Deepsliver Pty Ltd v Aquatherm Australia Pty Ltd - [2007] WADC 13

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: DEEPSILVER PTY LTD -v- AQUATHERM AUSTRALIA PTY LTD [2007] WADC 13

CORAM: COMMISSIONER SCHOOMBEE

HEARD: 4-8 SEPTEMBER 2006 & 12-13 OCTOBER 2006

DELIVERED : 23 FEBRUARY 2007

FILE NO/S: CIV 2415 of 2003

BETWEEN: DEEPSILVER PTY LTD (ACN 067 776 354)
Plaintiff
AND
AQUATHERM AUSTRALIA PTY LTD (ACN 059 578 782)
Defendant

Catchwords:

Contract - Formation of contract - Whether distributorship or agency - Implied terms - Best efforts to promote sale of products - To allow party the benefit of the contract - Trust and confidence - Breach of contract - Repudiation - Reasonable notice period

Legislation:

Foreign Corporations (Application of Laws) Act 1989

Result:

Plaintiff's claim dismissed
Defendant's counterclaim allowed

Representation:

Counsel:

Plaintiff: Mr G M Abbott
Defendant: Mr P B O'Neil

Solicitors:

Plaintiff: Hotchkin Hanly
Defendant: Redding & Associates

Case(s) referred to in judgment(s):

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Artfleet Pty Ltd v BG & BC Spackman Pty Ltd, unreported; SCt of WA; Lib No 980126; 25 March 1998
Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666
Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438
Davies v Smith (1939) 12 ALJ 260
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Godecke v Kirwan (1973) 129 CLR 629
Hawkins v Clayton (1988) 164 CLR 539
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Masters v Cameron (1954) 91 CLR 353
Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 [2001]
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359
Shevill v Builders Licensing Board (1982) 149 CLR 620
Summers v The Commonwealth (1918) 25 CLR 144
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632
Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498
Upper Hunter County District Council v Australian Chilling and Freezing Co (1968) 118 CLR 429
WK Witt (WA) Pty Ltd v Metters Ltd [1967] WAR 15

Case(s) also cited:

Butt v McDonald (1896) 7 QLJ 68
International Harvester Company of Australia Pty Ltd v Carigan's Hazeldene Pastoral Company (1958) 100 CLR 644
Old Papas Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd & Ors [2003] WASCA 11
Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106

COMMISSIONER SCHOOMBEE: Deepsilver Pty Ltd, trading as Higgins Agencies ("the plaintiff") entered into an agreement with Aquatherm Australia Pty Ltd ("the defendant") pursuant to which the plaintiff would market and sell the defendant's polypropylene plumbing products in Western Australia. The defendant is the Australian distributor of the Aquatherm plumbing products manufactured in Germany by Aquatherm Kunststoff-Extrusions-Und Spritzgiesstecnik GmbH, trading as Aquatherm GmbH. The polypropylene plumbing products distributed by the defendant in Australia were relatively new to the market in 2000, but have advantages over the more traditional copper piping in that they have a greater ability to withstand the corrosive effect of water, particularly if very hot, and have hygiene and acoustic advantages. The Aquatherm product is, however, more expensive than the traditional copper piping.
The defendant first achieved sales of its products in Australia in about 1996. In early 2000 the defendant secured the supply of plumbing products for its first project in Western Australia, the abattoir in Albany. Shortly thereafter it was successful in selling its product for another major project, the Armadale Hospital.

