CUB Pty Ltd v Hot Topic Australia Pty Ltd
[2012] VCC 1298
•19 October 2012
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted |
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
EXPEDITED CASES DIVISION
Case No. CI-11-00876
| CUB PTY LTD (ACN 004 056 106) | Plaintiff |
| v | |
| HOT TOPIC AUSTRALIA PTY LTD (ACN 096 693 122) | Defendant |
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JUDGE: | HER HONOUR JUDGE KENNEDY | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10, 11, 12, 13, 14 & 19 September 2012 | |
DATE OF JUDGMENT: | 19 October 2012 | |
CASE MAY BE CITED AS: | CUB Pty Ltd v Hot Topic Australia Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 1298 | |
REASONS FOR JUDGMENT
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Catchwords: Commercial law – Contract – whether plaintiff entitled to damages on the basis of a binding agreement – whether defendant entitled to set aside any agreement on the basis of misleading and deceptive conduct.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C. E. Shaw | Gadens Lawyers |
| For the Defendant | Mr C. R. Northrop | Bazzani Scully Brand Lawyers |
HER HONOUR:
Background
1 In this case the plaintiff, CUB Pty Ltd (formerly known as Fosters Australia Limited)[1] (“Fosters”) claims damages in respect of breaches of an alleged licence agreement for the defendant to exploit various Fosters brands including VB, Cougar, Carlton Gold, Carlton Mid, Melbourne Bitter, Fosters, Cascade, Crown Lager and CUB Heritage.
[1]By order made 12 September 2012, the plaintiff was given leave to file and serve an amended writ and statement of claim to reflect this name change.
2 Fosters claims it lawfully terminated this agreement with the result that it is entitled to “loss of bargain” damages for the full amount owing under this agreement (less amounts it has subsequently received from another licensee) at $505,000.[2]
[2]Outline of Submissions of the Plaintiff dated 19 September 2012 (SOP) at para 37.
3 The defendant (“Hot Topic”) denies that any finalised agreement was reached and claims restitution for an amount of $63,465.61 in respect of amounts it has paid to Fosters.[3]
[3]Defendant’s restitution claim document provided 11 September 2012.
4 The defendant has also Counterclaimed on the basis of various alleged representations and conduct it says were made, such that any licensing agreement should be set aside pursuant to s87 of the Trade Practices Act 1974 (Cth) or s158 of the Fair Trading Act 1999 (Vic). It also seeks damages as a result of this representation/conduct.
5 There were a number of issues in the case, although there were two primary issues as follows:
(a) is Fosters entitled to loss of bargain damages in respect of a binding contract between Fosters and Hot Topic?
(b) is Hot Topic entitled to relief in respect of the alleged representation/conduct?
Witnesses
6 Fosters called Ms Gibson, Mr Bouttell, and Mr Ashworth who were employed by the firm, Velocity Brand Management Pty Ltd (Velocity). Velocity was a licensing agent, which managed the licensing of intellectual property rights belonging to their clients.
7 The evidence of the witnesses from Velocity was primarily significant in terms of the defendant’s Counterclaim.
8 The defendant made various criticisms of these witnesses, highlighting, in particular, their lack of specific recollection. It was also suggested that Ms Gibson was argumentative and gave the impression of always seeking to advance the interests of her employer. Further, that she often gave evidence on the basis of what she thought “would have” happened rather than giving evidence of her actual recollection.[4]
[4]Defendant’s Closing Submissions dated 19 September 2012 (DCS) at para 72.
9 However, while it is clear that each of these witnesses had imprecise recollections, this was hardly surprising given the effluxion of time and the volume of email correspondence involved. I also found each of them, including Ms Gibson, to be generally forthright in conceding any such memory difficulties, and do not accept that Ms Gibson gave the impression of always seeking to advance the interests of Velocity. Moreover, the evidence of Ms Gibson was largely what would be expected of an institutional witness who would more readily recall procedures rather than the minutiae of what was done in any individual case.
10 Fosters also called Ms Brennan, who arranged for a subsequent licensing of Licensing Essentials Pty Ltd (“LE”) (which company had also been licensee from January 2006 to December 2008), after arrangements with Hot Topic were terminated. Her evidence will be referred to, below.
11 The defendant called one witness, Mr Kiro Stojanoski, a Director of Hot Topic.
12 I did not find Mr Stojanoski to be a straightforward witness. Rather, having had an opportunity to observe his demeanour, his evidence appeared to be designed, at times, to protect the defendant’s interests and defend his position rather than to give responsive and reliable evidence.
13 For example, when asked the reason why he made a payment of $44,000 in February 2010, he gave a lengthy response wherein he suggested that there were “a number of business considerations” which included that if he walked away he would lose a separate NRL contract. He also claimed that he thought that by making the payment it would show some goodwill, and they would be able to sit down and work out a “more appropriate deal.”
14 I do not accept this evidence. Leaving aside the relevance of this claim, his evidence appeared designed to limit the significance of his action in making a significant payment referable to a contract, which he now asserts did not exist.
15 He also gave evidence that he was prepared to criticise the performance of the previous licensee, as “failing to maximise“ the Fosters brands; and further put up a $500,000 minimum royalty guarantee (over 3 years),[5] in his “pitch” to Fosters. However, he claimed that he did not undertake any research on which to make such claims, and that he only relied on some figures which were suggested by Velocity. I did not find such a claim to be credible.
[5]See Hot Topic presentation to Foster’s Group – Licensing Proposal May 2008 at Court Book pages 104-5 and contained in Exhibit G.
16 Mr Stojanoski also appeared to be engaged in deflecting questions, by, for example, unnecessarily asking for terms he must have understood to be defined (for example, “brand marketing” and “lucrative”).
17 One can have some sympathy for Mr Stojanoski who, in the result, has committed the defendant to what he described as an agreement which was “not commercial.”[6] However, given the difficulties outlined above, it is appropriate to consider Mr Stojanoski’s evidence with care, and having regard to the available objective surrounding circumstances.
[6]Email of 1 April 2010, part of exhibit Q.
18 To the extent there is any relevant conflict, I generally preferred the evidence of the plaintiff’s witnesses.
Whether there was a binding contract
19 Fosters submitted that the parties had reached agreement by reason of an implied agreement pursuant to the terms of a formal trade mark licence document forwarded in about December, 2009 [7] (in oral submissions this was said to be by February 2010).
[7]Second Further Amended Statement of Claim dated 12 September 2012 at para 11
20 Alternatively, it was submitted that an agreement was reached pursuant to a “second deal memo” as varied, on the basis that certain provisions contained in that memo were waived by Fosters.[8]
[8]See Further and Better Particulars of Waiver document dated 11 September 2012; see also Second Further Amended Statement of Claim dated 12 September 2012 at paras 6-9
21 In order to assess this case, it is important to set out a relatively detailed chronology of events, which largely consisted of email communication.
