Gibson Chemicals Ltd v S a Sopura NV
[1999] VSC 203
•3 June 1999
| SUPREME COURT OF VICTORIA | |
| CAUSES JURISDICTION | Do not Send for Reporting |
| Not Restricted |
No. 4269 of 1998
| GIBSON CHEMICALS LTD. | Plaintiff |
| v | |
| S.A. SOPURA NV & ANOR. | Defendants |
---
JUDGE: | HEDIGAN, J. | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 3-7 May 1999 | |
DATE OF JUDGMENT: | 3 June 1999 | |
CASE MAY BE CITED AS: | As above | |
MEDIA NEUTRAL CITATION: | [1999] VSC 203 | |
---
CONTRACT - (i) Sale by one party of its assets and undertakings to third party - No assignment consented to - No novation of contract.
(ii)No written agreement executed by new parties - Parties continuing to trade - Whether on terms of previous agreement or a series of "ad hoc" agreements.
(iii)Clause permitting termination if licensor or licensee's business taken over or acquired by competitor - Whether conditions of terminability met.
FIDUCIARY DUTIES OF EMPLOYEES - Whether pre-existed - Whether breach.
TORT - Whether party sought to, and did, interfere with contractual relationship and fiduciary duties between employer and employees - Principles - Whether employees lawfully terminated their contracts because of fears of loss of employment because of international take-over.
EQUITY - Claim for equitable compensation or damages - Conduct by plaintiff in attempting to copy defendant's confidential information or trade secrets - Whether prevented from obtaining equitable relief by reason of "clean hands" doctrine.
---
APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. M. Colbran, Q.C. with Mr. Perlman | Baker & McKenzie |
| For the Defendant | Mr. W. Houghton, Q.C. with Mr. La Pirow | Lucas Neale |
GIBSON CHEMICALS LTD. v. S.A. SOPURA NV & ANOR.
HEDIGAN, J.:
On 3 February 1998 the plaintiff Gibson Chemicals Ltd. ("Gibson" or "Gibsons"), a Victorian company engaged in the business of manufacturing and supplying industrial chemicals, commenced this proceeding against the defendants, claiming (i) against the first defendant ("Sopura") damages for its alleged breach of contract and equitable compensation for an alleged breach by the first defendant of fiduciary duties to the plaintiff, and (ii) as against the second defendant ("Sopura Australia") equitable damages for knowing participation in the breach by the first defendant of its fiduciary duties to the plaintiff and in breach by the employees of the plaintiff of their fiduciary duties to the plaintiff. The first defendant is a Belgian company with international business which sold in Australia and other places throughout the world a range of chemical products, supporting technology and advice concerning it to corporate customers under various trademarks and names including "Sopura". The defendants deny these claims and have counterclaimed for declarations and damages for breaches of the Trade Practices Act, passing off by Gibson and for the unlawful use of confidential information of the Sopura companies. At the present time, it is sufficient for me to say that the issues raised by the counterclaim were not ready to be litigated at this time so that, after hearing counsel, I adjourned the hearing of the counterclaim to a date to be later fixed, on an undertaking by the plaintiff that no ground of objection or defence to the counterclaim founded upon Anshun-type estoppels would be raised. It is not necessary to refer again to the counterclaim.
I turn to a broad description of the mainstream events and the way in which the parties pleaded their cases in respect of these issues. On 1 October 1994 the first defendant entered into a licence agreement ("the Licence Agreement") with a company called TAK Pty. Ltd. (hereinafter called "'TAK"). TAK had been developed by Mr. Alan Bennett, a key witness for the plaintiff, a former director of TAK and a director and senior executive of the plaintiff, with two other persons in about 1980. TAK developed its business involving the manufacture and marketing of industrial cleaning chemicals, selling its products to major industrial customers such as GMH, Ford and to customers in the food and beverage industries, such as Inghams, Don Smallgoods and Slades Soft Drinks. Prior to the establishing by him of TAK, Bennett had been an employee of Gibson Chemicals Ltd., the plaintiff in this proceeding, from 1960 until 1975. Whilst Mr. Bennett had worked with Gibsons, a Mr. Ken Levy had been employed by Gibsons as its national sales manager. At the outset TAK manufactured the products which it sold to its customers. Later on, it entered into licensing arrangements with overseas manufacturers of industrial cleaning products, sometimes simply selling the product, but in the majority of cases manufacturing chemical compounds in accordance with the formulae, technology and other specifications of the licensors, all governed by agreements. In 1984 Mr. Ken Levy, himself a key witness for the defendant in this proceeding, went to work with TAK. Mr. Levy's skills were primarily in sales and marketing. When he worked for TAK, he was engaged by TAK through a consultancy agreement between TAK and Mr. Levy's company Onfield Marketing Pty. Ltd. As will be seen, a similar arrangement prevailed between Levy and Gibsons Chemicals Ltd. later on. Bennett and Levy were both aware from their time at Gibsons of the potential in sales of industrial cleaning chemicals to breweries, particularly to the largest then brewer Carlton & United Breweries ("CUB") which was the biggest producer of beer in Australia, its Abbotsford Brewery in Victoria being one of the largest breweries in Australia. It also operated breweries in New South Wales (Kent), in Queensland (Yatala) and in other capital cities. When Levy went to TAK one of his responsibilities, indeed the principal one, was to build up the capacity of TAK sales to Abbotsford. Levy was very successful at this and strongly developed his employer's connection, as well as his own, with CUB executives. By 1994 TAK sales of industrial cleaning chemicals to CUB were $300,000-$400,000 per annum, with some into New South Wales. The chemical product sold by TAK involved cleaning chemicals through lines, pipes and tanks connected with the brewing process (the so-called CIP (cleaning in place) method), and other lubricants and chemicals for other aspects of the brewing and bottling process. These involved chain lubricants (the biggest item of sale), sanitizers and various caustic soda based cleaners. According to the evidence of Mr. Bennett, at about this time TAK's competitors were (a) Gibson Chemicals Ltd., the plaintiff, a wholly owned subsidiary of Gibson Chemicals Industries Ltd. ("GCI"), the largest manufacturer of special chemicals in Australia but without much access to the brewing industry; (2) Ecolab Inc., a U.S. corporation with substantial world-wide operations which had an Australian subsidiary Ecolab Pty. Ltd. which was involved the manufacture and sale of the same sort of industrial cleaning chemicals as were sold by TAK, although it was a much larger business. Ecolab sold its chemicals to CUB in New South Wales and Queensland but not in Victoria. There were also Diversey Lever ("Diversey") and Campbell Brothers in strong competition with TAK in Victoria. The evidence appears to indicate that nearly all of the cleansing processes in the food, beverage and brewery industries were based on the use of alkaline or caustic compounds. TAK had some manufacture of sales of acid-based cleaning products into other industries, but neither it nor its competitors sold acid-based products for use in the brewery industry. In the course of a business trip to Europe for TAK, Levy met people from Sopura, and became interested in forming a relationship between TAK and Sopura for the sale of Sopura's industrial cleaning chemicals in Australia. Sopura itself was a large manufacturer based in Belgium (which has many breweries) and was well known in Europe as a supplier of acid-based compounds, these containing the compound monobromo acetic acid (mba) which, according to the evidence, gave Sopura products a marked technical advantage in that they were more effective in killing bacteria than the alkaline based products.
