Fortron Automotive Treatments Pty Ltd v Jones & Ors (No.2) - [2009] FMCA 322

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FORTRON AUTOMOTIVE TREATMENTS PTY LTD v JONES & ORS (No.2)

[2009] FMCA 322

TRADE PRACTICES – Misleading or deceptive conduct – alleged product substitution scheme.

EVIDENCE – Whether no case to answer.

Corporations Act 2001 (Cth), s.182(1)
Fair Trading Act 1987 (WA), ss.68, 79
Federal Magistrates Act 1999 (Cth), ss.21-23
Trade Practices Act 1974 (Cth), ss.75B(1)(a) & (c), 82

ACCC v Giraffe World Australia Pty Ltd (No 2) (1999) 95 FCR 302; [1999] FCA 1161
Australian Competition & Consumer Commission v Amcor Printing Papers Group Ltd & Ors (2000) 169 ALR 344; [2000] FCA 17
Australian Competition and Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17
Fortron Automotive Treatments Pty Ltd v Jones and Ors (2008) 222 FLR 1; [2008] FMCA 622
Hamilton v Whitehead (1988) 166 CLR 121
Jones v Dunkel (1959) 101 CLR 298
King v GIO Australia Holdings Ltd (2001) 184 ALR 98; [2001] FCA 308
Protean (Holdings) Ltd (Receivers and Managers appointed) & Ors v American Home Assurance Co [1985] VR 187
Quinlivan v ACCC (2004) ATPR 42-010; [2004] FCAFC 175
Rasomen Pty Ltd v Shell Company of Australia Ltd (1997) 75 FCR 216
Residues Treatment & Trading Co Ltd v Southern Resources Ltd (1989) 52 SASR 54
Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR 40-940
Yorke v Lucas (1985) 158 CLR 661

Applicant:

FORTRON AUTOMOTIVE TREATMENTS PTY LTD

First Respondent:

KENNETH JOHN JONES

Second Respondent:

TREBLEX AUTOMOTIVE PRODUCTS PTY LTD

Third Respondent:

SHEILA MARY JONES

Fourth Respondent:

WILLIAM PATRICK TULLY

Fifth Respondent:

HELEN GEORGINA TULLY

Sixth Respondent:

GAMMAR GROUPS (THAILAND) CO LTD

File Number:

PEG 172 of 2007

Judgment of:

Lucev FM

Hearing date:

14 May 2008

Date of Last Submission:

14 May 2008

Delivered at:

Perth

Delivered on:

13 May 2009

REPRESENTATION

Counsel for the Applicant:

Mr G Rabe

Solicitors for the Applicant:

Stables Scott

Counsel for the First to Fifth Respondents:

Ms G A Archer SC

Solicitors for the First to Fifth Respondents:

Sonia Edwards & Associates

Sixth Respondent:

No appearance

ORDERS

That the first to fifth respondents’ application for dismissal of the application (save as to breach of fiduciary duty against the fourth respondent) on the basis that there is no case to answer:
(a)be dismissed in relation to the first, second and fourth respondents; and
(b)be upheld in relation to the third and fifth respondents, accordingly that in relation to the third and fifth respondents that the application be dismissed.
The parties are to confer by 4.00pm on 15 May 2009 as to whether further mediation of the application might assist in resolution of the application.
The matter be adjourned to a directions hearing at 10.15am on 18 May 2009 for further directions as to:
(a)further mediation of the application, if any; and
(b)further hearing of the application, and in this regard, all parties are to provide available dates for further hearing to the Court by 4.00pm on 15 May 2009.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 172 of 2007

FORTRON AUTOMOTIVE TREATMENTS PTY LTD

Applicant

And

KENNETH JOHN JONES

First Respondent

TREBLEX AUTOMOTIVE PRODUCTS PTY LTD

Second Respondent

SHEILA MARY JONES

Third Respondent

WILLIAM PATRICK TULLY

Fourth Respondent

HELEN GEORGINA TULLY

Fifth Respondent

GAMMAR GROUPS (THAILAND) CO LTD

Sixth Respondent

REASONS FOR JUDGMENT

Introduction

The substantive application in this case alleges that the respondents were knowingly involved in a dishonest product substitution scheme and negligently breached duties that they owed to the applicant, Fortron Automotive Treatments Pty Ltd.[1]
[1] “Fortron”.
In this case the first to fifth respondents, Mr Jones, Treblex Automotive Products Pty Ltd,[2] Mrs Jones, Mr Tully and Mrs Tully[3] allege that they have no case to answer, save for the allegations of breach of fiduciary duty against Mr Tully. The sixth respondent, Gammar Group (Thailand) Co Ltd[4] has not appeared.
[2] “Treblex”.
[3] Collectively “the respondents”.
[4] “Gammar”.
In a previous judgment of this Court the Court held that the above respondents were not required to make an election before making their no case submission.[5]

Legal principles

[5] See Fortron Automotive Treatments Pty Ltd v Jones and Ors (2008) 222 FLR 1; [2008] FMCA 622.

General

In determining a no case submission the Court must consider its ultimate aim to be the attainment of justice.[6]
[6] Rasomen Pty Ltd v Shell Company of Australia Ltd (1997) 75 FCR 216 at 224 per von Doussa, Drummond and Finn JJ (“Rasomen”); Australian Competition & Consumer Commission v Amcor Printing Papers Group Ltd & Ors (2000) 169 ALR 344 at 357 per Sackville J; [2000] FCA 17 at para.62 per Sackville J (“Amcor Printing”).
In Protean (Holdings) Ltd (Receivers and Managers appointed) & Ors v American Home Assurance Co[7] it was said that where a no case to answer submission was entertained without requiring election, as is the case here, three results might ensue. First, that the evidence can sustain a finding against the party making the no case submission, in which case the submission is overruled and the case allowed to proceed. Second, that the case is so finely balanced that the presiding judicial officer is not satisfied that even if the evidence can sustain a finding against the party making the no case submission that the presiding judicial officer is prepared to make the necessary finding, and in those circumstances the no case submission is overruled and the case allowed to proceed. The third possible result is that the submission of no case to answer is persuasive and is upheld.[8]
[7] [1985] VR 187 (“Protean Holdings”).
[8] Protean Holdings at 215 per Young CJ.
In reaching a conclusion that the no case submission ought to be upheld, the Court is entitled to draw all proper inferences from the evidence, but is not entitled to draw inferences against the party making the no case submission based upon absence of evidence from the moving party. This entails a conclusion that the evidence could not sustain a finding against the party making the no case submission, and that judgment must be entered for that party because the other party has not discharged the burden of establishing the case. In this sense the third possibility requires the Court, to ask whether it, on the evidence given, would decide for the party against whom the submission is made.[9]
[9] Protean Holdings at 215 per Young CJ, citing in respect of the third possible result Jones v Dunkel (1959) 101 CLR 298 at 330-331 per Windeyer J.
In an oft cited passage in Residues Treatment & Trading Co Ltd v Southern Resources Ltd four situations in which a submission of no case to answer might be made were identified as follows:
1.Where no reference at all to the evidence is required.
2.Where a reference to the evidence is required only to establish that there is an evidentiary hiatus or failure to adduce any evidence as to an essential element in the cause of action.
3. Where it is argued that on a consideration of the evidence adduced by the plaintiff taken at its highest from the plaintiff's point of view, the evidence could not support the causes of action pleaded.
4. The situation where it is contended that although there is some evidence to support the plaintiff's claim, it is so weak and unreliable that it should be dismissed without calling upon the defendant.[10]
[10] (1989) 52 SASR 54 at 68 per Perry J (“Residues Treatment”) cited in Amcor Printing ALR at 357 per Sackville J; FCA at para.63 per Sackville J.

