Thong Guan Plastic and Paper Industries SDN BHD v Vicpac Industries Australia Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST D
F6050
No. 2093 of 2006

THONG GUAN PLASTIC AND PAPER INDUSTRIES SDN BHD (Malaysian Company Number 73976-V)	Plaintiff
- and -
VICPAC INDUSTRIES AUSTRALIA PTY LTD (ACN 116 245 491)	Defendant

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATE OF HEARING:	23-26 and 30 November, 1-2 and 7 December 2009
DATE OF JUDGMENT:	3 February 2010
CASE MAY BE CITED AS:	Thong Guan Plastic and Paper Industries SDN BHD v Vicpac Industries Australia Pty Ltd
MEDIUM NEUTRAL CITATION:	[2010] VSC 11

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SALE OF GOODS – Alleged agreement by vendor that it would not, directly or indirectly, supply purchaser’s customers – Agreement not established.

TRADE PRACTICES – Representation (implied from conduct) that vendor would not, directly or indirectly, supply purchaser’s customers without first giving notice to purchaser of vendor’s intention to do so – Supply by vendor to purchaser’s customers without notice to purchaser – Failure to give notice constituted misleading conduct in contravention of Trade Practices Act 1972 (Cth), s 52 – However, quantum of any resulting loss or damage not proved – Proceeding dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A McClelland	Brian Ward & Partners Pty Ltd
For the Defendant	Mr R Shepherd	Mason Sier Turnbull

TABLE OF CONTENTS

Parties and Introduction................................................................................................................... 2

History of the trading relationship between the parties............................................................ 3

What were the terms of the sales contracts?................................................................................. 7

Was there a no‑bypass term?.......................................................................................................... 10

The first conversation.................................................................................................................... 11
The second conversation................................................................................................................ 15
The third conversation................................................................................................................... 19
The fourth conversation................................................................................................................. 22
Conclusion: no-bypass term not established.................................................................................. 23

Did Thong Guan mislead Vicpac?................................................................................................ 33

Was it a term of the sales contracts that Thong Guan would act in good faith towards Vicpac? If so, did Thong Guan breach that term?......................................................................................... 38

Did Thong Guan fail to take steps necessary to give Vicpac the benefit of the sales contracts?.............................................................................................................................................................. 39

Did Thong Guan act unconscionably in connection with the sales contracts?................... 40

Was there a ‘credit agreement’ as alleged by Vicpac?............................................................... 40

Conclusions and orders.................................................................................................................. 42

HIS HONOUR:

Parties and Introduction

The plaintiff, Thong Guan Plastic and Paper Industries SDN BHD, is a Malaysian company. Thong Guan manufactures plastic bags and plastic film capable of being made into plastic bags by further processing.

The defendant, Vicpac Industries Australia Pty Ltd, is an Australian company based in Melbourne. Vicpac purchases plastic bags and plastic film from various suppliers, manufactures plastic bags from plastic film, and supplies plastic bags to its customers in Australia.

Thong Guan was one of Vicpac’s suppliers. The trading relationship between the parties commenced in 1999 and continued until early 2006. The relationship ended in bitter circumstances, with Vicpac alleging that Thong Guan had engaged in commercially unethical conduct by dealing, directly or indirectly, with three of Vicpac’s Australian customers (‘the three customers’). In these circumstances, Vicpac refused to pay for a large volume of products supplied to it by Thong Guan. At the cessation of trading, the amount owed by Vicpac to Thong Guan was $572,253.83. In this proceeding, Thong Guan claims this amount, and interest thereon, from Vicpac.

Vicpac has raised a plethora of defences and counterclaims, including breaches of express and implied terms of the individual sales contracts, breach of a separate agreement by Thong Guan that it would not bypass Vicpac and deal directly with its customers, bad faith, unconscionable conduct, negligent misstatement, and false or misleading conduct. A claim based on misuse of confidential information was abandoned during the trial.

Notwithstanding these multiple legal characterisations, Vicpac’s factual contentions are not complex. First, Vicpac contends that it has suffered loss and damage because Thong Guan delivered products later than required under the terms of the individual sales contracts. Second, Vicpac contends that it has suffered loss and damage because Thong Guan, in breach of agreement or contrary to representations that it would not do so, directly or indirectly sold plastic bags to the three customers.

Thong Guan accepts that it has, directly or indirectly, sold plastic bags to the three customers. However, it denies agreeing or representing that it would not do so, and denies that its conduct was misleading, in bad faith or unconscionable in any respect.

History of the trading relationship between the parties

It is necessary to consider the history of the trading relationship between the parties for a number of reasons: to identify the various trading entities which have conducted the Vicpac business from time to time; to identify the changes of business ownership, management and personnel of the Vicpac business; to identify the relevant management and personnel of Thong Guan; and because the trading relationship forms part of the surrounding circumstances in which the individual sales contracts were made.

At all relevant times, Ang Poon Khim (‘Mr Ang’ or ‘PK Ang’) was Vicpac’s Operations Director, and Wan Chia Keong (‘Mr Wan’ or CK Wan’) was Vicpac’s Development and Operations Manager, reporting directly to Mr Ang. At the time of relevant events, Mr Wan was engaged to Mr Ang’s daughter. In 2006, Mr Wan married Mr Ang’s daughter and became his son‑in‑law.

In 1999, when the parties commenced dealing with each other, the Vicpac business was conducted by Vicpac Industries (Australia) Pty Ltd, a company with a similar name but a different company from the defendant. Through their various trusts, the Vicpac business was owned by:

(1) John Young (50 per cent);

(2) Bruce Wong (33.33 per cent); and

(3) Ek Huang Eap (16.67 per cent).

This ownership structure remained in place until on or about 31 May 2005. During this time, Mr Young was a silent partner, Mr Wong was the general manager of the Vicpac business, and Mr Eap was the production manager, dealing principally with the manufacture of plastic bags from plastic film.

Although Mr Wong remained the general manager until 31 May 2005, his degree of autonomy reduced from February 2005 in the following circumstances. In August 2004, Mr Young asked his cousin, Pichai Vongvisitsin, to ‘look into Vicpac’s operations’. Mr Young’s request arose from his concern that the Vicpac business had made a significant loss in the financial year 2002, and only small profits in other years from 1999.

Following his review of Vicpac’s operations, Mr Vongvisitsin was appointed in February 2005 to act as Mr Young’s representative to, in Mr Vongvisitsin’s words, ‘co‑manage the Vicpac business’ with Mr Wong. From that time, Mr Vongvisitsin was actively involved in the management of Vicpac’s business.

By May 2005, Mr Wong had ceased being in effective control of the operation of Vicpac’s business. On 20 May 2005, Mr Wong ceased to be a director of Vicpac Industries (Australia) Pty Ltd and Mr Vongvisitsin assumed the role of sole director. From this time, Mr Wong ceased working for Vicpac and Mr Vongvisitsin assumed effective control of the Vicpac business. In June 2005, Mr Wong sold his entire interest in the Vicpac business to the trustee of Mr Vongvisitsin’s family trust. From this time, through their respective family trusts, the Vicpac business was controlled by:

(1) Mr Young (48 per cent);

(2) Mr Vongvisitsin (37 per cent); and

(3) Mr Eap (15 per cent).

After he left the Vicpac business, Mr Wong continued to have some dealings with Thong Guan and the three customers. In correspondence with Thong Guan, Mr Vongvisitsin made some thinly veiled allegations that Mr Wong had undermined Vicpac’s business by facilitating the transfer of the custom of the three customers from Vicpac to Thong Guan. Notwithstanding these allegations, neither party called Mr Wong to give evidence. Nor did either party contend that any adverse inference should be drawn against the other as a result.

On 15 September 2005, the defendant company was incorporated. From that time, it assumed ownership and control of the Vicpac business. The ownership structure remained the same. Unless it was necessary to do so, I will refer to the entity conducting the Vicpac business from time to time as ‘Vicpac’. There is no issue as to the defendant being liable for any judgment to which Thong Guan may be entitled.

The structural changes at Vicpac were accompanied by some changes in personnel. Some longstanding Vicpac employees were replaced. This caused some operational issues, but none of these issues had any effect upon the course of business between the parties as described below.

The parties entered into a series of ad hoc sales contracts. There was no constituent or overarching agreement between them. Thong Guan was under no obligation to accept any purchase order submitted to it by Vicpac and could cease accepting orders from Vicpac at any time. Vicpac was under no obligation to order any products from Thong Guan and could cease ordering products at any time.

The standard course of business between the parties was described by a purchasing executive employed by Thong Guan, Suan Cheng Ngeow (‘Ms Ngeow’), in the following general terms:

(1) Vicpac would regularly place purchase orders with Thong Guan, specifying the products required, the quantities and the required delivery date.

(2) Thong Guan generally required between five and six weeks to meet an order placed by Vicpac. It required a period of two to three weeks to manufacture the products and three weeks for shipment to Melbourne. However, depending on a range of circumstances, the process could take longer.

