|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Supreme Court of Victoria |
Last Updated: 27 November 2020
AT MELBOURNE
COMMERCIAL COURT
---
|
JUDGE:
|
|
|
WHERE HELD:
|
|
|
DATE OF HEARING:
|
|
|
CASE MAY BE CITED AS:
|
|
|
MEDIUM NEUTRAL CITATION:
|
DIRECTOR OR OFFICER – De facto director – Officer – Acting as director – Participating in decisions – Director and officer after resignation – Applicable principles – No change in role post resignation.
DIRECTOR’S AND OFFICER’S DUTIES – Sections 180, 181, 182 and 183 of the Corporations Act 2001 (Cth) – Care and diligence – Good faith and best interests of the company – Proper purpose – Improperly using position as director to gain advantage – Improperly use information obtained as a director to gain advantage – Breach of director’s duty – Corporate opportunity.
COMPENSATION ORDER – Section 1317H of the Corporations Act 2001 (Cth) – Breach of director’s and officer’s duties – Damage suffered – Applicable principles.
FIDUCIARY DUTY – Breach of fiduciary duty by director and officer – Fiduciary role to secure corporate opportunity – Conflict between duty and interest – Profiting from fiduciary role – Informed consent – Company constitution disclosure provisions.
EQUITABLE COMPENSATION – Applicable principles – Breach of fiduciary duty – Election – Causation.
ACCOUNT OF PROFITS – Breach of fiduciary duty – General principles – Election – Timing of election.
MISLEADING OR DECEPTIVE CONDUCT – Australian Consumer Law ss 18 and 236 – Applicable principles – Misleading conduct and representations related to corporate opportunity – Loss and damage – Causation proving counterfactual – Hypothetical as to what would have occurred – Onus of proof not satisfied – Knowing involvement.
BREACH OF WARRANTY OF AUTHORITY – General principles – Authorised representative and lawyer representation – Not authorised – Damages – Contractual measure – Breach of warranty of authority.
---
|
APPEARANCES:
|
Counsel
|
Solicitors
|
|
For the Plaintiff
|
Sinisgalli Foster Legal
|
|
|
For the Fourth Defendant
|
Mr J Podaridis
|
McDonald Legal
|
|
For the Seventh Defendant
|
Mr I Percy
|
Davis & De La Rue
|
TABLE OF CONTENTS
Introduction and summary 1
Background 6
Witnesses 49
Agreed list of issues 68
Mr Floropoulos — a de facto director or officer of Oliana? 71
Breach of director’s statutory duty claims 120
Damage claimed under s 1317H of the Act 154
Breach of fiduciary duty claims 167
Equitable compensation and account of profits 186
Misleading or deceptive conduct claim against Mr Floropoulos 196
Misleading or deceptive conduct claims against Mr Hone and Culinary Co 308
Breach of warranty of authority claim against Mr Hone 334
Other matters 354
Conclusion 354
List of Defined Terms & Named Persons 357
Annexure A — Oliana Payments Schedule 359
Schedule of parties 361
INTRODUCTION AND SUMMARY[1]
1 The plaintiff, Oliana Foods Pty Ltd (Oliana),[2] is a relatively small company that carries on the business of importing and distributing food products to supermarkets and other retail outlets. Mr Canzoneri is Oliana’s managing director and has a material ownership interest in Oliana. The seventh defendant, Mr Floropoulos, is a former long-time director of Oliana and has a material Oliana ownership interest. Prior to the dispute the subject of this proceeding Mr Floropoulos and Mr Canzoneri were close friends.
2 The dispute relates to the supply to and distribution by Oliana of vegan cheese products manufactured by a Greek company, Kremel AE (Kremel). At the factual core of Oliana’s claims are allegations that Mr Floropoulos:
(a) was a de facto director, officer, and fiduciary of Oliana responsible for sourcing an alternate supplier of vegan cheese for Oliana to replace Oliana’s then long-term supplier who, so Oliana and Mr Floropoulos had discovered in March or early April 2016, was making a very substantial margin on the prices it charged Oliana when compared to the prices it paid its own Greek manufacturer;(b) travelled to Greece on behalf of Oliana in late May 2016, identified Kremel as a suitable alternative manufacturer/supplier of vegan cheese products, and negotiated and agreed a very favourable Kremel supply price for Kremel vegan cheese, but did not disclose this price to Mr Canzoneri or anyone else at Oliana;
(c) with the co-operation and assistance of the fourth defendant, a solicitor, Mr Hone, interposed a company in between Kremel and Oliana (being the first defendant, Culinary Co) to obtain the supply of vegan cheese products direct from Kremel and on sell them to Oliana at a substantially marked-up price without Mr Canzoneri and Oliana’s knowledge;
(d) together with Mr Hone, conducted himself in a way that conveyed to Oliana that Culinary Co was ownership and otherwise linked to Kremel and that the Culinary Co supply price to Oliana was in fact the favourable Kremel supply price rather than the different undisclosed materially higher price set by Mr Floropoulos for Culinary Co that was designed to achieve an uplift for the benefit of Mr Floropoulos and Culinary Co without Mr Canzoneri’s or Oliana’s knowledge.
3 In the context of the above allegations Oliana pressed a number of claims seeking damages and other relief against Mr Floropoulos, namely: breach of statutory duty claims based upon an allegation that Mr Floropoulos was a de facto director or officer of Oliana; breach of fiduciary duty claims based upon Mr Floropoulos owing fiduciary duties to Oliana by reason of his position as a de facto director and officer of Oliana, and by reason of his role and responsibilities in connection with securing an alternative supply of vegan cheese for the benefit of Oliana; and claims that Mr Floropoulos engaged in misleading or deceptive conduct and was involved in conduct of that character engaged in by Mr Hone and Culinary Co.
4 As against Mr Hone, Oliana pressed claims seeking damages and other relief against him on the basis that Mr Hone: engaged in misleading or deceptive conduct; was involved in conduct of that character engaged in by Mr Floropoulos and Culinary Co; and was liable to Oliana for breach of warranty of authority as a result of representations made by him regarding his authority to act on behalf of Kremel in connection with the appointment of Oliana as Kremel’s exclusive distributor of its vegan cheese products in Australia and New Zealand.
5 Culinary Co was placed into liquidation well before the commencement of the trial and the claims against it were stayed by operation of law. No application for leave to proceed against Culinary Co was made. Culinary Co’s conduct was said by Oliana to have remained relevant because of Oliana’s knowing involvement claims against Mr Hone and Mr Floropoulos.[3]
6 Mr Floropoulos and Mr Hone denied that they were liable as alleged or at all.
7 Mr Floropoulos relied upon, among other things: his recorded resignation as a director in February 2016; alleged conversations said to have occurred with Mr Canzoneri prior to his trip to Greece in May 2016 about being able to obtain benefits for himself; a claimed absence of a fiduciary relationship; some factual matters that he denied and others that he alleged; a claimed absence of misleading or deceptive conduct; an alleged absence of reliance by Oliana; and an alleged failure on the part of Oliana to establish that the conduct it relied on had caused it the loss claimed in any event.
8 The matters relied upon by Mr Hone included: acting as and being seen to have acted as a ‘mere conduit’ in relation to the conveying of information; a claimed absence of misleading conduct at any material time after 7 June 2016; having acted honestly and reasonably and made all reasonable enquiries; a claimed absence of reliance by Oliana; challenges to the breach of warranty of authority claim, including in relation to reliance and damage; and an alleged failure of Oliana to establish that the conduct it relied upon caused the loss claimed.
9 For the reasons that follow, I have concluded that:
(a) Mr Floropoulos was a de facto director and officer of Oliana after 26 February 2016 and was subject to the statutory duties imposed on such directors and officers by ss 180, 181, 182 and 183 of the Corporations Act 2001 (Cth) (Act).(b) Mr Floropoulos was a fiduciary of Oliana in his role as a de facto director and officer of Oliana and he owed fiduciary duties to it in connection with his role and responsibilities in seeking to source and secure an alternative manufacturer/supplier of vegan cheese for the benefit of Oliana.
(c) Irrespective of his position as de facto director and officer of Oliana, Mr Floropoulos was in a fiduciary relationship with Oliana and owed fiduciary duties to it by reason of his role and responsibilities in connection with the sourcing and securing of an alternative manufacturer/supplier of vegan cheese for the benefit of Oliana.
(d) Mr Floropoulos breached the statutory duties under the Act that he owed to Oliana. Even if it had not been determined that Mr Floropoulos was a director of Oliana after 26 February 2016, he would have breached his duty to Oliana under s 183(1) of the Act by reason of his improper use of information obtained because he had been a director.
(e) Mr Floropoulos breached the fiduciary duties he owed to Oliana.
(f) Mr Floropoulos engaged in misleading and deceptive conduct of the kind alleged by Oliana in contravention of s 18 of the Australian Consumer Law (ACL).
(g) It is not necessary to determine whether Mr Floropoulos was a person involved in any misleading or deceptive conduct of Mr Hone or Culinary Co.
(h) Subject to addressing with the parties the issue of election in connection with Oliana’s alternative claim for an account of profits:[4]
(i) Oliana is entitled to an award of compensation against Mr Floropoulos pursuant to s 1317H of the Act of the amount claimed by Oliana, being an amount equal to what is defined later in these reasons as the ‘Oliana Loss Amount’.[5](ii) Oliana is entitled to an award of equitable compensation from Mr Floropoulos of an amount equal to the Oliana Loss Amount.
(i) Although Oliana established that Mr Floropoulos engaged in misleading and deceptive conduct and that Oliana relied upon that conduct, Oliana did not establish that the loss and damage claimed by it in respect of that conduct was suffered because of that conduct. Consequently, Oliana is not entitled to damages or compensation from Mr Floropoulos pursuant to s 236 or s 238 of the ACL.(j) Mr Hone engaged in misleading and deceptive conduct of the kind alleged by Oliana in contravention of s 18 of the ACL.
(k) It is not necessary to determine whether Mr Hone was a person involved in any misleading or deceptive conduct of Mr Floropoulos or Culinary Co.
(l) Oliana has established that Mr Hone is liable to it for breach of warranty of authority in respect of his claimed authority to act on behalf of Kremel in connection with the appointment of Oliana as Kremel’s exclusive distributor of its vegan cheese products in Australia and New Zealand.
(m) Oliana is entitled to damages from Mr Hone for breach of warranty of authority of an amount equal to the Oliana Loss Amount.[6]
(n) Although Oliana established that Mr Hone engaged in misleading and deceptive conduct and that Oliana relied upon that conduct, Oliana did not establish that the loss and damage claimed in respect of that conduct was suffered because of that conduct. Consequently, Oliana is not entitled to damages or compensation from Mr Hone pursuant to s 236 or s 238 of the ACL.
BACKGROUND
10 Oliana sources food and beverage products from Australian and overseas suppliers and distributes them to retail outlets and distributors in Australia. Mr Sebastian Canzoneri is Oliana’s managing director. Apart from a short time in 2012, he has been a director of Oliana since April 2011.
11 Mr Canzoneri and Mr Bill Floropoulos first met in 2011 at a football function. At that time Mr Floropoulos had a travel business, Luxe Travel Pty Ltd. They discussed Oliana’s food distribution business and Mr Floropoulos spoke of his Greek heritage, his connections in Greece and how he might be able to arrange meetings that might enable Oliana to enter into agreements with new suppliers for products from Greece, including vegan feta cheese. From about that time Mr Canzoneri used Mr Floropoulos’ travel agency and a friendship developed. Later that year Mr Canzoneri asked Mr Floropoulos if he wanted to join Oliana and he said that he did, and paid $25,000 to Oliana in order to become one of its four ‘partners’. The other partners were Mr Canzoneri, Mr Morris Italia and Mr Vincenzo Gianfriddo. As a result of an issue arising in the partnership regarding the activities of Mr Italia and Mr Gianfriddo, they ceased to be directors on 6 October 2011 and transferred their shares in Oliana to Mr Canzoneri.
12 Mr Floropoulos was appointed as a director on 6 October 2011. Although Mr Floropoulos is recorded as ceasing to be a director on and from 26 February 2016, in this proceeding Oliana contended that he continued as a de facto director, or an ‘officer’ of Oliana, from February 2016 until late December 2017 or early January 2018. Mr Floropoulos denied this and said that he ceased being a director or officer[7] of Oliana on 26 February 2016. Whether Mr Floropoulos was a director or officer of Oliana after February 2016 is one of the issues addressed later in these reasons.
13 Although there were some contested factual matters between the parties,[8] there was a large measure of common ground or agreement regarding the background and sequence of events, as was reflected in the revised agreed chronology of relevant facts and events provided to the Court during oral closing submissions (Agreed Chronology), and many of the documents in the court book. It is of assistance to the comprehension of the later consideration and analysis of the many issues in this proceeding to understand that the relevant background included the following.
14 Oliana is the trustee of the SMV Traders Unit Trust (SMV Trust). Sixty-two and a half per cent of the units in the SMV Trust are owned by one of Mr Canzoneri’s companies, Boriop Pty Ltd, 25% are owned by Mr Floropoulos, 10% are owned by Mr Canzoneri’s brother’s company, Victory Ridge Pty Ltd, and the remaining 2.5% of units are owned by a third party. Oliana has 900 fully paid shares on issue and paid up capital of $900. Mr Canzoneri owns 780 of the shares (86.6%) and Mr Floropoulos owns the remaining 120 shares (13.33%).
15 Mr Canzoneri described his role as largely overseeing the financial aspects of the company, overseeing sales along with Mr Floropoulos and basically ensuring that the company had the funds to be able to operate. He said one of Mr Floropoulos’ primary responsibilities was to ensure he got supplies for Oliana and negotiated the deals in order to have continuing supply. He said Mr Floropoulos had authority to enter into supply arrangements until late 2017.
16 Greek-supplied food products became a very important part of Oliana’s products. Prior to Mr Floropoulos becoming involved, they were described as forming a very minimal part of Oliana’s business, but they subsequently became substantial, being about 70% or 75% of Oliana’s product range. One of the early matters attended to by Mr Floropoulos was obtaining a vegan Greek feta cheese for Oliana to distribute, which had been the subject of discussion prior to Mr Floropoulos being invited to join Oliana.
17 Mr Floropoulos always had an office at Oliana, although he worked somewhat irregular hours and was frequently travelling. He and Mr Canzoneri became good friends and would communicate frequently together, typically quite informally. Many face-to-face discussions occurred over coffee, and they also communicated with each other by frequent text messages, some emails, and over the telephone.
18 Mr Floropoulos’ role was to manage and control supply arrangements between Oliana with suppliers, particularly Greek suppliers, which ultimately included Kremel. Kremel was the manufacturer and supplier of vegan cheese products at the heart of the dispute the subject of these proceedings.
19 Obtaining and maintaining supply agreements or arrangements with supermarkets was an important aspect of Oliana’s business, and during his time at Oliana Mr Floropoulos was involved in this process. The supermarkets to whom Oliana supplied goods at different times included Woolworths, Coles and a network of independent IGA stores. Oliana also supplied products to independent delicatessens and other stores.
20 There was no formal agreement in place between Oliana and Mr Canzoneri or Mr Floropoulos. They operated largely informally. Mr Canzoneri said there were no salaries as such but that payments were made to each of Mr Canzoneri, Mr Floropoulos and their respective wives. During the period 13 May 2015 to 22 December 2017 Mr Floropoulos’ wife, Ms Nikki Floropoulos, received 44 separate payments by electronic funds transfer totalling $55,250. With the exception of one payment of $1,500 in May 2015, all other payments were in the amount of $1,250. For the period from 11 December 2015 to 31 March 2017, Mr Floropoulos received 30 separate payments totalling $45,250. Except for two payments of $10,000 in January and March 2016, and a payment of $5,000 in June 2016, each payment to Mr Floropoulos was $750.
21 Mr Floropoulos received other benefits through Oliana. Relevantly, these included a BMW motor vehicle provided to Mr Floropoulos and a Porsche Cayenne four-wheel-drive motor vehicle for Ms Floropoulos (Porsche). The Porsche was purchased by Oliana through a finance arrangement. Mr Canzoneri said that payments on the lease continued to be made by Oliana until December 2017 or January 2018. The Porsche was not returned to Oliana by Mr Floropoulos or Ms Floropoulos and Mr Canzoneri understood it to have been repossessed.
22 On 20 July 2012 Mr Floropoulos executed, on behalf of Oliana, an agreement with Woolworths in relation to the supply of halloumi cheese.
23 On 18 July 2013 Oliana was invoiced for the Porsche provided to Ms Floropoulos. Mr Canzoneri was named as guarantor on the chattel mortgage agreement for the Porsche.
24 In 2014–2015 Mr Robert Wyner commenced to carry out work for Oliana through his company Foods International Pty Ltd (Foods International). He worked closely with Mr Floropoulos in trying to introduce Oliana products in Woolworths and Coles.
25 Mr Canzoneri said that in about early 2016 Oliana was undertaking some vehicle financing, and towards the middle of 2016 it was undertaking some financing for working capital. With respect to the vehicle financing he said the financiers sought security over the relevant vehicle and also directors’ guarantees. He said that he approached Mr Floropoulos and told him that they needed to be guarantors, and Mr Floropoulos said that he did not want to be a guarantor and that he could not do it. Mr Canzoneri gave evidence that he said to Mr Floropoulos that the only way that could occur was if ‘[y]ou come off as a director. So it was then agreed that he would come off as a director for the purpose, and then get back on as a director.’[9] He said that Mr Floropoulos agreed.
26 There were no documents in evidence regarding the vehicle financing, the purchasing of a vehicle, guarantees, or vehicle refinancing at that time.
27 Mr Floropoulos said differently. He denied that there was a discussion of the kind referred to by Mr Canzoneri. He said that the prospect of his resigning as director was first raised in late 2015 or early 2016, in circumstances where he said he did not want ‘to do this anymore’ and that his health was and had been poor. Mr Floropoulos said that because of this he said to Mr Canzoneri that he should resign and just take it easy and relax, and that Mr Canzoneri agreed.
28 When asked whether this discussion spanned one or more conversations, Mr Floropoulos said that there were many conversations. He said that the reason he felt that way was that his sister had passed away in 2012 and he did not want to face the same fate that she had. He said that he thought the best thing to do was to just stop and slow down. He said he then took a holiday in Hawaii and had a further conversation with Mr Canzoneri about his future when he returned from Hawaii. He said that he told Mr Canzoneri that he wanted to resign as a director, that he had had enough, and that Mr Canzoneri had ‘no issue’ with that. He added that Mr Canzoneri seemed ‘excited’ that Mr Floropoulos was coming off as a director.
29 When asked whether there was any discussion about the terms of his leaving, Mr Floropoulos said that he told Mr Canzoneri that he would ‘be there to help him’ when needed. Although he had earlier said Mr Canzoneri had said to him he could have use of the Porsche, he said there was no discussion about the return of the cars, the money that he had received and was receiving, or the money that was being paid to his wife.
30 With respect to his ongoing involvement with Oliana, when asked what he was doing, Mr Floropoulos said that he was not doing a lot but just helping wherever he could. He said that this came about because Mr Canzoneri would call him and ask him to help, which he said he was very reluctant to do but he did as a friend. He said that Oliana had a lot of issues making payments to suppliers, who would demand payment from it. He said that one of the things he helped with was dealing with these suppliers, as he had good relations with them.
31 These events regarding the circumstances leading to Mr Floropoulos’ resignation as a director of Oliana are addressed in more detail later in these reasons.
32 During Mr Floropoulos’ time with Oliana, he introduced Mr Canzoneri to Mr Terry Paule and what was described as Mr Paule’s company, My Life Co Pty Ltd (MyCo). Mr Floropoulos had known Mr Paule for over 20 years. Subsequent to Mr Floropoulos introducing Mr Canzoneri to Mr Paule, Oliana and MyCo entered into a supply arrangement pursuant to which MyCo started to supply a vegan cheese product branded ‘MyLife’ to Oliana. In turn, Oliana supplied that product to others, including IGA stores and Woolworths.
33 Mr Floropoulos is recorded as having resigned as a director from that 26 February 2016. He continued to manage Oliana’s Greek supply chain and do other things as will be seen and he and Ms Floropoulos continued to receive periodic payments and continued in possession of at least the Porsche leased by Oliana.
34 In the various text messages passing between Mr Canzoneri and Mr Floropoulos during the period 28 January to 29 February 2016 no mention is made of Mr Floropoulos’ resignation and there were text messages that sat in tension with that resignation.
35 On 3 April 2016, Mr Canzoneri confirmed by email to Mr Wyner and Mr Floropoulos that Mr Wyner had been appointed business development manager for Oliana, commencing on 4 April 2016. The primary objectives were stated to be to introduce new business and increase product lines with existing clients throughout the major chain category, and that the current major chain targets included Woolworths, Coles, Costco, Domino’s, Pizza Hut, Aldi, KFC, Nando’s, Subway and Crust Pizza. The email stated that Mr Wyner would be employed through his firm for two days per week and be paid a retainer of $60,000 per year, together with commission. The last two paragraphs of the email read as follows:
On a day-to-day basis, you will be responsible to Bill Floropoulos and will report to the Board of Directors on a monthly basis. As well as reporting on performance, you will be required to provide strategic advice and to create and implement a plan to facilitate the achievement of your primary objectives.On behalf of Oliana and its directors, we are excited at the opportunities your appointment will provide and we look forward to working with you.
36 At the time of Mr Wyner’s appointment, a major supermarket chain being supplied by Oliana was Woolworths.
37 As at April 2016, Mr Canzoneri was not pleased with the price that it was paying MyCo for MyLife vegan cheese. He had also become aware of the significant margin that MyCo was making on the sale of MyLife vegan cheese to Oliana when compared to the price MyCo was paying its Greek supplier to manufacture and supply the vegan cheese to MyCo (MyCo Cost Price). Mr Canzoneri was particularly concerned and wanted to improve Oliana’s position swiftly. Mr Floropoulos conveyed that he was as equally surprised and incensed.
38 In this context a meeting was arranged with MyCo’s Mr Paule in order to try to obtain a contribution from MyCo for a promotion of Oliana’s products at Woolworths. The meeting was attended by Mr Canzoneri, Mr Paule, and Mr Floropoulos. Some heated exchanges occurred in which Mr Paule expressed, forcefully, that he was more concerned about the state of Oliana’s unpaid accounts with MyCo than assisting Oliana with promotional costs. It was clear that Mr Paule would not be making any contribution to Oliana. Mr Canzoneri said that on leaving the meeting he said to Mr Floropoulos in substance that he was going to Greece to find another supplier, but that Mr Floropoulos asked if he could do it, to which Mr Canzoneri agreed. Mr Floropoulos said otherwise, stating that Mr Canzoneri asked Mr Floropoulos to go to Greece to find another supplier for vegan cheese.
39 Mr Floropoulos said that in about early May 2016 he and Mr Canzoneri met at the Moka Pot Café to discuss the intention to find an alternative Greek supplier of vegan cheese, and Mr Floropoulos said that he agreed to find an alternative supplier but that if he was successful he expected something for himself. Mr Floropoulos said that Mr Canzoneri agreed to this as long as Oliana received a reliable alternative source of vegan cheese at a fair price. Mr Canzoneri denied that there ever was such a conversation. This factual matter was said by counsel for Mr Floropoulos to be the ‘critical issue’ and is addressed in more detail later in these reasons. As will be seen, I have concluded that it has not been established that such a conversation occurred.
40 On 25 May 2016 Mr Floropoulos travelled to Greece, where he met with Mr Paris Garakis[10] of Kremel, the manufacturer of vegan cheese and other products. Mr Floropoulos had already planned the trip to Greece, where he had a personal matter to attend to. Although Mr Canzoneri was generally aware that Mr Floropoulos had legal matters in Greece, he was not aware that he was going for that matter. Mr Floropoulos was overseas from 25 May to 1 June 2016.
41 On about 20 May 2016 Culinary Co was registered as an Australian company. Mr Ian Hone is recorded as the sole director, secretary and shareholder. Kremel had and has no interest in Culinary Co.
42 An offer of debtor finance facility for Oliana was made by Scottish Pacific Business Finance on 23 May 2016. The facility limit was specified at $2,500,000, with security to include a guarantee from Mr Canzoneri. Mr Canzoneri signed the acceptance of the offer on 24 May 2016.
43 Mr Garakis emailed Mr Floropoulos on 27 May 2016[11] referring to their meeting in Athens and his appreciation of Mr Floropoulos’ decision to visit Greece ‘... in order to finalise our cooperation ...’. Mr Garakis stated that he had ‘... faith in our cooperation and a stable business relationship between us ...’ and attached ‘... our best price, as discussed in Athens ...’ (Kremel Supply Price). Reference was made to different forms of packaging and a request was made to ‘... indicate us the address you want the parcel to be sent ...’.
44 The Kremel Supply Price was not made known to Mr Canzoneri or anyone else at Oliana.
45 There were telephone conversations between Mr Floropoulos and Mr Canzoneri whilst Mr Floropoulos was in Greece and shortly thereafter. As will be seen, during these conversations Mr Floropoulos spoke about Oliana becoming the distributor for Kremel’s products; Kremel setting up an Australian company to deal with Oliana; pricing; getting an agreement; and Mr Hone being the person who would be contacting Mr Canzoneri about the exclusive distribution agreement. These discussions are addressed in greater detail later in these reasons.
46 On 30 May 2016 Mr Floropoulos is recorded on the ASIC register as being re-registered as a director of Oliana. Mr Floropoulos denied ever agreeing to be reappointed as a director.
47 On 1 June 2016 Mr Floropoulos emailed Mr Garakis confirming that the vegan cheese samples should be sent to Mr Hone at Culinary Co. Mr Floropoulos did not use his Oliana email address for this email or any other email sent to Kremel, and he did not copy this or other emails or written communications sent by him to Kremel to any other Oliana representative or officer.
48 On 7 June 2016 Mr Floropoulos forwarded outer carton concept designs to Mr Garakis. Those designs showed products branded as Culinary Co with a packaging notation that they were distributed by Oliana Foods Pty Ltd. This packaging was not shared with Oliana at that time. Ultimately it was not used.
49 On 7 June 2016 Mr Hone sent an email to Mr Canzoneri referring him to an attached letter, which was recorded as being sent by ‘Ian Hone, Director, The Culinary Co Pty Ltd ACN ...’. The attached letter was said by Oliana to be significant. It noted Mr Hone’s legal qualifications, was on letterhead showing an image of a gavel, and recorded the email address of Mr Hone as ‘honelegal@hotmail.com’. It was addressed to Mr Canzoneri care of Oliana Foods at Oliana’s office address and was in the following terms:[12]
Dear Mr Canzoneri,I hereby confirm that I am the sole officeholder for Culinary Co Pty Ltd and also act as the legal representative for and on behalf of Culinary Co - Greece whose managing director is Mr Paris Periandros.[13]
As you are aware my clients have been in discussions with several other distributors throughout Australia.
I confirm that I have been instructed by Mr Periandros to cease all talks with these third party distributors and to now appoint Oliana Foods to be the new distributors with exclusive rights for Culinary Co and its various products for both Australia and New Zealand.
As per your prior discussion with Mr Paris Periandros of Culinary Co – Greece, in good faith he has commenced the preparation of your initial order you have provided as per product specifications.
Within the next 24 hours we will provide you with an invoice for deposit to be paid as per our agreement.
Yours sincerely
Ian George Hone
Director
For and on behalf of Culinary Co Pty Ltd.
50 By email of the same day Mr Canzoneri responded thanking Mr Hone for his email, stating that he looked forward to a ‘... long and mutual association ...’ and asking that Mr Hone ‘...forward the agreement as soon as it is finalised...’.
51 What was not known to Mr Canzoneri or Oliana was that Culinary Co was not in any way linked to Kremel. In fact, prior to Mr Floropoulos leaving for Greece, Mr Floropoulos had set up Culinary Co and planned to interpose it between Oliana and the supplier Kremel so as to obtain a margin for the benefit of himself and Culinary Co.
52 On 7 and 8 June 2016 Oliana placed its first order with Culinary Co.
53 On 8 and 9 June 2016 Oliana received two invoices from Culinary Co, being invoices 00001 and 00002. Oliana paid $275,000 in respect of these invoices by payments made on 9 June 2016 ($75,000), 30 June 2016 ($100,000), 12 July 2016 ($50,000), and 5 August 2016 ($50,000).
54 Mr Damien Adams, who is Oliana’s supply manager, left Mr Floropoulos to be the sole person to deal with Kremel in respect of its orders. Except for one early order, Mr Adams did not deal thereafter directly with Kremel. Mr Adams said that he was told by Mr Floropoulos not to contact Kremel directly, as they did not speak English and Mr Floropoulos wished to avoid ‘communication issues’. Mr Adams gave evidence that this was an unusual request and that he habitually had direct contact with other Greek suppliers to Oliana. Mr Floropoulos denied that he ever instructed Mr Adams not to contact Kremel. This conflicting evidence is addressed later in these reasons. The evidence of Mr Adams is accepted.
55 During the period 12 to 23 June 2016 Mr Floropoulos was overseas in America, where he spent time with an accountant and, as it turned out, a business colleague, Mr Peter Delis. Mr Floropoulos and Mr Delis also spent four days in Los Angeles with Kremel’s Mr Garakis. It became apparent that Mr Floropoulos was also seeking to do business in America through another company, Telos Enterprises Pty Ltd (Telos).
56 During the period 5 to 19 July 2016 Mr Floropoulos was overseas in America.
57 On 6 July 2016 the ASIC register recorded Mr Floropoulos as again becoming deregistered as a director of Oliana. Mr Floropoulos said that he did not know that he had been put back on the register on 30 May 2016. Mr Canzoneri said otherwise.
58 Mr Floropoulos travelled to America during the periods 11 to 21 September 2016 and 12 October to 13 November 2016.
59 On 21 October 2016 Mr Floropoulos emailed Mr Garakis at Kremel from an email address for Telos and placed an order for 40 tonnes of Kremel product. He referred to the need for new artwork so as to get the project moving. The email was headed ‘OLIANA ORDER’ and had the words ‘Bill Floropoulos Managing Director’ at the end of the email. Kremel responded thanking ‘Bill and team’ for the order and addressed various logistical and packaging matters. Mr Floropoulos responded by email of 21 October 2016, again from his Telos email addressed to Kremel’s Mr Makrakis and Mr Garakis. The subject of the email was again ‘OLIANA ORDER’ and he said to Mr Makrakis that: ‘[f] or any work that is for Oliana please just email myself on this and Eleni’.
60 Eleni was a person external to Oliana who was assisting Mr Floropoulos with packaging.
61 On 24 October 2016 Kremel emailed Mr Floropoulos, at his Telos email address and a Gmail email address called ‘drbillsta’, a form described as a ‘... pro forma invoice of “Oliana Foods Pty Ltd”‘. That invoice recorded the buyer as Culinary Co and was addressed to the attention of Mr Hone. Mr Floropoulos responded that same day by email from his Gmail address with the subject recorded as ‘PRO FORMA INVOCE [sic]’. In that email, Mr Floropoulos stated that ‘the correct details for the Invoice are as follows’ and gave the purchasing company as Culinary Co with its address at Ricketts Road, Mount Waverley, with matters to be marked to the attention of Ian Hone. Mr Floropoulos also directed that ‘... all correspondence will only be emailed to me.’ A revised pro forma invoice was then sent by Kremel on 25 October 2016. None of this was known to Mr Canzoneri or Oliana.
62 A FaceTime call between Mr Floropoulos and Mr Garakis took place in Mr Canzoneri’s presence where Mr Floropoulos and Mr Garakis spoke in Greek only. Mr Canzoneri does not speak Greek. The Agreed Chronology initially recorded that after the call ended Mr Floropoulos informed Mr Canzoneri that Mr Garakis intended to instruct Mr Hone to prepare an exclusive distribution agreement. However, Mr Floropoulos was overseas in early November 2016 and Mr Canzoneri did not give a date for the FaceTime conversation and Mr Canzoneri’s evidence did not address what was said to him by Mr Floropoulos after the call. It became apparent though that Mr Hone was heavily involved with the exclusive distribution agreement.
63 On 17 November 2016 Mr Canzoneri texted Mr Floropoulos asking whether he had had a chance to speak to Mr Garakis about the agreement. Mr Floropoulos said in response that he would call him then. This and other text messages passing between Mr Floropoulos and Mr Canzoneri are addressed in more detail later in these reasons. Among other things they reveal that Mr Floropoulos was not being truthful in aspects of his dealings with Mr Canzoneri and Oliana.
64 On 21 November 2016 Mr Hone sent Mr Canzoneri a draft distribution agreement between Culinary Co and Oliana, noting that the product list needed to be added, which he was expecting to have to hand that day. Terms and features of that draft agreement included the following:
(a) It was entitled ‘Exclusive Distribution Agreement’ and it was said to be between Culinary Co as the company or supplier and Oliana as the distributor or wholesaler.(b) It recorded that the company ‘manufactures and sells’ the products listed and that the distributor desired to purchase the products from the company for resale in the territory, being Australia and New Zealand.
(c) The company desired to appoint the distributor as its exclusive distributor in the territory.
(d) The company granted the distributor the exclusive right to sell and distribute the relevant products to the customers located in the territory (clause 1A).
(e) The territory was Australia and New Zealand (clause 1B).
(f) The prices would be as recorded in the schedule (clause 2B).[14]
(g) Payment was to be made by electronic transfer of at least 50% of the total order price upon receipt of a pro forma invoice with the remaining balance to be paid within 45 days of receipt of the products at the distributor’s facility.
(h) A minimum order clause requiring a minimum of two containers of products per calendar month, whether or not such volume was ordered, and that the distributor would be liable for an amount of 24 containers of the products per year on a take-or-pay basis.
(i) Execution clauses contemplating execution by Ian Hone for and on behalf of Culinary Co and execution by an Oliana representative for and on behalf of Oliana. This version of the draft agreement did not include Kremel as a party or make provision for execution by Kremel.
65 Mr Canzoneri forwarded the draft agreement to his son who was also Oliana’s solicitor, Mr Michael Canzoneri, and to Mr Floropoulos. A short time later, Mr Floropoulos texted Mr Canzoneri asking ‘... can you tell me what we need to ask to be changed or looked at ... you know I don’t read every word ...’, to which Mr Canzoneri responded: ‘[l] eave it until the morning. I’ll re-read it and so will Michael’.
66 On 23 November Mr Floropoulos texted Mr Canzoneri stating that:
dad spoke to Greece last night. I hope they got it what I was saying ... we will see today hopefully we will get amended contract today
He stated further that he hoped they would get all the changes as he explained them and said he would call later.
67 Later that day Mr Hone sent an email to Mr Canzoneri attaching an amended document and in which he stated: ‘Sebastian, after discussions with Greece overnight please find amended document, product/price lists still to be added’.
68 This second draft of the distribution agreement, sent after what was said by Mr Hone to be ‘discussions with Greece overnight’, introduced Kremel as a named party. It recorded in the opening paragraph that Kremel was the Grantor, with Culinary Co being the company or supplier and Oliana being the distributor or wholesaler. It referred to Culinary Co, as the company, being the manufacturer and seller of the products ‘... for which it has been granted exclusive rights of distribution by the Grantor ...’. It recorded the agreement as being for a three-year period, with a further two-year option period. Whilst it adjusted the minimum order to one container of products per calendar month, it retained references to two containers in other parts of the clause and the minimum total of 24 containers. It also contained a reference to 48 containers for the entire term of the agreement, although the term had been increased to three years. With respect to execution, it included an additional execution clause to allow for execution by Kremel. That execution clause was in the following terms: ‘Executed by Ian Hone For and on behalf of Kremel A.E.’.
69 Mr Canzoneri texted Mr Floropoulos informing him that he had received the agreement but that it was not totally changed and that it still contained a reference requiring Oliana to pay for 24 containers per year. By return text message and a number of subsequent text messages, Mr Floropoulos, using derogatory language about Mr Hone, told Mr Canzoneri to email Mr Hone to tell him that that was not what was agreed and to get him to make the changes and send it back. He also said that he was with his Dad and asked that the email contract be forwarded to him and they would call them now to get it sorted. Mr Canzoneri said that he had already sent it, but that he was going to go through it that evening and compare. Mr Canzoneri added that whilst there were 12 pages, the more he read it the more things were wrong. There was an issue at trial as to whether the document being discussed in this exchange was a draft of the exclusive distribution agreement. I have found that it was.
70 On 24 November 2016 Michael Canzoneri sent a revised draft to Mr Hone and stated in his email that he had attempted to incorporate all of the pertinent terms into Oliana’s standard distribution agreement, and invited Mr Hone to telephone to discuss, or otherwise mark up, any requested amendments or corrections and send them by return. Five minutes later Mr Hone responded saying thanks and stating, ‘I will obtain instructions and revert’.
71 Also on that day Mr Hone emailed Mr Floropoulos a copy of the 9 June 2016 invoice, and Mr Floropoulos replied attaching an Oliana price schedule for inclusion in the exclusive distribution agreement. Mr Floropoulos texted Mr Canzoneri stating that Mr Canzoneri had not sent him the contract. Mr Hone also forwarded to Mr Floropoulos the email and revised draft agreement he had received from Michael Canzoneri.
72 On 25 November 2016 Mr Hone sent a document to Michael Canzoneri setting out some suggested amendments to three clauses of the draft sent by Michael Canzoneri and stated ‘All others the same’. On the same day Mr Floropoulos emailed Mr Hone, again attaching the price schedule, and stated as follows:
Hi Ian ,please add this in Price schedule ... also put in the amendments . lets [sic] get this signed up over the weekend if possible .
let me know if we need anything else .
73 Mr Hone then sent a price schedule to Michael Canzoneri on Saturday 26 November 2016 stating ‘... herewith pricing schedule for attachment to agreement ...’. That pricing schedule dealt with product, packaging and the AUD price per kilogram. The products were: vegan original; vegan cheddar; vegan mozzarella; vegan smoked; and vegan feta style in brine.
74 Mr Hone sent a copy of his email to Michael Canzoneri to Mr Floropoulos and also sent him a copy of his proposed amendments. The prices in the price schedule were materially greater than the Kremel Supply Price although Mr Canzoneri and Oliana did not know that.
75 On 28 November 2016 Mr Hone emailed Mr Canzoneri and Michael Canzoneri asking whether the changes in the schedule were acceptable and asking to be advised ‘ASAP’.
76 That same morning, Mr Floropoulos texted Mr Canzoneri saying good morning and asking ‘... how did we go with the Greeks is it all sorted now? ...’. In the text message exchange that followed, Mr Canzoneri said that he was waiting on a reply from Mr Hone, which Mr Floropoulos said he would get ‘them’ to follow up. He also said that he ‘... called Greece and they are on to it too ...’ and that he hoped to get something that night. Mr Canzoneri said to Mr Floropoulos that ‘as soon as we’ve got it we will sign’.
77 On 29 November 2016 Mr Hone again forwarded to Michael Canzoneri a further copy of the changes he proposed to the distribution agreement. Also on that day Mr Floropoulos texted Mr Canzoneri, asking that he ‘... send me Ian’s number ... need to get them sorted ASAP ... so we can [f###] this [expletive] off’.
78 Later that day Michael Canzoneri sent Mr Hone a Word version of the revised agreement with the amendments marked up and requested that Mr Hone advise if the changes were acceptable. Mr Hone forwarded this email to Mr Floropoulos by email and stated as follows:
Their response — as we sought except they want to put in a provision that the no set off provision doesn’t apply if there is a “genuine dispute as to defective products”. I don’t like that provision but it is a matter for you whether you want me to hold the line on it.
79 Mr Canzoneri signed the exclusive distributorship agreement on behalf of Oliana on 29 November 2016. On 30 November 2016 Mr Hone sent an email to Michael Canzoneri and Mr Sebastian Canzoneri in the following terms:
Dear Michael and SebastianI attach Agreement as signed and emailed by Sebastian yesterday, signed by myself for Culinary Co Pty Ltd WITH ONE AMENDMENT being in clause 3.2.3 where in line 2 I have changed the word ‘Supplier’ to ‘Distributor’ as clearly the supplier isn’t paying itself. Please initial the change and re-email and courier to my office 5/148 Walker Street, Dandenong.
Any queries please do not hesitate to call/email.
80 The terms and features of this signed agreement are discussed further later in these reasons. Among other things:
(a) Kremel and Culinary Co were jointly defined as ‘Together, the Supplier’ and Oliana Foods Pty Ltd was defined as the Distributor.(b) The background recorded in paragraph A that ‘the Supplier is the direct or indirect manufacturer of the products’ and paragraph B recorded that ‘the Supplier has agreed to appoint the Distributor to distribute the Products exclusively in the Territory on the terms and conditions set out in this agreement’.
(c) The Supplier granted the distributor the exclusive, non-transferrable right to distribute the Products in the Territory, which was Australia and New Zealand.
(d) Fifty per cent of the total order price was to be electronically transferred to the Supplier upon acceptance of an order by the Supplier and confirmation from the distributor, with the remaining payment for any order to be paid by the distributor not more than 45 days after delivery of the Products. With respect to the first two orders and/or shipments of two containers, the distributor agreed to deposit into the Supplier’s nominated bank account 50% of the orders with the balance of the 50% to be paid by transfer into the Supplier’s account upon the production of the free on board shipping documentation to be sent to the distributor advising the goods are ready to be shipped and ready to be delivered.
(e) Notices were dealt with in clause 11.1. In that clause it was recorded that notice for the ‘Supplier’ could be delivered by hand, by mail, by facsimile to Ian Hone at Level 1, Suite 34, 1 Ricketts Road, Mount Waverley.
(f) The Supplier product list addressed product, packaging and price per kilogram consistently with the pricing earlier referred to, which was as follows (Culinary Co Supply Price):
|
PRODUCT
|
PACKAGING
|
PRICE PER KG
(AUD)
|
|
Vegan Original
|
200gr Block
|
$14.32
|
|
200gr Slices
|
$15.20
|
|
|
200gr Shred
|
$16.15
|
|
|
Vegan Cheddar
|
200gr Block
|
$14.32
|
|
200gr Slices
|
$15.20
|
|
|
200gr Shred
|
$16.15
|
|
|
Vegan Mozzarella
|
200gr Block
|
$14.32
|
|
200gr Shred
|
$16.15
|
|
|
Vegan Smoked
|
200gr Block
|
$14.32
|
|
200gr Slices
|
$15.20
|
|
|
200gr Shred
|
$16.15
|
|
|
Vegan Feta Style In Brine
|
200gr Tupper
|
$15.60
|
81 The execution clauses provided a separate place for execution by each of Kremel, Culinary Co and Oliana. On the signed version of the copy of the document in evidence, the part of the execution clauses referring to Kremel is blank. Mr Hone is recorded as executing the document for Culinary Co as its sole director and secretary, and Mr Canzoneri is recorded as executing the document for Oliana as its sole director and secretary. A further copy was executed by Mr Canzoneri in early December 2016 due to one (insignificant) handwritten amendment by Mr Hone.
82 Mr Canzoneri said that he received an original of the agreement sent to him by mail from Mr Hone, which had a signature on behalf of Kremel in its execution block. Mr Canzoneri said he has been unable to locate this document. Mr Hone did not give evidence and there was no direct documentary evidence supporting its existence. Mr Garakis denied ever seeing or receiving the agreement and denied that he signed it, which was accepted by the parties. This is another matter addressed further later in these reasons. As will be seen, it has not been established that there was a copy purporting to be signed for Kremel.
83 Mr Canzoneri and Oliana were not aware that Mr Hone was communicating with and taking instructions from Mr Floropoulos or that Mr Floropoulos was behind Culinary Co. Mr Floropoulos did not ever disclose this to Mr Canzoneri or Oliana.
84 Between 3 and 9 December 2016 Mr Floropoulos was overseas in America.
85 On 8 December 2016 Mr Canzoneri texted Mr Floropoulos stating ‘[a]ll agreements are signed’, to which Mr Floropoulos replied ‘[t]hat’s great’. That was following the second signing by Mr Canzoneri.
86 Throughout the period late February 2016 until at least December 2017 Mr Floropoulos was doing a number of important things in connection with the business of Oliana. This is further discussed in the context of the de facto director and officer allegations later in these reasons.
87 On 13 December 2016 Mr Hone emailed Mr Canzoneri stating that he had ‘... heard from Greece ...’, that they were sending some pallets by air freight and some by sea and that:
As they have incurred a lot of costs and are trying to help your situation they have asked that you kindly pay the balance of $139272K for the first container by close of business Wednesday 14 December 2016.
He also stated that Mr Canzoneri should just shoot him an email if he had any queries and ‘I will chase with Greece’. In response Mr Canzoneri stated that all was good with the request and that payment would be made over the next three days, with the total amount being paid by the end of the week. This email was forwarded by Mr Hone to Mr Floropoulos on the same day. In his covering email to Mr Floropoulos, Mr Hone stated that he was sending Mr Canzoneri’s email ‘FYI. How do you want me to respond?’.
88 During 2017 other text messages were sent by Mr Floropoulos to Mr Canzoneri in which Mr Floropoulos conveyed that Kremel were seeking payment from Oliana when in fact that was not so because it was Culinary Co who had the supply arrangement with Kremel. This was not known to Oliana.
89 By 23 December 2016, Oliana had paid Culinary Co $385,000. During late December 2016 and January 2017 Oliana received the first shipment of products in stages.
90 During parts of the second half of 2016 and 2017 there were numerous texts and other messages coming from Mr Floropoulos, Culinary Co and Mr Canzoneri regarding supply and payment, including some expressed concerns on the part of Oliana that various payments had been made and that Oliana was frustrated at not being able to obtain a reconciliation in respect of substantial amounts paid. This continued over an extended period.
91 Oliana made substantial payments to Culinary Co during 2016 and 2017 and it was established on the evidence, and effectively common ground, that the payments were as reflected in the payment schedule annexed to Oliana’s written submission, substantial parts of which comprise Annexure A to these reasons (Oliana Payments Schedule). This also recorded the invoices from Kremel to Culinary Co and the payments to Culinary Co. It recorded that during the period June 2016 to 23 December 2017 Oliana paid Culinary Co $1,967,217.54 and Culinary Co paid Kremel only the equivalent of AUD505,848.09, with Culinary Co paying a further AUD24,937.66 on 23 February 2018.
92 There were ongoing exchanges between Mr Hone and Mr Floropoulos on the one hand and Oliana on the other regarding products that had been provided by way of air freight, who could deal with air freight, and whether amounts had been paid.
93 Throughout parts of 2016 and during 2017 concerns were raised by Oliana in relation to the timing and delivery of product, and the impact and difficulties the delays in deliveries were causing Oliana with supermarkets and others that Oliana was supplying.
94 Mr Wyner was working with, among others, Oliana customer Woolworths on behalf of Oliana in relation to the vegan cheese range and a media support package proposed for the launch in the first six months to 30 June 2017. For example, in an email of 4 January 2017 to Woolworths’ Mr Novak, Mr Wyner emphasised that Oliana was committed to the launch and success of the Oliana branded range and that it was only the start of things to come with an extensive range of products to follow.
95 Between 5 and 16 January 2017 Mr Floropoulos was in America.
96 In early 2017 Mr Canzoneri was informed by Mr Wyner that Woolworths wanted to set its own recommended retail price on the Oliana products, which was lower than the price at which they were being supplied to Oliana. Mr Canzoneri asked Mr Floropoulos to see if he could try and negotiate a discount with Kremel. Mr Floropoulos subsequently informed Mr Canzoneri that he had negotiated a 7% discount but that Oliana would need to pay the 50% balance owing on invoices upon delivery. In fact there had been no negotiations with Kremel because Mr Floropoulos was the person setting the Culinary Co Supply Price for Oliana, although this was not known to Mr Canzoneri or Oliana.
97 On 17 January 2017 Mr Floropoulos forwarded to Mr Hone copies of Culinary Co’s invoices 1 to 4, issued to Oliana in 2016. That same day Mr Hone sent an email to Mr Floropoulos attaching a proposed letter to Mr Canzoneri in relation to payment, invoicing and the 7% discount.
98 On 18 January 2017 Mr Hone emailed Mr Floropoulos asking him if a proposed letter to Mr Canzoneri, attached to the email, was ‘okay’. Later that day, Mr Hone sent an email to Mr Canzoneri in the following terms:
Dear SebastianI trust my email finds you well.
As you are aware with the current agreement that you have negotiated for the 7% discount for the first three months was on the basis that all invoices would be paid 50% on Order and the balance paid once product was shipped.
To date this has not happened.
In good faith we will continue to honour the 7% discount BUT you must keep to your side of the agreement.
As we have incurred air freight costs to the value of $65,000.00 shared 50%/50% between the two companies we require full payment immediately.
As you can appreciate we are trying to assist Oliana as much as possible in launching the Oliana range.
Your current payment schedule of small amounts is creating extra work for our accounts department and as such in future please pay as per the agreement.
Please find attached the invoices for the ‘Shredded’ and 4th Mixed FCL.
We totally understand your cashflow issues but we also have cash flow issues ourselves.
Please confirm by return the balance of outstanding invoices and the 50% for the attached will be paid by this Friday 20 January 2017.
99 Payments made by Oliana were made to the Culinary Co bank account. During 2016 and 2017 numerous payments were made out of Culinary Co’s bank account by or at the direction of Culinary Co and generally for Mr Floropoulos’ direct or indirect benefit. It became apparent during cross-examination that Mr Floropoulos controlled the Culinary Co bank account. None of this was known to Oliana.
100 During the period 27 February to 5 April 2017 Mr Floropoulos was overseas in America.
101 In early 2017 Oliana was facing various time pressures associated with getting supply into supermarkets, which was the subject of correspondence and communications between, among others, Mr Floropoulos and Kremel. This included communications between Mr Makrakis of Kremel and Mr Floropoulos in March 2017.
102 On 31 March 2017 the last payment of $750 from Oliana to Mr Floropoulos was made.
103 Mr Garakis visited Australia in April 2017 and a meeting took place on 8 April 2017. Present at the meeting were Mr Garakis, Mr Delis, Mr Floropoulos, Mr Canzoneri and Oliana’s sales manager, Theo Alexopoulos. Throughout the meeting and a subsequent dinner Mr Garakis spoke in Greek. Mr Canzoneri cannot speak Greek. Mr Canzoneri said that when he spoke to Mr Garakis, Mr Garakis would say words to the effect of ‘not understand’ and would wait for Mr Floropoulos to interpret, which he did.
104 During the meeting, Mr Delis spoke of Mr Canzoneri needing to ensure that Oliana paid Kremel on time, and Mr Canzoneri told Mr Garakis, through Mr Delis who translated into Greek, words to the effect of ‘we’re in credit’, and suggested that together Kremel and Oliana should reconcile the accounts.
105 In fact, Mr Garakis could understand and speak English reasonably well but said that Mr Floropoulos had requested of him that he only speak Greek in front of Mr Canzoneri, which he did. Mr Floropoulos denied that he made this request of Mr Garakis. This alleged request to speak only Greek was also referred to in later correspondence from Mr Garakis to Mr Floropoulos. The discrepancy between Mr Garakis’ and Mr Floropoulos’ evidence on this point is addressed later in these reasons, where it will be seen that I accept Mr Garakis’ evidence.
106 After the 8 April 2017 meeting, communications between Mr Delis and Mr Canzoneri occurred regarding payment, including a text from Mr Canzoneri to Mr Delis requesting his email address so that Mr Canzoneri could forward a ‘complete reconciliation’ of Oliana’s account with Culinary Co. In that text Mr Canzoneri stated that Mr Delis would see that inclusive of an air freight invoice ‘we’re in front by approx 15,000’. Reference was also made to some short delivery issues and other matters.
107 It appears that a reconciliation was subsequently provided by Mr Canzoneri, although it was not able to be located and was not in evidence. In his email of 2 May 2017 to Mr Canzoneri, Mr Delis referred to Mr Canzoneri’s ‘... recent email correspondences and reconciliation you provided ...’ and stated he was ‘... finding it difficult to see how you are requesting a net credit / refund when you have yet to receive the third container ...’. He referred to Mr Hone’s email of 18 January 2017 to Oliana, in which reference was made to the negotiated 7% discount on the basis that all invoices would be paid 50% on order and the balance when product was shipped (being when stock departed from Greece, as per the email from Mr Hone). Consequently, Mr Delis said that invoices would be adjusted to reflect the correct terms and immediate payment on the remaining balance of the third container would be requested. Reference was also made to Mr Canzoneri’s previous request to meet with Mr Garakis in Greece, in Crete. In this context Mr Delis stated that:
We also confirm that our client, Mr Paris Garakis, will not be available to meet you in Crete due in [sic] to his absence because of other business commitments until the first week in June 2017.
The email also requested the outstanding balance on invoice 004 and 50% deposit on air freight for invoice 005.
108 During the course of his evidence Mr Floropoulos denied that he had ever had a business relationship with Mr Delis beyond Mr Delis acting as his accountant. In cross-examination, Mr Floropoulos maintained that ‘from what I can recall’, that evidence was correct. However, he agreed that he and Mr Delis had set up a company called Archie Thompson Pty Ltd together and that Mr Delis had replaced him as sole shareholder and director in Telos and Bill F Pty Ltd. Mr Floropoulos stated that he could not recall whether any payments were made in return for the transfer of shares in these companies between himself and Mr Delis.
109 Mr Delis was not called as a witness by any party. It was not established on the evidence that Mr Garakis, or Kremel, was ever a ‘client’ of Mr Delis. Mr Garakis denied it and I accept this evidence. However, the evidence did demonstrate that Mr Delis was involved in numerous companies with which Mr Floropoulos was involved at different times and that numerous transactions occurred in relation to these companies where shares were transferred between Mr Floropoulos and related parties and Mr Delis. These included, for example, Telos, Bill F Pty Ltd, and Freestyle Foods Pty Ltd.
110 Mr Delis, Mr Hone and Mr Floropoulos were in different ways stating to Mr Canzoneri that funds were owing by Oliana to Culinary Co and making demands for payment. In this context, on 22 May 2017 Mr Delis forwarded to Mr Floropoulos and Mr Hone a draft email demand for payment to be sent to Mr Canzoneri and requested their respective ‘comments’. Late that Monday evening, Mr Hone responded stating: ‘[h]erewith proposed letter. Despite lateness of the hour I suggest we keep the noon deadline.’ He also said that ‘This letter will NOT be sent until approved.’
111 Prior to receiving Mr Hone’s revised draft letter, at 4:25pm on 22 May 2017, Mr Delis sent an email demand for payment to Mr Canzoneri which read in part as follows:
RE: CULINARY CO – DEMAND FOR PAYMENTDear Mr Canzoneri,
We confirm that you made representations last week to Bill that Oliana would continue to pay daily an amount of circa $15k to $20K.
You have failed to do so since you have only made two payments of $15k being on Tuesday the 16th May 2017 and on the 18th May 2017. This is not satisfactory and nor the agreed amounts of instalments to be paid.
You continue to ignore our clients (Culinary Co) requests which are strictly based as per the original agreement executed mid January 2017, and you continue to make payment plans that clearly cannot be met. In good faith after numerous heated discussions with Bill we reluctantly authorised the release of stock held in the ITM storage last Friday to assist you in good faith, despite yet again not receiving the correct amount we had previously requested and subsequently assured by Bill that it would be paid.
Thereafter you still provide further undertakings that you would continue to pay the daily instalments to bring the arrears outstanding up to date, but again you have failed to do so.
These chain of events have now obviously created a very embarrassing situation with our client in Greece and today we have been provided with the following instructions and accordingly this email now serves as a notice to the following:-
In summary our clients have always endeavoured to provide you with assistance, collaboration, guidance and product support as and when you have requested for it during the dialogue and discussions that we have had on several occasions. Unfortunately our clients current perception of your company based on your recent unsatisfactory payment history and undertakings provided, you have not responded in kind.Can you please contact me immediately to discuss the above and I would suspect you would treat this request as a matter of urgency.
I await your urgent responses to the above.
Yours faithfully,
Peter Delis – Director | Business Advisory
112 As is apparent, Mr Delis again referred to ‘... our client in Greece ...’ and the instructions which it was asserted he had been provided. Mr Delis also referred to ‘clients’ plural in the closing paragraphs.
113 On 23 May 2017 Mr Delis sent another email headed:
FINAL DEMAND - CULINARY COURGENT – FINAL DEMAND
Mr Delis again referred to his ‘clients’ placing Oliana on notice that if certain steps were not taken the agreement would be cancelled immediately, and Culinary Co would also cease any further dealings effective immediately. He also stated that, due to the urgency of the matter, ‘... at the request of our clients we have also linked Mr Ian Hone, the director of Culinary Co into this communication ...’. In fact, Kremel was not a client of Mr Delis.
114 During the period 19 to 27 June 2017 Mr Floropoulos was overseas.
115 On 1 July 2017 Mr Floropoulos and Mr Garakis signed an exclusive distribution agreement, expressed to be between Kremel and Culinary Co, which provided for Culinary Co to be the exclusive distributor of a range of products manufactured and supplied by Kremel for a broad range of territories being the United States, Republic of China, Philippines, New Zealand, Australia, United Kingdom, Israel, Singapore, Hong Kong and any other countries subsequently agreed upon by the parties in writing. Mr Floropoulos signed the agreement on behalf of Culinary Co.[15] The initial term was expressed to be for five years.
116 Mr Garakis conveyed that he felt that he was effectively tricked into signing this agreement. He expressed this view in an email he sent to Mr Floropoulos in April 2018.
117 Mr Floropoulos was again overseas during the periods 13 to 20 July and 4 to 11 August 2017, and between 5 to 7 September 2017.
118 On 17 September 2017 Mr Wyner wrote to Mr Canzoneri stating that Foods International would no longer continue as a consultant to Oliana Foods. Mr Wyner referred to discussions regarding Foods International’s outstanding account (which it was said amounted to $52,506.07) and requested payment within 30 days.
119 A few days later, on 22 September 2017, Mr Floropoulos sent an email to Woolworths’ Mr Novak, copied to Mr Wyner, regarding a proposal for exclusive supply of vegan products by Culinary Co to Woolworths. That was not known to Mr Canzoneri or Oliana, which was a supplier to Woolworths as Mr Floropoulos and Mr Wyner knew. That email was in the following terms:
Hi Jack,Thanks again for the meeting we had last week.
Again I apologise for the situation but moving forward I guarantee we will be on a winner.
I am working out the current situation with Oliana Foods which will be sorted out immediately.
Once clarified I’ll let you know.
Just to summarise what we discussed:
• Woolworths will have the Culinary brand exclusively and the range will be listed nationally by end January 2018 (TBC)
• Yoghurts & Deserts have and are being developed — I’m finding out what is ready to go so that it can be made available for Marrickville in November.
• Robert & I will updated on the Snack Pack
• I will see what we can do about a ‘Cashew’ based range
• I have samples of the ‘Toffuti’ spreads and development work has already commenced.
• Once our designer has implemented the changes to the label we discussed we’ll send them through to you.
• Pricing will be structured that we include ongoing marketing support.
Jack I’m glad that we could sit down and talk openly so that we can really make this the ‘hero’ in Woolworths with you and Stephanie.
Paris will be here from Greece on Monday 25th through to Friday the 29th of September. Please let me know what day you are free so we can fly up and see your self and Stephanie.
Have a Nice weekend
Bill Floropoulos
120 On 26 September 2017 Mr Wyner emailed Mr Novak and Ms Scalise of Woolworths, copied to Mr Floropoulos, regarding the proposed supply by Culinary Co and noting that he was working on pricing with Mr Floropoulos. Mr Wyner also enquired as to what trading terms were being considered by Woolworths.
121 On the same day, 26 September 2017, Mr Hone sent to Mr Delis, copied to Mr Floropoulos, an email attaching a draft letter and notice of termination of the contract between Culinary Co and Oliana for review and comment. He stated that it had been drawn up on the basis that Oliana was in default, but that Oliana had probably not committed any of the grounds that allowed for immediate termination under clause 10.2.
122 In a text exchange between Mr Delis and Oliana’s Mr Adams on 17 October 2017, Mr Delis referred to, among other things, his ‘instructions’ that until ‘our clients’ receive clear funds no stock would be released and advised that due to ‘the constant poor payment history, the discount of 7% is now no longer applicable’.
