Dem Compagnie P/L v Telxon Australia P/L

[2004] NSWCA 66

CITATION:	Dem Compagnie P/L & Ors v Telxon Australia P/L [2004] NSWCA 66
HEARING DATE(S):	12/11/03, 13/11/03
JUDGMENT DATE:	12 March 2004
JUDGMENT OF:	Meagher JA at 1; Handley JA at 17; Giles JA at 65
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	APPEAL - BREACH OF CONTRACT - EXPRESS TERMS - ORAL TERMS - ON-SELLING - CONTRACTUAL EXCLUSIVITY - DAMAGES - LOSS OF PROFITS - TRADE PRACTICES ACT (CTH) S 52 - INTEREST - GUARANTORS' LIABILITY - COSTS - Whether or not, by way of express terms, oral terms, estoppel, equity or other contractual bindings, the appellants had entered into an exclusive on-selling or re-selling arrangement with the opponent/respondent concerning particular opponent's products to a specific third-party purchaser - Held (2:1, per Meagher JA and Giles JA, Handley JA dissenting): Contract found to be incomplete due to inter alia express provisions which set out further (incomplete) requirements - Appeal dismissed with costs.
LEGISLATION CITED:	The Ophelia [1916] 2 AC 206 Trade Practices Act 1974
CASES CITED:	Allen v Tobias (1958) 98 CLR 367, 375 Jones v Dunkel (1959) 101 CLR 298 Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, 682, 693 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 CA Hillas & Co Ltd v Arcos Ltd [1923] All ER 494 Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20 Way v Latilla [1937] 3 All ER 759 HL 766 Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337, 350, 351 First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd's Rep 194 CA Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 61 Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd [1955] 2 QB 556 Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 Collings Construction Co Pty Ltd v Australian Competition and Consumer Commission (1998) 43 NSWLR 131 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 457
PARTIES :	Dem Compagnie Pty Limited & Eric Georges Dereu & Marylene Dereu v Telxon Australia Pty Limited
FILE NUMBER(S):	CA 41148 of 2002
COUNSEL:	A: J Simpkins SC R: M D Young
SOLICITORS:	A: Kalmath & McGhee Lawyers R: Dibbs Barker Gosling

LOWER COURTJURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	6968 of 2000
LOWER COURT JUDICIAL OFFICER :	Gamble ADCJ

CA 41148 of 2002

MEAGHER JA
HANDLEY JA
GILES JA

Friday, 12 March 2004

DEM COMPAGNIE PTY LIMITED & Ors v TELXON AUSTRALIA PTY LIMITED

FACTS:

The respondent developed and manufactured certain wireless handheld computer systems. It used the services of the second appellant in this industry, for several years, as an employee. The second appellant left the respondent’s employment in April 1997 and operated on his own behalf (including with his company, the first appellant, and with his wife, the third appellant), from June 1999 onwards. One of the appellants’ claims includes an alleged agreement with his former employer, the respondent, to on-sell their products to David Jones, including with exclusivity provisions, so that the appellant does not compete for this business with the respondent itself, ie the producer of the goods in question.
One question on appeal is whether or not the respondent entered into a Telxon Solution Partner Agreement with the second appellant, or if not, did the respondent become bound by the terms of such agreement by its conduct after 4 August 1999? If not, did the respondent become estopped from asserting the existence of the contract, was there any agreement between the parties, and if so, was there a breach and if so, what were the damages resulting from such breach? Further, was there a or any misrepresentation by the respondent concerning a contractual relationship with the appellants which would then entitle the first appellant to an award of damages under the Trade Practices Act 1970 (Cth)?
In the District Court proceedings these matters were held to be adverse to the plaintiffs (now appellants). The appellants appeal such findings.

THE DECISION (2:1, per Meagher JA and Giles JA, Handley JA dissenting):
Appeal dismissed with costs.

CA 41148 of 2002

MEAGHER JA
HANDLEY JA
GILES JA

Friday, 12 March 2004

DEM COMPAGNIE PTY LIMITED & Ors v TELXON AUSTRALIA PTY LIMITED

Judgment

1 MEAGHER JA: At all material times, the respondent Telxon Australia Pty Limited developed and manufactured certain wireless handheld computer systems, for use in various industries, and in particular in retail departmental stores. It sold these products and services in, inter alia, the Australian market. In this enterprise it made use, for many years, of the services of one of the appellants, Mr Eric Georges Dereu, who was at the time one of its employees.

2 Mr Dereu left Telxon’s employment in April 1997 and was operating on his own behalf after June 1999.

3 During the time of his employment he sold many of Telxon’s products to David Jones Limited, and after June 1999 was anxious to continue dealing with David Jones. The agreement which he sought was one whereby he bought the goods manufactured by Telxon from Telxon at a special price, and then resold them to David Jones at a higher price, Telxon promising not to sell to David Jones directly. His case is that he reached such an agreement with Telxon. Telxon denies that any such agreement ever came into existence. That is, basically, what this case is about – not, if I may say so, that you would realise it from reading the judgment of Gamble ADCJ.

4 In more precise form, the issues which called for resolution were: (a) was a written agreement (called by the parties a Telxon Solution Partner Agreement) actually executed by Telxon? (b) If not, did Telxon become bound by the terms of that document by reason of its conduct after 4 August 1999? (c) If these two questions are answered in the negative, did Telxon become estopped from asserting the existence of the contract: (d) If there was a contract between the parties (or the equivalent of a contract) was there a breach, and if so what were the damages? (e) In any event, was there a misrepresentation about the existence of a contract which would have entitled Dem Compagnie to an award of damages under the Trade Practices Act 1974?

5 Insofar as her Honour allowed these questions to be litigated, they were all answered adversely to the appellants. I might add that, for present purposes, the chief actor for the appellants was Mr E G Dereu; Mrs Dereu was his wife, and Dem Compagnie Pty Limited his private company.

6 When I mention the questions which her Honour allowed to be answered, I allude to the fact that she refused to permit the appellants to alter their pleadings so as to plead the estoppel referred to in (c) above. Her Honour’s decision in this regard seems to me to be plainly indefensible. As counsel for the plaintiffs (the present appellants) made clear, the estoppel relied on did not require the curial consideration of any facts other than those before the Court, so that no multiplication of issues, no unnecessary wastage of Court time, and no prejudicial effect on the defendant Telxon was involved. The mere fact that the application to amend was made at the last moment was not, of itself, enough to justify her Honour’s ruling; and it is not really surprising that she did not seek to justify, or even explain, it.

