Toucha Pty Ltd v Thomas Taylor (Bowls) Limited
[2017] FCA 514
•15 May 2017
FEDERAL COURT OF AUSTRALIA
Toucha Pty Ltd v Thomas Taylor (Bowls) Limited [2017] FCA 514
File number: WAD 390 of 2014 Judge: BARKER J Date of judgment: 15 May 2017 Catchwords: TRADE PRACTICES – misleading or deceptive conduct under s 51A and 52 of Trade Practices Act 1974 (Cth) – accessorial liability under s 75B of the Act – where applicant and first respondent entered into distribution agreement – where second respondent was managing director of first respondent – whether respondents represented to applicant that it would enter into new distribution agreement with applicant – alleged representations not established – application dismissed Legislation: Trade Practices Act 1974 (Cth) ss 51A, 52, 75B, 87 Date of hearing: 12-15 December 2016 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 138 Counsel for the Applicant: Mr P Lafferty Solicitor for the Applicant: Kings Park Corporate Lawyers Counsel for the Respondents: Mr J Slattery Solicitor for the Respondents: Griffith Hack Lawyers ORDERS
WAD 390 of 2014 BETWEEN: TOUCHA PTY LTD ABN 22 119 817 953
Applicant
AND: THOMAS TAYLOR (BOWLS) LIMITED (COMPANY NO SC 136912)
First Respondent
GRANT HERON
Second Respondent
JUDGE:
BARKER J
DATE OF ORDER:
15 MAY 2017
THE COURT ORDERS THAT:
1.The application against each respondent should be dismissed with costs.
2.The respondents be entitled to costs, and are to make submissions as to a costs order within 7 days.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BARKER J:
By a distribution agreement dated 27 June 2006 and made between Toucha Pty Ltd ABN 22 119 817 953 (an Australian corporation) and Thomas Taylor (Bowls) Limited (Company No SC 136912) (a Scottish company), Toucha was appointed the exclusive distributor for the marketing and sale of lawn bowls and accessories manufactured by Taylor under the brand name “Taylor Bowls” – referred to as the products – in the Territory, which comprised the States of Western Australia, South Australia, Tasmania, Queensland and the Northern Territory, for a period of five years from the date of signing.
More particularly, cl 9 of the distribution agreement, that dealt with the term of the agreement, provided that:
This Agreement shall, subject to the provisions for termination contained in Clause 11, commence on the date of signing of the Agreement and continue in full force and effect for a period of five years from the date of signing of this Agreement and thereafter until terminated by either party giving to the other not less than three (3) months notice of termination, such notice to expire at or any time after that period. If after the five year period both parties are happy with the Agreement, then Toucha Pty Ltd are to have first option on a further three year term.
On 7 February 2011, Mr Grant Heron, then the managing director of Taylor, informed Mr Rod Heaton, then the managing director of Toucha, that Taylor would not be entering into a new distribution agreement with Toucha following the expiration of the current distribution agreement.
In this proceeding, Toucha seeks compensation or damages from Taylor as well as Grant Heron, as a consequence of Taylor’s decision, on various bases.
As against Taylor, Toucha claims the following relief:
·equitable compensation, apparently based on estoppel;
·damages for common law misrepresentation;
·damages under the Trade Practices Act 1974 (Cth) in respect of misleading or deceptive conduct contrary to s 51A and s 52;
·orders under s 87 of the Trade Practices Act;
·damages in tort for negligent misstatement; and
·damages for breach of contract.
As against Grant Heron, Toucha claims:
·damages under the Trade Practices Act; and
·damages in tort for negligent misstatement;
The primary issue, given the manner in which Toucha ran its case at trial, is whether Toucha is entitled to damages under the Trade Practices Act in respect of any misleading or deceptive conduct alleged by it.
So far as the alleged misleading or deceptive conduct is concerned, Toucha pleads a number of representations, each of which it alleges is actionable under the Trade Practices Act:
(1)The first representation is pleaded in [8] of the statement of claim in the following terms:
8.At the meetings pleaded in paragraph 7 the second respondent acting for and on behalf of the first respondent represented to the applicant and assured the applicant that the first respondent would enter into a new distribution agreement with the applicant which would give the applicant the exclusive right to continue to sell the Products in the Territory subject to the applicant;
i.ceasing to distribute products in the Territory for Hensilite; and
ii. removing Steve Glasson as a Director and Shareholder of the applicant (the ‘First Representation’).
(2)The second representation is pleaded in [10] of the statement of claim in the following terms:
10.At a meeting held in Sydney in the State of New South Wales in or about October 2009 attended by Mr Adam and Mr Heaton acting for and on behalf of the applicant and the second respondent acting for and on behalf of the first respondent the second respondent informed the applicant that although the first respondent was going to appoint Mr Nick Aitken to distribute and sell certain of the first respondent's Products in the Territory he assured the applicant that the first respondent would enter into a new distribution agreement with the applicant (the ‘Second Representation’).
(3)The third representation is pleaded in [15] of the statement of claim as follows:
15.In or about October 2009 the second respondent acting for and on behalf of the first respondent represented to the applicant and assured the applicant that the first respondent would enter into a new distribution agreement with the applicant (the ‘Third Representation’).
Particulars
The applicant refers to an email from the second respondent to Mr Adam dated 21 October 2009
(4)The fourth representation is pleaded in [17] of the statement of claim in the following terms:
17.During the course of those discussions the second respondent represented to the applicant and assured the applicant that a new distribution agreement was being prepared by the first respondent for the applicant (the ‘Fourth Representation’).
(5)The fifth representation is pleaded in [18] of the statement of claim as follows:
18.In or about and between October 2010 and prior to 7 February 2011 Mr Adam and Mr Heaton had further discussions with the second respondent at the Premises during which the second respondent represented to the applicant that first respondent would be entering into a new distribution agreement with the applicant and on that basis the applicant should purchase certain apparel from the first respondent for sale in the Territory (the ‘Fifth Representation’).
In relation to these representations, Toucha pleads that it relied on each representation and suffered loss by doing so.
