Pirelli Tyres Australia Pty Ltd v Trofeo Pty Ltd
[2023] VCC 1376
•10 August 2023
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-21-00790
| PIRELLI TYRES AUSTRALIA PTY LTD (ACN 001 784 014) | Plaintiff |
| v | |
| TROFEO PTY LTD (ACN 109 136 656) and JIM MANOLIOS | First Defendant Second Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25-28 July, 2 August 2023 | |
DATE OF JUDGMENT: | 10 August 2023 | |
CASE MAY BE CITED AS: | Pirelli Tyres Australia Pty Ltd v Trofeo Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 1376 | |
REASONS FOR JUDGMENT
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Subject:Alleged breach of contract; alleged misleading or deceptive conduct
Catchwords: Claiming debt for goods sold and delivered – counterclaim for alleged breach of oral exclusive distributorship agreement – no exclusive distributorship agreement established – claim for misleading or deceptive conduct relative to first defendant’s status as exclusive distributor – misleading or deceptive conduct not established – counterclaim dismissed – judgment on plaintiff’s claim
Legislation Cited: Competition and Consumer Act 2010 (Cth)
Cases Cited:Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106; Smart Education Program Pty Ltd (in liq) v CLGC Australia Pty Ltd [2023] FCA 826; Regreen Asset Holdings Pty Ltd v Castricum Brothers Australia Pty Ltd [2015] VSCA 286
Judgment: (1) Within 14 of this day the parties must bring in short Minutes to give effect to these reasons.
(2)Trial date for assessment of damages fixed 4 December 2023 is vacated.
(3)Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Galbraith | Results Legal |
| For the Defendants | Mr J Ribbands | Kalus Kenny Intelex |
HIS HONOUR:
Background
1“Trofeo” is the Italian word for “trophy” (Transcript (“T”) 219, Lines (“L”) 20-22). This was the name that the second defendant, Mr Manolios, chose for the company he used to enter the motorsports business in Australia almost two decades ago.
2Mr Manolios said that he is the holder of a Bachelor of Science degree majoring in biochemistry and physiology, initially working in businesses associated with medical science. His first job was with a German multinational corporation selling diagnostics in Australia (T278, L18-23). One of his enterprises operated via a different company providing laboratory and blood typing services (Ibid, L28-29).
3His interest in motorsports began with his employment as a teenager by an Italian motor wrecking company known as “The Italian Job”. Later in his life, he acquired a Maserati motorcar through a distribution company known as “Suttons”. (T279, L24)
4Through Suttons it seems Mr Manolios made contact with Mr Rod Wilson, who shared an interest in Maserati motorcars. Mr Manolios hoped that Mr Wilson could render him assistance in racing his Maserati (T280). Mr Wilson’s company was known as “Motorsport Tyres Australia” [Pty Ltd] (“Motorsport Tyres”) (T284, L8).
5This led to Mr Manolios’ company, Trofeo Pty Ltd (“Trofeo”), purchasing assets from Mr Wilson’s company such as its stock of Pirelli tyres, equipment for changing racing tyres, some Maserati parts and equipment to service Maserati cars. These were acquired under what Mr Manolios described as “a basic … agreement”. These assets were at Motorsport Tyres’ premises at 42 Industrial Drive, Lilydale. These premises were leased to Motorsport Tyres and Trofeo took over as tenant (T291, L9 – T292, L1).
6Whilst Motorsport Tyres was continuing to distribute Pirelli tyres, its account with the plaintiff, Pirelli Tyres Australia Pty Ltd (“Pirelli Australia”), was suspended presumably because the company was arrears in paying for tyres which had already been supplied (T293, L1-3, 16-17).
7At all material times, Mr Simon Pool was the “Technical Manager” of the plaintiff, Pirelli Australia. He said in that role he had “three … areas [of Pirelli’s Australian business as his responsibility] … quality … training and … overseeing the motorsport business in Australia” (T50, L15-17). The plaintiff company he said imports tyres from “Pirelli Europe” and “we then sell them into the market in Australia and … New Zealand” (T51, L18-19). He described his company as an “importer and a seller” (Ibid, L20-21).
8Where a company or business is appointed as dealer or distributor of Pirelli tyres by Pirelli Australia, according to Mr Pool:
“We open an account to supply we have a standard … form for opening an account which we request … the business name, the people’s information, they have to provide credit references; we will also credit reference them ourselves through … our insurance company.” (T52, L6-11)
9If approved, a credit limit would be set. (Ibid, L14-15) This documentation includes requirement for personal guarantees and deals, to some extent, with trademark issues, according to Mr Pool. (T52, L30 – T53, L2)
10In the case of Trofeo, a document styled “CREDIT APPLICATION FORM” (CB 215-221) was signed, which disclosed commercial information relative to Trofeo, including its banking arrangements, senior management and so on. It included a one-page “directors guarantee” [sic] signed by Mr Manolios with the documentation as a whole dated 17 April 2006. Mr Pool said this was “the only document that we had for Trofeo Motorsport” (T53, L25-26).
11Mr Manolios remembered the sequence of events around this time as follows. His company purchased assets from Motorsport Tyres “a few months” before the credit application with Pirelli Australia was signed (T294, L14-15). He signed the credit application on behalf of himself and Trofeo following a meeting at Industrial Drive, Lilydale attended by himself, Mr Wilson (who had stayed on as general manager of Trofeo), and Mr Pool of Pirelli Australia (T294, L23-29).
12A further meeting, according to Mr Manolios’ recollection, took place in Sydney “Within the year” (Ibid, L16-18). At this time, whilst Trofeo’s enterprise was relatively small, it had two distinct parts, namely motorsports and motor tyres. (T295, L19-29) Since Trofeo was a relatively small company, there were no formal “divisions” (T296, L7-9).