123 In response, Mr Adams requested that Mr Delis call him, or, if that was too difficult, for Mr Delis to arrange for the client to contact Mr Adams directly. In the same text, Mr Adams stated that Mr Delis’ text was ‘factually inaccurate’. In response, Mr Delis texted Mr Adams in the afternoon of 17 October 2017 two text messages as follows:
I HAVE BEEN INSTRUCTED BY THE DIRECTOR, MR IAN HONE THAEFFECTIVETHAT EFFECTIVE IMMEDIATELY CULINARY CO PTY LTD IS TERMINATING THE AGREEMENT WITH OLIANA FOODS. CULINARY CO RESERVES ITS RIGHTS.
124 During November and December 2017 Mr Floropoulos sent numerous texts to Mr Canzoneri regarding payment related matters which included messages conveying that ‘Greece’ was requiring payment from Oliana, requesting that payment be made, conveying that Mr Floropoulos had had numerous communications with Kremel about payment, and stating that it was becoming embarrassing for him. In fact Kremel was not requesting any payments from Oliana and was not communicating with Mr Floropoulos about this. This was not known to Mr Canzoneri or Oliana.
125 In late 2017 Mr Canzoneri was becoming more and more frustrated and concerned with the delay in stock being provided and the absence of a reconciliation from Kremel (through Culinary Co), which he was expressing in his communications to Mr Floropoulos. He did not know that Culinary Co was being totally or substantially controlled by Mr Floropoulos.
126 On 22 December 2017 the last payment of $1,250 to Ms Nikki Floropoulos was made by Oliana.
127 On 27 December 2017 Mr Floropoulos signed a Woolworths vendor trade partner form on behalf of Culinary Co, providing his details for the company contact details, as well as those of Mr Wyner for communications. Mr Floropoulos is recorded as signing the document on 27 December 2017 in an execution block marked ‘Signature of chief executive officer/director/company director’. The agreement records it being signed by Woolworths Buying Department authorised personnel on 10 January 2018. This was not known to Oliana or disclosed by Mr Floropoulos.
128 On 3 January 2018 Mr Canzoneri emailed Mr Garakis and Mr Hone jointly on behalf of Oliana with the subject line ‘Urgent – Impending Coles Delisting’. That email was lengthy but it is appropriate to set out in full some of its terms:
Dear Paris and Ian,***We have been given notice today that Coles will delist our products if we cannot give them a firm delivery date for the current order–Please give this email your urgent attention***
I refer to our time spent with Paris here in April 2017.
We met together in good faith to discuss our business in general and resolve communication difficulties that we had been experiencing since the commencement of our commercial relationship.
There were a number of key points that were addressed at the time that are still outstanding and continue to complicate matters.
The main issue that is yet to be resolved, is the clear communication breakdown between Oliana and Kremel S.A.
The inability of our staff to deal directly with Paris’ team is causing significant problems and we are in danger of losing the Coles chain of stores if this is not resolved.
I summarise the outstanding issues as follows.
ACCOUNTS
...
To date, we have not received any statements for our account with Culinary Co, and have only recently received a generic invoice for freight that is devoid of any detail. We have requested itemised accounts and a reconciled statement detailing our transactions, and have not received anything. Whilst our records indicate we are substantially in credit of approximately $150,000, we have asked for this on many occasions and it has been conveyed to us that it is done but we are yet to receive anything supporting it.
We have paid for all our deliveries prior to goods being released even though we believe that we are in credit with Culinary and our agreement states that after the first 2 containers we should have 45-day payment terms after delivery.
ORDERING AND LOGISTICS
It was agreed that logistics to be dealt with by Damien directly with factory, and it was also agreed by Paris that we could use our own freight-forwarder. Upon engaging our own company, however, we were told that this was no longer allowed. We believe that the amounts being paid for freight are significantly overpriced and that we can secure far cheaper rates with our own freight-forwarding company, which will also streamline communication for pickup and delivery of stock.
In August 2017 we received a container of cheddar shred, which we had not ordered. Up until the container was delivered we had no way of knowing how we received this container. We are still to receive an invoice for this container — how is it possible that an entire container of product can arrive at our warehouse, unannounced, and without explanation. This is a significant concern for all parties, and typifies the communication breakdown experienced to date. At a subsequent meeting between Peter Delis, Bill Floropoulos and myself, it was finally identified that Bill had ordered the container without an order of Oliana.
We have paid over $200,000 in airfreight and have not sighted one invoice or document from the freight forwarder to substantiate these payments. For the latest airfreight shipment, we paid $78,000 for airfreight delivery in good faith for products delivered in or about later October. We have only just received the invoice for that payment from Culinary, some eight weeks later. The invoice does not include any supporting information other than confirming the total amount paid.
In September we placed orders for 3 containers and airfreight. Some six weeks ago we asked Bill to convey to Paris to have the order commenced without payment of the deposit (as our records indicate that we are still in credit), but instead on the premise that we would pay in full 100% value of the value of the goods prior to shipment. We were told that it has been done and for the last weeks we have, on a daily basis, asked for shipping and arrival dates. We have NOT been able to get these. No response has been given. Over the past week, I have called and messaged Bill to confirm delivery dates, but unfortunately he is unable to assist at this time. It is imperative that communication be opened immediately between Oliana and Kremel S.A. directly.
COMMUNICATION
We understand that Culinary is the company we deal with in relation to the invoices and accounts but we cannot understand why our logistics manager cannot deal directly with his counterpart in Greece and we feel that the lack of communication is causing the majority of our issues.
It is not appropriate for all communications to have to go through Bill, then through Peter, and then to Greece. This is extremely inefficient and is not producing results within the time frames required and is putting sales in jeopardy, to the detriment of both our companies.
Some three months ago, we required and asked on numerous occasions for the specification sheets for all Culinary products supplied to Oliana as a part of our HACCP certification. While rarely receiving replies to our correspondence, those rare replies simply stated that the specifications had already been sent and/or that they will be re-sent shortly. We have only just now received these specifications, which should have been a simple email to and from Oliana and Kremel S.A.
On 19 December 2017, Bill confirmed that 2,000 cartons to be sent by airfreight were ready for dispatch, and the 50% airfreight was paid immediately, with the balance due on arrival. Upon numerous requests to clarify dates, on 22 December 2017, we were given the date of 4 January 2018. We were not advised whether this would be the dispatch or delivery date. We have tried numerous times since then to confirm those details, without receiving confirmation.
Earlier today, Bill confirmed that he agreed that Damien should commence dealing directly with Ian and Peter, however I think it is very important that Damien also have direct contact with Paris’ team. Please provide direct detail for the logistics team at Kremel S.A.
Further to the first line of my email above, if we are unable to confirm delivery of the goods that were ordered in September, we will lose the Coles account.
I hope it is clear from the above that this is causing a substantial amount of stress and frustration which can easily be avoided if the lines of communication were opened as agreed.
GOING FORWARD
We have recently updated our budgets and have forecast a significant increase in sales for the coming calendar year, however we need the certainty of knowing what is happening with production schedules before we can commit to our clients.
I would appreciate a conference to be arranged between Ian, myself and Paris as a matter of urgency, so that we can get some clarity moving forward.
I await your urgent response.
Sincerely,
Sebastian Canzoneri
Director
129 On the same day Mr Garakis sent an email to Mr Floropoulos and Mr Delis commencing ‘Dear Partners’ and forwarding the email he had received from Mr Canzoneri. Mr Garakis noted that he had to send an answer to the email, and asked Mr Floropoulos and others to ‘kindly indicate the points that [Mr Canzoneri] has right ... the last thing I want is to be believed that my company lacks of flexibility and orders fulfilment’. As became apparent, most things were unknown to Mr Garakis because he was not aware of what Mr Floropoulos, Mr Delis and Mr Hone had been doing vis a vis Oliana. Mr Garakis was proceeding on the basis that he was supplying Culinary Co through Mr Floropoulos.
130 Early the following morning Mr Delis sent an email to Mr Garakis, Mr Floropoulos and Mr Hone referring to ‘telephone discussions earlier today with Paris’ and having ‘confirmed instructions to terminate Oliana Foods Pty Ltd’, said to be based on failure to meet payment arrangements during the 2017 calendar year and claimed acts of insolvency. Mr Delis also said that he had met with Mr Hone that day who, after reviewing the agreement between Culinary Co and Oliana, confirmed and cited various breaches of the agreement by Oliana, and stated that he would progress immediately to formally terminate the agreement.
131 Mr Delis then sent a further email on 4 January 2018 to Mr Garakis, Mr Floropoulos and Mr Hone, referring again to telephone discussions and stating that ‘as per Ian Hone’s legal advice’, they would wait to receive a copy of the notice of termination being drafted that evening by Mr Hone, before speaking again on the telephone to ‘confirm [Mr Garakis’] instructions’.
132 Mr Garakis responded as follows:
Dear Peter, dear partners,Thank you for your prompt response
However, as we discussed yesterday, I would prefer specific answers/contradictions on each issue he mentioned below
(ACCOUNTS, ORDERING AND LOGISTICS, COMMUNICATION)
And finally regarding the issue GOING FORWARD we will write: “Due to the above we are going to terminate our cooperation”
This sounds to me more professional
Moreover, I have to send him a follow up email today, until you arrange your formal answer.
Regards
Paris
133 These events were occurring in the context of Mr Canzoneri being concerned about the likely termination of supply arrangements with Coles based on short supply. On 4 January 2018, as foreshadowed by Mr Canzoneri’s email to Mr Garakis of the previous day, Coles informed Oliana by email that they would be terminating Oliana’s supply arrangement with Coles based on continued short supply.
134 On 7 January 2018 Culinary Co issued an invoice to Oliana for the sum of $240,000 said to be owing in respect of packaging, cartons, stickers, and formpack. The invoice was said to be due and payable by 21 January 2018. No contractual basis for the invoice was disclosed then or subsequently, and it was said by Oliana to be contrary to clause 5.2 of the exclusive distribution agreement. Mr Floropoulos acknowledged during cross-examination that there was no basis for this invoice.
135 On 10 January 2018 Mr Hone sent a letter to Oliana purporting to terminate the exclusive distribution agreement between Oliana and Culinary Co, citing among other things Oliana’s failure to pay the packaging invoice and other breaches.
136 The following day MSL Lawyers, through Michael Canzoneri, sent a letter on behalf of Oliana challenging the basis of termination and the validity of the 7 January 2018 invoice and asserting Oliana’s rights under the exclusive distribution agreement. It also requested, among other things, a reconciled statement of account. As was apparent from its terms, the letter proceeded on the basis that the exclusive distribution agreement was between Oliana as distributor and, Kremel and Culinary Co as, together ‘Supplier’.
137 On 11 January 2018, Mr Makrakis of Kremel sent an email to Mr Floropoulos seeking payment of €23,344 in respect of Oliana consumables that it had in stock, comprising cartons, printed film and plastic buckets. Kremel also reminded Mr Floropoulos not to ‘... forget your existing balance of 60,000 euros for [Oliana’s] orders ...’.
138 Thereafter further exchanges of correspondence passed between MSL Lawyers (through Michael Canzoneri) and Mr Hone regarding the disputed positions of Oliana and Culinary Co.
139 In a text exchange on 12 January 2018 between Mr Floropoulos and Kremel’s Mr Makrakis, Mr Floropoulos confirmed with Kremel that Culinary Co was now making its own brand, being Culinary Co, not Oliana.
140 On 2 February 2018 Culinary Co served a statutory demand dated 31 January on Oliana, accompanied by an affidavit of Mr Hone sworn 31 January 2018. The statutory demand was in respect of the alleged debt to Culinary Co of $240,000 for packaging. Except for the invoice no other documents or business records were produced by Mr Hone to support the existence of such a debt. By order made 20 April 2018 Associate Justice Efthim ordered that Culinary Co’s statutory demand of 31 January 2018 be set aside and that Culinary Co pay Oliana’s costs on an indemnity basis.
141 On 26 February 2018 Mr Canzoneri on behalf of Oliana emailed a letter direct to Kremel attaching various documentation, including an account reconciliation. The matters raised in that letter included the following:
(a) Mr Canzoneri was writing directly because there was no other option and he needed to ensure that they were both aware of what had been happening in Australia with Culinary Co.(b) From the time Oliana commenced purchasing products from Kremel it had been told by Mr Floropoulos not to contact Kremel directly and that all orders and correspondence must go through Mr Floropoulos or Mr Delis.
(c) Oliana had spent significant amounts, purchased significant amounts of product, and had spent money on marketing and advertising those products to establish Oliana as a market leader throughout Australia in the dairy-free market segment.
(d) Oliana was excited at the prospect of working with Kremel when they first spoke of working together and had committed resources and people to ensure continued growth and market penetration which had been achieved with placement in Coles and Woolworths, independent grocery chains as well as retail clients.
(e) It was extremely disappointing to find out after almost 18 months of good faith trading that:
(i) Culinary Co appeared to be its own company not linked to Kremel, contrary to Oliana’s belief and statements made from the outset.(ii) Culinary Co had not been relaying orders, payments or correspondence to Kremel such that Oliana had paid over $400,000 for stock that had not been delivered and that this had caused loss of the accounts with both Coles and Woolworths.
(iii) Over the past year Oliana had been put under constant pressure to make large payments to Culinary Co without invoices and in significantly shorter times than provided for by the agreement. Having performed a reconciliation based on payments and receipts and stock delivered, Oliana’s records confirmed that there was currently a credit of $408,291.63.
(iv) On one occasion a substantial deposit had been paid for an order that was cancelled, and Oliana had been assured that this amount would be put to the credit of other amounts, but this appeared not to have occurred.
(v) Parts of that previously cancelled order subsequently arrived, but only 30% of it and eight months late.
(vi) Culinary Co had been selling products to companies other than Oliana in breach of the agreement, being the contract between Oliana, Culinary Co and Kremel.
(vii) Culinary Co had refused to deal with Oliana and had not provided accounts or statements, then issued a statutory demand in respect of an alleged invoice for $240,000 that was for packaging never delivered, and where Oliana never had to pay packaging as it was always included in the price of goods.
(viii) Oliana was embroiled in legal proceedings with Culinary Co in relation to the statutory demand.
(ix) As a result of Culinary Co’s actions new legal proceedings would not just be against Culinary Co but would have to be filed against Kremel to restrain it from conducting business outside the terms of the exclusive distribution agreement.
(x) Confirmation was sought as to whether Culinary Co was owned by Kremel, and if so: whether Kremel was aware of the statutory demand; whether Kremel was aware that Oliana was in credit over $400,000; and whether Kremel had authorised the shipment of dairy-free cheese products to companies or individuals in Australia other than Oliana.
142 That same day, Mr Garakis forwarded Mr Canzoneri’s email to Mr Floropoulos. In that email Mr Garakis said he did not want to be involved in the conflict and that, one way or another, Mr Canzoneri must know that Kremel was an independent company and never ‘signed exclusivity’ with him. The email enquired as to what Mr Floropoulos’ lawyer might recommend for Kremel but stated that he did not want it to be ‘... the usal [scil. usual]: don’t write anything ... ‘ approach, and that he (Mr Garakis) must write instead.
143 On 6 March 2018 Kremel wrote to Mr Floropoulos by email addressing, among other things, the balance owing on Oliana’s orders, being approximately €45,000. Mr Floropoulos responded the same day stating, among other things, that he was doing his best to have it paid off and he respected the help and patience Mr Garakis and his business partner had given him.
144 On 8 March 2018 Mr Floropoulos wrote to Mr Garakis and Mr Papastefanakis of Kremel stating that he was seeking assistance and that he did not know what Kremel wanted to believe, but that the truth was that the ‘whole Oliana problem’ had put him in a ‘bad situation’. Among other things, he stated that he had attempted to borrow money from the bank, but that a loan was taking some time to secure because of unspecified alleged ‘fraudulent activities’ of Mr Canzoneri,[16] and he understood that this difficulty was not a Kremel problem. He sought a further 10 days to allow for a loan to be approved. He also asked that stock for Woolworths be made available because ‘... we face the possibility of loosing [sic] Woolworths, even though it has been explained to them many times ...’.[17]
145 On 8 March 2018 Culinary Co’s lawyer wrote to Mr Garakis saying that Oliana and Culinary Co were in dispute with matters to be litigated in court, but that he was asked by ‘my client to reassure you that my client intends to fully support your products, continue ordering from you, and disseminating your product ... throughout Australia’.
146 Mr Garakis responded by an email of 9 March 2018 in the following terms:
Dear Bill,We do not feel comfortable with the whole situation We support you, we believe you but we do not agree with your moves
...
I visited Melbourne and we met Sebastian. You said me not to talk in English at all, because this is better for the whole situation I never did it in my life before, but I did it for you Oliana sent me several mails asking for cooperation and some definitions, but I didn’t answer You suggested not to answer, because this is the lawyer’s advice Ok I said, but because we are a serious company, I had to answer something So, I asked 3 times for a letter from your side, in order to answer them according to your wishes I never got this letter and I am really sorry for this. Today, I will answer as I think And please do not promise this letter once again. I do not need it now
We are going to send the stock on Monday, as we scheduled And believe me it was not easy in so short time Try to find a solution with payment because we are also facing serious problem You know the logistics rules too, so, do not blackmail me that we are going to lose Woolworths If this happens, you will be the only responsible person
Best regards
Paris Garakis
CEO & Co founder
Food Technologist
KREMEL S.A.
147 That same day Mr Garakis also sent an email to Mr Canzoneri, copied to Mr Hone, Mr Floropoulos, Mr Delis and others in the following terms:[18]
Dear allI am really sorry for the conflict between Oliana and Culinary.
Truly, I am not satisfied with this because we lose sales.
Really, we do not want to involve in this conflict and please do not even think to implicate Kremel SA in this.
Me and my partner Nikos Papastefanakis own Kremel and only Kremel.
We never owned Culinary Co.
We never never, never, never signed any contract/agreement with Oliana.
We never, never, never, never signed any contract/agreement with Culinary.
Our company acts on its own behalf and only.
Our cooperation with Bill Floropoulos is based in good faith and friendship, not in contract.
148 In a further email from Mr Floropoulos to Mr Garakis on 9 March 2018, Mr Floropoulos referred to the pressure he was under; referred to the Woolworths position being a game that Woolworths had played; stated that with respect to Oliana he was trying to ‘protect everyone’ but instead had [f####d] himself in the process; and stated ‘... yes you are right: I have only my self to blame for this’. He also said that he had never and would never blackmail Mr Garakis, that his friendship meant more than Woolworths, and that he was only stating what it was that Woolworths was saying. He apologised for letting Mr Garakis down, noting that there was no excuse and stating that he would do what he would have to do to make it up.
149 On 22 and 23 April 2018, emails were exchanged between Mr Floropoulos and Mr Garakis in which Mr Floropoulos made complaint regarding the quality of certain products that had been supplied for distribution in the United States, referred to the exclusive distribution agreement between Kremel and Culinary Co signed in mid-June 2017, and made complaint regarding Kremel’s supply to companies other than Culinary Co in the United States as an alleged breach of the agreement. Mr Garakis responded in the following terms:
Dear Bill,I am not well when I am reading e mail like the below
We are sending vegan cheese with preservative to our clients years ago
No one has complained so far for moulds. You told me that you went in the
warehouse of your distributor and the temperature was quite high
You told me that we have to wait till the court decision and you were sure that we will win it, bla, bla, bla
You told me not to worry, he was a jerk, he knew nothing about the sensitivity of the product and you are going to find another distributor
Also that it was not Kremel mistake, you knew that, bla, bla, bla
Now you are telling another story and you are not willing to pay if I can understand
Bill we used to export before meet you. Stop saying everywhere that you owe
Kremel, you are the only one that can distribute our products, that we have
agreement etc
It is ridiculous you know that. There is not authorized agreement and please do not falsify something
Do not underestimate our intelligence Bill, and do not threaten us.
150 In his email of 23 April 2018, in response, Mr Floropoulos referred to the three-party contract between Oliana, Culinary Co and Kremel, noting ‘... This contract existed but was never signed by Kremel ...’. He then referred to ‘... the contract that exists ...’ being the one ‘... which you as director of Kremel have signed and I have signed on behalf of Culinary Co ... that was prepared ... and signed by you and me in your office last year ...’. Mr Floropoulos stated that he did not underestimate their intelligence and was not threatening them, but if they rejected an offer to get on a plane and come to Australia to discuss face to face he would have no other choice but to commence proceedings irrespective of the cost against Kremel, and that that was not a threat but simply the only option he had.
151 Mr Garakis responded by email in the following terms on that day:[19]
Hi Bill,You owe us approx 120.000 € and you can not pay us
We asked 8.000 for your drums one month before. Nothing. It is supposed we are in a hurry with Woolworths. Hello!!
After all these you are not in position to say for your final offer
Now you are Freestyle Foods
Before one month Culinary
Before Tellos
Before Oliana
I am very sorry about all of this situation, I mean it
But it is not our style to be always with lawyers and court. As I can see this is your style
With how many you are in the courts! And now you threat me again
You now that I never sign contracts because everybody knows that actually they protect no one
You have a piece of shit in your hand and you know that. This is not a valid document in accordance with Greek and European legislation
Yes I remember now. We were in our office and you said:
“It is nothing important Paris. Put a signature just for typical reasons. Our
relationship is not based on agreements but in mutual feelings”
And now you show this paper and you consider yourself as the exclusive distributor of Kremel. Shame on you!!
You could reach us more easily with filotimo. You Know what this means?
We could sell to Oliana directly but we didn’t
We could sell to Fries directly but we didn’t and a lot of other companies
You didn’t comment about the other supplier you dealing with
Regards
Paris
152 On 26 April 2018 Kremel’s lawyers sent an email to Mr Floropoulos addressing it to him both ‘personally and as the director of the companies named Culinary Co and Telos Pty Ltd’. That email made a demand in respect of an amount of €98,036.20 said to be owed by Culinary Co, and an amount of €16,536 said to be owed by Telos. It also made complaint that Mr Floropoulos had stated ‘unjustifiable [sic] and falsely that you represent our company as exclusive distributor and arbitrarily intervene between us and our clients ...’.
153 Thereafter there were numerous communications between various lawyers, including those acting for Mr Floropoulos, Culinary Co and Telos on the one hand, and those acting for Kremel on the other. On 1 May 2018 David & Co Lawyers, through Mr David Vlahos, advised Kremel’s lawyers that they acted for Mr Floropoulos, Culinary Co and Telos.
154 On 25 May 2018 the current proceedings were commenced by Oliana. In their original form they alleged, among other things, that an exclusive distribution agreement existed between Oliana on the one hand and Culinary Co and Kremel on the other. That is, it was alleged that Kremel was party to the exclusive distribution agreement. This was subsequently amended after Oliana became aware that Kremel had never been communicated with or involved with the agreement.
155 Culinary Co was placed in voluntary liquidation on 17 December 2018 and Mr Claudio Trimboli of Charles & Co was appointed liquidator. His report of 14 March 2019 recorded statements to the effect that:
(a) whilst not validly appointed as a director, it appeared that Mr Floropoulos had acted as a shadow director of Culinary Co;(b) Culinary Co had assets of $3,202 and liabilities (as assessed by the liquidator) of $178,946;
(c) debts of $255,000 were claimed by Mr Floropoulos;
(d) debts of $20,000 were claimed by Mr Hone;
(e) a debt of $13,980 was claimed by Mr Delis’ company Oakwood;
(f) a debt for $90,475 was claimed by Corporate Sports Unlimited;
(g) it identified suspicious payments of $310,000 to Mr Floropoulos;
(h) other suspicious payments of $727,000 had been identified, of which $610,000 had been traced to Telos.
156 During the period from June 2016 numerous payments were made from Culinary Co’s bank accounts which were ultimately acknowledged to have been made for the direct or indirect benefit of Mr Floropoulos or at his direction.
WITNESSES
157 Oliana called the following witnesses: its current sole director, Mr Canzoneri; Charlotte King, Oliana’s former bookkeeper; the liquidator of Culinary Co Pty Ltd, Mr Trimboli; Theo Alexopoulos, Oliana’s sales manager; Damien Adams, Oliana’s supply chain manager; and Mr Garakis, of Kremel.
158 The fourth defendant, Mr Hone, a solicitor, and the former sole shareholder and director of Culinary Co, did not give evidence and did not call any witnesses.
159 The seventh defendant, Mr Floropoulos, gave evidence but did not call any other witnesses. Whilst an outline of evidence for Mr Peter Delis was filed and during Mr Floropoulos’ opening reference was made to Mr Delis being called as a witness, ultimately he was not.[20]
160 I make the following general observations regarding the witnesses. Given the central positions of Mr Canzoneri and Mr Floropoulos, and the attacks made on their credit, the consideration of these witnesses is more lengthy than would otherwise have been the case. Further observations in connection with credit and some particular matters of fact in issue are addressed later in these reasons.
Ms King, Mr Trimboli, Mr Alexopoulos, and Mr Adams
161 The evidence in chief and cross-examination of each of Ms King, Mr Trimboli, Mr Alexopoulous, and Mr Adams was relatively brief.
162 Ms King ceased working for the plaintiff in May 2017 and had travelled from New Zealand to give her evidence. Ms King was an attentive, responsive and credible witness and no attack was made on her credit.
163 Like Ms King, the liquidator of Culinary Co, Mr Trimboli, was a responsive and credible witness doing his best to directly and succinctly address the questions asked of him. No attack was made on his credit.[21]
164 During his evidence, Mr Alexopoulous presented as a straightforward, responsive and credible witness and no attack was made on his credit.
165 Mr Adams was another responsive and credible witness. Although he was understandably a little nervous in the witness box, this did not detract from his evidence or credibility, and he presented as a person doing his best to answer responsively the questions asked of him openly and honestly. No attack was made on his credit. He was honest and straightforward.
Mr Canzoneri, Mr Floropoulos and Mr Garakis
166 The primary witnesses in the case were Mr Canzoneri and Mr Floropoulos and, to a lesser extent, Mr Garakis. Strong general and specific attacks were made upon the credit of each of Mr Floropoulos and Mr Canzoneri. As mentioned, Mr Hone did not give evidence, and some further observations on this topic appear later in these reasons.
Mr Garakis
167 The evidence of Mr Garakis was given by way of video link from Greece and an accredited interpreter was present in court. Mr Garakis’ first language is Greek, although it quickly became apparent that his understanding of and ability to speak English was reasonably good. I observed this and do not accept the submissions made to the contrary on behalf of Mr Hone. As was submitted by the parties to be appropriate, examination in chief and cross-examination were carried out in English, with resort being had to the Greek interpreter in some instances.
168 Mr Garakis was not a party to the proceeding.[22] He presented as a naturally expressive, straightforward person who was doing his best to answer responsively the questions asked of him, albeit with an occasional tendency to add additional matters to his answer. This appeared to be more to do with his natural manner, his unfamiliarity with the process of giving evidence, the video link on occasion, and language factors. He did not present as a person seeking to argue in favour of a position, although it was apparent that he had some strong feelings about how he considered he and Kremel had been treated by Mr Floropoulos in aspects of their dealings, as was also apparent from some of Mr Garakis’ emails sent to Mr Floropoulos in early 2018.[23] Mr Garakis presented as a credible and honest witness who also displayed what appeared to be a genuine level of distress at having become caught up in the dispute between Mr Canzoneri and Mr Floropoulos. This genuine distress was also evident in emails he wrote in early 2018.
169 Mr Hone and Mr Floropoulos did not attack Mr Garakis’ credit and relied on aspects of his evidence.
170 The plaintiff made no attack on Mr Garakis’ credit and submitted that he was a ‘wholly independent witness’ with ‘no “skin in the game” whatsoever’, who gave ‘transparently honest’ evidence that should be accepted in its entirety. In general terms I accept the substance of that submission.
Mr Floropoulos
171 Mr Floropoulos, the seventh defendant, has a strong, self-evident interest in the outcome of the claims the subject of the proceeding.[24] Like Mr Canzoneri, Mr Floropoulos’ evidence proceeded over an extended period. He was cross-examined at length by senior counsel for the plaintiff and subject to some brief, and what was contended by Oliana to be, ‘friendly’ cross-examination by counsel for Mr Hone. Re-examination was short and confined.
172 The plaintiff submitted that Mr Floropoulos was not a witness of truth, that he gave ‘patently false’ evidence, and that his oral evidence, save for admissions made in the course of cross-examination, should be rejected in its entirety. It was submitted that Mr Floropoulos prevaricated when giving evidence and that, whenever it suited him, claimed that he could not recall numerous manifestly important matters that had occurred only three to four years earlier. It was submitted that during the course of giving evidence, he had ‘exposed himself as a man of absolutely no credit whatsoever’.
173 It was submitted on behalf of Mr Floropoulos that his evidence, ‘with some minor exceptions, had a ring of truth about it’. Although it was acknowledged that Mr Floropoulos had to be asked several times to ‘just answer the question’, it was contended that this was attributable to his unfamiliarity with court processes which, so it was said, led to a desire to enter into a dialogue in response to questioning rather than answering questions directly. Nonetheless, it was submitted on his behalf that he did answer questions, including hard questions, and that he was prepared to make proper concessions in response to questioning against his interest. Reference was also made to Mr Floropoulos’ health, including his illness on the morning of 27 March 2020 (during the course of his evidence). Overall it was submitted that the court should find that Mr Floropoulos’ account as to contested matters was ‘more compelling, logical and consistent with contemporaneous evidence’ than that of Mr Canzoneri.
174 Speaking generally, Mr Floropoulos was an unsatisfactory witness, who did not present as reliable or credible, which became more apparent during cross-examination. His limited production of documents and failure to produce others both before and during the trial without satisfactory explanation,[25] and aspects of his evidence in chief, also raised at least material questions regarding his responsiveness and candour.
175 It was apparent from numerous contemporaneous documents and other evidence that Mr Floropoulos was not honest and truthful in various aspects of his dealings and communications with Oliana and Mr Canzoneri. During an exchange during closing submissions so much was candidly, but properly, acknowledged by counsel for Mr Floropoulos — which on the evidence was an inescapable conclusion in any event. As counsel for Mr Floropoulos said in a somewhat understated way during that exchange: ‘[w]ell, Your Honour, Mr Robins and the plaintiff have pointed to quite a number of SMS messages and parts of answers in cross-examination which indicate that Mr Floropoulos doesn’t always tell the truth’.[26]
176 Having regard to the evidence and the extended periods of examination in chief and cross-examination during which I had the opportunity to observe Mr Floropoulos give his evidence, I am not satisfied that, generally speaking, Mr Floropoulos was a witness doing his best to respond responsively to the questions asked of him. Although some particular aspects of Mr Floropoulos’ evidence are addressed in connection with the consideration and disposition of the various issues later in these reasons, I make the following additional illustrative observations regarding some features of Mr Floropoulos’ evidence that have contributed to the conclusions I have reached about him.
177 As mentioned, there was documentary and other evidence that demonstrated Mr Floropoulos was not honest and truthful in his dealings and communications with Oliana and Mr Canzoneri. Examples include:
(a) Mr Floropoulos’ agreement in cross-examination that at the time Oliana was negotiating the draft distribution agreement with Culinary Co, that he was ‘fully conveying to Mr Canzoneri, at that stage, that [he was] 100 per cent on his side of the bargaining negotiation; [he was] with Oliana’, and his agreement that this was ‘an entirely false position’ for him to convey to Mr Canzoneri at that time (noting that text messages between Mr Canzoneri and Mr Floropoulos from this period also demonstrated this position).[27](b) That Mr Floropoulos repeatedly described payments by Oliana to Culinary Co as ‘payments to Greece’ in conversations and text messages to Mr Canzoneri, despite his knowledge that Culinary Co was not a subsidiary of Kremel or any other Greek company — a characterisation that Mr Floropoulos agreed in cross-examination was ‘simply a lie’.[28]
(c) That Mr Floropoulos asked Mr Canzoneri by text message ‘what’s [Mr Garakis] charging us?’ in March 2017 despite his knowledge that Oliana was not in a contractual relationship with Kremel, and the prices being charged to Oliana were in fact Culinary Co’s prices set by Mr Floropoulos.[29]
(d) That Mr Floropoulos told Mr Canzoneri that Mr Delis required Oliana to pay Culinary Co the cost of freight shipping (which it was said Culinary Co would then pay on to ITM, the freight company) in order to secure the release of stock, and when Mr Canzoneri objected and queried why Oliana could not pay ITM directly, Mr Floropoulos texted Mr Canzoneri ‘I have no control of this Seb. I am trying to help’ — despite his agreement in cross-examination that, at this time, he was ‘in full control of Culinary Co’.
(e) Mr Floropoulos’ acknowledgment in cross-examination that he did not tell Mr Canzoneri the prices that Mr Floropoulos was receiving from Kremel because he knew or believed that Mr Canzoneri would have immediately terminated whatever deal had been struck, and would have either gone to Mr Garakis himself or sought a new supplier.[30]
(f) It was apparent that at times Mr Floropoulos was not candid in his dealings with Mr Garakis and Kremel. The documentary and related evidence regarding payment delays and challenges are good examples, particularly given the evidence regarding the substantial amounts that had been paid by Oliana to Culinary Co and the materially lower amounts that needed to be paid to Kremel, as was well reflected in the Oliana Payments Schedule.
(g) The evidence from Mr Garakis that he was asked by Mr Floropoulos to speak only in Greek when he met with Mr Canzoneri (who to Mr Floropoulos’ knowledge did not speak Greek) in Melbourne in April 2017, when he was well capable of speaking and understanding English. Although Mr Floropoulos denied giving that instruction to Mr Garakis, I do not accept that evidence and prefer the evidence of Mr Garakis, who was a credible witness and whose evidence was not challenged on this point by Mr Floropoulos’ counsel. Further, Mr Garakis’ position was also supported by his email of 9 March 2018 to Mr Floropoulos, in which he said: ‘I visited Melbourne and we met Sebastian. You said me not to talk in English at all, because this is better for the whole situation I never did it in my life before, but I did it for you ...’. I note also that Mr Floropoulos did not deny this claim in the contemporaneous email communications from him to Mr Garakis that followed.
(h) The evidence from Mr Adams that Mr Floropoulos had instructed him not to contact Kremel directly, in contrast to the arrangements that Oliana had with other suppliers such as Epirus, Dodoni and MyCo (where Mr Adams would habitually directly contact the supplier).[31] Mr Adams stated and I accept that ‘Bill’ made him aware that the people at Kremel did not speak English, and for that reason Mr Floropoulos was to be the sole point of contact to avoid communication issues.[32] Mr Adams stated that he had sent one email directly to Mr Makrakis at Kremel, following which, at most a week later, Mr Floropoulos had instructed him not to do so again.[33] Mr Floropoulos denied that he had ever told Mr Adams not to contact Kremel.[34] I do not accept that evidence and prefer the evidence of Mr Adams, noting also that it is consistent with emails from Mr Floropoulos to Kremel at the time that all communications be sent to him. I note also that although Mr Adams indicated that he would give evidence to this effect in his witness outline filed on 9 July 2018, and did in fact give evidence to this effect in court when Mr Floropoulos was present, Mr Floropoulos’ counsel did not materially challenge Mr Adams’ evidence on this point.
(i) Mr Floropoulos gave answers at various times that directly contradicted, were inconsistent with, or sat in tension with, other answers he had given. In some cases this occurred almost simultaneously and in others it occurred at different times during his evidence. These included, for example:
(i) Mr Floropoulos’ initial evidence that he had no interest in, and no control over, Culinary Co (which he said was 100 per cent owned and controlled by Mr Hone),[35] and his later agreement (after being taken to various transactions on the Culinary Co bank account and other evidence, including evidence of Mr Floropoulos’ direct dealings with Kremel on behalf of Culinary Co) that he was in fact in ‘full control’ of Culinary Co.[36](ii) Mr Floropoulos’ initial evidence that Telos was not his company or held for his benefit, and his later agreement that payments made to Telos were payments made to him or for his benefit.[37]
(iii) Mr Floropoulos’ initial evidence that he had not given Mr Hone instructions in relation to Mr Hone’s 7 June 2016 letter to Oliana, discussed the letter with Mr Hone, or even seen the letter at all prior to the commencement of the proceeding,[38] and his later acknowledgement in cross-examination from Mr Hone’s counsel that the information in the letter had been provided to Mr Hone by himself and Mr Delis.[39]
(iv) Mr Floropoulos’ initial denial in cross-examination that he was giving Mr Hone instructions as to the negotiation of the distribution agreement on behalf of Culinary Co in around November 2016,[40] which he later qualified by saying that it was ‘possible’ he had had contact with Mr Hone during the period that the distribution agreement was being negotiated, and then soon after agreed that he was, in fact, in ‘regular email contact with Mr Hone about the distribution agreement’.[41] This became apparent from documents produced during the trial in any event. It is also to be noted that the emails between Mr Floropoulos and Mr Hone produced by Mr Hone — but not Mr Floropoulos — on the second-last day of evidence in the trial demonstrated that Mr Hone was frequently and almost immediately forwarding Mr Floropoulos communications between himself and Oliana in relation to the exclusive distribution agreement and that Mr Floropoulos was materially engaged in this process.
(v) Mr Floropoulos’ evidence that ‘Mr Canzoneri wanted vegan cheese at any cost’, which he then agreed was not a ‘considered answer’.[42]
(vi) Mr Floropoulos’ initial denial that he was attempting to have Kremel-related products stocked in Woolworths in September 2017, and his later agreement that he was ‘keen to supply Kremel-provided vegan cheese products to Woolworths’.[43] This was also apparent from the communications with Woolworths and aspects of the lawyer’s correspondence on 8 March 2018 sent to Kremel.
(j) Mr Floropoulos’ limited and delayed production of documents, and failure to produce documents, in advance of and during trial and the absence of any credible explanation for the same. This aspect was further underscored by the smaller number of emails and documents sent and received by Mr Floropoulos that were produced by him in answer to the Notice to Produce served on him during the trial, when compared to the materially larger number of emails and documents sent and received by Mr Floropoulos produced by Mr Hone in answer to a parallel Notice to Produce — but noting also that such documents should have been produced by Mr Hone and Mr Floropoulos as part of discovery prior to trial in any event.(k) At times Mr Floropoulos resorted to self-serving statements or answers that appeared directed at what he considered best suited his position at the time rather than responsive and candid answers to questions asked. One example was Mr Floropoulos’ broad, volunteered, and attempted self-serving statement that ‘...I never used to check my emails...’,[44] which statement was made in circumstances where many of the documents that ultimately came to be part of the evidence demonstrated that this was not and could not have been the position. Another was his statement, referred to above, that ‘Mr Canzoneri wanted vegan cheese at any cost’.[45] Another related to text messages referring to Greece and his somewhat inexplicable and nonsensical response about one of them to the effect that it was just the way he wrote things.
178 Aspects of Mr Floropoulos’ oral evidence were inconsistent with the position revealed by contemporaneous documents, including some of the documents produced during the trial by Mr Hone in answer to the Notice to Produce, but which Mr Floropoulos did not produce — notwithstanding they had been sent or received by him. At times Mr Floropoulos maintained positions in his oral evidence until challenged in cross-examination with contemporaneous documents that conflicted with his account, at which point his position changed. In other instances Mr Floropoulos maintained his position in the face of contradictory documentation. Examples were the inconsistencies and tensions that were apparent between Mr Floropoulos’ evidence and the contemporaneous documents included the following:
(a) Mr Floropoulos’ evidence that he had never had a professional or business relationship with Mr Delis, apart from Mr Delis acting as Mr Floropoulos’ accountant,[46] despite an ASIC personal name extract for Mr Floropoulos demonstrating that Mr Floropoulos and Mr Delis had set up at least one company together and that there were company searches for other companies evidencing share transfers and dealings between them.[47](b) Mr Floropoulos’ evidence that he did not know, and was unable to explain, why Mr Hone had sent him numerous draft documents prepared on behalf of Culinary Co and ultimately sent by Mr Hone to Oliana, and he was unable to recall if Mr Hone was sending him draft documents in order to obtain his instructions on them.[48]
(c) Mr Floropoulos’ evidence that he was not involved in negotiations of the exclusive distribution agreement on Oliana’s side and that he and Mr Canzoneri had not spoken about the drafts of the distribution agreement or the execution of the distribution agreement,[49] which was shown not to be so by the contemporaneous text messages between Mr Floropoulos and Mr Canzoneri which demonstrate that they did discuss the agreement substantially and frequently.[50]
(d) Mr Floropoulos’ agreement that it was not correct for him to have instructed his counsel to put to Mr Canzoneri that Mr Wyner had done nothing substantial for Oliana prior to April 2016, when commission invoices issued by Mr Wyner to Oliana, and emails from Mr Wyner to Mr Floropoulos and Mr Canzoneri, demonstrated that Mr Wyner had undertaken substantial work for Oliana since 2014.[51]
179 On numerous occasions Mr Floropoulos appeared evasive and reluctant to answer questions directly. This included multiple occasions where he resorted to stating that he ‘could not comment’ and many instances where he responded with an answer to the effect of ‘I can’t recall’. The plaintiff highlighted that Mr Floropoulos responded to questions with words to the effect that he ‘could not recall’ on more than 70 occasions in the course of his evidence. Whilst it does not follow that an absence of recollection necessarily reflects adversely upon the credibility of a witness, having observed Mr Floropoulos give evidence over an extended period, and in the light of the other unsatisfactory aspects of his evidence, it is difficult to be satisfied that it was the case that Mr Floropoulos could not recall all of the matters that he said that he could not recall. It is also difficult to discern which answers of this character accurately reflected an inability to recall, although as an overall impression it appeared that Mr Floropoulos claimed to have a better recall in respect of things that he considered assisted his case than those that he considered might not. Further, having regard to the frequency, and at times the speed, with which he responded with answers to the effect of ‘I can’t recall’,[52] it appeared on occasion to be an answer of convenience or a non-responsive answer, much like numerous occasions where he responded with words to the effect of ‘I can’t comment’. I add that even if it was the case that Mr Floropoulos could not recall all of the matters that he said that he could not recall, this would show a materially limited recollection of some key events and communications, further requiring an appropriate level of caution to be taken regarding the reliability of his recollection more generally.
180 Mr Floropoulos also did not present as a particularly co-operative or open witness. Although being somewhat defensive in court proceedings is not uncommon for some witnesses, in addition, on occasions, Mr Floropoulos: was argumentative or flippant in his responses; was evasive or non-responsive; volunteered some non-responsive and disparaging statements regarding Mr Canzoneri; was less than candid; and made some statements or comments where it appeared he considered it may assist his case.
181 As is apparent, the above observations refer to examples only. Although there are others, it is sufficient to refer to the above in connection with my conclusion that Mr Floropoulos did not generally present as a reliable, responsive, and candid witness who was doing his best to answer the questions asked of him truthfully. This has meant that it is necessary to exercise particular caution regarding Mr Floropoulos’ oral evidence where it is not supported by other evidence or contemporaneous documents. Generally speaking, it has also meant that I am not prepared to accept Mr Floropoulos’ unsupported evidence on contentious matters in such circumstances.[53]
Mr Canzoneri
182 Given Mr Canzoneri’s interest in Oliana and the SMV Trust, and his position as Oliana’s sole director, Mr Canzoneri’s interest in the claims the subject of the proceeding was also self-evidently material. Mr Canzoneri was the plaintiff’s main witness and his evidence in chief and cross-examination was relatively long, taking place over an extended period. He was cross-examined at length, and by counsel for each of the defendants. He was also recalled and further cross-examined in connection with some additional text messages produced by Oliana late in the trial.
183 During his evidence in chief Mr Canzoneri presented as a credible and responsive witness who responded fluidly and naturally to the questions asked of him. He was not evasive and did not appear guarded or defensive. He was reasonably articulate and he largely confined his answers to the questions asked of him. He did not tend to seek to make speeches or to argue his case. Towards the end of his evidence in chief Mr Canzoneri disclosed, among other things, that he had been convicted of certain offences involving dishonesty in 1998 and had served a period of imprisonment as a consequence.
184 In cross-examination Mr Canzoneri presented a little differently at times. Although most of the time he remained responsive, on occasion he would seek to argue his case a little through his evidence, and at times was more defensive or a little evasive — which remained the position when he was recalled and further cross-examined regarding the late-produced text messages. That said, overall Mr Canzoneri largely presented as a credible witness.
185 As to particular important matters of fact in issue such as the resignation discussions in early 2016, the alleged Moka Pot Discussion, and the existence of a signed agreement, where Mr Canzoneri’s credit was submitted to be materially relevant, these are addressed separately later in these reasons.
186 It will be apparent from the above observations that I do not accept Mr Hone’s and Mr Floropoulos’ submissions that Mr Canzoneri did not present as a witness of truth, and that Mr Floropoulos’ evidence should always be preferred where it differed from that of Mr Canzoneri. As I have said, generally speaking, Mr Canzoneri did present as a credible witness. However, that is not to deny that there were some aspects of the evidence that raised questions regarding Mr Canzoneri’s position and evidence on some issues, and it is appropriate to say something further regarding the submissions made by Mr Floropoulos and Mr Hone in this regard.
187 In my view the level of emphasis placed on Mr Canzoneri’s past convictions for dishonesty related offences that he pleaded guilty to more than 20 years ago was somewhat misplaced. Mr Canzoneri raised and addressed these matters directly and openly in his evidence in chief and did not seek to sidestep his responsibility for them. Although I have taken these matters into account, having regard to the evidence in the proceeding and my observations of Mr Canzoneri in the witness box over an extended period, these matters do not weigh at all heavily in the balance so far as Mr Canzoneri’s credit is concerned.
188 Similarly, I do not consider that the evidence given by Mr Canzoneri regarding accounting detracted from his credit. When giving his evidence in chief regarding his past convictions he was asked to inform the court ‘about that matter’, and by way of background he explained that he was a partner in an accounting practice with three other partners. When it was put to him in cross-examination that he was a ‘qualified accountant’ he said that he was not. When it was put that he practised as an accountant he agreed. Cross-examining counsel did not pursue the topic, but the position appeared a little unclear and after cross-examination I asked Mr Canzoneri if he could clarify the position, which he did. He explained that although he had completed about 85% of his degree only and never completed it, he was a director and the general manager of the company that owned the accounting firm, and that his responsibilities were to manage the firm, bring in new clients and do consulting work, although he did not do ‘fiscal accounting work’.[54] This evidence was given in a straightforward and responsive way and did not adversely reflect on Mr Canzoneri’s credit.
189 Contrary to the submissions of Mr Floropoulos, the absence of a reconciliation document in evidence did not detract from Mr Canzoneri’s credit or his evidence that a reconciliation was provided. The reconciliation was referred to in a number of text messages from Mr Canzoneri, including one in which he sought an email address for Mr Delis to send it to. Further, in an email to Mr Canzoneri shortly thereafter, on 2 May 2017, Mr Delis referred to Mr Canzoneri’s ‘... recent email correspondence and reconciliation you provided ...’, noting also that the email refers to Mr Canzoneri’s request for a ‘net credit’, which was consistent with the evidence he gave and his communications during the second half of 2017 and early 2018.
190 Although it was less than satisfactory that a further bundle of text messages were produced by Mr Canzoneri late in the trial, this is another matter that did not in my view materially impact upon Mr Canzoneri’s credit. It was apparent that he had sought to comply with interlocutory orders including by producing documents that may not have been thought to assist him. In any event, this late production was explained by senior counsel for Oliana and it was proposed that its solicitor, Mr Foster, would swear an affidavit further explaining the position. Counsel for defendants (responsibly) said that it would not be necessary. Further, Mr Canzoneri was recalled to enable further cross-examination to occur regarding the text messages. That cross-examination went to aspects of the content of the messages, but counsel did not seek to challenge Mr Canzoneri in any material way about their late production or any related circumstances. In the circumstances that appeared to be a responsible and sensible approach for counsel to take. This issue was also materially different in character and extent to the position of Mr Floropoulos and that of Mr Hone, as the failure to produce documents in advance of trial when pressed and ordered well demonstrated.
191 Such evidence as there was regarding the question of the existence or otherwise of a loan to Oliana from Mr Floropoulos’ family was limited and squarely denied by Mr Canzoneri. This was not one of the alleged issues in the proceeding and arose peripherally, with the parties’ position correctly being that it was not a matter that the court was asked to or could satisfactorily determine on the evidence in this proceeding. This issue may or may not be agitated between the relevant parties at some point in the future, but that is a matter for another day. Further, contrary to Mr Floropoulos’ submissions, and as is addressed later in these reasons, the text messages from Mr Floropoulos in late 2016 did evidence that Mr Floropoulos was indicating to Mr Canzoneri that his father was somehow involved with the arrangements with Kremel and the distribution agreement. Mr Canzoneri’s evidence on these matters did not adversely impact on his credit.
192 That there was a difference between Mr Canzoneri and Mr Floropoulos as to the detail of the discussion after the meeting with Mr Paule is not in my view particularly significant to the credit of either person. In substance, that issue was as to whether Mr Canzoneri asked Mr Floropoulos to go to Greece, or Mr Canzoneri said he was going but Mr Floropoulos said that he would go. I do not see this particular aspect of the evidence as being material to the credit of either witness, although for the reasons earlier mentioned, I prefer the evidence of Mr Canzoneri.
193 Mr Hone’s reliance on Mr Adams’ evidence to attack Mr Canzoneri’s evidence regarding discrepancies in deliveries is also not significant. It is evident from the contemporaneous documents that there were real concerns at the time about reconciliations and supply discrepancies, as for example, some of the annotated, invoices showed. Although Mr Adams’ evidence is to be accepted, this was not challenged by Mr Canzoneri and the point sought to be made so far as credit is concerned is of no material force.
194 Insofar as the defendants, and particularly Mr Hone, sought to rely on past litigation in which Mr Canzoneri was involved as materially adversely affecting his credit or reliability, such contentions were also without persuasive force. That Mr Canzoneri or companies associated with him have in the past been involved in other litigation matters not. As to the particular judgments relied upon, none of them involved oral evidence being given by Mr Canzoneri or cross-examination of him, and confidential deeds of settlement in relation to two of the matters[55] suggested that they were resolved relatively favourably or satisfactorily for him or interests associated with him. Even if that was not so, however, the reasons relied upon do not provide a sound basis for any material attack on his credit generally or in the present case.
195 This is also the position in relation to the reasons of Gardiner AsJ in Boriop Pty Ltd v Moussi.[56] That case was an application to set aside a statutory demand in which Mr Canzoneri filed affidavit evidence on behalf of the plaintiff which was contested, but there was no oral evidence or cross-examination. That his Honour concluded that the plaintiff had not discharged the onus on the facts in that case and found on the materials that the version of events was implausible in the absence of cross-examination, does not aid the defendants in any material way, if at all, in the present context.
196 The points made regarding Mr Canzoneri that do raise an appropriate note of measured caution in relation to some aspects of his evidence relate to: the absence of contemporaneous documents regarding the vehicle financing in early 2016 in the context of the circumstances of resignation; the absence of documents supporting the existence of a copy of the distribution agreement purporting to be signed by Kremel; and the circumstances of Mr Floropoulos’ registration again as a director in May 2016 and removal in July 2016. As will be seen, the absence of contemporaneous documents is something which has influenced my conclusions that Oliana has not established on the evidence that Mr Floropoulos did resign because of vehicle financing, or that there was once an agreement in existence that purported to be signed by Kremel. Again, these matters are addressed in more detail later in these reasons.
197 That said, taking all matters into account, and having regard to my observations of Mr Canzoneri over an extended period, and the documentary and other evidence, it remains the case that, generally speaking, Mr Canzoneri presented as a credible and responsive witness even though not all of his evidence has ultimately been accepted. Generally, this has resulted in me preferring the evidence of Mr Canzoneri to that of Mr Floropoulos when there was a conflict that could not be resolved by reference to other evidence or contemporaneous documents. This approach has also been influenced by the views I have reached regarding Mr Floropoulos as earlier referred to.
Mr Hone
198 The last person to mention in the context of witnesses is Mr Hone. The more specific submissions of the plaintiff regarding inferences that should be drawn as a result of Mr Hone not giving evidence are addressed later in these reasons. As will be seen, and was understandably ultimately conceded by counsel for Mr Hone, it is open to draw adverse inferences on various matters as a result of Mr Hone not being called, although no different result in relation to any of the findings made and conclusions reached would have followed even if any such inferences were put to one side.
199 It is also appropriate to make a further observation regarding Mr Hone’s unexplained failure to produce documents as required by earlier court orders, and his late production of what was plainly highly relevant material during the course of the trial as a result of the plaintiff serving and pressing a Notice to Produce in respect of documents, the majority of which it appears should have been produced to Oliana by Mr Hone, a practising solicitor, at a much earlier time. Although Mr Hone suffered some personal challenges in connection with the illness and the sad and unfortunate passing of his wife in 2019, it is apparent that he did not comply with orders made on 20 July 2018, 7 September 2018, 30 November 2018, 15 March 2019, 23 August 2019, and 25 October 2019. Having regard to the obligations placed upon parties and legal practitioners by the Civil Procedure Act 2010 (Vic), the nature of the allegations made, the relevance and volume of the documents ultimately produced, and the absence of any evidence providing material insight or a satisfactory explanation for earlier non-production and the position at trial, the position appears to be, at best, most unsatisfactory.
200 In addition, the manner in which the evidence revealed that Mr Hone, an officer of this Court, acted in connection with Culinary Co and Mr Floropoulos, and in connection with his dealings and (limited) communications with Oliana, Mr Canzoneri, and Mr Garakis, did not reflect well on his actions and approach. This conduct remained unexplained by Mr Hone in circumstances where there was no evidence or sound reason put forward as to why he could not have given evidence in relation to these matters. For present purposes, however, my consideration of Mr Hone’s conduct, and the absence of any explanation for it, is properly confined to, and delineated by, the issues in the proceeding.
AGREED LIST OF ISSUES
201 The proceeding was conducted by reference to an agreed list of issues and the parties’ written and oral submissions were also tailored in that way. Summarised, the agreed issues were stated by the parties to be:[57]
(a) Between March 2016 and January 2018 was Mr Floropoulos a director, officer, or (other) fiduciary of Oliana and, if so, over what period?(b) Between March 2016 and January 2018 did Mr Floropoulos owe statutory duties to Oliana under ss 180(1), 181(1), 182(1) and 183(1) of the Act and, if so, did he breach any of those duties (and if so how) by:
(i) his dealings with Kremel;
(c) Between March 2016 and January 2018 did Mr Floropoulos owe fiduciary duties to Oliana to: act in its best interests; avoid the possibility of conflict; not to obtain a benefit for himself or another by reason or use of this position; and not to use information or opportunity gained whilst an officer or director for his own benefit in the absence of fully informed consent — and if so, did he breach any of these duties (and if so how)?(d) Between March 2016 and January 2018 did Mr Floropoulos divert to himself or Culinary Co a commercial opportunity of Oliana’s to acquire cheese products from Kremel at the prices set by Kremel within the principles stated in Regal (Hastings) v Gulliver?[58]
(e) In or about 2016 and continuing into 2017 did Mr Floropoulos engage in misleading or deceptive conduct in breach of the ACL by representing that:
(i) Kremel had appointed Oliana as exclusive distributor for Kremel’s products pursuant to the letter of 7 June 2016 and/or on the terms of the exclusive distribution agreement (Exclusive Distributor Representation);(ii) Mr Hone and Culinary Co had authority from Kremel to make supply arrangements on behalf of Kremel and to enter into the exclusive distribution agreement on behalf of Kremel (Authority Representation);
(iii) each of Culinary Co and Kremel were bound by the exclusive distribution agreement until at least 10 January 2018 (Binding Agreement Representation);
(iv) Culinary Co was Kremel’s Australian subsidiary/corporate representative (Australian Subsidiary Representation);
(v) The prices charged or to be charged by Culinary Co to Oliana were the prices charged by Kremel (Price Representation)?
(f) If yes to any part of (e), did Mr Hone aid and abet, or was he knowingly involved in that contravention within the meaning of s 75B of the Competition and Consumer Act (Cth) (CCA)?(g) In about 2016 and continuing into 2017 did Mr Hone or Culinary Co engage in misleading or deceptive conduct in breach of the ACL by:
(i) making the Exclusive Distributor Representation to Oliana;(ii) making the Authority Representation to Oliana;
(iii) making the Binding Agreement Representation to Oliana?
(h) If yes to any part of (g), did Mr Floropoulos aid and abet, or was he knowingly involved in that contravention within the meaning of s 75B of the CCA?(i) If Culinary Co and not Mr Hone was the sole person responsible for the contraventions in (g), did Mr Hone aid and abet, or was he knowingly involved in that contravention within the meaning of s 75B of the CCA?
(j) In about 2016 and continuing into 2017 did Mr Hone warrant to Oliana that he had the authority to act on Kremel’s behalf in relation to any exclusive distribution agreement and/or the matters set out in Mr Hone’s letter of 7 June 2016?
(k) Did Mr Hone have any such authority from Kremel at the time such warranty was given?
(l) In 2016 or 2017 did Mr Hone or anyone else inform Oliana that:
(i) Mr Hone did not in fact have the authority to act on Kremel’s behalf in relation to any exclusive distribution agreement and/or the matters set out in the letter dated 7 June 2016;(ii) Mr Hone’s authority from Kremel had been rescinded or withdrawn by Kremel in any, and if so what, way?
(m) Subject to the determination of the above issues:
(i) should the court make orders that there be an account of profits from Mr Floropoulos and Mr Hone to the plaintiff;(ii) did Oliana suffer loss and damage as a result of the conduct by Mr Floropoulos and/or Mr Hone and, if so, should Oliana be awarded: damages at law; equitable compensation; damages pursuant to s 236 of the ACL; compensation pursuant to s 238 of the ACL; and/or damages or compensation pursuant to s 1317H of the Act;
(iii) what is Oliana’s loss and damage and entitlement to interest?
202 It is convenient to approach the consideration and analysis in these reasons by reference to the agreed issues addressed by the parties, and broadly in the same order, but noting that some aspects have been grouped.
Was Mr Floropoulos a director or officer of Oliana during the period between March 2016 and January 2018?
Introduction
203 It was common ground that Mr Floropoulos was appointed a director of Oliana in October 2011 and remained formally appointed as such until 26 February 2011. Oliana contended, and Mr Floropoulos denied, that thereafter Mr Floropoulos acted in the position of director and was a de facto director by reason of the operation of sub-paragraph (b)(i) of the definition of ‘director’ in s 9 of the Act. Oliana also contended, and Mr Floropoulos denied, that Mr Floropoulos was an ‘officer’ of Oliana within the meaning of that expression in the Act because he was a director,[59] because he was a person who made or participated in making decisions that affected the whole, or a substantial part of the business of Oliana,[60] and/or because he had the capacity to affect significantly Oliana’s financial standing.[61]
204 Oliana did not ultimately contend that the directors of Oliana were accustomed to act in accordance with Mr Floropoulos’ instructions or wishes so as to make him what is often referred to as a ‘shadow director’ by reason of the operation of sub-para (b)(ii) of the definition of ‘director’ in s 9 of the Act. Oliana also properly conceded that notwithstanding that which was recorded in the ASIC register, it could not establish on the evidence that after February 2016 Mr Floropoulos had in fact been validly re-appointed as a director between 30 May and 6 July 2016.
Submissions
Oliana’s Submissions – Director or Officer
205 Oliana submitted that it did not matter that it could not prove that after February 2016 Mr Floropoulos was validly re-appointed as a director between 30 May and 6 July 2016 because, as a matter of fact, Mr Floropoulos continued to act in the position of director or otherwise conduct himself as an officer of Oliana.
206 With respect to the applicable law, there was no material issue between the parties and Oliana referred to a number of the well-known authorities and texts including, for example, Deputy Commissioner of Taxation v Austin;[62] Grimaldi v Chameleon Mining NL (No 2);[63] Ford’s Principles of Corporations Law;[64] and Shafron v Australian Securities and Investments Commission.[65]
207 In the context of the de facto director contention, attention was drawn to, among other things, the objective nature of the test and the need to consider whether the person has been doing the work of a director in that company. It was also observed that the question will often be one of fact and degree, with emphasis being placed upon the need to consider the duties performed by the person in the context of the operations and circumstances of the particular company concerned, and the need to see the question as one of substance rather than form or how someone is described.