7 Nevertheless, despite her Honour’s misuse of her discretion in this respect, I am of the view that the actual orders which she made were correct and that the appeal should be dismissed with costs.

8 On all the issues listed above, the dispute centres around the document called a Telxon Solution Partner Agreement (“TSP Agreement”). A copy of such a document is in evidence; it was a “common form” agreement. Such a copy was obtained from Telxon by the appellants, who filled in most of the blanks, such as address and contact numbers, the date “28 July 1999”, and, most importantly, the words “David Jones” under the table headed “Current Key Accounts” immediately below a paragraph which stated:

“One of the key objectives of the TSP Program is to provide a source of additional revenue stream into our partner’s key accounts. To assist in this process and to ensure we do not compete in these strategic accounts, please list your top key accounts.”

This, at first sight, would seem to justify the promise “not to compete” relied on by the appellants.

9 The appellants did not know, and had no means of knowing, whether Telxon ever executed the TSP Agreement. In Court, Telxon denied that it had done so. However, to some extent, Telxon acted as if it had, conducting itself in a manner which would seem to be explicable only on the basis that they had.

10 In mid-1999 a Mr Simon Barnier was a sales executive employed by Telxon. He reported to a Mr John Harriott, the Director of Sales and Marketing, and Mr Harriott reported to a Mr Brian Lang, the Managing Director.

11 Before Mr Dereu executed his copy of the TSP Agreement, Mr Barnier said to him: “I’ve spoken to Brian Lang. We are prepared to offer you a reseller agreement in relation to the David Jones account.” On 29 July 1999 Mr Barnier sent an email to Mr Dereu headed “David Jones Partner Pricing” attaching the price schedule for David Jones (i.e. the prices which Telxon recommended the appellants should sell to David Jones). From this time onwards, for some little time, the appellants were in the position they wanted: they bought the goods direct from Telxon and sold them at a higher price to David Jones, and Telxon did not deal directly with David Jones. And, from about September 1999, Mr Dereu started receiving regular emails from Telxon addressed to “Dear Telxon Solution Partner”.

12 Between August 1999 and February 2000, things hotted up a little. In this period, the appellants procured sales of Telxon products and services to a number of David Jones sites, including their stores in Chadstone, Southland and Harbourtown. In order to procure these sales Mr Dereu would attend the prospective David Jones site, hold discussions with David Jones personnel as to their requirements and propose a system representing a total solution for the relevant site. The appellants would then purchase, supply, install, configure and test the equipment and software making up the system. For each of the sales, Telxon provided to Mr Dereu information as to the availability and pricing of Telxon products to enable the appellants to negotiate their contracts with David Jones. For each of their sales, Telxon sold the products to the appellants at their discount rates set out in Mr Barnier’s email of 11 August 1999.

13 And there was much other evidence besides this.

14 If one took account of the above material, and nothing else, there would, in my opinion, be a powerful case to support the appellants’ propositions. One would either infer that Telxon had in fact executed the TSP Agreement, or had agreed to be bound by its provisions, or at least were estopped from maintaining that its terms were not operative.

15 However, there seems to me at least one powerful factor which, even on its own, negatives all these possibilities. According to the TSP Agreement itself, it was to be signed “in conjunction with” a “Telxon Reseller Agreement Package (Terms and Conditions)”. It is a common ground that none of the appellants even executed such a package. In an affidavit Mr Lang swore: “At the time a partner entered into a Telxon Solution Partner Agreement, Telxon required that it simultaneously entered into a Telxon Reseller Agreement Package.” He was not cross-examined on this. At the hearing before us, I enquired of Mr Simpkins QC, learned senior counsel for the appellants, whether there was any evidence to the effect that this requirement was ever dispensed with or waived, and he replied in the negative. Therefore, on the appellants’ own admissions, a document vital to a TSP agreement was never executed by either party. This would alone be fatal to the appellants’ case, but it is doubly so if one reads the Package, which makes it quite clear that even when a TSP Agreement is operative, Telxon retains the right to deal directly with the clients of its “partner”.

16 In my view the appeal should be dismissed with costs.

17 HANDLEY JA: The appellant company (DEM) sued Telxon for damages for breach of contract and breach of s 52 of the Trade Practices Act 1974. Telxon cross-claimed for the price of goods sold and delivered and joined Mr and Mrs Dereu, the second and third appellants, as cross-defendants claiming under their guarantee of DEM’s debts. The proceedings were heard by Gamble ADCJ who gave judgment on 9 November 2002 dismissing the action and giving judgment on the cross-claim against DEM and its guarantors.

18 The appellants appeal against the dismissal of DEM’s action. There is no independent appeal against the judgments on the cross-claim.

19 DEM relied on a contract in Telxon’s standard form of Telxon Solution Partner Agreement (TSP Agreement) which it signed on 4 August 1999. Its case was that Telxon entered into this contract by signing the original and by its performance. The trial judge held that the TSP Agreement never came into force. DEM’s case on the TSP Agreement was fairly open on the pleadings, and there could be no suggestion that Telxon was taken by surprise.

20 DEM’s case was that on 15 July 1999 Mr Barnier, a sales executive employed by Telxon, sent Mr Dereu an e-mail with a blank copy of the TSP Agreement. On 28 July Mr Dereu returned the signed agreement by e-mail with some of the blanks filled in. On 2 August Mr Barnier sent another e-mail to Mr Dereu asking him to sign an original copy of the TSP Agreement. The e-mail continued “this will then be signed by Brian Lang/John Harriett and sent back to you. We need this complete to finalise the partnership agreement”. Mr Dereu went to Telxon’s offices on 4 August and signed a copy of the TSP Agreement in Mr Barnier’s presence.

21 The trial judge held that Mr Barnier had no authority to negotiate with Mr Dereu on behalf of Telxon but there was ample evidence to the contrary. Mr Barnier had been asked by the managing director Mr Lang to undertake these negotiations. He had no authority to sign the agreement as he made clear in his e-mail of 2 August but this does not establish any lack of authority to undertake the preliminary steps.

22 Mr Barnier gave the executed copy of the TSP Agreement to Mr Harriett. It was not produced by Telxon at the trial and it did not call Mr Harriett or explain his absence. The statement of claim filed during 2000 alleged that the TSP Agreement had been entered into in or about August 1999. The defence filed on 30 July 2001 expressly admitted this allegation but an amended defence filed on 8 May 2002 denied it. The belated denial appears to be a lawyer’s point which did not reflect the understanding of the businessmen involved.

