Federal Court of Australia

Gold Titan Pty Ltd v Lopez (No 2) [2021] FCA 1523

File number:

NSD 1924 of 2019

Judgment of:

ABRAHAM J

Date of judgment:

3 December 2021

Catchwords:

DAMAGES assessment of damages for breach of contractual obligation of confidentiality and equitable obligation of confidence – assessment of damages for contravention of Australian Consumer Law

Legislation:

Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) s 18

Cases cited:

Cadbury Schweppes Inc v FBI Foods (1999) 59 BCLR(3d) 1; (1999) 167 DLR (4th) 577

Flogas Britain v Calor Gas [2013] EWHC 3060 (Ch)

Gold Titan v Lopez [2021] FCA 918

Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 6 ALR 445

Robb v Green [1895] 2 QB 1

Seager v Copydex (No 2) [1969] 2 All ER 718

Talbot v General Television Corporation Pty Ltd [1980] VR 224

Wilson v United Counties Bank Ltd [1920] AC 102

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

Regulator and Consumer Protection

Number of paragraphs:

76

Date of last submission/s:

9 November 2021

Date of hearing:

Determined on the papers

Counsel for the Applicant:

Mr M Hall SC

Solicitor for the Applicant:

Banki Haddock Fiora

Counsel for the Respondents:

Mr J Knackstredt

Solicitor for the Respondents:

Somerville Legal

ORDERS

NSD 1924 of 2019

BETWEEN:

GOLD TITAN PTY LTD (TRADING AS EVAGROUP ABN 47 124 061 169)

Applicant

AND:

NICHOLAS LOPEZ

First Respondent

IMPERIAL FLOORING AUSTRALIA PTY LTD (ACN 635 477 593)

Second Respondent

CEMIMAX AUSTRALIA PTY LTD (ABN 71 623 150 014) (and another named in the Schedule)

Third Respondent

order made by:

ABRAHAM J

DATE OF ORDER:

3 December 2021

THE COURT ORDERS THAT:

1.    The parties are to confer about the form of the orders to give effect to these reasons and those in the Liability Judgment (Gold Titan v Lopez [2021] FCA 918).

2.    The parties are to provide written submissions on the issue of costs.

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

REASONS FOR JUDGMENT

ABRAHAM J:

1    These reasons address the issue of the remedy that arises as a result of the decision in Gold Titan v Lopez [2021] FCA 918 (the Liability Judgment). In that decision, the Court found:

(1)    Mr Nicholas Lopez, the first respondent, breached his contractual obligation of confidentiality, and that he and Imperial Flooring Australia Pty Ltd (Imperial Flooring), the second respondent, breached their equitable obligation of confidence by using the “Evagroup Customer List” (as defined in the Liability Judgment at [3]);

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

(3)    the applicant’s claim for defamation was dismissed; and

(being the findings in relation to NSD 1924 of 2019)

(4)    there was no proper basis for Gold Titan Pty Ltd, trading as Evagroup (Evagroup), to offset the invoice dated 31 July 2019 from Cemimax Australia Pty Ltd (Cemimax) for Cemimax products it purchased.

(being the finding in relation to NSD 482 or 2020).

2    In light of the reasons, the parties were given an opportunity to provide further written submissions and evidence in relation to the relief they seek in the proceedings NSD 1924 of 2019.

3    A number of declarations are sought by the applicant, which are not opposed. The applicant also seeks an order that the first and second respondents provide on affidavit a list of all of the customers to whom the first and/or second respondents have sent a communication in an attempt to solicit or procure business for the second respondent. This is opposed by the respondents in those broad terms, and I will return to this issue below.

4    The principal issue of contention is what damages are to be paid, if any, as a result of the contravening conduct. These reasons focus primarily on that aspect.

5    For the reasons below, I order relief for the breaches of confidence and the ACL contraventions of $150,000.

Legal principles

6    In respect to the breach of contract, the purpose of awarding damages is to put the applicant in the position, so far as money can, that it would have been in had the wrongdoer not breached its contract. Similarly, the aim of equitable compensation is to compensate the applicant for the loss he or she has suffered as a result of a respondents breach: Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 6 ALR 445 at 446. There is no fixed method to achieving that outcome, and the court should assess damages using a method which, on the facts of the case, seem most appropriate to fulfil that general purpose: see also Talbot v General Television Corporation Pty Ltd [1980] VR 224 at 253.

7    Recognised approaches include that of neutralising a springboard advantage obtained by the respondent: Seager v Copydex (No 2) [1969] 2 All ER 718. In cases where the applicant uses the information in operating its own business, the advantage can be measured by assessing the reduction in the applicant’s sales: Cadbury Schweppes Inc v FBI Foods (1999) 59 BCLR(3d) 1; (1999) 167 DLR (4th) 577. This is to neutralise the unfair head start the new business obtains by using the confidential information.