13Mr Manolios said that he and Mr Wilson, in the months following the signature of the credit application, sat down:
“and we looked at how the business was going to move forward … we discussed several options, one of which was the Pirelli tyre distribution, and we did a market review … [and] came to the realisation of where the market was at that time and if we were to sell to increase tyre sales, what we needed to do in order to facilitate that. And so we came up with a business … marketing plan and away we went. Part of that was getting confirmation from Pirelli that we were still the distributor, because we’d changed companies so to speak. Even though we were selling tyres for Pirelli … I hadn’t seen a formal agreement, et cetera. So we organised the meeting with Paul Hembery”. (T296, L16-28)
14Mr Hembery was an employee of various companies in the international Pirelli Group from 1991 to 2018 (T255, L2-18). From late 1999, he was based in Milan and headed the Pirelli Group’s motorsport business, holding concurrently a number of roles within the group internationally. In 2008 to 2009, he was Chief Executive of the Asia Pacific region. In 2010 to 2017, he said he was “dedicated” to Formula 1 racing (Ibid).
15The Italian company, Pirelli & C. S.p.A is the second defendant to a counterclaim brought by Trofeo. Mr Hembery was unsure as to whether he was employed by this company, though he said he was “pretty sure it was the Italian holding company where my contract was held” (Ibid, L27-28).
16According to paragraph 26 of Trofeo’s Defence and Counterclaim, Mr Manolios attended a meeting in Australia, presumably the one referred to by Mr Manolios as having taken place in Sydney. Mr Hembery, said he did not recall the meeting, though he could not deny it took place. He said he did not recall it, though he did travel to Australia “on occasions” (T257, L26-30).
17Mr Manolios said the meeting took place at Pirelli’s offices in Sydney. As well as Mr Manolios and Mr Hembery, Mr Pool and Mr Wilson were also in attendance. According to Mr Manolios “we discussed the state of the market … at the time, the fact that Michelin were basically supplying to everybody and Pirelli sales were essentially at noise level” (T297, L1-3, 10-13). By that he meant that Trofeo was, at that stage, “purchasing 150 tyres a year … at that point, whereas Michelin would have been selling in the thousands” (Ibid, L15-18). Mr Wilson attended as General Manager of Trofeo, though he was not a shareholder (Ibid, L20-22).
18Mr Manolios said that he factored into the proposal he took to the Sydney meeting “the prospect of there only being one distributor of Pirelli motorsport circuit tyres in Australia” (viz Trofeo) (T298, L17-21). He said that he and his colleagues made a presentation, including a proposal to establish a GT sportscar racing series which would use Pirelli tyres exclusively “to get the Pirelli name back into that segment of the market” (Ibid, L22-31). He said that Messrs Hembery and Pool left the room where the meeting was held for about 45 minutes, and Mr Hembery said “Let’s do it” (T299, L1-4).
19At all material times, that is in the early part of the new millennium and until today, 2023, Pirelli marketed ordinary road tyres to the ordinary marketing public through a variety of retailers, rally tyres via a company trading as “FE Sports” (Exhibit B), bicycle tyres via a company known as “Trek Bicycle Corporation (Australia) Pty Ltd” (Exhibit A). The Pirelli Australia product distributed via Motorsport Tyres and its successor Trofeo were not for use on public roads but only for race circuit use.
20In a small market such as Australian motorsport racing, Pirelli Australia, according to Mr Pool, took the view that it would be damaging to appoint more than one distributor of circuit tyres because a multiplicity of dealers or distributors would be in competition with one another, perhaps driven to price cutting, and then be led to seeking price cuts or rebates from Pirelli Australia. Pirelli Australia saw its best interests in having a single distributor for its motorsport circuit tyres. If its business prospered, this would be to Pirelli Australia’s advantage (T104).
21As Mr Manolios was returning to Melbourne following the Sydney meeting, he said he was under the impression “That we were the exclusive sole [distributor]” (T299, L5-9). Encouraged by the meeting in Sydney, Mr Manolios said that he and his colleagues at Trofeo set about organising a GT series, undertook an advertising campaign, and ordered all the Pirelli tyres that they believed they would need. He was unsure whether Pirelli supported this expansion program by way of some marketing fund or merely by a discount or rebate on the tyre stock. (T300, L7-19)
22He said Trofeo also undertook investments aside from additional equipment to fit tyres and “marquees and – all the paraphernalia that you have to take to a … race meet” (T301, L5-9). In making these decisions, he said he was influenced by the fact that there were no other entities distributing motorsport circuit tyres for Pirelli (Ibid, L10-17). This flowed, he said, from “a verbal [scil oral] agreement between … Mr Hembery and … ourselves” (Ibid, L27-28).
23Mr Manolios said he did not understand that there was any time limit on the exclusivity which was promised to Trofeo (T312, L5-11). One particular item of investment was a B-double trailer set with a curtain side costing some $600,000 which was acquired on lease by Trofeo. Mr Manolios said that that lease has since been paid out and the trailer belongs to Trofeo. He said Trofeo owned the prime mover (T313, L1-8).
24Mr Manolios said that motorsport tyres had a single tyre machine, and when Trofeo took over as distributor or dealer for Pirelli tyres, it “added one”. By 2020, it had some eight tyre machines “plus the conveyor belt plus … compressors and all the … miscellaneous equipment that was needed in order to fit large quantities of tyres in a short space of time” (T311, L19-23).
