submitted that Mr Titus gave assistance to Mr Lopez in seeking to gain sales for Imperial Flooring. In that regard, Mr Lopez gave evidence that “[w]e [are] also partners. We’re partnered together, so whatever we do, we do it together, as far as, you know, selling to potential clients”. It was submitted that Mr Titus asserted that his purpose was not to make sales on behalf of Cemimax direct to customers, and therefore the necessary inference is that it was to support Mr Lopez. In those circumstances, Mr Titus should be found to have spoken to Mr Wang as agent for, and in an informal sense as a partner of, Imperial Flooring, as well as an agent for Cemimax.

185    As previously noted, Mr Wang was not called to give evidence.

186    In respect to each representation, the applicant relied on what it contended were admissions made by Mr Titus in cross-examination.

187    In respect to the first representation, it was submitted that Mr Titus’ evidence in cross-examination was that in a telephone call with Mr Wang in the months after the establishment of Imperial Flooring, he said words to the effect of: I (being Cemimax) will not be warranting stock that is out of date and that Evagroup was selling stock that he considered to be out of date. It was submitted that was an admission that the substance of the words spoken to Mr Wang was as pleaded: Cemimax products sold by Evagroup will not be protected by any warranty from Cemimax. If Evagroup was selling stock that was out of date and such stock would not be warranted, the conclusion is that Evagroup’s Cemimax stock was not warranted. The applicant further submitted that this is supported by Mr Yates’ evidence of the conversation being relayed to him by Mr Wang. It was also submitted that Mr Titus made substantially identical comments to Mr El-Saj at about the same time.

188    In respect to the second representation, the applicant contended that Mr Titus admitted during cross-examination that he had a conversation with Mr El-Saj in which he stated that if stock is out of date, it is not warranted, whether it was with Evagroup, or anyone else, the stock is not warranted. It was submitted that although Mr Titus maintained he did not suggest to Mr El-Saj that it was Evagroup’s stock being referred to, an email from him dated 21 November 2019 expressly told Mr El-Saj that Cemimax would not be warranting Evagroup’s Cemimax products, as they were either out of date or had been affected by a flood. From that point, Mr El-Saj (who was copied in to the email) was in receipt of information necessary to identify Evagroup as the subject of Mr Titus’ comments. It was submitted that Mr Titus’s evidence is further supported by Mr Yates’ evidence that he met with representatives of Richard Crookes Constructions (which related to Mr El-Saj) to allay their concerns arising from the assertion that Cemimax products bought from Evagroup would not have a warranty. It was submitted that Mr Yates was not challenged on this evidence during his cross-examination.

189    Evagroup asserts that the first representation conveyed the following defamatory meanings: that the applicant is selling an inferior product (first imputation); and the applicant is selling a product that is not endorsed or warranted by the manufacturer (second imputation).

190    It was submitted that the first imputation was conveyed on the following three interrelated bases.

191    First, Mr Titus stated that Evagroup’s Cemimax products did not have a warranty. It would be understood, prima facie, that a product not having a warranty is of poor quality or at least poorer in quality than those products that do have a warranty. That is because there is a legal right to call on a warranty and it insinuates that the manufacturer has no faith in the product’s performance and so will not stand behind it. Second, Mr Titus stated to Mr Wang that Evagroup’s products were out of date and/or (in relation to the second representation) damaged by a flood. Third, Mr Titus contrasted Evagroup’s stock with his company’s own Cemimax products. Mr Titus’ statements were to the effect that Evagroup’s products have characteristics (no warranty and not deserving of warranty, out of date and damaged) that make them less desirable than those Cemimax can provide. It submitted that a logical outcome of such a statement is that the recipient believes that the former products are inferior.

192    In respect to the second imputation, it was submitted that if it is accepted that Mr Titus said words to the effect of “Cemimax product sold by Evagroup will not be protected by any warranty from Cemimax” then the second imputation was conveyed.

193    The respondents submitted in respect to the first representation, that there was no direct evidence of what Evagroup allege was published. Mr Titus was the only participant in the conversation who gave evidence and his evidence ought to be accepted. Mr Titus confirmed that Mr Wang instigated the discussion about outdated stock. Mr Titus knew that Evagroup had outdated stock and said that stock, any stock, which was out of date was not warranted. The respondents submitted that the Court should reject the submission that Mr Titus’ cross-examination ought to be read as him telling Mr Wang that “Evagroup was selling stock that he considered to be out of date”. It was submitted that misinterprets the evidence and ignores that Mr Titus did not, and could not know which stock Evagroup was offering for sale. It was submitted rather, the evidence was that out of date goods would not be warranted, regardless of the vendor. It was submitted that an acceptable interpretation of the conversation was that Mr Wang asked Mr Titus about warranties on stock and Mr Titus explained Cemimax’s position on warranting products. It also made commercial common sense.

194    In respect to the second representation, for the same reasons given above including the absence of direct evidence of Mr El-Saj, it was submitted that the Court ought to accept Mr Titus’ evidence. The conversation in question began by Mr Titus being approached with questions about Cemimax products sold by Evagroup. Mr Titus’ evidence was consistent with his evidence in respect of the first matter complained of, being responses to questions about products sold by a particular supplier. What Mr Titus said to Mr El-Saj was: “if stock is out of date, it’s not warranted, whether it’s Evagroup, whether it’s anywhere else, stock is not warranted”. The essential part of the conversation by Mr Titus to Mr El-Saj is the words “if stock is out of date”. At the time this statement was made, in November 2019, Cemimax and Evagroup had ended their relationship. Evagroup had decided to stop stocking Cemimax products and by its own admission was running down the last of its stocks. Only Evagroup knew if the stock it was selling in November 2019 was out of date or not. It has not given evidence on that issue. Mr Titus’ evidence was said to be consistent throughout cross-examination, and is supported by the documentary evidence. The email made clear that two types of goods sold by Evagroup are not warranted by Cemimax: out of date stock, and damaged stock. It was submitted that Mr Titus made no statement that Evagroup’s stock as a whole was not warranted, only the stock which was out of date or damaged.

195    The respondents contended that even if the representations were made, there is no defamatory meaning attributable to them. It was submitted that the only way to arrive at the imputations which Evagroup allege is to read Mr Titus’ words out of context. It was submitted that this would involve the ordinary reasonable reader shutting their eyes to the obvious commercial position that Cemimax, as the manufacturer of the products in question, could choose whether or not to provide a warranty and on what terms to provide that warranty, including whether to warrant the performance of out of date products. Further, Evagroup’s case also requires one to accept the proposition that comparative statements, a product with a warranty is subjectively better than the same product without a warranty, are defamatory.

Consideration

196    The problem for the applicant in establishing these claims is the absence of evidence as to what was said in the impugned conversations and, significantly, the circumstances in which the conversations arose, and the impugned statements were made. The applicant chose to make (and persist) with these claims in the absence of direct evidence of the persons who were said to be the recipients of the representations. In the absence of evidence from Mr Wang and Mr El-Saj, the parties to these conversations, the claims rely entirely on what are said to be admissions by Mr Titus, and inferences which the applicant submitted can, and for its claim must, be drawn from them. The evidence is limited. Although it is said that there is some evidence that supports these admissions, even if that were to be accepted, it is insufficient and cannot overcome the gaps and deficiencies in the underlying evidence. In those circumstances, in my view, the evidence is insufficient and the applicant has not established either of the claims.

197    It is important to recall the applicant’s submission was that Mr Titus’ evidence about contentious matters must be treated with great caution, except where it is corroborated or against his interest.

198    Further, the applicant’s submission that Mr Titus “contacted various people in the industry, including Mr Jack Wang of Style Timber, and a Mr El-Saj of Richard Crookes Constructions”, has not been established. Rather, the only evidence in respect to this aspect is from Mr Titus who stated that he was contacted by them, asking questions about the product. At best, the evidence is that persons involved in the industry contacted Mr Titus, given his position at Cemimax, to ask about warranties on its products. That is the context of the ordinary and reasonable listener.

199    As the respondents submitted, this claim is in a commercial context of the manufacturer giving information about its products, when asked.

200    Moreover, given that by the end of the hearing the applicant conceded that neither representation could be maintained as against Mr Lopez and Imperial Flooring, the applicant’s submission that Mr Titus was acting on behalf of Imperial Flooring is irrelevant to the resolution of this claim.

201    In respect to the first representation, Mr Titus’ evidence was as follows:

Q:     You certainly can recall, can’t you, that you had a conversation with Mr Wang about the warranty situation that he bought through Mr Yates?

A:     The conversation that was had was Mr Wang asking me about stock being outdated, and the answer I said to Mr Yates was – whether it’s from Evagroup or from anyone else, if the stuff is out of date, then I can’t warrant it – you know?

Q:     You said more than that to Mr Wang – didn’t you. You said also that Evagroup was selling stock that you considered to be out of date?

A:     Well he had some stock that was out of date – correct.

Q:     And you said to Mr Wang that if Mr Wang purchased that stock for his projects from Evagroup, he would not be protected by warranty?

A:     No, I said to the effect that if you were purchasing products that are out of date, then we could not warrant that. If Mr Yates has that stock in his warehouse, it’s up to Mr Yates to sell Mr Wang stuff that was within date.