(3) Thong Guan had a standard procedure upon receipt of a purchase order from Vicpac. A Vicpac representative, usually Ms Ngeow, would telephone the Vicpac customer representative nominated in the purchase order. Ms Ngeow said that the purpose of this was to confirm receipt of the purchase order and to discuss Thong Guan’s ability to meet the required delivery date. Ms Ngeow said that it was standard procedure to advise Vicpac of any difficulty in meeting the required date and the reason for that difficulty. She said that there were many reasons for difficulty in complying with nominated delivery dates, including tight schedules for production in the last quarter of each year, machine breakdowns, production shutdowns due to public holidays and insufficient lead times being specified by the customer. Where the required delivery date could not be met, an alternative delivery date would be discussed. Ms Ngeow could not recall any occasion on which an order was cancelled by a Vicpac representative as a result of Thong Guan’s inability to meet the specified delivery date. To the contrary, Ms Ngeow gave evidence that, in these circumstances:

I was always told by the Vicpac representatives to go ahead with the order, and more often than not they would use words to the effect to “try our best”. In some instances, I was asked by the Vicpac representatives if it was possible to split the order and manufacture the products into separate lots if this would allow some of the goods to be delivered in a shorter time frame. In any event, production would not commence until Vicpac gave its approval (either by telephone or in writing) for these products to be delivered on an alternative date.
If I was asked by Vicpac to split the order I would notify Thong Guan’s production department who would take all steps to manufacture and process as much of the order as was possible.

Ms Ngeow said that some of these conversations were with Mr Vongvisitsin. Mr Vongvisitsin denied that he had any such conversations with Ms Ngeow. Mr Vongvisitsin denied that he ever authorised any late deliveries beyond the dates specified in Vicpac purchase orders, either directly through communication with Ms Ngeow, or through authorisation given to other staff members. For the reasons appearing below, it is unnecessary to resolve the conflict between Ms Ngeow and Mr Vongvisitsin on this issue.

What were the terms of the sales contracts?

Against this background, I proceed to consider the terms of the sales contracts between the parties.

Each of the sales transactions which is the subject of Thong Guan’s claim arose in the following way.

First, Vicpac sent a purchase order to Thong Guan, specifying the products required, the price to be paid and a required delivery date. The purchase orders were directed to the attention of Ms Ngeow and nominated a Vicpac employee as the ‘contact’ in respect of that order.

Following receipt of the purchase order, and discussions between Ms Ngeow and the nominated Vicpac representative, Thong Guan manufactured the products ordered, or such of those products that were to form part of an initial shipment to Vicpac.

Second, Thong Guan prepared a ‘proforma invoice’ describing the products and quantities to be shipped and stating the total price of the shipment. The proforma invoice was faxed to Vicpac after the products were shipped. Mr Vongvisitsin asserted that some of the proforma invoices were not received by Vicpac. He based this assertion upon the fact that, following a ‘proper search’ made under his supervision, some of the proforma invoices could not be located at Vicpac’s premises. However, the fact that Vicpac cannot locate some of the proforma invoices does not necessarily mean that they were not sent or received. In any event, as appears below, the proforma invoices were overtaken by commercial invoices issued by Thong Guan and admittedly received by Vicpac.

The facsimile coversheet accompanying the proforma invoices contained shipping details, including the date of shipment and estimated arrival date in Melbourne, and described the proforma invoices as ‘for your reference only’.

The proforma invoices contained the following relevant statements:

Payment Term: T/T 60 DAYS AFTER B/L DATE
…
Notes
(a)We reserve the right to charge interest at 2% per month on late payments. A Debit Note stating the overdue interest amount charged will be issued to you and has to be paid within 3 days of issuance. Any unpaid Debit Note will be charged into the amount of your next purchase order.

Third, Thong Guan sent a ‘commercial invoice’ to Vicpac. The commercial invoice largely replicated the proforma invoice, but contained additional information, including shipping details which were previously notified in the facsimile coversheet accompanying the proforma invoice. The commercial invoice did not, however, include any term requiring interest to be paid on late payments. In common with the proforma invoice, the payment term was specified as 60 days after the date of the bill of lading. As appears above, the products would ordinarily arrive about three weeks after shipment. Accordingly, the 60 day payment term had the effect of giving credit to Vicpac.

Fourth, Thong Guan provided Vicpac with certain shipping documents, including the bill of lading, insurance documents and a packing list which corresponded with the description and quantities of the products in the proforma invoice and the commercial invoice.

The proforma invoices and accompanying facsimile coversheets, commercial invoices and shipping documents were all received by Vicpac before the relevant shipments arrived. In every case, these documents disclosed that the products which had been shipped would arrive later than the required delivery dates specified in the Vicpac purchase orders. Further, where this was the case, the documents disclosed that the shipment comprised only part of the quantity of products specified in the purchase order. Accordingly, even if the standard discussions between Ms Ngeow and the nominated Vicpac representative did not take place, Vicpac knew prior to accepting delivery of each shipment that the delivery was not in conformity with its purchase order. Notwithstanding this knowledge, Vicpac accepted delivery of each shipment.

It was submitted on behalf of Vicpac that each sales contract included a term that Thong Guan would supply products by the dates and in the quantities specified in each of its purchase orders. This submission was based on the contention that each purchase order was an offer to purchase products strictly in accordance with the dates and quantities specified in the order, and that Thong Guan accepted each offer ‘by manufacturing and loading the goods ordered onto ships destined for Melbourne Port’. Accordingly, it was submitted that the whole of the terms of each sales contract were contained in Vicpac’s purchase orders.

I do not accept Vicpac’s contentions in this regard. Even if the standard discussions between Ms Ngeow and the nominated Vicpac representatives are ignored, there is no evidence of any unqualified assent by Thong Guan to the terms of the purchase orders. The manufacture and shipment of the whole or part of the goods specified in the purchase orders, on each occasion on a date which could not have resulted in the products arriving in Melbourne before the delivery date specified in the purchase order, is incapable of constituting acceptance of the precise terms of the offers contained in the purchase orders. In the first place, such conduct was not communicated to Vicpac prior to the receipt by Vicpac of the proforma invoice (and accompanying facsimile coversheet) or the commercial invoice, whichever of the two was received first. Secondly, there were obvious disconformities between the purchase orders on the one hand, and the proforma invoices (and accompanying facsimile coversheets) and commercial invoices on the other. In these circumstances, Thong Guan made a counter‑offer to supply the products described in the proforma invoices and the commercial invoices on the estimated arrival dates of each shipment.[1] Vicpac accepted these counter‑offers by presenting the bill of lading and collecting the products from the Melbourne port. This conduct was in accordance with the standard trading relationship between the parties.
[1]Mooney v Williams (1905) 3 CLR 1.

For the above reasons, I reject Vicpac’s defences and counterclaims based upon late delivery of products in breach of the terms of the relevant sales contracts. If the matter stood there, and there were no other defences and counterclaims raised by Vicpac, Thong Guan would be entitled to judgment for the whole of its claim. There is no dispute that the sales contracts provided for payment within 60 days of the relevant bills of lading.

An issue then arises as to whether the proforma invoices were contractual documents and, if so, whether it was a term of the sales contracts that Thong Guan would pay interest at two per cent per month on late payments. The issue is complicated by two matters. First, the facsimile coversheets described the proforma invoices as ‘for your reference only’. Second, the relevant term requiring payment of interest was not included on some of the proforma invoices which are in evidence. Third, there is no term requiring payment of interest in any of the commercial invoices. Taking the evidence as a whole, I am not satisfied that the parties reached any consensus as to the payment of interest. Accordingly, if Thong Guan is entitled to judgment, it should be limited to such interest as may be awarded under s 58 of the Supreme Court Act 1986 (Vic).

I turn to consider the various counterclaims and set‑offs raised by Vicpac.

Was there a no‑bypass term?

Vicpac alleges that each sale contract between the parties contained a term that:

at no time would [Thong Guan] endeavour to sell or sell products that it was manufacturing for [Vicpac] directly to [Vicpac’s] customers, bypassing [Vicpac].

I will refer to this alleged term as ‘the no‑bypass term’.

Vicpac alleges that the no‑bypass term arose from conversations and by implication. I will first consider the conversations relied upon.

In its defence and counterclaim, Vicpac alleges that there were four conversations constituting the no-bypass term. Further, although not referred to in the particulars, Mr Young of Vicpac gave evidence about some preliminary discussions between him and Mr Ang prior to the commencement of any trading relationship. The discussions occurred when the two men first met, at a trade exhibition in 1998 in Dusseldorf, Germany. Mr Young said that the general nature of the conversation concerned the two men ‘trying to look at some mutual benefit working together’ and that, during this general conversation, he mentioned to Mr Ang that:

it’s very important to work honestly together with mutual understanding, mutual trust and just like many factories that I work with, that they don’t go behind our back, we honestly speak to each other and they don’t go to sell directly. The reason I mention that is also because I have deal with a few other factories and when they don’t accept like that, we just stop. So I will usually [say] to the factory straightforward from the outset, they must not, they should not go behind our back to sell to our customers directly.

Mr Ang denied that any such conversation occurred. Mr Wong, who was also present at the trade exhibition, was not called as a witness.

I do not accept Mr Young’s evidence. In common with much of the evidence given by Vicpac’s witnesses concerning the alleged no‑bypass term, it was formulaic and unconvincing. It was not referred to in the particulars of the no‑bypass term and was not relied upon in final submissions.

I turn to the four conversations referred to in Vicpac’s particulars of the no‑bypass term.

