BDM Grange Ltd v Trimex Pty Ltd

[2015] NZHC 2469

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4460 [2015] NZHC 2469

BETWEEN

BDM GRANGE LIMITED

Plaintiff

AND

TRIMEX PTY LIMITED Defendant

Hearing:

24-28 November 2014, 1-5 December 2014, 8-9 December

2014

Appearances:

L J Turner for Plaintiff
MHL Morrison and C M Hanafin for Defendant

Judgment:

8 October 2015

JUDGMENT OF DUFFY J

This judgment was delivered by me on 8 October 2015 at 4.00 pm pursuant to

Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Solicitors:

Whaley Garnett, Auckland

Lowndes Jordan, Auckland

Counsel:

L Turner, Auckland

BDM GRANGE LIMITED v TRIMEX PTY LIMITED [2015] NZHC 2469 [8 October 2015]

[1]      Between October 1984 and September 2012 the plaintiff, (BDM Grange), and the defendant, (Trimex) Pty Ltd, were engaged in a business arrangement (the arrangement) that initially involved the wholesale of Clarins beauty products in New Zealand on  an  exclusive basis,  and  later  was  extended  to  include other similar products as well.1    After a dispute about whether BDM Grange had claimed impermissible deductions for expenditure Trimex ended the arrangement.

[2]      BDM Grange contends that it was entitled to make the disputed deductions for expenditure.  In addition, it claims that the arrangement was conducted under a partnership agreement, or alternatively a joint venture that gave rise to fiduciary duties, and so the taking of an account between the parties is now required.

[3]      Trimex denies that the parties were ever in a partnership or a joint venture, and so it disputes that there should be the taking of an account. Trimex contends that from the outset, and certainly by the time the arrangement came to an end, it was operating as a distribution agreement with Trimex as the overseas distributor and BDM Grange as the New Zealand wholesaler of the Trimex products. Trimex claims that the disputed expenditure deductions have led to a short fall in royalty payments that BDM Grange owed to it.

[4]      Each makes claims against the other based upon their respective view of their arrangement.2   Trimex also has a claim for injurious falsehood which relates to BDM Grange’s conduct after the arrangement had ended.

Background

[5]      In 1984, Denis Black, the then managing director of BDM Grange contacted

Clarins Paris to see if BDM Grange could be their agent in New Zealand.  However,

1      In the last two years of the arrangement the Trimex products and included the brands Clarins, Hermès, TMP, Azzaro, Aqua, Oscar de la Renta, Swarovski, RoC, Puig Group.   Trimex had distribution rights for these products as well as for Clarins.  However, Clarins always made up the substantial proportion of the Trimex products.  The products will be referred to collectively as the Trimex products.

2      The partnership/joint venture allegations are contained in BDM Grange’s statement of claim; Trimex has a counterclaim in which it sues BDM Grange for breach of the distribution agreement.

Trimex, which is an Australian registered company, held the Clarins licence for

Australasia. So Clarins Paris referred Mr Black to Trimex.

[6]      At the time New Zealand was subject to stringent import controls.   It was only possible to bring Clarins products into New Zealand under an import licence. BDM Grange held import licences to bring finished goods into New Zealand.  As an Australian company Trimex did not have and would have found it difficult to obtain a New Zealand import licence.  Therefore, if Clarins products were to be imported into New Zealand BDM Grange and Trimex needed to work together.  With that in

mind Mr Black negotiated with Mr Michel-Henri Carriol of Trimex.3   They agreed to

engage in an enterprise to market the Clarins brand in New Zealand.  They entered into a written contract, which provided:

C O N T R A C T made this 25th day of October 1984 BETWEEN TRIMEX PTY  LTD  of  213  Botany  Road,  Waterloo,  N.S.W.,  being  a  company registered in the State of New South Wales (hereinafter called “TRIMEX”) represented by Mr M.H. Carriol, Managing Director,   A N D   B.D.M LTD. of 74 France Street, Auckland, New Zealand, (hereinafter called “B.D.M.”) represented by Mr. D. Black, Managing Director.

1.The object of the contract is that TRIMEX will grant to a joint venture yet to be named (hereinafter called “the joint venture”) the right to distribute on an exclusive basis on the New Zealand market only   skin   care   products   under   the   trademark   “CLARINS” (hereinafter referred to as “the products”).

2.        Territory: the territory shall be NEW ZEALAND ONLY.

3.The outlets in which the products are to be sold shall be perfumeries, beauty institutes, chemists that have a perfume/cosmetic section and department stores that have a perfume/cosmetic section, all of which shall be retail outlets dealing with quality merchandise.

4.Any invoice for the products and services is payable to Trimex at nett 60 days from invoicing.

5.The products shall be sold by Trimex to the joint venture on an f.o.b. basis and insurance cover shall be in the responsibility of the joint venture.

6.The products shall remain the property of Trimex until such time as total  payment  for  corresponding  invoices  is  made  by  the  joint venture.

3      At the time Michel-Henri was managing director of Trimex, now his son Jean-Marc Carriol is managing director. As they both gave evidence I will refer to them as Mr M-H Carriol and Mr J- M Carriol respectively.

7.        This contract shall be for a term of one (1) year commencing on 1

October, 1984, and shall be renewable annually except when one party has advised the other by registered letter with acknowledgment

of receipt at least three months prior to the end of the contracted

period of its intention not to continue with the contract.

8.The law applicable to this contract shall be Australian law insofar as its interpretation and its execution is concerned.

9.It is understood that the joint venture company is a joint venture between Trimex New Zealand or that company’s designated entity having a shareholding of 50% and B.D.M. Ltd. or that company’s designated entity having a shareholding of 50%.

Dated this twenty fifth day of October 1984.

[7]      In  fact  the  arrangement  under  which  Clarins  products  were  shipped  to New Zealand and sold by BDM Grange did not fit with the terms of the written contract.   Clause 9 envisaged the incorporation of a joint venture company with BDM Grange or its designate holding 50 per cent of the shares and a New Zealand based Trimex entity or its designate holding the other 50 per cent of the shares.  This never happened.

[8]      Under cl 1 Trimex was to grant the joint venture company the exclusive right to distribute Clarins products in New Zealand.  Under cl 5 Trimex was to sell Clarins products to the joint venture company with cl 6 providing that property in those products remained with Trimex until it had received full payment for them from the joint venture company.   The failure to incorporate a joint venture company meant that no distribution rights were granted, and no Clarins products were sold to any such  entity.     However,  at  all  relevant  times  Trimex  dealt  exclusively  with BDM Grange.  Further, the parties operated under the understanding that property in products supplied by Trimex  would remain with Trimex until full payment was

received.4

[9]      Under cl 7 the contract was for one year, and then it was renewable annually. It could be ended by either Trimex or BDM Grange giving the other three months’ written notice to end the contract.   The arrangement was ended by Trimex giving BDM Grange three months notice in writing, which is consistent with the language

of cl 7.

4      This was consistent with cl 6 of the written contract.

[10]     Clause 8 made the written contract subject to Australian law.  No-one at the hearing before me argued that Australian law should be applied to the dispute.

[11]     BDM Grange and Trimex gave evidence on how the arrangement for the importation and sale of Clarins products into New Zealand and later other brand products supplied by Trimex worked.  The evidence included that of Mr Black and Mr M-H Carriol, who were the signatories to the written contract.

[12]     I am satisfied that the business relationship between the parties was never governed by the written contract.   Instead, elements of the written contract were reflected in an informal, flexible and ill-defined arrangement that resulted from oral discussions and the conduct of the parties over the years.   The terms of this arrangement, as well as any variations thereto, must now be gleaned from the evidence of those oral discussions and the parties’ conduct at times material to this dispute.

Common ground

[13]     This  much  was  common  ground  between  the  parties.    Trimex  was  an Australian based company that held distribution rights from certain brand principals. BDM Grange was a New Zealand based wholesaler of a range of products, whose business included the sale of Trimex products to New Zealand retailers.

[14]     BDM Grange purchased Trimex products from either Trimex, or as occurred in later years, directly from the brand principal.5   Trimex added a small margin to the price to cover its handling costs.6    Once the products arrived in New Zealand and were paid for by BDM Grange they were under the control of that company.  The products were stored in BDM Grange’s warehouse along with a variety of non-

Trimex  products.    The  Trimex  products  were  accounted  for  in  BDM  Grange’s

accounts as part of its general stock in trade.

5      This occurred with Clarins products after Clarins obtained shares in Trimex and it occurred with Puig products.  At all relevant times Trimex held the Australian distribution rights for Clarins’ products.

6      There is no issue between Trimex and BDM Grange regarding the prices that BDM Grange paid at this stage.

[15]     The Trimex  products  were  from  up-market  luxury brands  and  the  brand principals required them to be sold at retail level in a manner that fitted with their character.  From time to time Mr M-H Carriol of Trimex visited New Zealand and viewed how the Trimex products were being sold at retail level, particularly the Clarins  products.    Trimex,  as  the  holder  of  the  distribution  licence  for  Clarins products in Australasia, had obligations to the brand principal to ensure that Clarins products  were  being  sold  in  New  Zealand  in  a  way that  fitted  with  the  brand

principal’s   requirements.7      BDM   Grange  knew  of  and   operated  under  the

understanding that it would meet Clarins’ requirements for the sale of its products in New Zealand. The same applied for the other luxury Trimex products that BDM Grange sold in New Zealand.  Nonetheless, Trimex had no formal control over how BDM Grange conducted its wholesale business.   Had BDM Grange begun selling Clarins products in a way that was objectionable to Trimex and/or to Clarins, or another brand principal, all that Trimex could have done would be to end their arrangement.  On the other hand, from time to time Trimex would offer advice to

BDM Grange relating to the sale of the Trimex products.8

[16]     Profits from the sales of the Trimex products to retailers minus certain costs9 were shared equally between BDM Grange and either Trimex, or a New Zealand based subsidiary of Trimex.

[17]     The framework for the profit share remained substantially the same over the years.   From the total sales to retailers the costs of the goods sold as well as any returns and any duty and/or goods and services tax paid to the New Zealand Government10  were deducted to arrive at a gross margin.  Two further sets of costs

were deducted from the gross margin.   These were referred to as warehouse and

7      The brand principal presented Clarins as an expensive up-market beauty product.  It would not have been happy with Clarins products being presented for sale in New Zealand as a cheap brand.  Mr M-H Carriol gave evidence of visiting a pharmacy in Taupo (he had been staying at Huka Lodge in Taupo)  and observing Clarins products in that store being poorly presented in a way that did not fit with the image of the Clarins’ brand.   So he complained to BDM Grange and action was taken to alleviate his concerns.

8      As  a  wholesaler of Clarins products in Australia Trimex had  some  useful knowledge and experience of marketing Clarins products.

9      There is now a dispute over whether the deductible costs were actual costs, which resulted in the parties sharing a true net profit, rather than an agreed formula for determining the permissible deductions before the sum subject to the 50/50 split was arrived at.   For this reason I have referred to them here neutrally as deductible costs.

10     BDM Grange was solely responsible for payment of the landed costs of the imported goods.

administration costs (W & A) and advertising and promotion costs (A & P).  The balance left was then divided equally between BDM Grange and Trimex or its New Zealand subsidiary, depending upon the relevant time frame.

[18]     At sometime during the arrangement the parties adopted a financial year that ran from 1 October of one year to 30 September of the next year.  The choice of this period came about as a result of BDM Grange becoming part of the Alberto Culver Group, and it was retained after BDM Grange separated from this Group.

[19]     It is fair to say that the working relationship between the parties foundered on their disputes over the set percentage for deducting W & A costs, and the deductions for A & P expenditure for the 2011 and 2012 financial years. These disputes underlie Trimex’s claim for unpaid royalties, as the deductions for W & A and A & P affected the sum of the moneys to be divided between them.

[20]     In the present case, when it comes to the question of the deductions for W & A and A & P costs I do not consider that much turns on whether those costs were incurred under a “royalty” agreement or a partnership or a joint venture.11     The primary and critical questions are whether the parties had an agreed method for determining what the deductions for A & P and W & A costs would be in any financial year, and whether the deductions that BDM Grange made in the 2011 and

2012 financial years were done in accordance with those methods.  If BDM Grange has deducted too much for W & A and A & P costs, then Trimex has been paid less than what it should have been for the 2011 and 2012 financial years.  On the other hand if BDM Grange has deducted no more than what it was entitled to deduct, then Trimex has no basis for challenging the payments that it received for those years. For this reason I propose to deal first with the Trimex claim insofar as it relates to the

deductions for W & A and A & P costs.