Q:     And I know you’re – it’s difficult after this time, Mr Titus, but that last statement that you made about what you said to Mr Wang, did you say that face to face with Mr Wang or did you say it on the phone?

A:     No, it was on the phone.

202    In Mr Titus’ affidavit of 10 March 2020, his evidence was:

I refer to paragraph 162. I admit that I had a conversation with Mr Wang with words to the effect of:

  He said: “How is it possible for Peter to bypass you and sell direct?”

I said:     “Peter has brought stock that was almost out-of-date. Out-dated stock would not be warranted and that applies to all customers. We will warrant everything else as usual.”

I deny the balance of words attributed to me in that paragraph.

203    I note that this first representation, as opened on by the applicant, was that Mr Lopez was a party to this telephone call, and that during this call, Mr Titus, who was also on the call, said the words alleged. Mr Titus denied that, in relation to the conversation he was referring to, Mr Lopez was party to the telephone call. Mr Lopez also denied that there was any such conversation, or that such representation was said by him, or in his presence or hearing. The telephone call referred to by Mr Titus in cross-examination during which the first representation was said to have been made is significantly different to that identified in opening as the basis of the claim. It was said during opening that this representation was made to undercut Evagroup’s business in favour of Imperial Flooring. A three way conversation involving Mr Lopez is different to a telephone conversation with Mr Titus alone, where Mr Wang asked him questions about stock being outdated.

204    I also note that although the Statement of Claim pleads the first representation being on or about 12 November 2019, there is no evidence of when the conversation that is referred to by Mr Titus occurred. No date or approximation thereof, was put to Mr Titus.

205    For the reasons given above, Mr Titus was not a reliable witness. He gave inconsistent answers on this topic, in addition to those referred to above. However, that does not assist the applicant as rejecting his evidence on a topic does not result in the opposite being established. At best, for the applicant, Mr Titus’ evidence is that at some unknown time, in a telephone call between Mr Wang and Mr Titus, Mr Titus said that out of date stock is not covered by a Cemimax warranty in response to question(s) about out of date stock. Although he said Evagroup had some stock that was out of date, that is not clear given the evidence. That is, it is not entirely clear whether the evidence in cross-examination was that Evagroup had some out of date stock or that is what he told Mr Wang. There is nothing in the evidence that this was said to relate to all the Cemimax stock that Evagroup had on hand, or that all such stock is not warranted by the manufacturer. The broader context of the conversation, is unknown. There is no evidence as to what else was said in the conversation, as surely there were other topics of conversation.

206    In those circumstances, given the paucity of evidence, the applicant has not established the claimed statement was said, that the imputations alleged arise, and that it is defamatory.

207    I have formed that view without addressing the respondents’ submission that the Court should draw a Jones v Dunkel inference, and as such it is moot.

208    In respect to the second representation, Mr Titus’ evidence was as follows:

Q:     And you talked to him about the particular bags or the particular source of DL55 that was being used by Floor Prep?

A:     In what sense?

Q:    You said to him, didn’t you, that the supplier from whom Floor Prep was obtaining its DL55 was selling out of date products?

A:     Incorrect.

Q:     You said to him, didn’t you, that if they – that’s to say if Floor Prep used DL55 Cemimax brand leveller, obtained from that source, it would not be protected by any warranty?

A:     What source?

 Q:     The source that you said was selling out of date products?

 Q:     But who is it?

Q:    Well, you named them, didn’t you? You said EVA, Evagroup?

A:     I said – I didn’t say that. I said if stock is out of date, it’s not warranted, whether it’s Evagroup, whether it’s anywhere else, stock is not warranted.

209    Mr Titus accepted that this conversation occurred in November 2019.

210    The email of 21 November 2019 sent by Mr Titus is necessary for making out the applicant’s case, as it is that email that is said to make clear the conversation referred to Evagroup. The email was in response to an email of Mr Tai of Richard Crookes Construction asking three general questions:

John,

We refer to a recent telephone conversation between yourself and our contract administration Youcha El-Saj, in respect of using the Cemimex DL55/ Cemimex topping products for floor topping underneath carpet areas to the above project. We are at the final stage of deciding the appropriate product to use and seek clarification on the following (particularly from a QA perspective).

1.    We understand there may be some ‘outdated’ stock products in the market through your product distributor(s), please advise how we can identify these outdated products.

2.    Please advise the ‘shelf life’ of Cemimex DL55 and the process you use in tracking and recording, to determine whether a particular stock is outdated.

3.    From your advice, we understand the ‘outdated’ stock is suitable for domestic applications. Please provide the technical information relating to the suitability of domestic application versus residential apartments application (like the Montofior project). ie. Explain how it is suitable for domestic but not other applications.

We would be grateful if you can quickly assist with the above queries.

Regards,

Keith Tai, Contracts Manager

211    Mr Titus’ reply was:

Hi Keith,

Thank you for the email.

1.    In regards to the outdated stock, everything that comes from our Cemimax warehouse in 5 Coates Place Wetherill Park is well within date. We sell close to 50,000 bags a month so our stock barely reaches 3 months old. The conversation had with Youcha was in regards to a ex customer of ours Evagroup that had purchased out of date stock at a discounted rate, and was advised we will not be warranting it. They also had stock that we believe to affected by a flood they had a few months ago and we also said it was not going to be warranted because we cant guarantee the outcome. I believe a couple of layers that has been using this on your site that buy from them have been using the stock from there and to date have had no concerns. We put a 12 month shelf life on our products however depending on how it’s stored a longer shelf life can be achieved. But as the manufacturer we need to do this because we can’t always guarantee where the stock has been kept in the presence of storage from our customers. We don’t have any customers that store our Cemimax products that is in their warehouse for more than 2-3 months. Most of the stock that leave our warehouse goes directly to site.

2.    The shelf life we have is 12 months on our DL55. This is tracked by the manufacturing record we keep once the stock has been made.

3.    In regards to domestic applications, and as quoted “from my advice”, the reason for me saying this is because it was mentioned that if the stock is to be used on domestic installations where no warranty was to be given then its up to the Supplier to advise the installed of this. As in commercial applications a warranty will always be given for our material that is in date.

Just to add we have been supplying contractors for the last couple of years with our Cemimax products to your sites, and it was been a great success with no issues or concerns with our products. We had sold over 2million bags in the last two years and not one problem has occurred with any of our products. To date we have a zero record of products that been affected negatively.

Don’t know who is making claims or trying to damn us, but it concerns me that out of the blue we have a situation like this. If you would like me to attend your site and inspect any of the convers you have or the products on site, I will gladly do so.

If you have any further questions please don’t hesitate to contact me.

Regards,

John Titus.

212    Mr Titus was asked about the email which included the following:

Q:     And you see at the beginning of the second line, he’s got “distributer”, and he’s giving you the option of it being plural or singular. And what I’m suggesting to you is you had already said to Mr El-Saj that one product distributer, namely Evagroup, was selling outdated stock and the like?

A:     No, I didn’t.

Q:     And he’s confused, isn’t he, this is numbered paragraph 2, because he’s looked at the product, and it’s got no shelf-life on it?

A:     Mmm.

Q:     And that’s because, of course, isn’t it, the whole concept of shelf-life is something that had become convenient to you to spruik because you now were a weapon to defeat Mr Yates with?

A:     That’s incorrect.

…..

Q:     And you knew that the effect of saying the product that Mr Yates is selling isn’t suitable for commercial situations would have been to stop him supplying Montefiore Randwick?

A:    Well that’s incorrect. Mr Yates could have sold him the stuff that was – was well in date, not the stuff that was out of date, so.

Q:     And your intention, of course, in doing this, was to prevent him supplying Montefiore Randwick?

A:     That’s incorrect, I’m sorry.

Q:     It was to interfere with the arrangement under which Preps – sorry, Floor Prep was buying his stock to use in its contract with Montefiore Randwick?

A:     Incorrect. Wholly incorrect.

…..

Q:     You are saying in this email, the conversation – I insert the word “I” – “the conversation I had with Youcha was in regard of an ex-customer of ours, Evagroup, that had purchased out of date stock at a discounted rate, and was advised that we will not be warranting it”. And I’m suggesting to you that resolves any doubt at all about whether in your conversation with Mr El-Saj you had named Mr Yates’ company?

A:     Well that’s because – he’s brought up the – he’s brought that up first, and I said anything that’s outdated – of course.

 Q:     That’s just untrue, isn’t it, Mr Titus?

 A:     No, it’s not.

 Q:     You had brought it up first?

 A:     Sorry?

 Q:     You had brought it up first?

 A:    No.

 Q:     In the conversation with Mr El-Saj?

A:     Well that’s why he rang me, to ask me the question. So how can I have brought it up first?

Q:     Well, I beg your pardon, we will do that more carefully. You had, in the conversation with Mr El-Saj that took place prior to the receipt of Mr Tai’s email, said to Mr El-Saj “it’s Evagroup who have got the out of date stock, it’s Evagroup whose product will not be warranted by us”?

A:     Well that’s generalising. Like I said to you before, Evagroup had stock that was in date, and stock that was out of date.