208 By way of illustration, reference was made to a number of factors that the courts have considered in different cases, including: duties that would be expected to be performed by a director in the relevant company; the duties actually performed by the person; whether others in the company considered the person to be a director; whether the company held out the person as a director; whether the person held themselves out as a director; and whether those outside the company considered the person to be a director.
209 With respect to the ‘officer’ contention emphasis was placed upon the High Court’s observations in Shafron v ASIC regarding the operation of paragraph (b)(i) of the definition,[66] including that: the inquiry is directed to the role the person plays in the company but is not confined to the role played in relation to the particular issue in respect of which breach is alleged; it is not the case that to be an officer by reason of involvement with decision-making it is necessary that the person be in substantially the same position as directors; paragraph (b)(i) distinguishes between making decisions and participating in the making of those decisions, with the latter directing attention to the role the person has in the act of making a decision even if ultimately made by somebody else, meaning that the person’s contribution to the decision in question must be examined.
210 It was further submitted that s 201D of the Act, which deals with the need for a company to have a signed consent from the person concerned if they are to be appointed as a director, does not preclude a person from being a de facto director and that there was no provision in the Act akin to s 201D requiring written consent to become an officer of a company.
211 With respect to the facts in question, Oliana relied on the same factors and circumstances for their contentions with respect to de facto directorship as they did for their ‘officer’ contention, submitting that for present purposes the distinction between being a director and being an officer was ‘... necessarily a fine one’.[67]
212 The matters which Oliana submitted supported its contention that Mr Floropoulos was a de facto director were as follows:
(a) Oliana being a small proprietary company carrying on business of importing and distributing food and beverage products.(b) Oliana’s key management activities involving determining which products should be sourced for distribution, dealing with suppliers of products, and negotiating with retail outlets and distributors for the sale of those products.
(c) Mr Floropoulos’ primary responsibility being to negotiate with suppliers to ensure Oliana could obtain a continuing supply of products in his authority to negotiate and enter into agreements out of Oliana.
(d) Mr Canzoneri’s role primarily being one of management and finance.
(e) The regular consultation between Mr Canzoneri and Mr Floropoulos in relation to company business, with them meeting, speaking, or texting frequently.
(f) Mr Canzoneri’s denial that Mr Floropoulos told him in February 2016 that he was resigning from Oliana and Mr Canzoneri’s evidence about Mr Floropoulos electing to come off the ASIC register in late February 2016 because he was unwilling to provide a director’s guarantee in respect of vehicle finance that Oliana was obtaining at that time. In this regard it was submitted that the weight of evidence strongly supported Mr Canzoneri’s version of events which should be preferred to Mr Floropoulos’ evidence and, further, that this was supported by the ASIC register recording him as being appointed during the period 30 May to 6 July 2016. It was said that there was no other purpose or benefit for Oliana to obtain by re-registering Mr Floropoulos as a director during that period, and that no re-registration would have occurred if Mr Floropoulos had in fact indicated he wished to resign permanently for health reasons.
(g) The absence of any reference to an intention on the part of Mr Floropoulos to resign in the text messages passing between Mr Canzoneri and Mr Floropoulos in late February 2016 — and the opposite intention being evidenced in a text message on 25 February 2016 in which Mr Floropoulos said ‘we are on fire’ and in a further text message which stated that it was ‘... [t]ime to take Oliana to the next level ...’.
(h) The absence of any other indications in the text messages exchanged during February 2016 supporting Mr Floropoulos’ version of events, with such messages and other documents said to show his continued involvement with the dealings with Woolworths and Coles in the day-to-day operations of Oliana.
(i) The absence of any change to Mr Floropoulos’ day-to-day responsibilities and activities after 26 February 2016.
(j) The evidence and observations of the Oliana staff who gave evidence consistent with Mr Floropoulos remaining a director without any change to his role, and Mr Floropoulos not informing any of the staff that he had resigned or ceased to be a director (for reasons of ill health or otherwise).
(k) The absence of any announcement regarding Mr Floropoulos’ resignation to Oliana’s staff, customers or suppliers.
(l) The remuneration payments and arrangements in respect of Mr Floropoulos and his wife not changing post February 2016, and their continued use of the Porsche. It was said Mr Floropoulos accepted he used the Porsche until 2018 when it was repossessed by the leasing company.
(m) The existence, and acceptance by Mr Floropoulos, of various matters including: having authority to enter into agreements with suppliers until 2017; having access to Oliana’s bank accounts and online banking facilities;[68] having his own office on Oliana’s premises; the existence of business cards describing Mr Floropoulos as a director until at least May 2017; Mr Floropoulos holding himself out as a director of Oliana on his LinkedIn profile; using an email signature that recorded him as a director of Oliana subsequent to February 2016; and Mr Floropoulos’ management of Oliana’s relationship with Mr Paule of MyCo after February 2016.
(n) The absence of any material change in the role of Mr Floropoulos after February 2016.
(o) Oliana’s engagement of Mr Wyner as business development manager, including the terms of his engagement providing that on a day-to-day basis he would be responsible to Mr Floropoulos, and the regular and contact engagement between the two on behalf of Oliana thereafter. In this context reference was made to what was said to be the significance of the position given the importance of Coles and Woolworths to Oliana’s business. It was further submitted that Mr Floropoulos’ evidence that Mr Wyner did not provide any service of any substance to Oliana prior to his appointment in April 2016 had been demonstrated to be plainly wrong and it was submitted that it was clear that Mr Wyner was not appointed to replace Mr Floropoulos.
(p) Mr Floropoulos taking primary responsibility for finding an alternative supplier of vegan cheese from April–May 2016 after it became clear that the relationship with MyCo could not continue. It was submitted that little turned on whether Mr Floropoulos took on this role at his own insistence instead of Mr Canzoneri, or whether he was asked by Mr Canzoneri, or whether he offered to do so given that he was going to Greece. Oliana submitted that the important fact was that he undertook to Mr Canzoneri and Oliana to go to Greece to find a replacement supplier of vegan cheese for Oliana. In this context reference was also made to Mr Floropoulos accepting in cross-examination that he knew Mr Canzoneri was relying upon him and trusting him to find a replacement supplier.
(q) Mr Floropoulos’ involvement in the communications regarding the drafting of and entry into the exclusive distribution agreement regarding Kremel products.
(r) The documentary and other evidence showing that Mr Floropoulos was essentially authorised on behalf of Oliana to control, conduct, and engage with the critical supply arrangements between Oliana and Culinary Co/Kremel during 2016 and 2017 as well as in respect of MyCo and Epirus, which it was said occurred with limited and incomplete reporting to and engaging with Mr Canzoneri.
(s) Mr Floropoulos never telling Mr Canzoneri that he was making arrangements with Kremel for the benefit of Culinary Co, that he had any interest or role in Culinary Co, or that a mark-up of any kind had been imposed upon the Kremel Supply Price. Reference was also made to Mr Canzoneri’s evidence that it was Mr Floropoulos who first told him about Culinary Co, that Mr Floropoulos had said that Kremel had appointed a company in Australia and a lawyer by the name of Ian Hone, and that Kremel owned the company which Mr Floropoulos said was called Culinary.
(t) Mr Floropoulos’ dealings with Oliana’s supply chain manager, Mr Adams, and others in connection with airfreight and delivery of Kremel products.
213 Oliana submitted that in acting as he did during 2016 and 2017, Mr Floropoulos was performing the same kind of roles that he had previously undertaken for Oliana prior to February 2016 (at which time he was a formally registered director). It was said that there was no documentary evidence showing that Mr Floropoulos ever in any way disclaimed these responsibilities until late in December 2017 when, in one of the text messages to Mr Canzoneri, Mr Floropoulos made reference to aspects of the history of recent communications, wanting to get on with his life and to shut people up and that ‘... [I] will now go out on my own and earn a living for my family and look out for them ... I cannot win so I might as well do it for myself.’
214 With respect to Mr Floropoulos being an officer, primary reliance was placed upon para (b)(i) of the definition of ‘officer’ in s 9 of the Act with only very limited submissions directed towards the alternative contention based on para (b)(ii) that Mr Floropoulos was a person who had the capacity to affect significantly Oliana’s financial standing.
215 Oliana stated that it relied upon ‘much the same evidence’ as that referred to in connection with the contentions regarding Mr Floropoulos being a de facto director. It was submitted that if, contrary to what was described as Oliana’s ‘primary case’, it is found that Mr Floropoulos was not a de facto director, then he was an officer between at least April 2016 and January 2018. This was said to be because he satisfied the criteria in para (b)(i) of the definition of officer, by virtue of his participation (together with Mr Canzoneri) in key decisions affecting what on any view was a substantial part of Oliana’s business. These were said to include decisions relating to Oliana’s ongoing supplier relationships with Epirus, Mr Paule and MyCo, Kremel, and its other relationships with Woolworths and other distributors, including Coles and Aldi.
216 With respect to para (b)(ii) of the definition of officer, Oliana relied upon the same reasoning for its contention that Mr Floropoulos was involved in the management of Oliana’s affairs with respect to Kremel and in substance controlled the relationship until January 2018. It was further submitted that given that Mr Floropoulos accepted that Oliana’s relationship with Kremel was highly important to the ongoing survival and profitability of Oliana, in his management role of this supply arrangement he had the capacity to affect significantly the company’s financial standing, therefore satisfying the requirements in para (b)(ii) of the definition of officer.
Mr Floropoulos’ Submissions – Director or Officer
217 Mr Floropoulos denied that he was a director or officer (or employee or fiduciary) of Oliana after his resignation took effect on 26 February 2016. He submitted that his intention to resign was foreshadowed in discussions with Mr Canzoneri in late 2015 or early 2016, during which he indicated that he did not want to continue what he was doing with Oliana and that his health was not good. Mr Floropoulos said that Mr Canzoneri agreed with him and said he should resign and just take it easy and relax. Mr Floropoulos said that this was followed up by another discussion after he returned from Hawaii in mid-February 2016, during which he said to Mr Canzoneri that he wanted to resign as a director, had had enough, and that he wanted to pursue other opportunities particularly in America. Mr Floropoulos said that Mr Canzoneri gave his blessing, was happy and that there was ‘no issue’. Reference was also made in Mr Floropoulos’ submissions to the written notice of resignation given on 26 February 2016, which was recorded in the ASIC register.
218 It was submitted that Mr Floropoulos’ evidence of the conversation should be accepted, notwithstanding Mr Canzoneri’s denial that such conversation occurred. Reference was made in this context to Mr Canzoneri’s knowledge of the extent of Mr Floropoulos’ ill health and Mr Canzoneri’s knowledge of Mr Floropoulos travelling to Hawaii for a holiday. It was submitted that Mr Canzoneri’s evidence that the February 2016 resignation was prompted by Mr Floropoulos’ desire to avoid having to guarantee a car finance lease was not credible, and was also inconsistent with Oliana opening its case on the basis that Mr Floropoulos’ resignation was to avoid giving a guarantee in respect of a Scottish Pacific Business Finance facility that was to be used for working capital.
219 In this context reference was made to: Mr Canzoneri already having been the sole guarantor of the lease of the Porsche in April 2013 whilst Mr Floropoulos was a director; the absence of evidence of any car lease at or about the relevant time; the negotiations with Scottish Pacific not commencing until around 23 May 2016; the registering of Mr Floropoulos as a director on 30 May 2016 and his subsequent deregistration on 6 July 2016 by Mr Canzoneri; and the absence of any contemporaneous evidence to support Mr Canzoneri’s position regarding the car guarantee in the extensive text messages passing between the parties at that time.
220 Mr Floropoulos submitted that after 26 February 2016 he was neither a director nor officer of Oliana.[69] Whilst he continued to be a shareholder and have an interest in the success of Oliana, his continuing involvement was said to be confined to ‘... [a]d hoc engagement to perform, relevantly, the service of finding an alternative supplier of vegan cheese from about late April, early May 2016 ...’. It was further submitted that the continued use of cars leased by Oliana and the ongoing ‘irregular payments to himself and his wife ...’ were paid in consideration of him agreeing to continue to provide services to Oliana on an ad hoc basis, and were particularly in consideration of his work for the company in connection with finding Kremel and negotiating the alternative supply arrangements. This, so it was said, was reflected in Mr Floropoulos’ evidence that it was part of the agreement he contended was reached in a discussion at the Moka Pot Café.
221 With respect to the recorded reappointment of Mr Floropoulos as a director on the ASIC register between 30 May 2016 and 6 July 2016, it was submitted that no written consent to the appointment had been produced, Mr Floropoulos had not consented, and that Oliana’s position involved an admitted breach of s 201D(2) of the Act. It was further submitted that the limited evidence regarding the reinstatement to the ASIC register showed that it was orchestrated by Mr Canzoneri without Mr Floropoulos’ knowledge or consent, in relation to both the recording of the reappointment in May 2016 and the subsequent resignation in July 2016.
222 Mr Floropoulos submitted that these unilateral acts of reappointment were inconsistent with a belief that Mr Floropoulos was a director in the period following February 2016 and consistent with Mr Floropoulos’ position that he did not wish to continue to be one having regard to his ongoing ill health and desire to concentrate his energies in America. Mr Floropoulos’ submissions also contained a comment that the negotiations with Scottish Pacific may explain why Mr Canzoneri restored Mr Floropoulos to the ASIC register as a director of the plaintiff from 30 May 2016 until 6 July 2016.
223 In relation to the question of whether Mr Floropoulos was a de facto or shadow director after February 2016 it was further submitted that:
(a) Until 26 February 2016 Mr Floropoulos was primarily responsible for dealing with suppliers to Oliana, which included: sourcing products from Greece; dealing with its customer agent; international trade management and incoming freight. From late April/early May he was responsible for locating Kremel and thereafter was instrumental in securing the supply of vegan cheese from Kremel, which was supplied to Oliana by Culinary Co.(b) Mr Floropoulos had little or no involvement in arranging and managing the sale of Kremel products by Oliana to Woolworths, and that Mr Wyner was responsible for negotiating that arrangement.
(c) Mr Floropoulos attended the 8 April 2016 meeting with Mr Paule at Mr Canzoneri’s request because of his personal relationship with Mr Paule and because he had been responsible for introducing MyCo to Oliana.
(d) Mr Floropoulos had already arranged to go to Greece in May 2016 and was therefore fortuitously able personally to pursue alternative suppliers whilst there. During this visit he arranged for Mr Garakis to meet him and Mr Delis in Los Angeles to further his proposed dealings in America, which was consistent with what he told Mr Canzoneri in the discussions in February leading up to his resignation.
(e) Mr Floropoulos travelled extensively during 2016, spending much of his time in the United States, and Mr Canzoneri knew of the travel and must have been taken to have understood the purpose of it. Further, whatever Mr Canzoneri thought Mr Floropoulos was doing in the United States it was plain to him that Mr Floropoulos was not spending much time in Australia, or spending much time on activities on behalf of Oliana.
(f) During Mr Floropoulos’ absence from Australia throughout 2016 Mr Wyner was largely responsible for dealing with Oliana’s relationship with Woolworths.
(g) The continued use by Mr Floropoulos and his wife of the company supplied cars and the payments that continued after February 2016 could be explained as recognition that he continued to be a shareholder and unitholder, and several of Mr Floropoulos’ family members had made loans to Oliana.
(h) The payments made to Mr Floropoulos and his wife became increasingly irregular and the amount and frequency do not suggest payment of benefits for an ongoing director or officer.
(i) Mr Floropoulos had little to do with the negotiations for the exclusive distribution agreement which were undertaken by Mr Canzoneri and Michael Canzoneri directly with Mr Hone.
(j) Ms King was Oliana’s former bookkeeper and her evidence was to the effect that Mr Canzoneri was primarily responsible for the financial aspects and she would always run any issue of payment past Mr Canzoneri for approval. Further, Ms King’s evidence was that even if Mr Floropoulos did have the ability to access the electronic bank account of Oliana, she was not aware of any occasion when Mr Floropoulos did so.
224 To the extent it was contended that Mr Floropoulos acted as a shadow director because Mr Canzoneri was accustomed to act in accordance with Mr Floropoulos’ instructions or wishes, this was denied and said to be unsupported by the evidence. This is not further addressed because Oliana made clear in its submissions that it was not pursuing a ‘shadow director’ case.
225 There was no point of principle between the parties in relation to the applicable law, with Mr Floropoulos also making reference to a number of the well-known authorities earlier referred to. Points of emphasis varied having regard to the facts, with Mr Floropoulos referring to the observations in Austin regarding a necessary condition being the exercise of what might be called ‘top level management functions’.[70] Mr Floropoulos also made reference to the objective nature of the test, contending that Mr Canzoneri was primarily if not solely responsible for the financial, secretarial and accounting affairs of the company.
226 With respect to the allegation that Mr Floropoulos was an officer by reason of the operation of the para (b)(i) or (b)(ii) of that definition in s 9 of the Act, reference was also made by Mr Floropoulos to the High Court’s observations in Shafron v ASIC and it was submitted that such observations are concerned with persons involved in the management of the company.[71] Mr Floropoulos further submitted that having regard to the matters raised above, Mr Floropoulos was not at the relevant times involved in the management of Oliana.
227 As to the statements of Culinary Co’s liquidator, Mr Trimboli, in his report that Mr Floropoulos may have acted as a director of Culinary Co or a shadow director, such evidence was submitted to be of little or no weight.
Principles and observations – directors and officers
228 The duties in ss 180(1), 181(1), 182(1) and 183(1) of the Act apply to ‘a director or other officer’ of a corporation.
Meaning of ‘director’
229 Section 9 of the Act provides the following broad definition of ‘director’:
director of a company or other body means:(a) a person who:
(i) is appointed to the position of a director; or
(ii) is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to their position; and
(b) unless the contrary intention appears, a person who is not validly appointed as a director if:
(i) they act in the position of a director; or
(ii) the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.
Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person’s professional capacity, or the person’s business relationship with the directors or the company or body.
Note: Paragraph (b)—Contrary intention—Examples of provisions for which a person referred to in paragraph (b) would not be included in the term ‘director’ are:
• section 249C (power to call meetings of a company’s members)
• subsection 251A(3) (signing minutes of meetings)
• section 205B (notice to ASIC of change of address).
230 Persons falling within para (a) of the definition can be described as ‘de jure’ directors,[72] while persons falling within sub-paras (b)(i) and (ii) of the definition are often described as a ‘de facto’ and ‘shadow directors’, respectively.
231 Although it has been suggested that a rigid distinction between the concepts of ‘de facto’ and ‘shadow’ directors cannot be maintained,[73] it is nonetheless convenient to use these shorthand descriptions to consider these two aspects of the definition in turn, recognising of course that this is for convenience in these reasons and that it is not the language of the statute.
‘De facto’ directors
232 A ‘de facto’ director is a person, not validly appointed as a director, who acts in the position of a director. For example, the definition of ‘de facto’ director has been found to include a person who continues to act as a director despite their purported resignation.[74]
233 In Grimaldi, the Full Court of the Federal Court emphasised ‘that there is not one single decisive test of when a person will be found to be a de facto director’.[75] The Court nonetheless identified a number of relevant matters, including that:
(a) The definition of ‘de facto’ director contemplates that the person concerned has been ‘acting in a role (or roles) within the company and performing functions one would reasonably expect to have been performed by a director of that company given its circumstances’.[76] The roles and functions performed will vary with the relevant commercial context, operations and governance structure.[77](b) The relationship of a person with a company may evolve over time into that of a de facto director.[78]
(c) A person may only perform the role and functions which constitute them as a director for a limited period of time.[79]
(d) A person may be a de facto director despite the company having an active director or directors or a properly constituted and functioning board.[80]
(e) It is relevant but not decisive that the company has, itself, held the person out as a director.[81]
234 In Austin, Madgwick J stated that:[82]
[I]t seems to be a necessary condition of acting as a director, whether properly appointed or not, that one exercises what might be called the actual (and statutorily extended) top level of management functions. However, that is not necessarily a sufficient condition for such a conclusion, nor is it the same as saying that one must do things which only a director can do.
235 Madgwick J went on to emphasise that whether a person acts as a director will be ‘a question of degree’ requiring consideration ‘of the duties performed by that person in the context of the operations and circumstance of the particular company’.[83] That context was said to include the size of the relevant corporation, the internal practices or structure of the company, and how the relevant person was reasonably perceived by those who deal with the company.[84] Relevantly, in relation to the size of the corporation, Madgwick J stated that:[85]
If, in the case of a small company, a person has, with full discretion, ‘acted as the company’ in relation to matters of great importance to the company, and other than as an arms’ length expert engaged for a limited purpose, the conclusion that the person has acted in the capacity of a director may well be justified. The extent to which and the circumstances in which the person has so acted will nevertheless be of importance.... In a large and diversified company, great discretion to deal with very important matters must be reposed in employees. In the case of a supermarket chain, as in Tesco, it would hardly occur to anyone to suggest that a managerial employee held to have ‘acted as the company’ in breaking a consumer protection law at a particular store was acting as a director of the vast company concerned. As suggested above, in the case of a single person making decisions for a company the business of which was confined to the operation of a corner store, a different view might be taken.
‘Shadow’ directors [86]
236 What I have for convenience termed a ‘shadow’ director is a person who is not validly appointed as a director but a person to whose instructions or wishes the directors of the relevant company are accustomed to acting in accordance with.
237 In Re Akron Roads (in liq) (No 3), Robson J examined the authorities in relation to whether a person is a ‘shadow’ director under s 9(b)(ii) of the Act,[87] and conveniently summarised the relevant principles as follows:[88]
(1) who are the directors of the company, whether de facto or de jure;(2) that the defendant gave instructions or expressed wishes to those directors on how to act in relation to the company or that he was one of the persons who did so;
(3) that those directors acted in accordance with such instructions of wishes; and
(4) that [those directors] were so accustomed to act.[89]
(b) What is needed is first a board of directors claiming and purporting to act as such; and secondly a pattern of behaviour in which the board did not exercise any discretion or judgment of its own, but acted in accordance with the instructions or wishes of others.[90](c) It is not necessary that the instructions or wishes be given over the whole field of corporate activity for which the directors are responsible.[91]
(d) There is no inconsistency with a person being a shadow director and ... the board exercising some discretion or judgment in areas in respect of which the shadow director does not give instructions or express a wish. Rather, the test for a shadow director only requires that when the directors are given instructions or wishes, they are accustomed to act as s 9 requires.[92]
(e) The directors of the company must be accustomed to act as directors or the company in accordance with the person’s instructions or wishes as to how they should act.[93] This requires habitual compliance over a period of time.[94]
(f) The directors who must be accustomed to act need not be all of the directors but should be a governing majority of the board.[95]
(g) Although it is not necessary to establish that a person is a shadow director that the directors of the company do not exercise any discretion of their own, there must be a causal connection between the instructions or wish of the shadow director and the act taken by the directors.[96]
(h) The fact that a person has a genuine interest of his or her or its own in giving advice to the board, such as a bank or mortgagee, the mere fact that the board will tend to take that advice to preserve it from the mortgagee’s wrath will not make the mortgagee, et cetera a shadow director.[97]
(i) Similarly, the fact that the governing majority of the board accepts the views and wishes of another director (who represents and acts for another company) does not by itself make the other company a shadow director. The views or wishes of that director may be sound advice that the governing majority may consider as directors should be adopted as it is in the best interests of the company.
(j) Similarly, not every person whose advice is in fact heeded as a general rule by the board is to be classed as a de facto or shadow director.[98]
(k) On the other hand, if the instructions or wishes of the other director (who represented the putative director) were to carry out acts not in the best interests of the company, such as a decision to continue trading while insolvent, that might support the conclusion that the directors deferred to the decision making of the director who represents the putative director and were thus deferring to the decisions of the other company.[99]
(l) It is not necessary to go so far as to show that the de jure directors were subservient or had surrendered their roles.[100]
‘Officer’
238 Section 9 of the Act defines ‘officer’ as meaning certain specified office-holders, including directors and secretaries, as well as:
(b) a person:(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(ii) who has the capacity to affect significantly the corporation’s financial standing; or
(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation); ...
239 Paragraph (b) of the definition extends the scope of the term ‘officer’ beyond its ordinary meaning of ‘office holder’.[101] Persons identified in para (b) are identified by what they do (sub-para (i)), what capacity they have (sub-para (ii)), or what influence on the directors they have had and continue to have (sub-para (iii)).[102]
240 In relation to sub-para (b)(i) of the definition, the High Court stated in Shafron v ASIC that the inquiry ‘must be directed to what role the person in question plays in the corporation’ not the role they played in relation to the particular issue in respect of which a breach of duty is alleged.[103] Furthermore, the High Court explained that:[104]
26. ... [T]he idea of ‘participation’ directs attention to the role that a person has in the ultimate act of making a decision, even if that final act is undertaken by some other person or persons. The notion of participation in making decisions presents a question of fact and degree in which the significance to be given to the role played by the person in question must be assessed. ... Whether a person participates in making decisions of a particular character requires examination of what contribution that person makes to the making of a decision.27. As Mr Shafron submitted, again correctly, demonstrating that a person’s contribution to a decision can properly be described as a ‘real contribution’ would not be suffıcient to show that the person concerned had participated in making the decision. But, contrary to Mr Shafron’s submission, the Court of Appeal did not decide that making a real contribution to a decision was sufficient to constitute participation in making the decision. Rather, the Court’s focus was upon what was necessary to constitute participation. The references to ‘real contribution’ were no more than a summary description of the result of a more detailed consideration of the relevant question. In addition, it should not be forgotten, as the Court of Appeal also pointed out, that the statute requires that the decisions concerned be ‘decisions that affect the whole, or a substantial part, of the business of the corporation’. Participation in any decision of a corporation does not make a person an ‘officer’ — the decisions in which the person participates must have the significance for the business of the corporation that the statute prescribes.
241 In relation to sub-para (b)(ii) of the definition of ‘officer’, Nettle and Gordon JJ stated in ASIC v King that:[105]
91. [D]etermination of whether a person falls under para (b)(ii) of the definition of “‘officer’ of a corporation” requires consideration of the role the person played in the management of the corporation. The inquiry is not limited to any particular issue or act which the person was involved in, and which is said to constitute a breach of duty.[106] The text of para (b)(ii) is directed to those who have the capacity to affect significantly a corporation's financial standing: not just any capacity will suffice.[107] Determining whether a person has such a capacity depends on identifying their role in relation to the corporation, what they did or did not do (whether on a particular occasion or over time) and the relationship between their actions or inaction and the financial standing of the corporation.92. The quality of a person’s capacity or actions, and the effects of that capacity or those actions on the management of a corporation, are not necessarily uniform across corporations or corporate groups, or even uniform within a single corporation or group. The size of a corporation, the corporate structure, the management structure, and the identity and nature of the persons involved are likely to affect who is an officer of a corporation at any point in time. Circumstances may change over time, sometimes dramatically.
93. In smaller companies, it is possible for all members to participate in the management of the company such that it practically operates much like an incorporated partnership.[108]
242 In ASIC v King, Kiefel CJ, Gageler and Keane JJ identified that s 9 of the Act provides the definition of officer ‘of a corporation’, with those words meaning that, even where the definition in para (b) is satisfied, it remains necessary to ask whether the ‘officer’ is relevantly ‘of’ the corporation.[109] The majority stated that ‘questions of fact and degree arise as to whether that person also answers the description of being ‘of’ the corporation in the sense of being engaged, in fact, in the management of its affairs or property’.[110]
Consideration – De facto director or officer
243 Before continuing further with the consideration and analysis it is convenient to address some matters of fact relating to Mr Floropoulos’ resignation and that which followed. They are the differing accounts of Mr Canzoneri and Mr Floropoulos regarding the communications relating to and circumstances surrounding Mr Floropoulos’ resignation as a director in February 2016 and the communications relating to and circumstances surrounding Mr Floropoulos going to Greece in order to source an alternate supplier of vegan cheese for Oliana to replace MyCo.
Communications and Circumstances relating to Mr Floropoulos’ Resignation
244 It was not in dispute that Floropoulos’ resignation as a registered director was lodged with ASIC and took effect from 26 February 2016. Briefly, and as earlier indicated, Mr Floropoulos said that this occurred after he informed Mr Canzoneri in conversations in late 2015 and early 2016 that he wanted to step back for health reasons and pursue other business opportunities in the United States. He said that when he informed Mr Canzoneri about this Mr Canzoneri was fine with it. Mr Canzoneri said differently. He said the resignation occurred because Oliana was looking at some vehicle financing in early 2016, that the financiers required directors guarantees, that Mr Floropoulos did not want to be a guarantor, and it was agreed that Mr Floropoulos would ‘come off’ the public register as a director and then ‘get back on as a director’. In effect it was said to be a resignation in form and for convenience only when in reality it was intended that nothing would change. Reference was also made to working capital financing being proposed to be undertaken by Oliana in May 2016 that was also said to have required directors’ guarantees.
245 Whilst I am satisfied, and it was common ground, that Mr Floropoulos’ formal resignation took effect from 26 February 2016, it has not been established on the balance of probabilities that a conversation or conversations to the effect alleged by Mr Floropoulos, or to the effect alleged by Mr Canzoneri, occurred. As unsatisfactory as it may be, the result is that on the evidence before the court the detail of the circumstances leading to Mr Floropoulos’ formal resignation and removal from the ASIC register as a director are, in the context of this proceeding, to be treated as being largely unknown. I elaborate below.
246 I do not accept the evidence of Mr Floropoulos regarding the substance of the content of the conversations he said that he had with Mr Canzoneri in late 2015 and early 2016 regarding his resignation. I make the following observations.
247 For the reasons I have explained, Mr Floropoulos was not a credible witness and has not demonstrated himself to be a reliable witness. In the absence of sufficient material corroborating his oral evidence it is necessary to view his oral evidence with appropriate caution.
248 As counsel for Mr Floropoulos properly acknowledged, there is no reference to the resignation or its reasons in any contemporaneous emails, documents or text messages, and this was in circumstances where it was apparent that Mr Canzoneri and Mr Floropoulos communicated frequently by text and at times by email.
249 Not only is there no documentary evidence supporting the position, but there are contemporaneous documents that tend against it. One example is the text message exchange of 25 February 2016, the day before the 26 February 2016 resignation date, in which in the context of Oliana’s business activities, Mr Floropoulos boasts to Mr Canzoneri that ‘We’re on fire’ and that it was ‘... time to take Oliana to the next level ...’.[111] Another example is the text message of Mr Floropoulos sent to Mr Canzoneri in late 2017 about Mr Floropoulos going out on his own[112] — which was nearly two years after the conversations in which he said he informed Mr Canzoneri he was effectively doing just that and pursuing other things for ‘myself’.[113] Further examples include emails and other documents in which Mr Floropoulos described himself, or signed off, as a director of Oliana, and the email dated 3 April engaging Mr Robert Wyner, copied to Mr Floropoulos, in which reference was made by Mr Canzoneri to Mr Wyner being responsible to Mr Floropoulos.
250 The position also sits uncomfortably and in tension with what occurred subsequently regarding Mr Floropoulos and his ongoing involvement and activities with Oliana. This includes that which is reflected in the email of 3 April 2016 appointing Mr Wyner,[114] and the other considerations that have led me to conclude that Mr Floropoulos was a de facto director and officer of Oliana, all of which are discussed in more detail later in these reasons. The short and equivocal text message regarding the BMW does not weigh heavily against this.[115]
251 Further, even ignoring the above, Mr Floropoulos’ evidence on the topic was less than satisfactory. It was vague, general and not given fluently. It did not rise to meet the manner in which the way the conversation was pleaded and particularised in the further amended pleading in which it was included, noting also that this document was not filed until 19 February 2020, which was after the trial commenced. It also did not meet the manner in which the conversations were addressed in opening (which for the avoidance of doubt, is not intended as a criticism of how the defence was opened).[116]
252 With respect to the pleading, and by way of example, it may also be noted that, among other things, it was alleged in paragraph 66AB of the further amended defence that in consideration of Mr Floropoulos’ continued support and assistance, and him remaining a shareholder, Oliana agreed to continue to provide Mr Floropoulos with the benefits he would otherwise receive as a director. The particulars further alleged that Mr Canzoneri had said that if Mr Floropoulos would continue to support and assist Oliana from time to time, Oliana would continue to pay Mr Floropoulos his entitlements including regular payments to him and his wife and that they could continue to use the cars provided to them by Oliana.
253 However, Mr Floropoulos’ evidence in chief did not make good these allegations.[117] Notwithstanding that it may be inferred that instructions had only been recently given to newly retained counsel representing Mr Floropoulos so as to enable the further amended defence to be drawn, filed, and served shortly after the commencement of trial, Mr Floropoulos’ evidence in relation to these alleged conversations was not only general and somewhat vague, his answers in chief were in various respects inconsistent with the allegations made days before in the amended pleading.[118]
254 In addition, Mr Canzoneri, who generally I found to be a credible witness, denied that such a conversation or conversations occurred,[119] and this denial is consistent with the text messages earlier referred to, the absence of references in contemporaneous text messages, and the ongoing role of Mr Floropoulos thereafter.[120]
255 For different reasons I have concluded that Oliana has not established on the balance of probabilities that a conversation of the kind alleged by Mr Canzoneri occurred in early 2016 regarding Mr Floropoulos’ February 2016 resignation. Although I found Mr Canzoneri to be generally a credible and responsive witness and it is possible this occurred, there were features of the evidence on this topic that prevent me from being satisfied on the evidence to the requisite degree that it has been established that a conversation to the effect alleged by Mr Canzoneri occurred.
256 As counsel for Mr Floropoulos submitted, the most significant matter is the absence of corroborating documentary or other evidence regarding the vehicle financing, whether proposed or otherwise. Although it was said that as at February 2016 Oliana was looking at vehicle financing or re-financing, and that the financier required directors guarantees by way of security, the evidence of Mr Canzoneri was general in nature and no documents were produced to support the issue being considered or pursued by Mr Canzoneri or others at Oliana at the time. This stood in contrast to the documents produced in connection with the working capital finance that was received late in May 2016, which Mr Canzoneri also referred to.
257 Further, no adequate explanation was proffered in the evidence or the submissions as to why there were no documents referring to or supporting the claimed vehicle financing, or the requirements of the financiers said to have required directors’ guarantees. These matters are in my view sufficient to conclude that it has not been established on the evidence that such vehicle financing or re-financing was being considered or proposed or that a conversation about it resulted in Mr Floropoulos’ ‘coming off’ as a director.
258 Additional but less significant matters arguably further detract from Oliana’s position on this topic but given the conclusion reached above they need not be addressed at length. Briefly, they include: Mr Canzoneri having been the guarantor on the earlier vehicle finance for the Porsche at a time when Mr Floropoulos was and remained a director; the vehicle insurance register document in evidence seemingly not supporting the purchase of any vehicles by Oliana in 2016; and the absence of evidence identifying in any material way the reason for having to consider financing or re-financing of vehicles at the relevant time.
259 I therefore proceed on the basis that Mr Floropoulos’ formal resignation was effective from 26 February 2016 as reflected in the ASIC register but that the evidence does not establish details of the circumstances in which that occurred or the content of the conversations said to have occurred in relation to it. Given the manner in which Mr Floropoulos and Mr Canzoneri dealt with each other and Mr Canzoneri’s evidence, I do consider it to be likely that Mr Floropoulos was aware of the position regarding his reappointment in May 2016, noting also that the working capital finance was secured shortly before Mr Floropoulos was re-registered as a director on 30 May 2016. It was apparent, and I accept, that Mr Canzoneri trusted Mr Floropoulos and that they worked closely together, and I accept Mr Canzoneri’s evidence that Mr Floropoulos knew what was occurring. That said, it remains the position that on the evidence before the court the circumstances and reason why Mr Floropoulos is recorded as having resigned on 26 February 2016, being reappointed on 30 May 2016, and being again recorded as resigning in July 2016 are not established.
260 I turn now to the communications and circumstances surrounding Mr Floropoulos going to Greece to source an alternate supplier of vegan cheese for Oliana, and what counsel for Mr Floropoulos submitted and emphasised was the ‘critical’ Moka Pot Café discussion.
Communications relating to and circumstances surrounding Mr Floropoulos going to Greece to source an alternate supplier of vegan cheese for Oliana to replace MyCo
261 As is apparent from the relevant references earlier in these reasons, there were differences in the evidence of Mr Canzoneri and Mr Floropoulos regarding the communications and circumstances surrounding Mr Floropoulos going to Greece to source an alternative supplier of vegan cheese for Oliana.
262 Whilst both men gave evidence that there were communications about this subsequent to the meeting with Mr Paule on 8 April 2016, their respective accounts of the circumstances and discussions differed. At the substantive heart of the differences was whether in a conversation between Mr Floropoulos and Mr Canzoneri subsequent to the meeting with Mr Paule, said by Mr Floropoulos to have taken place at the Moka Pot Café, Mr Floropoulos said to Mr Canzoneri (in substance) that he was happy to find an alternative supplier for Oliana but that he wanted to get paid; that he was not going to do it for nothing and there had to be something in it for him; and Mr Canzoneri said he had no issue if Mr Floropoulos got paid, that he could get paid from whomever, but that he just wanted Mr Floropoulos to find him the product and get him a better price[121] (alleged Moka Pot Discussion).
263 Although acknowledging that there were numerous discussions between Mr Floropoulos and Mr Canzoneri and that they communicated frequently by telephone and met frequently at the Moka Pot Café, Mr Canzoneri strongly and consistently denied that there was any conversation to the effect alleged by Mr Floropoulos, whether at the Moka Pot Café where they frequently met or elsewhere.[122]
264 The occurrence or otherwise of a conversation to this effect was submitted by counsel for Mr Floropoulos to be ‘critical’ to Mr Floropoulos’ defence, even to the point that during oral closing submissions counsel for Mr Floropoulos stated that if I found against Mr Floropoulos on this issue then ‘... we fail. It’s really down to that ...’.[123] It was also put by Mr Floropoulos’ counsel that if the court found against Mr Floropoulos regarding the occurrence of a conversation where he said to Mr Canzoneri he wanted to get something out of it for himself, ‘it’s but a small step for your Honour to find that he was either a shadow or de facto director’.[124] On the other hand, counsel for Mr Floropoulos submitted that if such a conversation had occurred then, ‘... absent a few kinks ...’ the court should find in favour of Mr Floropoulos.
265 Although it is likely, and is accepted by the parties, that there were communications and discussions that occurred after the 8 April 2020 meeting with Mr Paule and before Mr Floropoulos travelled to Greece to find another supplier of vegan cheese for Oliana, I have concluded that it has not been established on the balance of probabilities that a conversation to the effect alleged by Mr Floropoulos regarding him wanting to get paid or ‘wanting something out of it’ occurred.
266 I am unable to accept the evidence of Mr Floropoulos regarding the content of the conversation he said that he had with Mr Canzoneri in this regard. As I have explained, Mr Floropoulos was not a credible witness and has not demonstrated himself to be a reliable and truthful witness. In the absence of sufficient material corroborating his evidence it is necessary to view his oral evidence with appropriate caution. I add that Mr Floropoulos’ evidence on this topic was again somewhat vague and general and to my observation was not given fluently or naturally, even taking into account Mr Floropoulos’ circumstances and being in a witness box in a court room bringing with it their own challenges.[125] I observe further as follows.
267 There was no documentary evidence supporting the occurrence of a conversation of the kind alleged, or subsequently making reference to the reward or payment of the kind said to have been discussed, as was properly acknowledged by counsel for Mr Floropoulos. This was the position both before Mr Floropoulos travelled to Greece and throughout 2016 and 2017 and thereafter.
268 Mr Floropoulos submitted that the alleged Moka Pot Discussion sat comfortably with and was supported by the discussions said to have been had prior to Mr Floropoulos’ resignation in February 2016. However, for the reasons earlier explained above, these conversations have not been established on the evidence. Even if they had been, the conclusion in relation to the alleged Moka Pot Discussion would not have changed.
269 The fact that there were discussions and communications between Mr Floropoulos and Mr Canzoneri over an extended period in 2016 and 2017, including after the 8 April meeting with Mr Paule, in connection with Oliana’s affairs does not assist Mr Floropoulos on this issue. Not only is there a noticeable absence of any direct or indirect reference to any such conversation or payment or reward, it is plain that Mr Floropoulos consciously did not disclose to Oliana his involvement with Culinary Co, the Kremel Supply Price, the Culinary Co mark-up or its amount, or related matters. These matters tend against any such open conversation of the kind alleged having occurred, as did Mr Floropoulos’ concessions in cross-examination that he would not have happily told Mr Canzoneri of the prices obtained from Kremel and of Mr Canzoneri possibly screaming ‘blue murder’ if he had been informed of it.
270 To this may be added Mr Floropoulos’ agreement in cross-examination that had Mr Canzoneri known what had not been disclosed to him by Mr Floropoulos about the pricing then Mr Canzoneri ‘... would have immediately terminated whatever deal [Mr Floropoulos] had struck with Mr Garakis ...’ and Mr Canzoneri ‘... would have either gone to Mr Garakis himself or some other supplier ...’.[126] Again, this sits in tension with the suggestion that Mr Canzoneri said to Mr Floropoulos that he only wanted to get a better price than he was getting with MyCo and that he was content for Mr Floropoulos to get whatever he could out of it. I address the nature and extent of Mr Floropoulos’ actions and his misleading and deceptive conduct later in these reasons.
271 Aspects of Mr Floropoulos’ evidence also did not make good the allegations made in the further amended defence filed just after the trial commenced, when the alleged Moka Pot Discussion was pleaded for the first time. The particulars alleged, among other things, that Mr Canzoneri had said that ‘he did not care what Bill got from the deal’. However, as Oliana pointed out, Mr Floropoulos did not give evidence to this effect. He referred only to Mr Canzoneri ‘having no issues if I got paid for it’ and saying ‘you can get paid from whoever it is’.[127]
272 Mr Floropoulos’ account also did not sit comfortably with the continued payments and benefits that he and his wife were receiving from Oliana in 2016 and thereafter. In this context it is also to be noted that Mr Floropoulos’ evidence on this topic did not make good the pleaded allegation in the particulars to paragraph 66DA of his further amended defence that Mr Floropoulos said to Mr Canzoneri that ‘... as long as he continued to receive the benefits that were being paid to him, he would try and locate a new supplier ...’. Mr Floropoulos did not give evidence to this effect.[128]
273 It is also the case that, as was submitted, Mr Floropoulos went to great length to conceal his involvement with the control of Culinary Co, including maintaining that position for much of the trial. This sits uncomfortably with the claimed discussion about being entitled to get anything he could out of it, and uncomfortably with the content of the ‘on fire’ text message exchange of 25 February 2016.
274 Attacks were made on the credit of Mr Canzoneri in the context of the resignation and his denial of the alleged Moka Pot Discussion, particularly by counsel for Mr Floropoulos. The issue of Mr Canzoneri’s general credit was addressed earlier in these reasons and need not be repeated. Mr Canzoneri denied that the conversation occurred and I accept his evidence on this topic, which sits comfortably with the matters mentioned above.
275 Mr Canzoneri’s position also sat comfortably with Oliana’s commercial position, its challenges regarding pricing, and the commercial position and relationship with Mr Paule and MyCo. Oliana, Mr Canzoneri and Mr Floropoulos had become aware of the low MyCo Cost Price, and Mr Canzoneri was seeking to achieve the same end. The suggestion that Mr Canzoneri or Oliana would agree to Mr Floropoulos being entitled to be paid whatever he could get from whoever he could is commercially improbable, recognising also that Mr Canzoneri was a person with experience in the industry and commercially motivated. Mr Floropoulos also accepted that Mr Canzoneri would have made his own inquiries if he had been informed by Mr Floropoulos of the pricing deal that Mr Floropoulos had consciously kept from him, which was further supported by documentary and other evidence regarding Mr Canzoneri’s expressed concerns to Mr Floropoulos about not being able to understand why prices similar to those being obtained by MyCo from manufacturers could not be obtained by Oliana through Kremel.
276 As earlier touched on, there was some discussion and debate in the evidence and submissions as to whether, following the meeting with Mr Paule, Mr Canzoneri said he was going to Greece to source a new supplier and Mr Floropoulos volunteered or insisted that he go, or whether during the alleged Moka Pot Discussion a few days later Mr Floropoulos said that he could find suppliers in Greece because he knew people there and Mr Canzoneri said words to the effect of that’s great and asked him to go. Although I do not consider this difference to be of material significance, noting that it was well established that Mr Floropoulos sought to locate and source an alternate supplier on behalf of Oliana, this is an occasion where in the absence of corroborating evidence I prefer the evidence of Mr Canzoneri. Further and in any event, given the somewhat acrimonious manner in which the meeting with Mr Paule finished on 8 April 2016, and Mr Canzoneri’s strong feelings about it, it appears likely that something was at least briefly said by Mr Canzoneri shortly after the meeting about the need to find a new Greek supplier. This conclusion sits well with the circumstances of the meeting with Mr Paule, the relationship with Mr Paule having further deteriorated, the recently acquired knowledge of the MyCo Cost Price, and the commercial desirability and logic in Oliana wanting to source an alternate supply at what were somewhat radically lower prices than Oliana was paying to MyCo if that was possible.
277 In the end however, and given the conclusions ultimately reached in this case, this particular issue or difference is not of great significance. It is clear that Mr Floropoulos was seeking to source an alternate supplier of vegan cheese for Oliana in Greece and even on Mr Floropoulos’ evidence he was doing so at Oliana’s express or implicit request.
278 I move to the question of whether Mr Floropoulos was a de facto director of Oliana. I proceed on the basis that it has not been established that there was a discussion or discussions prior to 26 February 2016 of the kind alleged by Mr Floropoulos or Mr Canzoneri, or a discussion to the effect of the alleged Moka Pot Discussion prior to Mr Floropoulos going to Greece in May 2016.
Was Mr Floropoulos a ‘de facto’ director?
279 Although Mr Floropoulos was not a validly appointed director after 26 February 2016, I have concluded that the plaintiff has established that he continued to be a director of Oliana within the meaning of that expression as used in s 9 of the Act after that date. This is because he acted in the position of a director during that period, thereby satisfying the requirements of paragraph (b)(i) of the definition of ‘director’ — which, as I have said, for convenience I shall refer to as being a de facto director. I elaborate below.
280 It was common ground that Mr Floropoulos was a validly appointed director until he resigned on 26 February 2016. Senior counsel for the plaintiff also accepted that the plaintiff could not establish on the documentary evidence that Mr Floropoulos was validly re-registered as a director again on 30 May 2016, notwithstanding that the ASIC register recorded such an appointment and a further resignation with effect from 6 July 2016. That said, and although the evidence did not establish the circumstances, Mr Canzoneri said that Mr Floropoulos was aware of what was going on and I accept that is at least likely.
281 Although the more detailed circumstances in which Mr Floropoulos’ resignation occurred and the reasons for it have not been established on the evidence, and for present purposes are to be treated as unknown, it has been established that Mr Floropoulos is recorded as having resigned as a director with effect from 26 February 2016. This was evidenced by the ASIC register and the documents prepared by Oliana’s accountants and so much was also accepted by Oliana. It follows that the fact of Mr Floropoulos’ resignation and its timing forms part of the relevant facts and circumstances to be considered when addressing the question of whether Mr Floropoulos was a de facto director of Oliana, and this has been taken into account.
282 As others have observed, whether a person acts as a director involves questions of fact and degree to be considered in the light of the particular circumstances of each case, including the nature and extent of the duties performed by the person in the context of the operations and circumstances of the company in question. I refer to the principles and observations earlier referred to, noting also that this concept of ‘fact and degree’ resonates here and that it is to be kept in mind in the present circumstances.
283 The evidence showed that Oliana was far from a large and sophisticated corporate entity that operated through formal processes, structures, and governance protocols, or a company that operated with formally documented and regular board meetings and procedures. Putting to one side for the moment the period after 26 February 2016, the evidence revealed, and it was largely common ground, that Oliana was a small and unsophisticated proprietary limited company operated and controlled by Mr Canzoneri and Mr Floropoulos largely informally — and at times very casually — as between the two of them in circumstances where the evidence did not reveal the existence of regular structured board meetings, formal board structures, or related or analogous processes.[129]
284 The circumstances in which Mr Floropoulos and Mr Canzoneri met and in which Mr Floropoulos became a director have been earlier referred to. Mr Floropoulos and Mr Canzoneri became good friends and trusted and liked each other. They became very close. They communicated frequently in a variety of informal ways regarding Oliana’s business and operations, including by text, telephone, discussions over coffee, and at times by email. As is not uncommon with many small proprietary limited companies, on a day-to-day basis Oliana operated in a way that more resembled what is sometimes described as a ‘quasi partnership’, with positions and decisions being informally arrived at between Mr Canzoneri and Mr Floropoulos through their frequent communications. The two of them operated as directors of Oliana in a context where Mr Floropoulos kept very irregular hours, spent limited time in his office or elsewhere at Oliana’s premises, and where he travelled frequently — both in relation to Oliana’s business and in connection with other matters and interests. They were the decision makers at the top of the tree and they worked collaboratively in that way. Further, in their role as directors of Oliana, Mr Canzoneri and Mr Floropoulos had some different areas of focus and emphasis. Relevantly, a key role for Mr Floropoulos was linked to sourcing and negotiating with suppliers of products and with customers of Oliana, including supermarkets and other outlets. Mr Canzoneri had more of a management and finance related role.
285 Matters such as these and the other evidence regarding the commercial context, company operations, and the roles and functions performed by Mr Floropoulos and Mr Canzoneri separately and together as validly appointed directors during the period up to 26 February 2016, form part of the relevant circumstances and framework in which to consider the question of whether Mr Floropoulos was a de facto director of Oliana after that date.
286 Having regard to the principles and observations earlier referred to, remaining mindful of the objective nature of the test, recognising that the analysis necessarily involves questions of fact and degree, and having particular regard to the facts and circumstances in question, I accept Oliana’s submission that it has been established on the evidence that Mr Floropoulos acted in the position of a director of Oliana after 26 February 2016 until December 2017. Although settling on a precise end date is not necessary given the conclusions reached in this proceeding, if it had been necessary to pick a time it would be from the date in late December 2017 when Mr Floropoulos sent the text message stating that he would ‘... get on with me life and to shut people up I will now go out on my own and earn a living for my family and look out for them ... I cannot win so I might as well do it for myself’ (de facto director end date). This is also supported by Mr Canzoneri directly contacting Mr Garakis and Mr Hone jointly by his email of 3 January 2018 and Mr Floropoulos’ text message of the same date saying that ‘... I need to get some of my things from the warehouse please’. It is further supported by the payments to Nikki Floropoulos ceasing after 27 December 2017. I draw attention to the following matters, albeit without descending into the detail of the evidence in relation to each of them.
287 As mentioned, Oliana was a small proprietary company that operated with little formality or board and corporate structures or processes, in circumstances where Mr Canzoneri and Mr Floropoulos dealt with each other and the affairs of Oliana prior to 26 February 2016 in an informal and casual way through frequent communications. Generally speaking the evidence demonstrated that this remained the position after 26 February 2016 and during 2017. Not only was this apparent from various aspects of the oral evidence given by each of Mr Canzoneri and Mr Floropoulos, but it was also evidenced by a number of documents relating to the communications between Mr Canzoneri and Mr Floropoulos regarding Oliana’s affairs and other documentary evidence. These included, for example, the many text messages in evidence, that passed between Mr Floropoulos and Mr Canzoneri.
288 Subsequent to February 2016 and continuing through 2017, Mr Floropoulos continued to carry out important supply and customer-related roles for Oliana in a substantively similar way to that which he did beforehand. He also continued to deal with and communicate with Mr Canzoneri in a substantively similar way as he had previously.
289 The continuation of Mr Floropoulos’ important role in relation to supply and customers during the period from February 2016 until at least late December 2017 was also apparent from other evidence, including, for example:
(a) Mr Floropoulos’ continued engagement with key suppliers, including MyCo and Kremel.(b) Various documents created during the relevant period evidencing Mr Floropoulos’ dealings with suppliers, supermarkets and others.
(c) The absence of any communications or announcements to suppliers, supermarkets or other customers regarding a change of position or role of Mr Floropoulos.
(d) Mr Canzoneri’s understanding, which I accept, that Mr Floropoulos continued in his role in relation to Oliana and particularly with respect to supply arrangements and customers.
(e) The absence of any announcements to or communications by Mr Canzoneri, Mr Floropoulos or others to Oliana’s staff regarding any resignation or change of role on the part of Mr Floropoulos, whether due to ill health or otherwise.
(f) The observations of staff of Oliana with whom Mr Floropoulos dealt subsequent to February 2016 that they did not see any change of role on the part of Mr Floropoulos.
(g) The importance and financial significance to Oliana of vegan cheese as a major product line and Mr Floropoulos’ continued engagement in respect of it with Mr Canzoneri and others, and particularly in relation to the challenged position with MyCo and Mr Paule.
(h) The role played by Mr Floropoulos in relation to the pricing issues and concerns of Oliana regarding the supply of vegan cheese by MyCo and Mr Floropoulos’ participation and role in the significant meeting with Mr Paule and Mr Canzoneri in April 2016.
(i) Mr Floropoulos’ central, responsible and significant role in sourcing an alternative supplier of vegan cheese for Oliana in connection with its supply and proposed supply to major supermarkets and others, including Coles and Woolworths and managing that relationship thereafter. The evidence revealed that this was a most significant matter financially and otherwise to Oliana and one in respect of which Mr Floropoulos had considerable autonomy, responsibility, and authority. This was evidenced by, among other things, the nature and extent of the dealings that occurred directly between Mr Floropoulos and Kremel, and in particular Mr Garakis of Kremel. The documentary and other evidence, including text messages from Mr Floropoulos to Mr Canzoneri revealed that this was an ongoing role for Oliana in relation to supply and customers in respect of vegan cheese during 2016 until late December 2017.
290 This ongoing role and function of Mr Floropoulos was further supported by the evidence of Oliana’s Mr Adams and Mr Alexopoulos that to their observation Mr Floropoulos’ role did not change following February 2016 and that, notwithstanding ongoing interaction with him, he never informed them of any resignation or change of position. Further, in the case of Mr Adams, he said, and I accept, that at a point relatively early in the dealings with Kremel he was asked or directed by Mr Floropoulos that communications with Kremel should only be through Mr Floropoulos. Although Mr Adams gave evidence that this was unusual, the evidence revealed that in substance this was complied with and that nearly all communications between Oliana and Kremel were through Mr Floropoulos only — until Mr Canzoneri emailed Mr Garakis and Mr Hone directly expressing his concerns regarding the arrangements and supply from Kremel on 3 January 2018.[130]
291 Mr Floropoulos’ engagement with Mr Wyner and his work with him in relation to Oliana’s business development affairs from April 2016 until Mr Wyner resigned in September 2017 is further evidence supportive of Mr Floropoulos carrying out an ongoing and important senior management role and function for Oliana in connection with suppliers and customers, akin to that which was carried out by him prior to 26 February 2016. In this context it may be noted that Mr Floropoulos made an unsupportable denial that he had previously worked with Mr Wyner in a substantive way regarding Oliana’s business. His statement that Mr Wyner was first introduced to Mr Canzoneri in 2016 by Mr Floropoulos was also incorrect.[131]
292 Mr Floropoulos’ engagement with and supervision of Mr Wyner in 2016 and following was supported by the evidence of Mr Canzoneri (which I accept) that he discussed the appointment of Mr Wyner with Mr Floropoulos prior to his engagement in April 2016, and by the express terms of the written engagement, dated 3 April 2016, a copy of which was also sent to Mr Floropoulos at the time. This comprised an email from Mr Canzoneri to Mr Wyner, copied to Mr Floropoulos. It was headed ‘Service Agreement’ and was in the following terms:
Good Afternoon Robert – I trust that you are enjoying your weekendI am writing to confirm your appointment as a Business Development Manager for Oliana Foods Pty Ltd, commencing tomorrow, 4 April 2016
As discussed your primary objectives will be to introduce new business and to increase product lines with existing clients, throughout the major chain category
As you are well aware, current major chains targets include, but are not limited to
• Woolworths
• Coles
• Cosco
• Domino’s
• Pizza Hut
• Aldi
• KFC
• Nando’s
• Subway
• Crust Pizza
Your firm will be employed for two (2) days per week, to be paid a retainer of $60,000 per year (plus GST), payable every 14 days
A commission of one percent (1%) is payable on net sales with a minimum GP of 15%, with such commission to be payable quarterly Please note that, as discussed, sales from products currently placed throughout Coles are excluded
Insofar as travel, Oliana will supply you an E-Tag for work use and will book and pay for all relevant interstate travel
On a day-to-day basis, you will be responsible to Bill Floropoulos and will report to the Board of Directors on a monthly basis As well as reporting on performance, you will be required to provide strategic advice and to create and implement a plan to facilitate the achievement of your primary objectives
On behalf of Oliana and its directors, we are excited at the opportunities your appointment will provide and we look forward to working with you.
293 As is apparent from the terms of the email, it recorded that Mr Wyner was to be responsible to Mr Floropoulos on a day-to-day basis, to which Mr Floropoulos took no objection. The importance of Mr Wyner’s role in relation to business development is apparent from the terms of the email, further underscoring the significance and senior nature of Mr Floropoulos’ role to whom Mr Wyner was responsible. Thereafter Mr Wyner and Mr Floropoulos engaged frequently and materially in relation to Oliana’s business prior to Mr Wyner’s resignation in September 2017 and such engagement was supported by numerous documents in evidence.
294 To the extent that it was pressed, I do not accept the contention that Mr Floropoulos introduced Mr Wyner to Mr Canzoneri in order to take over Mr Floropoulos’ role so as to allow Mr Floropoulos to step back after his resignation. This was not supported by the evidence and is not consistent with the terms of Mr Wyner’s appointment, or the manner in which Mr Floropoulos and Mr Wyner operated thereafter in relation to Oliana’s business affairs. As I have said, there was in evidence various illustrations of the engagement between Mr Wyner and Mr Floropoulos in relation to important matters of supply and customer arrangements for Oliana, and Mr Floropoulos acknowledged that he was in regular contact with Mr Wyner during 2017. Mr Floropoulos also acknowledged during cross-examination that he never once asked Mr Wyner to stop sending him emails or other communications in relation to Oliana’s affairs. The contention also sits in tension with reporting to Mr Floropoulos on a ‘day to day’ basis.
295 For completeness, I add that, understandably, counsel for Mr Floropoulos did not seek to contend that the supply arrangements in relation to vegan cheese were not an important and financially significant matter to Oliana, or that seeking to continue and develop further relationships with existing and new supermarkets and other customers was not an important and financially material aspect of Oliana’s business at that time. In any event, so much was apparent from the evidence of Mr Canzoneri and the documentary evidence and may be inferred from the terms of the email appointing Mr Wyner and the other documents in evidence in which Mr Canzoneri raised his concerns about risks to such business.
296 Some additional matters that were consistent with Mr Floropoulos having an ongoing role and acting as a director subsequent to 26 February 2016 until at least late December 2017 were:
(a) Mr Floropoulos continuing to describe himself as a director in his signature block when using his Oliana email account.(b) The ongoing receipt of payments from Oliana by Mr Floropoulos and his wife over an extended period.
(c) Mr Floropoulos continuing to have an office at Oliana’s premises until about January 2018.
(d) Ms King’s evidence that at the time she left, in about May 2017, there were still business cards at reception at Oliana’s premises for Mr Floropoulos describing him as a director.
(e) Mr Canzoneri’s evidence regarding the extent of Mr Floropoulos’ authority in relation to negotiating terms with suppliers and customers.
(f) Mr Floropoulos continuing to describe himself on his LinkedIn account as an Oliana director.
