Ramnath v Opm Quickleen International Pty Ltd - [2019] FCCA 749

FEDERAL CIRCUIT COURT OF AUSTRALIA

RAMNATH & ANOR v OPM QUICKLEEN INTERNATIONAL PTY LTD & ANOR

[2019] FCCA 749

Catchwords:

CONSUMER LAW– Whether a company engaged in misleading and deceptive conduct – whether a company director engaged in misleading and deceptive conduct – whether a company’s agent engaged in misleading and deceptive conduct – whether representations made by a company in trade or commerce – whether representations made by a company director in trade or commerce – whether representations made by a company’s agent in trade or commerce – did the applicant rely on these representations – contraventions found.

Legislation:

Competition and Consumer Act 2010 (Cth) sch.2, ss.4, 18, 236, 237, 243

Federal Circuit Court Rules 2001 (Cth) r.13.03C

Corporations Act 2001 (Cth)

Cases cited:

Phillip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7;

(1981) 148 CLR 457; (1981) 55 ALJR 120; (1981) 33 ALR 465

Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511;

(1999) 73 ALJR 839; (1999) 163 ALR 270; (1999) 17 ACLC 1055;

(1999) 31 ACSR 99; (1999) 24 Fam LR 669

Stack v Coast Securities (No 9) Pty Ltd [1983] HCA 36; (1983) 154 CLR 261;

(1983) 57 ALJR 731; (1983) 49 ALR 193

Johnson Tiles Pty Ltd (ACN 004 576 103) v Esso Australia Ltd

[2000] FCA 1572; (2000) 104 FCR 564; (2001) ATPR 41-794

Matheson v Findex Australia Pty Ltd [2011] FMCA 135; (2011) 252 FLR 197

Hornsby Building Information Centre Pty Ltd v Sydney Building Information

Centre Ltd [1978] HCA 11; (1978) 140 CLR 216; (1978) 52 ALJR 392; (1978)

18 ALR 639; (1978) ASC 55-010; (1978) ATPR 40-067

General Newspapers Pty Limited; Double Bay Newspapers Pty Limited and

Brehmer Fairfax Pty Limited v Telstra Corporation [1993] FCA 473;

(1993) ATPR 41-274; (1993) 117 ALR 629

First Applicant:

PRAKASH RAMNATH

Second Applicant:

AUSSIE CHEMICALS PTY LTD ACN 169 259 036

First Respondent:

OPM QUICKLEEN INTERNATIONAL PTY LTD ACN 115 506 075

Second Respondent

RICHARD MATUSIK

File Number:

SYG 2842 of 2014

Judgment of:

Judge Nicholls

Hearing date:

20 February 2019

Date of Last Submission:

8 March 2019

Delivered at:

Sydney

Delivered on:

27 March 2019

REPRESENTATION

Counsel for the Applicant:

Mr P. Rodionoff

Solicitors for the Applicant:

Mr A. Niles

Solicitors for the Respondent:

Mr B. Lambros

THE COURT DECLARES

The first and second applicants suffered damage as a result of the deceptive and misleading conduct of the first and second respondents which contravened s.18 of the Australian Consumer Law (Sch 2 of the Competition and Consumer Act 2010 (Cth)).

THE COURT ORDERS

The second respondent pay the first applicant $342,338.94
The second respondent pay the first applicant interest on that amount to be calculated as from 28 April 2014.
The first applicant to file and serve evidence in relation to his applications for costs on or before 10 April 2019.
The second respondent to file and serve any evidence in response on or before 24 April 2019.
The first applicant to file and serve any further evidence in reply on or before 8 May 2019.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2842 of 2014