23 Telxon’s list of discovered documents dated 18 February 2002 included among the documents which Telxon formerly had in its possession “original of the Telxon Solution Provider Agreement dated 4 August 1999” (2/415). Thus the list of documents, which was filed when the making of the agreement was admitted on the pleadings, contained a further admission about the agreement which was never formally withdrawn.

24 DEM relied on Telxon’s failure to produce the signed TSP Agreement. Its non-production was said to support an inference against Telxon in accordance with the principles in Allen v Tobias (1958) 98 CLR 367, 375 where the court quoted with approval from The Ophelia [1916] 2 AC 206, 229-30:

“if anyone by a deliberate act destroys a document which, according to what its contents may have been, would have told strongly either for him or against him, the strongest possible presumption arises that if it had been produced it would have told against him; and even if the document is destroyed by his own act, but under circumstances in which the intention to destroy evidence may fairly be considered rebutted, still he has to suffer. He is in the position that he is without the corroboration which might have been expected in his case.”

25 Mr Barnier told Mr Dereu that he would have the TSP Agreement signed by Mr Harriett on behalf of Telxon. The document was not produced and since its non-production was not explained the inference is that it had been deliberately destroyed. Mr Harriett, Telxon’s director of sales and marketing, was not called and his absence attracts the principles in Jones v Dunkel (1959) 101 CLR 298.

26 The judge rejected this part of DEM’s case because, as she said, the forms of the TSP Agreement in evidence did not include “the blank form as e-mailed to Mr Dereu or the form held by Mr Harriett”. She continued “both parties are therefore unable to produce a reliable copy of the document. In these circumstances it would be inappropriate to draw the inferences the plaintiffs suggests”. This reasoning cannot be supported. The blank form could not be produced because Mr Dereu had filled in some of the blanks and signed it before e-mailing it back to Mr Barnier. Its absence was fully explained and was a matter of no consequence. It could be reconstructed by ignoring the material inserted in the document e-mailed back to Mr Barnier.

27 DEM could not produce the document which, inferentially, was given to Mr Harriett. Only Telxon could ever have done this but her Honour seemed to think that its failure to produce that document in some way made it “inappropriate to draw the inferences the plaintiff suggests”. This is the opposite of the correct position because it is those very failures on Telxon’s part which make it appropriate for the court to draw inferences against it.

28 Two other reasons were given by the trial judge for rejecting DEM’s case on this issue. The first was the Mr Lang, Telxon’s managing director, instructed Mr Barnier not to enter into any arrangement with Mr Dereu or his company. Mr Simpkins SC who appeared for the appellants said that there was no such evidence from Mr Lang and Mr M D Young, who appeared for Telxon, did not seek to support this finding. The second reason, which her Honour described as “equally compelling” was that all this evidence was internal to Telxon, and its acceptance of the TSP Agreement was never notified to DEM. There was no express acceptance by Telxon of DEM’s offer made by delivery of the signed TSP Agreement. However there was ample evidence that Telxon acted for some months towards DEM as if it was a Telxon Solution Partner. This could only have been the case if the TSP Agreement was then in force.

29 Mr Barnier told his successor, Mr Woods, in late August that Mr Dereu was a partner through the partnership agreement and that Telxon would be supplying it equipment for resale to David Jones (black 198). Mr Woods sent e-mails to Mr Dereu (blue 1/5) on 1 October and 6 December 1999 referring to him as a Telxon Solution Partner (1/46, 49). In January 2000 he wrote enclosing a Telxon sales manual update, advising that “25% partner discounts” would apply to certain new items and listing in a table the current Telxon Solution Partner discounts (1/59A).

30 In September and October 1999 and February 2000 Telxon supplied equipment to DEM at substantial discounts. An e-mail of 29 July from Mr Barnier to Mr Dereu (1/19) was headed “David Jones Partner pricing”. The figures were amended by a letter from Mr Barnier of 11 August (1/40).

31 Although Telxon did not formally accept the offer made by DEM when the signed TSP Agreement was left with Mr Barnier, it accept it informally by its conduct in the succeeding months which treated it as a Telxon Solution Partner. The legal principles are well established: Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, 682, 693; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 CA.

32 Telxon also relied on the absence of a signed Telxon Reseller Agreement Package (TRAP Agreement). A statement on the cover sheet of the TSP Agreement said “to be signed in conjunction with the Telxon Reseller Agreement Package (Terms & Conditions)”. However Telxon made no attempt to have DEM sign such an agreement.

33 Following a meeting with Mr Lang and Mr Harriett in mid July 1999 Mr Barnier spoke to Mr Dereu and told him that Telxon was prepared to offer DEM a Reseller Agreement but it would have to sign a TSP Agreement. Mr Dereu asked for the document and a copy was sent by e-mail on 15 July without any TRAP Agreement. Mr Dereu was later told that he would have to sign an original copy of the TSP Agreement and he did so in the presence of Mr Barnier on 4 August. He was never given a copy of the TRAP Agreement and was never asked to sign such an agreement before or after 4 August. Indeed Mr Barnier in his e-mail of 2 August stated that Telxon required an original copy of the TSP Agreement to be signed “to finalise the partnership agreement”. Mr Barnier was called in DEM’s case but was not asked anything in cross-examination about the TRAP document, and it was not suggested to him that he had made a mistake in not getting a copy of it signed by Mr Dereu.

34 Whatever the general practice of Telxon may have been in requiring dealers to sign a TRAP Agreement it dispensed with any such requirement in this case. The absence of a signed TRAP Agreement did not prevent the TSP Agreement becoming a binding contract.

35 There were a number of gaps in the TSP Agreement left with Mr Barnier. Some of these related to information sought by the document which was not provided. The absence of this information does not mean that the contract was incomplete. Mr Barnier did not ask for this information when he was given the document or at any later time. The request for information which was not supplied was effectively waived.

36 The important gaps in the document related to the absence of an agreed discount rate and the absence of an agreed business plan. The agreement as a whole (1/24-36) was on Telxon stationery, and appeared to be in its standard form adopted on 11 February 1999. The copy retained by DEM contained a body of typed information which must have come from it. While some pages had no additions or alterations (1/26), others had been retyped to incorporate multiple references to DEM and information obtained from it (27-9), while on other pages information had been inserted in spaces provided (30, 32). It is evident from the copy e-mailed to Telxon on 28 July (1/99-113) that Mr Dereu had partly filled in the form e-mailed by Telxon on 15 July. It is also apparent that the material added by Mr Dereu was used in preparing the agreement which he signed on 4 August.