25According to Mr Hembery:
“the concept of exclusivity … in Pirelli never existed. … the legal position would have been that we never granted [it] … and not just talking motorsport but … as a company policy, … no matter what market you dealt with there was … no concept of exclusivity.” (T258, L1-7)
26Specifically as to the market for tyres in motorsport, Mr Hembery said there were three major international markets: United States of America, the United Kingdom and Italy. He said those markets:
“you maybe had two or three different motorsport distributors … often split by type of product, and by that I mean off-road, performance tyres, motorsport tyres … or circuit racing for a market like Australia”. (Ibid, L13-16)
27For a small market like Australia, he said it:
“made no sense for them [viz suppliers] to have … a small portion … of the market. So, you would only have one supplier and … all you wanted was to have … a supplier that was able to provide a quality of service so that your … consumer was having … a quality partnership and you’d have someone that … could pay the bills basically.” (Ibid, L21-28)
28Mr Hembery concluded:
“So, the concept of exclusivity never existed in the company but you would end up in a situation where you would be the preferred partner in a market simply because … the sales would be of a volume that would not justify having multiple … suppliers.” (T258, L31 – T259, L5)
29It followed, according to Mr Hembery, that Mr Manolios must have been wrong in suggesting that he was offered exclusivity for his company, Trofeo, in whatever meeting took place in 2006 (T259, L22-25).
30Mr Pool, like Mr Hembery, had no distinct memory of the meeting said to have taken place in 2006. He had not retained his diaries for this early period, but a computer entry on his laptop calendar referred to “Sydney meeting with Wilson” in 2007 (T60-61).
31Under cover of this general lack of records or specific recollection, he said “if we had meetings the word 'exclusive' would not be used because we're not allowed to use that. Our … contracts are distributor or dealer contracts.” (T61, L28-31) According to Mr Pool, had Mr Manolios raised the issue of exclusivity “I would’ve said no.” (T62, L2-3)
32As previously noted, in the years that followed, Trofeo sought to build its business as distributor of Pirelli Motorsport circuit tyres expanding its infrastructure, engaging additional staff, and making sponsorship arrangements with the organisers of major motorsports events in Australia, such as the Porsche GT Championship, the Australian GT Championship, and the Bathurst 12 Hour race.
33In 2013, Mr Manolios submitted a series of documents being a business plan, budget forecast and so forth to Mr Gianmaria Dolci of Pirelli’s head office in Italy (T302, L16-19, Court Book (“CB”) 241). This email set out in tabular form what was described as “Overview of Commitments for 2013 and Forecast Sales”, identifying some three events:
(i)Australian GT Championship;
(ii)Porsche GT Cup Challenge;
(iii)Bathurst 12 Hour.
34The Australian GT Championship was the subject of a joint supply agreement so that all tyres used at the event were supplied either by Pirelli Australia (via Trofeo) or by competitor, Michelin. The other two events had arrangements whereby Pirelli (via Trofeo) was the sole supplier of tyres for the event. The final item on the table was “Open Market Sales Slick and Rain”, which extended to “other state and national events”, where there was no exclusive supply arrangement. Trofeo (on behalf of Pirelli) was in competition with other suppliers.
35Mr Manolios continued in the email:
“In light of the additional business we have procured for 2013, we propose one supply agreement which encompasses all of the above contracts and sales. In summary we suggest that for 2013 (and beyond):
…
5. In our capacity as the Motorsport tyre distributor for Pirelli in Australia we would like to organize a corporate function at the Melbourne GP in 2013 for Pirelli/Trofeo clients …” (Ibid)
36In 2010, Trofeo had moved from the leased premises it inherited from Motorsport Tyres in Lilydale to premises purchased by Mr Manolios (or one of his companies) at Technology Circuit, Hallam. About half of this building was devoted to the Pirelli tyre business and the other half to Trofeo’s own racing interests (T307, L4-14).
37Additionally to the business of supplying Pirelli motorsport circuit tyres, Trofeo’s business “included dabbling in Corvettes, et cetera, and eventually it became having the Lamborghini GT car sales and support” (T306, L31 – T307, L2). Although the tyre business remained “the main component” (T307, L3).
38Mr Manolios said that this expansion program and investment program would not have been undertaken if he knew “that there was the possibility that any other entity or person or persons or entities might become involved in the distribution of [Pirelli] motorsport tyres in the circuit racing” (Ibid, L16-19).
39Eventually, Trofeo moved from Technology Circuit to Austral Place in Hallam to larger leased premises, providing almost double the floor space available at Technology Circuit (T308, L24 – T309, L1). This move, said Mr Manolios, occurred because:
“we had run out of space in order to support the Pirelli products. We needed to hold far more stock, … and we had a lot more infrastructure than we’d had previously.” (T309, L3-6)
40It was necessary, for instance, for the B-double trailer with open or “curtain” sides to be stored inside. (Ibid, L7-9, CB 595A and 595B) The B-double trailer needed to have open sides to render tyres readily accessible at tyre racetracks and also for display purposes. (T310, L6-12)
41On 7 February 2014, Mr Manolios sent an email to Mr Fabio Lopes of Pirelli’s Italian holding company, forwarding:
“Trofeo’s main marketing plans and objectives for 2014. Apart from what is covered in this document we are also investing in a new B double truck exclusively for tyre transport and fitting at events, attending the Top Gear Festival and supporting the Ferrari event in April (which will all be part of our overall marketing of the Pirelli brand) …” (CB 304)
42Mr Lopes joined Pirelli in 1998 and now serves as Chief Executive Officer of Pirelli Asia S.p.A, which is based in Singapore (T160, L6-8). From October 2012 until 2015, he was head of Motorsport Commercial of Pirelli Tyres S.p.A., and from 2018 he was the Chief Executive Officer of Pirelli Latam, the Pirelli entity based in his native Brazil (Ibid, L14-20).
43Mr Manolios said that he had annual meetings representing Trofeo to Pirelli’s international executives, initially Mr Hembery and, from 2012, Mr Lopes (T313, L18-22). Eventually, these meetings took place in Melbourne at the Formula 1 Grand Prix (Ibid, L21-22).