PRAKASH RAMNATH

First Applicant

AUSSIE CHEMICALS PTY LTD ACN 169 259 036

Second Applicant

And

OPM QUICKLEEN INTERNATIONAL PTY LTD ACN 115 506 075

First Respondent

RICHARD MATUSIK

Second Respondent

REASONS FOR JUDGMENT

This is an application made pursuant to the Australian Consumer Law [Schedule 2 of the Competition and Consumer Act 2010 (Cth)] (“ACL”), by Mr Prakash Ramnath and Aussie Chemicals Pty Ltd ACN 169 259 036 (“Aussie Chemicals”) seeking various declarations, orders and damages against OPM Quickleen International Pty Ltd ACN 115 506 075 (“Quickleen”) and Mr Richard Matusik.
Mr Ramnath was at the relevant times the sole director of Aussie Chemicals. Quickleen was the manufacturer of certain cleaning products. Mr Matusik was at the relevant times a director of Quickleen.
The applicants assert that in March 2014 and then in April or May 2014, Mr Ramnath and Aussie Chemicals, entered into agreements with Quickleen to distribute cleaning products (see applicant’s written submissions made on 20 February 2019 at [1]).
They claim that Mr Ramnath acting also on behalf of Aussie Chemicals, entered into these contracts relying on representations made to them by the respondents and by Mr Gary Johnston of Business Sales Australia.
The applicants claim that the representations, made in trade or commerce, were variously, “misleadingly or deceiving or likely to mislead or deceive” and was conduct in breach of s.18 of the ACL. They claim to have suffered loss as a result of the reliance on these representations. They seek relief under s.236, or in the alternative s.237 and s.243 of the ACL.
This case has been on foot for some time. While some of that time was spent awaiting various court events, (including mediation and the like), the respondents have caused some delay with the making of serious, but ultimately baseless allegations against the applicants, and seeking the appointment of a litigation guardian for Mr Matusik. Sometime after this appointment was made they then sought orders vacating that appointment.
In any event the matter was finally set down for hearing on 20 February 2019. Two matters require note.
First, at some point (not disputed by the applicants) Quickleen went into liquidation in 2018. The claims for damages and relief against Quickleen were not pressed. Mr Matusik remained the subject of the applicants’ claims.
Second, at the hearing the applicants were represented by counsel. A solicitor appeared for Mr Matusik. He stated that he had been unable to speak to Mr Matusik or to obtain instructions. He did not act for Quickleen (which was now said to be in the hands of the liquidator). While he remained on the record for Mr Matusik he was unable to make any contribution to the hearing. Mr Matusik’s solicitor was excused from the hearing as he had elected.
Mr Matusik had reasonable notice of the hearing of this matter. There was no explanation as to why he made himself unavailable to his solicitor, or otherwise failed to provide instructions. No adjournment of the hearing had been sought, nor was any such application made at the hearing. In all the circumstances I determined that the hearing should continue. No argument was put to the Court, nor was there any discernible reason not to proceed.
For the sake of completeness I note the following. As Mr Ramnath’s counsel submitted, the relevant legislative history contains some “historical” issues as to whether the Commonwealth Parliament had the power “to make laws in relation to individuals beyond that of companies”, in this case Mr Matusik.
In that light and to avoid any doubt Mr Ramnath’s Statement of Claim (“SOC”) makes reference to relevant New South Wales and Victorian legislation that provides for the application or inclusion of the ACL in state law.
Further, the applicant’s pleadings also refer to claims arising out of the contracts the respondents entered into separately with the applicants. I understood this to proceed on the basis that this Court had the capacity to consider such a claim based on its accrued jurisdiction to deal with the “whole” of a matter.
I note in this regard various authorities that provide support for the proposition that this Court has jurisdiction in these cirucmstances (see Phillip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7 at 475 per Barwick CJ, Re Wakim; Ex parte McNally [1999] HCA 27, Stack v Coast Securities (No 9) Pty Ltd [1983] HCA 36, Johnson Tiles Pty Ltd (ACN 004 576 103) v Esso Australia Ltd [2000] FCA 1572 at 597 [85], Matheson v Findex Australia Pty Ltd [2011] FMCA 135 at [21] – [22] per Lucev FM). In any event there was nothing in Mr Matusik’s Defence, or otherwise before the Court, to challenge the Court’s jurisdiction. In fact in their now abandoned cross claim in these proceedings, (see Defence at pages 12 – 13) the respondents appear to proceed on the basis of the Courts jurisdiction.
In the Defence filed on behalf of both respondents in these proceedings, Quickleen (but not Mr Matusik) made a cross claim against the applicants asserting a breach of contract (in relation to an agreement entered into in April 2014) which resulted in loss and damage to Quickeen and in respect of which it sought certain relief.
Quickleen did not appear at the hearing. Mr Lambros who appeared for Mr Matusik made clear he was not acting for Quickleen or its liquidator. It is not clear what position, if any, the liquidator had. It was reasonable to proceed on the basis, given the absence of any indication to the contrary, that the cross claim was not being pressed. To avoid doubt, and in the absence of any prosecution of the cross claim it is to be dismissed pursuant to r.13.03C(1)(c) of the Federal Circuit Court Rules 2001 (Cth).
The evidence before the Court was contained in the four affidavits of Mr Ramnath: ((c) below with exhibits).
(a)Affidavit filed on 1 September 2016 with exhibits PR1 and PR2 (the first affidavit);
(b)Affidavit filed on 13 September 2017 (the second affidavit);
(c)Affidavit filed on 13 November 2017 (the third affidavit); and
(d)Affidavit filed on 23 April 2018 (the fourth affidavit).
There was no evidence from Mr Matusik given his absence from the hearing.

Section 18 of the ACL is in the following terms: “(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).”

Section 4 of the ACL is in the following terms:
“(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.

(3) To avoid doubt, subsection (2) does not:

(a)have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or
(b)have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.

(4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:

(a)   a misleading representation; or
(b)   a representation that is misleading in a material particular; or
(c)    conduct that is misleading or is likely or liable to mislead;
and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.”

Section 236 of the ACL is in the following terms:
“(1) If:

(a)a person (the claimant) suffers loss or damage because of the conduct of another person; and

(b)the conduct contravened a provision of Chapter 2 or 3;

the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.

(2)An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.”

[Emphasis as in the original.]