The 2000 Agreement

The plaintiff had traded as a distributor of plumbing products made by various manufacturers since approximately 1995. Its managing director was Mr Peter Higgins. The plaintiff's sales strategy was to approach hydraulic consultants, plumbing contractors and merchants and persuade them of the benefits of the products sold by it. The practice in Western Australia was that plumbing contractors would buy their required product through merchants, essentially large stores such as Galvins Plumbing Plus ("Galvins"), Reece Pty Ltd ("Reece") or Tradelink Plumbing Centres ("Tradelink"). Mr Higgins became aware of the Aquatherm products through a plumbing contractor, Mr Robin Knott, who was involved in the Albany Abattoir project. Mr Knott suggested to Mr Higgins that he approach the defendant to establish representation for the product in Western Australia. Mr Higgins was pleased about the opportunity and contacted the general manager of the defendant, Mr Bryce Christian.
At the time of the construction of the Albany Abattoir the defendant had also become interested in establishing representation in Western Australia as it had secured supply of the Aquatherm product to another large project, the Armadale Hospital, and the plumbing contractors and merchants who it dealt with had indicated that representation of the Aquatherm product in Western Australia and readily available stock were a pre-requisite to making the Aquatherm product competitive.
Discussions ensued between Mr Higgins and Mr Christian which resulted in a facsimile letter from the defendant to the plaintiff, dated 28 June 2000 (Exhibit 31). This letter confirmed that the plaintiff would be supplied with pipe and PPR fittings less 35 per cent off the current trade price list, set by the defendant, PPR metal insert fittings less 30 per cent and tools less 10 per cent. The letter advised the plaintiff that if it ordered a container it would receive a discount of less 5 per cent nett, if payment occurred within 30 days, and less 2 per cent, if payment was made within 60 days. The defendant further stated the following:
"Peter, I confirm an initial consignment stock equivalent to one 20 foot container (to include NT requirement) will be delivered F.I.S. into Perth, at a mutually agreed date, and will be subject to payment within six (6) months from the month of delivery. The container allowance would not apply to consignment stock. The G.S.T. component would have to be paid by 7^th January, 2001, subject to the container being received in the anticipated month of October, 2000.
The Distributor Agreement will be reviewed by our solicitor and should be in final form within the next two weeks subject to the incoming Board's approval".
The letter of 28 June 2000 was only the written confirmation of part of the arrangement entered into between the defendant and the plaintiff. Mr Higgins gave evidence that it had been orally discussed between him and Mr Christian that stock would be delivered approximately once a month free into storage to the plaintiff's warehouse in Malaga in Perth. The monthly stock delivery was meant to replace any stock that had been sold from the initial consignment stock. As regards payment, Mr Higgins said that it was agreed that the plaintiff would send a purchase order to the defendant as soon as he had sold a particular product to a customer which purchase order would signal to the defendant that the particular stock needed to be replaced and that the plaintiff would pay the defendant within 60 days after the month in which the product was delivered to the customer. Mr Higgins gave further gave evidence that it was discussed that his responsibilities were to promote and sell the defendant's product in the market in Western Australia at a reasonable level, sufficient to make money for both, the plaintiff and the defendant. Mr Higgins said that it was discussed between himself and Mr Christian that the plaintiff wanted to be the sole distributor in Western Australia for a period of three years and that Mr Christian agreed to this requirement.
In giving evidence Mr Christian did not disagree that the additional terms were orally discussed between the parties, but said that he did not recall a discussion that the plaintiff would be entitled to be the sole distributor for a period of three years.
Although Mr Christian did not specifically say that he and Mr Higgins discussed prior to the letter of 28 June 2000 that the defendant would provide technical support to the plaintiff in marketing and selling the Aquatherm products, this is very likely to have been raised between the parties. Mr Bernd Emmert, the technical support person for the defendant, gave evidence that he provided technical support to the plaintiff. Mr Emmert first travelled to Western Australia in about August 2000 when he met with the hydraulic consultants on the Armadale Hospital project and trained the contractor and plumbers working on this project on the use and installation of the Aquatherm products. He said that he thereafter regularly travelled to Perth every three to five months in order to assist Mr Higgins in marketing the product to interested parties and to train the installers of the products. Mr Emmert was also available to provide advice on the telephone and did provide such advice to interested persons in Western Australia.
The facsimile letter of 28 June 2000 says that an initial consignment stock would be delivered in about October 2000, and was subject to payment within six months from the month of delivery. However, Mr Higgins denied in evidence that this had been agreed between the parties in the oral discussions prior to the receipt of the letter of 28 June 2000. Mr Higgins said that it was discussed that he would receive a container of consignment stock, but that this would remain the property of the defendant and that the plaintiff would only pay for it as and when sales of the products occurred and he drew down the consignment stock.
Mr Christian denied that this was the case. He said that the defendant always wanted the plaintiff to pay for the initial consignment stock. Mr Christian said that this was the basis on which he understood a distributor to be operating, namely that the distributor bought the stock from the defendant at a certain discount off the price on the published price list, paid upfront and could then sell the stock for any price in the range between the official price on the price list and the discounted price paid by the distributor. Mr Christian gave evidence that when he explained this to the plaintiff in the discussions prior to the letter of 28 June 2000, the plaintiff indicated that he was unable to pay for the consignment stock up front and that Mr Christian then made the concession that the plaintiff could have six months to pay for the consignment stock. Mr Christian said that the plaintiff agreed to purchase an initial consignment of a container load of stock and was grateful for the deferred payment terms of six months. According to Mr Christian, prior to the letter of 28 June 2000, there was an agreement that an initial container load of consignment stock would be purchased by the plaintiff and that it would therefore act as the defendant's distributor.
After receipt of the letter of 28 June 2000, the plaintiff represented the defendant on the Armadale Hospital project and started to market and sell the Aquatherm product. The defendant supplied and delivered the stock for the Armadale Hospital directly to site and, it appears, made monthly deliveries to the plaintiff's warehouse of stock that was required for secured projects. However, two matters referred to in the facsimile letter remained outstanding. The plaintiff never placed an order for the 20 foot container of initial consignment stock and the defendant did not provide the plaintiff with a distributor agreement prepared by solicitors for signing.
