TRADE PRACTICES – misleading and deceptive conduct – s 52 of the Trade Practices Act 1974 (Cth) – findings relating to conduct at meeting between two participants with no witnesses – whether two oral representations were conveyed to respondents – whether primary judge erred in respect of factual and credit findings including in relation to findings of fraud
DAMAGES – statutory compensation – s 82 of the Trade Practices Act 1974 (Cth) – where quantum to be assessed by reference to the position the respondents would have been in absent contravening conduct – whether primary judge erred in calculation of loss
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
CCL Secure Pty Ltd v Berry [2019] FCAFC 81
Case
[2019] FCAFC 81
Decision Date
CaseChat Overview and Summary
CCL Secure Pty Ltd, the appellant, was engaged in the business of producing polymer banknotes. The respondent, Dr Berry, an Irish national of Indian descent with substantial business experience in Nigeria, was acting on behalf of Securency, the manufacturer and designer of polymer technology, in its efforts to promote the introduction of polymer banknotes in Nigeria. Dr Berry negotiated an agency agreement with Securency, which outlined the terms of their partnership in promoting Securency's polymer notes in Nigeria. The agreement was executed in August 2006, with a revised version signed in March 2007. The central issue in this case was whether Dr Berry's agency would have survived the termination of other agencies by Securency, and if so, for how long. The court had to determine if the primary judge erred in making factual and credit findings, including the findings of fraud, and if the primary judge correctly calculated the loss for statutory compensation.
The court found that Dr Berry's agency would have been terminated at the latest during the worldwide terminations of other agencies by Securency. The court disagreed with the primary judge's assessment that Dr Berry and GSC would have survived the 2010 purge due to their particular relationships with Securency and Dr Berry being an honest agent. The court also found that the primary judge erred in assessing compensation on the basis of the presumed continuation of the Agency Agreement until 20 May 2018. Instead, the court considered that 29 November 2010 (being 60 days after 30 September 2010) was the latest possible end date for the assessment of compensation.
The appeal was allowed in part, and the order made by the primary judge on 17 August 2018 was set aside. The parties were required to file an agreed minute of orders identifying the further orders necessary to dispose of all issues on the appeal or, failing agreement, a minute of the orders for which that party contends, together with any affidavit material relied upon in relation to costs and any submissions. Any issue as to further orders was to be determined by the Full Court on the papers.
Orders
Orders of the court
1. The appeal be allowed in part.
2. Order 2 made by the primary judge on 17 August 2018 be set aside.
3. By 4pm on 31 May 2019, the parties file:
(a) an agreed minute of orders identifying the further orders necessary to dispose of all issues on the appeal so as to reflect these reasons; or
(b) failing agreement as to the orders, a minute of the orders for which that party contends, together with any affidavit material relied upon in relation to costs and any submissions (not exceeding two pages in length).
4. Subject to further order, any issue as to further orders is to be determined by the Full Court on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
It is convenient to deal with the first five groupings of grounds initially as they all directly or indirectly seek to impugn the central findings. Other than the grounds relating to reliance and damages, each of the grounds are advanced in aid of, or are subsidiary to, this primary argument (although some of the attacks on individual factual findings are, at best, of marginal relevance).B RELEVANT BACKGROUND TO APPEAL It is unnecessary to detail the factual background to the dispute in any real detail. What follows is sufficient to understand the issues that arise on the appeal. Securency was the manufacturer and designer of polymer technology, which