Portland Marketing (International) Pty Ltd v Wulff and Ors (No.2) - [2018] FCCA 2506

FEDERAL CIRCUIT COURT OF AUSTRALIA

PORTLAND MARKETING (INTERNATIONAL) PTY LTD v WULFF & ORS (No.2)

[2018] FCCA 2506

Catchwords:
CONTRACT – Necessity for agreement on essential terms – essential terms must be certain or ascertainable.

CONTRACT – Implication of term requiring reasonable notice of termination.

CONTRACT – Implication of term requiring the parties to act towards each other in good faith.

ESTOPPEL – Promissory estoppel – need for clarity in representations.

TORT – Inducing breach of contract – elements of the tort.

COPYRIGHT – Assignment of copyright – assignment included assignor’s right to sue for antecedent breach of copyright – nature of the assigned chose in action – availability of aggravated damages.

Legislation

Competition and Consumer Act 2010, s.138A
Australian Consumer Law, ss.4, 18, 29
Copyright Act 1968, ss.31, 35, 115, 196

Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600
Baird Textiles Holdings Ltd v Marks & Spencer plc [2002] 1 All ER (Comm) 737
Thorby v Goldberg (1964) 112 CLR 597
Scammell & Nephew Ltd v Ouston [1941] AC 251
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438
Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 41 VR 1
CGU Workers Compensation (NSW) Ltd v Garcia (2007) 69 NSWLR 680
Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Vukic v Grbin [2006] NSWSC 41
Arfaras v Vosnakis [2016] NSWCA 65
Saleh v Romanous (2010) 79 NSWLR 453
DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728
Ashton v Pratt (2015) 88 NSWLR 281
Legione v Hateley (1983) 152 CLR 406
Australian Crime Commission v Gray [2003] NSWCA 318
Galaxidis v Galaxidis [2004] NSWCA 111
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Daebo Shipping Co Ltd v The Ship Go Star (2012) 207 FCR 220
TSG Franchise Management Pty Ltd v Cigarette & Gift Warehouse (Franchising) Pty Ltd (No 2) (2016) 340 ALR 230
Short v The City Bank of Sydney (1912) 15 CLR 148
Volunteer ECO Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd (2013) 102 IPR 161
Sinanide v La Maison Kosmeao (1928) 139 LT 365
Seafolly Pty Ltd v Madden (2012) 297 ALR 337
Giorgianni v The Queen (1985) 156 CLR 473
Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd (1994) 123 ALR 681
Fair Work Ombudsman v South JinPty Ltd [2015] FCA 1456

Applicant:

PORTLAND MARKETING (INTERNATIONAL) PTY LTD (ACN 104 765 639)

First Respondent:

HENRIK WULFF TRADING AS RAZORPIT AUSTRALIA

Second Respondent:

UNITY AGENCIES PTY LTD (ACN 010 894 943)

Third Respondent:

FIRTAL BRANDS APS

File Number:

SYG 3055 of 2014

Judgment of:

Judge Cameron

Hearing dates:

2-6 and 9 May 2016, 16-17 June 2016, 12 September 2016, 2-3 November 2016

Date of Last Submission:

3 November 2016

Delivered at:

Sydney

Delivered on:

11 September 2018

REPRESENTATION

Counsel for the Applicant:

Mr G. Stapleton

Solicitors for the Applicant:

Hunter Flood Lawyers

Counsel for the Respondents:

Mr M.D Evans

Solicitors for the Respondents:

McKays

ORDERS

The application be dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA

AT SYDNEY

SYG 3055 of 2014

PORTLAND MARKETING (INTERNATIONAL) PTY LTD (ACN 104 765 639)

Applicant

And

HENRIK WULFF TRADING AS RAZORPIT AUSTRALIA

First Respondent

UNITY AGENCIES PTY LTD (ACN 010 894 943)

Second Respondent

FIRTAL BRANDS APS

Third Respondent

REASONS FOR JUDGMENT

INTRODUCTION................................................................................................. [1]

ALLEGATIONS..................................................................................................... [3]

Claims against Mr Wulf and Firtal Brands
Distribution Agreement.............................................................................. [4]
Express terms......................................................................................... [5]
Implied terms.......................................................................................... [6]

Breachs of the Distribution Agreement
Notice...................................................................................................... [7]
Good faith............................................................................................. [10]
Notice and good faith........................................................................... [11]

Misleading or deceptive conduct ............................................................ [13]
Promissory estoppel ................................................................................ [19]
Claims against Unity
Wrongful interference with contractual relations................................. [24]
Infringement of copyright........................................................................ [27]
Misleading or deceptive conduct............................................................. [29]
Loss and damage............................................................................................ [32]

DEFENCE........................................................................................................... [35]

Agreement between Mr Wulff and Firtal Brands........................................ [36]
“Dealings” between Portland and Mr Wulff
No Distribution Agreement..................................................................... [39]
Distribution Agreement............................................................................ [46]
Relationship between Portland and Firtal Brands....................................... [50]

RELEVANT LEGISLATION

Australian Consumer Law............................................................................. [51]
Copyright Act................................................................................................. [53]

APPLICANT’S EVIDENCE

Oscar de Vries
Formation of the Distribution Agreement.............................................. [55]
Events in 2012........................................................................................... [62]
Events in 2013........................................................................................... [63]
Events in 2014........................................................................................... [76]
Portland’s marketing strategy and plans............................................... [104]
Copyright................................................................................................. [111]
Loss.......................................................................................................... [114]
Tony Dimasi................................................................................................. [117]

RESPONDENTS’ EVIDENCE

Henrik Wulff
Agreement with Firtal Brands................................................................ [124]
Dealings with Portland........................................................................... [128]
Payment terms
Initial terms........................................................................................ [132]
First change........................................................................................ [133]
Second change.................................................................................... [134]
Third change....................................................................................... [136]

Payment issues........................................................................................ [145]
Termination of agreement...................................................................... [146]
Mikkel Salling
Agreement with Mr Wulff..................................................................... [151]
Dealings with Portland........................................................................... [161]
Relationship with Unity.......................................................................... [169]
Termination of Razorpit Australia agreement...................................... [173]
Other potential distributors................................................................... [177]
Richard Gresham......................................................................................... [179]
Negotations with Firtal Brands.............................................................. [180]
“Shave yourself a fortune” posters........................................................ [194]
David Grant.................................................................................................. [197]
Negotations with Firtal Brands.............................................................. [198]
Alleged infringements of copyright...................................................... [206]

CONSIDERATION

Credit of witnesses...................................................................................... [210]
Distribution Agreement.............................................................................. [211]
No agreement in writing......................................................................... [213]
Exclusive distributor.............................................................................. [215]
Wholesale prices.................................................................................... [219]
Minimum quantities................................................................................ [222]
Certainty of terms generally.................................................................. [225]
Agency.......................................................................................................... [230]
Termination on reasonable notice.............................................................. [239]
Good faith.................................................................................................... [249]
Specific performance ................................................................................. [257]
Promissory estoppel................................................................................... [258]
Misleading or deceptive conduct vis-à-vis Portland................................ [271]
Inducing breach of contract........................................................................ [290]
Primary argument................................................................................... [295]
Secondary argument............................................................................... [305]
Generally................................................................................................. [307]
Discussion............................................................................................... [309]
Copyright
First literary work – “Shave yourself a fortune” slogan...................... [324]
Second literary work – “Shave yourself a fortune” poster.................. [326]
Infringement............................................................................................ [330]
Damages
Compensatory damages..................................................................... [334]
Aggravated damages........................................................................... [336]

Discussion
First literary work.............................................................................. [338]
Second literary work.......................................................................... [340]
Damages.............................................................................................. [346]

Misleading or deceptive conduct vis-à-vis Shaver Shop franchisees ..... [353]
Discussion............................................................................................... [354]

CONCLUSION................................................................................................. [356]

INTRODUCTION

The third respondent (“Firtal Brands”) is a Danish company that manufactures a device called Razorpit which is designed to keep razor blades sharp. In 2009 the first respondent (“Mr Wulff”) began importing Razorpit units into Australia for sale to third parties. The applicant (“Portland”) is in the business of manufacturing, importing and distributing men’s grooming products.
Commencing in early 2012, Portland sold Razorpit to Australian retailers for sale to the public. It alleged that it had struck an agreement with Firtal Brands or Mr Wulff that it be the exclusive distributor of Razorpit to Australian retailers. It alleged that Firtal Brands or Mr Wulff wrongfully terminated that arrangement in July 2014 and that the second respondent (“Unity”) induced that breach of contract in order to take over the distribution rights to Razorpit. Portland also alleged that after taking over the distribution rights to Razorpit, Unity used some of Portland’s advertising material, contrary to its copyright in those alleged literary works.

ALLEGATIONS

Portland filed a Second Further Amended Statement of Claim on 28 June 2016. Relevant allegations are summarised below.

Claims against Mr Wulff and Firtal Brands

Distribution Agreement

Portland alleged that between August 2011 and February 2012 it entered into a binding agreement (“Distribution Agreement”) with Mr Wulff and/or Firtal Brands pursuant to which Mr Wulff and/or Firtal Brands agreed to supply Razorpit products to Portland for it to resell to Australian retailers. Portland alleged in this regard that Mr Wulff was Firtal Brands’ agent in Australia.

Express terms

Portland alleged that the following were express terms of the Distribution Agreement:
a)during the term of the Distribution Agreement, Portland would have the exclusive distribution rights for the Razorpit product for direct retail outlets in Australia for the purpose of building up the market for the product for the benefit of Portland, Mr Wulff and Firtal Brands;
b)Portland was to purchase Razorpit units at wholesale prices from Mr Wulff as agent of Firtal Brands;
c)between about 27 February 2012 and 18 February 2013 Portland could buy Razorpit products from Mr Wulff and/or Firtal Brands for $8.75 per unit;
d)between about 18 February 2013 and 8 March 2013 Portland could buy Razorpit products from Mr Wulff for $8.75 per unit less $2.35 per unit comprising a discount and a marketing contribution from Firtal Brands;
e)between about 8 March 2013 to about 10 February 2014 Portland could buy Razorpit products from Mr Wulff and/or Firtal Brands on the following terms:
i)$6.40 per unit less $1.00 per unit marketing contribution from Firtal Brands; and
ii)payable 50% in advance and 50% within sixty days;
f)from about 10 February 2014 Portland could buy the Razorpit products from Mr Wulff and/or Firtal Brands on the following terms:
i)$5.90 per unit; and
ii)payable 50% in advance and 50% within sixty days; and
g)10,000 units of Razorpit stock to be delivered to a facility in Marrickville in mid-July 2014 would be available for purchase by Portland to sell to its direct retail customers.

Implied terms

Portland alleged that the following were implied terms of the Distribution Agreement:
a)the Distribution Agreement was not terminable unilaterally by either party except upon nine months’ written notice to the other party;
b)alternatively, the Distribution Agreement was not terminable unilaterally by either party except upon reasonable written notice to the other party;
c)alternatively, Portland was entitled to notice of termination of the Distribution Agreement sufficient for it to at least:
i)sell the 10,000 units of Razorpit stock stored in the Marrickville facility; and/or alternatively
ii)obtain the commercial benefit of the time and money already invested by it in promoting Razorpit prior to 30 July 2014;
d)alternatively, Portland would be able to continue to promote Razorpit products in Australia for at least the period from 1 August 2014 to 31 January 2015; and
e)the parties owed a duty of good faith towards each other.