On 30 October 2000 the defendant sent a letter to the plaintiff (Exhibit 72) reminding him that the basis of the Aquatherm distributorship was that it carried with it the responsibility to store and distribute the product. The letter required the plaintiff to hold a six months' consignment stock to the net value of $50,000 commencing 1 January 2001 which had to be paid before 30 June 2001. The letter said that the alternative was an agency where the plaintiff would be paid a commission with the defendant undertaking the distribution and the invoicing. Mr Higgins gave evidence that he understood "consignment stock" to mean that he would hold it in his warehouse on behalf of the defendant, but that he did not have to pay for it until it was sold. He said that his focus was to market and sell the product and "everything else just falls into line after you get out and sell the product".
Mr Christian said in evidence that he wrote the letter to try and get the plaintiff to conform with the agreement of taking and paying for an initial consignment stock, but, in order to accommodate the plaintiff, he reduced the requirement for a 20 foot container (which would have held approximately $100,000 of stock) to a container to the value of $50,000. The October letter also specified that any additional stock over and above the consignment stock would be invoiced in the "normal manner".
The defendant did not receive any response from the plaintiff to this letter. On 7 November 2000 the defendant wrote another letter to the plaintiff (Exhibit 74) which apparently attached a list of suggested consignment stock and made a once-off offer to provide the metal fittings at less 35 per cent rather than 30 per cent. The letter asked for the plaintiff's "earliest advice", as the defendant wanted to organise and deliver the stock before the end of November. Mr Christian again advised the plaintiff that he could change his relationship to being an agent rather than a distributor, but that he would then receive a percentage commission and not a distributor's discount. The plaintiff did not reply to this letter.
On 17 November 2000 the defendant sent a brief facsimile to the plaintiff (Exhibit 76) asking whether there was any progress with the stock holding order and attached a copy of the offer. There was no response from the plaintiff.
On 19 January 2001 the defendant sent another letter to the plaintiff (Exhibit 73) saying "we need to resolve the matter of Distributor Stock Inventories (Consignment) this month". This letter suggested that the plaintiff could act as the defendant's agent at a commission of 6 per cent of the nett value with commission paid monthly. Galvins or another merchant could be the Western Australian distributor and hold stock in its warehouse and purchase direct from the defendant at the trade price less a percentage.
It appears that this letter eventually drew a response from the plaintiff, as the defendant's next letter to the plaintiff of 8 February 2001 (Exhibit 75) referred to a conversation the previous Friday. The letter of 8 February 2001 again set out the terms on which the plaintiff could act as an agent for the defendant and listed the advantages as "no stock, no distribution, no debt recovery". The letter emphasised that distributor discounts were conditional on stock being held in the quantities as advised earlier. It also said: "Lets (sic) accept that we are not at the distributor stage, but at agency stage, and immediately implement the above format and let the market decide for us as to when the Distributor is required".
On 21 February 2001 the plaintiff sent a written response to the defendant (Exhibit 77). The letter refers to the "fickle" Western Australian market and the fact that the Aquatherm product was still considered a trial product by the consultants. It said that merchants were relying on the manufacturer or his representative to carry stock, but that the plaintiff thought it most appropriate to bring over a consignment of pipe and fittings of the quantity required for any particular project without holding blanket consignment stock. In Mr Higgins' view Galvins or Tradelink would not entertain the idea of warehousing the Aquatherm product as there was not as yet a huge demand for this product. Mr Higgins said that he thought that a blanket consignment would result in him having an excess of items that were not required and a shortage of the exact product requested. He also indicated that a 6 per cent commission was far too low for the amount of work required to break a product into the market.
Mr Higgins added to this letter that he saw it as his responsibility to provide feedback to the defendant on how to identify and penetrate the "fickle" Western Australian market and that it was his commitment to make the defendant fully aware of the market conditions in Western Australia. The plaintiff said that "together, and only together, we can gain strong market penetration" and "together we can form a strategy to capitalise on the opportunities".
On 26 March 2001 the defendant responded by facsimile letter (Exhibit 78) to the plaintiff's letter of 21 February 2001. The defendant again emphasised the importance of the local representative of the Aquatherm product holding stock. It stated that it did not contemplate a "blanket consignment of products – only bread and butter lines, no exotics". The defendant also proposed that there could be a sunset clause for the consignment stock whereby the defendant would take back any product that the plaintiff had been unable to sell. Mr Christian expressed the view that "with the joint marketing by ourselves, and the obvious advantages of the Aquatherm product over the copper piping, the West Australian market would mature". When asked in examination in chief what he meant with "joint marketing", Mr Christian replied that the plaintiff, as the distributor was expected to assist the defendant in the marketing of the product in Western Australia.
On 28 March 2001 the defendant sent another facsimile letter to the plaintiff (Exhibit 80) elaborating on the proposed sunset clause. The letter said that a preliminary consignment of stock had been prepared which would have to be paid for by 30 September 2001. However, if the plaintiff was not in the position to make the payment by that date, the defendant would take back the stock not sold. On that basis the plaintiff would become a distributor from 1 October 2001 onwards. If the plaintiff was not prepared to accept the responsibilities of a distributor by 1 October 2001, the defendant would sever "our business relationship". The letter said that this arrangement allowed the plaintiff another six months to better assess his position as to whether Aquatherm was a viable product in Western Australia. The defendant asked for an immediate response so that the consignment stock could be sent over to Perth together with an order placed by Reece.
Mr Christian said in evidence that he did not believe that he received a response from the plaintiff to this letter. Mr Christian stated that by then he was frustrated by the plaintiff's lack of response to the defendant's attempts to accommodate the plaintiff's manner of conducting business.
On 13 December 2001 the defendant sent a further facsimile letter to the plaintiff (Exhibit 79) proposing a delivery arrangement for 2002 pursuant to which the plaintiff would receive one free in stock delivery per month, but would share equally the costs of additional deliveries with the defendant. The defendant also requested that a stock-take be undertaken early in the New Year and that the plaintiff should "beef up" his consignment levels so that he could become "the WA Consignment Distributor we originally sought". Mr Christian said in evidence that the plaintiff had gradually built up his consignment stock by the defendant providing him with "bread and butter" items so that the defendant could fulfil its obligation to the plumbing contractors and consultants of having readily available stock in Perth. However, since July 2000 the plaintiff had not paid for any of the consignment stock other than upon its sale to customers.

