Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd

[2024] NSWSC 18

Supreme Court

New South Wales

Medium Neutral Citation:

Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2024] NSWSC 18

Hearing dates:

22, 23, 25 August, 22 November 2022

Date of orders:

31 January 2024

Decision date:

31 January 2024

Jurisdiction:

Common Law

Before:

Gleeson J

Decision:

(1)   Judgment for the plaintiff against the defendant in the amount of $2,259,971.40.

(2) The defendant to pay the plaintiff interest on the amount of the judgment referred to in Order 1 above pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 19 June 2019 to the date of judgment.

(3)   The defendant to pay the plaintiff’s costs of the proceedings.

(4)   Direct that the Exhibits be returned after 28 days.

Catchwords:

CONTRACTS — express terms — incorporation of terms into written contract — where customer ticked the box on sales agreement referring to supplier’s terms and conditions of trading

CONTRACTS — construction — take or pay, annual quantity, and exclusivity provisions — whether provisions breached — whether take or pay provision void as a penalty — whether take or pay provision collateral stipulation to obligation to purchase annual quantity

CONTRACTS — formation — consideration — whether contract void for illusory consideration — construction of supplier’s executory promise to supply products

CONTRACTS — whether unilateral amendment of supplier’s terms — whether conventional estoppel established — whether parties adopted mutual assumption as to the terms of their legal relationship

CONTRACTS — terms — whether provisions void or unenforceable by reason of alleged misleading or deceptive conduct or unconscionable conduct — whether reasonable expectation of disclosure of specific terms of supplier’s terms and conditions of trading — whether failure to disclose specific terms was misleading or unconscionable conduct — where commercial negotiation at arm’s length for the supply of goods to customer on supplier’s standard terms and conditions of trading

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 100

Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, ss 18, 21, 22

Evidence Act 2005 (NSW), s 56

Uniform Civil Procedure Rules 2005 (NSW), r 42.1

Cases Cited:

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30

Ange v First East Auction Holdings Pty Ltd (ACN 083 112 505) [2011] VSCA 335; (2011) 284 ALR 638

Aquamore Credit Equity Pty Ltd v Hung [2021] NSWSC 1681

Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231; [2016] NSWCA 328

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54

Australian Competition and Consumer Commission v Medibank Private Ltd (2018) 267 FCR 544; [2018] FCAFC 235

Australian Competition and Consumer Commission v Geowish Pty Ltd (No 3) [2019] FCA 72; (2019) 368 ALR 441

Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40

Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18

Baltic Shipping Co v Dillon “Mikhail Lermentov” (1991) 22 NSWLR 1

Banque Commerciale SA (in liq) v Akhil Holdings Limited (1990) 169 CLR 279; [1990] HCA 11

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61

Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592; [2004] HCA 60

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25

Carnival Plc v Karpik (Ruby Princess) (2022) 294 FCR 524; [2022] FCAFC 149

Connor v Blacktown District Hospital [1971] 1 NSWLR 713

Dialogue Consulting Pty Ltd v Instagram Inc (2020) 291 FCR 155; [2020] FCA 1846

Electricity General Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Ermogenous v Greek Orthodox Community (2002) 209 CLR 95; [2002] HCA 8

Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53

Franklins Pty Ltd v Metcash Trading Ltd; Metcash Trading Ltd v Franklins Pty Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407

Gibb v Commissioner of Taxation (Cth) (1996) 118 CLR 628; [1966] HCA 74

Gilberto v Kenny (1983) 57 ALJR 283

Halford v Price (1960) 105 CLR 23;

[1960] HCA 38

Harris v Harris [2021] NSWCA 326

Hollaway v McFeeters (1956) 94 CLR 470

Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 272

Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313

Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433

In the matter of Gelpack Enterprises Pty Ltd (in liq) [2015] NSWSC 1558

Jenyns v Public Curator (Qld) (1953) 90 CLR 113

Karpik v Carnival Plc [2023] HCA 39; (2023) 98 ALJR 45

Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12

Macquarie International Clinic Pty Ltd v Sydney South-West Area Health Service [2010] NSWCA 268; (2010) 15 BPR 28,563

Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184

Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141

Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd [1998] 4 VR 559

McBride v ASK Funding Pty Ltd [2013] QCA 130

Meetfresh Franchising Pty Ltd v Ivanman Pty Ltd [2020] NSWCA 234

Miles v Luneburger Franchising Pty Ltd [2021] NSWCA 248

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31

Moratic Pty Ltd v Gordon [2007] NSWSC 5

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504

National Australia Bank Limited v Dionys as Trustee for the Angel Family Trust [2016] NSWCA 242

Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197; [1988] HCA 32

Paciocco v Australia & New Zealand Banking Group Limited (2015) 236 FCR 199; [2015] FCAFC 50

Paciocco v Australia and New Zealand Banking Group Limited (2016) 258 CLR 525; [2016] HCA 28

Placer Development Ltd v The Commonwealth (1969) 121 CLR 353; [1969] HCA 29

Ryledar Pty Ltd v Europhic Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65

SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132; (2017) 345 ALR 633

Segelov v Ernst & Young Services Pty Ltd (2015) 89 NSWLR 431; [2015] NSWCA 156

Smith v South Wales Switchgear Co Ltd [1978] 1 WLR 165

Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 96 ALJR 271

Surfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd [2017] 2 Qd R 66; [2016] QCA 213

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52

United Resource Management Pty Ltd v Par Recycling Services Pty Ltd [2023] NSWCA 236

Wallaby Grip Ltd v QBE Insurance (Australia) Ltd; Stewart v QBE Insurance (Australia) Ltd (2010) 240 CLR 444; [2010] HCA 9

Warner Bros Feature Productions Pty Ltd v Kennedy Miller Mitchell Films Pty Ltd [2018] NSWCA 81

Westpac Banking Corporation v Tanzone Pty Ltd [2000] NSWCA 25; (2000) 9 BPR17,521

Texts Cited:

J W Carter, Contract Law in Australia (J W Carter Publishing, 8th Ed, 2023)

Cheshire & Fifoot, Law of Contract (LexisNexis Butterworths, 12th Australian Edition, 2022)

Category:

Principal judgment

Parties:

Gispac Pty Ltd (Plaintiff)
Michael Hill Jeweller (Australia) Pty Ltd (Defendant)

Representation:

Counsel:
D R Sulan SC / R K Jameson (Plaintiff)
J Muir / A Newman (Defendant)

Solicitors:
Bridges Lawyers (Plaintiff)
Otto Martiens (Defendant)

File Number(s):

2019/187098

Judgment

1. GLEESON J: This proceeding involves a dispute as to whether a supplier’s terms and conditions of trading were incorporated into three contracts with its customer, and if incorporated into those contracts, whether some of those terms applied as a matter of construction, or whether the supplier is precluded from relying upon such terms by reason of several defences raised by the customer. If none of those defences are established, there is a dispute as to whether the supplier has proved the quantum of its claim for breach of contract.

Background and overview of issues

2. The plaintiff, Gispac Pty Ltd (Gispac), is a supplier of paper bags and other packaging material. The defendant, Michael Hill Jeweller (Australia) Pty Ltd (Michael Hill), is a well-known retailer of jewellery and accessories. In 2015, Michael Hill had approximately 167 retail stores in Australia, 52 stores in New Zealand, 60 stores in Canada and 9 stores in the United States. There is an issue as to whether the stores in New Zealand were operated by Michael Hill or another related group company. Michael Hill also established stores trading under the name “Emma & Roe”. Michael Hill International Limited, the ultimate holding company of Michael Hill, is listed on the Australian Stock Exchange. In the financial year ending 30 June 2015, the Michael Hill Group of companies had an operating revenue of about $503 million.

3. Gispac supplied wholesale packaging supplies in the form of carry bags to Michael Hill from around 2003 to May 2018. Sales agreements were entered into by the parties over this period for different types of bags, generally described as small or large bags. By 2014, the arrangement between the parties was that Gispac stored packaging bags for Michael Hill at its Australian and New Zealand warehouses and when Michael Hill required certain types of bags it would “draw down” on the stock of packaging bags held at those warehouses until that stock was depleted. Around 2014, Michael Hill undertook a major rebranding which included changing the type of packaging it was using in its retail stores. Also, in or about 2014, Michael Hill commenced a business called “Emma & Roe”, and as a result required bags with “Emma & Roe” artwork.

4. At issue in these proceedings are the terms of three Sales Agreements: (1) QTE33593 entered on 5 May 2014 in respect of Michael Hill small and large paper bags for New Zealand, (2) QTE33594 also entered on 5 May 2014 in respect of Michael Hill small and large paper bags for Australia, and (3) QTE34977 entered on 8 May 2015 in respect of Emma & Roe small and large bags for Australia. Gispac sourced the bags under the first two agreements from overseas manufacturers. A sample was prepared and approved by Michael Hill.

5. It is common ground that for each of these Sales Agreements, Gispac made its “ePlus” facility for ordering products available to Michael Hill and Michael Hill used this facility. The ePlus facility allowed each individual retail store of Michael Hill and Emma & Roe to order products directly from Gispac when the store required further stock. This had advantages for Michael Hill over a head office or centralised ordering system in that Michael Hill did not need to (i) forecast the product required, (ii) deal with the manufacturers, or (iii) deal with warehousing of products. Gispac established a secure web portal to enable the customer to place orders for products, which was accessible via a website as directed by Gispac. Orders could be placed by individual stores either through Gispac’s online portal, or by telephone, by facsimile or by email (and a Gispac employee would then enter the order into the portal). Gispac would arrange for those products to be delivered directly to the store, and issue invoices to the store upon the store placing an order and, at the end of each week, to Michael Hill’s head office in the form of a consolidated invoice.

Gispac’s claims

6. Gispac’s claim against Michael Hill relies upon establishing that its standard terms and conditions of trading were incorporated into the three Sales Agreements; these terms are referred to below as the 2012 Terms. Assuming incorporation of the 2012 Terms, Gispac says that the fact that the ePlus facility was used by Michael Hill meant that clauses 17 to 21 of the 2012 Terms applied to the Sales Agreements with the consequence that:

1. Michael Hill was required to purchase an annual quantity of paper bags pursuant to cl 18.1;

2. Michael Hill was obliged pursuant to cl 18.2 to pay the amounts sought in the “Shortfall invoices” as the amount of product it purchased was less than 25 per cent of the annual quantity in each quarter (“Shortfall”);

3. Michael Hill was required pursuant to cl 17 to exclusively obtain the products specified in the Sales Agreements for its retail stores in Australia and New Zealand;

4. the term of each of the Sales Agreements was 24 months: cl 21.1; and

5. the agreements were “rolling” arrangements which automatically renewed for a further period of 24 months unless Michael Hill gave Gispac six months’ written notice before the end of the 24-month term that it did not intend to renew the ePlus facility: cl 21.2.

7. In broad outline, Gispac contends that the term of the three Sales Agreements automatically renewed for a second term of 24 months, and that Michael Hill breached three obligations under the Sales Agreements: (i) the “take or pay” obligation in cl 18.2, over the second term of 24 months of the Sales Agreements, (ii) the obligation to purchase the annual quantity as required by cl 18.1 over the four years of the Sales Agreements, and (iii) the exclusivity obligation in cl 17.