Breaches of the Distribution Agreement

Notice

Portland alleged that on 30 July 2014 Mr Wulff and/or Firtal Brands purported to terminate the Distribution Agreement immediately, thereby breaching the implied terms of the Distribution Agreement as to notice.
Portland alleged that by failing to provide it with notice of termination pursuant to at least one of the four implied terms, Mr Wulff and/or Firtal Brands failed to terminate the Distribution Agreement and, in the circumstances, were liable to perform and carry into effect the terms of the agreement.
Portland alleged in the alternative that by purporting to terminate the Distribution Agreement without notice, Mr Wulff (by himself and/or by his principal) and/or Firtal Brands repudiated, wrongfully terminated and/or breached the Distribution Agreement.

Good faith

Portland also alleged that Mr Wulff and/or Firtal Brands breached the Distribution Agreement by failing to act in good faith when, in or about mid-July 2014, they caused 10,000 units of Razorpit stock to be delivered to the Marrickville facility for purchase and distribution by Portland pursuant to the Distribution Agreement in circumstances where they were considering terminating the agreement and then proceeded to do so on 30 July 2014.

Notice and good faith

Portland alleged that between 20 June 2014 and 30 July 2014 Mr Wulff and/or Firtal Brands appointed Unity, in place of Portland, to distribute Razorpit products throughout Australia with effect from about 30 July 2014 and, additionally, moved the stock in the Marrickville facility to Unity’s storage facility, without first giving notice to Portland. In doing so, it was alleged that Mr Wulff and/or Firtal Brands breached the Distribution Agreement’s implied terms as to notice and good faith.
Portland alleged that by failing to act in good faith, Mr Wulff (by himself and/or by his principal) and/or Firtal Brands repudiated, wrongfully terminated and/or breached the Distribution Agreement.

Misleading or deceptive conduct

Portland alleged that on or about 10 February 2014 Mr Wulff and/or Firtal Brands represented either expressly and/or by necessary implication to Mr de Vries that Portland could continue to promote Razorpit in 2014 (“First Representation”).
On or about 28 May 2014 Mr Wulff (by himself and/or his principal) and/or Firtal Brands represented expressly to Mr de Vries that they did not have a distribution partner in New Zealand and that Portland could supply Shaver Shop in New Zealand (“Second Representation”).
Portland alleged that in or about mid-July 2014 Mr Wulff (by himself and/or his principal) and/or Firtal Brands represented either expressly and/or by necessary implication to Mr de Vries that the 10,000 units of Razorpit stock would be available at the Marrickville facility for Portland to purchase and distribute to its customers pursuant to the Distribution Agreement (“Third Representation”).
Portland alleged that in reliance on the First, Second and Third Representations (“Representations”), which were alleged to have been representations as to future matters, it invested time and money to promote Razorpit in the period prior to 30 July 2014.
It was alleged that Mr Wulff and/or Firtal Brands did not have reasonable grounds for making the Representations, as demonstrated by their conduct:
a)on 30 July 2014 when they terminated, or purported to terminate, the Distribution Agreement without notice;
b)between about 20 June 2014 and 30 July 2014 when they appointed Unity to distribute Razorpit products throughout Australia in the place of Portland and moved the stock in the Marrickville facility to Unity’s storage facility, without first giving notice to Portland; and
c)by failing to act in good faith towards Portland, thereby repudiating and/or wrongfully terminating and/or breaching the Distribution Agreement.

Portland alleged that Mr Wulff’s and/or Firtal Brands’ conduct in making the Representations, or by making them and purporting to withdraw them, constituted:
a)misleading conduct in contravention of s.4 of the Australian Consumer Law (“ACL”) which is contained in sch.2 of Competition and Consumer Act 2010 (“CCA”); and
b)misleading or deceptive conduct or conduct likely to mislead or deceive in contravention of s.18 of the ACL.

Promissory estoppel

It was alleged that from about February 2012 to July 2014 Mr Wulff and/or Firtal Brands represented to Mr de Vries for Portland and to Portland that:
a)Mr Wulff was appointed by Firtal Brands to distribute Razorpit in Australia;
b)Mr Wulff and/or Firtal Brands was able to supply Razorpit to Portland at wholesale prices for Portland to resell to Australian direct retailers;
c)Mr Wulff in his own behalf and for Firtal Brands would supply Razorpit to Portland to enable it, exclusively, to develop the market for and build up sales of Razorpit in Australia through Australian direct retailers for the benefit of Portland, Mr Wulff and Firtal Brands;
d)Portland was able to and should promote the sale of Razorpit in Australia through direct and online marketing and advertising activities to develop the market for and build up sales of Razorpit in Australia;
e)Portland could purchase stock from Mr Wulff and/or Firtal Brands with staged payments of 50% at the time of supply and 50% sixty days after supply;
f)Portland was the distribution partner of Mr Wulff and/or Firtal Brands in Australia and could continue to be so during 2014 and or such other period subject to such reasonable notice of termination; and
g)the 10,000 units of Razorpit stock delivered to the Marrickville facility in mid-July 2014 would be available for Portland to purchase and distribute to its customers
(“Estoppel Representations”).
By reason of the Estoppel Representations, Portland was induced to assume and expect that Mr Wulff and/or Firtal Brands were committed to enabling Portland to:
a)continue to be able to promote Razorpit in Australia in 2014;
b)supply Razorpit to Shaver Shop in New Zealand;
c)purchase and distribute to its customers at least the 10,000 units of Razorpit stock in the Marrickville facility; and
d)continue to have the exclusive distribution rights for Razorpit for direct retail outlets in Australia for the purpose of building up the market for Razorpit, subject to reasonable notice of termination of those rights being provided.
It was alleged that Portland acted in reliance on the assumptions and expectations induced by the Estoppel Representations and in the period before 30 July 2014 invested substantial time, money and reputation to build up the market awareness, distribution channels and monthly sales for Razorpit. Portland alleged that Mr Wulff and/or Firtal Brands knew, ought to have known and/or intended that Portland would act accordingly and that, by so acting, Portland would be exposed to detriment if the Estoppel Representations were withdrawn and/or if reasonable notice of termination of the Distribution Agreement and/or the Razorpit supply arrangements was not given.
Portland alleged that on 30 July 2014 Mr Wulff and/or Firtal Brands purported to withdraw from the Estoppel Representations and/or to terminate the Distribution Agreement and/or the Razorpit supply arrangements without notice. Portland alleged that it had, as a consequence, suffered detriment since 31 July 2014 because Mr Wulff and/or Firtal Brands acted contrary to and failed to fulfil Portland’s assumptions and expectations.
Portland alleged that it would be against good conscience and unjust for Mr Wulff and/or Firtal Brands to be able to withdraw from the Estoppel Representations or to be able to terminate the Distribution Agreement and/or the Razorpit supply arrangements without reasonable notice.

Claims against the Unity

Wrongful interference with contractual relations

Portland alleged that between about 20 June 2014 and 30 July 2014 and before it was advised that the Distribution Agreement had been terminated, Unity intentionally induced Mr Wulff and/or Firtal Brands to breach the Distribution Agreement. Relevantly, it was alleged in this regard that:
a)Unity was aware that Portland had legal rights to distribute Razorpit products throughout Australia;
b)Unity and Firtal Brands discussed the opportunity for Unity to take over the Distribution Agreement from Portland and Unity’s capacity to distribute Razorpit products throughout Australia;
c)Unity procured the agreement of Shaver Shop to contribute $100,000 towards a television advertising campaign and to provide its network of franchises as a distribution network for Razorpit;
d)Unity caused Mr Wulff and/or Firtal Brands to believe that its market presence, experience and capacity made Unity a better option than Portland for the distribution of Razorpit products in Australia;
e)Unity caused Mr Wulff and/or Firtal Brands to agree to contractual terms on which it would pay for, and/or arrange for, the storage by it of the Razorpit stock which was at that time stored in the Marrickville facility; and
f)Unity caused Mr Wulff and/or Firtal Brands to arrange for the removal of the Razorpit stock stored in the Marrickville facility and its transport to storage facilities nominated by Unity.
Further and in the alternative, Portland alleged that Unity:
a)wilfully disregarded the existence and/or terms of the Distribution Agreement;
b)wilfully refrained from enquiring whether the Distribution Agreement might have been lawfully terminated before it accepted the terms of its contract with Mr Wulff and/or Firtal Brands; and
c)wilfully disregarded or was recklessly indifferent or wilfully blind to whether the Distribution Agreement had been lawfully terminated before it accepted the terms of the contract with Mr Wulff and/or Firtal Brands.
Portland alleged that on or before 25 July 2014 Unity told Firtal Brands that it was willing to take over the entire Razorpit stock that had been available to it (Portland). Thereafter, on or before 29 July 2014, Mr Wulff sold that stock to a new distributor and had it removed to a new storage facility nominated by Unity.

Infringement of copyright

Portland alleged that it was the owner of the copyright of two literary works within the meaning of s.31 of the Copyright Act 1968, being the slogan “Shave Yourself a Fortune” (“First Literary Work”) and a poster, as amended in mid-2013, comprising the First Literary Work, images and text (“Second Literary Work”).
It was alleged that from at least 4 August 2014, Unity, without the licence of Portland, used the First and Second Literary Works and/or authorised or acquiesced to their use by others in a material form which infringed Portland’s copyright.

Misleading or deceptive conduct

Portland alleged that from about 31 July 2014, during the notice period for termination of the Distribution Agreement, Unity commenced promotional activities representing that it was the distributor of Razorpit in Australia. It was alleged in this regard that Unity:
a)used the First and Second Literary Works at the Shaver Shop Annual Conference on 4 August 2014;
b)caused, contributed to or acquiesced in Shaver Shop using the First and Second Literary Works in Shaver Shop outlets; and
c)used words which represented that the change of distribution from Portland to Unity would not change the supply arrangements for Razorpit.
Portland alleged that such conduct contravened of s.18 of the ACL because it was misleading and deceptive or likely to mislead and deceive direct retail consumers dealing with Unity to believe that:
a)Unity was licensed by Portland to use the First and Second Literary Works in the course of its promotional activities; and/or
b)Unity was associated in trade with Portland, had the approval, endorsement or authorisation of Portland or that it was Portland.
Portland alleged that such conduct also amounted to false and misleading representations in contravention of s.29 of the ACL.

Loss and damage

In addition to declaratory relief, Portland seeks from Mr Wulff and/or Firtal Brands damages and/or equitable damages in the amount of $325,387, or an amount not exceeding the Court’s $750,000 jurisdictional limit pursuant to s.138A of the CCA.
Portland seeks the same damages from Unity together with exemplary damages for its alleged wrongful interference with contractual relations, and damages pursuant to s.115 of the Copyright Act.
Portland additionally sought orders restraining Unity from using, authorising the use of or acquiescing in the use by others of the First and Second Literary Works without its licence. Alternatively, it sought payment by Unity of the profits made arising from its alleged infringement of Portland’s copyright.

DEFENCE

The respondents opposed the application in its entirety and denied the substantive allegations made against them.