8    In employment cases, damages are not limited to the loss of trading profits and can extend to diminution in goodwill, see for example, Robb v Green [1895] 2 QB 1 (Robb v Green). An absence of precise proof is not a reason to withhold damages. In Robb v Green it was observed at 20:

the specific instances as yet traced to the defendant’s action are, it is true, but few; but still their loss does not form the limit of the injury to the plaintiff, for the wholesale canvass of his customers was likely to influence many and diminish permanently his receipts and profits...

9    The respondents did not take issue with the principles as described above, but rather their application.

10    Relevantly, for this case the applicant contended that the breach of contract does not have to be the sole cause of the loss. If it is a cause in fact of the loss, then damages are recoverable unless some other event has broken the chain of causation. Where the alleged break is an act of the claimant, the principle is said to be as articulated by Lord Atkinson in Wilson v United Counties Bank Ltd [1920] AC 102 at 125:

If one man inflicts an injury upon another the resort by the sufferer to reasonable expedients for the bona fide purpose of counteracting… or lessening the evil effects of the injury done him, does not necessarily absolve the wrongdoer, even though the sufferer’s efforts should, in the result, undesignedly aggravate the result of the injury.

Submissions

11    In summary, the applicant contends that damages for loss of profits, loss due to discounting prices, loss of goodwill and damage to reputation and hurt feelings should be awarded against the first and second respondents (together, the respondents) jointly and severally.

12    In relation to the breach of the equitable duty of confidence, the applicant submitted the loss of profit arising from customers moving to the respondents, the loss incurred by reducing prices to retain customers, and the loss suffered through the respondents obtaining a head start are recoverable: citing Flogas Britain v Calor Gas [2013] EWHC 3060 (Ch) (Flogas). The applicant submitted that what occurred in Flogas is a useful guide for this case. That case involved a customer data base assembled over many years by a small business, which was stolen by an employee at the termination of his employment and used to send out at least two “mail shots” advertising the services of his new employer. The Court awarded damages for loss of contribution to Flogas’ profit from customers who had moved to other suppliers as a result of the mail shots, for the loss arising from the reduction in prices given to retain customers who were “woken up to opportunities for price negotiation as a result of the mail shots” and for additional management time and professional costs dealing with the disruption. The need for a degree of conjecture in quantifying damage should not prevent a court from seeking to fully compensate the injured party, particularly when the need for conjecture is itself a consequence of the respondent’s conduct.

13    The applicant submitted in its written submissions that a “net loss of profit attributable to the 10 months following the breach of confidence should be assessed at about $370,000-375,000”. The applicant put forward two methods of calculation.

14    First, the applicant submitted the claim in respect to loss of business from the breach of confidence can be most simply quantified using the information in Confidential Exhibit S, which is a month by month comparison of Evagroup’s net profit for the 2019 and 2020 financial years. It was submitted that, by using the 12 month time frame which includes July 2019 (prior to the breach) and June 2020 (when the applicant introduced its replacement product to the market), no further allowances for any market vicissitudes are required as those months are favourable to the respondents. The applicant submits the appropriate net figure is a loss of $371,213.78.

15    Alternatively, the applicant submitted the months of July 2019 and June 2020 could be excluded from the comparison calculation, and instead replaced with a discount rate of 35% to account for factors such as Mr Lopez’s departure from the business, a transition from Cemimax products and market vicissitudes. Numerically, by excluding those two months, a loss of $573,060.59 is calculated, which after applying the 35% discount rate, a total of $372,489.38 is produced. The applicant also submitted that a “check” could be conducted by using the invoices contained in the Courtbook.

16    The applicant also submitted an award for capital loss to goodwill equivalent to 10 to 20% of the loss of sales should be awarded. It submitted the Court is not confined to awarding damages for loss of revenue, and can take account of the fact that the goodwill of a business also suffers harm. It accepted that the applicant had repaired his loss of revenue to a significant extent in the 12 months following the breach, and on that basis “does not contend for a large additional damages award under this head”.

17    It also submitted that the Court should attempt to estimate the extent to which that loss was contributed to by the respondents’ ACL contraventions, and indicate a proportion of the award which is supported on that basis. That was the extent of the submission in respect to that contravention. It was not submitted that these damages were in addition to, rather, that the Court could “take the whole of the loss identified and simply use a method of percentage or proportion to seek to identify some part of it that was discrete to the ACL claim”.

18    The respondents criticised the approach taken by the applicant. They addressed the failures of the evidence relied on, which I will refer to in more detail below. In particular, the respondents criticised the applicant’s quantification as “hopelessly unreliable” and the discount rate attributed to the period.