11     The Partnership Act 1908 recognises that when it comes to dealings between partners they can agree on their mutual rights and duties and that such agreement can be express or be inferred from a course of dealing: see ss 22 and 27; the same legal principles are applied in the case of joint ventures.

How the W & A costs were set

[21]     At all times the W & A costs were expressed as a percentage of net sales. The evidence shows that the W & A rate varied over the years.  Between 1985 and

2001 the rate was set at 21.5 per cent; between 2002 and 2005 it was set at 20 per cent.   Then in discussions that commenced in 2006 Trimex made it clear that it wanted the W & A rate reduced to 17 per cent.12

[22]     By  2006  New  Zealand  had  long  since  abandoned  import  licensing,  and persons wanting to import beauty products into New Zealand could easily do so. Trimex was not dependent on BDM Grange in the way that it had been in the days when import licences were required.  There was a competitor of BDM Grange that was a potential replacement for the company. Alternatively, had it wanted to, Trimex could have imported Clarins and other Trimex brand products into New Zealand

itself and sold them to retailers.13   Thus, Trimex was in a strong bargaining position

when it came to negotiating a lower W & A rate.14

[23]    Also, in 2006 BDM Grange was part of the Alberto Culver Group of companies.15   The total amount of products and turnover of BDM Grange was such that its management believed that, given time and with the economies of scale that were then available to BDM Grange, its overall W & A costs could be spread in a way that allowed a rate in the vicinity of 17 per cent to be applied to the Trimex products.

[24]     In his evidence Mr Berryman, BDM Grange’s Managing Director, accepted that following discussions with Trimex on 6 October 2006 and 7 March 2007, the percentage deduction for W & A costs was reduced by agreement.  The 17 per cent rate that Trimex wanted was not achieved immediately.   The rate went down to

18 per cent for the 2007 financial year.  It remained at that rate for the 2009 and 2010

12     The evidence shows that even before 2006 Trimex was querying why the W & A rate could not come down to something in the vicinity of 17 per cent.

13     This is what Trimex is now doing.

14     BDM Grange also had the embarrassment that its former managing director Chris Parker had attempted to secure the Clarins business for himself.   BDM Grange had taken legal action against him to prevent this, but nonetheless as the holder of Clarins distribution rights in Australasia Trimex was not happy with what had occurred.

15     The Alberto Culver Group was an international distributor of beauty products for which BDM Grange was the New Zealand wholesaler.

financial years.  But then, Mr Berryman said, it was “agreed retroactively that the

17 per cent rate could be applied to the trading statement for F 09.”16   Mr Berryman also accepted that there was agreement that “the same rate would be applied for the

2010  year,  which  was  approximately  half  way  through  at  the  time  of  [the]

discussion”.

[25]     The evidence of the parties’ negotiations over the W & A rate establishes that under their arrangement this rate was determined by agreement.   Once a rate was agreed it remained in place until the parties agreed to change it.

[26]     Provided circumstances remained much the same BDM Grange could cope with the W & A rate being 17 per cent.  However, by 2010 things had changed for the worse.   By then the Alberto Culver Group had sold out of BDM Grange; the company had lost the rights to import and wholesale Alberto Culver products; those rights had gone to Unilever NZ Ltd, which was another New Zealand based wholesaler of beauty products.   The loss of the Alberto Culver products had  a detrimental impact on BDM Grange’s business.  The Trimex products now formed a large part of BDM Grange’s wholesale business.  BDM Grange’s management had

purchased shares in the company from Alberto Culver.17     The new owners were

facing hard times as the company had fewer products to wholesale.18   The economies of scale had changed.  So the management of BDM Grange wanted to increase the W & A rate to 22.5 per cent, which they saw as being more aligned with the  actual W & A costs for the Trimex products.19

[27]     From BDM Grange’s perspective it could not continue to operate if the W &

A rate stayed as low as 17 per cent.  One of the directors said at the time that for the company to survive the W & A rate needed to move to 22.5 per cent.  The company

16     The 2009 financial year.

17     The purchasers were Mr Berryman who had been BDM Grange’s Managing Director since February 2005 and  another director Kenneth Syminton indirectly through his interest in  a holding company that acquired a portion of the shares in BDM Grange.  Later, in May 2013,

Mr Syminton sold the shares in which he indirectly held an interest to Mr Berryman.

18     Mr Berryman said in evidence that BDM Grange’s percentage of overhead to sales significantly increased.  Mr Syminton said the costs were projected to increase to approximately 23 per cent across the total business of BDM Grange.

19     Trimex  never  expressed a  view on  whether this  was  so.    Its  view  was  that  with  careful management changes the actual W & A rates could align with the 17 per cent rate.

made numerous attempts to persuade Trimex to agree to increase the W & A costs allowance from 17 per cent to 22.5 per cent.

[28]     It is against this background that BDM Grange now contends that in 2010 the

W & A rate moved to 22.5 per cent.  BDM Grange pleads that:20

… in respect of W & A that at a meeting on or about 16 September

2010 Trimex agreed that BDM could apply a W & A allocation rate of

22.5%  of  net  sales  of  Trimex   products,  such   agreement   being conditional upon validation of that rate BDM’s actual costs incurred in respect of the Trimex products through a process involving the financial controllers of the parties, which condition was fulfilled.

Trimex refutes this.  Its evidence is that no such agreement was ever reached and that at all material times the W & A rate remained at 17 per cent.   So, unless BDM Grange can establish that Trimex agreed to the W & A rate increasing from 17 per cent to 22.5 per cent there is no basis for BDM Grange’s claim that it was entitled to apply the higher rate when it came to prepare the trading statements for the 2011 and

2012 financial years.21

[29]     The first evidence of BDM Grange expressing a wish to re-visit the W & A rate is to be found in an email dated 30 July 2010.  The email refers to a meeting that took place that day without the parties having an opportunity to address the issue fully. Then there was a meeting in Auckland between Mr Berryman, Mr Syminton (a director of BDM Grange) and Mr M-H Carriol on 13 September 2010 during which the prospect of increasing the W & A deduction was raised again by BDM Grange.22

[30]     Mr Syminton’s evidence was that at the meeting on 13 September 2010

Mr M-H Carriol accepted that the deduction for W & A should represent BDM

Grange’s actual costs and so, provided that BDM Grange could validate a deduction

20     At [4.7] of  its Reply to Positive Allegations in Amended Statement of Defence to, Defence and

Counterclaim by Defendant dated 3 December 2014.

21     BDM Grange’s pleading confines its case regarding the change in the W & A rate to one based on agreement.  In some of its correspondence with Trimex BDM Grange argued that absent any agreement it could apply its actual costs as the W & A rate.  However, this approach did not find

its way into BDM Grange’s pleading.

22     The evidence refers to the meeting having occurred on 13 September 2010 whereas the pleading refers to a meeting on or about 16 September 2010.  Nothing turns on the actual date as it is common ground between the parties that they only had one face to face meeting in September

2010.  I propose to adopt 13 September 2010 as the date for the meeting as this fits with the evidence.

of 22.5 per cent as representing its actual costs, this rate should then apply.  There was to be a due diligence exercise conducted by the respective companies’ financial heads of staff.  However, under cross-examination Mr Syminton refined his evidence by saying:

… I came out of that meeting personally feeling that we had substantially agreed under the joint venture arrangement that we would go onto this rate but it had to be confirmed by due analysis and that was substantially done.

(Emphasis added).

And later:

Q… Mr Carriol does take a different view he says that there was no agreement reached at 22.5 per cent at that meeting.  What do you say to that?

A         Well I’ve got a different view.

Q        You agree there was no unequivocal acceptance ever received? A   Not to my knowledge.

[31]     Mr Syminton also accepted under cross-examination that there could be no agreement until the information exchange between the two companies had taken place:

QNow I put it to you that there was no agreement reached at the September meeting before the exchange of information as to what the W & A rate was to become?

AWhat I can advise on is that at that meeting with Mr Michel Carriol, Andrew Berryman and myself were present and the purpose of that discussion was all centred around this overhead concern, that was the number that we’d spoke about [22.5 per cent] throughout that meeting  and  it  was  agreed  that  we  should  get  some  robustness around that rather than just a couple of directors advising the other party that that’s what it was and so it was agreed that we would go and do some due diligence, which is, I think, a quite normal practice and to the best of  my knowledge that was carried out.  Questions came back on that, all of them, to the best of my knowledge, were answered in full and a final view.

…

QDo you accept that there could be no agreement at a new rate until the completion of information exchange and actual agreement between the senior personnel of the companies?

A         Yes, my understanding we were doing this in good faith.

…

Q        You say “in good faith”, in good faith you would want to be sure that

your counterparty was of the same mind and agreed as to the rate? A        Well that’s why I thought we went away and did due diligence.

QWould it surprise you that Mr Josephson sent an email announcing that  BDM  were  going  to  budget  at  22.5  per  cent  but  got  no agreement whatsoever from Trimex to that?

ANo it doesn’t surprise me because I’m aware, to the best of my knowledge that that was the case, but counter to that there was no disagreement either.

[32]     Mr Berryman was more adamant that the parties had reached agreement at the meeting on 13 September 2010 to the effect that provided BDM Grange could validate the rate of 22.5 per cent that would become the percentage deduction for W & A.  His evidence on this point is neatly encapsulated in the following exchange:

QIs it your view that Mr Carriol said at the meeting that provided you could substantiate your figure of 22.[5]% reflected your actual overheads he would accept it?

AYes that’s exactly that’s framed better language than I put it but yes that’s exactly as I saw it.

Q        There was some correspondence after the meeting –

A        Correct.

Q- with the idea that Mr Evans would speak to Mr Josephson about the rate.

A        Yes.

QAnother way of looking at that exercise would be to say that Trimex was not decided on the matter but was prepared to have the matter looked into to see if there could be adjustments or not is that another way it could be looked at?

ANo, my, in my view it’s the former, not the latter that you’ve just mentioned of the two options there. It’s, no, it’s certainly the former.

[33]     Earlier in his evidence Mr Berryman had said about the stance BDM Grange took at the 13 September 2010 meeting:

A… we wanted to re-fix the rate as it has been done over the years with BDM’s close to, aligned to is a better word, its actual rate. And we used to call it the actual rate.

…

Q        This wasn’t an email recording anything that had been agreed by that

stage [September 2010] was it?

AWe understood we had agreement in our meeting.  We’d met in June, we’d met in September, face to face in Auckland and both Ken [Syminton] and I said, “We can’t leave that meeting until we make it clear we cannot survive and do business for less than 22.5 per cent.”

QNow the process was the financial  controllers  were  to exchange data?

A        Yes.

QAnd it’s implicit in that that process is for the purpose of reaching agreement, isn’t it?

A        No for validation of our rate. Agreement had been reached.

[34]     On the other hand, throughout what was a long cross-examination, Mr M-H Carriol was adamant that at the 13 September 2010 meeting he never agreed to the W & A rate being increased to 22.5 per cent, subject to this rate being validated by due diligence as representing BDM Grange’s actual or less than actual W & A costs.

[35]     Mr M-H Carriol accepted that Trimex was prepared to look at whether the W & A rate could be increased to 22.5 per cent.  As at 13 September 2010, Trimex knew that after losing the Alberto Culver range the economies of scale of BDM Grange’s business operations had changed, it became difficult for BDM Grange to maintain the same amount of warehouse space for a smaller number of products without loading the costs of that space onto the remaining products. As a wholesaler of Clarins  and  other beauty products  in Australia Trimex  had  knowledge  about managing wholesale operations in that market.   Trimex was prepared to make its knowledge available to BDM Grange by looking at what Mr M-H Carriol described

as the “cost of the operation” and to advise on ways that this might be reduced.23

Mr M-H Carriol also acknowledged that once Trimex had looked into matters further it may have been prepared to agree to increase the W & A rate from 17 per cent to something less than the 22.5 per cent that BDM Grange sought.  However, Trimex considered there were other options available to BDM Grange to reduce its costs,

such as reducing warehouse space or staff.  In short Trimex was reluctant to have its

23     In this regard Mr J-M Carriol gave evidence about using a third party’s warehouse or sub-letting existing warehouse space to another entity.

profit share reduced just because a change of cost factors, unrelated to the wholesale of Trimex products had affected BDM Grange.

[36]     There is a conflict between the parties’ oral evidence on the question of what the W & A rate for the 2011 and 2012 financial years should be.  I have found their written communications between 2010 and 2012 regarding the W & A rate to be most helpful to resolving this conflict.24     I have set out passages of the relevant communications that I find telling.