Assessment of credibility

The no case submission run by the respondents was put on the basis that it did not require the Court to consider the credibility of any of the witnesses, but rather, for these purposes, the normal weighing of the available evidence.
In responding to the no case submission Fortron says that the Court needs to make an assessment as to how well the witnesses performed in dealing with their evidence, and in particular cross-examination.
Without going to credit the Court can:
a)draw all proper inferences from the evidence;[11] and
b)draw no inference against a party making a no case submission because of the absence of evidence from that party.[12]
[11] Rasomen at 228 per von Doussa, Drummond and Finn JJ; Amcor Printing ALR at 360 per Sackville J; FCA at para.76 per Sackville J.
[12] Protean Holdings at 215 per Young CJ.

The no case submission for Mr Jones, Treblex and Mr Tully

It was submitted that in respect of Mr Jones, Treblex and Mr Tully it was necessary for two matters to be proven as preliminary issues. They were:
a)that there was a product substitution scheme; and
b)that Mr Jones, Treblex and Mr Tully were knowingly involved in any product substitution scheme.
It was submitted that there is no evidence of knowing involvement by Mr Jones, Treblex or Mr Tully in any of the alleged contraventions, and it was on this basis that the no case to answer submission in relation to Mr Jones, Treblex and Mr Tully was run.

Knowing involvement

Under s.75B of the TP Act a person involved in a contravention includes a person who has:
a)“aided, abetted, counselled or procured the contravention”;[13] or
b)“been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention”.[14]
[13] TP Act, s.75B(1)(a).
[14] TP Act, s.75B(1)(c).
Aiding or abetting or being knowingly concerned in or a party to a contravention:
a)requires actual knowledge of the facts which constitute the elements of the contravention;[15]
b)may include a failure to make reasonable inquiry about the facts where there is a suspicion that the facts are not what they seem, from which actual knowledge may be inferred;[16] and
c)does not require an intention to contravene the TP Act, but does require intentional participation in the events constituting the contravention.[17]
[15] Yorke v Lucas (1985) 158 CLR 661 at 666-669 per Mason ACJ, Wilson, Deane and Dawson JJ; Quinlivan v ACCC (2004) ATPR 42-010; [2004] FCAFC 175 (“Quinlivan”).
[16] King v GIO Australia Holdings Ltd (2001) 184 ALR 98; [2001] FCA 308.
[17] Yorke v Lucas (1985) 158 CLR 661 at 666-669 per Mason ACJ, Wilson, Deane and Dawson JJ; ACCC v Giraffe World Australia Pty Ltd (No 2) (1999) 95 FCR 302 at 346 per Lindgren J; [1999] FCA 1161 at paras.184-187 per Lindgren J.
Ordinarily, a principal will not be liable for the conduct of a corporation, except where the principal’s actions are such that they may be taken to be those of the corporation.[18]
[18] Hamilton v Whitehead (1988) 166 CLR 121; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR 40-940.
In Australian Competition and Consumer Commission v IMB Group Pty Ltd[19] the Full Court of the Federal Court dealt, albeit obiter, with accessorial liability which had been assumed on the basis of directorship and involvement in promotion of activities of the alleged contravener being sufficient to attract the operation of s.75B(1)(c) of the TP Act.[20] In the absence of findings by the primary Judge of knowledge on the part of any of the individual respondents of each of the essential elements of the contraventions alleged, declarations as to those contraventions by the primary Judge were set aside. It follows that merely being a director and being involved in promoting the relevant activities constituting the alleged contraventions is of itself insufficient without a claim that an individual respondent has knowledge of each of the essential elements of the contravention, or if such a claim is made, evidence of that knowledge.[21]
[19] [2003] FCAFC 17 (“IMB Group”).
[20] IMB Group at para.134 per Cooper, Kiefel and Emmett JJ.
[21] IMB Group at paras.133-136 and 138 per Cooper, Kiefel and Emmett JJ.

Expert evidence

Counsel for the respondents argued that Fortron’s expert evidence supported the submission that the respondents had no case to answer. This is because it was suggested, at its simplest, that the expert evidence lends itself to the conclusion that product substitution was going on in relation to both the Fortron and Treblex products which were being exported to Thailand.
For reasons which will become apparent the Court need not examine the expert scientific evidence in any detail, and, for the purposes of the no case to answer submission, can accept the suggestion made by Counsel for the respondents that product substitution was going on in relation to both the Fortron and Treblex products exported to Thailand.