Consideration

To avoid doubt I also note, and accept, that Quickleen has been placed into liquidation. Mr Ramnath made clear in his submissions that he would no longer pursue the claim against Quickleen.
The applicants proceeded, and pressed, their claims against Mr Matusik. Their references in submissions to Quickleen were for the purpose of context and understanding what was alleged against Mr Matusik. Noting also, that on the evidence Mr Matusik as the relevant officer of Quickleen was the guiding force and instrument of its conduct.
As set out above Mr Matusik has not presented himself to respond to the application, and the SOC. He has not sought to rely on any evidence. That leaves the evidence of Mr Ramnath which was formally read. It has not been challenged by other evidence. Nor was it the subject of any cross examination. I am unable to see any reason not to generally accept the evidence of Mr Ramnath.
Mr Ramnath’s legal representatives have assisted him in providing a comprehensive and detailed account of relevant events. This is not a case where an applicant seeks to make out misrepresentation claims under the ACL based on one or two reported statements, or some ambiguous phrasing in a brochure or contract.
Rather, Mr Ramnath’s and Aussie Chemical’s application rests on the large number of communications between Mr Ramnath (in his own capacity) and on behalf of Aussie Chemicals and the respondents and their agent. The “formal” Defence filed in this case at an early stage of the proceedings provides some insight into the respondent’s (now relevantly Mr Matusik’s) possible case.
In his Defence filed in the proceedings Mr Matusik admitted that at all material times Aussie Chemicals was a corporation within the meaning of that term in the Corporations Act 2001 (Cth). A similar admission was made in relation to Quickleen (relevant up to the date of liquidation apparently in December 2018).
However, the failure to meaningfully engage with the subsequent development of the applicants’ case (for example by way of an amended defence) and the absence, and lack of participation, in the hearing of Mr Matusik leaves very little, if anything, to challenge Mr Ramnath’s accounts.
As mentioned above, the applicants’ case, as set out in the SOC, is that they relied on certain representations made to them by Mr Johnston, Quickleen and Mr Matusik to enter into certain contracts.
What emerges from the evidence before the Court is the following outline of the applicants’ case. In early 2014 Mr Ramnath wanted to buy a business. He contacted Mr Gary Johnston of Business Sales Australia.
On or about 4 February 2014 he and Mr Johnston had certain discussions about what was available and suitable. Further discussions took place on 10 February 2014.
Mr Johnston then provided certain details about Quickleen. By his conduct, and implicit in various statements, he held out that he was Quickleen’s, and Mr Matusik’s agent. This, and further telephone and email communications between Mr Johnston and Mr Ramnath focused on distribution of Quickleen products primarily in New South Wales.
At about 15 February 2014 Mr Ramnath was put in contact with Mr Matusik. Mr Matusik told Mr Ramnath of existing and anticipated purchase orders (of Quickleen products) from a number of organisations and the opportunity for sales through television (the TVSN network).
On 18 February 2014 Mr Matusik sent a Memorandum of Understanding (“MOU”) to Mr Ramnath for his consideration. As set out in his submissions (at [22]) Mr Ramnath says that he was also told that there was other interest in acquiring the distribution rights for Quickleen products. Mr Ramnath signed this on 20 February 2014 and paid $22,000 as a “non- refundable deposit”. Of central relevance was that the MOU provided that customers for Quickleen products would be forwarded to Mr Ramnath “upon settlement”.
That settlement amongst other things was subject to a Business Plan. This plan was provided to Mr Ramnath on 27 February 2014. On the same day Mr Ramnath was told that the Business Plan or more particularly the “Cash flow and Financial projection schedules” which were related to the Business Plan, was “not correct” and another plan would be provided the following day.
Mr Ramnath’s evidence is that all these representations were made both by Mr Johnston, acting as agent for Quickleen, and in a practical sense Mr Matusik, and by Mr Matusik.
It is also his evidence that given the pressure to “settle” the matter (that is to sign the MOU and then the relevant distribution agreement) he did not conduct due diligence on the proposed agreement (see [27] of applicant’s written submissions).
Mr Ramnath signed the agreement on 6 March 2014 (see [30] of applicant’s written submissions). The agreement provided for a series of scheduled payments by Mr Ramnath. The final payment was made on 28 April 2014 (see [32] of applicant’s written submissions).
On that date also Mr Ramnath registered Aussie Chemicals. He then sought from Mr Matusik and Quickleen a sole distributor agreement for Aussie Chemicals (see [33] of applicant’s written submissions). On or about 29 April 2014 Mr Ramnath, on behalf of Aussie Chemicals entered into an agreement with Quickleen (Mr Matusik signed for Quickleen) to distribute Quickleen products.
What Mr Ramnath describes as a “small amount of stock” was sent to Aussie Chemicals on 2 May 2014, and the balance of the stock (as envisaged in the agreement) was sent on 28 May 2014 (see [35] of applicant’s written submissions).
Mr Ramnath and Aussie Chemicals sought to then sell the stock. On Mr Ramnath’s evidence he employed the strategies recommended to him by the respondents (see [37] of applicant’s written submissions).
His evidence is that the Quickleen product was not as “easy” to sell as he had been given to believe from the representations made to him. He sold some stock. But this was not sufficient to sustain the business or to achieve any profitability for Aussie Chemicals.
On 4 September 2014 Mr Ramnath and Aussie Chemicals sought to rescind their respective contracts.
As set out above the applicants seek damages as a result of what they say was the deceptive and misleading conduct by Mr Matusik, Quickleen and their agent Mr Johnston. In the alternative the applicants seek relief pursuant to s.237 and s.243 of the ACL.
The following questions emerge for consideration:
1.Were the representations as alleged made by Mr Johnston and if so were they made on behalf of Mr Matusik and Quickleen?
2.Were the representations, as alleged, made by Mr Matusik and Quickleen?
3.Were the representations made in trade or commerce?
4.If they were made, when viewed objectively were the representations misleading or deceiving or likely to mislead or deceive with reference to s.18 of the ACL?
5.Did Mr Ramnath and Aussie Chemicals rely on the representations to enter into the agreements of 6 March 2014 and on or about 29 April 2014 respectively?
6.Did Mr Ramnath and Aussie Chemicals suffer loss because of Mr Matusik’s conduct, which contravened the requirements of the ACL?
The applicants assert that Mr Johnston acted as agent, or on behalf of Quickleen. As Mr Matusik was the principal of Quickleen the representations were also made on his behalf.
In his Defence Mr Matusik admits that Mr Johnston was a broker who acted as agent for Quickleen, but only to the extent that he forwarded “information about distribution agreements for Quickleen”. Further, the Defence admits that Mr Johnston forwarded a business profile to Mr Ramnath.
There is no dispute (outlined in the Defence) that Mr Johnston acted as a broker in facilitating the agreements between Quickleen, Mr Ramnath and Aussie Chemicals.
However, as set out above in his Defence Mr Matusik also refers to Mr Johnston as Quickleen’s “agent” however, this also is said to be limited to his simply forwarding information about distribution agreements for Quickleen, and a business profile about Quickleen.

