Juno Beauty Pty Ltd v Superior Skin Care Pty Ltd

[2006] NSWLC 23

Local Court of New South Wales

CITATION:	Juno Beauty Pty Ltd v Superior Skin Care Pty Ltd [2006] NSWLC 23
JURISDICTION:	Civil
PARTIES:	Juno Beauty Pty Ltd Superior Skin Care Pty Ltd
FILE NUMBER:	9239/05
PLACE OF HEARING:	Downing Centre Local Court
DATE OF DECISION:	04/24/2006
MAGISTRATE:	Magistrate H Dillon
CATCHWORDS:	Contract - Whether trial period a term of contract - Whether contract provided for a set period of notice or an implied term as to reasonable notice - Whether commission payable after termination of contract - Whether plaintiff effective cause of sale of machine - Whether plaintiff liable to account to defendant for share of profits on sale of two machines
LEGISLATION CITED:
CASES CITED:	Crawford Fitting Co v Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 Emmons Mount Gambier Pty Ltd v Specilaist Solicitors Network Pty Ltd (2005) NSWCA 117 Moneywood Nominees Pty Ltd v Saloman Nominees Pty Ltd (2001) 202 CLR 351
REPRESENTATION:	Foulsham and Geddes - Solicitors Mr A Ogborne - Counsel Ms A Drayton of Schweizer Kobras - Solicitors
ORDERS:	Verdict for the plaintiff in the sum of $17,218.07 and judgment accordingly.; Verdict for the cross-defendant and judgment accordingly.; Interest to be calculated by the Registrar from 9 March 2005.; Parties have liberty to apply on question of costs.

JUDGMENT

1. Both parties in this matter are companies involved in what is known as “the beauty industry”. The plaintiff, Juno Beauty Pty Limited (“Juno”) was directed and managed by Mr James Powell who had had, at the relevant times, lengthy experience in dealing with cosmetics and, in particular, skin products. Mr Powell had left a large firm to establish his own business in Sydney.

2. The defendant company, Superior Skin Care Pty Limited (“Superior”), is based in Perth but has distributors interstate. Its principal line of products is known as SkinCeuticals. They are not mass-marketed but are distributed to professional beauty salons. In 2004, the parties reached a series of agreements concerning promotion, marketing and distribution of beauty products and the sale of a type of machine known as a “microdermabrasion” machine which is used in beauty salons for skin treatments.

3. By its statement of claim Juno makes four allegations of breach of contract against Superior and seeks consequential damages. The first is that Superior breached an agreement pursuant to which Juno was paid a retainer of $13,500 per month plus Goods and Services Tax (“GST”). It alleges that the defendant paid only part of the retainer due in advance for March 2005 and that it owes Juno $7425 in that respect.

4. Second, it alleges that Superior breached an agreement that it would pay a commission of one per cent of the value of its products sold by the plaintiff in February 2005. It makes claim to a sum of $421.00 in that respect.

5. Third, Juno claims a sum of $2420 being its share of the profits on a microdermabrasion machine sold to a client called “Escape”. The plaintiff alleges that the parties had agreed that they would share the profits on machines sourced by Superior from the manufacturer Clairderm.

6. Fourth, it claims payment in lieu of three months notice it alleges was a term of its agreement with Superior but was not given prior to the termination of the contract in March 2005.

7. By its cross-claim Superior alleges that Juno breached its agreement with Superior to share profits on Clairderm skin treatment machines sold by Juno by failing to account for a sum due to it after the sale of two Clairderm machines to a beauty salon in Dubbo called “Beautiful Image”.

The issues

8. Several issues arise for determination. The resolution of them depends in most cases on the credibility of the witnesses.

9. In terms of the facts, the major disputes concern the terms of the various agreements reached by the parties.

10. The plaintiff asserts that it was agreed that there be a three-month period of notice given by the defendant prior to termination of the contract. Not only does the defendant deny this but it asserts that there was no need for such a period of notice to be given because the agreement provided that the plaintiff be “on probation” for six months and the defendant simply chose not to renew the contract beyond March 2005 pursuant to this term of the agreement.

11. A second set of issues concerns the sale of microdermabrasion machines. It is necessary to determine, as best as the court is able, the terms on which the parties agreed that they would share the profits made on the machines sold. Juno asserts that if it sold machines to its old customers and did not source the machines through Superior, it was entitled to the entire profit made on such sales. Superior disputes that construction of the agreement and claims a commission on any such machines sold during the currency of the agreement.

12. A related issue is whether a share of the profits on a machine ultimately sold by Superior to Escape after 9 March 2005, when the principal agreement terminated, is owed by Superior to the plaintiff. The plaintiff maintains that it entitled to that share on the basis that it was an effective (although not the sole) cause of the sale.