was commercialised by Securency in association with the Reserve Bank of Australia including by the production of polymer banknotes. Efforts had been made as early as 1999 to obtain an order from the Central Bank of Nigeria for the production of polymer-based banknotes for Nigerian currency. Dr Berry, a director and shareholder of GSC, is an Irish national of Indian descent with substantial business experience in Nigeria. As a result of his experience, Dr Berry was well-placed to assist Securency in its efforts to promote the introduction of polymer banknotes in Nigeria. Dr Berry began working on behalf of Securency which initially involved travel to Nigeria and attending meetings with key personnel, including with the Governor of the Central Bank of Nigeria in 2003. Following this meeting with the Governor, Dr Berry reported to Mr Hugh Brown (the director of sales and marketing of Securency) and Mr Chapman his view that the only way that Nigerian authorities would be convinced to change from paper banknotes to polymer banknotes would be for production of banknotes, and ultimately the polymer substrate through a process called opacification, to be undertaken in Nigeria. Although throughout the period 2003 to June 2006, Dr Berry did not have any formal contract in place, Securency described Dr Berry as its partner (J[51]-[52]) when negotiating the adoption of polymer notes in Nigeria. Dr Berry acted in that capacity from the outset on the basis of his belief that, in the long term, an opacification plant would be built in Nigeria with the participation of the Nigerian Government and Dr Berry (J[7]). In June 2006, Dr Berry met with Mr Brown in India to negotiate a formal contract and in or around August 2006, the parties executed an agency agreement. A slightly revised version of this agreement was re-executed by the parties in or around March 2007. It is this version of the agency agreement (Agency Agreement) which is presently relevant. The material terms of the Agency Agreement were identified by the primary judge at J[93]. It will be necessary to make further reference to its provisions when considering the grounds of appeal relating to damages, but the provisions relevant for background purposes are as follows:(1)Dr Berry and GSC were named as the agent of Securency in Nigeria and ECWAS territory;(2)Dr Berry and GSC would use their best endeavours as agent to advertise, market, promote and obtain orders in the territory for Securency’s product of opacified polymer (cl 2.2);(3)the scope of the agency was restricted to advertising, marketing and promoting the product in the territory, obtaining orders from customers located in the territory, submitting them to Securency and any matter incidental to those tasks (cl 2.3);(4)the Agency Agreement commenced on 2 February 2006 and continued until the Expiry Date “unless terminated earlier in accordance with this Agreement” (cl 3.1);(5)the Termination Date was defined (in cl 1.1) as meaning the earlier of the “Expiry Date” (being 30 June 2008 “automatically renewed for further terms every two years unless terminated as per the Termination clauses contained in the contract”) or the date upon which “this Agreement is terminated”;(6)the various Termination clauses provided for termination upon:(a)Securency giving Dr Berry and GSC 60 days’ written notice (cl 2.6); (b)30 days’ written notice given by either party to the other party, which notice could be given at any time on or after the date which was 30 days before the Expiry Date (cl 3.2);(c)an event of default or insolvency occurring under cl 16;(7)if Securency received an order for the product from a customer located in the territory, “it must forward a copy of the order to [Dr Berry and GSC] as soon as practicable” (cl 5.1(c));(8)commission was payable on invoice sales (defined in cl 1.1 to mean, relevantly, the amount of all invoices rendered by Securency and paid by customers relating to sales in the territory) in accordance with a formula set out in cl 8;(9)on the expiry or termination of the Agency Agreement, Dr Berry and GSC were not entitled to payment of any commission in respect of invoice sales from the date of expiry or termination (cl 17.1(a));(10)the rate of commission was 15% (sch 1).