The 2003 Agreement

Approximately six months later, on 19 June 2002, the defendant sent another letter to the plaintiff (Exhibit 81). Mr Christian stated: "Its (sic) has now been two years that you and I have been (diplomatically) 'discussing' the merits of Distributorship vis-à-vis Agency". He pointed out that the plaintiff's return was that of a distributor without the responsibilities of a distributor. The defendant asked how they could enter a new financial year with a better understanding on this issue, particularly as Germany's investment and participation in the defendant had given this "vexing question" a new priority. The defendant again proposed a choice between the plaintiff being a distributor and an agent. In order to be a distributor, the plaintiff would have to purchase all stock held by him as at 1 July 2002 at a special and once-off discount of 50 per cent from the trade price list. Payment would be deferred until 31 October 2002. The letter also proposed increased discounts so that all PPR products could be obtained by the plaintiff at 40 per cent discount with the exception of certain pipes. The payment terms would be 60 days and 2 per cent discount for payment by 30 days. On this basis the plaintiff would be given a "three year exclusive WA Distribution Contract".
The other choice was to be an agent in which event the plaintiff would not have to pay for any consignment stock. In this case the plaintiff would receive a discount of 30 per cent off the trade price list on all PPR products subject to the exception of certain products. The terms of payment would be 30 days and the plaintiff would be appointed "the Aquatherm Agent for WA" for a period of three years.
Mr Christian said in evidence that he did not receive any response from the plaintiff to this letter.
On 24 July 2002 the defendant sent another letter to the plaintiff (Exhibit 82) stating: "As a consequence of your decision to remain as a Consignment Agent I advise the Agents (sic) terms of reference, as set out in my letter of 19 June, 2002 will now apply on all transactions on and from 1 July, 2002." The letter again summarised the terms set out in the previous letter, including that the discount for all PPR products would be 30 per cent with the exception of certain pipes and fittings at 10 per cent and tools at 15 per cent. The letter confirmed that the agency period would be for three years from 1 July 2002.
There does not seem to have been an immediate response from the plaintiff. On 10 December 2002 the plaintiff sent a facsimile letter to the defendant (Exhibit 33) referring to a conversation in the previous week. The facsimile letter is headed "Re: Distributor/Agency agreement". Mr Higgins said in the letter that he did not understand why the plaintiff should accept a 5 per cent reduction in commission where it had put a considerable amount of time, money and effort into the Aquatherm product. The plaintiff explained that it had chosen to go through the merchants in order to secure its and the defendant's payments. This meant that the merchant got a 10-15 per cent discount off the trade price list and the plaintiff took what was left, 15-20 per cent. (This statement does not seem to be quite correct, as at a discount of 35 per cent off the trade price list, there would have remained 5-20 per cent for the plaintiff). The plaintiff said that anything less than the stated margins were not acceptable on a product with such a high overhead cost, handling, storage and distribution. He stated that he would not accept a lesser margin, without any justification, particularly not where the plaintiff had made huge inroads into the West Australian market and had kept up its end of the agreement and expected the defendant to do the same. Mr Higgins said that he was happy to look at options that were a win/win situation for both, but would not be "forced into accepting anything without negotiation".
On 12 December 2002 the defendant sent a further letter to the plaintiff (Exhibit 34) which had essentially the same content as the letter of 19 June 2002, except for the adjustment of the date at which the plaintiff had to purchase all consignment stock then in his warehouse to 18 December 2002. Mr Christian said in evidence that he resent the letter to the plaintiff as Mr Higgins had indicated in a telephone conversation that he had mislaid the June letter.
Mr Christian gave evidence that it had been agreed between him and Mr Higgins that Mr Christian would telephone Mr Higgins on 24 December 2002 to discuss the plaintiff's decision with regard to the options of being a distributor or agent as set out in the letter of 12 December 2002. Mr Christian said that when he telephoned the plaintiff from Canada, where Mr Christian was on holidays, the plaintiff refused to discuss the two options, but immediately suggested to Mr Christian that the plaintiff could purchase containers directly from Germany. Mr Christian responded that it was madness to consider purchasing containers directly from Germany where the plaintiff would not consider purchasing the consignment stock currently in his possession. The plaintiff then hung up. Mr Christian tried to ring the plaintiff back, but the plaintiff refused to take his call. In cross-examination Mr Higgins said that it was "my prerogative on Christmas Eve" to refuse to take Mr Christian's call again.
On 6 January 2003 the defendant wrote a letter to the plaintiff (Exhibit 35) stating the following:
"The events of the past seven months and in particular the past three weeks, have, certainly in my mind, ably demonstrated your association with Aquatherm will remain that of an agent and, very pleasingly from your prospective (sic), within the terms on which we commenced our informal business relationship.
Your now advised concerns about Aquatherm's market potential and its long term importance to Higgins, particularly in the light of the other more established products you represent, is understood along with your further concern regarding your ability to pay for your start up stock (had you chosen to become a distributor) without our extended payment program.
The issue of distributorship need not be one to concern you in the future.
Your request to remain a performance based Agent on a varying and mutually agreed come and go consignment basis is now confirmed. The reconciliation of the past six months trading, hopefully, will be resolved before you leave on vacation on 8 January 2003".
On 13 January 2003 the plaintiff responded to the defendant by letter (Exhibit 36) saying that he was finally in a position to sit down and explain why "we made the decision we did". The plaintiff said, in summary, that the biggest issue with the current arrangement was to determine what the right mix and quantity of products were to be held on consignment. However, he felt that this was now much more under control than six months ago. As this was the major concern, he could not see how changing the structure would address the problem, unless the plaintiff purchased container lots from Germany, thereby taking the majority of stock out of the defendant's hands and reducing the defendant's costs and hassles.
The plaintiff then summarised his understanding that it would remain the agent for the defendant on the basis that it would receive a discount of 35 per cent in respect of the trade price list for all PPR pipe and fittings, with certain exceptions, and that the payment terms would be 30 days from month of invoice. The plaintiff further stated that it was to be appointed the agent for Western Australia for a period of three years and that it awaited the defendant's document for signing, outlining the terms and conditions summarised in the plaintiff's letter.
Mr Christian said in evidence that he was not prepared to enter into this agreement for a fixed period of three years and therefore did not prepare a formal document for the plaintiff to sign. Mr Christian had not referred to a three year term in his letter of 6 January 2003 in which he accepted that the plaintiff would continue his relationship as a "performance based Agent on a varying and mutually agreed come and go consignment basis".
On 21 January 2003 the defendant responded to the plaintiff's letter of 13 January 2003 (Exhibit 37) by specifically referring to this letter under the heading "Re". The letter stated the following:
"I re-confirm your appointment as the Aquatherm WA Agent for the Fusiotherm Polypropylene (PPR 80) Water Service Pressure Pipe System within the terms originally entered into between our companies.
The offer written you in June 2002, has at your request, been withdrawn".
The defendant's letter essentially repeated the discount structure proposed by the plaintiff which was based on 35 per cent. The defendant did not specifically say that he was not prepared to accept the plaintiff's term that the plaintiff be appointed as agent for Western Australia for a period of three years, but referred to the fact that the written offer of June 2002 (which was in similar terms as that of 12 December 2002 and included a three year term for the distributor or agency arrangement) had been withdrawn.

The Medina and UWA Projects

In early 2003 the plaintiff marketed the Aquatherm product to Sanwell Pty Ltd ("Sanwell"), a plumbing contractor, for the Medina Hotel on the Perth conference centre site ("the Medina project") and for the new science building for the University of Western Australia ("the UWA project"). The merchant that Sanwell dealt with in respect of these projects was Galvins. Mr Higgins had preliminary discussions with Mr Michael Edwards, the assistant general manager at Galvins, and with Mr Peter Thompson of Sanwell. Mr Higgins also discussed the proposed two projects with Mr Bernd Emmert, the technical support person for the defendant. Mr Christian said that he was not certain whether Mr Higgins had mentioned the two projects in the telephone conversation on Christmas Eve 2002 when Mr Higgins raised the possibility of obtaining containers with stock directly from Germany or whether he had been told about the two upcoming projects on another occasion prior to 25 March 2003.