The first conversation

First, Vicpac relies on a conversation said to have taken place in March 2005 between Mr Vongvisitsin and Mr Ang at the offices of Thong Guan in Penang, Malaysia. Before referring to the evidence concerning this meeting, it is necessary to consider the surrounding circumstances.

Commencing in late 2004, one of the three customers, a company trading under the name ‘Surepak’, became increasingly dissatisfied with Vicpac’s service. Surepak is a small company managed by the O’Brien family. James O’Brien is the general manager. His son, Andrew O’Brien, is the national operations manager. Until late 2004, Surepak enjoyed a solid business relationship with Vicpac, mainly due to the good working relationship between the O’Briens and Mr Wong. By late 2004, however, it was apparent to the O’Briens that Mr Vongvisitsin was gradually taking over Mr Wong’s role as the general manager of Vicpac. They began to notice problems and lost confidence in Vicpac management and staff. In particular, they noticed that Vicpac appeared to be carrying less Surepak stock, which resulted in difficulties of supply. As a consequence, Surepak set about trying to find an alternative supplier. A consultant, Theresa Lim, was engaged. Ms Lim recommended three overseas companies, one of which was Thong Guan.

Andrew O’Brien then sent an e-mail to Mr Wan, asking if Thong Guan would supply Surepak directly. That e-mail could not be located and was not in evidence. Following a discussion with Mr Ang, Mr Wan replied to the e-mail on 22 February 2005 in the following terms:

Dear Andrew,
I apologise that I have overlooked on your company name. We have been dealing through Vicpac to several Australian account and we are not in the position to deal with anyone besides Vicpac.
We believe Vicpac will continue to offer competitive package and services to its customer, … We see that Vicpac as local entity acts as a complementary to us in adding value to our products and services.
I apologise for the inconvenience caused and look forward to support Surepak, as an intermediate customer, towards greater growth in the future.[2]

I will refer to this e-mail as the ‘February e-mail’.

[2]Emphasis added.

Mr Wan sent a copy of the February e-mail to Mr Wong of Vicpac. As a result, Mr Wong telephoned James O’Brien. According to Mr O’Brien, Mr Wong’s conduct during this telephone call was out of character, and gave him the distinct impression that Mr Wong ‘was playing to an audience’. Mr Wong said to James O’Brien that Surepak’s direct approach to Thong Guan was ‘unethical’ and ‘not proper business’ practice. Whether or not Mr Wong was ‘playing to an audience’ (presumably Mr Vongvisitsin) it is probable that Mr Vongvisitsin knew of the February e-mail and discussed it with Mr Wong, and I so find.

The O’Briens remained dissatisfied with the service provided by Vicpac. On 4 March 2005, James O’Brien sent a letter to Mr Wong giving examples of the deterioration in Vicpac’s service over the previous four months. Mr O’Brien followed this letter up with a telephone call to Mr Wong. A meeting was arranged. Mr Vongvisitsin was also present. Mr O’Brien said that he was satisfied with the meeting, as he felt Mr Wong had listened to Surepak’s complaints. In these circumstances, a decision was made that Surepak would continue to order products from Vicpac for the time being.

Against this background, Mr Vongvisitsin met with Mr Ang in Penang and the first conversation took place. Mr Vongvisitsin gave evidence that one of the key topics of discussion ‘was the supply directly to Vicpac’s customers’. According to Mr Vongvisitsin, Mr Ang showed him a copy of the February e-mail. Mr Vongvisitsin continued in his evidence:

Mr Ang said to me, while showing me the e-mail, that he had already addressed the problem … by giving Surepak the reply of the e-mail, and basically saying, we will never sell directly to Surepak, we already told Surepak so, … and I basically told Mr Ang that Thong Guan cannot sell directly to Vicpac’s customers. Mr Ang agreed and told me that Thong Guan will never do that.

The conversation between Mr Vongvisitsin and Mr Ang was in English. This was the common language spoken by them. Mr Ang’s first language is Mandarin, which Mr Vongvisitsin does not speak or understand.

According to Mr Vongvisitsin, Teoh Chye Tuan (‘Mr Teoh’) was also present and overhead the conversation. Mr Teoh said that he recalled Mr Ang showing Mr Vongvisitsin an e-mail ‘on the screen of the laptop’ and then printing out a paper copy of an e-mail. Mr Teoh gave evidence in Mandarin through an interpreter. He obviously understands very little English. Notwithstanding this, he said that he recalled Mr Ang saying to Mr Vongvisitsin, with reference to the e-mail, that he would not deal directly with Mr Vongvisitsin’s customers. It was not put to Mr Ang that the February e-mail was first shown by him to Mr Vongvisitsin on the screen of his laptop, and then printed out as a paper copy for the purposes of discussion. Nor did Mr Vongvisitsin give evidence of this occurring. Mr Vongvisitsin said only that ‘that was the email that Mr P K Ang showed me’. He made no reference to being shown it in two forms; first on a laptop screen and then in a paper copy.

Mr Teoh is not an officer or employee of Vicpac. He is a director of a related company, Victory Flexible Packaging Pty Ltd, in which Mr Vongvisitsin owns a controlling interest. Victory supplies three‑layer plastic film to Vicpac for the manufacture by Vicpac of courier bags. Victory’s factory is also in Penang. Mr Teoh drove Mr Vongvisitsin from the Victory factory to Thong Guan’s offices on the day of the first conversation.

Mr Ang denied that Mr Teoh was present during the meeting. He based this denial on evidence that he has no recollection of ever meeting Mr Teoh in Mr Vongvisitsin’s company. Further, although he could not recall the conversation with Mr Vongvisitsin during the meeting, he was nevertheless prepared to deny that he made the statements attributed to him by Mr Vongvisitsin and Mr Teoh - that Thong Guan would never sell directly to Vicpac’s customers - on the basis that he would never make such a statement. The reasons for this, and my findings as to the probabilities as to what was said, are discussed further below.

Mr Ang also denied that the February e-mail was shown by him to Mr Vongvisitsin, or discussed, during the first conversation. When pressed in cross‑examination, Mr Ang asked for time to read the February e-mail, noting: ‘It is not from me so why should I discuss this.’ Having read the e-mail, Mr Ang said that the first time he had read it was in the witness box, and continued: ‘It’s impossible for me to show Mr Vong about the e-mail and discuss.’ At this stage, the cross‑examination on this issue ended. It was not put to Mr Ang that he knew the February e-mail was an important document in the case, and that he must have read it before the trial commenced. It was not put to him that he had any involvement in the decision to send the e-mail. It was not put to him that he opened his laptop during the first conversation, showed Mr Vongvisitsin the February e-mail, and then printed a paper copy.

The second conversation

The second conversation relied upon by Vicpac to support the no‑bypass term took place on 8 July 2005 between Mr Vongvisitsin and Mr Wan at Vicpac’s offices in Melbourne. Again, Mr Vongvisitsin says that the meeting was attended by a third person; in this case Mr Eap. The second conversation took place in the following circumstances.

In June 2005, Thong Guan notified Vicpac of some price increases concerning products for on-supply to Surepak. This led to some e-mail correspondence between Mr Vongvisitsin, Mr Wan and Ms Ngeow. Mr Ang received copies of some of this correspondence and was aware of the issue. He determined to leave it to Mr Wan and Ms Ngeow to deal with.

As a result of Thong Guan’s price increases, Vicpac indicated to Surepak that its prices would increase. This caused Andrew and James O’Brien to decide that it was time to ‘move on and find another supplier’. As a result, they approached Mr Wan again in late June or early July 2005. According to Mr Wan, he received an e-mail from Andrew O’Brien explaining that Surepak was experiencing ongoing stock shortage and delivery problems with Vicpac and that, in these circumstances, ‘if Thong Guan did not supply Surepak directly, he would source the products from other overseas suppliers’. Further, Mr Wan recalls speaking with Mr Wong about this approach from Surepak, and being told by him that the O’Briens ‘were very unhappy with Vicpac and they were going to find a new supplier’. In these circumstances, Mr Wan agreed that Thong Guan would supply Surepak.

Andrew and James O’Brien did not recall the e-mail from Andrew O’Brien to Mr Wan. However, they both recalled deciding to find a new supplier, deciding to approach Thong Guan a second time, and asking Bruce Wong to contact Thong Guan on their behalf. On 4 July 2005, Bruce Wong provided James O’Brien with a document listing the current prices being charged by Vicpac to Surepak, and Thong Guan’s proposed prices for supply directly to Surepak. This document was then referred to in pricing discussions between Thong Guan and Surepak. Accordingly, I find that the price discussions between Thong Guan and Surepak were at least in prospect, had probably commenced, and may have concluded prior to the second conversation on 8 July 2005. The first purchase order from Surepak to Thong Guan is dated 13 July 2005.

Vicpac was not informed of these events. The decision not to inform Vicpac that Thong Guan had commenced direct dealings with Surepak was made by Mr Wan. He candidly admitted this once the matter was put to him with sufficient clarity. He said that he decided not to inform Vicpac because he knew Vicpac would be ‘very upset’ and that they might have stopped purchasing products from Thong Guan.