It alleges that in reliance upon the first representation it altered its position by:
(1)terminating its agreement with Hensilite;
(2)removing Mr Steve Glasson as director of Toucha; and
(3)reacquiring Mr Glasson’s share in Toucha.
As to the second representation, Toucha pleads that, acting in reliance on it, it “forbore from instigating proceedings against [Taylor] for breach of the agreement”.
It further pleads that as a consequence of forbearing to sue Taylor, Toucha suffered detriment in that any cause of action it may have had against Taylor for breach of agreement is now statute barred.
In relation to the fifth representation, Toucha pleads that it acted in reliance on it by:
(1)purchasing certain items of apparel to the value of $150,000 from Taylor for sale and distribution in the Territory; and
(2)incurred certain advertising costs in the sum of $10,000 associated with advertising in various publications the sale of the products by Toucha in the Territory in 2011.
Toucha additionally pleads that it suffered detriment, contrary to the five representations, by Taylor’s failure and/or refusal to enter into a new distribution agreement with it, and that by “first inducing an expectation and then resiling from it the applicant has suffered loss and damage”.
Toucha further pleads that, in these premises, Taylor “is estopped from acting other than in accordance with the expectation”.
This “estoppel” pleading, as it is headed in the statement of claim, would appear to be the basis of the equitable compensation claim against Taylor.
To the extent that Toucha relies upon s 51A of the Trade Practices Act, and relies upon a representation as to a future matter, it first pleads in [20] of the statement of claim that:
20.On or about 7 February 2011 [Grant Heron] acting for and on behalf of [Taylor] informed Mr Adam by telephone that [Toucha] that [Taylor] would not be entering into a new distribution agreement with [Toucha].
Then, in [26] of the statement of claim, it pleads that by reason of the matters pleaded in [20]:
i.the Representations were misleading and deceptive in that [Taylor] knew or ought to have known that at the material time that the Representations were made [Taylor] did not intend to enter into a new distribution agreement with [Toucha];
iithe Representations constituted conduct by [Taylor] which was misleading and deceptive or likely to mislead and deceive by virtue of sections 51A and 52 of the Trade Practices Act 1974 (Cth) (the ‘Act’) and as a consequence constituted conduct by [Taylor] in breach of section 52 of the Act; and
iii[Toucha] has suffered loss and damage and claims damages pursuant to sections 82 and 87 of the Act.
Particulars
[Toucha] will provide further and better particulars of its loss and damage prior to trial.
Against Grant Heron, relief is sought under s 75B of the Trade Practices Act on the basis he was knowingly concerned in or a party to the contravention of s 52 of the Trade Practices Act by Taylor.
Further, by [30] of the statement of claim, Toucha alleged that Taylor and Grant Heron each owed a duty of care to Toucha to exercise reasonable care to ensure that the representations were true and correct and to ensure that Toucha would not suffer financial harm as a result of the representations. This appears to be the basis of the claim for damages both for common law misrepresentation and negligent misstatement.
Toucha also maintained the other causes of action referred to above.
As counsel for Toucha explained in closing submissions, what Toucha has pleaded essentially is that there were five representations made between early 2008 through to late 2010, four of which were oral and the fifth in writing, the written representation being that pleaded at [15] of the statement of claim which is reliant upon an email sent by Grant Heron to Mr Paul Adam, a director of Toucha, dated 21 October 2009.
Counsel for Toucha said that all five representations in some respects are conflated. He said that what underpins all the representations is the proposition that, from the outset of the very first representation through until the fifth representation, Taylor and Grant Heron made representations to the effect that Toucha would get a new contract. That, counsel said, was the “central theme” that underpinned the representations.
I will deal first with my assessment of the evidence supporting the claims made and then turn to each of the specific representations alleged and the other pleaded causes of action.
PRELIMINARY ASSESSMENT OF EVIDENCE AND CLAIMS
At material times in 2006, a well‑known bowls identity, Mr Dennis Katunarich, had been operating a bowls store in Osborne Park, Western Australia, and distributing bowls for Taylor in Western Australia, Queensland, South Australia, Northern Territory and Tasmania. At that time, Mr Walter Jacobs was the Taylor distribution agent for New South Wales, Victoria and the Australian Capital Territory.
Mr Steve Boylen, a well‑known lawn bowls commentator, who knew both Mr Katunarich and Mr Alex Heron (Grant Heron’s father), of Taylor, proposed the acquisition of Mr Katunarich’s store and the distribution rights that he exercised for Taylor in Australia.
As part of the process by which this business plan was implemented, Mr Glasson, a former lawn bowls world champion, Mr Heaton, also a lawn bowler of distinction, along with Mrs Lynda Boylen (the wife of Mr Boylen), Mr Tony O’Meehan, Mrs Leslie O’Meehan, and Mr Adam all became involved in the acquisition. Ultimately, Toucha became the corporate vehicle by which Mr Katunarich’s various interests were, in effect, acquired.
The result of the acquisition by Toucha was that Toucha acquired the lawn bowls store, which sold a range of accessories and lawn bowls of Taylor and, indeed, other manufacturers including Henselite, but also obtained the agreement of Taylor to exercise the distribution rights that Mr Katunarich had previously exercised in his various territories.
The distribution agreement made in June 2006 represented the culmination of the distribution agreement side of that acquisition.
In July 2007, not long into the new venture, Mr Boylen passed away. Subsequently, Mrs Boylen ceased to be involved in Toucha. Mr Adam, who had been the accountant to Mr Boylen, became more directly involved in the business of Toucha at that point.
So far as the trial of this proceeding was concerned, the key witnesses on behalf of Toucha seeking to make out its claims were Mr Heaton and Mr Adam.
While Mr Alex Heron plainly had discussions with Mr Boylen at material times in 2006, by the time this matter came to trial it was Mr Alex Heron’s son, Grant Heron, who had become the managing director and principal representative of Taylor in dealings between Taylor and Toucha, who gave evidence on behalf of Taylor.