Events up to execution of “second deal memo”
22 On 5 March 2008, a document entitled Foster’s Group “deal memo” was executed by Mr Stojanoski (though not Fosters) (“the first deal memo”). This was consequent on a meeting which occurred at the premises of Hot Topic between Mr Bouttell, Ms Gibson, and Mr Stojanoksi in relation to Hot Topic becoming a proposed licensee.
23 The first deal memo contained the following terms:
· the term of the licence is given as 1 February 2008 until 31 January 2010;
· the licence is given in respect of a small range of specified products;
· the royalty rate is specified as 15 per cent of the licensee’s selling price;
· the “total minimum guarantee” requirement was set as $5,000 advance on signing and $15,000 advance on royalty for 31 July 2008, giving a total of $20,000 plus GST;
· a “royalty excess” requirement such that where royalties received by the Licensee exceeded the Total Minimum Guarantee, the Licensee would be required to pay Fosters the excess; and
· royalty reports were required quarterly with reports due no later than 15 days after the end of each quarter.
24 Invoices were delivered dated 1 April 2008 and 15 July 2008 for the amounts of $5,500 and $16,500 respectively, with both amounts being paid in July 2008.[9]
[9]Second Amended Defence and Counterclaim dated 5 June 2012 (Defence and Counterclaim) at para 5(a).
25 Royalty reports were also later provided for the third and fourth quarter of 2008 in relation to the first deal memo.[10]
[10]Defence and Counterclaim at para 5(b).
26 Meanwhile, negotiations continued in relation to the period from 1 January 2009 for a broader range of products.
27 Mr Stojanoski also alleges that a meeting took place at Fosters around 28 April with Ms Gibson and Mr Bouttell being present, and which will be referred to, below. Mr Bouttell recalled two meetings in April, though Ms Gibson did not specifically recall such a meeting.
28 In any event, by email of 28 May 2008, Mr Stojanoski annexed a document entitled “Fosters Licensing Proposal”, which appears to be in the form of a PowerPoint presentation. This proposal contained the following:
· the current licensee “has failed to maximise these brands and as a result they have cost Fosters significant market share and failed to become the Licensed programs that they should be”;
· the guarantee proposed is $300,000 for the years 2009 to 2010 and $200,000 for the year 2011 with the covering email suggest they should be “cross-collateralized” (such that any earnings in the second year can be off-set against those in the first).
29 The proposal also highlighted the positive attributes of Hot Topic, and included details of the wide experience of Mr Stojanoski, with the apparent desire to secure the licence.
30 Both Ms Gibson and Mr Bouttell suggested that this document, consistent with its presentation, was presented as a PowerPoint presentation at the office of Fosters. This was denied by Mr Stojanoski, although nothing appears to turn on it.
31 Negotiations thereafter continued. By email of 29 May 2008, Mr Bouttell suggested that they would like to “exclude Manchester” as part of the product categories covered by the licence. Further, that he needed Mr Stojanoski’s fee to be at $175 for each of years one and two (2009 and 2010) and $225 for 2011, in which case he would “go to Foster’s with Hot Topic as our preferred option”. He then wrote as follows:
Latoya can give you all the sales info top [sic] show you what works and what doesn’t once you have agreed and will work with you closely in getting this to an extremely successful program.
32 [This email is of some significance in terms of the Counterclaim and is given further consideration, below].
33 Then, by email of 30 May, Mr Stojanoski wrote that he was disappointed with Manchester and says as follows:
I am happy to go with the increase in guarantee and terms suggested if we leave Manchester in. Paul, I am not normally a big guarantee giver on a first contract, especially when there is a great risk of the incumbent dumping stock, but I really believe in the group of brands that Foster’s holds and I believe we can get them back to the levels that they should be. We really need a big ticket item such as Manchester to make it work.
34 Mr Bouttell then wrote back on the same day saying:
We are happy for Manchester to stay in for you – with regards to your current deal which is $20K, we can just add that on which will give us: 2009 $195, 2010 $195 and 2011 $245.
35 By email of 30 May, Mr Stojanoski says: “Sounds good. Lets do it!”
36 The “second deal memo” was then provided to Mr Stojanoski.
Second Deal Memo
37 The second deal memo is entitled “Foster’s Group Deal Memo” and contained the following terms:
The terms set out in the Deal Memo contain basic commercial terms, which will form the basis of a formal licensing agreement between Foster’s Australia Limited (Foster’s) … and the Licensee named below (Formal Agreement). The parties agree to use their best endeavours to execute the Formal Agreement within 60 days from the date of this Deal Memo. The Formal Agreement will contain detailed provisions regarding the various rights and responsibilities of the parties as well as other provisions required by Foster’s.
Licensee shall have no rights whatsoever in relation to any [Foster’s] Brands until such time as a Formal Agreement has been signed by both parties [one of the “relevant provisions ”].
The parties agree to keep the terms and conditions contained herein confidential unless disclosure is required by law (emphasis added).
38 The body of the second deal memo contained the following:
· the term of the licence is given as 1 January 2009 until 31 December 2011;
· the products specified included a much greater range than the first memo, including drink ware, barware, gifts and novelty;
· the royalty rate is specified as 15 per cent of the licensee’s selling price;
· the “royalty excess” requirement was again such that where royalties received by the licensee exceeded the Total Minimum Guarantee, the licensee would be required to pay Fosters the excess;
· royalty reports were required quarterly with reports due no later than 15 days after the end of each quarter due 15 January, 15 April, 15 July and 15 October.
39 The second deal memo also contained provisions specifying brands, distribution channels, territory and that the licence was a non-exclusive one.
40 The minimum guarantee/advances on signing/advances on royalties reflected the amounts agreed in the emails as follows:
2009 2010 2011 Total Minimum Guarantee
(comprised of the following instalments)
Advance on signing $35,000 Advance on royalty 1 January $40,000 $50,000 $65,000 Advance on royalty 1 April $40,000 $50,000 $60,000 Advance on royalty 1 July $40,000 $50,000 $60,000 1 October $40,000 $45,000 $60,000 Total $195,000 $195,000 $245,000
41 The agreement is signed by Mr Stojanoski, as Managing Director of Hot Topic Pty Ltd, on 5 September 2008 under the heading “Licensee Name”, “[p]lease acknowledge your company’s acceptance of the above-details which will form the basis of the Formal Agreement”.
42 The document is not signed for and on behalf of Fosters Australia Limited and at the foot of the execution page the following appears:
No agreement of any nature is entered into until such time as FA has signed the above [one of the “relevant provisions”].
43 The defendant submitted that, given the inclusion of the relevant provisions, the second deal memo was an excellent example of the third category of documents identified by the High Court in Masters v Cameron,[11] namely one in which the intention of the parties is not to make a concluded bargain at all unless and until they execute a formal contract.
[11](1954) 91 CLR 353 at [360].