[37]     On 21 September 2010, Mr Berryman followed up the 13 September 2010 meeting between himself, Mr Syminton and Mr M-H Carriol with an email.   The email stated:25

Thank you for your time in discussing the Trimex/BDM NZ P & L model last week.

As discussed, the reasonable and fair philosophy agreed that should form the basis of this P & L is that:

“True overheads/financial costs (no more or less) to service the total Trimex/BDM  NZ portfolio  should  be  taken  into  account  –  with  the balance of profits split thereafter”.

With this in mind and as discussed if the two financial gurus Ron & Dan could now work this true figure up, we would then be in a position to implement this fair and reasonable outcome for F11.

This should not take too long to work through, and Dan will be able to send through the relevant data this week.

[38]     Mr  Berryman’s  email  of  21  September  2010  is  not  a  straightforward unequivocal assertion that at the September meeting the parties agreed that W & A costs would align with BDM Grange’s actual costs.   Instead he approached  the subject in a more general and fuzzy way by referring to a “reasonable and fair philosophy” that was agreed, and then referred to the true overheads/financial costs being something that “should be taken into account”.   The notion that something “should” be taken into account is quite different from an agreement that something

“is to be” taken into account.   Following the reference to the two financial gurus

24     For this reason at times I have set out the communications in full.

25     The reference to Ron and Dan are Ron Evans for Trimex and Dan Josephson for BDM Grange.

F11 is Financial Year 2011.

working “this true figure up” the statement that the parties “would then be in a position to implement this fair and reasonable outcome for F11” is a conditional statement rather than a positive assertion that once a “true figure” was known it was to be adopted.

[39]     Nonetheless, the email prompted a direct rebuttal from Mr M-H Carriol who responded by email the following day, 22 September 2010:

I follow your email 21 September, which is subsequent to our discussion in your office during which you advised that you would like to review the administrative costs of doing business.

I duly noted your views and also express mine by which we have to make a differentiation between full absorption on one hand and incremental costs on the other hand.  I also pointed that the cost of doing business in mass and bridge merchandise is higher than doing business in selective distribution up-market merchandise.  I also indicated we were prepared to look at your views, and to start the ball rolling Dan could send some data to Ron Evans for a valuation.

The  closer  element  we  have  to  have  in  consideration  in  studying  this exercise, would be also that we establish precise methods of operation for A

& P expenditure in terms of over investment.  What we do not want to see happening is that we discover at the end of the financial year, that BDM has

over invested in A & P on some brands without Trimex knowledge and we are presented with a fate accompli.  If we decide jointly to over invest we should do it with a clear understanding why we are doing it and what should

be the limit of our over investment.

So let us look at all of these elements together.

[40]     The content of these emails reveals that shortly after the 13 September 2010 face-to-face meeting BDM Grange and Trimex were expressing different views of what had transpired at this meeting.

[41]     One possible explanation for the parties not being ad idem on what had occurred at the 13 September 2010 meeting was the manner in which Mr M-H Carriol may have conducted himself.  He started his professional life as a diplomat. In the course of his evidence-in-chief, Mr M-H Carriol was referred to his email of

22 September 2010.  He went through the email.  He said the words he used in the email “you would like to review” did not mean acceptance.  He commented that due to his former profession he used diplomatic words, and then he offered the advice: “When a diplomat says, ‘Yes’, he thinks, ‘Maybe’, when a diplomat says ‘Maybe’ he

really says ‘No’, and when a diplomat says ‘No’, he is not a diplomat”.   He went on to say that he respected Mr Syminton and realised the position BDM Grange was in with the loss of the Alberto Culver brands.  He emphasised that his approach at the meeting was to be polite to persons with whom Trimex had a longstanding business association.

[42]     Later Mr M-H Carriol was cross-examined.   His comment that “when a diplomat says yes he means maybe” was put to him.   He was asked whether the language which he used at the meeting with Mr Syminton and Mr Berryman could have been interpreted by them to mean that he agreed with them that subject to validation the W & A rate deduction could be increased to align with BDM Grange’s actual W & A costs.  Mr M-H Carriol conceded that maybe he was too polite, or that it was possible that it was perceived he was too polite.  He went onto say:

Nevertheless, if it was the case they would have been in absolutely no doubt when a few days after my email that you were referring a few minute ago was received.

He then said:

... for both of them it would have been very clear if they was in any doubt from a few days before that, that I didn’t agree.  Quite to the contrary I put it very bluntly this time, more than that, generally more precise in my, or less diplomatic in writing that I’m in my words.

[43]     It began to look, therefore, that one explanation for why Mr M-H Carriol was at odds with Mr Berryman and Mr Syminton over the outcome that was reached at the September 2010 meeting was because Mr M-H Carriol’s diplomacy and politesse had outwardly conveyed to them Trimex’s acceptance of BDM Grange’s position.  In which case provided 22.5 per cent was validated as representing actual W & A costs, the percentage deduction would increase to that amount.

[44]     Whether Trimex accepted BDM Grange’s proposal for increasing the W & A rate is something that has to be objectively assessed.  If a reasonable person present at the meeting on 13 September 2010 had gained the impression from Mr M-H Carriol’s manner that he was saying yes to the proposition put forward by BDM Grange, his subjective intent and motivation could not negate the outward manifestation of his conduct.   This would mean that he had unwittingly accepted

BDM Grange’s position.   Once such acceptance was given it could not later be

withdrawn.

[45]     This view of matters is attractive in the sense that it provides an explanation for why the three persons who were at the 13 September 2010 meeting hold such different views on what occurred.  Any other explanation entails the Court reaching the view that the witnesses for one of the parties are either not credible or unreliable.

[46]     It is clear from the testimony of Mr Berryman and Mr Syminton that from the September 2010 meeting BDM Grange very much wanted to obtain the comfort of an agreement in principle to increase the W & A deduction to 22.5 per cent.  If that had eventuated I would have expected them to clearly assert that was the case.

[47]     Mr Berryman was cross-examined about Mr Carriol’s email of 22 September

2010:

Q.       ...  We’ve got Mr Carriol responding to you on the 22nd September?

A.       Yes.

Q.       He’s referring to your email about the philosophy of wanting actual

overheads?

A.       Uh huh.

Q.       In the second paragraph he says, “I duly noted your views.”

A.       Yes.

Q.        “And   also   expressed   mine,   by   which   we   have   to   make   a differentiation between full absorption on the one hand and incremental costs on the other.”

A.       Uh huh.

Q.       That’s not an email that reflects agreement having been reached is it?

A.        When we received this email we thought the same as you, what's happening here?  We’re finding the other party is trying to maybe move  the  goal  posts  somewhat  from  what  we’d  agreed  in  our meeting.   I spoke to Mr Carriol on the phone and we said, “Our agreement is our agreement, we’re not doing this business for less than 22.5 and once it’s validated it’s validated.  We’re not and that's the end of the process.”   We made it clear and Ken Syminton a

60 per cent shareholder made it clear to me, “Don’t deviate from this, we cannot survive for less than that.”

Q.       I have to put to you that that’s just totally untrue Mr Berryman.

A.       It’s not.

Q.       Now have a look at the final paragraph of this email. A.     Yes.

Q.       Before doing so, Mr Carriol is a diplomatic man, isn’t he?

A.       Yes.

Q.       He uses diplomatic ways to describe his position? A.        Yes.

Q.       And I put it to you that his second paragraph is a more diplomatic

approach than simply saying, “No”?

A.        No.   That wasn’t the case, as reflected by the fact that the SFOs thereafter  went  and  did  their  due  diligence,  why  would  that  go ahead?  One would have to ask?

[48]     Despite  Mr  Berryman’s  testimony  that  he  rang  Mr  M-H  Carriol  after receiving his 22 September 2010 email and asserted the existence of an agreement to increase the W & A, there is no evidence of contemporaneous written communications to that effect.   At no time immediately or shortly after receiving Mr M-H Carriol’s email of 22 September 2010 did BDM Grange write to him or someone else at Trimex to assert that Trimex had already agreed in principle to the W & A rate increasing to 22.5 per cent, or to the W & A rate being aligned with BDM Grange’s actual W & A costs, subject to validation by the two companies’ financial controllers.

[49]     If Mr Syminton and Mr Berryman confidently and honestly believed that at the 13 September 2010 meeting Mr M-H Carriol had agreed to increase the W & A rate to 22.5 per cent,26 subject to BDM Grange establishing that this represented its actual W & A costs I would have thought that one of them would have expressed that view clearly and firmly in a written communication to Trimex once they received

Mr M-H Carriol’s email of 22 September 2010.27   Instead what then occurred was an

26     Or to some other rate that aligned with the actual W & A costs.

27     This is particularly so given that Mr Berryman now says that when he received the email dated

22 September 2010 from Trimex he saw it as an attempt by Trimex to back away from what had been agreed on 13 September 2010.

exchange of emails between the respective financial controllers of Trimex and BDM Grange.

[50]     On  24  September  2010,  Mr Josephson  emailed  Mr  Evans  providing  a breakdown of Clarins overheads and advising that BDM Grange would like to apply true overhead costs in the trading statement for the 2011 financial year.  Those costs came  to  21.6  per  cent  as  shown  on  the  schedule.    Mr  Evans  responded  on

24 September 2010 seeking further information.28    Mr Berryman contended as part

of an answer to  a question in cross-examination that the fact the two  financial controllers began communicating about the actual W & A costs demonstrates that the validation  process  had  commenced,  which  is  consistent  with  there  being  an agreement in principle to increase the W & A rate.   However, that is not the only inference to be drawn from those communications.  The fact they were taking place is also consistent with Trimex’s explanation that it was prepared to look at BDM Grange’s costs to see if there was a way that those costs could be reduced without impacting on the level of profit share received by Trimex.

[51]     In my view the answer to whose testimony to accept lies in looking at how the   parties   conducted   themselves   in   the   period   following   the   meeting   of

13 September 2010 up to when Trimex ended its relationship with BDM Grange. The purpose for doing so  is to see: (a) when it was that BDM Grange first asserted that Mr M-H Carriol had agreed to the W & A increase on the terms asserted by BDM Grange; and (b) what else was being said at the time about changing the W & A rate.

[52]     On 24 September 2010 Mr Evans sought an explanation from BDM Grange for: (a) the “instore services”; (b) 4.2 per cent of the W & A costs were attributed to marketing, here Mr Evans queried if this was the cost of marketing staff, and if so were those staff dedicated to the Trimex brands or shared brands. He also sought

clarification (a) on the item termed “senior management” which made up 1.7 per

28     The questions he asked were: What are the “jv” brand sales as a percentage of the total BDM sales?  What are the “jv” brand unit quantities shipped as a percentage of the total BDM units shipped?  Are the percentage allocations proposed for the “jv” brands on share of sales?  If not please specify?

cent of the costs; and (b) for items terms “other administrative costs” for which

0.6 per cent was attributed.

[53]     On 25 September 2010, Mr Berryman responded stating that he was able to give some advice particularly concerning freight costs but said Mr Josephson would supply the data shortly.   Further emails were sent by Mr Josephson on 27 and 28

September 2010 with attached tables to answer Mr Evans’ queries.  It is clear from the tables attached to the emails that some of the costs for the items in the table were actual costs, and others were based on a percentage share of BDM Grange’s overall costs.

[54]     On 6 October 2010, Mr Josephson emailed Mr Evans requesting a response to  his  28  September  2010  email.     On  8  October  2010,  Mr  Evans  emailed Mr Josephson requesting further information.  On 11 October 2010, Mr Josephson responded to Mr Evans with further information.   Mr Evans had wanted to know how BDM Grange calculated the share of the building to determine the allocation of various costs items to Clarins and other Trimex brands.   Mr Josephson responded advising that the computation was based on the brands carrying their share of the overhead costs by “allocating them according to the space occupying the building”.

[55]     On 4  November 2010,  Mr Josephson  wrote to  Mr Evans  advising  BDM Grange had finalised the financial plan and budget for the 2011 year.  He advised that the W & A component of the budget would be set at 22.5 per cent of net sales. Until September 2011, this was the last communication in evidence between BDM Grange and Trimex regarding W & A costs for the 2011 financial year and following.29

[56]     The  only other  relevant  evidence  for  the  period  2010  is  an  email  dated

8 October 2010 from Mr J-M Carriol to Mr M-H Carriol and Mr Evans.  In the email

29     There was some correspondence in late November and early December 2010 but this did not relate to the W & A rate for the 2011 financial year and following years.  On 30 November 2010, Mr Berryman emailed Trimex a copy of the New Zealand Clarins A & P dissection report with the actual financial year 2010 and the proposed financial year 2011; this report did not record W & A costs.  On 7 December 2010, Mr Berryman sent Trimex the profit and loss report for the financial year 2010, in which the W & A costs for that year were deducted at a rate of 17 per cent together with a dissection report.