Yet in a documents sent by Mr Johnston to Mr Ramnath on 12 February 2014 (PR2 –“B” at page 24) it is made clear that the “QUICKLEEN SOLE DISRTIBUTION LICENSE FOR NEW SOUTH WALES” is “Marketed by: Gary Johnston”. Any reasonable view of this is that Mr Johnston was not simply forwarding documents, but actively involved in promoting Quickleen products distribution licenses.
While the business profile appears to have been prepared by Mr Johnston’s organisation (Business Sales Australia), there is nothing in the evidence before the Court to suggest it was prepared other than on behalf of Quickleen and Mr Matusik, to present Quickleen’s profile to potential purchasers and product distributors.
Importantly, in his Defence, Mr Matusik and relevantly Quickleen, focuses on what is said to be Mr Ramnath’s failure to exercise due diligence. I accept Mr Ramnath’s evidence, that Mr Johnston made representations to Mr Ramnath and subsequently to Aussie Chemicals on behalf of Mr Matusik and Quickleen, and there is now nothing to counter Mr Ramnath’s evidence.
Mr Matusik’s subsequent conduct and communications in his engagement with Mr Ramnath and Aussie Chemicals did not resile from what Mr Johnston had represented. The evidence reveals that Mr Ramnath in fact proceeded because he accepted and relied upon what he had been told by Mr Johnston.
Mr Ramnath’s evidence of some of his communications with Mr Johnston also support the proposition that Mr Johnston was acting for Quickleen and Mr Matusik.
For example, in a communication on about 13 February 2014, Mr Johnston made clear he had been negotiating with another person to distribute Quickleen products (see [14] of the first affidavit). This was not a situation where Mr Johnston was merely passing on some information about Quickleen (and see [15] of the first affidavit), but was actively engaged on behalf of Quickleen and Mr Matusik in securing agreements for the distribution of Quickleen products.
The attempt in the Defence to confine Mr Johnston’s role to being an “agent” who simply forwarded material and information, is not accepted in light of Mr Ramnath’s evidence (which is not countered by any evidence from the respondents) that Mr Johnston was actively and directly representing the interests of Quickleen and Mr Matusik.
As to the representations made by Mr Johnston these are set out in considerable detail in Mr Ramnath’s affidavits and supported by documents he has also put before the Court (see generally PR 2 and the first affidavit at [8]-[10], [12]-[26], [33], [42], [44], [46] and [47] and the second affidavit at [7] and his third affidavit at [4], [6]-[10]).
I find that Mr Johnston did make the representations as alleged by Mr Ramnath and that he did so on behalf of Quickleen and Mr Matusik with Mr Matusik’s authority.
Mr Ramnath also set out in his affidavits representations made to him and to Aussie Chemicals by Mr Matusik directly and Quickleen (that is by Mr Matusik acting on its behalf) (see the first affidavit at [27]-[28], [34]-[35], [39] and [51]).
In the Defence, Mr Matusik generally does not admit the matters asserted in the SOC as being representations made by him personally, (SOC at [22]-[31] and Defence at [23]-[34]).
Given that Mr Matusik has elected not to contest the allegations at a final hearing and therefore, has not sought the reading of any of his evidence, nor challenged in cross examination Mr Ramnath’s evidence, that evidence remains unchallenged. There is nothing in the evidence before the Court to say that that evidence should not be accepted.
On this basis, I find that Mr Matusik did make the representations as alleged, to both Mr Ramnath and as relevant to Aussie Chemicals.
As is clear s.18 of the ACL requires an applicant to show that the misleading or deceptive conduct (in this case the representations) were made “in trade or commerce”.
On the evidence before the Court I accept the applicant’s submissions that the representations were made in trade or commerce.
Plainly, Quickleen was in the business of selling cleaning products through distributors, not only in Australia, but internationally (see page 27 of PR2). As part of its business it sold licenses to others to distribute its products. In the representations to Mr Ramnath made by Mr Johnston and Mr Matusik on his own behalf, and on behalf of Quickleen, Mr Ramnath was required to expend funds, which I accept is a part of trade and commerce when done in a business context.
Mr Matusik’s Defence in essence, is a series of denials of the applicants’ claims set out in the SOC as to the nature and terms of the representations. Some small attempt is made in some instances at providing some idea of the basis of the denials.
For example, at [43] of the Defence, which refers to paragraph [40] of the SOC, Mr Matusik makes counterclaims as to the claims of the toxicity of the products which were the subject of the communications and licence proposal to distribute. The Defence states the product was not toxic, but concedes it was hazardous in certain circumstances.
Mr Ramnath’s evidence (see [17] of the third affidavit) was that on 5 – 6 May 2014 Mr Matusik gave him a number of documents which included Material Safety Data Sheets in relation to the two subject products of Quickleen.
“Quickleen R” is described in the same document as “powder used for cleaning Rangehood filters” (see item 1 page 16-19 of exhibit “B” of the third affidavit). At item 3, page 16 of exhibit “B” of the third affidavit, “Quickleen R” is “classified as hazardous”.
“Quickleen-S” is the subject of a separate document (see page 20-23 of exhibit “B” to the third affidavit - please note that some of the pages of this exhibit are double sided). Quickleen S was not classified as hazardous, however some risks with using the product were noted.
The date of this first document is 27 April 2006 (page 16 of exhibit “B” of the third affidavit). It predated by many years the relevant events of 2014 (see also page 20 of exhibit “B” of the third affidavit Quickleen-S dated 21 October 2013).
In the advertising material Mr Ramnath was given on 12 February 2014 (see [12] of the first affidavit) both “Quickleen R” and “Quickleen S” are referred to in the same document (see page 27 of PR2). When regard is had to the entire document the general references are to “Quickleen” see for example at page 25 of PR2:
“This Business Information memorandum:
(a)is intended to acquaint a prospective Buyer with preliminary information only regarding QUICKLEEN”.
[Emphasis as in the original.]
In the bundle of documents sent to Mr Ramnath on 12 February 2014 by Mr Johnston was also a document headed “Quickleen - S”. In the body of the document is the following:
“The ‘Quickleen’ product has an independent review rating as being the most convenient, effective, easy to use, odourless, cost effective & non-hazardous/non-toxic cleaning detergent on the global market today…”.