297 Further, the evidence revealed that, consistent with the role he was undertaking, Mr Floropoulos was materially and centrally involved in the communications and negotiations with Mr Garakis, Kremel and Oliana in relation to supply for Oliana, and in managing and being responsible for the relationship thereafter. These communications needed to be looked at carefully in the context of all other communications between Mr Canzoneri and Mr Floropoulos. They suggested and convey to Mr Canzoneri that Mr Floropoulos was acting only in Oliana’s interests and on its behalf. However, and as became apparent, communications passing between Mr Hone, Mr Delis and Mr Floropoulos at the same time revealed Mr Floropoulos’ heavy involvement with Culinary Co and his duplicitous approach towards Oliana and Mr Canzoneri in circumstances where it is apparent that such matters were not only not disclosed to Mr Canzoneri but were intentionally kept from him and others at Oliana by Mr Floropoulos. These and other related matters are addressed further below in the context of the allegations of breach by Mr Floropoulos of statutory and fiduciary duties owed to Oliana, and Oliana’s misleading and deceptive conduct claims.
298 Two further examples of documents that are materially consistent with and support the other evidence regarding Mr Floropoulos having and carrying out an ongoing role of importance substantially the same as, or similar to, that which he carried out prior to 26 February 2016 comprise text messages from Mr Floropoulos to Mr Canzoneri at each end of the February 2016 to December 2017 period. The first is dated 25 February 2016, being the day before Mr Floropoulos’ formal resignation was to take effect. The second is a text message nearly two years later, in late December 2017.
299 As Oliana pointed out, the text message of 25 February 2016 recorded the following exchange:
BF: We’re on fireSC: [fire emoji]
BF: It’s good ... time to take Oliana to the next level.
BF: Yes of course
SC: That is correct [thumbs up emoji] together!!
This and other text messages reflected a strong and effective personal and working relationship together in relation to each other and the business of Oliana. Mr Floropoulos accepted that this was an illustration that fairly characterised his relationship with Mr Canzoneri at the time.[132] Consistent with the evidence of Mr Floropoulos having an ongoing and important role subsequent to February 2016 as referred to above, the text does not sit comfortably with Mr Floropoulos stepping away or going out on his own.
300 As earlier referred to, apart from the resignation as recorded in ASIC documentation there was no substantive or material documentary evidence showing that Mr Floropoulos in any way disclaimed, was stepping back from, or no longer was prepared to be responsible for his role regarding Oliana’s business throughout 2016 and 2017 until late in December 2017. By this time tensions had been rising in relation to Mr Canzoneri’s concern about supply, account reconciliation, and payments with respect to the alternate vegan cheese supply, as was reflected in text messages and other communications from Mr Canzoneri at the time. At this stage he was not aware of Mr Floropoulos’ involvement with Culinary Co or the undisclosed imposition of a margin on the Kremel Supply Price. In one of these exchanges, in late December 2017, Mr Floropoulos sent a text message to Mr Canzoneri in the following terms:
There has been a lot of talk behind my back about me doing things when I have not done anything. So my conclusion is the best way forward for you guys to deal direct with Peter and Ian. Greece has asked it to be like this.I have to get on with my life and to shut people up I will now go out on my own and earn a living for my family and look out for them ... I cannot win so I might as well do it for my self.
301 This text, nearly two years after February 2016, is referring to Mr Floropoulos stepping away from Mr Canzoneri and Oliana at that time which, it may be emphasised, is December 2017. This contemporaneously stated position by Mr Floropoulos sits in tension with his evidence that he had previously told Mr Canzoneri that he wanted to step away and do his own thing in late 2015 or February 2016, and in tension with Mr Floropoulos’ position regarding the alleged Moka Pot Discussion.[133] Further, it is also consistent with and supportive of Mr Floropoulos having continued with his role and functions for Oliana. In this context one might ask rhetorically: if Mr Floropoulos was already out on his own and working independently from Oliana, why would he be stating in December 2017 that he would then ‘... go out on [his] own and earn a living ...’ and that ‘... [he] cannot win so [he] might as well do it for [himself]’?
302 It also appears that he proposed to act on his December 2017 stated intention, as was supported by his text message to Mr Canzoneri of 3 January 2018 in which he indicated that he wanted to get ‘... some of my things from the warehouse please’.
303 That said, the conclusion reached regarding Mr Floropoulos being a de facto director would not have changed even absent one or more of these text messages. This is because having regard to the facts and circumstances, including the matters referred to above, Oliana has established that Mr Floropoulos acted in the position of a director during the period from 26 February 2016 until the de facto director end date.
304 In reaching the conclusion that Mr Floropoulos was a de facto director of Oliana it was also necessary to consider the circumstances in context as I have, including the various matters and submissions raised by counsel for Mr Floropoulos. In determining this issue and having regard to questions of fact and degree, such matters have been weighed in the balance. Briefly, they include the following:
(a) The periods during which Mr Floropoulos was absent from Australia in the United States, Greece and elsewhere.(b) The evidence relating to the ASIC records recording Mr Floropoulos as having been reinstated on the register as a director between 30 May and 6 July 2016, and the fact that it was not established on the evidence that Mr Floropoulos was validly reinstated as was accepted by Oliana.
(c) The contention that Mr Floropoulos did not act in the position of a director of Oliana and was only undertaking occasional tasks on an ad hoc basis in a manner materially different to that which had occurred before. I do not accept this submission and refer to the reasoning above and the manner in which Mr Floropoulos previously carried out his role, noting also that his pattern of work whilst he was formally appointed a director was irregular with limited presence in the office and substantial overseas travel. I refer also to the evidence of Mr Adams, Mr Alexopoulos and Ms King about not perceiving or hearing about any change of role for Mr Floropoulos.
(d) My conclusions in relation to the resignation discussions, the alleged Moka Pot Café Discussion, and the appointment of Mr Wyner and Mr Floropoulos’ ongoing role in relation to the same.
(e) The submission that Mr Floropoulos had little to do with the negotiating of the distribution agreement with Culinary Co and Kremel, which I do not accept. As is apparent from the ‘Background’ section above and is explored in more detail later in these reasons, the evidence demonstrated that Mr Floropoulos had a consistent and material role in relation to the exclusive distribution agreement, as was apparent from the evidence regarding matters of pricing and some other terms, including the minimum quantities. These matters were underscored by the text exchanges between Mr Floropoulos and Mr Canzoneri, albeit also revealing aspects of Mr Floropoulos’ untruthful dealings with Mr Canzoneri and Oliana. This untruthfulness was properly acknowledged by Mr Floropoulos’ counsel in exchanges during closing submissions. That is not to deny that Mr Canzoneri’s son, Michael Canzoneri, was the solicitor assisting and was materially involved in the drafting of the document for Oliana. This is further addressed in the context of the misleading conduct allegations later in these reasons.
(f) The competing evidence regarding the access to the Oliana online banking via electronic means that it was said Mr Floropoulos had. In this context I accept that it was not established that Mr Floropoulos accessed the bank accounts, noting also Ms King’s evidence regarding her seeking approval from Mr Canzoneri in relation to payments. Although I am satisfied that it was at least likely that Mr Floropoulos possessed the ability to access at least the bank account details, the evidence as to whether he knew that or not was somewhat equivocal and I accept that it was not established that he did, or that he in fact accessed the bank accounts.
(g) The limited and somewhat unsatisfactory evidence of Mr Floropoulos regarding the provision of ongoing benefits earlier referred to, and such evidence sitting in tension with aspects of the recently pleaded particulars of the conversation said to have occurred between Mr Floropoulos and Mr Canzoneri.
(h) The limited and very general references in Mr Floropoulos’ evidence to retention of benefits being in connection with a loan said to have been made by his parents to Oliana, which sat in tension with the particulars to paragraph 66DA of his further amended defence and other evidence regarding those benefits.[134] In this regard it was common ground that the court was not in a position to and should not seek to determine whether there was or was not a loan between Oliana and Mr Floropoulos’ parents, who were not parties to the proceeding, noting also that the existence of any loan of this type was strongly denied. In any event, had it been necessary to determine it, the limited evidence before the court would not have established the existence of such a loan, or even if it had, what the current position was in relation to it. As earlier mentioned, I am satisfied that it is also the position that the text messages in November 2016 from Mr Floropoulos to Mr Canzoneri did refer to Mr Floropoulos’ father being involved with the exclusive distribution contract, although whether that was true or not is a different matter.
305 As I have said, and mindful of the principles and observations earlier referred and the particular circumstances in question, I have concluded that the plaintiff has established during the period from 26 February until late December 2017 Mr Floropoulos was a ‘director’ of Oliana because he acted in the position of a director during that period, thereby satisfying the requirements of paragraph (b)(i) of the definition of ‘director’ in s 9 of the Act.
306 Even if there had been doubt about Mr Floropoulos still acting as a director immediately after the resignation on 26 February 2016, the date would have been no later than 3 April 2016, which it will be recalled was the date upon which Mr Wyner was retained to report to Mr Floropoulos on a day to day basis in relation to the important matters referred to in the email of that date. This is also supported by Mr Floropoulos’ involvement with the important meeting with Mr Paule and all that followed thereafter, remembering that it has not been established on the evidence that the alleged resignation discussions or alleged Moka Pot Discussion occurred.
307 As it happens the conclusion reached sits comfortably with the understandable position taken by counsel for Mr Floropoulos. As earlier mentioned, in closing submissions counsel frankly but responsibly stated that if the court was not satisfied that the alleged Moka Pot Discussion occurred then Mr Floropoulos’ defence would fail and that it would be open to conclude that Mr Floropoulos was either a shadow or de facto director at that time, which would be ‘but a small step’. It was apparent that this observation was particularly linked to the role Mr Floropoulos was taking on in relation to the sourcing of an alternate vegan cheese supplier in the context of the resignation on 26 February 2016, and was focused on the period after the discussion with Mr Paule on 8 April 2016 rather than the period between February and April 2016.
Was Mr Floropoulos a shadow director of Oliana?
308 Although brief written submissions were made on behalf of Mr Floropoulos on this topic, it is not necessary to address it. If Oliana was originally pursuing such a claim, senior counsel for Oliana made plain that it was not being pressed. If the issue had fallen for determination Oliana would not have succeeded because the statutory criterion was ill-fitting given the circumstances, and the evidence did not establish that ‘the directors of [Oliana] were accustomed to act in accordance with [Mr Floropoulos’] instructions or wishes’ in the manner explained in the authorities.
Was Mr Floropoulos an ‘officer’ of Oliana?
309 Having determined that Mr Floropoulos was a director of Oliana, it is clear that he was also an ‘officer’ of Oliana within the meaning of that expression as used in s 9 of the Act. This is because the relevant definition expressly includes a director of a corporation as an officer.
310 That being so — and because I have determined that Mr Floropoulos was a director of Oliana — it is not strictly necessary to address or reach a conclusion in relation the question of whether Mr Floropoulos was an officer by reason of the operation of paragraphs (b)(i) or (b)(ii) of the definition of ‘officer’. However, in deference to the short submissions made on the issue by the parties I briefly state my conclusion and reasons for the same below, noting in this context that the parties largely relied upon the same submissions regarding factual matters as they did in relation to the de facto director issue.
311 Even if Mr Floropoulos had not been determined to be a de facto director of Oliana, having regard to the matters earlier referred to and the principles and observations addressed above in relation to the meaning of ‘officer’, I would have concluded that Oliana had established that Mr Floropoulos was an officer of Oliana. The statutory criteria in paragraph (b)(i) of the definition of officer were satisfied because Mr Floropoulos was at the relevant time ‘a person who makes, or participates in making, decisions that affect the whole or a substantial part, of the business of the corporation’.
312 The role of Mr Floropoulos in the company has been earlier referred to. It could hardly have been in dispute that the matters that Mr Floropoulos was closely involved with regarding supply and distribution arrangements were matters relating to the whole or a substantial part of the business of Oliana. Understandably, no material submission was put to the contrary. In any event, so much was established on the evidence.
313 Further, the manner in which Mr Canzoneri and Mr Floropoulos dealt with each other and worked together as Oliana’s decision-makers and the most senior persons in the business of Oliana was readily apparent, and it was clear that Mr Floropoulos was at least a person who, through his management role and responsibilities, participated in making decisions that affected the whole or a substantial part of the business. In substance, the evidence presented a clear picture of Mr Canzoneri and Mr Floropoulos together sharing the top level management roles in this small private company and of being the people who made or participated together in making the decisions that affected the whole or substantially the whole of the business of the company. Although directing attention to the role of the person in the decision making is central, the analysis is also informed by reference to the decisions in which the person makes or participates in making. In this case there were various illustrations where it was clear that Mr Floropoulos had an influential role in the decision making, and that he and Mr Canzoneri together were the decision makers.
314 The decisions of the calibre in question include the decision made in connection with seeking an alternate supplier to Mr Paule. The decision to obtain supply from Kremel is also an example, as is establishing the price that was to be paid to Kremel, albeit this became somewhat clouded by the deceptive conduct of Mr Floropoulos in his dealings with Mr Canzoneri. A further example is Mr Floropoulos’ participation with the terms of the Culinary Co distribution agreement, particularly as to price. Another illustration relates to the decision making regarding supply and distribution terms and arrangements with supermarkets, as the appointment letter of Mr Wyner and the dealings thereafter evidence.
315 It will be apparent from the above, and that which has been said in the context of the de facto director issue, that I do not accept Mr Floropoulos’ submission that he was not at the relevant times involved in the management of Oliana, noting also that this is not the sole touchstone in any event.
316 Given the conclusions above, it is not strictly necessary to address Oliana’s submissions regarding paragraph (b)(ii) of the definition of ‘officer’, noting also that such submissions were more lightly put, with Oliana’s focus being more directed to the statutory criteria in paragraph (b)(i) of the definition. However, it was also established that Mr Floropoulos was a person who had the capacity to affect significantly Oliana’s financial standing. This was not only apparent from his senior management role and involvement in his decision, but also from the significance of the MyCo vegan cheese products to Oliana, which was apparent from the amounts involved, and Mr Canzoneri said as much, including that it was a significant part of its food range and bottom line. Having regard to Mr Floropoulos’ role regarding Kremel and Oliana and his roles and responsibility more generally, including overseeing Mr Wyner in relation to supermarket and other business development, it is well established that he was a person who had the capacity to affect significantly Oliana’s financial standing — which, incidentally, he did. I refer also in this context to the earlier observation from ASIC v King regarding smaller companies, as Oliana was.
317 It follows that Mr Floropoulos also satisfied the requirements of paragraph (b)(ii) of the definition of ‘officer’.
318 With respect to the period in question, my conclusions with respect to the period of Mr Floropoulos being a de facto director apply equally. Further, even if I had not determined that Mr Floropoulos was a de facto director, I would have determined that he was an officer in any event, and for the period from 26 February 2016 until the de facto director end date. If I am wrong about the commencement date, then it would have been from at least 3 April 2016 for the same reasons as earlier addressed.
Breach of Statutory duty claims against Mr Floropoulos
319 The issues here were stated by the parties to be:
(a) Whether between March 2016 and January 2018, Mr Floropoulos owed statutory duties to Oliana under ss 180(1), 181(1), 182(1), or 183(1) of the Act.(b) If such duties were owed, whether Mr Floropoulos breached any of those duties (and if so how) by:
(i) his dealings with Kremel;(ii) his dealings with and/or his interest in Culinary Co; and/or
320 Sections 180(1), 181(1), 182(1) and 183(1) impose a number of statutory duties on directors and other officers. The duties in ss 182(1) and 183(1) also apply to employees of a corporation, although this is not relevant for present purposes.
321 There was no dispute between the parties regarding the principles applicable to and the operation of the statutory provisions in question. The relevant principles for these statutory duties were recently addressed in United Petroleum Australia Pty Ltd v Herbert Smith Freehills (‘United Petroleum’),[135] and it is convenient to draw upon these observations when addressing each of the relevant provisions, as I do when considering the different duties below.
Was Mr Floropoulos subject to the statutory duties and obligations?
322 The short answer to this question is yes.
323 It was common ground that for the period that Mr Floropoulos was validly appointed as a director, or is otherwise found to have been a director or officer within the meaning of those expressions in the Act, he was subject to the relevant duties under the sections referred to.
324 Sections 180, 181 and 182 of the Act apply to a director or other officer of a corporation[136] and Mr Floropoulos was a director and officer of Oliana during the period earlier referred to. Consequently Mr Floropoulos was subject to the statutory duties and obligations in ss 180, 181 and 182 of the Act during that period.
325 The obligation in s 183 of the Act applies to ‘... a person who obtains information because they are or have been a director or other officer or employee of a corporation ...’, and Mr Floropoulos is such a person. As is apparent from the terms of this section, its reach extends beyond the period that one remains a director or officer, which was not controversial. It was not in dispute that the prohibition in s 183(1) regarding improper use of information by a director or officer or former director or officer of a company extended to Mr Floropoulos after 26 February 2016, even if he was not found to be a director or officer of Oliana after that time.
Did Mr Floropoulos breach the statutory duties as alleged?
Oliana’s submissions
326 Although considerable territory was traversed in the evidence, in closing submissions the focus of Oliana’s statutory breach of duty claims narrowed. The nub of the conduct relied upon by Oliana for the purposes of its claims under ss 182 and 183 was said to be that Mr Floropoulos arranged for Oliana to be supplied with Kremel products, via the company Culinary Co, which he interposed between Kremel and Oliana in order to artificially inflate the supply charges paid by Oliana for his own benefit. It was said that, having diverted the Kremel supply opportunity to Culinary Co, a company in substance controlled by Mr Floropoulos, Mr Floropoulos then used his position as the officer responsible for conducting and overseeing all dealings with Kremel, and the knowledge he had acquired as a director or officer of Oliana regarding Oliana’s requirements, overheads and profit margins relating to the supply of vegan cheese products, to conceal the true nature of his dealings with Kremel and Culinary Co.
327 It was submitted that Mr Floropoulos acted in this way to bring about a situation where Oliana repeatedly ordered Kremel products via Culinary Co as Kremel’s supposed Australian subsidiary or representative, and so that each time Oliana paid for the product it did so at a substantial concealed mark-up to its true cost. Oliana submitted that it was Mr Floropoulos who effectively used that mark-up for his own purposes by his diversion of in excess of $910,000 from Culinary Co’s bank account.
328 Oliana referred to various aspects of the evidence relating to Mr Floropoulos’ dealings with Kremel, Culinary Co, and Mr Hone, and submitted that its claim against Mr Floropoulos for breach of statutory duties was both strong and straightforward. In concluding its written closing submission on this aspect, Oliana’s case was expressed as follows:
(a) Oliana’s case under ss 182 and 183 is simple. It was by the use of information Mr Floropoulos acquired as a director, officer, or employee of Oliana (namely, the true Kremel price, and the price at which Oliana’s previous supplier MyCo had been supplying Oliana) and/or by the use of his position (namely, as the director or officer in charge of Oliana’s relationship with Kremel) that Mr Floropoulos was able to interpose Culinary Co and artificially inflate the supply charges paid by Oliana for his own direct benefit and to the detriment of Oliana. Even if his false case was accepted that as a fact he ceased to be an officer of Oliana after 26 February 2016, he still used the information he had learnt prior to that time as to the MyCo prices and the Oliana sales margins to fix the prices charged by Culinary Co and to thereby directly benefit himself and Culinary Co to the severe detriment of Oliana.(b) This conduct could never amount to an exercise of powers and discharging of duties with the degree of care and diligence of a reasonable person in Mr Floropoulos’ position as required by s 180 of the Act to fail to disclose the substantial mark-up arising from the artificially inflated price, to fail to disclose his interest in Culinary Co and his dealings with Mr Hone, and in doing so, cause substantial commercial harm to Oliana.
(c) And it could never have been an act in ‘good faith in the best interests’ of Oliana as required by s 181 of the Act, either assessed objectively or subjectively, for Mr Floropoulos to interpose Culinary Co to artificially inflate the supply charges paid by Oliana for his own direct benefit, and later to approach Woolworths with the intention of competing with Oliana in the supply of Kremel products.
(d) By reason of the foregoing, Oliana contends that Mr Floropoulos contravened each of ss 180, 181, 182 and 183 of the Act.
Mr Floropoulos’ submissions
329 The primary focus of Mr Floropoulos’ defence to the breach of statutory duty claims was that after his resignation on 26 February 2016 he was no longer an officer or director of Oliana. For the reasons earlier referred to, that defence has not succeeded.
330 Only limited alternative submissions were addressed to the question of breach. Given the primary defence and the circumstances revealed by the evidence, this was an understandable position to take and one which sat comfortably with statements made by counsel for Mr Floropoulos regarding the likely outcome if the primary defence was not successful.
331 That said, Mr Floropoulos did make the following submissions:
(a) Except for the obligations imposed by s 183(1) of the Act, the other statutory obligations ceased to apply upon Mr Floropoulos’ resignation in February 2016 and there was no allegation of breach prior to that time.(b) Section 183(1) provides that a person who obtains information because, relevantly, they have been a director or officer of a corporation must not improperly use the information to gain an advantage for themselves or someone else, or cause detriment to the corporation. Mr Floropoulos did not obtain any relevant information during his time as a director that he improperly used to gain an advantage for himself, or relevantly Culinary Co, to the detriment of Oliana. In this context it was submitted that the relevant information was the detail of the MyCo Cost Price.
(c) The discovery of the MyCo Cost Price led to the ‘pivotal’ meeting with Mr Paule on 8 April 2016. It is to be inferred that this meeting occurred soon after the MyCo Cost Price was discovered and not ‘early 2016’ as was Mr Canzoneri’s evidence. It was submitted that this evidence was contrived to fix the date of the discovery prior to Mr Floropoulos’ resignation in February 2016, when the more likely scenario and inference that should be drawn is that the discovery occurred after Mr Floropoulos resigned and not long before the April 2016 meeting.
(d) Subsequent to the 8 April 2016 meeting with Mr Paule, Mr Floropoulos used his own contacts and initiative to source Kremel as a supplier in circumstances where he had not gained the knowledge of the MyCo Cost Price whilst a director or officer of Oliana. The only real information acted upon was the newly obtained information regarding the MyCo Cost Price, which was obtained whilst Mr Floropoulos was not a director.
(e) Oliana secured a 25% to 30% reduction in the price of the purchase of vegan cheese through the arrangements with Kremel and Culinary Co, which reduced price went to Oliana’s bottom line profit. Accordingly, Oliana suffered no detriment through the use of any information obtained by Mr Floropoulos.
(f) Putting to one side the issue of informed consent, s 183(1) was not engaged because the information did not come to Mr Floropoulos because he had been a director or other officer of Oliana, but it came to him from Mr Canzoneri or possibly Mr Adams.
332 Mr Floropoulos further submitted that if he was found to have been a director of Oliana he was entitled to the benefit of clause 57 of Oliana’s Constitution. This clause, so it was submitted, absolved directors of any liability to account to Oliana for transactions in which they have an interest when they have observed the provisions of the law relating to the declaring of their interests in contracts or proposed contracts, or of any office or property held, which might create duties or interests in conflict with their duties or interests as a director. In this context, Mr Floropoulos submitted that he did make sufficient disclosure of his intention to obtain a benefit through any successful sourcing of an alternative supplier and thereby disclosed his interest in any such arrangement, and that Mr Canzoneri expressly consented to this approach during the alleged Moka Pot Discussion.
Consideration – breach of statutory duties
333 Substantial parts of Oliana’s submissions addressed the alleged breaches of statutory duty in a somewhat rolled up or collective fashion, although it was apparent that this approach was taken because it relied upon essentially the same underlying conduct for each alleged breach of statutory duty. After addressing that alleged conduct below, I turn separately to consider each of the provisions relied upon.
Conduct of Mr Floropoulos said to give rise to breaches of statutory duty
334 What was described as the nub of the conduct relied upon in this context was referred to above when addressing Oliana’s submissions. That conduct was also relied upon in relation to the alleged breaches of fiduciary duty addressed later in these reasons.
335 I am satisfied that Oliana established on the evidence that the conduct at the heart of its breach of statutory duty allegations occurred. In being so satisfied of these and the other matters in this case that I have found to be established, the matters taken into account have included those referred to in s 140(1) and (2) of the Evidence Act 2008 (Vic), including the gravity of the matters alleged.[137] Among other things, the evidence established the following:[138]
(a) Mr Floropoulos had been in a senior and material role in relation to supply arrangements for Oliana for many years and possessed considerable experience in this area, and even more so in the context of Greek supplies.(b) Mr Floropoulos and Mr Canzoneri worked closely together in the way earlier described. Mr Canzoneri was a formally appointed director of Oliana and he trusted Mr Floropoulos and Mr Floropoulos knew that.
(c) Mr Floropoulos had materially relevant and specialised knowledge in this context. Among other things he knew: the financial and related importance to Oliana of obtaining an alternate supply of vegan cheese; the challenged and precarious nature of the relationship with Mr Paule and MyCo; the prices charged by MyCo to Oliana for vegan cheese; the MyCo Cost Price from at least shortly before the meeting with Mr Paule on 8 April 2020; that Mr Canzoneri wanted to see if comparable prices could be obtained for Oliana from an alternate supplier or manufacturer in Greece by approaching them directly; and of the pricing and arrangements Oliana had with supermarkets and others in relation to the supply and sale of vegan cheese products.
(d) Mr Floropoulos was undertaking the task of identifying and seeking to secure an alternative supplier of vegan cheese on behalf of Oliana and he accepted[139] that he knew that Mr Canzoneri was relying on him and trusting him when he went to Greece in May 2016 to find a replacement supplier.[140]
(e) Prior to leaving for Greece and earlier in May 2016, Mr Floropoulos had already decided to set up Culinary Co, had obtained advice from Mr Delis, and had given instructions to Mr Delis and Mr Hone to do so. Culinary Co was registered on 20 May 2016. This was not disclosed to Mr Canzoneri or anyone else at Oliana.
(f) Even though Mr Floropoulos had the knowledge referred to above and was undertaking the task of seeking to source an alternate direct supplier for Oliana in Greece, as Mr Floropoulos acknowledged during cross-examination, it was always Mr Floropoulos’ intention (undisclosed to Oliana or Mr Canzoneri) that when he found a supplier he was going to interpose Culinary Co as an intermediary between Oliana and the supplier. Mr Floropoulos ‘never once mentioned’ to Mr Canzoneri through 2016 or 2017 that he had any role or interest in Culinary Co.[141] He maintained this position for parts of the trial, but ultimately conceded in cross-examination the true nature and extent of his substantial involvement and control.
(g) In Greece in late May 2016 Mr Floropoulos identified Kremel as the alternate supplier for Oliana and negotiated very good supply pricing from Kremel (being the Kremel Supply Price) but did not disclose it to Mr Canzoneri or provide a copy of the Kremel price list to him.[142]
(h) Keeping in mind the findings in relation to the resignation discussions and the alleged Moka Pot Discussion, at no time was it ever discussed, agreed to or authorised by Oliana that Culinary Co could be set up or receive or retain any profits or benefits from the supply of vegan cheese products from Kremel. For completeness, I add that even if it had been established that conversations of the kind alleged had occurred, such conversations would not have established that there was any discussion, agreement or authorisation of Culinary Co being established, being interposed, or being entitled to receive or retain profits or benefits from the supply of vegan cheese products by Kremel — or about Mr Floropoulos not disclosing the Kremel Supply Price.
(i) Mr Canzoneri proceeded on the (incorrect) understanding that Culinary Co was Kremel owned, or a representative of Kremel, and that Mr Floropoulos was at all times acting for Oliana and in its interests in the dealings with Kremel and Culinary Co. He was unaware of Mr Floropoulos’ role and involvement with Culinary Co and of the existence or amounts of or the Kremel Supply Price obtained by Mr Floropoulos from Kremel.
(j) Having not disclosed the Kremel Supply Price to Mr Canzoneri or anyone else at Oliana, Mr Floropoulos instructed Mr Hone what prices to insert in the initial invoices given to Oliana for Kremel vegan cheese products, and later the distribution agreement. This occurred in circumstances where at that time Mr Floropoulos had the pricing and other knowledge regarding Oliana earlier referred to.
(k) Unbeknown to Mr Canzoneri or anyone else at Oliana, the Culinary Co Supply Price to Oliana inserted in the invoices and the distribution agreement on Mr Floropoulos’ instruction were significantly higher than the Kremel Supply Price, including as they did very large mark-ups determined by Mr Floropoulos — but not disclosed to Mr Canzoneri or anyone else at Oliana above the Kremel Supply Price. These were reflected in the invoices and related documents and apparent from the Oliana Payments Schedule.
(l) On each occasion that Kremel vegan cheese products were supplied to Oliana and paid for by Oliana through Culinary Co, Culinary Co received a substantial mark-up. Mr Floropoulos ultimately accepted, that by December 2017 Oliana had paid nearly $2 million for products where they would have paid in the order of $500,000 for such products if Oliana had been paying the Kremel Supply Price that Mr Floropoulos had not disclosed. The detailed figures are set out in the Oliana Payments Schedule, and the defendants did not ultimately contest the accuracy of those details.
(m) Mr Floropoulos believed that Mr Canzoneri would possibly have screamed ‘blue murder’ if he knew about the Kremel Supply Price and, as he conceded in cross-examination, he believed that Mr Canzoneri would have immediately terminated whatever deal that had been struck with Mr Garakis and gone to Mr Garakis himself or some other supplier.
(n) Although Culinary Co was established with Mr Hone recorded as its sole director and shareholder, Mr Floropoulos had access to and control of the Culinary Co bank accounts, including the ability to make withdrawals and transfers. As was apparent from the evidence, and Mr Floropoulos ultimately acknowledged during cross-examination, Mr Floropoulos was the person who was effectively in full control of Culinary Co,[143] although this was not known to Mr Canzoneri.[144]
(o) Mr Floropoulos acknowledged in cross-examination that he benefited to the tune of $920,000 from the approximately $1.2 million of Culinary Co’s gross profit received through Oliana. Mr Hone and Mr Delis may also have benefited although whether that was so or the extent of such benefits was not clearly established on the evidence.[145] The movements and transfers in the bank accounts were as reflected in the Culinary Co bank statements, the details of which need not be set out here. No amounts were paid to Oliana.
(p) From at least about September 2017 Mr Floropoulos was seeking to introduce Culinary Co as a direct supplier to Woolworths and in December 2017 Mr Floropoulos signed a new vendor form with Woolworths on behalf of Culinary Co. This was not disclosed to Mr Canzoneri or Oliana. Although Mr Floropoulos denied that this included vegan cheese products, I do not accept that evidence, noting also that it is not material to the conclusions I have reached in any event, and that it sits in tension with some of the documents including Culinary Co’s lawyer’s letter to Kremel of 8 March 2018.
336 With these matters in mind I return to the particular statutory provisions said to have been breached, addressing ss 183 and 182 of the Act first, before ss 181 and 180.
Section 183 — No improper use of information
337 Section 183(1) of the Act provides:
(1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:
(a) gain an advantage for themselves or someone else; or(b) cause detriment to the corporation.
338 In United Petroleum, Elliott J described the relevant principles for the application of s 183(1) as follows:[146]
647. The elements for contravention of s 183 “in chronological order” are as follows:[147]
(1) The person was, at the relevant time, a director, officer or employee of the corporation.(2) The person acquired the relevant information.
(3) She or he acquired that information by virtue of the position as a director, officer or employee of the corporation.
(4) She or he made improper use of that information in order to gain directly or indirectly an advantage.
(5) Such advantage was either for her or himself or for some other person.
(6) Alternatively to (4) and (5), that she or he made that improper use to cause detriment to the company.
648. Section 183 involves the misuse of information, rather than a director’s position, and requires the same proscribed purpose and the same impropriety as s 182.[148]649. Although breach of confidence may fall within the reach of s 183,[149] the issue is not whether the information is confidential, but how it was acquired. The question is whether the information was acquired by virtue of being a director, officer or employee.[150]
339 As is apparent from Elliott J’s observations and the authorities to which he referred, the court applies an objective standard when determining whether there has been a breach of s 183(1),[151] and s 183 involves the same proscribed standard and the same impropriety as s 182. These matters are elaborated on in the next part of these reasons when addressing s 182.
340 I am satisfied that Oliana has established that Mr Floropoulos breached s 183(1) by improperly using information obtained because he was a director or officer of Oliana to gain an advantage for himself, and for another, and to cause detriment to Oliana.
341 Mr Floropoulos was a formally appointed director until 26 February 2016 and, as I have determined, was a de facto director and officer thereafter. Relevantly, the information Mr Floropoulos acquired because he was a director or officer (Oliana Information) included:
(a) the MyCo Supply Price to Oliana, which information was gained before February 2016;(b) Oliana’s profit margins on its vegan cheese products supplied by MyCo, which information was known prior to February 2016; and
(c) the MyCo Cost Price, which information was acquired after 26 February 2016 but before the meeting with Mr Paule on 8 April 2016.
342 The Oliana Information was acquired because Mr Floropoulos was a director and officer of Oliana, which he had been since 2011. As a director and officer of Oliana, a small proprietary limited company, Mr Floropoulos had been the person responsible for and heavily involved with the supply arrangements regarding vegan cheese and other products. It was said that he also had particular responsibility in relation to Greek products. Had he not been a director he would not have been in that role or acquired the Oliana Information, noting in this regard the evidence of Mr Canzoneri as to how Mr Floropoulos came to join Oliana as a director, which I accept. It was because of his role as director and officer — including after 25 May 2016 when he negotiated and obtained the Kremel Supply Price — that he acquired the Oliana Information. Indeed, putting the period after 26 February 2016 to one side for the moment, it was not suggested or submitted that such knowledge as was acquired before then had been acquired by Mr Floropoulos for any reason other than because he was a director or officer of Oliana.
343 With respect to the timing of the receipt by Mr Floropoulos of the Oliana Information regarding the MyCo Cost Price, it was submitted by Mr Floropoulos that it should be inferred that such information came to Mr Floropoulos after 26 February 2016 and most likely shortly before the meeting. I accept the substance of this submission, which by the time of closing submissions was not a matter of great controversy.
344 The limited evidence that there was on the topic did not establish that the information became known to anyone prior to 26 February 2016. Mr Canzoneri did not give direct evidence as to the date but said ‘yes’ in response to a leading question in evidence in chief as to whether ‘in early 2016’ Oliana received a delivery of MyLife products that contained some paperwork that included details of the MyCo Cost Price. What was meant by early 2016 was not clear. Mr Canzoneri was not asked when it was received, the documents in question were not in evidence, and neither Mr Adams nor Mr Alexopoulos gave evidence on the topic clarifying the position. I do not accept that such evidence was contrived or designed to put the date before 26 February 2016, which such evidence would not necessarily have done anyway.
345 The upshot is that it was not established that the MyCo Cost Price information was received prior to 26 February 2016. Given how significant the information was to Oliana, Mr Canzoneri, and Mr Canzoneri’s evidence about Mr Floropoulos stating that he was ‘feeling sick in the stomach’ to think Mr Paule ‘would do that to us’, there is also force in the submission that it is likely to have been closer to the meeting with Mr Paule on 8 April 2016, although precisely when that was cannot be determined on the evidence, but that does not matter. It is clear, and it was common ground, that Mr Floropoulos did have the information about the MyCo Cost Price prior to the meeting with Mr Paule on 8 April 2016.
346 Given the findings that I have made regarding Mr Floropoulos remaining a director and officer this conclusion regarding timing is, in the end, of little moment. And as I explain below, it ultimately would not have been determinative any way because of the other Oliana Information previously acquired by Mr Floropoulos.
347 Mr Floropoulos made improper use of at least the information regarding the MyCo Supply Price; the MyCo Cost Price; and the Oliana profit margins for the purpose of gaining an advantage for himself and Culinary Co and to cause detriment to Oliana. Even if the MyCo Cost Price information were to be put to one side, it was not in dispute (and was established on the evidence) that he was aware of the MyCo Supply Price and Oliana profit margin information before 26 February 2016.
348 Having regard to the matters and circumstances referred to above, it may be inferred that the above information regarding the MyCo Cost Price, the MyCo Supply Price, and the Oliana profit margin information was used by Mr Floropoulos to assist him in obtaining the Kremel Supply Price and to determine, set and charge the Culinary Co Supply Price for Oliana, that Mr Floropoulos knew were cheaper than the prices Oliana was being charged by MyCo, but which Mr Floropoulos also knew were significantly higher than the Kremel Supply Price that Mr Floropoulos had secured but not disclosed to Mr Canzoneri or others at Oliana.
349 It is plain that this was directed at securing a financial advantage for Culinary Co and Mr Floropoulos flowing from the substantial interposed undisclosed marked–up Culinary Co Supply Price determined by Mr Floropoulos without the knowledge of Mr Canzoneri. That was to benefit Mr Floropoulos and Culinary Co, as indeed the evidence showed occurred. In so doing, Mr Floropoulos was implementing an undisclosed design that he conceded in cross-examination that he had always intended on doing from at least some time in May 2016 before he went to Greece.
350 This is not a borderline case, and nor was it submitted to be. It is clear that the use of the information regarding the MyCo Cost Price and MyCo Supply Price by Mr Floropoulos in the way that he did breached the standard of conduct that would be expected of a person in Mr Floropoulos’ position by a reasonable person with knowledge of the duties, powers and authority of his or her position as a director or officer, and of the circumstances of the case, including the commercial context.[152]
351 Although an objective test is to be applied, I add that Mr Floropoulos’ concealment and non-disclosure of what he was intending, and what he did thereafter, allows in my view for an inference to be drawn that Mr Floropoulos appreciated that what he was doing at least likely breached the standard of conduct expected of him. So much so was supported by various aspects of the evidence, a good example of which was his concession in cross-examination that he believed that if he had informed Mr Canzoneri of the position Mr Canzoneri would have terminated whatever arrangement existed in relation to Culinary Co and entered into an arrangement direct with Mr Garakis or another supplier.
352 It may also be observed that the conclusion reached here sits comfortably with illustrations in the authorities[153] regarding diversion of business opportunities, competing businesses and concealed benefits, but noting that it is always the position that each case must depend on its own facts and circumstances.
353 To the extent that it was submitted that ‘Oliana suffered no detriment through the use of any information obtained by’ Mr Floropoulos,[154] this does not assist Mr Floropoulos. As identified by Elliott J, the suffering of detriment is not required, with the focus being improper use and purpose,[155] noting also that the purpose of gaining an advantage for himself and Culinary Co has been established. In any event, the submission is without merit. The detriment suffered by Oliana includes not obtaining the opportunity that Oliana would have had if Mr Floropoulos had acted in Oliana’s interests and secured the Kremel Supply Price for it and not improperly used the information in question. The fact that the Culinary Co Supply Price was lower than the MyCo Supply Price does not change this or mean that no detriment was suffered.
354 It will be apparent from the above that I do not accept the submission that the only information used by Mr Floropoulos was the information regarding the MyCo Cost Price that Mr Floropoulos unsuccessfully contended he acquired whilst not a director or officer. However, even if it had been the case that this particular information had been acquired after he ceased to be a director, it would have made no difference to my conclusion. One of the central pieces of information improperly used was the MyCo Supply Price which, on any view, was acquired before 26 February 2016 because Mr Floropoulos was a director or officer of Oliana. The improper use of this information alone would have been sufficient information to make good the alleged breach of s 183(1) of the Act in the circumstances.
355 Putting to one side that there was no pleaded defence of Mr Floropoulos regarding clause 57 of Oliana’s Constitution (Clause 57), its existence and terms do not assist him and his attempt to rely upon it in this context is without merit.
356 Clause 57 provides as follows:
no director shall be disqualified by his office from contracting or entering into any arrangement with the company either as vendor or purchaser or otherwise nor shall any such contract or arrangement entered into by or on behalf of the company in which any director shall in any way be interested be avoided nor shall any director so contracting or being so interested be liable to account to the company for any profit realised by any such contract or arrangement by reason of such director holding that office or of the fiduciary relationship thereby established but every director shall observe the provisions of the Law relating to the declaring of the interest of the directors in contracts or proposed contracts with the company or of any office or property held by the directors which might create duties or interests in conflict with their duties or interests as directors.
357 The definitions section of Oliana’s Constitution defined ‘the Law’ to be the Act. It also contained a customary provision in the interpretation section to the effect that any reference to an act or regulation shall be deemed to refer to such act or regulation as amended or substituted from time to time.
358 Section 191 of the Act, which I shall not recite, sets out the requirements regarding a director’s duty to give notice to the other directors of matters relating to the affairs of the company in which the director has a material interest, but subject to the exceptions in s 191(2). Section 193 of the Act provides that s 191 and s 192 (which relates to the giving of standing notice) have effect in addition to and not in derogation of any general law rule about conflicts of interest and any provisions in a company’s constitution restricting a director from having certain interests or holding office or property that involve duties or interests that conflict with their duties or interests as a director.
359 A provision in the Constitution of a company may validate a contract which would otherwise be voidable under the general law, but to obtain its protection the director must strictly comply with any conditions laid down in the provision. The director also bears the onus of proving that he is compliant with the provision.[156]
360 As Mahoney JA observed in Woolworths Ltd v Kelly,[157] in the context of a consideration of Regal (Hastings), a director may avoid the consequences of his fiduciary obligations and so derive a benefit from his dealings with the company in two ways. That is, by obtaining the fully informed consent or approval of the company to what is proposed or has been done, or by such means as are provided in the company’s constitutive documents.
361 Subject to the terms of the constitution in question, the issue is examined by looking to the substance of any notice given or interest disclosed and, as Oliana acknowledged, it need not be formal in any rigid way.[158]
362 Although the Act does not expressly provide for a defence to an alleged contravention of ss 180, 181, 182 or 183 of the Act by reference to the terms of a company’s permissive clauses in its constitutive documents, the existence of and compliance with such terms will typically be relevant to consideration of whether the director complied with their obligation to act with due care and diligence, in good faith, and not improperly.
363 In the circumstances of this case Clause 57 is not relevantly engaged. Given that which has been addressed in the reasons so far, the reasoning can be shortly stated and it is sufficient to mention the following.
364 First, Clause 57 required Mr Floropoulos to comply with s 91 of the Act. Putting to one side that the notice is required to be given at a directors’ meeting as soon as practicable after the director becomes aware of the interest, s 91(3) provides that the notice to be given must give details of the nature and extent of the interest and the relation of the interest to the affairs of the company.
365 Secondly, Mr Floropoulos relies upon the resignation discussion and the alleged Moka Pot Discussion as the essential factual foundation said to constitute proper disclosure, particularly the latter. I have determined that it has not been established that these conversations occurred as alleged by Mr Floropoulos.
366 Thirdly, even if the occurrence of the discussions had been established, neither they nor any other communications or discussions referred to in the evidence, whether taken alone or in any combination, come close to disclosing the nature and extent of Mr Floropoulos’ interest in Culinary Co and the exclusive distribution arrangement with Kremel, or the relation of such interests to the affairs of Oliana.
367 Fourthly, and in any event, it was readily apparent from Mr Floropoulos’ evidence and documents in evidence — and particularly the text messages passing between Mr Floropoulos and Mr Canzoneri — that Mr Floropoulos was consciously seeking to conceal rather than disclose the nature and extent of his interest and its relation to the affairs of Oliana.
368 It follows that even if it were to be assumed that compliance with Clause 57 would have resulted in Mr Floropoulos’ use of the information not being improper, it is not relevantly engaged in the circumstances.
369 Oliana has established that Mr Floropoulos breached s 183(1) of the Act as he obtained information because he was a director and officer of Oliana — namely, information regarding the MyCo Supply Price, the MyCo Cost Price, and Oliana’s profit margins — and he improperly used that information to gain an advantage for himself and for Culinary Co, and to cause detriment to Oliana.
370 Further and in any event, even if Mr Floropoulos had not been a director or officer after 26 February 2016, Mr Floropoulos would have breached s 183(1) of the Act because the information regarding the MyCo Supply Price and Oliana’s profit margins was gained before 26 February 2016.
Section 182 — Use of position
371 Section 182(1) of the Act provides:
(1) A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a) gain an advantage for themselves or someone else; or(b) cause detriment to the corporation.
372 Relevantly, the matters to be established are:[159]
(a) Mr Floropoulos was a director or officer of Oliana at the relevant time.(b) Mr Floropoulos made improper use of his position as a director or officer.
(c) Mr Floropoulos made the improper use of his position for the purpose of gaining an advantage or, alternatively causing detriment to the Oliana.
(d) The advantage sought to be gained was for Mr Floropoulos or someone else.
373 In United Petroleum it was observed that:[160]
644. Section 182 requires a director not to have a proscribed purpose: to gain an advantage or to cause a detriment.[161] It is not necessary that an advantage has in fact been gained by the director or other person or that detriment has in fact been caused to the corporation.[162] Further, in ascertaining whether a director had 1 or other of the proscribed purposes in mind when she or he made use of her or his position, it is relevant to consider the particular duties and responsibilities of the director and her or his appreciation of the circumstances at the relevant time.[163]645. The test is whether the conduct would breach the standards of conduct that would be expected of a person in the director’s position by a reasonable person with knowledge of the duties, powers and authority of her or his position as director, and of the circumstances of the case, including the commercial context.[164] A director’s appreciation of the relevant circumstances might be relevant to analysis of the propriety of the use the director made of her or his position in acting as she or he did.[165]
646. In this court, it has been held that impropriety requires “behaviour [that] breached the norm of conduct thought necessary for the proper conduct of commercial life so that people will have confidence that the running of the marketplace is in safe hands”.[166]
374 I am satisfied that Oliana has established that Mr Floropoulos contravened s 182(1) of the Act by making improper use of his position as a director and officer of Oliana to gain an advantage for himself and Culinary Co, and also to cause detriment to Oliana. Unsurprisingly, aspects of the chain of reasoning for this conclusion bear some similarities to that relating to Mr Floropoulos’ contravention of s 183(1) of the Act.
375 Mr Floropoulos was a formally appointed director until 26 February 2016 and, as I have determined, was a de facto director and officer thereafter in any event.
376 Mr Floropoulos was the director and officer of Oliana who was at least primarily responsible for dealing with relevant supply issues and in this role was the person responsible for sourcing and securing an alternate supplier of vegan cheese on behalf of Oliana, and dealing with the relationship thereafter, which he was being relied upon and trusted by Oliana to do.
377 As the person at least primarily responsible for this matter of significance to Oliana and its financial affairs, Mr Floropoulos used his position as an Oliana director and officer to secure the Kremel Supply Price, and to determine, set and charge the Culinary Co Supply Price to Oliana (through interposing Culinary Co) that Mr Floropoulos knew was cheaper than the price Oliana was being charged by MyCo, but which Mr Floropoulos also knew was significantly higher than the Kremel Supply Price that Mr Floropoulos had secured but did not disclose to Mr Canzoneri or others at Oliana.
378 It is readily apparent that this was directed at securing a financial advantage for Culinary Co and Mr Floropoulos over an extended period, which was to flow from the substantial interposed undisclosed marked–up Culinary Co Supply Price that was engineered by Mr Floropoulos without the knowledge of Mr Canzoneri. That was to benefit Mr Floropoulos and Culinary Co, as indeed the evidence showed ultimately occurred. In so doing Mr Floropoulos was implementing an undisclosed plan through the interposing of Culinary Co that he conceded he had always intended on doing.
379 It is clear that Mr Floropoulos improperly used his position in this way and that he did so to benefit himself and Culinary Co, and to cause detriment to Oliana.
380 As I have said, this is not a borderline case. The use by Mr Floropoulos of his position in the way described breached the standard of conduct that would be expected of a person in Mr Floropoulos’ position by a reasonable person with knowledge of the duties, powers and authority of her or his position as director, and of the circumstances of the case, including the commercial context.[167] It may also be observed that Mr Floropoulos’ improper use of his position was behaviour that breached the norm of conduct thought necessary for the proper conduct of commercial life in the way referred to by Pagone J in Griffiths v Beerens Pty Ltd.[168]
381 As was the case with Mr Floropoulos’ improper use of information earlier referred to, Mr Floropoulos’ concealment and non-disclosure of what he was intending, and what he did, allows in my view for an inference to be drawn that Mr Floropoulos appreciated that what he was doing at least likely breached the standard of conduct expected of him.[169]
382 Again the conclusion reached regarding the contravention of s 182(1) of the Act sits comfortably with illustrations in the authorities[170] regarding conflicts of interest, diversion of business opportunities, competing businesses, and concealed benefits, but noting again the cautionary note that each case depends upon its own facts.
383 To the extent that Mr Floropoulos sought to rely upon Clause 57 of Oliana’s constitution in relation to s 182 of the Act, this does not assist him. I refer to the reasoning above regarding s 183, the substance of which applies equally here.
384 I add that even if what was alleged to have been said in the alleged Moka Pot Discussion had been established it would not have altered the position. The matters relied upon did not at all address or disclose most significant matters, including Mr Floropoulos’ involvement with Mr Hone and his control of Culinary Co, its interposition between Kremel and Oliana, or the Kremel Supply Price.
Section 180 — Care and diligence
385 Section 180 of the Act relevantly sets out a statutory formulation for the duty of care and diligence as follows:
Care and diligence —directors and other officers(1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
(a) were a director or officer of a corporation in the corporation’s circumstances; and(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
Business judgment rule(2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:
(a) make the judgment in good faith for a proper purpose; and(b) do not have a material personal interest in the subject matter of the judgment; and
(c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and
(d) rationally believe that the judgment is in the best interests of the corporation.
The director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.(3) In this section
business judgment any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.
386 In United Petroleum,[171] it was observed as follows in relation to s 180(1):[172]
609. By placing the “reasonable person” in “the office” and with the “same responsibilities” as the relevant director, s 180 creates an objective test.[173] The applicable standard is what an ordinary person, with the knowledge and experience of the relevant director, would have done.[174]610. The duty mandates, at its core, that a director’s involvement in the company’s management requires ordinary competence or reasonable ability.[175] Equivalently, the duty of diligence requires directors to take reasonable steps to place themselves in a position to guide and monitor the company’s management.[176]
...
612. Whether a director has exercised a reasonable degree of care and diligence in a given scenario can only be answered by balancing the foreseeable risk of harm against the potential benefits that could reasonably have been expected to accrue to the company from the conduct in question.[177]
613. The degree of departure from the acceptable standard required to constitute a breach of the director’s statutory duty of care and diligence is the same as that which would support a claim of negligence at common law.[178]
614. The statutory duty of care recognizes a distinction, which must be kept firmly in mind, between negligence and mere mistakes, with liability arising for the former and not for the latter.[179] In relation to decisions made in expectation of events that might happen in the future, courts are conscious that forecasting is a difficult and uncertain process, with much room for mistakes and errors of judgment, and for differences of opinion.[180]
615. In ASIC v Rich, Austin J stated that:[181]
The statute requires the court to apply a standard defined in terms of the degree of care and diligence that a reasonable person would exercise, taking into account the corporation’s circumstances, the offices occupied by the defendants and their responsibilities within the corporation. That requires the defendants’ conduct to be assessed with close regard to the circumstances existing at the relevant time, without the benefit of hindsight, and with the distinction between negligence and mistakes or errors of judgment firmly in mind. If the impugned conduct is found to be a mere error of judgment, then the statutory standard under s 180(1) is not contravened and it is unnecessary to advert to the special business judgment rule in s 180(2). In the view that I have taken of it ... s 180(2) provides a defence in a case where the impugned conduct goes beyond a mere error of judgment, and would contravene the statutory standard but for the defence.(Emphasis added.)
616. Further, on the relationship between the duty contained in s 180(1) and the business judgment rule contained in s 180(2), Austin J stated:[182]
[T]he statutory duty of care and diligence is essentially the same as the duty of care and diligence of a director or officer at general law. Since business judgment considerations are an integral part of the general law duty, it follows ... that those considerations are to be taken into account in applying the statutory standard of care and diligence. But it does not follow that the statutory defence in s 180(2) is therefore redundant. The business judgment considerations that figure in the articulation and application of the statutory standard of care and diligence are open-ended, whereas s 180(2) is a specific statutory rule having defined components and a defined outcome. It is at least theoretically possible that s 180(2) might protect defendants from liability for acts or omissions that would otherwise constitute a contravention of s 180(1) notwithstanding business judgment considerations at that level. Additionally, on a practical level s 180(2) articulates criteria that can be a reference point for directors and officers and their advisers, and can offer a direct solution to the issue of breach of duty in a straightforward case.(Emphasis added.)
617. The reference in s 180(1)(a) to the “corporation’s circumstances” requires the court to consider the type of company involved, the size and nature of its business or businesses, the provisions of its constitution, the composition of its board and the distribution of the work between the board and other officers.[183]618. Where relevant, it is necessary to have regard to the company’s status as a listed or unlisted entity.[184] Where the context involves the sale of shares, it is necessary to consider the circumstances of the transactions as a whole, with an eye to reality.[185]
619. The “responsibilities” referred to in s 180(1)(b) include the factual arrangements operating within the company and affecting the director in question and arrangements flowing from the experience and skills that the director brought to her or his office, and also any arrangements within the board or between the director and executive management affecting the work that the director would be expected to carry out.[186] As such, it is not the case that “responsibilities” refer only to specific tasks delegated to the relevant director.[187]
387 It has been said that ‘special vigilance’ and ‘scrupulous concern’ are required where a director is in a position of potential conflict.[188]
388 Oliana’s emphasis on the obligations under s 180 during its submissions was considerably less than the emphasis placed upon the obligations under ss 182 and 183 of the Act, and given the findings made in relation to those sections it is not strictly necessary to determine this issue. However, in deference to the submissions made, I propose briefly to state my conclusions and reasons for the same.
389 The position is again clear and I am satisfied that it has been established that Mr Floropoulos breached his obligations under s 180 by failing to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they were a director and officer of Oliana in its circumstances, and occupied the office held by Mr Floropoulos and had the same responsibilities that he had.[189]
390 Given the discussion thus far above, and to which I refer, it is sufficient to go to the heart of the matter, noting the history, Mr Floropoulos’ role, and the circumstances earlier referred to. Being the director and officer of Oliana responsible for identifying and securing a new supplier of vegan cheese for Oliana who had the knowledge and information mentioned above, it is in my view plain that he contravened s 180(1) by, at least: failing to disclose the Kremel Supply Price to Oliana and for its benefit; seeking to interpose, and interposing, Culinary Co in the Oliana supply arrangement and marking up the Kremel Supply Price to the amount ultimately charged to Oliana; and failing to take steps to pass on the Kremel Supply Price to Oliana. No director or officer exercising the required degree of care and diligence could have so acted.
391 The foreseeable risk of harm to Oliana was clear, being the financial detriment to flow from paying prices for Kremel products that were significantly higher than the Kremel Supply Price. That was no ‘mere mistake’, and the issue of the operation of the business judgment rule does not arise.
392 Indeed, putting to one side the submissions made regarding the resignation and alleged Moka Pot Discussion, and the operation of Clause 57 of Oliana’s Constitution, no material submission was made against a finding of contravention if Mr Floropoulos was found to be a director and officer, as I have found him to be.
393 Again, to the extent that Mr Floropoulos sought to rely on Clause 57 of Oliana’s constitution, it does not assist him. I refer to the reasoning in paragraphs above in the context of s 183, the substance of which applies equally, but noting that here one is to look to duties of care and diligence and not (expressly) to improper use of information and position or good faith.
394 I add further that what was asserted to have been said in the alleged Moka Pot Discussion would not have assisted Mr Floropoulos in any event because it did not address at all disclosure of significant matters including the Kremel Supply Price, the interposition of Culinary Co, and Mr Floropoulos’ involvement with Mr Hone and his control of Culinary Co.
Section 181 — Good faith
395 Section 181(1) of the Act provides:
A director or other officer of a corporation must exercise their powers and discharge their duties:
(a) in good faith in the best interests of the corporation; and(b) for a proper purpose.
396 Section 181(1) contains two separate duties: the requirement to act in good faith in the best interests of the company in paragraph (a) and the requirement to act for a proper purpose in paragraph (b).[190]
Good faith in the best interests of the corporation
397 Elliott J recently addressed the principles in relation to s 181(1)(a) as follows:[191]
Best interests of the company627. The board, and not the shareholders, determine what is in the best interests of the company. As stated in ANZ Executors & Trustee Company Ltd v Quintex Australia Ltd (receivers and managers appointed):[192]
[A] shareholder’s freedom to exercise [her or his] vote as [she or he] pleases does not mean that in law [she or he] can accomplish everything that takes [her or his] fancy. The right to vote is, it is true, a species of property that can be exercised at will, and it may confer control over the affairs and property of the company; but it does not follow that the holder may always do whatever [she or he] pleases with the corporate assets. For they are the property of the company and not of the shareholder, who has no legal or equitable interest in them.(Emphasis added.)
628. As Byrne J observed in Glover v Willert,[193] the board manages the company. The directors are not obliged to act on the direction of all shareholders in general meeting.629. In relation to determining the best interests of a company, the High Court has held that “[d]irectors in whom are vested the right and the duty of deciding where the company’s interests lie and how they are to be served may be concerned with a wide range of practical considerations, and their judgment, if exercised in good faith and not for irrelevant purposes, is not open to review in the courts”.[194]
630. There is conflicting authority concerning the meaning of “in good faith” in s 181(1)(a).
631. There is a view that the requirement that there be an “absence of good faith” involves “much more than negligence”.[195] On this view, s 181(1)(a) “is contravened only where a director engaged deliberately in conduct, knowing that it was not in the interests of the company”.[196] This approach involves a subjective standard.
632. An alternative view is that the test is objective. On this view, breach of s 181(1) requires consciousness that what was being done was not in the best interests of the company, but “consciousness in this sense means knowledge of the facts that make the conduct not in the best interests of the company; it is not necessary to establish knowledge that the conduct constituted a breach of the law or was improper”.[197]
633. These divergent views were considered in ASIC v Macdonald (No 11).[198] The objective test was rejected in favour of requiring subjective dishonesty.[199]
634. In this jurisdiction, the issue was considered in Mernda Developments Pty Ltd (in liq) v Alamanda Property Investments No 2 Pty Ltd (in liq).[200] In an uncontested appeal,[201] the Court of Appeal stated that, although there had been some debate in the past, it was generally accepted that the objective test ought to be applied.[202]
635. Following this decision of the Court of Appeal, the objective test was applied to the issue of whether directors were acting in good faith in at least 3 decisions of the trial division.[203]
636. However, in the more recent decision of ASIC v Flugge,[204] Robson J, after carefully considering the authorities, and acknowledging he was bound by the Court of Appeal’s decision,[205] applied both an objective and a subjective test to s 181(1)(a) “as held apposite by Owen J in Bell Group v Westpac and approved by the Court of Appeal in Mernda v Alamanda”.[206] It may be his Honour intended to refer to both paragraphs (a) and (b) of s 181(1) when making this observation.[207]
637. Relevantly, Owen J held that the test of “whether directors are acting bona fide in the interests of the company as a whole is largely (though by no means entirely) subjective”.[208] His Honour continued:[209]
The court can look objectively at the surrounding circumstances and at the impugned transaction or exercise of power. But it does so not for the purpose of deciding whether or not there was commercial justification for the decision. Rather, the objective inquiry is done to assist the court in deciding whether to accept or discount the assertions that the directors make about their subjective intentions and beliefs.
638. On appeal, Robson J’s decision was upheld.[210] Further, the Court of Appeal stated that Robson J dealt comprehensively and accurately with the legal principles governing s 181.[211] However, like Mernda Developments Pty Ltd (in liq) v Alamanda Property Investments No 2 Pty Ltd (in liq),[212] the Court of Appeal did not have the benefit of competing submissions on this issue.[213]639. In circumstances where this court also had no competing submissions on the proper construction of s 181(1)(a) or (b),[214] and on either approach to the proper construction of the provision no liability has been found, it is unnecessary to distil the state of the authorities on this section beyond what has already been stated.