44 However, it will be observed that, given the language used, this intention appears to have application to Fosters only rather than necessarily to both parties.
Second Deal Memo to February 2010
45 On 9 October 2008, the defendant paid $38,500 (including GST) in respect of a tax invoice dated 29 August 2008, for the advance on signing which was the amount provided in the second deal memo and which amount was accepted.[12]
[12]Defence and Counterclaim at para 8.
46 Fosters further delivered invoices dated 31 January 2009, 1 April 2009 and 2 July 2009, in accordance with the second deal memo, although these were not paid.
47 Mr Stojanoski admitted that he sourced products that met the description of the products in the second deal memo.
48 The defendant also admitted submitting products to Fosters for approval,[13] and distributing and selling products bearing the plaintiff’s marks between September 2008 and June 2010.[14]
[13]Defence and Counterclaim at para 13(bc).
[14]Defendant’s Further and Better Particulars dated 9 March 2012 at para 1.
49 The defendant also provided the plaintiff with quarterly sales reports of 20 April 2009 (first quarter 2009); 15 July 2009 (second quarter 2009); 16 October 2009 (third quarter 2009); and 4 February 2010 (fourth quarter 2009) in relation to sales made in the quarters specified.
50 However, at the same time as such actions occurred, two issues arose in terms of relations between the parties during 2009.
51 One concerned ongoing sales by the former licensee, LE.
52 Another concerned the delivery of hampers by an entity known as Chrisco during the time of Mr Stojanoski’s licensed term in 2009. Following a concern raised by Mr Stojanoski on 15 December 2008 in relation to this issue, Ms Gibson responded as follows on 7 January 2009:
As the preliminary order had already been placed with LE by Chrisco and the work done by LE to get the order, Fosters/VBM agreed to allow LE to fulfil the 2009 delivery.
We understand that this is an issue for you, and are happy to discuss an MG reduction proportionate to the size of the final order LE receive from Chrisco (emphasis added).
53 What then transpired between January and September 2009 were a large number of emails in which the subject of an MG reduction was discussed, (some of which will be referred to below).
54 By September 2009 negotiations had reached the stage wherein Velocity had suggested they should go back to the original proposal of Mr Stojanoski contained in his original “pitch” (of $300,000 for 2009 and 2010 and $200,000 in 2011).
55 By email of 12 September 2009, Mr Stojanoski responded to this suggestion as follows:
What you have suggested is not enough of a compromise in the circumstances. I would like to suggest one last change, even though it is not my ideal scenario, but hopefully one that will be accepted and allow everyone to move on in a positive way. Move another 40k from 2009 to 2012. Make the 40k due on October 1st 2009 due on December 31st. All 2010 payments moved by 2 months. 2009 and 2010 to be cross-collateralised. Let me know your thoughts and I hope you can accept the above and we can all move forward.
56 By email dated 15 September 2009, Ms Gibson provided the numbers Mr Stojanoski suggested into “an MG form”, and requested his confirmation that this was how he would like to see the payments scheduled.
57 Mr Stojanoski then responded by email of 21 September 2009, making some “slight changes”, and setting out his proposal in tabular form, as set out below. He also noted that 2009 and 2010 need to be cross collateralised and that the $40k for 2009 was to be due December 31st.
58 The table he provided was as follows:
2009 2010 2011 2012 Total Minimum Guarantee Advance on signing $35,000 Advance on royalty 1 Jan Advance on royalty 1 March $40,000 $50,000 $40,000 Advance on royalty 1 April Advance on royalty 1 June $40,000 $45,000 Advance on royalty 1 July Advance on royalty 1 Sept $50,000 $65,000 $40,000 31 December $40,000 Advance on royalty 1 Dec $50,000 $60,000 $60,000 Total $75,000 $180,000 $220,000 $160,000 (this is an error as total should be $140,000)
59 This meant that there was a substantial reduction in the payments for 2009 (from $195,000 to $75,000). The term of the licence was also to be extended into 2012. Finally, although it appeared as though the total payments were to remain at $635,000 (as per the second deal memo), there was an arithmetical error in the table for the total for 2012 (given as $160,000 when it should have been $140,000). This meant that the total payments overall would be reduced from $635,000 to $615,000.
60 His email concluded, “please let me know when you can confirm if this will proceed. I need to order stock, but can’t do so until I know”.
61 By email of 30 November 2009, Mr Lumby wrote attaching an invoice for the minimum guarantee due December 2009, “under the revised Fosters Australia contract”.
62 The invoice was for an amount of $44,000 being the amount of $40,000 plus GST. The description for the amount of $40,000 is “minimum guarantee payment due December 2009 (revised payment schedule)”.
63 By email of 15 December 2009, Mr Lumby again sought confirmation that the first instalment for the revised Fosters Australia program of $44,000 “will be paid on the due date, 31 December 2009”, attaching a copy of the invoice previously forwarded.
64 In an email of 15 December 2009, Mr Stojanoski wrote as follows:
No problems and apologies for all the delays. It has been a tough year. Hopefully next year will be much easier for all of us.
Has the revised contract been accepted by Fosters? I’m yet to have confirmation of this and as a result we have not been developing new products.
65 By email of 15 December 2009, Ms Gibson wrote:
Your revised contract has been confirmed and is with Fosters legal for their sign off. It will be sent out early next week for you to sign, and is per the terms we’ve previously agreed to.
66 By email of 22 December 2009, Mr Lumby also wrote:
I notice that Latoya has confirmed, in an email to you 15 December 2009, of the acceptance by Fosters Australia of the revised minimum guarantee schedule.
I’ve checked with Latoya today and the revised contract should be couriered to you no later than tomorrow.
Assuming you receive the contract, please confirm that the payment of the December 2009 MG will be made by 31 December (emphasis added).
67 The revised trade mark licence contract was in fact couriered to Mr Stojanoski on 22 December with the schedule attached. It generally duplicated the schedule attached to the second deal memo including parties; royalty rate; brands; distribution channels and products. It also provided a commencement date of 1 January 2009.
68 However, consistent with Mr Stojanoski’s email, the term of the licence was to be extended to 31 December 2012. The total minimum guarantee provision also contained a table which mirrored his table (provided on 21 September). This table included the advance on signing (already paid) of $35,000, and also the other figures provided by Mr Stojanoski, including the arithmetical error in the total for 2012, and including provision for combining years 2009 and 2010 (as he requested).
69 The contract was otherwise a more detailed document containing a large amount of standardised “boilerplate” provisions.
70 On 23 December Mr Lumby again wrote seeking confirmation that Mr Stojansoki had received the revised contract, and that the payment would be made on 31 December.
71 This was followed up with further requests for payment on 4 January and 13 January though it appears that Mr Stojanoski was on leave during this time.
72 On 2 February, Mr Gibson wrote as follows:
We need to get some confirmation from you on whether you intend to honour the revised payment schedule and sign the amended contract.