Agreement between Mr Wulff and Firtal Brands

The respondents alleged that in or about mid-2009 Mr Wulff entered into an oral agreement with Firtal Brands whereby it was agreed that:
a)Firtal Brands would sell Razorpit to Mr Wulff from time to time as stock was required;
b)Mr Wulff would be responsible for the logistics of selling the Razorpit product to Australian customers;
c)Firtal Brands would act as a sales representative for Mr Wulff on the basis that it would be paid a commission of $3.00 per Razorpit sold in Australia; and
d)Mr Wulff would be remunerated by the difference between the proceeds of sales to Australian customers and the costs of those sales.
The respondents alleged that under this agreement Mr Wulff was independent of Firtal Brands and was not its agent and Firtal Brands was not his principal.
The respondents alleged that this agreement was terminated by Firtal Brands in July 2014.

“Dealings” between Portland and Mr Wulff

No Distribution Agreement

The respondents denied the existence of any Distribution Agreement and alleged that Portland specifically rejected the notion of entering into a formal distributorship agreement as this would have obliged it to order specific minimum quantities on a monthly basis and undertake other obligations (such as defined advertising) which it felt would be too onerous.
The respondents alleged that whilst there was no formal or binding agreement between Portland and Mr Wulff, there was a course of dealings between them as follows:
a)Portland would place orders for Razorpits from time to time with Mr Wulff;
b)Mr Wulff would consider each order as it was placed and decide whether or not to accept the order and on what terms;
c)Mr Wulff did accept and supply various orders from time to time;
d)there was no agreement obliging Mr Wulff to accept any particular order or to supply any particular number of Razorpit units to Portland other than those orders which Mr Wulff chose to accept from time to time;
e)there was no agreement obliging Portland to order any of the Razorpits or to order a certain or minimum number from time to time;
f)payment for accepted orders was to be made according to the terms of each order. The payment terms changed over time as Portland persistently failed to pay on time;
g)there was no agreement prescribing what Portland was to do with the stock supplied to it or to whom it could supply it;
h)there was no agreement that Portland was obliged to advertise or promote the product or to expend any effort or money doing so, although on occasions the costs of Razorpit units for particular orders were reduced after negotiation as a gesture of goodwill when Portland claimed it had expended funds in advertising; and
i)Portland was obliged to pay Mr Wulff for the stock timeously in accordance with the invoices and payment terms for each order.
The respondents alleged that there was no binding overall arrangement for Portland to be supplied with Razorpit in Australia on an exclusive basis or at all and no binding agreement between Portland and Mr Wulff other than those individual contracts which came into existence on the acceptance by Mr Wulff of each order from Portland.
The respondents alleged that in breach of the terms of payment for individual orders, Portland persistently failed to pay Mr Wulff on time and in accordance with payment terms. It was alleged in this regard that Portland still owed Mr Wulff $13,395.93 in respect of unpaid stock.
The respondents alleged that as a result of the breaches, Mr Wulff was constantly unable to pay Firtal Brands in a timely way for the stock obtained from it which had been used to supply Portland. From July 2014, following termination of the arrangement between Mr Wulff and Firtal Brands, Mr Wulff ceased to accept orders from Portland.
In relation to the 10,000 units of stock, the respondents alleged that as Portland was under no obligation to purchase it and Mr Wulff was under no obligation to sell it to Portland, a term allowing Portland time in relation to that stock ought not be implied.
It was further alleged that in circumstances where Portland had had no contractual obligations and had rejected binding itself to a formal distribution agreement, an implied term allowing it a period of notice to obtain the commercial benefit of the time and money it had invested ought not be implied even if there had been an overall distribution agreement.

Distribution Agreement

The respondents alleged in the alternative that, if there was such an agreement, it was terminable at will and was duly terminated on 29 July 2014, or alternatively on 30 or 31 July 2014.
Alternatively, if there was a distribution agreement terminable on reasonable notice, such notice had been given. It was alleged that termination occurred on 29, 30 or 31 July 2014.
The respondents alleged that Portland’s persistent late payments amounted to breaches of an essential term of the agreement. It was alleged that Mr Wulff accepted those breaches and brought the contract to an end.
Alternatively, it was alleged that Portland repudiated the agreement by its late payments and that such repudiation was accepted by Mr Wulff who brought the contract to an end.

Relationship between Portland and Firtal Brands

The respondents alleged that there was no agreement of any nature between Portland and Firtal Brands and, as such, Firtal Brands had no obligation to supply Razorpit units.

RELEVANT LEGISLATION

Australian Consumer Law

The ACL is found in sch.2 to the CCA. Section 4 provides:
4 Misleading representations with respect to future matters
(1)     If:
(a)a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b)the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
(2)For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a)     a party to the proceeding; or
(b)     any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
…
Part 2-1 of chapter 2 and pt.3-1 of chapter 3 of the ACL set out the general and specific protections, respectively, in respect of misleading or deceptive conduct:
18 Misleading or deceptive conduct
(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2)Nothing in Part 3‑1 (which is about unfair practices) limits by implication subsection (1).
…
29 False or misleading representations about goods or services
(1)A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
…
(d)make a false or misleading representation that a particular person has agreed to acquire goods or services; or
(e)make a false or misleading representation that purports to be a testimonial by any person relating to goods or services; or
(f)      make a false or misleading representation concerning:
(i)      a testimonial by any person; or
(ii)     a representation that purports to be such a testimonial;
relating to goods or services; or
(g)make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or
(h)make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or
(i)make a false or misleading representation with respect to the price of goods or services; or
(j)     make a false or misleading representation concerning the availability of facilities for the repair of goods or of spare parts for goods; or
(k)make a false or misleading representation concerning the place of origin of goods; or
(l)make a false or misleading representation concerning the need for any goods or services; or
(m)make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3‑2); or
(n)make a false or misleading representation concerning a requirement to pay for a contractual right that:
(i)          is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3‑2); and
(ii)     a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law).
…

Copyright Act

Division 1 of pt.3 pf the Copyright Act sets out provisions relating to the nature, duration and ownership of copyright in works. In this regard, at all material times ss.31 and 35 relevantly provided:
31 Nature of copyright in original works
(1) For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a work, is the exclusive right:
(a) in the case of a literary, dramatic or musical work, to do all or any of the following acts:
(i)     to reproduce the work in a material form;
(ii)     to publish the work;
(iii)    to perform the work in public;
(iv) to communicate the work to the public;
(vi) to make an adaptation of the work;
(vii)   to do, in relation to a work that is an adaptation of the first‑mentioned work, any of the acts specified in relation to the first‑mentioned work in subparagraphs (i) to (iv), inclusive; …
…
35 Ownership of copyright in original works
(1) This section has effect subject to Parts VII and X.
(2) Subject to this section, the author of a literary, dramatic, musical or artistic work is the owner of any copyright subsisting in the work by virtue of this Part.
(3) The operation of any of the next three succeeding subsections in relation to copyright in a particular work may be excluded or modified by agreement.
...
(6) Where a literary, dramatic or artistic work to which neither of the last two preceding subsections applies, or a musical work, is made by the author in pursuance of the terms of his or her employment by another person under a contract of service or apprenticeship, that other person is the owner of any copyright subsisting in the work by virtue of this Part.
…
Section 115 relevantly provides:
115 Actions for infringement
…
(2) Subject to this Act, the relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the court thinks fit) and either damages or an account of profits.
…
(4)     Where, in an action under this section:
(a) an infringement of copyright is established; and
(b) the court is satisfied that it is proper to do so, having regard to:
(i)     the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and
(ii)    whether the infringement involved the conversion of a work or other subject‑matter from hardcopy or analog form into a digital or other electronic machine‑readable form; and
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.

APPLICANT’S EVIDENCE

Oscar de Vries

Formation of the Distribution Agreement

Mr de Vries is Portland’s sole director and shareholder. On 14 April 2010 he emailed Firtal Brands and enquired about the possibility of distributing Razorpit in Australia. Mr Mikkel Salling, the Chief Executive Officer of Firtal Brands, replied on 4 May 2010 and advised Mr de Vries of the company’s basic distribution terms. Mr de Vries deposed that the distribution terms were initially too risky for him to consider pursuing.
On 13 July 2011 Mr Salling emailed Mr de Vries as follows:
Well, since we spoke the last time we have set-up an Australian warehouse in Perth and are supplying a few smaller retailers. However we are not doing a dedicated sales effort in Australia. …
Bottom line is that we are still looking for a distributor who can make a massive market introduction and get it listed with some of the majors. …
If you are interested in picking up the dialogue again I would be happy to do so. Terms are still the same. Please advice [sic] how we could move forward.
Mr de Vries and Mr Salling exchanged numerous emails between July and September 2011 which culminated in them meeting in Amsterdam on 8 September 2011. Mr de Vries deposed that they had a conversation to the following effect:
Mr Salling:Razorpit was invented by … and we obtained the rights to distribute it. We have attempted to market the product in Australia and a friend of mine, Henrik Wulff, who is also a Dane is our agent in Perth, Western Australia. We store the stock in his garage and he distributes it to small online retailers from time to time.
We have a major retailer in Denmark and it has been successful but we desperately want major retailers in Australia to sell it. Henrik has been trying to market the product but he has a full time job as a Police officer so is unable to work on Razorpit full time to build the market.
Mr de Vries: The product is complimentary to my shaving products and it’s an add-on to what I do. It is the perfect product for me to get into Shaver Shop who I already have as a major retail customer. I have existing distribution channels for my own products in Coles, Priceline, Shaver Shop and pharmacies that I can use to help build distribution for Razorpit.
Mr Salling:I can let you buy Razorpit for A$8.75 per unit to help facilitate you getting it into Shaver Shop. Henrik is holding stock in Perth so you have to buy it directly from him.
Mr de Vries: Great, thank you. That arrangement works for me because I don’t have to buy such onerous quantities. I’ll get stuck into and try and get it into Shaver Shop.
Mr de Vries said that during that meeting something had been said about the potential arrangement being an exclusive distribution arrangement and that he would be the only seller to retailers.
In cross-examination Mr de Vries said that it was agreed during that meeting that Portland would purchase Razorpit at wholesale prices. He could not recall whether the specific figure of $8.75 was discussed but that was the price he had started with.
Mr de Vries said that no specific commitment was made in relation to advertising other than that he would advertise in some fashion. However, he agreed that he did not have to advertise at all if he did not want to.
Mr de Vries denied that what emerged from that meeting was a “loose arrangement”. He said that what they had was a “collaborative arrangement”.