Trade Fair in Germany

25 March 2003 was the start of a four-day trade fair in Frankfurt, Germany, at which Aquatherm GmbH had a stand and which Mr Higgins visited. Mr Emmert gave evidence that this was a large trade fair for plumbing and sanitation products only and was held every three years. Aquatherm GmbH had a large stand of approximately 200m² at which approximately 20-25 people were working. Mr Emmert had travelled from Sydney to provide technical support and particularly English translation to interested customers and the defendant had advised its distributors in Australia and Mr Higgins of the upcoming occurrence of the fair. Mr Higgins decided to attend the trade fair in Germany because four of the manufacturers that he represented had displays at the fair and it was a good opportunity for him to receive some training. He also had the opportunity to visit the Aquatherm factory to see how the product was manufactured.
Mr Higgins said in evidence that at the request of Mr Christian he took with him to Germany a bill of quantities for the Medina and UWA projects to discuss with the representatives of Aquatherm GmbH whether the required quantities were enough to fill a container from Germany. Mr Higgins stated that he had raised with Mr Christian the possibility of obtaining a container with product for specifically these two projects from the defendant in Sydney, but that Mr Christian had indicated that the defendant required substantial stock for a large project in New Zealand and did not want to have its stock depleted. Mr Christian denied in evidence that he had suggested to Mr Higgins to take a bill of quantities in respect of the two projects to Germany to discuss a container being shipped directly from Germany. Mr Christian also strongly refuted the suggestion that he said that he did not want to deplete the defendant's stock because of a project in New Zealand. He said that New Zealand had its own distributorship arrangement with Aquatherm GmbH and that there was no way that he would have supplied product to New Zealand.
Mr Higgins gave evidence that at the trade fair in Germany Mr Bernd Emmert introduced him to Mr Rosenberg. Mr Higgins said that he knew that Mr Rosenberg had some connection with Aquatherm GmbH, as he was the son of the owner, but that Mr Rosenberg was at the time working in Italy. He also knew that Mr Rosenberg was a director of the defendant and Mr Rosenberg told him that he was the managing director of the defendant. Mr Bernd Emmert denied in evidence that he had introduced the plaintiff to Mr Rosenberg and suggested that the plaintiff could have introduced himself, as he would have been able to locate Mr Rosenberg via the reception at Aquatherm GmbH's stand. Mr Rosenberg gave evidence that he could not recall how Mr Higgins had been introduced to him.
It is common cause that Mr Higgins, Mr Emmert and Mr Rosenberg sat down to have a cup of coffee at tables in the centre of the display. Mr Higgins said that he discussed the Medina and UWA projects with Mr Rosenberg on that occasion and also showed him the bill of quantities in the presence of Mr Emmert. Both Mr Emmert and Mr Rosenberg denied that this had taken place at the trade fair. Mr Rosenberg said that Mr Higgins showed him the bill of quantities and told him about the two projects at a subsequent meeting between Mr Higgins and Mr Rosenberg at the Aquatherm GmbH factory in Attendoorn. Mr Higgins had been invited to a tour of the factory which all representatives from Australia and New Zealand attended. However, Mr Higgins was not able to fit the scheduled tour into his programme and therefore asked to view the factory and meet with Mr Rosenberg on a subsequent occasion.
Mr Rosenberg gave evidence via video link. He said that he had a meeting with Mr Higgins of approximately two hours after Mr Higgins had completed his tour of the factory. Mr Rosenberg said that Mr Higgins complained to him about the service provided by the defendant, its marketing strategy and the unprofessional manner in which Mr Christian dealt with the documentation. Mr Higgins also explained to him the difference in the market between Sydney and Perth and the long distance between these two cities and indicated to Mr Rosenberg that he thought it more appropriate if the plaintiff would deal directly with Aquatherm GmbH. Mr Rosenberg reported that the plaintiff had told him that Western Australia should be marketed in a different way and not from Sydney, that he did not wish to continue his relationship with the defendant ("didn't want to follow or to go further with Aquatherm Australia") and that he was looking for direct deliveries, including direct invoicing, from Aquatherm GmbH.
Mr Rosenberg said that Mr Higgins told him about the Medina and UWA projects and asked for direct delivery of a container of product for these projects. He showed him some spreadsheets indicating the quantities required, but it was clear that they would not fill a container. Mr Rosenberg gave evidence that it was not unusual to send a direct container to customers in order to reduce freight costs, although the customers would not be directly invoiced. He therefore indicated to Mr Higgins that he would look into the possibility of sending a container directly from Germany for the two projects.
Mr Rosenberg said that it was very clear from his discussion with Mr Higgins that he wanted to establish a direct relationship between the plaintiff and Aquatherm GmbH and that this was not confined to delivery of a container for the Medina and UWA projects. Mr Higgins wanted ongoing direct deliveries and direct invoicing because of the unprofessional marketing of the defendant, the problems with documentation and the far distance between Sydney and Perth.
Mr Higgins denied in evidence that he had approached Mr Rosenberg about a direct relationship between the plaintiff and Aquatherm GmbH. He said the only purpose of discussing a container with him was to have the product for the Medina and UWA projects shipped directly from Germany in order to save the defendant the freight costs "over the Nullarbor". In fact, the freight costs would not have been a saving to the plaintiff, as Mr Christian explained in evidence (and the documentation confirms this) that all stock was delivered at all times free in stock to the plaintiff's warehouse. Mr Higgins denied that he wanted to establish a direct relationship between the plaintiff and Aquatherm GmbH and emphasised that he regarded Mr Rosenberg as a representative of the defendant and not of Aquatherm GmbH. He said that Mr Emmert had offered to introduce him to Mr Rosenberg, as Mr Rosenberg was a director of the defendant and Mr Rosenberg had told him so himself. He only knew that Mr Rosenberg had some connection with the German manufacturer, but was not sure of Mr Rosenberg's status in this regard. Mr Higgins stated in evidence that there would have been no point in him obtaining stock directly from Germany, if he had not been prepared to pay for the stock received from the defendant. He admitted that he had taken some documentation including hand written documents by Mr Christian to show Mr Rosenberg the "logistical issues we were facing with dealing out of Sydney". He said that the hand written notes from Mr Christian were illegible and that the defendant would not send promised stock deliveries within a reasonable time and that he had raised those issues with Mr Rosenberg as the managing director of the defendant.
Mr Higgins admitted in cross-examination that he had made hand written notes during the meeting with Mr Rosenberg (Exhibit 83). The notes show a list of concerns under the heading "Administration - Australia" such as "paperwork; no packing lists; invoice turnaround; statements; stock-take; no idea of our stock and FIS prices questioned". The notes summarise what are presumably Mr Higgins' views about Mr Bernd Emmert and Mr Bryce Christian. With regard to Mr Bryce Christian the notes state inter alia "upsets customers, staff (H/A), consultants; $$spent wrong areas; always rubbishes opposition". Lastly the notes contain under the heading "Summary" the following:
"No advantage to WA to have NSW administration;
What does it cost NSW to handle WA?;
Deduct this figure from prices, handle WA direct".

Events after the Trade Fair

On 9 April 2003 (Exhibit 38) Ms Simone Mengel, the personal assistant to Mr Rosenberg, sent an email to the plaintiff attaching a quotation for a direct container delivery for the Medina (and presumably the UWA) project. She advised that the quantities did not fill a 20 foot container and that the remaining space could be taken up by additional pipe and fittings. The email said that the terms for a direct delivery would be payment to the defendant of 50 per cent in advance and 50 per cent after 60 days from date of invoice. Prices would be agreed with Mr Rosenberg after receipt of an additional order (presumably to fill the container) from the plaintiff.
On 11 April 2003 Mr Rosenberg sent a further email to Mr Higgins (Exhibit 38) stating the following:
"Additionally to Simone's information I suggest the following:
Higgins Agencies take over the actual consignment stock held by Higgins Agencies based on the condition offered by Bryce Christian to you last year.
Peter, I do that suggestion because from my point of view it is impossible to be both – an agent and a distributor for the same market at the same time. Through full direct containers you start to be a distributor. Please, send me your thoughts about (sic)".
The plaintiff responded to the email on 12 April 2003 (Exhibit 84) advising Mr Rosenberg that he would respond to his queries next week. Mr Higgins also said: "I don't know what the big deal is between being considered an agent or a distributor and how that effects anyone but me".