I’m currently briefing in licensees on brands and campaign planning for the next 18 months, and until you confirm the above I cannot keep you in the loop. There are a lot of opportunities in the pipeline, and development of these campaigns is starting now – if you wish to continue with this program you need to be involved.
Can you please respond to Athol or myself, and confirm your position.
73 On 4 February 2010, Hot Topic sent a royalty sales report to Fosters for the fourth quarter of 2009.
74 Then by email of 5 February, Mr Ashworth wrote:
You are now more than a month overdue on the $44,000 MG payment that was to be paid on the 31st of December, and despite attempts by Athol and Latoya, you are yet to confirm your intention to pay this amount or sign the revised agreement.
We negotiated with Fosters to obtain this revised deal on your behalf, with the expectation that would [sic] stick to the new schedule of payments. If you continue to avoid our attempts to resolve the outstanding payment and agreement, we will be forced to refer the matter to Foster’s and their Legal department to recover the contracted monies that are outstanding.
I am also going to speak to the team at the NRL as well as I understand from my discussions with them the other day that there are monies outstanding there as well !
Please respond to us as a matter of urgency as to when these amounts will be paid.
75 Then by email of 9 February 2010, Mr Stojanoski wrote:
Hi Athol,
This payment of 40K plus GST will be raised today.
Latoya and James,
We need to get together on this licensing group of brands.
We are really struggling to get interest in the brand in any substantial way to be able to generate any significant level of royalties. This is at a time when we’ve grown the rest of our business.
I asked some time back if we were able to get hold of LE sales data for the 2 years preceding our signing of the licence so I could work on the market gaps and look at where we might be going wrong.
We have developed a great range of products and there is only fleeting interest.
Having huge shortfalls on contracts that do not generate revenue will damage our cash flow and that has implications on our other licences.
James, when are you next in Melbourne. Can we all get together to discuss.
Latoya, with regard to your earlier email regarding meetings at Fosters. Let me know when these are so I can attend (emphasis added).
76 An invoice was also sent under the revised payment schedule, dated 5 February 2010, for $40,000 plus GST in respect of the minimum guarantee due 1 March 2010.
77 Then, on 10 February, 2010, the defendant made a payment in an amount of $44,000,[15] being the amount sought by Mr Lumby “under the revised Fosters Australia contract.”
[15]Defence and Counterclaim at para 13.
Post-February 2010
78 Evidence was adduced as to the conduct of the parties subsequent to February 2010. Such evidence can be used to determine whether a contract was concluded,[16] although some care is warranted given the relationship between the parties was clearly breaking down.
[16]See cases referred to in N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract (LexisNexis Butterworths Australia, 9th ed, 2008) para 3.9.
79 In particular, evidence was led about a meeting which occurred on 20 April 2010, at Fosters which was attended by Ms Gibson, Mr Ashworth, and Mr Stojanoski.
80 Mr Stojanoski’s evidence was that he complained that he never received what he was promised in terms of sales information. Further, that he told Mr Ashworth that he was not going to sign the contract, whereupon Mr Ashworth said he would try to assist in brokering some agreement. He suggested Mr Stojanoski write an email suggesting some new guarantee figures, but to take into consideration what Fosters may see as reasonable.
81 Mr Ashworth did not have a detailed recollection of the meeting but he recalled Mr Stojanoski asking for sales figures, and was sure there were general conversations about apportioning blame in relation to the non-performance of the program. He did not recall Mr Stojanoski specifically saying he would not sign the contract, but agreed that it would have been his job to try and obtain a signed contract.
82 Ms Gibson recalled little about the meeting.
83 The defendant provided another royalty report around this time dated 21 April in relation to sales occurring in the first quarter of 2010.
84 By email of 7 May 2010, Mr Stojanoski suggested he was having difficulty “meeting our commitments under the contract” for a number of reasons and that he needed “our contract obligations” to be reduced to $30,000 to each of 2010, 2011, and 2012.
85 By email of 3 June 2010, Ms Gibson stated that “Fosters have come back to me with a decision on your request for changes to be made to your current (amended) agreement. At this stage they have decided that they will not make any further changes to the existing minimum guarantee commitment…”
86 By email of 20 July 2010, Hot Topic then provided a further royalty report in relation to sales in the second quarter of 2010.
87 By September 2010, the first 3 amounts of minimum guarantees for 2010 under the revised schedule totalling $130,000 had not been paid ($40,000 due 1 March; $40,000 due 1 June; and $50,000 due 1 September).
88 By letter of 28 September 2010, Ms Gibson forwarded a letter of demand for this $130,000.
89 By letter dated 7 October 2010, Mr Ianuali, Director of the defendant, responded to the effect that “our Companies entered into mutual discussions with a view to entering into a formal agreement regarding the Fosters License in 2008/9 (emphasis added).” The letter cited requests for historical sales and states that in the circumstances “…we are left with no choice but to cease selling the brands and stop negotiations regarding a contract to market Fosters Brands. We will be destroying all remaining stock on hand (emphasis added).”
90 By correspondence of 13 October 2010, Ms Gibson sought a declaration in relation to the cessation of production and/or destruction of inventory and made a “final request for payment of $130,000 in respect of the three outstanding instalments of the Total Minimum Guarantee in 2010.” The letter also stated that, if the declaration was not provided and payments not made by 20 October, then they would immediately terminate the Agreement.
91 Then by correspondence of 11 November 2010, Ms Gibson provided notice of termination of the Agreement.
Resolution
Whether a binding agreement
92 In terms of whether there is an implied contract, or one to which the parties agreed by their conduct, the question is whether, “viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain”.[17]
[17]PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd and Another (2007) 20 VR 487 at [6] (Nettle JA).
93 The relevant provisions which formed part of the second deal memo suggest that, Fosters, at least, did not intend to grant a licence pending the execution by it of a formal agreement.
94 It is also true that no formal document was executed within the 60 days contemplated by the second deal memo.
95 Nevertheless, from 1 January 2009, the parties clearly acted on the basis that the defendant was licensed to utilise the intellectual property of Fosters.
96 Thus, Hot Topic, with the approval of Fosters, sourced product that met the description of the products in the second deal memo; submitted such products to Fosters for approval; and distributed and sold such products with the acquiescence of Fosters (who were apprised of this fact through the royalty reports).
97 However, the defendant highlighted a number of matters it said were inconsistent with the existence of a binding contract, including the ongoing discussions; the pattern of invoicing (being the absence of an invoice in September 2009, and the alleged failure to press for payments of 2009 invoices); and the absence of formal approval from Fosters pursuant to the provisions of its written agency agreement with Velocity (this was also raised as a distinct issue in its own right, which will be dealt with, below).[18]
[18]DCS at para 55.