It should be added that at the time of the 2006 distribution agreement, there was already what might be called a “handshake” distribution agreement for an entity in Queensland called Bowls Paradise to which the 2006 agreement was understood to be subject. Toucha plainly was content to proceed on the basis that that arrangement would continue.
At early material times, the primary competition for the sale of lawn bowls appeared to be between Henselite, an Australian manufacturer and distributor, and Taylor. Mr Heaton, when he gave evidence, explained that Toucha was initially keen to prevent Henselite from opening a shop in Western Australia. It wished to protect its business through the Osborne Park shop. He said that Mr Boylen had earlier discussed with Taylor an arrangement whereby Toucha could continue to sell Henselite bowls in Western Australia, even though on the face of it, to distribute anyone else’s bowls apart from Taylor’s would be in breach of the 2006 distribution agreement.
It is clear that Taylor, by Mr Alex Heron, agreed to a 12 month trial of that arrangement, on the limited basis explained by Mr Boylen in an email he sent to Mr Alex Heron.
That was in early 2007, and by the end of that year, Taylor were making it clear that, because Henselite was a competitor, the arrangement could not continue. While it plainly was initially agreed as a trial arrangement for 12 months, when Toucha made a limited distribution agreement with Henselite, it was actually for a two year period. Nothing, however, ultimately turns on that fact in this proceeding.
The first meeting between representatives of Toucha and Taylor occurred in February 2008. By that time, Mr Boylen had passed away. The Herons visited Perth and met the Toucha people. They later had meetings with Mr Jacobs in Sydney. As noted below, the Herons also had an apartment in Mooloolaba in Queensland. At the first meeting in February 2008, the questions of the future of Mr Glasson and the Henselite agreement were raised. I deal with that issue below.
It is also appropriate to mention, at this juncture, one Mr Nick Atkins, who, according to the evidence, had some sort of arrangement with Taylor whereby he was entitled to distribute accessories in parts of Australia. It seems that, at various times, Mr Atkins had bowling bags made up in China and distributed them, as well as Taylor accessories, on his own account in Australia. Mr Jacob apparently had his own line of accessories for New South Wales, Victoria and the Australian Capital Territory. Mr Atkins, it would appear, did not endeavour to operate in Mr Jacob’s territories, though it does appear that he was, at various times, supplying orders in the territory of Toucha as defined in the 2006 distribution agreement.
When they first met and again later, Mr Adam and Mr Heaton, on behalf of Toucha, spent some time trying to convince the Herons, particularly Grant Heron in the later period after he took over the management of the company from his father, to insert provisions in the distribution agreement, or a new distribution agreement, more like the terms of the Henselite distribution agreement, which made the supply and sale rules of accessories clearer, effectively shutting out Mr Atkins from the Toucha territory. Toucha also wanted to be able to develop their own special clothing lines to suit Australian conditions and to have clearer arrangements in that regard with Taylor as well. This was a matter of some significance to Toucha.
The reality is, as discussed below, that Toucha never did finally agree any of those issues with Taylor and even though, late in the piece, Taylor said they would be sending a draft agreement to Toucha for the purposes of negotiation, based on an agreement that Taylor had been developing with Greenmasters, another distribution arrangement, that foreshadowed event never eventuated. I find below, nonetheless, that Taylor never represented, as Toucha pleads, that it would give Toucha a new agreement.
Mr Heaton’s evidence made it clear that while Toucha had the distribution agreement with Taylor, the business otherwise operated through the Osborne Park lawn bowls store was of some significance, his suggestion being that the Taylor products constituted about half the sales or profits of that business. I was left with the strong impression as a result of Mr Heaton’s evidence that, at material times, when questions concerning Mr Atkins, or Toucha’s ability to have its own line of clothing and the like were raised for discussion, the need for Toucha to maintain cordial relations with Taylor was well understood by Toucha as a matter of good commercial sense.
I will deal below with the express representations pleaded. I am not satisfied, however, from Mr Heaton’s evidence that his recollections of very express and particular representations having been made at relevant meetings can be relied upon. His evidence, in my assessment, was affected to some extent by the events over time. His recollections did not fit consistently with those of Mr Adam or Grant Heron. Nor did they fit with the available contemporary or other relevant documentary materials circulated after meetings.
As a result of Mr Heaton’s evidence, I was left with the clear impression that Toucha hoped and assumed the distribution agreement it had made with Taylor would work out and that, in time, a new distribution agreement would be put in place which would deal with the various issues, including Mr Atkins and the questions of accessories distribution and the like. Plainly, on his evidence, the focus in a redrafted distribution agreement was to be on the clothing side of things. The whole question of the distribution agreement needed finally to be negotiated. Toucha plainly hoped for, and in my estimation had no particular reason to think that they would not finally be successful on negotiating a new distribution agreement, but on the basis of Mr Heaton’s evidence, I do not conclude there were any representations made expressly or by conduct or by silence that they would be given an agreement.
Similarly, I am not satisfied that the first pleaded representation was made out. As mentioned above, at the first meeting between the parties in February 2008 the questions of the future of Mr Glasson and the Henselite agreement were raised. Because Mr Glasson had once been sponsored by Taylor but had chosen to move to Henselite sponsorship, Taylor was simply not prepared to deal with him. That may have been considered unreasonable, and plainly was considered unreasonable, by the Toucha representatives. They thought they could do with Henselite without disadvantaging Taylor. But the Taylor position was clear, for obvious reasons. I am not satisfied that Taylor ever demanded that Mr Glasson be removed as a director and that, if he were, Toucha would obtain a new distribution agreement. Similarly, so far as the future of the short term Henselite distribution agreement was concerned, I am not satisfied that the representations pleaded as having been made by Taylor were ever made. Taylor did not wish to see that limited business arrangement, out of the Osborne Park store, continue. They had their own competitive reasons for taking that position. They made that very clear, albeit in apparently terse terms, to Toucha. Much evidence was given at the hearing by Mr Heaton and by Mr Adam on how Toucha considered the Henselite agreement was worth examining further. But, plainly, Taylor were not prepared to countenance it for its own business reasons.