13. Finally, the defendant does not contest that a commission of one per cent of the sales of SkinCeutical products made by Juno was payable but raises the question whether those commissions were payable to Juno or its employees. The plaintiff argues that the terms of its arrangements with its employees concerning the commission is irrelevant to the question of the commission payable by Superior to Juno pursuant to their agreement.

Further background

14. Many of the facts in this matter are not in issue. It is common ground that on 7 July 2004 the parties met at the Mercure Hotel in Sydney where they discussed the possibility of forming a joint venture of some sort. Present were Mr James Powell, who was the managing director of Juno, Mr Jan Hohmann, the managing director of Superior, and Mss Wendy Neely and Cate Gilbert, who at that time were employed by Superior. No agreement was reached at the meeting but Mr Powell suggested that he formulate a proposal for Superior to consider.

15. On 13 July, Mr Powell emailed Mr Hohmann a letter outlining his proposal. In summary, he offered to use Juno as a vehicle for promoting sales of SkinCeuticals products on behalf of Superior. The specific services he offered on behalf of Juno were to do with sales, training, customer service and public relations. He offered to dedicate one employee to public relations work for Superior and 50 per cent of the time of two other employees. In consideration, he proposed a monthly retainer of $10,000 paid in advance.

16. Mr Hohmann replied on 20 July and the agreement struck included terms that Juno would take over a Superior employee, Ms Cate Gilbert, and be paid a monthly retainer of $13,500 plus commissions of one per cent of sales on all Superior products sold in NSW. It was also agreed that there be a review of the fee structure after three or four months (i.e. in about October or November 2004). There were also other conditions but those terms are disputed and are discussed below.

17. In July 2004, Mr Hohmann negotiated with the manufacturers of Clairderm skin care machines and obtained a 25 per cent discount on any Clairderm machines it sold. Following on from that agreement, Mr Hohmann made an offer to Mr Powell for the sharing of profits made on Clairderm machines sold by Juno. The specific terms of that agreement are in dispute and further evidence about them is considered below but it is common ground that some sort of agreement was reached by the parties for the sharing of profits on Clairderm machines.

18. About a month before this agreement was struck, Juno had sold certain beauty products to a business calling itself “Beautiful Image” (“B.I.”). In December 2004 Juno sold two Clairderm machines to B.I. without notifying Superior and without sharing the profits on the machines with Superior. Whether Juno was liable to account to Superior for a share of the profits is the principal issue in the cross-claim.

19. In November 2004 the organisers of a conference to do with laser beauty treatments wrote to Mr Hohmann telling him that conference would also cover ancillary cosmetic treatments including the use of microdermabrasion machines. They invited Superior to exhibit its wares at the conference. Mr Hohmann encouraged Mr Powell to participate. The conference was held in Sydney in February 2005.

20. In February 2005, Juno achieved sales of Superior’s products worth $42,944.44. The commission calculable on that sum is $429.43.

21. On 1 March 2005 Juno sent an invoice for the sum of $13,500 to Superior, its claim to its monthly retainer in advance for that month. Some time shortly afterwards Juno was paid 50 per cent of that amount; the balance remains outstanding.

22. Mr Hohmann visited the United States in February 2005 but returned in early March. On 9 March, he met Mr Powell. The agreements between Juno and Superior were repudiated or terminated on that day.

23. On that day Mr Powell emailed Mr Hohmann attaching a letter concerning the termination of the contract. In that letter, among other things, he referred to the agreement making provision for termination on three months notice. He also requested that if a microdermabrasion machine was sold to Escape that Juno be paid a commission of $2200 plus GST. Various other arrangements to do with staff, office equipment and the possible new business ventures were also raised in the letter.

24. Mr Hohmann replied the following day. Among other things, he wrote, “It is also disappointing that you now insinuate that we have binding agreements which you very well know do not exist.” He did not specify the “binding agreements” to which he was referring. He also did not refute in terms Mr Powell’s claim that they had had an arrangement for three months notice before termination.

25. On 11 March Mr Powell responded with a letter of demand for the outstanding retainer and commissions including payment in lieu of notice. He followed this up on 10 April with an email demanding Juno’s share of profits on the sale of a Clairderm machine to Escape.

26. I now turn to the evidence in relation to the disputed facts.

Evidence

27. Although in the interests of economy I have not made specific reference to every item of evidence, I have taken them all into account. Evidence was given for the plaintiff by Mr Powell and for the defendant by Mr Hohmann and Ms Cate Gilbert. Each party tendered a number of business records.