Mr   J-M   Carriol30    sets   out   his   concerns   regarding  Trimex   “continuing   the conversation of considering the margin increase31 for New Zealand”.  He notes that there are a “whole host of other things that are important”.  Mr J-M Carriol expresses a view regarding an agreement which he considered Trimex and BDM Grange were operating under.32     His suggestion to the other members of Trimex’s senior management  was  that  Trimex  should  begin  to  plan  for  a  future  without  BDM

Grange.   He goes onto note “margin discussions without discussions of all other things – is pointless”.   The email reflects Mr J-M Carriol’s frustration with BDM Grange’s continual attempts to increase the margin.  There is nothing in this internal email between Trimex management that would suggest that in their minds Trimex had already reached an agreement with BDM Grange over the margin increases. Thus there is no admission regarding approval of an increase in the W & A rate to be found in this email.

[57]     In terms of the documentary evidence before the Court the next piece of evidence  is  when  the  parties  began  discussing  the  2011  financial  year.33      On

9 September  2011,  Mr  J-M  Carriol  emailed  Peter  Cleland,  a  director  of  BDM Grange.   The email begins with a statement that Mr J-M Carriol would provide a history of events (relevant to setting a W & A rate) as requested by Mr Cleland.  The email then traverses what occurred “4 to 5 years ago” when Trimex had planned to move its business to another party but then decided to remain with BDM Grange at a time when that company was under the management of the Alberto Culver Group. Mr J-M Carriol records that Alberto Culver/BDM Grange and Trimex/Clarins agreed

to reverse this decision following a change of management34  and made agreements

to remain together.   This was said to have been done at meetings with the new management of BDM Grange (Mr Berryman and David Webb) and followed up by

30     At this time Mr J-M Carriol, who is the son of Mr M-H Carriol, was managing director of

Trimex.

31     This was a reference to the increase in the W & A rate sought by BDM Grange.

32     At this time there had been an exchange of draft written contracts to update the parties business relationship.  None were ever executed and at the trial no party contended that any one of those drafts had become operative.   However back in late 2010 Mr J-M Carriol appears to have

believed that a draft contract that Trimex signed and returned to BDM Grange was operative.

33     By then the parties must each have been aware the W & A rate was still an issue for them to resolve because Mr J-M Carriol’s email attempts to provide an historical context to the setting of W & A rates.

34     This is a reference to the BDM Grange’s termination of Mr Porter’s appointment as Managing

Director.

Graham Hart.   Mr J-M Carriol stated that “this new agreement stipulated that the new total overheads cost agreement would fall to 17 per cent over two years.”  He then states that the decrease to 17 per cent should have occurred earlier than it did, and that the extra benefits have remained with BDM Grange.

[58]     Mr J-M Carriol refers to written agreements, which were updated in May

2007, being circulated in November 2008 and again in 2009.35   The latter was signed by Trimex and sent to BDM Grange, but an executed copy was never returned to Trimex.

[59]     Mr J-M Carriol records that despite the written agreements signed by Trimex not being executed and returned, BDM Grange and Trimex continued to trade.  He then records  that  in  the absence of the written agreements  being returned  fully executed, there was a plan in place whereby Trimex would begin to invoice quarterly for its share of profit and, in addition, 90 to 95 per cent of the anticipated Trimex profit level would be paid immediately at the end of the September 2009 financial year with the balance to be paid following finalisation and verification of the trading statement for that year.  He records that this plan was extended to commence, and the quarterly programme was to start, in the September 2010 financial year.  He records that there was a discussion in February 2010 when profit share payments were to be made biannual rather than quarterly.   He notes that at that time there were still outstanding payments from the previous financial year, and Trimex had not been paid for the first half of the present financial year, the midpoint of which had already passed at the time of writing the email.   He then confirms what he describes as a service fee, which fits with the W & A costs, being 17 per cent for all Trimex products.  He states that the profit share is to be billed by Trimex per season on an anticipated amount from the New Zealand accounts.   He then sets out a plan by which the invoices and payments will occur.  Nothing is said about Trimex having reached any agreement in principle that W & A or service costs would increase to

22.5 per cent or thereabouts.

[60]     Mr Berryman responded to Mr J-M Carriol on 12 September 2011.   First, Mr Berryman disputed the existence of a written agreement between the parties.  He

35     Those agreements were never in fact fully executed.

stated “this historical Trimex proposed document was never signed”.  He went on to state  that  BDM  Grange  has  and  still  does  desire  an  agreement  (by  which  I understand him to mean written agreement) however not at any cost.  He recorded that operationally there were opportunities for the parties to work closer together and gain improved efficiencies for the benefit of both parties but noted that this had not occurred.  He then referred to what he termed “recent rules of engagement that have been  agreed” stating that “the improved benefits will accrue for all”.   He then

stated:36

We have an open P & L philosophy for our BDM rules of engagement with all our brand partners, one which all BDM partners and ourselves believe is totally fair and reasonable.

1.    BDM needs to cover costs of operating, plus Marketing and return a reasonable percentage to shareholders.

·     For all BDM brands under management this is explained as a minimum bottom line pre-tax expected for BDM shareholders of 10% of Net Sales.

·     Except Trimex brands, were [sic] the arrangement has already been cost of operating and then a split of pre-tax on a 50/50 basis.

This Trimex partnership has always resulted in Trimex brands delivering to BDM  a  result  well  below  that  expected  from the  balance  of  the  BDM portfolio.  To then charge Trimex a fee well below cost of operating not to mention place and a few Marketing charges as well (ala RoC) and then split profit 50/50 was a grand gesture on the part of David Webb and others, however an obviously non-acceptable position for a standalone BDM, or really any business that wants to stay in business.

Although  providing  materially  less  pre-tax  to  BDM  than  other  brands targeted (10%), the BDM/Trimex partnership philosophy has been accepted by BDM, this is a cost of operating covered with Pre-Tax shared.

We have well and truly been over the cost of OH/Exp operating for BDM, validating thoroughly the 22.5% actual cost of such.  This percentage is a healthy percentage for any full service Beauty company operating in the compact New Zealand market (there are lessor [sic] resourced options however as other brands have rapidly seen to their detriment they certainly provide a far lessor [sic] result in this reasonably costly New Zealand market!).  To accept less than this would be financial suicide for BDM, and one we will obviously not be accepting – as I am sure Trimex would not do so if in the position of BDM.

36     The reference to David Webb in this passage is a reference to the meeting between BDM Grange and Trimex where Mr Webb agreed that W & A cost be decreased to 17 per cent.  Mr Webb was then a director of BDM Grange, and Albert Culver Vice President and head of Alberto Culver Asia-Pacific.  Mr Berryman reported to Mr Webb while BDM Grange was part of the Alberto Culver group.

Hopefully now that we have cleared up this current situation on another note Lanolips due to our relationship and the importance of this brand to Trimex, BDM have offered to represent such for a reduced once only pre-tax rate to BDM of 5.0%.  Additionally, BDM will gladly represent Trimex brands as long as such:

1.    Fits within the BDM portfolio and has market appeal.

2.    Provides a reasonable margin post OH/Exp to the shared P & L.

·Due to our long term relationship, BDM has and does currently take a more flexible approach to Trimex brands proposed for BDM representation, and as such has accepted brands that under normal circumstances  would  have been rejected  by BDM in  favour  of more attractive options – this we expect to continue.

We  would  be  pleased  to  sit  down  and  draw  up  a  fair  and  reasonable, mutually agreed long term agreement, and would be available at Trimex’s convenience to do such.  Could we propose a date in late October or early November for such?

(Emphasis added).

[61]     This email shows that as at 12 September 2011 Mr Berryman was still trying to justify a W & A rate of 22.5 per cent, and wanting to sit down and agree a long term agreement with Trimex.  There is nothing in this email that alludes to, let alone asserts, that BDM Grange and Trimex had already agreed that in principle the W & A rate would increase to 22.5 per cent.

[62]     Mr J-M Carriol responded to Mr Berryman stating “thanks for the views, always happy to hear them”.   He noted that at present he had identified a way to reduce “your headcount (ie costs and therefore increase your profit and get some extra sales)”.  The last statement is consistent with Trimex’s stance that it understood the economics of scale had changed for BDM Grange and the impact this had on the company’s costs.   Trimex was prepared to help BDM Grange overcome its difficulties, but not at the cost of seeing its profit share reduced through an increase in the W & A rate.

[63]     On 20 September 2011, Mr J-M Carriol wrote to BDM suggesting ways that BDM could reduce its costs.  This letter is consistent with the Trimex held view that no agreement permitting a W & A increase to 22.5 per cent or actual cost had been reached.  Once again Trimex offered to help BDM Grange to reduce its costs, thus avoiding any increase in the W & A rate.

[64]     On 23 September 2011, Trimex sent an invoice to BDM Grange for 95 per cent of the estimated share of profit for the 2011 financial year.  The amount due was NZD$570,000.

[65]     BDM Grange and Trimex were communicating in November 2011 regarding

A & P costs but nothing was said about the W & A percentage.

[66]     Then on 21 December 2011, Mr Josephson emailed the trading statement to

Trimex for the 2011 trading year.  This trading statement recorded the W & A rate at

22.5 per cent.  That same day Mr M-H Carriol emailed Mr Berryman referring to the email from Mr Josephson to Mr Evans with the attached trading account for the financial year 2011.   His email said “before looking at it in detail I already see a mistake, the warehouse and administration is 17 per cent not 22.5 per cent can you please ask Dan to reissue the document”.  Once again, when faced with, what was here an implicit assertion by BDM Grange that the W & A rate was now 22.5 per cent, Trimex promptly rejected that.

[67]     Then  on  23 January 2012,  Mr Evans  emailed Mr Berryman  referring  to Mr M-H Carriol’s email of 21 December 2011 and requested amended accounts. This prompted a response from Mr Berryman on 24 January 2012.  This was BDM Grange’s first response to Trimex’s rejection of the W & A rate being 22.5 percent. The emailed response was as follows:

At the completion of the fiscal 10 and as we commenced fiscal 11, the overriding philosophy of the shared NZ P & L was  highlighted,  it  was emphasised that this critically needed to be adhered to moving forward to ensure the financial viability of this mutually shared agreement.  This being, that the true net profit on the share P & L be split 50/50, post an inaccurate recognition  of  all  elements,  importantly  including  the  OH/Exp  (incl logistics), line, and, as per historical correspondence below, this was highlighted, and post due diligence recognized as being 22.5% for fiscal 11.

·     22.5% overhead & expense in this  compact New Zealand market is a highly efficient rate, and as a comparison of benchmark, a review of the publically available (legal requirement) NZ annual P & L records of multinational companies operating in similar categories highlights materially over-higher Overhead & Expense rates for this market.  Our competitors operating in similar companies would regard 22.5% as an attractive OH/Exp rate for the NZ market.

·     BDM’s higher turnover and thus critical mass is the principle reason that BDM is able to operate this lower 22.5% OH/Exp rate than competitor companies within this compact market, to the benefit of both Trimex and BDM.

·     Should  an  incorrect  and  artificial  rate  of  17.5%  be  applied  for  the Trimex portion, then the Pre-Tax split would end up being a grossly unfair and certainly unacceptable to BDM split of 71% Trimex & 29% BDM (see attached analysis).

·     BDM not only executes all the elements required to go to market, but also provides the capital and cashflow requirements, thus a 50/50 split of true pre-tax would seem a very reasonable arrangement for Trimex and certainly anything less than such for BDM would not be acceptable to BDM.

·     Post the divesture of Alberto Culver, and although BDM has gained the rights to numerous key new brands of late, it will take some time to reduce the overhead/Exp line back down to 22.5% post the Alberto Culver divesture.  However, as a gesture of goodwill, BDM is willing to take this uplifted OH/Exp hit during this period of BDM critical mass rebuilding, and hold the rate for F12 at 22.5%.

Respectfully, if the positions were reversed, would Trimex accept anything other than a true 50/50 split of Pre-Tax?

[68]     Whilst this email puts forward a strong and vigorous argument for BDM’s desire to have the W & A rate increased to 22.5 per cent, it is deafeningly silent as regards  an  assertion  that  Trimex  had  already  contractually  bound  itself  on

13 September 2010 to increase the W & A rate from 17 per cent to 22.5 per cent.37

[69]     On 1 February 2012, Mr M-H Carriol emailed Mr Berryman in response to his email of 24 January 2012. The email stated:

We are aware that you have been searching for a review of the agreed overhead margins.