The questions concerning Mr Glasson and the Henselite agreement involved questions of personal and business judgment, respectively, from Taylor’s point of view. They were unwilling to see either continued. I am simply not satisfied on any of the evidence that, expressly or by inference or by conduct, Taylor represented to Toucha that if Mr Glasson were removed as a director and ceased to have an involvement in the Toucha business, and if the Henselite agreement were not continued, Toucha would be rewarded with a new distribution agreement in due course.
Mr Adam was called after Mr Heaton. Mr Adam appears to have provided much of the business know‑how behind the Toucha operation. He explained in his evidence that it was through his support for Mr Boylen’s decision to enter into the business that Mrs Boylen was convinced that her husband, even though he was ill at the time, should involve himself in the business. To support that approach, Mr Adam himself took a 12.5% shareholding in the business at the outset.
Following Mr Boylen’s death in 2007, Mr Adam became more familiar with the operational side of the business, whereas previously he was involved just in the business and accounting side. He maintained an accounting business in Geraldton, from where he would travel to Perth regularly to do the business activity statements and income tax returns for the business. He said it was at those regular meetings that he became more familiar with what was happening with the business.
As to the Henselite agreement that had been made as a result of the discussions between Mr Boylen and Mr Alex Heron, Mr Adam said he only got to see that agreement well after the event when familiarising himself with materials before the March 2008 meeting with the Herons in Perth.
While Mr Adam appeared to be attentive to many details and I consider his evidence was generally reliable, I was left with the clear impression at the end of it that Toucha was filled with expectations that a new distribution agreement would eventually be made, but not that the particular representations pleaded in this proceeding were actually made.
Mr Adam’s evidence explained how business meetings occurred, what matters were discussed, the context for discussion, and how the main issue was getting greater clarity into a new contract concerning the distribution and sale of clothing and other accessories in the Toucha territory and how they wanted to get Mr Atkins out of Toucha’s territory.
It became apparent through Mr Adam’s testimony that at the Sydney meeting in 2009, when Mr Jacob, Mr Atkins and others including Toucha representatives were present, Grant Heron came up with a particular idea for how to involve Mr Atkins, but confining him just to New South Wales, Victoria and the Australian Capital Territory – something with which Mr Jacob was not enamoured.
This led to a later email which showed that Taylor had a “rethink” about that proposal. The idea then became that Taylor would develop a presence with a warehouse in Sydney that Mr Atkins would run and to which the new clothing line would be sent. There was an agreement eventually that about 60% would be distributed in the “East” and the balance would go to Toucha in the “West” – although Toucha’s territory included Queensland.
According to Mr Adam’s testimony, at that point the effect of these arrangements was more or less to ensure that Toucha, and not Mr Atkins, got to distribute accessories in its territory. On the face of it, that proposed arrangement was consistent with the 2006 distribution agreement, as Mr Adam acknowledged in his evidence when the proposition was put to him.
As explained by Mr Adam, however, while Toucha kept expecting the new agreement to arrive, and Grant Heron plainly indicated that he had settled the Greenmaster contracts and would be in a position to send Toucha’s contract in draft to Toucha for negotiation purposes in January 2010, that did not happen. Rather, discussions kept occurring around the clothing arrangements.
Mr Adam said that, in effect, in anticipation of a contract, Toucha acceded to the clothing launch and the distribution of a larger order of clothing to them it would usually take. It may be accepted, from what Mr Heaton and Mr Adam said about the clothing order, that it was in advance of what they had previously sold in one season out of the Perth store, and represented what they would normally sell over a two or three year period. They collectively conveyed the understanding in their evidence, however, that they saw this as a commercially sensible thing to agree to do on their understanding that Toucha would soon enter into a renegotiation of their contract. Not long after that, though, they learnt from Grant Heron that the distribution agreement would not be extended.
After they received that advice, they went to Mooloolaba to meet Grant Heron. They then discovered that Taylor was advertising for a manager for their Australian operation. Plainly, they had no inkling of those plans of Taylor.
I should record here that it is of some significance, in my estimation, that when Mr Heaton and Mr Adam flew to see Grant Heron in Mooloolaba they did not challenge him about Taylor’s unfair practices or of having effectively promised them the renewal of the distribution agreement only to have reneged on that promise. Instead, what they were wanting was to ensure that they could return unwanted stock just ordered and also order, at a lower distribution rate, Taylor’s bowls for sale by them at their Perth store in the future.
At this point, taking into account the evidence given by both Mr Heaton and Mr Adam, it is difficult to conclude that the specific representations pleaded have been made out, as against Toucha holding hopes and expectations which were simply disappointed.
While Mr O’Meehan was also called to give evidence, he had little to add.
I will now turn to the question of the specific representations and other pleaded causes of action more directly.
FIRST REPRESENTATION
Toucha alleges that the first representation was made by Grant Heron to Mr Adam and Mr Heaton at various meetings during February 2008 and November 2008 in Mooloolaba in Queensland and Fremantle in Western Australia and constituted a representation that:
[Taylor] would enter into a new distribution agreement with the applicant which would give the applicant the exclusive right to continue to sell the Products in the Territory subject to the applicant (1) ceasing to distribute Products in the Territory for Henselite and (2) removing Steve Glasson as a director and shareholder of the applicant.
There were two relevant meetings between representatives of Toucha and Grant Heron between February 2008 and November 2008. The first was on 5 February 2008 and the second on 14 November 2008.
The 5 February meeting was at Pier 21 at Fremantle and was attended by Mr Alex Heron, the father of Grant Heron, and Grant Heron, for Taylor, on the one hand, and Mr Heaton and Mr O’Meehan, for Toucha, on the other.
Mr Heaton’s evidence of the discussions that occurred contained no reference to any discussion of a “new contract”. He said that the documents he was shown at the meeting recorded all significant matters discussed at the meeting. Those documents do not record any discussion of the “contract”. It is apparent from Mr Heaton’s evidence of the discussions that the discussion concerning Henselite and Mr Glasson was in no way linked to any representation concerning a “new” contract between Toucha and Taylor.