The formation of the original contract for retainer and commission on sales

28. Mr Powell gave evidence that at the meeting of 7 July 2004 he had discussed with Mr Hohmann their common interests. His evidence was to the effect that Mr Hohmann envisaged Juno providing services in NSW for Superior and that he had been keen to get started. He said that he had told Mr Hohmann that he would need a monthly retainer and for incentives to be built into the agreement.

29. Mr Hohmann largely agreed with the evidence given by Mr Powell except that his version of the conversation was that, after Mr Powell had suggested he tender a proposal to Superior, Mr Hohmann had said that the parties “could give it a six months trial.”

30. Ms Cate Gilbert’s evidence was broadly consistent with that of Mr Hohmann. She said that during the discussion Mr Hohmann had told Mr Powell that Superior wanted to set up an office in NSW and was interested in working with Mr Powell. She said that Mr Powell had stated that he was interested in this idea and had made a number of suggestions about how the venture could be conducted mentioning staffing arrangements, contacts with David Jones and Ella Rouge and other things. Her evidence was that after Mr Powell had made these suggestions Mr Hohmann had said, “Let’s give it six months to see how it goes.” In cross-examination, while she maintained that this had been said, on other relevant matters her memory was incomplete or fragmentary.

31. Mr Powell denied that there had been any mention or discussion of a six-months trial period. Mr Hohmann’s evidence was that at the same time as he proposed a six-months trial period he offered to pay a commission on sales by Juno of Superior products of one per cent. He asserted that it was standard operating procedure for him to give a new commercial relationship a six-months trial.

32. Mr Powell gave further evidence that the following weekend he had met Mr Hohmann at a trade show on the Gold Coast and again discussed the joint venture. He denied that there had been any discussion at that meeting of a six-months trial period.

The agreement to share profits on skin treatment machines

33. As noted above, it is common ground that the parties reached agreement in July 2004 that they should share the profits of certain sales of Clairderm skin treatment machines. The terms of that agreement, however, are disputed. Mr Powell’s version of the conversation in which the agreement was reached was that Mr Hohmann said to him:

I've got a special deal whereby I receive commission for the sale of ClairDerm microdermabrasion machines. My commission is calculated as any revenue in excess of $6,750. 00. I'd like to propose that your company and my company equally share the commission on the sale of any ClairDerm microdermabrasion machines sold to customers that resulted from our marketing and that Juno can continue to earn 100 per cent of any commission on microdermabrasion machines sold to its customers. What do you think?

34. Mr Powell’s evidence in the statement tendered in evidence was that he had agreed with the proposal and confirmed the agreement in a document entitled “Structure of the Juno Beauty Agreement”. He later gave evidence in his statement that he had given Mr Hohmann a copy of this document on or about 19 October.

35. His oral evidence was broadly consistent with that which he had given in his statement. He asserted that he had told Mr Hohmann that he would agree if the arrangement applied only in respect of machines sold as a result of marketing activity by Superior but not to existing customers or clients of Juno. He said that Mr Hohmann had agreed to this restriction.

36. Mr Powell also gave evidence that he had had a commercial relationship prior to this conversation with the manufacturer of Clairderm machines. While he gave evidence that he had been unaware in July 2004 of the relationship, Mr Hohmann did not dispute the fact.

37. A letter dated 5 December 2005 from Mr Powell to Ms Kerensa Crowle, tendered as part of Juno’s business records, summarised her commissions for various products marketed by Juno. In relation to the Clairderm machines it stated that the commission on machines for which “the lead” (or prospective buyer) was identified by Superior the commission was 6.25 per cent but where the machines were sold as a result of leads generated by Juno itself the commission was to be 50 per cent of the price in excess of $6600.

38. Mr Hohmann’s evidence of the conversation constituting the agreement was somewhat different from that of Mr Powell. According to his statement, his offer had been in the following terms:

I have negotiated a 25% discount for Superior on all Clairderm machines purchased for sale in Sydney. We can on-sell the machines at their standard price and therefore make a profit of 25%. I will agree to pay you 50% of that profit made if you agree to sell the machines for us.

39. Mr Hohmann said that Mr Powell had replied, “That’s fine. All sales are to be invoiced by you.”

The disputes concerning sales of machines without commission

40. The parties are in dispute concerning commissions said to be owing to one another in relation to two separate sales of Clairderm machines. The cross-claim concerns the sale of two machines by Juno. Mr Powell conceded in his evidence that Juno had sold two Clairderm machines to B.I., a salon in Dubbo, without notifying Superior or accounting to it for half of the profits. He said that the machines had been sourced directly from the manufacturer, not through Superior. His evidence, however, was that the agreement allowed Juno to claim the entire profit on machines sold by it to its old clients and that accordingly the profit had been retained in full.

