Ahern v Associated Products Pty Ltd
[2017] NSWDC 185
•30 March 2017
District Court
New South Wales
Medium Neutral Citation: Ahern v Associated Products Pty Ltd & Anor [2017] NSWDC 185 Hearing dates: 22 – 24 March 2017, 27 – 30 March 2017 Date of orders: 30 March 2017 Decision date: 30 March 2017 Jurisdiction: Civil Before: Neilson DCJ Decision: Verdict and judgment for the plaintiff against the first defendant for $122,000.
Verdict and judgment for the second defendant against the plaintiff.
Order the first defendant to pay 90% of the plaintiff's costs on the ordinary basis until 27 February 2017 and 90% of the plaintiff's costs on an indemnity basis from 28 February 2017.Catchwords: CONTRACT – CONSUMER PROTECTION
TORTS – DECEIT
Sale of distributorship of confectionery products over a territory for 2 years – Whether misleading or deceptive conduct by vendor – Whether vendor guilty of tort of deceit – Whether director of defendant company had accessorial liabilityLegislation Cited: Competition and Consumer Act 2010 (Cth)
Trade Practices Act 1974 (Cth)Cases Cited: Edgington v Fitzmaurice (1885) 29 Ch D 459
Helton v Allen (1940) 63 CLR 691
Keller v LED Technologies Pty Ltd [2010] FCFCA 55
King v GIO Australia Holdings Ltd [2001] FCA 238
Krakowski v Eurolynx Pty Ltd (1995) 183 CLR 563
Watson v Foxman (1995) 49 NSWLR 315Category: Principal judgment Parties: Bronwyn Louise Ahern (Plaintiff)
Associated Products Pty Ltd (First Defendant)
Paul Sengos (Second Defendant)Representation: Counsel:
Solicitors:
Mr M Klooster (Plaintiff)
Mr J Hassett (Defendant)
Macedone Legal (Plaintiff)
Hassett Lee & Co Lawyers (Defendant)
File Number(s): 2015/334944 Publication restriction: Nil
Judgment
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HIS HONOUR: The plaintiff, Mrs Bronwyn Louise Ahern, brings an action for damages. She relies upon the statutory cause of action contained in s 18 of the Australian Consumer Law, which is comprised in Sch 2 of the Competition and Consumer Act 2010 (Cth). She also relies upon the common law tort of deceit. The causes of action are alleged to arise from the circumstances in which the plaintiff entered into a distribution agreement with the first defendant company, of which the second defendant, Mr Paul Sengos, is the director, secretary and shareholder. The plaintiff signed the written agreement on 23 December 2014 and sent it via email to the defendants. The pleadings indicate some disagreement as to the effective date of the agreement but nothing hangs on whether it was 23 December 2014 or 13 January 2015, as pleaded in par 2 of the defence. It is common ground that on 13 January 2015 the plaintiff first engaged in work which she was entitled to perform under the distribution agreement. There is no suggestion that at any time did the defendants provide to the plaintiff a signed counter copy of the distribution agreement.
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Shortly stated, the plaintiff agreed to buy confectionery from the first defendant and to distribute it to retailers in a specified geographical area. The retailers would, through their outlets, sell the confectionery to members of the public, the ultimate consumers. Neither of the defendants manufactured confectionery. All the confectionery sold by the first defendant was purchased, and most of it was imported from overseas, although Mr Sengos said that he was not the importer.
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Paragraph 7 of the statement of claim is preceded by a heading "Misleading or deceptive conduct". The pleading is this
"7 On or around 19 December 2014, the first defendant, through the actions of the second defendant, made the following express representations:
7.1 That the Territory's monthly sales turnover in the period January 2013 to December 2014, being the previous 24 months (the Period), range from $7,850.00 to $18,553.00;
7.2 That the Territory's monthly sales turnover was at least $7,850.00 per month during the Period;
7.3 That the Territory's average monthly sales turnover was $14,428.79 during the Period;
7.4 That the sales figures provided were true and accurate;
7.5 That the territory had an established customer base of at least 106 existing customer accounts;
and the following implied representations [sic]:
7.6 That the Territory would continue to generate a similar turnover after it was acquired by the Plaintiff
(together the Representations).”
The representations alleged between pars 7.1 and 7.5 of that pleading are contained in a written document. What is referred to as the 'implied representation' depends, according to the submissions made to me, on an oral conversation between the plaintiff and the second defendant, Mr Paul Sengos on 19 December 2014.
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In cases of this nature it is important to bear in mind certain basic principles. Those are contained in the judgment of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315. Commencing at p 318 his Honour said this:
“Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as 'misleading' within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act)), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the Court: (1) What the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether the spoken words were misleading may depend upon what, examined at the time, may have been seen to have been relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in the conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the Court, which means that the Court 'must feel an actual persuasion of its occurrence or existence'. Such satisfaction is 'not...attained or established independently of the nature and consequence of the fact or facts to be proved', including the 'seriousness of the allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding': Helton v Allen (1940) 63 CLR 691 at 712. Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a cause of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration.”
Many aspects of the evidence given before me demonstrate a number of the principles which his Honour pointed out were a matter of ordinary human experience.
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It is convenient to consider some of the background of the parties. Mr Paul Sengos, in his affidavit sworn on 22 September 2016, said this:
"8. The products within the display folder [which he showed to the plaintiff on 19 December 2014] have been developed by me over my lifetime in the confectionery business in Australia and New Zealand. I have been in the business for some 41 years. The model the first defendant's business operates upon was first formed by me in 1984 when I formed a wholesale confectionery business known as Discount Confectionery. This business sold confectionery direct to retailers through a team of 'owner operators' that purchased the items from the business and sold them to retailers based on a defined geographical area. It was a good business model and became very successful. In the latter part of the 1980s it had an annual turnover of $6 million with 60 owner operators nationally in Australia and 18 in New Zealand. There were also 5 master distributors who supplied to the owner operators in each State.
9. From this time on, I have operated various forms of this business model.
10. The key to the business is sourcing and selling confectionery on which high margins can be achieved. Sometimes this involves confectionery which is close to, or even past, the manufacturer's 'best before' dates. The confectionery items do not deteriorate quickly, as with, for example, dairy products. But older confectionery, or end of run lines, can be purchased cheaply and sold at near full retail price. It is up to me, based on my experience, to recognise and source these lines. It is this aspect of the business that gives us our high profit margin."