37 Giles JA has dealt with the provisions in the document signed by Mr Dereu in his judgment [paras 76-91]. I am in general agreement with his Honour’s analysis but, with respect, I do not agree with his conclusion in [para 86] on the effect of the provision dealing with Current Key Accounts.

38 The various gaps in the document where Mr Dereu did not provide the information that the document called for, apart from the absence of any figure in cl 3.1 for the discount that DEM would receive, are, in my judgment, of no importance. The gaps were evident in the document Mr Dereu sent back to Mr Barnier by e-mail on 28 July (1/99 & foll). Mr Barnier was not troubled by these gaps and when he responded on 2 August asking Mr Dereu to sign an original copy of the agreement he said nothing about them. Mr Barnier did not mention this matter when Mr Dereu signed the agreement on 4 August and nothing was said thereafter. These obvious gaps did not prevent Telxon admitting the existence of a TSP Agreement in its original defence and its list of documents.

39 Clause 3.1 provides:

“ Pricing
Telxon will grant D.E.M Compagnie a % discount from the current published price book. This price book is subject to change, hence please refer to the alliance manager for accurate and authorised pricing. This discount level is to be reviewed in 6 months from date of signing.”

40 The rate of discount was not filled in but the parties contemplated that some discount would be offered. Failure to agree on a figure does not mean that the TSP Agreement was void for uncertainty. The implication that a reasonable discount was to be allowed completed the contract. The relevant principles are well settled. In Hillas & Co Ltd v Arcos Ltd [1932] All ER 494 HL Lord Wright said at 503-4, 507:

“It is … the duty of the Court to construe such documents fairly and broadly, without being too astute or subtle in finding defects … [This] does not mean that the Court is to make a contract for the parties, or to go outside the words they have used, except insofar as there are appropriate implications of law as, for instance, the implication of what is just and reasonable to be ascertained by the Court as matter of machinery where the contractual intention is clear but the contract is silent on some detail. …
When the learned Lord Justice speaks of essential terms not being precisely determined, ie, by express terms of the contract, he is, I venture with respect to think, wrong in deducing as a matter of law that they must, therefore, be determined by a subsequent contract; he is ignoring … the legal implication in contracts of what is reasonable, which runs throughout the whole of modern English law in relation to business contracts … It is unnecessary … to multiply illustrations of this principle, which goes far beyond matters of price.”

41 See also Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20, 25-6, 27-8. The court’s approach to the task of fixing reasonable remuneration where the contract is silent is applicable. The process was explained in Way v Latilla [1937] 3 All ER 759 HL 766 by Lord Wright:

“… the amount to which the appellant is entitled is left at large, and the court must do the best it can to arrive at a figure which seems to it fair and reasonable to both parties, on all the facts of the case. One aspect of the facts to be considered is found in the communings of the parties while the business was going on. Evidence of this nature is admissible to show what the parties had in mind, however indeterminately, with regard to the basis of remuneration. On those facts, the court may be able to infer, or attribute to the parties, an intention that a certain basis of payment should apply.”

42 These parties dealt amicably with each other, presumably for mutual profit, between August 1999 and February 2000 and these dealings provide all the material a court would need to fix a reasonable rate of discount. I conclude therefore that the TSP Agreement was an enforceable contract. However many of its provisions were so vague as to be little more than laudatory representations and sales talk but these were severable. I see no reason why their presence should invalidate those parts of the agreement which were certain and intended on their face to create legal relations.

43 I come now to the critical provision on which the appellants relied, that dealing with DEM’s Current Key Accounts. It provided, under the heading Telxon Reseller Business Plan in cl 4:

“ Current Key Accounts
One of the key objectives of the TSP program is to provide a source of additional revenue stream into our partner’s key accounts. To assist in this process and to ensure we do not compete in the strategic accounts, please list your top key accounts.”

44 There was a table below headed on the left “Current Key Accounts” and on the right “Supplied Solution”. “David Jones” appeared in the left hand column and “RF”, standing for radio frequency, in the right.

45 This language has to be read in conjunction with other statements in the document which form part of the relevant background and context. Clause 1, headed “TSP Overview” included the following:

“The TSP program is based on one to one business relationship with our partners, where we underpin our relationship with high regard to the values of honesty, integrity and professionalism. Our objective is to protect our partners in joint business engagements and to eliminate or mitigate partner conflict.”

46 Clause 3.1 and 3.3 under the heading “Obligations” provided:

1. D.E.M. Compagnie and Telxon will work together in external marketing efforts …
…
3. D.E.M. Compagnie and Telxon will jointly develop and execute sales and marketing plans .” (emphasis supplied)

47 Telxon contended that the critical provision was only a representation of its present intention and imposed no contractual obligation. I am unable to accept this. Clause 3.3 provided that the companies “will jointly develop and execute sales and marketing plans”. Clause 4, headed “Telxon Reseller Business Plan” did not refer in terms to sales or marketing plans, the expression found in cl 3.3, but cl 4 was such a plan.

48 The opening sentence of the critical provision reads “One of the key objectives of the TSP program is to provide a source of additional revenue stream into our partner’s key accounts”. This was in the nature of a recital and not promissory. However it was an agreed statement of “the genesis” and “the aim, object or commercial purpose” of what followed, to borrow some of the language of Sir Anthony Mason in Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337, 350, 351. The opening sentence is relevant when construing what follows.

49 The statement, already quoted from cl 1, that Telxon’s objective “is to protect our partners in joint business engagements and to eliminate or mitigate conflict,” in the nature of a recital and not promissory, is relevant when construing the critical statement “to ensure we do not compete in the strategic accounts”.

50 The parties contemplated that marketing activities undertaken by DEM with David Jones would involve the sale of Telxon’s equipment. This is what happened until February 2000 when Telxon withheld realistic quotes from DEM and dealt directly with David Jones.

51 Until then marketing Telxon’s products to David Jones was a “joint business engagement”. The only way that Telxon could eliminate or mitigate partner conflict in such a situation was “to ensure” that it did “not compete”.

52 I therefore approach the critical provision with a strong predisposition in favour of a construction which would give it an effective operation for the benefit and protection of a Telxon partner.

53 If the provision is construed as nothing more than a representation of Telxon’s then present intention it will have no practical effect. The protection it appears to confer on a Telxon partner will be completely illusory. In this context the statement by Steyn LJ in First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd’s Rep 194 CA, 196 is relevant:

“A theme that runs through our law of contract is that the reasonable expectations of honest men must be protected. It is not a rule or principle of law. It is the objective which has been and still is the principal moulding force of our law of contract. … If the prima facie solution to a problem runs counter to the reasonable expectations of honest men, this criterion sometimes requires a rigorous re-examination of the problem to ascertain whether the law does indeed compel demonstrable unfairness.”