44When Mr Lopes took over international responsibility for Pirelli motorsport, Mr Manolios said he made contact with him and met him on Trofeo’s behalf in Italy (Ibid, L28-30). At these meetings, Mr Manolios said that:
“All I wanted was a document that reflected our relationship. [viz the relationship between Pirelli Australia and Trofeo] So it wasn’t that I was seeking distribution or anything new … All I wanted was a contract, an agreement, that reflected our relationship.” (T314, L11-15)
45Mr Manolios and Mr Lopes met in Milan in November 2012. Mr Lopes sent Mr Manolios an email dated 2 December 2012, which set out “Minutes” of that meeting. Item 1 read:
“Pirelli will provide the standard distribution contract to Trofeo, as Motorsport products distributor (Simon, as we’ve just talked, please provide asap)” (CB 223)
46This email was copied to a number of persons, including Mr Simon Pool, Pirelli Australia’s Technical Manager.
47Elaborating on this item, Mr Manolios said in evidence:
“Well, my question to Fabio was that we were the distributor but we didn’t have a contract and, um, we really needed – the business was growing and we really needed to formalise everything …” (T320, L18-21)
48Mr Manolios said that nobody explained to him what the “standard distribution contract” entailed (Ibid, L26-27). Mr Manolios said that in discussion he did not use the word “exclusive”, “because I just assumed that, … that’s what we were talking about.” (T321, L7-8)
49As to the meeting on 29 November 2012, Mr Lopes remembered it being attended by Mr Manolios and also Mr Wilson. Mr Lopes said “we discussed many aspects related to the relationship between Pirelli Australia and Trofeo”, including sponsorships, rebates, new motorsport events and so forth (T162, 18-26). He continued “there was also an enquiry by Mr Manolios regarding whether Pirelli Australia would provide any kind of exclusive distribution agreement to Trofeo.” (Ibid, L26-29)
50According to Mr Lopes, Mr Manolios:
“was asking … whether … I would consider any exclusivity discussion, … and what I said was … that it [viz Pirelli Australia] would provide the standard one [viz distributor agreement]. Because this is what we do I’ll say in Australia.” (T163, L11-14)
51Mr Manolios sent an email to Mr Lopes on 1 March 2013, stating inter alia “I do not have any contracts yet …” (CB 248). Mr Lopes responded by an email on 6 March “Regarding the contract I already talked to Simon and he will present the standard distribution contract we have in Australia” (Ibid). Mr Lopes said that Mr Manolios “although he was asking for this exclusivity, … the only condition that we could provide … would be … to negotiate, or say this is standard distribution agreement.” (T164, L8-11)
52Mr Lopes said that at the meeting, he said that his policy was to refer matters to Mr Pool because his role from Italy was to assist, and matters such as distributorship agreements were controlled locally and not from Milan (T164, L18-23).
53A similar meeting was held between the parties in November 2013. Mr Manolios followed this meeting up with an email to Mr Lopes copied to Mr Pool in Australia, dated 16 December 2013. Amongst the matters which Mr Manolios sought to “confirm”, “from our meeting going forward for 2014” was:
“3.An exclusive distributor agreement will be negotiated with Trofeo encompassing our relationship (note no agreement was provided in 2013).” (CB 260)
54Mr Manolios said that at the meeting he told Mr Lopes “that I believe it’s with the Italian, um, lawyers. He said he didn’t know and he was relying on … Mr Pool … he would follow it up again.” (T325, L26-29)
55Mr Manolios said that following the discussion in November 2014, he believed that “We [Trofeo] were continuing to be the sole, exclusive, whatever you want to call it, distributor for the Australian market for motorsport and ultra-high performance road tyres.” (T326, L1-4)
56On 10 January 2014, Mr Lopes sought an update from Mr Pool. He continued the following day “We received a payment on Jan 2nd for most of the outstanding. Jim isn’t now back in the country till January 20th when I will resolve the outstanding items.” (CB 259)
57This seemed to indicate that Pirelli Australia’s principal concern was bringing Trofeo’s trading account back into order. Mr Lopes sent a follow-up email to Mr Pool, stating “Simon, How about the distribution contract, have you presented it to Jim?” (Ibid)
58Mr Manolios said that his reference to negotiating “an exclusive distributor agreement” in his email of 16 December 2013 was not a concession or an implication that no such agreement already existed. Rather, it was a reference to an anticipated negotiation as to matters of detail. The “exclusive” issue had, in his view, already been determined in favour of Trofeo (T384, L2-14).
59As to what those detailed matters requiring negotiation might be, he said “there would be term, renewal, um, those sorts of things …” (Ibid). This would seem to cut across the belief that, as from 2006, Trofeo had been granted a perpetual exclusive distributorship agreement.
60As at 2017, the Pirelli website listing what were described as “motorsport dealers” for Europe, North America, “Center South America” and Asia Pacific showed “Trofeo Motorsport” as the only dealer for Australia (CB 305).
61In 2017, Trofeo underwent an audit by its insurer. As a result, Mr Manolios sent an email to Mr Ernesto Garcia of Pirelli in Italy dated 9 February 2017, which stated inter alia “I urgently need a letter of Authority from you regarding Trofeo Motorsport and our exclusive dealership of Pirelli Motorsport tyres in Australia” (CB 77).
62He submitted a draft addressed “To whom it may concern”, beginning “This letter confirms that Trofeo Motorsport (Trofeo Pty Ltd.) is the current exclusive dealer of Motorsport and Ultra High Performance tyres in Australia …” (CB 310). This email was copied to Mr Pool at Pirelli Australia.
63Mr Pool responded with a slightly modified proposed letter beginning “This letter confirms that Trofeo Motorsport (Trofeo Pty Ltd.) is Pirelli Tyres Australia Motorsport Tyre Dealer for circuit and extreme performance tyres in Australia.” (CB 309)
64Omitted was the reference to an exclusive dealership. It continued:
“Trofeo Motorsport exclusively provide trackside support for Pirelli motorsport tyres, including shipping, selling and fitting the tyres at events around Australia.” (Ibid)
65It also referred to “exclusive on-site supply and service of Pirelli circuit tyres …” (Ibid) at a number of events, including the Bathurst 12 Hour and so on.