Evidence
Evidence Before The Court
We now turn to the evidence before the primary judge detailing Dr Berry’s account. C.3 The Relevant Evidence As there were no contemporaneous records, nor affidavits, to identify what Dr Berry said about the events at the February Meeting, it is necessary to consider both Dr Berry’s evidence in chief and under cross-examination. The following table sets out how each representation was finally pleaded and “particularised” and the evidence pointed to by Dr Berry and GSC as having made out each of these representations drawn from the oral testimony of Dr Berry in chief. The “particulars” are not particulars in the usual sense; for reasons that are not readily apparent, those acting for Dr Berry considered it appropriate to incorporate Dr Berry’s anticipated evidence (set out in a served but unfiled proof of evidence) as particularisation of the material facts pleaded. This is not to say that the “particulars” were unimportant. When taken together with what is pleaded at 2FASOC [26]-[26E], they identify what was contended to have happened with real specificity. The case advanced was that the Renewal Representation was made while referring to the intention to enter into a future renewal agreement, but that the Second Representation was made contemporaneously with the provision to Dr Berry of the document being the then unsigned partnership agreement. The representation allegations at trial and the evidence given in chief, with matters of particular significance emphasised, were as follows: In cross-examination in relation to the Renewal Representation, Dr Berry gave evidence that Mr Chapman had said that “our existing terms would continue” (T154.37 29/08/17). By this he meant “under the new agreement” (T154.40), but he drew an apparent contrast between these terms (of a proposed renewal agreement) and the partnership agreement which was “different in every respect” from his existing Agency Agreement (T155.37-38 29/08/17; see also T156.3 29/08/17). In cross-examination in relation to the Second Representation, Dr Berry gave the following evidence (T152.22-28 29/08/17) as to the partnership agreement:[Counsel for Securency] And that. Dr Berry, is because it [that is, the partnership agreement] does not exist, does it? It is a figment of your imagination, to put it kindly?—The document I signed was not the same document that’s here. I signed a document, gave it back to Peter, and Peter was going to give it on to get to Australia. Hugh was travelling to Australia; he was going to carry it. There were some issues that we needed to discuss on that, which I thought were longer issues. As soon as the document got to Australia, we would begin discussions. Somewhat surprisingly in the light of this evidence, later evidence given by Dr Berry was that the partnership agreement was a draft that could be “corrected or modified” (T169.13-18 29/08/17) and required a final sign off by all parties (T169.18 29/08/17; T169.41-44 29/08/17); indeed it was said to be “incomplete” in fundamental respects (T169.46-170.3 29/08/17), and “fundamentally deficient” for Dr Berry’s purposes (T171.11-16 29/08/17). Further confused and confusing aspects of the evidence of Dr Berry concerning the partnership agreement will be examined in detail below.C.4 The Findings as to the February Meeting
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
Securency further submitted that the respondents had not identified any authority which supported the proposition that, since Securency was found to have made fraudulent representations, it was precluded from asserting that it could and would have terminated the agency lawfully in any event.E.2 Consideration We agree that the date of termination would have been no later than 29 November 2010. We do not accept the respondents’ submission that there was no evidence that anybody in a decision-making role in Securency would have terminated Dr Berry and GSC were it not for the wrongful and false proposition that he wished to be released from the Agency Agreement. To the extent, as submitted on behalf of Dr Berry and GSC, that the primary judge approached the case as being one in which the chance of Dr Berry and GSC surviving the 2010 purge was greater than the ordinary agent because of the particular relationships that they had and because Dr Berry was an honest agent and was known to be so within Securency, we disagree. We see no cogent basis for concluding that Dr Berry and GSC would have survived the worldwide agency terminations. In our opinion, the worldwide terminations would have been made, and were made, absent the contravening conduct. Contrary to the submissions on behalf of Dr Berry and GSC, we do not see a basis for placing a percentage chance on their prospects of survival of those terminations. We do not accept the submission that Dr Berry was a special case in this respect. It was not put to Dr Berry that he was a special case and we see no force in the argument that Mr Beeby did not give evidence that he would have terminated Dr Berry specifically. Mr Beeby’s evidence was that a decision was made to halt the use of agents altogether and consequently all of Securency’s agents were terminated. It was not put to him that Dr Berry would not have been terminated at that time. We do not accept that Dr Berry had a chance of survival. We also note that Dr Berry and GSC accepted, contrary to what the primary judge said about the loss of an opportunity to construct the opacification plant, that at trial Dr Berry and GSC did not ask for their loss to be assessed on that basis, that the loss of opportunity to construct and operate the opacification plant was not part of their case, and to that extent the primary judge was in error. In any event, as outlined at [179] above, the primary judge did not attempt to directly value the loss of that opportunity, proceeding instead to assess loss by reference to the presumed continuation of the Agency Agreement until 20 May 2018. Having found that Dr Berry’s and GSC’s agency would have been terminated at the latest during the worldwide terminations, in our opinion, 29 November 2010 (being 60 days after 30 September 2010) is the latest possible end date for the assessment of compensation. We therefore consider that the primary judge erred in assessing compensation on the basis of the presumed continuation of the Agency Agreement until 20 May 2018.