19    The respondents submitted that of all the contacts on the Evagroup Customer List, being the information which was the subject of the breach of confidence and the information that benefitted the respondents, there were only seven customers to which the respondents made sales. The respondents identified the seven customers and detailed various figures as to how much profit was derived from them. It also described those customers dealings with Evagroup during the relevant period, and made submissions as to what if anything could be attributable to the respondents conduct. It submitted that the maximum profit which could have been obtained by Imperial Flooring from these customers over the entire period for which there are records, could only be a fraction of that which is claimed by Evagroup.

20    The total profit alleged to have been gained by the first and second respondents in relation to these customers was $56,667.05. It was submitted that the starting point for the maximum amount of compensable loss incurred by Evagroup is represented by Imperial Flooring’s gross profit figures. It was submitted that those figures ought to be further discounted by an appropriate sum to arrive at a net profit figure representing any final damages award. For example, of the “maximum profit” from the seven customers, only a portion could be attributed to Mr Lopez’s former employment with Evagroup; any sales predating the email sent on 9 September 2019, and any sales made many months after that email which lack proximity to the alleged wrongdoing, ought be discounted. It was submitted that as Evagroup has not supplied evidence on this issue, Imperial Flooring’s net profit can be used as a proxy. Imperial Flooring’s profit and loss statement for the 2020 financial year indicates that gross profit was 14.6%, and its net profit was about 30% of gross profit (calculated as net profit adjusted by adding back other one-off expenses, divided by gross profit). The net profit in respect to the seven customers, and the figure the respondents submitted is the appropriate damages, was $16,984.11.

21    The respondents noted that the applicant has made no effort to quantify the actual losses flowing from the breach of the ACL.

Consideration

22    At the outset it is necessary to address two features of the applicant’s case. First, the applicant’s supplementary submissions do not properly grapple with the reasoning of the Liability Judgment, the manner in which it presented its case, or the evidence on which it relied. Second, the quality of the financial evidence relied on impacts both the submissions made and evidentiary basis on which relief is to be assessed.

23    As to the first aspect, the case presented by Evagroup in proceeding NSD 1924 of 2019 contended that there was “a concerted campaign” by the four respondents “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. The three claims actually advanced, including defamation are described above, with only the first two being established. The applicant did not establish any claim against Cemimax or its managing director, Mr John Titus. In NSD 482 of 2020, in response to an action brought by Cemimax against Evagroup in relation to the unpaid Invoice, Evagroup alleged that Cemimax had engaged in conduct which disentitled it to claiming the amount owed. The primary basis of this allegation was the deliberate conduct of Cemimax, principally through Mr Titus, to destroy Evagroup’s ability to on-sell the products covered by the Invoice. That is, it was alleged that Cemimax’s conduct affected Evagroup’s ability to sell its product. Evagroup did not establish any disentitling conduct. Evagroup did not establish the disentitling conduct or its defamation claim, yet the conduct of Cemimax and Mr Titus underpinning those claims was said to have affected its ability to sell its product.

24    It must be recalled that any award of damages is against Mr Lopez and Imperial Flooring only, and in relation to the claims of breach of confidence and breach of the ACL.

25    Although Evagroup recognises that the result means various discrete heads of loss cannot be claimed as they are not attributable to the causes of actions on which it succeeded, it submitted they are small. To characterise the difference in result and the manner in which the case was presented as having no real significance, is inaccurate.

26    The primary basis for the submission appears to be this:

It must now be accepted that (a) and (b) are discrete forms of loss, or rather of increased expense, not attributable to the causes of action upon which the Applicant succeeded. But they are small. At Reasons [319]-[320] the Court preferred the submission of the Respondents that Mr Yates’ original estimate of the amount of those costs, when he raised and then withdrew an invoice for $50,000, was a better measure of those costs than the Applicant’s case at trial. Indeed the Respondents submitted, and the Court has largely accepted, that the Applicant suffered no increased costs on those accounts. Of course the Applicant disputed that but the Respondents cannot now be heard to say, contrary to the position taken at trial, that the impact of those factors was significant. There is no proper basis for attributing any deduction from the Applicant’s loss of profitability to those causes, and certainly no basis for a deduction in excess of $50,000.

27    As is apparent, the submission is based on a contention that the Court concluded the original $50,000 invoice was the better measure of the costs involved. However, that is not the finding made, noting that at the hearing Evagroup claimed its costs were $350,000. At [323] of the Liability Judgment, I concluded that there was not sufficient, adequate or reliable evidence to explain or justify those amounts claimed. Evagroup had not established how costs at the hearing were, coincidently, $350,000, a figure remarkably similar to that due as a result of Cemimax’s Invoice. More relevantly for present purposes, despite the paucity of evidence to justify that amount of the claim, Mr Yates gave evidence that it represented the amount of costs involved. This raised an issue as to the reliability of Mr Yates evidence in respect to financial consequences of the events. Significantly, the reasons contained in the Liability Judgment raise the paucity and inadequacy of the evidence underlying the amounts claimed. Evagroup was on notice of the importance of such evidence to support the assertions for damages made. Yet despite that, Evagroup did not take the opportunity to provide further evidence.