As you know, no agreement of change has been made for any change for the last financial year and none either for this current new financial year.

As such the only items that should be in the Clarins accounts are the 17% overhead recovery, 18.6% a & p on Clarins, 6% for beauty advisors and the landed cost of goods – after which we split the residual amount. This system should not be foreign to any of your team as it has been the case for many years.

37     Subject to validation that 22.5 per cent represented BDM Grange’s actual W & A costs or less

than those costs.

As every conversation with BDM seems to have become bogged down with these continual attempts by BDM to attempt to re-work agreements (wasting a lot of time that could rather be spent on managing the growth of the business) we believe it is time to put this issue to bed.

In order to look at this issue we shall have a full and proper review with the aim of taking a clear position for the next financial year.  For this to be done with you we will need to do the following:

Firstly, we will be coming to New Zealand on Feb 20th and we will send you an overview, in the coming days, of the work agenda we will need to cover. This list of work items will be used to do a full analysis of the situation in New Zealand that can then be used in discussion should any changes be agreed for the next financial year.

Secondly, Jean-Marc Carriol has already outlined a range of actions that would be able to reduce costs for BDM.  We need, first, to see the numbered and timelined plan being put into place for this at our meeting on February

20th and immediately after. Any situation whereby these steps have not been demonstrated to have begun to have been concretely enacted is, naturally,

not  one  that  can  be  condusive  to  any  form  of  a  review  of  conditions.

Conversely, we are open to any form of other suggestion other than this approach to help alleviate the cost of burden of doing business.

[70]     The email then went on to deal with periodic payments of the profit share payments and was critical that this had not occurred.  Mr M-H Carriol observed that there were some incorrect statements in Mr Berryman’s email of 24 January 2012 but stated that he saw no point in entering into discussion about those as he believed the review process he was suggesting would remedy that situation.

[71]     He ended the email by stating:

In summary, we seem to have a lot of talking about plans and reviewing situations; for Trimex to consider making your request concrete we would need to see that the things we have indicated last year have been truly made concrete.

[72]     Mr Berryman responded by email on the same day stating:

We look forward to our February meeting and to hopefully gain further traction and definitive agreement moving forward, a few points of note that we believe are relevant pre this meeting:

·     BDM has requested a fair & reasonable agreement be enacted between Trimex  &  BDM  for  a  number  of  years.    Unfortunately  the  only document that has been tabled is one that from BDM’s viewpoint is far

from fair & reasonable and in the most part an agreement that BDM

could and has not in any totality agreed to. ...38

·     To help with traction at this meeting we believe it should be noted re

BDM’s non negotiable position in the following two key areas:

1.   A 50/50 split of pre-tax, post all OH/Exp incurred, is surely an extremely fair and reasonable position for Trimex and anything less than such in the equation for BDM is not financial viable (for fiscal 10/11 this is as provided).39

2.   Payment is at fiscal year end, BDM already covers the cash flow and capital requirement for this agreement and ongoing quarterly cash payments is again not reasonable or fair, or an arrangement that BDM is able to agree to.  Payment was made promptly as requested at this year end and will continue to be made so at year end moving forward.

(Emphasis added).

[73]     Mr  Berryman  then  stated  that  BDM  Grange  had  not  accepted  Trimex’s proposed draft written agreements and referred to confusion that may have arisen regarding whether that was so or not.   He acknowledged that Trimex may have misinterpreted that as BDM Grange attempting to re-work their business arrangements.

[74]     Once again  the above  email  communications  between  BDM  Grange  and

Trimex say nothing about them having already agreed in principle at a meeting on 13

September 2010 that BDM Grange would be entitled to apply an increased W & A

rate.

[75]     The next email communications between the parties were in the same vein. On 3 February 2012, Mr M-H Carriol emailed BDM Grange stating:

BDM has arbitrarily added to the account of the financial year 2010/11 an amount of 5.5% an increase in warehouse and administration costs, this represents $537,334 NZ which if added to the account would represent an increased profitability for our joint venture operation therefore 50% is due to Trimex, $268,667 NZ.

38     This was a reference to the draft written agreements that had been exchanged between the parties which never became operative.

39     Here BDM Grange was seeking recovery of all overheads/expenses incurred.  This aligned with the 22.5 per cent W & A rate, which aligned with the actual W & A costs.

[76]     The email then dealt with A & P concerns.  It stated that Trimex had therefore not been paid fully for the financial year 2010/2011 due to shortfalls resulting from the excess W & A costs and the A & P costs. The email then stated:

Moving to the generalities of your past email, we do not believe that we need to note for the record that the current 17% programme was agreed with the managing director and CFO of Alberto Culver at that time.40   It is also noted that Andrew Berryman was directly involved in those agreements.

[77]     The email went onto discuss Mr Berryman’s involvement in the exchange

between the parties of draft written agreements.  It continued:

We have signalled our preparedness to have a review of our current agreement, after full investigation and discussions, however, in a situation whereby BDM wishes to continue to unilaterally deny current working practices and agreements with Trimex and continue to withhold payments, Trimex will be obliged, by protocol, to immediately move to further actions.

[78]     The email then requested BDM Grange to forward the outstanding amounts which came to a total of $391,819 to Trimex.

[79]     Mr Berryman responded by email on 13 February 2012 expressing BDM

Grange’s disappointment and surprise at receiving the Trimex email as:

It was and remains fully BDM’s position that fiscal 11 accounts and amounts

owing to Trimex from such have been fully, (& expediently) paid and closed

...

[80]     Under a heading further points of note, Mr Berryman stated:

·     BDM does not disagree that the OH/Exp rate was changed to 17% for fiscal periods F09 & F010.

·     Additionally, Post the inception of the Trimex/BDM agreement in 1984, the OH/Exp rate has been discussed and altered on a number of occasions, and only for the periods of easily accessible recent BDM financial records (fiscal periods 03 to 11) the rate has been altered without disagreement on four occasions, as per:

1.   Fiscal 05 & 06 rate change vs previous fiscal

2.   Fiscal 07 & 08 rate change vs previous fiscal

3.   Fiscal 09 & 10 rate change vs previous fiscal

40     This is a reference to the meetings in 2006 and 2007.

4.   Fiscal 11 rate change vs previous fiscal.

A rate review and change has been a normal historical course of business with this agreement.

·     Although BDM has been under recovering against the rate of 17%, BDM does not have a dispute with the contention that this was the rate agreed with Alberto Culver management and that utilized for fiscal

09 & 10.

·     As per the October 1984 original and only formal agreement confirmed between Trimex & BDM the intent was and remains today a 50%/50% split of true and actual profits from the NZ BDM/Trimex P & L.  It is BDM’s view that this is a very fair & reasonable split of profits for Trimex, with BDM responsibilities including executing all market actions/activities, providing all capital requirements and managing the cashflows.

(Emphasis added).

[81]     The email went onto document how an increase of the W & A rate had occurred:

This change was instigated post BDM Grange raising the key concern of BDM material under recovery at a rate of 17.1% on a number of occasions, with this formally raised w/c 13th September 2010 during a visit to NZ by Michel Carriol (with Jean-Marie) [sic] followed by a diligent and thorough processes to ensure the correct rate of 22.5% be utilized, with this commencing and including fiscal 11, as per:

·     Meeting held in NZ w/c 13th September 2010, under recovery and incorrect  rate  issue  raised  and  discussed.    Additionally,  BDM  we contend had reasonable grounds to request a re-calculation of fiscal

09 & 10, with a true fair & reasonable 50/50 split of profits accounted for over this period with aligned reimbursement to BDM.   However,

this was not requested by BDM, as the rate although not a correct

reflection of actual costs over this period, as mentioned had been agreed with Alberto Culver.   Thus, only a reflection of the true rate moving forward  with  this  effective  for  fiscal  11  - was  tabled  &  to  BDM’s contention confirmed.

·     Post the tabling of the true rate to be applied of 22.5%, it was then proposed by Trimex to undertake due diligence between the Financial Heads of Trimex & BDM to further validate this true rate.  This took place between 24th & 28th September 2010, with further BDM email confirmations on 6th October & 4 November 2010.    Email communication between the two companies financial heads (attached), clearly outlines the due diligence.  Despite clear communication from BDM asking if any issues remained, no issues where [sic] raised regarding  the  true  rate  of  22.5%  that  was  to  now  be  utilized, commencing  fiscal  11.     The  post  due  diligence  correspondence regarding this process clearly stating in an email (to Mr Carriol & Ron

Evans) that the budgeted rate for fiscal 11 period would be 22.5%, again no issue was raised regarding such.

·     The first correspondence that BDM received regarding any concern with the true rate to be applied, was via an email from Mr Carriol on

21st December 2011.

·     As mentioned, the OH/Exp rate has changed a number of times since the inception of the agreement between Trimex & BDM in 1984, accordingly BDM undertook all reasonable and necessary steps to enact a normal course of business change for fiscal 11.  This to reflect a true rate in keeping with the intent of the 50/50 split of proceeds regarding this  agreement.    BDM  had  rightly  understood  that  this  had  been accepted between the parties, and certainly no Trimex rejection/dispute of this true rate to be applied for fiscal 11 was raised at any time during the thorough change process undertaken and subsequent confirmation at the commencement of fiscal 11.

(Emphasis added).

[82]     Mr Berryman’s email of 13 February 2012 is significant for a number of

reasons:

(a)       For  the  first  time  Mr  Berryman  asserted  that  at  the  meeting  on

13 September 2010, Trimex is said to have confirmed that for the financial year 2011 and onwards the W & A deduction would be actual costs; and

(b)Mr Berryman suggested more than once that Trimex never registered any concern regarding the application of an actual rate recovery for W

& A until Mr Carriol’s email on 21 December 2011.

The latter assertion is factually incorrect.  As early as 22 September 2010, and only one   day   after   receiving   an   email   from   Mr   Berryman   asserting   “true overhead/financial costs should be taken into account” Mr M-H Carriol had refuted that this was so.

[83]     Mr Berryman’s email of 13 February 2012 prompted Mr M-H Carriol to respond by email on 17 February 2012 stating that prior to the arrival of Trimex personnel in New Zealand for the meeting later in February 2012, he considered it useful to put down the Trimex view in advance of the meeting.  He stated:

We have been more than just surprised and disappointed by the statements in your e-mail of Monday 13th of February and wished to comment before we arrive this coming week.

[84]     He said his email was to set the record straight; he identified four main issues, one of which he described as the “claim of non-existent agreement on overheads at 22.5%”.   Having noted the headings he then dealt with each topic in substance.     Under  the  heading  dealing  with  the  “non-existent  agreement  on overheads at 22.5 per cent” he referred to BDM’s claim that “there is some sort of agreement with Trimex for the 22.5% rate instead of the agreed 17% for overheads”. He stated it would not be possible to apply a change on a retroactive basis for the

2010/2011 New Zealand financial year to increase in overhead fees.  He stated that notice and agreement to do this was required prior to the commencement of the

2010/2011 New Zealand financial year.   He then referred to discussions which occurred after the beginning of the 2010/2011 financial year, which had continued during the course of 2011, and as late as the last quarter to the calendar year 2011:

However, more importantly as we have already stated, in any case no agreement was reached at any time at any of the subsequent discussions.

Additionally we clearly indicated to BDM that there was no acceptance nor agreement at every meeting where such discussions were held.

We note that BDM cannot provide any agreement document.

We find your claim that such an agreement is in place quite untenable.

[85]     Later in February 2012, the draft Clarins budget for the 2012 financial year was exchanged.  No final Clarins budget for that financial year was ever agreed. The parties continued to communicate by email on the separate issue of A & P costings.

[86]     Then on 18 April 2012, Mr M-H Carriol wrote to Mr Berryman following the discussions at the meeting on 20 February 2012 in Auckland setting out Trimex’s view that it was in the interests of the parties to finalise the question of the overhead fee contribution.  In his email he stated that up to the last review in 2005 the W & A costs had been set at 20 per cent following other reductions since 1984.   He then traversed what had occurred after 2005 and how it had come to be that the W & A rate had been decreased to 17 per cent.  He then stated that under the 1984 written agreement BDM Grange had no grounds to unilaterally change the W & A costs

retroactively.  He stated that BDM Grange had recently come to Trimex “to discuss the desire to change the contribution to overheads fee” and went onto state “Trimex at no time indicated any desire nor agreement to make any changes to the overhead fee.   Moreover, Trimex made clear and continued to make clear that it was not in agreement to make changes to the overhead contribution fee.”  He then stated that for any such change to have occurred BDM Grange would have had to provide written notice by 30 June 2010 if using the 1984 agreement.  He noted that 30 June

2010 predated the:

… claimed discussion made by BDM and  no such notice was provided by

BDM.