Mr Jones’ no case submission

Allegations in statement of claim

Counsel for Mr Jones ran the no case submission on the basis that the case against Jones is sufficiently set out in paragraphs 32 and 33 of the statement of claim,[22] which read as follows:
[22] Being the statement of claim as further re-amended pursuant to the Order of Justice French on 10 July 2007.
32.At all material times since 1999 Jones has, by virtue of the responsibilities he had for the supply, marketing and distribution of Fortron Product in Thailand pursuant to the terms of the Distribution Agreement up until 17 April 2003:
(a)     had a detailed knowledge:
(i)     of the market in Thailand for automotive treatment products;
(ii)     of the suppliers of such products within Australia;
(iii)   of the procedures involved in sourcing such products from suppliers in Australia, exporting them to Thailand and distributing them within Thailand;
(iv)    of the profits being made by the Applicant in Thailand from the sale there of the Fortron Product;
(b)known that the Fortron Product had an excellent reputation in Thailand;
(c)had a close working relationship with Tully whose responsibilities with the Applicant by 2000 included:
(i)     the development and management of a stock control system for the Fortron Product, including product for export to Gammar pursuant to the Distribution Agreement;
(ii)     responsibility for quality assurance management of the Applicant;
(iii)   responsibility for the preparation of monthly management reports including the provision of profit and loss reports;
(d)had a close business relationship with:
(i)     Goldleaf Australia and in particular with its manager Mathews, as a result of sourcing product for and on behalf of the Applicant from Goldleaf Australia for, inter alia, export to Gammar in Thailand for distribution pursuant to the terms of the Distribution Agreement;
(ii)     Gammar and in particular with its manager Changlor and Changlor’s wife, Srikijkul.
33.It was in the aforesaid circumstances that from approximately March 1999 to February 2005, Jones in his personal capacity prior to 17 October 2003 and in his capacity as a director of Treblex since 17 October 2003 undertook responsibility for the implementation of the Substituted Product Scheme by engaging in the following conduct in Thailand, alternatively in Perth, Australia, alternatively partly in Thailand and partly in Perth, Western Australia:
(a)In March 1999, Jones:
(i)     advised Changlor to incorporate in Thailand a company by the name of Fortron Treatment (Thailand) Co Ltd and having Changlor’s wife, Srikijkul, as a director of that company;
(ii)     assisted Changlor and Srikijkul with the incorporation in Thailand on 30 March 1999 of Fortron Treatment (Thailand) Co Ltd with Srikijkul being a director thereof;
(b)In June 1999, Jones assisted Changlor and Srikijkul to change the name of Fortron Treatment (Thailand) Co Ltd to Goldleaf Products Co Ltd, which change of name was registered in Thailand on 29 June 1999 and which company is defined in paragraph 11 above as Goldleaf Thailand.
(c)On or about 17 June 1999, Jones obtained from Goldleaf Australia that company’s Bureau Veritas Quality International Certificate, known as an ISO Certificate which was required by Jones for the implementation of the Substituted Product Scheme and Jones arranged for an employee of the Applicant to fax that certificate to Changlor in Thailand.
(d)On or about 17 October 2003, Jones arranged for the incorporation of Treblex in Western Australia.
(e)During the period December 2003 to February 2005 Jones, in his capacity as a director of Treblex planned and co-ordinated:
(i)     the exportation by Treblex to either Gammar and/or Goldleaf Thailand of automotive treatment products sourced from Goldleaf Australia;
(ii)     the packaging and labelling in Thailand of the exported product referred to in the previous sub-paragraph by:
(1)Changlor or companies associated with him; and/or
(2)by Gammar; and/or
(3)by Goldleaf Thailand
in containers identical to the containers used by Gammar in distributing the Fortron Product, which containers were labelled with the identical labels used by Gammar in distributing Fortron Product;
(iii)   the distribution and sale by Gammar and/or by Goldleaf Thailand of the aforesaid exported product to existing Gammar customers of Fortron Product using the distribution network established by the Applicant and Gammar in the implementation of the Distribution Agreement;
Particulars
(1)The Applicant relies on Jones’s involvement in the conduct of Treblex as pleaded in sub-paragraphs 23(vii) to (x) (inclusive) above.
(f)He travelled to Thailand on various occasions during 2004 following the termination of his employment with the Applicant on 16 April 2003 and while in Thailand on these occasions he falsely represented himself to persons involved in the marketing and distribution of automotive treatment products in Thailand as the Applicant’s “Director – Operations”.
(g)He, together with Changlor and Tully, authored on 25 August 2004 a pro-forma letter notifying all Gammar’s Fortron Product customers of a new development, namely the pending supply of automotive treatment products under the new Treblex label, which letter was sent to Fortron Product customers by Treblex and/or Gammar on or about February 2005.
(h)He, together with Tully, met with Changlor in Perth during 2004 in furtherance of the implementation of the Substituted Product Scheme.
The particulars referred to in sub-paragraph (e)(iii)(1) above are as follows:
(vii)During the period December 2003 to February 2005, Gammar imported in Thailand automotive treatment products from Treblex the subject of the following commercial invoices rendered by Treblex to Gammar:
(1)     EX2001 dated 15 December 2003;
(2)     EX 2002 dated 26 March 2004;
(3)     EX2006a dated 11 June 2004;
(4)     EX2007 dated 16 July 2004;
(5)     EX2008 dated 10 August 2004;
(6)     EX1010 dated 7 September 2004;
(7)     EX2012 dated 14 October 2004;
(8)     EX2017 dated 28 December 2004.
(viii)During the period October 2004 to February 2005, Gammar arranged for Goldleaf Thailand to import into Thailand automotive treatment products from Treblex the subject of the following commercial invoices rendered by Treblex to Goldleaf Thailand:
(1)     EX2011 dated 13 October 2004;
(2)     EX1015 dated 10 December 2004.
(ix)During the period December 2003 to February 2005, Goldleaf Australia supplied automotive treatment products to Treblex as described in the following Goldleaf Australia numbered invoices to Treblex:
(1)     7027 dated 18 December 2003;
(2)     7183 dated 18 March 2004;
(3)     7335 dated 9 June 2004;
(4)     7364 dated 28 June 2004;
(5)     7439 dated 10 August 2004;
(6)     7450 dated 18 August 2004;
(7)     7550 dated 14 October 2004;
(8)     7557 dated 21 October 2004;
(9)     7667 dated 21 December 2004.
(x)During the period January 2004 to February 2005, Gammar supplied to the dealerships and service centres of one of its sub-distributors in Thailand of exclusively Fortron Product, Force International Co Ltd (“Force International”), the following quantities of automotive treatment products labelled “Fortron” (the units referred to being 250ml bottles), which products were partly sourced from the Applicant and partly sourced from Treblex and all of which products Changlor represented to the managing director of Force International, Tanan Wacharotayangkura (“Tony”), to be genuine Fortron Product:
(1)     January 2004 – 2,880
(2)     February 2004 – 4,600
(3)     March 2004 – 4,040
(4)     April 2004 – 5,320
(5)     May 2004 – 3,040
(6)     June 2004 – 2,840
(7)     July 2004 – 5,160
(8)     August 2004 – 4,640
(9)     September 2004 – 5,362
(10)   October 2004 – 6,327
(11)   November 2004 – 4,652
(12)   December 2004 – 8,435
(13)   January 2005 – 1,812
(14)   February 2005 – 1,824.

Mr Jones submits that the allegations against him at paragraph 33(a) to (c) amount to no more than advice to incorporate Fortron Treatment (Thailand) Co Ltd,[23] a change of name of Fortron Thailand to Goldleaf Products Co Limited[24] and the provision of the ISO certificate for Goldleaf Enterprises Pty Ltd[25] to be sent to Mr Changlor in Thailand. Mr Jones submits that there is nothing to suggest that these things were done in furtherance of the alleged product substitution scheme, particularly in circumstances where after 1999 Mr Jones continued for a further two or three years to work to create a successful business for Fortron in Thailand. Mr Jones says that the incorporation of Fortron Thailand in 1999, six years after he had become involved in Fortron and only seven months after Changlor and Fortron had entered into a five year written contract, does not suggest that it could have been done, or possibly could have been done, in anticipation of a product substitution scheme some four and one half years later.
[23] “Fortron Thailand”.
[24] “Goldleaf Thailand”.
[25] “Goldleaf Australia”.
The incorporation of Treblex in Western Australia referred to in paragraph 33(d) is again said by Mr Jones not to suggest any involvement in the alleged product substitution scheme, but rather to be evidence which is neutral.
Paragraph 33(e) refers to the planning and co-ordination of the packaging and labelling in Thailand of the Treblex exported product, that is the product’s packaging and labelling in Fortron bottles with Fortron labels. Mr Jones argues that this does not help prove knowledge of the alleged product substitution scheme, arguing that knowledge (of the alleged product substitution scheme) cannot be inferred because Mr Jones planned to implement the alleged scheme.
Paragraph 33(f) of the statement of claim asserts that Jones travelled to Thailand on various occasions during 2004 and whilst there falsely represented himself to persons involved in the marketing and distribution of automotive treatment products as Fortron’s director of operations. Mr Jones argues that the only evidence of this comes from Dr Wacharotayangkura, who says that he believed Mr Jones was acting for Fortron during the critical period. Mr Jones says that on the best available version (for the applicant) of Dr Wacharotayangkura’s evidence, he continued to believe that Mr Jones was acting for Fortron until about October or November 2004. Mr Jones points to the fact that he was talking about a number of new products not supplied by Fortron, including Treblex, Chemforce, Ultra and a Cockpit home brand. Further, it is said that when Jones was in Thailand he wanted to meet with B-Quik, but that did not happen at all in 2004. However,