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I do not know what happened with Mr Sengos' business between the 1980s and 2014. However, it is clear that by the end of 2014 the business was much, much smaller than it was back in the 1980s. According to Mr Sengos' affidavit, as at the date of his swearing the affidavit, 22 September 2016, he had divided the whole of Australia and New Zealand into 12 territories. Nine of those territories were in Australia and three were in New Zealand. The 12 territories are itemised in par 5 of Mr Sengos' primary affidavit and beside each is a letter in lower case. Territories were often described by a number but the numbering system is quite unclear. Sydney appears to have been divided into at least four territories. One is described as the "Bankstown” area or Territory 3. Another is described as the "Strathfield" area, or Territory 4. Another is described as the "North Shore" and the other in Sydney is described as "West of Parramatta and Eastern Suburbs" which may in fact represent two territories. The only other area in New South Wales is described as "Wollongong". There was one territory in Western Australia described as "Perth" and one in South Australia described as that whole State. There was one area in Queensland described as "Gold Coast" and one area in Victoria described as "Melbourne". There was one area in the North Island of New Zealand described as "Palmerston North" and two areas in the South Island one described as “Christchurch” and the other as “Dunedin”.
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Prior to her entering into the distribution agreement with the first defendant, the plaintiff herself had no background in either the confectionery business or retail sales. Her curriculum vitae is an annexure to her affidavit. Between November 1990 and July 1993 she worked for Continental Airlines in reservations and in sales. Between July 1993 and April 2006 she was the personal assistant to a director of Speed E Gas (NSW) Pty Ltd where she had a number of duties, which were mainly clerical, involved with finance. There is then a gap in her employment history which probably represents time spent looking after her children. She has four children. In 2010 and 2011 she did volunteer work with Sutherland Early Child Services. Commencing in September 2011 she worked for Regional Express Airlines (Rex) as a flight attendant. In July 2014 she commenced work for Virgin Australia in "guest services" which appears to be welcoming customers of that airline at an airport or airports, and assisting with checking in and boarding, and looking after disabled customers. This last job was and is a part time job. She had given away fulltime work with Rex in order to be able to spend more time with her family.
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At the time of the swearing of her principal affidavit on 26 July 2016 her children were aged 22, 20, 14 and 13. In stating that the plaintiff did not have any background in a confectionery business I have not overlooked the fact that her father, Mr Ralph Walter Keyes, owned in the 1970s Davies Chocolates which operated from factory premises at Kingsgrove. He operated that business for approximately five years. However that would have been when his daughter, the plaintiff, was a girl and there is a major difference between manufacturing handcrafted chocolates and selling them directly to the public and to retailers and being involved in the type of confectionery business that was operated by the defendants.
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The plaintiff, in December 2014, was seeking to re-enter the workforce and was hoping to find a business which could be her own so that she would be self-employed. Her principal affidavit continues thus:
"[15] When searching the internet, I was searching for a job or business opportunity which offered flexible hours and days. I wanted to be able to be at home with my kids before and after school and I wanted to be able to spend time with them during the school holidays. Ideally, I was hoping to find a business where I could work my own hours, three to four days a week.
[16] On or about 15 December 2014, as I was searching various career and business websites, I came across an advertisement for a lolly business. The advertisement had been placed by a business broker called BCI Business Brokers.
[17] I was immediately attracted to the advertisement. The business appeared to be flexible and would fit in around my family. I was also attracted to the business because my father had owned a successful confectionery business when I was a child."
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The advertisement that the plaintiff read was only available to her for a limited period of time. She could not reproduce it. However, it is before me as an annexure to Mr Sengos' affidavit and also as an annexure to the affidavit of Mr John Kagelaris, sworn on 7 October 2016. The affidavit of Mr Kagelaris is exhibit 2. The affidavit of Mr Sengos is exhibit 1. The advertisement placed by BCI Business Brokers bears date 5 November 2014. The first part of the advertisement is a disclaimer. The disclaimer contains this statement "BCI Pty Ltd trading as BCI Business Brokers (BCI) has not verified whether or not the information is accurate and does not have any belief one way or the other in its accuracy."
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The business that was for sale was the distributorship for the territory, described as either the Bankstown area or Territory 3. The vendor of the territory was John Kagelaris Pty Ltd. That company is beneficially owned by Mr John Kagelaris. However, it did not have its own bank account. It appears, from the evidence I have heard, that no real discrimen was made between John Kagelaris Pty Ltd and Mr John Kagelaris and the person least able to discriminate between the two was Mr Kagelaris himself. According to Mr Kagelaris' affidavit he had purchased this territory from Mr Sengos in 2011 for $35,000 and had, since that time "built it up", by which I assume he means he increased the number of customers that he had and, therefore, the retailers who could distribute the confectionery that he was distributing on behalf of the first defendant. Implicit in what I have said thus far I should now make explicit: Associated Products Pty Ltd traded as Discount Confectionery. Territory 3 was for sale for $129,000 plus GST.
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Page 5 of the advertisement contains this matter:
"The sale is for the goodwill of the business. The buyer will receive:
• A list of all the current customers with contact details
• An introduction to all the customers
• Training during handover period with the vendor to familiarise the buyer with the current service standards and methodology
• An agreement with the confectionery supplier, Associated Products Pty Ltd, for an exclusive geographical area for a 4 year period, after 4 years the supplier will make available a further contract."
On the same page there is a subheading "Sales Verification". Beneath it is this matter:
"Since Discounted Confectionery sells to retailers on a cash only basis, verification of sales is threefold:
• Vendor Tax returns
• Sales spreadsheet for more than 2 years (enclosed)
• Purchases from supplier (on report enclosed)"
The report enclosed appears to be only a further reference to a spreadsheet which is set up on p 11 of the advertisement.
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That spreadsheet shows for each month, between January 2012 and October 2014 the “Sales” made by the distributor, then the “Cost of Goods” purchased by the distributor from the first defendant, which were sold to the retailers, and then the difference between the two, which is headed "Profit", and probably ought to have been described as "Gross Profit". It then provides another column headed "Profit on Sales" which is really a percentage of the gross profit compared to the total sale. For example, for January 2012 the sales were $12,120. The cost of goods were $4,680. The "profit" is $7,440 and the "profit on sales" is expressed as being 61.38561%.