66I asked Mr Manolios whether he was troubled by what I described as “a fairly subtle reworking of the [draft] letter, so as to remove the word ‘exclusive’ from where it had been placed in your draft”. Mr Manolios replied “It didn’t worry me because the purposes of the letter were to, um, satisfy the insurer …” (T329, L11-18). He agreed that he would have been happy with whatever text would have satisfied the insurer’s concerns (Ibid, L19-21).
67Nevertheless, according to Mr Manolios, he was firm in his view that Pirelli had committed to provide Trofeo with exclusive distributorship. Had Pirelli decided to sell to someone else, or appoint someone else to sell competition tyres, he said he would have “gone berserk” (T328, L13-16).
68In fact, Trofeo did receive some evidence of the sale of competition or circuit tyres by Pirelli Australia to others.
69Mr Chris Montgomery served as Trofeo’s general manager or operations manager for a period of 10 years until April 2023 (T195, L13-16). He identified what are described as logistic stickers on Pirelli circuit tyres indicating they had been sold to an organisation known as Zagame Autosport and shipped on 30 September 2019 (CB 609, T217). Mr Montgomery said he raised concerns as to this with Mr Pool (Ibid).
70According to Mr Montgomery:
“There was different reasons at times. Sometimes it was, oh, we need to keep a, a relationship or manufacturer’s relationship. Um, there was, there was any number of reasons and, and it happened fairly regularly. Not every time it was raised with Simon.” (T217, L27-31)
71Mr Montgomery said “There was never a definitive answer as to why it happened. It was kind of always, it was just a different, a different reason for it” (T218, L1-3).
72The tone of Mr Montgomery’s evidence was that he found the various explanations for this phenomenon given by Mr Pool unconvincing. Under cross-examination, Mr Montgomery was unable confidently to conclude at what event the consignment stickers were photographed (T247-8).
73On 4 March 2020, Mr David Vervaart of Trofeo sent an email to Mr Pool of Pirelli Australia copied to Mr Manolios and Mr Emery, also of Trofeo, and Mr Montgomery. This email signed by Mr Vervaart as “General Manager” of Trofeo, dealing with the following matters “Exclusive Motorsport Tyre Distribution”, “Australian GT Exclusive Tyre Supplier”. Under the first heading, paragraph 11 stated “New agreement to be 5 + 5”.
74Mr Pool responded by an email dated 6 March 2020, thanking Mr Vervaart for his proposal and continuing “I am in discussion with Milan for the commercial motorsport aspects and logistics for the stock. We will respond over the weekend.” (CB 558-561)
75Mr Pool said that he had not discussed an exclusive motorsport tyre distribution with Trofeo at that time, or indeed at any other time (T93, L23-27). According to Mr Pool, he received the email:
“the only contact we were having at … that stage was trying to get paid and that was the end of it. There was no response to this, um, everything was being cancelled so there was nothing to discuss.” (T93, 31 – T94, L4)
76Over the years, Trofeo’s account with Pirelli Australia had been repeatedly placed on “hold”, that is being outside the credit terms agreed upon. Pirelli Australia declined to supply further stock except on a COD (cash on delivery) basis until the account was brought back into order.
77Mr Montgomery agreed that these “holds” for non-payment could be one month. There could be two months (T247, L11-13). For Mr Montgomery, as General Manager or Operations Manager, it was inconvenient or very difficult to acquire stock on a COD basis. He said he would “go mad at Jim [Mr Manolios]”. The account would be paid and credit would be restored (T251, L26-28).
78Mr Pool sent an email to Mr Davide Delorenzi, a head office executive, dated 29 August 2019. The email was copied to Mr Pierre Olivier Chevalier on the subject “Pirelli distribution”. The email began:
“Trofeo Motorsport can’t pay their account on time again this month. I have discussed the situation with Jim over the last weeks again.
Jim promised to bring the account back into line in July but that didn’t happen. We have stopped supplying him tyres other than for the last GT Championship race.” (CB 527)
79Mr Pool said that Trofeo’s account seemed to be in arrears “Each year [in August]”. Mr Pool continued “but I feel the situation is worse because he [Mr Manolios] has never come up with ideas like those listed below.” (Ibid) Mr Pool reported an outstanding debt of $852,298.41. Mr Pool said that Mr Manolios “wants to pay $100,000 per month to clear the account. This is not enough.” (Ibid) He noted a proposal on Trofeo’s behalf relative to the Australian GT Championship. Mr Pool continued:
“As you are aware he owns the GT Championship (bought it this year). The entries are dropping at each event. We have the next event in September and many more teams say they won’t enter
…
I want to negotiate a new contract for next year as the cost to be the sole tyre supplier is not worth it unless we have over 16-18 cars.
I think the Championship is at risk of collapsing the way he [Mr Manolios] is running it.” (Ibid)
80Mr Pool noted that he had received “… 2 expressions of interest from other people who want to take over the distribution rights.” (Ibid) He concluded:
“I want to get paid by the year end and then appoint a new distributor. This will likely lose us the GT Championship but I think it is at risk of not running anyway.” (Ibid)
This proceeding
Plaintiff’s claim
81In a Writ filed 26 February 2021, Pirelli sought the sum of $1,130,066.20 as a debt owing for goods sold and delivered, together with a further $104,964.53 as a debt for additional goods and interest at the rate of 13.95 per cent calculated from 26 February 2021. Alternatively, statutory interest and certain variations upon that relief. An Amended Writ and Statement of Claim was filed on 2 March 2021.