Coincidentally, on 28 June 2005 Mr Vongvisitsin sent an e-mail to Mr Ang in the following terms:

Subject: Potential conflicts with one of our competitors from melbourne
Dear PK
Greetings from Melbourne, I hope this e-mail finds all is well with you, your family and your staff at Thong Guan.
I am just dropping a short note to alert you that a company by name of Quick Pack Pty Ltd; a competitor of Vicpac is likely to solicit business with TG for the same products that we are currently selling in Australia. Please caution your sales department that any enquiries from this company should be carefully scrutinised for potential conflicts with our business.

Mr Ang forwarded this e-mail to Mr Wan with the comment ‘Pls take note’.

Mr Vongvisitsin gave evidence that ‘the more important issue’ discussed during the second conversation was pricing. He said that he asked Mr Wan for pricing concessions ‘in order to win confidence of Surepak back’. Mr Vongvisitsin said that Mr Wan gave no assurances concerning pricing ‘and basically told me that the only thing we could really accomplish in the meeting was to stretch out the timeframe and he would go back and look at those’.

Mr Vongvisitsin then gave the following evidence:

Then I said to Mr Wan on the issue of supplying directly to our customers, basically I told Mr Wan that I hoped that no‑one in [Thong Guan] or Mr Bruce Wong had sourced the product to be on‑sold to Vicpac’s customers and he assured me that no, that would never happen …[3]

[3]Emphasis added.

Mr Vongvisitsin was then asked whether there was any discussion about particular customers during the course of this meeting. He replied:

Well, obviously …
we discuss the issue of Thong Guan supplying directly to Surepak, Jasol and Hunter because those were the three customers that obviously was at the time, was a concern from all the past correspondence and e-mail and meetings and so forth.[4]

[4]Emphasis added.

I reject Mr Vongvisitsin’s evidence that there was any reference during this meeting to Jasol or Hunter. In July 2005, no issue had arisen concerning possible supplies by Thong Guan to these customers. It was not until later in 2005 that Mr Vongvisitsin noticed that orders for these customers were reducing and his trade enquiries led him to believe that Thong Guan was indirectly supplying products to Jasol and Hunter ‘via another company’.

Mr Eap gave evidence concerning the meeting on 8 July 2005. He gave that evidence through an interpreter. Although his understanding of English is better than that of Mr Teoh, he nevertheless relied heavily upon the interpreter to understand most of the questions put to him. Notwithstanding this, he said that he could recall what was said in English between Mr Vongvisitsin and Mr Wan during the course of this conversation.

When Mr Eap was asked to recount the second conversation in his evidence in chief, he referred to two issues being discussed: delayed delivery by Thong Guan to Vicpac, and pricing. The following exchange then occurred between Vicpac’s counsel and Mr Eap:

Did Mr Vong then raise something else then? --- Just these two issues.
Then with Mr Wan, did Mr Vong raise something about customers?

There was an objection to this obviously leading question, and it was withdrawn. Notwithstanding this, the question acted as an obvious prompt to Mr Eap, who then volunteered the following non‑responsive evidence:

You discussed the prices? --- Then after talking about the pricing, Pichai said that he hoped that Mr Wan would not go and do business with our clients … Pichai said that he hoped that Mr Wan would not contact the company set up by Bruce Wong as well as our clients.
Did Mr Wan say anything about what he would do? --- He said that he would absolutely not do things like that.
… He would not go to our clients when he was doing business with us.

Mr Wan denied that Mr Eap was present during the second conversation. Further, he denied making any statement during that meeting to the effect that Thong Guan would not supply Surepak or other customers of Vicpac.

Mr Wan gave evidence of robust discussions concerning pricing. He said that Mr Vongvisitsin ‘adamantly expressed to me that Vicpac would not accept any price increase and that Thong Guan was at risk of losing Vicpac if it proceeded with these increases’. In these circumstances, Mr Wan said that he informed Mr Vongvisitsin that Thong Guan would not increase its prices, ‘but that this was only temporary’.

Mr Wan recalled that, during the second conversation, Mr Vongvisitsin stated that he was concerned about Surepak’s approach to Thong Guan in February 2005. However, he denied telling Mr Vongvisitsin that Thong Guan would never supply Vicpac’s customers directly. Mr Wan gave three reasons to support this denial: (1) that he did not have authority to make such an agreement; (2) that he would ‘never have entered into an arrangement which was open ended and stopped Thong Guan increasing or maintaining its business operations’; and (3) that, at the time of the meeting, he was ‘considering, or had even decided to accept orders from Surepak’.

The third reason given by Mr Wan highlights the seriousness of this aspect of Vicpac’s case, which amounts to an allegation of fraud. Given that Mr Wan was at least considering Surepak’s second approach for direct supply, had probably commenced discussions with Surepak to that end, and may even have concluded those discussions, any statement or promise by Mr Wan that Thong Guan would not supply products directly to Surepak would have been knowingly false.

The third conversation

The third conversation relied upon by Vicpac took place between Mr Vongvisitsin and Mr Wan in September 2005 at Thong Guan’s office in Penang. Again, Mr Vongvisitsin says that the conversation was witnessed by a third party; this time Mr Teoh.

The third conversation took place against the following background. By August 2005, two other customers of Vicpac, Hunter Industrial and Jasol Australia, had become dissatisfied with the service they were receiving from Vicpac. They decided to seek an alternative supplier. Bruce Wong became aware of this, and telephoned James O’Brien of Surepak to inform him of the development.

Later in August, the O’Briens met with David Hunter to discuss the possibility of Surepak supplying Hunter. On 20 September 2005, Mr Wong provided James O’Brien of Surepak with Thong Guan’s price list for the supply to Surepak of products intended for on‑sale to Hunter. There were then price negotiations between Surepak and Hunter. An agreement was reached. As a result, Hunter placed its first order for supply from Surepak at some stage in late September 2005.

According to Mr Hunter, he spoke with Mr Vongvisitsin at this time and told him of his decision to source products from Surepak. Mr Vongvisitsin denied that this conversation occurred. For the reasons give below, it is unnecessary to resolve this conflict.

On 17 September 2005, Bruce Wong provided James O’Brien with Thong Guan’s price list for the supply of products intended for on‑sale to Jasol to Surepak. On 20 September 2005, Surepak provided Jasol with a quotation to supply it with products. There were then price negotiations between Surepak and Jasol. This was confirmed by Andrew O’Brien, who recalled meeting with his father and representatives of Jasol, including Mr Brook King, in about September 2005, and subsequently providing the quotation to supply Jasol dated 20 September 2005. Mr King had a different recollection. He recalled approaching Surepak in early 2006 after a series of problems with Vicpac, culminating in the delivery of the wrong products in January 2006. However, when Mr King was shown the 17 September 2005 price list, and the quotation from Surepak to Jasol dated 20 September 2005, he became less certain. The documents are a more reliable guide to the timing than Mr King’s recollection. On this basis, I find that it is likely that price negotiations took place between Surepak and Jasol in September 2005, at about the time of the quotation from Surepak to Jasol.

Mr Wan acknowledged that he was involved in the negotiations with Surepak concerning the prices which Thong Guan would charge Surepak for products to be on‑sold to Jasol and Hunter. Accordingly, from this time, Mr Wan knew that Surepak intended to supply Jasol and Hunter with the products which Vicpac had previously supplied to them, and that Thong Guan would first supply those products to Surepak.

The third conversation was principally concerned with Thong Guan’s proposed price increases. Mr Vongvisitsin says that he also raised problems that he and his staff were experiencing with Ms Ngeow, and that Mr Wan acknowledged that ‘Ms Ngeow needs to be disciplined’. Mr Wan denies this conversation concerning Ms Ngeow, who still works for him: ‘I wouldn’t be saying something so bad about Ngeow.’ I accept Mr Wan’s evidence as the more probable. Ms Ngeow presented to the Court as a dedicated, diligent and competent employee.

According to Mr Vongvisitsin, he then took the opportunity to raise, again, his concerns that Thong Guan should not deal directly with Vicpac’s customers. He gave the following evidence:

Then I say to Mr Wan that, “Wan, in addition to that we have been getting fewer and fewer orders and in a slower pace from our customers and I hope that no‑one in [Thong Guan] again or Bruce Wong had sourced the product and sell it directly to our customers.”
Did Mr Wan say anything to you in response? --- Mr Wan told me that he agreed …
… He simply agreed with me and that Thong Guan would never supply or deal directly bypassing Vicpac.
Were any particular customers mentioned? ---Yes, Jasol, Surepak and Hunter.
So you raised not just customers generally, but you named particular customers … ? --- That’s my best recollection, and that statement really related to the three customers specifically, that the orders had slowed down.

Notwithstanding his difficulties in understanding the English language, Mr Teoh also gave evidence about this conversation. He said that he could recall it ‘because it was in general English so I could understand’.

Mr Wan denied that Mr Teoh was present during the third conversation. However, he did recall that Mr Teoh drove Mr Vongvisitsin to the meeting. He also denied that he made any of the statements attributed to him by Mr Vongvisitsin and Mr Teoh, to the effect that Thong Guan would not supply Vicpac’s customers. According to Mr Wan, there was no discussion about this issue during the third conversation. Mr Wan said that the meeting at which the third conversation occurred involved discussion concerning supply issues and the personnel changes within Vicpac.