8. In final submissions, Gispac put its claim for damages in the alternative. Its primary claim is for liquidated damages for breach of the take or pay provision in cl 18.2 in the amount of $2,259,971.40 (Gispac did not press its claim for GST in respect of this amount). Alternatively, Gispac claims damages for breach of the annual quantity provision in cl 18.1 during the applicable term of the Sales Agreements (either a 4-year, 2-year, or 1-year term): $2,012,545 (4-year), $1,018,932 (2-year) or $569,623 (1-year). In the further alternative to damages under cll 18.2 or 18.1, Gispac claims damages for breach of the exclusivity provision in cl 17, again depending upon the applicable term of the Sales Agreements (but there is no exclusivity claim for a 1-year term): $465,129 (4-year) or $13,206 (2-year). Gispac abandoned its claim for storage costs under cl 18.2(b) in final submissions (T112.16).

9. Michael Hill raised multiple defences to Gispac’s claim, including:

1. that Gispac’s 2012 Terms were not incorporated into the Sales Agreements, or alternatively, if such terms were incorporated, those terms were replaced in 2016 with Gispac’s 2016 Terms which did not include obligations with respect to annual quantity, take or pay, exclusivity, or automatic renewal for 24 months in the absence of Michael Hill giving six months’ written notice of non-renewal of the ePlus facility;

2. if Gispac’s 2012 Terms applied to the Sales Agreements, then as a matter of construction, the annual quantity and take or pay obligations in cl 18 were not engaged;

3. alternatively to (2), Gispac is precluded from relying upon the take or pay obligation in cl 18.2 because it is a penalty, or from relying upon cll 17, 18 and 21 in their entirety because either (i) the Sales Agreements are a contract for illusory consideration, (ii) Gispac is precluded by a conventional estoppel from relying upon these terms, or (iii) Gispac engaged in misleading or deceptive conduct or unconscionable conduct contrary to the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, ss 18 and 21 and Michael Hill is entitled to relief that these provisions are either void or not enforceable;

4. alternatively to (2) and (3), Michael Hill did not breach the exclusivity obligation in cl 17 of the 2012 Terms;

5. as to quantum, if Gispac suffered any loss in relation to its “Shortfall” claim under cl 18.2, Michael Hill’s primary position is that the loss is $4,562, or alternatively $19,451; and

6. alternatively to (5), Gispac’s secondary position is that several matters warrant a reduction in the amount of any damages awarded to Gispac under cll 18.1 or 18.2, and other matters warrant a reduction in any damages for breach of the exclusivity obligation in cl 17.

The material facts

10. Gispac commenced supplying packaging bags to Michael Hill in 2003. On or about 5 September 2003, Michael Hill signed a credit account application. Under the heading “Credit Terms”, the account application specified various terms which the customer agreed with the supplier, including:

1. payment terms of within 7 days of the date on which the goods are sold or the services are provided or within such other period of time as may be notified to the customer from time to time by the supplier (pars (a), (c));

2. the directors of the customer were personally bound by the customer’s payment obligations and personally indemnified the supplier in respect of any breach by the customer liable (par (e); and

3. a retention of title clause (par (g).

11. Although not comprehensive, the following facts are agreed:

…

2.   From at least October 2012, Gispac had made its ePlus service available to Michael Hill, and Michael Hill used it until May 2018.

3.   On or about 5 May 2014, Mr Chris Colvile of Michael Hill signed Sales Agreement QTE33593 and Sales Agreement QTE33594, both dated 28 April 2014, for the supply of wholesale packaging by Gispac to Michael Hill, and ticked the box shown on page 2 of each of those documents.

4.   On or about 8 May 2015, Mr Chris Colvile of Michael Hill signed Sales Agreement QTE34977 dated 28 April 2015, and ticked the box shown on page 2 of that document.

5.   Michael Hill did not provide to Gispac a notice that it did not intend to renew the Sales Agreements six months before the time that Gispac alleges was the end of the first term of those agreements.

6.   In or about 2016, the Gispac Terms were updated to a new set of terms.

7.   On 30 June 2017, Mr Bogatez of Gispac emailed Michael Hill a “Shortfall” calculation for May 2016 to April 2017, and a copy of the Gispac Terms.

8.   Until June 2017, Gispac had not previously sent Michael Hill calculations for “Shortfall,” and had not emailed or otherwise provided to Michael Hill an electronic or hard copy of the Gispac Terms.

9.   In May 2018, Michael Hill placed its last order for bags with Gispac.

10.   On or about 27 June 2018, Gispac requested Michael Hill to provide a nominated delivery address.

11.   On 17 May 2019, Gispac issued Michael Hill with three “Debit Notes” said to be for “Shortfall” amounts being:

(a)   Debit Note No. INV73342 for $497,298.80 ex GST;

(b)   Debit Note No. INV73343 for $1,587,017.40 ex GST;

(c)   Debit Note No. INV73344 for $177,360 ex GST.

12.   Michael Hill has not paid to Gispac any amount Gispac demanded in those Debit Notes.

13.   On 17 May 2019, Gispac demanded payment from Michael Hill in respect of storage costs of $39,407.66, which Gispac said were incurred pursuant to clause 4.4 of the Gispac Terms.

14.   Michael Hill has not paid Gispac the amount it has demanded in respect of storage costs.

15.   As at July 2019 when Michael Hill filed its Defence, the website address was not a functioning hyperlink and did not direct someone who clicked on that website address to a copy of the Gispac Terms. (Underlining in original)

12. The following is not agreed:

Whether or not the website address below operated as a properly functioning hyperlink as at 5 May 2014 and 8 May 2015 ie whether it directed someone who clicked on that website address to a copy of the Gispac Terms at either of those times.

_and_conditions_jan2012.pdf (Underlining in original)

The Sales Agreements

13. In April 2014, Mr Chris Colvile, Michael Hill’s group distribution manager, met with Mr Simon Cook, Gispac’s sales manager, at Michael Hill’s headquarters in Brisbane. In an email from Mr Cook to Mr Colvile, among others, dated 22 April 2014, Mr Cook recorded his understanding that the parties were working towards a new Michael Hill bag rollout on 1 September 2014. On 30 April 2014, Mr Neil Duff, Gispac’s senior account manager, sent an email to Mr Colvile, copied to Mr Cook, attaching two quotations styled “Sales Agreement” for the “new Michael Hill Spot UV Paper Bags” – QTE33594 for Australia and QTE33593 for New Zealand, and requested “please sign and return the agreements to me”.

13. The third Sales Agreement was sent by Gispac to Mr Colvile under cover of an email dated 8 May 2015 as a quotation QTE34977 for Australia, and requested that “if you wish to move forward with this I would be grateful if you could sign and return, remembering to tick the terms and conditions box”.

14. Each of the Sales Agreements was in standard form. It is sufficient to refer to the terms of the second Sales Agreement. This was a 2-page document styled quotation No QTE33594 dated 28 April 2014 in respect of a specified quantity of two types of Michael Hill bags for Australia – small and large paper bags with spot UV – and it was signed on behalf of Michael Hill on 5 May 2014. On the front page of the Sales Agreement was a Schedule listing the following:

Michael Hill Small Paper Bag w/Spot UV	QTY	UNIT PRICE	TOTAL PRICE
1,050,000	$0.3900	$409,500.00

…

Michael Hill Large Paper Bag w/Spot UV	QTY	UNIT PRICE	TOTAL PRICE
800,000	$0.5600	$448,000.00

…

Under each product in the Schedule appeared details of the specifications and outside print of the paper bags. It is not necessary to reproduce this detail.

16. Page 2 of the Sales Agreement included the following under the heading “Terms”:

Terms
Art/FiIm/Plates	Additional charges apply
Payment Terms	30 Days from invoice date
Delivery Charge	EPLUS: Free In Store – Direct to Stores
Lead Time	Approx 8 – 10 weeks from pre-production sample approval
Delivery Type	EPLUS: Delivery Direct To Stores
Minimum Invoice Value	$400 Minimum Invoice Value
* The total price may vary; as per industry standards and subject to production the final quantity may be 10% over or under the actual ordered quantity. This Sales Agreement is valid for a period of 7 days.
Sub Total	$857,500.00
GST	$ 85,750.00
Total Amount	$943,250.00

17. The Sales Agreement also contained the following, with the box ticked in handwriting:

TERMS AND CONDITIONS OF TRADING

Please tick to confirm that you agree to agree to the terms and conditions that can be found at the following link:

start="18">

Underneath this box appeared the customer’s printed name, “Michael Hill Jewellers”, the handwritten printed name and signature of Chris Colvile, and the date “05/05/14”, together with the printed name of the supplier, “Gispac Pty Ltd” and the name “Neil Duff”. Mr Colvile returned the signed Sales Agreement to Gispac under cover of an email dated 5 May 2014.

Mr Colvile, on behalf of Michael Hill, also signed the first Sales Agreement dated 5 May 2014 for New Zealand in respect of Michael Hill bags – 350,000 small bags and 200,000 large bags (the price was in New Zealand dollars) and returned the signed agreement to Gispac under cover of an email dated 5 May 2014. He signed the third Sales Agreement dated 8 May 2015 for Australia in respect of Emma & Roe bags – 100,000 small bags and 100,000 large bags and returned the signed agreement to Gispac under cover of an email dated 8 May 2015.

I find that the parties made a written contract the subject of the Sales Agreements when Mr Colvile on behalf of Michael Hill accepted Gispac’s offer by returning the signed Sales Agreements to Gispac by email on 5 May 2014 in relation to the first and second Sales Agreements, and by email dated 8 May 2015 in relation to the third Sales Agreement. That is consistent with the admission on the pleadings that Michael Hill entered the three documents each entitled “Sales Agreements” for the supply of wholesale packaging by Gispac to Michael Hill (Further Amended Defence, par 10(a)).

Gispac’s 2012 Terms

21. The affidavit evidence of Mr Edwin Bogatez, the director of Gispac, established that from 2012 until sometime in 2016, Gispac’s standard terms were in the form of a 5-page document containing 21 clauses with a footer on each page styled “Gispac – Terms and Conditions of Trading – 23 1 12_ reviewed (2)” (the 2012 Terms). The relevant provisions of the 2012 Terms are reproduced below.

gispac

Print Form

TERMS AND CONDITIONS OF TRADING

RELATING TO ALL SALE AGREEMENTS ENTERED INTO WITH GISPAC PTY LTD

The following terms and conditions apply to Sales Agreements with Gispac Pty Ltd (ABN 30 081 934 278) (Gispac). The terms in clauses 19 to 23 inclusive apply to Sales Agreements that include any ePlus facility.

1 Definitions

In these Terms and Conditions of Trading, unless the context otherwise requires:

Account Application means an application made by the Customer requesting Gispac not to require immediate payment upon order or delivery of goods or the provision of services by Gispac.

…

Annual Quantity means the minimum amount of Product to be purchased by the Customer over a period of 12 calendar months commencing on the date of commencement of the Term.

…

EPlus means the ordering, storage, reporting and delivery system of Gispac, accessible via the Web Ordering Portal or by facsimile, as determined by Gispac in its absolute discretion.

…

Outlets means retail outlets of the Customer.

…

Product means the products specified on the front page of a Sales Agreement.

Price means the amount payable by the Customer in respect of the Products specified in a Sales Schedule.

Sales Agreement means a Sales Schedule and these Terms and Conditions of Trading.

Sales Schedule means the schedule contained on the front page of the Sale Agreement setting out the Product specifications.

…

Term means the period set out in any Sales Agreement under an ePlus facility or otherwise in accordance with clause 23 of these Terms and Conditions of Trading.

Terms and Conditions of Trading means these terms and conditions.

Terms of Payment means the terms of payment of the Price (including the payment of a deposit) specified in the Sales Schedule.

…

Territory means Australia & New Zealand.