The only evidence that Mr Adam gave of a “new” contract as at the date of this meeting was in his evidence to the effect that for Toucha to move forward at that stage:
updating or having a new contract drawn up, we would have to remove Steve Glasson as a shareholder of this company as Alex [Heron] would not agree to anything if Steve Glasson was still involved.
Mr Adam also said there was some discussion about the contract not being very well written, especially in comparison to the Henselite contract. He said that Toucha had issues with Taylor not having any accessories and Toucha wanted a clear definition of what accessories they were able to have branded as Taylor, as none of this was in the existing contract. He expressed the view that they needed a new contract similar to the Henselite contract that gave them more definition and direction. He also emphasised that Toucha was just over 18 months into their contract and he did not “see any need to get a contract done yesterday”. But he confirmed that it was something that needed to be addressed because of the issues they had in respect of a new contract.
Counsel for Taylor submitted that there is no mention of a “new” contract being discussed at the 5 February meeting in the relevant documents relating to that meeting, and the fact that Mr Heaton made no mention of a new contract being discussed at that time, it may well be that Mr Adam confused the timing of the discussion about the content of any new contract, and that what he was recalling was more likely to have occurred on 14 November 2008. In my view, there is substance in that submission and I would accept it. The 5 February meeting was still quite early on in the distribution relationship and the question about having greater definition in a contract seems to have arisen later.
Grant Heron’s evidence was that there was no discussion at the 5 February meeting in relation to a “new” distribution agreement. I accept the submission that his evidence is, when the other evidence is properly assessed, to be accepted.
In that regard, a contemporaneous file note made by Grant Heron of matters discussed makes no reference to any discussion of a new contract. Nor does an email he sent to Mr Heaton summarising matters discussed at the meeting. No mention is made of a new agreement in the email that Mr Heaton sent to Grant Heron on 18 February 2008 providing a report from the meeting.
In the circumstances, I accept it is clear that the first representation was not conveyed at the 5 February meeting. This is perhaps an example of how recollections about what was said at a meeting sometime after the event can be imperfect or merge with other events.
I have set out above, in dealing with my preliminary assessment of the claims made, that questions of the future of Mr Glasson in the Toucha business and the continuation of the Henselite agreement were plainly discussed in February 2008 at the first meeting involving the Herons and the representatives of Toucha at that point. Toucha wanted to both continue with Mr Glasson and the Henselite agreement. Taylor were uncompromising in expressing their views about their unwillingness to do business, in effect, with either. It remained a question for Toucha whether they wished to continue to involve Mr Glasson in the business. Plainly, to do so, would affect the willingness of Taylor to deal with them in the future. The same should be said of the Henselite agreement. There was no obligation on Taylor to consider an extension of that agreement, as much as Toucha thought it made good business sense for both sides, Toucha and Taylor.
What is clear though, is that the discussion about those two matters of Mr Glasson and the Henselite agreement are simply not the subject of the first representation pleaded. No indication was given expressly or by inference that if Mr Glasson were removed as a director, and the Henselite agreement discontinued, that Taylor would enter into a new distribution agreement, as pleaded.
The 14 November 2008 meeting also took place at Pier 21. The attendees were Grant Heron, Mr Adam, Mr Heaton and Mr O’Meehan.
Mr Heaton gave evidence that at this meeting he was told by Mr Alex Heron that “a contract would be drafted and we will be sent a copy”. However, he could not recall, at least initially, whether Mr Adam or Grant Heron had said that. However, as counsel for Taylor and Grant Heron has noted, Mr Alex Heron was not present at that meeting.
Mr Heaton went on to say that Grant Heron stated at this meeting that:
It would be coming … we see it a draft contract. We were also promised a new contract after we did the things requested.
Counsel for the respondents submit that this evidence is conclusionary and therefore of low weight. He notes that Mr Heaton also gave evidence that there was discussion at this meeting of the Greenmaster contract and that was “going to be the basis of the new contract”. In cross-examination, however, he said “we showed him [Grant Heron] the Henselite agreement, and he was getting back to us on a new contract”. Mr Heaton added that Grant Heron “was very happy with what we were doing, so we had confidence in him that, if that’s the process he wanted to go through, that was the process”. Mr Heaton also agreed that what Grant Heron was telling him in the email of 15 November 2008 was that he wanted to leave any new contract to “closer to renewal time”.
I accept the submission made by Taylor that Mr Heaton’s evidence of the discussion of a “new contract” on 14 November 2008 should not be accepted. I accept the proposition that Mr Heaton’s evidence that Toucha was “promised” a new agreement was conclusionary and inconsistent with the email Grant Heron sent the following day. Mr Heaton, generally speaking, gave evidence that was well after the event and, without suggesting it was consciously intended, it was inclined to serve the allegations made on behalf of Toucha. Mr Heaton clearly appeared to have placed a construction on things said that were not warranted as of the time they were said.
In contrast, Mr Adam gave evidence that at the 14 November 2008 meeting there was a discussion about “the possibility of us having a new contract”. He explained that there was a discussion with Grant Heron concerning the termination of the Henselite agreement. He explained how there was the issue with Mr Atkins and how that needed to be resolved and, in time, it was hoped that by getting the contract “redone”, those matters could be defined. He explained there were still no accessories “on the radar” in the short term from Taylor as far as clothing and other things like bags and shoes were concerned. Mr Adam’s evidence about the 14 November 2008 meeting is the basis upon which I readily infer that those matters were discussed, not as he had earlier suggested at the 5 February meeting, but at this meeting.
Counsel for the respondents also note that Mr Adam went on to state that, at the 14 November 2008 meeting, “Grant commented that if a new contract was to be drawn up, it will be drawn up by his solicitors”. It is also relevant to note, as counsel for the respondents does, that Mr Adam gave evidence that, while the Greenmaster contract was mentioned at the 14 November 2008 meeting, the attendees did not then sit down and talk about the contents of that Greenmaster contract.
I accept the submission made on behalf of the respondents that the evidence of Mr Adam does not support the first representation alleged to the effect that Taylor “would” enter into a “new contract” if Toucha terminated its relationship with Henselite and Mr Glasson.