54 A construction of the critical provision which treated it as illusory would defeat the purpose identified by Steyn LJ. Moreover in Hillas & Co Ltd v Arcos Ltd [1932] All ER 494 HL, 499 Lord Tomlin said:

“… the problem for a court of construction must always be so to balance matters that, without violation of essential principle, the dealings of men may as far as possible be treated as effective, and that the law may not incur the reproach of being the destroyer of bargains.”

55 Courts have to determine whether oral statements during negotiations have contractual force as terms of the contract or as oral collateral warranties. The relevant principles are those stated by Gibbs CJ in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 61:

“A representation made in the course of negotiations which result in a binding agreement may be a warranty … in one of two ways: it may become a term of the agreement itself, or it may be a separate collateral contract … In either case the question whether the representation creates a binding contractual obligation depends on the intention of the parties. In J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435, 442 and Ross v Allis-Chalmers Australia Pty Ltd (1980) 55 ALJR 8, 10-11, it was said that a statement will constitute a collateral warranty only if it was ‘promissory and not merely representational’, and it is equally true that a statement which is ‘merely representational’ …. will not form part of the main contract. If the parties did not intend that there should be contractual liability in respect of the accuracy of the representation, it will not create contractual obligations. [A party cannot] rely on his secret thoughts to escape liability, if his representations were reasonably considered by the persons to whom they were made as intended to be contractual promises, and if those persons intended to accept them as such. The intention of the parties is to be ascertained objectively … In other words, as Lord Denning said in Oscar Chess Ltd v Williams [1957] 1 WLR 370, 375: ‘… If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice’.”

56 This was a dissenting judgment on the present point but the majority did not disagree with this statement of principle.

57 Where the oral statement was in the form of representation as to past or existing facts proof of contractual intent will not be easy. The same difficultly does not arise if the statement was promissory in form and related to the future conduct of the promisor. In the present case the critical phrase “to ensure we do not compete in these strategic accounts” was promissory in form and was linked with Telxon’s request in the document that DEM list its top key accounts. The natural construction is “if you do this we will do that”.

58 In my judgment the critical provision was sufficiently certain and had contractual force. Any residual doubts should be resolved in favour of DEM by construing the document against Telxon which proffered it. This would accord with the principle of construction embodied in the Latin maxim “contra proferentum”. Giles JA finds that “the relevant words conveyed an intention on Telxon’s part to avoid competing with DEM in relation to David Jones”. I agree with respect but think that the other matters I have referred to require the further, very small step of finding that the words were also promissory.

59 The critical provision construed as contractual conferred real protection on DEM and would not be ineffective or uncommercial. The TSP Agreement did not provide expressly for its duration or termination. It could therefore be determined on reasonable notice given at any time: Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd [1955] 2 QB 556. The agreement was not terminable instantly at will. Termination pursuant to notice would not affect accrued rights, and the length of notice required depends on the facts when the notice is given. Above at 581. Telxon could not compete with DEM during the period of notice, and the notice would have to be long enough to give DEM a reasonable opportunity to bring current negotiations to a successful conclusion. Telxon did not give notice of termination at any stage.

60 I would therefore hold that in February 2000 when Telxon began to deal directly with David Jones it committed a breach or breaches of that part of cl 4 which imposed on it a contractual obligation not to compete with DEM in that strategic account.

61 The claim in estoppel which the trial judge wrongly refused to allow to be added by amendment, in the result added nothing to the claim in contract that had been pleaded, and need not be further considered.

62 I agree with Giles JA that the appellants failed to prove any damage flowing from Telxon’s breach of s 52 of the Trade Practices Act when read with s 51A(2).

63 Telxon pleaded repudiatory breaches by DEM of alleged express and implied terms in the contract and breaches of fiduciary duty, and its termination of the contract. The trial judge did not decide these matters but they were raised by Telxon’s notice of contention. It is clear that DEM was not in a fiduciary relation with Telxon: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41. Substantial evidence was led in support of this part of Telxon’s case which it had not relied on in and after February 2000 to justify its conduct in dealing directly with David Jones. However Mr Young submitted that this did not matter and cited in support Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359. That case establishes that termination of a contract for breach can be supported by evidence of breaches which were not relied upon by the terminating party at the time and of which it was not then aware. The fatal difficulty with this submission is that Telxon did not purport to terminate the contract for breach.

64 In my judgment therefore the appellants have proved a breach of contract by Telxon and the appeal should succeed. The trial judge did not assess the damages for Telxon’s breach of contract because she held that there was no contract. Although the parties addressed the issue of damages in their written submissions the Court intimated that if it found that there had been a breach of contract by Telxon the issue of damages would be remitted to the District Court (T 13/11/03 p116). I would therefore propose the following orders:

1. Appeal allowed with costs.

2. Judgment of the District Court set aside.

3. Judgment for DEM for damages to be assessed for breach of contract.

4. Proceedings remitted to the District Court for assessment of such damages by a judge other than Gamble ADCJ on the existing evidence without prejudice to the discretion of the trial judge to admit further evidence by leave.

5. Costs of the original trial to abide the order of the judge conducting the assessment.

6. Telxon to have a certificate under the Suitors’ Fund Act in respect of the costs of the appeal if qualified.

65 GILES JA: The appellant DEM Compagnie Pty Ltd (“DEM”) claimed from the respondent Telxon Australia Pty Ltd (“Telxon”) damages for breach of contract and recovery of loss suffered by conduct in contravention of s 52 of the Trade Practices Act 1974 (“the Act”). Telxon cross-claimed against DEM to recover the price of goods sold to DEM and against Mr Eric Dereu and Mrs Marylene Dereu, the persons behind DEM, as guarantors of payment for the goods. Mr and Mrs Dereu relied on the same contravening conduct as was relied on by DEM for their defence to the claim against them as guarantors, asserting unconscionability in equity and entitlement under the Act to have the guarantees declared void.