On 1 October 1994 Sopura as licensor and TAK as licensee entered into a licensing agreement for a period of three years. Sopura's business was described as a "manufacturer and marketer of chemical products and processes for use in the brewery and beverage industries plus provision of concept, design and application and know-how supportive to the use of such products and processes". This agreement provided for royalty payments at 6% on all sales and a royalty payment of another 6% on all sales of products totally manufactured in Australia from formulations supplied by the licensor. Thus it was anticipated that not only chemical products for direct sale in respect of the brewing industry, supported by Sopura's know-how, would be subject to royalty but also royalty on Australian manufactured products from Sopura formulations.
The Third Schedule to that agreement listed certain products which had been developed and manufactured by TAK and not identified as licensed products, which were to be exempt from royalty payments. It will be necessary to look at some features of the licence agreement in conjunction with the evidence and counsel's submissions later. There were definitions of what the licensor's business field was. Sopura granted to TAK the exclusive right and licence to use Sopura's licensed trademarks and technical information in connection with (a) the manufacture of the licensed products based on the concentrates and the licensor's formulations; and (b) in connection with the sale and advertising of the licensed products. Sopura agreed that during the period of the agreement it would not sell or distribute its products to any other person and would use its best endeavours to safeguard the exclusivity granted to the licensee.
TAK in return as licensee agreed to purchase concentrates and products in accordance with the licensor's standard terms and conditions of supply and not to purchase concentrates in connection with the use of Sopura's information and licensed products from anyone but Sopura during the term. Clause 13(1) of the agreement provided that the agreement should run for three years from the commencement date unless it was terminated earlier. If that did not occur, the agreement would extend for further successive 12-month periods until one party gave written notice to the contrary at least two months prior to the expiration of the term or any further term.
Clause 13.3 enabled either party to give written notice of default in the event of the opposite party failing to meet performance, duties, obligations and undertakings. If the defaulting party had not remedied the default within 30 days the right to terminate on 10 days' written notice arose.
A important clause in this agreement is clause 13.05 which I reproduce:
"13.05Either party may terminate this agreement upon 30 days' notice if the business of the licensee or licensor is merged into, acquired by or consolidated with another company wherever located whose business in competition with that of the licensee or licensor or if the major ownership of the licensee and licensor entered into either party's business field anywhere in the world."
According to the evidence of Mr. Levy, who played a major role in the bringing about of the agreement (although it appears that the form of it was lifted by Bennett from an agreement with a U.S. company "Oakite"), when TAK began to sell Sopura products into the local brewing industry that new product was substantially different from and far ahead of the cleaning agents then on offer from the established suppliers. The Sopura products were clearly superior and within 12 months of the licence agreement that portion of the TAK business relating to brewery grew from virtually zero to 10%.
The unchallenged evidence of Monsieur Paul-Eric Loncin, a director and the principal of Sopura, stated that the Sopura technology includes its chemical products, the formulations for those products, the application techniques for the products that are critical in their use and the recommendations by Sopura to its customers on their planned set-up and arrangement. He stated that those recommendations were important because if they fell into the hands of a competitor, the competitor could use all of the documentation, then set up and seek to then substitute its products for Sopura's products. He stated that the Sopura technology had been developed over a long period of time, had a great value and had to be protected from competitors. It would appear Sopura was established in Belgium by Monsieur Loncin's father in 1946 and has expanded into markets in Europe, including Eastern Europe, South East Asia, Africa, South America and Australasia. I should say that it was accepted by both parties that Ecolab is a major competitor to Sopura in the markets in which Sopura operates and is a direct competitor with Sopura in Australia, being established in Australia prior to Sopura entering into the Australian markets.
In 1995 TAK sold out to the plaintiff Gibson Chemicals Ltd. This meant that Gibsons secured an entry into the brewery supply business and opened up the brewery world including CUB to the other chemical products manufactured by Gibson Chemicals that were suitable and saleable to the brewing industry. Ecolab had been the main Australian competitor of TAK and Gibson in that it held the Lion-Nathan national account, said by Levy to be worth $4m per annum, as well as the CUB Kent Brewery in New South Wales, accounts that all parties were anxious to obtain. Both TAK and Gibson, according to Levy, had competed against Ecolab for Lion-Nathan's business.
The plaintiff's statement of claim in paragraph 7 pleaded that Sopura had consented to the assignment of the agreement from TAK to the plaintiff. There was no evidence led in support of this claim nor was it addressed by counsel for the plaintiff. I therefore ignore it. On 29th November 1995 TAK sold the business and assets of TAK to the plaintiff. Sopura was not a party to this agreement. There were disagreements between the plaintiff and Sopura after the acquisition concerning the execution of a new licence agreement, including a dispute which had arisen regarding the non-payment by TAK of royalties on certain products in respect of which Sopura claimed royalties. According to Levy, this area had not been resolved so that first TAK and then Gibsons continued to refuse to pay certain royalties claimed by the first defendant. Also, according to Levy, and indeed confirmed by other evidence including that of Monsieur Loncin and his wife and co-director Madame Monique Loncin-Coppieters, there were arguments about the failure of the parties to resolve a dispute about what products should be included in the Third Schedule of the proposed new agreement between Gibson and Sopura, Gibson being desirous of greatly expanding the number of products it might sell without having to pay royalties, with Sopura resisting and declining to agree. According to Monsieur Loncin he informed both Bennett and the managing director of Gibsons, Mr. Bob Ooms of this disagreement. His concerns were also about Sopura technology, information and know-how not falling into the hands of any competitor through any licensee, and that no licensee would trade in opposition to Sopura anywhere in Australia or in the World. His evidence was that he told Bennett that he was concerned that the Sopura technology should not be made available to persons within Gibsons, including shareholders, for use in competition with Sopura. According to Monsieur Loncin, he stated that Sopura would be prepared to work with Gibson but a number of matters would have to be changed. Sopura never consented to any assignment of the original licence agreement with TAK nor was it ever raised with Monsieur Loncin. Negotiations commenced after the sending by Bennett to Sopura of what was in effect the former agreement, with the names simply changed by Bennett. Loncin was concerned about the expansion of the size of the company compared with the company with which he had worked which increased the possibility of conflict and a change in the way in which Sopura and TAK had worked. He was assured there would be no problem. He claimed to have found later that this was incorrect because Gibson continued to sell products competitive to Sopura and to expand the scope of its activity by increasing the products nominated in the proposed Third Schedule. He claimed to have been alarmed at the expansion of a number of products in the draft Third Schedule compared to the Third Schedule in the previous TAK agreement. This was one reason why the agreement was not acceptable to him. I note that Monsieur Loncin became ill after a heart attack in March 1996. No agreement was made between his wife and Bennett or Ooms in the course of negotiations, according to her and the outstanding issues that had arisen as a consequence of the on-sale of TAK were not resolved. Sopura did not sign off on any draft or final form of any agreement in this respect although discussions about the nature of the business relationship took place. During 1996 and 1997 Sopura continued to supply Gibson with products. There has been a dispute between the parties as to whether that was the consequence of a novated agreement or an agreement implied to be in place on the previous terms or whether or not it was simply a series of ad hoc arrangements of a commercial nature in which goods were requested, goods were supplied and goods were paid for, either party being at liberty to not continue with the arrangement without notice.