41. An account statement to B.I. dated 5 February 2005, tendered as part of Juno’s business records, showed that B.I. was charged $17,200 by Juno for two Clairderm machines but that this was reduced on account of a trade-in, payments to the manufacturer and airfares for Ms Crowle. The ultimate profit appears to have been a sum of $850 on those two machines.

42. Mr Hohmann’s evidence was that there was no exclusion in respect of old customers and that Superior only learned by accident in March 2006 that Juno had sold two Clairderm machines to B.I.

43. The second sale was to Escape. Mr Powell’s evidence was that Escape was a “lead” found by Ms Crowle. According to Mr Hohmann, he had received notification in the United States from his office in February 2005 that Mr Powell had alerted Superior to the fact that the owners of Escape were looking to open a second salon and could be a big account. In email correspondence on 23 February 2004 with both Superior and Escape Mr Powell outlined his proposal to sell SkinCeuticals products to Escape but made no mention at that stage of Clairderm machines.

44. Notwithstanding the fact that the emails of 23 February did not mention that Escape was interested in a Clairderm machine, Mr Powell asserted in his written statement that “the client had been introduced by Kerensa Crowle, an employee of the plaintiff, and was looking at purchasing one of the microdermabrasion machines distributed by the defendant.”

45. On 9 March 2005, Messrs Powell and Hohmann travelled together to the meeting with the principals of Escape. According to Mr Powell, during the car trip from Mascot to Balgowlah, Mr Hohmann and he discussed the commissions on products and Mr Hohmann confirmed that if Escape bought a Clairderm machine Juno would receive a commission of $2200. In cross-examination, it was suggested that there had been no discussion about the sale of a Clairderm machine to Escape but Mr Powell was adamant in his evidence that there had been. He conceded, however, as he had had no further commercial ties with Mr Hohmann after 9 March 2005, that he was unsure precisely how the sale of the machine had come about afterwards.

46. In his statement, however, Mr Powell went on immediately to state that Mr Hohmann had said in the same conversation, “I really need to save costs” and that he proposed to terminate the agreement with Juno, take over Juno’s staff and continue the business relationship on a commission-only basis with Mr Powell.

47. Mr Hohmann’s evidence in relation to the sale of the machine to Escape was that when he spoke to Mr Powell on 9 March he terminated the agreements with Juno and offered him a fresh arrangement on a commission-only basis.

48. In Mr Powell’s letter of 9 March concerning the termination but not in Mr Hohmann’s reply of 10 March 2005 there was mention of the Escape commission. Mr Powell claimed a $2200 commission to be shared with Ms Crowle if a Clairderm machine was ultimately sold to Escape. Mr Hohmann replied the next day and did not specifically address this claim but did not reject it in terms either. He did say in the letter, “It is also disappointing that you now insinuate that we have binding agreements which you know very well do not exist.” This cryptic utterance may have been intended to apply to the Escape commission but in the context of the two letters and the history of the parties it is not clear.

49. The evidence shows that a microdermabrasion machine was sold to escape by Superior on or about 24 May 2005. According to Mr Hohmann, Mr Powell had not mentioned the Clairderm machine on 9 March but he was the one to do so. He said that the person responsible for the ultimate sale was Ms Gilbert.

Provision in the contract for notice

50. Mr Powell’s evidence on this point has been, to some extent, dealt with above. He stated that in July 2004 he had agreed with Mr Hohmann’s proposal concerning commission on Clairderm machines and had confirmed their agreement with the document called, “Structure of the Juno Beauty Agreement”.

51. That document, in the section headed “Fees”, represents that the parties had agreed “a minimum of three months notice [was] required from either party for termination” of the agreement.

52. An annotated copy of the agreement was tendered in evidence for Juno, the annotation being dated 19 October 2004. It read: “Reviewed with JH. JH agreed. No problem but would like to review additional commissions and incentives later.” Mr Powell initialled the annotation but there was no such written adoption of the document by Mr Hohmann.

53. Mr Powell asserted that he and Mr Hohmann had reviewed the document on or about 19 October and that his note recorded their concurrence to all its terms. It was not clear, however, from his evidence whether his assertion was that the contract had been varied in October to incorporate that term or had included such a term from the time of its formation.

54. Mr Hohmann disputed that he had ever been shown the document during the currency of their arrangements. He was contemptuous of at least one aspect of the document, namely, a representation that “Juno Beauty will develop strategies to substantially increase sales and it is expected that the sales of $5 million will be achieved by 2007.” His evidence was that he would not have accepted such a claim by Juno because such a goal was unachievable given that SkinCeuticals operated within a small niche market rather than a mass market.