28    The applicant’s submission as to the amount in respect to those claims being “small”, only refers to the one basis of its set off claim, and not the primary basis, being the conduct of Cemimax and Mr Titus.

29    In that context, Evagroup submitted, (without any reference to the evidence) that to the extent discounting was forced on them by either the fact that Imperial Flooring had been able to communicate its price advantage to Evagroup’s customers via the Customer List or had been able to emphasise that pricing advantage because of Mr Lopez’s confidential access to Evagroup’s own pricing, that is damage caused by the breach of confidence. The applicant provided no further assistance as to how, if that is correct, it is to be assessed.

30    However, the breach of confidence claims did not relate to the use of confidential information generally, but specifically to the use of the Evagroup Customer List. Moreover, the only “evidence” relied on by the applicant said to support the submission is an email of 26 August 2019 from Mr Lopez to Mr Jack Wang, which was not admitted in evidence at the hearing. The applicant now seeks to have the email admitted on a narrower basis confined to the issue of damages, which the respondents oppose. The document was not admitted, and although an opportunity was provided to the parties to put on further evidence in respect to relief, given the nature of the claim, there is no proper basis to now admit this document. That said, even if admitted, it could only be described as scant evidence, at best, of the point it is said to establish. I note that this was the only further evidence the applicant attempted to rely on.

31    This is also in a context where the applicant accepted that “It is correct to say that after that Mr Yates identified the pricing issues as one of the reasons why he had to discount his own prices and one of his reasons for switching to supply a new and different product”, were matters unrelated to the established claims. However, this does not take account of Mr Yates evidence as to discounting prices due to the conduct of Cemimax and Mr Titus, of the nature referred to above, which was not established. Given Mr Yates evidence, it is difficult to accept the applicant’s submission that “any loss of profit attributable to discounting because of the need to match price reductions should be put aside as irrelevant and unquantified. It is not shown to have been even a cause of the loss of profits, still less the sole cause of any part of it.

32    In respect to the defamation claim, the applicant submits:

The defamatory comments are also irrelevant to the quantification of loss by reference to reduced profitability and Confidential Exhibit S (commencing at CB 2366). The Court has not accepted, and the Respondents have denied, that the comments were ever made. They cannot now rely on their own wrong in reduction of damages. It is true of course that Mr Yates was strongly incensed by what he perceived to be a campaign of misinformation about him and his products. That sense of injustice was apparent in his oral evidence. But his belief as to that cannot change the fact that it has been found the words have not been shown to have been spoken nor the imputations conveyed. The Court is left with no more than the fact that Mr Lopez used the mailing list to contact those customers, including Mr Wang and the officers of Ray Crookes Constructions, in order to seek to persuade them (with Mr Titus’ active assistance) to stop buying from EvaGroup. Of course the Applicant cannot recover the amounts for which it contended as aggravated damages under this head, but its claim for lost profits is left intact.

33    This submission does not grapple with the manner in which the case was presented.

34    At [330] of the Liability Judgment, I observe in respect to relief:

As is apparent from Evagroup’s claims in its offset arguments in relation to the Invoice, it submits its business was adversely affected by the conduct of Mr Titus and Cemimax. As explained there, whatever Mr Yates may believe to be the case, the evidence led did not support the proposition. More importantly for present purposes, that conduct cannot form part of this consideration. Yet, it formed a significant part of its case as to why the sales were affected.

35    Mr Yates' evidence included that damaging statements by Mr Titus (and Mr Lopez, although that was not part of the claim) led him to reduce his prices. As I noted in the Liability Judgment at [331], despite the differences in the claims made, in his evidence Mr Yates did not address the issue of damages that each of the respondents may be liable for, and in many respects, lumped the conduct together. That approach has consequences, particularly so as not all claims were established.

36    It is not as simple as the applicant’s submission that as those claims (or set off arguments) have not been not established, all of the loss referred to in Confidential Exhibit S must be attributed to the claims on which Evagroup succeeded. That the applicant did not establish those claims on the evidence led, does not affect the actions of Mr Yates. The submission does not address Mr Yates evidence as to his state of mind for doing certain acts. For example, the basis on which Mr Yates said he reduced the prices to Style Timber Floors relates to the campaign of misinformation as well as to the unfair competition from Imperial Flooring supported by Cemimax.

37    Another example where Evagroup has failed to grapple with the reasoning in the Liability Judgment is the press release, recited and defined at [28] of the decision. The submission made by Evagroup that the issue of the press release is also inconsistent with the reasoning of the Liability Judgment.