The fourth conversation

The fourth conversation relied upon by Vicpac to establish the alleged no‑bypass term took place in late September 2005 between Mr Vongvisitsin and Mr Ang at Vicpac’s offices in Melbourne. Again, Mr Vongvisitsin says that a third party was present, on this occasion Mr Eap.

Mr Vongvisitsin said that he again took the opportunity, following discussions about supply issues, to raise the subject of Thong Guan dealing directly with Vicpac’s customers. Mr Vongvisitsin said:

Therefore I told Mr Ang again, that I have to emphasise to Mr Ang that the basis on which Vicpac and Thong Guan are doing business must be carried out in good faith. That’s what I emphasise to him all the time, and that Thong Guan would never deal directly or supply directly in terms of bypassing Vicpac, and Mr P K Ang agree.

Once again, notwithstanding his difficulties in understanding English, Mr Eap claimed he could recall what was said during the course of this conversation. In his evidence in chief, Mr Eap recounted a conversation between Mr Vongvisitsin and Mr Ang concerning late delivery and pricing issues. He initially offered no evidence concerning discussions about Thong Guan dealing directly with Vicpac’s customers. However, a leading question prompted the following exchange:

Was there any discussion, anything raised by Pichai about what Thong Guan could not do? --- Yes.
Can you tell his Honour what that was? --- Pichai said to P K that he hoped that we will be able to keep the price and also would not deliver – have late deliveries and also he said that he hoped that P K would not go to the clients, our clients, and do business with them.
What did Mr Ang say about that? --- He agreed that he would not do those things.

Mr Eap said that he then overheard a telephone conversation between Mr Ang and Mr Wan, who was then in Malaysia. His evidence in that regard was wholly unsatisfactory. It casts further doubt upon his reliability as a witness. In his evidence in chief, Mr Eap said that he observed Mr Ang ‘pick up his phone and call Malaysia to speak to C K Wan.’ He said that he could hear the conversations, which were conducted in Chinese between Mr Ang and Mr Wan. In cross‑examination, Mr Eap withdrew this evidence. He first said that he could not hear what Mr Wan was saying, ‘but I can understand between the two of them talking’. Following this evidence, counsel for Thong Guan put Mr Eap’s witness statement to him, in which he recounted what he heard Mr Wan tell Mr Ang during the conversation. When confronted with his witness statement, his response was ‘I not hear but P K told me. It’s true’. When pressed about the inconsistency between that evidence and his witness statement, he gave another version of events:

We are talking, P K pick up the phone and ring up and then talking with C K Wan and, by that time, we on the speaker and then we talk, the three of us talking.[5]

The versions of events given by Mr Eap in cross‑examination were not put to Mr Ang in cross‑examination. The final version, that there was a conversation on a speaker phone in which Mr Vongvisitsin participated, was not put to Mr Wan.

[5]Emphasis added.

Mr Ang’s evidence concerning the fourth conversation was straightforward. He again denied that there were any discussions to the effect alleged by Mr Vongvisitsin and Mr Eap, and denied that Mr Eap was present.

Conclusion: no-bypass term not established

I do not accept that the conversations relied upon by Vicpac prove the existence of the no‑bypass term. My reasons are as follows.

First, following the four conversations relied upon, Mr Vongvisitsin wrote to Mr Ang and Mr Wan on a number of occasions about his suspicion, and later his belief, that Thong Guan was dealing directly with Surepak and indirectly with other Vicpac customers. Mr Vongvisitsin did not assert in any of his correspondence that Thong Guan had agreed or represented that it would not deal directly with Vicpac’s customers. The relevant correspondence is summarised below.

On 13 October 2005, a matter of weeks after the fourth conversation relied upon by Vicpac, Mr Vongvisitsin sent an e-mail to Mr Ang and Mr Wan. By this time, Mr Vongvisitsin had been informed by Surepak that it had obtained an alternative supplier overseas. The e-mail is in the following terms:

Subject: Surepak business loss
Dear PK and Wan,
I hope all is well with you and the family.
I’ve spoken to the owner of Surepak and he confirmed that Vicpac will not get the same business as before. He told me that they engaged a consultant several months ago to connect and set up all his imports. I don’t have to guess who the consultant is but I don’t want to believe that Thong Guan is the supplier. It is unfortunate that the supply chain now is broken and the prices and margins for our commodity products will be ruined by this move.
Despite the fact that we stop ordering [Surepak] items from Thong Guan due to the confirmation above, we will not find out later that you are selling to this customer either directly or indirectly.

In cross‑examination, Mr Vongvisitsin asserted that the final paragraph of this letter contains a reference to the promises which had been made orally in the four conversations relied upon, ‘although it was not clearly stated about the promises’. I do not accept that the final paragraph of this e-mail is capable of bearing that meaning.

On 2 December 2005, Mr Vongvisitsin sent a strongly worded e-mail to Mr Wan. By this time, there were many outstanding invoices beyond the 60 days credit provided by Thong Guan, and Mr Wan was seeking payment. In these circumstances, Thong Guan was threatening to withhold further shipments or to prevent the release of containers which had already been shipped. In these circumstances, it would have been natural for Mr Vongvisitsin to respond with a reference to his complaints against Thong Guan, in particular that Thong Guan was bypassing Vicpac and supplying the three customers. He did not. Instead, Mr Vongvisitsin sent an e-mail encouraging Thong Guan to fulfil existing orders and allow delivery of shipments already made. Most of the shipments related to products intended for on‑supply to customers other than Surepak, Hunter or Jasol.

It was put to Mr Vongvisitsin in cross‑examination that he had no intention of paying for the products supplied after this date. He denied it. He said that it was only after all of the containers had been received by Vicpac that he made a decision to refuse payment. He sought to justify this decision on two grounds:

(1) that he did not know that Thong Guan was supplying Surepak until all of the products had been accepted by Vicpac; and

(2) that he did not believe Vicpac was obliged to pay for products until all products in a relevant purchase order had been supplied.

I reject both of these explanations.

As to the first justification, I am satisfied that Mr Vongvisitsin believed at this time that Thong Guan was supplying Surepak directly and was indirectly supplying Jasol and Hunter ‘via another company’. In his witness statement, he said that this was his belief ‘by late 2005’. In cross‑examination, he sought to retract this, and instead say that he suspected this to be the case but could not verify it. I find that Mr Vongvisitsin’s belief at this time was beyond suspicion, and that he held the beliefs specified in his witness statement. This conclusion is reinforced by the fact that Vicpac’s last order for supply by Thong Guan was some six weeks earlier, on 14 October 2005.

As to the second justification, the contention was first advanced during the course of giving evidence. I reject it as a recent invention, put forward by Mr Vongvisitsin to defend himself in the heat of cross‑examination.

Further, by 2 December 2005, Mr Vongvisitsin had organised for Vicpac to purchase single layer plastic bags from Victory. Victory obtained supply of these bags from Lean Teck Plastics, a company owned by Mr Teoh. In fact, Vicpac placed an order for Victory to supply it with plastic bags on the day of this e-mail, 2 December 2005.

Taking the evidence as a whole, I find that on 2 December 2005, when he encouraged Mr Wan to deliver the relevant containers, Mr Vongvisitsin did not intend to pay for them. Believing that he had been betrayed, he was endeavouring to take advantage of the credit provided by Thong Guan as a measure of self‑help for what he perceived was unethical conduct by Thong Guan in bypassing Vicpac and dealing with its customers.

In early 2006, Mr Vongvisitsin sent an e-mail to Mr Ang. The date of the e-mail is unknown. Mr Ang replied to it on 10 February 2006. Mr Ang’s e-mail bears the subject ‘Re: Well Wishing’.

Mr Vongvisitsin’s e-mail is a mixture of well-wishes, speculations and serious allegations. Mr Vongvisitsin asserted that Vicpac’s business of re-selling Thong Guan products in Australia had ‘been taken away by Thong Guan with the collaboration of an old friend’, an obvious reference to Mr Wong. He referred to Thong Guan’s decision to trade in this way as disheartening, and ‘not what you would call an ethical one’. Then, with apparent reference to the first and fourth conversations relied upon to support the alleged no‑bypass term, Mr Vongvisitsin stated:

Everytime (sic) I think about our last few meetings in both Malaysia and your last visit to us in Melbourne, I become lost as to why you did not give me any indication when I asked you openly if [Thong Guan] sells directly or indirectly to JASOL, Hunter and Surepak. What has Vicpac done wrong to cause [Thong Guan] to drop us? Please enlighten me if Vicpac or myself have conducted in any way unprofessionally or unethically.

These statements by Mr Vongvisitsin do not allege that any promise or representation was made by Mr Ang that Thong Guan would not bypass Vicpac and deal with its customers. The statements do, however, support Mr Vongvisitsin’s evidence that this subject was discussed during the ‘last few meetings’ referred to.

In his e-mail in response, Mr Ang used vague and conciliatory language. He sought to blame ‘the new team’ in the ‘Blown Film Business Unit’ of Thong Guan. He referred to his sadness at the apparent loss of friendship with Mr Young. He made vague references to his own failings. He concluded with the statement: ‘I sincerely apologise and seek your pardon for the inconvenience that I caused.’