If Levy's evidence is to be accepted as to the events which occurred during this period, Gibson was active in seeking to have non-Sopura products supplied, thus avoiding royalties. However, I do not deem this aspect as necessary to be decided for the purpose of this case.
The situation was dramatically altered on 29th August 1997 when Ecolab Inc. announced a take-over bid for the whole of the assets and undertakings of Gibson Chemical Industries Ltd., the parent company of the plaintiff. If this were successful then self-evidently a major competitor of Sopura in the Australian market would acquire, at the very minimum, the opportunity to gain the CUB market into which Sopura-Gibson sold and to gain an opportunity to become familiar with the Sopura techniques and technology. I will discuss the details of the various reactions of persons likely to be affected and their conduct later in these reasons.
However, it is common ground that on 17th October 1997 Ecolab published a formal take-over offer to all shareholders of Gibson Chemical Industries Ltd., that offer being conditional upon acceptance by a sufficient number of shareholders. On 6th November 1997 Ecolab made its formal take-over offer to all shareholders of Gibson Chemicals Industries Ltd. unconditional and by 26th November 1997 Ecolab had acquired 90% of all the issued shares in GCI Ltd. As a consequence, under the Take-over Code, it was thereby entitled to acquire compulsorily all the remaining shares. The evidence indicates that Sopura was informed of the commencement of this take-over process and put in place what might be termed provisional protective measures including the formation of the an Australian Sopura company, the second defendant. On 11th December the first defendant gave 30 days' notice of termination of any licence agreements, claiming it was entitled to do so pursuant to clause 13.05 of the TAK agreement or, if the terms of the agreement no longer existed, at any time. Ultimately, a number of Gibson Chemicals Ltd. employees including Levy, and two other senior executives Bruce and Grimes and two less senior employees resigned from Gibsons and subsequently became employed by Sopura Australia Pty. Ltd. The main purchaser of the Sopura products (through TAK and then Gibson), and its technology was CUB which, having satisfied itself that the Sopura Australian company had appropriate manufacturing and distribution facilities, continued to take the Sopura products, formulae and technology from Sopura Australia and thus did not source from Gibson. For other reasons to which I will advert, it is unlikely that the plaintiff could have supplied the products desired to be used in the CIP system through the Ecolab-owned Gibson because the evidence would indicate Ecolab would not permit acid-based cleansing and sanitizing agents to be handled or manufactured in its acquired workplace. It also appears that in September 1997 Bennett, for Gibsons, directed the technical chemist Bruce to in effect analyse formulations supplied by Sopura in order to know their chemical composition so as to permit, if necessary, their reproduction by Ecolab-Gibsons.
I turn briefly to the pleadings which make the dispute in this case clear enough.
The plaintiff pleads the licence agreement between the first defendant and TAK as obliging the supply to TAK of the products, technical information and assistance dealt with in the licence agreement and the exclusive right in TAK to that assistance, knowledge and products, and to assist TAK to maintain that exclusivity. In return for TAK purchasing from Sopura the products and paying more royalties in accordance with the terms of the licence agreement, it pleads the implied terms of the licence agreement that Sopura would not do act inimical to the business, trade and commerce of TAK in Australia and do all things necessary to enable TAK to have the benefit of the licence agreement. It claims that after the sale by TAK to the plaintiff of TAK's business and assets, the agreement between TAK and Sopura was discharged by agreement and replaced by a licence agreement on the same terms between the plaintiff and the first defendant, thus accounting for the continued business between them. It claims Sopura owed Gibsons the fiduciary duties set out but breached them. It claims that the licence agreement was automatically renewed in October 1997 for a term of one year by virtue of clause 3.01 of that agreement because Sopura had not given any contrary indication. The plea about this aspect for the plaintiff was that the continuation of the business arrangements between Gibson and Sopura was on the basis of an agreed assignment or novation of the previous agreement. Alternatively, that an implication should be drawn that the commercial arrangement continued on the same terms as the original agreement between TAK and Sopura. It therefore pleads that the first defendant's purported termination of the licence agreement to 13 January 1998 was invalid and in breach of the licence agreement. It is pleaded that five employees referred to were in breach of their duties of fidelity to Gibson by acting contrary to the interests of the plaintiff and failing to give reasonable notice of their resignation. It pleads that they negotiated with the defendants for termination of their employment with the plaintiff and for the commencement of employment with the second defendant in breach of those fiduciary duties. It pleads that the defendants wrongfully procured those employees to determine their employment with the plaintiff with a view to commencing employment with Sopura Australia, leading to loss and damage to the plaintiff. It also pleads that the defendants wrongly interfered with the contracts of employment of each of those employees and knowingly participated in a breach by them of their fiduciary duties to the plaintiff. This constituted a breach by the first defendant of its licence agreement and its fiduciary duties to the plaintiff and that the second plaintiff knowingly participated in those breaches.
The defendants deny all of these allegations. They deny that the agreement with TAK in effect survived the sale of TAK to Gibson. They claim that Gibson and Sopura could not agree on terms mostly because no agreement could be reached about Gibson's attempt to expand the royalty-free products and other matters. They contend that the subsequent supply was on a series of independent, "ad-hoc" commonplace commercial sales and purchase not governed by the previous agreement. In any event if there were an agreement as contended for by the plaintiff, there was no breach of it upon the first defendant determining on 11 December 1997. It relies on the provisions of clause 13.05, arguing that the business of the plaintiff had been merged into, acquired by or consolidated with the business of Ecolab, or alternatively that the major ownership of the plaintiff as from 6 November 1997 was Ecolab Inc., not denied to be in competition with the first defendant. They deny any procuration of the resignation of any of the employees, all of whom they contend gave appropriate notice under the terms of their employment and whose resignations were accepted as immediately effective.
The defendants deny any unlawful or improper approaches to employees of the plaintiff, in effect contending that the relevant employees approached Sopura seeking out secure employment because they thought they would lose their jobs with Gibson. It is said that Ecolab-Gibson would not use the Sopura products and technology in relation to CUB. With respect to all the claims founded in equity against the defendants, the defendants by their amended defence (paragraphs 34-41) plead that the plaintiff is disentitled to equitable relief against either defendant because the plaintiff had wrongfully used confidential and secret information concerning the first defendant's chemical compounds and processes acquired by the plaintiff in the course of dealing with the first defendant, in breach of obligations of trust and confidence, for purposes other than the purposes for which they were supplied and without the licence, authority or consent of the first defendant. It is said that the plaintiff used it for the purposes of the plaintiff and not for the purpose of the first defendant's business and to the first defendant's detriment, and had not preserved its confidentiality. The particulars of these allegations essentially are that at about the time that Ecolab Inc. was proposing to make a take-over bid for GCI Ltd. (September 1997), Bennett directed Gibson's Technical Director Bruce, and another employee of Gibson, to assemble samples of Sopura's products and data sheets to enable the plaintiff to copy those products and reproduce them in the event that Sopura ceased to supply them to Gibson. This defence is essentially the "clean hands" doctrine of equity by way of defence.
