Loyola v Cryeng Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Loyola v Cryeng Pty Ltd [2012] FCAFC 71

Citation: Loyola v Cryeng Pty Ltd [2012] FCAFC 71
Appeal from: Cryeng Pty Ltd v Loyola [2011] FCA 956
Parties: GEORGE HUMBERTO LOYOLA and PIONEER CRYOGENICS PTY LIMITED v CRYENG PTY LTD ACN 071 997 763
File number: NSD 1544 of 2011
Judges: JACOBSON, BESANKO AND PERRAM JJ
Date of judgment: 18 May 2012
Catchwords:

TRADE PRACTICES – appeal – misleading or deceptive conduct – where respondent company involved in manufacture of cryogenic vessels – where appellant company director resigned and established competitor company – where director allegedly made representations to company’s customers prior to resignation – where pleaded representation to effect that company ceasing manufacture and trade in cryogenic vessels – where pleaded cessation of business representation allegedly made by director during course of meeting with customer – where customer cancelled valuable business contract with company following meeting – where evidence of customer that director’s representation caused uncertainty surrounding future of the company – whether pleaded cessation of business representation made out – whether representation needed to be viewed in light of surrounding factual matrix – whether error in award of damages for damage to commercial reputation – s 82 Trade Practices Act 1972 (Cth).

Held:  The appeal must be allowed because it was not the cessation of business representation which led to cancellation of business contract.    
Legislation: Trade Practices Act 1974 (Cth), s 82
Cases cited: Aaron’s Reefs Ltd v Twiss [1896] AC 273
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
Butcherv Lachlan Elder Realty Ply Ltd (2004) 218 CLR 592 at [109]
Campbell v Backoffice Investments Ply Ltd (2009) 238 CLR 304
Flamingo Park Pty Ltd v Dolly Dolly Creations Pty Ltd (1986) 65 ALR 500
Gould v Vaggelas (1985) 157 CLR 215
Jones v Dunkel (1959) 101 CLR 298
Reiffel v ACN 075 839 226 Ltd (2003) 132 FCR 437
Smith v Chadwick (1884) 9 App Cas 187
The Bell Group (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239
Warren v Coombes (1979) 142 CLR 531
Date of hearing: 20 February 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 114
Counsel for the Appellants: Mr M Pesman with Ms J Little
Solicitor for the Appellants: Norton Rose
Counsel for the Respondent: Mr B Lee SC with Ms R Francois
Solicitor for the Respondent: William Roberts Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1544 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

GEORGE HUMBERTO LOYOLA
First Appellant

PIONEER CRYOGENICS PTY LIMITED
Second Appellant
AND:

CRYENG PTY LTD ACN 071 997 763
Respondent

JUDGES:

JACOBSON, BESANKO AND PERRAM JJ

DATE OF ORDER:

18 MAY 2012

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The appeal be allowed.

2.The first and third orders made on 23 August 2011 be set aside and, in lieu thereof, there be an order that the first…

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Details
Case
[2012] FCAFC 71
Decision Date

CaseChat Overview and Summary

In the case of Loyola v Cryeng Pty Ltd, the appellant, George Loyola, a former director of Cryeng Pty Ltd, a company involved in the manufacture of cryogenic vessels, appealed against the decision of the trial judge. Loyola had resigned from Cryeng and established a competing company, Pioneer Cryogenics. He was alleged to have made representations to Cryeng's customers that Cryeng was ceasing manufacture and trade in cryogenic vessels, leading to the cancellation of a valuable business contract. The legal issues before the court included whether the alleged representation regarding the cessation of business was made, and whether it was this representation that led to the cancellation of the contract. The court also examined whether there was an error in the award of damages for damage to Cryeng's commercial reputation.

The court found that the evidence regarding the cessation of business representation was indeed made by Loyola during a meeting with a customer, but it was not this representation that led to the cancellation of the business contract. The court considered the surrounding factual matrix and concluded that the misleading conduct of Loyola and Pioneer Cryogenics did cause damage to Cryeng's reputation, but the amount of compensation to be awarded was more problematic. The trial judge had awarded $140,000 in damages, but the court found that $50,000 would be an appropriate amount given the evidence before the trial judge.

The appeal was allowed, and the court set aside the trial judge's order for damages and substituted it with an order for $50,000 in damages. The court also made orders regarding the costs of the application and the appeal, directing the parties to submit their views on the costs within specified timeframes. The court did not disturb the order for the payment of interest on the damages awarded by the trial judge.

ORDERS:

1. The appeal be allowed.
2. The first and third orders made on 23 August 2011 be set aside and, in lieu thereof, there be an order that the first and second respondents pay to the applicant damages in the amount of $50,000.
3. The first and second respondents file and serve within seven days submissions dealing with the costs of the application and the costs of the appeal.
4. The applicant file and serve within 14 days submissions dealing with the costs of the application and the costs of the appeal.

Orders

Orders of the court

1. The appeal be allowed.

2. The first and third orders made on 23 August 2011 be set aside and, in lieu thereof, there be an order that the first and second respondents pay to the applicant damages in the amount of $50,000.