In that regard, I consider the evidence given by Grant Heron to more accurately reflect the terms and flavour of the 14 November 2008 meeting in relation to a “new distribution agreement”. He said:
Paul had asked if we could clarify some of the accessories, etcetera, that they could source because there were goods that they can source, there were goods that we could supply from the UK and he wanted clarification of any other goods that they could go ahead, source and brand themselves. There was also discussion which - about the distribution agreement and that was in general, all the ones that I had in place, and I mentioned that I would be looking at all the distribution agreements at some point in the future because they were all quite different from each other and cause me a lot of problems trying to manage them all.
I accept Grant Heron’s evidence that he did not say to those in attendance at the 14 November 2008 meeting that Taylor would enter into a new distribution agreement if Toucha ceased distributing Henselite products and removed Mr Glasson as a shareholder.
Grant Heron’s evidence is consistent with the terms of the email he sent to Mr Adam the following day on 15 November 2008. In particular he made reference to a “new contract” in commenting “I don’t think we need to rush into one straight away”. The further terms of that email are also relevant in this regard:
… I take your point re the list of products, we can do this now and look at the contract at the end of the initial 5 year term, which I believe has 2 years to run. As I said at the meeting I had been looking at all the contracts, there are differences in them all which I was planning on ironing out as renewal time came for the sake of clarity/sanity on my part. Taylor's has a board meeting early December at which we will discuss these issues, I will get back to you then. I feel we had a good meeting, and we are certainly more than happy with the way Toucha is going, I look forward to a long relationship with you all.
Finally, I consider that the evidence given about a meeting in March 2008 in Mooloolaba is not relevant to the first representation pleaded, as it is plain that, while Mr Alex Heron attended that meeting, Grant Heron did not. The first representation pleaded is reliant on what Grant Heron had to say at relevant meetings. It is not made out on the evidence.
THE SECOND AND THIRD REPRESENTATIONS
These may be dealt with together because, as the respondents submit, they are related.
The second representation is alleged to have been made by Grant Heron to Mr Adam and Mr Heaton in or about October 2009 at a meeting in Sydney, and to have been to the effect that:
Although [Taylor] is going to appoint Mr Nick Atkins to distribute and sell certain of [Taylor’s] Products in the Territory [Grant Heron] assured [Toucha] that [Taylor] would enter into a new distribution agreement with [Toucha].
The third representation concerns an email that Grant Heron sent to Mr Adam on 21 October 2009 after the meeting, in which it is alleged that “[Taylor] represented to [Toucha] and assured [Toucha] that [Taylor] would enter into a new distribution agreement with [Toucha]”.
There were in fact two meetings between Grant Heron and representatives of Toucha in Sydney, in September 2009 and October 2009. The first involved other distributors of Taylor’s products in Australia. The minutes of that meeting do not reveal any discussion of a new distribution agreement. Grant Heron gave evidence that I accept, that there was no discussion of a “new contract” at that first meeting.
The second meeting in Sydney in September 2009 took place on the day after the first one and was held at a hotel in The Rocks. The attendees were Grant Heron, his former wife, Mr Adam and Mr Heaton.
Mr Heaton in his evidence in chief agreed that the content of item 2 in the email that Mr Adam later sent Grant Heron (but before October 2009) was an accurate reflection of what was discussed in that meeting in relation to a “new contract”. The first line in point 2 of the email states, “Grant you mentioned that you are about to complete a new contract with Greenmaster and this will be the template for our new contract. What is the timeline for this?”. Mr Heaton said the document shown to him was a minute from that meeting. It records that “Grant assured them that once the Greenmaster contract was signed by end Sept, these would follow”. In cross-examination, Mr Heaton agreed that Grant Heron told him that he was currently working on finalising a new distribution agreement with Greenmaster and that when he finished, he would send through a draft agreement for negotiating the following year. I accept the submission made on behalf of the respondents that Mr Heaton agreed that that was where it was left at that particular point in time. What he was being told was that he would get a “proposed agreement” which would “be negotiated” in the future. Mr Heaton agreed he never saw that draft contract.
Mr Adam gave evidence about what was discussed at the September 2009 meeting. He said the Greenmaster contract was coming up for renewal and that Grant Heron “was going to use that as a template for our new agreement”. Grant Heron said he did not know when to expect that.
The evidence given on behalf of the witnesses called for Toucha does not, in my view, establish the second or third representation as pleaded.
This is consistent, in my view, with the evidence of Grant Heron of what happened at that meeting. He said that Mr Adam mentioned the Henselite contract and said that Taylor should have a look at that and use some of the clauses in a new contract. Grant Heron said he told the Toucha representatives he was completing a more comprehensive contract for Greenmaster which included a trade mark licencing agreement. He said that once it had been finalised, it would form the basis of any negotiations with Toucha. I accept the respondent’s submission that Grant Heron’s evidence in this regard is consistent with the email he sent Mr Adam and Mr Heaton shortly after the September 2009 meeting, on 21 October 2009. I accept his evidence of what was discussed at the meeting.
The email sent by Grant Heron on 21 October 2009 does not, in my view, constitute a representation that Taylor “would” enter into a new distribution agreement with Toucha. At best, it reveals an intention to provide a new draft distribution agreement, once the Greenmaster agreement was completed, with a view to commencing negotiations about the terms of an agreement.
I find the second and third representations pleaded are not established.
The essential feature in so many ways of the Toucha case is that it was more or less guaranteed by Taylor that they would be given a new contract on particular terms. But plainly, that was not the case. I accept, more broadly, the evidence given by Grant Heron that he had every intention of sending a draft new agreement once he finalised the Greenmaster contract, and that he then intended to negotiate with Toucha about terms appropriately. Pending the outcome of negotiations, a new agreement might be made or it might not be. There was no final certainty about that. I do not consider Grant Heron’s evidence in this regard was, as Toucha submit, contrived in order to get around his earlier representation that Toucha would be given a new contract.