Mr Ang gave an explanation for the tone of his e-mail. He said in his witness statement:

In writing the e-mail, I was conscious that Thong Guan had lost a sizeable amount of business with Vicpac – not just in relation to products for on‑sale to Surepak, Jasol and Hunter, but in relation to products intended for on‑sale by Vicpac to many other companies as well. I was also conscious that Vicpac owed Thong Guan a very large sum of money (more than AUS$570,000) in respect of outstanding invoices, which was not in any way secured, and which would be difficult to pursue in Australia (given that Thong Guan was based in Malaysia) if Vicpac decided that it did not wish to pay. More importantly, however, I was concerned about how those at Vicpac were feeling, given that I regarded those who worked at Vicpac (particularly Mr Young) to be longstanding and good friends. For these reasons, I decided to be non‑confrontational in my e-mail, and to seek to repair the relationship. I stated in the e-mail that the most important thing was “life and people” and that this was my main concern.[6]

[6]Mr Ang’s witness statement, [66].

It was not put to Mr Ang in cross‑examination that this was a false explanation. In these circumstances, I accept it. Further, Mr Ang’s e-mail contains no concessions of any specific kind.

On 8 June 2006, Mr Vongvisitsin wrote a considered letter to Mr Ang. He acknowledged that he was endeavouring to set out Vicpac’s grievances against Thong Guan for the purpose of promoting a commercial resolution between businessmen. Once again, the letter is a mixture of well‑wishes and serious allegations. Mr Vongvisitsin apologised for not attending the marriage of Mr Ang’s daughter to Mr Wan, at which time he ‘wanted to also to meet [Mr Ang] and discuss the situation of the business lost between Vicpac and [Thong Guan] which we still need to do’. Mr Vongvisitsin then made a series of allegations about direct approaches by Mr Wong to Vicpac customers for the purpose of having them direct their supply orders, directly or indirectly, to Thong Guan. The letter also contains allegations of deliberate delay and obfuscation in the supply of goods to Vicpac, with the intention of destroying its business. Mr Vongvisitsin concluded with a threat to bring proceedings under the Trade Practices At 1974 (Cth) for loss of profits. Notwithstanding the tone of the letter, however, no allegation is made that Thong Guan promised or represented that it would not deal, directly or indirectly, with Vicpac’s customers.

The second reason I do not accept that the four conversations prove the existence of a no‑bypass term is that it is unlikely that Mr Ang or Mr Wan would have agreed to such a term. As formulated, the no‑bypass term constitutes a permanent and unlimited undertaking by Thong Guan that it would not sell to Surepak or any other customer of Vicpac. Both Mr Ang and Mr Wan, although frankly conceding that they could not recall the detail of the four conversations relied upon by Vicpac, gave credible and persuasive reasons in their evidence to support their denials that they gave any such undertaking. In summary:

(1) In circumstances where it could legitimately cease placing any orders with Thong Guan for any reason it chose, Vicpac offered no consideration for the alleged no‑bypass term. In particular, Vicpac did not offer to continue to purchase products from Thong Guan for any period or in any minimum quantities.

(2) Mr Ang said that Thong Guan has never entered into an exclusive relationship with any of its customers, including about guaranteed supply by Thong Guan or the placing of minimum orders by the customer.

(3) Mr Wan had no authority to give any such undertaking.

(4) The level of Vicpac’s orders, especially for new products, had been in decline during 2004 and 2005.

(5) Vicpac had not placed any substantial orders for Surepak products since February 2005.

Further, by the time of the second, third and fourth conversations, Mr Ang and Mr Wan well knew that Thong Guan intended to supply Surepak. Accordingly, any undertaking, promise or representation by them to the effect alleged would have been knowingly false. To establish such a case, Vicpac would need to present clear proof.[7] Even in the absence of an allegation of fraud, the Court would require clear evidence that sufficiently precise words were used to constitute such an important agreement as the alleged no‑bypass term; or that a representation to that effect was made. This is particularly so in circumstances where there is no contemporaneous document which records what was said during any of the meetings.[8]
[7]Briginshaw v Briginshaw (1938) 60 CLR 336, 362; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 450.
[8]For example, Watson v Foxman (1995) 49 NSWLR 315, 318-9.

Third, there are matters which affect Mr Vongvisitsin’s credibility as a witness. There were occasions when Mr Vongvisitsin was evasive in answering questions, volunteered irrelevant information and was unwilling to concede the truth of obvious matters which he perceived were contrary to Vicpac’s case. Further, my rejection of his evidence concerning his intention, on 2 December 2005, to pay for the containers which he encouraged Mr Wan to release, undermines his credibility.

Taking the evidence as a whole, including correspondence emanating from Mr Vongvisitsin, it is apparent that he honestly believes that the trust and confidence which he placed in his personal relationship with Mr Ang has been breached by conduct which he views as commercially unethical. This has coloured the whole of his evidence. I am satisfied that, following the February e-mail coming to the attention of Mr Vongvisitsin, he believed that Thong Guan would not knowingly bypass Vicpac and deal, directly or indirectly, with its customers; at least without giving Vicpac notice. When Mr Vongvisitsin subsequently discovered that Thong Guan had done so, he became angry. He believed that Thong Guan had acted unethically. This anger infected Mr Vongvisitsin’s approach to his dealings with Thong Guan thereafter and the evidence which he, and those associated with him, have presented to this Court. As appears below, Mr Vongvisitsin’s anger was justified, because there was a misleading aspect to Thong Guan’s conduct. However, that provides no excuse for presenting coloured and formulaic evidence to the Court, which I reject as improbable.

Fourth, even if it is accepted that they were present and heard the relevant conversations, the evidence of Mr Teoh and Mr Eap was plainly unreliable. Each gave evidence that they recalled the content of conversations between Mr Vongvisitsin and Mr Ang or Mr Wan in English, when they clearly have difficulty understanding that language. Each gave evidence with the assistance of an interpreter. Further, each conceded that the matters under discussion were not within their field of responsibility. Indeed, Mr Teoh had no involvement in the management of the Vicpac business, had no business dealings with Vicpac, and acknowledged that there was no reason for the relevant statements to have any lasting impression upon him.

Mr Eap’s evidence was unimpressive. After apparently exhausting his memory about the relevant conversations, he needed prompting by leading questions to recall anything relevant to the alleged no‑bypass term. In cross‑examination, he endeavoured to demonstrate that he has a reasonable grasp of the English language by directly answering some questions without the assistance of the interpreter. I am not satisfied, however, that his level of English ability is sufficient to enable his evidence to form the basis of a conclusion by the Court as to statements made by others. This was demonstrated by an exchange between Mr Eap and counsel for Thong Guan in cross‑examination. It was put to Mr Eap that he could not recall Mr Wan saying during the relevant meeting that ‘Thong Guan will always supply via Vicpac’. These words were taken directly from Mr Eap’s own witness statement. Notwithstanding this, he could not understand the question.

Mr Eap’s credibility is also undermined by his inconsistent evidence concerning the telephone conversation between P K Ang and C K Wan, which he contends he overheard.

As to Mr Teoh, his evidence concerning Mr Ang opening the February e-mail on a computer and then printing a paper copy of it was most unconvincing. As noted above, this version of events was not put to Mr Ang and was not the subject of evidence from Mr Vongvisitsin.

Fifth, the four conversations relied upon occurred over four years ago. They were apparently routine business meetings, dealing with a variety of subjects. The detailed recollections put forward by Mr Vongvisitsin, and supported by Mr Eap and Mr Teoh, appeared formulaic and rehearsed. The notion that Mr Eap and Mr Teoh can have a clear recollection of what was said in English over four years ago is fanciful. I find their evidence to be highly improbable and do not accept it. On the other hand, the evidence of Mr Ang and Mr Wan that they cannot recall the detail of what was said at these meetings, but did not make the statements attributed to them, is more in accordance with probability.

For the above reasons, I reject Vicpac’s case that the alleged no‑bypass term was made orally. I turn to consider the alternative case; that the no‑bypass term should be implied.

Vicpac alleges that the no‑bypass term should be implied to ‘give business efficacy’ to each individual sale contract. I do not accept that this is so. The alleged no‑bypass term is unnecessary for the effective operation of the individual sale contracts, and would be both unreasonable and unworkable. This conclusion is supported by the following matters:

(1) There was no overarching agreement between the parties – Vicpac was free to cease ordering products from Thong Guan at any time and for any reason, and Thong Guan was free to refuse any purchase order placed by Vicpac.

(2) The individual sales contracts relate only to particular orders and deliveries.

(3) There was nothing unique about the products being manufactured by Thong Guan for supply to Vicpac – they were in the nature of a commodity and could be replicated by any other plastic bag manufacturer from a sample.

(4) The no‑bypass term is unlimited as to time and as to the circumstances in which it operates.[9] It is highly improbable that Thong Guan would have agreed to such a term if asked to include it in the sales contracts.

[9]Cf. Futuretronics.au Pty Ltd v Graphix Labels Pty Ltd [2007] FCA 1621, [130], [133].

Finally, in considering Vicpac’s case based upon the alleged no‑bypass term, I am not satisfied that, even if such a term were proved, its breach caused any loss to Vicpac. This is because each of the three customers would in any event have ceased ordering products from Vicpac at about the time it did, because of dissatisfaction with Vicpac’s service. The representatives of each of the three customers gave evidence to this effect, which I accept.