398 In the subsequent appeal, United Petroleum Australia Pty Ltd v Hudson, the Court of Appeal acknowledged Elliott J’s discussion of whether ‘in good faith’ applies a subjective, objective or combined standard, but found that it was not there necessary to identify or resolve that divergent authority.[215]
Proper purpose
399 As to the operation of s 181(1)(b), in United Petroleum it was observed as follows:[216]
640. Directors must exercise their powers for the purpose for which they were conferred, and not for any collateral or improper purpose.[217] Assessment of the particular conduct, therefore, involves 2 steps. First, the court must consider the nature of the power in question. Secondly, the court must examine the substantial purpose for which the power was exercised. Only then can it determine whether the purpose for which the power was exercised was a proper purpose or not.[218]641. The objective commercial justification of a director’s conduct is not determinative of purpose. It is only relevant to assessing the credibility of assertions made by the director as to her or his motivation.[219] Honest or altruistic behaviour by a director will not prevent a finding of improper conduct on their part if that conduct was carried out for an improper or collateral purpose.[220]
642. There may be more than 1 purpose underlying the exercise of the director’s powers, including how such exercise will impact upon their own interests. Accordingly, it is necessary to identify the substantial object which could be said to form the real ground for the director’s action.[221] The issue is not whether a decision was good or bad; it is whether the director acted in breach of the duty.[222]
643. The court must determine whether, but for the improper or collateral purpose, the directors would have performed the act impugned.[223]
Consideration – breach of s 181 of the Act
400 Oliana’s pleading and submissions on s 181 of the Act focussed only on s 181(1)(a), being the obligation upon a director to act in good faith in the best interests of the corporation. It was submitted that, whether assessed objectively or subjectively, ‘it could never have been an act in good faith in the best interests of Oliana’ for Mr Floropoulos to interpose Culinary Co to artificially inflate the supply charges paid by Oliana for his own direct benefit, and, in addition, later to approach Woolworths with the intention of competing with Oliana in the supply of Kremel products.
401 Except for submissions made in connection with the alleged Moka Pot Discussion and Clause 57, no material submissions were made that if Mr Floropoulos was found to be a director or officer, then by taking the steps that he did in connection with the interposition of Culinary Co and determining and setting the Culinary Co Supply Price without Oliana’s knowledge of the Kremel Supply Price and other matters, Mr Floropoulos acted in good faith and in the interests of Oliana. This was consistent with Mr Floropoulos’ position including regarding the failure of his defence being inextricably linked to the alleged Moka Pot Discussion. This is not to ignore the onus that was on Oliana in this context, or the considerations I have earlier indicated have been taken into account in connection with s 140(2) of the Evidence Act, the gravity of the matters being considered and Briginshaw considerations.
402 Having regard to the background, context and earlier discussion, this issue can also be dealt with crisply. It is in my view clear that Mr Floropoulos breached s 181(1)(a) of the Act by failing to act in good faith in the interest of Oliana and I accept that this is so whether the issue is assessed objectively or subjectively. As was the case with Elliott J and the Court of Appeal in United, it is therefore unnecessary to seek to identify and resolve the divergent authority on the point, noting further that, as in many cases, I have not had the benefit of detailed competing submissions on this issue from the parties.[224]
403 Mr Floropoulos failed to act in good faith and in the best interests of Oliana by reason of his actions in: causing Culinary Co to be established so as to obtain distribution rights from Kremel when he was tasked, in his capacity as a director and officer of Oliana, with the responsibility for obtaining alternate supply rights on behalf of Oliana; obtaining distribution rights from Kremel for Culinary Co and not Oliana; interposing Culinary Co between Kremel and Oliana; securing the Kremel Supply Price for Culinary Co and not Oliana; determining and setting the Culinary Co Supply Price to Oliana at substantially marked up prices to the Kremel Supply Price; and not disclosing to Oliana his and Culinary Co’s interest, or the true position regarding his involvement with Culinary Co and the Kremel exclusive distribution rights.
404 It was clear on the evidence, and could be inferred in any event, that in so acting Mr Floropoulos was seeking to obtain a benefit for himself and Culinary Co, as in fact occurred. This was to the detriment of Oliana because through Mr Floropoulos’ actions he deprived Oliana of securing supply at the Kremel Supply Price, which it can be inferred would have been available to Oliana through Mr Floropoulos had he not secretly interposed Culinary Co without Oliana’s knowledge. Plainly this was not in the best interests of Oliana, who was aware of the low MyCo Cost Price and was seeking to source an alternate supplier with low supply prices for itself. It was Mr Floropoulos, a director and officer of Oliana as I have found, who was responsible for this significant and important matter and it was his actions just summarised that acted directly against the interests of Oliana.
405 It is similarly clear that in so acting Mr Floropoulos failed to act in good faith, whether viewed objectively or subjectively. Mr Floropoulos knew of the steps that he was taking, which involved considered and deliberate conduct on his part over an extended period. It may be readily inferred from the circumstances that he knew that what he was doing was not in the interests of Oliana given his experience, his object and intent, his conscious and deliberate actions and his knowledge of the lower Kremel Supply Price that he was consciously diverting from Oliana to Culinary Co for the benefit of Culinary Co and his own benefit, when he knew that Oliana was not aware of the position. This was further underscored by the documentary evidence revealing the lengths that Mr Floropoulos went to in order to conceal the true positon from Mr Canzoneri and Oliana, and supported by the cross-examination of Mr Floropoulos regarding the prospect of Mr Canzoneri ‘screaming blue murder’ if it had been disclosed, and his acknowledgement that Mr Canzoneri would have cancelled the deal had he known and sought to obtain the supply direct from Mr Garakis or another supplier. Both the subjective and objective approach referred to by Elliott J in United Petroleum are satisfied, and in my view clearly so.
406 Having determined that the resignation discussions and the alleged Moka Pot Discussion did not occur as alleged by Mr Floropoulos, it follows that these cannot assist Mr Floropoulos’ defence. However, even if they had occurred, the result would not have changed because the essential facts and their characterisation referred to above remain the same, noting in particular the limited nature of the discussion Mr Floropoulos said occurred in any event. Even on Mr Floropoulos’ evidence nothing like that which in fact occurred was addressed or even hinted at in the alleged discussions, with Mr Floropoulos’ own ultimate concession in cross-examination confirming what was obvious on the evidence in any event. That is, had it been disclosed directly or indirectly in the alleged Moka Pot Discussion or otherwise, Mr Canzoneri would have reacted strongly and stridently against it recognising it was far from in the interests of Oliana. It is also to be remembered that Mr Floropoulos sought to conceal his behaviour even though he claimed there had been a discussion as alleged, which again allows for an inference that he knew his deliberate conduct was not in the best interests of Oliana — as was plain anyway.
407 Again, the terms of Clause 57 do not assist Mr Floropoulos and the substance of the reasoning earlier referred to on this topic applies equally here.
Damages and s 1317H of the Act
408 Each of the statutory duties the plaintiff alleged were breached by Mr Floropoulos are civil penalty provisions of the Act. Where a person has contravened a civil penalty provision in relation to a corporation and the corporation suffered damage as a result of that contravention the court may order compensation under s 1317H of the Act.
409 Section 1317J(2) provides that a corporation may apply for a compensation order. Section 1317H relevantly provides:
1317H Compensation orders—corporation/scheme civil penalty provisionsCompensation for damage suffered
(1) A Court may order a person to compensate a corporation, registered scheme or notified foreign passport fund for damage suffered by the corporation, scheme or fund if:
(a) the person has contravened a corporation/scheme civil penalty provision in relation to the corporation, scheme or fund; and(b) the damage resulted from the contravention.
The order must specify the amount of the compensation.
Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 1317E.
Damage includes profits(2) In determining the damage suffered by the corporation, scheme or fund for the purposes of making a compensation order, include profits made by any person resulting from the contravention or the offence.
...
Recovery of damage
(5) A compensation order may be enforced as if it were a judgment of the Court.
410 Both the requirement that damage ‘resulted from the contravention’ and the inclusion of a reference to profits made by the contravenor as a result of the contravention in the text of s 1317H have been considered by the courts.
411 In Adler v ASIC (‘Adler’),[225] Giles JA (with whom Mason P and Beazley JA agreed) considered whether the applicable test of causation imposed by s 1317H(1)(b) was what had been described by the trial judge in that case as ‘... the wider and thus more stringent test of causation ... by analogy to that applicable in equity to breaches of fiduciary duty’, or the ‘the less stringent, common law test of causation’. The trial judge had held that the equitable test of causation ought to be applied when considering s 1317H(1)(b). Considering this point, Giles JA stated:[226]
707. I do not think it necessary to further the debate over causation for the purposes of determining equitable compensation. I am respectfully unable to agree that analogy with equitable claims against fiduciaries influences the meaning and application of “resulted from” in s 1317H. As Spigelman CJ observed in O’Halloran v RT Thomas & Family Pty Ltd (at 272) —
... the remedy of equitable compensation differs from damages at common law. It also differs from damages under a statutory regime where the court is concerned with, and confined by, the construction of the statute. Causation for purposes of s 212 of the Corporations Law will not involve the same analysis of causation as is required for breach of a fiduciary obligation.
708. For s 1317H, the analogy with equitable claims against fiduciaries is all the more difficult because some civil penalty provisions in the Act do not involve contravention by a person standing in a fiduciary capacity.709. In my opinion, the words “resulted from” in s 1317H are words by which, in their natural meaning, only the damage which as a matter of fact was caused by the contravention can be the subject of an order for compensation. Like the word “by” in s 82 of the Trade Practices Act 1974 (Cth) (see Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 at [38]- [42]), they should be given their ordinary meaning of requiring a causal connection between the damage and the contravening conduct, free from the strictures of analogy with equitable claims against fiduciaries.
710. ASIC submitted that the limited class of applicants for compensation orders distinguished this provision from s 82 of the Trade Practices Act, but I do not see that as a material distinction. It submitted that in Marks v GIO Australia Holdings Ltd, Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 and I & L Securities v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109 it was recognised that general law principles could be useful guides. That is correct, but in doing so the High Court made clear that the ordinary meaning of the words of the statute had primacy. Section 185 of the Act underlines that the statutory duties in ss 180-183 are additional to and stand free of a director’s common law and equitable duties.
412 Edelman J in the Federal Court (as he then was) in Agricultural Land Management Ltd v Jackson (No 2),[227] considering the above passage, observed:[228]
451. In Adler, Giles JA applied a “but for” approach as a negative criterion. The same “but for” approach has been applied as a negative criterion by the plurality of the High Court of Australia in relation to compensation for breach of statutory proscriptions against misleading or deceptive conduct. Their Honours referred to “the essential question of causation” and spoke of “determining what action or inaction would have occurred if the true position had been known”.452. The application of an analogy with equitable compensation reaches the same conclusion; as explained above, reparative compensation for a breach of fiduciary duty of this type should involve a negative “but for” criterion. ...
413 In Vanguard Financial Planners Pty Ltd v Ale,[229] Black J held that the plaintiff would have been required ‘... to establish that the relevant damage was as a matter of fact caused by the particular contravention, or satisfy a “common sense” standard of causation’[230] in order to be entitled to a compensation order under s 1317H (although, as the plaintiffs in that case had failed to make out causation or loss on the less stringent test for causation in equity, the question was left undecided). Similarly, in Termite Resources NL (in liq) v Meadows,[231] White J stated, referring to Adler, that:[232]
727. ... The terms “resulted from” and “as a result of” used in ss 1317H and 598(2) respectively require that there be a causal connection between the alleged damage, on the one hand, and the identified contravening conduct, on the other. It is damage which, as a matter of fact, was caused by the contravention which may be the subject of an order for compensation under these provisions ...
414 In Grimaldi,[233] the Full Federal Court considered the stipulation in s 1317H(2) that ‘[i]n determining the damage suffered by the corporation or scheme for the purposes of making a compensation order, include profits made by any person resulting from the contravention or the offence’. More specifically, whether the wording of the provision required, or simply empowered, the court to include profits made by a contravenor when making a compensation order under s 1317H(1). The appellant in the proceeding submitted that the wording of the provision was obligatory, namely, if a compensation order were to be made, it must include profits made by the contravenor. The second respondent to the appeal submitted that:[234]
630. ... the “include profits” formula is simply definitional in the sense that it brings with the compensatory scheme of the section a type of claim (ie for profits made) which would not otherwise necessarily fall within the formula “damage suffered by the corporation” as, for example, where the contravenor or a third person made profits as a result of the contravention, but without loss to the corporation. Put shortly, it empowers the Court to compensate for profits made from a contravention without proof of a corresponding loss.
415 Describing the subsection as ‘a poorly executed drafting contrivance’,[235] the court accepted the second respondent’s submission as to the import and application of s 1317H(2). The court gave its reasoning as follows:[236]
631. Having regard (i) to the more obvious meaning of the precursor provision, s 1317HD; (ii) to the lack of any explanation for the new composite treatment of profits and loss save probably that it reflected “a plain English rewrite”; (iii) to the anomaly of giving a discretion to the Court to make a compensation order but then requiring it inexorably to order the contravenor to pay any and all compensation allowable under the subsection for damage actually suffered and for damage deemed suffered (ie for profits made by “any person”), whatever the inconvenience or injustice this might occasion in a given case and irrespective of whether other remedies, equitable or common law, have been awarded to compensate for particular damage or to recover particular profits; and (iv) to the fact that either of the proposed interpretations is arguable given the language of the subsection, we consider that Murchison’s interpretation is to be preferred. It is unlikely that the legislature would have intended so inconvenient a change in the pre-existing law without making that intention plain ...
416 It follows, therefore, that although the court may include in any compensation order an order that profits made by a contravenor be paid to the corporation, it is not in all circumstances obliged to do so.
417 The full court in Grimaldi also considered the interaction between compensation orders under s 1317H and orders for equitable compensation for breach of fiduciary duty, noting that there will often be overlap between the remedies available and warning against allowing double recovery. The court observed:[237]
641. ... It is predictable that the profits recoverable in each such claim will to a considerable degree (if not wholly) be the same. What neither the equitable remedy nor s 1317H mandates is double recovery. In consequence to the extent that each of the orders may by his Honour have areas of independent operation (differing principles of attribution/causation under the Corporations Act and in equity may account for this), the orders each have their own work to do. The orders to that extent are complementary. However, to the extent each order would sweep up profits which would also be caught by the other, they cannot be enforced so as to produce double recovery: Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 635 at [39]. While s 185 countenances cumulative remedies, it does not envisage double recovery: cf ASIC v Adler at [116]-[118].
418 Finally in relation to recovery under s 1317H, it may be noted that there is no requirement for the corporation to mitigate its loss or damage by action against a third party, although of course it may do so. In ASIC v Australian Investors Forum Pty Ltd (No 3),[238] Palmer J stated (in the context of a proceeding brought by ASIC):[239]
64. If the corporation has been able to recoup some part of the loss by action against a third party, a compensation order subsequently made under s 1317H(1) will relate only to the shortfall in recoupment. But the corporation is not obliged to endeavour to mitigate its loss from the transaction by proceeding against third parties before looking to the delinquent officer whose contravention of the Act occasioned the loss. The corporation, and ASIC on its behalf, are entitled to look first to the delinquent officer to make good the loss. Obviously, if the corporation proceeds against the delinquent officer and a third party, there cannot be double recovery.
419 The obligation of a plaintiff to mitigate their loss more generally in relation to the making of a s 1317H compensation order was considered by Wigney J in Trilogy Funds Management Ltd v Sullivan (No 2) (‘Trilogy’)[240] (upheld on appeal),[241] when it was concluded that the common law doctrine of mitigation of damage should not be read into the Act — but noting that considerations that might arise in that context may, depending on the circumstances, be relevant to causation. Mitigation was not raised by the defendants in this case and need not be further addressed.
Consideration – damages and s 1317H of the Act
Oliana submissions
420 Oliana contended that it suffered damage, that the damage resulted from Mr Floropoulos’ contraventions of the Act, and that a compensation order pursuant to s 1317H should be made in its favour in respect of that damage.
421 Referring to Australian Securities and Investments Commission v Rich[242] (‘ASIC v Rich’), Oliana submitted that when considering whether the damage resulted from the contraventions, the test is satisfied if the acts or omissions were so connected to the damage suffered by the company in question that, as a matter of ordinary common sense and experience, they should be regarded as the cause. Oliana submitted that, but for Mr Floropoulos’ breaches of statutory duty, Oliana would have obtained the products from Kremel at the Kremel Supply Prices and in this context the case was one involving a wrongful diversion of the Kremel supply to Culinary Co, and a concealed mark up by Mr Floropoulos.
422 It submitted that, as a direct result of Mr Floropoulos’ breaches of statutory duty, it paid Culinary Co $1,967,217.54 for goods obtained from Kremel through Culinary Co when the true AUD price at the Kremel Supply Price was $587,781.54[243] plus associated freight costs totalling $391,624.74. The difference, being a sum of $987,811.26, was said to be the amount that would not have been paid by Oliana if Mr Floropoulos had not contravened the Act in the manner earlier addressed. This amount was said to be Oliana’s damage and loss (Oliana Loss Amount). Statutory interest was also claimed from the date of the issue of the proceedings.
423 The Oliana Loss Amount was the amount claimed by Oliana in respect of each of its claims against Mr Floropoulos and Mr Hone,[244] not only in respect of the s 1317H Claim.
424 In calculating damages in this way Oliana characterised its damages claim as ‘generous’, stating that: it did not seek to bring a damages claim in respect of any lost opportunity with Woolworths, Coles or other retailers; it allowed credit for the partial delivery of products on the cancelled order the subject of invoice CUL 003; it did not seek to reduce the freight costs by a just allowance for sea freight on the airfreight paid by it; and because it took into account Oliana having paid freight costs where it was said not to be clear on the evidence in Culinary Co’s bank statements that such amounts were paid by Culinary Co.
425 The Oliana Loss Amount was derived from the evidence, including invoices of Oliana and Culinary Co for goods and freight, exchange rates, and the evidence of Oliana’s Mr Adams. As mentioned, it was conveniently summarised in Schedule 5 to Oliana’s written submission, which was ultimately — and understandably — not the subject of any relevant dispute. That schedule has been substantially reproduced as the Oliana Payments Schedule, which is Annexure A to these reasons.
Mr Floropoulos’ submissions[245]
426 Mr Floropoulos — and Mr Hone in relation to the claims brought against him — dealt with loss and damage in something of a collective manner across all claims. It was submitted that Oliana had not proved causation or made out any entitlement to damages. It was contended that, in essence, Oliana’s claim should be characterised as a claim for the loss of a chance to attempt to negotiate a more favourable supply contract, and that it cannot be simply assumed that, but for the conduct and any misrepresentations, Oliana would have been able to obtain the same price from Kremel as was obtained by Culinary Co. It was submitted that Oliana did not ask Mr Garakis whether Kremel would have been prepared to supply Oliana, or supply at the same price, and that there was no evidence on the issue.
427 By reference to authorities such as Sellars v Adelaide Petroleum NL[246] and Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG (‘BHP v Steuler’)[247] it was submitted that if Oliana had pursued a loss of opportunity claim it would have been necessary for it to have proved, on the balance of probabilities, what alternative commercial opportunity it would have acted to secure but for the alleged contravening conduct, and that by not doing so, ‘some’ loss or damage was sustained. ‘It could then have invited quantification of that loss by reference to degrees of probability or possibility’.[248]
428 Mr Floropoulos — and Mr Hone in respect of the claims made against him — submitted that, just as in BHP v Steuler, the plaintiff had not sought to meet the threshold test because it had not gone into evidence to say what commercial opportunity it would have pursued. It was submitted that Mr Canzoneri gave ‘scant evidence’ about ‘what he would have done but for the offending conduct’. It was said that although he said he would have gone to Greece himself and negotiated with another manufacturer to supply direct, no other evidence was given as to how he might have done so or what his chances were except for his evidence that he had found a Belgian supplier and sourced and found other suppliers for olives, olive oil and feta cheese. Reference was also made to Mr Floropoulos’ evidence that Oliana had a very bad reputation in Greece on payment and submitted that it was unlikely that Mr Canzoneri would have been able to procure such supply. Emphasis was also placed on the fact that Oliana called no evidence from anyone else to verify that Mr Canzoneri would have been able to achieve his aim, ‘... let alone the price that might have been negotiated ...’. It was submitted that the court was in no position to infer that the price that Oliana might have achieved would have been anything like the MyCo Cost Price.
429 It was also submitted that Oliana did not suffer loss because it was in a better position than it would otherwise have been in because the Culinary Co Supply Price was lower than the MyCo Supply Price, although ultimately it appeared that this aspect was only faintly pressed.
430 These cost submissions were made generally by Mr Floropoulos (and Mr Hone) across all of the claims, with it also being said by Mr Floropoulos that, for the same reasons, no causal link had been established in relation to the claim for equitable compensation in respect of the alleged breach of fiduciary duty.[249]
431 In response to Mr Floropoulos (and Mr Hone), Oliana emphasised that its primary position was that it was a ‘direct’ damages claim with causation having been established in respect of its breach of duty claims. Even if that was assumed not to be the case, it was submitted that causation of the kind referred to by the defendants had been established in any event. This was because, so it was said, there was sufficient evidence for the court to be satisfied on the balance of probabilities that Mr Canzoneri would have sought supply from Kremel and that Kremel would have supplied Oliana with the Kremel products at the Kremel Supply Price.[250]
Disposition – s 1317H
432 I accept Oliana’s submission that it has established that it suffered damage that resulted from Mr Floropoulos’ contraventions of the Act and that a compensation order pursuant to s 1317H should be made in its favour in respect of that damage. I also accept that it has been established that the quantum of the loss claimed is the Oliana Loss Amount.[251]
433 Having regard to the principles and observations referred to above regarding the operation of s 1317H of the Act and the particular circumstances of this case, it is plain that the contraventions were so connected with the loss that, as a matter of ordinary common sense and experience, they should be regarded as the cause of them.
434 If Mr Floropoulos had complied with and not breached the statutory duties he owed to Oliana, then he would not have acted as he did in his and Culinary Co’s interests, but would have acted in Oliana’s interests. In so doing he would have carried out the task he was undertaking on Oliana’s behalf and in its interest, which would have seen him secure the exclusive distribution rights for Kremel’s products for Oliana and not Culinary Co, and at the Kremel Supply Prices. Had that occurred then the price that Oliana would have paid for the Kremel products would have been the Kremel Supply Price and not the Culinary Co Supply Price (plus appropriate adjustments for air freight). In this way it can also be seen that ‘but for’ Mr Floropoulos’ breaches of statutory duty Oliana would not have suffered the loss that it did, and that the damage ‘resulted from’ Mr Floropoulos’ contraventions. This applies in relation to the breaches of each of the statutory provisions, although it would have been sufficient for it to have been the case in respect of only one of them.
435 To the extent Mr Floropoulos and Mr Hone relied upon submissions focussed on what alternative transaction or opportunity Mr Canzoneri might have pursued for Oliana, this was in my view misplaced in the context of the claims under s 1317H of the Act.[252] This is because in this context the focus is not on what Mr Canzoneri would have done but on that which would have occurred if Mr Floropoulos had not contravened the Act in the way that he did, but had complied with his statutory duties.[253]
436 It was not submitted by Mr Floropoulos or Mr Hone that if Mr Floropoulos had complied with his statutory duties he would not have been able to secure the distribution rights for Oliana (as opposed to Culinary Co) at the Kremel Supply Prices. That this was so was not surprising.
437 In any event, I accept that it can be inferred that Mr Floropoulos would have been able to do just that, and secure the distribution rights at the Kremel Supply Prices for Oliana had he complied with his statutory duties and sought to do so. This is well supported by, among other things: the absence of any prior dealings or relationship between Kremel/Mr Garakis on the one hand and Mr Floropoulos or Culinary Co on the other; Mr Garakis’ evidence about giving his best price and his enthusiasm for the ‘the very, very nice opportunity for us’;[254] the Kremel Supply Price still enabling Kremel to make a profit; Mr Garakis’ evidence about being ‘very happy’[255] with the opportunity because Kremel was a ‘small company’[256] seeking business opportunities, especially exports;[257] the positive relationship formed swiftly between Mr Garakis and Mr Floropoulos; and the ease and speed with which the prices were arrived at and distribution rights were secured for the benefit of Culinary Co and Mr Floropoulos by him.
438 It also sits comfortably with actions of Mr Garakis after Mr Floropoulos agreed the Kremel Supply Prices including: Mr Garakis’ further evidence about his visit to Oliana’s premises, including his volunteered natural statement that ‘[t]his was a very, very nice opportunity for me to expand my business and I was happy. I couldn’t imagine all of these things. Never’;[258] Mr Floropoulos referring to at least one order as ‘Re: OLIANA ORDER’ in communications with Kremel and Mr Garakis;[259] Mr Garakis travelling to Australia to see Oliana’s premises and operation; Kremel’s email of 24 October 2016 to Mr Floropoulos in which it was stated: ‘Dear Mr Floropoulos, In attached file you can find the Proforma invoice of “Oliana foods Pty ltd” order. Always at your disposal, Best regards, ...’;[260] Mr Garakis’ absence of concern about Oliana and payments and it not being his business; and the absence of any evidence that Mr Garakis was aware of any alleged poor payment reputation of Oliana in Greece, which I do not accept was established on the evidence in any event.[261]
439 It was apparent that Mr Floropoulos and Mr Garakis established a positive relationship quickly and that Mr Garakis liked dealing with Mr Floropoulos, gave him Kremel’s best price, and was very happy to proceed with him, as was reflected in Mr Floropoulos being able to secure supply at the Kremel Supply Prices quite easily. It may be inferred that Mr Floropoulos would have been able to secure the supply for Oliana at the Kremel Supply Price had he complied with rather than breached his duties in the manner referred to. Mr Floropoulos did not suggest otherwise in his evidence and it was not put to Mr Garakis that he would not have supplied Oliana direct if that is what Mr Floropoulos had sought as he ought to have done.[262]
440 To the extent that it was pressed, I do not accept the contention that Oliana did not suffer loss because the Culinary Co Supply Price was less than the MyCo Supply Price, and it is sufficient to refer to the preceding discussion regarding Oliana’s loss and the calculation of the Oliana Loss Amount. That Oliana was previously paying MyCo a higher price for its products than it paid for the Culinary Co products does not relevantly affect that analysis.
441 To the extent that Mr Floropoulos or Mr Hone pressed the contention that disputes between Culinary Co and Oliana about payment or delays were relevant to the issue of loss, I do not accept that submission, noting also that it appeared not to be pressed in closing submissions. In any event, it does not affect the earlier analysis, noting that the loss is calculated by reference to amounts actually paid to Culinary Co by Oliana and that no set-off or counterclaim was pleaded or raised by any party.
442 As mentioned, neither of the defendants sought to contend that statutory interest ought not to be awarded if Oliana succeeded in obtaining damages. Subject to raising with the parties the date when Mr Floropoulos was joined as a party to the proceeding and addressing any other matters that might be raised on the topic, it is appropriate that Oliana be awarded statutory interest.
Fiduciary duty claims against Mr Floropoulos
443 In this section I address the following issues:
(a) Whether Mr Floropoulos was a fiduciary of Oliana.(b) Whether Mr Floropoulos owed fiduciary duties to Oliana.
(c) Whether Mr Floropoulos beached any fiduciary duties owed to Oliana. In this context I also address what was recorded as the separate issue of whether between March 2016 and January 2018 Mr Floropoulos diverted to himself a commercial opportunity of Oliana to himself or Culinary Co to acquire vegan cheese from Kremel at Kremel Supply Price ‘... within the principles stated in Regal Hastings v Gulliver ...’.[263]
Was Mr Floropoulos a fiduciary of Oliana?
444 The issue is whether Mr Floropoulos was in a fiduciary relationship with Oliana, either by reason of him being a de facto director or officer of Oliana, or by reason of the role he played in connection with the sourcing of an alternative supplier of vegan cheese products for Oliana.[264]
445 It was common ground between the parties that if Mr Floropoulos was found to be a de facto director or an officer of Oliana then the relationship was fiduciary in nature. That being so, and having determined that Mr Floropoulos was a de facto director and officer of Oliana after 26 February 2016, it is not strictly necessary to determine whether, if Mr Floropoulos had not been a director or officer after that date, whether he was a fiduciary of Oliana by reason of the role he undertook in connection with the sourcing of an alternative supplier of vegan cheese for Oliana. However, the parties have made submissions on the issue and it is convenient to address them and then state briefly my reasons for concluding that, whether or not I had not found that Mr Floropoulos was a director and officer of Oliana, he was a fiduciary and owed fiduciary duties to Oliana in any event in connection with the role he was undertaking.
Oliana’s submissions — fiduciary
446 Oliana’s ‘principal case’ was that Mr Floropoulos was a fiduciary by virtue of him being a de facto director or officer until about January 2018. But even if that were not so, Oliana contended that he was a fiduciary by virtue of having undertaken to act for Oliana in obtaining alternative supply and in its relationship with Kremel in connection with the supply of vegan cheese products.
447 There appeared to be no material controversy between the parties in relation to applicable principles so far as fiduciaries were concerned. Oliana referred to observations made in a number of the well-rehearsed authorities. In this context some emphasis was placed upon the relationship of agent and principal being one of the recognised categories of fiduciary relationships, whilst also recognising the nature and extent of duties in a given case will depend upon an examination of the circumstances in question.
448 With respect to the contention that a fiduciary relationship existed even if Mr Floropoulos was not found to be a director or officer of Oliana, Oliana submitted that Mr Floropoulos expressly or impliedly undertook to act on behalf of and in the interests of Oliana in relation to obtaining an alternate supplier, and the ongoing Kremel relationship throughout 2016 and 2017. Oliana submitted further that in so doing, Mr Floropoulos accessed a special opportunity to exercise his power or discretion to the detriment of Oliana which was vulnerable to any abuse by Mr Floropoulos because of his position. It was submitted that Mr Floropoulos accepted in his evidence that he had undertaken to approach Kremel on behalf of Oliana and negotiate with it on Oliana’s behalf in relation to the supply of vegan cheese products.
449 The matters that Oliana relied upon in support of its position were as follows:
(a) Mr Floropoulos acting as agent for Oliana in connection with the dealings with Kremel.(b) Mr Floropoulos’ acceptance that he had undertaken to approach Kremel on behalf of Oliana and to negotiate with it in relation to the supply of vegan cheese products to Oliana.
(c) The importance of the negotiations to Oliana given its fragile relationship with Mr Paule and MyCo and the importance of not losing the opportunity to obtain vegan cheese products for Woolworths and other retail outlets — and Mr Floropoulos’ knowledge of such matters.
(d) The trust placed in Mr Floropoulos by Mr Canzoneri and Mr Floropoulos’ acceptance that he knew Mr Canzoneri was relying upon him and trusting him when he went to Greece to find a replacement supplier for MyCo.
(e) Given the circumstances, Oliana’s entitlement to expect Mr Floropoulos would act in its interests in negotiations with Kremel and that full and proper disclosure would be made of any material matter or any conflict of interest.
(f) Mr Floropoulos’ acceptance that at the time the exclusive distribution agreement was being addressed, and continuing thereafter, that he was fully conveying to Mr Canzoneri that he was 100% with Oliana and on Oliana and Mr Canzoneri’s side of the bargaining.
(g) Mr Floropoulos actively seeking to engender reliance in an ongoing way by: preventing anyone else from Oliana dealing directly with Kremel; instructing Mr Canzoneri not to come to Greece to join him while the deal was being negotiated; directing Kremel that all correspondence relating to Kremel only be emailed to him, and also not via his Oliana email address; asking Mr Canzoneri to trust him in September 2016 when payment had been made but supply had not been made; instructing Mr Canzoneri not to contact Mr Garakis directly; instructing Mr Garakis to speak only in Greek to and around Mr Canzoneri when he came to Melbourne in April 2017; and directing Mr Adams that all communications should go through Mr Floropoulos.
450 Oliana submitted that the dispute over the detail as to whether Mr Canzoneri requested that Mr Floropoulos go to Greece to act on Oliana’s behalf, or whether Mr Floropoulos requested that he go instead of Mr Canzoneri, was ‘largely irrelevant’. It was stated that Mr Floropoulos accepted in his evidence that he had undertaken to approach Kremel on behalf of Oliana and negotiate with it in relation to the supply of vegan cheese products, and reference was also made to the factual matters listed above.
451 With respect to the terms of Oliana’s constitution, and in particular Clause 57, it was submitted that this did not assist Mr Floropoulos’ position. It was submitted that to obtain protection from permissive clauses like Clause 57 it was necessary for directors to observe and comply with the requirements of the law relating to the declarations of interest, and that directors bear the onus of proving that such provisions have been complied with. It was therefore submitted that Mr Floropoulos bore the onus of establishing that he had complied with s 191 of the Act.
452 In this context Oliana contended that Mr Floropoulos had a material personal interest in relation to the Kremel/Culinary Co supply dealings and by reason of the operation of s 191(1) and (3) was required to give the other directors notice of that interest with such notice to set out the details of the nature and extent of the interest, which was to be given at a directors meeting as soon as practicable after the director became aware of their interest in the matter, with the details to be recorded in the minutes of the meeting.
453 Oliana further submitted that once a breach of a fiduciary duty to provide information had been established, the onus was on the fiduciary to show that the information not given could not have affected the decision of the beneficiary, and that Mr Floropoulos had not discharged that onus ‘... in the slightest way’.
454 Oliana submitted that Mr Floropoulos ‘was a fiduciary to Oliana in relation to the Kremel relationship, regardless of whether or not he was also a fiduciary because he was a director’.
Mr Floropoulos’ submissions – fiduciary
455 Mr Floropoulos submitted that after his resignation in February 2016 he no longer owed any fiduciary duties to Oliana because he was not a de facto director or officer. To the extent that Oliana pressed the contention that Mr Floropoulos owed Oliana a fiduciary duty because Mr Floropoulos was a shareholder, this was rejected by Mr Floropoulos, who submitted that such an approach would involve a novel legal proposition.
456 As to matters of principle and observations in the authorities, there was no material dispute between the parties and Mr Floropoulos also made reference to well-rehearsed cases. Drawing upon Grimaldi[265] and the cases there referred to, Mr Floropoulos also observed that a person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another person as would thereby reasonably entitle that other person to expect that he or she will act in that other’s interest to the exclusion of his or her own, or a third party’s interest.
457 Mr Floropoulos contended that in this context the question was what function or responsibility the putative fiduciary had undertaken to perform, which was a question of fact that determined the subject matter over which any fiduciary obligations extended, which would often, in the case of specific agencies, be narrowly defined.
458 As to the particular facts referred to in paragraph 66M of the amended statement of claim,[266] it was submitted that none of the matters relied upon, either alone or together, were sufficient to establish any fiduciary duty on the part of Mr Floropoulos to Oliana. The matters referred to were: the shareholding in Oliana; the appointment of Mr Floropoulos as a director between 30 May and 6 July 2016; Mr Floropoulos acting in the position of a director or officer; statutory duties under the Act; the request by Mr Canzoneri following the 8 April 2016 meeting with Mr Paule that Mr Floropoulos attempt to identify an alternative supplier of vegan cheese products for Oliana; and the fact that Mr Floropoulos identified a potential alternative supplier in Kremel and travelled to Greece to negotiate terms on which Kremel would supply vegan cheese products to Oliana for sale by Oliana under the Oliana brand.
459 In this context, and in substance, it was submitted that the relevant evidence was as follows:
(a) Mr Floropoulos’ evidence that Mr Canzoneri agreed to Mr Floropoulos being compensated for his efforts in locating an alternative supplier in the alleged Moka Pot Discussion, and Mr Floropoulos thereafter locating an alternative supplier, which was a task completed by no later than 27 May 2016.(b) Negotiations after identifying Kremel being at arm’s length and a function of Mr Canzoneri and his solicitor son Michael Canzoneri on the one hand, with Mr Hone of Culinary Co on the other, but not being with Mr Floropoulos.
(c) Mr Floropoulos not being involved in any negotiations between Oliana and Culinary Co regarding price, with Mr Floropoulos simply providing the price schedule for the distribution agreement.
(d) Oliana having the opportunity to enter into a bilateral contract with Culinary Co, but not doing so when it was open to Oliana to seek whatever terms were needed to protect its position, but it failed to do so.
(e) Oliana having the opportunity to follow up Kremel to attempt to obtain its signature to the tripartite distribution agreement which it did not do.
460 Mr Floropoulos further submitted that if he was found to have been a continuing director of Oliana and therefore owed fiduciary duties he was entitled to the benefit of Clause 57 of Oliana’s Constitution.
461 Mr Floropoulos submitted that through the resignation discussions, but more particularly, the alleged Moka Pot Discussion, he made sufficient disclosure of his intention to obtain a benefit through any successful sourcing of an alternative supplier, and thereby his interest in any such arrangement, and that Mr Canzoneri expressly consented to it. He further submitted that Clause 57 ameliorated the otherwise strict prescriptive duties arising from any fiduciary relationship.
462 In concluding on the topic Mr Floropoulos submitted that what in truth Oliana was attempting to do was to invoke equitable sanctions in what was really a misrepresentation claim. Some emphasis was also placed on the facts and observations of Gibbs CJ in Hospital Products and the conclusion in that case that the defendant was found not to be a fiduciary.
Some principles and observations – fiduciaries
463 The essence of a fiduciary relationship is that one party is obliged to act in the interests of another party to the exclusion of their own self-interest. Certain relationships have been acknowledged to be fiduciary in nature. These include that of director and company.[267] However, the categories of relationships giving rise to fiduciary duties are not closed. In Hospital Products Ltd v United States Surgical Corp,[268] Mason J explained:
The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.[269]
464 Recently, in Schmidt v AHRkalimpa Pty Ltd (‘Schmidt’),[270] the Court of Appeal succinctly expressed the position as follows:
89. Fiduciary relationships have been referred to as relationships of trust and confidence or confidential relations. As stated by the High Court in Hospital Products Ltd v United States Surgical Corporation, the critical feature of these relationships is that ‘the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense’.[271] There is no comprehensive statement of the criteria by reference to which the existence of a fiduciary relationship may be established.[272] The creation of a joint venture relationship is not, in itself, determinative of whether a fiduciary relationship exists.[273]90. Once a fiduciary relationship is found to exist, the duties of the fiduciary will vary according to the circumstances which generate the relationship.[274] The scope of the fiduciary duty is dependent upon the nature of the relationship and the facts of the case.[275] The scope of the fiduciary obligations may be determined by reference to the terms of the agreement giving rise to those obligations and also by reference to the course of dealings actually pursued by the parties.[276]
91. A person who occupies a fiduciary position may not use that position to gain a profit or advantage for himself or herself, nor may he or she obtain a benefit by entering into a transaction in conflict with his or her fiduciary duty, without the informed consent of the person to whom the duty is owed.[277] A fiduciary must account to the person to whom the duty is owed for any benefit or gain:
(a) which has been obtained or received in circumstances where a conflict or significant possibility of conflict exists between his or her fiduciary duty and his or her personal interest in the pursuit or possible receipt of such benefit or gain; or(b) which was obtained or received by use or by reason of his or her fiduciary position or of opportunity or knowledge resulting from it.[278]
92. A fiduciary may act in his or her own interests, and will not be required to account for any profits obtained, in matters falling outside the scope of the fiduciary relationship.[279]
465 Fiduciary relationships are rarely fiduciary for all purposes. As the Court of Appeal stated in Adventure Golf Systems Australia v Belgravia Health & Leisure:[280]
126. ... The determination of the scope of a fiduciary relationship is logically distinct from the determination of its existence. The scope defines the reach of the fiduciary relationship; it is the subject matter over which the fiduciary obligations extend.[281] Put simply, ‘a person may be a fiduciary in some activities but not in others’.[282]
466 As noted above, due to the nature of the relationship a fiduciary is prohibited from obtaining any unauthorised benefit from the relationship and from being in a position of conflict.[283] In Howard v FCT,[284] Hayne and Crennan JJ explained the prohibition on not being in a position of conflict as follows:
59. It is well established[285] that “[i]t is an inflexible rule of a Court of Equity that a person in a fiduciary position ... is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict”. The majority in Pilmer v Duke Group Ltd (In liq) said[286] of this obligation that “the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is ‘a conflict or a real or substantial possibility of a conflict’[287] between personal interests of the fiduciary and those to whom the duty is owed” or a conflict between competing duties.60. But, as the majority in Pilmer also pointed out,[288] it is necessary to recognise, and give due weight to the fact, that different minds may reach different conclusions as to the presence or absence of a real possibility of conflict between duty and interest or duty and duty. That is, the doctrine cannot “be inexorably applied and without regard to the particular circumstances of the situation”.[289]
61. It follows that the working out of the application of the rule to company directors is not achieved by the bare repetition of its terms. Much closer attention must be given to the duties, interests and alleged manner of conflict than is given by simply observing that directors owe fiduciary duties. It is necessary to identify the duties or interests which are said to conflict or present a real possibility of conflict.
467 With respect to the prohibition on a fiduciary obtaining an unauthorised benefit, Hayne and Crennan JJ observed:[290]
62. It is equally well established that a fiduciary cannot profit from the relationship. A fiduciary must account for a profit or benefit obtained or received by reason or by use of the fiduciary position or by reason or by use of any opportunity or knowledge resulting from the position.63. This obligation is engaged when a company director diverts a business opportunity of the company to his or her personal advantage. It may be engaged by other circumstances. A director’s diversion of the company's business opportunity will also commonly (perhaps inevitably) engage the director’s obligation not to be in a position of conflict. But regardless of whether the obligation to avoid conflicts is engaged, a critical question presented for consideration in relation to the obligation not to obtain unauthorised benefits will be whether the director has obtained a benefit by reason or by use of the relationship between that director and the company.
468 The question identified by their Honours requires attention to be given to how and why it is said that the director obtained a benefit by reason or by use of the relationship. Further, as Regal (Hastings)[291] demonstrates, if the opportunity came to the director in the course or as a result of holding office as a director, it is not necessarily to the point to establish that the company could not or would not have exploited the opportunity.[292] In Regal (Hastings), the directors of the company were held bound to account to the company for their profit despite the company’s inability to raise the capital necessary to undertake the venture from which the directors made their profit.
Consideration – Was Mr Floropoulos a fiduciary?
469 It was common ground between the parties that if Mr Floropoulos was a de facto director and officer of Oliana he was a fiduciary and a fiduciary relationship existed between them, including in connection with his role in obtaining and dealing with the alternate supply of vegan cheese for Oliana. In the circumstances this was a correct position to take.[293]
470 However, whether or not Mr Floropoulos was a de facto director and officer of Oliana, Mr Floropoulos was in a fiduciary relationship with Oliana in relation to: the sourcing of an alternate supplier of vegan cheese for Oliana; the negotiation of the terms of that alternate supply with the supplier (and particularly in relation to price), in this case Kremel; and in the conduct and management of the ongoing supply arrangements with Kremel until Mr Floropoulos ceased to be involved with Oliana in late December 2017. If a particular date were required it would be the de facto director end date. Given my findings in relation to Oliana’s primary case regarding Mr Floropoulos being a director and officer, I need only briefly elaborate below regarding my reasons for this conclusion.
471 First, I have found that it has not been established that there was a resignation discussion of the kind alleged by Mr Floropoulos prior to 26 February 2020 or that the alleged Moka Pot Discussion occurred.
472 Secondly, Mr Floropoulos had been in a senior and material role in relation to supply arrangements for Oliana for many years and possessed experience and expertise, and even more so in the context of Greek suppliers.
473 Thirdly, Mr Floropoulos and Mr Canzoneri worked closely together in the way earlier described in connection with Oliana. Mr Canzoneri was a formally appointed director of Oliana and he trusted Mr Floropoulos and Mr Floropoulos knew that.
474 Fourthly, Mr Floropoulos had materially relevant and special knowledge in this context. Among other things, he knew: the financial and related importance to Oliana of obtaining an alternate supply of vegan cheese; the challenged and precarious nature of the relationship with Mr Paule and MyCo; the MyCo Supply Price charged to Oliana; the radically lower MyCo Cost Price; that Mr Canzoneri, for Oliana, wanted to see if comparable prices to the MyCo Cost Price could be obtained from an alternate supplier or manufacturer by approaching them directly; and of the profit margins and arrangements Oliana had with supermarkets and others in relation to the supply and sale of vegan cheese products.
475 Fifthly, undertaking the task of seeking to source an alternate supplier and negotiate certain terms, including in particular the pricing, was an activity that Mr Floropoulos was undertaking to do for, on behalf of, and in the interests of Oliana. It was clear that Mr Floropoulos knew that and that he knew that Mr Canzoneri was proceeding on the basis that he (Mr Floropoulos) was acting in Oliana’s interests.
476 Sixthly, it was only Mr Floropoulos who was dealing with Kremel in any material way, and he took steps to ensure this situation did not change.
477 Seventhly, in the circumstances the exercise being undertaken by Mr Floropoulos for Oliana involved the exercise of power and discretion that could and would affect the interests of Oliana in both a legal and practical sense — as in fact occurred.
478 In these circumstances it is in my view clear that even if Mr Floropoulos had not been a director or officer of Oliana he was in a fiduciary relationship with Oliana in relation to these activities in any event.
479 I add that even if it had been established that the resignation discussions or the alleged Moka Pot Discussion had occurred as alleged by Mr Floropoulos, and it had been concluded that Mr Floropoulos was not a director or officer of Oliana, I would still have concluded that Mr Floropoulos was a fiduciary of Oliana in the way referred to above and for substantively the same reasons.[294] The existence and limited alleged content of the conversations as put by Mr Floropoulos would not change the substance of the essential features to which I have referred.
480 Before concluding on this sub-topic I should say some more about aspects of Mr Floropoulos’ submissions in this context.
481 Although it does not change the result, I accept the submission that Mr Floropoulos being a shareholder does not give rise to a fiduciary relationship between Mr Floropoulos and Oliana. This was not pressed by Oliana.
482 I also accept that in the context of Mr Floropoulos having been found to be a director and officer, the scope and operation of Clause 57 is relevant. However, this is more relevant to the nature and extent of the duties and the question of breach, rather than the existence or otherwise of the fiduciary relationship. As will be seen, it does not assist Mr Floropoulos.
483 I do not accept that the positon of Michael Canzoneri materially assists Mr Floropoulos in this context. The fact that Michael Canzoneri was ultimately materially involved in the drafting of the distribution agreement does not detract from the matters relating to Mr Floropoulos to which I have referred, or relevantly affect the positon of Mr Floropoulos being a fiduciary of Oliana.
484 Similarly, even if it was assumed to be the case that it would have been as easy for Mr Canzoneri to follow up the position directly with Mr Garakis as is now suggested could have occurred, that does not alter the position because the substance of that which is referred to above remains the same. Further, and in any event, the evidence demonstrated that the position was far more nuanced than is suggested, and revealed that Mr Floropoulos acted in ways so as to maximise the prospect of material communications with Kremel and Mr Garakis taking place only through him. I refer, for example, to: Mr Floropoulos’ request that Mr Garakis speak only in Greek at the initial meeting with Mr Canzoneri; his instruction to Mr Adams about Kremel dealing direct with Mr Floropoulos; the evidence showing that Mr Floropoulos in fact operated in this way with Kremel; the email requests to Kremel that all communications be sent to Mr Floropoulos; and the heavy use by Mr Floropoulos in his communications with Kremel of email addresses that were not Oliana addresses or accessible by it.
485 It will be apparent that I do not accept the submission that Oliana’s focus on equitable sanctions was misplaced, ‘... in what was really a misrepresentation claim ...’, although as will be seen, I do accept that it has been established that Mr Floropoulos and Mr Hone engaged in misleading and deceptive conduct, which is addressed in detail in the next section of these reasons.
486 With respect to the decision in Hospital Products, the facts and circumstances under consideration are markedly different to those considered by the High Court, and a close comparison of the same does not assist, noting also the importance in this area of the law of paying close attention to the particular facts and circumstances in question.
Did Mr Floropoulos owe fiduciary duties to Oliana and if so did he breach them?
487 As framed by the parties the issue was whether between March 2016 and January 2018, Mr Floropoulos owed fiduciary duties to Oliana to:
(a) act in the best interests of Oliana;(b) avoid a conflict, or significant possibility of conflict between his duties to Oliana and his personal interests or the interests of any other person;
(c) not to obtain, for himself or another person, any benefit or gain by reason or use of his position;
(d) not to use any information he acquired or any opportunity which arose, or became available, in the course of him acting as a director or officer for Oliana for his own benefit in the absence of Oliana’s fully informed consent permitting him to do so;
and, if so, whether Mr Floropoulos breached any of those fiduciary duties (and if so how).
Did Mr Floropoulos owe fiduciary duties to Oliana?
488 I have already determined that Mr Floropoulos was a de facto director and officer of Oliana after 26 February 2016 until late December 2017 and that even if he had not been, he was in a fiduciary relationship with Oliana in any event. It follows that fiduciary duties were owed by Mr Floropoulos to Oliana, and it was not and could not be seriously contended otherwise.[295]
489 With respect to the duties owed by fiduciaries, it is sufficient to refer without elaboration to the principles and observations earlier discussed. The duties of the fiduciary will vary according to the circumstances, and the scope is dependent on the nature of the relationship and the facts of the case. As the Court of Appeal in Schmidt observed, a person who occupies a fiduciary position may not, unless otherwise provided, use that position to gain a profit or advantage for himself or herself (or another), put himself or herself in a position where interest and duty conflict, and may not obtain a benefit for himself or herself (or another) by entering into a transaction in conflict with his or her fiduciary duty without the informed consent of the person to whom the duty is owed. A fiduciary must not misappropriate a company’s property for his or her benefit or that of a third party, and a fiduciary must not divert any profit-making opportunity in the same line of business as the company’s present or prospective business to himself or herself except with the company’s fully informed consent.[296] The positive fiduciary duties of loyalty of a director include to act in good faith in the best interests of the company.[297]
490 It is in my view clear that Mr Floropoulos’ fiduciary duties extended to at least Mr Floropoulos’ activities in connection with seeking to secure a new supplier for Oliana and his dealings with Kremel and Culinary Co in this regard and thereafter. However, I accept Mr Floropoulos’ submission that the scope and extent of the fiduciary duties owed by Mr Floropoulos as a director and officer is to be considered in the context of, and to be calibrated by reference to, the terms of Clause 57 of Oliana’s constitution,[298] and by any informed consent. These matters are addressed further below.
Did Mr Floropoulos breach the fiduciary duties owed to Oliana?
491 Mr Floropoulos’ fiduciary duties were owed in his position as a director and officer of Oliana, and in any event, each being owed in connection with his role and responsibility for sourcing, securing, and dealing with the new supply arrangement on behalf of Oliana and in its interests. The object was to seek to obtain low pricing akin to the MyCo Cost Price that Oliana had discovered, and Mr Floropoulos’ role and obligation was to seek to facilitate that objective on behalf of Oliana rather than undermine it, as he did.[299]
492 Unless the scope of his duties had been relevantly circumscribed by the terms and operation of Clause 57 or the obtaining of informed consent (which they were not), it is plain that Mr Floropoulos breached his duty not to profit or advantage himself or another (Culinary Co), in acting in the way that he did with Culinary Co and Kremel when his interests and duty clearly conflicted, and by diverting a commercial opportunity in the line of Oliana’s business for his benefit and that of Culinary Co.
493 To partially employ the words of Hayne and Crennan JJ in Howard v FCT and the plurality in Pilmer: in acting as he did in relation to Kremel and Culinary Co, Mr Floropoulos breached fiduciary duties owed to Oliana because: he put himself in a position where his interest and duty to Oliana conflicted; he promoted his personal interests, and those of Culinary Co; he pursued and made a gain or advantage for himself and for Culinary Co[300] in circumstances where there was at least a real possibility of conflict between the personal interests of Mr Floropoulos, and those of Oliana to whom the duty was owed; he diverted a commercial opportunity in the line of Oliana’s business without the fully informed consent of Oliana. By acting as he did he also failed to act in good faith in the interests of Oliana.[301]
494 As was the case in CellOS Software Ltd v Huber[302] and Grimaldi,[303] Mr Floropoulos was a person that had ‘... undertaken to perform such a function for or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in the other’s interest to the exclusion of his or her own or a third party’s interest’.[304] That is not what Mr Floropoulos did. He did the opposite.
495 Mr Floropoulos acted in breach of his fiduciary duty owed to Oliana and profited from his relationship with Oliana where his duty and interests collided. He did so by diverting Oliana’s opportunity to acquire Kremel vegan cheese direct from Kremel at the Kremel Supply Price to his own advantage and to the advantage of Culinary Co. This occurred by reason of and by use of the relationship between Mr Floropoulos and Oliana, as a director, officer and fiduciary. Understandably, it was not submitted that Mr Floropoulos could not have secured the Kremel supply arrangement or the Kremel Supply Price for Oliana, although on the evidence it was established that he could have done so in any event as earlier mentioned.
496 In these circumstances it is not necessary to separately address the issue posed by the parties in relation to the ‘principles in Regal Hastings’. This is not only because of the above conclusions reached, but because the decision in that case, and the authorities there referred to, did not in my view so much establish the existence of a separate cause of action for diversion of commercial opportunity. Rather, the decision in Regal (Hastings) is but an example of the application to the specific facts in that case of established equitable principles regarding fiduciaries, as is apparent from a review of the decision and the myriad of cases that have addressed or referred to it. As Professor Nolan observed in Landmark Cases In Equity ‘the House of Lords ultimately decided the case by applying in a perfectly orthodox fashion the principle that a fiduciary may not make an unauthorised profit out of his position’.[305] This is also consistent with how the decision has been addressed elsewhere, including for example, by the authors of Ford, Austin and Ramsay’s Principles of Corporations Law[306] and recently by Beach J in CellOS. In any event, the result is the same.
497 It not having been established that the alleged Moka Pot Discussion and resignation discussion occurred as alleged by Mr Floropoulos, the foundation of his submissions about having obtained fully informed consent and his activities being permitted by Clause 57 falls away and is without merit.
498 In any event, the authorities well illustrate the nature and extent of the somewhat onerous task faced by a fiduciary seeking to rely upon a defence of fully informed consent, and that it is not sufficient simply to put the person to whom the duty is owed on inquiry. Although it is a question of fact in each case having regard to the particular circumstances with no precise formula, there is a focus on substance, and the person being informed of all the material facts, typically with full candour. See, for example, Howard v FCT,[307] Maguire v Makaronis (‘Maguire’),[308] and Rinehart v Rinehart.[309] The authors of Meagher, Gummow and Lehane’s Equity Doctrines and Remedies have observed:[310]
If a person occupying a fiduciary position wishes to enter into a transaction which would otherwise amount to a breach of duty, the fiduciary must, if liability is to be avoided, make full disclosure to the person to whom the duty is owed of all relevant facts known to the fiduciary, and that person must consent to the fiduciary’s proposal. What is required for a fully informed consent is a question of fact in all the circumstances of the case and there is no precise formula which will determine in all cases if fully informed consent has been given.
499 Even if the resignation discussions and alleged Moka Pot Discussion had occurred as alleged the result would be the same. Even on Mr Floropoulos’ evidence key and central information was not disclosed, including information regarding Mr Floropoulos’ involvement with Culinary Co, his dealings with Kremel and Culinary Co, and the Kremel Supply Price.
500 Again Clause 57 also provides no assistance to Mr Floropoulos. Although the scope and extent of Mr Floropoulos’ fiduciary duty as a director and officer will be calibrated to take into account the terms and operation of Clause 57, it has not been established to have been relevantly engaged. I refer in this regard to the observations previously made regarding Clause 57 in the statutory duty context, the substance of which is equally germane here.
Conclusion – breach of fiduciary duty
501 As I have said, Oliana has established that Mr Floropoulos breached fiduciary duties owed to Oliana in connection with the supply of Kremel products in the manner referred to above.
Relief Sought – breach of fiduciary duty
502 In respect of its breach of fiduciary duty claim Oliana sought equitable compensation, alternatively an account of profits. It was ultimately common ground that Oliana did not need to make its election until after the delivery of these reasons and that if it elected to have an account of profits further directions and a further hearing would be required. As to Oliana’s claim for equitable compensation, Oliana claimed the Oliana Loss Amount, which was calculated in the way described above when dealing with the s 1317H claim.
503 Mr Floropoulos did not make any material additional specific submissions directed at equitable compensation,[311] again contending that causation had not been established because of insufficient evidence regarding that which Mr Canzoneri would have done and that which would have followed. That is, it had not been established that Mr Canzoneri could and would have obtained supply from Kremel, or at the Kremel Supply Price.
Principles and Observations – Equitable compensation and account of profits
504 In Schmidt, the Court of Appeal stated the principles relevant to an award of equitable compensation and addressed aspects of the account of profits remedy as follows:[312]
181. The Court, in its equitable jurisdiction, has the power to award compensation for a breach of fiduciary duty.[313]182. Equitable compensation is aimed at restoring the innocent party, as nearly as possible, to the position in which he or she would have been had the breach of fiduciary duty not occurred.[314] This can be contrasted to an account of profits where the errant fiduciary will be ordered to render an account of the profits made within the scope and ambit of his or her duty.[315]
183. As the obligation imposed upon defaulting fiduciaries is more absolute than the common law obligation to pay damages for tort or breach of contract, the obligation is not limited or influenced by common law principles relating to remoteness of damage, foreseeability or causation.[316] In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd, Gageler J stated:
[A] causal connection sufficient for the fiduciary to be liable to the equitable remedy of compensation will exist if a loss to the person to whom the fiduciary obligation is owed would not have been sustained but for the breach.[317]
184. The normal rule is that equitable compensation is assessed not as at the date of the breach but as at the time of the trial, with the full benefit of hindsight.[318] Up until a fiduciary who is in breach of his or her fiduciary duties makes full restitution and pays appropriate compensation, the fiduciary’s breaches are presumed to continue.[319]185. In accordance with the ‘cardinal principle’ of equity, ‘the remedy must be fashioned to fit the nature of the case and the particular facts’.[320] As to the method of assessing equitable compensation, it has been said that this will vary according to the nature of the fiduciary obligation whose breach is to be redressed.[321] Equitable compensation is often calculated by reference to the loss suffered by the innocent party.[322] However, in some cases, it may be appropriate to compensate the claimant by reference to the profits earned or gain made by the person who committed the breach of fiduciary duty.[323]
186. In a claim for equitable compensation, the person to whom the fiduciary duties are owed has the onus of establishing the quantum of his or her claim.[324]
187. Whilst a fiduciary need not act dishonestly or fraudulently in order to be liable for a breach of fiduciary duty,[325] consideration of the severity of the breach of the fiduciary obligation and the extent of the fiduciary’s involvement and culpability may be relevant to the assessment of compensation.[326]
188. In the context of an account of profits, it has been said that in determining the remedy for a breach of fiduciary duty, the claimant should not obtain a windfall or be unjustly enriched.[327] Further, a breaching fiduciary may be able to establish that some profit or benefit is beyond the scope of liability for which he or she should account, such as where the profit or benefit has no reasonable connection to the wrongdoing.[328] However, once a causal link to the profit or benefit claimed is established, the onus is on the errant fiduciary to show that he or she should not account for the full value of the profit or benefit.[329] Accordingly, profits may be apportioned if an antecedent arrangement exists for the sharing of those profits.[330] In the absence of an antecedent arrangement for the sharing of profits, a defaulting fiduciary may be entitled to an allowance for skill, expertise and expenses.[331] As was said by the High Court in Warman International Ltd v Dwyer:
[A] distinction should be drawn between cases in which a specific asset is acquired and cases in which a business is acquired and operated. ...In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal’s goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal’s property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff’s property but the product of the fiduciary’s skill, efforts, property and resources. This is not to say that the liability of a fiduciary to account should be governed by the doctrine of unjust enrichment, though that doctrine may well have a useful part to play; it is simply to say that the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff.[332]
189. The flexibility of the remedies for a breach of fiduciary duty committed in relation to the establishment of an ongoing business is exemplified by the following statement by Gageler J in Ancient Order which was made in the context of a claim for an account of profits:
Where the benefit or gain which has in fact been obtained by the errant fiduciary ... is the establishment of an ongoing business, the outcome might accordingly be that the fiduciary ... is liable to account ‘for the entire business and its profits, due allowance being made for the time, energy, skill and financial contribution that [the fiduciary...] has expended or made’. Depending on the circumstances, the outcome in the alternative might be that some lesser measure, more favourable to the fiduciary ... is judged better to reflect the equities of the case.[333]
505 As was observed in Maguire,[334] the policy of the law to hold trustees and non-trustee fiduciaries to the obligations to perform the trust and duties is ’strongly manifested’ in cases where loss is occasioned upon breach arising from conflict between duty and interest. As is apparent, the concept of equitable compensation is a flexible one, designed to do justice in the particular circumstances of the case directed to restoring the claimant to the position it would have been in had the breach of duty not occurred — but not by applying causation principles in the same way as they are at common law or in relation to statutory claims.