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On p 6 is material beneath the heading "Business Features". It records that Mr Kagelaris had started selling confectionery to retailers in 2011, records that he built the area up to "over 100 customers" in his exclusive geographical area, which was not only the Bankstown and Auburn areas but included the Sutherland Shire. According to this blurb Mr Kagelaris had not canvassed for new business for nearly two years because of family illness. He had only worked three days a week for the preceding two years and he thought the area was only providing about 20% of the potential customers in the area. It further records that the vendor was selling to independent retailers, such as newsagents, IGA grocery stores, corner stores, tobacconists and the like and that confectionery was sold by a "vast number of retailers". It was then specifically stated that the business was a "cash business", and that accordingly there were no debtors. There were said to be over 100 customers in the exclusive territory available to the purchaser of Mr Kagelaris' business. It was stated that the purchaser could work his or her own hours.
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On p 8 on the same advertisement the number of retailers was stated to be "approximately 110" and, in addition to mentioning the stores which I have already quoted, it refers to fruit markets and convenience stores.
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The only economic data provided in the advertisement beyond the monthly sales and profit history are the profit and loss statements for John Kagelaris Pty Ltd for each of the financial years ending 30 June 2013 and 30 June 2014. For the financial year ending June 2013, sales were said to be $155,745. The cost of goods were said to be $60,775 and gross profit from trading was accordingly $94,970. Expenses were $3,035 and the net profit was $91,935, obviously before tax. The expenses were motor vehicle expenses, accounting costs and telephone costs. In the financial year ending 30 June 2014 the sales were said to be $177,771. The cost of goods was $62,829. The gross profit was $114,942. Total expenses were $3,225 and the net profit before tax was $111,717.
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The plaintiff was extremely interested in purchasing the business being operated by Mr Kagelaris in Territory 3. On 16 December 2014 the plaintiff sent an email to Mr Phil Lyons, the responsible person at BCI Business Brokers. In it she sought "copies of purchases from Associated Products Pty Ltd to support the Profit and Loss information". Mr Lyons responded shortly thereafter pointing out that he had asked the vendor, that is Mr Kagelaris, about copies of the purchases but then said, "but I am not sure if they are available as it is a cash business." The email went on to say that Mr Kagelaris ("the vendor") did not have bank statements but his "tax returns" were in the file, meaning the advertisement placed by BCI to which the plaintiff by this time had access. They were not tax returns as such but profit and loss statements. There was a further exchange of emails between the plaintiff and Mr Lyons about the geographical area of Territory 3. On 17 December 2014 the plaintiff asked further questions of Mr Lyons about whether Mr Kagelaris was registered for GST and whether he could supply "notice of assessments" for the previous two financial years and whether he lodged any business activity statements. The evidence before me does not indicate that there was any response to that request for information but that may be because other things were happening quickly.
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A meeting was arranged between the plaintiff and Mr Kagelaris and Mr Sengos at Storage King, 21C Richmond Road, Homebush West. The meeting was appointed for 9am on Friday 19 December 2014. In the meantime, however, the business was sold by Mr Kagelaris to Ms Pia Arias with whom Mr Kagelaris had been in contact prior to an interest being displayed by the plaintiff. According to Mr Kagelaris' affidavit he agreed to sell the business to Ms Arias a day or so after the plaintiff's initial inquiry. The evidence does not disclose whether Ms Arias agreed to pay the asking price of $129,000. However the parties before me appeared to have proceeded on the assumption that she did so or that she paid somewhere close to that figure for Territory 3.
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The plaintiff was still interested, despite the sale of Territory 3, in obtaining a similar business from the defendant. The defendant's husband was told by Mr Sengos that he did have another territory available adjacent to Territory 3 and that they could still meet on 19 December at 9am at the Storage King facility to discuss that business opportunity. The meeting took place. The plaintiff describes what occurred at the meeting in pars [48] to [62] of her primary affidavit sworn on 26 July 2016, exhibit B.
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According to Mrs Ahern, one of the first things that Mr Sengos said to her was that he was going to put Territory 4 on the market but did not want it to be on the market at the same time as was Territory 3. He then told the plaintiff that by his contacting her he would potentially save money because he did not have to pay any broker's fees. That is disputed by Mr Sengos who pointed out that if he were required to pay any broker's fees he would put the broker's fees onto the selling price and therefore the person who would pay for broker's fees was in fact the purchaser and therefore if anyone was potentially saving money it would have been the plaintiff. It is not necessary to decide on what was said about that matter but it highlights the very sort of problems outlined by McLelland CJ in Eq in Watson v Foxman.
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It is common ground that Mr Sengos handed to the plaintiff an A4 display folder which contained a number of plastic sleeves which each contained a sheet of paper. The sheets of paper contained information regarding the products that were being sold by the first defendant. Mr Sengos, said the plaintiff, told her that she should take the display folder with her when she visited each shop and show it to the retailers to indicate what was for sale, and that she should also take samples of some of the confectionery with her. There was then a discussion about the sales figures for Territory 4. Mr Sengos handed a spreadsheet, and there is no dispute about what the spreadsheet was. It is this:
Jan-13
$9,105.00
Feb-13
$14,150.00
Mar-13
$13,986,00
Apr-13
$14,686,00
May-13
$15,555,00
Jun-13
$13,150,00
Jul-13
$15,860,00
Aug-13
$14,896.00
Sep-13
$14,930,00
Oct-13
$16,050,00
Nov-13
$15,980,00
Dec-13
$14,755,00
Jan-14
$10,123.00
Feb-14
$17,332,00
Mar-14
$18,553.00
Apr-14
$15,855.00
May-14
$13,425.00
Jun-14
$14,125.00
Jul-14
$14,985.00
Aug-14
$15,300.00
Sep-14
$15,860,00
Oct-14
$15,300,00
Nov-14
$14,500,00
Dec-14
$7,850,00
Eventually there found its way into evidence a larger version of this document. It is exhibit 3. It contains this information:
Month
Sales
Cost of Goods
Profit
Jan-12
$8,600.00
$3,620.00
$4,980.00
Feb-12
$11,850.00
$4,615.00
$7,235.00
Mar-12
$12,150.00
$5,355.00
$6,795.00
Apr-12
$11,785.00
$4,876.00
$6,909.00
May-12
$12,100.00
$4,863.00
$7,237.00
Jun-12
$12,863.00
$5,314.00
$7,549.00
Jul-12
$11,933.00
$4,650.00
$7,283.00
Aug-12
$13,444.00
$5,850.00
$7,594.00
Sep-12
$13,153.00
$5,685.00
$7,468.00
Oct-12
$14,100.00
$5,336.00
$8,764.00
Nov-12
$14,105.00
$5,532.00
$8,573.00
Dec-12
$14,985.00
$5,632.00
$9,353.00
Jan-13
$9,105.00
$4,005.00
$5,100.00
Feb-13
$14,150.00
$5,563.00
$8,587.00
Mar-13
$13,986.00
$5,535.00
$8,451.00
Apr-13
$14,666.00
$5,782.00
$8,884.00
May-13
$15,555.00
$6,010.00
$9,545.00
Jun-13
$13,150.00
$4,850.00
$8,300.00
Jul-03
$15,860.00
$4,532.00
$11,328.00
Aug-13
$14,896.00
$4,953.00
$9,943.00
Sep-13
$14,930.00
$5,314.00
$9,616.00
Oct-13
$16,050.00
$5,667.00
$10,383.00
Nov-13
$15,980.00
$6,324.00
$9,656.00
Dec-13
$14,755.00
$5,056.00
$9,699.00
Jan-14
$10,123.00
$3,099.00
$7,024.00
Feb-14
$17,332.00
$6,105.00
$11,227.00
Mar-14
$18,553.00
$5,875.00
$12,678.00
Apr-14
$15,855.00
$5,645.00
$10,210.00
May-14
$13,425.00
$5,055.00
$8,370.00
Jun-14
$14,125.00
$5,305.00
$8,820.00
Jul-14
$14,985.00
$5,564.00
$9,421.00
Aug-14
$15,300,00
$5,621.00
$9,679.00
Sep-14
$15,860.00
$5,931.00
$9,929.00
Oct-14
$15,300.00
$5,500.00
$9,800.00
Nov-14
$14,500.00
$5,300.00
$9,200.00
Dec-14
$7,850.00
$6,150.00
$10,195.00
One will note that the sales figures provided to the plaintiff at the meeting which was described in the evidence as "the spread-sheet", only contains the sales figures from January 2013 to December 2014. Exhibit 3 contains the sales figures commencing in January 2012 and ending in December 2014. The figures between January 2013 and November 2014 are the same, the one difference being that the figures for December 2014 are different but that is explicable by the fact that the "spread-sheet" that was provided to the plaintiff at the meeting on 19 December would have not had all the sales figures for that month.