3. The first and second respondents file and serve within seven days submissions dealing with the costs of the application and the costs of the appeal.

4. The applicant file and serve within 14 days submissions dealing with the costs of the application and the costs of the appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

That letter was said to have:(a)mounted to or conveyed a representation that Pioneer Cryogenics was the successor to [Cryeng] and had been established with the approval and participation of[Cryeng] and/or its employees (Successor Representation).Mr Martin’s evidence Mr Martin gave evidence for Cryeng. His evidence was contained in two affidavits, one sworn on 3 September 2010 and the other on 10 September 2010. In the first affidavit, Mr Martin deposed that in or about early April 2008, Mr Loyola attended a meeting at Air Liquide’s Melbourne offices with Mr Paul Nield and Mr Ken Palmer of Air Liquide as well as Mr Martin “and possibly some other colleagues”. Mr Martin deposed that at the meeting Mr Loyola said words to the effect:-“I have incorporated a new cryogenic vessel manufacturing company called Pioneer Cryogenics. I have resigned from Cryeng. Most of Cryeng’s other employees have also resigned or will be resigning to join Pioneer Cryogenics, including Cryeng’s vessel engineer, workshop staff/supervisor and some of its fabrication staff. I am not sure what’s going to happen to Cryeng’s fabrication workshop at St Mary’s.” Mr Martin went on to state that Mr Loyola also said at the meeting that Pioneer would be willing to provide Air Liquide with a quote for the 200,000 litre vessel for Botany. This was a reference to the cryogenic vessel for which Air Liquide had placed a purchase order with Cryeng on 26 March 2008. Mr Martin stated his understanding of what Mr Loyola had told him at the meeting in the following terms:… he wasn’t certain if Cryeng was in a position to be able to build the Botany Vessel. Mr Martin went on to say that, as a result, after speaking to his supervisor and other colleagues, he cancelled the order for this vessel from Cryeng:… verbally with Mr Loyola and in writing at a later date. The reference to the cancellation in writing was to a letter dated 13 May 2008 from Mr Martin to Cryeng. The letter stated “as per our verbal discussions with Mr George Loyola on 8th April 2008 Air Liquide hereby withdraws & cancels” the purchase order issued to Cryeng for the 200,000 litre vessel. In his second affidavit. Mr Martin said he could not remember the precise words spoken to Mr Loyola at the April meeting but:(w)hatever Mr Loyola said in the conversation left me at its conclusion with the view that there was uncertainty as to both whether Cryeng Pty Ltd (Cryeng) was to be in the business of supplying cryogenic vessels moving forward into the future and could also supply the Botany Vessel. Mr Martin was cross-examined on the differences between his first affidavit and his second affidavit but nothing turns on this. He was also cross-examined on the words “as per our verbal discussion with Mr George Loyola on 8th April 2008” in the cancellation letter. The cross-examination was as follows:Mr Pesman: And that means, doesn’t it, that you cancelled the order orally in early April 2008?Mr Martin: Yes.Mr Pesman: And probably on 8 April 2008?Mr Martin: I’m uncertain whether it was the 8th or it was earlyMr Pesman: Well, you say that ‘As per our verbal discussion on 8 April 2008’ in the letter and that’s the most likely date, isn’t it?Mr Martin: Correct.Mr Pesman: So as far as Air Liquide was concerned, any arrangement with Cryeng was cancelled on or about 8 April?Mr Martin: Correct.The Mosaic

Decision

Reasons for decision

The trial Judge identified the evidence before her which was relevant to this issue. She said that the evidence might be described as flimsy. Nevertheless, she accepted that the misleading conduct of Mr Loyola and Pioneer caused damage to Cryeng’s reputation. She found that determining the amount of compensation to be awarded in respect of that loss was “more problematic”. She said that she doubted that the damage was very severe or long lasting. The trial Judge referred to the relevant authorities. She said that doing the best she could with the scanty evidence the amount of $50,000 would be an appropriate award of damages. The task facing her Honour was a difficult one, but we can see no error in her approach. CONCLUSIONS The first order made by the trial Judge that the first and second respondents pay to the applicant damages in the amount of $140,000 must be set aside. In lieu thereof, there must be an order that the first and second respondents pay to the applicant damages in the amount of $50,000. The second order made by the trial Judge concerned the payment of interest under s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth) on the damages awarded, and there seems to be no reason to disturb that order. The third order made by the trial Judge was that the first and second respondents pay the applicant’s costs of the application. We do not know whether the order we propose to substitute for the orders made by the trial Judge affects the question of the costs of the application. Furthermore, it is necessary to hear the parties on the costs of the appeal. In the circumstances, we would make the following orders:1.The appeal be allowed.2.The first and third orders made on 23 August 2011 be set aside and, in lieu thereof, there be an order that the first and second respondents pay to the applicant damages in the amount of $50,000.3.The first and second respondents file and serve within seven days submissions dealing with the costs of the application and the costs of the appeal.4.The applicant file and serve within 14 days submissions dealing with the costs of the application and the costs of the appeal.

Ratio Decidendi

Legal Principle Established

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