506 I refer also to the discussion in Meagher Gummow and Lehane’s Equity Doctrines & Remedies regarding the hypothetical inquiry and the structured exercise undertaken in connection with breaches of fiduciary duty, including proceeding on the assumption that the defendant fiduciary would have performed all duties. As the learned authors observed ‘... when deciding what would have happened absent a particular breach of duty, it must be supposed that the defendant trustee or other fiduciary would have acted according to conscience’.[335]
507 When assessing quantum and considering what would have happened if no breach had occurred, the court should not speculate against the plaintiff, or assume that something might have occurred when in fact it did not.[336] When dealing with a loss of opportunity where a court is challenged with placing a monetary value on something that lacks precise measurement the court is entitled to use common sense and general notions of justice and fairness.[337]
508 In GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers (‘Pearce’),[338] Warren CJ sitting in the Court of Appeal (with whom Chernov JA and Dodds-Streeton AJA agreed) considered the choice between an account of profits and equitable compensation available to a claimant who had established a breach of fiduciary duty. Her Honour stated:[339]
50. A fiduciary cannot be permitted to retain a profit or benefit which she or he has obtained by reason of a breach of fiduciary duty.[340] In light of the finding of the trial judge, Pearce Co was entitled to claim relief.51. In Hospital Products Ltd v United States Surgical Corporation[341] Mason J discussed the approach to relief where breach of fiduciary duties has occurred and observed that each case will depend upon its own facts and circumstances. Where fiduciaries have either made profits or caused loss through breach of fiduciary duties, one or more of the following remedies will be applied: (i) constructive trust; (ii) an account of profits; or (iii) equitable compensation.
...
53. An account of profits directs a defendant to give the plaintiff the monetary value of what she or he has obtained,[342] whereas equitable compensation directs the defendant to restore the monetary value of the loss which she or he has caused to the plaintiff.[343]
509 In issue in Pearce was whether the plaintiff had, whether at the time of trial or at the time of judgment, elected to pursue equitable compensation or whether it had not made an election as between equitable compensation and an account of profits, either at trial or at the date of judgment. The trial judge held that the plaintiff had elected to pursue equitable compensation over an account of profits, as the plaintiff had not sought an order for the latter. The plaintiff appealed this finding on the basis that the trial judge ought to have offered it an election prior to the entry of judgment. In relation to the question of election and its timing, Warren CJ stated:[344]
A plaintiff, where faced with a choice between an account of profits or equitable compensation, must make a decision as to which one it will pursue. For instance, in Tang Man Sit v Capacious Investments[345] the plaintiff was awarded an account of profits and compensation in the same suit and sought to enforce both remedies. However, in that case the Privy Council reiterated, as did the High Court in Warman International Ltd v Dwyer[346] that an account for profits and an award of damages are alternative and not cumulative remedies.[347] Normally, where both remedies are available, a plaintiff must elect between them. Ordinarily, the election need not be made before the trial starts and may be delayed until determination of the cause of action. There is therefore no difficulty where the plaintiff claims both equitable compensation and an account of profits in the prayer for relief, however, election must be made when (but not before) judgment is given. Where the plaintiff does not know which remedy is more favourable at the time of judgment on liability, the court may order discovery or other orders designed to give the plaintiff the information it requires to make the election.[348]
510 Gageler J, in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (‘Ancient Order’),[349] — in the same passage quoted by the Court of Appeal in Schmidt extracted in more succinct terms above — addressed the causal connection in the context of an account of profits as follows:[350]
A causal connection between a fiduciary’s breach of fiduciary obligation and a benefit or gain sufficient for the fiduciary or knowing participant to be liable to the equitable remedy of account will exist if the benefit or gain to the fiduciary or knowing participant would not have been obtained “but for” the breach, in the same way as a causal connection sufficient for the fiduciary to be liable to the equitable remedy of compensation will exist if a loss to the person to whom the fiduciary obligation is owed would not have been sustained but for the breach.[351] Because the concern of equity is to vindicate the equitable obligation that has been breached, the “but for” connection will be sufficient even though other contributing causes might be in play. That the fiduciary’s breach of fiduciary obligation is dishonest and fraudulent is also good reason for treating a sufficient causal connection as existing if the dishonest and fraudulent breach can be concluded to have played a material part in contributing to the benefit or gain of the fiduciary or knowing participant even in circumstances where it cannot be concluded that the benefit or gain would not have been obtained but for the breach.
511 As to the assessment of profit that a plaintiff is entitled to recover, it is sufficient to refer to, without repeating, the observations of the High Court in Warman International Ltd v Dwyer (‘Warman’)[352] and Ancient Order,[353] extracted by the Court of Appeal in Schmidt and referred to above. The starting point is that the plaintiff is entitled to the whole of the profit made by the breaching fiduciary[354] and the onus is on the breaching fiduciary to establish that it would be inequitable for an order to be made requiring an account of the entire profits made.[355]
512 In order to do justice in equity as between the parties, when determining the amount to be awarded for an account of profits, the court may make allowances for any special contribution (whether it was made in time, skill, energy, or financial terms) of the breaching fiduciary to the profit ultimately made by him or her. This is to avoid, as was made clear in Warman, the liability of the fiduciary becoming ‘... transformed into a vehicle for the unjust enrichment of the plaintiff ...’.[356]
513 In the context of breach of fiduciary duty claims it is not uncommon for issues to arise as to whether the reasoning in Brickenden v London Loan and Savings Co (‘Brickenden’)[357] is applicable, which in turn can lead to discussion of that which was decided by the frequently quoted passage of Lord Thankerton in his judgment delivered on behalf of the Privy Council, its current status, and the extent to which it is relevant to the facts in question. Very briefly, Brickenden involved a solicitor acting on both sides of a mortgage transaction where it was alleged that in breach of his fiduciary duty the solicitor failed to disclose to the lender that he was to benefit from the transaction by the loan proceeds being utilised to discharge a prior mortgage in respect of which the solicitor had an interest. In connection with the contention that the transaction would have proceeded anyway, Lord Thankerton said as follows:
When a party, holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that the disclosure would not have altered the decision to proceed with the transaction because the constituent’s action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant.’[358]
514 As was observed in Equity Doctrines & Remedies[359] this passage has been described by J A Heydon (writing extra judicially) as notoriously difficult, and has ‘meant all things to all judges’, with some conflicts in the cases. The decision in Wollongong Coal Ltd v Gujarat NRE Properties Pty Ltd (‘Wollongong Coal’)[360] is, with respect, a very recent and helpful illustration of a considered discussion on the issue addressing many of the cases,[361] to which I refer but need not be addressed in further detail here. It is also to be observed that, as was there emphasised, ‘... what Brickenden said could not be maintained by a fiduciary in breach of his duty of disclosure was the contention that the constituent (ie the principal or the party to whom the duty was owed) would have done what he (or it) did even if the fiduciary had disclosed the non-disclosed fact’.[362]
Consideration – Equitable compensation and account of profits
515 I refer to the submissions and the discussion of Oliana’s damages claim in the context of s 1317H of the Act above. As there noted, the same amount is claimed by Oliana under each head of Oliana’s claims, including this equitable compensation claim. That amount is the Oliana Loss Amount, based as it is on the difference between the amounts paid at the Culinary Co Supply Price and the amounts that would have been paid at the Kremel Supply Price.
516 Subject to Oliana addressing the issue of its election, Oliana has established that it is entitled to equitable compensation or an account profits from Mr Floropoulos. Having regard to the principles addressed above, it is evident that sufficient ‘causal’ connection to its claimed loss has been established. But for Mr Floropoulos’ breaches of fiduciary duty Oliana would not have sustained the loss that it did, being the Oliana Loss Amount. If Mr Floropoulos: had not put himself in a position where his interest and duty to Oliana conflicted; had not promoted his personal interests, and those of Culinary Co, by making and pursuing a gain for himself and for Culinary Co;[363] had not diverted the commercial opportunity; and had acted in good faith in the interests of Oliana, Mr Floropoulos, would have complied with his duties and acted according to conscience. In so doing, Mr Floropoulos would have acted as a loyal fiduciary and secured supply from Kremel for Oliana at the Kremel Supply Price. He would have carried out his role and responsibilities in this regard on behalf of Oliana and in its interest.
517 I have earlier determined that it has been established on the balance of probabilities that supply could have been obtained for Oliana by Mr Floropoulos from Kremel at the Kremel Supply Price.[364] In any event, it was not submitted that the opportunity could not have been so obtained by Mr Floropoulos by him acting in accordance with the fiduciary duties that he owed to Oliana.
518 In this context Mr Floropoulos’ emphasis on what Mr Canzoneri might have done was in my view somewhat misplaced because it paid insufficient regard to the need to focus upon compliance by Mr Floropoulos with his fiduciary duties, as opposed to disclosure of how he was proposing to breach them. He did not have a fiduciary duty to seek informed consent.[365] He had fiduciary duties of the kind earlier referred to, but accepting of course that had fully informed consent been obtained (which it was not) that would have impacted on the content of his duty and the question of breach.
519 Although Oliana made reference to the reasoning in Brickenden in connection with its claim for equitable compensation or an account of profits, it has not been necessary to have resort to this reasoning in reaching the above conclusions, although noting that the defendants did not appear expressly to submit that such reliance on Brickenden was misplaced. That said, and without descending into a review or consideration of the various issues arising in connection with Brickenden of the kind undertaken in Wollongong Coal, it is not immediately apparent how it is said that the reasoning engages in the current circumstances. This is because not only was the issue there focussed only on a fiduciary obligation of disclosure (as often occurs in solicitor cases but is not the position here), but in the present circumstances it is not contended that if disclosure had occurred Oliana would have proceeded with the same transaction in any event.[366] Even if it had been so contended, the evidence establishes otherwise. As Rein J observed in Wollongong Coal, what Brickenden said could not be maintained by a fiduciary in breach of a duty of disclosure was the contention that the party to whom the duty was owed would have done what he, she, or it did even if the fiduciary had disclosed the non-disclosed material facts.[367] It is not necessary to say anything further regarding the reasoning in Brickenden for present purposes.
520 For the reasons earlier explained Oliana has established that the quantum of its loss is the Oliana Loss Amount. Depending on its election Oliana is entitled an account of profits or to be awarded an amount equal to the Oliana Loss Amount by way of equitable compensation. Double recovery is of course not permitted.
521 At this stage it is not necessary to address Oliana’s account of profits claim further. Although it initially claimed that the profits were equal to the Oliana Loss Amount, upon reflection it was properly recognised that the issue was not quite so straightforward. As the parties agreed, should Oliana elect to have an account of profits, further directions will need to be made and a further hearing will be required.[368] The issue of election will be addressed with the parties when these reasons are handed down.
Misleading or deceptive conduct claims against Mr Floropoulos
522 As framed by the parties in the List of Issues, the issues were stated to be whether, in or about 2016 and continuing into 2017, Mr Floropoulos engaged in misleading or deceptive conduct in contravention of the ACL by representing to Oliana that:
(a) Kremel had appointed Oliana as exclusive distributor for Kremel’s products pursuant to the letter dated 7 June 2016 and/or the terms of the exclusive distribution agreement (Exclusive Distributor Representation);(b) Hone and Culinary Co had authority from Kremel to make supply arrangements on behalf of Kremel and to enter into the exclusive distribution agreement on behalf of Kremel (Authority Representation);
(c) Each of Culinary Co and Kremel were bound by the exclusive distribution agreement at least until 10 January 2018 (Binding Agreement Representation);
(d) Culinary Co was Kremel’s Australian subsidiary/corporate representative (Australian Subsidiary Representation);
(e) The prices charged or to be charged by Culinary Co to Oliana were the prices charged by Kremel (Price Representation).
523 Although framed in this way, the allegations were more complex and overlapping than first appears, because each of the alleged representations were in terms substantially founded upon what were defined in the amended statement of claim as the ‘Supply Representations’ said to have been made by Mr Floropoulos, and upon certain conduct of Mr Floropoulos which was defined in the pleadings as the ‘Floropoulos Conduct’.
524 The Supply Representations were said to have started from May 2016 after Mr Floropoulos identified Kremel as the potential supplier for Oliana and negotiated with it when in Greece. The Supply Representations were said to have followed on from the conclusion of those negotiations, with the representations being made between May and November 2016 and continuing until at least 21 December 2017, being representations by Mr Floropoulos to Oliana that:
(a) Kremel had agreed to deal exclusively with Oliana in relation to the supplier of Kremel products in Australia and New Zealand.(b) Kremel was willing and would in fact supply products to Oliana manufactured by it at the prices charged by Kremel.
(c) Mr Hone was Kremel’s duly authorised legal representative in Australia.
(d) Culinary Co was Kremel’s Australian subsidiary/corporate representative.
(e) The prices charged or to be charged by Culinary Co to Oliana were the prices charged by Kremel.
525 The Floropoulos Conduct was said to be that Mr Floropoulos:
(a) did not qualify, withdraw or resile from the Supply Representations;(b) advised that Kremel invoices be directed to the attention of Mr Hone at Culinary Co and not Oliana;
(c) told Mr Canzoneri that Mr Garakis, Kremel’s managing director, was going to instruct Mr Hone to prepare a contract recording the parties’ exclusive distribution agreement;
(d) discussed with and assisted Mr Canzoneri in finalising the terms of the draft exclusive distribution agreement provided to Mr Canzoneri by Mr Hone;
(e) communicated with Kremel on behalf of Oliana in relation to the supply of Kremel’s products.
526 A further issue was whether Mr Floropoulos aided and abetted or was knowingly involved in the misleading conduct alleged to have been engaged in by Mr Hone and Culinary Co, which is addressed later in these reasons.
Principles and observations
527 Again there was no issue between the parties regarding the applicable principles and the state of the law.
528 Section 18(1) of the ACL provides that ‘[a] person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’. Section 236 of the ACL entitles a person who suffers ‘loss or damage because of’ the misleading or deceptive conduct of another person to ‘recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention’. Where engaged, s 238 of the ACL provides for the making of compensation orders that the court considers will compensate the person concerned for loss and damage or reduce the loss and damage.
529 Conduct is misleading or deceptive if it is likely to mislead or deceive or has a tendency to lead into error.[369] This is a question of fact determined objectively in the context of the surrounding facts and circumstances.[370]
530 In Comité Interprofessionnel du Vin de Champagne v Powell,[371] Beach J helpfully set out what he, with respect, rightly described as ‘non-contentious principles’ as follows:
170. First, there is no meaningful difference between the words and phrases “misleading or deceptive”, “mislead or deceive” or “false or misleading”; see Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [14] per Gordon J and Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2014] FCA 634; (2014) 317 ALR 73 at [40] per Allsop CJ.171. Second, where the issue is the effect of conduct on a class of persons such as consumers (rather than identified individuals to whom a particular misrepresentation has been made or particular conduct directed), the effect of the conduct or representations upon ordinary or reasonable members of that class must be considered (Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45 at [102] and [103]). This hypothetical construct avoids using the very ignorant or the very knowledgeable to assess effect or likely effect; it also avoids using those credited with habitual caution or exceptional carelessness; it also avoids considering the assumptions of persons which are extreme or fanciful. Further, the objective characteristics that one attributes to ordinary or reasonable members of the relevant class may differ depending on the medium for communication being considered. There is scope for diversity of response both within the same medium and across different media.
172. Fourth, for the purposes of s 18, one must identify the relevant conduct and then consider whether that conduct, considered as a whole and in context, is misleading or deceptive or likely to mislead or deceive. Such conduct is not to be pigeon-holed into the framework or language of representation (cf the language of s 29).
173. Fifth, conduct is misleading or deceptive or likely to mislead or deceive if it has the tendency to lead into error (Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640; at [39] per French CJ, Crennan, Bell and Keane JJ). But conduct causing confusion or wonderment is not necessarily co-extensive with misleading or deceptive conduct (Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 at [8] per French CJ, Crennan and Kiefel JJ).
174. Sixth, the question is whether there was a real but not remote chance or possibility that the relevant conduct was misleading or deceptive or likely to mislead or deceive. To assess this one looks at the potential practical consequences and effect of the conduct.
175. Seventh, for the purposes of s 18, the words “likely to mislead or deceive” demonstrate that it is not necessary to show actual deception. Relatedly, it is not necessary to adduce evidence from persons to show that they were actually misled or deceived.
176. Eighth, there must be a sufficient nexus between the impugned conduct or apprehended conduct and the consumer’s misconception or deception. As was said in SAP Australia Pty Ltd v Sapient Australia Pty Ltd [1999] FCA 1821; (1999) 169 ALR 1 at [51] by French, Heerey and Lindgren JJ:
The characterisation of conduct as “misleading or deceptive or likely to mislead or deceive” involves a judgment of a notional cause and effect relationship between the conduct and the putative consumer’s state of mind. Implicit in that judgment is a selection process which can reject some causal connections, which, although theoretically open, are too tenuous or impose responsibility otherwise than in accordance with the policy of the legislation.
177. Subject to one qualification, the error or misconception must result from the respondent’s conduct and not from other circumstances for which the respondent was not responsible. But conduct that exploits or feeds into and thereby reinforces the pre-existing mistaken views of members of the relevant class may be misleading or deceptive or likely to mislead or deceive. ...178. Ninth, conduct that is merely transitory or ephemeral where any likely misleading impression is likely to be readily or quickly dispelled or corrected does not constitute conduct that would infringe s 18 (Knight v Beyond Properties Pty Ltd [2007] FCAFC 170; (2007) 242 ALR 586 at [58] per French, Tamberlin and Rares JJ).
...
180. But there is another dimension to this aspect relevant to the present case concerning ... use of social media. ... Take for example Twitter. Tweeting is fleeting. Further, the ripple effects of such a mode are unclear. It may be said of such media that it is transitory and ephemeral. But there are three aspects that support a characterisation of such social media and its intercourse as being more enduring. First, a Tweet may be fleeting, but its effect or influence on a reader may be more enduring as I explain later. Second, although particular communications may be fleeting in real time, nevertheless, there is usually a more permanent record of the communications contained and preserved within the type of mode used or elsewhere for anyone to access at a later stage. Third, although the communications may be fleeting in real time, nevertheless the repetition over an extended time frame of similar types of communications may demonstrate a pattern of more enduring and potentially infringing conduct. Such a more enduring pattern may establish a contravention of s 18 even though any one individual communication on a Twitter feed flitting in and out of cyberspace may be more ephemeral.
181. Tenth, and relatedly, it is one thing to say that the conduct must be more than transitory or ephemeral, but it is another thing to say that the conduct or its effect must endure up to some “point of sale”. There is no such requirement to establish a s 18 contravention.
182. Eleventh, in determining whether a contravention of s 18 of the ACL has occurred, the focus of the inquiry is on whether a not insignificant number within the class have been misled or deceived or are likely to have been misled or deceived by the respondent’s conduct. There has been some debate about the meaning of “a not insignificant number”. The Campomar formulation looks at the issue in a normative sense. The reactions of the hypothetical individual within the class are considered. The hypothetical individual is a reasonable or ordinary member of the class. Does satisfying the Campomar formulation satisfy the “not insignificant number” requirement?
183. I am inclined to the view that if, applying the Campomar test, reasonable members of the class would be likely to be misled, then such a finding carries with it that a significant proportion of the class would be likely to be misled. But if I am wrong and that a finding of a “not insignificant number” of members of the class being likely to be misled is an additional requirement that needs to be satisfied, then I would make that finding in the present case. For a discussion of these issues, see Peter Bodum A/S v DKSH Australia Pty Ltd [2011] FCAFC 98; (2011) 280 ALR 639 at [206] to [210] per Greenwood J and National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90; (2004) 61 IPR 420 at [70] and [71] per Jacobson and Bennett JJ.
531 In Australian Olympic Committee, Inc. v Telstra Corporation Ltd,[372] Wigney J also helpfully summarised a number of the relevant and well-accepted principles, which I shall not set out in full. Additional matters noted included the following:
...
532 A representor who makes a representation with respect to a future matter which is challenged in Court, must bring forward evidence that there were reasonable grounds for the making of that representation at the time that it was made if it wishes to avoid the presumptive consequences of engaging the operation of s 4 of the ACL.
533 Silence may constitute misleading or deceptive conduct where it embodies a false representation or where there is a reasonable expectation that a relevant fact will be disclosed.[373] Silence may also form part of the relevant surrounding facts and circumstances in which impugned conduct is assessed.
534 In Addenbrooke Pty Ltd v Duncan (No 2), Gilmour and White JJ (Dowsett J agreeing) stated that circumstances in which a reasonable expectation of disclosure may arise include:
Determination of whether a failure to disclose a matter is misleading or deceptive requires an examination of all the circumstances. If in all the circumstances, assessed objectively, a representee would have been entitled to expect an undisclosed matter would be disclosed, that may constitute misleading or deceptive conduct.[375] It is necessary to consider whether in the circumstances the acts, omissions, statements or silence means there has been conduct that is misleading or deceptive or likely to mislead and deceive.[376]
535 Disclaimers and exclusion clauses cannot be relied upon to exclude liability for misleading or deceptive conduct. However, the existence and context of such clauses are often part of the context and circumstances to consider in deciding whether there has been misleading or deceptive conduct, and whether or not, for example, pre-contractual representations were relied upon, or the claimed misleading conduct has been causative of loss.[377]
536 In considering whether the facts of a case disclose misleading or deceptive conduct, a two-step analysis is followed. The first step involves asking whether the facts establish the conduct alleged and the second step involves asking whether, as a question of fact, the conduct is misleading or deceptive or likely to mislead or deceive.[378]
537 It has been observed that the fact that a person who has been the subject of a misrepresentation could have discovered the misrepresentation had he or she made proper inquiries, does not absolve the maker of the misrepresentation from liability for breach.[379]
538 As was observed by French J in Gardam v George Willis & Co Ltd,[380] ‘the innocent carriage of a false representation from one person to another in circumstances where the carrier is and is seen to be a mere conduit does not involve him [or her] in making that representation’.
539 In Jafari v 23 Developments Pty Ltd, the Court of Appeal stated the following in relation to causation for misleading or deceptive conduct claims:[381]
133. ... the critical question is whether loss or damage is caused ‘by’ (or ‘because of’) the contravening conduct and, when it comes to causation, that question may be answered in the affirmative even if the representee did not rely on the misrepresentation in the strict sense of the word.[382] In Campbell v Backoffice Investments Pty Ltd, Gummow, Hayne, Heydon and Kiefel JJ referred to observations made by Giles JA in the court below, and said:
Giles JA was right to point out that reliance is not a substitute in the context of the Fair Trading Act for the essential question of causation. Moreover, it is also right to observe, as Giles JA said, that ‘[i]t may be artificial to speak of reliance in determining what action or inaction would have occurred if the true position had been known’.[383]
134. In a positive misrepresentation claim, causation may be established by demonstrating that the representee would have acted differently if they had known that the representation conveyed to them was false. If, for instance, by having known of the truth concealed by a misleading representation, the representee would not have entered into a transaction, contract or investment opportunity which resulted in them suffering a loss, the court can hold that the representation was a necessary factor in the representee’s decision to enter into that transaction.[384] In Smith v Noss, Giles JA said:
Even where the misleading or deceptive conduct lies in disclosing something — making a representation which is false — the notion of reliance must be used with care. Causation will be established if there would have been inaction or some other action had it been known that the representation was false. Since the representee did not know the falsity of the representation, again there is a hypothetical question, and in such a case the scope for the representee to give evidence of thought processes at the time may be quite limited and ‘reliance’ may mean no more than that the representee would have acted differently had it been known that the representation was false. To speak of a need for explanation or for specific evidence of reliance, or for evidence of a decision-making process, can lead to error; the question is one of causation.Secondly and more fundamentally, specific evidence of reliance is not essential for proof of causation. Such evidence may be one strand, perhaps an important one, in the factual skein, but causation may be found without it.[385]
540 The Court of Appeal recently observed in SF Cosentino Pty Ltd v Glendining[386] that s 18 of the ACL is not confined to ‘reasonable reliance’ and the section is not restricted to the protection and care of the astute. Provided that there is a causal connection between the contravention and the loss or damage, negligence on the part of a plaintiff should not preclude a successful claim for misleading or deceptive conduct.[387]
541 For the purposes of s 236, the plaintiff bears the onus of proving loss.[388] Damages under s 236 are generally assessed according to the measure of damages for the tort of deceit.[389] The general measure of damages for deceit is the prejudice or disadvantage suffered in consequence of the plaintiff having altered their position under the inducement of the fraudulent representation.[390]
Context and Circumstances
542 The evidence regarding the context and circumstances relevant to this particular allegation of misleading conduct is also relevant to the many remaining allegations of misleading conduct and it is convenient to turn to that first. Although substantial aspects of the context and surrounding circumstances are apparent from the Background section above and other factual matters previously addressed, given the manner in which the misleading conduct claims have been framed and the many overlapping and at times circular matters relied on in relation to each of the representations, it is necessary to revisit some of these acts and omissions (and additional items) in some detail given their importance to all of the misleading conduct allegations against Mr Floropoulos and Mr Hone.[391] As will be seen, this unfortunately necessitates a level of repetition.
543 Mr Floropoulos resigned his formal appointment as a director of Oliana on 26 February 2016, but continued to carry on his role in a substantially unchanged way thereafter — and in the context of the 25 February 2016 text message exchange between Mr Canzoneri and Mr Floropoulos about ‘being on fire’ and taking Oliana ‘to the next level’ ‘together’. It will be recalled that I have determined that he was a de facto director, officer and fiduciary thereafter.
544 It was not established on the evidence that the resignation discussions or the alleged Moka Pot Discussion occurred as alleged by Mr Floropoulos. On the evidence, the reasons for Mr Floropoulos resigning his formal position as a director on 26 February 2016 have not been revealed.
545 Mr Canzoneri and Oliana had become aware of the MyCo Cost Price that MyCo was paying its manufacturer in Greece. Mr Canzoneri was incensed at the mark-up Oliana was being charged by MyCo. Mr Floropoulos also knew the MyCo Cost Price, the MyCo Supply Price to Oliana, and what Oliana was receiving from Woolworths and other retailers for the MyCo products.
546 On 3 April 2016, Oliana appointed Mr Wyner as its business development manager, who was to be responsible to Mr Floropoulos on a day-to-day basis.
547 The relationship with MyCo had deteriorated and Mr Canzoneri and Mr Floropoulos were involved in the challenged meeting with Mr Paule on 8 April 2016, in which Mr Canzoneri failed to obtain the financial support he had been seeking for Oliana. Mr Paule and MyCo had been introduced to Oliana through Mr Floropoulos, who had known Mr Paule for many years. The MyCo vegan cheese products became a significant product and revenue item for Oliana.
548 Given the knowledge of the MyCo Cost Price and the challenges with the relationship, Oliana urgently wanted to secure a new supplier of vegan cheese products direct. This was materially financially important to Oliana and Mr Floropoulos knew that.
549 Mr Floropoulos was tasked with the responsibility of going to Greece and locating and securing a new source of vegan cheese products for Oliana and he undertook that task on Oliana’s behalf, travelling to Greece on 25 May 2016.
550 The relationship between Mr Canzoneri and Mr Floropoulos was longstanding. Mr Canzoneri trusted Mr Floropoulos and Mr Floropoulos knew that. Mr Floropoulos also knew that Mr Canzoneri and Oliana were trusting him when he went to Greece to find a replacement supplier for Oliana.
551 Days before he travelled to Greece, and without Mr Canzoneri’s or Oliana’s knowledge, Mr Floropoulos arranged for the incorporation of Culinary Co on 20 May 2016, having earlier given instructions to Mr Hone and Mr Delis to carry out that task.
552 Although not known to Mr Canzoneri or Oliana, Mr Floropoulos conceded that it ‘... was always [his] intention, in Greece, that whatever else [he] did, if [he] found a supplier [he was] going to interpose Culinary Co as an intermediary between Oliana and the supplier ...’.[392] As earlier referred to, Mr Floropoulos also accepted that he was the person in effective control of Culinary Co and that he did not disclose his involvement with or control of Culinary Co to Mr Canzoneri or Oliana at any relevant time prior to these proceedings, which was established on the evidence in any event.
553 On 27 May 2016 Mr Garakis emailed Mr Floropoulos at his ‘drbillsta’ email address. In that email Mr Garakis referred to it being nice meeting each other in Athens and looking forward to ‘our cooperation’ and a ‘stable business relationship between us’. The email attached ‘... our best price as discussed in Athens’ and wished Mr Floropoulos a pleasant flight back to Australia. It can be inferred that the email address used was provided directly or indirectly to Mr Garakis by Mr Floropoulos.
554 This email was not sent to Mr Canzoneri or Oliana by Mr Floropoulos and Mr Canzoneri was not aware of it at any relevant time. The attachment with the prices was not produced by Mr Floropoulos in evidence, but it was not suggested that the original was not attached to the email when received by Mr Floropoulos. It can be inferred that this contained the prices Mr Floropoulos agreed would be paid by Culinary Co to Kremel (being the Kremel Supply Price), which as earlier referred to were markedly lower than the Culinary Co Supply Price to Oliana.
555 Mr Canzoneri said, and I accept, that Mr Floropoulos telephoned him from Greece and that during that telephone conversation:[393]
(a) Mr Floropoulos said he had met with a supplier he had found and Mr Canzoneri said he wanted to come over, but Mr Floropoulos said something to the effect of ‘Look they’re Greeks. I know how they deal. Let me deal with it’, to which Mr Canzoneri said fine.[394](b) Mr Floropoulos said ‘the price they’re coming up with’ was a particular price and Mr Canzoneri said to Mr Floropoulos that Mr Paule was making a mark-up of a 100% minimum and he could not understand ‘... why we can’t get the same price ...’. In response Mr Floropoulos said that Mr Paule ‘had set the standard’ and Mr Canzoneri responded by asking ‘[b]ut how can that standard be set? We’re going to the manufacturer directly’.
(c) Mr Canzoneri said he could not accept the prices and to at least try to get better pricing ‘... because if we can’t then we’re in no better position than we were with Terry Paule’. Mr Floropoulos then said ‘[w]hat would you be happy with?’ and Mr Canzoneri said ‘... Bill, at the end of the day, if we can get 20, 30 per cent out of it ... it’ll be better but still not what we should be aiming for’.
(d) Mr Floropoulos said something about the financial crisis in Greece and that the ‘company here in Greece want to deal with the Australian company that they’re going to set up or have set up. They’re already in discussions with a company in Brisbane that is faintly related. But however he will ensure that he will talk to them and that Oliana will get the agreement’.
(e) That at that time Mr Floropoulos did not say anything about who the owner of that company was.
556 Mr Canzoneri also said, and I accept, that nothing was said in that conversation or at any other time in relation to Mr Floropoulos ‘... being able to get some commission or part of the action’, if he could achieve [Mr Canzoneri’s ] minimum requirements. As Mr Canzoneri put it: ‘[t]here was never any discussions with Bill in relation to receiving commissions or actions or being rewarded for any supply that he got for Oliana. He was part of Oliana’.[395]
557 With respect to the ‘Australian company that they’re going to set up or have set up’, Mr Canzoneri said, and I accept, that in a further telephone conversation after ‘Bill coming back’, which occurred ‘probably two or three days’[396] later, Mr Floropoulos said that Kremel had appointed a company in Australia and that a lawyer by the name of Ian Hone was the person responsible and that Kremel owned the company. Mr Canzoneri also said, and I accept, that Mr Floropoulos informed Mr Canzoneri that it was a company called Culinary; that he (Mr Canzoneri) did not have any concern about dealing with an Australian company set up by a Greek supplier; and that Mr Floropoulos did not say anything suggesting that he was in any way involved in Culinary Co at any relevant time.
558 With respect to Mr Hone, Mr Canzoneri said that Mr Floropoulos told him, and I accept, that he would hear from Ian Hone who was representing ‘... Kremel — the Greeks ...’, and that when he asked why an ‘Australian speaking lawyer is representing, um, the Greeks who can’t speak Australian? ...’ Mr Floropoulos told him he did not know and that ‘...the association came from the Greek chamber of commerce’. Mr Canzoneri was also asked and confirmed that at that time ‘... I trusted [Mr Floropoulos] 100 per cent without doubt’.
559 Mr Garakis said (and I accept) that he trusted Mr Floropoulos and began business on a handshake noting that ‘[m]aybe it’s romantic but this is how I act. I knew Bill; I trusted Bill Floropoulos, and he said, “I’m going to import your product in Melbourne, and Oliana is going to distribute it”. And I said, “okay, Bill. Let’s proceed”. And I didn’t know any special agreement’.[397]
560 On 7 June 2016 Mr Hone sent the 7 June 2016 letter to Mr Canzoneri. It will be recalled that it was in the following terms:
Dear Mr CanzoneriI hereby confirm that I am the sole officeholder for Culinary Co Pty Ltd and also act as the legal representative for and on behalf of Culinary Co-Greece whose managing director is Mr Paris Periandros.[398]
As you are aware my clients have been in discussions with several other distributors throughout Australia.
I confirm that I have been instructed by Mr Periandros to cease all talks with these third party distributors and to now appoint Oliana Foods to be the new distributors with exclusive rights for Culinary Co and its various products for both Australia and New Zealand.
As per your prior discussion with Mr Paris Periandros of Culinary Co-Greece in good faith he has commenced the preparation of your initial order you have provided as per product specifications.
Within the next 24 hours we will provide you with an invoice for deposit to be paid as per our agreement.
Yours sincerely
Ian George Hone
Director
For and on behalf of Culinary Co Pty Ltd
561 During cross-examination by counsel for Mr Hone, Mr Floropoulos admitted that he had involvement in relation to the letter and that the information provided in it was provided to Mr Hone by himself and Mr Delis. This was not known to Oliana or Mr Canzoneri.
562 Mr Canzoneri responded by email stating:
Good afternoon IanThank you for email (sic) and we look forward to a long and mutual association. Please forward the agreement as soon as it is finalised.
563 Mr Canzoneri said, and I accept, that upon receipt of the letter he telephoned Mr Floropoulos and told him that he had received the letter and that he also asked about the agreement, to which Mr Floropoulos responded that ‘the agreement will come’ but you can start working with that, about which Mr Canzoneri said in his evidence ‘I took it as he said, and I proceeded with that’. To the extent Mr Floropoulos denied having knowledge of the terms of the letter, I do not accept that evidence. The evidence showed that he was effectively in control of everything from behind the scenes. He also provided information for it and it was consistent with his telephone calls to Mr Canzoneri. It can be inferred that he was aware of its terms either shortly before or at the time it was sent.[399]
564 By email of 9 June 2016 sent from his ‘honelegal’ email address, Mr Hone attached two invoices for the shipment of the first two containers and requested 50% deposit (totalling $278,544) and stated that the balance was to be paid upon arrival of the goods. Payment was requested ‘today’ as ‘... we have commenced order preparation ...’. The invoices were on Culinary Co letterhead.
565 Mr Canzoneri said he was happy with the letter and based on it, paid amounts totalling $275,000 to Culinary Co. Of this amount, Culinary Co’s bank statements showed that $75,000 was paid on 30 June 2016, $100,000 on 30 June 2016, $50,000 was paid on 12 July 2016 and $50,000 was paid on 5 August 2016.
566 Mr Adams gave evidence, which I accept, that in about June 2016 when the first order was being placed, he had a discussion with Mr Floropoulos about how the Kremel/Culinary Co arrangement was going to work, resulting in his understanding ‘... that Kremel had — was setting up an Australian identity to — move the freight to them so we would have our invoices in Australian dollars ... we had other suppliers that had done this, and so I didn’t think anything of it to that point’.[400] Mr Adams also said, and I accept, that the Kremel logistics arrangements were different to other Greek suppliers ‘... in that the communication was all done through Mr Floropoulos’.[401] This happened because Mr Floropoulos had told him that ‘... the language barrier was significant and, therefore, it was easier to communicate through Bill ...’.[402] Mr Adams accepted that the business should be dealt with like this, agreed that he accepted Mr Floropoulos’ instruction to this effect, and stated that he had no reason not to.
567 To the extent that Mr Floropoulos maintained his denial of such communications with Mr Adams, I do not accept that denial and accept the evidence of Mr Adams, who was a credible and honest witness and whose credibility was not attacked. Mr Adams’ evidence is also consistent with what happened thereafter, and with Mr Floropoulos’ email instructions to Kremel that all emails be sent through him. It is also consistent with what Mr Floropoulos said to Mr Adams in April 2017 after Mr Adams had sent an email to Kremel, namely, that ‘... they [Kremel] wanted to deal with — through him [Mr Floropoulos] still’,[403] and what Mr Adams did thereafter — which is again supported by the documents in evidence relating to the communications with Kremel and the text exchanges leading up to Mr Canzoneri sending his email to Kremel on 3 January 2018, and the terms of that email. Again, to the extent Mr Floropoulos maintained a denial of this April 2017 conversation, I accept and prefer the evidence of Mr Adams. His evidence was also consistent with him not speaking to anyone else except Bill regarding the Culinary Co orders.[404]
568 In fact, and contrary to Mr Floropoulos’ statements to Mr Adams that ‘the language barrier was significant’, the documents showed and I observed that Mr Garakis had a relatively strong command of English and nearly all the email communications in evidence coming from Kremel were written in the English language. Mr Garakis demonstrated his relatively strong understanding of English and his English comprehension and speaking ability when giving evidence. I do not accept the exaggerated submission of Mr Hone that Mr Garakis’ evidence demonstrated that he spoke very little English, which was also inconsistent with Mr Garakis’ own evidence on the topic.
569 More than once Mr Canzoneri said that had he been informed of Mr Floropoulos’ role and involvement, he would have either gone to Kremel direct or gone to another supplier. This is addressed further when dealing with reliance, causation, and loss.
570 Mr Canzoneri said, and I accept, that in September 2016 he was concerned about not having the artwork for the product labels and when the product would be arriving, and that this was discussed with Mr Floropoulos. He said that he ‘... kept saying to Bill, ‘[w]hat is happening with the product? Why aren’t we getting it? I want to meet Paris. I want to talk and I want to go there’. Mr Canzoneri said that [Bill] ‘... kept saying to me that it’s a very delicate situation, and I’ve got to understand how the people from Crete — their philosophy is and how they think, and just believe in him [Mr Floropoulos] and just leave it to him and the products would arrive’.[405] Shortly thereafter Mr Canzoneri was involved in approving packaging for Oliana.
571 On 21 October 2016 Mr Floropoulos requested by email that Kremel only email him and ‘Eleni’ for any work that was for Oliana. Eleni was assisting Mr Floropoulos and was not part of Oliana. By a further email to Kremel of 24 October 2016 from his ‘drbillsta’ account when dealing with the ‘pro forma’ invoice from Kremel he directed Kremel that ‘[a]ll correspondence will only be emailed to me’, and gave details as to what was to be recorded on the invoices for Culinary Co.
572 On 17 November Mr Canzoneri asked Mr Floropoulos by text message whether he had a chance to speak to Mr Garakis about the agreement to which Mr Floropoulos responded ‘I will call him now’. Mr Canzoneri followed up with a text the next day about ‘any developments? Did you speak to overseas about contract’ and Mr Floropoulos responded: ’... yes we should of got it yesterday’, that he was following up with ‘Ian’ and ‘we will get today’. Mr Canzoneri said he would call Mr Hone to which Mr Floropoulos said ‘OK’.
573 On 21 November 2016 Mr Hone sent Mr Canzoneri a draft agreement noting that the product list needed to be added, which he was expecting to get that day. Features of this draft included those earlier referred to in the Background section above.
574 Mr Canzoneri forwarded the email on to his son Michael Canzoneri and Mr Floropoulos. Mr Floropoulos texted Mr Canzoneri asking ‘what we need to ask to be changed or looked at ... you know I don’t read every word’, to which Mr Canzoneri said Mr Floropoulos should leave it until the morning as he and Michael would read it. As is now known, Mr Floropoulos knew exactly what was occurring but was acting as though he did not, making it appear as though he was acting in Oliana’s interests.
575 There was some evidence that Mr Floropoulos was having marital issues with his wife. On 22 November 2016 Mr Floropoulos texted Mr Canzoneri saying he was ‘at family lawyer. What is my % at Oliana’. Mr Canzoneri responded: ‘[o]n paper from the beginning its 25%. Please explain that it ha (sic) no value as its loosing (sic) money and owes a lot of money to lenders, as I assume that Nicky will asking her share (sic). I’m not sure and have to check but it could be that the units are in bmc? So if not in your name, I can only assume that you have no interest but your dad has’.
576 Thereafter there were further communications and text messages in relation to the draft agreements, including those referred to in the Background section above. Matters to note include the following:
(a) Subsequent to 21 November 2016, Mr Floropoulos and Mr Canzoneri had communicated about the first draft by text or telephone, although the content of this communication is not known. That it occurred can be inferred from the run of the communications that followed, although no different result would follow if it was put to one side.(b) On 23 November 2016 Mr Floropoulos texted Mr Canzoneri saying that his father ‘... spoke to Greece last night. I hope they got it what I was saying ... we will see today hopefully we will get an amended contract today’. Mr Canzoneri responded with thank you, and Mr Floropoulos said in reply ‘... I hope they got all he (sic) changes as I explained them ... Will call you later’.
(c) During the afternoon of 23 November 2016 Mr Hone sent an email to Mr Canzoneri stating ‘[a]fter discussions with Greece overnight please find amended document, product/price list still to be added’, and attaching a further draft agreement. This second ‘Hone draft’ had the features referred to in the Background section, including introducing Kremel as a party and an execution block for Kremel that expressly contemplated Mr Hone executing on behalf of Kremel. Subsequently the same day Mr Canzoneri texted Mr Floropoulos saying that the agreement had been received but it was not totally changed and that ‘... [s]till want us to pay for 24 containers per year’.
(d) Mr Floropoulos responded in strong and offensive language instructing Mr Canzoneri to: ‘email back that dumb [expletive] and tell him it was agreed that we don’t have to buy 24 containers. It is 1 container a month’. The person being described in that language by Mr Floropoulos was Mr Hone. Mr Canzoneri responded that ‘he has one container but still committed to 24, he is dumb, does he get a commission?’. A review of the drafts makes apparent that this was referring to the terms of clause L that dealt with the minimum number of containers required to be purchased. Mr Floropoulos responded ‘... no idea Seb ... Just email him back and say it’s 1 container a month — and that’s it ... he can make the change and send it back. Have it signed and let’s get on with the job’. Mr Floropoulos said further that he ‘was with dad now — can you please email me contract and we will call them now ... to get sorted’, to which Mr Canzoneri said he had emailed it, but was going to go through it that night to compare. Mr Floropoulos then asked a pricing question about the agreement to which Mr Canzoneri said, yes, but let me read it thoroughly.
(e) In a further text message in response to Mr Floropoulos a little later that day Mr Canzoneri said ‘...Bill, leave until tomorrow morning because whilst there are 12 pages the more I read the more things are wrong, best that I type over the adjustments and than (sic) your dad has the full changes’. The relevant draft of the exclusive distribution agreement was in fact 12 pages long. Mr Floropoulos responded ‘okay ... I will find out price of shred and let you know ... We can’t push to [sic] much either ... then they will start making changes too’. This was a further example of many where Mr Floropoulos was pretending that the agreement was being negotiated by Kremel and Culinary Co on the one hand and he and Mr Canzoneri for Oliana on the other.
(f) There were further text messages exchanged between Mr Canzoneri and Mr Floropoulos that day regarding the agreement and which also made reference to Mr Floropoulos’ father being involved. I am satisfied that the 12-page agreement being referred to in the text messages by Mr Floropoulos was the draft exclusive distribution agreement, noting also that counsel for Mr Floropoulos properly acknowledged that such a finding was open. It follows that I do not accept that this was a reference to a different agreement.
(g) One of those text messages on 24 November 2016 referred to Mr Canzoneri having not sent Mr Floropoulos the contract, to which Mr Canzoneri responded that ‘we are still working on it’.
(h) Michael Canzoneri sent a revised agreement to Mr Hone on 24 November 2016 stating that he had tried to incorporate all the pertinent terms into Oliana’s standard distribution agreement and invited him to contact himself or Mr Canzoneri or otherwise make any requested amendments. The features of that agreement included Kremel and Culinary Co being jointly defined as the Supplier, which was not corrected or altered by Mr Floropoulos or Mr Hone and remained the position in the final version. This is referred to in more detail in the Background section above and further below.
(i) On 25 November 2016 Mr Hone sent through a separate document on a single page with some relatively minor changes. On 26 November 2016 Mr Hone sent an email attaching ‘pricing schedule for attachment to agreement’. As was common ground and established on the evidence, the Culinary Co supply prices were markedly higher than the price at which the products were being supplied by Kremel to Culinary Co, although this was not known to Mr Canzoneri or Oliana.
(j) On 28 November 2016 Mr Floropoulos texted Mr Canzoneri saying good morning and asking ‘[h]ow did we go with the Greeks is it all sorted now? ... Let me know ...’. Mr Floropoulos was informed that they were waiting on a reply from Mr Hone and that Michael had emailed him. Mr Floropoulos responded stating ‘I will get them to follow up’. After Mr Canzoneri said that they had last emailed Mr Hone that night after Mr Canzoneri had met with Mr Floropoulos and still had not received a reply, Mr Floropoulos responded: ‘[c]alled Greece they are on it too’ and that he hoped ‘to get something tonight’ and that he wanted ‘... to finish this tomorrow ... want to get out of here’. Mr Canzoneri responded ‘[a]s soon as we get it, we will sign’. Subsequent texts in strong language were also sent by Mr Floropoulos regarding Mr Paule and how he should be dealt with.
577 Further communications passed in connection with the agreement, including those described in the Background section above. By email dated 30 November 2016 Mr Hone attached the agreement ‘as signed and emailed by Sebastian yesterday, signed by myself for Culinary Co Pty Ltd WITH ONE AMENDMENT being in clause 3.2.3 where in line 2 I have changed the word “Supplier” to “Distributor” as clearly the supplier isn’t paying itself. Please initial the change and re-email and courier to my office ...’. This was later signed again by Mr Canzoneri in early December 2016 and sent back to Mr Hone.
578 On 8 December 2016 Mr Canzoneri texted Mr Floropoulos that ‘all agreements are signed’ to which Mr Floropoulos responded ‘[t]hat’s great’.
579 The execution clauses of the final version of the agreement were as described in the Background section and Mr Hone signed in the way there indicated.
580 Although Mr Canzoneri said that he received a copy in the mail purporting to be signed on behalf of Kremel, on the evidence I am not satisfied that this has been established on the balance of probabilities. This is because there was no supporting evidence of any kind, such a document was not found, and its existence was not supported or established by inference or otherwise from the contemporaneous documents that were in evidence or any enclosing hard copy email or letter. Given the circumstances, I accept that it may be possible that it occurred and has since been lost or taken from Oliana, but I am not satisfied to the requisite degree on the evidence before the court. In these circumstances it is not necessary to address the contention that because Michael Canzoneri was not called to give evidence on the point it should be inferred that his evidence would not have assisted Oliana.[406]
581 Although Mr Floropoulos gave some oral evidence to the effect that he informed Mr Canzoneri that Kremel would not sign the exclusive distribution agreement, I do not accept that evidence. In addition to the observations earlier made regarding Mr Floropoulos’ credibility and honesty, I add the following. First, the evidence is not corroborated or supported by any contemporaneous documents. Second, it was not put to Mr Garakis in cross-examination that he had been asked to sign the agreement but had refused. Third, it was not put to Mr Canzoneri that he had been told by Mr Floropoulos that Mr Garakis had not signed and refused to sign. Fourth, Mr Garakis’ evidence was that he had not seen the document at the time. He gave a strong natural reaction when asked whether the agreement was brought to his attention and he was asked to sign it, saying ‘no, no, no’ several times. Mr Garakis appeared genuine and immediate in his response to this question — as he did with others. No attack was made on his credit and in fact Mr Floropoulos’ written submissions referred to Mr Garakis’ evidence about not seeing it or being asked to sign it.
582 Fifth, for Mr Floropoulos to have said that Kremel would not sign the agreement sits uncomfortably with his communications with Mr Canzoneri as evidenced by the text messages and his references to ‘Greece’ and the Greeks — albeit that some of them were plainly false and ultimately acknowledged to be. Sixth, the evidence Mr Floropoulos gave was somewhat vague and non-specific and did not emerge in any coherent or plausible context. Seventh, had such a statement been made it can be inferred that it would have evoked a material reaction from Mr Canzoneri and there was no evidence of any such reaction. Further, it was not referred to in any of the communications written by Mr Floropoulos, Mr Canzoneri, Michael Canzoneri or anyone else at the time. Having regard to the background and the manner in which Mr Floropoulos gave his evidence and other remarks earlier made, in my view his evidence regarding this matter emerged more because he perceived it might be helpful to his position. In any event, having regard to the matters I have raised, even if this was not the case I am not satisfied on the balance of probabilities that a statement was made by Mr Floropoulos to Mr Canzoneri to the effect alleged at any relevant time.
583 In early 2017, in the context of Woolworths wanting to set its own recommended retail price for Oliana products, Mr Canzoneri had a conversation with Mr Floropoulos about pricing. Mr Canzoneri asked Mr Floropoulos to speak to Kremel and get a further discount on the prices Oliana had been given because at the prices Oliana was proposing with Woolworths ‘there was no way we would be able to get our range in’[407] to Woolworths. Mr Floropoulos said he would talk to them and asked Mr Canzoneri how much he wanted, to which Mr Canzoneri responded ‘... [a]nything between 15 to 20 percent’.[408] Mr Canzoneri said, and I accept, that Mr Floropoulos came back to him and said, in substance, ’look, the most they’ll do is 7% but the term is that they want to be paid on delivery of the product in order to give the 7%’.
584 With respect to this discount, Mr Canzoneri asked Mr Floropoulos who he had spoken to about it and Mr Floropoulos said it was Paris, meaning Mr Garakis. Mr Canzoneri agreed to the proposal but at the time was not aware of any mark-up or other imposition of charges between Culinary Co and Oliana or that, in fact, there had been no discussion with Mr Garakis on the issue or that the 7% and change of terms was determined for Culinary Co by Mr Floropoulos.[409]
585 There was a text exchange between Mr Floropoulos and Mr Canzoneri on 6 April 2017 in the following terms:
BF: I’m next to you all the way. I will never let you down... And I never have... If I ever needed help, I came to you...BF: 1 PM I will be in town... I love you like my father...
...
BF: I am very sick and I told no one.
SC: and you know that I will always be there for you, not for money, but friendship.
BF: I know that... the people against us are laughing at us... certain people are trying to put a wedge and sabotage us... we now need to stick together.
SC: Let’s talk at 1 PM.
BF: Let’s smash them
SC: All the way
586 Mr Garakis came to Melbourne in April 2017 and Mr Canzoneri met him at Oliana’s warehouse. Mr Garakis spoke only Greek when in the presence of Mr Canzoneri even though he had a relatively strong understanding of and ability to speak English. Mr Garakis’ evidence — given in English — was that this happened because ‘... this was the plan. I trust Mr Floropoulos, and he told me not to speak at all in English with Mr Canzoneri, and I admit I said, ‘Okay, if you think this is — we have to do it, we are going to do it’. He told me, “Okay. Just leave me to discuss and please pretend that you do not know English. I was uncomfortable, but okay. I do not know exactly English, but at least I can communicate ...’.[410] Mr Garakis also confirmed that he only spoke Greek at the dinner the same evening with Mr Canzoneri and Mr Floropoulos and Mr Delis. Further, Mr Garakis stated that neither Mr Hone nor Mr Delis were ever engaged by Kremel.[411] He also gave evidence to the effect that payments by Oliana were never of any concern to him because, although unknown to Oliana, Kremel’s relationship was with Culinary Co.
587 Again, to the extent that Mr Floropoulos maintained his denial of giving Mr Garakis such an instruction or request, I do not accept that evidence and prefer the evidence of Mr Garakis. Mr Garakis’ evidence was also supported by the other evidence regarding Mr Garakis speaking only Greek at the time, the content of Mr Garakis’ email sent to Mr Floropoulos on 9 March 2018, and the absence of any contemporaneous denial by Mr Floropoulos in the emails he sent to Mr Garakis at that time. It will be recalled that, in part, Mr Garakis’ email stated:
Dear BillWe do not feel comfortable with the whole situation. We support you, we believe you but we do not agree with your moves.
.....
I visited Melbourne and we met Sebastian. You said me not to talk in English at all, because this is better for the whole situation I never did it in my life before, but I did it for you Oliana sent me several mails asking for cooperation and some definitions, but I didn’t answer You suggested not to answer because this is the lawyer’s advice Ok I said, but because we are a serious company, I had to answer something So, I asked 3 times for a letter from your side, in order to answer them according to your wishes I never got this letter and I am really sorry for this. Today, I will answer as I think And please do not promise me this letter once again. I do not need it now
588 In an email sent to Mr Garakis by Mr Floropoulos at that time, in early March 2018, Mr Floropoulos stated, among other things: ‘[a]s for Oliana I was trying to protect everyone but instead I [f####d] myself in the process. Yes you are right I have only myself to blame for this ... As for Sebastian and Oliana I could not care less. My health has deteriorated putting up with all there (sic) crap. I am sorry I have let you boys down there is no excuse for this ...’.
589 On 1 July 2017 and at Mr Floropoulos’ instigation and urging, Kremel signed an exclusive distribution agreement with Culinary Co, with Mr Floropoulos being the Culinary Co authorised representative who executed it on its behalf. This was not disclosed to Mr Canzoneri or Oliana. It will be recalled that Mr Garakis considered he had been tricked or misled into signing the document by Mr Floropoulos, as was reflected in his email of 23 April 2018 referred to in the Background section above.
590 In numerous text messages sent by Mr Floropoulos to Mr Canzoneri, Mr Floropoulos referred to communications with ‘Greece’, ‘Paris’, or ‘the Greeks’ in relation to various matters in circumstances where it was apparent that there were no such communications, and Mr Floropoulos was making it up and not telling the truth, as his counsel candidly but properly acknowledged in closing submissions. This included the text messages earlier referred to and messages sent during 2017 in which Mr Floropoulos made demands or requests for payment purportedly on behalf of ‘Greece’ or Mr Garakis, in circumstances where Mr Floropoulos knew that there was no direct relationship between Kremel and Oliana, that Kremel was being paid by Culinary Co at the much lower Kremel Supply Price, and neither Mr Garakis nor Kremel was demanding or requesting payment from Oliana. Some particular examples include:
(a) Numerous texts from Mr Floropoulos regarding the agreements in late 2016 earlier referred to.(b) Numerous text messages in late February and March 2017 regarding the asserted need for Oliana to pay Mr Garakis/Kremel and in which statements made by Mr Floropoulos included: ‘[w]e have to do at least 100k today we have strung him along for weeks now’; ‘I forgot to mention I was asked for another payment of at least 100K tomorrow ... so if you can do 50K and the balance by the end of next week that would be great’; ‘Just don’t forget to send them payment of 150 on Friday’; ‘[p]lease don’t forget payment tomorrow, 150K to Paris. He is expecting it’; ‘Pay Paris today’; ‘Please just let me know for Paris payment ... I will speak to him and see what he can d (sic) to help. He is frustrated about the payments; ‘Will it be today? I think he is relying on it today’; ‘I just spoke to him about the payment ... he said he will speak with my dad ... This is not acceptable ...’; ‘Just make sure Paris is paid today or tomorrow as he will call my old man if it is not done then we will have other head aches’; ‘Seb I have Paris timing me about payment tomorrow ... I don’t know what to say to him’; ‘Ok ... but he wants payment tomorrow as promised’; ‘Hi Seb, spoke with them in Greece he needs that 130k like oxygen’; ‘Please don’t forget to send me remittance as I have to notify Paris’; Paris is coming next Friday the 7th and will be staying with my Parents, he is not happy about the payments as they are not the terms agreed but has still done everything and beyond As we’ve asked of him’.
(c) A text from Mr Delis to Mr Canzoneri on 13 April 2017 in which he stated, among other things, ‘please attend payment today ... We note that Paris has gone above and beyond to accommodate all your requirements. We are now waiting on Paris to confirm instructions upon his return to Crete. Can you please forward me a copy of the remittance for payment today, so we can send it through to Paris’. Mr Canzoneri responded and in part again requested a reconciliation so that amounts paid could be cross-checked against the amounts demanded.
(d) Text messages from Mr Floropoulos regarding payment to Paris in November 2017 which included statements such as the following: ‘Have you paid Greece anything?’; ‘Hi Seb, have you made any payments to Greece? They just called me’; ‘ITM will not release if the last airfreight is not paid in full, and the Greeks want there (sic) balance too. Then we have all the new orders too.’; ‘Payment?’; ‘How did you go? I need to call them. That’s Greece.’; ‘Good morning Seb. You need to pay the $48k it is becoming embarrassing now with these guys.’; ‘Seb, will you make payments tomorrow? I am on the phone to sort all this out.’
591 In the context of requests for payment to Greece and airfreight, in November 2017 Mr Canzoneri was requesting a reconciliation and also an invoice in connection with the relevant payments, and becoming frustrated at not being provided with an invoice or a reconciliation in respect of the substantial amounts which by then had been paid to Culinary Co, which by 27 November 2017 exceeded $1,900,000 in circumstances where payments by Culinary Co to Kremel at that time had been less than $500,000.
592 In the text exchange on 26 November 2017 Mr Canzoneri told Mr Floropoulos: ‘I’m writing to Paris. I’ll (scil. All) I have asked for is an invoice to pay the balance. I have already paid $50 k without it. What the [f###] are we doing wrong?’. Mr Floropoulos responded by stating that ‘[h]e will direct you to Peter [Delis]’ and that ‘[y]ou’ll get Peter offside even more if you do that’ and Mr Floropoulos said he would call Mr Delis.
593 In the context of this exchange and Mr Canzoneri’s concern Mr Floropoulos texted: ‘Seb, are you accusing me of Something?’ and ‘It is starting to give me the shits’. Mr Canzoneri responded stating, among other things ‘No, bill. I trust you with my life, in fact my life is in your hands’, to which Mr Floropoulos said ‘leave it with me’.
594 Mr Canzoneri’s concern regarding deliveries and supplies continued after further text exchanges in which Mr Canzoneri expressed dissatisfaction regarding the absence of product, the approach of Kremel and others, and related matters. The relevant text exchanges on 15 December 2017 and thereafter included the following:[412]
SC: Bill, you’re obviously very busy with freestyles and your personal life, all that I have asked of you is to give me a date that you have said you would. Even telling me January is of no use to me as January could be any day. This is a logistic matter that should have been dealt with Damien and overseas. I have paid over $2M in the last 12 months and I can’t even talk to the factory. I’m in everyone else’s mercy. How do you think I feel! Bill, I’m going to email, Paris, you, Horne (scil. Hone) and peter, this fir (sic) me is hell in not knowing where we are at and can’t get information. I’ve had enough! I’ve been sick over this and can’t continue like this...BF: do what you have to do...
...
SC: Is that what’s been happening, are the rumours true. I have put my family in your hands and you have given me promises ... I haven’t had one line from greece as it’s been all up to you! From day one we couldn’t and still can’t contact Greece, you have promised so many times to allow us to deal with logistics, but not once have you carried that out. All I have asked is based on what you have been telling me! ... I told you 2 weeks ago that I feel that I’m been lead to the slaughter and this is what’s happened.
BF: Are you kidding me I would do something like that... I am very sick to even think about even working ...
BF: There has been a lot of talk behind my back about me doing things and I have not done anything. So my conclusion is the best way forward for you guys to deal direct with Ian and Peter. Greece has asked it to be like this. I have to get on with my life and to shut people up I will now go out on my own and earn a living for my family and look out for them ... I can’t win so I might as well do it for my self. ...
SC: Can you please call me
BF: I will... I just can’t talk at the moment
SC: Just need to know where it’s at, will it here on the 4 th if not why not, stock is ready and has been since early last week?