Dr Wacharotayangkura did tell Mr Jones that he had been successful in persuading B-Quik to take Fortron products in 2004.[26]
[26] Transcript at page 181.
Mr Jones also points to emails from Dr Wacharotayangkura which indicate that Mr Jones was endeavouring to persuade Shell to shift from Fortron to a house brand in winter 2004. Mr Jones says that that is inconsistent with a representation that he was acting for Fortron.
In relation to B-Quik Dr Wacharotayangkura agreed that he did not try to shift B-Quik from Fortron products to Treblex products because to do so might entail losing B-Quik as a customer, in circumstances where B-Quik had recently become a customer, and was persuaded to become a customer on the basis of the availability of Fortron products.[27]

Mr Jones also points to the fact that by January 2005 Mr Jones was presenting Treblex to the staff of Dr Wacharotayangkura while presenting awards for the best seller of the month.[28]
[27] Transcript at pages 196-197.
[28] Transcript at page 164.
Paragraph 33(g) of the statement of claim relates to the letter alleged to have been authored, and sent, on 25 August 2004 notifying Gammar’s customers of a new development. Mr Jones here says that there is no evidence that this letter was ever sent. That, however, is not said to be important. What is said to be important is that the content of the letter is entirely consistent with Mr Jones seeking to expand his business to new clients who had not previously been supplied, at all, by Gammar.
Finally, in relation to paragraph 33(h) of the statement of claim,

Mr Jones says that the fact that he met with Changlor in Perth in 2004 is entirely neutral: Mr Jones says that this meeting was about Treblex, and had nothing to do with the alleged product substitution scheme.

Was Mr Tully knowingly involved?

The material facts in relation to Mr Tully are said by Counsel for

Mr Tully to be sufficiently set out for the purposes of the no case submission at paragraph 38 of the statement of claim, which reads as follows:
38.Tully aided or abetted Jones and/or was directly or indirectly, knowingly concerned in, or a party to, the contraventions by Jones in his capacity as a director of Treblex during the period 17 October 2003 to February 2005 because:
(a)he knew:
(i)     of the Distribution Agreement and of Gammar’s breach of it; and
(ii)     of the Substituted Product Scheme;
and his knowledge of these matters is to be inferred from the contents of a document written by him dated 25 October 2004 setting out his reasons for his dismissal from the Applicant, which document is available for inspection and is referred to hereafter as the “Tully Memorandum”.
(b)he was between 17 October 2003 and 31 May 2004 a director and secretary of Treblex;
(c)on the incorporation of Treblex, he agreed to take a one third equity position in Treblex in consideration for assisting Jones with:
(i)     all necessary accounting and compliance work associated with the implementation of the Substituted Product Scheme;
(ii)     all dealings with Austrade in relation to the exportation of bulk automotive treatment products to Thailand as required for the implementation of the Substituted Product Scheme;
(iii)   all financial matters incidental to the implementation of the Substituted Product Scheme;
and he did during the period 17 October 2003 and February 2005 assist Jones with all of these said matters.
(d)he travelled with Jones to Thailand in May 2004 and in January 2005 to assist Jones with the implementation of the Substituted Product Scheme;
(e)he co-authored, with Jones and Changlor, the letter referred to in sub-paragraph 33(g) above;
(f)he, together with Jones, met with Changlor in Perth during 2004 in furtherance of the implementation of the Substituted Product Scheme.
Paragraph 38(a) of the statement of claim cannot be relied upon as it is founded upon evidence contained in the Tully Memorandum which the Court held to be inadmissible.
In relation to paragraph 38(b) of the statement of claim it is submitted that being a director and secretary of Treblex is consistent with

Mr Tully being involved in a business, and not consistent with involvement in the alleged product substitution scheme.
In relation to paragraph 38(c) it is argued that these are activities that are consistent with the conduct of the business, and pleading that

Mr Tully did these things with knowledge or for the purposes of the implementation of the product substitution scheme is a bootstraps argument.
In relation to paragraph 38(d) it is admitted that Mr Tully travelled with Mr Jones in January 2005, but is said that he did not do so, and that there is no evidence that he did so, in May 2004. In any event, it is said that the 2005 travel is not evidence that there was a product substitution scheme in which Mr Tully was knowingly involved.
In relation to paragraph 38(e) it is argued that there is no evidence that Mr Tully co-authored the letter with Mr Jones and Mr Changlor, or that he was otherwise involved with it. The letter referred to is a letter authored on 25 August 2004, being a pro-forma letter notifying all of Gammar’s Fortron product customers of a new development, namely the pending supply of automotive treatment products under the new Treblex label, which letter was sent to Fortron product customers by Treblex and/or Gammar in or about February 2005.[29]
[29] See statement of claim, para.33(g).
In relation to paragraph 38(f) of the statement of claim it is alleged that Mr Tully met with Jones and Changlor in Perth during 2004 in furtherance of the implementation of the product substitution scheme. Again, it is argued that this is a bootstraps argument and that it cannot be argued that this was in furtherance of the alleged product substitution scheme.
Reference was also made by Counsel for Mr Tully of evidence relating to Mr Tully raising concerns about the valuation of a Fortron subsidiary, Fortron MS. There is no dispute that Fortron knew that

Mr Tully was concerned about the valuation and the auditor’s qualifications concerning the valuation. Mr Tully says that the explanations for raising those concerns, namely that it might contribute to Fortron’s collapse, or that he was simply disgruntled and vindictive and wanted retribution, whilst all possibilities, do not support, and are not evidence, related to a knowing involvement in the alleged product substitution scheme.
In relation to the January 2005 meeting in Thailand Mr Tully says that it does not prove his involvement in a product substitution scheme, but rather that the evidence is indicative of a plan to obtain more customers for Treblex.