I now turn to a brief summary of the main themes of the evidence from the various witnesses, the detail of which will also appear in my findings of fact which I make in the case. I confine myself for present purposes to the issue of liability and not damage. Apart from documents and answers to interrogatories tendered, the plaintiff called but one witness to give oral evidence, namely Mr. Alan Lloyd Bennett to whom I have previously referred. In his witness statement of 8 April 1999, verified in the witness box, Mr. Bennett explained the establishment of TAK and his previous history of working for Gibson for 13 years. It appeared from his evidence that he had a chemistry background but it is my impression that he had been more involved in company management over a long period of time. My broad description of the background facts is consistent with the evidence given by this witness. His evidence described some of the activities of the five employees (including Levy in respect of his employment with Gibson). It is claimed that the first defendant sought to interfere with and detach to its own advantage the services of them with Gibson.
Mr. Bruce (who gave evidence for the defendant) is an industrial chemist by occupation whose responsibilities, according to Bennett, were quality control, product development and technical service. He said Bruce was skilled at understanding the engineering side of the brewing process and applied his knowledge to develop the product to suit applications which TAK sought to market to CUB, spending two or three days a week at the CUB plant at Abbotsford.
Mr. George Grimes joined TAK as a sales representative and worked in conjunction with Levy and Bruce on sales development at the Abbotsford plant, visiting the Abbotsford brewery three or four times a week. Later he was transferred to Brisbane and became a Queensland manager responsible for the TAK sales to CUB at Yatala in Queensland. The relevant employees of TAK became employees of Gibson and worked in the same areas during 1996 and 1997. The arrangement made by Gibson concerning Levy was with Mr. Levy's company Onfield Marketing Pty. Ltd. after Gibson took over, similar to that which existed between TAK and Onfield. See Court Book 159-163. As to the other employment with Gibson, see, re Bruce, Court Book 164-167; re Grimes, Court Book 168-172. Mr. Daryl Flint was also a chemical engineer who worked at the Yatala plant on secondment from Gibson, working with Mr. Grimes and keeping in contact with Levy and Bruce. Mr. Bruzzaniti was a salesman in Victoria with close connections for Gibson with the Abbotsford brewery, in much the same way as Flint was with the Yatala brewery in Queensland.
According to Bennett, he commenced negotiations for the sale of the business and assets of TAK to Gibson in September 1995. Gibson was then, as now, a wholly owned subsidiary of GCI Ltd. Mr. Ooms was then the managing director of GCI and was involved in these discussions. When these negotiations were virtually completed successfully from Gibson's perspective, Bennett arranged for a letter of 11 November 1995 to get to Loncin through Mr. Gyngell (Exhibit 2) which led to a meeting between them. On 21 November 1995, Mr. Loncin met with Bennett and Ooms and, according to Bennett, expressed his concern about the Gibson take-over because it was a much larger company than TAK and Loncin wanted to do business with a smaller company, with people he knew. Bennett claimed that he explained the fact that the key personnel would be staying on, and that Loncin was satisfied, that he would continue to work with Gibsons as he had with TAK. I make the observation that Loncin by no means agreed with that aspect, claiming in his evidence that he was very concerned that the Sopura technology and know-how might fall into the hand of a competitor and did not want the Sopura technology made available to anyone for use in competition with Sopura. What he said was that Sopura would be prepared to work with Gibson but there were a numbers of matters that had to be changed. According to Bennett, Mr. Ooms proposed that there should be a further agreement executed in the name of Gibson. I note that Ooms, still a senior director of GCI, was said to be available in Sydney but was not called as a witness in this case. Bennett agreed that no new agreement was ever executed but that Sopura continued to supply its products and advice. He claimed that that was pursuant to the TAK/Sopura agreement. This was a matter denied by the defendant as I have already identified. Thereafter, Bennett had management responsibility for the Gibson-Sopura manufacturing and distribution business. He claimed the sales and business development control remained with Mr. Levy. Correspondence took place between Bennett and Monsieur Loncin and, after his illness, his wife Monique took over with respect to the draft agreement which had been sent by Bennett. This had no changes to the basic clauses, including termination clauses, but a substantial increase in the number and range of the products included in the Third Schedule in respect of which there would be no royalty payments by Gibson. According to Bennett, Ooms told him that Loncin had expressed concern about the expanded list of the Gibson's products on which no licence fee would be paid. It also appears that Bennett faxed Loncin on 17 October 1996 with a statement that "any new business opportunities ... would be pursued with Sopura products provided that these products were better than Gibson's products" and that they would look to replacing some of their sales with Sopura products. This was described by Madame Loncin at a less than unqualified version of the "best endeavours" clause which had been contained in the draft agreement which was itself something less than had been in the TAK agreement.
Bennett's evidence was that the announcement on 22 August 1997 by Ecolab Inc. was to the effect that a newly established Ecolab Australia Pty. Ltd. ("Ecolab Australia") had acquired 14.9% of the shares in GCI Ltd., the parent company of the plaintiff. On 29 August Ecolab Inc. announced that Ecolab Australia would stand to make an offer for all the outstanding shares in GCI. Some time shortly after this, Gibson informed Madame Loncin of these details. By 17 October Ecolab Australia had sent a take-over offer to GCI shareholders, an offer which was declared unconditional by 6 November 1997. As I have previously indicated, on 26 November Ecolab Australia had acquired over 90% of the shares in GCI and thereby compulsorily acquired the remaining GCI shares which was concluded by 12 January 1998. Bennett claimed that when he received the letter of termination of the licence agreement from Sopura on 12 December 1997, no change had occurred to the operation of the business, Levy still heading up the brewery side and reporting to him. It was substantially run by the same personnel including the employees referred to. He claimed that Ecolab Australia was not in the business of manufacturing and marketing of chemical of chemical products and processes in any way affecting the CUB side. Ecolab Pty. Ltd., another Australian subsidiary of Ecolab Inc. had operated such a business in 1997. Bennett claimed that at no time was Ecolab Pty. Ltd. or Ecolab Australia or any company in the Ecolab Group involved in the manufacture of acid-based products containing MBA for use in the brewery industry or otherwise because it was a world-wide policy of Ecolab not to get involved in the manufacture of products containing MBA. I daresay that this policy, apparently known to the Gibson employees, might have strongly fuelled the inference that the business of Gibson with CUB, using the Sopura products, acid-based, may well come to an end.