595 It is apparent that during this time Mr Canzoneri had also requested Mr Floropoulos to call Mr Garakis and reminded him in further text messages. There was then a further text exchange on 21 December 2017 regarding pricing and in respect of which Mr Floropoulos said: ‘... Seb ... Keep the 45 days.. pricing will get set according now. 50% upfront and balance 45 days ... new pricing will reflect containers. Just spoke with them in Greece.’ In a text message from Mr Canzoneri to Mr Floropoulos on 2 January 18 Mr Canzoneri stated, among other things:
Bill,I am very sorry you are unwell.
Once again though, you have put me off as you have on many occasions. Your “15 minutes” actually never ends because even if I do get a response from my repeated calls and messages, you never actually give me a straight answer.
Of all people, you understand the importance of the airfreight, not just to Oliana, to my family, to yours, and to everyone else involved in this company. Despite this, you keep stringing me along and while I haven’t been by your side for every doctor’s visit or every trip to the hospital, I have been there for you often enough to know you can take 3 minutes to call Greece for a simple answer and then call me back.
It is frustrating that you will make me out to be the bad guy for chasing you while you are unwell, but is always the same and this is unacceptable.
You have said he would let Damien deal with it, but you haven’t given across the contact details we need and for the past six weeks, all that you have given me are excuses, leading me to think that your (sic) playing a game with me.
I know you will either ignore this, or tell me that you’ve had enough and everyone can go jump. Either way, this stalling needs to end.
I will now directly contact the appropriate people in Greece to get answers that should be so simple to provide. I know you say this will put them offside, however I would rather know firsthand that they are upset with me than be my current situation, where I know nothing at all.
Aside from you being upset or telling me to jump, I would honestly just like one answer: what is the reason you are making our friendship and our business together so difficult?...
596 It appears that Mr Floropoulos responded to this question as follows: ‘sorry Seb ... I will get Peter and Ian to make contact with you and Damien ... They will be your point if (sic) contact. Let me know if you want to catch up ... I need to get some of my things from the warehouse please’.
597 The events and other communications that were occurring in this last half of 2017 also include the additional matters referred to in the Background, to which I refer.
598 On 3 January 2018 Mr Canzoneri sent his lengthy email direct to Mr Garakis and Mr Hone, addressed ‘Dear Paris and Ian’. This email referred to the main issue needing to be resolved as ‘the clear communication breakdown between Oliana and Kremel’ and its content is set out earlier in these reasons. It may be noted that, consistent with what Mr Adams said Mr Floropoulos told him, the email stated in part that ‘we understand that Culinary is the company we deal with in relation to invoices and accounts but we cannot understand why our logistics manager cannot deal directly with his counterpart in Greece and we feel that the lack of communication is causing the majority of our issues’.
599 Thereafter correspondence was exchanged as earlier referred to, eventually resulting in this proceeding being commenced and Mr Canzoneri and Oliana later discovering the true position regarding the interposition of Culinary Co by Mr Floropoulos and his involvement with it.
600 Finally on this aspect of the circumstances and context, it was established on the evidence that neither Mr Floropoulos, Mr Hone, Mr Delis nor anyone else had disclosed to or informed Mr Canzoneri or anyone else at Oliana of the true position regarding Culinary Co, its arrangements with Kremel, Mr Floropoulos’ involvement with and control of Culinary Co, the arrangements he had made with Kremel for Culinary Co, or the Kremel Supply Price. It was also established that Mr Floropoulos did not disclose his relationship or dealings with Mr Hone or true involvement with him. Further, even if Mr Floropoulos’ evidence regarding the resignation discussion or the alleged Moka Pot Discussion had been accepted, this would remain the position regarding Culinary Co, Kremel, Mr Hone and the Kremel Supply Price. I also refer again to Mr Floropoulos’ belief as to how Mr Canzoneri would have responded if he had been informed about it at the time.
Exclusive Distributor Representation: Kremel had appointed Oliana as exclusive distributor for Kremel’s products pursuant to the letter dated 7 June 2016 and/or the terms of the exclusive distribution agreement
Oliana’s submissions
601 Oliana submitted that this representation was first made in a telephone conversation between Mr Floropoulos and Mr Canzoneri in late May 2016, whilst Mr Floropoulos was in Greece and telephoned about having met with Kremel. After saying that the company in Greece wanted to deal through an Australian company that they were going to have set up, Mr Floropoulos said that he would talk to them and Oliana would get the agreement, meaning Kremel’s agreement that it would supply products to Oliana.
602 Oliana submitted that this representation was ‘reinforced’ by a range of further statements, conduct and communications during 2017, including by the failure to disclose at any time that Kremel had not signed the exclusive distribution agreement with Oliana, and that in June 2017 Mr Floropoulos had in fact signed a distribution agreement with Kremel for and on behalf of Culinary Co.
603 The ‘reinforcing’ conduct relied upon was said to be as follows:
(a) During a conversation between Mr Canzoneri and Mr Floropoulos after Mr Canzoneri received the 7 June 2016 letter, Mr Floropoulos said to Mr Canzoneri that ‘the agreement will come. At least you can start working with that’.(b) Mr Floropoulos admitted to Mr Hone’s counsel in cross-examination that he contributed to the information for the 7 June 2016 letter.
(c) In September 2016 when, after Mr Canzoneri expressed concern to Mr Floropoulos that he had not met or spoken with Mr Garakis, Mr Floropoulos said to him to ‘just believe in him [Mr Floropoulos] and just leave it to him, and the products would arrive.’
(d) In November 2016 in the SMS messages sent by Mr Floropoulos to Mr Canzoneri, Mr Floropoulos reinforced matters by representing that he and his father were (or would be) speaking to Paris Garakis and Kremel about the then draft exclusive distribution agreement, further confirming the impression created by the document as drafted by Mr Hone which itself represented from the second draft on words that Kremel was to be bound by it, and was the joint ‘Supplier’ with Culinary Co.
(e) In late January or early February 2017 when Mr Canzoneri requested that Mr Floropoulos asked Kremel for a discount and Mr Floropoulos responded indicating he had spoken to Mr Garakis of Kremel and stated ‘the most they’ll do is 7% but the terms is that they’ll want to be paid on delivery of the product in order to give the 7%’.[413]
(f) By Mr Floropoulos’ failure especially in light of the circumstances above to at any time disclose to Mr Canzoneri that Kremel had declined to sign the exclusive distribution agreement;[414]
(g) By Mr Floropoulos’ failure at any time to disclose to Mr Canzoneri that he had signed his own exclusive distribution agreement with Kremel on behalf of Culinary Co in around mid-2017;
(h) By Mr Floropoulos’ repeated demands for payment purportedly made on behalf of Mr Garakis, or ‘Greece’, which continued until at least December 2017[415] and which Mr Floropoulos in substance accepted were false and misleading.
604 Oliana submitted that the text messages in which Mr Floropoulos referred to payments to Greece and in which it was contended that he was deliberately seeking to characterise payments to Culinary Co as payments to Kremel well-illustrated the continuing representation that the Culinary Co invoices were in effect invoices rendered on behalf of Kremel.
605 Oliana further submitted that ‘insofar as those representations included statements as to future matters (ie that Kremel was not only then bound but was also on a continuing basis into the future so bound to exclusively supply to Oliana)’, Mr Floropoulos did not adduce evidence that he had reasonable grounds to make them. On the contrary, so it was said, his expressed intention in his negotiations with Kremel (concealed by him from Oliana) was never to secure any rights for Oliana, but rather to secure such rights for Culinary Co. It was submitted that it was Mr Floropoulos’ burden to do so under s 4(2) of the ACL.
606 In respect of this and the other representations, Oliana submitted that at no time did Mr Floropoulos qualify or resile from the any of the representations. Further, Oliana submitted that Mr Floropoulos knowingly exploited Mr Canzoneri’s trust. Given the known trust and confidence then placed in Mr Floropoulos by Mr Canzoneri,[416] and the importance of the Kremel supply to Oliana’s business, it was submitted that Oliana had a reasonable expectation that Mr Floropoulos would disclose any information materially relevant to Oliana’s supply relationship with Kremel, including as to pricing Kremel’s entry or otherwise into any exclusive distribution agreement, the nature of Kremel’s or his own relationship with Culinary Co, or any intention or any entitlement of Culinary Co to charge a mark-up over and above the price charged by Kremel for the products.
607 Oliana submitted that rather than resile from the representations made, Mr Floropoulos sought to conceal their falsity, including by:
(i) instructing Mr Canzoneri not to come to Greece to join him while the deal was being negotiated with Kremel;(ii) requesting that Kremel direct all invoices to Mr Hone;
(iii) directing that Kremel only email him for all work relating to Oliana;
(iv) asking Mr Canzoneri to trust him, when in September 2016 Mr Canzoneri expressed concerns that Oliana had paid $275,000 but no supply had arrived;
(v) instructing Mr Canzoneri not to contact Mr Garakis directly;
(vi) directing that Mr Garakis not speak to Mr Canzoneri in English during their meeting in April 2017;
(vii) directing Mr Adams not to make further contact with Kremel after he had emailed Mr Makrakis of Kremel on 12 April 2017;[417]
(viii) questioning Mr Canzoneri about the prices being charged by Mr Garakis of Kremel to Oliana, when he knew at the time that it was he, on behalf of Culinary Co, who set the prices payable by Oliana.
608 Oliana submitted that if any of the representations are found to have been made, they were made in trade or commerce. No submissions on this aspect were put to the contrary.[418]
609 With respect to Mr Floropoulos’ evidence that he said something to Mr Canzoneri to the effect of ‘they [Kremel] don’t want to sign it’, Oliana submitted that this evidence ought not to be accepted and that it was not put to Mr Canzoneri.
610 It was contended that the Exclusive Distributor Representation was misleading or deceptive or likely to mislead or deceive because it was false, inaccurate and incorrect because Kremel had not agreed to deal exclusively with Oliana in relation to the supply of Kremel products in Australia and New Zealand, and Kremel had not appointed Oliana as exclusive distributor for Kremel’s products at all or pursuant to the terms of the exclusive distribution agreement, noting in this context Mr Garakis’ unchallenged evidence to this effect.
Mr Floropoulos’ Submissions
611 Mr Floropoulos made some general submissions regarding the need for the court to be affirmatively satisfied upon the balance of probabilities, and drew attention to observations made regarding the challenges and difficulties facing parties seeking to prove oral representations, with some emphasis also placed on the need for ‘actual persuasion’.[419]
612 The Exclusive Distributor Representation was denied and reference was made to Mr Floropoulos’ evidence that he told Mr Canzoneri that Kremel would not sign the exclusive distribution agreement.
613 It was submitted further that the representation could not have been continuing until 21 December 2017,with attention being drawn to:
(a) The content of Mr Hone’s letter of 7 June 2016 — noting also that the letter was from Mr Hone not Mr Floropoulos.(b) The content of the draft agreements recording Culinary Co as the distributor.
(c) The process and communications in November 2016 through which the terms of the exclusive distribution agreement were finalised, and the active role played by Mr Canzoneri and his son, Michael Canzoneri.
(d) Mr Canzoneri and his son being in a position to know that Culinary Co was not a subsidiary of Kremel, which so it was said, ‘ a simple company search’ would have shown.
(e) Mr Floropoulos’ limited involvement in the communications and process of finalising the terms of the distribution agreement.
(f) The text messages exchanged between Mr Canzoneri and Mr Floropoulos on 23 November 2016.
(g) The exclusive distribution agreement being signed by Oliana and Culinary Co only and not Kremel.
(h) There having been nothing to stop Mr Canzoneri or his son from communicating directly with Kremel in relation to the exclusive distribution agreement in an attempt to have Kremel bound by it.
614 In the context of the text messages on 23 November 2016 referring to Mr Floropoulos’ father, it was submitted that there was no need for him to be consulted about the distribution agreement, which so it was said, supported the contention that the references were to a different agreement. However, it was properly acknowledged by counsel for Mr Floropoulos that it was open for the court to find that the references were to the exclusive distribution agreements in question.[420]
615 Mr Floropoulos also submitted that Oliana had a ‘timing problem’ in relation to reliance or causation, given that it first ordered cheese on 8 June 2016, yet the terms of the exclusive distribution agreement were not finalised until 30 November 2016, and never executed by Kremel in any event.
Consideration – Exclusive Distributor Representation
616 Although there were elements of overlap and circularity to the manner in which the amended statement of claim addressed this and other alleged misleading conduct,[421] the issues as framed by the parties refined the position and aided clarity, as did their written and oral closing submissions.
617 Having regard to the evidence, including the evidence regarding the context and surrounding circumstances, the position is in my view clear. Oliana has established that Mr Floropoulos made the Exclusive Distributor Representation and that it was misleading or deceptive and likely to mislead or deceive. Although the timing issue is a little more nuanced, I have concluded that the Exclusive Distributor Representation was made from no later than 7 June 2016 and that it continued until at least early January 2018.
618 Addressing the question of whether it has been established that Mr Floropoulos engaged in the relevant conduct involves looking to, among other things, the acts and omissions of Mr Floropoulos relied upon by Oliana as addressed and refined in its closing submissions said to support the Supply Representations and the Floropoulos Conduct said to give rise to the collectively described Exclusive Distributor Representation.[422] In respect of the relevant acts and omissions of Mr Floropoulos that are established on the evidence, it is then necessary to consider whether they gave rise to the making of the alleged representations by Mr Floropoulos. Only then is it necessary to move to the ‘second stage’ of the analysis and consider whether the representation was misleading or deceptive or likely to mislead or deceive.
619 The alleged acts and omissions relied upon were earlier identified when addressing Oliana’s submissions. As previously referred to, and as each of Mr Floropoulos and Oliana pointed out in their closing submissions, the Exclusive Distributor Representation also relied in part upon the Supply Representations and Floropoulos Conduct.
620 As is apparent from the factual matters addressed above, nearly all the alleged acts and omissions of Mr Floropoulos relied upon by Oliana have been established on the evidence. Relevantly, it is sufficient to observe that these included:
(a) The statements made by Mr Floropoulos to Mr Canzoneri during the telephone conversations regarding: the price Kremel was coming up with; setting up an Australian company; the establishment of Culinary Co; it being owned by Kremel; Mr Hone representing ‘Kremel – the Greeks’; Mr Hone’s association having come from the Greek chamber of commerce; that Mr Canzoneri would be contacted by him; and that Oliana would get the agreement.(b) Mr Hone sending the 7 June 2016 letter and Mr Floropoulos having been involved with providing the information for it,[423] as he conceded in cross–examination, and noting that it can also be inferred that Mr Floropoulos was aware of at least the substance of its final terms as earlier mentioned — although the ultimate result would not change even if that were not to be the position.
(c) Mr Floropoulos’ discussion with Mr Adams when the first order was being placed about Kremel setting up Culinary Co, so that this could be used to move the freight to, and to allow for the invoices to be in Australian dollars — which was consistent with comments to this effect in Mr Canzoneri’s email to Mr Garakis on 3 January 2018.
(d) Mr Floropoulos not disclosing to Mr Canzoneri or anyone else at Oliana: that he had set up Culinary Co; that he proposed to — and did — interpose Culinary Co between Kremel and Oliana so as to allow for a mark-up of pricing to Culinary Co; the Kremel Supply Price; that the arrangement reached with Mr Garakis and Kremel from the outset was for Kremel to supply to Culinary Co not Oliana; or the nature or extent of his involvement with Culinary Co.
(e) That Mr Canzoneri, and through him, Oliana, trusted Mr Floropoulos, including in connection with his role in obtaining an alternate supplier of vegan cheese products on behalf of Oliana.
(f) Mr Floropoulos being involved with the negotiation of the exclusive distribution agreement with Mr Canzoneri and Oliana, purportedly on Oliana’s behalf, and not disclosing the true position including that: there was to be no agreement with Kremel; that Mr Hone and Culinary Co did not represent Kremel; that Mr Floropoulos was involved with and responsible for Culinary Co being set up; that the Culinary Co Supply Price involved a material mark-up imposed by Mr Floropoulos for Culinary Co without Oliana’s knowledge; and that at the same time Mr Floropoulos was communicating with Oliana and conveying that he was acting on its behalf, he was also communicating with Mr Hone in his own interests and those of Culinary Co.
(g) Mr Floropoulos’ silence and non-disclosure continuing throughout 2016 and 2017 — including in the context of the drafting of the exclusive distribution agreement in November 2016 in which Culinary Co and Kremel were described jointly as the ‘Supplier’, and what followed thereafter in late 2016 and all of 2017.
(h) Mr Floropoulos taking positive steps that had the effect of concealing the true position, including: resisting and discouraging Mr Canzoneri from coming to Greece; making the statements regarding Kremel setting up or operating though an Australian entity; being aware of and involved in the creation and sending of the 7 June 2016 letter; taking steps so that communications and dealings with Kremel were dealt with through Mr Floropoulos and not Oliana — including his emails to Kremel and his instructions to Mr Adams; and misrepresenting the position regarding Kremel being involved with and granting the 7% discount; arranging for Mr Garakis to speak only in Greek during his meeting and dinner with Mr Canzoneri in April 2017; the sending of numerous text messages in which untrue statements were made regarding Kremel’s position and the arrangements (as earlier referred to) — including those relating to communications with Mr Garakis and Kremel about the terms of the distribution agreement between Oliana and Kremel (which in fact was never in contemplation by Mr Floropoulos and was not being progressed); and payment demands and requests wrongly said by Mr Floropoulos to have been made by Kremel.
(i) Mr Floropoulos not disclosing that in July 2017 he had signed an exclusive distribution agreement with Kremel on behalf of Culinary Co.
621 Having regard to the circumstances and context, I accept Oliana’s submission that it had a reasonable expectation that Mr Floropoulos would disclose to it information materially relevant to Oliana’s actual or prospective supply arrangements with Kremel, including the information referred to above.[424] Given the history of and trust in the relationship, and the role being performed by Mr Floropoulos for Oliana, this is in my view, a clear case in that regard and the position would remain the same whether or not Mr Floropoulos was a de facto director, officer, or otherwise found to be a fiduciary given the role he was undertaking for Oliana, and the history and trust in the relationship.
622 Having regard to the above and the context and circumstances earlier referred to, I am satisfied that by reason of the acts and omissions (including non-disclosure) of Mr Floropoulos referred to, Mr Floropoulos represented to Oliana that Kremel had agreed to deal exclusively with Oliana in relation to the supply of Kremel Products, that Kremel was willing and would in fact supply products manufactured by it at the prices charged by Kremel; that Oliana was appointed as exclusive distributor for Kremel as stated in the 7 June 2016 letter, and that from the time the exclusive distribution agreement was signed by Mr Hone and Mr Canzoneri Oliana was appointed as exclusive distributor for Kremel by the terms of the exclusive distributor agreement.[425]
623 Although I do not wish to repeat the evidence and context earlier referred to, it is desirable to elaborate a little further regarding the making of the said representations, before moving to the question of whether such conduct was misleading or deceptive, or likely to be so as alleged.
624 Mr Floropoulos was seeking a supplier for Oliana in the context and circumstances earlier referred to. Mr Floropoulos interposing an intermediary of any kind was not raised or discussed by Mr Floropoulos and it is plain that it was not something that Mr Canzoneri or Oliana considered. It was not on Oliana’s radar. Given the task that Mr Floropoulos was undertaking and his discussions with Mr Canzoneri from Greece, it is evident that he was conveying that he had found a supplier for Oliana, being Kremel, who was willing to deal with Oliana through a company that Kremel was going to set up, which Mr Floropoulos referred to as Culinary Co and linked Kremel and Mr Hone to. This was a lie because it was Mr Floropoulos who had set up Culinary Co before he even went to Greece in order to interpose it between Kremel and Oliana, without Oliana knowing of Mr Floropoulos’ interest or intent. Mr Floropoulos conveyed confidence about Oliana being appointed and conveyed that Kremel’s representative, Mr Hone, would contact him. Mr Floropoulos and Mr Canzoneri also discussed pricing in the context of Mr Floropoulos’ communications with Kremel and Mr Floropoulos was conveying that the pricing arrangements being negotiated for Oliana were being negotiated between Mr Floropoulos for Oliana and Mr Garakis for Kremel, which was not the case at all. The prices for Oliana were being set by Mr Floropoulos through Culinary Co, even at that early stage, again remembering that it had always been Mr Floropoulos’ undisclosed intention to interpose Culinary Co and impose a significant mark-up for his benefit and the benefit of Culinary Co.
625 It is in this context (and the circumstances earlier addressed) that Mr Canzoneri received the 7 June 2016 letter from Mr Hone. That letter, the preparation of which Mr Floropoulos was involved with and, it can be inferred, was aware of, reinforced the position in plain terms. Among other things, the letter:
(a) Confirmed that Mr Hone acted for and on behalf of ‘Culinary Co Greece’ (which did not exist), whose managing director was Mr Garakis.(b) Stated that ‘my clients’ had been in discussions with other distributors in Australia but that Mr Hone had ‘... been instructed by Mr [Garakis] to cease all talks with these third party distributors and to now appoint Oliana Foods to be the new distributors with exclusive rights for Culinary Co and its various products for both Australia and New Zealand ...’.[426]
(c) Referred to ‘... your discussions ‘with Mr [Garakis] of Culinary Co Greece’[427] and stated that ‘in good faith he has commenced the preparation of your initial order ...’.
(d) Stated that within the next 24 hours ‘... we will provide you with an invoice for deposit to be paid as per our agreement’.
626 Mr Canzoneri responded to Mr Hone saying that he was ‘... looking forward to the long and mutual association ...’ and asking for the formal agreement ‘... as soon as it was finalised ...’ which, it may be inferred, he was aware of from his earlier discussions with Mr Floropoulos. Mr Canzoneri also spoke with Mr Floropoulos about the letter advising of the appointment and asked about the agreement, to which Mr Floropoulos said words to the effect of ‘... the agreement will come ...’. Invoices were then sent by Mr Hone totalling $278,544, and the amount of $275,000 was paid as previously referred to.
627 Having regard to the circumstances, including Mr Floropoulos’ non-disclosure in circumstances where Mr Canzoneri and Oliana could reasonably expected disclosure, the evidence establishes that from at least 7 June 2016 Mr Floropoulos represented that Kremel had agreed to deal exclusively with Oliana in relation to the supply of Kremel Products,[428] that Kremel was willing and would in fact supply products manufactured by it at the prices charged by Kremel, and that Oliana was appointed as exclusive distributor for Kremel as stated in the 7 June 2016 letter. These were all continuing representations and I accept that Mr Floropoulos did not resile from them at any relevant time, albeit in circumstances where at all times it was at least reasonable for Oliana to have expected that the true position would be disclosed to it by Mr Floropoulos.
628 By his statement that the ‘... agreement will come ...’ it is apparent that Mr Floropoulos was referring to a formal distribution agreement from Kremel, which Mr Canzoneri had asked Mr Hone to send as soon as it was ‘finalised’. By Mr Floropoulos’ statement in this regard and his silence about the true position I am satisfied that this representation was as to a future matter — albeit made in circumstances where Mr Floropoulos knew that no agreement would be coming from Kremel. There were no reasonable grounds for making the representation that were pleaded or established.
629 It is also the case that the Supply Representations that Kremel was willing and would in fact supply products manufactured by it at the prices charged by Kremel was as to a future matter insofar as it was forward looking past 7 June 2016. However, Mr Floropoulos knew at all times that Kremel would not in fact be supplying Oliana its products at the prices charged by Kremel — or in fact at all given that Mr Floropoulos had made arrangements for Kremel to supply Culinary Co and not Oliana, albeit unknown to Oliana. There were no reasonable grounds for making such a representation and none were pleaded or established by Mr Floropoulos.
630 I am also satisfied that from at least the time after which Mr Canzoneri and Mr Hone signed (again) the exclusive distributor agreement in early December 2016, Mr Floropoulos represented that Oliana was appointed as exclusive distributor for Kremel by the terms of that agreement. That representation was a continuing representation and I accept that Mr Floropoulos did not resile from it at any relevant time — but again in circumstances where it was at all times reasonable for Oliana to have expected that the true position would be disclosed to it by Mr Floropoulos. I make the following additional observations on this aspect.
631 The circumstances leading up to and the context in which the exclusive distribution agreement was negotiated and finalised cannot be put to one side in the way that aspects of the defendants’ submissions at least implicitly suggested might occur. The negotiations and communications took place in the way earlier referred to as part of a continuum of communications and events which, at its core, involved Mr Floropoulos’ undisclosed plan to interpose Culinary Co as Kremel’s distributor and subject Oliana to a material mark-up on the Kremel Supply Price without Mr Canzoneri or Oliana knowing that was the position. The terms of the exclusive distribution agreement were finalised in the circumstances earlier described, including in the context of the representations and statements made in the 7 June 2016 letter earlier referred to.
632 By the time the agreement was being negotiated, Oliana had received written confirmation that it had been appointed as exclusive dealer through the 7 June 2016 letter from Mr Hone, that Mr Floropoulos was involved in supplying the information for, and which contained false statements consistent with what Mr Floropoulos had told Mr Canzoneri in the discussions he had with him shortly before the letter was sent. Oliana had also placed orders and paid a considerable sum of money in respect of those orders, in a manner consistent with it having considered that it had been appointed and Kremel had agreed to grant it exclusive distribution rights, albeit with the terms of the formal agreement to be finalised. Again, it was reasonable for Oliana to expect Mr Floropoulos to disclose the true position and he did not do so. Moreover, he was engaged in communications with Mr Canzoneri and Oliana regarding the agreement in a manner which conveyed that Kremel was involved in the negotiations and that the terms were being addressed with Kremel in Greece. I refer, for example, to the text messages between Mr Floropoulos and Mr Canzoneri during this time. This was not true.
633 Further, documents late produced by Mr Hone (but not by Mr Floropoulos in discovery or in response to a notice to produce even though he had received many of them by that time) during the trial showed that Mr Hone was keeping Mr Floropoulos abreast of the drafts and revisions, with many examples of emails being almost immediately forwarded by Mr Hone to Mr Floropoulos, and also examples of instructions being sought from Mr Floropoulos.
634 It is also not to be forgotten that Kremel and Culinary Co was described and defined in the agreement as ‘Together, the Supplier’, with Kremel having also been introduced as a party in the second draft earlier sent by Mr Hone to Mr Canzoneri.[429] This reflected an amendment made by Oliana to the initial draft from Mr Hone, it was consistent with the position reflected in the 7 June 2016 letter, and that which Mr Floropoulos had told Mr Canzoneri (and Mr Adams) about regarding Kremel operating though a company in Australia that it was setting up.
635 Although Mr Floropoulos and Mr Hone sought to play down the inclusion of Kremel in the definition of ‘Supplier’ and, in effect, referred to the definition and the execution clause as being the only references to Kremel, these submissions were without persuasive force. They do not give sufficient regard to other aspects of the exclusive distribution agreement, which Mr Floropoulos knew Mr Canzoneri had been involved with negotiating, and which reflected that: Kremel and Culinary Co were linked; that Kremel was — together with Culinary Co — the manufacturer and supplier to Oliana; that the Supplier had agreed to appoint Oliana as the Distributor to distribute the Products; and that the Supplier’s price was as reflected in the price list attached to the agreement.
636 That this was so can be well illustrated even by brief reference to just a limited number of terms and features of the agreement — although there are other illustrations — as follows:
(a) Kremel and Culinary Co were each parties to the agreement and named and defined as ‘Together, the Supplier’. Oliana was defined as the Distributor.(b) Under the heading ‘Background’ recital A recorded that the Supplier is a direct or indirect manufacturer of the products and recital B recorded that the Supplier has agreed to appoint the Distributor to distribute the products exclusively in the Territory on the terms and conditions set out in this agreement.
(c) ‘Supplier’s Price List’ was a defined term meaning the list attached to the Agreement and marked schedule 1. This price list is the list of the Culinary Co Supply Price in fact charged to Oliana.
(d) Clause 2.1 headed ‘Grant’ provided that the Supplier hereby grants the Distributor the exclusive non-transferable right to distribute the Products in the Territory.
(e) All obligations other than those of Oliana were expressed in all of the relevant clauses as being obligations of the Supplier. This defined term features in the majority of terms in the agreement.
(f) Clause 3.1.3 provided that it is the Supplier that is to deliver the products to the Distributor, with clause 3.1.5 providing that risk in the product passes from the Supplier to the Distributor upon delivery to the carrier responsible for delivery to the Distributor.
(g) Clause 3.1.6 contained a retention of title clause in favour of the Supplier.
(h) Clause 3.2 dealt with payment and provided that upon acceptance of an order by the Supplier the Distributor shall deposit at least 50% of the total order price into the ‘Supplier’s nominated bank account’ with the balance to be paid 45 days after delivery. Clause 3.2.3 made special provision for payments in relation to the first two containers, in each case providing for payment to the ‘Supplier’ though its nominated bank account.
(i) Clause 5.1.1 provided that the Supplier must not grant any person the right to distribute the products in the Territory and clause 5.1.2 provided that the Supplier must refer to the Distributor any enquiries or orders for the products received from potential customers.
(j) Clause 5.2 required the Supplier to pack the products under the brand of Oliana and that for the purpose of entering into the agreement and as a sign of good faith ‘... the Supplier at a cost of EURO 30,000 shall proceed to arrange packaging and labels for the products at its own cost and responsibility’.
(k) Clause 9.2 contained an indemnity in favour of the Supplier.
(l) The notice provision in clause 11.1.1 recorded the Supplier’s address for any notice under the agreement to be Ian Hone of Level 1, Suite 34, 1 Ricketts Road, Mount Waverley, Victoria, Australia.
(m) The Supplier price list was in fact the price list by Mr Floropoulos to Mr Hone that contained the Culinary Co Supply prices determined and set by Mr Floropoulos, although this was unknown to Mr Canzoneri and Oliana.
637 It is and was plain from the terms of the exclusive distribution agreement that, consistent with what had earlier been represented by Mr Floropoulos, it had been negotiated and finalised on the basis that Kremel was linked to Culinary Co and was the manufacturer of the products and together they were the Supplier to Oliana, who was the only distributor. It is also apparent that it provided for only one price being the Supplier’s price. Further, Mr Floropoulos was aware of what he was doing and that which he had not disclosed. He was also receiving the drafts of the agreements from both Mr Hone and Mr Canzoneri, although Mr Canzoneri had no idea about the dual non-disclosed role Mr Floropoulos was playing.
638 Further, the terms of the agreement as revised by Mr Canzoneri and his son made it obvious and further reinforced that Oliana was proceeding on the basis that Kremel was linked to Culinary Co, that Kremel was supplying Oliana, and that there was only one price, which Oliana understood to be a Kremel price. Given Mr Floropoulos’ role in acting on Oliana’s behalf, and the terms of the agreement as it was negotiated, at least the substance of which it can be inferred he was aware of given the email and text exchanges, this further underscores that Oliana could have at least reasonably expected Mr Floropoulos to disclose the true position, that there was to be no arrangement between Kremel and Oliana, and that the Culinary Co Supply prices were not the Kremel Supply Prices and included a substantial mark-up on the same, for the benefit of Mr Floropoulos and Culinary Co.
639 The matters discussed above did, as alleged, reinforce the representations,[430] which were continuing representations.
640 It will be apparent that I do not accept Mr Floropoulos’ submissions — and to the extent that they were made, Mr Hone’s submissions — that the representations were not made by Mr Floropoulos. Aspects of these submissions were addressed earlier when dealing with the facts. I make the following additional observations.
641 That Kremel did not sign the agreement or ever see it or agree to it is not to the point. We are here concerned with misleading conduct allegations on the part of Mr Floropoulos and, particularly, whether Mr Floropoulos engaged in misleading conduct by making the representations earlier referred to.
642 Given the evidence, I find no difficulty finding the sense of ‘actual persuasion’[431] referred to by counsel for Mr Floropoulos, noting also that I am more than comfortably satisfied that it has been established that Mr Floropoulos engaged in the conduct referred to, recognising and taking into account also the nature and gravity of the allegations even though no fraud claim was brought.
643 When regard is had to the whole of the context and circumstances, including Mr Floropoulos’ silence and non-disclosure, the fact that it was Mr Hone who sent the 7 June 1016 letter does not materially aid Mr Floropoulos’ position. He was involved in all of the relevant conduct as has been described above, and he was aware of and involved with supplying the information for the letter, and had informed Mr Canzoneri that he would be hearing from Mr Hone, as in fact occurred. He also knew of the true position. It is to be remembered that the conduct is to be considered in context.
644 I also do not accept that the content of the 7 June 2016 letter assists Mr Floropoulos’ position, again noting that it is to be considered in context. Further, that it refers to Mr Hone, (who was earlier said by Mr Floropoulos to be representing Kremel) being the sole ‘officeholder’ of Culinary Co in the same sentence as (wrongly) stating that he acted as the legal representative of Culinary Co Greece whose managing director is Mr Garakis, detracts from Mr Floropoulos’ position rather than enhances it. The letter also says in terms that Mr Hone is ‘confirming’ instructions from Mr Garakis to cease all talks with others ‘... and now appoint Oliana Foods to be the new distributors for Culinary Co and its various products for both Australia and New Zealand’. To this it may be added that the letter contemplates the appointment commencing immediately, noting that the initial order is being commenced and a substantial invoice is to be sent in the next 24 hours — as it was on 9 June 2016 for more than $275,000. It is clear in my view that, viewed in context, the 7 June 2016 letter was representing, as foreshadowed by Mr Floropoulos, that the appointment was with effect from at least 7 June 2016 — although the language of writing to ‘confirm’ is suggestive of it conveying that the position had been earlier conveyed — again a position consistent with Mr Canzoneri’s account of his conversations with Mr Floropoulos.
645 I do not accept that the terms of the exclusive distribution agreement as finalised (or the earlier drafts) change the position or bring about an end to the earlier representations. The drafts were created and exchanged in the context and circumstances earlier referred to and reinforced the position in the way earlier described. As to some specific points raised, the following is noted.
646 First, the drafting change to include Kremel as Supplier jointly with Kremel is supportive of the position conveyed by Mr Floropoulos to Mr Canzoneri and reflected in the 7 June 2016 letter. Notwithstanding his knowledge of the true position, Mr Floropoulos held his silence and did not disclose the true position.
647 Secondly, the impression created by Mr Floropoulos in his texts to Mr Canzoneri was that the agreement was being negotiated with Kremel, when to his knowledge it was not.
648 Third, although a review of the execution clauses does not show it as having been signed by or on behalf of Kremel, and I accept that it was not signed by Mr Garakis, these matters have to be considered in the context of all the circumstances. When they are, they do not in my view detract from the making of the representations, particularly given Mr Floropoulos’ considered silence on the topic, the represented linkage to Mr Hone, Culinary Co and Kremel being ‘Together, the Supplier’ and Mr Hone being the person specified to receive notices for ‘the Supplier’.
649 Fourth, even assuming that a ‘simple company search’ would have shown that Culinary Co was not a subsidiary of Kremel, that matter does not detract from the overall position conveyed when weighed in the balance in the context and circumstances. In effect, it is a submission that Mr Canzoneri’s son, a solicitor for Oliana, could have discovered that fact, which in turn would have put him on inquiry. It does not, however, alter the conduct engaged in by Mr Floropoulos. Further, Mr Floropoulos knew all the facts and Oliana was entitled to reasonably expect disclosure of the true position, which did not occur.
650 Fifth, I do not accept that Mr Floropoulos’ involvement in the agreement negotiations can be characterised as limited, noting that he was materially involved with Mr Canzoneri and Oliana on one side and, unbeknownst to Oliana, with Mr Hone and Culinary Co on the other. But even if ‘limited’ involvement had been a correct characterisation, it is of no material consequence. It was established that Mr Floropoulos was aware of the progress of negotiations and that Mr Hone was communicating with him in real time in relation to the process, as was Mr Canzoneri for Oliana. Further, Mr Floropoulos’ texts consciously created the impression that he (and at times his father) was dealing with Kremel in relation to the agreement for Oliana, when Mr Floropoulos knew that not to be the case. As referred to earlier, although it is not clear why Mr Floropoulos was referring to his father and this, like some matters, will remain an unanswered question, I am well satisfied that the agreement being referred to in these text messages was the exclusive distribution agreement. This is for the reasons earlier stated, which it will be recalled were supported by the natural reading of the messages, the context, and the relevant draft being 12 pages long as stated in the message.
651 Sixth, even if it was assumed to be the case that ‘... there was nothing stopping ...’ Mr Canzoneri or his son contacting Kremel direct, that does not assist in this context. Mr Canzoneri trusted Mr Floropoulos who, so he believed, was dealing with things on behalf of Oliana. Mr Floropoulos had also taken the steps earlier referred to that resulted in matters being dealt with directly by Mr Floropoulos, including discouraging direct contact with Kremel. That Mr Canzoneri or his son did not relevantly contact Kremel direct until Mr Canzoneri’s email of 3 January 2018 (to Mr Hone and Mr Garakis jointly) does not change the fact that Mr Floropoulos engaged in the conduct that I have found he engaged in. It may also be noted that the content of that contemporaneous email and the sending of it jointly to Mr Garakis and Mr Hone sits comfortably with the position that Oliana alleged was represented to it.
652 Eighth, given the findings I have made about the representations and when they were made, the timing issue referred to on behalf of Mr Floropoulos does not arise — although it need not be considered at this point in any event, as it related more to causation and reliance, which is addressed later in these reasons. It is without force in that context anyway.
653 Ninth, for the reasons earlier addressed, I do not accept that Mr Floropoulos informed Mr Canzoneri that Kremel would not sign the agreement.
654 To the extent that Mr Floropoulos sought to rely on the existence of clause 2.3 and the ‘entire agreement’ clause in the exclusive distribution agreement ultimately signed, this does not assist him in relation to his conduct or the defence of the claim more broadly. So far as his conduct is concerned, there is nothing about the inclusion of those clauses in the exclusive distribution agreement that changes the conduct he engaged in, and his ongoing silence in the face of the terms of the agreement which reinforced the position as previously explained.
655 As I have said, each of the representations[432] was continuing and they continued throughout 2017 until at least 10 January 2018, which is supported by the terms of Mr Canzoneri’s email sent 3 January 2018 to Mr Hone and Mr Garakis jointly. It is also inferentially supported by the fact that Oliana was making payments to Culinary Co up to 21 December 2017. It may also be noted that even these proceedings were first filed on the basis that there was an agreement between Kremel and Oliana, and it was only in the context of the proceeding that this became known not to be true, with Mr Garakis ultimately being called as a witness for Oliana. It is sufficient, however, for present purposes to conclude that the representations continued until past the end of December 2017, noting also that neither Mr Floropoulos nor Mr Hone revealed the more accurate position until part way through the trial. The purported notice of termination of 10 January 2018 expressly referred to the exclusive distribution agreement and its terms as though it remained in operation and was being relied upon.
656 Having determined that Mr Floropoulos engaged in the conduct referred to, the question of whether it was misleading or deceptive or likely to mislead or deceive is more straightforward and can be addressed swiftly — noting also that neither of the defendants put forward any substantive case that if the conduct was established, it was not misleading or deceiving or likely to mislead or deceive. But in any event the position is clear.
657 The Supply Representations and the Exclusive Distributor Representations referred to above were misleading or deceptive and likely to mislead or deceive, and as it happens known by Mr Floropoulos to be so, for at least the following reasons:
(a) Kremel had not agreed to deal exclusively with Oliana in relation to the supply of Kremel Products;(b) Oliana had not been appointed as exclusive distributor for Kremel as stated in the 7 June 2016 letter;
(c) Oliana had not been appointed as exclusive distributor for Kremel by the terms of the exclusive distributor agreement;
(d) Kremel did not in fact supply products manufactured by it to Oliana at the Kremel Supply Price or at all (because they were supplied to Culinary Co).
658 Further, insofar as the Supply Representation that Kremel would in fact supply products manufactured by it to Oliana at the Kremel Supply Price was as to a future matter, which in my view it was, it is deemed by s 4(1) of the ACL to be misleading, noting that no reasonable grounds were pleaded or established by Mr Floropoulos. The same may be said of the representation that Oliana would get the agreement.
659 Although it is not necessary to establish that a person was misled or deceived in order to establish a contravention of s 18 of the ACL, it was plain from Mr Canzoneri’s evidence and the contemporaneous documents, that until at least January 2018 Mr Canzoneri and Oliana were misled and deceived.
660 Clause 2.3 and the entire agreement clause in the exclusive distribution agreement do not assist Mr Floropoulos in this context. Clause 2.3, which dealt with no party being an employee, agent, partner of the other and related matters regarding power and authority, is to be viewed in context and in the light of the other circumstances. When that occurs it does not at all impact upon the nature of the conduct or it being misleading or deceptive and likely to mislead or deceive — as is the case in relation to the other representations discussed below.
661 The position is the same with the entire agreement clause in clause 11.6, which states that the agreement supersedes any previous arrangements, agreements, deeds, representations, understanding or statements whether in writing or some other format. First, it may be noted that Mr Floropoulos is not a party to the agreement and therefore the clause would not be construed as relating to his conduct even if it could affect the position (which in this case it cannot). In any event, the existence of such a clause in the context and circumstances does not at all impact upon the conduct of Mr Floropoulos or its misleading and deceptive character. Again, this is also the position with the other representations addressed below.
662 This leaves the question of whether Oliana suffered loss and damage because of Mr Floropoulos’ conduct and, if so, the amount of loss and damage. These issues and other matters relating to the relief claimed are addressed later after dealing with the other alleged representations said to have been made by Mr Floropoulos.
Authority Representation: Hone and Culinary Co had authority from Kremel to make supply arrangements on behalf of Kremel and to enter into the exclusive distribution agreement on behalf of Kremel
Submissions
663 As with the Exclusive Distributor Representation, the alleged Authority Representation was founded in large part upon the Supply Representations and Floropoulos Conduct earlier addressed.[433] Again, the position was refined in the closing submissions although the overlapping and circularity of the allegations remained.
664 Oliana submitted that the Authority Representation was made during a telephone conversation while Mr Floropoulos was in Greece in late May 2016, in which Mr Floropoulos said to Mr Canzoneri that ‘Kremel had appointed a company in Australia and then a lawyer by the name of Ian Hone’.[434]
665 This representation was said to have been ‘reinforced’ by:
(a) a telephone conversation between Mr Canzoneri and Mr Floropoulos while Mr Floropoulos was in Greece, in which Mr Floropoulos said to Mr Canzoneri that Kremel owned the [Australian] company;[435](b) Mr Floropoulos telling Mr Canzoneri a few days later that the Australian company was called Culinary;[436]
(c) Mr Floropoulos telling Mr Canzoneri shortly after that he would ‘hear from Ian Hone who is representing the Greeks’;[437]
(d) Mr Floropoulos in the same conversation informing Mr Canzoneri when queried about Kremel’s relationship with Mr Hone, that they were associated through the Greek Chamber of Commerce;[438]
(e) Mr Floropoulos’ failure at any time to disclose to Mr Canzoneri: his own relationship with Mr Hone; his role and interest in Culinary Co; that the Culinary Co Supply Prices included an almost 200% mark-up on the Kremel Supply Price; that Mr Hone did not in fact have any authority to act for Kremel; and that Kremel had not signed the exclusive distribution agreement;[439]
(f) Mr Floropoulos’ repeated demands for payment purportedly made on behalf of Mr Garakis, or ‘Greece’, which continued until January 2018[440] and which Mr Floropoulos in substance accepted were false and misleading;
(g) Mr Floropoulos’ actions in late 2017 in seeking to conceal his own conduct when Mr Canzoneri was expressing concern as to Mr Delis’ conduct and Mr Canzoneri’s suspicion that something may be amiss. Such actions were said to have reached their ‘nadir’ after Mr Floropoulos queried whether he was being accused and Mr Canzoneri wrote in reply: ‘[n]o Bill, I trust you with my life, in fact my life is in your hands’ and Mr Floropoulos responded with ‘[l]eave it with me’.
666 It was contended that the representation was misleading or deceptive or likely to mislead or deceive because it was false, inaccurate and incorrect because Mr Hone was not representing Kremel and had no other authority to act on behalf of Kremel or any officer of Kremel in any dealings with Oliana. It was further submitted that as far as Kremel was concerned, Mr Hone was Mr Floropoulos’ lawyer with reference being made to Mr Garakis’ unchallenged evidence to this effect.
667 Mr Floropoulos acknowledged that, in the letter of 7 June 2016, Mr Hone did ‘initially claim’ to be acting as a legal representative on behalf of ‘Culinary Co – Greece’ and that Mr Garakis intended to appoint Oliana ‘to be the new distributor with exclusive rights for Culinary Co in its various products for both Australia and New Zealand’.
668 However, it was submitted that as the negotiations for the exclusive distribution agreement unfolded, and by at least the date of execution by Oliana and Culinary Co, Oliana became aware that Culinary Co had no authority from Kremel to enter into an agreement. This, so it was said, was made plain by the fact Kremel failed or refused to sign the agreement, which was a fact known to Mr Canzoneri and his solicitor son, Michael. In this context, emphasis was placed on the email from Mr Hone sending the signed agreement, in which he stated it had been signed by ‘myself [Ian Hone] for Culinary Co Pty Ltd’. It was submitted that from this point on Oliana was squarely on notice that Mr Hone only signed the agreement on behalf of Culinary Co — which it was submitted was apparent from the execution page in any event.
669 It was further submitted that Mr Canzoneri’s evidence that he saw a copy of the distribution agreement signed by Kremel had no credibility, noting further that ‘Paris Garakis gave evidence that no such agreement was ever signed or executed by or on behalf of Kremel ... (and no one asked him to)’.
Consideration – Authority Representation
670 The approach to be taken to this Authority Representation and the remaining representations is the same as that described and taken in connection with the Exclusive Distributor Representation (which also had as its basis the Supply Representations and the Floropoulos Conduct), but taking into account the acts and omissions relied upon in connection with the different representations. As mentioned, with all of the alleged representations reliance was placed in part on the Supply Representations,[441] which included the alleged representations that Kremel had agreed to deal exclusively with Oliana in relation to the supply of Kremel products, and that Kremel was willing and would in fact supply Kremel products to Oliana manufactured by it at the prices charged by Kremel. I have already determined that it has been established on the evidence that these Supply Representations and the Exclusive Distributor Representation were representations made by Mr Floropoulos, that they were continuing representations, and that they were misleading or deceptive and likely to mislead or deceive.
671 I am also satisfied that it has been established that Mr Floropoulos represented that Mr Hone was Kremel’s authorised representative in Australia[442] and that Mr Hone and Culinary Co had the authority to make supply arrangements on behalf of Kremel and to enter into the exclusive distribution agreement on its behalf. Given the earlier discussion regarding context and circumstances, these and the remaining representations can be dealt with more briefly.
672 As the earlier discussion of the facts and the Exclusive Distributor Representation reveals, and putting to one side the colourful characterisation of Mr Floropoulos’ conduct by Oliana, nearly all the acts and omissions of Mr Floropoulos relied upon in support of the making of the Authority Representation (referred to above) were established on the evidence. The matters not disclosed to Mr Canzoneri or Oliana included the existence and extent of the mark-up between the Kremel Supply Price and Culinary Co Supply Price, and the fact that neither Mr Hone nor Culinary Co had any authority to act for Kremel.
673 It was also the case that when Mr Canzoneri raised a suspicion with Mr Floropoulos in the text messages in late 2017 about the possibility of something being amiss, Mr Floropoulos responded asking whether he was being accused of something to which Mr Canzoneri wrote: ‘[n]o Bill, I trust you with my life, in fact my life is in your hands’ and Mr Floropoulos responded with ‘[l]eave it with me’. Mr Floropoulos so acted where in fact he knew the true position, which he did not disclose in any way to Mr Canzoneri or Oliana.[443]
674 For the reasons earlier referred to, Oliana also had at least a reasonable expectation that Mr Floropoulos would disclose to it information materially relevant to Oliana’s actual or prospective supply arrangements with Kremel, in this case including the true position regarding Mr Hone and Culinary Co.
675 In the circumstances and context in which they occurred, I am satisfied that by reason of the acts and omissions of Mr Floropoulos referred to,[444] Mr Floropoulos represented to Oliana from the time of his telephone calls with Mr Canzoneri in late May 2016 that Mr Hone was Kremel’s authorised representative in Australia, and that he and Culinary Co had the authority to make supply arrangements on behalf of Kremel and to enter into the exclusive distribution agreement on its behalf.
676 I refer in this regard to the observations made above regarding the Exclusive Distributor Representations and Supply Representations, which are also relevant to the consideration of the Authority Representation. I add the following.
677 Mr Floropoulos was the person who had gone to Greece to find the new supplier for Oliana and who had conveyed to Oliana the information regarding: Kremel setting up an Australian company; that company being called Culinary; Mr Hone being Kremel’s representative; the connection between Mr Hone and Kremel having arisen through the Greek chamber of commerce; and Mr Hone being the person Mr Canzoneri would be hearing from.
678 In that context Mr Hone sent the 7 June 2016 letter to Mr Canzoneri, being a letter the creation and sending of which Mr Floropoulos was involved in, and which was the contact from Kremel’s representative that Mr Floropoulos told Mr Canzoneri to expect. The letter was consistent with what Mr Floropoulos had conveyed to Mr Canzoneri, stating that Mr Hone was the sole ‘officeholder’ (not shareholder) of Culinary Co and the legal representative ‘for and on behalf of Culinary Co Greece whose managing director is Mr Paris [Garakis]’. It also confirmed that Mr Hone was instructed ‘... to now appoint Oliana Foods to be the new distributors with the exclusive rights for Culinary Co and its various products for both Australia and New Zealand’.
679 Considered in the context earlier described, and in circumstances where Oliana had a reasonable expectation of disclosure from Mr Floropoulos, I am satisfied that by Mr Floropoulos’ conduct, including his non-disclosure of the true position, from the time of his telephone discussion in late May 2016 prior to receipt of the letter of 7 June 2016, he represented that Mr Hone, and the Australian company being set up by Kremel, Culinary Co, had the authority to make supply arrangements on behalf of Kremel.
680 That representation was a continuing representation until at least 10 January 2018, and I accept that Mr Floropoulos did not disclose the true position — namely, that neither Mr Hone nor Culinary Co possessed any such authority, at any relevant time, which was essentially common ground between the parties in any event.
681 Noting that the negotiations for the exclusive distribution agreement and the provision of the first and second drafts by Mr Hone occurred in November 2016, it is desirable to make some further observations regarding the representation that Mr Hone and/or Culinary Co had the authority to enter into the exclusive distribution agreement on Kremel’s behalf.
682 As I have found, from at least June 2016 Mr Floropoulos represented that Mr Hone, and the Australian company being set up by Kremel, Culinary Co, had the authority to make supply arrangements on behalf of Kremel, which was a continuing representation. The negotiation or finalisation of the formal distribution agreement was in contemplation by Oliana and Mr Floropoulos as, for example, Mr Canzoneri’s email response to Mr Hone’s 7 June 2016 letter and his discussions with Mr Floropoulos at the time illustrate.
683 Putting to one side the communications between Mr Canzoneri and Mr Floropoulos, all of the communications with Mr Canzoneri, Oliana, and Michael Canzoneri from the Kremel/Culinary Co side in relation to the agreement came through Mr Hone, Culinary Co’s stated sole officeholder (which Mr Floropoulos knew). This occurred in the context and circumstances earlier described, including for example, Culinary Co being the Australian company being set up by Greece, Mr Hone being Kremel’s representative, and the sending of the 7 June 2016 letter that Mr Floropoulos provided information for.[445]
684 Further, in the text messages between Mr Floropoulos and Mr Canzoneri in which Mr Floropoulos falsely stated he was communicating with Greece about certain matters associated with the draft agreements, it was contemplated that all communications would come back to Oliana through Mr Hone, Culinary Co’s sole officeholder, as in fact occurred.
685 It is also not to be forgotten that Mr Hone and Culinary Co being so authorised was consistent with the impression created from the outset. It was also reinforced by the terms of the signature block for Kremel in the second draft agreement prepared by Mr Hone, which Mr Floropoulos was at least aware was being prepared and sent. That blank signature block, included by Mr Hone, made provision for Mr Hone signing on behalf of Kremel and Culinary Co. The form of the signature blocks only changed when Michael Canzoneri converted the document to try and make it conform with Oliana’s usual agreement.
686 That Mr Floropoulos was aware of the terms of these drafts is apparent from the text exchanges with Mr Canzoneri on 23 November 2016, in which Mr Floropoulos is addressing errors in the second draft from Mr Hone, and where Mr Floropoulos asks Mr Canzoneri to email him the contract and Mr Canzoneri confirms that he has. This was the version that Mr Hone had sent to Mr Canzoneri, (it may be inferred on Mr Floropoulos’ instruction), under cover of an email on 23 November 2016 stating ‘after discussions with Greece overnight please find amended document, product/price list still to be added’. It was also apparent that Mr Floropoulos was seeking and obtaining the other later drafts, again evidenced by, among other things, the text messages on 24 November 2016 and the emails from Mr Hone to Mr Floropoulos throughout that period.[446] The email of 6 December 2016 from Oliana to Mr Hone, attaching the re-signed final version with the handwritten revision of Mr Hone, was also sent to Mr Floropoulos by Mr Hone, in fact three minutes after it was received by Mr Hone.
687 The position was further reinforced by the features of the final form of the exclusive distribution agreement, which perpetuated the link between, and combined nature of, Kremel and Culinary Co, as well as Mr Hone’s role. These features included Culinary Co and Kremel being defined as ‘Together, the Suppler’, the Supplier appointing Oliana as the Distributor, and the other matters mentioned earlier in these reasons. It will also be recalled that Mr Hone was the person recorded in the exclusive distribution agreement as the person authorised to receive notices on behalf of the ‘Supplier’, which was Kremel and Culinary Co. Mr Floropoulos was receiving drafts and received the final form of the agreement. He knew the position was different to that which was stated in it. It does not matter that many of these changes were initially introduced into the drafting by Mr Michael Canzoneri.
688 Notwithstanding the context and circumstances, including those just mentioned, and the fact that Mr Floropoulos knew that Kremel had not been consulted about the agreement or asked to sign it, Mr Floropoulos did not resile from his position and did not at any time disclose to Oliana the true position regarding neither Mr Hone nor Culinary Co having any authority on behalf of Kremel. Rather, he allowed and encouraged Mr Canzoneri and Oliana to continue to deal through Mr Hone, who to Mr Floropoulos’ knowledge, was presenting to Mr Canzoneri as though he was operating in his dual role as representative of Kremel and officeholder of what had been represented to be Kremel’s Australian company, Culinary Co. Further, Mr Floropoulos encouraged Mr Canzoneri to deal with Mr Hone, was hurrying him to do so, and remained silent even after he was made aware that Culinary Co and Oliana had signed the exclusive distribution agreement and he knew that Kremel had not signed it and would not be doing so. This was because Mr Floropoulos had never raised the issue with Kremel or Mr Garakis, and had made the supply arrangements with Kremel for his benefit and the benefit of Culinary Co.
689 As I have said, in the circumstances I am satisfied that by his conduct Mr Floropoulos represented to Oliana that Mr Hone and Culinary Co had the authority to enter into the exclusive distribution agreement on Kremel’s behalf, which was a continuing representation.
690 It will be apparent that I do not accept the submission that any representation effectively ceased by at least the date of execution of the exclusive distribution agreement by Oliana and Culinary Co given the way the negotiations for the distribution agreement unfolded, or that this was made plain by the fact that Kremel failed or refused to sign the agreement, which was known to Mr Canzoneri and his son Michael. As things transpired it was not controversial on the evidence that the agreement was not in fact signed by Kremel or Mr Garakis. There was a difference between the parties as to whether Mr Canzoneri saw a document at the time purporting to be signed on behalf of Kremel, although I have earlier determined that this has not been established on the evidence. However, that does not alter the position I have reached.
691 The absence of a signature on the document in the execution clause for Kremel has to be considered in the context of the communications and other circumstances referred to, including Mr Floropoulos’ silence. Mr Floropoulos knew that neither Mr Garakis nor anyone else had signed the document on behalf of Kremel, but he had been the person who, by his conduct, had represented that Mr Hone and Culinary Co were linked to and authorised by Kremel in the way earlier described. When Mr Canzoneri texted that the agreement had been signed (which was consistent with a belief Mr Hone had authority), Mr Floropoulos said ‘good’ and remained silent. In the continuum of conduct to that point, neither the terms of the document nor the circumstances of its execution, including Mr Hone’s covering email when sending back the signed agreement, resulted in the representation ceasing or being relevantly diluted. Further, the representations were reinforced by Mr Floropoulos’ subsequent conduct, including, for example, his false text messages with respect to claimed requests and demands for payment by Kremel, and by his continued silence regarding the true position about Mr Hone’s and Culinary Co’s authority.
692 Again, the entire agreement clause and clause 2.3 do not assist, and the substance of the reasons earlier referred to apply with equal force here. There is nothing about those clauses that impacts upon Mr Floropoulos’ conduct and when considered and weighed as part of the circumstances, they do not dilute or neutralise the representations made by him. The suggestion that the clauses should be construed contra proferentem is, with respect, misplaced. We are not here dealing with the construction of those clauses but the question of whether Mr Floropoulos engaged in misleading or deceptive conduct. But even if they were to be so construed, it makes no difference.
693 Finally on this aspect, insofar as Mr Floropoulos relied upon submissions made regarding the Exclusive Distributor Representation, I refer to the observations earlier made regarding that representation.
694 As I have said, the Authority Representation was continuing and it is sufficient to say that it continued until at least 10 January 2018, it only becoming apparent to Oliana that Kremel was not party to the exclusive distribution agreement in connection with legal proceedings later in 2018.
695 Having determined that the Authority Representation was made by Mr Floropoulos, the question of whether it was misleading or deceptive or likely to mislead or deceived can again be addressed briefly — also noting that no substantive case was put forward that, if the conduct was established, it was not misleading or deceptive, or likely to mislead or deceive.
696 The Authority Representation (including the conduct underlying it) was misleading or deceptive and likely to mislead or deceive, and known by Mr Floropoulos to be so, because Mr Hone was not Kremel’s authorised representative, and neither he nor Culinary Co had the authority to make supply arrangements on behalf of Kremel, or to enter into the exclusive distribution agreement on its behalf.
697 The question of whether Oliana suffered loss and damage because of this conduct and related issues are addressed later in these reasons.
Binding Agreement Representation: Each of Culinary Co and Kremel were bound by the exclusive distribution agreement until at least 10 January 2018
Submissions
698 In respect of the Binding Agreement Representation, Oliana relied upon the same matters that it referred to in relation to the Exclusive Distributor Representation and the Authority Representation, noting also that it was again said to be founded in large part on the Supply Representations and the Floropoulos Conduct.
699 It was contended that the Binding Agreement Representation was misleading or deceptive because, relevantly, Kremel was not bound by the exclusive distribution agreement.
700 Mr Floropoulos submitted that the agreement signed by Oliana and Culinary Co was produced by Michael Canzoneri as solicitor for Oliana, noting that he had stated in correspondence that he had tried to ‘... incorporate all of the pertinent terms [from the Ian Hone draft] into our standard Distribution Agreement’. Reference was again made to the clause regarding one party not being able to bind another (clause 2.3), and to the entire agreement clause.
701 Although it was acknowledged that Kremel and Culinary Co had been defined in the agreement as ‘Together, the Supplier’, it was submitted that this was the only part of the document where it was suggested that Kremel and Culinary Co were jointly to be considered as the Supplier. It was submitted further that the contra proferentem rule should apply, and that clause 2.3 did not permit a construction that Culinary Co had any power or authority to bind Kremel to the agreement.
702 Emphasis was placed upon the fact that only two parties executed the document, and it was submitted that, absent Kremel’s signature, it could not bind Kremel, and may arguably not be binding on the two parties who signed it.[447] It was also said that any prior representation that Culinary Co might have made was negated by the entire agreement clause. Again, it was submitted that Mr Canzoneri’s evidence that he saw a copy of the agreement executed by Kremel should be rejected.
703 In the alternative it was submitted that even if the representation was made, it was never acted on by Oliana. This, so it was said, was because Oliana never took any steps to ascertain directly whether Kremel would execute the agreement and that it failed to do so even though Mr Floropoulos had told Mr Canzoneri that Kremel would not enter into an exclusive distribution agreement with Oliana.