Web Ordering Portal means the secure web portal established by Gispac to enable the Customer to place orders for Products and accessible via a website as directed by Gispac.

2 Supply and Prices

2.1 Gispac shall, subject to these Terms and Conditions of Trading, supply the Products to the Customer for the Price. The Customer shall pay Gispac the Price in accordance with the Terms of Payment.

2.2 If the Terms of Payment provide that the Customer is to pay a deposit, that deposit must be paid in full prior to production of the Products and Gispac shall be entitled to delay production until the deposit is paid by the Customer in full. If the Customer is to pay all or part of the Price on receipt of an invoice or upon delivery of the Product, the Customer shall pay that amount immediately upon receipt of an invoice or upon delivery of the Products (as the case may be) and Gispac shall be entitled to withhold delivery of the Products until the required amount is paid to Gispac in full.

2.3 The Customer shall strictly comply with the terms of credit set out in the Terms of Payment or in the Account Application entered into by the Customer and Gispac. In the case of inconsistency between the Terms of Payment and the Account Application, the Terms of Payment shall prevail.

3 Payment

3.1 Unless otherwise specified in the Sales Schedule, the Customer must pay all invoices on receipt of the invoice. …

3.3 The Customer must lodge for approval by Gispac, an Account Application governing the terms upon which credit may be provided in connection with the supply of Products. Until the Account Application has been approved, Gispac is under no obligation to supply Products.

4 Delivery

4.1 Gispac will not be liable for any loss or damage whatsoever due to the failure by Gispac to deliver the Products (or any of them) promptly or at all. Notwithstanding that Gispac may have delayed or failed to deliver the Products (or any of them) promptly, the Customer shall be bound to accept delivery and to pay for the Products in full provide that delivery shall be tendered at any time within 1 month of the expected date of delivery.

…

4.3 Gispac may make part deliveries of an order and each part delivery shall constitute a separate agreement. Failure to make a delivery of the total order shall not invalidate the Sales Agreement as regards other deliveries. Where Gispac makes part delivery, Gispac may invoice the Customer for the Products delivered on each separate delivery.

4.4 Where the Customer has not specified delivery instructions at the time of placing an order for the Products, and the Customer has failed to provide such delivery instructions to Gispac within 3 days of a request by Gispac, Gispac may impose a charge on the Customer for storage of the Products at the prevailing market rate for storage or the actual cost of storage (at the election of Gispac). The parties agree that Gispac may charge for storage from the first day after Gispac has requested the Customer to provide delivery instructions until the day upon which the Products have been delivered to the Customer. Notwithstanding clause 4.1, Products stored in accordance with this clause under Gispac’s possession, custody or control is completely at the Customer’s risk.

…

10 Termination

…

10.3 The Customer has no entitlement to terminate any Sales Agreement other than in accordance with these Terms and Conditions of Trading.

…

15 Amendments

15.1 Gispac may make amendments to these Terms and Conditions of Trading or any Sale Agreement from time to time if:

(a) the amendments will benefit or will not permanently and adversely affect the Customer; or

(b) the Customer agrees to the amendments; or

(c) Gispac reasonably expects the amendments to permanently and adversely affect the Customer, and Gispac has given the Customer reasonable notice of the amendments and offering the Customer the right to terminate any Sale Agreement (without fault) within 30 days of the notice and the Customer does not terminate the Sales Agreement.

15.2 Any amendments to these Terms and Conditions of Trading or any Sales Agreement have no force or effect unless effected by Gispac in accordance with clause 15.1 or otherwise agreed in writing by Gispac.

16 Other

16.1 Gispac may without notice assign or transfer any right or liability under these Terms and Conditions of Trading or any Sales Agreement. Where required by Gispac to effect the transfer of any such rights or liabilities, the Customer will sign and enter into an agreement on substantially similar terms and conditions as these Terms and Conditions of Trading or Sales Agreement with the party to which Gispac transfers its right and liabilities. The Customer may not assign or transfer any right or liability under these terms and Conditions of Trading or any Sales Agreement without the prior written consent of Gispac.

16.2 No failure to exercise and no delay in exercising any right, power or remedy under these Terms and Conditions of Trading or any Sales Agreement will operate as a waiver. Nor will any single or partial exercise of any right, power or remedy preclude any other or further exercise of that or any other right, power or remedy. Any waiver by Gispac of any right, power or remedy under these Terms and Conditions of Trading or any Sales Agreement must be express and given in writing by Gispac.

16.3 These Terms and Conditions of Trading and any Sales Agreement shall be construed in accordance with the laws of New South Wales. Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales.

16.4 The Sales Schedule, these Terms and Conditions of Trading, the Account Application and any Disclosure Agreement, where provided, together form the agreement between the parties with respect to the supply of Products to the Customer and constitute the sole understanding with respect to its subject matter and supersedes all prior understandings, written or oral.

EPlus Facility

The following terms and conditions apply to Sales Agreements where Gispac has agreed to make the ePlus service available to a Customer.

17. Appointment

The Customer appoints Gispac for the Term as the exclusive supplier of the Products to Outlets in the Territory.

18. Annual Quantity

18.1 The Customer agrees to purchase from Gispac an amount of each Product that is equal to or exceeds the Annual Quantity specified in the Sales Schedule for each Product.

18.2 If the amount of Product purchased by the Customer during each quarter during the Term is less than 25% of the Annual Quantity (Shortfall), Gispac may do either or both of the following things:

(a) invoice the Customer for the Shortfall; and

(b) charge the Customer for storage of the Shortfall at the prevailing market rate for storage or the actual cost of storage, commencing on the day immediately following the relevant quarter.

19 Orders

19.1 Each Outlet or Head Office will order its requirements for Products directly from Gispac via the Web Ordering Portal.

…

19.7 Gispac reserves the right to accept or decline the Customer’s order at any time and for any reason, or to require the Customer to provide additional verification or information associated with an order. Any order accepted by Gispac is on these Terms and Conditions of Trading, irrespective of any Customer terms on any order.

20 Prices Payable

20.1 The Customer must pay Gispac for the Products that Outlets or Head Office order at the current prices agreed for the Products by Gispac and the Customer. The prices applicable upon commencement of a Sales Agreement are specified in the Sales Schedule. If an order has not been invoiced before a price change in accordance with clause 20.2, the Products that comprise that order will be supplied at the new price for those Products.

20.2 If any Sales Agreement is renewed in accordance with clause 21.2, Gispac may increase the price of the Products by giving written notice to the Customer. Excluding any component of a price increase due to taxation, price increases will not exceed 15% of the Product price as agreed under clause 20.1 during the extended Term.

20.3 Gispac reserves the right, by notice to the Customer at any time before delivery of the Products, to increase the price of the Products to reflect any increase in the cost to Gispac of producing and/or delivering the Products due to any factor beyond Gispac’s reasonable control. The Customer shall, by executing the Sales Schedule, accepts and will pay any such price increase as notified to the Customer by Gispac.

…

21 Term

21.1 The Term is 24 months from the date of execution of the Account Application.

21.2 These Terms and Conditions of Trading will automatically renew for a period of 24 months unless the Customer gives Gispac written notice 6 months before the end of the current Term that it does not intend to renew the EPlus Facility.

ePlus facility

22. There are admissions on the pleadings (defence pars [15] and [16]), and it is also an agreed fact (par [2]) that, at least from October 2012, Gispac made its ePlus service available to Michael Hill and Michael Hill utilised Gispac’s ePlus facility. The expressions “ePlus” and “Web Ordering Portal” are defined in cl 1 of the 2012 Terms (see [21] above]. As indicated, the ePlus facility offered by Gispac enabled individual Michael Hill stores to: (a) order products (subject to availability), when they required them, directly from Gispac, (b) have products delivered directly to the ordering store, and (c) have invoices provided direct to the store and to Michael Hill’s head office.

Additional findings

23. It is convenient to make some additional findings at this stage.

24. I accept the evidence of Mr Edwin Bogatez, the director of Gispac, that:

1. some of the factors on which Gispac relied in determining the prices for the first and second Sales Agreements was his understanding that the duration of the 2014 agreements was a minimum commitment of two years and the quantity of bags to be purchased under the 2014 agreements, and that Gispac determined that a lower unit price for the bags could be provided because it was able to negotiate lower production prices with manufacturers based on continuity of supply of the bags (November 2020 affidavit, par 21);

2. when determining the unit prices for the 2015 Sales Agreement, Gispac considered the quantity of bags to be purchased and Mr Bogatez’s understanding of the minimum 2-year duration of the arrangement (November 2020 affidavit, par 25);

3. the prices charged by Gispac to Michael Hill under the first and second Sales Agreements were subject to “rise and fall” reviews, that is, adjusted in accordance with the AUD/USD exchange rate, in circumstances where manufacturers charged Gispac in USD for product manufactured for Gispac. Those price reviews were conducted by Gispac and notified to Michael Hill effective January 2015, 1 August 2015 and 14 January 2016. The 2015 Sales Agreement was not subject to rise and fall reviews (November 2020 affidavit, par 35-42; Ex B).

25. On or about 30 June 2016, Gispac ceased to operate its New Zealand warehouse. From 1 July 2016, Gispac engaged DHL Express and TNT Express as its courier in respect of product delivered to Michael Hill and Emma & Roe stores in New Zealand. This product was delivered direct to stores in New Zealand with shorter lead times. I find that Mr Bogatez informed Mr Colvile that Gispac would start charging these orders in AUD due to the efficiency in getting orders to New Zealand. Mr Colvile agreed to this change.

26. Mr Bogatez also informed Mr Colvile in or about June 2016 that given the greater shipping costs to New Zealand, Gispac needed to increase the prices for the New Zealand bags to (i) AUD$0.57 for small Michael Hill bags, and (ii) AUD$0.83 for large Michael Hill bags. Mr Colvile acquiesced in this price increase; he did not tell Mr Bogatez that a price increase was not acceptable, and he took no step to dispute the price increase notified by Mr Bogatez. From 1 July 2016, Gispac charged prices under the first 2014 Sales Agreement (QTE33593) of (i) AUD$0.57 for small Michael Hill bags and (ii) AUD$0.83 for large Michael Hill bags.

27. Michael Hill ceased ordering product from Gispac in May 2018. At that time, Gispac held the following product the subject of the Sales Agreements:

1. in relation to the two 2014 Sales Agreements: (i) 105,840 Michael Hill small spot UV paper bags – $55,036.80, (ii) 67,680 Michael Hill large spot UV paper bags – $50,760.00; and

2. in relation to the 2015 Sales Agreement: 124,500 Emma & Roe large paper bags – $77,190.00.

Michael Hill’s ticking of the terms and conditions box referring to the 2012 Terms

28. Prior to signing the first two Sales Agreements on 5 May 2014, Mr Colvile had signed and ticked the box referring to the 2012 Terms on several previous Sales Agreements, relevantly, on 22 January 2014 and 3 March 2014. Prior to signing the third Sales Agreement on 8 May 2015, Mr Colvile had signed and ticked the box referring to the 2012 Terms on five further occasions between 26 August 2014 and 25 March 2015.