Events in 2012

Mr de Vries deposed that he returned to Sydney about a week later and started to plan how he would build up the market for Razorpit in Australia. It is apparent from the emails exhibited to his affidavit that Mr de Vries was able to supply Razorpit to various Shaver Shop outlets during 2012 using stock which he had purchased directly from Mr Wulff in Perth. However, it is also apparent that sales of Razorpit fell below expectations. In an email to Mr Wulff dated 10 December 2012 Mr de Vries stated:
Shaver Shop sales have been really bad, and it’s caught me out. The catalogue promotion did not deliver any sales. …
… The problem with Razorpit is that I need to invest heavily in marketing before I can expect any sales, which erodes the margin. Most of the stores only ordered a pathetic amount – 6 or 12 units per store – considering it was in the father’s day catalogue. …

Events in 2013

Mr de Vries deposed that he formed the view in January 2013 that he needed to spend money on advertising to promote the product and generate sales. He discussed the matter with his daughter who came up with the slogan “Shave yourself a fortune”. Mr de Vries then asked a family friend, a Mr Gover, to design a poster incorporating the slogan and a picture of a Razorpit unit as a promotional tool for the product. Mr de Vries deposed:
On 22 January 2013, Luke Gover sent me an email with the poster he had designed …
On 22 January 2013 Mr de Vries emailed Mr Wulff a copy of the poster along with commentary about his strategy for creating an advertising campaign for Razorpit:
I am working on a deal with a friend in Melbourne, whose company handles the washroom ads in cinemas, shopping centres and airports. This would be right above the urinals in as many spots as possible. Reality is without advertising, it does not sell and some of the Shaver Shops want to return stock. It is not selling through.
Meanwhile, I have my own financial dramas. Got my new Gel into Woolworths, but manufacturing and their late payment terms are crippling. Busy trying to raise some capital and will have to pay o/s invoice over the next couple of months. It’s really caught me out and in hindsight I got into RazorPit half-baked.
Sorry, but just need to ride this period out and at the same time put something in place that will boost sales quickly and sustainably.
Mr de Vries also sent Mr Salling and David Grant, then of Shaver Shop, a copy of the proposed poster.
On 7 February 2013 Mr de Vries asked Mr Wulff to reduce Razorpit’s unit price as he (Mr de Vries) would be spending money on advertising. On 12 February 2013 Mr Salling offered to reduce the unit price of Razorpit from $8.75 to $7.40 in order to support Mr de Vries’s marketing efforts provided, amongst other things, that Mr de Vries committed to purchasing a minimum of 504 units. While no agreement was reached in relation to that minimum quantity (and it was never raised again), from at least 13 February 2013 Mr de Vries was charged $7.40 per unit.
On 16 February 2013 Mr de Vries emailed Mr Salling as follows:
The ad campaign is a step forward because without it Shaver Shop couldn’t sell any Razorpits. It’s paying off in that sense, but not financially at this stage because of the advertising costs I am incurring.
…
Beyond these next 2000 units, it all depends on whether the advertising actually turns a profit for me. Fingers crossed.
Mr de Vries agreed that he could have terminated the relationship at this point and that that would have been the end of things.
On 18 February 2013, following further correspondence between them, Mr Salling emailed Mr de Vries, relevantly, as follows:
Understood. I am very interested in finding a way for you to make money on this project. From my point of view I won’t be making any money long term if you give up before we build critical mass and recognition.
What made me a bit cautious in this particular matter was the fact that several payments were several months over due and I were [sic] not sure if you were about to ditch Razorpit and focus on your other business.
…
In terms of making Razorpit a profitable business for you I can not [sic] offer to reduce the sales price as the margin for Razorpit Australia is already as tiny as it can be. Instead Firtal Brands will offer a marketing contribution of AU$1.00 per units ordered through the rest of 2013. The marketing contribution will be deducted on invoices from Razorpit Australia.
With the new pricing and the marketing contribution you have a total saving of AU$2.35/unit. If this does not make the business viable I am afraid there is no more we can do.
On 22 February 2013 Mr de Vries emailed Shaver Shop complaining that some of their shops had no stock of Razorpit and could not benefit from his advertising campaign. However, on 7 March 2013 he emailed Mr Salling saying that he had run out of stock and that as he estimated future regular sales of 1,500-2,000 units per month it would be more efficient if, in future, stock was delivered to Sydney rather than to Mr Wulff in Perth.
On 8 March 2013 Mr de Vries was copied into an email from Mr Salling to Mr Wulff. In that email Mr Salling advised Mr Wulff that he and Mr de Vries had spoken and had agreed that in order to maintain the momentum Mr Salling would be shipping 1080 Razorpit units from Denmark directly to Mr de Vries in Sydney on the following terms:
Price: AU$6.40 less AU$1.00 in Firtal marketing contribution = AU$5.40/unit
Terms: 50% payment in advance … Remaining 50% on 8^th May [60 days later].
Mr de Vries was informed on 26 March 2013 that Razorpit would be featured in The Weekend Australian Magazine over the weekend of 6-7 April 2013. As a result, he arranged for the “Shave Yourself a Fortune” poster to be updated to include the words “As featured in The Weekend Australian”.
On 3 April 2013 Mr Wulff agreed to Mr de Vries’s request to arrange storage space in Sydney for Razorpit stock. The parties agreed to use a warehouse facility in Marrickville which Mr de Vries was already using to store non-Razorpit stock.
Mr de Vries and Mr Wulff continued to exchange numerous emails between April and December 2013. Most of their emails related to the issuing and payment of invoices, orders and the delivery and/or collection of Razorpit stock in Australia.
Mr de Vries and Mr Salling also exchanged numerous emails during this period. For the most part, their emails were concerned with:
a)Mr de Vries’s marketing and promotional efforts;
b)stock management issues, including resupply of Australian stock, shipment and delivery issues; and
c)Razorpit sales and promotions in overseas markets.
On 28 October 2013 Mr Salling emailed Mr de Vries and Mr Wulff as follows:
Hi Oscar,
We can resupply when needed but we can not [sic] afford to have a huge inventory in Sydney. You are buying on very extraordinary terms and if we offered the same storage and payment conditions to all of our distribution partners we would kill ourself. Hope you understand.
Henrik: Let me know when we are down to 4,000 pcs on stock in Sydney.
In late November 2013 Mr de Vries and Mr Salling had the following email exchange:
Mr de Vries, 26 November 2013:
Just committed to biggest ever campaign. 40 shopping centres + 58 cinemas + Qantas terminals around Australia, so $$$ gone. …
Mr Salling, 27 November 2013:
Great Oscar.
Are you still 100% focused on Shavershop or also on other retailers? At some point we need to create new retail partners. The question is when the timing is right.
Mr de Vries, 26 November 2013 (Australian timezone):
They [Shavershop] have 75 stores now and keep expanding. Apart from supermarkets Coles and Woolworths, there are no other viable chains in my view. However, I have pitched twice to Australia Post and will pitch again early 2014.
Mr Salling, 29 November 2013:
I trust you handle positioning in Australia the best possible way. We share the same interest and your decisions has [sic] proven to be solid so far.

Events in 2014

On 10 February 2014 Mr Wulff emailed Mr de Vries as follows:
Hi Oscar,
I’ve attached invoices for the 20 cartons the other day and the remaining 27 cartons as requested. I’ve also advised ADS [Advanced Distribution Services i.e. the Marrickville warehouse], so all good for collection.
Now last year we hardly made any profit, mainly because of the $1 discount you received on all orders. At the same time we took on additional storage expenses in order to accommodate you. Furthermore the weakened Australian dollar vs. US dollar means I have to pay nearly 5-10% more for orders placed now compared to a year ago.
However I have to acknowledge you’ve been very successful in the past 12 months and I’ve been very impressed with the sale numbers you’ve reached. So in order to assist you with marketing I’ve added a 50 cent discount to both these orders (47 cartons in total) and will continue to do so in the foreseeable future.
I hope you’ll find this an acceptable solution and hopefully continue promoting Razorpit in 2014.
On 20 March 2014 Mr de Vries and Mr Salling had the following email exchange:
Mr de Vries:
Just got this picture sent by one of the Shaver Shop buyers, who questioned me supplying them exclusively …
This is a barber shop chain in Sydney. Do you supply them?
I have been spending so (too) much on advertising and obviously I am not keen to see other stores riding on the back of that.
Mr Salling:
Have you promised exclusivity to Shaver Shop? If so, I am a bit surprised.
As we told you at the beginning of our partnership we have been supplying a small wholesale company in Sydney who sells to barber salons and male grooming resellers. I think they supply 20-30 independents. They were the company to achieve the Men’s Health award and probably the reason you were made aware of the Razorpit in the first place.
I can understand why you forgot about this as we didn’t discuss it much since then. So the big surprise is why Shaver Shop didn’t notice that there are other resellers on the market before now. I found these onliners [sic] in five minutes. Thought you were supplying some of them.
How do you suggest we handle this? I am open to discuss an agreement where you take over all the accounts. …
During cross-examination Mr de Vries was taken to the following exchange of emails which were included in Mr Salling’s affidavit of 17 December 2015 but were not apparently included in Mr de Vries’s affidavits. The exchange is a continuation of the parties’ discussion of 20 March 2014:
Mr Salling:
… Anyway, let me know if I should draft a proposal for an exclusive agreement.
Mr de Vries:
Let’s definitely discuss.
Not quite sure how far I can take it though, without TV. … Looked at TV but it just isn’t affordable.
Mr Salling:
… Will send you a proposal for a distribution agreement next week.
Mr de Vries denied that the above exchange indicated that Portland had never had an exclusive distribution agreement with Firtal Brands, that this was the first time such an agreement had been raised, and that he had deliberately excluded these emails from his affidavits because they were inconsistent with his assertion that in Amsterdam on 8 September 2011 he and Mr Salling had agreed that he would have an exclusive distribution agreement. In relation to the latter point, Mr de Vries said that he thought that every email had been printed.
On 21 March 2014 Mr Salling emailed Mr de Vries and advised him that he was planning to ship 10,000 units to Sydney in early June.
On 31 March 2014 Mr de Vries employed his daughter on a full-time basis to work in the business as he was too busy to do everything that he wanted to do to promote the product. Mr de Vries said that his daughter was specifically tasked with exploiting social media and public relations and that 50% of her time was focused on Razorpit. Her duties in this regard included:
a)issuing a press release to target media for Fathers’ Day 2014;
b)establishing a social media presence for Razorpit; and
c)directing the creation of a Razorpit website for the Australian market.
On 16 May 2014 Mr Wulff emailed Mr de Vries and advised him that he was yet to approve the purchase of the 10,000 units and would be discussing it further with Mr Salling.
On 14 April 2014 Mr Salling forwarded to Mr de Vries an email which he had received from AAB Fashion, a company which supplied Shaver Shop with various product lines. AAB Fashion indicated that they were interested in discussing the possibility of taking over the supply of Razorpit. In his email to Mr de Vries, Mr Salling stated that he had turned the offer down. The following day, Mr Salling received another expression of interest which he also forwarded to Mr de Vries.
On 20 May 2014 Mr Salling emailed Mr de Vries as follows:
The 10000 pcs arrive in Sydney approx. 1^st July.
…
I’ll be straight forward. We work on a very tight margin with you, but are happy to do it because you put great effort in the advertising of Razorpit. The regular distribution price of Razorpit in Australia would be AU$10.00.
On top of the low price we are facilitating a lot of the tasks and costs that are usually handled by a distributor:
- import
- customs clearance
- warehousing
- extended payment terms
We don’t have a supply issue. We can supply all of the products you need. But the fact that you don’t forecast orders, always talk about financial struggle, always talk about cutting off advertising and always being late on payments really creates a difficult environment for our business.
If all these things are reality and not just a way of negotiating better terms then it might make more sense that we work on an agents agreement instead were [sic] you get 10% commission for the revenue you bring in. We would then pay for the advertising and shipments to retailers. You should only handle communications and coordination. You would have no costs – only earnings.
At least you should put forward documentation of sales prices and costs so we can better understand where you are coming from.
Let me know how we can proceed. I don’t think you pointing fingers at our ability to deliver and us pointing fingers at your ability to make payments on time is a healthy path forward for any of us.
Mr de Vries responded, relevantly, as follows:
As long as I know more stock is coming that’s fine. Not trying to negotiate better terms, but clearly I have to manage margins and cost carefully.
Cannot forecast orders other than saying we do 2000-2500 units in a good month.
On 28 May 2014 Mr Salling received an expression of interest from CFC Australia, a company which supplied pharmacies and barbershops in Australia. Mr Salling forwarded that email to Mr de Vries, stating:
Are you interested in working with them? They told me they need a landed price of AU$10.00 to make it work – So would allow for a small margin for you if you supply them.
Let me know if you are making contact or if you want me to turn them down.
Mr de Vries and Mr Salling then exchanged the following emails on 28 May 2014:
Mr de Vries:
Thanks for forwarding.
In theory every extra sale sounds good, but at that price all it is is just moving a few extra units without them covering any of the advertising costs. And we only sell a Razorpit once.
… The next best step is for me to keep trying to get a national chain like Priceline or Australia Post.
Incidentally, Shaver Shop are opening 3 stores in New Zealand and want me to supply them. Do you sell there yet?
Mr Salling:
I trust your decision. I’ll write them later today and tell we can not [sic] supply them.
We supply a few online stores in New Zealand but have no distribution partner. Feel free to supply Shaver Shop there.
In an email dated 1 June 2014 which was copied to Mr de Vries, Mr Salling responded to a further expression of interest as follows:
We already work with a distribution partner in Australia. I have copied in Oscar de Vries from Portland Marketing who handles all our Australian distribution. Feel free to reach out to Oscar to see if there is any way you can work together.
On 10 June 2014 Mr de Vries advised Mr Salling that he had run out of stock and asked him to confirm when the shipment of 10,000 Razorpit units was expected to arrive in Sydney. Mr Salling responded the next day, stating that the units had been shipped a couple of weeks earlier and that he would revert with a delivery date.
Mr de Vries deposed that on 20 June 2014 he emailed Kathleen Radford of Shaver Shop, at her request, a soft copy of the “Shave Yourself a Fortune” poster.