98 Even though there were ongoing negotiations to adjust the minimum guarantee payments (as the defendant emphasised), many such communications appear to proceed on the basis that the parties considered themselves bound by an agreement, notwithstanding the absence of signature of Fosters and/or a formal agreement, as follows:
· on 7 January 2009 Mr Stojanoski writes and asks why was this [the Chrisco issue] not discussed “during the contract negotiation process”; also suggesting that there will definitely need to be a reduction in MG “but we would rather that we were to be allowed to deliver the orders for 2009 as was negotiated for this new contract (emphasis added)”;
· on 25 June 2009 Mr Stojanoski writes “…I haven’t heard back regarding our contract payments and revised guarantee. We can’t meet our obligations while LE is still in sell off mode (emphasis added)”;
· by email dated 3 July 2009, Mr Stojanoski suggests that he is “… in no position to pay any further funds until we resolve the action with regard to our Fosters contract (emphasis added)” ;
· Ms Gibson writes back (also on 3 July) stating that “… I am willing to work with you where I can on an adjustment to your minimum guarantee, but as stated then it is not an option to adjust your commitment for F09. This number is locked in, and Fosters are expecting that it will be paid (emphasis added)”;
· Mr Stojanoski then writes (again on 3 July) that he was “happy to look at paying monies, but not without knowing what the restructure of our agreement will entail (emphasis added)”;
· by email of 24 July 2009, Ms Gibson provides a minimum guarantee adjustment, though she speaks of the need for him to “honour your F09 commitment…(emphasis added)” and requests that he confirm by return email that he is satisfied with the above and upon payment of the outstanding F09 guarantee a revised contract would be forwarded for signing;
· by email of 30 July, Mr Lumby of Velocity suggests he had left various emails and phone messages without any response and requests payment on the outstanding invoices, suggesting that they “need to be paid immediately (emphasis added)”;
· in an email of 11 August, Mr Stojanoski suggests that all “outstanding” guarantees from 2009, minus an amount for Chrisco, be moved to 2012, and that they pay royalties on sales for the remainder of 2009 (emphasis added);
· an email from Mr Stojanoski of 18 August further complains that he is “not getting what I was sold when negotiating the licence…(emphasis added)”;
· in an email of 31 August from Mr Ashworth he suggests that “you [Mr Stojanoski] chose to sign on to the program and to the MG commitment, of your own volition, and you have a responsibility to live up to that… (emphasis added).” Further, that “whilst we would very much like to come to an amicable resolution, you do have a signed deal memo which is a binding document and if we cannot come to a compromise, Fosters will pursue the matter legally (emphasis added).”
99 There were also such indications in emails after February 2010, cited above (see emails of 7 May 2010 and 3 June 2010).
100 Further, although there does not appear to be an invoice for September 2009, the pattern of invoicing is consistent with the existence of a binding agreement. Thus:
· the defendant paid, and Fosters accepted, the payment of $38,500, being the amount specified in the second deal memo, for the advance on signing;
· that Fosters further delivered invoices dated 31 January 2009, 1 April 2009 and 2 July 2009 in accordance with the second deal memo, and solely referable to the second deal memo, or, “Fosters contract”;
· that such invoices were not rejected by Hot Topic; and
· that, contrary to the suggestion of the defendant, Fosters did press for payment of such invoices as is evident in the email of 30 July of Mr Lumby above.
101 It is true that clause 4.10 of the written agency agreement between Fosters and Velocity provided that Velocity was not, except with written approval of Fosters, to enter into any licence agreement. However, the evidence of Ms Gibson was that she worked out of a Fosters office, had a Fosters email address, and had a Fosters business card. Mr Stojanoski also gave evidence that he knew she had an office at Fosters, and that her email address was a Fosters email address, actually describing her an “an agent” for Fosters.
102 In paragraph 13 of the defendant’s defence, the defendant also admits to submitting proposed products to the plaintiff (not Velocity) for approval.[19]
[19]Defence and Counterclaim at para 13(bc).
103 In such circumstances, I consider that a reasonable observer would consider that any licence arrangement was made with Fosters, not Velocity. This is particularly so given both parties knew that the relevant trademarks were those of Fosters, not those of Velocity, and that Mr Stojanoski could be taken to understand that Fosters were acquiescing in his usage given the evidence of Ms Gibson.
104 In such circumstances, any internal absence of formal authority was not inconsistent with the existence of a binding arrangement between Fosters and the defendant.
105 In my view then, reasonable persons on both side would take the view that a licence agreement had in fact been reached for Hot Topic to utilise the intellectual property of Fosters. This was even conceded by Mr Stojanoski himself, who accepted that if Hot Topic sold something it was obliged to pay Fosters a royalty for what it sold, as it used Fosters’ trade mark.
106 The issue is really, instead, the terms upon which the licence agreement were agreed.
107 The payment of the advance and the pattern of invoicing (without objection) were exclusively referable to the amounts specified in the second deal memo. The provision of quarterly sales reports was also in accordance with that memo, and related to the sales of products specified in that memo.
108 It will also be recalled that Mr Stojanoski actually signed the second deal memo, while the correspondence is consistent with the parties viewing themselves as bound on the basis of the second deal memo.
109 In all of the circumstances, I am therefore satisfied that the agreement reached by the parties’ conduct was that the licence commenced on 1 January 2009, was granted on the terms of the second deal memo, though absent the relevant provisions.
110 Pursuant to PRA,[20] such an implied agreement can also be found even if the second deal memo is seen to contain a Masters v Cameron type 3 condition, as the defendant contends.
[20]PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd and Another [2007] VSCA 310 at [70].
111 A complicating feature in the case is the continuing negotiations in relation to the revision of the minimum guarantee payments.
112 However, in my view, the conduct of the parties in late 2009 / early 2010 supports the revision of the agreement already formed, on the basis of the revised minimum guarantee payments suggested by Mr Stojanoski himself on 21 September 2009.
113 The assent of Fosters to the revised schedule is evidenced by the invoice of 20 November of the $40,000 due December 2009, “under the revised Fosters contract”; by the email of Ms Gibson of 15 December which suggested that the “revised contract has been confirmed”; by the email of 22 December wherein Mr Lumby notes Ms Gibson’s confirmation “of the acceptance by Fosters Australia of the revised minimum guarantee schedule”; and, finally, by the forwarding of the formal contract which contained the revised schedule.
114 The assent of Mr Stojanoski might more readily be inferred, given he had been consistently pressing for relief from payments during 2009, and the revised schedule gave such relief.
115 In any event, the payment of the $44,000 by Mr Stojanoski on 10 February puts the matter beyond doubt. Such actions are unequivocally referable to an assent to the revised schedule.
116 It follows that I consider that, by February, 2010, the parties’ apparent intention was to amend or vary their licence agreement commenced on 1 January 2009 (based on the second deal memo), so as to encapsulate the revised schedule.
117 An issue that remains, however, is whether the defendant has agreed to be bound by the detailed terms of the formal agreement couriered to Mr Stojanoski in December. Such document was not executed at the time, nor in the subsequent meeting of April 2010.