In short, when the bundle of documents sent to Mr Ramnath is read in its entirety, there is nothing to indicate that “Quickleen R” is hazardous. In context given the presentation and reference to “Quickleen R” in the same document as “Quickleen S” (page 27 of PR2) it is reasonable to understand that what is being represented is that the safety level of “Quickleen R” is that of “Quickleen S”.
In light of the subsequent documentation given to Mr Ramnath by Mr Matusik in May 2014 that is plainly not the case.
The evidence of Mr Ramnath is that a large number of representations were made to him, both oral, written and documentary. His submissions are that in relation to critical matters such as the profits he could expect if he entered into agreement with Quickleen (and Mr Matusik), the multiplicity of sales mechanisms (for example television, “direct to business” at shows and fairs), ongoing customers of Quickleen replenishing their supplies, and an income stream from what was said to be “Head office sales” to certain national companies (Bidvest, BBQ’s Galore, Ilve, OfficeMax, Reward Distribution and Costco), were all representations that induced him to enter into the subsequent agreements.
The unchallenged evidence of Mr Ramnath, which is accepted, is that the representations made to him, starting from early February 2014, presented a highly positive and glowing picture of the business opportunity offered by Quickleen.
On the evidence, that was not limited to profits to be made from sales generated by the distributor, but also royalties to be paid to the distributor from fulfilling orders made to Quickleen’s national office, as part of national accounts operated by Quickleen with many ongoing customers.
Further, as set out in the MOU, Mr Ramnath was told that on settlement he would be given information about clients in New South Wales, including those who had made purchases on the Internet. I accept Mr Ramnath’s submissions that, on the evidence, what was being represented to him was that there were a large number of such customers and that Mr Ramnath could approach them directly to make sales thus generating profits from those sales, instead of relying on royalties from head office sales.
Mr Ramnath’s evidence, again I note unchallenged, is that while these records were subsequently produced they revealed a comparatively small number of customers (36 in 2011, and 19 in 2012) which was in contrast to the representations which describe the numbers of customers as “huge”. Further the relevant amounts were for “small” numbers of Quickleen products.
In his submissions Mr Ramnath referred to many parts of his evidence to support the proposition that Quickleen had set its pricing policy in such a way as to ensure “high margin” of profit.
This was particularly set out in Business Plan sent to Mr Ramnath, (see PR2 at page 214). Further, the “Cash flow and Financial projection” schedules, which ultimately became an annexure to the agreements with Mr Ramnath and Aussie Chemicals, also asserted high margins.
Yet, this was in contrast to information sent to Mr Ramnath on 9 May 2014 (after the dates of both agreements) which revealed from actual sales records much lower margins than represented in the projected schedules.
The SOC sets out in detail the representations made to Mr Ramnath and Aussie Chemicals by Mr Johnston, Mr Matusik, and Mr Matusik acting on behalf of Quickleen, on which Mr Ramnath now relies (see SOC at [8]–[31]). In his Defence Mr Matusik either denies the representations were made, were not made in the way asserted, or he disputes various calculations.
In the absence of evidence from Mr Matusik, Mr Ramnath’s evidence is the only relevant evidence before the Court. Having considered each item at [8]–[31] in light of the evidence before the Court, I am satisfied that the representations were made as asserted in the SOC. In particular, the following representations were misleading or deceptive and were likely to mislead or deceive: the expected potential sales, profitability of the proposed business arrangement, the ease of making sales, the expected income and the ongoing, and potential customer base.
I find that in this regard Mr Matusik, and for that matter Quickleen, on whose behalf Mr Johnston and Mr Matusik made various representations breached s.18 of the ACL.
Mr Ramnath also submits that he, on his own behalf, and on behalf of Aussie Chemicals relied on these representations to enter into the agreements of 6 March 2014 and on or about 29 April 2014 (see SOC at [32]– [35]).
In his Defence Mr Matusik argues that the agreements were entered into as asserted in the SOC. He otherwise denies that Mr Ramnath and Aussie Chemicals relied on the representations to enter into the agreements. I note however, that apart from one matter as to the relevant amount, he admits that Mr Ramnath paid the license fee for the distribution rights and an amount for stock.
In any event it is the unchallenged evidence of Mr Ramnath that he did rely on the representations made to him to enter into the agreement initially on his own behalf, and subsequently on behalf of Aussie Chemicals.