Grant Heron gave evidence that after he received an email from Mr Adam on 9 December 2008, which raised the possibility of a “joint venture” between Toucha and Mr Jacobs, the distributor for Taylor in New South Wales, Victoria and the Australian Capital Territory, he (Grant Heron) started to reconsider the nature of Taylor’s distribution arrangements in Australia. He said he did so because he was concerned about a joint venture of that nature and how the Australian industry might begin dictating terms to Taylor about how their products should be sold, and the pricing and the volumes of sales.
Grant Heron said it was this concern that caused Taylor to consider there might be a better way for them to operate in Australia. I accept his evidence.
In the result, he did not send a new draft distribution agreement to Toucha. I accept the submission made on behalf of the respondents, however, that the fact that he did not do so does not render anything he said or did at the meetings in September 2009 either misleading or deceptive. There is no basis, and I will come to this, for finding on the balance of probabilities that he never intended to do what he said he would do, but that later events caused him to reconsider his position.
THE FOURTH AND FIFTH REPRESENTATIONS
The fourth representation pleaded is that Grant Heron, between 25 October 2009 and October 2010, at Toucha’s shop premises in Osborne Park, “assured [Toucha] that a new distribution agreement was being prepared by [Taylor] for [Toucha]”.
The fifth representation is alleged to have been conveyed by Grant Heron in discussions with Mr Adam and Mr Heaton between October 2010 and 7 February 2011. It is alleged Grant Heron represented “that [Taylor] would be entering into a new distribution agreement with [Toucha] and on that basis [Toucha] should purchase certain apparel from [Taylor] for sale in the Territory”.
I accept the submission made on behalf of the respondents that while the time period for these two allegations spans the period from 25 October 2009 to 7 February 2011, the evidence reveals only one relevant discussion and that was during a meeting in Perth on 5 October 2010.
Mr Heaton in his primary evidence said there was discussion about a “new” contract at the 5 October 2010 meeting and that Grant Heron said that he had been dragging his feet but “would get it to us shortly”. Mr Heaton asserted that it was a “forgone conclusion” that Toucha would be getting a new contract from Taylor. He said: “and we made that commitment with the clothing”. For reasons similar to those given above, I consider Mr Heaton’s evidence in this regard was conclusionary. His evidence, in my assessment, did not provide a narrative account of what was said, but involved what he thought, after the event, was being conveyed. In some respects it also appeared to relate to discussions or events that occurred at a later time. I put little evidentiary weight on it.
The minutes of the 5 October 2010 meeting circulated by Grant Heron are not consistent with the evidence of that meeting given by Mr Heaton.
As the respondents reasonably submit, if one goes to the letter that the solicitors for Toucha sent to Taylor on 3 June 2011 – albeit many months after the 5 October 2010 meeting, there is no reference, at point 13 of the letter in relation to the 5 October meeting, to any positive representation having been made of the sort that Mr Heaton now suggests in his evidence.
Mr Adam’s evidence of the 5 October meeting is that it was at a café and that Grant Heron advised that the contract “was in hand and we would have it very soon”. He indicated that there were still some things that Toucha needed to negotiate for their contract “because it won’t be exactly the same as Greenmaster”. That was the extent of the conversation, according to Mr Adam.
Grant Heron, in his evidence, said that Mr Adam again raised the issue of the contract. At that point, the contract had about eight months to run. He asked that when it came time they would need to discuss its details. Grant Heron said that he would “look at it in due course. We’ve got 8 months to go yet”.
A minute of the meeting was made by Grant Heron. It does not support the claim that he represented that Taylor “would” enter into a new agreement. He said that at that time Taylor had not decided what it was going to do with the distribution agreements in Australia going forward. He added that, “I was still thrashing ideas out”. He said Taylor’s board did not finally make a decision about the Australian distribution position until a board meeting of 14 December 2010.
On behalf of Taylor, it is submitted that Taylor was under no obligation to inform Toucha at the 5 October 2010 meeting that it was still considering exactly what it was going to do with the distribution arrangements for Australia going forward. The then current distribution agreement still had nine months to run. Taylor makes the point that it had not decided not to enter into a new distribution agreement; it may still have done so at that point.
Taylor also submits that the evidence does not support the claim that it represented that Toucha should purchase clothing and accessories from it on the basis that Taylor “would” enter into a new distribution agreement. It notes that Mr Heaton had admitted that Grant Heron never said to him at the October 2010 meeting that “because we’re going to enter into a new contract with you, you should take a stock of clothing”. Also Taylor submits Mr Adam never gave any evidence in relation to the 5 October 2010 meeting to that effect. Grant Heron gave evidence that, at the 5 October meeting, he did not tell Toucha representatives that they should purchase this volume of clothing and accessories because Taylor was going to enter into a new distribution agreement with Toucha.
I accept the construction of the evidence for which the respondents contend. Namely, that the questions of Toucha distributing Taylor’s clothing and apparel had been under discussion for a number of years. Under the distribution agreement, Toucha had an obligation to “maintain adequate stock levels at all times to sustain market capital and demands”. Buying and selling Taylor accessories was part of their role as Taylor’s distributor. The contemporaneous documentation reveals that Toucha was told of the quantity of clothing that was to be sent to them as far back as November 2009 and that the clothing had been manufactured and dispatched to Toucha prior to the end of July 2010. Further, Toucha had determined that it did not want Mr Atkins to import and warehouse that apparel for it. The consequence was that Toucha needed to buy and hold the stock itself.
I am not satisfied that Toucha has established that the fourth and/or fifth representations were made as alleged.
FORBEARANCE TO INSTIGATING PROCEEDINGS
As noted above, one of the allegations made by Toucha is that it chose to “forbear from instigating proceedings against [Taylor] for breach of the [distribution agreement]” in reliance on the second representation alleged by it.
Taylor terminated the distribution agreement on 7 February 2011. Toucha sought legal advice soon after that. A letter from the solicitors sent on behalf of Toucha on 3 June made specific reference to the allegation of breach of contract. No limitation period had then expired. As the respondents submit, any decision to forgo bringing proceedings for breach of contract cannot be related to the second representation alleged.
In any event, I have found that the second representation alleged was not made.