On 14 April 2003, Mr Christian sent an email to Mr Rosenberg (Exhibit 94) which stated the following:
"I've received Higgin's email and the content is predictable - he wants all the benefits of a Distributor but only the responsibilities of an Agent. Do you need to be involved in this nonsense; image the confusion of having regional agents in various national markets trying to do direct deals. We have had no direct communication with Higgins.
Dirk, it would be dangerous to provide Higgins with any ex Gmb rates, he is just a price Broker. We believe his container rates should be his WA TRADE PRICE LIST less the discounts advised you on Friday conditional upon him buying the container (50% cent with order) and the consignment stock which is presently in his warehouse (which is the size of a 10 man tent).
Dirk, this nonsense is distracting too many people, please tell him to resolve his, possible, container opportunities with the Australian Distributor".
On 15 April 2003, Mr Rosenberg sent a further email to Mr Higgins, with a copy to the defendant (Exhibit 41), attaching a spreadsheet showing the units for the Medina and UWA projects and indicating that there was still space in the 20 foot container. Mr Rosenberg listed the conditions for the container from Aquatherm GmbH as follows:
"* your current WA pricelist less 40%
* less 5% for direct container
* 50% of the invoice value to be deposited before shipment
*the remaining 50% to be paid 60 days after invoice date, alternatively, for another discount of 3%, after 30 days".
Mr Rosenberg advised the plaintiff that it had to take over the actual consignment stock held by it based on the condition offered by Mr Christian in the previous year with payment at the end of August 2003. The email further said that for these two projects, the above conditions were also offered by way of delivery directly from Sydney, in which event Mr Higgins should contact Mr Christian. Lastly, Mr Rosenberg stated that he did not believe that Mr Higgins expected an answer from him with regard to Mr Higgins' statement that he did not know what the "big deal" was between becoming an agent or a distributor.
On 15 April 2003 the plaintiff sent a facsimile letter to Mr Dirk Rosenberg (Exhibit 44) attaching the sales history for the past eight months in respect of major items. Mr Higgins said in evidence that this was done so that Mr Rosenberg could assess which items were most suitable to fill the remaining space in the container.
On 16 April 2003 Mr Christian sent an email to Mr Higgins (Exhibit 85) asking him to confirm the container proposal, in all its detail, was acceptable to the plaintiff.
On 19 April 2003 Mr Christian sent an email to Mr Rosenberg (Exhibit 96) in the following terms:
"Firstly congratulations on skilfully side stepping Higgins' enquiry – having done that you then dummy passed the ball to me. You have some Rugby skills.
DISTRIBUTOR V AGENT _ PRICE CONTROL:
As the Distributor has purchased the product he can determine the price into his market.
As the Agent is not the owner of the product he with his supplier decide (sic) the offered (sic) price. The Supplier retains ownership and therefore price control of His product, through his Agent, until such time as the Agent sells the product.
This will prove a vexatious issue for Higgins when he is asked what rates (WA List less a discount) he sold through his Merchant to Sanwell. As Higgins is probably of the view he is dealing directly with Germany he is very likely to decline to answer _ however, he is still, until such time as he accepts the terms of our container proposal, an Agent.
Higgins is running with the Distributor/Container rates without indicating acceptance of the terms of that proposal _ he only wants the price not the responsibility that goes with it. This is another opportunity to come on board in a game that started last year.
A dummy pass if done skilfully can leave your opponent stranded _ at the end of this game we will know who has been throwing the best dummy passes".
On 23 April 2003 Mr Bernd Emmert sent an email to Mr Higgins (Exhibit 86) asking him to advise the defendant of the "discounted rates/discounts of (sic) the Trade Price List provided for the UWA and Medina Project through the Merchant". Mr Christian said in evidence that he could not recall whether he asked Mr Emmert to request these rates. Mr Emmert denied that he had been asked by Mr Christian to make that enquiry. He said that he had asked for the discounted rates of his own accord because he wanted to see how the Aquatherm product was doing in the West Australian market, particularly in respect of large projects. In cross-examination he said that although he was a technical assistant he became interested in the price that the Aquatherm product was fetching in Western Australia because he had the opportunity to become a shareholder in the defendant. That opportunity had existed since he had joined the defendant on 1 July 2000, but he eventually only took up that opportunity on 1 January 2005.
Mr Higgins replied by email (Exhibit 86) on the same day to the email from Mr Emmert asking why Mr Emmert wanted these prices. In response Mr Emmert sent an email dated 24 April 2003 (Exhibit 87) saying that the defendant just wanted to know what the market rates of its product were in Western Australia. Mr Higgins replied on 24 April 2003 by email (Exhibit 88) which said the following:
"How long is a piece of string ??
There is (sic) NO market rates.
It is dependant on how strong the specification is & whether or not the principal contractor allows alternatives. If there is NO competition, then we sell at the Trade Price, Less a discount to the merchant.
In the UWA / Medina case, it is completely different again, so these figures will NOT give you any market rates either".
This email also advised the defendant that Mr Higgins had spoken with the plumbing contractor that day and that the plumbing contractor was still analysing the figures.
On 26 April 2003 Mr Christian sent an email to Mr Higgins (Exhibit 48) stating that Mr Emmert had shown him the plaintiff's replies to the defendant's enquiry about the project rates. He then said:
"Peter, the very simple question we are asking you is for your project (container consideration) offer ie. your discount from our Trade Price List. We are a team, our product will not be sold unless Sanwell consider us price competitive _ certainly this is the case with Medina. Why are you reluctant to advise us of the offer on your product? You are our Agent after all _ it's not an unreasonable request. You are negotiating, as our Agent and through a Merchant, the sale of our product to a Buyer. Please if there is some reason why you believe we should not know then please and (sic) let us be the judge of that, it is bizarre that we should have to go to these lengths to get a simple answer to very simple question".
On Wednesday, 30 April 2003, Mr Christian sent another email to Mr Higgins (Exhibit 49) which repeated the enquiry and referred to the earlier emails. Mr Christian said that it was important to the defendant to know the offer and its terms to enable the defendant to respond quickly as a team should there be difficulties with the plumbing contractor, Sanwell, on either the rates or the terms. Mr Christian stated that these matters were important to the defendant, especially as the terms of the container offer required a considerable upfront payment which had to be taken into consideration. Of equal importance was "conforming product substitution". Mr Christian explained in evidence that by "conforming product substitution", he meant the ever-existing threat that the plumbing contractor would substitute products which did not conform to the specifications but were cheaper than the Aquatherm products. Mr Christian also stated in the email that the plaintiff was acting as the defendant's agent and as such was obliged to advise the defendant of the offer. He asked why there was such reluctance and whether it was not a team effort.
On Friday, 2 May 2003, Mr Christian sent a further email to Mr Higgins (Exhibit 50) stating that the defendant had still not had a reply to the many requests for the rates offered on the two projects and that this had been going on for nearly a fortnight. He said "is this your way of saying we are not allowed to know – I couldn't image you would tolerate such behaviour from your suppliers".
Mr Higgins said in evidence that he was away at the end of April for the school holidays in the country and that he did not take his mobile phone or his laptop with him. This was why he had not responded to the various emails from the defendant. However, in cross-examination Mr Higgins admitted that he did not want to tell the defendant what discount rates he had offered to the plumbing contractor. He said that the price agreed between himself and Galvins was confidential. He was asked whether he did not want to disclose the offer to Galvins because the discount offered was based on his own discount of 35 per cent (which reflected his ordinary trading terms, rather than on the 40 per cent discount offered for the container from Germany), and Mr Higgins replied "correct, at that time, yes" (at T 275). Mr Higgins admitted that he knew that the defendant was anxious to see that a competitive price was offered so that the two projects could be secured.
The evidence elicited from Mr Higgins never made it quite clear what discounts the plaintiff had offered to Galvins and to Sanwell in respect of the two projects and how these discounts were calculated. The only explanation given by Mr Higgins was that he first worked on the costs of the product to himself and then added a margin while at the same time deducting a discount for Galvins and for Sanwell from the trade price list. Mr Higgins was referred to two documents which set out various costs and discounts. Mr Higgins said in evidence that he had prepared both documents in conjunction with Mr Michael Edwards of Galvins. The first document (Exhibit 46) appears to have been printed on 16 April 2003 and only deals with the UWA project. This document was not explained in any detail by Mr Higgins. It shows various discounts, one of which appears to be based on a discount to the plaintiff of 40 per cent off the trade price, although it does not refer to 40 per cent. This document states at the top that Galvins would receive a discount of 10 per cent.