 Q:     Now?

A:     He was fully aware of that, so he can’t – I – you know – I can’t be responsible for him to sell out of date stock.

 Q:     We’re dealing here with a likely?    

 A:     he’s got – got stock

 Q:     Sorry. I didn’t mean to stop you, you ?

A:     well he had stock that was within date, there’s no reason why he couldn’t sell that stock.

 …

Q:     You knew that the information that you gave to Mr El-Saj in that conversation about the warranty was untrue, didn’t you?

A:     How so?

Q:     You knew that there would be no problem for the enforcement of a warranty on the Cemimax product if it was purchased by Floor Preparation Australia via Mr Yates’ Evagroup?

A:     If I knew – there would be no warranty if it was bought from Evagroup.

Q:     Now, you knew that the warranty situation would be exactly the same and that Richard Crookes Construction and their client would have exactly the same contractual rights if the Cemimax leveller was bought via Mr Yates as if it was bought via Mr Lopez?

A:     No. The thing in question here is the stuff that’s out of warranty.

Q:     And in suggesting to Mr El-Saj that he was in danger of getting unwarranted product if he dealt with Mr Yates you told a deliberate untruth?

A:     Not at all. That’s not true.

213    The email is not the subject of any claim for defamation. Rather, the applicant’s claim is based on the conversation between Mr Titus and Mr El-Saj. The relevance of the email is that the applicant submitted this is evidence of the content of the conversation.

214    As with the first representation, Mr Titus’ evidence is inconsistent. Again, rejecting his evidence on a topic does not, without other evidence, result in the opposite having been established. There are many unsatisfactory aspects of Mr Titus’ evidence in relation to this topic.

215    Although the email does make clear that in the conversation reference was made to Evagroup, the sentences in the email about the conversation do not provide any context in which the statements on the telephone were made. The only oral evidence in relation to that aspect was Mr Titus’ limited evidence. Despite the questions put in cross-examination, the only evidence was that this conversation occurred as a result of Mr Titus being approached by Mr El-Saj. As with the first representation, with limited exception, there is no evidence as to what else was said in the conversation. Although the email referred to the storage of Cemimax products, there is no evidence, one way or the other, that that was said during the conversation. The email also included that the product can be used after the 12 month period depending on storage. Again, there is no evidence as to whether that was said. The email talks of layers who have had no concerns about products. The imputations which flow from statements are affected by the context in which they appear, or are said. The imputation is to be construed in the context of the entire publication. As this is an oral representation that is relied on, the overall tone or tenor of the person making the representation may effect the imputation to be drawn. Here, there is an absence of evidence of the context.

216    Moreover, it is important to recall the imputation alleged, that Cemimax products sold by Evagroup will not be protected by any warranty from Cemimax. The inference from that allegation is that it relates to all and any Cemimax product. Mr Titus’ oral evidence did not relate to all stock. Nor is that said in the email. The absence of the full context in which the conversation occurred, in the circumstances of this case, hinders the applicant’s ability to establish whether the imputation arose.

217    Moreover, two of the three submissions made by the applicant referred to above at [191] in support of the imputations sought, the basis on which there was no warranty, and that Mr Titus’ statements were to the effect that Evagroup’s products have characteristics which made them less desirable than products Cemimax can provide, are matters separate from the imputation as to warranty. In any event, there is no evidence that during the conversation relied on, a comparison between Cemimax and Evagroup products occurred.

218    Again, given the paucity of evidence, the applicant has not established the statement claimed was said, that the imputations alleged arise, and that it is defamatory.

2020 Proceedings

Unpaid invoice

219    Cemimax and Mr Titus (the third and fourth respondents respectively) seek payment by Evagroup of the Invoice issued on 31 July 2019 in an amount of $358,443.25, together with interest and the costs of this action. The Invoice relates to flooring products and identifies six types of product: DL55, DL59, DP60 (in 5kg and 20kg quantities) and DP80 (again in 5kg and 20kg quantities).

220    Cemimax contends that the documentary evidence establishes that Evagroup requested to purchase the goods the subject of the Invoice and had asked to be invoiced for those goods. Evagroup’s defence admitted that an agreement for the sale of the goods exists and to not having paid for the goods ordered. In addition, during cross-examination Mr Yates admitted to receiving the Invoice; requesting to purchase the products the subject of the Invoice; that the products purchased were Cemimax products already stored at Evagroup’s warehouse; that Evagroup had not paid the Invoice; and that Evagroup had subsequently sold all of the product to its customers, retaining the proceeds.

221    However, Evagroup contended that Cemimax is disentitled from claiming the amounts specified in the Invoice; and, or alternatively, Evagroup is entitled to amounts of compensation against Cemimax by way of setoff, which is at least equal to the amount of the Invoice. Cemimax contended that Evagroup’s defences said to justify the non-payment should be rejected.

222    The first category of offsetting conduct relied on by Evagroup was referred to as “disentitling conduct”. Evagroup described the disentitling conduct as the deliberate conduct of Cemimax, principally through its managing director Mr Titus, to destroy Evagroup’s ability to on-sell the products covered by the Invoice and thereby to make the purchase agreement ineffective. The second category of offsetting conduct includes the issues of overstocking or over-ordering by Cemimax; the entitlement to compensation for poor quality pallets and the additional costs incurred by Evagroup dealing with them; and the defamatory and misleading statements made by Mr Titus regarding Evagroup and its director.

223    Before considering those bases in more detail it is appropriate to make two preliminary observations.

224    First, this claim relates to the Invoice dated 31 July 2019 in respect to product purchased by Evagroup. This purchase, although against the backdrop of the logistics agreement, is different from it. This was a purchase of product where Evagroup obtained ownership as opposed to product being delivered to them to be stored as reflected by the logistics agreement (described above at [10]). As Evagroup accepted, this was a contract for the sale of goods. Cemimax fulfilled a purchase order sent by Mr Yates. Although the product was already stored in his warehouse, until Evagroup purchased the product, ownership did not pass. This purchase was in a context where Cemimax had advised that they had found their own storage facility for the product, and that it would be moving its product from Evagroup to this new facility. There is no basis to suggest that this was anything but a voluntary purchase of the product by Evagroup. It is clear from the evidence that some stock was moved to the Cemimax premises.

225    Second, it is necessary to consider each of the bases separately bearing in mind that Evagroup must first establish the factual basis of the claim before a consideration of whether it could offset the debt arises. The factual basis for each of Evagroup’s claims is disputed.

First basis of the claim

Submission

226    The first category relies on a term implied into the contract, that Cemimax “would not do anything to stymie or limit [Evagroup’s] ability to on-sell the goods the subject of the Invoice”, and a similar implied term that Cemimax and its managing director “would not do anything to render the sale agreement inefficacious”. Evagroup submitted they are implications arising at law, rather than from the circumstances of the making of the contract, citing Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359 at 378; Service Station Association v Berg Bennett & Associates Pty Ltd [1993] FCA 638; (1993) 45 FCR 84 (Service Station Association) at 98. In relation to Shepherd, Evagroup relied on the observations by Dixon J at 378, of an agency contract:

The express promise of the appellants to use his best endeavours to obtain orders for the respondent and influence business on its behalf necessarily includes an obligation not to hinder or prevent the fulfilment of its purpose. Moreover, the contract established a relation between the parties intended to subsist for a period, and it involved some degree of mutual confidence and required a continual co-operation. Its object was the increase of the sale of the respondent’s manufactures…such an agreement inevitably imported a tacit condition that the appellant…should not endeavour to impede or defeat the respondent in the sale of its manufactures at the prices it might think proper to ask.

227    Evagroup submitted that “the implication into an agency agreement or an agreement of this sort, a logistics agreement, [arises] as a matter of law”. Gummow J in Service Station Association described it as “A negative covenant not to interfere with the performance of a positive obligation”. Evagroup contended that the authorities relied on by Cemimax to defeat its argument apply to the implication of terms into contracts “in fact” and not “at law”: Carter J, Penden E, Tolhurst G, Contract Law in Australia (5th ed, Lexis Nexus Australia) at [11]-[13]. As the authors note, among the differences is a shift of onus. It was submitted that it is for Cemimax to demonstrate why the clause should not be implied, given the implication of such a clause in past cases. Evagroup submitted that the terms are implied in this case irrespective of whether the matter is approached on the basis that the goods were supplied and the Invoice was raised under the ongoing contract between the parties, or alternatively under a “one off” contract created by the purchase order and Invoice, although it contended the former was the better view of the transaction.

228    Evagroup contended that “in breach of those implied terms Cemimax Australia set out on a deliberate campaign to destroy [Evagroup’s] opportunity to sell the products it had supplied. That campaign had as its principal element the campaign of misinformation and lies, particularly about the warranty available to a purchaser of the product”. It was said that Evagroup’s response, which was to announce that it would cease supplying Cemimax products and to reduce prices of existing stock, was a rational and reasonable response to the respondents’ breaches, which had made it impossible as a practical matter to sell the products the subject of the Invoice (other than at below cost price), and other stock already on hand. Evagroup submitted that this claim is based on the respondents’ false statements regarding Evagroup, its director and its products, and is closely related to the defamation claim. It submitted however, that the question here is “whether the conduct of Mr Titus on behalf of Cemimax Australia in telling the market, falsely, that [Evagroup] was a thief who would unscrupulously steal business from its own customers, and that it was selling an out-of-date product, was done with the intention, or would have the likely effect, of stymieing or significantly limiting [Evagroup’s] ability to enjoy the benefit of the goods it had purchased”. Evagroup referred to the evidence and submitted that Mr Titus’ conduct was part of a wider campaign on his part to target the ability of Evagroup to sell Cemimax products.