That evidence has not been challenged before the Court. There is no reason now not to accept it, particularly as Mr Ramnath’s evidence sets out a reasonable explanation as to why, on what was put to him at the time by way of the representations, the business opportunity offered to him was profitable, lucrative, included a safe and effective product with large numbers of existing clients and many existing and potential avenues to expand the scope of the product distribution (see in particular the second affidavit at [6]–[18], and the first affidavit generally and in particular at [9]–[29], [31]-[37], [39], [41]-[52],[54] and [56]-[58]).
I find that both Mr Ramnath and Aussie Chemicals relied on the representations made by Mr Johnston, Mr Matusik and Mr Matusik on behalf of Quickleen to enter into the respective agreements.
At [40]–[57] of the SOC the applicants set out their claims as to why they say the representations were misleading or deceptive or likely to mislead or deceive. In his Defence Mr Matusik either denies the matters alleged or seeks to explain what the representations meant.
Again, Mr Ramnath’s comprehensive evidence remains unchallenged. That evidence reveals that each of the items asserted in the SOC at [40]–[57] is supported by evidence. In the absence of evidence to the contrary, it is accepted.
In his Defence, Mr Matusik appears to assert that there were various statements made (Mr Ramnath refers to them as “disclaimers”) to Mr Ramnath on a number of occasions which stand in answer to his claim that he was induced or relevantly relied on entering into the agreements based on the respondents, and their agents, representations.
One such “disclaimer” is said to be the repeated statements that “due diligence” inquiries be made “to satisfy themselves as to the voracity (SIC: veracity) and accuracy of the financial statements and other material or information contained in this document…” (see the Defence at [8](c)). Another appears to be to seek to argue the truth of the statements made, or in essence, argue that reasonable explanations existed for the representations (see the Defence at [11] and [18]-[19]).
I agree with Mr Ramnath’s submission that such “disclaimers” must be viewed in the context of the entire circumstances of this case. Further, as is clear the question of intent is not, at least directly, relevant to s.18 of the ACL (Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11).
In that light Mr Matusik would not have been ordinarily able, had he appeared to press his Defence, to rely on the intention behind the representations as an argument to counter the claim of misleading or deceptive statements. As is clear the question in relation to a contravention of s.18 of the ACL is whether the impugned statements, as a matter of fact, contain, or otherwise convey a meaning which is false.
When viewed in their entirety the multiple representations made (in various documents and orally) to Mr Ramnath and the various “disclaimers” (as set out in the Defence) are a minor, and to a significant extent formulaic, part of the totality of the representations.
At [8] of his Defence Mr Matusik relies on “disclaimers” set out in a Business Plan (“QUICKLEEN SOLE DISTRUBUTION LICENSE FOR NEW SOUTH WALES”) as a defence to the matters set out in the SOC at [8]. While some level of “puffery” or even exaggeration may be accepted as being a part of such documents (see General Newspapers Pty Limited; Double Bay Newspapers Pty Limited and Brehmer Fairfax Pty Limited v Telstra Corporation [1993] FCA 473 at [45]), s.18 of the ACL makes no distinction between puffery and representations. That does not automatically mean that all puffery is to be regarded as misleading.
The two documents in question as they relate to [8] of the SOC, the Defence, and the agent’s representations are in evidence as exhibits to the first affidavit (PR2 at page 1–18). The following provides an example of what was being represented about Quickleen:
“The best way to sum up the advantages of ‘Quickleen’ is that you are investing in a distributorship/product that does not need to be proven, it has been proven in over 17 countries now [in excess of 3,600 tons has been sold], it has a universal pricing structure, and is automatically reordered by the client when it runs out, not to mention an exceptional profit margin. Richard Matusik CEO and Founder of Quickleen has been involved over the last 18 years in the Direct Sales of high quality stainless kitchenware (Alessi, Inoxpran, Zepter International etc), and realized a huge potential niche in the market for an effective Stainless Steel, Copper, Brass, Aluminum, Silver and metal cleaner. He discovered by accident a formula in early 2002, which is proven to be approximately 11 times stronger than caustic soda, with beyond incredible results. The uniqueness of the product was not only in its strength, but in its user friendliness – no gloves, smell, harsh abrasives or toxic chemicals and its user friendly and biodegradable.