The second document (Exhibit 69) was only printed in June 2004. It does not indicate when it may have been first generated and it was also not explained in any detail by Mr Higgins. This document deals with both the Medina and the UWA projects and shows a cost to the plaintiff of the trade price minus 35 per cent and a discount of 10 per cent off the trade price to Galvins. The document seems to indicate that Sanwell would only get a discount of about 2.8 per cent off the trade price (the amounts in the column under the heading "Sanwell" amount to 97.2 per cent of the trade price) and that this would give Galvins a margin of 8 per cent on their sales to Sanwell. It appears that pursuant to this arrangement the plaintiff would have the benefit of the remaining discount of 25 per cent. It may have been because of the small discount offered to Sanwell and Galvins that Mr Higgins was reluctant to disclose this information to the defendant. However, the detail of this document and the discount offered to Sanwell were not explored by either party at the trial.
Mr Higgins also did not explain clearly in evidence whether the final offer to Galvins and Sanwell was based on a 35 per cent or 40 per cent discount off the trade price list to the plaintiff. In examination-in-chief Mr Higgins indicated that he had calculated the price to Galvins on the basis of the "costings from the direct shipment" (at T 126-127) which were based on a 40 per cent discount. During cross-examination he initially said that he could not recall whether he negotiated on the basis of a 40 per cent discount and would have to refer back to the documents to clarify that question (at T 254). Later he said that the prices offered to Galvins were based on a discount of 35 per cent (at T 256 and 258). Subsequently Mr Higgins said (at T 292 and 293) that the offer to Galvins and Sanwell was on the basis of a 35 per cent discount off the trade price "before a container offer at discount of 40 per cent was there".
It appears from the various statements made by Mr Higgins in evidence that he made an offer to Galvins and Sanwell based on a discount of 35 per cent off the trade price before he was told that he could get a container at 40 per cent discount and that he did not adjust his offer to Galvins and Sanwell to allow them part of the benefit of the better deal offered to him. Mr Higgins acknowledged that the container offer allowed him to make a bigger profit than what he had expected to make when he put a proposal to Galvins and Sanwell based on the 35 per cent discount (T 319-320). This appears to be a further reason why Mr Higgins did not want to tell the defendant exactly what discounts he had offered to Galvins and Sanwell.
Mr Christian gave evidence that later in the day on Friday, 2 May 2003, he rang Mr Higgins to ask him about the progress of the Medina and UWA projects. He particularly wanted to know what the lead times were on the projects and whether the plaintiff was prepared to accept the conditions placed upon the offer of a direct container from Aquatherm GmbH. Mr Christian was also concerned to know at what rates the product was sold to Sanwell as he wanted to ensure that it was a competitive price. Mr Higgins told Mr Christian that the rates put to Sanwell were based on a mark up of 17.5 per cent for the plaintiff and an 8 per cent consideration for Galvins. Mr Christian did not understand from what base figure these percentages were calculated and whether this was based on a discount of 35 per cent or 40 per cent off the trade price.
As regards the lead times, Mr Higgins told Mr Christian that the Medina project was one month away and the UWA project six months. Mr Christian said that he was very concerned to learn about the lead-time for the Medina project as this was the larger project of the two and it would take 6-8 weeks to obtain a container from Germany. However, Mr Higgins was quite adamant that he was doing a container deal with Germany. When Mr Christian raised with him whether the plaintiff was prepared to purchase the consignment stock then in his possession Mr Higgins disputed that this was a condition of the container offer from Germany and said that it was only a suggestion by Mr Rosenberg. The reception on Mr Higgins' mobile phone then dropped out and Mr Christian lost contact.
On Tuesday, 6 May 2003, Mr Christian sent another email to Mr Higgins (Exhibit 51) in which he made an offer to the plaintiff to receive the stock for the two projects in a container from Sydney at a discount of 40 per cent. Mr Christian referred to the fact that the Medina project was not far away and that the stock for the two projects was available in Australia which made it unnecessary to incur sea freight, duty and GST charges. He offered the plaintiff a discount off the trade price of 40 per cent, similar to that offered by Aquatherm GmbH and indicated that the products could be delivered into Sanwell's yard. Mr Christian said in the email that the defendant was prepared to offer this discount as a project rate and not only as a container rate. Mr Christian explained in evidence that this meant that any subsequent variations in product required would still be subject to the 40 per cent discount rate in respect of the particular two projects.
The email further stated that the plaintiff would not have to pay 50 per cent of the value of the container up front, but would only have to pay as and when the stock was required. Mr Christian made it clear that the plaintiff would not have to purchase the existing consignment stock in his warehouse. The defendant proposed some rates on which the product could be sold to Sanwell which were based on the trade price less 20 per cent for Sanwell and less 8 per cent for Galvins. The email also made the point that if the plaintiff were to take direct delivery of a container from Germany, there would be excess stock in the container which the plaintiff would have paid for which would be stored together with stock in the plaintiff's warehouse ex Sydney which the plaintiff had not paid for. In evidence Mr Christian said that this was a logistical nightmare.
Mr Christian also referred in the email to the fact that supply from Sydney was far more beneficial to the defendant in terms of stock management and the return on the stock. In evidence Mr Christian said that he was concerned that more stock was brought into Australia for which the defendant would have had to pay the sea freight, sea freight insurance, duty and GST, whereas the same product was already available in Sydney. It would be better for the defendant to turn over its stock and there was then no problem in meeting the lead-time for the Medina project. It would only take three days to transport any required product from Sydney to Perth. The email asked Mr Higgins for his views.
It appears that Mr Christian tried to contact Mr Higgins by telephone the next day, as he sent a further email to Mr Higgins on 7 May 2003 (Exhibit 52). This email said that he had sought to speak with Mr Higgins on that day regarding Sanwell. The email stated that there were aspects of the Sanwell offer which concerned the defendant, particularly the requirement of a container deposit and the cost burden that this imposed on Galvins for a "lousy return". In evidence Mr Christian explained that his understanding from the telephone conversation with Mr Higgins on 2 May 2003 was that Galvins would pay the 50 per cent deposit for the container upfront. He was concerned about the additional burden that this placed on Galvins. Mr Christian also stated that he assumed that Mr Higgins had not told Galvins what his buying prices were.
In the email of 7 May 2003 Mr Christian put the following five questions to Mr Higgins:
"1.Are you buying the consignment stock presently held at Malaga?
2.Who will purchase the additional stock to fill the container?
3.Will it be insisted that the container be a dedicated Sanwell one even if it is not full?
4.Are you insistent this exercise be only done as a container?
5.If it must be a container, why when we have already adequate stocks in Australia and therefore have to incur seafreight, duty and GST expenses on what is likely to be less than full container?"
Mr Christian asked Mr Higgins to "clear the air on these points before proceeding" and noted that he had still not received confirmation of the terms of the container proposal from Aquatherm GmbH.
On Thursday, 8 May 2003, Mr Christian sent a further email to Mr Higgins (Exhibit 53) emphasising that Mr Rosenberg had imposed the condition that the plaintiff purchase the existing consignment stock in his warehouse and that the plaintiff had still not indicated whether he accepted that condition.
The plaintiff replied on the same day by email to the defendant (Exhibit 54) with a copy to Mr Rosenberg. The email states the following:
"I am glad you have started to correspond by Email, as I can understand exactly what you are saying, unlike your hand written correspondence. Maybe you should also Email your packing lists to us, detailing exactly what we should expect to receive… It also allows me to clearly get my message across to you, without any thoughts of you NOT listening to me.
Again, as I said to you on the telephone last Friday afternoon & again yesterday, I have put a proposal to Sanwell, based on the offer I received from Dirk, with the amendments advised by Bernd to me. The offer was made in conjunction with Galvins & all parties are happy. It is of NO concern to you or me what margin Galvins have, if they are happy with it & it will get the order.
I intend to have the results of that offer, whether it is accepted or not by tomorrow evening, Friday 9/5/03.
It does NOT matter how many times you contact me, I do NOT expect an answer prior to this date & I will not discuss it with them until then, as I do not believe it is necessary. Until my guest goes back to Sydney, I am out of the office. I have a relationship with both my customers, Galvins & Sanwell, that I have built & nurtured over the past 8 years & do NOT need your assistance. Your only concern should be my ability to pay your bill, which is your decision. Apart from that, leave WA to me to handle, please."