229    Evagroup further contended that, although not alleged to be breaches of the contract, the additional conduct of Cemimax and Mr Titus reinforce the impression that no sooner had they sold the leftover stock to Mr Yates, they set about making sure that he could not sell it. Evagroup referred to evidence of the assistance given by Mr Titus to Mr Lopez. It also relied on evidence of discriminatory pricing, with Mr Lopez obtaining stock from Cemimax which allowed Imperial Flooring to offer it to customers delivered for less than $16 per bag (which was the price Mr Titus ultimately accepted Evagroup was required to pay).

230    Evagroup contended that in a further response to the campaign of misinformation, as well as to the unfair competition from Imperial Flooring supported by Cemimax, that from about August 2019, Mr Yates was obliged to start reducing the prices of the product. Mr Yates gave evidence that he adopted three strategies to mitigate the harm he was suffering: (1) he reduced the price of DL55 floor leveller to several of his customers, including most significantly to Floor Preparation Australia and Style Timber Floors; (2) he substituted the more expensive DL59 instead of DL55, effectively giving the same two customers an additional discount; and (3) he discounted DL59 and supplied to a different group of customers as well as to Style Timber Floors. Those three strategies resulted in a loss of $47,466.84 which the applicant submitted is additional harm caused by Cemimax’s breaches and would either strengthen the conclusion that no amount is recoverable under the Invoice, or alternatively would be a discrete factor contributing to the amount of any setoff to be ordered against the invoiced sum.

231    Cemimax submitted that in relation to the first category, no such terms are to be implied into the contract. Moreover, the assertions as to the breach, being that Cemimax and Mr Titus have defamed Evagroup and Mr Yates during two alleged conversations involving Mr Titus, should be rejected for the reasons they gave in relation to the defamation claim. The respondents contended that the submission is not supported by authority. Moreover, the respondents submitted that the product was on-sold.

Consideration

232    The primary basis on which the setoff was advanced was the disentitling conduct based on an alleged breach of implied conditions in the contract between Evagroup and Cemimax. Evagroup’s submission directs attention to the terms pleaded in its defence. The defence alleges that the term is implied in the logistics agreement entered into in February 2019. Evagroup’s submission as to the implied condition, referred to above at [227], does not accurately reflect the pleading. The pleading alleges a condition which relates to the product provided pursuant to the logistics agreement, and “not the goods the subject of the Invoice”. It follows that although Evagroup submitted that it did not matter for its argument whether the sale giving rise to the Invoice was part of the logistics agreement or a “one off” contract, that latter proposition was not pleaded. However, as explained above at [224], this purchase was not part of the logistics agreement. There was no agency arrangement with these goods. There is a sale of goods contract, where title was transferred.

233    Nonetheless, assuming for the purpose of argument that the conditions existed, the only alleged breach was “a deliberate campaign [by Cemimax] to destroy [Evagroup’s] opportunity to sell the products it had supplied. That campaign had as its principal element the campaign of misinformation and lies, particularly about the warranty available to a purchaser of the product”. This involved “telling the market, falsely, that [Evagroup] was a thief who would unscrupulously steal business from its own customers, and that it was selling an out-of-date product, was done with the intention, or would have the likely effect, of stymieing or significantly limiting [Evagroup’s] ability to enjoy the benefit of the goods it had purchased”.

234    There is no evidence (or sufficient or reliable evidence), to substantiate any statements being made by Mr Titus (or Cemimax) asserting that Evagroup was a thief who would unscrupulously steal business from its own customers. This, no doubt, is the reason Evagroup conceded this aspect of its defamation claim, which had been pleaded but which was not pressed at the hearing. That concession must reflect an acknowledgement as to the state of the evidence, and Evagroup’s inability to substantiate those claims. Some lesser form or quality of evidence on that topic could not and does not suffice in respect to this argument. The allegation, in so far as it relates to stealing clients, is not established.

235    Indeed, apart from the two conversations in which Evagroup says that Mr Titus made admissions (including in the email) and which are referred to in relation to the defamation claim, there is no evidence capable of establishing the underlying remaining factual propositions. Certainly none was identified. Evagroup accepted that this argument was closely related to the defamation claim. It is plain from the evidence that Mr Yates had conversations with a number of clients after the time Mr Lopez left his employment, but anything he was told in those conversations does not provide a proper evidentiary basis for establishing these assertions. Although what Mr Yates was told might provide an explanation for his actions, and may be relevant to Mr Yates’ state of mind, it does not establish that Mr Titus (or Mr Lopez) did or said the matters relayed to him. Although Evagroup submitted that “[i]t is notoriously the case that the victim of a campaign to damage their reputation cannot trace or prove every instance of it”, it must prove some instances to establish a campaign. It did not. Untested hearsay assertions in the affidavit evidence of Mr Yates are insufficient to establish such a claim. The only evidence referred to by the applicant in closing submissions is the email chain to Mr Tai at Richard Crooks Construction (the business involved in the second representation of the defamation claim, dated 22 November 2019) and Mr Yates recitation of a conversation with “Andrea” of Floor Preparation Australia on 13 November 2019. In this regard Evagroup chose not to call any other witnesses to support its claim. I note that the factual assertions underlying this argument, including that Evagroup was stealing customers and was acting unscrupulously, was not put to Mr Titus in cross-examination.

236    Therefore if Evagroup’s basis is stripped of its assertions of the more egregious conduct, what remains is the statements which were the basis of the defamation claim.

237    Those statements related to the issue of stock being out of date, which is far narrower than those relied on in this argument.

238    As to the evidence of Mr Titus, as explained above at [205] and [215], in respect to the two conversations in which he gave evidence, those related to the warranty of the product (and flooding) and it was the customer who raised the issue of a warranty. For the reasons explained above, given the paucity and quality of the evidence of those conversations, the applicant has not established that the statements were defamatory. Appreciating for this argument the technicalities required in respect to a defamation claim are not required, the flaws in the evidence relied on apply regardless, rendering it insufficient.

239    Significantly, those conversations, according to the Statement of Claim, are alleged to have occurred in November 2019, some months after the Invoice was sent and payment was required.

240    It is unclear how the limited evidence from Mr Titus, and given its timing (even if, contrary to my findings it was accepted), could properly establish a deliberate “campaign” by Cemimax to destroy Evagroup’s opportunity to sell the products it had supplied some months earlier.

241    In any event, it is also not apparent the basis on which it is said a “campaign of misinformation and lies, particularly about the warranty available to a purchaser of the product” is established.

242    Mr Yates accepted that Mr Titus had told him during conversations that the product had a shelf life of 12 months, although he denied he was told that in relation to this stock. Mr Yates also accepted that he was aware at the time of the purchase that some of the product had been in his warehouse for many months. There is contemporaneous documentary evidence by Mr Yates which supports the proposition that he was aware of the shelf life. In an email by Mr Yates sent on 18 April 2019 to Cemimax, he inquired how many containers were in transit as he was severely overstocked. He stated inter alia, “[t]he DL59 will start to expire before it is sold if we are not careful as at current sales we are carrying nearly 12 months of inventory”. As is apparent from the email, it is plain that he was also concerned that the stock be sold before that expiry date. Neither party addressed this evidence.

243    That said, Mr Yates did not accept that he was aware that the stock he was purchasing, or at least some of it, was going to be soon out of date. The basis for his rejection of that proposition was: “I would have sold the whole lot in three months, and it was the substitute product. There was no date on it, it was given to us at the same price as DL55, so we could substitute the product and sell the product so Cemimax didn’t have to move it to their warehouse”. That is, on “current sales it wouldn’t have been [out of date]...we would have sold the product in the next three months”. That is not a response to the question. Implicit in that answer, is an acknowledgement that if it was later than three months, it may have been out of date. In any event, as explained above, these conversations involving Mr Titus are alleged to have occurred in November 2019, over three months after the purchase. Apart from this limited evidence, there was no evidence as to the age of the stock which was part of that purchased by the Invoice. That said, in so far as the applicant suggested that there was no shelf life for the product and that that had been concocted by Mr Titus to disadvantage Mr Yates, that is inconsistent with the evidence of Mr Yates referred to above.

244    Although there was evidence that product could be used after 12 months if stored correctly, the evidence of Cemimax is that they would not warranty the product. There is no evidence that any statement suggesting Cemimax would not warranty product after 12 months is a false statement. It is for Cemimax to determine when it provides a warranty.