On 1 July 2014 Mr de Vries emailed Mr Salling as follows:
Just taking orders for 1500+ units. Some very urgent.
When will new shipment arrive?
Mr Salling responded:
7-10 days for the 10k to arrive. Depending on customs.
Henrik: Could you contact the local DSV office and ask for an update?
On 10 July 2014 Mr de Vries emailed, it appears, Mr Wulff and Mr Salling, requesting an update on the 10,000 units. Mr Salling responded the next day:
I don’t have a clear answer. The container were [sic] picked out for inspection three days ago so it depends on how fast the authorities clear it. My best guess is delivery at warehouse tomorrow or Monday.
In early July 2014 a shipment of 10,000 Razorpit units was delivered to the warehouse in Marrickville. Mr de Vries agreed that he did not place a purchase order for the 10,000 units.
By email dated 11 July 2014 Mr Wulff advised Mr de Vries that he would not be releasing any further units until all outstanding invoices had been paid by Mr de Vries. Mr Wulff continued:
I simply can’t work on these terms, where you pay the initial 50% of an order whenever you see fit and then the remaining 50% when you need further stock, despite some of these invoice [sic] being several weeks and even months overdue.
So from now on I require 100% payment up front and I won’t release any units prior to payment being received into my bank account. I would have preferred to work on other terms, but as you have continuously failed to comply with any of these agreements, then I have to put measurements [sic] in place to protect my business.
In a further email to Mr de Vries on 13 July 2014, Mr Wulff stated:
Unfortunately I can’t release further stock until I have received full payment for outstanding invoices and full payment for the 40 cartons [which Mr de Vries had ordered]. To give you a very basic understanding of some of the payment issues, I can refer to a couple of the recent invoices. Invoice 95 was due for payment on 26/01/2014, you paid on 20/03/2014, when you needed further stock. Invoice 102 was due for payment on 21/02/2014, you paid on 11/04/2014, when you needed further stock. Most invoices have been a month or more overdue, actually I don’t believe you’ve paid one single invoice on time. So as far as a good working arrangement goes, I’ve addressed this issue and my concerns on numerous occasions, but you have for one reason or another failed to comply.
The lack of timely payments means I can’t trust when I’ll receive the next payment or when I can pay my outstanding invoices. As such I have to change payment terms in order to protect my business and reputation. We can’t change the current situation, but we can try to move forward together. If you are capable of paying on time over the next few months, then I’m willing to review the payment terms.
Mr de Vries emailed Mr Salling at around this time, expressing his surprise at Mr Wulff’s “reaction” and advising that “with zero credit and advertising campaign costs it’s going to be incredibly difficult”. In an email to Mr de Vries on 14 July 2014, Mr Salling responded:
If Henrik is right about never receiving payments on time I can not [sic] blame him for making that decision. I think we have been supportive on the terms offered and I would expect you to make payments on time. ...
Mr de Vries replied and Mr Salling responded further on 15 July 2014 saying:
I agree that we can not [sic] change terms on invoices already issued, but seeing that ALL 13 invoices this year have been paid too late, you might understand why Henrik is getting a bit nervous. In order to move forward I suggest we establish a credit maximum which you can not [sic] exceed. Henrik will get back to you on that.
I really don’t think that we are responsible for you making payments on time. We provide invoices with due dates and expect you to pay on time. …
Later that day, Mr Wulff emailed Mr de Vries saying:
Find an invoice for a further 10 cartons attached to this email. I have advised ADS they can release 50 cartons to you.
As discussed, I need to set a maximum credit limited [sic], especially with the large quantity of units now at hand. I will need to ensure you do not exceed a credit limit of $12,000. In order to keep it around that, I need you to pay invoices 118, 119 and 120 ASAP. They are due within the next 15 days anyway.
In a further email to Mr de Vries on 17 July 2014, Mr Wulff stated:
Please find an invoice for 10 cartons attached to this email. Once I have received payment for this and you’ve ensured the credit limit is below $12,000, then I’m happy to release stock.
In his response, Mr de Vries advised Mr Wulff that he had finalised payment for that invoice as well as invoice 118. Mr Wulff responded:
Yes but in order to keep the credit limit around $12,000 you need to pay invoice 119 and 120 as well. Once I’ve received payment confirmation, I will release the requested stock.
It appears that Mr de Vries paid those invoices as, later that day, Mr Wulff emailed the warehouse in Marrickville and advised them that Mr de Vries could collect ten cartons.
On 23 July 2014 Mr Wulff emailed Mr de Vries an invoice for five cartons of Razorpit stock, saying:
As you are well above the credit limit, I will need full payment in advance for this order, before I can release stock.
Later that day, Mr Wulff emailed the Marrickville warehouse authorising the release of five cartons of stock to Mr de Vries.
On 30 July 2014 Mr Wulff emailed Mr de Vries confirming a telephone conversation he said they had had the day before advising that he would not be supplying Mr de Vries with further Razorpit stock.
Later that day, Mr de Vries received an email from the operator of the warehouse in Marrickville confirming that the warehouse no longer held any stock for Mr Wulff. Mr de Vries subsequently emailed Mr Salling as follows:
Are you aware that Henrik has moved all stock out of ADS?
He called me last night and sent me a very strange email this morning, but no mention of having moved stock already. We have new orders to fulfil, a new ad campaign starting for Aug/Sep and NO stock whatsoever.
Can you please call me urgently.
Mr Salling replied on 31 July 2014 saying, amongst other things, that he was aware that Mr Wulff had decided to terminate the relationship and that it was “a decision belonging to Henrik and Razorpit Australia which I can not [sic] challenge”. In a follow-up email later that day, Mr Salling advised Mr de Vries that Mr Wulff was standing firm on his decision and had already sold all of the stock to a new distributor. Mr Salling repeated that Firtal Brands was not in a position to supply Mr de Vries directly without Mr Wulff’s approval.
Mr de Vries deposed that as at 30 July 2014 there were no amounts due and payable by Portland to Mr Wulff, although a number of invoices were due for payment later in accordance with their payment terms. Those invoices, totalling $13,395.95, remained outstanding.
In a letter to Portland’s solicitors dated 14 August 2014, Mr Wulff’s solicitors said:
We confirm that our client had an exclusive distribution agreement for the RAZORPIT razor sharpener product (Product) with the Danish manufacturer Firtal Brands, but that agreement was terminated on 25 July 2014. The distributorship was terminated due to our client’s consistent failure to pay the manufacturer within its terms of trade. This was a result of your client consistently failing to pay within our client’s terms of trade. (emphasis in original)
Attached to that letter was a letter from Firtal Brands to Mr Wulff dated 25 July 2014 saying:
Termination of distribution agreement
Dear Henrik,
Following our conference call I hereby confirm that our distribution agreement is terminated with immediate effect.
Seeing that the majority of payments have been significantly over due and you have not been able to maintain a suitable stock level to manage demand, we have decided to move forward with a new distribution partner named Unity Agencies.
I am sorry it has come to this, as I understand that late payments from Portland Marketing is the key reason for your financial struggles. However receiving payments as per agreement is key for a growth company like Firtal Brands. We need to manage cash flow carefully.
If you are interested in shipping off the remainder of your stock I can offer the opportunity of supplying Unity Agencies who are willing to take over the entire stock. Let me know if this is of interest.

Portland’s marketing strategy and plans

Mr de Vries deposed that Portland started to use “Shave Yourself a Fortune”, and the poster incorporating it, from about 1 February 2013. He deposed that it was only after the poster started to be used in the washroom advertising campaign that awareness of Razorpit and the volume of sales started to increase significantly.
Mr de Vries said that between February 2013 and the first half of 2014, he ran the washroom advertisements over a total period of eight to nine months. He was unable to provide specific dates but said that he would have advertised in the better months, for example, the months leading up to Fathers’ Day and Christmas. He said that on the occasion he stopped advertising for a month, sales dropped off “straightaway”.
Mr de Vries said that when he became aware that he would no longer be selling Razorpit, he withdrew the washroom advertisements which had been installed for August 2014 (and were supposed to continue in September) and replaced them with advertisements for his other products. He deposed that the advertising expenses for August and September 2014 had not yet been invoiced to or paid by Portland.
Mr de Vries deposed that based on the sales achieved in the December 2013 and June 2014 quarter, he had intended to continue to build Razorpit sales throughout the rest of 2014 and beyond.
Mr de Vries also deposed that as at 30 July 2014 he had put the following marketing strategies in place to continue building sales into the period leading up to Father’s Day and Christmas:
a)from 31 March 2014 he had employed his daughter on a full-time basis on a salary of $45,000 per annum plus superannuation to spend 50% of her time using social media and other media forms to arrange branding, marketing and promotional activities to promote Razorpit and build sales;
b)from about 2 April 2014, a Razorpit Australia Facebook page was created. He incurred costs to promote the page with “sponsored posts” which were paid advertising messages that appeared on targeted users’ newsfeeds;
c)from about 28 April 2014 he had arranged for the creation of a Razorpit Australia website;
d)from January 2013 he had used and occasionally updated the “Shave Yourself a Fortune” poster to advertise Razorpit in washrooms in Qantas Domestic airport terminals, shopping centres and cinemas around Australia;
e)between 1 May 2014 and 30 July 2014 he had arranged a promotional article for Razorpit to air on TV, the benefit of which he lost when he lost the distribution rights to Razorpit. He had to take steps to replace the promotion with other products;
f)between 2 and 4 June 2014 he had distributed an email to 47 journalists from Australian print publications to promote awareness of Razorpit and to build sales;
g)on 5 June 2014 he submitted an application for the trade mark of “Shave Yourself a Fortune” and “Shave a Fortune”; and
h)on or about 2 June 2014 he had made arrangements with Shaver Shop to include Razorpit in their Fathers’ Day catalogue.
Mr de Vries deposed that from 30 July 2014 he had orders for 1,418 Razorpit units which he was unable to supply.
Mr de Vries said that if he had been given nine months’ notice of the termination he would have been more circumspect in his marketing spending and would not have set up a website but would still have advertised in washrooms until Christmas 2014. If he had been given two months’ notice he would have continued with his advertising bookings for August and September 2014 but would not have gone beyond that.