118 It is not clear that anything turns on the adoption of all the formal terms.[21] Rather, an implied agreement can readily be found on the basis of the second deal memo, as amended by the revised minimum guarantee schedule.
[21]There may have been an issue as to the interest rate but the plaintiff, in closing, conceded that only statutory interest was pursued.
119 It is not readily apparent that the defendant would be expected to have any objection to any of the terms contained. The defendant alleges that it would not have agreed to the “entire agreement” provision contained in clause 22. However, no issues (including this one) were raised as to the form of the agreement in late 2009 or, indeed, at any time in 2010. This was despite the fact that, by the delivery of the document in December 2009, the defendant was given ample notice of the full terms on which Fosters wished to proceed, on the basis of the (more beneficial) terms of the revised schedule.
120 Subsequent to being given such notice, in February 2010, the defendant also sent further royalty reports, and received further invoices (without protest) for the minimum guarantees due. Critically, the payment of a significant amount of money by the defendant on 10 February 2010 (being the sum of $44,000) was clearly referable to the terms contained in the written document, and may be seen as a consent to that document.
121 In such circumstances, then, I am satisfied that the implied agreement reached was on the terms of the formal licence agreement.
122 Given my finding of an implied agreement it is unnecessary to further consider the question of a waiver by Fosters. The defendant submitted, relying on the decision in PRA, that given there was no contract on the basis of the second deal memo, then there were no provisions that could be waived.
123 However, the condition the subject of PRA was in a markedly different form to those under consideration in this case, and clearly provided that the contract “shall not come into effect” until the execution of the formal instrument. This is to be distinguished from the present case wherein the provisions appear to be solely for the benefit of Fosters, and hence capable of waiver.[22]
[22]See Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 at [159] (Gibbs CJ).
124 If it was necessary, I would therefore find that the relevant provisions were capable of, and were waived, by reason of the conduct of Fosters already specified.[23] However, given my finding of an implied agreement it is unnecessary to consider this further.
Agency
[23]Also set out in the Further and Better Particulars of Waiver document dated 11 September 2012.
125 A remaining issue is an “agency” issue raised by the defendant during the course of the trial. Thus, it was said that, given the terms of the agency agreement with Velocity (particularly clause 4.10), Velocity had no actual authority to enter any binding licence agreement in the absence of written approval from Fosters. The defendant also submitted that ostensible authority principles did not assist a principal to establish agency in its favour.[24]
[24]GE Dal Pont, Law of Agency (Butterworths, 2001) at [20.25].
126 The evidence of Ms Gibson was that she had weekly progress meetings with Fosters where they would discuss any issues and developments. More particularly, she said that Fosters approved the second deal memo. Her evidence was also that Fosters knew goods were being produced, because Mr Fetterplace of Fosters had seen the goods and approved them. Fosters had also seen the royalty reports and knew goods were being sold. Her evidence was that Mr Fetterplace was apprised of the changes to the schedule, and agreed to them. Additionally that the long form agreement was a Fosters template which had been approved by Fosters legal. It was also discussed with her Fosters contact, and “finalised” before couriering to the defendant. Both letters of demand were also discussed and approved by Fosters.
127 I accept the evidence of Ms Gibson. Contrary to a submission of the defendant, I also do not consider that it was necessary for an employee of Fosters to be called in this case. There was nothing further required from such a witness whose evidence would only be “cumulative.”[25]
[25]Cross on Evidence (Butterworths loose leaf) at [1215]
128 Rather, all prerequisites for a valid ratification are present in this case.[26] Thus, Velocity clearly purported to act on behalf of Fosters; Fosters was a competent principal entitled to give a licence in relation to its brands;[27] and Fosters was legally capable of entering the agreement itself.
[26]GE Dal Pont, Law of Agency (Butterworths, 2001) at [5.7]
[27]See Defence and Counterclaim at para 23(b).
129 In the light of the evidence, even absent actual or implied authority, Fosters has unequivocally ratified the entry into the agreement I have found to exist. In particular, this has occurred by reason of the “finalisation” of the formal agreement by Fosters and the forwarding of the two letters of demand as approved by Fosters.
Damages
130 The terms of the formal contract entitled Fosters to terminate for the Licensee’s failure to pay any amount payable to Fosters (clause 8(c)). However, absence a specific term in the agreement,[28] Fosters is required to demonstrate a right to terminate conferred by law in order to obtain loss of bargain damages.[29]
[28]To this end it should be noted that although clause 9.1 provides that any termination will be without prejudice to rights of the parties, it gives no express entitlement to loss of bargain damages.
[29]Shevill v Builder’s Licensing Board (1982) 149 CLR 621.
131 In this respect, Fosters claims that it was entitled to terminate, because Hot Topic breached a fundamental term of the agreement by not paying the minimum guarantee amounts for 1 March, 1 June, and 1 September 2010, totalling $130,000. Alternatively, it says Hot Topic repudiated the contract.
132 In order to establish repudiation, Fosters must show an intention no longer to be bound by the contract or an intention to fulfil the contract only in a manner substantially inconsistent with the party’s obligations and not in any other way.[30]
[30]Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at [33] (Mason J).
133 As at 28 September 2010, the defendant had made only one payment under the original agreement of $35,000 in October 2008. It had only then made one further payment under the revised schedule of $40,000 in February 2010. A further 3 amounts had become due and had not been paid, notwithstanding Fosters had agreed to significantly reduce amounts payable for 2009.
134 Moreover, when the first demand was sent, the response of Hot Topic of 7 October was to the effect that it was left with “no choice but to cease selling the brand and to stop negotiations….” It also suggested that royalties had been “overpaid” as any payments had been paid under a “proposed guarantee schedule as a sign of good will”, rather than under a contract.
135 It again made no payment in response to the second demand of 13 October.
136 Multiple breaches may have a combined significance in determining whether repudiation has occurred.[31] This has occurred in this case. Moreover, given the attitude evinced in the correspondence of 7 October, there was a high probability that the breaches would continue given Hot Topic rejected that any finalised contract even existed.
[31]Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
137 In such circumstances, I am satisfied that the defendant repudiated the contract. The defendant made no submissions in opposition to such a finding.
138 By its correspondence of 11 November, Fosters acted to accept this repudiation by terminating the contract. It thereby becomes entitled to loss of bargain damages,[32] which it claims to be the full value of the contract amounting to $540,000 ($615,000 less $75,000 paid by the defendant), less the amounts receivable pursuant to the further agreement it entered into with LE after the agreement with Hot Topic was terminated.
[32]Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at [260] (Mason CJ).
139 The defence alleged that any loss was “caused by Fosters’ failure to secure a contract for the sale and distribution of merchandise”, and that any payments from such sale should be applied in the reduction of such loss.[33]
[33]Defence and Counterclaim at para 17A.