245    I note that there is a dispute between Mr Yates and Mr Titus as to the basis on which Evagroup obtained a discount on the stock it purchased the subject of the Invoice, with Mr Yates disputing it was because of the age of the stock. Nonetheless, on his own admission the stock had been in Evagroup’s warehouse for some time. As Mr Titus was not involved in the sale, there is no evidence that this was other than what he was told by Ms Chen as to why the sale was made. The evidence clearly establishes that the stock was purchased at a reduced rate.

246    Despite Evagroup’s submission that the Court would readily infer from the two conversations that Mr Titus’ conduct was part of a wider campaign on his part to target Evagroup’s ability to sell Cemimax products, the evidence referred to does not establish that. Accepting that Evagroup also relies on other evidence that Mr Titus supported Imperial Flooring in its business, it is not said by Evagroup that is a breach of any implied condition. In any event, the evidence pointed to appears to be the conversation at a breakfast with Mr Wang and Mr Lopez held in November 2019 to introduce Mr Wang to Mr Lopez, and a telephone call with Mr Wang thanking him for breakfast. Leaving aside that this all appears to relate to Mr Wang, this does not provide a proper basis to infer a deliberate campaign of misinformation and lies targeting Evagroup. Evagroup’s submission that it is corroboration of Mr Titus’ determination to harm Evagroup in a context where it is not alleged to be a breach of the agreement, cannot assist it. The fact that Imperial Flooring may have used Cemimax’s premises as its address at the time of its inception also does not, without more, assist. Apart from the fact that the evidence is limited, and does not have the effect contended for, it cannot in any event, provide a makeweight for the absence of evidence of the underlying breach.

247    Even assuming there was an implied term of the nature alleged, Evagroup has not established that “Cemimax Australia set out on a deliberate campaign to destroy [Evagroup’s] opportunity to sell the products it had supplied. That campaign had as its principal element the campaign of misinformation and lies, particularly about the warranty available to a purchaser of the product”.

248    Before leaving this basis for Evagroup’s submission, it is appropriate to refer briefly to one other aspect of Evagroup’s case, which was directed to the consequences of the purported conduct. It relates to Evagroup’s response, which was to announce that it would cease supplying Cemimax products and to reduce prices of existing stock. The reference to announcing that Evagroup would cease providing Cemimax product is a reference to the press release recited above at [28]. As to Evagroup’s submission that this was “a rational and reasonable response to the respondents’ breaches”, it is timely to recall that this action is brought by Cemimax, it is Cemimax who is owed the money. However, the press release primarily talks about Mr Lopez and Imperial Flooring not Cemimax. Cemimax and Mr Titus are not part of any claim in relation to the use of confidential information or breaches of the ACL. Although the release said that Mr Titus openly praised Mr Lopez for how quickly he managed to grow his customer base, even leaving aside the absence of an evidentiary basis in these proceedings for that statement, that is not suggested to be a breach. That sentence in the press release also refers to Imperial Flooring having 300 clients, which Mr Yates accepted, was a made up figure. On its face, the press release announces that Evagroup will cease stocking Cemimax, with the obvious inference being because of the conduct of Mr Lopez in setting up Imperial Flooring. Moreover, this press release was issued on 24 September 2019 when the conversations by Mr Titus which formed the basis of the defamation claims and campaign of misinformation occurred in November 2019. It cannot assist this aspect of the claim.

249    Although Mr Yates may have perceived this was damage control, it is difficult to see how it might not have adversely affected his sales. For example, if a customer wanted to continue to use Cemimax products they would need to go elsewhere (which does not necessarily mean to Imperial Flooring). The customer may not have wanted to change the brand of product and, in the circumstances, might be sceptical about the new product being better. That Mr Yates chose to include sarcastic comments about Mr Lopez in the press release, one assumes designed to hinder his business, may have affected a customer’s willingness to deal with his own business. Regardless of the reasonableness of the decisions to change product, to announce the decision in the press release in the terms in which it was issued could not be described as a reasonable response.

250    Mr Yates’ evidence was that he reduced the prices for his Cemimax product from about August/September 2019 because of statements made by the respondents and the respondents trying to take his customers. That submission clearly encompasses the conduct alleged against Mr Lopez, not relating to this action, or the breaches alleged. In his initial affidavit Mr Yates described that the change of product was due to issues he was having with Cemimax and the pricing of the product, and that he did not consider he could compete. However, those issues were not said to be a breach of any implied condition of the agreement. Although Evagroup changed products and reduced their prices to sell stock, it has not been established that was due to a deliberate campaign related to the conduct of Cemimax. That Mr Yates might believe that Mr Titus has some responsibility, or that he had a campaign, does not establish the fact of it occurring. It was incumbent on Evagroup to lead admissible evidence to establish this claim.

251    This first basis of the Evagroup’s offset claim, which is its primary basis, is not established.

Second basis of the claim

Submission

252    Evagroup’s case in relation to the second category of the claim is put in the alternative to the first category, and relates to two factors; the cost and difficulty caused by the faulty pallets on which stock was delivered, and the impact of excess stock ordered by Mr Titus on Evagroup during the life of the logistics agreement. Evagroup referred to the evidence in relation to each. The applicant also provided the method which it says is appropriate to determine the amount of money it claims is owed as a result of the overstocking and faulty pallets.

253    First, the faulty pallets claim related to pallets which were delivered to Evagroup that were different to those which had been used before and after. It was said that the faulty pallets were different in size and construction, and markedly inferior in comparison. Pallet trucks did not fit under them so that they could not be readily moved around the site and they were also prone to breaking. Mr Yates complained about this to Cemimax. Mr Yates’ evidence is that the additional work required to repack the product onto superior pallets and to clean up the mess associated with the faulty ones totalled 350 hours at what he estimates to be an average labour cost of $50 per hour. Mr Titus was aware that that cost was being incurred.

254    Second, the excess stock relates to the agreement entered into in February 2018 between Mr Yates and Mr Titus under which the only payment to Evagroup for logistics and warehousing costs arose when the product was shipped out of the warehouse to a customer. It was contended that an express term of the contract was that Evagroup store a maximum of approximately 150 pallets. The document evidencing the agreement has a bullet point, “minimum allowance for storage of approx. 150 pallets”. The applicant’s case is that was an error and Mr Yates’ evidence was that it was a maximum and not a minimum. Amounts far in excess of that were delivered by Cemimax. The amount shipped was 1800 pallets. Mr Yates complained about the excess stock.

255    Evagroup recited the evidence on the topic of whether the agreement was for a maximum or minimum amount. It contended that Mr Yates’ evidence should be preferred on this issue, and that it is anchored to the commercial realities of the new arrangement. The applicant further contended that if the Court is not satisfied of the express term limiting the stock, in the alternative it alleges that gross overstocking is a breach of the implied term of the contract, referred to above. In that regard, Evagroup submitted that gross overstocking is a breach of the implied term as pleaded. It accepted that on this alternative basis it would not have been able to insist upon precise or close adherence to the 150 pallet maximum. It submitted, referring to Shepherd, that the term implied by law in a contract of this nature “includes a degree of co-operation over the intended business” and “in the face of complaints from Evagroup, Cemimax Australia continued to order container upon container of excessive stock, that implied term was breached”.

256    Evagroup also relied on the evidence of Mr Yates as to repacking the pallets and the method by which he calculated the basis of the claim.

257    Mr Yates gave evidence that in or about January 2019 to March 2019, Evagroup repacked pallets of Cemimax products prior to those pallets being transported to the end customer. Evagroup also cleaned the mess created every time a pallet collapsed at their site. He estimated that the repacking and clean up associated with the faulty pallets equated to approximately 350 hours at $50 per hour which he estimated as $15,000 (it amounts to $17,500).

258    Mr Yates’ evidence was that in or about April 2019, Cemimax started to send more than 150 pallets, being the maximum amount of stock that had been agreed upon in February 2018, and Evagroup had to store much more stock than it had agreed, and more than it had capacity for. As at April 2019, Evagroup was storing 1,745 pallets of Cemimax’s product. This increased to approximately 1,800 pallets in about May 2019. Having made enquiries with Swift Transport, a logistics business, which charged $7.50 plus GST per pallet per week, Mr Yates said that the cost to Evagroup to store an extra 1,360 pallets was approximately $353,600 plus GST per annum (which is calculated using a value of $5.00 per pallet per week for 52 weeks).

259     Mr Yates also said he had lost employee hours as a result of: staff needing to move the excess stock in the warehouse before being able to access other products for other customers; staff being required to work public holidays to remove stock from the containers and store it to avoid demurrage charges when large quantities were delivered around public holidays; staff having to undertake more working hours to respond to customer orders; and having to reduce the amount of stock of other product that Evagroup would normally carry. Mr Yates said he estimated that Evagroup incurred wages in lost time in the amount of approximately $35,828.40. This was calculated by having regard to the hourly rates of the various Evagroup employees and knowing approximately how many extra hours were involved in Evagroup dealing with the overstocking from Cemimax. For example, Mr Yates worked overtime on Anzac Day, over Easter, on weekends and afterhours for approximately 136 hours at $80/hour x 1.095 = $11,913.60 (including super) and the cost to Evagroup for office/warehouse staff of approximately 12 hours extra per week which is calculated as 52 x 12 x $35/hour x 1.095 =$23,914.80 (including super).