38    As explained in those reasons, it was Evagroup’s submission that the press release was “a rational and reasonable response to the respondents’ breaches”. The press release is addressed at [248]-[250] and [333]-[340].

39    Given the submission Evagroup made on relief, it is appropriate to repeat [249]-[250] of the Liability Judgment, which were as follows:

[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.

40    And [337]-[340]:

[337]    Mr Yates gave evidence that he issued the press release as damage control. It may be reasonable to change the products he supplies, but that Mr Yates chose to announce that by way of the press release in the terms in which it is drafted, does not advance his case. It is a relevant factor which impacts on damages.

[338]    As explained elsewhere, the press release brings with it a number of connotations. The press release, although obviously sarcastic in part, confirms that Imperial Flooring was a reseller of Cemimax products. It, inter alia, informs Evagroup’s clients that it will no longer be supplying Cemimax products, although it has enough to supply its customers until the end of the year, after which a new product would be available from November 2019. It follows that anyone who wished to continue to use Cemimax had to source it elsewhere (which does not necessarily mean to Imperial Flooring). It suggested that the new product it would be supplying was better than Cemimax products, therefore it could be understood that Cemimax was not as good a product as the one it was changing to. As the applicant noted, the press release was published on 24 September 2019, which was after, inter alia, the Unsolicited Communications sent on 9 September 2019. The applicant submitted the damage was done by that time. As explained above I do not accept the respondents’ submission that its conduct is limited to the email addresses in the BCC List.

[339]    However, I do not accept the submission that a great deal of the information was already known to the customers by the Unsolicited Communication. The two matters referred to in the preceding paragraph do not fall in that category. Nor does the fact that Mr Yates made sarcastic comments about Mr Lopez and Imperial Flooring. As explained elsewhere, the tone of the email may well have deterred customers from doing business with Evagroup and indeed Imperial Flooring, particularly by this time where there were other suppliers in the market. That said, it can be accepted that but for the respondents’ conduct in using Evagroup’s confidential information, that press release would not have been necessary. Mr Lopez has denied he had and used the Evagroup Customer List (as opposed to the fact is was not confidential), a stance he maintained during the trial despite compelling evidence to the contrary.

[340]    Moreover, although the press release may arguably have an effect on the issue of damages, I do not accept the respondents’ submission that damages are limited to the events that occurred only up until the date of the release. Although the release notified customers of the existence of Imperial Flooring, that does not detract from the fact that Mr Lopez and Imperial Flooring still had, and could use, the confidential information to contact individual customers.

41    Despite that, and that the submission characterising the press release was rejected, on the issue of relief the applicant maintains that the press release was a reasonable and proportionate response to the conduct and on that basis had no, or no significant impact on the assessment of damages.

42    That said, I accept that the press release was an attempt to mitigate loss.

43    As is apparent from the passages recited above at [39], Mr Yates made a decision to change products from Cemimax to an alternative product, Ecoset. His evidence was that this occurred, inter alia, as a response to the conduct of Cemimax in relation to costs incurred by him and the representations Cemimax, through Mr Titus, made about him. Those matters do not relate to the claims on which Evagroup is entitled to damages. As noted in the passage recited above, that impacted on Evagroup’s sales thereafter. It informed the market it was moving away from Cemimax. The issue of discounting the price of Evagroup’s remaining Cemimax products occurred as a result of its dispute with Cemimax. Some price reductions were said to relate to retaining that client’s business, in a context where the issue was said to relate to the defamation claim (or like matters involving Cemimax and Mr Titus). These matters are also unrelated to the claims. On the evidence, these matters, such as the change of product, were a choice made by Evagroup because of its dealings with Cemimax. It is important to remember that Cemimax, and its commercial relationship with Evagroup (or any other supplier of its products) was not part of the claims established.

44    In relation to the press release the applicant also submitted that:

Mr Yates dates the loss of customers and of sales to August/September 2019: Yates 1 [193] (CB 93-94). That is borne out by the quantum evidence discussed below. That predates the press release, and predates the matters complained of in the (unsuccessful) defamation action on 12 and 13 November 2019. That timing strongly emphasises the causal significance of Imperial’s and Lopez’s conduct in the first weeks after his departure in bringing about the lost sales. Mr Yates’ evidence also attributes his losses to that cause either solely or jointly: see for example Yates 1 [208] (CB 95) (loss of margin on sales to Style Timber attributed to, inter alia, “the approaches by Imperial…”) and [217] (CB 97) (similar evidence re Floor Preparation Australia attributed to both the false statements and “contacting EvaGroup’s customers”).