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Significantly, exhibit 3 also details the cost of goods and they were not supplied to the plaintiff at the meeting. They were not supplied to the plaintiff, according to Mr Sengos, because she did not ask for them. I find the failure to supply the cost of goods to the plaintiff somewhat surprising because they would have shown a much greater profit than what the plaintiff was led to believe, that the profit was about half of the value of sales. According to exhibit 3 the cost of goods was less than half of the sales made.
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Paragraph [53] of the plaintiff's primary affidavit is this:
"During the meeting as I looked at the spreadsheet containing the sales figures we had a conversation to the following effect:
Paul: 'Its good money. Just look at the figures, they speak for themselves. This is a good business. There is no selling involved, the lollies sell themselves."
Me: 'We'll take the figures home and discuss them. Do you have anything to support the figures?'
Paul: 'They're the sales figures for Territory 4, I can't fabricate them. The sales are the sales and these are the sales for Territory 4.'"
The words attributed to Paul "I can't fabricate them" are words which do not represent the idiomatic use of the English language. If one were to say something of that nature, one would idiomatically say, "I haven't fabricated them." However, the oral evidence establishes that Mr Sengos made no such statement at the time. At p 64 of the transcript the plaintiff is recorded as saying this in cross examination:
"Q. Yes, you said they were the sales figure but there was no conversation about are they fabricated or are they not on that day, was there?
A. That was the actual meeting. No, you're right, there was nothing about fabrication on that day.
...
Q. It was only later, when you were challenging the figures, that the subject of fabrication came up in February the next year, correct?
A. It came up at the second meeting at the coffee shop, correct."
I appreciate that the transcript, as it currently stands, has, instead of the last full stop a question mark but that is a mistranscription of what the plaintiff actually said. She did not use a rising inflection to ask a question, she was in fact using a word to admit the proposition that the question put to her by the cross examiner was correct. The meeting at the coffee shop in 2015 occurred on 18 February 2015.
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On the following page of the transcript the plaintiff indulged in what could be described as backsliding and then said she could not recall when fabrication was raised for the first time but she agreed it came up at the meeting on 18 February 2015. She then said she recalled it coming up "a few times" and that she knew it definitely came up in the conversation at the coffee shop on 18 February 2015. However, the probabilities favour the proposition that the question of fabrication was not raised until the plaintiff had suspicions about the truthfulness of the spreadsheet which she was given on 19 December 2014. It appears to me to be extremely unlikely that Mr Sengos himself would have said words to the effect that he did not provide fabricated figures at an initial meeting in which the plaintiff was showing eagerness to take up a distributorship for his company. Again, it appears to me that the plaintiff's recollection of what happened on 19 December 2014 has been coloured by her later relations and interactions with Mr Sengos, after she became suspicious of the accuracy of the sales figures provided to her at the meeting on 19 December 2014: the very sort of matter referred to by McLelland CJ in Eq in Watson v Foxman.
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The next two paragraphs of the plaintiff's primary affidavit are these
"[54] I wanted to know who was operating territory 4. Paul and I had a conversation to the following effect:
Me: 'Who currently operates the territory?'
Paul: 'Territory 4 is run by the company.'
[55] I was very interested in finding out how flexible the business was. During the meeting we had a conversation to the following effect:
Me: 'I'm looking for something that is flexible.'
Paul: 'The company rep selling in the area now is only working two to four days per week. It's up to you how many days you work. The business is very flexible; you can work whenever you want.'"
In [57] of the same affidavit, again referring to the conversation on 19 December, the company representative is described as “John” and it is common ground that the company representative was Mr John Kagelaris who was the vendor of Territory 3.
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This should have raised alarm bells with the plaintiff because, according to the advertisement that she read for Territory 3, Mr Kagelaris was only working three days per week in that area and had been so working for the previous two years. Mr Sengos was telling her that Mr Kagelaris was the company representative and was working two to four days per week in Territory 4. It later came out at the end of the oral evidence that Mr Kagelaris was also the company representative in the Eastern Suburbs, so that Mr Kagelaris was selling in Territory 3, Territory 4 and the Eastern Suburbs and that, one would have thought, would have been fulltime work. However this was not raised with either Mr Sengos or Mr Kagelaris in cross examination. However, the plaintiff herself ought to have picked up the fact that Kagelaris was said to be only able to work three days a week in Territory 3 because of illness in the family but, nevertheless, was working between two and four days per week in Territory 4 as well as the company representative.
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The price for which Mr Sengos was offering Territory 4 to the plaintiff was $108,000. She inquired what that in fact gave her. Mr Sengos told her that she was purchasing the goodwill of the first defendant company for discount confectionery in the Territory and she would also be obtaining the customer list. A representation was made that the territory had 106 existing customer accounts.