55. Mr Powell was cross-examined at some length and to some effect about the reason why the copy of the document provided to the defence did not have the annotation upon it and the copy tendered with his statement had. He explained that there had been a number of copies of it made and kept in various files in his office but otherwise was unable to provide a reason.

Consideration and findings of facts

56. I have taken into account all the submissions of counsel for both parties. Each party bears the onus of proving its claims on the balance of probabilities. Before considering the evidence in relation to each particular claim, it is necessary to make some observations on the credibility of the witnesses.

57. Messrs Powell and Hohmann did not, in my view, present as highly persuasive witnesses. Notwithstanding the availability of a considerable quantity of business records to both of them, much of the vital evidence was in the form of uncorroborated evidence of conversations in which contradictory versions were given by each witness. By the time that the witnesses came to write their statements, their memories of the crucial conversations were between 12 and about 18 months old. I formed the strong impression in both cases that the witnesses were reconstructing, in a self-serving fashion, much of their evidence. Time has a tendency to do that to memory, even in the most honest of witnesses. Although, fortunately, there was a significant quantity of contemporaneous documentary evidence upon which to fall back, the fact-finding exercise has been difficult because of the caution with which I have had to approach the evidence given by the witnesses.

58. Demeanour is an inherently difficult form of evidence to assess and in many, perhaps most, cases it would be unfair to damn a witness solely on the basis of his or her apparent discomfiture in the witness box. That said, although initially Mr Powell appeared to be a straightforward witness, with perhaps a tendency, frequently observed in nervous witnesses, to prolixity, after a period my confidence in his evidence diminished.

59. Some of his evidence and the manner in which he gave it, caused me to have concerns about Mr Powell’s reliability as a witness. An acute example of this, upon which he was vigorously and effectively cross-examined, was that in his statement Mr Powell claimed that as a result of Juno entering the field on Superior’s account, it had managed to raise sales in NSW by nearly 300 per cent in only three months. This evidence was clearly intended to impress the court by placing Juno in a very favourable light and, by implication, place a shadow across the bona fides of Superior. Yet the evidence was demonstrated in cross-examination to be untrue. Whether the representation by Mr Powell was deliberately or inadvertently untrue was unclear but either way it considerably diminished his credibility because it gave the impression that he had a tendency to embellish his evidence and that he was careless with the facts. It was during this cross-examination on this topic that Mr Powell seemed least sure of his evidence and most discomfited.

60. Mr Powell also gave evidence in his statement that he had been told by Mr Hohmann in November 2004 that Superior intended to stop marketing Clairderm machines. As far as I can make out there was no evidence from Mr Hohmann on that point, but, even if there were, it seems unlikely that Mr Hohmann did say because it is common ground that Superior sold such a machine to Escape in May 2005. True it is that Superior may have changed tack on that policy, but the objective suggests that Mr Powell’s evidence is mistaken. That did not add to his general credibility.

61. Mr Hohmann’s evidence also gave me pause. While he was not prone as was Mr Powell to giving lengthy and unresponsive answers to questions, he appeared at times to be excessively categorical in his assertions. For example, he denied absolutely that there had been any discussion between himself and Mr Powell concerning a commission for Juno on the machine sold to Escape. If that is the case, Mr Powell’s letter of 9 March 2005 makes no sense, especially when it is read together with Mr Hohmann’s response of 10 March. These very adamant assertions by him, when they were contradicted by contemporaneous records, gave rise to an impression that he, like Mr Powell, was reconstructing significant portions of his evidence.

62. Ms Gilbert only gave evidence in respect of the meeting of 7 July. She seemed to be a witness doing her best to recollect the conversations and events but it was clear that her memory was, unsurprisingly, imperfect on some minor matters. Overall, however, she presented as an honest and reliable witness.

The formation of the original contract and its terms

63. One of the major disputes between the parties is whether it was a term of the contract formed by them in early July that the contract would be subject to a trial period of six months. Mr Powell denied that there was any such term or, indeed, any mention of such a proposed term in the meeting of 7 July 2004. It is certainly true that in the proposal document sent by him to Mr Hohmann there was no mention of such a term, nor was there anything in the response by Mr Hohmann to the proposal.

64. In my view, the evidence from Mr Hohmann and Ms Gilbert that Mr Hohmann had suggested a six-months trial period is more likely to be the case than not for two reasons. First, while there were certain shortcomings in Ms Gilbert’s recollections of fairly minor matters surrounding the commercial relationship between Superior and Juno the six-months trial period is something that someone at that meeting might be reasonably expected to remember if it had been raised. In my view, there was nothing to suggest that she was doing other than her best to recollect the meeting. Her recollections were slightly different from those of Mr Hohmann, suggesting that they had not put their heads together to agree on a common version.