45    The passage of evidence relied on in relation to [208] of Mr Yates’ affidavit is (in full) as follows:

I have been forced to drop Evagroup's prices in order to keep Style Timber as a customer given the approaches by Imperial Australia Pty Ltd/Cemimax, the lower prices Imperial Australia Pty Ltd has offered Style Timber of less than $16.00 per bag of Cemimax product (which Evagroup was prohibited from doing) and the statements made to Mr Wang about no warranty of the Cemimax product supplied by Evagroup and me and Evagroup going to steal customers.

46    Although there is reference to Imperial Flooring approaching Style Timber Floors, the issue of what prices Evagroup could charge customers and statements to Mr Wang relate to Cemimax. The same can be said of the following passage.

47    Mr Yates’ evidence in [217] of his affidavit is as follows:

I have reviewed Evagroup's records that it keeps for the purposes of doing business and Evagroup has sold Cemimax stock to Floor Preparation Australia for $8 per bag less than it would have done if the Respondents were not making damaging statements in the industry and contacting Evagroup's customers….

48    These passages illustrate the difficulty that arises on the evidence due to intertwining the respondents given the claims that were, and were not, established.

49    Turning to the second feature, the financial evidence relied on by the applicant.

50    The applicant submitted that the case on quantum is principally a documentary one, with the primary document being Confidential Exhibit S, “a Profit & Loss statement for EvaGroup generated just after the close of the 2020 financial year and permitting comparison of that financial year with the prior financial year”. It was submitted that Confidential Exhibit S is a business record produced from the applicant’s MYOB system, and there has been no challenge to its accuracy. It was also contended that Confidential Exhibit G quantifies the loss of margin suffered by Evagroup when selling Cemimax products to a specific group of named customers in the period September 2019 to April 2020. Although independently recoverable, that loss is fully subsumed in the loss identified in Confidential Exhibit S.

51    The respondents criticised the evidence relied on, many of which are well founded.

52    Evagroup chose not to provide any expert evidence in relation to establishing the quantum of damages it says it suffered. A further opportunity was afforded for additional evidence, and despite being on notice, none was provided. The explanation was that there was no need for a forensic accountant as the claim is being put on a simpler basis, that there is a loss based measure directed at certain customers and a diminution of sales. The applicant submitted that the approach taken, by demonstrating the loss using their own accounting records, is relatively cost-effective. However, the applicant has not so much as put on evidence from its accountant (who was referred to during the hearing). The absence of such evidence, in the circumstances, makes the assessment of damages substantially more difficult.

53    Leaving aside the absence of any expert evidence, a number of issues arise in relation to the evidence placed before the Court.

54    The evidence provided is very limited. As the respondents correctly submitted, Evagroup’s evidence on loss is based on comparing profit figures from the 2020 financial year with the year immediately prior. Evagroup primarily rely on a one-page so-called profit and loss statement (Confidential Exhibit S), set out in an unfamiliar form, in order to perform this comparison. It has not been prepared by or under the supervision of an accountant. It has not been audited or scrutinised by an expert. Evagroup claims that Mr Yates “explained” this document in his affidavit, which is that it was “generated from MYOB by me on 7 July 2020”. I note that that is the extent of the explanation provided.

55    The so-called “profit and loss statement” simply provides one figure each month for 2019 and 2020. It is a only a one row table of the bald “net profit/(loss)” figure displayed under each month without any reference to any underlying information. It does not contain any of the information which is normally associated with such statements, which at the very least usually summarises revenue, costs and expenses. It does not contain any information to give the purported net profit figures meaning.

56    Moreover, there is no proper underlying documentation for the “profit and loss statement. Evagroup submitted that “[m]any of the primary documents to support it are in evidence as Confidential Exhibit P commencing at CB 2937, but because those documents were assembled to answer a notice to produce, there is not a complete overlap of the time periods involved”. Pausing there, those documents are simply many thousands of pages of individual invoices issued by Evagroup. It is unclear what use the Court is to make of those documents absent them being provided in a manner, and with an explanation, that can assist the resolution of the issue. In their current form they cannot be used to assess the reliability of the profit and loss statement.

57    As noted above, the applicant submitted that the profit and loss statement is a business record and that there has been no challenge to its accuracy. However, the respondents have questioned the reliability of the document in the absence of any other evidence or underlying evidence. Moreover, the respondents contended, in the absence of other evidence, it does not reflect what the Evagroup contends. For example, it was submitted that “all that this single year-on-year comparison shows – in fact all that it can show (assuming its reliability) – is a difference in performance from one year to the next. In particular, there is no evidence as to whether the 2019 financial year was representative of Evagroup’s usual trading conditions”. It was submitted that a true comparison would require more fulsome financial information to have been disclosed for at least several years, spanning at least the relevant timeframe in question. It may be that the 2019 financial year was unusually profitable. This possibility is illustrated by the fact that it was the first year in which Evagroup had the benefit of a dedicated sales director. As a result, the Court cannot rely upon evidence of the 2019 financial year’s performance as a yardstick against which to measure. There is merit in the respondents submission. It is no answer to say, as the applicant does, that as Evagroup only sold Cemimax in 2019, that is the only relevant year.