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For each customer there was a card. The customer cards were later delivered to the plaintiff. Customer cards are annexed to the plaintiff's primary affidavit, they commence at p 99 of the annexure end at p 208. There are further customer cards between p 209 and 218 but they represent new customers acquired by the plaintiff and/or her husband. If my mathematics be correct, which is always problematic, the cards indicate that there were 110 customers, so that the representation about the number of customers is not erroneous.
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In further conversation alleged to have taken place on 19 December, the plaintiff inquired as to how she would be introduced to customers and she was told that the company representative, that is Mr Kagelaris, would "introduce her to every customer". In [58] the plaintiff deposed to a conversation which indicated there were “no accounts” as such as the plaintiff would deliver goods to customers, the customers would pay for the goods in cash. Thus there were never any debtors nor any credit problems, for example, from cheques being dishonoured or by electronic debits being reversed by a bank. On the other hand it was pointed out to the plaintiff at the meeting that she was required to pay for stock delivered to her and that in fact the payment would have to be received before the stock was delivered to her and in that fashion the first defendant would not be out of pocket because of stock that had been delivered to a distributor.
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Paragraph [63] of the plaintiff's affidavit records a conversation between the plaintiff and her father about whether the plaintiff should enter into the business. According to the plaintiff's affidavit, Mr Keyes thought that Mr Sengos was a "straight shooter" and there is no averment by the plaintiff that she disagreed with her father's assessment. The plaintiff went on to point out that she was happy with the area that might become hers because her two sons were at school at Trinity College at Summer Hill and that was in the area in question and she could drop them to school and collect them from school each day. The only doubt raised by the plaintiff's father was as to the size of the territory which he thought was smaller than the area of Territory 3. Nothing turns on that because what was important was the number of potential outlets rather than the geographical area in question, and also the density of the population. The inner west is generally more densely populated than what might now be described as the middle west and certainly the Sutherland Shire.
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Later on 19 December the plaintiff sent to Mr Sengos an email asking for a copy of the purchase agreement. That was provided to her. However, she did not take any legal advice. The document was read both by her and by her husband, who himself is a businessman and the owner of a distributorship. However the plaintiff's husband's experience in the distribution of goods is essentially in the bicycle industry and there is a big difference between selling bicycles and selling lollies. However, one would think that Mr Ahern had some business acumen and experience, and could assist Mrs Ahern when reading the proposed purchase agreement.
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On the size of the area, I should cite [69] of the plaintiff's primary affidavit:
"The business appeared to be a great opportunity and seemed to suit what I was looking for. As I was looking over the documents Paul had given my husband and I [sic], I noticed that territory 3, being the territory advertised by BCI Business Brokers was considerably larger than territory 4 but the sales figures for each were the same. I decided to question Paul about this before I made any final decision to sign the distribution agreement for territory 4."
In oral evidence the plaintiff told me that the figures were not the same but they were similar. I raised that question with her myself because it appeared to me that if the sales figures for each of Territories 3 and 4 were the same that should have rang an alarm bell as it was highly improbable two separate geographical areas should return exactly the same sales figure month after month for a period of two years. However, the plaintiff said that they were not the same but similar.
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The response to the plaintiff's email transmission concerning the size of the territories was a request by Mr Sengos that the plaintiff telephone him. According to [72] of the plaintiff's affidavit she could not recall if she then had any conversation with Mr Sengos about that issue. The next relevant communication was an email sent by Mr Sengos to the plaintiff and her husband at 7.40pm on 22 December 2014. The email appears to have been intended to be, and accepted as, a goad or stimulus to the plaintiff's entering into the distribution agreement. The email is this:
"The agent that sold the Canterbury run has a couple of people who have showed interest in buying that run and I am sure that one of them would buy the Marrickville run that I have discussed with you guys. I am flexible with settlement date, I would like to have a signed contract and a deposit as soon as possible however.
What stage are you both up to? I do not want to seem too pushy but at the same time I do not want to lose the other 'potential' buyers either.
Can you give me an answer by the close of business tomorrow as to whether you wish to proceed?"
The plaintiff's affidavit then continues thus:
"[74] Before making any final decision, I looked over the sales figures Paul had given me for territory 4. At this time:
(a) I had been provided with a spreadsheet setting up the revenue of the business for the past 2 years. I relied on the accuracy of the figures and did not make any independent inquiries as to their accuracy or authenticity at the time;
(b) the revenue identified in the spreadsheets would greatly assist my family;
(c) the location of the territory and the flexible hours I could work seemed fantastic;
(d) I had been told that there was an existing customer base; ...”
In [76] of her affidavit the plaintiff formally states that she relied on the revenues spread out in the spreadsheet in entering into the distribution agreement. I have no doubt about that.
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The plaintiff, as I earlier indicated, signed the distribution agreement on 23 December 2014 and on the same day transmitted a deposit of $10,800 to the first defendant's bank account. The plaintiff let Mr Sengos know on the morning of 22 December 2014 that she wished to proceed and that she would email him a copy of the signed contract on the following day and confirmed by email on the following day the fact that she transferred the deposit to the first defendant's account.
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There are some things about the contract which ought be noted. Most of those things to be noted are contained in Sch 1. The contract fee was, as I have indicated, $108,000. That is to be compared with the advertised fee for Territory 3 of $129,000, which would have included some commission payable to BCI Business Brokers. The term of the plaintiff's contract was two years with a renewal term of two years. That is to be contrasted with the term of the Territory 3 contract of four years with an option to renew for four years. Item 13 in the schedule refers to an administration fee of $2,500 plus GST which was an amount payable by the plaintiff to meet the first defendant's "reasonable costs and expenses for consenting to the transfer, including but not limited to legal fees to prepare all necessary documents.”
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Clause 35 of the agreement refers to a minimum monthly purchase. The minimum monthly purchase stipulated in Sch 1 was $5,000 and, according to cl 35, that minimum monthly purchase amount was to be increased by 10% each six months. An example is then provided in cl 35 of how the clause was intended to operate and it operated in this fashion: as at the commencement of the agreement, January 2015, the minimum monthly payment was $5,000; commencing on 1 July 2015 increased to $5,500; commencing in January 2016 it would increase to $6,050 and in July 2016 to $6,650. Were the contract still operative the minimum monthly purchase would have been in January 2017 $7,320.50.