260    As to this second category, Cemimax referred to the evidence from its perspective as to the interpretation of the contract and whether the 150 pallets was to be a maximum or minimum number, and submitted that reliance should be placed on the documentary evidence over that of a witness, citing Watson v Foxman (1995) 49 NSWLR 315. It submitted in any event, the 1800 pallets was the product of many months of build-up which Evagroup let happen. It further submitted, that even if there was a maximum or an approximate maximum of 150 pallets, there is no causal connection between that and the Invoice, particularly given that all the stock was sold. It also submitted that it was impossible to quantify any loss.

261    Cemimax submitted that what transpired after the agreement was made, is that Evagroup willingly accepted more than 150 pallets of product. By its own evidence, Evagroup held 1,745 pallets of stock in April 2019 and approximately 1,800 pallets at May 2019. Rather than reduce their stock level, purchase order #67778244, being the order which led to Cemimax generating the Invoice, reflects that on 31 July 2019, Evagroup ordered 11,183 bags of DL59 (or 224 pallets) and 8,566 bags of DL55 (or 172 pallets). It was submitted that may have been because Evagroup was selling 8,500 bags (or 170 pallets) worth of stock per month at that time, a figure which sits poorly alongside a claim that Evagroup would only hold a maximum of 150 pallets. Mr Yates also told Mr Titus that Evagroup could handle three times as much stock as they were receiving.

262    As to the faulty pallets, the respondents relied on the Sale of Goods Act 1923 (NSW) as the Invoice involved a purchase order different or separate from the logistics agreement, being Evagroup purchasing goods which it was then going to sell. Cemimax never rejected the goods. Again Cemimax submitted that in any event, there is no causal connection between the faulty pallets and any loss.

263    Cemimax took issue with the method used by Mr Yates for calculating the purported loss. It submitted nothing had been quantified.

Consideration

Overstocking

264    The primary basis of this aspect of the claim is dependent on Evagroup first establishing that there was a term in its agreement with Cemimax that there be a maximum of approximately 150 pallets of Cemimax’s product stored in their warehouse at any one time.

The evidence

265    It is common ground that the agreement between Mr Yates and Mr Titus was made orally in February 2018, as described above at [10]. In brief, the agreement involved Evagroup purchasing and taking delivery of stock supplied by Cemimax.

266    A letter by Mr Yates of 13 February 2018, after the terms of the letter had been approved by Evagroup’s accountant, was sent to Cemimax. It purports to set out in written form Mr Yates’ understanding of the terms of the parties’ oral agreement. It is important to note that although the evidence of this letter is of some importance, it remains that it is an oral contract, not a written one.

267    The letter includes the following:

Dear John,

Thanks for the opportunity to quote on the Storage and Distribution of Cemimax.

In a show of how much faith we have in both you and the product, we cancelled our order with Bostik and have switched to stocking and supplying your product immediately. As we are the largest stockist of Bostik in the Country, this was a massive decision for us.

Please find below our Charges and the Advantages of using Evagroup. Please note these charges are well below what we charge other Customers as well as we have allowed a grace period of 6 weeks before any minimum charges are applied and even those are very accommodating as it is a new product and needs to grow as the market becomes aware of the products you sell.

Handling/Storage charges (All pricing excludes gst)

•    Charge $1.70 per bag

•    Minimum allowance for storage of approx. 150 pallets.

•    Unloading of containers same day (should avoid demurrage charges)

•    Loading of vehicles for pickup & deliveries (Pickups Mon-Fri 7am-5pm & Saturdays 9am-1pm)

•    Make up of orders when full pallets not required

•    No minimum charge until 1st April 2018

•    Minimum charge from 1st April 2018 $2000 per month

•    Incentive price to Evagroup $15.00 per bag

•    Review after 6 months

Advantages of using Evagroup

•    Low minimums for quite months such as January

•    Rail allows 40 ft containers (Huge savings on freight from China)

•    Rail cost saving as no side loaders required.

•    Long opening hours

•    No waiting in Warehouse for pickups

•    Excellent customer service

•    Increased sales with Evagroup selling Cemimax instead of Bostik

•    Exposure to larger Customer base

•    Room for growth

•    No wages, no holiday pay no admin costs.

•    No rent and Outgoings

•    Multiple staff to handle calls and logistics

Please feel free to contact me should you require any further information.

Regards

Peter Yates

268    As is apparent, the letter refers to a “minimum” allowance for storage of approximately 150 pallets, rather than a maximum which Evagroup contends was the agreement. There is no reference elsewhere in the letter to a maximum limit.

269    Mr Yates gave evidence that he intended for that letter so say “maximum” not “minimum”, because of Evagroup’s warehouse capacity. Mr Yates said he had conversations with Mr Titus in February 2018 where he said words to the effect of “we can only carry a maximum of approximately 150 pallets”. It was a mistake that the word “minimum” was included rather than “maximum”. The letter was prepared by Mr Yates. He accepted that he considered the letter to be an important document and that he showed it to Evagroup’s accountant.

270    It was put to him in cross-examination that there was no agreement for a minimum amount but rather the 150 pallet approximation was an “internal assumption” on his part. Although Mr Yates initially rejected that proposition, shortly thereafter this passage occurred:

Q:     ….It wasn’t ever communicated [to Cemimax] until much later in the piece, that you contended that the agreement provided for a maximum for 150 palettes. Correct?

A:     That’s correct.

Q:     And that’s because up until that point, what had actually happened was that you had made an internal assumption that you would receive about 100 – sorry – you had made an internal assumption that, at any one time, you would probably be storing about 150 palettes. Correct?

A:     Yes.

271    What transpired after the agreement is that Evagroup accepted more than 150 pallets of product. As Cemimax submitted, by Evagroup’s evidence it held 1,745 pallets of stock in April 2019 and approximately 1,800 pallets at May 2019.

272    Mr Yates accepted that he permitted additional stock but said he complained about the amount, citing an email from him to Cemimax dated 18 April 2019. That was as follows:

Good morning guys,

Can you please advise if there are any containers on the water.

We were told there were no more except the 2 containers (terrazzo/vests etc)

Last Thursday another 5 came in and today there are 7 more coming in (inc the terrazzo/vests)

That is now 27 containers in the past 3 weeks.

I will come over sometime next week to discuss further as we are now severely overstocked and can no longer accept more inventory.

The DL59 will start to expire before it is sold if we are not careful as at current sales we are carrying nearly 12 months of inventory.

We will talk soon but please do not order anymore inventory until we can sort this out.

Regards,

Peter Yates

273    Mr Yates accepted in cross-examination that this was the first time he had raised this issue in writing, although he said he had an earlier telephone call with Zoe (the recipient of the email from Cemimax) but could not recall when that was. However, in that call he had just said “[t]here’s a lot and it just keeps coming in”.

274    It is to be noted that in the email recited above, that there is no reference to this being in breach of Cemimax’s agreement with Evagroup that it would store a maximum of 150 pallets. Mr Yates accepted that neither in the telephone call nor in the email did he complain about the amount exceeding the approximate 150 pallet maximum.

275    Despite Mr Yates’ oral evidence as to the timing and extent of the complaints no reference was made to the purported conversation he had with Mr Titus on or about 18 April 2019, which is referred to in his affidavit in reply:

On or about 18 April 2019, I had a conversation with Mr Titus regarding the error of referring to “minimum” rather than “maximum” in the quote dated 13 February 2018 from Evagroup to Cemimax. We had a conversation in words to the following effect:

I said: You are carrying too much stock.

He said: You said you could carry a lot more.

I said: We said 150 pallets maximum.

He said: You said 150 pallets minimum.

I said: Obviously we meant maximum, it was a typo and you know because 150 pallets maximum is what we always spoke about.

276    There was no evidence of the circumstances of the conversation, or whether it was face to face or by telephone. This is in a context where in the email of 18 April 2019, recited above, he had said he would attend next week to discuss the matter further. That conversation also is not referred to in the email by Mr Yates to Mr Titus dated 15 May 2019 (as described in the following paragraph).

277    The email from Mr Yates of 15 May 2019 was headed “1.0 Fees and charges effective 1st July 2019” and addressed the overstocking. This email was to “take the opportunity to submit our new arrangement for Cemimax which was up for review August 2018”. It is to be noted this new arrangement was never the subject of any agreement, and that although the February 2018 agreement was up for review in August 2018, this email was not sent until May 2019. Nonetheless, in this email Mr Yates outlined additional charges he was invoicing:

2.0 Additional Charges

In the current contract, we allowed for 150 pallets of storage. This has been exceeded to a great extent, and as at April 30 2019 we had in excess of 1500 pallets in stock. This equates to more than 10 times the allocated amount.

Stock holding history for the past 7 months can be found below. Please note exercising overflow options outside of Evagroup was simply not feasible.

Evagroup will be invoicing an excess storage charge of $50,000 in the month of May 2019 which is only around 20% of what the realistic charges should be.

This will also cover additional storage until June 2019.

On June 30 2019, we will carry out a stock take and the accrued handling fees will be invoiced for all remaining inventory to bring all charges up to date.