The no case submission for the third respondent – Mrs Jones

Mrs Jones is a director of Treblex.
The no case submission with respect to Mrs Jones has a very narrow focus.
The relevant paragraphs of the statement of claim which Counsel for Mrs Jones says sufficiently set out the case against Mrs Jones, for the purposes of the no case submission, are paragraphs 36 and 37 which provide as follows:
36.The following persons aided or abetted Jones in his aforesaid contravention of the Fair Trading Act and/or were directly or indirectly, knowingly concerned in, or parties to, the said contravention:
a.Mary Jones;
b.Tully; and
c.Helen Tully.
37.Mary Jones aided or abetted Jones and/or was directly or indirectly, knowingly concerned in, or a party to the contraventions by Jones in his capacity as a director of Treblex during the period 17 October 2003 to February 2005 because she was at all material times … a director of Treblex.
In essence, it is alleged that because Mrs Jones was at all material times a director of Treblex she aided or abetted Mr Jones in his alleged contraventions.

The no case submission for the fifth respondent – Mrs Tully

Mrs Tully worked at Treblex as the Export Manager whilst her husband Mr Tully was employed by Treblex in a senior capacity. Mrs Tully was involved in sending documentation and ordering product.
As with Mrs Jones, the focus of the no case submission in relation to Mrs Tully is very narrow.
The relevant paragraphs of the statement of claim which were relied on by Counsel for Mrs Tully as sufficiently setting out the case against her for the purposes of the no case submission are paragraphs 36 (which is set out above in relation to Mrs Jones) and 39 which is as follows:
39.Helen Tully aided or abetted Jones and/or was directly or indirectly, knowingly concerned in, or a party to, the contraventions by Jones in his capacity as a director of Treblex during the period 17 October 2003 to February 2005 because she knew about the Substituted Product Scheme and assisted in its implementation by no later than 17 October 2003 and those facts are to be inferred from the following facts and circumstances:
(a)she was at all material times employed by Treblex as the export manager and her principal responsibility in that position was to assist Jones with all administrative procedures involved in exporting to Gammar and/or Goldleaf Thailand in Thailand automotive treatment products sourced from Goldleaf indeedAustralia and in carrying out those functions she had no reasonable grounds to believe that the said product was being marketed, distributed and sold in Thailand by Gammar and/or Goldleaf Thailand as being anything other than genuine Fortron Product;
(b)she liaised with Mathews of Goldleaf Australia and obtained from him Material Safety Data Sheets specifying the products that Goldleaf Australia was supplying to Treblex which she knew would be exported to Gammar and/or Goldleaf Thailand and sold there by either or both of those companies as genuine Fortron Product;
(c)she prepared commercial invoices, packing lists, credit notes, banking and shipping documentation showing automotive treatment products sourced from Goldleaf Australia for sale to Gammar and/or to Goldleaf Thailand at a time when she knew that the only products being marketed, distributed and sold in Thailand by either Gammar or Goldleaf Thailand were products labelled as genuine Fortron Product.
(d)she was married to Tully and was thereby aware of the facts and circumstances leading to Tully’s decision to resign as a director of Treblex in May 2004 while still employed in a senior position with the Applicant, which facts and circumstances are those set out in the Tully Memorandum.
In relation to paragraph 39(a) of the statement of claim, Mrs Tully accepts that she was the Export Manager of Treblex and assisted

Mr Jones in his duties. The evidence discloses some orders or order forms sent to Mrs Tully, and some documents which describe

Mrs Tully as the export manager. It is submitted that an allegation of no reasonable grounds to believe the product was marketed as anything other than genuine Fortron product cannot be grounds for alleging that Mrs Tully had knowledge of an alleged product substitution scheme.

It is said that the inference sought to be drawn from those facts cannot be inferred.
The allegation in paragraph 39(b) of the statement of claim, that

Mrs Tully liaised with Goldleaf Australia and obtained Material Safety Data Sheets specifying products that Goldleaf Australia was supplying to Treblex and which it is alleged she knew would be exported to Gammar and/or Goldleaf Thailand to be sold there by either or both of those companies as genuine Fortron product is, again, said to be a bootstraps argument. Likewise, in relation to the allegation at paragraph 39(c) of the statement of claim that Mrs Tully knew that products which were genuine Fortron products were being marketed, sold and distributed in Thailand by either Gammar or Goldleaf Thailand because she prepared commercial invoices, packing lists, credit notes, banking and shipping documentation for automotive treatment products sourced from Goldleaf Australia for sale to Gammar and/or to Goldleaf Thailand.
The allegation in paragraph 39(d) of the statement of claim is dependent upon the facts and circumstances said to be set out in the Tully Memorandum which the Court has ruled inadmissible. Those facts and circumstances cannot therefore be considered in determining whether the evidence establishes that there is a case to answer.
Mrs Tully submits that there is no evidence that she had knowledge of anything to do with the alleged product substitution scheme.

Applicant’s submissions concerning no case

Circumstantial evidence

Fortron acknowledges that much of the evidence in support of its case is circumstantial, but says that this is necessarily so in cases involving product substitution. Fortron says this is a case of product substitution because sub-distributors thought that they were getting Fortron product when in fact they were getting Treblex product which was being passed off as Fortron product.

Expert evidence

Fortron says that the respondents’ submissions that the evidence of Fortron’s expert supported the respondents’ no case submission proceeded on a false premise. Fortron argues that product substitution can be engaged in even if the same product was given to both Fortron and Treblex and that it was not necessary to establish that what was in a Fortron bottle was a different product to what was in a Treblex bottle. What mattered was that the return for the sale of an allegedly Fortron product was going back to Treblex not to Fortron.

Evidence generally

Fortron submitted that there could be no dispute that over a substantial period of years Fortron had been distributing automotive treatment products in Thailand and had built substantial goodwill in the market.
On the evidence Fortron says that Treblex admitted to a large volume of exports to Gammar, and that Gammar had the infrastructure to distribute automotive treatment products in Thailand, by re-distributing the product from the 200 litre drums in which it was shipped to Thailand (by both Fortron and Treblex) and putting it in smaller bottles for distribution to the market. That infrastructure had been developed because Gammar had an exclusive distribution agreement with Fortron during the period 1993 to 2005 and it was only Gammar who could

re-distribute the product in this way in Thailand by use of that infrastructure built up as a consequence of the agreement between Gammar and Fortron for exclusive distribution of the Fortron product. Fortron says that Treblex, Mr Jones and Mr Tully all had knowledge of the exclusive and ongoing distribution agreement between Gammar and Fortron.
Fortron submitted that during the period from 2003 to early 2005 Treblex did not have:
a)an address in Thailand;
b)its own factory or infrastructure in place to process the large volumes of automotive treatment products exported to Gammar;
c)any infrastructure to enable it to re-distribute the exported product into 250 millilitre bottles with Treblex labels;
d)an agreement with a distributor who could distribute the product around Thailand,
but nevertheless it incurred expenses related to the printing of labels and the acquisition of 250 millilitre plastic bottles.
Fortron’s case, put shortly, is that this evidence raises a case which it is necessary for the respondents, and particularly Treblex, Mr Jones and Mr Tully, to answer. The applicant says that Treblex, Mr Jones and