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One must contrast the term of the agreement entered into by the plaintiff for Territory 4 with the term offered for Territory 3. The term for Territory 3 was twice that for Territory 4. The purchase price was roughly the same, indicating that the distribution agreement for Territory 4 was not as favourable to the purchaser, in this case the plaintiff, than was the distribution agreement for Territory 3, the one that was in fact purchased by Ms Pia Arias.
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As I have already mentioned, the plaintiff commenced working under the contract on 13 January 2015. She did not commence at the beginning of January because she and her family went on a planned annual holiday. The plaintiff appears to have last worked under the contract on or about 28 February 2015.
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According to the plaintiff's written submissions, MFI 13, the plaintiff operated the business within Territory 4 until 25 February 2015. According to [322] of the plaintiff's primary affidavit, her son was sick on 26 February 2015 and at that time she did not think he would be well enough to leave him to go to see customers with John Kagelaris on 27 February 2015. On 26 February 2015 she sent to Mr Kagelaris a text message letting him know that she would not be able to meet with him and visit customers on 27 February 2015. On that day the plaintiff commenced receiving emails from Mr Sengos requiring her to purchase stock from the first defendant in accordance with the distribution agreement. According to the plaintiff's affidavit [326], she did not wish to purchase any more stock from the first defendant on that day because as far as she was concerned, the "customers" were not purchasing the stock that she had ready to sell to them and therefore she did not believe there was any need to purchase further stock albeit that she was required by the contract that she had signed to do so. In [326] of her affidavit the plaintiff also stated that she believed that Mr Sengos had "fabricated the sales figures and lied to me about the customer base for the territory". It appears to be common ground that the plaintiff did not work after 25 February 2015. The first defendant issued a breach notice to the plaintiff pursuant to the contract on 10 March 2015 and a termination notice on 22 March 2015. Those events led to the commencement of the current proceedings.
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The evidence discusses at some length what happened between 13 January 2015 and 25 February 2015. I have been provided with a mountain of emails, the method of the collation of which makes it almost impossible to read with alacrity and the process of reading them is extremely time consuming.
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However, one must go into the events immediately following 13 January 2015. It is common ground that the plaintiff paid to the defendant the full purchase price required by the contract, namely to $108,000. On 2 January 2015 the plaintiff received an email from Mr Sengos. Attached to that email were a tax invoice for the first lot of stock that she ordered from the first defendant and a spreadsheet identifying that stock. On 9 January 2015 the plaintiff paid the cost of the first order. The amount in question was $5,901.83. Later in the afternoon of that day a truck arrived at her home containing two pallets of stock together with the customer cards for Territory 4, product information sheets and business cards. The customer cards were in a box. The product information sheets which she received are annexed to her affidavit, between p 85 and 98 of the exhibit to the affidavit. They described a number of items of confectionery and the retail price, the cost price to the retailer and the amount of profit that the retailer could make by selling these items of confectionery to consumers at the recommended retail price. In [110] of her affidavit the plaintiff pointed out that each time the first defendant had new products on offer she would receive a product information sheet regarding the new products from the first defendant. On the evening of 10 January 2015, the plaintiff received another email from Mr Sengos, attached to which was what was called the "suggested car stock list". This was a list of stock that the plaintiff should take with her when she went out to transact business.
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On 12 January 2015 the plaintiff unpacked the stock that had been delivered to her on 9 January 2015. She had placed shelving in the garage at her home and she placed the majority of stock on the shelves sorting the stock into different categories. She also placed the stock suggested by Mr Sengos in the email concerning the "car stock" in her motor vehicle. On 13 January 2015 the plaintiff met with Mr Kagelaris outside a shop of a customer. Much of what is said to have occurred on that day is disputed by Mr Kagelaris. Some of what the plaintiff says occurred on that day appears to me to have been reconstructed with hindsight and with the views that the plaintiff eventually formed about the defendant's business and the integrity both of Mr Sengos and Mr Kagelaris. Suffice to say that according to the plaintiff she and Mr Kagelaris visited about ten customers on that day.
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On the afternoon of that day, at 4.03pm, Mr Sengos sent to the plaintiff a polite email. He asked of her, how was her first day and how much did she sell? The response sent by the plaintiff to Mr Sengos at 5.29pm that afternoon is this: "Wow, a lot to take in, but I enjoyed it. John made me laugh a lot. I did $310.00. There appeared to be a lot of "buyers" away. Hopefully tomorrow will be better in sales." One will note that the plaintiff said that she enjoyed her day's work. There is no suggestion in this contemporaneous email that the plaintiff had any concerns about things such as John’s being known to the shopkeepers or about the shopkeepers not recognising him or about his being brusque or of his not introducing her to shopkeepers.
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On Wednesday, 14 January, the plaintiff went out again with Mr Kagelaris. In [141] of her primary affidavit the plaintiff said, "I made very few sales on this day". When pressed in cross examination she could not remember how much was sold on that day. Eventually it was agreed that she in fact sold stock for $288.50 on that day. According to the same paragraph of her affidavit she visited about ten further customers on that day.
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Thursday, 15 January 2014 ended up being a bit more profitable day. On Thursday, 15 January the plaintiff was accompanied by her husband, Tim. I trust he will not take it amiss if I so describe him for ease of reference. At [144] of her affidavit the plaintiff said that her husband sold about $600 worth of stock on that day. In the same paragraph she said, "about $300 of stock was sold to a brand new customer that he [Tim] had found (fruit shop)." The solicitor who appeared for the defendant, Mr Hassett, at the hearing prepared a document which was marked for identification 1 and eventually became exhibit 4. It contained his calculations of what was sold by the plaintiff or on her behalf during the four days commencing 13 January 2015. He looked at the sales recorded on each of the customer records and then placed the price of each item beside the item sold and that enabled him to make a calculation of the value of the sales. Mr Hassett brought the total value of the sales on that day to $667.80. However there were certain errors or things that were mistakenly or wrongly taken into account and, for example, Mr Hassett did not allow for specials. It was eventually conceded by Mr Hassett that he would agree with $600 worth of stock attested to by the plaintiff. However, on the new customer card there was not $300 worth of stock shown but only $91.80 of stock. However, Mr Ahern said this, at transcript p 87 "It was $91 but I delivered the stuff that they didn't have in the car the next day but failed to write it onto the sheet, which is my mistake." In answer to the next question he confirmed that it was around $300 of stock that had been sold to this new customer and he wasn't exactly sure about the value of the stock that he delivered but did not record, but, all told, it was worth approximately $300. He agreed that that indicated the sales on that day ought to have been recorded as being approximately $800 and that can be found in transcript p 88, question commencing at line 7.