29. Mr Colvile acknowledged in cross-examination that (i) he was aware that in ticking the box above his signature he was signing and ticking referable to Gispac’s standard terms and conditions (T68.23-25), (ii) he was not forced to do so quickly by anything Gispac did or said to him, (iii) he chose not to read the 2012 Terms and he could have sought some advice if he had read them (T69.31-50, 70.1-15), (iv) he did not take any steps to satisfy himself of the content of the standard terms which Gispac expressly brought to his attention by way of the tick-box system, and (v) he understood that it was a requirement of Gispac that Michael Hill agree to those terms and conditions, prior to Gispac proceeding with the Sales Agreements (T70.23-44). Michael Hill submitted that Mr Colvile was over-agreeable to propositions put to him in cross-examination. I do not agree. By reference to my notes made at the time of cross-examination of Mr Colvile, I accept that he was a reliable witness who candidly answered the questions put to him.

28. I find that in ticking the terms and conditions box located immediately above the signature clause which he signed, Mr Colvile, on behalf of Michael Hill, knew that he was signing and ticking referable to Gispac’s terms and conditions. The evidence of Mr Bogatez establishes that these terms were the 2012 Terms: see [33]-[34] below.

29. Notwithstanding that each of the Sales Agreements is a signed contract, Michael Hill put in issue whether the 2012 Terms were available for inspection on the website maintained by Gispac at the URL address stated in the Sales Agreements set out at [17] above. The defence of Michael Hill contended that at all times on and after 5 May 2014, the link to the Gispac website that appears on page two of the Sales Agreements was defective or did not exist (par [14(c)]). Michael Hill did not attempt to prove this assertion by way of evidence. Mr Colvile’s evidence was that he did not go to Gispac’s website looking for any terms (affidavit, par [36]), and he agreed in cross-examination that he “chose not to read them” (T69.46).

30. As explained under Issue 1 below, the question of whether the URL link to the 2012 Terms in the Sales Agreements was operable in May 2014 and May 2015 does not arise if, as Gispac contended, the mode of incorporation of the 2012 Terms is by reference as terms of a signed contract. The question only arises if, as Michael Hill contended, the 2012 Terms were incorporated by notice as terms of an unsigned contract. This is the context in which I now turn to the dispute as to whether the link to the 2012 Terms was operable in May 2014 and May 2015.

Was the link to the 2012 Terms operable in May 2014 and May 2015?

33. The relevant evidence concerning the link to the 2012 Terms was given by Mr Bogatez in pars [26] to [29] of his November 2020 affidavit as follows:

[26]   Each of the Sales Agreements contained a URL link to Gispac’s standard terms and conditions as they existed at the time those agreements were entered (the Terms).

[27]   That link was:

‘ URL Terms Link).

[28]    Exhibited at pages 51 to 55 of EB-1 is a copy of the Terms.

[29]    In May 2014 and May 2015, a customer would be, by clicking on the URL Terms Link, directed to an area of the Gispac website which contained a copy of the Terms. (Emphasis in original.)

34. The evidence of Mr Bogatez in pars [26] to [28] was admitted without objection and he was not directly challenged on this evidence. I reject Michael Hill’s submission that in light of the cross-examination of Mr Bogatez his evidence did not establish that a set of terms identical in all respects to the 2012 Terms existed at Gispac’s office, as at 5 May 2014 and 8 May 2015. I also reject Michael Hill’s submissions that Mr Bogatez was a deeply unsatisfactory witness and in effect, tailored his evidence and answered some questions “through the lens of Gispac’s case”. By reference to my notes made at the time of cross-examination of Mr Bogatez, I accept that he was a reliable witness, who was doing his best to give honest and accurate evidence in respect of events occurring several years earlier.

35. “URL” is a well-known acronym for a Uniform Resource Locator, which is a reference to the location of a resource on the internet. A “link” describes the function of an internet browser which takes an internet user from one place on the internet to another. Michael Hill objected to par [29] of Mr Bogatez’s affidavit on two grounds: (i) competence, and (ii) that it assumed a fact not in evidence. Gispac responded that par [29] was admissible as evidence of Gispac’s business practice in circumstances where Michael Hill contended that the URL link was not operational in 2014/2015. At the hearing, I rejected par [29] (T2.40). Although Gispac did not seek to be heard on that ruling, it is appropriate to briefly indicate my reasons.

Ruling on evidence

36. The admissibility of evidence is governed by the fundamental principle in s 56 of the Evidence Act 2005 (NSW) that irrelevant evidence is inadmissible, while relevant evidence is admissible except as otherwise provided by the Act. Relevant evidence is that which, if it were accepted, could rationally affect the assessment of the probability of the existence of a fact in issue in the proceeding: s 55(1).

37. To prove that an act has been done, it is admissible to prove any general course of business or office, whether public or private, according to which it would ordinarily have been done, there being a probability that the general course will be followed in the particular case: SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132 at [150]; (2017) 345 ALR 633, citing Connorv Blacktown District Hospital [1971] 1 NSWLR 713 at 721 (Asprey JA, Mason JA agreeing).

38. Although Mr Bogatez was a director of Gispac for 22 years, overseeing Gispac’s day-to-day operations, his evidence in par [29] is not evidence of a routine, habitual or general practice of Gispac, relevantly, that the URL link on the Sales Agreements was operational in 2014/2015. Mr Bogatez did not depose to his usual and invariable practice of accessing the URL link or the usual and variable practice of Gispac with respect to the URL link from which the inference could be drawn that the relevant practice was followed by Gispac in May 2014 and May 2015. Further, insofar as Mr Bogatez gave evidence of what a customer of Gispac would have experienced in 2014 and 2015 by clicking on the URL terms link, his evidence in cross-examination referred to at [39] below demonstrates that the objection on the ground of competence was well-founded.

Whether inference should be drawn that the URL “link” in the Sales Agreements was operational

39. Mr Bogatez gave evidence in cross-examination that he could not recall clicking on the link in 2014 or 2015 (T22 .27 and .30); he had no reason to click on the link in the relevant period (T23.16); he never noticed that hyperlinks in documents are “usually underlined” (T24.40); he did not make enquires whether the hyperlink did work in 2014 or 2015 (T24.44-47); nor after June 2017 did he get someone in IT at Gispac or engage a forensic expert to look for some trace of this link as at 2014 “on the internet” (T 25.19). He also said that the link was not published on the internet, rather he was told by Gispac’s IT consultants, after this proceeding commenced, that “[i]t was on our internal server” (T25.20). He said that the reason the 2012 Terms were “put on a separate link, into our own server, at that particular time” is that the ePlus terms were specific to Gispac’s own organisation, and Mr Bogatez did not want his competitors and “the whole world” looking at the terms and conditions (T50.35).

40. Accepting that there is no direct evidence that the URL link to the 2012 Terms referred to in par [26] of Mr Bogatez’s affidavit operated as a hyperlink to Gispac’s website in May 2014 or May 2015, the question is whether an inference should be drawn that it was in fact the case, given Mr Bogatez’s evidence in pars [26]-[28] of his affidavit, together with his evidence in par [33] that, to the best of his knowledge, at the time the Sales Agreements were entered into, the URL terms link was effective and operational, and that he had no reason to believe that this link was not operational at that time.

41. One difficulty with drawing that inference is that the evidence of Mr Bogatez in cross-examination cast doubt on what he meant when he deposed in his affidavit to his belief that the link was effective and operational at the time the Sales Agreements were entered into. As indicated, the effect of Mr Bogatez’s evidence was that the 2012 Terms were not generally available on the internet to a person, such as a competitor, accessing Gispac’s website. Rather, the 2012 Terms were held on Gispac’s internal server and only available to its customers. Acceptance of that proposition required an inference that Gispac’s customers had access to the internal server where it was said the 2012 Terms were contained. An inference that Gispac’s customers, such as Michael Hill, who utilised the portal providing the ePlus facility had some access to Gispac’s internal server can be readily drawn from Mr Bogatez’s evidence. However, the evidence does not reveal whether the portal providing the ePlus facility also contained the 2012 Terms.

42. Another possibility is that a customer such as Michael Hill could access the 2012 Terms by clicking on the “link” in the PDF versions of the Sales Agreements that were attached to the two emails sent by Gispac to Michael Hill on 5 May 2014 and the email sent on 8 May 2015. That would be consistent with Mr Bogatez’s evidence that the 2012 Terms were put on a separate link in Gispac’s own server and made available to customers in that manner.

43. Some support for such an inference is provided by the following matters. First, the link had appeared in each of Gispac’s Sales Agreements from at least 2013 to 2015, and there is no suggestion in the evidence of any complaint by any of Gispac’s 15-20 ePlus customers over a two-year period, that there had been any difficulty with accessing the link to the 2012 Terms (T18.25). Second, Mr Bogatez was not challenged on his evidence that he had no reason to believe the link was not operable at the time the Sales Agreements were entered into (November affidavit, par [33]), or his evidence that he had no reason to click on the link in the relevant period (T23.16) was consistent with there being no complaints made to Gispac to the effect that the link did not work.

44. Nevertheless, I am not persuaded that the evidence establishes that a URL hyperlink to the 2012 Terms was operable in May 2014 and 2015 in the sense that a person clicking on the link in the Sales Agreement or typing the URL shown on the Sales Agreement into a web browser would be directed to the 2012 Terms, given the absence of direct evidence supporting that proposition.

Gispac’s 2016 Terms

45. In 2016, Gispac’s standard terms were updated, and a new set of terms were issued (the 2016 Terms). The 2016 Terms do not include any of the provisions which Gispac relies upon for its claim against Michael Hill, relevantly, the minimum quantity provision in cl 18.1, the take or pay provision in cl 18.2, the exclusivity provision in cl 17, or the automatic renewal for 24 months in cl 21.2.

46. I find that the 2016 Terms were issued in 2016 but am unable to be any more precise as to when in 2016 this occurred, given Mr Bogatez’s evidence that the terms changed “[i]n or about 2016” (T15.5-8; November affidavit, par [32]). Michael Hill relies on this imprecision in the evidence for the submission that Gispac has not shown the duration for which the 2012 Terms applied, which is relevant to Gispac’s claim that the 2012 Terms applied to the second term of the three Sales Agreements, after the expiry of the initial term of 24 months. This contention is addressed under Issue 1 at [85]f below.

Issues for determination

47. At the end of the trial, the essential issues for determination were refined as follows:

Issue 1:

(a)   Were Gispac’s 2012 Terms incorporated into each of the Sales Agreements?

(b)   Did the 2016 Terms apply to the Sales Agreements from about 2016 or not?

Issue 2:

If the Gispac 2012 Terms were incorporated, what was the “Term” of the Sales Agreements (in other words, when did each of the Sales Agreements start and end)?

Issue 3:

(a)   What is the proper construction of clause 18 of the Gispac 2012 Terms?

(b)   How many bags did Michael Hill buy from Gispac from 5 May 2014 and, if that number can be ascertained, was there a “Shortfall?”

(c) Is Michael Hill in breach of, and liable to pay Gispac any amount in relation to that “Shortfall”, under clause 18.2 of the Gispac 2012 Terms?

Issue 4:

Is Michael Hill in breach of, and liable to pay Gispac any amount under, clause 18.1 of the Gispac 2012 Terms?

Issue 5:

Did Michael Hill breach its obligation of exclusivity under clause 17 to Gispac?

Issue 6:

Has Michael Hill established any of its defences based on estoppel, misleading or deceptive conduct, unconscionable conduct, the doctrine of penalties or illusory consideration?

Issue 7:

What is the quantum of any loss Gispac has suffered?

48. As will be seen, several sub-issues also require consideration.

Issue 1(a): Were Gispac’s 2012 Terms incorporated into each of the Sales Agreements?