Mr Tully must have known that the products were being sent to Thailand and being sold, marketed and distributed as Fortron products. Further, that if Treblex was exporting automotive treatment products to Gammar in 2003, and on to 2005, Gammar could only have processed those products using the factory and the bottling equipment specifically set up for bottling and labelling Fortron product, and that to do so was in breach of the exclusive distribution agreement between Gammar and Fortron of which Mr Jones and Mr Tully, and by inference Treblex, had express knowledge.
Fortron says that the circumstantial evidence is sufficient to establish that Treblex, Mr Jones and Mr Tully must have known that the Treblex product was being bottled and labelled and sold as Fortron product until early 2005.
Fortron points to visits by Mr Jones to Thailand at the end of 2003, during 2004 and in early 2005, in addition to Mr Jones’ many visits during the ten years prior to 2003, as providing the opportunity to engage in the product substitution scheme, or to have knowledge that the product substitution scheme was in operation.
A significant plank of Fortron’s case is that there is no evidence of Treblex product in the Thailand market prior to early 2005, notwithstanding considerable exports of Treblex products to Thailand prior to that time. The evidence of export of Treblex product to Fortron’s principal distributor, Gammar, in Thailand, needs to be read, Fortron argues, in the context of discussions between Mr Jones and

Dr Wacharotayangkura. Dr Wacharotayangkura was a sub-distributor (under Gammar) of Fortron products in Thailand.
Dr Wacharotayangkura gave evidence that at all times he believed that Mr Jones was acting on behalf of Fortron, including as Fortron’s international director, up to and including the time in 2005 when

Mr Jones was indicating that it would be necessary for there to be a name change from Fortron to Treblex for the product which was entering the market in Thailand.

Dr Wacharotayangkura gave evidence of an email from Mr Jones dated 6 January 2005 in which Mr Jones is referring to an appointment with two companies referred to in that email and where he indicates that it is important to have an appointment “so we are able to explain them that we are changing from Fortron to Treblex.” The applicant argues that this email indicates that up until that time Fortron product had been sold from Treblex, and that that is the meaning of the words “changing from Fortron to Treblex”.
In a further email to Dr Wacharotayangkura dated 17 January 2005

Mr Jones refers to the need to make appointments with two named companies “to explain very simply about the change of name from Fortron to Treblex.” In an email on 18 January 2005 Mr Jones says “the change of name should be kept as simple as we possibly can.” In a further email in February 2005 Mr Jones seeks the assistance of

Dr Wacharotayangkura “to assist in the smooth transition of this name change to Treblex.”
During the period 2003 to 2005 Mr Jones and Mr Tully also told various persons, both in Thailand and Australia (including an employee of Fortron in Australia) that Fortron was in financial difficulty. This was put in various ways. It was said that Fortron was going bankrupt. On another occasion it was indicated that the shareholding in Fortron ought to change because of financial difficulties. On yet another occasion, it was put that Fortron was entering into a joint venture with Gammar because of the financial difficulties that Fortron was experiencing. In January and February 2005 these suggestions were put in quick succession to Dr Wacharotayangkura in an endeavour to justify the change of name to Treblex. In context, it is Fortron’s case that these suggestions were made, both in 2005 and before, in an effort to cover up the product substitution scheme.
On 1 February 2005 a letter was sent to Gammar’s clients in Thailand indicating that a joint venture had been established with Treblex Australia “to ensure we continue to provide you with quality products and first class support and service and support into the future” in relation to the marketing of a “range of automotive industrial products under the name Treblex.” The letter from Gammar which is signed by Parnu Changlor, a director of Gammar, and Mr Jones, says:
“The only change you will notice will be the name, Treblex.”
Fortron points to Mr Jones’ integral role as a senior officer and director of Fortron from 1993 to 2003 as giving him the knowledge of the products and market necessary to establish a new product, namely Treblex, in Thailand.
Fortron also points to a sequence of incorporations of companies, beginning in 1999 with the registration of Fortron Thailand, later Goldleaf Thailand. These names mirror the names of Fortron and Goldleaf Australia, from whom Fortron sourced product. The registration of these companies in Thailand was, on Fortron’s case, done without the knowledge of Fortron, and in circumstances where Fortron had registered “Fortron” trade marks in both Australia and Thailand at the relevant times.
Fortron also points to the formation of Treblex in August 2003 after Mr Jones departed from Fortron. The applicant further points to the provision in 1999 by Fortron, to Fortron Thailand, of Goldleaf Australia’s quality assurance, or ISO, certificate. This was provided to Fortron Thailand at the direction of Mr Jones, who was at that time, Fortron’s director of operations. Fortron says that the sequence of company registrations in Thailand, without the knowledge of Fortron, and the provision of an ISO certificate in 1999, together with the formation of Treblex after Mr Jones’ departure from Fortron in 2003, give rise to an inference that the product substitution scheme had been planned, and possibly in operation, for some time.
Fortron points to Mr Tully’s statements in 2002 and 2003 that Fortron was “going broke”. These statements were made to an employee of Fortron in Australia, and were made by Mr Tully both before and after the formation of Treblex. They were made in the context of Mr Tully indicating to the Fortron employee concerned that it would be possible for a group of people to purchase the automotive treatment side of the Fortron business if Fortron went into liquidation. Mr Tully, together with Mr Jones, is at, or about, this time already a director and shareholder in Treblex, or about to become so.
Fortron also points to sales information which indicates that Fortron’s average monthly unit sales to Gammar in Thailand fell from over 21,000 in 2002 to just over 7,000 in 2004.
Fortron says that it had substantial goodwill in the market in Thailand for automotive treatment products. Fortron says that the evidence suggests that it would take time for a competitor to establish itself in the market in Thailand, and therefore there is an incentive to engage in covert product substitution. Fortron says that needs to be measured against a background where there is no evidence that Treblex products were available in Thailand until early 2005, but that Fortron’s export sales had been dropping at the same time as Treblex’ export sales had been increasing. Those sales figures, lead to the inference, Fortron says, that the Treblex product was being exported to, and bottled and sold in Thailand as Fortron product.
Fortron also points to the fact that Mr Jones is said to have represented himself as a representative of Fortron during the period following his departure from Fortron and prior to the launch of the Treblex product, that is between 2003 and early 2005, and that Dr Wacharotayangkura believed that Mr Jones was acting on behalf of Fortron throughout that period. Fortron says that Mr Jones’ conduct is consistent with Treblex implementing a product substitution scheme.
Fortron relies on the evidence of Mr Kiks, the Chief Executive Officer of B-Quik Co Ltd in Bangkok, Thailand, who met with

Dr Wacharotayangkura and Mr Jones in early January 2005. Mr Kiks says that Mr Jones told him that the Fortron products would be phased out and replaced by similar automotive treatment product by the name of Treblex. Mr Kiks said that he was told that:
“All that would happen would be a change of brand name. The product would be the same and the sales system would be the same, the ordering system would be the same also.”