58    The respondents submitted that apart from the reliability issues referred to above, Evagroup’s evidence does not break down the types of product and services sold, which is important given that Evagroup was not only in the business of selling flooring leveller and does not identify Evagroup’s top-line sales, its expenses, or any relevant changes to those expenses. It submitted that in this respect there is, in fact, no direct evidence that the change in profit was caused by a drop in sales, as opposed to an increase in expenses. Again, there is some merit in those submissions.

59    It is the former point that is a matter of particular concern as it is clear that this claim only relates to floor leveller. The evidence established that this was not the only product sold by Evagroup. Indeed, it was not even the only Cemimax product. There is no evidence referrable to sales or profit in respect to that aspect of the business.

60    I note also in this regard the applicant relies on Confidential Exhibit G, which is said to quantify the loss of margin suffered by Evagroup in selling Cemimax products to a specific group of named customers in the period from September 2019 to April 2020. Noting the applicant’s submission that although independently recoverable, that loss is fully subsumed in the loss identified in Confidential Exhibit S. However, Mr Yates described this occurring as a result of the statements being made by the respondents in an attempt to take his customers, which relates inter alia, to the allegations involving Cemimax and Mr Titus and not the claims established. That this is seen to be subsumed in the figures in the profit and loss statement illustrates an underlying problem with the applicant’s evidence.

61    Against that background, I turn to the assessment of damages.

62    The applicant has approached this case on the basis than an assessment is to be made of what profits have been lost as a result of the respondents contraventions. As is apparent from the discussion above, in the circumstances of this case, the approach taken by the applicant of comparing Evagroup’s net profit for the 12 month time frame from July 2019 to assess the loss to the business is too simplistic. Moreover, it does not take account, indeed it ignores, the reasons in the Liability Judgment, and the applicant’s evidence for the reasons various actions were taken by him. It fails to take into account the impact of the press release and that it is relevant to assessment for damages for the reasons recited above. For example, if a customer wanted to continue to use Cemimax products after November, it notified them they would need to go elsewhere (which does not necessarily mean to Imperial Flooring). The calculation also ignores that there were other suppliers of this product joining the market and that Evagroup chose to change products from Cemimax to Ecoset. The evidence from Mr Yates is that latter decision related to Cemimax pricing the applicant out of the market. Cemimax are not involved in the breach of confidence claims or the ACL contraventions.

63    As noted above, the applicant submitted that Flogas, which also involved a customer data base assembled over many years by a small business, unlawfully used to send out two mailshots, provides guidance for awarding damages. It submitted that in respect to the breach of confidence, damages were assessed on the basis of the loss of profit arising from customers moving to the respondents, the loss incurred by reducing prices to retain customers, and the loss suffered through the respondents obtaining a head start, and are therefore recoverable. Those are relevant considerations in relation such a claim. However, in so far as they are related to these contraventions, unlike this case, the applicant in Flogas led detailed expert evidence addressing the relevant considerations, and related them to the breach of confidence. This is to be distinguished from the applicant’s approach in this case, relying on bald profit/loss figures.

64    As explained above, the underlying financial evidence in support is deficient in many respects. Much of the applicant’s submission is based on speculation. Certainly the scant figures provided cannot support some of the submissions. The profit did fall after the first respondent left, although given the limited information provided, (and the difficulties that the applicant was having with Cemimax, not attributable to these claims) it is difficult to assess the real impact of the conduct. It may be accepted that business from some customers was affected, however, on the evidence it is difficult to assess. On occasion the figures in the profit and loss statement vary significantly from month to month, in respect to both years. The January and February figures for both years are not dissimilar despite the applicant selling a different product in 2020. It can be assumed changing products would have an impact, particularly while customers came to accept a new product. This matter is not properly addressed by the applicant. The figures drop significantly in March and April 2020 many months after the conduct the subject of the claim. There is no evidence which addresses the monthly variations, or whether this simply reflects the vicissitudes of the business. There is no evidence as to the portion of the business which related to floor leveller, as opposed to the other products and services sold. Moreover, as explained earlier, although, the applicant claimed that he incurred expenses as a result of the conduct of Cemimax in respect to the pallets and overstocking, given the applicant’s approach, there is no evidence as to how this affects the various profit/loss figures.