He went onto state:

So even in the hypothetical situation that no other agreement exists, BDM

are still faced with the fact that under the existence of a documented paid

17% fee in previous years, and only using the 1984 agreement, BDM has still failed to properly discharge any of its duties to make a change to the

overhead fees.

Furthermore, a new agreement would require agreement documentation from the shareholders of Trimex. None exist as no agreement was made.

We note that no agreement to change has been made for 2011/2012 year either.

[87]     He then recorded that:

In  the  process  of  settling  the  amount  due  to Trimex  for  the  10/11  NZ Financial year BDM took the decision to arbitrarily add 5.5% of fee costs of wholesale and Trimex has indicated that we are not in agreement with this approach and there is no basis in agreement (nor in law) that can give rise to BDM being able to justify this increase.   The amount of 5.5% represents

$537,334 NZD and that therefore Trimex is entitled to receive $268,667. (based on initial calculations).

[88]     In a separate email on 18 April 2012 sent shortly after the first, Mr M-H Carriol wrote to BDM Grange referring to a question that its director, Peter Cleland, had asked at the meeting in February 2012 as to what BDM Grange needed to do to keep the Trimex business.  Mr M-H Carriol indicated his concern that the pattern of conduct in the recent past did not bode well for the future.   He referred to BDM Grange as indicating the same unchanging position which in Trimex’s view was a breach of their agreement. He then stated:

With this in mind let us spell it out in no uncertain terms what is needed (with the clear position that we have not taken and continue to not take any undertakings towards BDM).

1.   Overcharged fees for 2010/11 and potentially 11/12 must remain at the

17% agreement rate and money sent to Trimex immediately.

2.   Overcharged a & p monies are to be sent to Trimex immediately.

3.    The 17% overhead fee would need to remain in place or be reduced –

not increased.

[89]     On 3 May 2012 BDM Grange’s barrister, Lewis Turner, wrote an opinion on the contractual issues with Trimex.  This opinion was apparently provided to Trimex on 4 May 2012.41  The advice was in response to the Trimex emails of 18 April 2012. Mr Turner identified three main points of contention, these being:

(a)       Whether there was a contact between the parties formed sometime between 2005 and 2007;

(b)      The W & A deduction rate (which he referred to as overhead fee); and

(c)      Trimex’s allegation there was an A & P overcharge.

[90]     The relevant aspects of Mr Turner’s opinion here are the advice on the setting of the W & A rate of deduction.  Also of relevance here was some of the broader advice on the contractual status of the parties insofar as it impinges on the W & A rate.   Mr Turner was of the view that no agreement was concluded between the parties either sometime during or after 2005.  However, it is clear from reading his advice that what he meant was no formal written agreement.  He did not address the question of whether the oral discussions and the course of conduct of the parties from 2005 onwards could create contractual obligations between them.

[91]     Mr Turner did recognise that the only formal written agreement between the parties was the 1984 written agreement (which he described as a distribution agreement) as well as the subsequent conduct of the parties.  Mr Turner recognised

that “BDM pays Trimex 50% of its net profit on the Clarins branded products, in

41     A letter dated 21 December 2012 from Whaley Garnett (BDM Grange’s solicitor) to Mr J-M Carriol of Trimex lists correspondence that had already been provided to Trimex including Mr Turner’s opinion and the date it was emailed to Trimex.

return for the grant of the right to distribute by Trimex”.   He then referred to the

1984 document contemplating the establishment of a joint venture which he stated “clearly never occurred”.  He referred to suggestions in recent correspondence from Trimex that there was a more recent written agreement and said that was not so.42

He then stated:

It  almost  goes  without  saying  that,  in  determining  net  profit,  actual overheads must be taken into account.  Over the years, because two different businesses are involved, the percentage applicable for overheads has been discussed and set from time to time.   Per example, changes were made in respect of the 2005 and 2006 years; the 2007 and 2008 years; and the 2009 and 2010 years.  The alternative to reaching agreement from time to time as has occurred would be an annual audit process.

examination.107

[290]   Towards the end of the parties’ arrangement Mr J-M Carriol prepared an email dated 26 July 2010 which covered the arrangement’s history.  The email shows that he had gone over documents in Trimex’s possession for the purpose of getting a clear view of how the arrangement had operated over the  years, particularly in relation to W & A. The email was sent to Mr M-H Carriol and started:

You should read this so that you do not contradict the actual history and current documentation – we can send after our meeting or before.

[291] BDM Grange submitted that the recap in the email included incorrect statements regarding the nature of the agreement between the parties.   It was submitted  that  Mr  J-M  Carriol  was  “seeking  to  line  up  a  story  which  in  fact contained inaccuracies.”  This was another factor which BDM Grange submitted was relevant to assessing the credibility of the Trimex evidence.

[292]   However, first and foremost, at no time did BDM Grange’s counsel cross- examine Mr M-H Carriol or Mr J-M Carriol on the subject of whether the email of

26 July 2010 was an attempt to “line up a story.”  If BDM Grange wanted to pursue the idea that this email was an attempt to “line up a story”, it was obliged to cross- examine Mr J-M Carriol who was the creator of the document, and Mr M-H Carriol who was its intended recipient.  Because that did not occur, I do not consider I can place any weight on this submission by BDM Grange.

[293]   The requirements of cross-examination are now found in s 92 of the Evidence Act 2006.  It is unfair and improper to let a witness’s evidence go unchallenged in cross-examination  and  later  argue  that  he  should  not  be  believed.108     This requirement is well settled.  It was described in Browne v Dunn where Lord Halsbury said:109

My Lords, I have always understood that if you intend to impeach a witness you are bound, whilst he is in the box, to give him an opportunity of making any explanation which is open to him; and, it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair play and fair dealing with a witness.

108   James Lindsay Glissan Cross-examination Practice and Procedure: An Australian Perspective

(Legal Books Pty Ltd, Sydney, 1985) at 95.

109   Browne v Dunn (1893) 6 R 67 (HL) at 70-71.

[294]   Furthermore, from my reading of the email dated 26 July 2010 it fits with other Trimex documents in terms of the Trimex view of events.  It is clear to me that there was a period of time following the exchange of the draft contracts when Trimex believed they were being acted on.110    Trimex had sent a signed version to BDM Grange, it was BDM Grange that had first sought the execution of written contracts.111   So once Trimex sent signed copies of the final draft to BDM Grange it is understandable that it would have thought this constituted a new written contract between the parties.   For whatever reason, the final draft as received by BDM Grange was never executed.  By the time the proceeding had come to trial Trimex was also of the view the draft contracts never became live.  However this is not to say it did not genuinely believe that to be so earlier on.

[295]   It is clear to me from the correspondence that Trimex was exchanging with BDM Grange after 2009 that for a period of time it believed the draft contracts had either become final, or were being acted upon.  It is also clear to me that Mr J-M Carriol had attempted to record the history of the arrangement from the documents that were available to him.   Whilst Mr M-H Carriol had been involved from the outset, it was always possible that he might need to refresh his memory of what had transpired over the years.  There is nothing in the submission BDM Grange makes about Trimex’s evidence.

[296]   In the course of reaching a view on the issues regarding W & A and A & P, I have expressed views on the credibility of the Trimex witnesses, and the credibility of BDM Grange’s witnesses, which have led me to prefer the evidence of the Trimex witnesses.   There is nothing in the submissions of BDM Grange that I have now dealt with regarding the complaints about the Trimex evidence that detracts in any

way from those earlier findings that I have made.

110   The email of 26 July 2010 refers to this.

111   This seems to have been prompted by Alberto-Culver who was then a major shareholder in

BDM Grange.

Conclusion on liability claims regarding the parties’ arrangement

[297]   I am satisfied for the reasons already given that there was no partnership nor was there a joint venture that gave rise to fiduciary obligations. Thus BDM Grange’s claims against Trimex must fail.

[298]   I am satisfied for the reasons already given that Trimex has established that BDM Grange owes Trimex money as a result of BDM Grange wrongly deducting certain expenditure in the trading statements for the 2011 and 2012 financial years. The remaining question is to quantify those liabilities.

Quantification of money owed to Trimex

[299]   BDM Grange did not challenge Trimex’s quantification of the sums of money that remain owing to it.  Nor did BDM Grange dispute that Trimex has made demand for the payment of those sums of money.  I accept Trimex’s evidence in this regard. For the 2011 financial year BDM Grange paid Trimex a total sum of $570,000. When the 2011 trading statement is adjusted to remove the wrongly claimed expenditure, the balance for division between the parties is $992,580.   There is a variance of $422,580.

[300]   For the 2012 financial year once the trading statement is adjusted to take account of the wrongly claimed expenditure, the balance for division between the parties  comes  to  $1,115,063,  none  of  which  has  been  paid  by  BDM  Grange. Therefore BDM Grange owes Trimex a total sum of $1,537,643,

Injurious falsehood

[301]   Trimex’s second counterclaim is for injurious falsehood.  Trimex alleges that on three separate occasions in October 2013 Mr Berryman sent emails (the three emails) containing false statements to companies with which Trimex has an existing business relationship.112

[302]   Injurious  falsehood  is  a  tort  concerned  with  the  malicious  infliction  of pecuniary loss on a person by the making of false statements to a third person.  The plaintiff must prove that there has been a false statement, that the statement was published to a third person, that the statement was published maliciously and that damage resulted.113

[303]   Here  there  is  no  doubt  the  subject  statements  were  published  to  a  third person.  The key questions are whether the statements were false, whether they were published maliciously and if so, has damage resulted.  I will deal with each in turn.

A false statement

[304]   The defendant’s  representation,  whether orally or in  writing,  must  be an objectively false statement.  The question is what the statement would convey to the ordinary person. It is possible for a half-truth to amount to a false statement: “a true statement of part of the facts may in effect be made false by a suppression of the remainder”.114

[305]   The three emails Trimex relies on were substantially the same.  They referred to legal proceedings involving the parties that were currently before the High Court. Specific reference was made to evidence filed by Mr J-M Carriol in addition to other evidence filed by Trimex. The emails stated:

(a)      “Additionally, by Jean-Marc Carriols [sic] own sworn affidavit to the High Court, a termination fee is payable from Trimex to BDM of NZD$3,778,228, this was due on 29th December 2012.  This amount, amongst other material amounts due from Trimex to BDM remain

[sic] at this time outstanding”.115

113   These four elements were set out by the High Court of Australia in Palmer-Bruyn  and Parker Pty Ltd v Parsons [2001] HCA 69, (2001) 208 CLR 388 at [52] and endorsed in Stephen Todd (ed) The Law of Torts in New Zealand (6th ed, Brookers, Wellington, 2013) at [15.3.03].

114   At [15.3.03] citing Jorgensen v Jaggard [1917] GLR 68 (SC).

115   One of the emails, dated, 14 October 2013, gave greater specificity to the “material amounts” outstanding as it referred to a debt of “NZD$58k” concerning product ordered and paid for by BDM Grange but diverted at “Clarins request” to Trimex which was yet to be paid for by Trimex.

(b)Trimex was “either unwilling or unable to pay the material amounts due to BDM” and that “other interested parties dealing with Trimex should be aware of this concerning matter for their own business interests”; and

(c)      Sworn  evidence  given  on  Trimex’s  behalf  in  the  High  Court, including by its managing director Mr J-M Carriol included “material incorrect/false statements.”

In two of the emails BDM Grange then expressed its willingness to discuss business opportunities with the recipient.   The third was sent to Clarins, which was a shareholder in Trimex.

[306]   BDM Grange pleaded that at the time Mr Berryman made these statements and emailed them to the three recipients he honestly believed the statements to be correct.116

[307]   Trimex submitted that the implications arising out of the emails were that:

(a)       Trimex conducted business in an unethical and untrustworthy manner; (b)    Trimex did not pay its due debts because it was insolvent or otherwise

improperly refused to do so;

(c)       Trimex’s managing director and other officers were dishonest; and

(d)Any party doing business with Trimex was at serious risk as a consequence of the above.

Trimex submitted that each of the representations in the emails was false.