Consideration

Fortron’s evidence must be taken at its highest when assessing whether the respondents’ no case to answer submission can be successful. It is important to bear in mind that it is an application that there is no case to answer on the evidence. It is not a strike out or summary judgment application. Often, it seemed to the Court as if the respondents were arguing the latter rather than the former.
The Court does not need to canvass all of the evidence in detail and arrive at specific findings of fact when dealing with a no case to answer submission. It is sufficient for the Court to indicate its view on a broad review of the evidence, particularly, where, as here, the Court has ultimately concluded that there is sufficient evidence for the case to be answered.

Mr Jones

Mr Jones’ advice and assistance to various persons in relation to:
a)the incorporation of Fortron Thailand in 1999 and the change of name of Fortron Thailand to Goldleaf Thailand; and
b)the provision in 1999 of the ISO Certificate for Goldleaf Australia to persons in Thailand associated with Goldleaf Thailand,
would not, if viewed solely as company incorporations and changes of name and the provision of information, provide any real basis for a suggestion that Mr Jones was knowingly concerned in the alleged product substitution scheme. Likewise, the incorporation by Mr Jones of Treblex in Australia in 2003 would not, of itself, provide any real basis for a suggestion that Mr Jones was knowingly concerned in the alleged product substitution scheme.
The above events cannot however be viewed as discrete, disassociated events, as they:
a)were undertaken by persons who were, depending on the time, either in, or formerly in, commercial or employment relationships with Fortron and Goldleaf Australia;
b)were undertaken without the knowledge of other senior officers and directors of Fortron;
c)involved incorporations where the company names chosen were , in the case of Fortron Thailand and Goldleaf Thailand, very similar to those of Fortron and Goldleaf Australia; and
d)in the case of Fortron Thailand, involved the use of a name (“Fortron”) subject to trademark protection in Australia and Thailand.
The facts referred to in the previous paragraph, either alone or in combination (whole or part), could, in the Court’s view, constitute an evidentiary basis for a planned production substitution scheme. As the Court observed in the course of argument, to arrive at that conclusion might be difficult. Upon reflection, however, it is not a conclusion so difficult of, or lacking in, probability, as to be inconceivable or even unarguable.
In relation to the allegation that Mr Jones, in his capacity as a director of Treblex, planned and co-ordinated various aspects of the alleged product substitution scheme, Mr Jones asserts that knowledge cannot be inferred because of a plan to implement the alleged scheme. The Court considers that knowledge of an alleged scheme might be inferred from a plan to implement such a scheme, particularly if such a scheme is implemented. However, the evidence goes further than that, and the following statements in writing from Mr Jones, contained in emails forwarded by Mr Jones to Dr Wacharotayangkura in January and February 2005:
a)“so we are able to explain them that we are changing from Fortron to Treblex”;
b)“to explain very simply about the change of name from Fortron to Treblex”;
c)“the change of name should be kept as simple as we possibly can”;
d)“to assist in the smooth transition of this name change to Treblex”; and
e)“The only change you will notice will be the name, Treblex”,
provide a foundation for an argument that there was actual knowledge of an actual product substitution scheme.
Each statement above:
a)speaks, in one form or another, of “the change” of name; and
b)with one exception, the name change to “Treblex”.
All of the above statements are statements from which it might be argued by the applicant that the Court can find that there was an existing product being distributed and that the only thing that would change would be the name, from Fortron to Treblex. In circumstances where product was already being bottled and distributed, and the only thing that was to change was the name, there would then be a basis for Fortron to argue that this Court ought to find there was a pre-existing product substitution scheme, and that it involved substituting Treblex product for Fortron product.
Without more, the above statements, emanating, as they appear to, from Mr Jones, are sufficient to find that Mr Jones has a case to answer. However, there is more.
The evidence of Mr Kiks was that he was told by Mr Jones that:
“All that would happen would be a change of brand name. The product would be the same and the sales system would be the same, the ordering system would be the same also.”(bold emphasis added)
On the face of it there is no reason to cast doubt on Mr Kiks’ evidence, at least for present purposes. Thus it is open, the Court concludes, on the basis of his evidence, for Fortron to argue that:
a)a simple change of name;
b)no change of product;
c)no change of sales system; and
d)no change of ordering system,
is evidence from which the Court might infer that a product substitution scheme was already in place.
There is other evidence, of varying quality and strength, which, when taken in conjunction with the evidence considered above, is in the Court’s view sufficient to allow an inference or inferences to be drawn to establish that Mr Jones was knowingly concerned in an alleged product substitution scheme and has a case to answer. That evidence includes:
a)Mr Jones’ role as a senior officer and director of Fortron for more than a decade from 1993 to 2003, which, it can be argued, put him in a position to organise a product substitution scheme from the inside or with an insider’s knowledge following his departure from Fortron in 2003;
b)Mr Jones’ visits to Thailand following his departure from Fortron in 2003;
c)Mr Jones allegedly portraying himself in Thailand as a representative of Fortron, possibly until as late as early 2005;
d)Mr Jones’ alleged statements to Dr Wacharotayangkura concerning Fortron’s alleged financial difficulties; and
e)between 2002 and 2004, the apparent downturn in Fortron’s sales of automotive product to Gammar in Thailand and the apparently corresponding rise in Treblex sales of automotive product to Gammar.
To the extent that Fortron’s submission that Mr Jones has a case to answer relies upon the evidence of Dr Wacharotayangkura the Court finds that Dr Wacharotayangkura’s evidence, for present purposes, was not unreliable and was not any more inconsistent than the Court might expect in circumstances where:
a)the factual matrix is relatively convoluted and involves commercial relationships of some sensitivity; and
b)he was giving evidence in:
i)a foreign court in a foreign land; and
ii)not in his native language.
For the above reasons the Court concludes that there is evidence sufficient to infer that Mr Jones was knowingly concerned in the alleged product substitution scheme, and that he therefore has a case to answer.

Treblex

On the evidence led by the applicant Mr Jones was a director and shareholder of Treblex. There is sufficient evidence for the applicant to argue that Mr Jones conducted the alleged activities by reason of which he has been found to have a case to answer, in his role as a director of Treblex, and for and on behalf of Treblex, and so as to inextricably entwine Treblex in those activities. On that basis, Treblex would have a case to answer. Moreover, and in any event, to the extent that the activities engaged in by Mr Jones were the activities of Treblex it also follows that Treblex has a case to answer.
That conclusion is also supported by the fact that Treblex was exporting product, in increasing quantities, to Gammar, which it knew had the infrastructure to distribute the product, in circumstances where Treblex had no infrastructure and minimal administrative or support systems of its own in Thailand.
The Court therefore concludes that Treblex has a case to answer.

Mrs Jones

The Statement of Claim essentially alleges that Mrs Jones was at all material times a director of Treblex and that Mrs Jones aided or abetted Mr Jones in his alleged contraventions.
There is:
a)
no evidence of any involvement in any relevant activity by

Mrs Jones;
b)
no allegation of fact in the statement of claim asserting that

Mrs Jones had actual knowledge of the essential elements of the alleged contraventions or that she intentionally participated in them; and
c)no evidence of the matters referred to in sub-paragraph (b).
Counsel for Fortron effectively conceded, and properly so in the Court’s view, that there was no case for Mrs Jones to answer.[30]
[30] Transcript at page 404.
In those circumstances, the no case submission with respect to

Mrs Jones must be upheld.