65. Second, Mr Hohmann made the observation that it was his standard procedure when entering a new commercial partnership to give it a six-months trial. His evidence on that point was not tested or contradicted by Juno. It might seem a matter of commonsense, in any event, that two parties to such an arrangement give the relationship a trial run – after all, Superior was agreeing to pay a considerable amount of money as a retainer to Juno. It stands to reason that Mr Hohmann would have been concerned to ensure that his company got value for its $13,500 per month.

66. Juno’s counsel submitted, however, that even if it were to be accepted by the court that Mr Hohmann had at the meeting of 7 July proposed a six-months trial period, no agreement was reached at that meeting and the proposed term was never imported into the agreement that was formed on or about 20 July. In support of that argument, Mr Osborne contends that the weight of the evidence shows that no action was taken by Mr Hohmann to terminate the agreement after six months but rather that the chronology of events is consistent with Mr Powell’s version that no time limit was placed on the agreement. He argued that the agreement to review the commissions and incentives after three or four months suggests that no six-month trial period was ever established by the parties. Moreover, he submits, a review did take place after about three months.

67. It is possible, notwithstanding the fact that there was no mention in the documentation of the original agreement, that a six-months trial period was a term of the agreement. I do not doubt that this was Mr Hohmann’s original intention. However, it is clear from the documentation that a review of the commissions and incentives was to take place after three or four months and no mention of a six-month review is made in the correspondence between the parties. This suggests that the three-months review, which was incorporated into Juno’s proposal and agreed to by Superior, superseded the original notion, floated by Mr Hohmann on 7 July, of a six-months trial. Under that scheme, Superior would have had the opportunity at an even earlier stage than originally proposed by Mr Powell to review Juno’s performance and to make a decision about whether or not the venture was worth pursuing from its point of view. It would thus have been to its commercial advantage to let the six-months trial suggestion drop.

68. In any event, Superior bears the evidentiary onus of proving that the term for which it contends was incorporated in the contract. Notwithstanding my reservations about the reliability of Mr Powell’s evidence, for the reasons given above, I cannot be satisfied that the agreement was limited in the way claimed by Mr Hohmann.

Notice

69. It is a natural progression from having dealt with that issue to deal now with the question of notice.

70. The evidence in relation to the issue of notice is in conflict. According to Mr Powell, the “structure” document reflected the agreement made by the parties. It is curious then, if that is the case, that it was not endorsed in writing by Mr Hohmann. According to Mr Powell, he and Mr Hohmann went through the document together in October 2004. Mr Hohmann flatly denies having seen the document before it was presented to his solicitors as part of a reply to a request for particulars. As the document had apparently been prepared by Mr Powell as early as July (or about that time), it is strange that the notice provision upon which Juno now relies did not form part of the written proposal and that there is no record of it having been sent to Superior for consideration and endorsement or to record its agreement at any time earlier than October 2004.

71. Mr Powell’s explanation that he had multiple copies of the “structure” document in various files again seems a strange claim. One of the notable features of this case is that there is relatively little documentation of key aspects of it. Mr Powell ran a small company out of one office with very few staff. Apart from Superior he had very few clients. So the explanation that he offered, implying as it did that he had a large quantity of files in various systems, was strikingly thin.

72. It is noteworthy that the copy tendered with his statement and the copy sent to the defendant’s solicitors were both amended in handwriting: a figure of $14,667 was changed to $41,677. Moreover, the alterations on the documents appear to have been identical, suggesting that the original document (which was not tendered) did not have the 19 October 2004 notation on it at the time the copy of it was sent to the solicitors.

73. True it is that a copy of a copy may have been sent to the solicitors but only Mr Powell is in a position, as far as I am aware, to clarify the situation precisely. As the evidence stands, he has not done so. It may be difficult, given the passage of time, for him to do so. This is not to say that I could be satisfied on the balance of probabilities that he had, as was suggested by the defendant’s counsel, fabricated the notation on the copy of the “structure” document. The evidence simply does not go that far. Nevertheless, I did not find his explanation persuasive.

74. Finally, it seems to me to defy commonsense that Superior would have agreed to three months’ notice if its original idea was have a six-months trial and then it accepted a review after three to four months. In my opinion, it is much more likely that the notice period of three months was something that was on Mr Powell’s “wish list” but was not agreed to by Superior.