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On Friday, 16 January 2015 it was eventually established that the plaintiff sold stock worth $389.20. The total for that week was, leaving aside the extra $200 that the plaintiff's husband did not record, $1,587.70. If one adds to that the $200 that the plaintiff's husband did not record, that indicates sales for the four days of $1,787.00 or almost $1,800. The significance of those figures is that in her affidavit the plaintiff said this at [151]:
"The first week of trading I had sold about $800 worth of stock. I had seen about 15 existing customers each day. I had attempted to make sales on four week days. Either my husband or I visited almost all of the existing customers by the end of the first week. Although I had not made very many sales in the first week, I was still very optimistic and positive about my new business."
To state that her sales for the first week "were about $800" is a gross under exaggeration. The sales were closer to $1,800. On 15 January the plaintiff visited about 15 customers. In [151], which I have already quoted, the plaintiff said that she saw about 15 customers each day. Assuming that she saw 15 customers on the Friday, then on her own evidence the plaintiff or her husband had visited 50 customers, which is less than half the customer base, although in [151] she attested to visiting "almost all of the existing customers", which is gross hyperbole.
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Again this points to the plaintiff's reconstructing what actually occurred from her memory after her memory had been clouded by subsequent experiences with the business and with Mr Sengos and with Mr Kagelaris. It does suggest that the plaintiff's evidence is unreliable. The plaintiff agreed in cross examination that it was clearly incorrect to say that she'd actually seen almost all of the customers by the end of the first week. That concession is recorded on transcript p 49, line 32.
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The cross examination of the plaintiff then turned to this, commencing at p 50:
"Q. But my point is if you took a random four days in January, which this is [13-16 January] and you've made $1,600, these figures of $9,105 and $10,123 are more or less equivalent to that sample aren't they?
A. For your example, yes."
I should point out that $9,102 were the sales from January 2013 for Territory 4, according to the spreadsheet and $10,123 were the sales for January 2014 according to that spreadsheet. Of course, if the plaintiff could make sales of $1,600 over four days that would indicate that in five days she could sell $2,000 worth of stock and over a four week period she could sell about $8,000 worth of stock. If one adds the extra $200 of stock per week that the plaintiff's husband did not record, one can see that she could have earned in a four week period about $9,000 if those figures be accurate. I should indicate that it appears to be accepted that the sales for January in each year were down compared with other months of the year. For example, the sales for January 2012, in Territory 4 were $8,600 which is far less than the sales for each other month in that calendar year for that territory. Similarly the sales figures for Territory 3 for January 2013 were much less than for any other month in that calendar year and the same can be said for the sales in January 2014 for that territory compared to the records for the other nine months reported in the spreadsheet for Territory 3 contained in BCI Business Broker's advertisement for that territory. One could see therefore that there was no real reason to query the validity of the figures provided by the defendants to the plaintiff on 19 December 2014 based on the plaintiff's selling experience during the four days commencing on Tuesday, 13 January 2016.
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I return to the cross examination that I just commenced quoting:
"Q. Now you maintain this spreadsheet is a forgery, do you not?
A. I never use the word forgery.
Q. Well let me put to you there are two possibilities here. Either Mr Sengos recorded these figures in the manner that he says in his affidavit, which I'll come to in a minute, or he made them up. There’s only two possibilities, aren't there? Option A or option B?
A. Yes.
Q. Not option C. No one else could have done this could they? You can't think of an option C?
A. No.
Q. So really, we're down to he forged them or he didn't. Is that what we're down to?
A. I never used the word that they were forged.
HIS HONOUR: Forgery has got a meaning in law that is incorrect. What you're saying is that these are just invented or concocted or incorrect?
HASSETT: Yes. Thank you, your Honour.
Q. They're concocted. Is that what you say in these proceedings?
A. No.
Q. But I thought that was your complaint?
A. I said they were misleading.
Q. Well they're only misleading if they're wrong aren't they?
A. Yes.
Q. If they're right they're not misleading?
A. Correct.
Q. The basis that you say they are wrong is what?
A. Is from the figures of the sales.
Q. On what basis do you assert that these figures are wrong?
A. On the figures of the sales.
Q. Your sales?
A. Yes.
Q. You say that because you couldn't subsequently make these kind of sales, the sales on p 17 [the spreadsheet] must be incorrect?
A. Yes.
Q. That's what you say?
A. Yes.
Q. But of course different people have different selling abilities, do they not?
A. Of course.
Q. And Mr Kagelaris may have been a better salesman than you. Might that not be possible?
A. Sure.
Q. And he's known these people, or many of them, for 13 years as we've talked about. Correct?
A. Yes.
Q. He may have simply been more successful at selling than you, might that not explain it?
A. Yes."
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The plaintiff gave up selling the defendant's products because she could not achieve the level of sales that had previously been achieved by Mr Kagelaris when he was operating this Territory 4 on behalf of the first defendant, that proposition, of course, being based on the accuracy of the sales figures contained in the spreadsheet. The defence case is that there is no hard evidence that the figures contained in the spreadsheet are incorrect, that they are misleading, that they are deceptive, that they are, so to speak, a thing of Mr Sengos' imagination, or wishful thinking. The plaintiff believes that the figures were invented, concocted, conjured out of nowhere because she could not reach them.
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In these proceedings the plaintiff bears the onus of proof. She must prove to the Court's satisfaction that the figures are deceptive or misleading or likely to mislead or to deceive. The defendant bears no onus of proof. The defendant does not have to establish that the figures impugned were actually made. That is the legal position. The evidentiary position of course can change, depending on what evidence be adduced.
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The evidence discusses in detail some other specific days of sales. The first to which I should turn is Friday, 6 February 2015. On that day the shops were visited by Mr Tim Ahern. On that day, at 5.54pm, the plaintiff sent an email to Mr Sengos. It says this: "Also Tim did 12 shops today with a total of $115.00. Hmmm!!!! And he has been in sales VERY successfully for 18 years." At 6.09pm Mr Sengos sent the plaintiff this email "Were these 12 new shops or existing?". At 6.22pm Mr Sengos sent a further email to the plaintiff "Can you please send your list of the 12 shops that Tim called on today for $115.00 in total sales." At 6.27pm the plaintiff sent Mr Sengos an email containing this list of businesses:
"Houda mixed business -- Roselands
Ezymart – Earlwood
Croydon park petroleum – Croydon Park
Van Pho – Dulwich Hill
Izmir Market – Dulwich Hill
Convenience store – Campsie
Supermarket Beamish -- Campsie
Mixed Business – Campsie
King of the pac – Kingsgrove
5 star handy – Kingsgrove"
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Mr Sengos on Monday, 9 February 2015, visited each of those stores. He then sent an email to the plaintiff at 4.34pm. The relevant part of the email is this
"...I have today called on the outlets you mentioned with the following results below in [capital letters] - there are three orders can you please deliver these within the next 48 hours.