82At the outset of trial, counsel announced that they were agreed that there should be judgment as at 25 July 2023 for Pirelli in the sum of $1,130,066.20, together with interest calculated to that date at $365,673.12. However, no judgment in that amount should be given or entered pending resolution of the counterclaim made by Trofeo for resolution of the effect of that counterclaim upon Pirelli’s entitlements to enforce that judgment.
83Shortly before the scheduled commencement of the trial, in the face of difficulties with resolving the issue of damages on the counterclaim by Trofeo, I ordered on 10 July 2023 that the trial commencing on 25 July deal with Pirelli’s claim and issues of liability on Trofeo’s counterclaim only. I deferred the assessment of such damages, should that be necessary, to a further trial on 4 December 2023.
84The trial on 25 July proceeded in that manner with Pirelli’s claim resolved in the manner described. This left the only issue for trial in July – the issue of “liability” on Trofeo’s counterclaim.
Counterclaim
85The counterclaim has been brought by Trofeo against Pirelli Australia as the first defendant to counterclaim, and Pirelli & C. S.p.A., which appears to be the Italian holding company of Pirelli, as second defendant to counterclaim.
86By its Amended Counterclaim dated 3 August 2022, Trofeo contended, first, that as a subsidiary of the Italian holding company, Pirelli Australia was an agent for the Italian company. At paragraph 26 of the Amended Counterclaim (CB 25), Trofeo alleged that an agreement was made “in or about December 2013”, whereby the Italian company engaged Trofeo “as its sole distributor for the retail sale of Pirelli tyres and related products for motorsports in Australia”.
87This agreement or appointment was particularised as being “partly oral, partly in writing and partly implied”. The oral evidence was said to be constituted by a conversation between Mr Manolios on behalf of Trofeo and Mr Hembery on behalf of the Italian company in 2006 at a meeting in Australia. The agreement was said to have been “renewed” in November 2013 between Mr Manolios on behalf of Trofeo and “Fabio Marcola” [viz Mr Lopes] of the Italian holding company “on behalf of Pirelli Australia”.
88The written elements of this agreement were said to be contained in emails between Mr Manolios and “Marcola” [viz Mr Lopes] dated 16 December 2013 and 20 December 2013. The implied elements were said to arise “by reason of the agreement, the conduct of the parties and the need to give business efficacy to the agreement”.
89Next, at paragraph 27, in breach of the “exclusive distributorship agreement”, Pirelli [the Italian company] by itself and/or by its agent Pirelli Aust” enabled and/or facilitated sales of tyres and related products for motorsports within Australia via third parties and to the exclusion of Trofeo. The Italian company “has dealt with tyres and related products for motorsport otherwise than by providing them to Trofeo so that the supply of stock to Trofeo has been limited” (CB 25).
90According to the Particulars:
“Pirelli Aust has diverted stock that was imported into Australia for sale by Trofeo by selling that stock to other markets such as New Zealand. As a result, the availability of tyres that should have been provided to Trofeo was reduced.” (Ibid)
91According to paragraph 28 of the Amended Counterclaim (CB 26), “The details and extent of sales via third parties are within the possession and knowledge of Pirelli Aust and Pirelli [the Italian company]”, but it was said Trofeo had:
“(a) Lost profits on sales;
(b) Stock that is unable to be sold;
(c) Lost profits on future sales;
(d) Loss of opportunity to sell those tyres and stock that were diverted to
other markets” (CB 26).
92The Amended Counterclaim included a further cause of action alleged on the basis of misleading or deceptive conduct contrary to s18 of the Australian Consumer Law. It was said that Trofeo was given to understand that it would be “the sole distributor for motorsports in Australia”, which was described as “the exclusivity representations”, with those representations given “in order to induce Trofeo to enter into agreements with Pirelli Aust for the purchase of tyres and related motorsports products”. The representations were said to have been given by the Italian holding company, Pirelli Australia or both.
93The same Particulars, given relative to the contract alleged, were relied on relative to the “exclusivity representations”.
94The representations, according to the Counterclaim, were “false and/or untrue in that …” the Italian and the Australian Pirelli companies sold tyres and related motorsport products within Australia “otherwise than via Trofeo” (Ibid), “Pirelli Aust advised customers not to purchase stock held by Trofeo, asserting that it was old or dated stock, and then sold the same products from the same batches from their own stock;” (Ibid). Pirelli Australia and/or the Italian holding company “sold tyres and related motorsports products which were intended to be delivered to Trofeo by diverting that stock to other markets such as New Zealand” (Ibid).
95These matters were said to constitute misleading and deceptive conduct contrary to the Australian Consumer Law and, as a consequence of such conduct, Trofeo suffered loss. The same particulars of loss and damage were given as with respect to the alleged breach of contract.
96In light of the “split” of the trial, no evidence was led by Trofeo purporting to establish its loss or damage, either by reason of alleged breach of contract by one, the other or both of the Pirelli companies, or by reason of misleading or deceptive conduct on the part of either or those companies. Nor was there evidence other than at the most vague and general level of the alleged breaches of the exclusivity obligation allegedly contractually assumed by the Pirelli companies or, alternatively, represented by them to exist by way of misleading or deceptive conduct.
97For the purposes of the present determination as to liability, I should assume that there has been at least nominal loss or damage suffered, assuming that the cause of action in contract and/or misleading or deceptive conduct is otherwise made out.
98The loss or damage alleged at paragraph 33 of the Amended Counterclaim (CB 27) appears to allege expectation rather than reliance loss. Whilst the authorities establish clearly an entitlement to recover reliance loss suffered by reason of misleading or deceptive conduct in trade, the entitlement to recover expectation loss is less clear. It can be said with some confidence that it is less extensive than the ability to recover such losses for breach of contract.
99It is unnecessary to canvass these issues which may be deferred to the damages assessment trial later this year, should that prove necessary.