It was submitted on behalf of Vicpac that the evidence of Andrew O’Brien supported a finding that, in the absence of Thong Guan agreeing to supply Surepak, Surepak would have continued to do business with Vicpac. I reject that submission. In cross‑examination, Mr O’Brien stated clearly that Surepak intended to change suppliers, whether or not Thong Guan agreed to supply it. He said: ‘It could have been Thong Guan, it could have been anybody.’

Mr Hunter said that, by September 2005, his dissatisfaction with Vicpac’s service ‘was not redeemable and I was no longer prepared to entrust Hunter’s reputation in Vicpac’.

Mr King of Jasol said: ‘Had Jasol not sourced Plastic Bag Products through Surepak, I would have looked for another supplier, such was my concern about Vicpac’s reliability as a supplier, and its treatment of Jasol when problems had eventuated.’

Further, in the absence of Thong Guan agreeing to supply the three customers, they would have had little difficulty in obtaining an alternative supplier to Vicpac. The products could have been manufactured by any supplier with the requisite machinery.

It was also submitted on behalf of Vicpac that, at the very least, Thong Guan’s breach of the alleged no‑bypass term deprived Vicpac of the opportunity to maintain the custom of one or more of the three customers. However, apart from briefly mentioning this possibility, no submissions were directed towards how, or on the basis of what evidence, the Court should evaluate any such lost opportunity. I am not satisfied that there was any realistic possibility that any of the three customers would, in the absence of Thong Guan supplying Surepak, have continued to deal with Vicpac.

Did Thong Guan mislead Vicpac?

As an alternative to its claims based upon the alleged no‑bypass term, Vicpac alleges that Thong Guan made a representation to it in the same terms as the alleged no‑bypass agreement: that at no time would Thong Guan sell products that it was manufacturing for Vicpac directly or indirectly to Vicpac’s customers. Vicpac alleges that the representation was untrue because Thong Guan intended to bypass Vicpac by direct sales to Surepak and indirect sales to Jasol and Hunter. This is a case of fraud, although relief was claimed on the basis of contravention of s 52 of the Trade Practices Act 1974 (Cth).

Vicpac alleges in its particulars that the representation was made orally and by silence. Insofar as it is alleged that the representations were made orally, reliance is placed upon the same four conversations alleged to constitute the no‑bypass term. For the reasons given above, I am not satisfied that Vicpac has satisfied its onus to prove the representations. It follows that the negligent misstatement case also fails.

Vicpac also alleges in its particulars that the representation was made by silence. A representation by silence is well known to the law. In Re Demagogue Pty Ltd v Nicholas Ramensky and Gisela Elizabeth Ramensky,[10] Gummow J (as he then was) quoted with approval the remarks of French J (as he then was) in Kimberley NZI Finance Ltd v Torero Pty Ltd,[11] that the cases in which silence may constitute misleading or deceptive conduct:

are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.[12]

[10](1992) 39 FCR 31, [34].

[11][1989] ATPR (Digest) 46-054.

[12]Ibid, 53,195 (emphasis added).

The representation by silence is alleged in the particulars to have arisen from the nature of the business arrangements between the parties, the fact that Thong Guan did not at any time inform Vicpac that it regarded itself as free to sell products to Vicpac’s customers, and from Thong Guan’s failure to inform Vicpac that it intended to sell and, after March 2005, had in fact sold, products directly to Surepak. No reference is made in these particulars to the February e-mail. Notwithstanding this, the February e-mail was the subject of evidence, puttage and submissions. In particular, Mr Vongvisitsin said that Mr Ang showed the February e-mail to him during the course of the first conversation relied upon, at the March 2005 meeting in Penang. For the reasons given above, I do not accept Mr Vongvisitsin’s evidence, or that of Mr Teoh. However, the fact remains that the February e-mail formed a material part of Vicpac’s misleading and deceptive conduct case.

Whether or not the February e-mail was shown to Mr Vongvisitsin by Mr Ang, there is no doubt that it was sent by Mr Wan to Mr Wong, and it is probable that it came to the attention of Mr Vongvisitsin soon after it was sent. In my view, Mr Wan’s conduct in sending a copy of the February e-mail to Mr Wong constituted a representation that Thong Guan would not sell products directly to Surepak without first informing Vicpac of its intention to do so. The February e-mail was in definite terms, stating: ‘we are not in the position to deal with anyone besides Vicpac’. In these circumstances, it was reasonable for Vicpac to expect that, if Thong Guan came to a different decision and determined to supply products to Surepak directly, Thong Guan would inform Vicpac of that fact.

Contrary to this reasonable expectation, Thong Guan deliberately refrained from informing Vicpac that it was dealing with Surepak directly. Mr Wan gave candid evidence about his decision in July 2005 to withhold this information from Vicpac. Further, when directly confronted with Mr Vongvisitsin’s allegations in his 13 October 2005 e-mail, Mr Wan and Mr Ang made a conscious decision that Mr Vongvisitsin should not be informed that Thong Guan was dealing directly with Surepak. For this reason, no reply was sent to Mr Vongvisitsin’s e-mail. Mr Wan said that Thong Guan was at liberty to take this course because there was no agreement between the parties that Thong Guan would not supply Vicpac’s customers. He described Thong Guan’s usual practice of not dealing directly with the customers of its customers, as evidenced by the February e-mail, as ‘just a gentlemen’s way of doing business’.

In these circumstances, a case of misleading conduct was established. However, for the reasons given below, Vicpac has failed to prove that it suffered a quantifiable loss arising from such conduct.

Vicpac contends that it suffered loss and damage by purchasing products from Thong Guan for on‑sale to Surepak, Jasol and Hunter in circumstances where it did not know that Thong Guan was supplying or intended to supply them directly. Vicpac alleges that it has suffered loss and damage because, as a result of making these purchases, it has been left with products which it intended to supply to the three customers, which they no longer require because they now obtain supply from Thong Guan (‘the unsold stock’). In these circumstances, Vicpac claims the cost price of the unsold stock and the storage costs in respect of that stock. For Vicpac to prove loss and damage of this kind, it must prove the following matters.

First, there was no misleading conduct until Thong Guan intended to act contrary to Vicpac’s reasonable expectation, which Thong Guan induced by the February e-mail. Accordingly, Vicpac must prove the date on which Thong Guan first intended to sell products directly to Surepak. In this regard, counsel for Vicpac conceded that the earliest date evidencing such an intention is 4 July 2005. On that day, Mr Wong (who by that stage was no longer employed by or interested in the Vicpac business) gave James O’Brien of Surepak a document setting out the current price at which Thong Guan was selling products bearing a Surepak code to Vicpac, and Thong Guan’s proposed prices for direct sales to Surepak. I accept that this is an appropriate date to select for the purposes of considering this issue.

It is also necessary to consider when Thong Guan first intended to supply Surepak for the purposes of on‑supply to Jasol and Hunter. Until this time, there was no misleading conduct in respect of Vicpac’s orders for products intended for on‑supply to these customers. The earliest date would appear to be 17 September 2005 (for Jasol) and 20 September 2005 (for Hunter), when Thong Guan’s price lists for supply of Jasol and Hunter products to Surepak were provided by Mr Wong to Surepak, to assist it in price negotiations with Jasol and Hunter. Further, as noted above, the evidence of Mr Wan establishes that, in or about September 2005, he was involved in negotiations with Surepak concerning the prices which Thong Guan would charge Surepak for products to be on‑sold to Jasol and Hunter. Accordingly, by 20 September 2005, he knew that Surepak intended to supply Jasol and Hunter with products which had previously been supplied to them by Vicpac.

Second, Vicpac must prove that it in fact placed purchase orders for products intended for on‑sale to Surepak, Hunter or Jasol after the dates that Thong Guan’s conduct became relevantly misleading. No such case has been established concerning Surepak products. The relevant date is 4 July 2005. Vicpac’s final order for Surepak products was placed on 15 June 2005.

As to Jasol, the relevant date is 17 September 2005. After that date, on 20 September 2005, Vicpac placed one relevant purchase order, and thereafter accepted deliveries in respect of that order.

As to Hunter, the relevant date is 20 September 2005. After that date, on 14 October 2005, Vicpac placed one relevant purchase order, and thereafter accepted deliveries in respect of that order.

Third, Vicpac must prove that it is in a worse position because it purchased those products. This involves a comparison between the position that Vicpac is in as a consequence of purchasing and accepting delivery of the relevant products, and the position it would have been in had it not purchased the products at all or if it had refused to accept delivery of them.[13] It is at this stage that Vicpac’s damages case fails. After 4 July 2005, Vicpac did not order any products for on‑supply to Surepak. As to products intended for on‑supply to Hunter or Jasol, Vicpac has conducted no analysis of the unsold stock to ascertain which parts of that stock were ordered after 17 September 2005 (for Jasol) or 20 September (for Hunter). The Court is left to speculate as to the proportion of the unsold stock which relates to the purchases made after that date.
[13]For example, Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, 512-5.