278    This “new arrangement” never came into effect. I note it does not contain any maximum limit. I note also that the email refers to “allowing for 150 pallets” which is not the language of an agreement that there would be a maximum of approximately 150 pallets. This appears however to be the first reference to the agreement. It is in this context that Evagroup then sent an invoice for $50,000 to Cemimax. There was nothing in the February 2018 agreement which permitted charging for overstocking, and this charge was not agreed to by Cemimax.

279    Mr Yates gave evidence that on 31 May 2019, Evagroup issued invoice number 00136548 for $55,000 for the logistics services rendered by Evagroup to Cemimax, $50,000 of which was for repacking the faulty pallets and overstocking, and that Cemimax had not paid that invoice. However, as is apparent from his affidavit dated 21 April 2020, Mr Yates later cancelled that invoice. He said he did so solely on the basis that Ms Chen (who is the Cemimax representative in China with whom he dealt) promised to continue supplying Evagroup. There is a WeChat message thread in evidence between Mr Yates and Ms Chen. The WeChat messages which occurred between 3 August 2019 and 5 August 2019 make it clear that Cemimax China were not accepting the invoice and asked him to reconsider. A message in the chain from Mr Yates reflects that he said he would cancel the invoice because of their relationship, and would concentrate on his future business with Cemimax. In the WeChat messages, Ms Chen also said that the pricing they had agreed to was made without any knowledge of this invoice and if they had known, it would have been different. Mr Yates reissued the invoice without the $50,000 charge. Evagroup obtained stock from China for about 6 weeks until, according to Mr Yates, the supply unexpectedly stopped, the promise was broken, and he said, the invoice was reinstated.

280    Mr Yates gave evidence that he accepted the product Cemimax delivered to Evagroup, although he contended that it was over the agreed limit. He said Evagroup had never refused any delivery during its 12 years’ existence. He agreed he had sold the product delivered to customers.

281    I note also that in an email sent by Mr Yates to Mr Titus on 3 August 2019, Mr Yates said the following:

You are also correct when asked, I did say we could carry in excess of 100,000 bags and in fact we can carry more than 3 times that if the sales reflected that. As you would be aware, there are significant storage and labour costs involved in unloading and storing that much inventory.

This wasn’t the issue with Cemimax, your under performance in sales was. With months of you selling less and around 2000 bags, these costs were far greater than the income from your sales at $1.70 per bag.

282    Mr Yates accepted that conversation took place in July 2019.

283    I note that Mr Yates was continuing to order stock, for example, in an email of 29 May 2019 sent by him to Ms Ebert at Cemimax (of which Mr Titus was copied into), he confirmed that there were 17,000 bags of the DL55 in stock and suggested ordering 15 containers a week apart, so that there would be five containers arriving each week.

284    The evidence in relation to the amount that Evagroup claims is owed as a result of the overstocking is addressed below at [318]-[324].

285    Mr Titus denied that as part of the agreement, Cemimax could only send a maximum of 150 pallets (50 bags to a pallet), to Evagroup’s warehouse. Mr Titus’ evidence was:

[33].     In July 2018, I had a conversation with Mr Yates with words to the effect of:

I said:     “We are growing and demand is growing. Are you able to handle more stock if we continue to grow?

He said:     “Yes, we can go three times as much as this.”

[34].     In November 2018, I had another conversation with Mr Yates with words to the effect of:

  He said:     “We have got too much stock coming in.”

I said:     “We discussed this a few months ago, but no worries, I will tell China to slow down production.”

[35].     Subsequently, Cemimax ran out of stock and were unable to supply our customers with orders that we were receiving for DL55, so we had to fill those orders with the more premium DL59 at the DL55 price. Appearing at pages 78-79 and marks annexure “JT-11 is an example of this.”

[36].     In April 2019, I had a conversation with Mr Yates with words to the effect of:

  He said:     “There’s a problem with too much stock.”

I said:     “We’ll slow things down again. I hope that we don’t lose sales again like we did a few months ago. We are continuing to grow. Can you handle it?”

He said:     “We can, but we will need to manage it better.”

I said:     “If we get orders from our customers for 50,000 bags, we need 100,000 bags in storage as it takes 3 weeks to get here from China.”

He said:     “I can do it I just need to work it out.”

There was a transition period following this conversation where some pallets that were already being delivered to Australia arrives, but apart from those, China did not send any more stock.

[39].    I refer to paragraph 47 [of Mr Yates’ affidavit]. After receiving the email marked annexure PY-10, on 23 April 2019. I had a meeting with Mr Yates and Zoe was present:

I said:     “We’ve had this conversation a few times where you’ve said to me that you can hold three times the amount of stock. Our sales are continuing to grow. We can’t not bring stock in because we are getting more orders everyday. The issue is your warehouse.”

   He said:     “We will have to figure it out”

[40].     At no stage did Mr Yates ever say that he was unable to accommodate us any further until early June 2019, when we had a conversation with words to the following effect:

 He said:     “This is becoming a joke. There is too much stock. We didn’t allow for this much. I’ve done more than enough for you.”

 I said:     “Peter, would you like me to get my own warehouse?”

 He said:     “Maybe that’s what you’ll have to do.”

 I said:     “Okay, and there’s no way I am paying the $50K invoice.”

 He said:     “I will cancel the invoice.”

This was the first time that Mr Yates ever indicated that he was unable to store our stock at his warehouse.

286    Mr Yates accepted that he had a number of conversations about Evagroup’s capacity to store more stock.

287    In cross-examination Mr Titus acknowledged that there had never been any discussion between him and Mr Yates about setting a minimum number of pallets.

 Q:     Do you remember a one page document from February 2018?

 A:     Mmm

 Q:    That you, in your affidavit, call “the quote”?

 A:     Mmm.

Q:     That contains Mr Yates’ proposed pricing, and then underneath that a bunch of little dots, little ticks, and the reasons why he says it’s a good idea to work with him?

A:    Yes.

 Q:     Okay. When you received that?

 A:     Mmm

 Q:     and you saw the word “minimum”?

 A:     Mmm

 Q:    150, you knew that he had made a mistake, didn’t you?

 A:     No.

 Q:    You recognised that that wasn’t what was meant at all?

 A:     No, I didn’t think it was a mistake at all.

Q:     But it didn’t really matter, did it, because you weren’t, at that stage, proposing to bring in much more than that, were you?

A:     Well, forecasting from the talk about bringing in and the business growing, you know, it’s not just going to stay at one particular kind of – how many pallets are going to be. It’s – you’re forecasting, but there’s no – yes, there’s – 

Q:    You don’t suggest, do you, that there had been a prior discussion between you and Mr Yates about setting a minimum number of pallets?

A:     No.

288    He also accepted that he and Mr Yates had gone through a process of trying to estimate the approximate amount of stock that would be sold. Mr Titus accepted at the time of the agreement he was unsure how much stock would be sold, and in light of that uncertainty denied there was an agreement for a maximum limit.

Consideration

289    This first issue to be determined is whether Evagroup has established that the agreement included a term that there would be a maximum of approximately 150 pallets stored in their warehouse.

290    Cemimax submitted that evidence of intentions postdating the conclusion of the parties’ agreement are not admissible for the purposes of determining the construction to be given to the agreement: Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at [35]. So much may be accepted when there is a contract that is wholly in writing, but the situation is different where that is not so. In Lym International Pty Ltd v Marcolongo [2011] NSWCA 303, Campbell J (Basten and Sacker JA agreeing) summarised the difference at [141]-[143]:

[141]     There is a vast difference between the task that is involved in interpreting a wholly written contract, and the task involved in finding what has been agreed in a contract that is not wholly in writing. The difference between those tasks in itself makes a vast difference between the circumstances in which post-contractual conduct can be relevant for the respective tasks.

[142]     Where there is a contract that is wholly in writing, there is no doubt what the contract is - it is the writing. The task of interpretation is ascertaining the meaning that the bystander who knows all the relevant surrounding circumstances would understand from the parties using the words in that writing. The admissibility of evidence for interpreting a wholly written contract is decided by reference to whether it is able to assist in ascertaining the meaning that the bystander who knows all the relevant surrounding circumstances would understand from the parties using those words. Save in the case of post-contractual events providing retrospectant evidence of a surrounding circumstance that was known to the parties at the time of contracting, the view favoured in this court is that post-contractual conduct cannot assist in that task, and thus is not admissible, or if admitted cannot legitimately be used in that task: the cases cited by McColl JA in County at [161] ([118] above).

[143]     By contrast, the task in ascertaining what are the terms of a contract that is not wholly in writing is quite different - the task is finding as a fact what the parties have agreed. A range of post-contractual conduct could be relevant to ascertaining what the parties have agreed. For example, their conduct in carrying out the contract could itself be objective evidence of what they had agreed, an admission of one of the parties could assist in ascertaining what they have agreed, and business records created to record or report on the contract rather than carry it out could also assist in that task.

See also BH Australia Constructions Pty Ltd v Kapeller [2019] NSWSC 1086; (2019) 100 NSWLR 367 at [69].