Copyright

On 1 August 2014 Mr de Vries sent an email to various Shaver Shop stores alerting them to the fact that Portland was in dispute with the “overseas supplier” of Razorpit and that an alternative distributor in Australia had been appointed without notice. The email continued:
The pressing issue for us is that we have committed to a new upcoming national advertising campaign using new “SHAVE YOURSELF A FORTURNE” creative and committed to supplying existing orders that have been placed. At this stage, we are negotiating with the media company to remove all existing and new advertising in the washrooms nationally …
On 4 August 2014 someone at the Shaver Shop conference rang Mr de Vries and told him that Unity was using the “Shave Yourself a Fortune” poster at its conference stand. Mr de Vries’s then-solicitors wrote to Unity on 7 August 2014 alleging, amongst other things, that they had infringed Portland’s copyright in doing so.
In a letter dated “August 2014”, which Mr de Vries deposed was sent to his then-solicitors on 19 August 2014, Richard Gresham, the Managing Director of Unity, stated that his company had used the poster in the mistaken belief that it was a Shaver Shop advertisement. Mr Gresham undertook not to use the artwork again without Portland’s permission but rejected the allegation that it had suffered any loss or damage arising from Unity’s use of the poster.

Loss

Mr de Vries said that he would have sold 3,330 Razorpit units per month in the nine month notice period he alleged he should have been given and that the loss of $288,000 he claimed represented a loss of approximately $9.60 per unit. He deposed that that figure was based on a sale price of $15.50 per unit, less the purchase price of $5.90 per unit. Mr de Vries conceded that the costs of advertising ($1.50 per unit), freight (approximately 30-48 cents per unit) and warehousing (including a minimum pick fee of $15.70 per order) were not taken into account in that calculation.
Mr de Vries deposed that the annual cost of marketing Razorpit was approximately $60,000, comprising $22,000 for his daughter’s salary and $37,000 for advertising.
Mr de Vries deposed that having invested so much time, effort and money into the development of a market for Razorpit, after the distribution agreement was terminated he decided that the only way forward was to launch his own product. He came up with a new name – Razormate – which was trademarked on 26 August 2014. A website in that name was registered on 4 September 2014. Mr de Vries deposed that Portland sold its first Razormate product on 6 July 2015.

Tony Dimasi

Mr Dimasi is a retail economist who advises on the sales volumes various products or businesses are likely to achieve in particular circumstances. Mr Dimasi prepared a report on the volume of Razorpit sales which Portland would probably have achieved in the period July 2014 to June 2015, had it been able to continue supplying Razorpit to Shaver Shop in that period.
In his report, Mr Dimasi referred to the number of Razorpit units Portland sold to Shaver Shop on a monthly basis from March 2012 to July 2014. Mr Dimasi reported that those sales increased very strongly month on month, and continued to gather momentum as Portland implemented its “washroom advertising” program from February 2013. Mr Dimasi reported that, following the advertising campaign, Portland’s annual sales of Razorpit increased from 1,931 units to 21,766 units. Mr Dimasi also reported that in March 2014 Razorpit sales were 49% higher than they had been in March 2013 and that over the five month period March 2014 to July 2014 Portland’s sales of Razorpit were 82% higher than the corresponding period in 2013.
In making an assessment of the likely potential sales of Razorpit in the period July 2014 to June 2015, Mr Dimasi had regard to the following information:
a)Portland’s sales figures of Razorpit for the period March 2012 to July 2014, as provided by Mr de Vries. Mr Dimasi said that he did not independently verify these figures as that task had not been part of his brief;
b)the general retail trading background in shopping centres around Australia, based on monthly surveys of trading performance. These surveys did not look at specific sales of particular products. Rather, they contained sales figures for different categories of retailers and were used to measure the general health and trading conditions within regional shopping centres. Mr Dimasi reported in this regard that non-food speciality shops – the category in which Shaver Shop stores fell – saw significant improvement in trading conditions during the 2014/15 financial year; and
c)advice (presumably from Mr de Vries) that Portland had planned to continue the washroom advertising program and to extend its marketing strategies by using Facebook, creating a website and also an “infotainment” program which was to be aired on free to air television.
Mr Dimasi concluded:
In my opinion, given the strong trading conditions during 2014/15 within the shopping centres in which Portland Marketing was operating its Washroom Advertising program, and where most of the Shaver Shop outlets were situated, that as a minimum the sales growth momentum achieved for Razorpit during FY2013/14 would reasonably have expected to continue throughout FY2015/16. The additional marketing initiatives which Portland Marketing was proposing to undertake during FY2015 … would have contributed further to the sales growth momentum, and could potentially have resulted in even greater sales growth than the trend line estimates …
It is my view that sales of Razorpit for FY2014/15 by Portland Marketing to Shaver Shop would have been at least 40,000 units, having regard to all the available information. (emphasis included)
Mr Dimasi opined that the trajectory of sales indicated a higher figure but reported that he took a “somewhat conservative view” and assumed a moderation in the growth rate of sales.
Mr Dimasi said that he did not form a view about Razorpit’s marketing potential or whether it would be successful with or without advertising. He said that he was primarily looking at issues relating to patterns, trends and locations.
Mr Dimasi said that his projections were likely to be lower if the hypothetical scenario was that the business would be trading over the next nine months (from July 2014) “under conditions of winding down in an orderly fashion”. His projections were likely to be “significantly” lower if the winding down period occurred instead over two months. This was based on the fact that his projections assumed that the level of advertising in December 2013 would remain the same (whereas the number of advertising locations which had in fact been booked by Portland for August and September 2014 were significantly lower than in December 2013).

RESPONDENTS’ EVIDENCE

Henrik Wulff

Agreement with Firtal Brands

Mr Wulff deposed that in mid-2009 he was approached by Jesper Hvsejsel, one of the founders of Firtal Brands and an old school friend, about importing Firtal Brands’ Razorpit product into Australia and overseeing its sales. He deposed that after various discussions with Mr Salling, the other founder of Firtal Brands, they reached an informal agreement under which Firtal Brands would sell Razorpit products to him from time-to-time and he would be the primary person responsible for the logistics of selling the product to Australian customers, including importing it, dealing with customer issues, processing sales requests, handling invoicing and receipting and liaising with Australian customers to arrange the delivery of stock. Mr Wulff deposed that as part of the informal agreement Firtal Brands, acting through Mr Salling, acted as his sales representative by looking after the sales side of the business, which included brokering deals and making sure that sales were flowing.He deposed that Mr Salling was paid a commission of $3 per Razorpit sold in Australia while he (Mr Wulff) was remunerated from the net profits of the sales he made. He deposed that he would not have been interested in the arrangement if he had had to look after sales.

It was submitted that Mr Salling’s reply of 24 July 2014 would have been further confirmation that the agreement remained on foot:
We will terminate with Portland Marketing based on the fact that we can not [sic] rely on a partner that does not pay the bills. We plan on notifying Portland Marketing about the termination as soon as you and I have agreed on the final issues in the transition.
Portland argued that although Mr Salling went on to say in the next paragraph that:
From a contractual point of view there will not be any issue between Firtal and Portland Marketing as we never signed or proposed any agreement to them. …
the two quoted passages presented a contradiction such that Messrs Gresham and Grant could not use the latter statement to support a claim to have honestly believed that Firtal Brands and Portland did not have a contract. It was submitted that the contradiction was overlooked because the men were recklessly indifferent to whether a contract existed.
It was submitted that if the Court had any doubt about Unity’s knowledge on 22 and 23 July, then Mr Grant’s 7 August 2014 email to Mr Salling was unequivocal. In that email, Mr Grant attached a revised version of the draft distribution agreement, stating:
I have changed the date from October 1st to August 1st 2014 for ordering qty’s. I have also adjusted the figure down by 8,000 units to account for the stock we purchased in July. I want to avoid any issues for you about us ordering when you were technically dealing with Portland …
It was submitted that this email was evidence that Mr Grant was not only wilfully blind or recklessly indifferent to the subsistence of a contract between Portland and Firtal Brands but had actual knowledge of those contractual relations. It was submitted that this was effectively a concession that Unity was aware that it was ordering stock when Firtal Brands was technically still dealing with Portland.

Secondary argument

Portland’s secondary argument was that if the emails of 22 and 23 July 2014 did not constitute commitment to an agreement, then Mr Grant’s 24 July 2014 email, in which he said “This is now a done deal” and “All done, all sorted, pull the trigger”, did. It will be recalled that Mr Grant’s email had been preceded by an email in which Mr Salling had stated:
We plan on notifying Portland Marketing about the termination as soon as you and I have agreed on the final issues in the transition.
From a contractual point of view there will not be any issue between Firtal and Portland Marketing as we never signed or proposed any agreement to them.
Portland submitted that that email also represented “the ultimate commercial and legal contradiction” in that Firtal Brands accepted that termination was required but considered there to be no contractual liability. It argued that this ought to have been a cue to Mr Gresham to seek legal advice about risk but he did not do so because he was already committed, eager to represent Razorpit at the Shaver Shop conference and accustomed to hand-shake deals.

Generally

It was submitted that in order to determine intention and knowledge in this case, the Court had to look into Mr Gresham and Mr Grant’s states of mind, recalling that Mr Gresham was copied into Mr Grant’s email correspondence with Mr Salling. It was submitted, first, that Mr Gresham and Mr Grant were both financially motivated to do the transaction. Mr Gresham conceded that the transaction with Firtal Brands would have contributed to Mr Grant’s bonus-earning potential in accordance with the terms of his employment contract. As for Mr Gresham himself, it was submitted that any additional revenue generated for the business would advantageously affect his “bottom line” and the value of his shares.
It was submitted that the financial incentives driving Mr Gresham and Mr Grant were reflected in the emails which detailed their desire to get to the Shaver Shop conference on 4 August 2014. It was submitted in this regard that the transaction:
a)was first contemplated by Mr Gresham and Mr Grant on 9 July 2014 (presumably when Mr Salling emailed Mr Gresham and asked him if he would be interested in taking over the supply of Razorpit to Shaver Shop); and
b)was finalised approximately two weeks later, on 23 July 2014 by Mr Grant’s email of that date saying that Unity were willing to move forward (or 24 July 2014, on Portland’s secondary case that the transaction was finalised by Mr Grant’s email of that date confirming the deal).
It was submitted that the reason the transaction was finalised so quickly was because Mr Gresham and Mr Grant’s motivation “was exaggerated and enhanced” by the prospect of attending the Shaver Shop conference on 4 August 2014 “ready, willing and able to be the representative of Razorpit”. It was submitted that they would have seen the financial outcomes they were seeking to be achievable, thus further motivating them to complete the deal.