[308]  The cause of action in which BDM Grange claimed Trimex owed it a termination fee of NZ$3,778,228 was abandoned one clear day before the trial of the proceeding  commenced.    However,  I  note  that  the  proceeding  was  issued  on

11 October 2013; so at the time the emails were sent, this cause of action was live. However, all that this meant was that at the time the emails were sent Trimex was facing allegations that it owed BDM Grange a due debt of NZ$3,778.228, which is quite different from actually owing such a debt.

[309]   The existence of the alleged debt was based upon cl 13 of a draft agreement that had been emailed by Mr Hart of BDM Grange to Mr J-M Carriol on 23 October

2007.117   Clause 13 read as follows:

13.      Termination  of  Agreement.     Upon  expiration,  cancellation  or termination of this Agreement or the current Trimex agreement with BDM covering Clarins, Prada and Puij, with respect to each brand then being distributed  by  BDM  under  such  agreement  (the  “Terminated  Brands”), Trimex  shall  pay to  BDM  a termination fee in  an  amount  equal to the “average equal BDM profit” in respect of each Terminated Brand.   For purposes hereof, the “average annual BDM profit” shall be BDM’s gross sales of each Terminated Brand during the preceding 3 year period less the costs of goods sold, advertising and promotion expenses (A & P), and the fee payable to Trimex Fee in respect of each Terminated Brand.  Trimex shall make such payment to BDM within 90 days of the last date on which BDM distributed the Terminated Brand(s).

[310]   Mr Hart’s email of 23 October 2007, along with the attached draft contract, was copied to Mr Berryman.  On 10 December 2007 Mr Hart, on behalf of BDM Grange wrote to Trimex in relation to the draft agreement stating “BDM disagree with Trimex in principal but will accept the deletion nevertheless.”  This email was also copied to Mr Berryman.  One of those deletions was the clause that provided for a  termination  fee.     In  reliance  on  this  email  exchange  Trimex  submits  that Mr Berryman  knew  from  the  time  he  received  those  emails  that  there  was  no termination fee in the draft contracts. Accordingly, Trimex argues that Mr Berryman and BDM Grange would have known at the time the 2013 emails were sent to the recipient companies that there was no contractual basis to support the alleged debt of NZ$3,778.228.

[311]   Mr Berryman was  cross-examined  on  his  knowledge of the email  of  10

December 2007, which Mr Hart copied to him.  Mr Berryman denied that he knew of

117   During 2007 the parties had discussed formalising their arrangement in a written agreement.

The only written agreement between the parties was the 1984 written contract.  In 2007 draft contracts were exchanged and Trimex actually executed a contract, which it forwarded to BDM Grange for execution. This never happened.

this email at the relevant times.118   Trimex submitted that Mr Berryman’s credibility

was in doubt generally, and this was but another example of that.

[312]   Mr Berryman’s alleged belief that Trimex owed the debt of NZ$3,778.228

was based on his interpretation of paragraph 20 of Mr J-M Carriol’s affidavit of

28 June 2013 (the affidavit), which Trimex had filed in support of its statutory demand proceeding.119

[313]   In paragraph 20 Mr J-M Carriol referred to the parties exchanging several drafts of a written contract, which was never signed off.120   He then said that through their course of conduct the parties had traded under the terms of the draft contract. He went on to refer to the draft contract and the terms under which the parties had acted  as  evidencing  that  there  was  no  partnership.    Given  the  importance  of paragraph 20, I consider it helpful to set it out in full:

During 2005 to 2007, BDM and Trimex negotiated a new agreement to replace the 1984 agreement.  This was undertaken to facilitate the transfer of current and future brands distributed by another competitor distribution company in New Zealand.   Several drafts were exchanged but a final document was not signed.   Trimex indicated that it was trading under the terms of the new agreement and BDM continued to do so as well.  At no time did either party insert any wording in relation to a partnership.  A copy of the last version of the agreement as e-mailed from BDM on 23 October

2007 is annexed as pages 1 to 10.

(Emphasis added).

[314]   The last sentence of paragraph 20 when read literally and carefully can be seen to refer to the last version of the draft contract that came from BDM Grange. Presumably Mr J-M Carriol had annexed this version to his affidavit to show that the last version as prepared by BDM Grange made no provision for a partnership as this could be seen to indicate how BDM Grange saw matters at the time, which was inconsistent  with  its  later  allegations  the  parties  had  always  operated  under  a

partnership.   Mr J-M Carriol made it clear while under cross-examination that his

118   Being in October 2013 when the three emails were sent to the three companies.

119   This was the forerunner to Trimex’s counterclaim in this proceeding.  See affidavit of Mr Jean- Marc Carriol in Support of Notice of Opposition by Respondents to Application to Set Aside Statutory Demand, sworn 28 June 2013.

120   The copy of the draft contract that Mr J-MCarriol annexed to his affidavit shows that each party

description of the version of the draft contract annexed to his affidavit as the “last version of the agreement as emailed from BDM” was correct.121

[315]   However, Mr Berryman promoted a reading of the last sentence in paragraph

20 of the affidavit that would have Mr J-M Carriol’s reference to the draft contract sent by BDM Grange on 23 October 2013 being understood to mean this was the final draft that the parties had exchanged.  If understood in this way the reader would be left to conclude that this draft contract contained terms that the parties may have adopted by conduct.  One of those terms was cl 13, which provided for a termination fee.  Mr J-M Carriol never referred to this clause in the body of his affidavit.

[316]   Later versions of the draft contract were circulated by Trimex.  The email of

10 December 2007 from Mr Hart to Trimex shows that by then the clause providing for a termination fee had been removed.  Therefore, even if the parties could be said to have adopted by conduct the terms of a draft contract, the drafts that came after

10 December 2007 made no provision for a termination fee.

[317]   Anyone who knew the factual matrix in which the exchange of draft contracts had occurred would have realised that an assertion the parties traded “under the terms  of the new  agreement” could  not  be directly linked  to  the draft  contract annexed to Mr J-M Carriol’s affidavit.

[318]   Trimex submits that, in saying that Mr J-M Carriol acknowledged Trimex owed BDM Grange a termination fee of NZ$3,778,228.   Mr Berryman has opportunistically placed a gloss on paragraph 20 of Mr J-M Carriol’s affidavit and told a half-truth.  Mr J-M Carriol never acknowledged in the body of the affidavit that Trimex owed a termination fee.  Working back from cl 13 together with a casual reading of what Mr J-M Carriol said in paragraph 20 one could reach the point inferentially of concluding that the agreement the parties traded under from October

2007 provided for a termination fee.  The next step would be to infer that Trimex by

its conduct had made itself liable to pay a termination fee to BDM Grange.  Only

121    Presumably he had annexed this version to his affidavit to show that the last version prepared by BDM Grange made no provision for a partnership which indicated how BDM Grange saw matters at the time and was inconsistent with its later allegations the parties had always operated under a partnership.

then could one conclude that Trimex owed BDM Grange a substantial termination fee.  However, anyone who knew what had actually transpired between the parties during the exchange of draft contracts would not have drawn such inferences.  The source material was ambiguous and artful reasoning was required to reach the end point.

[319]   Under cross-examination Mr Berryman conceded that he had read Mr J-M

Carriol’s affidavit as an opportunity to claim the NZ$3,778.228 termination fee.

Q.       So in reliance on this affidavit, [the J-M Carriol affidavit of 28 June

2013] you decided that clause 13 applied?

A.       I thought he, if he wishes this contract to apply, well let’s apply it

then based on clause 13 obviously.

…

Q.       You read his affidavit and concluded that clause 13 applied? A.     Yes.

Q.       Okay.  But you knew very well that the parties had expressly agreed

that clause 13 needed to be deleted didn’t you?

A.       No I didn’t, no.  … I received information later on that it was, but

no, to be honest I wasn't actually aware of it.

Q.       Aware of what?

A.        I had forgotten all about that clause.  In all the drafts.  It’s not till, this was sent to me by Jean-Marc Carriol with his affidavit and I read it through, then we saw clause 13.  Oh, well if he wants this to apply and he wants to pass $3.7 million then so be it.  That’s when I knew of it, that’s my memory of it, because these drafts went on for three or four years and got nowhere and I actually forgot about clause 13 completely.

(Emphasis added).

[320]   In his answers above Mr Berryman acknowledged that the exchange of draft contracts went on for three or four years and, as he said, got nowhere.  So, he knew this all along but was prepared, nonetheless, to adopt the draft contract annexed to Mr J-M Carriol’s affidavit in order to advance BDM Grange’s case.

[321]   Later under cross-examination when it was put to Mr Berryman that the parties were in dispute over their respective claims, and so he would have known that Trimex owed no actual debts to BDM Grange, Mr Berryman had this to say:

QYou’d just commenced High Court proceedings, you knew these matters were in dispute?

A.       Oh yes, but we knew it was in dispute.

Q.       So they weren’t due debts at all were they?

A.        The 3.7 million was a due debt.  If I took it as plainly as I could, if you can explain to me where I’ve got it wrong, that would be fantastic, but I have been given an affidavit and I understand that everything in an affidavit has to be the absolute truth, without fail. In that affidavit is attached a contract that the other party has sworn as a contract between the two of us.  In that contract, the clause 13 is without question an amount owing of 3.7 million to BDM from Trimex.  Is it not clear that that debt is owed and that it was meant to be paid on the 30th  December 2012?   We wrote back to the other party and said, “thank you for your affidavit, we agree with your clause in respect of the contract.  Could you please pay a termination fee under that contract that’s due of 3.7 million dollars?”

Q.       Mr Berryman -

A.       Is there anything wrong with that legal line of thinking?

Q.        Mr Berryman, that is total nonsense.  You cherry picked one clause out of it, you were in total disagreement with them over the W & A rate within that same version of the contract, weren’t you?

A.       The which, yes, we were, yes.

Q.       So what you are saying is just nonsense, isn’t it?

A.       But we’re willing to accept the whole contract now; you pay your

3.7 million as you put forward in your affidavit.

Q.       Well.

A.       And we made it clear to Trimex that that was the case.

[322]   Whilst Mr Berryman stated in the emails that Mr J-M Carriol had made incorrect or false statements in the 28 June 2013 affidavit, nowhere in evidence did Mr Berryman address those matters.  The emails contain assertions by BDM Grange that Trimex was in partnership with BDM Grange, which was contrary to sworn evidence by Trimex.  Insofar as Mr Berryman asserted that Trimex’s deponents had incorrectly sworn affidavits wrongly denying the existence of a partnership this

inferentially suggested dishonesty on the part of Trimex.  However, the context of those statements makes it apparent to the reader that each party disputed the other’s position.

[323]   Trimex’s argument that Mr Berryman knew of the contents of Mr Hart’s emails in October 2007, and therefore the removal of the termination fee from the draft contract, is not the only relevant source of information regarding the state of Mr Berryman’s knowledge at the time he sent the three emails.  I consider that it is also worthwhile to look at the documentary evidence relevant to the parties’ discussions on the exchange of draft contracts.  As with other factual disputes in this proceeding the contemporaneous written exchanges help one to gauge what was happening and who knew what at the relevant times.

[324]   The emails and other written exchanges between Trimex and BDM Grange in the period from 2010 until the arrangement ended make interesting reading in terms of what is said about their contractual arrangements.  I have already covered this in some detail in the part of the judgment dealing with W & A costs.

[325]   Email communications in late 2010 reveal that Mr J-M Carriol believed at the time that a draft contract that Trimex had signed and returned to BDM Grange was operative.122     This is consistent with how Mr J-M Carriol portrayed the parties’ arrangement in the affidavit.  I have no doubt that at the time he honestly believed this to be so.

[326]   On 9 September 2011, in response to a request from Mr Clelland of BDM Grange Mr J-M Carriol emailed Mr Clelland a history of how from Trimex’s perspective the W & A rates were set.  The email traverses the discussions Trimex had with Mr Webb when the W & P rate was reduced to 17 per cent.123  At one point in the email Mr J-M Carriol states:

In approx May 2007, just over 3 years ago, the agreements were finally updated and these agreements were re-circulated in November 2008 and again in 2009.

We note that agreement updates were requested at the time by Alberto- Culver/BDM.

Further on in the email Mr J-M Carriol stated:

We   note   that   BDM/ALBERTO-CULVER   followed   up   to   get   these agreements in place and signed, however failed to return them.   (You will note the document is still labelled with the AB and GH initials  - being Andrew Berryman and Graham Hart initials from proposed modifications on a base document.)

We understand that there were a number of things happening, change of ownership structure, new ceo etc.

We  therefore,  informed  BDM/ALBERTO-CULVER,   on   more  than   1 occasion, that these are the conditions under which Trimex/Clarins would supply and continue to trade and work with BDM – whilst we awaited the signed copies.  This was acknowledged by BDM.