291    It follows that determining what the parties agreed is a fact finding task.

292    There is conflicting oral evidence as to whether there was an agreement as to a maximum limit.

293    The only relatively contemporaneous record of the agreement is Mr Yates’ letter dated 13 February 2018 to Cemimax which supports Mr Titus’ evidence that there was no such agreement, there being no reference to a maximum limit but reference to a minimum. This letter was drafted by Mr Yates and was checked by Evagroup’s accountant before being sent to Cemimax. It can be inferred that what it recorded did not cause any concern to the accountant from a commercial perspective.

294    The objective evidence is that after the agreement, Cemimax sent stock to Evagroup on a very regular basis and it appears not to have been confined to approximately 150 pallets. Evagroup accepted the stock, without raising any issue until some 14 months later in the email of 18 April 2019 to Cemimax. Although Mr Yates said there had been a telephone conversation earlier (he was unable to say when) it was in limited terms: see [273] above. Both parties were acting as if there was no maximum pallet limit in the agreement. When Mr Yates raised the issue of the amount of stock in that email of 18 April 2019 it is not in the context of there being a breach of the maximum limit term of the agreement, but was in the context of his concerns about the volume of stock, and that it may expire.

295    This was also in a context where the product was being established in the industry and it would be expected that sales would increase.

296    This evidence supports that there was no maximum amount.

297    I note that on the evidence, Mr Yates first raises the issue of a maximum amount with Mr Titus in a conversation about the time of that email on 18 April 2019, recited above at [272], in his affidavit in reply. Mr Titus disputes the terms of the conversation. It is inconsistent with Mr Yates’ oral evidence as to the occasions he raised the issue of a maximum limit. It appears to also be inconsistent with the email sent by Mr Yates to Mr Titus on 15 May 2019 as to the relevance of the 150 pallet limit, because if the conversation on 18 August 2019 had occurred as he says, he would have been well aware that Mr Titus’ view, consistent with the letter, was that there was a minimum amount.

298    I note also that there was no suggestion that there was any issue with space for storage. To the contrary, Mr Yates said to Mr Titus in August 2019 that he could handle “100,000 bags and in fact we could carry 3 times that if sales reflected that”. Although he said that was dependent on sales, the product must be stored in the warehouse until the time of sale.

299    Evagroup contended that it only made commercial sense that the agreement was a maximum limit, as it was not compensated for logistics until the bags were sold. Cemimax contended that the letter also referred to an agreed “minimum” monthly charge to be levied by Evagroup and that this “minimum” charge can have no commercial sense unless the agreed storage of pallets was in fact a “minimum”, rather than a “maximum”. It contended that it did not agree to a maximum when the market was growing and it would not have wanted to limit its ability to supply the stock needed.

300    Although it may be accepted that Mr Yates was only compensated when the product was sold, as Mr Titus said, in a growing market there would be no basis to limit its ability to supply the product. This is particularly so where Evagroup was the only place in Australia where the product was stored, and Evagroup its only reseller at that time.

301    Mr Yates plainly wanted product sales to grow, as this was the product he was providing to his customers (having stopped supplying Bostik). He accepted he was party to discussions with Mr Titus that he had the capacity to store more product. If he could handle three times the amount providing sales required it, the issue was sales not space. The submission that commercially only a maximum limit made sense as Evagroup was not paid until the product was sold, does not provide a basis to limit the amount at 150 pallets. The issue was one of sales. He needed the product to supply, otherwise he would need to order it to fill any sale. In that context, Evagroup’s submission in that regard cannot carry much weight.

302    Evagroup also submitted that it accepted that it “is clear that at the time [Evagroup] was prepared to permit, without complaint, some additional stock to be held in excess of that amount. But throughout the period of the trading relationship between [Evagroup] and [Cemimax], the applicant was complaining when excessive shipments were received and [Cemimax] was acknowledging the legitimacy of that complaint and undertaking to reduce the quantity shipped”, citing only one email from Mr Yates to Cemimax dated 18 April 2019. However, as apparent from the evidence recited above, it does not support the submission that “throughout the period of the trading relationship” there had been complaints in relation to overstocking. The relationship began in February 2018, with Mr Yates’ evidence being that the first written complaint by him was in April 2019: see [271]-[273].

303    Evagroup has not established that the term of the agreement provided an approximate maximum amount.

304    Nor am I satisfied of Evagroup’s alternative basis, that there was a breach of the implied term of the contract (which formed the basis of the first claim). The submission was limited. It was based on the premise that the “term implied by law in a contract of this nature includes a degree of co-operation over the intended business”. It will be recalled the pleaded condition is that Cemimax would not do anything to stymie or limit Evagroup’s ability to on-sell the products provided by the logistic agreement, and a similar implied term that Cemimax and its managing director would not do anything to render the logistic agreement inefficacious. There was no term pleaded involving co-operation. Even assuming for the purpose of argument that the implied condition referred to in the defence exists, it is difficult to understand, given the evidence on the topic of overstocking, how that could amount to any breach. In any event, Evagroup has not established this basis.

305    Any issue of a breach on the basis of overstocking does not arise.

Faulty pallets

306    This aspect of the claim is said to relate to the cost and difficulty incurred by Evagroup, as a result of faulty pallets being used by Cemimax in relation to the delivery of stock. This relates to events between October 2018 and January 2019 when between 300 and 400 pallets arrived that were different in size and construction, and markedly inferior to those which had been used before and after.

307    It may be accepted that there were some faulty pallets.

308    Cemimax contended that in the case of customer photographs of damaged stock relied upon by Evagroup, the product had passed from Cemimax, through Evagroup’s warehouse, to a delivery person and then on to the customer’s site, and therefore there is an inescapable possibility that any damage could have occurred after the product was taken in by Evagroup. It also contended given the handling of product in this process, it is more likely than not that this is when the damage occurred, and therefore Evagroup has not discharged its onus. Although there might be some merit in the first submission, that there may be an issue as to when and where the damage discovered by the customers occurred, it is plain that there was damaged packaging and pallet issues at Evagroup’s warehouse. It is that repackaging and repalleting that forms the basis of this aspect of the claim.

309    Nonetheless, when the stock the subject of the faulty pallets arrived, it was under the logistics agreement, and ownership remained with Cemimax. There is no provision in the logistics agreement as to additional fees that may be charged. There is no evidence that this relates to any of the stock purchased by Evagroup, the subject of the Invoice. Rather it appears to refer to a time earlier in the relationship.

310    It may also be accepted that Mr Yates informed Mr Titus of the faulty pallets, or at least some aspects of his complaint about them. Evagroup pointed to a text message and email as an example. There are photographs of the faulty products in a text message with an accompanying message “[let] you know how much grief these pallets are causing”. There is no evidence as to the date of that message and no request for assistance. In the email to Mr Titus, Mr Yates states, inter alia, that “China made [a mistake] by switching pallets, resulting in hundreds of hours of repacking as well as issues in the market and a consistent mess in the warehouse because of this mistake. We received more than 400 rubbish pallets. We had another pallet collapse for a customer on Friday and are now replacing this at our cost. We have now repacked in excess of 100 pallets but more to go”. Mr Yates pointed out in that email that he is not charging for this, with Evagroup bearing the cost. This is consistent with the evidence of Mr Titus that Cemimax Australia had no control over the pallets used by Cemimax China, that Mr Yates had said to Mr Titus that he had it under control, and that he was not charging for this. The email is dated 3 August 2019, with its purported purpose being to clarify issues with Mr Titus. It is plain that Mr Yates is dealing with Cemimax China by this time, Cemimax had its own warehouse and Mr Yates had withdrawn his invoice of 31 May 2019 for $50,000. The relationship had broken down. I note that although the email in August refers to more than 100 pallets being faulty, Mr Yates now claims a figure of 300-400 pallets from October 2018 to January 2019. This also does not sit with Mr Yates’ evidence that “[d]ue to the issues with the pallets, in or about January 2019 to March 2019, Evagroup repacked pallets of the Cemimax products prior to those pallets being transported to the end customer”.

311    Evagroup acknowledged that at the time of the email Mr Yates was not proposing to charge for the additional time for repackaging. Evagroup submitted however that “was before [Mr Yates] knew what was to happen just a week later with Mr Lopez’s resignation and the storm of unfair competition, unfair competitive pricing, lies and misinformation, into which his business was about to sail”. That appears to be the motivation for the basis of this claim. However, this aspect of the proceeding relates to Cemimax and not Mr Lopez, and as found above, in so far as these proceedings are concerned, Evagroup has not established a campaign of lies and misinformation by Mr Titus. Cemimax are not liable for the acts of Mr Lopez. Moreover, Mr Yates’ approach of now proposing to charge the respondents does not take account of the fact that part of the context in which the 31 May 2019 invoice had been withdrawn by him, is that Ms Chen said in messages that she would not have negotiated the price she did for stock with him if she had known about these charges (including the overstocking charge). That is, Mr Yates would have had to pay more for the product. He had received, or was receiving stock from Cemimax China at a cost lower than he would otherwise have had to pay.

312    The competitive pricing referred to by Mr Yates is assumed to be a reference to the new pricing list which was issued in July 2019. However, since that time, in the email of August 2019 as described above, Mr Yates had informed Mr Titus he was not charging Cemimax for the faulty pallets. That does not provide an appropriate basis to offset part of the payment required on an Invoice for the purchase of unrelated goods.