Discussion

As it has already been found that no contract subsisted between Portland and Firtal Brands, the allegation that Unity induced a breach of such a contract must fail at the first hurdle.
However, had there been a contract between those parties, Portland would have had to show a number of matters in order to make out its allegation. In Daebo Shipping Co Ltd v The Ship Go Star (2012) 207 FCR 220 it was said by the Full Federal Court that:
The tort of inducing a breach of contract consists of the following elements:
(1)there must be a contract between the plaintiff (or applicant) and a third party;
(2)the defendant (or respondent) must know that such a contract exists;
(3)the defendant must know that if the third party does, or fails to do, a particular act, that conduct of the third party would be a breach of the contract;
(4)the defendant must intend to induce or procure the third party to breach the contract by doing or failing to do that particular act;
(5)the breach must cause loss or damage to the plaintiff.
The gravamen of the tort is the defendant’s intention to induce or procure the breach in the knowledge that such a breach will interfere with the plaintiff’s contractual rights: Allstate Life Insurance Company v Australia & New Zealand Banking Group Ltd (1995) 58 FCR 26 at 43A-C per Lindgren J with whom Lockhart and Tamberlin JJ agreed; Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at [159]-[171] per Sheller, Stein and Giles JJA; LED Technologies Pty Ltd v Roadvision Pty Ltd (2012) 199 FCR 204 at [40]-[54] per Besanko J with whom Mansfield and Flick JJ agreed. As Lindgren J explained, the defendant must have “a fairly good idea” that the contract benefits another person in the relevant respect. He said that knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights, even though the defendant does not know the precise term that will be breached. Reckless indifference or wilful blindness can amount to knowledge for this purpose: Allstate at 43C-44F; Fightvision at [171]; LED at [54]. (at 240 [88]-[89])
There is no requisite intent if a person believed on reasonable grounds that what they induced or procured the contracting party to do would not be in breach of contract: TSG Franchise Management Pty Ltd v Cigarette & Gift Warehouse (Franchising) Pty Ltd (No 2) (2016) 340 ALR 230 at 244 [58], citing Short v The City Bank of Sydney (1912) 15 CLR 148 at 160.
Most importantly for this case, Portland had to show that Unity:
a)knew that a contract subsisted between Portland and Firtal Brands; and
b)intended to induce Firtal Brands to breach the contract or intended to procure such a breach.
The first question is whether Unity’s witnesses should be accepted when they said that they had no subjective belief in the existence of a contract between Portland and Firtal Brands.
I accept Mr Gresham’s evidence that, from 11 July 2014 when he emailed Mr Salling saying that Unity was interested in taking over the distribution of Razorpit in Australia, Mr Grant took over communication between the two companies, copying him into the correspondence. Those facts are significant because it is plain that Mr Gresham was senior to Mr Grant and I accept that he had the final say on whether the deal with Firtal Brands went ahead.
Portland stressed how close Firtal Brands and Unity were to an agreement on 23 July 2014 but I find that there was no agreement until the next day. I am persuaded by the email correspondence which passed between Messrs Grant and Salling from 21 to 24 July 2014 that Unity only bound itself to take over the distribution of Razorpit in Australia after it and Firtal Brands had worked through a number of issues which had required agreement or clarification. That point was reached with Mr Salling’s email of 24 July 2014 which led to Mr Grant’s reply of the same date saying that the deal had been done. The ownership of the remaining 8,000 Razorpit units, their sale price and marketing arrangements were issues which had to be addressed before that point could be reached.
Another important issue was Portland’s role and status. Consistently with the concern expressed in Mr Grant’s email of 23 July 2014, Mr Gresham’s oral evidence, which I accept, was that if he had been advised that Firtal Brands and Portland had a contract then the negotiation would have been treated differently and, specifically, Unity would have asked for more detail on termination periods applicable to Portland’s distributorship or whether Firtal Brands thought it had cause to terminate the contract for breach by Portland in which case they would have had to “sit on the sidelines” and see what happened. Neither of those circumstances would have amounted to a contractual breach by Firtal Brands and so association with such conduct would not have made Unity guilty of the tort alleged.
Although Portland conceded that Mr Gresham was a credible and honest witness, an impression I too formed of him, it sought to diminish the significance of his oral evidence concerning what he would have done if aware of the existence of the alleged contract on the basis that that evidence had been given in re-examination and so was less “authentic” than his evidence in cross-examination. The difficulty with that submission was that Mr Gresham was unshaken in cross-examination with no major concessions having been elicited from him. Moreover, his relevant evidence in re-examination was not different in import from that in cross-examination when he candidly stated that Unity wanted to obtain the Razorpit distributorship but whether it was going to be available was a matter for Firtal Brands:
Mr Stapleton: And you knew that it was almost impossible, based on the deal that Unity had offered to Firtal, that Firtal could give any notice of termination to Portland Marketing?
Mr Gresham: Well, Firtal could have made any decision they wished. I couldn’t influence that. We were giving them our side of the case. If he [Mr Salling] had come back and said he wants to give him a year’s notice, then that’s Firtal’s – he can make that decision. I can’t make that decision for him.
I conclude that Mr Gresham did not have a subjective belief that Firtal Brands and Portland had a contract in relation to the distribution of Razorpit in Australia. Plainly Mr Gresham was aware that Firtal Brands had a relationship with Portland by which the latter was distributing Razorpit in Australia but the documentary evidence is that at important stages in their negotiations prior to Unity’s commitment to the distributorship on 24 July 2014, Firtal Brands had advised that there was no contract between it and Portland. Nothing Mr Gresham said in cross-examination provided any persuasive reason to doubt his evidence that he relied on those statements.
Given that Mr Gresham was supervising Mr Grant’s negotiations, I conclude that it was his opinion which is the one to which regard should be had when identifying Unity’s subjective belief on the question.
But in any event, Mr Grant’s evidence on the question was substantially the same as Mr Gresham’s in that he said that he had relied on Mr Salling’s assurance that there was no contract between Firtal Brands and Portland and had believed there to have been no such contract. It was not suggested to him that his evidence on that point was incorrect. Further, the fact that the arrangement between Firtal Brands and Portland was not terminated until after Firtal Brands and Unity had reached an agreement is not necessarily contradictory of Mr Grant’s evidence, as Portland appears to believe.
Portland failed to demonstrate any plausible basis for Messrs Gresham or Grant to doubt the accuracy of the message which Firtal Brands gave them, namely that the relationship between it and Portland was not contractual in nature, or for the Court to doubt the genuineness of their evidence on this question. In the latter connection, Portland’s submission that Messrs Gresham and Grant were, at least in part, motivated to do the deal by the possibility of financial advantage flowing to them from securing the Razorpit distributorship, can be accepted. However, that fact is hardly shocking or surprising and, most importantly, of no materiality to what those men believed. It is to be noted that it was not suggested that cupidity caused them to give false evidence. Further, the fact that, as the evidence shows, Unity was indifferent to the consequences for Portland of the new arrangement does not mean that it was indifferent to whether Portland had a contract with Firtal Brands, which its conduct shows was indeed a matter of concern to it.
Finally, Portland’s case as to knowledge was not limited to the allegation that Unity had had actual knowledge of the contract in that it alleged in the alternative that Unity had been wilfully blind or recklessly indifferent to the contract’s existence or possible existence. However, these allegations are not made out because it is plain on the evidence that Unity did make enquiries of Firtal Brands regarding Portland and was reassured that there was no contract between them. The making of those enquiries shows that Unity was not wilfully blind or recklessly indifferent to the existence or possible existence of the sort of contract for which Portland has contended, had it actually existed.
For these reasons, even if a contract of the sort alleged had subsisted between Portland and Firtal Brands, I would find that at all material times Unity did not know or believe that to have been the case. I therefore conclude that even if the contract alleged had existed, Unity’s conduct would not have amounted to the tortious inducing of its breach.

Copyright

First literary work – “Shave yourself a fortune” slogan

Referring to Volunteer ECO Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd (2013) 102 IPR 161 and Sinanide v La Maison Kosmeao (1928) 139 LT 365, Portland submitted that common words used in a unique way involving judgment, effort and skill could be sufficiently original to attract copyright rights. Portland submitted that it had been an act of ingenuity, creativity and originality on the part of Mr de Vries’s daughter to insert one letter – H – into the well-known colloquial expression “save yourself a fortune” and to transform it thereby into a proposition with a particular double meaning relevant to this particular product. It was submitted that the two propositions – the essence of the product and its value proposition – were brought to life with the use of a single letter in a common phrase. It was submitted that that formulation was original, unique and possessed the necessary level of skill and judgment spoken of in the authorities.
Portland also submitted that the deed of assignment between Ms de Vries and Portland was an effective assignment of the copyright under s.196 of the Copyright Act such that it had standing to sue under the Act.

Second literary work – “Shave yourself a fortune” poster

In his affidavit of 23 December 2014 Mr de Vries deposed that:
Shortly after my conversation with Ellen, I asked a family friend of mine, Luke Gover, to design a poster incorporating “Shave yourself a fortune” and a picture of a Razorpit unit as a promotional tool for the product.
Portland submitted that Mr de Vries had directed Mr Gover to produce the poster with the Razorpit image and the words “Shave Yourself a Fortune” and that he had sourced the Razorpit logo and the Shaver Shop logo from Mr Salling and Shaver Shop respectively. Portland argued that as the person dictating the marketing strategy, Mr de Vries required the logos, the Razorpit image and the words “Shave Yourself a Fortune” to be incorporated into the poster, and it could be inferred that he had also suggested that the banknotes image be included. Portland submitted that Mr de Vries had first asked Mr Gover to put the elements together and at a later point to make amendments at his direction.
Portland submitted that Mr Gover was not a “creative” who had been hired for his intellect and skill and who had free reign to create an original work but a person who had simply been required to perform a task and was, in substance, no more than an amanuensis. Portland submitted that because the material elements of the poster had been provided to him by Mr de Vries, Mr Gover had not used any creative artistic ingenuity or skill to produce the poster and the subsequent amendment of it was also made at Mr de Vries’s direction. Additionally, Mr Gover’s two fees of $300 and $200 were, it was submitted, of a size commensurate with a person directed to perform a task under another’s direction rather than with a person exercising their own judgment.
Portland argued that therefore the design and originality of the Second Literary Work rested with it and that as the author of the final version of the poster it owned the Second Literary Work.

Infringement

It was submitted that Unity infringed Portland’s copyright when it used Portland’s poster at the Shaver Shop conference on 4 August 2014. Portland submitted that Unity could only avoid liability for damages if it had made reasonable inquiries and that ignorance alone was not a sufficient defence.
Portland submitted that Mr Gresham and Mr Grant’s evidence that they did not know that the poster belonged to Portland was “inherently improbable”. In that regard it was submitted that they knew that Shaver Shop did not own the poster because:
a)Mr Gresham admitted in cross-examination that he had seen the advertisement in men’s washrooms and knew that that form of advertising was not typically used by Shaver Shop;
b)Mr Grant accepted that Shaver Shop did not, while he was employed there, use that form of advertising;
c)they were aware, through Mr Salling, that Portland had arranged the washroom advertising.
It was consequently submitted that Unity would have known that the poster could only have been owned by Firtal Brands or Portland and that Messrs Gresham and Grant had been less than honest about who they thought owned the poster because they had been advised by Mr Salling that the washroom advertising had been arranged by Portland but nevertheless said that they thought the poster belonged to Firtal Brands. It was submitted that if Mr Gresham and Mr Grant had honestly believed that the poster belonged to Firtal Brands then they would have requested a copy from Mr Salling rather than Mr Fox of Shaver Shop.
It was submitted that Mr Grant did not make an inquiry about whether the poster was owned by Shaver Shop because he was aware that it was not.