49. The actual terms of the contract are determined by reference to the statements the parties themselves adopted as an expression of their obligations: Cheshire & Fifoot, Law of Contract (LexisNexis Butterworths, 12^th Australian Edition, 2022) at [10.19]. Here, the Sales Agreements were made when Michael Hill’s representative, Mr Colvile, returned the signed document on behalf of Michael Hill, thereby accepting the offer the subject of the quotation contained in the three Sales Agreements. The relevant question is whether the contract then made included the 2012 Terms. This requires an objective ascertainment of that to which the parties agreed. The subjectively held opinions or beliefs of the parties are irrelevant to whether a term or terms have been agreed upon: Ermogenous v Greek Orthodox Community (2002) 209 CLR 95; [2002] HCA 8 at [25].

Incorporation of terms

50. Gispac has the onus of proving that the 2012 Terms were incorporated as terms of the Sales Agreements: National Australia Bank Limited v Dionys as Trustee for the Angel Family Trust [2016] NSWCA 242 at [56]-[57] (Sackville AJA, Macfarlan JA agreeing at [1], White J agreeing at [165]), citing Wallaby Grip Ltd v QBE Insurance (Australia) Ltd; Stewart v QBE Insurance (Australia) Ltd (2010) 240 CLR 444; [2010] HCA 9 at [35]-[36].

51. By reference to Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, Gispac submitted that the mode of incorporation of the 2012 Terms into the Sales Agreements was the act of Michael Hill’s representative signing the Sales Agreements and ticking the box under the heading “Terms and Conditions of Trading”. Alternatively, it is said that such terms were incorporated by reference.

52. Although Michael Hill accepted in closing submissions that this case is a signed document case in that the Sales Agreements had been signed on behalf of Michael Hill and are therefore within the principle in Toll (T120.35-37), Michael Hill says that this case should be treated as an unsigned document case. It is said that the contract is a “hybrid” comprising the signed Sales Agreement and the unsigned 2012 Terms referred to in that signed document and therefore the principles in the “ticket cases”, not Toll, apply to the incorporation of terms into Sales Agreements.

53. Relying upon the principles in the ticket cases such as Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd [1998] 4 VR 559 at 561, 562, 567-9; Surfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd [2017] 2 Qd R 66; [2016] QCA 213 at [51]-[52], [65]-[68]; Dialogue Consulting Pty Ltd v Instagram Inc (2020) 291 FCR 155; [2020] FCA 1846 at [293]-[295], it is said that:

• terms appearing in the unsigned document are incorporated in the (written) contract only if reasonable notice has been given of them: Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 227-229; [1988] HCA 32;

• the inclusion of unusual or onerous terms in an unsigned document may require its proponent to draw those terms to the attention of the other party, and an express acceptance of an offer that incorporates other terms does not necessarily connote acceptance of all those other terms; if the person has not read the terms, their consent may be taken as being consent to the terms that are appropriate to a contract of the type in question; and

• the Sales Agreement “did not, in that form, take the Michael Hill representative to a copy of the Gispac Terms”; cll 17, 18 19 and 21 of the 2012 Terms were unusual, or not the kind of terms a purchaser might expect in this type of contract in “standard” terms attaching to the supply of wholesale packaging in Australia, and therefore, Michael Hill is not bound by those terms.

Applicable legal principles

54. Michael Hill’s submission that this is an unsigned document case is bad in law. The submission conflates the mode of term incorporation by signature (and by reference in the case of written contracts), with the mode of term incorporation by notice in the case of unsigned contracts.

55. In Oceanic Sun Line v Fay, Brennan J distinguished the two types of cases – signed contracts and unsigned documents, such as a “ticket case” – stating at 228-229:

If a passenger signs and thereby binds himself to the terms of a contract of carriage containing a clause exempting the carrier from liability for loss arising out of the carriage, it is immaterial that the passenger did not trouble to discover the contents of the contract. But where an exemption clause is contained in a ticket or other document intended by the carrier to contain the terms of carriage, yet the other party is not in fact aware when the contract is made that an exemption clause is intended to be a term of the contract, the carrier cannot rely on that clause unless, at the time of the contract, the carrier had done all that was reasonably necessary to bring the exemption clause to the passenger's notice. (Citations omitted; emphasis added).

56. In Carnival Plc v Karpik (Ruby Princess) (2022) 294 FCR 524; [2022] FCAFC 149 (reversed on other grounds: Karpik v Carnival Plc [2023] HCA 39; (2023) 98 ALJR 45), Derrington J (Allsop CJ agreeing) said of the ticket cases at [166]:

The ticket cases are concerned with contractual formation and the scope of the terms to which the parties have agreed where an agreement has arisen orally or by conduct, and in the course of which one party seeks to introduce written terms contained on or referred to in a document passing between them.

57. That is, the ticket cases “form a particular category of cases concerned with the objective assessment of the circumstances in which parties have entered into a contractual relationship in the absence of a signed agreement”: Carnival Plc v Karpik (Ruby Princess) at [206(a)]. That is not the present case.

Written contracts

58. Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [114] (Leeming JA, Ward and Emmett JJA agreeing) is authority for the proposition that, given the general rule in Toll, the “ticket cases” have no application to the circumstance where a party executes a written contract, even if it chooses to do so without reading documents to which it refers. Leeming JA said at [114]:

The law here is very clear. A unanimous High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd at [57] confirmed that:

“[57] … The general rule, which applies in the present case, is that where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document.”

59. Incorporation of a set of terms by reference to those terms in a written contract is commonplace. J W Carter, Contract Law in Australia (J W Carter Publishing, 8th ed, 2023) at [10-19], gives several examples of incorporation in a written contract, including:

• the standard terms of the business of one of the parties: Smith v South Wales Switchgear Co Ltd [1978] 1 WLR 165, a case involving a written contract: see at 177A (Lord Keith); see also at 171E (Lord Fraser), 177B (Lord Keith), 167D (Lord Wilberforce) and 167E (Viscount Dilhorne); and

• a standard form document approved by a body such as a law society or a real estate institute: for example, Gilberto v Kenny (1983) 57 ALJR 283 at 284F.

60. Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 involved a written contract between an architect, acting for an owner, and an engineer to provide engineering services: at [56]-[57]. The owner argued that it should not be bound by the Conditions of Engagement in accordance with the engineer’s letter to the architect, since it did not have actual notice of those conditions which included an onerous provision, an exclusion clause. Giles JA rejected the owner’s argument relying on Maxitherm (discussed below), that the relevant question was whether it could reasonably be taken to have assented to the provisions and, on the basis of Baltic Shipping Co v Dillon“Mikhail Lermentov” (1991) 22 NSWLR 1 at 8-9 and 24-25 that, where limitation provisions are concerned, express consent or reasonable notice was required, and hence the owner should not be found to have agreed to be bound by the Conditions of Engagement. Giles JA held at [85] that “the test is objective” and that the nature of the term did not preclude the finding that it was incorporated. Rather, “it was not only a reasonable finding, but in the circumstances all but compelled”.

60. McBride v ASK Funding Pty Ltd [2013] QCA 130 involved a signed loan agreement said to be made on the terms and conditions including those attached, however, the standard terms and conditions were not in fact attached to the loan agreement. Applying the general rule in Toll at [57], the Queensland Court of Appeal held that the failure to attach the standard terms, even where they are described as attached, does not affect the conclusion that the standard terms and conditions are a contractual document: at [50]-[51].

61. Warner Bros Feature Productions Pty Ltd v Kennedy Miller Mitchell Films Pty Ltd [2018] NSWCA 81 involved a letter agreement which incorporated by reference a “WB standard term for ‘A’ list directors and producers” “subject to good faith negotiations within WB’s and WB’s customary parameters”. On the evidence, the terms which were “WB standard term for ‘A’ list directors and producers” included an arbitration clause, and it was held that these standard terms were immediately incorporated, while leaving room for subsequent negotiations about their precise effect in the letter agreement: at [56] (Bathurst CJ, Beazley P and Emmett AJA agreeing). Importantly at [59], Bathurst CJ said that it was not of any significance that such terms were not supplied to the other parties to the contract, referring to the statement in Toll at [47] concerning the importance which the common law has long assigned to the signing of documents, noting that legal instruments are “often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature”.

62. Ange v First East Auction Holdings Pty Ltd (ACN 083 112 505) [2011] VSCA 335; (2011) 284 ALR 638 involved a written consignment agreement for the sale of paintings, which referred to the general conditions, but like McBride such terms were not attached: at [46]. On appeal, Sifris AJA (Neave and Tate JJA agreeing) held that the general conditions formed part of the agreement: at [45]. The dispositive reasons were given by Sifris AJA at [52] and [57]:

[52]   In the present case, the general conditions were not attached to the agreement. However, it is apparent that Bonhams intended that the general conditions apply to the agreement. Further, this is what both parties assented to by signing the agreement specifically acknowledging that the general conditions would apply.

…

[57]   Accordingly, in my opinion, the general conditions in the present case form part of the agreement between Mrs Ange and Bonhams. They were intended to form part of it. They were in the possession of Mrs Ange and were clearly and specifically incorporated by reference.

64. The reference in Ange at [57] to Mrs Ange being in possession of the general terms reflected the particular facts in that case, relevantly, she had previously been provided with the general conditions in connection with an earlier unsigned contract. That fact was unnecessary for the finding of incorporation by reference in a written contract, given his Honour’s apparent approval of Smith v South Wales Switchgear, where the written contract the subject of the purchase order referred to “our general conditions of contract 24001, obtainable on request”, the purchaser did not request a copy of the general conditions, and the House of Lords held that it was sufficient that the purchase order indicated the manner in which the general conditions could be ascertained, namely, by request.

65. Insofar as Sifris AJA went on to address a further question raised by Mrs Ange, relying on the statements by Buchanan JA in Maxitherm at 569, his Honour’s statements at [61] and [67] were strictly obiter since the mode of incorporation by notice was not relevant as Ange involved a written contract incorporating terms by reference: Ange at [52] and [57].

Unsigned contracts

66. Maxitherm and Surfstone are distinguishable on their facts. Both involved whether an offeree was bound by a term set out or incorporated in an unsigned contract. In Maxitherm, the offeror’s confirming fax stating that the offer was based on the offeror’s standard terms and conditions “as per previous quotation” (which was identified by a document number and date) was not signed by the offeree, it was accepted orally by the offeree in a telephone call: see Buchanan JA at 564. In Surfstone, the offeror’s fee proposal incorporated by reference the Guideline Terms of the Association of Consulting Engineers of Australia and there was no evidence of any formal acceptance, oral or otherwise, but it was not in dispute that the engineer was retained and did carry out the services: see Morrison JA at [17], [19].

67. That the remarks by Buchanan JA in Maxitherm at 568-569 (Ormiston JA agreeing at 561) concerned an unsigned contract is plain in the passages reproduced below:

Once the conclusion has been reached that an express offer containing a party’s standard terms has been accepted, there is no occasion to then consider whether sufficient steps have been taken to bring the standard terms to the attention of the other party. The ultimate question is whether the party relying upon the standard terms can properly assume that the other party has consented to those terms.

…

I do not intend to convey that express acceptance of an offer which incorporates other terms by reference necessarily connotes acceptance of all those terms. In a case where the person expressing consent has not read the terms, his consent may be taken to be a consent to those terms which are appropriate to a contract of the type in question. If the terms include provisions which no one would anticipate in a contract of the type in question, it would not be appropriate to assume consent to those provisions. The basic enquiry remains whether it is reasonable to assume that a contracting party has assented to the terms put forward by the other party. …

As I have said, in my opinion the inclusion of an unusual term, at least in an unsigned document, may require its proponent to take special steps to bring it to the attention of the other party, for otherwise it may not be reasonable to assume consent to the term. Whether special steps are required, and what those steps must be, will depend upon the circumstances of each case. Further, I think that a term may be unusual because it is more than ordinarily onerous. However, I do not consider that the mere fact that a provision is onerous entitles a court applying the common law to reject it as a term unless special steps have been taken to draw attention to it. The relevant question is whether a contracting party can be reasonably taken to have assented to a particular term, not whether a contracting party should be subject to an unreasonable term. (Emphasis added.)