75. I think it more probable than not that there was an implied condition in the contract that reasonable notice be given. See, for example, Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438. It is submitted by counsel for the plaintiff that, given the circumstances, three months’ notice would be reasonable. Ms Drayton, for the defendant, did not directly address that issue in her submissions but I did not infer that she agreed with Mr Ogborne’s proposal. In my view, given that, once the contract was terminated on 9 March, Juno more or less handed over responsibility for its staff to Superior (but, of course, for Mr Powell himself), one months’ notice would have been more than sufficient to satisfy the condition. I will allow that sum only, that is, $13,500.

The commission on the skin treatment machines

76. In relation to the machines sold to Beautiful Image, the clear evidence is that the machines were not sourced by Superior. It came as a surprise to Superior when it found that B.I. had bought two Clairderm machines from Juno. Given that the foundation of the agreement between Superior and Juno was for the parties to share the profits or commission on machines bought at a discount by Superior from the manufacturer, and even Mr Hohmann did not say in his evidence that it was a condition of the agreement that Superior have exclusive rights to source the machines, it is not clear that Superior had any claim against Juno if Juno sourced machines itself.

77. It was to Superior’s advantage to have an agent in NSW selling Clairderm machines to its customers and clients. According to Mr Powell, the parties agreed that Juno could continue to service its own clients without penalty or sharing of profits. It seems to have had some established client base or “leads” at the time. Mr Hohmann did not agree that any such conversation or agreement had been formed. The one piece of evidence that might corroborate Mr Powell is the document showing the distinction between commissions paid to Ms Crowle for machines sold as a result of “leads” provided by Superior and those she found for herself. Because I do not regard Mr Powell as a very reliable witness I am not satisfied that the conversation he claimed took place did occur or that, if it did, it was in the terms he reported in his evidence.

78. Nevertheless, on the evidence before me, whether that conversation took place does not does not seem to affect the issue because the profit-sharing agreement concerned only those machines that were obtained by Superior and sold on its behalf by Juno. That is the clear implication of Mr Hohmann’s own evidence. He at no time mentioned in his evidence any discussion about a commission payable to Superior on machines sourced from the manufacturer by Juno itself. He does not appear to have contemplated the possibility that it would do so, hence his surprise when he found out that Juno had sold two machines about which he had had no previous knowledge. There was no suggestion in his evidence that Superior had obtained an exclusion agency or licence in respect of Clairderm machines. Rather the suggestion was that Superior use Juno as its agent in respect of machines it, Superior, chose to market.

79. As to the question of the commission on the machine sold to Escape, the evidence is once again in conflict and none of it is compelling. According to Mr Powell, the sale of the machine would not have occurred but for the efforts of Ms Crowle. It is striking that in the enthusiastic emails Mr Powell sent to Superior in February 2005 there was no mention made even of a potential sale of a Clairderm machine. This is in stark contrast to the adamant assertions by Mr Powell in his oral evidence. If there had been any material discussions between Juno and Escape concerning the purchase of a skin treatment machine, some reflection of those discussions, one would think, might have been found in the emails to Superior.

80. It is possible, however, that in the two-week gap between the emails being sent on 23 February and the meeting of 9 March 2005 some negotiations concerning the machine took place between Juno and Escape came to pass but the lack of a documentary record of it is perplexing.

81. The one solid piece of evidence that tends to support Mr Powell is his letter of 9 March, which followed his conversation with Mr Hohmann. Given that Mr Powell’s company had just been “sacked”, it was important for him there and then to place on the record what entitlements he claimed for Juno as a result of the termination of the agreement. He did so in relation to the commission on the machine. In his reply Mr Hohmann did not expressly contradict the claim made by Mr Powell to a commission of $2200 if a Clairderm machine was sold to Escape following the meeting that took place with the principals of that establishment. Precisely on what basis Mr Powell nominated a figure of $2200 was not made clear in the evidence. It is a figure significantly above the profits Juno is said to have made on its sales of Clairderm machines to B.I.

82. Mr Hohmann claimed in his evidence that the sale was the responsibility of Ms Gilbert. That is probably correct, given that she no longer worked for Juno and that Superior had taken over all aspects of the deal with Escape. Nonetheless, even if it did not engineer the complete sale, it was sufficient to entitle Juno to its agreed commission or share of the profits if it was an effective cause (not necessarily the only cause) of the sale of the machine. See, for example, Moneywood Nominees Pty Ltd v Saloman Nominees Pty Ltd [2001] HCA 2;

Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117

83. If Ms Crowle had had dealings with Escape, as appears to be an uncontested fact, and if Mr Hohmann by his silence left open the claim to a commission, and if the usual course of business was for Juno and Superior to attempt to combine sales of cosmetics and skin creams with sales of skin treatment machines to beauty salons, as one can readily surmise from the evidence, a reasonable inference arises that Juno would have at opened negotiations in respect of Escape buying a Clairderm machine. If that is accepted, as I think it ought to be, it is also reasonable to infer that by introducing the potential buyer to the product ultimately purchased, Juno was an effective, but obviously not sole, cause of the sale.