Damages

Compensatory damages

Portland submitted that its copyright was breached on 4 August 2014 and that this continued until 19 August 2014 when the poster was returned. Portland submitted that the advertising campaign in the washrooms, which had been arranged for the whole of August 2014, contributed to Unity’s profit during the period of the copyright infringement and that Unity had been able to take advantage of that advertising because its wrongful use of Portland’s poster at the Shaver Shop conference linked it, in the minds of the franchisees present, to the product and created an impression that the existing marketing was still being used.

Portland submitted that its loss could be determined by reference to Unity’s profit made from the time it first infringed to the time it returned the poster, less an amount that reflected the profit that was naturally going to occur without any breach of the copyright. It was submitted that compensatory damages should be awarded based on sales of Razorpit in August 2014 as follows:
a)Unity’s August sales (2,377 units) multiplied by Portland’s gross margin of $8.10 per unit, giving a figure of $19,253; or
b)Portland’s lost sales, based on Mr Dimasi’s report, of 3,042 units for August 2014 less the 49 units actually sold (2,993 units) multiplied by Portland’s gross margin of $8.10 per unit, giving a figure of $24,243.

Aggravated damages

Portland submitted that aggravated damages were also justified because of what it described as Unity’s flagrant and blatant use of the material for its commercial benefit which Portland said, on the basis that no inquiries had been made, occurred with a positive disregard for its interests. It was submitted that Mr Gresham and Mr Grant’s conduct went beyond a failure to make reasonable inquiries in that they had turned a blind eye to who owned the poster and used it for their own benefit. Portland submitted in that connection that:
a)Mr Grant received a copy of the artwork from Mr de Vries in January 2013 while still at Shaver Shop but denied in cross-examination that he had received it;
b)Unity knew Shaver Shop did not produce an advertisement of that type because Shaver Shop did not advertise in men’s washrooms;
c)Unity knew that all of the advertising was being done by Portland and that Portland was using the artwork;
d)Unity had been in active dialogue with Firtal Brands and could have asked who owned the poster but chose not to and instead asked Shaver Shop for it;
e)Mr Gresham’s “August 2014” letter, referred to earlier at [113], in which he said that Unity had “inadvertently made 2 copies of the poster and displayed them”, was written before it was known that the email from Mr Grant to Mr Fox would be produced on discovery proving that the poster had been intentionally requested for Unity’s use at the Shaver Shop conference on 4 August 2014; and
f)Mr Gresham’s letter was an attempt to deflect liability from Unity’s deliberate and precise infringement of Portland’s copyright.
Portland contended that the evidence suggested that Messrs Gresham and Grant knew, before asking Shaver Shop for it, exactly who owned the poster and that Mr Gresham could not be accepted when he said that his statement in his August 2014 letter that Unity’s display of the poster had been inadvertent should be read to mean Unity used the copyright material inadvertently.

Discussion

First literary work

Assuming for present purposes that the “Shave yourself a fortune” slogan was a sufficiently creative use of the language to attract copyright once it was reduced to writing, and assuming that Ms de Vries did reduce it to writing, the case based on assignment of the copyright to Portland must nevertheless fail because no attempt was made to show how the alleged infringement of the copyright would have caused loss and damage to Ms de Vries.
The deed of assignment was dated 30 September 2014, which was a point in time after the alleged infringement. Consequently, any chose in action which was assigned with the alleged copyright in the slogan was whatever claim Ms de Vries might have had arising from the alleged infringement: s.115(1) of the Copyright Act; Seafolly Pty Ltd v Madden (2012) 297 ALR 337. No evidence was adduced to show what loss Ms de Vries might have suffered and so Portland’s derivative claim must fail for want of proof of relevant loss.

Second literary work

The evidence of the creation of the poster in its original form and then in its amended form was distinctly thin. In his affidavit of 23 December 2014 Mr de Vries said on those matters:
66.Shortly after my conversation with Ellen, I asked a family friend of mine, Luke Gover, to design a poster incorporating “Shave yourself a fortune” and a picture of a Razorpit unit as a promotional tool for the product.
67.On 22 January 2013, Luke Gover sent me an email with the poster he had designed …
…
89.On 27 March 2013, I received an email from Mr Salling in reply to my email to him on 26 March 2014, in which I forwarded an email from Ross Bilton, Deputy Chief Sub-editor of the Australian in which Ross Bilton confirmed Razorpit would be featured over the weekend of 6-7 April 2013. …
90.After receiving confirmation from Mr Bilton about the feature to appear in the Australian newspaper, on behalf of the applicant I arranged for the “Shave Yourself a Fortune” poster to be updated to include a quote stating “As featured in the Weekend Australian (Apr 6-7, 2013). …
…
295.On 30 September 2014, Luke Gover signed a Deed of Assignment of the Copyright in “Shave Yourself a Fortune” poster designed in January 2013 to the applicant.
It was apparent from invoices annexed to Mr de Vries’s affidavit of 12 April 2016 that Mr Gover performed design work on both versions of the poster.
That is as far as Portland’s evidence on this issue goes.
It is sufficiently clear that Mr Gover was an independent contractor rather than an employee and so Portland did not benefit from an automatic vesting in it of the copyright in the poster pursuant to s.35(6) of the Copyright Act.
Although it can be assumed, notwithstanding the absence of clear evidence on the point, that Mr de Vries supplied Mr Gover with all the components of the poster such as the text and the product’s image and logo, it is impossible to conclude from the available evidence that Mr de Vries had a significant hand in the design of the poster, much less that he was truly its author and that Mr Gover was no more than his amanuensis as Portland argued. The allegation that Portland owned the copyright in the poster as author is therefore not made out.
Consequently, I find that Mr Gover was the author of the poster, in both its iterations, and so owned the copyright in it. There was no evidence other than a bare assertion by Mr de Vries that Mr Gover had assigned that copyright to Portland, an explicit decision having been taken not to tender the instrument of assignment. The available evidence provides an insufficient basis to make a positive finding that Mr Gover successfully assigned his copyright to Portland.
As Portland has not proved that it owned the copyright in the poster, whether as author or assignee, its claim that Unity breached that copyright by displaying the poster at the Shaver Shop conference in August 2014 has not been proved.

Damages

In the circumstances, the question of compensatory damages does not arise. However, in the event that my conclusions on the copyright questions are wrong and at least nominal damages should be awarded, I would nevertheless not conclude that aggravated damages ought to be awarded.
Portland’s case, in this and in other respects, consisted of complaints that Unity should have done more to discover the alleged truth of the situation than it itself did to protect its own contended-for rights when it had been a position to do so. As rehearsed earlier, Portland submitted hyperbolically that Unity’s use of the poster had been “flagrant and blatant” and had occurred with a positive disregard for its interests. It was submitted that Mr Gresham and Mr Grant had turned a blind eye to who owned the poster and had used it for their own benefit.
The contention that Messrs Gresham and Grant turned a blind eye to the truth is in substance an allegation that their claimed ignorance of Portland’s alleged ownership of the slogan and poster was a dissimulation that bespoke knowledge of what Portland said was the true situation: Giorgianni v The Queen (1985) 156 CLR 473 at 487 and 495; Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd (1994) 123 ALR 681 at 693-694; Fair Work Ombudsman v South JinPty Ltd [2015] FCA 1456 at [231]-[233]. However, the only foundation for that assertion was Unity’s awareness that Shaver Shop did not advertise in men’s washrooms and that the advertising was being done by Portland. The evidence of both Mr Gresham and Mr Grant was that, in their experience, the copyright in advertising material was often held by the manufacturer whose product was being advertised. The fact that Portland was arranging the advertising placements was not contradictory of that evidence which was also not shown to have been incorrect or an exaggeration. I see no reason to disbelieve it.
Further, I am not persuaded that Mr Grant had any recollection of seeing the advertisement when Mr de Vries first sent it to Shaver Shop. The fact that he had been on holiday when it arrived and then left Shaver Shop a couple of weeks later points against him having done so when, as he said, during his absence he would have collected hundreds of emails a day and on his return he would have only read emails of particular relevance to him, in particular those of suppliers with whom he had daily contact. In any event, the email which Mr de Vries sent to him on 23 January 2013 was opaque on the question of copyright rights, saying simply:
Dear David
We’re planning to run this ad in various cinema & shopping centres around Australia.
Could you please send me hi-res Shaver Shop logo?
Regards
That email was not inconsistent with Portland placing an advertisement which had been provided to it by Firtal Brands.
Overall, although Mr Gresham and Mr Grant might have been more punctilious in the steps they took leading up to the use of the poster, I am not persuaded that they were guilty of anything more than some lack of care.
Finally, I do not place much weight on the fact that Unity sought the poster from Shaver Shop rather than Firtal Brands. The poster was plainly one designed for use in Australia and so it was not unreasonable to ask the principal Australian retailer of the product if it could supply a copy. This is particularly so as the poster was to be used at that retailer’s own annual conference.
In those circumstances, I conclude that the conduct of Messrs Gresham and Grant, even if mistaken as alleged, was prosaic and far from flagrant. I also note that once advised of Portland’s claims, Unity ceased its use of the poster. For these reasons, even if Portland had been entitled to some damages for Unity’s use of the poster, I would not have found it to be entitled to aggravated damages under s.115(4) of the Copyright Act.

Misleading or deceptive conduct claim vis-à-vis Shaver Shop franchisees

Portland submitted that Unity’s use of its material constituted misleading or deceptive conduct or conduct that was likely to mislead or deceive the Shaver Shop franchisees who attended the Shaver Shop 2014 annual conference. Portland reasoned that if Mr Grant and Mr Gresham knew that Shaver Shop did not use washroom advertising, it could reasonably be inferred that the franchisees were similarly aware. It was submitted that it was entirely conceivable that a Shaver Shop franchisee would associate the poster with Portland. Portland argued that a Shaver Shop franchisee who was aware that there had been a change in the supplier would have seen the poster Unity used at the conference and made the assumption, been led to believe or deceived into thinking that Unity had the consent, approval, authorisation or endorsement of Portland to use that poster or that Unity was associated in trade with Portland.

Discussion

No evidence was adduced to prove that any of Shaver Shop’s franchisees had been misled in the manner alleged or had relied on the alleged misrepresentations whether in a way which caused Portland any loss or damage which might be compensable under the ACL or at all. Portland speculated that the posters might have enhanced Unity’s sales but did not adduce evidence which gave substance to that speculation. This claim must fail on that account. But in any event, Portland’s loss of Razorpit sales was caused by Firtal Brands’ decision to make Unity its exclusive distributor, not anything Unity may have said or done at the Shaver Shop 2014 conference.
The same reasoning and conclusions apply to the allegation based on s.29 of the ACL.

CONCLUSION

The application will be dismissed.

I certify that the preceding three hundred and fifty-six (356) paragraphs are a true copy of the reasons for judgment of Judge Cameron

Associate:

Date: 11 September 2018