66 Although the adequacy of the pleading was in dispute, DEM submitted at the trial that the contract had been made expressly, upon Telxon’s execution of a document entitled the Telxon Solution Partner Agreement (“the TSP Agreement”), or alternatively that the making of a contract in the terms of the TSP Agreement should be found from the conduct of the parties in acting upon and in accordance with that document. DEM applied for leave to amend to rely on a contract in the terms of the TSP Agreement arising by estoppel, but leave was refused. A number of terms of the contract were pleaded, the term relevant to the breach on which DEM relied being in essence that Telxon would not supply or offer to supply its goods and services directly to DEM’s customers. Whether the TSP Agreement contained such a term was itself in contention. The judge held that the contract on which DEM relied had not been made. She declined to infer from circumstantial evidence that the TSP Agreement had been executed by Telxon, and did not think that the evidence of the conduct of the parties was sufficient to find a contract in the terms of that document.

67 The conduct in contravention of s 52 of the Act was pleaded as a number of representations made without reasonable grounds. The representations took up the pleaded contractual terms. The only representation arguably made without reasonable grounds corresponded to the term already mentioned, that Telxon would not supply or offer to supply its goods and services directly to DEM’s customers. Again the adequacy of the pleading was in dispute, DEM relying at the trial on a representation that a contract in the terms of the TSP Agreement was in place. The judge’s reasons are not particularly clear, but she considered that the representation on which DEM and the Dereus relied was outside the pleaded case and in any event said that she was not satisfied that Telxon had failed to disclose or had misrepresented “the nature of the arrangements” between Telxon and DEM. She also appears to have found that there was not reliance on the representations. These findings flowed through to rejection of the Dereus’ defences.

68 Central to DEM’s contract claim was the promise it said was to be found in the TSP Agreement, that Telxon would not supply or offer to supply its goods or services directly to DEM’s customers. Central to DEM’s claim under the Act and the Dereus’ defences was the representation they said was to be found in the TSP Agreement, again that Telxon would not supply or offer to supply its goods or services direct to DEM’s customers. That the TSP Agreement contained the promise was necessary in order that there be relevant breach of contract. That the TSP Agreement contained the representation was necessary, although not sufficient, in order that there be contravention of s 52 of the Act or unconscionability in equity. There was no promise or representation to DEM or the Dereus as to that element of the relationship between them otherwise than through the ASP Agreement.

69 Telxon manufactured wireless handheld computer systems, including systems for use in stock control in commercial enterprises such as department stores. It sold the systems directly to end-users and to organisations which re-sold them to end-users.

70 For some years prior to April 1997 Mr Dereu had been employed by Telxon as Director Sales and Marketing. On his leaving that employment he and an associate, through Wireless Access Tech Pty Ltd (“Wireless Access”), entered into a two year Sales Representation Agreement with Telxon. Under the agreement Wireless Access was appointed as Telxon’s representative “to assist Telxon entering in Contracts with the Clients” (cl 1). It was entitled to a periodical fixed payment from Telxon plus commission on contracts obtained through its endeavours (cll 8, 7). Its appointment was non-exclusive and Telxon “can otherwise deal or appoint others to deal with Clients as Telxon sees fit.” (cl 6).

71 At the end of the two years Telxon told Wireless Access that it did not wish to renew the agreement on the same terms. Mr Dereu’s associate retired. Accordingly, there were discussions about a new arrangement between Telxon and Mr Dereu.

72 The Clients with which Wireless Access dealt as Telxon’s representative included David Jones Ltd (“David Jones”). There was conflict between the witnesses as to the discussions, which the judge did not resolve. At best for DEM and the Dereus, in the discussions Mr Dereu was told that Telxon was prepared to offer him a reseller agreement and he would have to sign a Telxon Solution Partner Agreement, that he could keep dealing with David Jones, and that Telxon would sell to him at a discounted price and he would have to re-sell to David Jones at Telxon’s list price.

73 Mr Simon Barnier of Telxon sent to Mr Dereu by e-mail a blank form of TSP Agreement. Mr Dereu filled in details and e-mailed it back. He later went to Mr Barnier’s office and signed a document in the form as he had completed it.

74 In the view that I take, it is not necessary to decide whether the TSP Agreement was contractual because executed by Telxon or because of the conduct of the parties. I will assume that it was, but I do not think that the promise on which DEM relied was to be found in it.

75 The first page of the TSP Agreement began with a box for details of the “Reseller”. This box was completed with the name of DEM and other details. Lower down the page were the words “This Agreement shall commence on the date of execution by Telxon (the ‘effective date’)”, hence the question of execution of the document found adversely to DEM by the judge. Below this was provision for execution by Telxon and by DEM, including statements of “effective date”. Below this again, although without an earlier asterisk to which it might be referable, was -

“* To be signed in conjunction with Telxon Reseller Agreement Package (Terms & Conditions)”.

76 The next page of the TSP Agreement was a Table of Contents. It was -

“1. TSP Overview 3
2. Objectives 4
3. Obligations 5
4. Telxon Reseller Business Plan 7
5 TSP Market Plan Initiatives 10
6. Approvals 11
7. Appenedix [sic] 12
7.1 Telxon Australia Pty Ltd – Contacts”

77 The TSP Overview on page 3 was a eulogy of “Telxon’s Solution Partner (TSP Program)”, conveying that what were called Telxon partners would benefit in many ways from participation in the programme. What participation in the programme meant was not clear, and was apparently to be found in what Telxon thereafter made available to the partners. The page ended -

“The TSP program is based on one to one business relationship with our partners, where we underpin our relationship with high regard to the values of honesty, integrity and professionalism. Our object is to protect our partners in joint business engagements and to eliminate or mitigate partner conflict.”

78 Page 4 dealing with Objectives read -

“1. DEM compagnie to be recognised by Telxon as a ‘Telxon Solution Partner (TSP), both internally within Telxon and externally in the market.
2. DEM compagnie to go-to-market with Telxon’s comprehensive suite of wireless mobile information system products and support services, to the Australian corporate market place.
3. Enhance and complement DEM compagnie core competencies and market focus in the following key vertical and horizontal markets.
[Here was a table of markets, ticked as to ‘Retailing’ and ‘Others’.]
4. Establish a target account list in the above markets for joint Telxon/DEM compagnie marketing activities.
5. DEM compagnie to collaborate with Telxon on the definition, design and implementation of joint go-to-market strategies and business plans.
6. Ensure that DEM compagnie consultants, engineers and sales people be adequately trained on Telxon technologies and products, and are thereby able to appropriately recommend Telxon based solutions.”

79 Pages 5 and 6 dealing with Obligations began -

“1. DEM compagnie and Telxon will work together in external marketing efforts that may include, but not necessarily DEM compagnie be limited to, press releases, advertising, joint use of logos, joint web links, white papers, customer references, case studies, client seminars and industry conferences.
…
3. DEM compagnie and Telxon will jointly develop and execute sales and marketing plans.
4. DEM compagnie and Telxon will establish an escalation process to facilitate resolution of critical account situations in a timely manner.”