There is also a question whether a claim for breach of contract against Taylor in relation to the role of Mr Atkins on the basis pleaded in the statement of claim was likely to have succeeded. The respondents say the distribution agreement was governed by Scots law, and that Toucha has not led any evidence as to the applicable law suggesting that Toucha would have succeeded in a claim for breach of contract under it.
Further, Taylor argues that Toucha’s claim is that Taylor has breached the distribution agreement by appointing Mr Atkins to sell and distribute certain products in the Toucha Territory in about October 2009. However, it contends, the evidence reveals that although Taylor proposed at the meeting in Sydney in September 2009 that Mr Atkins would be appointed to play a role in distributing clothes and accessories, it did not proceed with that proposal. Rather, after a rethink, as Grant Heron put it, about distribution arrangements, he put forward a proposal on behalf of Taylor that “(as per the current agreement) [Toucha] distribute all the clothing accessories in your territories. Taylor’s will supply from our sources and we will give you a breakdown of the prices we are paying, what we will supply to you at and the prices with those you should supply other retailers at”.
Taylor contends that that revised proposal was the only one that was actually implemented and it did not involve Mr Atkins distributing any clothing or accessories in the Toucha territories. Taylor refers to the evidence of Mr Adam in cross-examination agreeing that that is what happened.
Taylor also submits that, in any event, Toucha has not established any loss or damage in relation to the alleged forgoing opportunity to sue.
I accept these various submissions made on behalf of Taylor. There was a historic complaint about the role Mr Atkins played, which was not effectively activated by Toucha at any material time. The formal articulation of the breach of contract claim appears, as Taylor contends, to have been based on a 2009 proposal by Taylor that was never implemented; as Mr Adam acknowledged.
In any event, there really is very little except a complaint about forbearance to sue, without any detail of what the claim would have amounted to in terms of the alleged losses suffered by Toucha, in order to sustain this cause of action.
The claim based on this pleaded cause of action fails.
LOSSES FROM PURCHASING CLOTHING AND APPAREL
Toucha claims it purchased certain apparel from Taylor and placed certain advertising in reliance on the fifth representation alleged. Taylor denies that expenditure was incurred as a consequence of any reliance on the fifth representation.
I have already found that the fifth representation is not made out.
Taylor admitted in its pleadings that Toucha purchased clothing at an unspecified value and placed advertising of uncertain value. However, Taylor says that at no point has it admitted any other allegations made, as to the value or the reliance questions.
I accept the submission made on behalf of Taylor that Toucha has not proven any loss as a result of the purchase of the clothing and apparel or the advertising.
LOSS
As to the question of loss more generally, at the trial, the particulars of loss were confirmed by counsel for Toucha to constitute:
·Lost opportunity to earn profits from distributing Taylor’s products in the Territory pursuant to the proposed new distribution agreement.
·Lost advertising expense.
·Lost profit derived from the sale of Henselite products.
·Lost benefit from its association with Mr Glasson.
I accept the submission made by Taylor that Toucha has not adduced any evidence capable of supporting the heads of loss in the last three categories.
As to the claim of loss of the opportunity to earn profits from distributing Taylor’s products pursuant to a new distribution agreement, as the respondents contend, that is a claim for expectation damages and the authorities do not support an award of expectation damages in cases of contravention of s 52 of the Trade Practices Act, equitable estoppel or negligent misstatement.
In any event, I have already found above that the representations upon which this claim of loss is made have not been established.
Further, I also accept that the basis upon which the expectation loss is advanced, supported by the expert evidence of Mr Tony Kolker, has serious difficulties.
Mr Kolker, in cross-examination, confirmed that he was not asked to calculate the loss and damage suffered by Toucha as a result of not entering into a new distribution agreement.
He also admitted that he assumed that the new distribution agreement would be in identical terms to the one that existed between 2006 and 2011, and that this was an important assumption. I accept the submission made by the respondents that if there had been a new distribution agreement, the evidence suggested it would not have been identical to the old one.
In fact, as the respondents contend, no consensus as to important terms of any new agreement had been reached, including as to the length of the new agreement, the territory to be covered, the pricing structure, the product mix or marketing obligations. Mr Kolker accepted if the parties did not agree on a number of those things, then it would not be possible to reasonably estimate expected profits.
Additionally, Mr Kolker assumed, based on his instructions from Toucha, that Taylor’s products typically made up 85% of the net profit of Toucha.
In support of this instruction, Mr Adam said that 90% of Toucha’s income stream, as a percentage of turnover, came from having the distribution agreement. He agreed that 90% was a reference to the revenue that included sales of Taylor bowls made through Toucha’s retail shop. Mr Adam admitted that even after the distribution agreement ended in the middle of 2011, the retail shop was still able to sell Taylor’s bowls. The respondents submit that, in these circumstances, it would appear that Mr Adam’s evidence about the 90% of Toucha revenue coming from the distribution agreement was not correct as it was influenced and affected by sales through the retail business, which Toucha was free to continue after the end of the distribution agreement. Therefore revenue, was not lost to the extent of 90% by reason of not having a new distribution agreement.
The respondents note that for the purpose of Mr Kolker’s report, he was also instructed to assume that Taylor’s products “made up 85% of gross net profit” for Toucha. He accepted in cross‑examination that if 85% of the revenue came from that distributorship, it would not necessarily transfer to an 85% profit. Thus, the respondents submit that, in the circumstances, Toucha has not proved the factual basis necessary to sustain Mr Kolker’s assumption that 85% of Toucha’s net profit came from the distribution agreement.
I conclude that I could not have relied on Mr Kolker’s evidence to assess an expectation loss, in the event that I had found that such as loss could be sheeted home to Taylor. While some loss no doubt would have followed the “loss” of a new distribution agreement on the expectation basis, the loss would not have been what Mr Kolker calculated.
CONCLUSION AND ORDERS
For these reasons, Toucha’s originating application against each respondent should be dismissed with costs. I will hear from the parties as to the terms of the final orders to be made.
I certify that the preceding one hundred and thirty-eight (138) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. Associate:
Dated: 15 May 2017
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