100During the trial, Mr Ribbands on behalf of Trofeo sought leave to file a Further Amended Counterclaim, seeking to add a paragraph 25A immediately after the paragraph alleging that Pirelli Australia was a subsidiary and agent of the Italian Pirelli company, the second defendant to counterclaim. The proposed new paragraph read:
“25AFabio Lopes was at all material times an agent of Pirelli [the Italian holding company] and/or Pirelli Aust.”
101Mr Galbraith on behalf of the Pirelli company, opposed the grant of leave to amend, relying on well-known passages from the Judgment of the High Court in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175. Accepting to the hilt the force of their Honours’ strictures against late amendments to pleadings, the court was speaking in the context of amendments which derailed trials. The present proposed amendment has no such effect.
102Mr Ribbands said it did no more than bring the pleaded version of the counterclaim into conformity with the evidence. I accept that contention. Leave to file a Further Amended Counterclaim is granted.
Conclusions
103In some respect, Mr Manolios’ view of events was, even accepting his account of what transpired, quite unrealistic, as already noted. Following a meeting in Sydney with Pirelli executives Messrs Hembery and Pool, he believed that Trofeo had been appointed Pirelli’s sole distributor of motorsport circuit tyres in Australia in perpetuity, despite the fact that he conceded that the word “exclusive” was not used in the discussions nor any synonyms such as “sole”, and there was nothing in writing.
104In closing argument, Trofeo’s counsel, Mr Ribbands conceded that any distributorship arrangement agreed on at the Sydney meeting would be subject to cancellation for breach of a fundamental term or repudiation, or simply by Pirelli’s giving what might be judged “reasonable notice” of termination. Perhaps Mr Manolios’ view that Trofeo’s rights as exclusive distributor were perpetual was dictated by the thought that by early 2020, when matters “blew up” between Pirelli and Trofeo, more than the normal commercial term of any distributorship agreement had elapsed.
105Mr Vervaart on behalf of Trofeo in March 2020, proposed a distributorship agreement on the basis of “5 + 5”, meaning presumably that any distributorship agreement would be for an initial period of five years with an option for Trofeo to renew it for a further five-year period. Two five-year periods had already expired between the Sydney meeting and the “blow up” in 2019-2020.
106Mr Ribbands noted the fundamental contention of Trofeo was that it had been appointed sole distributor for the retail sale of Pirelli tyres and related products for motorsports in Australia by an agreement made “in or about December 2013” (Paragraph 26 of the counterclaim, CB 25). He said that the key question was did Pirelli say or do anything that would have caused the reasonable commercial business person/Trofeo to proceed on the assumption that they had the sole distributorship.
107Both Pirelli Australia and Trofeo saw their commercial interests as being served by there being but one distributor of Pirelli motorsports circuit tyres in Australia. In those circumstances, it is unsurprising that Trofeo should be described as “the” distributor of such products for Pirelli. As a matter of language, it would also be quite accurate to describe Trofeo as the “sole” distributor of those products for Pirelli without necessarily entailing any contractual restraint upon Pirelli’s legal entitlement to appoint an additional or substitute distributor. The word “exclusive”, when attached to a distributorship, however, carries with it a strong implication that there is a contractual obligation conditionally or unconditionally restricting or excluding other distributors.
108Whilst in the correspondence referred to in the above narrative the word “exclusive” is used on a number of occasions, the source of that language is Trofeo not Pirelli Australia.
109In his closing contentions dated 1 August 2023 at paragraph 9, Mr Ribbands said:
“A reference to the distributor can only mean that there is no other means of distribution. Pirelli plainly recognised this when it contemplated dealing with others to ‘take over the distribution rights’.”
110What I have said already indicates that I do not accept the logic of this contention. To operate with a single distributor who can accurately be described as “the” distributor or the “sole” distributor is not the same as operating with that distributor subject to a contractual obligation, not to add distributors or replace the incumbent.
111The effect of the evidence from the various Pirelli executives was that, as a worldwide policy, the Pirelli group did not appoint exclusive distributors. The present issue could have been resolved and put to rest by a single email from Mr Pool, as the local executive responsible for the Trofeo relationship or one of the international executives, stating “Pirelli doesn’t do ‘exclusive’”. No such email has been discovered or put into evidence.
112Mr Lopes, on a number of occasions, asked Mr Pool to provide a distribution agreement or a standard distribution agreement. At the material time, no such standard form document appeared to be issued or entered into by Pirelli Australia. The only document relative to distribution was the one entered into with Trofeo at the outset of the relationship, which was directed principally and almost solely to issues of credit and directors’ guarantees.
113Mr Lopes’ responses on these matters might be thought to be somewhat evasive or non-responsive to the issue of “exclusive” distributorship repeatedly raised by Trofeo.
114The various email exchanges referred to and relied on by Mr Ribbands, whereby Trofeo raised the issue of exclusive distributorship with Pirelli Australia and the Italian holding company and various international executives. To put these matters in context, however, it must be recalled that these items of correspondence were exchanged over a period of 14-15 years.
115Two matters are striking but not necessarily conclusive. First, the lack of any evidence that either by word of mouth or in written communication Pirelli refrained from describing its relationship with Trofeo as “exclusive”. Secondly, that repeated requests for an exclusive distributorship agreement were ignored or evaded but, at any event, not acceded to.
116Again, as Mr Galbraith observed, Mr Manolios’ email to Mr Lopes of 16 December 2013 (CB 260), following up on a meeting held between Mr Lopes and Mr Manolios the previous month of November, referred to a number of “outstanding issues”. One of which was described as follows:
“3.An exclusive distributor agreement will be negotiated with Trofeo encompassing our relationship (note no agreement was provided in 2013).” (CB 260)
117Mr Galbraith noted the futurity in this language, both in describing the matter as an “outstanding” issue and the reference to negotiations to be held in the future (which in fact never occurred).