80 Following paragraphs up to para 11 dealt with staffing and nominated personnel, provision by DEM of sales forecasts, and provision by Telxon of sales and technical resources to assist DEM and “continual updated training, product and sales information and material”. There was then a provision, out of the numbering system but clearly enough to be a Telxon obligation -

“ 3.1 Pricing
Telxon will grant DEM compagnie a __% discount from the current published price book. This price book is subject to change, hence please refer to the alliance manager for accurate and authorised pricing. This discount level is to be reviewed in 6 months from date of signing.
Telxon products used by DEM compagnie for demonstration and internal use to be granted a 50% discount from published list price.”

81 Pages 7 to 9 dealing with Telxon Reseller Business Plan had beneath that heading “To be completed by Applicant”. Some parts of what followed to low down on p 8 were completed, other parts were not. The effect of the completed parts was that according to DEM’s business plan its region was New South Wales, its “Revenues” was $150,000, its primary market was “Retail” and it had a sales staff of one. Parts dealing with secondary markets, a description of business activities and identifications of “Software Platforms, Hardware Platforms and Network Interfaces” and of “Proprietary Application(S)” [sic] were not completed. A space for “Comments” on p 7 was not completed.

82 Commencing low down on p 8 and going to the end on p 9 were two paragraphs. I have underlined in the first of these the words said to be the source of the promise and the representation. The paragraphs were -

“ Current Key Accounts

One of the key objectives of the TSP programme is to provide a source of additional revenue stream into our partner’s key accounts. To assist in this process and to ensure we do not compete in these strategic accounts , please list your top key accounts.

No	Current Key Accounts	Supplied Solution
1.	David Jones	RF
2.
3.
4.
5.
6.
7.
8.
9.
10.

Proposed Target Accounts
In conjunction with Telxon to assist in qualifying and profiling your existing target market and accounts, list the top TSP targeted accounts.

No	Current Key Accounts	Supplied Solution
1.	David Jones	RF
2.	BBC	RF
3.	Harvey Norman	RF
4.
5.
6.
7.
8.
9.
10.

83 Page 10 dealing with TSP Market Plan Initiatives was a calendar and activity table apparently intended to show a plan for sales and marketing activities over a period. It was not completed.

84 Page 11 dealing with Approvals provided for identification of “Telxon Products Targeted For Reselling” and for forecast quarterly and yearly dollar amounts for Purchasers. At its end, under the word “Approvals”, there was provision for signature of the Applicant and of Telxon’s National Alliance Manager and Director of Sales & Marketing, presumably by way of agreement on the marketing intention and expectation. It also was not completed.

85 Pages 12 and 13, the Appendix, was a Telxon contact list.

86 It was submitted that the words “to ensure we do not compete in these strategic accounts” meant that Telxon promised or represented that it would not supply or offer to supply its goods and services directly to DEM’s customers. On any view it would be difficult to find that promise or representation, since the paragraph was directed only to DEM’s current key accounts and the nomination of David Jones. The wrongful conduct on which DEM and the Dereus relied was Telxon dealing directly with David Jones. The more specific promise or representation would probably suffice for DEM and the Dereus, that Telxon promised or represented that it would not compete with DEM in dealing with David Jones.

87 From the asterisked reference to the Telxon Reseller Agreement Package (Terms and Conditions) (“the TRAP Agreement”), the TSP Agreement was intended to be accompanied by a more formal agreement regulating the relationship between Telxon as supplier and the partner as reseller. Mr Dereu’s evidence as to receipt of a TRAP Agreement was varied, but there was insufficient to establish that, to the extent that the terms of the TSP Agreement were in force between the parties, the terms of the TRAP Agreement were also in force between them in conjunction with the terms of the TSP Agreement. It is a matter of interest, but no more, that the terms of the TRAP Agreement made clear that Telxon could deal directly with its reseller’s customers. But the fact that on its face the TSP Agreement was intended to be accompanied by the more formal agreement suggests restraint in giving all the contents of the document the effect of stating contractual obligations.

88 The TSP Agreement began with the TSP Overview in language distant from that of legal obligation. It then moved to the Objectives, more apt to found legal obligations but clearly enough not intended to do so: for example, it can not have been intended that DEM would be in breach of contract if it failed to “go-to-market” in the manner described in the objective in para 2, and it is unlikely to have been intended that the parties be legally bound to the vagueness of enhancing and complementing DEM’s core competencies and market focus (see the objective in para 2). In these pages the TSP Agreement was not stating contractual obligations. It was setting the scene for the express statement of obligations in the Obligations pages.

89 The Obligations pages then stated contractual obligations, in language not without difficulty but appropriate enough for obligatory provision of information one to the other and devotion of resources by each for the development and execution of sales and marketing plans. Not specifically stated, but clear enough from the rest of the document, was that DEM would purchase goods from Telxon and resell them, so the sales and marketing plans would be plans for sales and marketing by DEM to which Telxon would lend its know-how and expertise. But there was the all-important statement, albeit left incomplete, of the price at which Telxon would sell to DEM.

90 The following pages then moved away from contractual obligations. Taking them in reverse order, the contact list was information for DEM’s assistance; the Approvals page, if completed, would have recorded DEM’s intention and expectation and Telxon’s agreement upon them, but DEM would not have been in breach of contract if, for example, it had failed to achieve the forecast dollar amounts; and the TSP Market Plan Initiatives, if completed, would have been of a similar nature. The Telxon Reseller Business Plan pages, then, were again DEM’s intention and expectation, plainly coming from DEM (because “To be completed by Applicant”) as information provided to Telxon. DEM would not be in breach of contract if its region was not NSW (in fact the contentious dealing with David Jones was in Western Australia), if its revenue was not $150,000, if it moved to a primary market of manufacturing or finance rather than retail, or if its sales staff became two.