Mr. Bennett's witness statement on 8 April did not address the events which occurred during the Ecolab take-over process nor in the month of December 1997. It was in this period that virtually all of the events immediately relevant to the plaintiff's claim against the defendants founded on the tort of wrongful interfering with the contracts of employment of the employees or knowingly participating in a breach of them by their duties to the plaintiff is founded. Bennett dealt with these issues primarily by way of answering Mr. Levy's statement, essentially denying a substantial part of Levy's account, e.g. a denial that he told Levy that Levy was unlikely to be retained if the Ecolab take-over was successful because of his age and other matters, a denial that he told Levy that his job was at risk because he was 68 years old and only had a sub-contract. Nevertheless he seemed to say in his evidence to me that some of the statements attributed by Levy to him may have been made but he had no recollection of them. He denied that he told Levy that he was planning to leave himself if the Ecolab take-over was successful. He denied that he told Levy a second time that there was no position for him with Ecolab and he claimed that he had no recollection, without denying them, of a number of important conversations with Levy, sworn to by Levy. He did not deny that he had a conversation, possibly in the last week of November. He said that Levy told him that he was going to join Sopura, denying Levy's version that he was still considering joining Sopura. He denied in effect giving Levy his blessing as to that. He said that Levy told him that Bruce was going and that he asked Bruce who said that he was glad that Bennett knew. He said that Levy told him that whatever the circumstances, he wanted to leave anyway.
I turn briefly to some of the defendants' statements. Monsieur Paul-Eric Loncin described in detail a number of matters in relation to the importance of the Sopura technology and products, that company's competition with Ecolab in other markets and the shock of firstly the sale of TAK to Gibson and then the take-over of Gibson by Ecolab, which was in direct competition with Sopura in Australia in the brewery market (Lion-Nathan). Monsieur Loncin gave evidence as to the draft agreement presented by Bennett after the sale by TAK and his telling Bennett in effect that he was very worried that the Sopura technology information and know-how would fall into a competitor's hands. He also expressed his concerns to Bob Ooms as well as to Alan Bennett.
He denied consenting to any assignment of the original licence agreement, about which he was never consulted. Sopura was not involved in those discussions at all. Afterwards Gibson sought to negotiate a direct arrangement with Sopura which went on over a long period without success because they could not agree. After the take-over by Gibsons of TAK he asked Ooms to provide a commitment to sell only Sopura products into the brewery and beverage industry and that both Bennett and Ooms had told him that there was no problem, there would be no interference with the way the business had been run between Sopura and TAC. He later found out that that assurance was not fulfilled because Gibson continued to sell products in competition to Sopura products and endeavoured to expand the scope of that activity by increasing the products nominated in the Third Schedule. This led to disagreement, that disagreement was not then resolved and never was resolved. When he got the draft licence agreement from Bennett he rejected the proposal. It was after that that he became ill and did not follow up personally the negotiations with the plaintiff. But in any event, they failed because the plaintiff was endeavouring to put a greatly increased number of royalty free products into the Third Schedule. Notwithstanding that, he continued to supply to Gibson products upon order although there was no agreement in place. The products were ordered, he supplied them and he was paid. Some of his objections were recognized but he did not sign off on any draft or final form of any agreement and the relationship was totally unconcluded between them. He was always worried that Sopura technology might fall into the hand of its competitors, including Ecolab, or that the Sopura products might be down-graded or excluded from the Australasian market due to an obvious commercial conflict. From early September Ooms kept in touch with him and told him about the progress of the take-over which Ooms originally thought would not be successful. Ooms said that the Gibson Board was opposed to it but that ultimately the view changed and it became apparent that the take-over was likely to succeed.
As it became apparent in late September that the take-over had the potential to succeed, he became alarmed and sought to put something in place to protect Sopura's product in market position. Through an accountant h arranged for the acquisition of a company (a shelf company) using the Sopura name so that if it became necessary for Sopura to trade on its own it would have a suitable structure for the purpose. This was Sopura Australia. He came to Australia in October 1997. He denied that when he engaged the accountant to get an alternative corporate structure that he made any suggestions about getting an alternative distributor. He denied that he asked Anderson of McKenzies to get an alternative distributor; that all he asked Anderson to do was to inquire as to the possibility of acquiring a company to look after Sopura's business in Australia in the event the Ecolab take-over succeeded, so as to protect the business Sopura had in Australia, and its technology and know-how. This was not so much to protect sales but the technology, name and formulae. Mr. Loncin accepted that the products being acquired by TAK and then Gibson were mostly to supply to CUB. He said he was concerned about the whole future in Australia and New Zealand and not just about sales to CUB, although that was a matter of significance to him but not as much as being evicted from the market by his biggest competitor which was of a greater concern.
He arranged to meet Mr. Levy, because of his consciousness to maintain a connection with the Sopura products into Australia, at the Jika Jika Motel in October 1997. It is not clear who initiated that phone conversation, but apparently they both agreed to meet and met around 20 October, a date which verified from his passport. He had never been in Australia prior to 20 October. He was concerned about the future of Sopura. He knew he could not collaborate with his biggest competitor and he thought he had to form a company of which Levy and Bruce might be elements. He discussed this with Levy and told him of his concern about the take-over of the plaintiff by Ecolab, because of the competition between Ecolab and Sopura throughout the world. He told him that he had established another company which would be Sopura's company for Australia if the need arose. He told him that his plans were not formed but that if Ecolab got control of Gibson he wanted to be able to ensure that Sopura products would be sold in Australia and its market protected. He made a proposal to Levy to work for the second defendant, including to head it up, if necessary. He asked Levy about his salary requirements as to which Levy explained that he was not an employee of Gibson but hired from his own private company. He said to Levy that he would pay his company a fee in return for his services and that he would pay him the same amount that had been paid by Gibsons. Levy told him that he got a commission from Gibsons for promoting the sale of Sopura products, amounting to $25,000 each year. Loncin told Levy that he would not be prepared to pay that. Levy did not say that he would take a job but only that he was interested in working for Sopura because he believed that if Ecolab's take-over was successful his job at Gibson would be terminated. He asked Levy about Bruce and Grimes and Levy told him that they were both concerned about their future and might be interested in similar offers. He told Levy that he expected the Australian company to be commercially successfully and was prepared to invest in it up to $1m. but only to maintain the market that had been established, and to increase it if possible.
In November he spoke to Bob Ooms who told him that Ecolab might want to continue with the licence arrangements. He asked Ooms what Ooms would do if he was in his position and he said "Probably look to other solutions" which Loncin understood to mean that Gibson would not be involved in selling Sopura products in Australia so that Sopura would have to make new arrangements. It was not until December that he put a concrete offer of positions to either Levy or Bruce. Levy was prepared to accept, but Bruce required further conditions before he would commit himself. He ultimately agreed to those terms. He had come back to Australia on 27 November as soon as heard about the Ecolab's acquisition of the 90% which he got through conversation with Bob Ooms. He inquired about leasing premises but all of this had only been provisional depending upon what happened to the take-over. He did not later speak to Ooms about this, but, in view of Ooms' suggestion to him, he knew what he had to do. He established the Australian company at a later stage because Ooms was the managing director of Gibson. He set up premises in Bayswater to commence on 13 January 1998 but they moved in a little earlier.