The other main difference which separates Quickleen from 7,500 other chemical distributors is the simple sales process. A distributor simply demonstrates the product in the owner’s premises, the demo takes just 1 to 2 minutes and 8 out of 10 times the owner or chef will purchase the products – THEY ARE THAT GOOD! “Quickleen” is available in over 17 countries with 3,600 tons being sold worldwide and growing.”

[Emphasis as in the original.]

The phrases used include the following: “not need to be proven”; “universal pricing structure”; “exceptional profit margin”; “high quality”; “huge potential niche”; “proven to be approximately 11 times stronger”; “[t]he uniqueness of the product”; “user friendliness – no gloves, small, harsh abrasives or toxic chemicals and its user friendly and biodegradable”; “simple sales process”; “8 out of 10 times the owner or chef will purchase the products - THEY ARE THAT GOOD!”
[Emphasis as in the original.]
Whether these statements, or representations, are to be described as puffery, or otherwise does not matter. When they are viewed in the context of the entirety of the representations made to Mr Ramnath, the “disclaimers” on which the Defence appears to rely pale into comparative insignificance.
Mr Ramnath’s submission that the representations painted a “rosy” picture is in my view an understatement of the character of what was being represented. The “disclaimers” were in context nowhere near as weighty as these representations.
I accept Mr Ramnath’s submissions that these disclaimers did not have the effect of modifying what, on Mr Ramnath’s evidence, was the misleading and deceptive conduct of Mr Matusik and Quickleen (and their agent).
Mr Matusik, at [18] of the Defence, asserts that the Business Plan “identified the weaknesses of the prospective business” (see page 216-217 of PR2). The Defence provides what are said to be examples of this (see [18] of the Defence):
“Further on or about 27 February 2014 the First Respondent delivered to the broker who forwarded the same to the First Applicant a business plan for a sole distribution licence for New South Wales for the First Applicant which identified the weaknesses of the prospective business as being:-
(a)no market presence in New South Wales;
(b)the business is dependent on its Directors during the formative stage;
(c)existing competitors in the marketplace;
(d)zero market share in New South Wales;
(e)a greenfields site;
(f)price sensitive customers;
(g)the need to warehouse product;

and that the business would be subject to and need to overcome the following threats:-

(i)poor reputation in the industry in the areas of quality and reliability;
(ii)potential for economic downturn;
(iii)existing competitors within the industry;

(iv)new entrants entering the industry;
(v)increasing costs of materials;
(vi)possible Government/regulatory changes;
(vii)changes to market drivers;
(viii)inferior products affecting short-term outcome;
(ix)increased number of DIY and supported through home TV shows and magazines.”
[Error in the original.]

While these examples are clearly contained in the Business Plan they need to be viewed in the context of the entire document, and in the context of the entirety of the representations made by Mr Matusik, Quicklen and Mr Johnston, their agent.
As to the document itself what also appears are such representations as: “the revolutionary product that’s taking the global market by storm”; “proven in over 18 countries selling in excess of 3,600 tons worldwide and growing strong”; “the business will turn a profit in its first year”; “Quickleen is the only product in the market that will add value to a business’s bottom line”, make clear that the disclaimers are but a small part of the otherwise glowing and positive thrust of the document.
The use of such hyperbole appears to be inimical to what after all was said to be a “Business Plan”. That plan made clear under the heading of “Revenue” (page 220 of PR2) that:
“Over the next 12 months, ‘Quickleen’ will:
·generate $750,000-$1,000,000 in sales (conservative figures)…”.
There is nothing in the evidence otherwise before the Court to say that Mr Matusik, Quickleen or Mr Johnston qualified or amended the thrust of the statements prior to the entering into of the two agreements.
When the entirety of the representations are taken into account Mr Matusik, Quickleen (and their agent) engaged in misleading and deceptive conduct, or in conduct that was likely to mislead or deceive.
Further, on the unchallenged evidence before the Court, Mr Ramnath relied on this conduct to enter into one agreement on his own behalf and in another on behalf of Aussie Chemicals (see the second affidavit at [6]–[18]).
What is set out above is sufficient to find that Mr Matusik and Quickleen contravened s.18 of the ACL.
Mr Ramnath also relied on two recision notices sent to Quickleen on 4 September 2014 (see [24] of and annexure “A” to the second affidavit).
These notices are in the following terms:
“…NOTICE OF RESCICION
I hereby rescind the contract dated 6 March 2014 entered into between OPM Quickleen International Pty Ltd and myself.
The contract is rescinded for material misrepresentations as to the likely earnings of the sole Distributor of Products in New South Wales. Those misrepresentations induced me into entering into the contract.
I require that within 21 days you refund me the license fee I paid you and also notify me within 21 days where to return unsold stock.
I note the license fee to be repaid is $22,000 plus GST totalling $242,000.00. I require payment for the refunded stock within 14 days of return…”.

“…NOTICE OF RECISSION

Aussie Chemicals Pty Ltd (the Company) hereby rescinds the contract made on or about 29 April 2014 between OPM Quickleen International Pty Ltd and the Company.
The contract is rescinded for material misrepresentations as to the likely earnings of the sole Distributor of Products in New South Wales. Those misrepresentations induced the Company into entering into the contract.
The Company requires that within 21 days you refund it the license fee it paid you and also notify it within 21 days where to return unsold stock.
Note the license fee to be repaid is $220,000 plus GST totalling $242,000.00. Payment for the returned stock is required within 14 days of return…”.