91 The identification of Current Key Accounts and Proposed Target Accounts should be seen in this setting. They were information provided by DEM to Telxon. The purpose in providing the information was made tolerably clear. For the Proposed Target Accounts it was so that Telxon could “assist in qualifying and profiling your existing target market and accounts”. For the Current Key Accounts it was to assist in the TSP programme providing “a source of additional revenue stream into our partner’s key accounts” and “to ensure we do not compete in these strategic accounts”. There was no contractual obligation on Telxon to qualify and profile DEM’s existing target market and accounts, save so far as pursuant to the express obligations earlier set out Telxon lent its know-how and expertise to the development and execution of DEM’s sales and marketing plans. There was no contractual obligation on Telxon to provide a source of additional revenue stream into DEM’s key accounts, whatever that may have meant, save so far as Telxon’s performance pursuant to the express obligations earlier set out would hopefully promote that result. Telxon could simply take into account in doing what it was otherwise obliged to do that the current and target accounts were as DEM informed it. I do not think that the words on which reliance was placed, “and to ensure we do not compete in these strategic accounts”, were in a different category. They may have expressed an intention on Telxon’s part to avoid competing with DEM in relation to David Jones, but they did not impose a contractual obligation not to compete.

92 That this is a correct understanding of the TSP Agreement is supported by the following considerations. If DEM acquired other key accounts, for example BBC and Harvey Norman identified as the top targeted accounts, it would seem that the obligation not to compete would not inhibit Telxon from dealing directly with them. Conversely, if David Jones ceased to be a DEM customer, or a key account, it would seem that Telxon could deal directly with it. If Telxon was inhibited in dealing directly with after-acquired accounts (or accounts afterwards regarded by DEM as key accounts), or with an account once but no longer a DEM key account, Telxon could be exposed to deprivation of its own accounts if DEM chose to direct its attention to them and to inability to deal with the former DEM customer. The utility of the obligation if found is doubtful, the scope for uncertainty and dispute is wide, and while the law can resolve uncertainty and dispute the uncommercial operation of this part of the TSP Agreement, if it were to state a contractual obligation, is a further reason why in its setting the identification of the Current Key Accounts does not do so.

93 The courts should be disposed to uphold and give meaning to contracts of commercial men. The contracts should be approached “fairly and broadly, without being too astute or subtle in finding defects” (Hellas & Co Ltd v Arcos Ltd (1932) All ER 494 at 503; if, as has been suggested, this applies only to documents drawn without legal assistance, the TSP Agreement appears to be of that kind). But commercial men sometimes fail effectively to make a contract, or to make a contract which regulates their relationship as one or other of them thinks it does, and they sometimes maintain a relationship which is found to be wanting in law when put to the test. In my opinion, that is so in the present case.

94 I accept that the relevant words conveyed an intention on Telxon’s part to avoid competing with DEM in relation to David Jones. This could be misleading conduct in contravention of s 52 of the Act if it were seen as a representation of a present intention but the intention was not in fact held, or if it were seen as a representation as to Telxon’s future conduct but Telxon did not have reasonable grounds for making the representation. DEM and the Dereus pleaded the representation in the latter way, and so pursuant to s 51A(2) of the Act Telxon was deemed not to have reasonable grounds for making the representation unless it adduced evidence to the contrary.

95 Telxon did not adduce evidence to the contrary. Its case was that at all times it considered itself free to deal directly with David Jones. Accordingly, the way was open for DEM to recover any loss it proved it suffered by Telxon’s misleading conduct, and for the Dereus to have their guarantee declared void if that was an appropriate way of dealing with loss they were likely to suffer by Telxon’s misleading conduct.

96 DEM set out to prove the profits it would have made from dealing with David Jones. That was the correct measure of loss for its claim in contract, but it was not the measure of any loss it suffered by Telxon’s misleading conduct. The words of ss 82 and 87 of the Act must be applied, without necessary analogy with damages in tort or for breach of contract. But the compensable loss is loss suffered by the conduct contravening the Act, requiring causation, and commonly “a comparison must be made between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct”: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at [42] per McHugh, Hayne and Callinan JJ. If it is shown that, but for the contravening conduct, the plaintiff would have entered into a profitable contract, the lost profit may be a proper measure of loss. If the contravening conduct is misrepresenting a benefit and it is shown that, but for the misleading and deceptive conduct, the plaintiff would have entered into a contract which would have returned that benefit, the lost profit as a proper measure of loss may correspond with the damages if the benefit were contractual: Marks v GIO Australia Holdings Ltd at [20] per Gaudron J. Neither causal path is here material.

97 Mr Dereu, who for this purpose was DEM, did not give evidence that he would not have acted as Telxon’s reseller at all, or would not have dealt with David Jones, if he had known that Telxon considered itself free to deal directly with David Jones. His evidence, noted below, was directed to a belief that he had a contract in the terms of the TSP Agreement. It did not extend to what he would otherwise have done. It may be that implicit in the judge’s finding of no reliance on the representations was a finding adverse to DEM in this respect. However, it does not matter, because DEM did not prove its loss otherwise than by the loss of profits. It did not prove that it would have “acted in some way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted”: Marks v GIO Australia Holdings Ltd at [48] per McHugh, Hayne and Callinan JJ.

98 DEM relied on Collings Construction Co Pty Ltd v Australian Competition and Consumer Commission (1998) 43 NSWLR 131. A wide interpretation of the relief which may be granted under s 87 of the Act was there adopted, warranting damages extending to the cost of demolition and rebuilding of defective homes less the contract prices. The Court was at pains to make clear that the damages were not for “expectation loss”, see at 144. The facts were very different, and I do not think it can be said that DEM’s lost profits were loss suffered by Telxon’s misleading conduct.

99 Mr Dereu gave evidence that he signed the guarantee “relying on the TSP Agreement”, and that he had the belief that “a TSP contract or agreement was in place”. He said that the basis for the belief was his signature of the TSP Agreement at Mr Barnier’s office, the acceptance by Telxon of some orders which he thereafter placed with Telxon, and some e-mails addressing DEM as a Telxon Solution Partner. He said that he read the paragraph under Current Key Accounts, but said no more. Mrs Dereu did not give evidence, nor did Mr Dereu give evidence concerning her signature of the guarantee. The pleaded case was not misleading conduct in relation to the existence of a contract in the terms of the TSP Agreement, but relevantly misleading conduct in relation to Telxon dealing directly with DEM’s customers. There was no evidence from the Dereus of a belief, from the TSP Agreement and at the time they gave the guarantee, that Telxon would not supply or offer to supply its goods and services directly to DEM’s customers, or would not compete with DEM in dealing with David Jones. I do not think the evidence supported the pleaded case of entry into the guarantee in reliance on Telxon’s misleading conduct, nor was there failure to disclose the unexpected in the relationship between Telxon and DEM within the principle considered in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 457.

100 Although not for the reasons give by the judge, her orders should be upheld. I propose that the appeal be dismissed with costs.

******

Last Modified: 03/12/2004