68. The same can be said of the judgment of Callaway JA at 562 (who agreed with Buchanan JA, subject to his remarks at 562f):

It is not uncommon to enter into a transaction on another party’s standard terms and conditions without enquiring what they are. It is often not worth doing so and a sensible commercial risk to run. The law reflects commercial reality by holding the party who does not enquire to such of the other party’s standard terms and conditions as may fairly be regarded as within the risk the first party took. Some terms are outside the risk and the first party is not bound by them. A term may be contrary to industry practice or, however appropriate to other contracts into which the other party regularly enters, unsuited to the particular contract. It is rarely, if ever, sufficient that a term is onerous, but its onerous quality or some other feature may show that it was not reasonably to be expected.

69. Read in context, these statements in Maxitherm are directed to the case of unsigned documents. They are consistent with long established authority in relation to unsigned documents: see, for example, Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433 at 438E-F, 445B-F.

70. Dialogue Consulting v Instagram involved a “sign-in wrap” agreement on the Instagram website as part of the Instagram account creation process, not a written contract. The evidence was that if a user chose to proceed to create an Instagram account, the user was required to confirm at the point of registration that he or she agreed to the original terms of use either “By clicking Register” or in some cases “By tapping to continue”. The issue was whether, given the absence of a signed contract, the original terms of use were incorporated by reference, and hence whether Instagram had provided sufficient notice to Dialogue of the terms of use, which included an arbitration clause. Dialogue contended that the alleged arbitration clause was not one reasonably to be expected when creating an Instagram account and accordingly, something more was required by way of provision of information about the clause to the acceptor before the contract was formed.

71. Beach J referred to the observations of Callaway JA in Maxitherm at 562 (reproduced at [68] above), and found at [295], that these observations were not helpful to Dialogue because (i) either Dialogue knew of the terms of use or chose not to enquire, (ii) the arbitration clause was not that unusual, and, (iii) in any event, its existence was specifically highlighted at the top of the original terms of use and in capitals and if special steps were required, these were undertaken. Dialogue is distinguishable on its facts.

Application of principles to the facts

72. The Sales Agreements were obviously contractual, as were Gispac’s “terms and conditions” referred to in the box headed “Terms and Conditions of Trading”. The question of whether by signing and ticking the terms and conditions box in the Sales Agreements Mr Colvile evidenced Michael Hill’s contractual intention to be bound by the 2012 Terms, is answered by asking what that conduct would have led a reasonable person in the position of the other party to believe: Toll at [40]. Here, Mr Colvile’s act of signing and ticking the box referable to Gispac’s standard terms and conditions indicated an intention by Michael Hill to be bound by Gispac’s terms and conditions regardless of whether they have been read and considered: Oceanic Sun Line v Fay at 228. As said in Carnival Plc v Karpik (Ruby Princess) at [236]:

… the affixing of a signature objectively conveys that the party signing “either has read and approved the contents of the document or is willing to take the chance of being bound by those contents … whatever they might be”: L’Estrange v Graucob ; Toll v Alphapharm at 184 –186 [54]–[59]: and no question of the reasonableness of the notice of any onerous or unusual terms arises.

73. As I have found above, in ticking the terms and conditions box above his signature, Mr Colvile was aware that he was signing and ticking referrable to Gispac’s standard terms and conditions. There is no suggested vitiating element to Michael Hill’s agreement to the 2012 Terms. Mr Colvile was not rushed or tricked into doing so; he chose not to read the 2012 Terms and he could have sought some advice if he had read them; he did not take any steps to satisfy himself of the content of the standard terms which Gispac expressly brought to his attention by way of the tick-box system; and, importantly, he understood that it was a requirement of Gispac that Michael Hill agree to those terms and conditions, prior to Gispac proceeding with the Sales Agreements. I find that the 2012 Terms were incorporated as terms of the Sales Agreements. The question of whether Michael Hill is entitled to equitable or statutory relief is addressed below under Issue 6.

Alternative hypothesis: incorporation of terms by notice – onerous or unusual terms of an unsigned document

74. It is not necessary to address Michael Hill’s submission that, treating this case as an “unsigned document”, cll 17, 18 and 21.2 were onerous or unusual and should have been brought to Michael’s attention, and therefore were not incorporated. Insofar as this submission is based on Maxitherm, it is contrary to (i) the High Court’s later decision in Toll at [57], which governs the incorporation of terms into a signed contract, (ii) this Court’s decision in Mainteck dealing with incorporation by reference in a written contract, (iii) the statement in Carnival Plc v Karpik (Ruby Princess) at [236], and (iv) the authorities dealing with signed contracts referred to at [59]-[65] above.

75. Had it been necessary to decide the question of incorporation by notice, I would have concluded that (a) the terms relied upon by Gispac, specifically cll 17, 18 and 21.2, were not unusual or onerous terms, and (b) reasonable notice of the 2012 Terms as forming part of the Sales Agreements was given by the express reference to those terms and conditions in the box in the Sales Agreements such as to cause them to be incorporated.

76. As to (a), in Toll at [54] the joint judgment observed that “the criterion by which a court might declare a contractual provision to be unusual or onerous is [not] always easy to identify”. It has been said that it is not enough to simply show that a term was “onerous”; what must be shown is that the term is “more than ordinarily onerous”: Maxitherm at 569 (Buchanan JA). Addressing each provision in turn.

77. Clause 17: Michael Hill submitted that the exclusivity obligation in cl 17 “shackled the purchaser to this [exclusive] arrangement” and that even if Gispac was not performing its end of the bargain, Michael Hill still had to continue to buy bags from Gispac and pay Gispac for bags that Gispac could not supply. I reject this submission. As Gispac correctly pointed out, this submission disregarded that if Gispac did not perform its obligations under the Sales Agreements, then Michael Hill would have a claim for breach and a right to terminate (depending on the seriousness of the breach), or a right to elect to accept a repudiation, thus ending the relationship and the exclusivity regime.

78. Another consideration is that the exclusivity clause is limited to the supply of the same type and style of products the subject of the Sales Agreements. It did not prevent Michael Hill stores from purchasing any other products from other suppliers, not did it extend its reach beyond the term of the Sales Agreements. I am not persuaded that the exclusivity provision was onerous.

79. Clause 18: Michael Hill submitted that cl 18 is onerous and highly disadvantageous to the customer because the calculation of the “Shortfall” in cl 18.2 is performed quarterly, and the clause entitled Gispac to be paid more than the contract price during each year. The premise of this submission is flawed: cl 18 does not permit recovery greater than the contract price in respect of the acquisition of the Annual Quantity.

80. Where the customer fails to purchase 25 per cent of the product in a particular quarter, Gispac is entitled to issue an invoice for that product, which is a liquidated claim, and the customer is taken to have purchased 25 per cent in that quarter. The consequence is that the customer is then only obligated to purchase the remaining 75 per cent in the other quarters of the year. Read this way, cll 18.1 and 18.2 operate so that the customer has a fixed obligation under the Sales Agreement across the year of the contract.

81. It is also said that the calculation of the “Shortfall” is unsuited to a retail business like Michael Hill that has fluctuating sales and thus fluctuating demand for bags. This ignored that cl 18.2 was part of the ePlus facility which conferred a commercial benefit on Michael Hill of which Mr Bogatez gave unchallenged evidence (see [88] below), including that prices were set by reference to the rolling nature of the contracts and cheaper prices were offered where a customer agreed to use the ePlus facility and agreed to purchase a minimum annual quantity.

82. Clause 21.2: Michael Hill also complained that the automatic renewal obligation in cl 21.2 was onerous because it “shackled the purchaser to this arrangement”. I do not agree. A term of two years for the benefits provided by the ePlus facility was not onerous. The complaint also ignored that Michael Hill was entitled under this clause to give notice before the end of a current Term that it did not intend to renew the ePlus facility. That cannot be characterised as onerous, let alone more than ordinarily onerous.

83. As to (b), given each of the matters referred to at [73] above, the written request in the Sales Agreement to tick the box headed “TERMS AND CONDITIONS OF TRADING” to “confirm that you agree to the terms and conditions …” was sufficient to draw attention to Gispac’s terms of supply, relevantly, exclusivity, annual quantity, quarterly product shortfalls, and automatic renewal unless notice of termination was given by Michael Hill.

Conclusion on incorporation of 2012 Terms

84. I find that the three Sales Agreements signed by Mr Colvile on behalf of Michael Hill incorporated the 2012 Terms. Contrary to Michael Hill’s submission, this case is not to be treated as an “unsigned document” case, nor is it necessary for Gispac to establish that reasonable steps were taken to bring the 2012 Terms to the attention of Michael Hill.

Issue 1(b): Were the 2012 Terms were replaced by the 2016 Terms?

85. Michael Hill says that the 2012 Terms were replaced in about 2016, given the amendment power in cl 15.1(a) of the 2012 Terms and the evidence of Mr Bogatez referred to at [46] above. It is said that (i) Gispac had the ability under cl 15.1(a) to amend the 2012 Terms unilaterally and was not required to notify Michael Hill of the change, and (ii) Gispac cannot rely upon the 2012 Terms from the time the 2016 Terms came into effect because the 2016 Terms were “undoubtedly more favourable to Michael Hill” for the purposes of cl 15.1(a), as they did not include cll 17, 18 and 21.2.

86. Gispac says that the amendment power in cl 15 of the 2012 Terms was not engaged because the 2016 Terms were not “undoubtedly more favourable to Michael Hill” since Michael Hill continued to use the ePlus facility in 2016 and later years. It was said that there were benefits obtained by Michael Hill using the ePlus facility which it had agreed to in the 2012 Terms, which were not available under the 2016 Terms.

Decision

87. A contract may confer a unilateral power of amendment on a party: In the matter of Gelpack Enterprises Pty Ltd (in liq) [2015] NSWSC 1558 at [19]-[23] (Brereton J). Here, cl 15.1(a) of the 2012 Terms gave Gispac a contractual power to change those terms, within certain parameters, relevantly, to make amendments to the 2012 Terms from time to time if “the amendments will benefit or will not permanently and adversely affect” the customer.

88. It is common ground that Gispac agreed to make the ePlus service available to Michael Hill for each of the Sales Agreements. So much is admitted by Michael Hill in its defence, par [15]. This admission is consistent with the reference to “Delivery Type” – “EPLUS: Delivery Direct To Stores” on page 2 of the Sales Agreements: see [16] above. The benefits conferred by the 2012 Terms, which were not available under the 2016 Terms, included that the ePlus facility:

1. provided the Michael Hill stores with direct access to stock as and when they needed it, as Mr Bogatez said in his November 2020 affidavit at pars [46]-[49], and Mr Colvile confirmed in cross-examination was an advantage because the stores knew what stock they needed at any given time (T67.8, 72.20);

2. usually provided better pricing for customers, as Mr Bogatez said in his November 2020 affidavit at par [15] and adhered to in cross-examination (T30.7-11);

3. afforded Michael Hill the administrative benefit of weekly invoices issued to its head office which facilitated all invoices being collected and paid by Michael Hill at one time and rolling stock coming in and out of Gispac’s warehouse and delivered all around Australia (T32.39-44); and

263. I find that no deduction should be made for the first two quarters of the first and second Sales Agreements (Q1 – 5 May 2014 – 4 August 2014, and Q2 – 5 August 2014 – 4 November 2014). These quarters not relevant to the shortfall claim under cl 18.2 which only relates to the second term of the first, second and third Sales Agreements. As to the significance of the Product Tables and the stock issue, no deduction should be made for these matters for the reasons given at [293]-[298] below.