Mr Tully

In the Court’s view there is sufficient evidence for Mr Tully to have a case to answer. In the Court’s view, a case to answer for Mr Tully arises by inference from the following facts:
a)
that he was a director and secretary of Treblex at relevant times, and in that capacity would arguably have worked closely with

Mr Jones, which puts Mr Tully in a position to be part of, and have knowledge of, any alleged product substitution scheme;
b)that he travelled to Thailand with Mr Jones in January 2005 at a time when the “name change” from Treblex to Fortron was a significant issue, and at a time when Mr Jones was, on Fortron’s evidence, making statements from which the Court has found that it might be argued by Fortron, and be open for the Court to infer, that there was an existing product being distributed and that the only thing that would change would be the name, from Fortron to Treblex;
c)was a director and secretary of Treblex at a time when he was still employed, in a senior capacity at Fortron, and therefore had an opportunity to further any alleged product substitution scheme from within one of Treblex’ competitors, in circumstances where Fortron were seemingly unaware of his involvement with Treblex; and
d)his statements concerning Fortron’s financial position, some of which were made while he was still employed by Fortron in a senior capacity, and when he was, or was about to become, a director and secretary of Treblex, thus leaving it open to Fortron to argue, and the Court to infer, that the statements concerning Fortron’s financial position were evidence of a possible design to exploit any perceived financial difficulties so as to possibly advance any product substitution scheme in which Treblex might have been involved.
Furthermore, the no case to answer submission in relation to Mr Tully is made in relation to part only of the claim against him by Fortron. That is, it is not made in relation to Fortron’s claim of an alleged breach of fiduciary duty, and duties under the Corporations Act,[31] to act honestly in Fortron’s service, and not to gain an advantage or benefit for himself or someone else to the detriment of Fortron. The allegations made in the statement of claim in relation to the alleged breaches of those duties by Mr Tully overlap with the allegations against Mr Jones and Treblex in respect of which the Court has found that there is a case to answer, and also overlap with the allegations against Mr Tully in relation to breaches of ss.68 and 79 of the Fair Trading Act 1987 (WA).[32]
[31] Corporations Act 2001 (Cth), s.182(1).
[32] “FT Act”, which sections find their equivalents in ss.75B and 82 of the TP Act.
In the circumstances, there appears to be a significant overlap between the two claims made against Mr Tully in respect of which relief is sought, and in those circumstances, the Court does not consider it appropriate to find that there is no case to answer in respect of the alleged breaches of the FT Act.
For the above reasons the Court concludes that there is evidence sufficient to infer that Mr Tully was knowingly concerned in the alleged product substitution scheme, and that he therefore has a case to answer. In any event, because of the existence of the separate claims with respect to breaches of fiduciary and corporate duties, the Court considers that it is appropriate for Mr Tully to answer the case.

Mrs Tully

The statement of claim essentially alleges that Mrs Tully was involved in the alleged product substitution scheme by reason of her:
a)being employed by Treblex as the Export Manager and being responsible for assisting Mr Jones with administrative procedures concerning exports from Treblex to Gammar and Goldleaf Thailand, and that capacity she prepared various commercial, banking and freight documentation for the export of automotive treatment products to Thailand; and
b)that she obtained from Goldleaf Australia material safety data sheets specifying products that Goldleaf Australia was supplying to Treblex which she knew would be exported to Gammar and/or Goldleaf Thailand and sold there by either or both of those companies as genuine Fortron product.
In the Court’s view the evidence in relation to Mrs Tully:
a)goes no further than proving that she was an employee of Treblex performing the normal administrative functions of an employee in her position as Export Manager; and
b)does not evidence a link between the evidence which demonstrates that Mr Jones has a case to answer, particularly in relation to his knowledge of the suggested name change from Treblex to Fortron and the events surrounding that suggested name change, and in particular those referred to in paragraphs 76 and 77 and 80 and 81 above, save that she would have been aware that Mr Jones was visiting Thailand following his departure from Fortron in 2003.

In those circumstances, the no case submission with respect to

Mrs Tully will be upheld.

Expert Evidence

The submission by Counsel for the respondents that product substitution was going on in relation to both the Fortron and Treblex product exported to Thailand can, as indicated above, be accepted by the Court for the purposes of the present argument. The respondents argue that acceptance of that suggestion means that there is no case to answer on the part of the respondents. However, the Court takes a different view. In the Court’s view, the mere fact that product substitution was occurring in relation to both Treblex and Fortron would not preclude Treblex from being involved in an alleged product substitution scheme in relation to Fortron. Merely because Treblex was itself being possibly duped does not preclude it from engaging in a product substitution scheme in relation to Fortron, even if, it ultimately transpires that the product being substituted is the same product as Fortron’s. The issue is whether Treblex thought that they were engaged in a product substitution scheme, and whether the product they thought that they were substituting for the Fortron product ultimately resulted in the purchase by persons of product that the purchasers thought was Fortron, but which was supplied by Treblex, albeit that Treblex did not know that it was the same product as was being supplied for the “genuine” Fortron product. Taken one step further, if persons thought that they were buying Fortron product, the monies for that purchase, or at least the profits from that purchase, ought to be Fortron’s, not Treblex’.
For those reasons, the expert evidence, whilst it might be consistent with Fortron and Treblex providing the same product to distributors in Thailand, is not necessarily inconsistent with Treblex engaging in a product substitution scheme in relation to Fortron’s products in Thailand. Whether or not that is so will ultimately depend upon a consideration of all of the evidence, and not just one possibility arising from Fortron’s expert evidence.

Absence of Gammar

The absence of Gammar from these proceedings could not and has not led the Court to draw any inference adverse to the respondents for the purposes of determining the no case submission.

Conclusions and Orders

For reasons set out above the Court has concluded that the respondents’ application for dismissal of the application (save as to breach of fiduciary duty against Mr Tully) on the basis that there is no case to answer:
a)be dismissed in relation to the first, second and fourth respondents; and
b)be upheld in relation to the third and fifth respondents,
and there will be an order accordingly.
Having regard to the Court’s ongoing obligation to endeavour to resolve disputes otherwise than by way of the exercise of judicial power[33] the parties are ordered to confer by 4.00pm on 15 May 2009 as to whether further mediation of the application might assist in resolution of the application. Otherwise, there will be an order that the matter is to be adjourned to a directions hearing at 10.15am on 18 May 2009 for further directions as to:
a)further mediation of the application, if any; and
b)further hearing of the application, and in this regard, all parties are to provide available dates for further hearing to the Court by 4.00pm on 15 May 2009.
[33] Federal Magistrates Act, 1999 (Cth) ss.21-23.
The Court will hear the parties as to costs.

I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of Lucev FM

Associate: S Gough

Date: 13 May 2009