Monique Loncin- Coppieters, the wife of Monsieur Loncin and a director of Sopura, confirmed many of these matters, including their concern about the purchase by Gibson of TAK. She said that they informed the Australian Stock Exchange and Gibsons that any agreement with the plaintiff would require modifications to the TAK agreement, particularly provisions which required the plaintiff to use Sopura products exclusively in the beverage industry and to pay a fee in respect of that to Sopura. A number of meetings went on with Ooms between November 1995 and the northern hemisphere spring of 1997. She received a draft agreement from Bennett of an agreement between Gibson and the plaintiff in July 1996 which was unacceptable to her because of the increase in the royalty-free products from the Third Schedule and a less than unqualified commitment to the exclusive use of Sopura products by the plaintiff in the beverage industry. In September 1996 she and her husband met Ooms in Paris. He put proposals to them for other forms of commercial agreement including that GCI acquire a minority holding in the first defendant. This was rejected as was the Gibson proposed agreement, she saying that such a long list of excluded products ran contrary to the intention of Gibson to work exclusively with Sopura products. No agreement was reached then, and it never was, notwithstanding meetings with Ooms who came to Belgium. She said that discussions kept going because the parties believed they would be able to finally enter into an agreement once they resolved their issues. However, the take-over bid put an end to that. After the Ecolab take-over offer commenced, she discussed the issue with Bennett, raising concern that Ecolab was a competitor of Sopura in all countries where Sopura was active. At that time Bennett asked again for her to sign the agreement he had sent in July 1996 and that she should sign it to protect Sopura's interest and confidentiality. She told him in November 1997 that Sopura would not sign the agreement. No cross-examination of this witness took place.
Mr. Kenneth Levy was an important defence witness who is now the Chief Executive Officer of Sopura Australia. It is not necessary for me to describe his technical employment arrangements with TAK and Gibson although they were managed through his company rather than directly. Mr. Levy was primarily a marketing sales person and had a very substantial experience. He was 68 at the time of the Ecolab take-over. He had worked for Gibsons but was later invited by Bennett, who well understood his abilities, to come to TAK where he was very instrumental in developing both the TAK connection with Sopura and the sale of Sopura products into CUB, the Sopura products being superior, although differently based, from other cleaning agents employed in the Australian brewery scene. It is not necessary for me to refer in detail to the evidence of Mr. Levy concerning the various competitors in the market although it is obvious from that evidence that Sopura had competitors, in particular Ecolab, which had the Lion-Nathan national account worth $4m. and indeed part of CUB output in New South Wales. Ecolab is a worldwide company with a vast business. Mr. Levy was instrumental in the making of the agreement between TAK and Sopura. He does not appear to have been much connected with the Gibson acquisition of TAK although his evidence was that he was aware that there were disagreements between Gibson and Sopura after the acquisition of TAK, and that he was aware of the areas where no agreement had been achieved between Sopura and Gibson. This included his familiarity with the commercial disagreement then arising regarding non-payment by TAK of royalties on certain products in respect of which Sopura claimed the royalties. He was aware that the plaintiff had sought to exclude a large of its products from the payment of royalties in a way that was not acceptable to Sopura. He instanced an occasion of Bennett directing him to supply a TAK product rather than a Sopura product in breach of the earlier agreement between TAK and Sopura.
When the Ecolab Inc. take-over was announced, Levy became not only concerned about likely staff changes which could result from the Ecolab take-over if it succeeded but also his own position. He was then 68 years old and had, as it were, a sub-contractor status. He also knew that Ecolab had its own brewery division and that the Ecolab person in that position was senior in the hierarchy to Levy. Levy stated that Bennett said that he thought that Ooms and he were also among the first to go if the take-over succeeded. Bennett said that he told Levy that, if he had somewhere to go, he should go. Bennett, was planning to leave himself if the Ecolab take-over was successful because, although he was wealthy, he, Bennett, still wanted to work for another five years. Bennett told him that there would not be a position for Levy with Ecolab. Bennett asked him about Sopura's attitude to the take-over and he told Bennett of a conversation he had had with Loncin that showed Sopura was concerned but was not going to take any action but would await developments. He stated Bennett said that he would contact Loncin to discuss it but told Levy that he thought the take-over would be successful and that both Bennett and Levy could find themselves out of a job. Levy said he had a conversation with Bennett about a number of articles in the newspapers about the take-over. Bennett told him that if he, Levy, wanted to join Sopura he would not stand in his way. Levy said that he was very relieved to hear this and treated it as a blessing from Bennett, and thereby Gibson, for Levy to make his own arrangements about future employment, including with Sopura. He spoke to Bennett on 17 November (notes taken of the conversation) in which Bennett spoke about the continued brewery division of the plaintiff in the event of the take-over being successful but not including any role in it for Levy. He said Bennett's words to him were "Look, for what it's worth, Oomsie spoke to America last night and they said they want to continue with the brewing division." In the last week of November, Bennett said, "I know you're considering joining with Sopura" and he agreed that he was. Bennett said he did not know what was happening to him but "if I were you (meaning Levy) I would leave", saying "Let me know when you decide, I will not do anything to interfere." He said that in the same conversation Bennett asked if Bruce and Grimes were concerned about their future. He said that he told Bennett that he had spoken to them and they were both very worried and they were almost certain to talk to Sopura about their future. I make the passing observation that this was hardly a situation of an opponent secretly trying to steal valued employees. Bennett knew from Levy what was going on.
Loncin had contacted him in mid-September concerning the Ecolab take-over and his concerns about its effect upon Sopura. He was concerned that his competitor Ecolab would access Sopura's confidential information and he told him that he was going to investigate means to protect his business if the Ecolab take-over succeeded. He met Loncin at the Jika Jika Motel in late October and Loncin expressed his concern about the take-over particularly about Ecolab's competitive position internationally. Loncin told him he had registered Sopura in Australia and referred to Sopura Australia stating that depending upon what happened as a result of the take-over, he was intending to commence business in Australia and he wanted to maintain Sopura's business in Australia. He said that he would want in those circumstances Levy to head up the Australian company if those events occurred. Levy explained his sub-contract arrangements and that he wanted the same salary structure and the same income. He did not tell Loncin that he would accept a position but merely that he was interested because it was his belief that if the Ecolab take-over was successful Levy would lose his job. Loncin was prepared to offer the same salary but not the same commission so that he would be $25,000 worse off in money terms. Upon Loncin asking, he told him that both Bruce and Grimes were very worried about their future and were likely to be interested in a similar offer. No one else was mentioned. Loncin told him that he would invest money in Australia to establish the business up to $1m. He wanted the Australian company to maintain the existing brewing business, to increase it and expand the operations of the company. Some time in November he spoke to Loncin by telephone who merely inquired whether he was still interested in working for the second defendant. This was more likely because the Ecolab take-over appeared more likely to succeed.