264. I find that Gispac has established its shortfall claim under cl 18.2 in the amount of $2,259,971.40 plus interest.

Annual quantity claim: cl 18.1

269. Alternatively, Gispac claimed damages under cl 18.1 for the loss of profits arising from Michael Hill’s failure to purchase the “Annual Quantity” of bags during the applicable term of the Sales Agreements being either $2,012,545 (4-year), $1,018,932 (2-year) or $569,623 (1-year).

270. Michael Hill’s primary position adopted Mr Temple-Cole’s scenario A2 or alternatively scenario A1. Scenario A2 assumes no incorporation of the 2012 Terms, no time period or limit to purchase the stated quantity (“QTY”) in the Sales Agreements, and the relevant quantity (“QTY”) stated in the Sales Agreements is subject to a 90 per cent limitation. Scenario A1 adopts the same assumptions subject to the relevant quantity being the stated figure “QTY” in the Sales Agreements. Michael Hill says that Gispac’s loss of profit is $4,562 (scenario A2) or alternatively, $19,451 (scenario A1).

271. These scenarios can be put aside as they are based upon assumptions, which are contrary to my findings, namely, that (i) the 2012 Terms are not incorporated into the Sales Agreements, and (ii) the annual quantity obligation under cl 18.1 should be reduced to 90 per cent of the stated “QTY” in the Sales Agreements. Contrary to Michael Hill’s submission, the notation in the Sales Agreements referred to at [16] above, that “[t]he total price may vary; as per industry standards and subject to production the final quantity may be 10% over or under the actual ordered quantity”, does not negate or undermine Michael Hill’s obligation to purchase the stated quantity (“QTY”) in the Sales Agreements. In addition, there is no evidence that the final production was 10 per cent less than the stated quantity (“QTY”) in the Sales Agreements.

272. Michael Hill advanced two fallback positions. First, the “QTY” figure in each Sales Agreement is treated as a fixed, one-off, figure and the “Unit Price” considered as static (not the price paid by Michael Hill from time to time, which, in fact, increased given the price reviews by Gispac). On this approach (ignoring the adjustments which Michael Hill otherwise seeks), the loss under cl 18.1 is calculated by Michael Hill as $52,830.40. This scenario was not considered by Mr Temple-Cole nor Mr Mullins. The assumptions on which this submission was made were not made out.

273. The second fallback position assumes incorporation of the 2012 Terms, no extension of the two-year term of the Sales Agreements (because the 2016 Terms replaced the 2012 Terms), and the stated quantity in the Sales Agreements applied over 24 months, not 12 months, or alternatively, the stated quantity applied over 24 months minus 10 per cent. Applying Mr Temple-Cole’s scenarios B1 and B2, Michael Hill says that this gives a lost profit after tax of $229,665 (Scenario B1) or $193,495 (Scenario B2 – 90 per cent limitation). Whilst disputing that either of these scenarios was applicable, Gispac did not dispute the Michael Hill’s calculations relying upon Mr Temple-Cole’s scenarios B1 and B2. Again, the assumptions on which this submission was made were not made out.

274. Michael Hill’s secondary position is that three matters warrant a reduction in the amount of any damages Gispac is awarded, namely, (i) no damages should be awarded for the first and second quarters of the first and second Sales Agreements, (ii) no damages should be awarded, or damages should be reduced, where the Product Tables show more bags than the located invoices, and (iii) Gispac did not prove that it could actually supply the “minimum quantity” which Michael Hill was required to buy for certain quarters of the first 24-month term of the three Sales Agreements. There is a substantial overlap between the suggested deductions in (i) and (iii).

First and second quarters of the first and second Sales Agreements

275. It is said that no damages should be awarded for the first two quarters of the first and second Sales Agreements for both small and large bags, being 5 May 2014 to 4 August 2014 (Q1) and 5 August 2014 to 4 November 2014 (Q2), in circumstances where both the Product Tables and the located invoices showed no records of invoicing or purchasing of bags by Michael Hill in those quarters.

276. Michael Hill says that removing the claim for these quarters from Gispac’s lost profit calculation under cl 18.1 reduces any damages by $240,961. (It should be observed that Michael Hill did not argue for any larger reduction in damages under cl 18.1, based on the asserted inability of Gispac to supply bags in Q1 and Q2 of the first and second Sales Agreements.)

277. Gispac says that the proposed reduction in the claim under cl 18.1 is unjustified for three reasons: (i) the point was not pleaded, nor mentioned in Michael Hill’s opening, (ii) the point was not explored in the cross-examination of Mr Bogatez, and (iii) the suggested inference that Gispac did not have available stock for supply in Q1 and Q2 must be based on evidence rather than speculation, and no evidence has been identified as supporting such an inference.

278. As to the pleading objection, the relevant principles are summarised in Harris v Harris [2021] NSWCA 326 at [71]-[74], principally by reference to Banque Commerciale SA (In Liq) v Akhil Holdings Limited (1990) 169 CLR 279 at 286-287 (Mason CJ and Gaudron J), and 293, 296-297 (Dawson J); [1990] HCA 11.

279. Gispac submitted that Michael Hill’s pleaded defence (par 32(b)) only raised the issue of alleged delivery failures in respect of three specific periods: December 2015 to January 2016, December 2016 to January 2017, and “at other times during high volume trading periods for [Michael Hill], particulars of which will be provided”. However, this ignored that in addition to putting in issue specific alleged delivery failures, Michael Hill also put in issue the wider issue of whether Gispac was ready, willing and able to supply the products the subject of the three Sales Agreements: see ASOC, par 46; amended defence, par 46(a).

280. The essential question is whether Gispac knew the nature of the case it had to meet. In my view, Gispac was on notice of the case it had to meet by Michael Hill’s amended defence (par 46(a)) and the expert report served by Michael Hill when calculating Gispac’s loss which put in issue whether Gispac held inventory for certain quarters of the Sales Agreements: see Mr Temple-Cole’s first report at pars 167 and 168, replying to Mr Mullins’ first report at sections 6.3 and 7, and Appendix F, to which Mr Mullins’ responded in his third report at pars 2.2.20 - 2.2 22. It is no answer that the experts did not address this issue in their Joint Report.

281. The absence of cross-examination of Mr Bogatez on this topic was acknowledged by Michael Hill (T171.31-33), however, there was cross-examination of Mr Bogatez on the related topic of the time taken for orders issued to Gispac’s overseas suppliers to be delivered to Australia. This is relevant to the issue of whether Gispac was ready and willing to supply bags to Michael Hill in Q1 and Q2: see [286] below.

282. As to the drawing of inferences, the applicable principle is stated in Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 at [73], citing Hollaway v McFeeters (1956) 94 CLR 470 at 480-481:

A party seeking to establish that an inference ought to be drawn must demonstrate that that inference is the more probable one which arises from the established facts. The inference must be based on evidence rather than speculation. (citations omitted)

283. Contrary to Gispac’s submission, I find that the following evidence supports the inference that Gispac did not hold inventory to supply bags to Michael Hill for Q1 and Q2 of the first and second Sales Agreements.

284. First, the first and second Sales Agreements expressly contemplated some delay in the supply of bags to Micahel Hill after 5 May 2014, given the reference to the “lead time” for delivery, being “Approx 8-10 weeks from pre-production sample approval”: see [16] above. Accepting what is implicit in the evidence of Mr Bogatez, that such approval had been given by Michael Hill before 5 May 2014 (November affidavit, pars [17] and [18]), plainly the parties anticipated that there would be a period of time after 5 May 2014 when Gispac would not hold any inventory of bags for the first and second Sales Agreements.

285. Second, consistent with an anticipated “lead time” for delivery, Mr Cook’s email to Mr Colvile dated 22 April 2014 recorded the parties’ understanding that Michael Hill was working towards a new bag rollout on 1 September 2014: see [13] above.

286. Third, the evidence of Mr Bogatez was that it generally took three months for the overseas suppliers to deliver bags to Gispac from the time of order, and sometimes it took a lot longer, up to six months (T27.17-26).

287. Fourth, in his analysis of Gispac’s supplier and freight invoices in section 7 of his first report, Mr Mullins observed that the earliest freight invoice date was 17 October 2014. Taking into account the “lead time” between the supplier invoice date and the freight invoice date, all other freight invoice dates adopted by Mr Mullins were on and after 12 November 2014 (Ex WM1, Appendix I). Further, Mr Mullins’ Appendix F.1 records nil inventory for the first Sales Agreement for small and large bags shipped to New Zealand until purchases by Gispac Q3 commencing 5 November 2014 (Figures 38 and 39). Mr Mullins’ Appendix F.2 records nil inventory for the first and second Sales Agreements small and large bags shipped to Australia until purchases by Gispac in Q3 commencing 5 November 2014, except for 7,920 small bags and 18,000 large bags held as inventory from purchases in Q2 (Figures 40 and 41), which based on the earliest freight invoice date, Gispac did not hold prior to at least 17 October 2014.

288. I find that, except for the very limited number of bags held no earlier than 17 October 2014 (see [287] above), Gispac did not hold any inventory of bags for supply under the first and second Sales Agreements until the third quarter commencing 5 November 2014 (Q3).

289. Michael Hill says that the obligation under cl 18.1 to purchase the annual quantity of bags was dependent on performance by Gispac of its obligation to supply bags. The relevant principle is stated in Meetfresh Franchising Pty Ltd v Ivanman Pty Ltd [2020] NSWCA 234 at [41], where Macfarlan JA (Bell P and Meagher JA agreeing) said of dependent promises:

JW Carter, Carter’s Breach of Contract (2^nd ed, 2018, LexisNexis Butterworths) explains the principle involved in this respect as follows (at [1-08]):

“Where an obligation to perform is a dependent obligation, the promise which creates the obligation is a dependent or conditional promise. Otherwise, the promise stating the obligation is an independent or unconditional promise. Whether an obligation or promise is dependent or independent depends on the construction of the contract.”

290. I find that on the proper construction of the Sales Agreements, Michael Hill’s obligation under cl 18.1 to purchase the annual quantity of bags was dependent on performance by Gispac of its obligation to supply bags as ordered. That is, Michael Hill’s obligation to perform its annual quantity obligation was dependent on prior performance by Gispac in supplying bags.

291. In Macquarie International Clinic Pty Ltd v Sydney South-West Area Health Service [2010] NSWCA 268; (2010) 15 BPR 28,563 at [161], Hodgson JA (Allsop P and Macfarlan JA agreeing) said of a party’s entitlement to damages:

… a plaintiff seeking to obtain damages for breach of contract referable to its not receiving a benefit under the contract must prove that it did or would but for the breach have done what was required of it to become entitled to that benefit. That is, in general terms, if the plaintiff has not afforded substantial performance of the contract, it must prove it was ready, willing and able to do so: Hensley v Reschke [1914] HCA 88; (1914) 18 CLR 452, Foran v Wight [1989] HCA 51; (1989) 168 CLR 385.