140 However, the plaintiff called Ms Brennan, a licensing manager at Velocity, to explain the ongoing arrangements with LE. Thus, she gave evidence that the amount receivable under the further agreement with LE is valued at $30,000 for a period to 30 June 2012. [34] She also gave evidence that all but $10,000 of this amount had been paid, but that she expects it will be paid. Any royalties that LE report to the end of the year outside the minimum guarantee period will also be payable to Fosters and she believes, based on previous performance, that this is likely to be around $5000.
[34]Constituted by a deal memo; a long form trade mark licence agreement and correspondence dated 27 May 2011.
141 I accept this evidence, which was not challenged by the defendant.
142 Accordingly, Fosters is entitled to a quantum of $540,000 less $30,000 less the extra $5000 expected, giving a total of $505,000 (subject to the defendant’s Counterclaim).
143 In such circumstances, it is unnecessary to consider the defendant’s claim to restitution for amounts paid, as such amounts were properly paid under the agreement.
Claim based on misleading and deceptive conduct
144 In order to consider this claim it is important to set out the precise way that the defendant put its case.
145 Firstly, Hot Topic pleaded that Fosters made the following implied representations:
(a) by proposing minimum royalty of $190,000 Fosters impliedly represented that sales of merchandise during the period of the proposed agreement would exceed the amount needed to achieve an actual royalty payment of at least $190,000 a year;[35]
[35]Defence and Counterclaim at para 26.
(b) by specifying minimum royalty payments in the second deal memo, Fosters impliedly represented that sales during the period of the proposed agreement would exceed the amount needed to achieve an actual royalty payment for each year of at least the specified minimum royalty;[36]
(c) by failing to disclose sales information Fosters has impliedly represented that royalties payable would exceed the minimum royalties, and it had no reason to believe that the amount of sales would be insufficient to result in actual royalties of at least the minimum amount;[37]
[36]Defence and Counterclaim at para 29.
[37]Defence and Counterclaim at para 38.
146 It was also alleged that:
(d) the “failure to disclose the sales information” constituted conduct in trade or commerce that was misleading or deceptive.[38]
[38]Defence and Counterclaim at para 37.
147 Although not pleaded, the defendant in closing appeared to also rely on an express representation allegedly made by Mr Bouttell, wherein he said “yes” when Mr Stojanoski asked whether the $190,000 minimum guarantee was based on current and ongoing business (unpleaded representation).
148 Fosters submitted that this unpleaded representation formed no part of the defendant’s case, which was pleaded and particularised with some apparent care and in the context of a court order of 11 July 2012, which included a notation that the parties were bound by their respective particulars unless the trial judge orders otherwise.
149 No application was made to the court to vary such orders and/or amend the pleading to allege such an express representation. I therefore accept the defendant’s submission that the unpleaded representation forms no part of the case for this court to determine.
150 Nevertheless, given both parties addressed the issue, for the sake of completeness, I have considered this representation along with those pleaded, below.
Whether representations/ conduct established
Actual (unpleaded) representation
151 The evidence of Mr Stojanoski was that in April 2008 he asked what sort of guarantee would be required, and Mr Bouttell told him $190,000 per year. Mr Stojanoski then asked whether that was based on current and ongoing business and Mr Bouttell said “yes, it was…”
152 The evidence of Mr Bouttell was that the only conversation he had with Mr Stojanoski about sales numbers was what was going to work and what wasn’t going to work. He said Mr Stojanoski wanted sales reports to find out what were the best selling products, what worked and didn’t work. Under cross examination, he agreed they discussed a guarantee, but he could not recall that the number of $190,000 was what he gave. However, he firmly rejected the suggestion that he said “yes” when asked if it was based on ongoing business. He further maintained that the only time he could recall talking about sales was when Mr Stojanoski asked him what worked and what didn’t and that this occurred in a telephone conversation.
153
The evidence of Ms Gibson was that she did not recall exactly what was said, but that it was possible that Mr Bouttell said that the figure they were looking for was $190,000. She could not confirm if Mr Bouttell said
“yes” to the question as to whether the figure was based on ongoing sustainable business. However, she said the only discussion about sales was insofar as what products did and did not work, and did not believe they would have discussed the royalties earned by LE.
154 In the light of this evidence, I accept that Mr Bouttell is likely to have suggested a figure of $190,000. However, I do not accept that he confirmed such a figure was based on existing and ongoing sales, as is now suggested by Mr Stojanoski (outside his pleaded case).
155 I say this because of the reservations previously expressed about some of his evidence. Moreover, the surrounding objective evidence is against the making of such an oral representation. In particular, I note the following:
· the email of 29 May 2008, cited already, which refers to sales information, is consistent with Mr Bouttell’s version of events that what was discussed was related to “what works and what doesn’t” and, further, that such information would only be given once there was an agreement; and
· that although there are emails alleging that such a representation was made, the defendant only pointed to emails dated well after April 2008, during the course of the second half of 2009. Significantly, the defendant was unable to point to any request for sales figures citing such a representation after the alleged representation was made, and prior to execution of the second deal memo (which would be expected if such a representation was made).
156 It follows that, if it be necessary to consider, the defendant did not establish that the non-pleaded representation was made out in any event.
157 It remains to consider the other representations/conduct alleged.
Implied representations
158 Determining whether an implied representation was made involves determining whether what was actually said or done in all the relevant circumstances conveyed something more so as to lead the other party into error.[39] Given the conduct is relied on by an individual seeking damages, the conduct is to be considered bearing in mind what each knew about the other as a result of their dealings.[40]
[39]Bennett v Elysium Noosa Pty Ltd (2002) FCR 72 at [88] (Reeves J).
[40]Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.
159 The parties in the present case entered into arms length negotiations in circumstances where both would be expected to be attempting to get the best deal they could. Mr Stojanoski himself accepted that he was a very experienced operator in the licensing area (with 19 years experience and with involvement of up to 50 brands) and conveyed this to Fosters in his “pitch” in May 2008.[41]
[41]See Hot Topic presentation to Foster’s Group – Licensing Proposal May 2008 at Court Book page 136 and contained in Exhibit G.
160 It is also important to note the context in which the proferring of the $190,000 was made. Thus, following on from this, Mr Stojanoski did not just adopt the figure but suggested that he pay a lesser amount of $300,000 spread over 2 years (and $200,000 for 2011).[42] Negotiations then continued to the stage where the figures became $195,000 for 2009; $195,000 for 2010 and $245,000 for 2011, only after the inclusion of Manchester.
[42]See Hot Topic presentation to Foster’s Group – Licensing Proposal May 2008 at Court Book page 104 and contained in Exhibit G.
161 In these circumstances, the figure of $190,000 was not the end of negotiations, but, rather, a starting figure. However, I do not accept that the mere suggestion of a minimum guarantee figure at the beginning of a business negotiation somehow translates into an “implied” representation that Hot Topic would be able to achieve sales to earn that figure. Such a suggestion would make ordinary business negotiations unworkable and must be rejected.