65    I note that the preferred method of calculation as to loss of business by Evagroup described above at [14], appears rather arbitrary. There is no explanation of the 12 month or the 10 month time frame. It is said the 12 month method gives the respondents “credit for both the positive result in July 2019 (prior to the breach) and in June 2020 (when Mr Yates had established his new replacement products in the market)” and on that basis there is no need to discount the figure for various market factors. In respect to the 10 month method, which omits the positive results in July 2019 and June 2020, a greater loss is calculated and therefore the applicant applies a discount of 35% for variables. It is unclear why the appropriate discount rate is 35%, but on either approach, the loss contended for is essentially the same. I note that there may be an issue with the calculation undertaken by the applicant in respect to the 10 month period although, if that is so, it is of no moment to the result. It is also unclear the basis on which it is said that the applicant had established the new products on the market in June 2020, but I assume because of the profit recorded in June 2020, it acts on the basis that its business has recovered. In any event, the submission appears to proceed on that basis. However, the evidence was that it was introduced in November 2019, and it was done because Cemimax was pricing the applicant out of the market. The reduced figures in 2020 (which apart from February appear greater than 2019), may be impacted by that. As previously explained, that is unrelated to the claims. The approach taken by the applicant fails to properly address issues which arise from the Liability Judgment.

66    Having said that, it may be accepted that some loss was also incurred by the applicant due to Mr Yates having to take the time to investigate and respond to (including by dealing with his customers) what the respondents were doing with their business which may have had an impact his own business. On the evidence this involved attempts to retain some customers (although the extent to which is attributed to the contraventions or other reasons, for example Cemimax pricing the applicant out of the market is unclear). It may also be accepted that the respondents obtained a head start in its business by the use it made of the confidential information. The applicant may have lost out on jobs it might otherwise have obtained.

67    On the other hand, the respondents approach is also simplistic. The approach does not take account of the gravamen of the respondents conduct, and the purpose behind it. It fails to recognise the breaches of confidence and the consequences that flow from them. Moreover, the submission does not address the springboard effect the use of the applicant’s confidential information had on the respondents ability to launch its business, in particular in the time frame in which it did.

68    There is a great divide between the parties as to the figures said to represent the loss incurred. On any scenario, there is only a very limited number of customers identified from the Evagroup Customer List doing business with the respondents. It must be accepted that it is difficult to prove such matters, but the difference between the number of customers lost and the figure claimed as lost profit is stark. I note also that during this period there were other suppliers, being Cemimax and Top Level Supply.

69    The applicant’s claim under the 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. The applicant does not submit that any additional amount of damage can be quantified, but the actions are all encompassed with the breaches of confidence. It submitted rather that a portion of the appropriate award simply be attributed to that claim.

70    All that said, I am mindful that given the nature of established contraventions by the respondents, the Court should assess the quantum of compensation on a liberal basis, and do the best it can on the evidence available.

71    Having considered the submissions, the evidence and applying the relevant legal principles, (bearing in mind, inter alia, that the applicant chose to sell a new product from November 2019, and other discounting factors unrelated to the claim), the damages awarded for the breaches of confidence and the ACL contraventions should be $150,000. Given the nature of the breaches of confidence, it comprises the substantial portion of the claim, with the ACL claim (being the limited time over which it occurred and customers had been contacted) being limited to $25,000.

Declarations and other orders sought

72    As noted above, a number of declarations are sought by the applicant and are not opposed by the respondent. Those declarations will be made.

73    There is also an order sought by the applicant requesting that the first and second respondents provide on affidavit a list of all of the customers to whom the first and/or second respondents have sent a communication in an attempt to solicit or procure business for the second respondent”. In the broad terms presently sought, the respondents oppose the order. It was submitted that given the findings in the Liability Judgment, it may be accepted for present purposes that all of the names on the Evagroup Customer List were contacted by the respondents, and by the injunctive relief, Evagroup will be protected from its clients being further contacted by the respondents on this basis. It was also contended that providing the names of such potential clients risks giving Evagroup a springboard to grow its own business at the expense of Imperial Flooring.

74    In reply, the applicants sought to narrow the order to being “The First and Second Respondents provide on affidavit a list of all of the customers on the Evagroup Customer List to whom the First and/or Second Respondents sent any communication in an attempt to solicit or procure business for the Second Respondent in the period 9 August to 20 November 2019. The rewording was said to limit the affidavit to customers on the Evagroup Customer List that were contacted from the date that Mr Lopez gave his notice to Evagroup, to the date the proceedings commenced. The information to be provided includes a time period expanding more than two years ago. In these circumstances there be a risk that Evagroup could use that information to springboard its own business at the expense of Imperial Flooring, given the customers are limited to those who already appear on the Evagroup Customer List.

75    The applicant did not address the respondents’ submission that the order was not required. Indeed, no submission is advanced as to why, in particular in light of the injunctions, the order should be made.

76    In those circumstances, I do not propose to make such an order.

I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Abraham.

Associate:

Dated:    3 December 2021

SCHEDULE OF PARTIES

NSD 1924 of 2019

Respondents

Fourth Respondent:

JOHN TITUS