292. I am not satisfied that Gispac has demonstrated that it was ready and willing to supply bags to Michael Hill under the first and second Sales Agreements in Q1 and Q2 of those agreements. Accordingly, I accept Michael Hill’s submission that Gispac’s claim under cl 18.1 should be reduced by $240,961.

Product Tables

293. Michael Hill puts in issue Gispac’s proof of the number of bags that Michael Hill bought from Gispac. It is said that where the Product Tables show more bags than the located invoices for 25 quarters across the Sales Agreements and bag sizes, this is probative evidence that the located invoices for those quarters do not capture all bags Michael Hill purchased. If the shortfall for all such quarters is removed, Michael Hill says that Gispac’s damages claim is reduced by $587,368 on its four-year claim.

294. Alternatively, it is said that if the lower Product Table shortfall figure is used instead of the higher located invoices’ shortfall for the quarters where the Product Tables show more bags purchased than the located invoices, Gispac’s four-year claim is reduced by $28,036.

295. This contention has been addressed and rejected at [127]f above.

Stock issue

296. It is said by Michael Hill that Gispac’s records indicate that it did not have enough stock to supply to Michael Hill for Q1 and Q2 of the first and second Sales Agreements, and for Q1 of the third Sales Agreement, and any damages awarded for breach of cl 18.1 should be reduced by $247,974. Gispac did not dispute the calculation of this deduction in Annexure G to Michael Hill’s closing submissions dated 21 November 2022.

297. Insofar as this deduction relates to Q1 and Q2 of the first and second Sales Agreements, it overlaps with the deduction addressed at [275]f above, which I have already found is appropriate and should be made. No further deduction is required.

298. Insofar as this deduction relates to Q1 of the third Sales Agreement, the analysis by Mr Mullins in Appendix H.2 (Tables 51 and 52), establishes that Gispac did not hold any inventory of Emma & Roe bags for Q1 of the third Sales Agreement, being 5 May 2015 to 4 August 2015 (CB3/876). Accordingly, the suggested deduction of $7,013 is appropriate and should be made.

299. I find that Gispac’s claim under cl 18.1 of $2,102,545 should be reduced in total by $247,974: see [292] and [298] above. Gispac’s loss of profits in relation to the annual quantity claim under cl 18.1 is assessed as $1,764,571 plus interest.

Exclusivity claim: cl 17.1

300. In the further alternative to the claim for damages under either cll 18.2 or 18.1, Gispac claimed damages for breach of the exclusivity obligation in cl 17. I have found that Michael Hill breached the exclusivity obligation in cl 17 in relation to the Australian outlets: see [172] above.

301. The quantum of this claim depends upon whether the Sales Agreements operated for a 4-year or a 2-year term (there being no exclusivity loss for a 1-year term). In writing, Gispac claimed damages before tax of $465,129 (4 years) or $13,206 (2 years). I have concluded that the Sales Agreements were automatically renewed. Accordingly, Gispac’s claim is to be assessed by reference to a 4-year term. The breach of the exclusivity obligation relates to the period after 5 May 2016, specifically purchases by MHW from Jewel Pak between August 2016 and May 2018 (Ex WNM2, Annexure G, CB3/855-857).

302. Mr Mullins quantified Gispac’s loss of profit in respect of the exclusivity claim as its expected net cashflow had Michael Hill purchased from Gispac the replacement products which it ordered from Jewel Pak instead. He applied the same methodology which he used to calculate the cl 18.1 damages, namely, revenue less supply, freight and delivery costs.

303. Mr Mullins undertook two loss calculations: (i) replacement products ordered by Michael Hill (scenario A), and (ii) replacement products invoiced to Michael Hill (scenario B). It is common ground that the loss should be calculated by reference to the quantity of replacement products invoiced to Michael Hill the subject of the third-party invoices. Mr Mullins calculated the quantum of the loss on scenario B as $442,434 before tax, assuming a 4-year term of the Sales Agreements.

304. Mr Temple-Cole’s scenario D2 calculated the quantum of Gispac’s loss as $281,809 after tax; he assessed the loss as $402,585 before tax: see Ex J, being the table in Mr Temple-Cole’s report dated 1 October 2021 headed “Scenario B – Replacement Products (Invoiced excluding New Zealand)”.

305. Michael Hill said that Mr Mullins’ calculation of exclusivity loss should be reduced for two reasons: one temporal and the other geographical, relating to New Zealand outlets. This reflected the assumptions for Mr Temple-Cole’s scenario D2, namely, (i) excluding replacement product supplied to New Zealand outlets, and (ii) including replacement product for which Michael Hill received an invoice from an alternative supplier (Jewel Pak) in respect of a purchase order made during the terms of the Sales Agreements (see par 2.1.7 of the Joint Report).

Third-party purchases after the expiry of the first and second Sales Agreements

306. The temporal reduction in the exclusivity loss sought by Michael Hill concerns five third party invoices issued by Jewel Pak to Michael Hill after the second term of the first and second Sales Agreements. The question is whether the relevant purchase orders by Michael Hill for the replacement product the subject of the five invoices from Jewel Pak were issued by Michael Hill prior to 5 May 2018, in which case there was a breach of the exclusivity obligation.

307. The five invoices for replacement product fall into two categories. One concerns invoices issued by Jewel Pak dated 20 November 2018 and 19 December 2018 (CB3/814-815) in respect of purchase orders by MHW both dated 13 August 2018 (CB3/820-821). Prima facie, these invoices were not a breach of the exclusivity obligation under cl 17 as they were issued after the end of the second 24-month term of the first and second Sales Agreements.

308. Gispac says that an inference should be drawn from (i) the fact that these purchase orders were produced by Michael Hill in response to a notice to produce issued by Gispac, and (ii) the orders contain the word “Revised” next to the reference “P.O.” on these purchase orders, that an earlier purchase order had been issued by Michael Hill during the second 24-month term of the first and second Sales Agreements, that is, before 5 May 2018. I reject this submission. It is speculative. The evidence does not permit an inference to be drawn from the use of the word “Revised” on the relevant purchase orders issued by Michael Hill that the date(s) on which any earlier purchase order was issued by Michael Hill were before 5 May 2018.

309. The second category of invoices issued by Jewel Pak were dated 11, 23 and 26 July 2018 (CB3/81-813). The date of the three matching purchase orders by MHW for this replacement product was in each case 11 April 2018 (CB3/817-819). I find that the purchase of this replacement product from Jewel Pak was a breach of Michael Hill’s exclusivity obligation under cl 17. The breach occurred within the second 24-month term of the first and second Sales Agreements, and the evidence established that this replacement product was invoiced to Michael Hill. It is not to the point that the date of third-party supplier’s invoice was after 5 May 2018; the breach by Michael Hill of cl 17 had already occurred before this date.

306. In summary, I find that the exclusivity loss does not include the two Jewel Pak invoices both dated 13 August 2018, being J-7969 for 88,800 small bags and J-8005 for 86,880 small bags.

New Zealand Outlets

311. The geographical reduction in the exclusivity loss concerns purchases by MHNZ from third-party suppliers for its New Zealand stores. For the reasons given under Issue 5 above, Michael Hill is not liable to Gispac for purchases by MHNZ from third-party suppliers for its New Zealand stores.

Quantum of exclusivity claim

312. In oral closing submissions, Gispac accepted that Mr Temple-Cole’s scenario D2, and Ex J containing Mr Temple-Cole’s before tax calculation of the exclusivity loss, correctly assessed its exclusivity loss as $402,585 before tax, taking into account the deduction by Mr Temple-Cole for (a) the New Zealand outlets, and (b) the two Jewel Pak invoices the subject of Michael Hill purchase orders dated 13 August 2018 (T195.12-15). Michael Hill did not argue to the contrary.

313. I reject Michael Hill’s submission that, by reference to Mr Mullins’ scenario B, the appropriate deduction in the exclusivity loss is $95,413 before tax. This submission ignored two matters. First, Mr Mullins’ scenario B correctly included the three invoices for replacement product issued by Jewel Pak to Michael Hill dated 11, 23 and 28 July 2018. Second, the appropriate deduction for the two Jewel Pak invoices dated 13 August 2018 was addressed in Mr Temple-Cole’s scenario D2, given the assumptions for this scenario recorded in par 2.1.7 of the Joint Report.

314. I find that when the appropriate temporal and geographical deductions are made, Gispac’s exclusivity loss under cl 17 is assessed as $402,585 plus interest.

Interest

315. Gispac claimed prejudgment interest on any award of damages. There was significant agreement between the parties as to the date on which interest should run under s 100 of the Civil Procedure Act 2005 (NSW).

316. As to the Shortfall claim under cl 18.2, it is common ground that the cause of action accrued on 17 June 2019, being 30 days from the date of the shortfall invoices issued by Gispac to Michael Hill dated 17 May 2019. Interest should therefore be calculated from 17 June 2019 (T188.13, 200.1-3).

317. As to the alternative claim under cl 18.1 (Annual Quantity), it is common ground that the cause of action accrued at the end of each 12-month period in which Michael Hill failed to purchase the relevant annual quantity. Thus, for example, in relation to the first and second Sales Agreements, interest would run from 5 May 2015 in respect of the first 12-month period commencing on 5 May 2014, from 5 May 2016 in respect of the subsequent 12-month period commencing on 5 May 2015, and so on. The same approach applies to the third Sales Agreement.

318. As to the further alternative claim under cl 17 (Exclusivity Loss), the parties diverged as to whether the cause of action accrued on the date MHW placed purchase orders with Jewel Pak, or the date on which Jewel Pak invoiced Michael Hill Jewellers or MHW in respect of such purchase orders. In terms of quantum, the timing difference is likely to be immaterial.

319. As a matter of principle, the cause of action for breach of cl 17 accrued on the date Michael Hill placed purchase orders with Jewel Pak and prejudgment interest would run from those dates. However, in circumstances where it is common ground that the loss is to be calculated by reference to the replacement products invoiced to Michael Hill Jewellers or MHW by Jewel Pak there is a compelling reason to award interest from the later date by reference to the quantity of replacement products invoiced by Jewel Pak.

Summary of conclusions on quantum

320. My conclusions on quantum may be summarised as follows:

1. Shortfall claim – cl 18.2: Gispac is entitled to judgment for breach of cl 18.2 in the amount of $2,259,971.40, plus prejudgment interest under s 100 of the Civil Procedure Act from 17 June 2019.

2. Annual Quantity claim – cl 18.1: alternatively, if I am wrong in finding that Michael Hill breached cl 18.2, Michael Hill is liable to Gispac for damages for breach of cl 18.1 in the amount of $1,764,571, plus prejudgment interest under s 100 of the Civil Procedure Act calculated at the end of each 12-month period in the manner referred to at [317] above.

3. Exclusivity claim – cl 17: in the further alternative, if I am wrong in finding that Michael Hill breached either cll 18.2 or 18.1, Michael Hill is liable to Gispac for damages for breach of cl 17 in the amount of $402,585, plus prejudgment interest under s 100 of the Civil Procedure Act from the date of each invoice issued by Jewel Pak as referred to at [319] above.

Costs

321. There is no reason why costs should not follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

Orders

322. I make the following orders:

1. Judgment for the plaintiff against the defendant in the amount of $2,259,971.40.

2. The defendant to pay the plaintiff interest on the amount of the judgment referred to in Order 1 above pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 19 June 2019 to the date of judgment.

3. The defendant to pay the plaintiff’s costs of the proceedings.

4. Direct that the Exhibits be returned after 28 days.

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Decision last updated: 31 January 2024