On 3 December 1997 he had a conversation with Bruce. It appeared that Bruce was likely to leave Gibson, believing he had no future at Gibson because the Ecolab technical manager was well senior to Bruce. On 9 December Bennett came to his office and said "Look, when you leave could you take Kim McPherson with you?" Levy had not formally announced or tendered any resignation at that stage but this made it clear to him and merely reinforced that Bennett knew that he was intending to leave. However, Levy thought there was no place for McPherson, a serviceman a CUB, with Sopura. Bennett then said words to the effect, "look I understand what you're doing and I agree. I won't stand in your way. It's okay by me. I would do the same thing if I were in your shoes". Then they discussed the timing of the resignation. He told Bennett that Bruce was likely to leave and it would be best if they left on 18 December because that was the date the plant shut down. Bennett said that that would be "all right and let's leave it at that". Bennett said that he expected that Sopura was going to cancel any further supply arrangements. He expected that because he understood perfectly that Sopura could not continue the supply arrangements with the plaintiff because Ecolab was their largest competition internationally and in some sites in Australia.
He said that there had been strong disagreement between Grimes in Queensland and his manager. Grimes resigned on 9 December. On 10 December Bennett asked Levy if he would reminding resigning on Friday 12 December and not wait the extra week, and to make sure that Peter Bruce resigned on that day as well. Bennett said that there had been adverse reaction to George Grimes' resignation and that it would assist him if they were to leave at the end of the week. As a consequence both Bruce and Levy resigned as requested. On 12 December he went to see Bennett in his office with Bruce at 11 o'clock. They both gave Bennett letters of resignation. Bennett then said that he would arrange for someone to accompany them while collecting their personal belongings and dropping off company belongings, that is, they were told to leave on the spot and they did.
Levy gave evidence of speaking to Bruce shortly after the conversation with Loncin in October 1997 at the Jika Jika Motel. Bruce was very unsettled and uncertain about his future and looking elsewhere for employment. Levy raised the possibility of working with Sopura but Bruce said no more than that he was interested in continuing to work with the Sopura products and technology and was not prepared to commit himself to any change of employment at that time. Bruce told him on the evening of 3 December that he wanted to take up any offer of employment with Sopura Australia. Bruce's own evidence confirmed this. He never spoke to Loncin himself. On 6 December Levy spoke to Bruzzaniti about his future employment, he being concerned about it. Bruzzaniti told him that he was going to resign because of his conflicts with his manager Mr. Morrissey. Levy told him there was a job with the second defendant and he said he would take it.
Before summarizing the facts as I find them to be, it is necessary to say something about the respective credibilities of Bennett and Levy. Based on my observation of the witnesses in the witness box, I much prefer the evidence of Levy who was candid and convincing. My view is that Bennett was still influenced by his continuing position with Ecolab-Gibson and may have had some fears about his continued employment, arising out of these events and this case. I note that he had failed to address the question of the conversations in the latter part of the year with Levy both in his affidavit sworn on 3 February 1998 and in his witness statement for the purposes of this case, apparently preferring to save the issue up for reply. That is, he desired to know what Levy's version was before he committed himself to his own. Bennett persistently revealed an inability to recall conversations put to him, a fairly standard answer being he did not recall that but it may well have happened or it was possible that that was said. He has, in my judgment, a poor memory about these events. It is beyond doubt that he gave a direction to Bruce to copy the Sopura formulation and to reverse engineer them, a matter he did not reveal in the course of his evidence and, even when cross-examined about it, was unattractively evasive. Moreover, his version of events is not consistent with the documents. Where his evidence conflicts with that of Levy, I prefer Levy's evidence. Mr. Levy was a candid witness, unafraid to mention matters possibly contrary to the acceptability of his evidence but adhering in a convincing and believable way to the main themes of the events which he addressed. I do not have any doubt at all that Bennett told him in September, when the Ecolab Inc. take-over was first mounted, that he, Levy, being 68 and with his own sub-contract rather than direct employment with Gibson, was unlikely to get a job and that he, Bennett, feared that he may not retain his. In my judgment, Bennett had this fear throughout and strongly threw in his lot with Ecolab Inc. in an effort, a successful one, to keep his position with Gibson. I also accept that at an early stage he told Levy that he expected Levy to seek other employment, meaning employment with Sopura, that he would not stand in his way and that he would do it himself if he thought he could get a job there. Levy rightly interpreted that as meaning that he had Bennett's blessing, and thereby Gibson's, and was relieved. He said that he was relieved because Bennett might have told him on the spot to clear out his desk and leave. Bennett was in a difficult position in one way and was, in my judgment, happy for Levy to go. It made him safer. At the early stages he believed that the take-over attempt would fail and in those circumstances he was not going to imperil his position with Gibson. On the other hand, if it succeeded, he could not appear to have been a person working against the interests of the taking over by Ecolab. He kept his conversations with the employees private. Mr. Bennett's inclination was to be a survivor and indeed that is why, in an effort to be able to ingratiate himself with the new proprietor, he instructed Bruce in September to collect the samples and data sheets of Sopura. It may be, as Mr. Colbran submitted, that the data sheets were documents in the public domain because of the necessity to file them with the Federal body. The same could not said of the far more critical formulated products. Bennett hardly denied this saying he gave that direction as "insurance", that is as a measure of protection. I interpret this also as insurance for Bennett personally, to please the new owner. At that point of time no instructions to do so had come from Ecolab, which had not as yet secured Gibson, nor from Ooms. Mr. Bennett was therefore quite prepared to copy, that is, steal, the make-up of confidential formulae of Sopura without telling Sopura. He clearly did this because he believed that it would advantage him, including his new masters, and that it might please them. In the event, it probably did not as Ecolab was not prepared to manufacture acid-based cleaners, although, if Bennett is to be believed, it might have brought them in to supply them to CUB if necessary.
Levy, in early September, believed that he was unlikely to be retained for the reasons to which I have already referred. It was a little later, probably on 22 September 1997 that Bennett again told Levy that he Bennett was planning to leave himself if Ecolab's take-over was successful and if he had somewhere to go. He told Levy that he was wealthy but still wanted to work for another five years. These latter matters were denied by Bennett but I accept Levy's evidence about this. Bennett again told Levy that there would not be a position for him with Ecolab. Levy told Bennett at that time that he had received a telephone call from Loncin who expressed concern about the Ecolab take-over and its likely effect on Sopura's chances of continuing in business in Australia, emphasizing the competition between Ecolab and Sopura around the world and that he did not want Ecolab to have access to Sopura's confidential information. Loncin had said that he was going to investigate means to protect his business in the event that the Ecolab take-over succeeded. Levy told Bennett this and that his belief was that Sopura was going to await developments. Bennett said he would telephone Loncin and again said that he and Levy could find themselves out of a job. According to Levy, on Saturday 4 October the matter was discussed again between him and Bennett who told him that he would not stand in his way if he wanted to leave and that Levy should keep Bennett informed as to any action he would take because he would support him.