The first method was based on the actual sales made during that period by the defendant and the application of an "expected" profit margin based on the trade price list used by the plaintiff as at January 2003 and the discounts then available to the plaintiff plus the direct costs (other than the acquisition costs) that would in all likelihood have been incurred by the plaintiff.
The second method was based not on what the defendant had actual sold during the period 13 May 2003 to 20 January 2006, but on the average of the historical sales made by the plaintiff over the period 2000 to 2003. Mr Neil also prepared a variant of this method which was based on the historical sales by the plaintiff during 2003 only, ie. the most recent sales.
The third method employed by Mr Neil was based on the actual sales made by the defendant in the relevant period together with the average margin obtained by the plaintiff according to the historical records and, as a variant of this, based on the average margin achieved by the plaintiff in 2003.
The problem with the calculations made by Mr Neil is that they did not address the possibility that the Court might hold that the 2003 Agreement was not for a three year term but for an indeterminate time and that this agreement might be terminable on reasonable notice. The information contained in Mr Neil's report in support of the various methods employed by him does not enable the Court to calculate the loss of profit suffered by the plaintiff for a period of two months after 13 May 2003. The information in support of the report is only broken down into the respective years and not into months.
If this matter were to go further and the plaintiff's loss of profits for a period, considered reasonable as a notice period, would become relevant, further evidence by Mr Neil would have to be presented. I would have been prepared to have based the calculation of the damages on the actual sales achieved by the defendant in the two months after 13 May 2003, as this was a period so close to the termination of the relationship with the plaintiff that the ability of Galvins to reach a wider customer base would not have had any great impact at that time. In my view the average margin achieved by the plaintiff in the financial year 2002/03 should then have been applied to the actual sales made by the defendant, as this was the most likely margin at which the plaintiff would have continued re-selling the Aquatherm products for another two months. However, on the information available to this Court, it is not possible to make this calculation.

Defendant's Counterclaim

The defendant made a counterclaim for damages in the total amount of $36,517.01 which represents various amounts due by the plaintiff to the defendant for sales of the Aquatherm products during certain periods both prior to and immediately after the termination of the agreement on 13 May 2003. As the plaintiff has admitted these amounts and that they are due, it is not necessary to deal with them in more detail.
I accordingly dismiss the plaintiff's claim for damages and allow the defendant's counterclaim for damages in the amount of $36,517.01. I also allow the defendant's claim for interest at the rate of 6 per cent per annum on the various amounts and from the dates as set out in a minute of proposed orders filed by the defendant.