84. Notwithstanding my reservations about the oral evidence, in this case there appears to be at least some reasonable evidence supporting the plaintiff’s claim. In my view, although the balance is very fine, it is more probable than not that it was an effective cause of the sale of the machine to escape and is therefore entitled to claim a fifty per cent share of the profits on that sale.

85. It appears that the machine was sold to Escape for $6468.00 inclusive of GST. Compared with the prices obtained for other machines sold to B.I. that appears very low. As far as I can see there is no direct evidence of the quantum of the profit made on the sale by Superior. It therefore seems that a claim to a share of commission of $2200 is excessive. I note also that in relation to its sale of machines, Juno claimed various expenses involved in the sale would considerably reduce the amount for which, if found liable, it would have to account. I do not have evidence before me of the costs involved in selling the machine to Escape but can infer that some percentage of the paper profit would have been eaten up in costs.

86. In all the circumstances I think it reasonable to allow only $1000 in respect of this aspect of the plaintiff’s claim, conceding that although this is the best the court can do there is a degree of speculation involved.

Commission and retainer

87. The uncontested evidence is that in February 2005, Juno sold $42,944.44 worth of Superior’s products and was entitled to a commission of one per cent. It has not been paid. Whether those moneys, when paid, are then payable to the ex-sales staff of Juno or not, they remain to be paid. It is no defence, in my view, to say that Superior’s agreement with Juno was that the moneys were to be paid to Juno’s sales staff. That may well have been the case but it does not relieve Superior of its obligations to Juno. If the agreement was that Juno pay the moneys to its sales staff it is entitled to receive those moneys and then is obliged to account to its ex-sales staff for their shares of those moneys. In any event, Superior is liable to Juno in relation to this aspect of the claim in the sum of $429.43.

88. The undisputed evidence is that the agreement between the parties was that Superior would pay a monthly retainer in advance to Juno. The agreement was terminated on 9 March 2005. In my view, Juno is entitled to a proportion of the retainer for the month of March (in addition to payment in lieu of notice). For a month of 31 days, the proportion daily rate was $435.48. I would allow nine days at this rate, a sum of $3919.32. I note, however, that on 3 March the plaintiff was paid half its monthly retainer for that month, a sum of $6750. It follows that Juno was overpaid $2830.68. Damages are compensatory and awarded in order to place the wronged party, insofar as that is reasonably possible, in its original position. In my view, the overpayment should be taken into account when assessing the total damages suffered by Juno.

An aside on the issue of quantum

89. At the trial of the matter, counsel for the plaintiff told the court that updated figures concerning quantum would be provided prior to judgment being delivered. With the consent of the defendant’s legal representatives, this course was agreed.

90. A short time after the hearing concluded, I received a document setting out the plaintiff’s calculations and submissions in relation to quantum. This was followed by a letter from the defendant’s solicitors protesting against the submissions and seeking to have the court ignore them and the plaintiff to withdraw them. I heard nothing from either party until after these reasons were prepared and the parties notified that a decision would be handed down.

91. In my view, given this turn of events, it would not be appropriate for me to have regard to further submissions concerning quantum. In any event, I have conducted my own analysis of quantum as is self-evident from these reasons. That analysis has been conducted on the basis of the findings of fact I have made rather than by reference to submissions which are underpinned by a different set of assumptions.

Conclusions

92. In summary, the plaintiff has proven on the balance of probabilities much of its claim. It is entitled to recover its retainer for nine days of the month of March 2005, less the amount already paid; one month’s payment in lieu of notice; the unpaid commission on the sales generated by Juno in February 2005 and commission on the sale of the machine to Escape. According to my calculations, this comes to a total of $16,018.07.

93. On the other hand, however, in my view, the cross-claim fails in its entirety.

Verdicts and judgments

94. In relation to its claim, there will be a verdict for the plaintiff in the sum of $16,018.07 and judgment accordingly.

95. In relation to the cross-claim, there will be a verdict for the cross-defendant and judgment accordingly.

96. Interest to be calculated by the Registrar from 9 March 2005.

97. In relation to costs, I propose an order that costs be in a sum agreed or assessed. Parties may have liberty to apply in relation to that question.

Hugh Dillon