118Mr Ribbands said that these were explicable upon the basis that there was an existing word of mouth agreement as to exclusivity (dating back on Mr Manolios’ narrative to 2006), and the process of negotiation described was only reducing the already existing and enforceable agreement to writing with the potential which any such negotiation might have to add additional or different terms to the written version.
119It is inherently unlikely that trading organisations such as Trofeo and, in particular, Pirelli Australia, should enter into such fundamental and important obligations other than in writing. The issue of Trofeo’s credit entitlements on its trading account, issues of rebate, sponsorships and so forth, according to the evidence, were all reduced to writing informal agreements. It is implausible, in those circumstances, that these parties would enter into so fundamental an obligation as one of exclusive distributorship other than in writing.
120Mr Galbraith contended that obligations of importance and complexity generally are not entered into by commercial parties other than by formal agreement, and the lack of such a formal agreement would tend to indicate that any discussions or understandings which might or might not have taken place, were not intended to constitute a binding contract. He referred to Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 where, having referred to a number of authorities on the subject, Brooking J (as he then was), speaking of the parties before him, said:
“I think it extremely unlikely that parties in the position of those said to be contracting in the present case, whose relationships had always been regulated by a series of formal and complicated agreements, would have intended to become bound immediately in respect of the sale of land for $5.1 million on the basis that they would, if necessary, be content to have such rights and obligations as the law confers or imposes upon those who do no more than agree to buy and sell land for a certain price.” [1994] 2 VR 106, 138
121The same might be said for a hypothetical “exclusive” contractual arrangement between two parties lasting for a period of 17 years (2006 to 2023). See also Smart Education Program Pty Ltd (in liq) v CLGC Australia Pty Ltd [2023] FCA 826 [58] per Jackman J.
122Again, to similar effect, the email of 4 March 2020 by Mr Vervaart on behalf of Trofeo to Mr Pool (CB 558-60). The email begins:
“Thanks for your patience whilst waiting on our proposal.
Below are the key points for an agreement. We will send you tomorrow a more detailed presentation.” (CB 558-60)
123If there is any written version of this more detailed presentation, it was not put into evidence.
124The email continues under the heading “Exclusive Motorsport Tyre Distribution” to set out a series of contractual terms, including the reference to “new agreement to be 5 + 5” already referred to. All 16 paragraphs under the heading speak in the language of futurity. Again indicating that there was no existing agreement granting exclusive distributorship to Trofeo. These exchanges, after the alleged contract was made, are admissible for the purposes of determining whether in fact the contract as alleged was made between the parties. It falls outside the prohibition on receipt of evidence as to the proper construction of written contracts admitted by both parties to exist (Regreen Asset Holdings Pty Ltd v Castricum Brothers Australia Pty Ltd [2015] VSCA 286 [134] per Warren CJ, Kyrou and McLeish JJA).
125Moreover, insofar as Mr Manolios assumed that appointment of Trofeo as the distributor for Pirelli motorsport circuit tyres in Australia necessarily entailed an obligation on Pirelli Australia to maintain the distributorship as “exclusive”, I do not believe such an assumption was justified. If no exclusive appointment was made in 2006 or 2007, I cannot see that any subsequent events would have constituted such an exclusive appointment insofar as Trofeo pressed for such appointment, but continued to do business without it, it continued contractual arrangements with Pirelli which did not include any element of exclusivity.
126On behalf of Trofeo, Mr Ribbands contended that the email from Mr Pool to his superior in Italy on 29 August 2019 (CB 527) could be regarded as an admission of the existence of an exclusive distributorship. He said there was nothing in this email which amounted to an assertion that Pirelli Australia was entitled to appoint any number of distributors without regard to any “exclusive” entitlements of Trofeo. The email makes no such assertions. It was apparently intended for internal administrative purposes, not as a statement of legal position. I can see no part of the email which constitutes an admission of any “exclusive” entitlements on the part of Trofeo.
127The counterclaim, insofar as it is based on alleged breach of contract, fails.
128Insofar as the counterclaim is based upon alleged misleading or deceptive conduct, it is unnecessary to quote ss18 and 236 of the Australian Consumer Law, which first impose an obligation on those engaged in trade or commerce to refrain from engaging in misleading or deceptive conduct, and grants those who have suffered loss and damage from such misleading or deceptive conduct engaged in trade or commerce a right to an award of damages from the court to compensate for such loss and damage. These provisions, and the standard expositions as to their operation, are too well known to require repetition here.
129The findings already made with respect to a cause of action based on contract carry with it the consequence that since it has not been proven that either of the Pirelli companies in fact undertook contractual obligation of exclusivity in favour of Trofeo in the Australian motorsports tyre market. The very same dealings and the very same items of correspondence which fall short of establishing a contractual obligation of exclusivity cannot amount to conduct misleading or deceiving Trofeo into believing that it enjoyed such an entitlement.
130The emails quoted above indicate a knowledge and acceptance by Trofeo that whilst it was seeking a contractual entitlement to an exclusive distributorship, it did not in fact enjoy such status as at the date of the emails. Again, since Trofeo’s request for exclusivity in those emails seems to have fallen on stony ground and elicited no positive response, in all the circumstances it cannot be said that inaction or silence on the part of the Pirelli companies constituted misleading or deceptive conduct leading Trofeo to believe that it was granted exclusivity.
131The counterclaim for misleading or deceptive conduct likewise fails.
Disposition
132The Further Amended Counterclaim must be dismissed. Pirelli Australia’s claim against Trofeo and Mr Manolios, as conceded on the first day of trial, must succeed. I will direct the parties to bring in short Minutes to give effect to these reasons, including an up to date calculation of interest on the plaintiff’s claim.
133Costs will be reserved since I have heard no argument on that subject.
134The trial for the assessment of damages on the counterclaim fixed for 4 December 2023 should be vacated. With the dismissal of the counterclaim, no issue as to staying the judgment in favour of the plaintiff arises.
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