On a date, probably 20 or 22 October 1997, Loncin came to Melbourne and met Levy at the Jika Jika Motel in Fairfield. He there expressed his concerns about the take-over by Ecolab and told Levy that he had registered the name of Sopura in Australia. I have already referred to this conversation with respect to Loncin's evidence. Loncin at that point of time was taking further steps, all provisional upon the Ecolab take-over succeeding, and one of them was to make it clear to Levy that if Ecolab did take over Gibson, Loncin was nevertheless going to continue with Sopura in Australia. In effect he asked Levy in the event of those events occurring whether Levy would become involved with the Australian company. Levy explained his arrangement with Gibson through Onfield Marketing Pty. Ltd. He told Loncin he was interested in the position because if Ecolab did take over, Levy's services would be terminated. Loncin said that if these events happened he would offer the same salary to Levy as he got from the plaintiff but would not pay the commission, this meant $25,000 before tax in diminution of Levy's package. According to Levy there were some later discussions in early November with Loncin by telephone the substance of which was an inquiry whether or not Levy was still interested in working for the second defendant if the Ecolab take-over succeeded. At this point of time, in my judgment, Levy naturally enough tried to protect his future and was keen not to lose the opportunity of working for Sopura if Ecolab took over the plaintiff. Neither of them made any final commitment at this point of time. Gibson, through Bennett, knew of Levy's contact with Loncin. Levy said that in late November he told Bennett that he was considering joining Sopura and Bennett at once told him "Let me know what you decide, I'll not do anything to interfere". Bennett denied this although he said that Levy had told him, if not then in early December, that he was leaving and that he was joining Sopura. It may be, in my judgment, that Bennett was there referring to the formal statement in December by Levy that he was leaving and going to Sopura. I accept Levy's evidence that there was a conversation in the last week of November to the effect which I have described. Levy's evidence was that Bennett asked him if Bruce and Grimes were concerned about their future and that he told Bennett that they were both worried and they almost certainly wanted to talk to Sopura about their future. It is the fact, of course, that both Bruce and Grimes resigned from the plaintiff. They joined Sopura Australia on the same day as did Levy, namely 15 December 1997. Late on 9 December, according to Levy, Bennett said words to the effect: "I understand what you are doing and I agree. I won't stand in your way. It's okay by me. I'd do the same thing if I were in your shoes", and that there was then a discussion between them as to the appropriate timing of Levy's resignation. Levy suggested 18 December and Bennett said that was all right. Bennett stated that he had a feeling that Sopura were going to cancel any further supply arrangements, he was expecting it and understood perfectly that Sopura could not continue with the supply arrangements with Gibson once it was acquired by Ecolab. On 10 December, as I find, Bennett asked Levy by telephone if he would mind resigning on Friday the 12th and not wait the extra week and to make sure that Peter Bruce resigned on that day as well. Levy's evidence was that he also said that it would assist him if Grimes went at the end of the week too because there had been some adverse reactions to the resignation that he had had already tendered. Both Levy and Bruce went on 12 December to see Bennett. Bruce handed Bennett a letter of resignation which Bennett looked at. Bennett then told both he would arrange for someone to accompany them while they collected their personal belongings and dropped off company belongings. This was a by no means unfamiliar corporate practice of not permitting the departing employees to be in a position to exercise any influence or to carry off or copy a former employer's property or records. It amounted to relieving both Bruce and Levy-Onfield of the necessity to serve out any notice. Indeed Onfield was paid a pro rata payment for Levy's services up to 12 December 1997. Levy had spoken to Bruce and Grimes about their possibly going to Sopura's Australian company because of his awareness that they were very unsettled and uncertain about their future. Bruce was not prepared to commit himself whilst the take-over process was evolving but told Levy on the evening of 3 December that he did want to go to Sopura. Of course, at that point of time the take-over was virtually completed. Bruce had in mid-September, pursuant to Bennett's instruction to do so, assembled copies of the material safety data sheets supplied by Sopura and concentrates and instructed one of the Gibson chemists to review them and to be prepared to take swift action to copy the concentrates. His instructions, according to Bruce's evidence, were carried out and that the chemist had been successful in sourcing the ingredient bromo-acetic acid.
Quinton confirmed when cross-examined that he had not been asked to assess the overall profitability of the business of the Gibson group as such and had not taken into account many of the overheads normally applicable for sales of chemicals in the brewing group's operations, e.g. the cost of staff. It appears that Baker & McKenzie, the plaintiff's solicitors, asked him to prepare a statement of the sales and gross margins on a 12-month basis. Even with that limitation, namely that he was merely requested to prepare loss of sales and loss of gross margins on the products sold to the two relevant breweries, he was not in a position to estimate what caused those losses. Thus he had not done any exercise to enable it to be known whether in fact the Gibson business was more profitable or less profitable as a consequence of the relevant executives having left or not. The royalty payments were not included as parts of the cost of the products of Gibsons, according to Mr. Quinton, nor did he take into account on the effect of the overall profitability of Gibson of not paying the 6% royalty on Sopura goods that would have been sold in the period from 8 January 1988 onwards. No account was taken of Ecolab's sales in the brewing and beverage industry of non-Sopura products from January 1988. Asked by me to in effect to estimate loss of net profit, assuming there was a loss on Sopura products, he thought it might be 20 to 25% of the sales. He accepted that the brewery business was competitive but thought changing from one supplier to another was very costly. Despite the loss of the Sopura business, according to Mr. Quinton, the actual volume of products being manufactured through Gibsons Cheltenham plant increased because sales increased. These goods were a mixture of TAK-Gibson and Ecolab products, manufacturing products for brewing and beverage industry. He said that the integration process of Ecolab had not gone as smoothly as they would have liked and although productivity went up, efficiency did not, because the computer systems were not working properly. So far as lost gross profit on Sopura products for Yatala (CUB Queensland), he did not consider the sale of Gibson-TAK products to Yatala because he was not asked to. Supply of products to both Abbotsford and Yatala were kept up. He could not say whether they increased or not. He appeared to accept that Mr. Ames' method of calculating breakdown of wages in relation to the brewing was sound although he might have a different opinion about the percentages. He accepted that Ames' criticism about the incompleteness of his exercise was correct nor did he make any allowance for the commercial uncertainties, even without change.
Had I reached the point of having to attempt to estimate the damages in this case, I would not have been rationally able to do so. Even applying a 20% estimation of net profit, it is impossible to know, on the evidence of Mr. Quinton, whether it is accurate that there were gross, or net losses, and even if there were, what were they attributable to. In cases of this kind, estimation of loss might and should be done even if it cannot be done as a matter of precise mathematical calculation. But the plaintiff must establish a loss, and the amount of the loss. The evidence in this case leaves both matters in doubt. Estimations that might be made in the assessment of damages in the personal injuries sphere, e.g. for pain and suffering, may frequently be made on slender material because the translation of pain and suffering into money is not a truly rational exercise, more a unscientific assessment. That is not the case when losses arising out of a cause of action as here relied on are claimed. See J.L.W. (Vic.) Pty. Ltd. v. Tsiloglou [1994] 1 V.R. 237 at 245, where Brooking, J. discusses the general principle that courts must do their best to quantify loss, even when speculation and guesswork is involved. I note his Honour agreed with the view expressed by Pincus, J. in Schindlers Lift (supra) at 319, that if the evidence called by the plaintiff fails to provide any rational foundation for the proper estimate of damage the Court should simply decline to make one. Accordingly, there will be judgment in the proceeding for the defendant.
I will hear from counsel on costs as to the remnant of the proceeding, namely the counterclaim.
---
12
0
0