The one with the * told me that the last rep they seen was John!!
...
Houda mixed business – Roselands: ORDERED 3 CLASSIC POPS AND 1 GORILLA GUM
Ezymart – Earlwood: CLOSED ON MONDAYS
Croydon park petroleum – Croydon Park: SALES ARE VERY SLOW AND DOES NOT NEED STOCK
Van Pho – Dulwich Hill: ORDERED 1 SPARK GUN AND 1 GRAPE ZAPPO
Izmir Market – Dulwich Hill: HAS ENOUGH STOCK
Convenience store – Campsie: PURCHASED FROM TIM LAST WEEK
Supermarket Beamish -- Campsie: OWNER IS OVERSEAS FOR THE LAST MONTH AND NOT BACK FOR ANOTHER 3 WEEKS
Mixed Business – Campsie: SHOP CLOSED
King of the pac – Kingsgrove: SALES VERY SLOW AND HAS ENOUGH STOCK
5 star handy – Kingsgrove: HAS PLENTY OF STOCK"
There is reference in this email in lines that I have omitted to a visit to Carlton Fresh at Carlton which doesn't advance the matter anywhere but also reference to a new shop owned by Patricia on top of Kingsgrove Station which placed an order for 1 Gorilla Gum. The email records three further orders that Mr Sengos was able to achieve, at least two of them being despite the visit of Mr Ahern on the preceding Friday.
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Mr Ahern sought to fill the extra orders that had been obtained by Mr Sengos on Monday, 9 February. He went in particular to Van Pho at Dulwich Hill to deliver the Spark Gun and Grape Zappo. When one goes to the Van Pho card on p 142 of the annexure to the plaintiff's primary affidavit, one will see that the Spark Gun has been inserted but then deleted by being cancelled and the Grape Zappo, which was actually delivered by Mr Ahern.
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In his affidavit of 22 July 2016, which is exhibit C, Mr Timothy Ahern said this:
"[70] When I arrived at the Asian Grocer and handed the owner the lollies and toys, I observe the owner look over the lollies. The owner of the Asian Grocer then became very angry. He spoke to me aggressively and we had a conversation to the following effect:
Customer: 'Where is the use by date? It has to have a use by date.'
I then looked at the lollies and noticed that they did not have a use by date on them. I thought this was very strange. I had not previously realised that the lollies did not have a use by date on them. I apologised to the owner and left the shop promising to return with properly marked lollies.
[71] Immediately after leaving the Asian Grocer I telephoned Paul. We had a conversation in words to the following effect:
Me: 'The lollies the Asian grocer ordered do not have use by dates on them. That's not right.'
Paul: 'Don't worry about it. I will send you some stickers with use by dates on them and you can put them on the lolly bucket.'
Paul's response was alarming. I did not think that that was the right thing to do.
[72] A few days later an envelope arrived in the post at our house. The envelope contained stickers with use by dates on them. My wife and I no longer have the envelope or stickers which were received.
[73] At no stage did I place any of the stickers on the lollies, lolly buckets or boxes."
When citing that evidence and other evidence concerning "use by" dates I have used deliberately the words "use by" rather than as typed in every document I have seen in this case "used by", which of course is the wrong appellation.
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An aside is here necessary. One of the documents sent by Mr Sengos to the plaintiff was a document produced by the NSW Food Authority. It is headed "Understanding Best Before dates & Use By/Expiry dates". It says this
"Food labels have date marks to tell us about the shelf life of foods. These date marks help us tell how long food can be kept before it begins to deteriorate. All food with a shelf life of less than two years must be date marked. Many canned foods, such as bake beans etc are not date marked because they are safe and keep quality for over two years.
USE BY or EXPIRY DATES:
FOODS MUST BE EATEN or THROWN AWAY BY THIS DATE
After this date foods may be unsafe to eat even if they look fine because the nutrients in the food may become unstable or a build-up of bacteria may occur.
BEST BEFORE DATES:
FOODS ARE STILL SAFE TO EAT AFTER THIS DATE
The ‘Best Before’ date indicates that the product may have lost some of its quality after this date passes.
(a) that the representation was made;
(b) that the representation was:
(i) misleading or deceptive; or
(ii) likely to mislead or deceive; or
(iii) false.
[18] “Knowledge” must be actual and not constructive and may be considered to include wilful blindness, but it does not include recklessness or negligence."
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Mr Klooster provided me with two authorities to support the propositions in par 18 of his written submissions, namely King v GIO Australia Holdings Ltd [2001] FCA 238 and Keller v LED Technologies Pty Ltd [2010] FCFCA 55 [335]. I have pointed out that the plaintiff has failed to prove on the balance of probabilities one of the essential elements of the tort of deceit and that is the knowledge of the falsity of the representation made. I pointed out that carelessness is consistent with an honest belief and is insufficient to establish that element of the tort of deceit. In essence I have found that the plaintiff has failed to prove recklessness and I have found that it is likely that the carelessness was involved. Carelessness is negligence. Accordingly the plaintiff has not made out a case against Mr Sengos for personal accessorial liability.
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As Mr Klooster pointed out in [19] of his written submissions, the requirement of the intention to be involved in the contravention cannot be dispensed with even if the provision in question requires no actual intent. Section 18 requires no actual intent. In the written submissions Mr Klooster accepted that the plaintiff bore the onus of proof to establish that the second defendant had the requisite knowledge and intention to engage in the contravention and since my finding is merely of carelessness or negligence the plaintiff has not established that Mr Sengos is personally liable because of accessorial liability.
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I have inquired of the representatives of the parties whether any further reason for judgment required. I am told that no such reason is required.
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For those reasons, I give verdict and judgment for the plaintiff against the first defendant for $122,000.
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I give verdict and judgment for the second defendant against the plaintiff.
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I order the first defendant to pay 90% of the plaintiff's costs on the ordinary basis until 27 February 2017 and 90% of the plaintiff's costs on an indemnity basis from 28 February 2017.
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I have made no costs order in favour of the second defendant because of the reduction of the plaintiff’s costs by 10%, and bearing in mind Mr Hassett’s concession that no additional evidence was adduced because of the joinder of the second defendant.
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Decision last updated: 18 July 2017
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