It is Mr Ramnath’s evidence that the contracts (agreements) were rescinded for misrepresentation. He relies on relevant common law principles to argue that the contracts were validly rescinded.
As set out above a large number of representations were made to Mr Ramnath and Aussie Chemicals by Mr Matusik, Quickleen and their agent, Mr Johnston. These occurred before Mr Ramnath and Aussie Chemicals entered into the respective contracts to distribute Quickleen products in New South Wales.
On the evidence, these statements misrepresented the existing state of affairs as to the profitability of the Quickleen distribution, the selling or marketing of Quickleen products, the lucrative, global nature of the business, and the cash flow to Mr Ramnath and Aussie Chemicals from national sales. These misrepresentations were continuing up to the time of the making of the two agreements.
They were material to the matter of Mr Ramnath and Aussie Chemicals entering into the contracts and were, on the evidence, calculated to induce him, and him on behalf of Aussie Chemicals, to enter into the contracts. On the evidence there is certainly more than a fair inference to be drawn that Mr Ramnath was induced to enter into the contracts by the misrepresentations. Mr Ramnath’s evidence, unchallenged before the Court by Mr Matusik, is that he relied on the misrepresentations.
On the evidence the contracts were validly rescinded given the material connection between the misrepresentations and the inducements to enter into the contracts. I will make the orders sought.
The applicants also assert that they suffered damage as a result of the misleading and deceptive conduct of Mr Matusik (and Quickleen). They seek damages pursuant to s.236 of the ACL.
The immediate question is whether there is a sufficient level of causal connection between the misrepresentations and the damage which Mr Ramnath says he and Aussie Chemicals suffered. This question is to be answered with reference to the evidence before the Court and Mr Matusik’s conduct.
Further, it needs to be considered, whether this conduct, in the particular circumstances of this case, induced or intended to induce Mr Ramnath (and Aussie Chemicals) to act to his detriment, that is to enter into the agreements.
Mr Ramnath’s evidence of his reliance on the misrepresentations is set out at [6]–[18] of his second affidavit. As with his other evidence before the Court it remains unchallenged. Further, the evidence itself is sufficient to establish that he was induced into entering the contracts because of the respondents’ misrepresentations.
In his written submissions Mr Ramnath sets out the details of the quantum of damages that he seeks. The amount of $338,647.90 is set out at [15] of the fourth affidavit. However, it is noted that this number has increased to $342,338.94 (see [82] of the applicant’s written submissions) on account of Mr Ramnaths continued expense of storing Quickleen products as outlined below at (c). It is made up of the following:
“The following damages are claimed²⁷:
(a)Amount paid for license fee²⁸   $242,000.00
(b)Amount paid for stock²⁹  $55,000.00
(c)Cost of storing Quickleen product  $18, 718.01 to January 2019³⁰
(d)Loss from Merryland mall 3 day event³¹                $1,271.10
(e)Loss from Castle Hill 3 day event³²  $591.00
(f)Public liability insurance paid³³  $215.26
(g)Worker’s compensation insurance³⁴  $269.07
(h)Loss of opportunity to be employed
in alternative gainful employment  $24,274.50³⁵
while involved with Quickleen
TOTAL before interest and costs  $342,338.94”
[Footnotes omitted.]
The amounts as calculated are supported by the evidence before the Court. The total amount should be paid by Mr Matusik to Mr Ramnath. While some of the amounts in these calculations relate to Aussie Chemicals, I accept Mr Ramnath’s evidence as explained in his submissions to the Court, that the loss suffered was his and his alone, given that there were no funds available to Aussie Chemicals at the time of its entering into the agreement, and subsequently, other than those provided by Mr Ramnath.
Mr Ramnath also asked that Mr Matusik pay interest on this amount (see [83] of the applicant’s written submissions):
“The applicants claim interest on any award of damages under section 76 Federal Circuit Court Act. They ask that interest be awarded from 28 April 2014 being the date on which the last instalment of the purchase price and initial stock purchase was paid. Although a number of expenses occurred after this date, the lion’s share of the claim relates to sums paid by Prakash between 20 February 2014 and 28 April 2014. Having the one date for calculation of interest simplifies the calculation.”

Mr Ramnath’s submission is supported by his evidence before the Court. I see no reason not to agree that it is appropriate to calculate the interest that should be paid as from 28 April 2014.
Given that finding it is not necessary to consider the SOC in relation to s.237 or s.243 of the ACL or to make the orders sought in that regard.
Mr Ramnath also seeks costs. He seeks a set amount. Given the history of this case and generally the conduct of Mr Matusik in his various actions (and inaction) before the Court it is appropriate that the Court set costs in a fixed amount, rather than referring the matter for assessment or taxation. I accept in the circumstances and in particular given Mr Matusik’s failure to attend at the final hearing, or to give instructions to his solicitor in relation to the presentation of his Defence at the final hearing, that that is the appropriate course.
There are three aspects to the matter of costs. On 12 June 2015, I made an order that the applicants’ application for costs thrown away, due to the need for further directions on that day in great part due to the respondents’ failure to attend at mediation, be set down for hearing at the final hearing of this matter.
On 17 October 2017, I made orders that Mr Matusik pay the applicant’s costs thrown away by reason of an adjournment granted to the respondents and the appointment (subsequently withdrawn) of a litigation guardian for Mr Matusik. The orders were that costs thrown away were to be as agreed. I accept that no such agreement has been reached.
Finally, Mr Ramnath asked for costs for the entire proceedings other than for the costs referred to above.
I will make the costs orders as sought by Mr Ramnath. As to the amount relevant to each order I grant leave to Mr Ramnath to calculate the amounts sought for each and to file any documentary evidence in support.
A copy of this judgment will be provided to Mr Matusik’s solicitor. If Mr Matusik wishes to make representations on the calculations relating to cost he will be given 14 days from the date of the filing of Mr Ramnath’s submissions, and any evidence, to do so.
I will make the orders as sought by Mr Ramnath.

I certify that the preceding one hundred and thirty-four (134) paragraphs are a true copy of the reasons for judgment of Judge Nicholls

Date: 27 March 2019