162 For similar reasons, I also do not accept that the mere specification of the figures in the second deal memo constituted any implied representation to the effect alleged. Again, those figures were the result of negotiations by freestanding commercial parties well able to look after their own interests. I do not accept that by agreeing to the figures contained therein Fosters somehow represented that Hot Topic would be able to achieve sales to earn royalties of those amounts.
163 The pleadings also alleged that the “failure” to disclose sales information gave rise to a similar implied representation. As will be seen below, I do not accept that there was any such “failure.” Moreover, even if there was, the defendant did not establish how any failure conveyed “something more” so that there was a representation that royalties would exceed the minimum guarantee payments.
164 The claims based on implied representations are therefore not established.
Alleged conduct: failure to disclose sales information
165 Silence may amount to misleading or deceptive conduct. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd,[43] the High Court stated at [14]:
In determining whether there has been a contravention of s 52 of the Trade Practices Act, it is necessary to determine “whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive”. The term “conduct” is to be understood according to its definition in s 4(2)(a) and (b) of the Trade Practices Act, which includes a reference to “refusing to do any act”. That, in turn, includes a reference to “refraining (otherwise than inadvertently) from doing that act”.
[43][2010] 241 CLR 357 (French CJ and Kiefel J).
166 In terms of the alleged failure to disclose sales information, the defendant relied on a number of matters in this case which it submitted warranted disclosure:
· only Fosters and velocity had actual knowledge of the performance of the brand;
· Mr Bouttell proposed a figure of $190,000;
· the terms of the 29 May 2008 email;
· that Mr Stojanoski asked for information on several occasions;
· Velocity knew Hot Topic wished to have the information without which it would not be able to make any assessment of the appropriate minimum guarantee; and
· as late as 7 April 2010 Velocity said LE was achieving its minimum guarantee.[44]
[44]DCS at para 92.
167 None of the above matters are capable of giving rise to an obligation to disclose the sales information of LE.
168 In terms of the knowledge of Velocity, simply because Velocity might have been privy to information about the previous licensee’s performance does not give rise to an obligation to disclose it.
169 I also do not accept that Velocity knew that Hot Topic would not be able to make any assessment of the appropriate guarantee without such information. Mr Bouttell disagreed that the defendant would need to know what price was being charged by the previous licensee. Ms Gibson also gave evidence that LE had been able to undertake its own market research through discussions with their own retailers. Further, that Mr Stojanoski never asked for information about the sales of Licensing Essentials in 2008 although information about products that did and didn’t work was given to him at briefing sessions. This is consistent with the emails of 2008, and particularly the email of 29 May, 2008.
170 I also do not consider that the suggestion of a $190,000 figure at the commencement of negotiations gave rise to any such obligation.
171 The actual terms of the 29 May email also made it absolutely clear that only a particular type of information was to be provided, and then, only once the parties had “agreed.”
172 The fact that Mr Stojanoski asked for such information also does not assist the defendant. It was open for the defendant to refuse to sign the second deal memo and/or refuse to commence licensing the products when the figures were not provided, but it did no such thing. Requests cannot give rise to an obligation to provide the figures requested.
173 Finally, anything said after formation of the contract in April 2010 cannot be relevant. In any event, the email of 7 April 2010 appears to be referring back to what occurred in the early negotiations in April 2008. As indicated, below, Velocity would only have had limited information about the sales of LE at that time.
174 I am, therefore, not satisfied that any “failure to disclose sales information” arises.
175 It follows that none of the representations/ conduct are made out with the result that the Counterclaim should be dismissed.
176 In such circumstances, it is unnecessary to consider the defendant’s Counterclaim further. However, out of deference to Counsel, I also consider that the defendant has failed to demonstrate other aspects of its Counterclaim. Given such findings are unnecessary I will only summarise them briefly.
Other aspects of misleading/deceptive claims
177 Firstly, I consider that even if a representation was made in April 2008 to the effect that there would be enough sales to achieve minimum royalties, Fosters had reasonable grounds to make this representation[45] on the basis of the royalty reports for LE in 2006 and 2007.
[45]And see s51A Trade Practices Act 1974
178 The evidence before the court suggests that LE had made royalties of $366,559.26 for the year ended 2006 and $161,986.79 for the first three quarters of 2007 (the last quarter not being available)[46]. Although it does appear that royalties reduced in 2008, only the first quarter report would have been available (due as at 15 April).
[46]Though there was also evidence that the last two quarters were generally the best quarters (given they included father’s day and Christmas).
179 It is also significant that Mr Stojanoski himself had made criticisms of the performance of LE in his “pitch” in May 2008. This suggested that the defendant would be able to do better than LE.
180 In the light of all this evidence, Fosters had reasonable grounds to make a representation to the effect alleged if, contrary to my findings, any such representation was made.
181 Secondly, the defendant did not establish that it relied on any of the alleged representations or conduct.
182 In terms of the alleged representations about the sufficiencies of sales, Mr Stojanoski attempted to suggest that the only basis on which he made his presentation and entered negotiations was on the basis of the figures suggested by Fosters and that, further, he did not conduct any independent research.
183 However, as indicated already, I did not find this evidence credible. It is inherently unlikely that a person with the experience and profile he himself described, would rely on figures suggested by the other side to a transaction. This is particularly so given he agreed that he did prepare budgets the majority of the time. The figure opened (of $190,000) was in any event subject to further negotiation as already detailed.
184 In terms of the alleged failure to provide sales information, for reasons given already, it was clear to Mr Stojanoski from the terms of the email of 29 May 2008, that the sales information was of a restricted type (showing what works and doesn’t), and would only be supplied once there was an agreement. However, despite this, he executed the second deal memo and commenced utilising Fosters brands.
185 It is true that Mr Stojanoski alleges that he would not have made his offer in his email of 21 September 2009, based on the figures he has now received in relation to LE’s sales in 2008. However, I do not accept this evidence. Rather, in my view, consistent with the language he himself used in his email of 11 August, he was anxious to reduce “outstanding” 2009 payments, which he appreciated were otherwise due.
186 As a final matter, the defendant sought damages in relation to various costs it alleges it incurred, and suffered as a result of the alleged misleading and deceptive conduct. Such development costs were initially claimed in an amount of $134,200.[47] However, such a claim was substantially reduced to USD $11,404 during the defendant’s closing.
[47]Defendant’s Further and Better Particulars dated 9 March 2012.
187 The amount claimed is, however, misconceived since, as Mr Stojanoski conceded under cross examination, the amounts given were all expenses without any account of the amount earned in sales.
188 None of the amounts claimed were thereby established.
189 The Counterclaim should be dismissed.
Conclusion
190 There will be judgment for the plaintiff in the amount of $505,000 together with statutory interest.
191 The Counterclaim is dismissed.
192 I will hear from the parties on the question of costs.
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