BDM and Trimex then continued to trade under these conditions and this point was recollected by BDM at the meeting on February 25th 2010.

We copy you here, again, on the agreement. (Emphasis added)

[327]   Mr Berryman responded to Mr J-M Carriol’s email on 12 September 2011. Much of the response dealt with the W & A deduction rate.124    It is significant for present purposes that Mr Berryman’s response to Mr J-M Carriol’s email opened in the following way:

We do need to clear up this so called historical agreement.  Despite BDM desiring an agreement for many years, this historical proposed Trimex document was never signed and it was outlined at the time that this was because we did not agree with many or actually most of the elements of this proposed agreement.   I do not believe any company would sign this agreement, (well not one that would be in business for long), this was clearly explained by both Graham Hart and myself, thus could we please cease from referring to this non-agreed agreement as if it was an agreed agreement. (emphasis added)

[328]   Later on 1 February 2012 Mr Berryman again refuted the existence of any written agreements.125    Mr Berryman sent a further email on 13 February 2012 in

which  he  stated  that  the  October  1984  written  contract  was  the  only  formal agreement between Trimex and BDM Grange.126

[329]   Given the trenchant statements that Mr Berryman made in 2011 and 2012 denying the existence of any written agreement between the parties, other than the

1984 written contract, the only reasonable inference that can be drawn from the statements he made at that time is that he had a firm belief there was no written agreement in operation between BDM Grange and Trimex, or that by their conduct the parties had adopted the terms of the draft contract/s.  Given he held those views in 2011 and 2012, I find it difficult to see that he could have honestly believed in October 2013 that Trimex and BDM Grange had traded under a written contract, which contained a termination fee as per the draft contract attached to Mr J-M Carriol’s affidavit, or by a course of conduct had adopted such terms as being their agreement.

[330]   The fact Mr Berryman received copies of emails in 2007, which made it clear that no written contract with a termination fee had come into existence then, goes some way to prove he must have known in October 2013 that Trimex did not owe a debt to BDM Grange based upon a contractual termination fee.  Then there are the statements Mr Berryman made in the above mentioned communications in 2011 and

2012, as well as his answers under cross-examination.127     Taken altogether, there is

strong, if not overwhelming, proof that at all material times Mr Berryman knew the true situation: namely, that there was no agreement between the parties that imposed a termination fee.   It follows from this that he must have known there was no genuine basis for him to assert that Trimex owed BDM Grange a debt of NZ$3,778,228 that it either refused or was unable to pay.

[331]   Further, as a result of the communications between Trimex and BDM Grange after  the  termination  of  the  arrangement  and  the  statutory  demand  proceeding brought by Trimex against BDM Grange, Mr Berryman would also have known that

there was a live dispute between the parties regarding what each owed to the other.128

126   See [79] – [81] herein.

127   See [319] – [321] herein

128   The respective claims that each made against the other potentially allowed for an equitable set- off.

In such circumstances unless Trimex was actually owed nothing by BDM Grange it was always going to be the case that each party may have a debt that could be set-off against what it owed to the other party.  Thus in October 2013 there was no basis for Mr Berryman to be writing to third parties stating that Trimex owed unpaid debts to BDM Grange.

[332]   The assertions in the emails that by Mr J-M Carriol’s “own sworn affidavit, a termination fee is payable from Trimex to BDM of NZD$3,778,288, this was due to BDM on 29th  December 2012” gives the reader the clear impression that: (a) this debt is acknowledged by Trimex; (b) is therefore undisputed; and (c) nonetheless Trimex refuses to pay it are false.  All of which gives an adverse impression of the ethics, honesty, solvency and business conduct of Trimex and its senior officers.

[333]   I find that the three email statements are objectively false.  The findings that I have made on the state of Mr Berryman’s knowledge lead me to conclude that at the time he made the statements he knew them to be false.   He chose artfully and opportunistically to put a gloss on Mr J-M Carriol’s affidavit evidence that distorted its truth, in order to advantage BDM Grange.  This is similar to stating a half-truth or as was recognised in Petch v Customs and Excise Commissioners:129

There are indeed cases where every word in a statement is, taken by itself, strictly true but the whole has been carefully put together to imply something unstated which is false.

Malice

[334]   The  defendant’s  statement  must  have  been  published  maliciously.    The burden of proof is on the plaintiff to establish malice.  A definition of malice for this tort was given by Mahon J in Customglass Boats Ltd v Salthouse Brothers Ltd:130

That sense [of malice] includes an intent to injure the true owner of the property or, alternatively, publication with an indirect or dishonest motive: Balden v Shorter [1933] Ch 427. the formulation preferred in Joyce v Motor Surveys Ltd [1948] Ch 252 was “an intent to injure without just cause or excuse”. This case is near the borderline between mere negligence and reckless disregard of the consequences of a known misstatement, but I think it falls within the latter category and is thus a case of malicious publication.

129   Peter v Customs and Excise Commissioners [1993] ICR 789 (CA) at 808.

130   Customglass Boats Ltd v Salthouse Brothers Ltd [1976] 1 NZLR 36 (SC) at 49.

[335]   I consider that for company A: (a) to knowingly make a false assertion that it is owed a debt of NZ$3,788,288 by company B, which it refuses to pay; (b) for company A then to publish this statement to other companies that deal with company A and B; and (c) for company A then to offer to provide its services to those other companies the logical and probable inference to draw from those circumstances is that the statement was made for a malicious purpose.  Apart from being a misjudged bad taste joke, the only possible purpose for company A to make those statements would be that company A has the intent to injure or to hurt company B.  At the very least it demonstrates that company A has a reckless disregard of the consequences of making the false statements for company B, which can also amount to malice for the

purpose of this tort.   Negligence does not amount to malice.131     Nor do genuine

mistakes.132   Neither fits with the evidence in this case.

[336]   There is no question here of BDM Grange making a bad joke.  I am satisfied that the false statements were made maliciously.

Damage

[337]   Section 5 of the Defamation Act 1992 provides:

5         Malicious falsehood actionable without proof of special damage

In  proceedings for slander of title, slander of goods, or other malicious falsehood, it is not necessary to allege or prove special damage if the publication of the matter that is the subject of the proceedings is likely to cause pecuniary loss to the plaintiff.

The Law of Torts in New Zealand states that the purpose of this section is to provide a remedy despite the difficult of proving actual loss.133

[338]   In his evidence Mr J-M Carriol stated that he could not say with certainty that Trimex had suffered damage.   However, the publication of the relevant emails is something that is very likely to have caused Trimex pecuniary loss.  The statement that  Mr  J-M  Carriol  had  acknowledged  in  an  affidavit  that  Trimex  owed

NZ$3,778,228, which Trimex refused to pay, is strongly suggestive of the statement

131   Alexander v Clegg [2004] 3 NZLR 586 (CA).

132   Manthel v Bolton [1916] GLR 59 (SC).

133   Stephen Todd, above n 113, at [13.3.02].

being true.  The statement would give rise to concerns and doubts about Trimex’s solvency, how it conducts its business and the honesty of its senior officers.   It reflected badly on Trimex and I consider it would have had an adverse effect on how the recipients viewed Trimex.  I also consider that it is likely to have discouraged the recipients from commercially engaging with Trimex when they could avoid doing so.  One of the recipients, Clarins, was a shareholder of Trimex and so it may have viewed the false statements more circumspectly than the other recipients.  However, even then I consider it is probable that the doubts and concerns such false statements would generate may have caused Clarins to hesitate about any further engagement with Trimex.

[339]   Furthermore,  the  false  statements  included  an  offer  by  BDM  Grange  to provide its services to the recipients.  This suggests to me that one of the purposes of making these statements was to portray BDM Grange as being a better company to do business with.  If this purpose were achieved, it would necessarily cause Trimex pecuniary loss.

[340]   It follows that the false statements meet the tort’s requirement of being likely to cause pecuniary loss to Trimex.  Moreover, at the time of the trial Mr Berryman had  not  retracted  the  false  statements,  which  is  a  factor  that  exacerbates  the likelihood of loss.  This is especially so, given that before the trial commenced BDM Grange abandoned its cause of action alleging Trimex owed a debt NZ$3,778,228. This amounted to a clear acknowledgment by BDM Grange that no such debt was due to it.

[341]   Trimex  seeks  an  award  of  damages  of  $150,000.    I consider  that  is  an appropriate award of damages when the seriousness of BDM Grange’s conduct is taken into account.  Here Mr Berryman made:

(a)       intentional and knowingly false statements;

(b)he did so maliciously about a large company trading as a whole sale distributor in Australia and New Zealand in beauty products;

(c)       those statements reflected badly on the overall commercial integrity of that company;

(d)the false statements could have resulted in business being removed from Trimex and going to BDM Grange instead; and

(e)       BDM  Grange  took  no  steps  (by  way  of  issuing  a  retraction)  to ameliorate the adverse effect of the false statements on Trimex.

[342]   Trimex responsibly accepted that it was unable to prove actual pecuniary loss, which is why it sought general damages and argued that the sum of $50,000 for each injuriously false representation was just in the circumstances.  It acknowledged that there are no cases in New Zealand where a party has obtained an award of general damages for injurious falsehood.  It further submitted that because s 5 of the Defamation Act is not replicated in other jurisdictions comparisons with overseas cases are unhelpful.   It also acknowledged that it is difficult to make direct comparisons with general damages awards in defamation cases since that tort exclusively protects against loss of reputation and general damages can be awarded

to cover that loss.  Nonetheless it referred to a passage in Siemer v Stiassny134 where

the Court of Appeal addressed general damages in a defamation case.  In the context of doing so it described general damages in defamation cases as being taken to refer to losses sustained that are “normal and to be anticipated when a person’s reputation is impaired.” The Court of Appeal recognised that the “impairment of one’s relations can interfere in quite unpredictable and unknowable ways with the enjoyment of life” this being the reason for damages being awarded without proof of any impairment of reputation.   The Court of Appeal described common law general damages as “an estimate, however rough, of the probable extent of actual loss a person has suffered, and will likely in the future.”   Trimex referred to a similar

passage in Reeves v Mase135where Priestley J expressed similar sentiments regarding

an award of general damages in a defamation case.   In Reeves v Mase Priestley J

considered the following factors to be relevant when making an assessment of the quantum for general damages:

134   Siemer v Stiassny [2011] 2 NZLR 361 at [48].

135   Reeves v Mase HC TAU CP22/00 15 June 2001.

(a)       the defendant’s failure to defend proceedings;

(b)       the absence of an apology;

(c)      the fact the defamatory publications were distributed to professional colleagues of the first plaintiff in the region where he practiced; and

(d)the   fact   the   reputation   of   all   three   plaintiffs   were   otherwise unblemished.

[343]   I accept Trimex’s submission that general damages are to compensate for the probable extent of any present and future losses, and in this regard they operate as a “rough estimate”.   The claim for general damages must be viewed in the context where Trimex accepts that the recipients of the injurious falsehoods have not ceased trading with Trimex, though I accept Trimex’s submission that the communications may have cast doubt as to Trimex’s solvency and integrity.

[344]   Trimex  submits  that  the  factors  relevant  for  the  Court  to  make  a  rough estimate for general damages in the present case are:

(a)      the false representations were formally written down and not merely spoken in an informal manner;

(b)the email recipients were parties in existing trading relationships with Trimex, and those relationships were known to BDM Grange through its own business relationship with Trimex;

(c)       the   false   representations   went   towards  Trimex’s   solvency  and

integrity, these being two key aspects of any business relationship; (d)         Trimex has received no retraction or apology;

(e)       the  emails  will  have  had  some  damaging  impact  on  Trimex’s

reputation in an industry that trades upon reputation; and

(f)       the  emails  were  sent  for  a  purpose  calculated  to  cause  financial

damage to Trimex and potentially to BDM Grange’s financial gain.

[345]   I consider the factors identified by Trimex to all be relevant to reaching an award of general damages that is fair and just in the circumstances.  Having taken all those matters into account they confirm to me that an appropriate award of general damages here is a total sum of $150,000.

Result

1.BDM Grange’s claims against Trimex are dismissed and judgment is entered on those claims for Trimex.

2.Trimex has established its counterclaims against BDM Grange and therefore judgment is entered for Trimex against BDM Grange in the sum of:

(a)       $1,537,643 (being money contractually owed by BDM Grange to Trimex); and

(b)$150,000 (being damages awarded against BDM Grange for the tort of injurious falsehood); and

(c)       Interest pursuant to s 87 of the Judicature Act 1908.

3.        Leave is reserved to the parties to file memoranda on costs.