Further, even if such evidence was before the Court, Vicpac has acted unreasonably in failing to mitigate its loss. Mr Vongvisitsin said that he attempted to sell the unsold stock to Surepak, Jasol and Hunter. He said that he offered them a discount of between 10 and 15 per cent on the prevailing price between Vicpac and those customers. He said that Hunter agreed to buy some stock, but did not identify how much or at what price. This was the extent of Mr Vongvisitsin’s efforts to mitigate Vicpac’s loss. He conceded in cross‑examination that he was not willing to sell any of the unsold stock at a price below that which Vicpac had purchased from Thong Guan. He said: ‘I willing to offer discount to get rid of this product at a price no lower than what I paid Thong Guan.’[14] When it was put to Mr Vongvisitsin that he could have sold the stock for below the cost price, in order to mitigate Vicpac’s loss, he accepted that this course was open. He said that if he endeavoured to do so; ‘I’m sure there would be people who might be interested’. In that regard, it is relevant that, although the unsold stock is packed in boxes bearing the names or logos of the three customers, the stock is comprised of generic plastic bags of standard sizes. It could have been re‑boxed and sold to any person in the market.
[14]Emphasis added.

When his attempts to sell the unsold stock were unsuccessful, Mr Vongvisitsin said that he decided that he should not sell the stock because it was ‘in litigation from my point of view that I perhaps should not touch it’.

By the end of 2006 at the latest, Mr Vongvisitsin well knew that none of the three customers was likely to order any stock from Vicpac at the slightly discounted prices which he had offered them. In addition, Vicpac alleges it was incurring a daily loss for pallet hire from October 2005, and from March 2008 was forced to pay increased rent for storage space in respect of the unsold stock. In all the circumstances, it was unreasonable for Vicpac to retain the unsold stock, and thereby incur costs for increased rental, and in respect of pallet hire, from the end of 2006 at the latest.

Was it a term of the sales contracts that Thong Guan would act in good faith towards Vicpac? If so, did Thong Guan breach that term?

In its defence and counterclaim, Vicpac alleged that it was an implied term of each sale contract that Thong Guan would, in performing its obligation to supply goods ordered by Vicpac, act fairly and in good faith toward Vicpac.

I do not accept that each of the sale contracts contained an implied term of good faith. In Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL & Ors,[15] Buchanan JA (with whom Osborn AJA agreed) did not accept that there is an implied term of good faith in all commercial contracts.[16] Buchanan JA considered that the implication of such a term depended on the facts of each case. He postulated an example of contractual relations where it may be necessary to import an implied obligation of good faith to protect a vulnerable party from exploitive conduct which subverts the original purpose for which the contract was made. Buchanan JA described the implication of such a term in these circumstances as:

perhaps an ad hoc implication meeting the tests laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings, rather than implication as a matter of law creating a legal incident of contracts of a certain type. [17]

[15][2005] VSCA 228.

[16]Ibid, [25].

[17]Ibid [citations omitted].

Counsel for Vicpac submitted that this was a case which satisfied the conventional tests for the establishment of an ad hoc implied term requiring Thong Guan to act in good faith towards Vicpac in the performance of the individual sales contracts. I do not accept that submission. In the absence of a constituent or overarching agreement between the parties governing the sales contracts, such as an arrangement obliging Thong Guan to sell products to Vicpac and requiring Vicpac to order products from Thong Guan, an implied obligation of good faith is both unnecessary and unreasonable. In effect, this aspect of Vicpac’s case is no more than a re‑formulation of the alleged no‑bypass term. Further, although it was put as an implied term of each individual sales contract, the substance of the case was that there was a floating obligation of good faith governing the relationship between the parties while they continued dealing with each other on an ad hoc basis. Such a case is untenable.

However, even if established, the case based upon Thong Guan’s alleged failure to act in good faith would fail at a causation level. As stated above, the three customers would in any event have sought an alternative source of supply, even if Thong Guan had not been prepared to deal with Surepak directly.

Did Thong Guan fail to take steps necessary to give Vicpac the benefit of the sales contracts?

Vicpac alleges that it was an implied term of each of the individual sales contracts that Thong Guan would not perform any act or take any step that would tend to prevent Vicpac from enjoying the benefit of the supply of products ordered. Implied in every contract is a general obligation that each party will do all things necessary to enable the other party to have the benefit of the contract.[18] However, as the learned authors of Cheshire and Fifoot’s Law of Contract point out:[19]

The duty of co‑operation requires performance only of acts which are necessary to preserve the ‘benefit of the contract’ – not ‘the benefit of the party’. In other words, the ambit of the required co‑operation is defined by what has been promised under the contract in question, and not [by] some absolute obligation to look after the benefit of the other party.

[18]Butt v McDonald (1896) 7 QLJ 68; Secured Income Real Estate (Australia) Ltd v St Martin’s Investments Pty Ltd (1979) 144 CLR 596, 607.

[19]9^th Australian Edition, 2008 at [10.42].

In this case, the only benefit that the individual contracts of sale were intended to confer on Vicpac was a sale of goods to Vicpac. It was no part of the individual sales contracts that Vicpac should be able to deal with the goods, once delivered, in any particular way – such as by selling them to a particular customer.

On this basis, Thong Guan’s conduct in selling products to Surepak, and indirectly supplying Jasol and Hunter though Surepak, was not in breach of this implied term. In common with Vicpac’s reliance upon the alleged implied term of good faith, this aspect of its case is simply a re‑formulation of the alleged no‑bypass term.

Even if established, the conduct relied upon did not cause loss to Vicpac. Its loss was caused because the three customers were dissatisfied with its service, and determined to seek an alternative supplier. They would have done so even if Thong Guan had not been prepared to supply Surepak.

Did Thong Guan act unconscionably in connection with the sales contracts?

Vicpac alleges that Thong Guan engaged in conduct which constituted unconscionable conduct in contravention of s 51AC of the Trade Practices Act 1974 (Cth). Section 51AC relevantly prohibits unconscionable conduct ‘in connection with’ the acquisition or supply of goods.

It was submitted on behalf of Vicpac that, in circumstances where Thong Guan intended to sell goods (directly or indirectly) to the three customers and did not advise Vicpac of that intention, it was unconscionable for Thong Guan to supply Vicpac with goods intended for on‑supply to those customers. As appears above, Vicpac has established that this conduct by Thong Guan was misleading or deceptive. However, as stated above, Vicpac has failed to establish any quantifiable loss in respect of that conduct. It is accordingly unnecessary to further consider Vicpac’s unconscionable conduct case.

Was there a ‘credit agreement’ as alleged by Vicpac?

Finally, Vicpac alleges that on or about 26 October 2007 the parties entered into an agreement (‘the credit agreement’) under which:

(1) Thong Guan agreed to re‑take possession of the unsold stock which Vicpac had been unable to sell to the three customers; and

(2) Thong Guan would provide a credit to Vicpac in respect of the unsold stock, equal in amount to the original sale price of the stock to Vicpac and Vicpac’s storage costs in relation to that stock.

Vicpac contends that the credit agreement was partly written and partly oral. Insofar as it was oral, Vicpac relies on conversations between solicitors previously acting for the parties. The solicitor who previously acted for Vicpac, Mr Ames, provided a witness statement, which was admitted without objection. There was no cross‑examination. The witness statement does not prove the credit agreement. It is accordingly necessary to consider the correspondence between the solicitors which is alleged by Vicpac to constitute the written part of the credit agreement.

The correspondence commenced with a letter dated 26 October 2007 from Thong Guan’s previous solicitors to the solicitors previously acting for Vicpac. In that letter, Thong Guan’s solicitors confirmed an agreement reached between the parties at court on that day, including a term that Thong Guan ‘can take back any of the stock which it wants of the stock which [Vicpac] has not paid for’.[20] Vicpac’s solicitors responded on the same day. They confirmed the agreement, with one exception – relating to the value to be attributed to any stock which was taken back. They did not seek to contend that Thong Guan was obliged to take back any stock. Accordingly, under the agreement referred to in the correspondence, Thong Guan had an option to ‘take back any of the stock which it wants’.
[20]Emphasis added.

Nearly a year passed. Thong Guan engaged its present solicitors. In a letter dated 18 September 2008, Thong Guan’s solicitors stated that they had been instructed by Thong Guan ‘that it still wishes to collect this stock from your client’s warehouse’.[21] There was no reply to this aspect of the letter. On 21 November 2008, Thong Guan’s solicitors wrote to Vicpac’s solicitors stating a different position, that ‘our client will not be seeking recovery of these goods’.[22] On 24 November 2008, Vicpac’s previous solicitor replied. He noted the change of position by Thong Guan, and continued: ‘Irrespective, I now place you on notice that my client will dispose of the stock during January 2009 unless you provide any reason why that should not occur by 19 December 2008.’
[21]Emphasis added.
[22]Emphasis added.

The above correspondence does not establish the credit agreement which Vicpac alleges. The change of position in the correspondence from Thong Guan’s present solicitors did not give rise to any agreement in connection with any identifiable stock.

Conclusions and orders

For the above reasons, Thong Guan is entitled to judgment for the sum of $572,253.83 together with interest thereon pursuant to s 58 of the Supreme Court Act. I will hear the parties as to the amount of that interest, and as to costs. Vicpac’s counterclaim will be dismissed.

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Thong Guan Plastic and Paper Industries Sdn BHD v Vicpac Industries Australia Pty Ltd [2010] VSC 11

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Addy v Commissioner of Taxation [2021] HCA 34

Briginshaw v Briginshaw [1938] HCA 34

[2010] VSC 11

3 February 2010