Consideration – Binding Agreement Representation
704 Because Oliana relied upon the same matters as it did in relation to the Exclusive Distributor Representation and Authority Representations, I refer to the previous discussion of these matters earlier in these reasons. Having regard to the context and circumstances, I am satisfied that Mr Floropoulos represented to Oliana that each of Culinary Co and Kremel were bound by the exclusive distribution agreement. Given the earlier discussion and the overlapping and inter-related nature of the representations, this issue can be addressed relatively briefly.
705 The agreement came to be prepared and signed in the manner and circumstances earlier described and in the context of the representations and conduct of Mr Floropoulos referred to above. Such circumstances included: Mr Floropoulos’ role and task; the conversations with Mr Canzoneri about Kremel setting up and owning Culinary Co and hearing from Mr Hone; the 7 June 2016 letter appointing Oliana; Mr Floropoulos’ non-disclosure of what was really happening whilst knowing of the true position and the trust placed in him; Mr Floropoulos’ discussion with Mr Adams about the role of Culinary Co; Mr Floropoulos being the only person dealing with Kremel, ‘Greece’ or ‘the Greeks’; Mr Floropoulos’ communications with Mr Canzoneri about the preparation and terms of the agreement and interactions with ‘Greece’; the terms and features of the exclusive distribution agreement, including Kremel being described as ‘Supplier’ and related matters; Mr Floropoulos proceeding and operating with Oliana as though the agreement was on foot and in operation from the time of its completion, including for example, by falsely relaying (non-existent) requests for payment from Kremel and Mr Garakis purportedly pursuant to its terms; and Mr Floropoulos not disclosing that there was no agreement with Kremel or that they were not aware of its existence.
706 In these circumstances and notwithstanding that the signature block did not bear a signature for Kremel, by his conduct, including his silence, Mr Floropoulos was representing to Mr Canzoneri and Oliana that there was a binding agreement on foot and in operation between Oliana, Kremel and Culinary Co until at least 10 January 2018, when notice of termination was served. This representation was a continuing representation, operating from the time the agreement was finalised and signed by Mr Canzoneri and Mr Hone in December 2016 until 10 January 2018.
707 As I did when considering the other representations, in reaching this conclusion I have taken into account the terms of the exclusive distribution agreement relied upon by Mr Floropoulos,[448] it not having been established on the evidence that there was a copy purporting to be signed by Kremel, the involvement of Michael Canzoneri and the correspondence passing with Mr Hone in connection with its execution.
708 As I have emphasised previously, the matters raised by Mr Floropoulos are part of the circumstances and are not to be looked at in isolation. When they are considered with the other matters to which I have a referred, and whether taken alone or in any combination, they do not alter in any material way the nature or extent of the conduct of Mr Floropoulos. And for the reasons previously mentioned, I do not accept that Mr Floropoulos told Mr Canzoneri that Kremel would not sign the agreement — being an agreement that Kremel did not know existed — noting also that Mr Floropoulos did not do anything else to alter the impression created about its existence and operation.
709 I also draw attention again to: Mr Floropoulos encouraging and hurrying Mr Canzoneri to get the agreement finalised and signed, as the text messages showed; Mr Floropoulos responding ‘[t]hat’s great’ to Mr Canzoneri when informed by text that the agreement had been signed;[449] and Mr Floropoulos remaining silent and proceeding as though Kremel was bound and the exclusive distribution agreement was in operation pursuant to its terms from at least that time, when in fact Mr Floropoulos knew that that was not so and consciously said nothing. It may also be noted in this context that, unbeknownst to Oliana, Mr Hone forwarded the email and signed agreement received from Oliana to Mr Floropoulos minutes after it was received but in his text messages with Mr Canzoneri, Mr Floropoulos pretended to be unaware of the position and still said nothing.
710 In the circumstances, Oliana had at least a reasonable expectation that Mr Floropoulos would disclose to it that Kremel had nothing to do with the exclusive distribution agreement and were not a party to it, as the evidence amply demonstrated and in the end was effectively common ground. Instead, Mr Floropoulos disclosed nothing, allowing Oliana to proceed on the basis that there was an agreement in operation between it as ‘Distributor’ on the one hand and Kremel and Culinary Co, together, as ‘Supplier’ on the other.
711 With respect to the other matters relied upon by Mr Floropoulos, I refer to the observations made in connection with the Exclusive Distributor Representation, and the Authority Representation, which are also relevant here. I add that whilst it is of course possible that in other circumstances the absence of a signature on an agreement by one of the parties may have greater significance when considering whether by other conduct a representation was conveyed as to the agreement being in existence, operating and binding on that non-signing party, we are concerned only with these particular and highly unusual circumstances in question. Here, the position is different, and materially so.
712 Mr Floropoulos submitted in the alternative that even if the Binding Agreement Representation was made it was not acted on because Oliana never took steps to ascertain directly whether Kremel would execute the agreement. Accepting that no such steps were taken directly with Kremel, this does not alter the character or effect of Mr Floropoulos’ conduct, including his silence. Speaking more generally, it will be apparent from the consideration of the issue of loss and damage later in these reasons that I do not accept the submission that Oliana did not rely on the representations and underlying conduct of Mr Floropoulos.[450]
713 It was not controversial that if the Binding Agreement Representation was made that it was misleading or deceptive or likely to mislead or deceive. That this is so was clear. It was misleading or deceptive and likely to mislead or deceive because Kremel was never a party to or aware of the exclusive distribution agreement and it was not binding on Kremel.[451]
714 Loss and damage and related matters are addressed later in these reasons.
Australian Subsidiary Representation: Culinary Co was Kremel’s Australian subsidiary/corporate representative
Submissions
715 For this representation,[452] namely that Culinary Co was Kremel’s Australian subsidiary/corporate representative, Oliana submitted that the representation was made during a telephone conversation while Mr Floropoulos was in Greece, in which Mr Floropoulos said to Mr Canzoneri that ’the company here in Greece want to deal with the Australian company they’re going to set up or have set up‘[453] and shortly after, ‘that the Greek supplier had set up an Australian company’.[454] Attention was drawn to counsel for Mr Floropoulos not challenging this evidence in cross-examination at all.
716 This representation was said to have been ‘reinforced’ by:
(a) a telephone conversation between Mr Canzoneri and Mr Floropoulos while Mr Floropoulos was in Greece, in which Mr Floropoulos’ said to Mr Canzoneri that ‘Kremel owned the [Australian] company’;[455](b) Mr Floropoulos a few days later when he told Mr Canzoneri that the Australian company was called Culinary;[456]
(c) Mr Floropoulos telling Mr Canzoneri shortly after that he would hear from Ian Hone who is representing the Greeks;[457]
(d) Mr Floropoulos in that same conversation informing Mr Canzoneri when he asked Mr Floropoulos about Kremel’s relationship with Mr Hone, that they were associated through the Greek chamber of commerce;[458]
(e) the contents of the 7 June 2016 letter to the drafting of which Mr Floropoulos contributed;[459]
(f) Mr Floropoulos’ failure at any time to disclose to Mr Canzoneri: his own relationship with Mr Hone; that Mr Hone did not in fact have any authority to act for Kremel; and that Kremel had not signed the exclusive distribution agreement;[460]
(g) Mr Floropoulos’ repeated demands for payment purportedly made on behalf of Mr Garakis, or for ‘Greece’ which continued until January 2018,[461] and which demands Mr Floropoulos in substance accepted were false and misleading as in truth he was solely seeking payment for Culinary Co and not Kremel.
717 Oliana contended that Mr Adams’ evidence strongly supported that of Mr Canzoneri, and that Mr Adams gave evidence that he also understood that Kremel was setting up an Australian company to move freight and invoice them in Australian dollars. His evidence was that he had had conversations with Mr Floropoulos about this and that these conversations were the source of his understanding.[462] Oliana emphasised that Mr Adams was not challenged in this respect in cross-examination.
718 It was contended that the Australian Subsidiary Representation was misleading or deceptive or likely to mislead or deceive because it was false, inaccurate and incorrect because Kremel had not set up an Australian company that was wholly owned by it, and Culinary Co was not Kremel’s representative or associated with or authorised by Kremel to act on its behalf in relation to the exclusive distribution agreement. It was further submitted that Kremel never treated Culinary Co as its Australian subsidiary and that Mr Garakis was never challenged on this evidence in cross-examination.
719 Mr Floropoulos submitted that this representation was not supported by the evidence and that Mr Floropoulos’ evidence was to the effect that Mr Garakis informed him that Kremel was contemplating setting up its own distribution company in Brisbane, and that Kremel soon agreed to use Culinary Co to distribute its product.
720 It was submitted that Mr Canzoneri knew that Culinary Co was to be the distributor by at least 7 June 2016 when he received Mr Hone’s email and letter. Attention was also drawn to the first draft agreement from Mr Hone not referring to Kremel, and also to the process and communications in connection with the drafting of the agreement as between Mr Hone and Michael Canzoneri.
721 Mr Floropoulos further submitted that Oliana was ‘in a position to know’ that Kremel was not owned or controlled by Culinary Co because a simple company search could have been undertaken, and there was also nothing stopping Mr Canzoneri or Michael Canzoneri communicating directly with Kremel in an attempt to have it agree to the distribution agreement.
722 It was also submitted that if anyone could have corroborated Mr Canzoneri’s evidence about seeing a version of the agreement purportedly signed on behalf of Kremel it would have been Michael Canzoneri, and because he did not give evidence the court should draw the ‘usual inference’ that his evidence would not have assisted on this issue.
Consideration – Australian Subsidiary Representation
723 I am satisfied that it has been established that Mr Floropoulos represented to Oliana that Culinary Co was to be its corporate representative in Australia and was owned by it. The evidence did not establish that the word ‘subsidiary’ was specifically used, but that does not matter.
724 With respect to this conclusion it is sufficient to refer to: the statements made by Mr Floropoulos to Mr Canzoneri regarding Culinary Co and Mr Hone, and Culinary Co being owned by Kremel; the 7 June 2016 letter to which Mr Floropoulos had contributed; Mr Floropoulos’ statements to Mr Adams regarding Culinary Co around the time of the first order; Mr Floropoulos’ silence when Oliana had at least a reasonable expectation that Mr Floropoulos would disclose that Culinary Co was not linked or owned by Kremel or its representative; and his numerous false statements regarding Greece or ‘the Greeks’ being the parties requesting and demanding payment from Oliana. It was further reinforced by the terms and features of the exclusive distribution agreement, including the description of the ‘Supplier’ (Kremel and Culinary Co) being the direct or indirect manufacturer.
725 This was a representation made from shortly before the 7 June 2016 letter was sent and continuing until at least 10 January 2018.
726 It will be apparent that I do not accept the submission that the representation was not supported by the evidence. I observe further as follows.
727 That Mr Floropoulos stated in an initial conversation with Mr Canzoneri that Kremel was considering setting up a company in Brisbane does not aid Mr Floropoulos, and has to be viewed in the context of that which went before and that which followed, including the conduct and circumstances to which I have earlier referred. That also included the statements in the 7 June 2016 letter regarding instructions to ‘... cease all talks ...’ with others and to appoint Oliana, and referred to ‘Culinary Co-Greece’ twice. Given the circumstances and context in which the letter was received, and its content, I do not accept that it was apparent that Culinary Co was separate and distinct from Kremel. The opposite is the position, with the letter reinforcing the earlier described connection.[463]
728 The initial draft agreement similarly does not assist Mr Floropoulos. The fact that the first draft referred to Culinary Co only does not change the position when it is considered with that which went before and that which followed, including: the express inclusion of Kremel in Mr Hone’s second draft; the execution clause in that draft recording Mr Hone as the authorised person for Kremel; the terms of the subsequent drafts and the final agreement; Kremel and Culinary Co being the Supplier; and Mr Floropoulos’ ongoing and considered silence.
729 Even if it is correct that ‘a simple company search’ would have revealed the ‘true position’ of Mr Hone holding the shares of Culinary Co, that does not change the character or effect of Mr Floropoulos’ conduct. The evidence did not establish that such a search was carried out[464] or that the ‘true position’ was discovered.
730 And even if such a search had been carried out and it had been revealed that Mr Hone was the shareholder, in the circumstances that would not of itself changed the conclusion I have reached given the other conduct and circumstances to which I have referred. In this regard it is to be recalled that Mr Floropoulos had said that Mr Hone was the person acting for Kremel, which the letter reinforced, even referring to Mr Hone as being the ‘sole officeholder’ (not shareholder) and it being Mr Hone that had been the person having the discussions with third party distributors that were to ‘cease’ and Mr Hone being instructed to appoint Oliana. It would not necessarily follow from Mr Hone being recorded as the shareholder that Culinary Co was not Kremel’s corporate representative in the way represented, or that he owned the shares in some nominee or bare trustee capacity given the surrounding circumstances.[465] But as I have said, it was not established that such a search was carried out or that the true position was discovered. That the true position was not discovered is also apparent from Mr Canzoneri’s evidence and the contemporaneous run of communications, including, for example, Mr Canzoneri’s email to Mr Garakis and Mr Hone jointly on 3 January 2018, and that which passed between the parties and their then respective lawyers thereafter. It will also be recalled that Mr Canzoneri’s email of 3 January 2018 was consistent with Mr Adams’ evidence about Culinary Co being set up by Kremel for invoicing and logistics.
731 I have earlier indicated that it has not been established on the evidence that there was a copy of the agreement purportedly signed by Kremel and therefore this need not be addressed further. Even if it was the case that ‘there was nothing stopping’ Mr Canzoneri or Michael Canzoneri communicating directly with Kremel about the agreement or Culinary Co, that does not relevantly assist Mr Floropoulos. Such a fact does not impact upon the nature, character or effect of Mr Floropoulos’ conduct in the circumstances. In any event, Mr Floropoulos actively discouraged any direct contact with Kremel as Mr Canzoneri’s and Mr Adams’ evidence, and various documents, established. In this context it is also not to be forgotten that Mr Canzoneri, and through him, Oliana, completely trusted Mr Floropoulos. Given the evidence on this topic it is unsurprising that Mr Canzoneri believed what Mr Floropoulos said and acted consistently with what he asked until sending his email to Mr Garakis and Mr Hone jointly on 3 January 2018.
732 Oliana has established that Mr Floropoulos represented to it that Culinary Co was Kremel’s representative in Australia and was owned by it. That being so, it was not controversial that this was misleading and deceptive and likely to mislead and deceive. That was because it was not true. Culinary Co was not Kremel’s corporate representative in Australia and was not owned by it.
733 Loss and damage and related matters are dealt with at the end of this section of the reasons.
Price Representation: The prices charged or to be charged by Culinary Co to Oliana were the prices charged by Kremel
Submissions
734 For the Price Representation Oliana again relied upon the same matters and evidence it relied upon for the Exclusive Distributor Representation and the Authority Representation (referred to earlier), again noting that this representation was also founded upon the Supply Representations and the Floropoulos Conduct.
(a) Mr Floropoulos telling Mr Canzoneri by phone from Greece the ‘price they’re coming up with’[466] in circumstances where a reasonable person in the shoes of Mr Canzoneri would understand the reference to ‘they’ to be ‘Kremel’;(b) Mr Floropoulos’ failure at any time to ever disclose any mark-up or imposition of other charges between Culinary and Oliana;[467]
(c) Mr Floropoulos’ later text messages inquiring as to ‘what is Paris charging us?’ when he knew the true position and of Culinary Co’s mark-up;
(d) Mr Floropoulos’ repeated demands for payment purportedly made on behalf of Mr Garakis, or ‘Greece’ which continued until at January 2018[468] and which Mr Floropoulos in substance accepted were false and misleading.
(e) Mr Floropoulos’ conduct in preventing Mr Canzoneri and others at Oliana from dealing directly with Kremel.
736 It was contended that the Price Representation was misleading or deceptive or likely to mislead or deceive because it was false, inaccurate and incorrect because the prices charged by Culinary Co were not the prices charged by Kremel. The Culinary Co prices were set by Mr Floropoulos and not Kremel,[469] and the prices at which Kremel had agreed to supply the Oliana products, manufactured by Kremel, were in fact substantially lower than the prices invoiced by Culinary Co to Oliana.
737 Mr Floropoulos denied making the Price Representation and contended as follows:
(a) After Mr Canzoneri discovered the MyCo Cost Price it is to be inferred that he knew from then that the manufacturer’s price was materially less than that being charged by a distributor.(b) Mr Canzoneri must be taken to have known that the role Culinary Co would perform as a distributor would involve it in administrative and other costs above the Kremel Supply Price that would be expected to be passed on to Oliana, and such knowledge is to be inferred from Mr Canzoneri’s experience and dealings with Mr Paule and the MyCo supply.
(c) It is to be inferred that Mr Canzoneri understood and accepted that Culinary Co would be making a mark-up on the price it paid to Kremel — which was also consistent with Mr Floropoulos’ position that Mr Canzoneri accepted that Mr Floropoulos would be entitled to a benefit for his work in sourcing an alternate supplier.
(d) There was no evidence that Mr Canzoneri asked Mr Floropoulos or Mr Hone what the price Culinary Co was paying to Kremel or asked that they confirm that the prices in the exclusive distribution agreement were Kremel prices. No such question was asked because Mr Canzoneri was comfortable with the price Culinary Co was charging, which inferentially included a mark-up that Mr Floropoulos benefited from.
Consideration – Price Representation
738 I am satisfied that Mr Floropoulos represented to Oliana that the prices Oliana was to be charged, would be charged, and the prices Oliana was in fact charged, were the prices charged by Kremel, that is, the Kremel Supply Price. This was a continuing representation.
739 Oliana relied upon the conduct earlier identified and addressed in connection with the Exclusive Distributor Representation, the Authority Representation, and the additional matters referred to above. Most of these matters and evidence have been previously addressed above, to which I refer.
740 It will be apparent that there is essentially almost complete overlap between the Price Representation and the representation addressed earlier in the context of the Supply Representations, where I determined that it had been established that Mr Floropoulos did represent to Oliana that Kremel was willing and would in fact supply products manufactured by it at the prices charged by Kremel. I refer to without repeating the matters there set out.
741 It remains clear from the evidence that Mr Floropoulos was conveying to Mr Canzoneri and Oliana that the prices for Oliana for Kremel’s products would be, and were, the supply prices charged by Kremel. Without repeating all of the detail of evidence, it is sufficient to refer to the following:
(a) The knowledge of the MyCo Cost Price and role of Mr Floropoulos in seeking an alternate direct supplier on behalf of Oliana.(b) Mr Canzoneri’s evidence regarding the discussions with Mr Floropoulos in late May and early June (which I accept) regarding Kremel, appointing Oliana, and pricing. For example, in the telephone call Mr Floropoulos made to Mr Canzoneri after meeting with Kremel, Mr Floropoulos had told Mr Canzoneri of ‘[t]he price they’re coming up with’, plainly meaning Kremel. Mr Canzoneri said that the prices were too high and not acceptable and that he could not understand why prices like those of MyCo could not be obtained, to which Mr Floropoulos indicated that they could not because ‘Terry Paule’s set the standard’. Mr Canzoneri said ‘But how can that standard be set? We’re going to a manufacturer directly ...’.[470] He then asked Mr Floropoulos to ‘... at least try to get a better price ...’ and Mr Floropoulos asked what he would be happy with, to which he said ‘[l]ook Bill, at the end of the day if we can get 20, 30 % out of it ... It’ll be better but still not what we should be aiming for’.[471]
(c) It is apparent from the evidence that from the outset Mr Floropoulos was conveying that the pricing for Oliana was coming from and being set by the manufacturer Kremel direct, which is what Mr Floropoulos was there to seek to obtain. But as is now known, in fact, Mr Floropoulos had already decided to interpose Culinary Co and the pricing that Mr Floropoulos was conveying to Oliana was not Kremel’s pricing but pricing that Mr Floropoulos was setting himself. There were no negotiations that Mr Floropoulos was going back to Kremel with on Oliana’s behalf.
(d) Mr Floropoulos’ statements to Mr Canzoneri regarding Culinary Co, Mr Hone - and the terms of the 7 June 2016 letter - conveying, among other things, the instructions from Culinary Co – Greece ‘... to now appoint ... Oliana to be the new distributors with exclusive rights for Culinary Co and its various products for both Australia and New Zealand ...’.
(e) Mr Floropoulos’ communications in connection with the negotiation of the exclusive distribution agreement, and his silence in relation to the origin of the prices attached to the agreement not being from Kremel, but being prices set by Mr Floropoulos himself for Culinary Co.
(f) The terms of the exclusive distribution agreement earlier addressed, including in particular in this context: there being only one ‘Distributor’, being Oliana; there being only one ‘Supplier’, being Kremel and Culinary Co jointly; Kremel and Culinary Co being described as the direct and indirect manufacturer of the products; the terms granting Oliana the exclusive distribution rights; the pricing terms, including that the only prices dealt with were the ‘Supplier’s’ prices, which was recorded as Kremel and Culinary Co jointly.
(g) Mr Floropoulos’ role and his failure to disclose any mark-up or imposition of any other charges between Culinary Co and Oliana in circumstances where Oliana could reasonably have expected (at least) such disclosure.
(h) Mr Canzoneri’s discussion with Mr Floropoulos in early 2017 in connection with Woolworths setting its own recommended retail price when he asked Mr Floropoulos ‘... to speak to Kremel and get a, ah, further discount on the prices ...[472] Bill Floropoulos said he’ll talk to them. Ah, he asked me how much that I wanted. I said I wanted anything between 15 to 20 per cent. He came back and ah he said ‘look, the most they’ll do is seven percent, but the term is that they’ll want to be paid on delivery of the product in order to give the seven per cent, and I agreed to that’.[473]
(i) Mr Floropoulos’ numerous statements to Mr Canzoneri regarding Kremel, Greece or ‘the Greeks’ demanding payment for product in circumstances where, to Mr Floropoulos’ knowledge, no such demands were being made by Kremel and no direct relationship with Oliana existed.
(j) Mr Floropoulos’ ongoing silence and failure to disclose the true position, including the existence of the mark-ups in circumstances where Oliana had at least a reasonable expectation of disclosure.
742 As indicated, the Price Representation was continuing from the time of the discussion between Mr Floropoulos and Mr Canzoneri in late May until at least 10 January 2018, although it appeared to continue beyond that as was reflected by the lawyers’ correspondence in evidence and the original statement of claim.
743 The Price Representation was as to a future matter insofar as it was forward looking — that is, that the price Oliana would be charged was the Kremel Supply Price. There was no reasonable grounds for making such a representation and none were pleaded or established by Mr Floropoulos.
744 I do not accept the submission that the Price Representation ought not to be found to have been made because it is to be inferred that Mr Canzoneri must be taken to have known of some mark-up, because he was aware that the MyCo Cost Price was materially lower than the price Oliana was paying for Kremel Products. Having regard to the facts and circumstances, such an inference is not open on the evidence. It may also be noted that Mr Canzoneri with Mr Floropoulos was specifically addressing the fact that it was manufacturers’ pricing, emphasising in an exchange that ‘we’ were going to the manufacturer directly. Further, it ignores the terms of the exclusive distribution agreement, which as I have said, addressed in terms the existence of only one set of prices for the ‘Distributor’ (Oliana) being the ‘Supplier’s’ price (Kremel and Culinary Co jointly), who were also stated to be the direct or indirect manufacturer.
745 Similarly, I do not accept that it is to be inferred that Mr Canzoneri must have known and accepted that Culinary Co would be including a mark-up because of Mr Canzoneri’s knowledge in the industry about distributors generally or because it would necessarily have incurred some costs. Again, having regard to the circumstances and context in which Culinary Co became involved, such an inference is not open on the evidence. Further, because of the manner and extent to which Culinary Co was represented as being linked to and owned by Kremel, it does not follow that such a mark-up would have been imposed by Culinary Co if it had been so linked to Kremel. One can only speculate as to what may or may not have been the position if the link between the companies existed in the way Mr Floropoulos represented that it did, however such speculation is of no utility for present purposes. Additionally, Culinary Co was not represented to Mr Canzoneri or Oliana to be a distributor in any event, noting further that this was also made plain by the terms of the exclusive distribution agreement.
746 Whilst it is true that there was no evidence that Mr Canzoneri asked Mr Floropoulos or Mr Hone to confirm that the prices being charged were the Kremel prices, this does not aid Mr Floropoulos or change the nature and effect of his conduct. Further, the absence of such a request is consistent with the pricing position as represented by Mr Floropoulos to Mr Canzoneri and Oliana, and given the representations of Mr Floropoulos and the terms of the exclusive distribution agreement this was unsurprising. Again, it was apparent from Mr Canzoneri’s evidence and the communications between Mr Floropoulos and Mr Canzoneri that it was not on Mr Canzoneri’s radar that it was possible that the prices being paid were anything other than the Kremel Supply Price.
747 Finally, Mr Floropoulos can gain no support on this topic from the resignation discussion or the alleged Moka Pot Discussion given that they have not been established to have occurred as Mr Floropoulos alleged. Further, and in any event, even if they were assumed to have occurred in early 2016 as alleged, they would not change the position. This is because they would be viewed in the context and circumstances of the subsequent events to which I have referred and would not have operated to dilute or neutralise the representation or any of the other representations.
748 Plainly enough, the representations that the prices charged and to be charged to Oliana were and would be the prices charged by Kremel were misleading or deceptive and likely to mislead or deceive. This was because the prices charged to Oliana were not and were never going to be the prices charged by Kremel as Mr Floropoulos knew and planned. Insofar as they were as to a future matter[474] they are deemed by s 4 of the ACL to be misleading because Mr Floropoulos did not plead or establish any reasonable grounds for making them.
Did Oliana suffer loss or damage because of the conduct of Mr Floropoulos that was misleading or deceptive or likely to mislead or deceive?
749 Oliana seeks damages pursuant to s 236 of the ACL, alternatively a compensation order pursuant to s 238 of the ACL.
Statutory provisions
750 The relevant statutory provisions read as follows:
236 Actions for damages(1) If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
(2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.
238 Compensation orders etc. arising out of other proceedings
(1) If a court finds, in a proceeding instituted under a provision of Chapter 4 or this Chapter (other than this section), that a person (the injured person) who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of the conduct of another person that:
(a) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or
(b) constitutes applying or relying on, or purporting to apply or rely on, a term of a contract that has been declared under section 250 to be an unfair term;
the court may make such order or orders as it thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
Note: The orders that the court may make include all or any of the orders set out in section 243.
(2) The order must be an order that the court considers will:
(a) compensate the injured person in whole or in part for the loss or damage; or
(b) prevent or reduce the loss or damage.
751 Section 243 of the ACL sets out a lengthy but non-exhaustive list of examples of the kinds of orders that can be made under s 238 of the ACL.[475]
Damages for misleading or deceptive conduct – s 236 of the ACL
752 Section 236 was preceded by s 82 of the Trade Practices Act 1974 (Cth) and is in relevantly similar terms. Although s 82 of the Trade Practices Act applied to ‘[a] person who suffers loss or damage by an act of another person ...’ and s 236 of the ACL applies to a person ‘... who suffers loss or damage because of the conduct of another person ...’ (emphasis added), the provisions have been treated as equivalent in case law and commentary since the enactment of the ACL in 2010.[476] This is because the courts (including the High Court), when dealing with s 82 of the Trade Practices Act, dealt with the ‘curious’[477] use of the word ‘by’ in the provision by interpreting it as importing a concept of causation that might be more effectively expressed by the words ‘“by means of”, “by reason of”, “in consequence of” or “as a result of”’.[478] It follows that the extensive case law considering s 82 of the Trade Practices Act is of assistance in assessing the import and application of s 236.
753 In Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG,[479] the Court of Appeal summarised the principles applicable to s 82 of the Trade Practices Act as follows:[480]
540. There are several relevant principles governing the issues of causation and loss under s 82 of the TPA that are important to keep in mind:
(1) A plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage it has suffered in consequence of its altering its position under the inducement of the misrepresentations made by the defendant;[481](2) Under s 82(1) of the TPA, as under the common law, a plaintiff can only recover compensation for actual loss or damage incurred, as distinct from potential or likely damage;[482]
(3) In determining whether a plaintiff has suffered loss or damage under s 82(1), it is usually necessary to compare the position that the plaintiff is in having been misled, with the position it would have been in but for the misrepresentation; by undertaking this comparison a court can determine whether the plaintiff is worse off as a result of relying upon the misrepresentation made by a defendant;[483]
(4) Section 82 requires identification of a causal link between loss or damage and conduct done in contravention of the Act;[484] the question of causation is relative to the purpose of s 82, applied to the circumstances of a particular case;[485]
(5) Determining the question of causation will often involve considering how much worse off the plaintiff is as a result of entering into the transaction which the representation induced it to enter than it would have been had the transaction not taken place. This entitles the plaintiff to all the consequential loss directly flowing from its reliance on the representation, at least if the loss is foreseeable;[486]
(6) Analysing the question of causation only by reference to what is, in essence, a ‘but for’ test has been found wanting in other contexts and it should not be treated as an exclusive test of causation under s 82 of the TPA either;[487] especially where there is more than one cause of the loss;[488]
(7) It is relevant to ask what the plaintiff would have done had it not relied on the representation;[489]
(8) As the judge recognised here,[490] there are cases where if the contravening conduct had not occurred which misled the plaintiff, the plaintiff would not have embarked upon the project or transaction at all[491] (the ‘no transaction cases’), and there are cases where if the plaintiff had not been misled it would still have embarked upon the project or transaction, but would have done so by entering into an alternative arrangement with the same party or a different party[492] (‘alternative transaction cases’);
(9) A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted;[493]
(10) A court should not engage in speculation about multiple possibilities of past hypotheticals to which no specific evidence was directed;[494]
(11) Once the causal connection is established, there is nothing in s 82 of the TPA which suggests that the amount that may be recovered under that section should be limited by drawing some analogy with the law of contract, tort or equitable remedies;[495]
(12) If the defendant’s breach has ‘materially contributed’ to the loss or damage suffered, it will be regarded as a cause of the loss or damage, despite other factors or conditions having played an even more significant role in producing the loss or damage. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage;[496]
(13) In exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional.[497]
754 In Keys Consulting Pty Ltd v Cat Enterprises Pty Ltd,[498] the Court of Appeal considered the principles relevant to the measure of damages available to a plaintiff under s 236 of the ACL, and the nature of the burden of proof the plaintiff bears to establish his, her or its loss. In relation to the measure of damages applicable for a claim in misleading or deceptive conduct, the Court of Appeal observed:[499]
Neither the former Trade Practices Act 1974 (Cth) (‘TPA’) nor the current ACL prescribe a particular measure of damages when an assessment is to be made for the purpose of remedying loss and damage. That said, it has been consistently held that for both misleading and deceptive conduct and for false representations, the most appropriate measure of damages in most, if not all, cases is the measure of damages for the tort of deceit.[500]The general measure of damages for deceit is the sum representing the prejudice or disadvantage suffered in consequence of the plaintiff having altered their position under the inducement of the fraudulent representation.[501] It follows, that that measure may be expressed as the loss incurred by the inducement, diminished by the corresponding advantage in money or money’s worth that was obtained ‘on the other side’.[502]
755 Considering the question of proof of loss, the Court of Appeal drew a distinction between cases where actual loss has been proved by the plaintiff, but quantification of that loss has been difficult to prove with certainty (in which case the court may estimate damages), and cases where the plaintiff has simply failed to discharge the burden on it to make good its claim for loss or damage. The Court of Appeal observed:[503]
In claims for damages, the plaintiff must prove both the fact of loss and the amount of that loss before he or she can recover substantial damages.[504] If a plaintiff fails to prove either of those elements, he or she may recover nominal damages only where the claim is in contract, or the action fails altogether, where it lies in tort.[505]However, it is well established that a mere difficulty in quantifying damages does not necessarily defeat the plaintiff’s entitlement to a remedy against the wrongdoer. In appropriate circumstances, where some sort of actual loss has been established, the court must estimate the damages as best it can.[506]
...
However, there is a distinction to be drawn between a situation that does not permit damages to be assessed with certainty, and one in which the plaintiff has simply failed to produce evidence that was otherwise reasonably available. The plaintiff is entitled to have the court do the best it can in the former case, but not in the latter. Where a party is able to produce evidence about loss and damage, they must do so with as much certainty and particularity as is reasonable in the circumstances. This principle is long established.[507]
Put succinctly, Devlin J said in Biggin & Co Ltd v Permanite Ltd:[508]
where precise evidence is obtainable, the court naturally expects to have it, [but] where it is not, the court must do the best it can.[509]
756 In Sellars v Adelaide Petroleum NL (‘Sellars’),[510] the High Court emphasised the distinction between proof of causation and proof of damages in cases of misleading or deceptive conduct, particularly in cases where the plaintiff has an ‘alternative transaction’ case. The High Court held that causation must be proved on the balance of probabilities in the circumstances of the case. Mason CJ, Dawson, Toohey and Gaudron JJ observed that it was for this reason that the appellant had failed to establish his loss in Gates v Mutual Life Assurance Society Ltd — there was ‘no evidence as to what the appellant would have done had he known that the respondent insurance company did not offer insurance on the terms he wanted; nor was there any evidence that insurance was available on those terms elsewhere’.[511] But once causation is established to the requisite standard of proof, the court may assess the value of the opportunity lost, or the alternative that the plaintiff may have taken, by reference to informed hypotheses.
757 The question of proof of loss was also considered very recently by the High Court in Berry v CCL Secure Pty Ltd (‘Berry’).[512] Considering the High Court’s decision in Sellars, Bell, Keane and Nettle JJ in Berry stated:[513]
By parity of reasoning with Malec[514] and Amann Aviation,[515] in Sellars[516] it was held that, where a claimant established on the balance of probabilities that misleading or deceptive conduct contrary to s 52 of the TPA caused the claimant the loss of a commercial opportunity of some value (not being a negligible value), the value of that lost opportunity was to be ascertained by reference to hypotheses and possibilities which, though they were speculative and therefore not capable of proof on the balance of probabilities, could be evaluated as a matter of informed estimation.
758 When discussing what is necessary to established in cases involving lost commercial opportunities and considering the decision in Pitcher Partners Consulting Pty Ltd v Neville’s Bus Service Pty Ltd (‘Pitcher Partners’),[517] it was observed that:
Moreover, and more significantly, the Full Court held that it was not necessary for the claimant to prove on the balance of probabilities that it would have been successful in so renegotiating the contract. According to the Full Court, it was enough that there was a “sufficient likelihood” of that occurring to permit the court, using the “robust approach” warranted by the contribution of the wrongdoer to the claimant’s difficulties of proof, to award damages equal to the full costs of the finance leases.Prima facie, the conclusion that the claimant was entitled to damages equal to the full costs of the finance leases presents as questionable. Although the primary judge in Pitcher Partners found it to be proved on the balance of probabilities that the claimant would have been successful in negotiating full recoupment of the finance lease costs, the Full Court stated that such a finding was unnecessary to justify full recovery. As has been seen, their Honours considered that it was enough that there was a “sufficiently real possibility” or “sufficient likelihood” – expressions which, used as they were in contradistinction to proof “on the balance of probabilities”, imply that their Honours conceived of “sufficient likelihood” as being something less than proof on the balance of probabilities. Of course, there was no doubt that the accountants' deceit deprived the claimant of a commercial opportunity of negotiating for recoupment of the finance lease costs. But, as has been seen, previous decisions of this Court concerning the recovery of damages for lost commercial opportunities – regardless of whether they are commercial opportunities to earn an extension or renewal of a contract, as in Amann Aviation, or to negotiate a new contract, as in Sellars, or even to institute proceedings for the recovery of damages, as in Malec – have held that, once it is established on the balance of probabilities that the defendant's wrong caused the loss of opportunity, the value of the loss falls to be determined (and discounted) according to the assessed degree of likelihood that, assuming the claimant had been able to exploit the opportunity, it might not have resulted in all of the gain that was hoped for. On that basis, but for the primary judge's finding in Pitcher Partners that it was proved on the balance of probabilities that the claimant would have been successful in negotiating total recoupment of the finance lease costs, it might be thought that the amount of damages awarded for the lost opportunity to negotiate should have been no more than the proportion of the finance costs assessed according to the degree of likelihood that, if the claimant had been able to renegotiate the contract, the negotiation would have proved entirely successful.
For present purposes, however, it is unnecessary finally to determine whether the decision of the Full Court in Pitcher Partners correctly states the law relating to damages for deceit. The established authority of this Court governing the assessment of damages under s 82 of the TPA for the loss of a commercial opportunity caused by misleading or deceptive conduct contrary to s 52 of the TPA is relevantly as laid down in Sellars. Where a claimant establishes on the balance of probabilities that misleading or deceptive conduct contrary to s 52 has caused the loss of a commercial opportunity of some value (not being a negligible value), the value of the lost opportunity is to be ascertained by reference to hypotheses and possibilities which, though they may not be capable of proof on the balance of probabilities, are to be evaluated as a matter of informed estimation. But, to repeat, this matter is capable of resolution without resort to that principle.[518]
Compensation order for misleading or deceptive conduct – s 238 of the ACL
759 It is readily apparent from ss 238 and 243 of the ACL that the court’s power in making a compensatory order pursuant to s 238 is more extensive than the more limited power to award damages pursuant to s 236. However, under s 238, the court may also award compensation in respect of loss or damage that the claimant has suffered or is likely to suffer. The types of orders that a court can make, set out in s 243, include the power to void, vary, or refuse to enforce a contract; an order directing a respondent to refund money, return property, or pay a claimant the amount of the past or likely future loss or damage; and an order requiring a respondent to provide services to the claimant.
760 In The Law of Misleading or Deceptive Conduct in Australia, the learned author, Colin Lockhart, sets out a helpful comparison of the remedies afforded by ss 236, 237 and 238 of the ACL. He notes that all three provisions ‘share the common purpose of providing redress for loss or damage flowing from a contravention of the statutes’ prohibitions’,[519] and that as a result, to be entitled to a compensation order under ss 237 or 238, the claimant must prove that the breach caused the loss complained of (as with s 236). As a result, there is potential for ‘considerable overlap’ between s 236 on one hand and the compensatory orders available under ss 237 and 238 on the other[520] in relation to monetary orders. As Lockhart explains, the compensatory orders in ss 237 and 238 of the ACL ‘broaden the compensatory nets cast by the legislation,[521] including by allowing damages to be awarded under ss 237 or 238 for damage that has not yet occurred, but is ‘likely’ to.[522] It is also important to note that ss 237 and 238 of the ACL involve the exercise of discretion whereas s 236 does not.
Oliana’s submissions
761 Oliana contended that it was entitled to recover damages equal to the Oliana Loss Amount under s 236 of the ACL, alternatively that a compensation order should be made in its favour in the same amount. The manner in which this amount was arrived at was addressed earlier in these reasons.
762 There was no dispute between the parties regarding the principles governing claims made pursuant to ss 236 and 238 of the ACL, although there was a degree of difference as to how the parties characterised the claim for loss and damage under the ACL.
763 Oliana submitted that, relying on the misleading conduct and representations of Mr Floropoulos: it conducted its dealings in relation to Kremel products through Mr Floropoulos, Mr Hone and Culinary Co; ordered Kremel’s products and paid to Culinary Co the amounts recorded in the Oliana Payments Schedule for those products (Oliana Product Payments);[523] and that it did not approach Mr Garakis and Kremel to obtain supply directly and at the Kremel Supply Price.
764 It submitted that its damages claim was straightforward and ‘direct’. Counsel for Oliana expressed more than once that Oliana had not pleaded and was not pursuing a ‘loss of a chance case’. Oliana’s causation case was that, but for the misleading and deceptive conduct of Mr Floropoulos,[524] Oliana could have and would have sought and obtained supply from Kremel directly at the Kremel Supply Prices. That was the counterfactual it relied upon in its written and oral closing submissions[525] and which Oliana contended and acknowledged that it had the burden of establishing on the balance of probabilities. It submitted that it was not a loss of opportunity claim[526] involving the complexities of calculations based on loss of profits. It emphasised in its opening and in its in closing submissions[527] that it was expressly limiting its damages claim only to the price differential between the Kremel Supply Price and the Culinary Co Supply Price and was not making any claim in respect of future profits or benefits that it might have obtained from Woolworths, Coles or elsewhere in connection with an alternative direct supply arrangement between Oliana and Kremel at the Kremel Supply Prices. Consequently, its focus was understandably upon its contention that it ‘could and would have’ secured the alternative direct supply arrangement with Kremel at the Kremel Supply Prices.[528]
765 As explained when dealing with the s 1317H Claim,[529] Mr Floropoulos (and Mr Hone) submitted that Oliana’s claim was, or was akin to, a loss of a chance claim involving an alternative transaction that was to be determined in accordance with the principles referred to in Sellars. Although the defendants submitted that reliance had not been established, the central focus in closing submissions was that, even if reliance was established, Oliana had failed to identify and prove on the balance of probabilities the alternative commercial opportunity that it said it could have and would have pursued and obtained but for any contravening conduct. It was said that Oliana had fallen well short of discharging its onus of proof.
766 This last point was strongly emphasised. It was contended that Oliana did not plead the alternative transaction case, although no major point on this was pressed, and the issue was properly and responsibly engaged with by Mr Floropoulos and Mr Hone in any event. It was submitted that Oliana had not proved causation and that it suffered the damage as alleged, and that it cannot be simply assumed that, but for the alleged misrepresentations, Oliana would have pursued or been able to obtain supply from Kremel, or obtain supply at the same price as Culinary Co (the Kremel Supply Price). Mr Floropoulos emphasised that Oliana had called Mr Garakis as one of its witnesses but did not lead any evidence from him at all as to whether Kremel would have been willing to supply Oliana and if so on what price or basis. There was simply no evidence on these issues, so it was said. Mr Floropoulos submitted that the plaintiff had not sought to meet the ‘threshold’ test in Sellars and had failed to establish that it could have and would have obtained supply from Kremel direct at the Kremel Supply Prices.
767 As to the evidence, Mr Floropoulos submitted that Mr Canzoneri gave scant evidence about what he would have done, other than his evidence about the conversation with Mr Floropoulos after the meeting with Mr Paule about going to Greece and, as was acknowledged in oral submissions, his evidence in chief that he would have either have gone to Kremel directly or to another supplier. It was said that no other evidence was given as to how he might have done this, his ability, or what his chances were except for some brief evidence that he had found a Belgian supplier and sourced and found suppliers of olives, olive oil and feta cheese. Reference was made to the absence of any evidence from Mr Canzoneri that this was done personally or how it had been achieved. It was further emphasised that no evidence was called from any other party as to whether alternative sourcing would have been able to be achieved, whether through Mr Garakis or elsewhere, ‘let alone the price’ for such an alternative transaction.
768 In placing emphasis on the absence of any evidence being led from Mr Garakis and the ‘scant’ evidence more generally, it was submitted that the court was in no position to infer that Oliana could have and would have been able to secure an alternative supply arrangement with Kremel or at anything like the Kremel Supply Price.[530] Reference was also made to Mr Floropoulos’ evidence that Oliana had a poor reputation in Greece and that its reputation ‘stank’.
Oliana’s further submission
769 With respect to these evidentiary matters, Oliana’s position was that it accepted that it bore the onus of establishing its counterfactual on the balance of probabilities, again noting that it was not seeking damages based on any future profits or benefits connected with the supply arrangement it claimed it could and would have obtained from Kremel at the Kremel Supply Prices. It said the true loss was the difference in price reflected by the Culinary Co mark-up and that there was nothing to suggest that Kremel would not have agreed to supply Oliana at the Kremel Supply Price.
770 Although it was acknowledged that no direct evidence was adduced from Mr Garakis on the issue by Oliana, reference was made to aspects of evidence given by Mr Garakis in cross-examination regarding: the absence of prior dealings or any special relationship between Mr Floropoulos and Mr Garakis/Kremel in May 2016; the supply opportunity for Kremel and Mr Garakis’ being very happy about it and wanting business opportunities, especially exports; Mr Garakis agreeing that he was not doing favours on price, that he gave Mr Floropoulos ‘his best price’ and that ‘of course’ it was a price which enabled Kremel to still make a profit; Mr Garakis’ knowledge that the product was for Oliana, as was said to have been shown by the documents; and that it was not put to Mr Garakis in cross-examination that he would not have supplied Oliana, or done so at the Kremel Supply Price. Oliana also referred to Mr Floropoulos’ acknowledgement in cross-examination of his belief that Mr Canzoneri would have sought to go to Mr Garakis direct or another supplier had he known of the true position.
Consideration – loss and damage
771 Although there was an element of difference between the parties during closing submissions as to how the loss claim was to be ‘characterised’, that difference was in truth less than might at first appear — and given that Oliana limited its damages claim, was of no material significance in any event. Given the manner in which it limited its damages claim, Oliana understandably did not contend that there was any need for assessments on the basis of ‘probabilities and possibilities’ in the way described in Sellars,[531] which is why it did not characterise its claim as a loss of a chance.
772 As ultimately pressed, Oliana’s damages claim was conceptually quite straightforward as it contended. It was properly to be viewed as a claim based on a postulated alternative supply transaction or arrangement with Kremel direct at the Kremel Supply Prices. So much was also apparent from Oliana’s written and oral ‘but for’ contention. As Mr Floropoulos’ submissions pointed out, in the end this appeared to be common ground, and was not relevantly debatable in any event.
773 I turn to the causation question of whether Oliana has established on the balance of probabilities that, but for the contravening conduct, it could have and would have obtained the direct supply arrangement with Kremel at the Kremel Supply Prices.
774 Insofar as it was pressed, I do not accept Mr Floropoulos’ submission that Oliana did not identify what ‘opportunity’ was said to have been forgone. Although aspects of Mr Canzoneri’s evidence spoke of seeking supply from an alternative supplier other than Kremel, Oliana’s ultimate position as reflected in its written and oral closing submissions was based upon securing supply from Kremel direct at the Kremel Supply Prices. It was also apparent that Mr Floropoulos understood this to be the position because he addressed the issue and evidence in this way directly in his written and oral closing submissions.
775 As Oliana submitted, in this case the causation issue focusses upon whether Oliana established on the balance of probabilities that it relied upon the representations of Mr Floropoulos by refraining from pursuing supply through Kremel directly, and that had it pursued such supply, it could have and would have obtained supply from Kremel at the Kremel Supply Price.
776 As to the question of reliance generally, it is clear in my view that reliance of various kinds was established on the evidence and I do not propose to dwell on this aspect at any length. Mr Canzoneri, and through him, Oliana, relied on the conduct and representations of Mr Floropoulos as was reflected in the manner in which they proceeded with the orders and payment shortly after the telephone calls from Greece in late May 2016, and in how Oliana conducted itself thereafter from late May 2016 and early June 2016.[532] Mr Canzoneri’s evidence showed that he was misled by the misleading and deceptive conduct of Mr Floropoulos (and Mr Hone) from the outset and in a continuing way, which was apparent from his own evidence and from the contemporaneous communications from Mr Canzoneri throughout this period. That Mr Canzoneri and Oliana were misled and continued to be misled as the conduct was reinforced and compounded as time went on is not surprising given the nature of the conduct. It is also supported by the terms of Mr Canzoneri’s email to Mr Garakis and Mr Hone jointly dated 3 January 2018 and the communications that passed shortly thereafter, being more than a year and a half after conduct was first engaged in by Mr Floropoulos in late May 2016 and following and Mr Hone in early June 2016 and following. The notice of termination sent on 10 January 2018 purported to be based on the exclusive distribution agreement, as did the baseless packaging invoice used to support the statutory demand served on Oliana that was ultimately set aside.
777 I do not accept the submission that from the time of the signing of the exclusive distribution agreement Mr Canzoneri could have been under no misapprehension of the true position. This was not established on the evidence and Mr Canzoneri’s and Mr Adams’ evidence was inconsistent with it, as were the many communications from Mr Canzoneri throughout the second half of 2016 and in 2017 — including those in relation to the exclusive distribution agreement. I refer also to the observations regarding the features and terms of that agreement earlier made and the observations in that context regarding the events at that time and the making of the representations. As earlier referred to, the circumstances surrounding the drafting and execution of the exclusive distribution agreement did not relevantly dilute or alter the position from the perspective of Mr Canzoneri or Oliana, as Mr Canzoneri’s evidence and the communications revealed. This was also supported by the terms of the original statement of claim when this proceeding was first issued and before Oliana discovered the true position in relation to Kremel. The entire agreement clause and clause 2.3 of the exclusive distribution agreement do not assist Mr Floropoulos or Mr Hone.
778 In the context of the damages counterfactual, one element of reliance that requires some further attention is the question of whether it was established by Oliana that, but for the contravening conduct of Mr Floropoulos, Mr Canzoneri would have sought to approach Kremel direct to see if direct supply could be obtained from it. Although it is correct that the direct evidence of Mr Canzoneri on this matter was limited and revealed on one view a level of equivocation on the topic, when all the evidence is considered I am satisfied that it was more likely than not that had Mr Canzoneri known the true position and not been misled at any time from late May or early June 2016 until at least 21 December 2017,[533] he would himself have sought to explore with Kremel whether he could obtain supply from Kremel. I elaborate as to why below.
779 After becoming aware of MyCo’s Cost Price and following the challenged meeting with Mr Paule in April 2016 it was clear that Mr Canzoneri and Oliana wanted to find a direct supplier of vegan cheese in Greece so as to obtain a lower supply price, and to do so expeditiously with a level of commercial urgency. This was consistent with the relationship with MyCo having deteriorated and wanting to continue with the supply of vegan cheese products. Mr Canzoneri also gave evidence that he wanted that to be a supply for ‘Oliana branded, Oliana owned’,[534] which was not challenged and I accept.
780 By late May 2016 Mr Floropoulos had sourced Kremel as a suitable supplier and told Mr Canzoneri about it, although in his first call at least he did not mention the name. In his telephone call with Mr Floropoulos about pricing when Mr Floropoulos was in Greece dealing with Mr Garakis, Mr Canzoneri told Mr Floropoulos that he wanted to come over to Greece and be involved with the negotiations. Mr Floropoulos discouraged him saying ‘Look, they’re Greeks. I know how they deal. Let me deal with it ...’.[535] Mr Canzoneri trusted Mr Floropoulos and that is what he did. In fact, by that stage Mr Floropoulos had already decided to seek the supply for his benefit and the benefit of Culinary Co but had not disclosed that to Mr Canzoneri.
781 In a further telephone call from Greece Mr Floropoulos told Mr Canzoneri the name of the company (Kremel) and that they were setting up the company in Australia that was called Culinary. Not long after that he told Mr Canzoneri that Kremel owned Culinary Co. Kremel’s identity was also confirmed in Mr Hone’s letter. Subsequently Mr Canzoneri and Oliana acted as has earlier been addressed at length, including by proceeding with the orders, making payments, signing the exclusive distribution agreement, proceeding on the basis that the agreement was in operation, and not contacting Mr Garakis and Kremel direct in any substantive way until the email of 3 January 2018 was sent to Mr Garakis and Mr Hone jointly.
782 As both parties pointed out, Mr Canzoneri gave evidence that had he known of the true position regarding Mr Floropoulos’ involvement and that the supply was not through Kremel in the way represented he would not have proceeded in that way but would have either dealt with Kremel direct or found another supplier in Europe.[536] This was repeated on more than one occasion during his evidence in chief, albeit sometimes in a leading way.
783 When giving this evidence I understood Mr Canzoneri to be saying that once he knew of Kremel’s existence he would be first trying to deal with Kremel but going elsewhere if that did not work out, and so much may be inferred. But whether or not the evidence is seen in context in this way, or is looked at more narrowly, divorced from the context, and as no more than the words spoken in answer to the question without the inference but with a level of uncertainty as to which of the two approaches would have been followed, the result does not change given the evidence of other matters, to which I will shortly refer.
784 Although not referred to in the same way in the closing submissions, reference should also be made to when Mr Canzoneri was asked in chief what he would have done if in April/May 2016 Mr Floropoulos had told him that he had an interest in Culinary Co. He said in answer that he would have declined to go with Culinary Co and that ‘... If I declined Culinary Co, Your Honour, I would have done exactly what I did a year later. Um, I sourced the product myself and from another country [sic - company] in Belgium. I’ve got much better prices and terms’.[537] The question was asked in a context where the identity of the supplier was not then taken to be known, noting in this regard that the supplier was not sourced until late May 2016, with Kremel’s identity being conveyed to Mr Canzoneri a little later than that.
785 That it is likely that Mr Canzoneri would have attempted to obtain supply from Kremel directly before trying any new supplier is supported by a number of other matters. They include the following:
(a) Oliana was seeking to source a suitable supplier expeditiously in Greece and had a commercial imperative to do so given the position with MyCo.(b) A suitable supplier had been identified by Mr Floropoulos in Greece and by very late May 2016 and early June 2016 Mr Canzoneri was aware of the identity of the company concerned (Kremel) and Mr Garakis’ role in it.
(c) Mr Canzoneri had been involved in the food supply industry for many years and there was no evidence suggestive of an inability to travel to Greece.
(d) Mr Canzoneri was aware that Kremel was in the business of supplying, among other things, vegan cheese products, and that Kremel was in a position to supply such products — having been made aware of such matters through Mr Floropoulos and reinforced on 7 June 2016 in Mr Hone’s letter, which Mr Floropoulos had been involved in supplying the information for.
(e) Seeking to approach Mr Garakis and Kremel was consistent with his conversation with Mr Floropoulos in late May 2016 when Mr Canzoneri said to Mr Floropoulos that he wanted to come over to Greece and Mr Floropoulos discouraged Mr Canzoneri from doing so — and his earlier evidence referred to by counsel for Mr Floropoulos about events after the meeting with Mr Paule and saying he wanted to go to Greece to source another supplier.
(f) There was nothing illogical about Mr Canzoneri seeking to approach an identified supplier directly, particularly given Oliana’s desire to address and deal with the supply issue expeditiously and the desire to maintain and grow existing downstream supply chains.
(g) Mr Floropoulos accepted in cross-examination that if he (Mr Floropoulos) had told Mr Canzoneri of the true position he would have ‘possibly’ screamed blue murder and he accepted that he knew or believed that Mr Canzoneri would have immediately terminated whatever deal Mr Floropoulos had struck with Mr Garakis and either gone to Mr Garakis himself or some other supplier.
(h) Mr Canzoneri was not materially challenged on his evidence as to what he would have done — and was not shaken in any event, noting that he had obtained supply of some other different products from suppliers on other occasions.
(i) When the position with Mr Floropoulos was deteriorating and his concerns were becoming heightened, Mr Canzoneri ultimately sought to deal direct with Mr Garakis (and Mr Hone jointly) as was reflected in his 3 January 2018 email.
786 In these circumstances I do not consider that Mr Floropoulos is correct when he refers to the evidence on the topic of what Mr Canzoneri would have attempted to do as being ‘scant’. Notwithstanding that there might be seen to have been some tensions or equivocation, it is to be recalled that the evidence was as to a past hypothetical and it is to be viewed in context — noting also that his initial response was in respect of a time when the identity of the supplier was not known. In any event, having regard to the whole of the evidence I am satisfied that Oliana has established that it is at least likely that Mr Canzoneri would have approached Kremel direct to seek to obtain supply from it had it not been misled about the position by Mr Floropoulos (and Mr Hone).
787 As to timing, I have concluded that conduct was engaged in by Mr Floropoulos from late May 2016 and early June and that it continued. The first payment was made by Oliana on 9 June 2016. It has been established that if the position had not been misrepresented by Mr Floropoulos (and Mr Hone) Mr Canzoneri would have attempted to pursue the opportunity directly for Oliana (as he thought Mr Floropoulos was doing) from that early time, and that this would have occurred swiftly in late May 2016 or early June 2016[538] — but in any event prior to the making of the first payment. Further, I am satisfied that if the true position had not been revealed until a later point during the period late May 2016 until at least early January 2018, Mr Canzoneri would have acted in the same way at the time, whatever be the date on which the true position had been revealed or become known — which is also supported by Mr Canzoneri’s evidence and the other matters referred to, including his email to Mr Garakis and Mr Hone jointly on 3 January 2018.
788 In this context it is of no relevantly persuasive force to point to the fact that Oliana did not obtain supply from Kremel a little later in 2018 after things came to a head. This is because at that point in time Mr Canzoneri and Oliana remained under the misapprehension that Oliana was the exclusive distributor of Kremel and that Kremel had breached the agreement, including by wrongfully terminating it, as was well illustrated by the lawyer’s correspondence at the time and the terms of the original statement of claim. Further, the terms of Mr Canzoneri’s email of 3 January 2018 reveal that he was in that context still seeking supply from Kremel.
789 As was apparent from Mr Floropoulos’ submissions, the more significant issue on the evidence was whether Oliana had established on the balance of probabilities that it could have obtained from Kremel supply of the Kremel products at all, and if so at the Kremel Supply Price. That is, whether it had proved this fundamental part of its causation counterfactual.
790 Although the consideration of this aspect is not without its challenges, in the end, and after considering all the evidence, the substance of counsel for Mr Floropoulos’ submission on this causation question should be accepted. I have concluded that Oliana has not established that the contravening conduct of Mr Floropoulos caused the loss claimed because contrary to its submission, it has not established on the balance of probabilities that it could have secured supply from Kremel direct, or that it could have done so at the Kremel Supply Price.[539] It has not been established that this claimed loss and damage was suffered because of the contravening conduct of Mr Floropoulos. This conclusion holds whether it is looked at from May 2016 prior to Mr Canzoneri being aware of Kremel as the supplier, or at any relevant time thereafter during the period late May/early June 2016 to January 2018.
791 There are some matters that might be used to seek to support an inference in favour of Oliana on this topic.[540] They include the matters raised by Oliana and there are some others, as mentioned below:
(a) Kremel was in the business of manufacturing the products for sale.(b) There was no evidence of a prior relationship or arrangement between Mr Floropoulos and Mr Garakis/Kremel.[541]
(c) The supply was for Oliana’s downstream supply chain in Australia, which the evidence established was known to Mr Garakis and Kremel from late May and early June 2016 and thereafter.[542]
(d) In 2016 and most of 2017 Culinary Co did not have a downstream supply chain in Australia. It had been incorporated in May with Mr Floropoulos accepting that he had intended to interpose it between Oliana and Kremel and to charge an undisclosed margin.
(e) Mr Garakis was positive about the opportunity and regarded the chance to supply products to Mr Floropoulos/Culinary Co (for Oliana’s downstream supply chain) as a ‘... very, very nice opportunity for [him] to expand [his] business ...’.
(f) Mr Garakis acknowledged that although his price was his best price, he was not doing Culinary Co ‘any favours’ and that ‘of course’ it still allowed a profit for Kremel.
(g) There was no material evidence to suggest the existence of any material reason as to why Kremel would not have wanted to supply Oliana. Its knowledge of Oliana effectively from the outset and subsequently arguably sits in tension with such a suggestion. As to the suggested issue about Oliana having a poor reputation in Greece, this was not otherwise established apart from Mr Floropoulos’ evidence on the topic (which I do not accept given the absence of any material documentary or other corroboration). Further, it was also not established that Mr Garakis was or would have been aware of or concerned about any such issue in any event.[543]
792 On the other hand, Mr Canzoneri’s evidence on the topic was very limited and there were other matters to consider. For example:
(a) Prior to being aware of Kremel, it was not apparent how Kremel might have been identified in Greece by Oliana as a possible or suitable supplier — noting that Mr Floropoulos’ role in relation to supply and particularly Greek products was established on the evidence.(b) Once Kremel had been identified and contacted by Oliana, there was no elaboration in the evidence as to how the prospect of such supply might have been pursued by Mr Canzoneri (or others at Oliana) with Mr Garakis and Kremel in late May 2016 or thereafter — noting also that Mr Canzoneri understood there to be a language barrier with Mr Garakis[544] and that Mr Canzoneri did not speak Greek.
(c) The absence of any evidence as to what would or might have been sought from Kremel in relation to supply from late May 2016 or thereafter.
(d) The absence of any evidence as to how it was proposed that Mr Canzoneri or others for Oliana might have approached securing a price the same as the Kremel Supply Price. In this context it is to be noted that the counterfactual understandably does not incorporate Oliana’s knowledge of the Kremel Supply Price negotiated by Mr Floropoulos.
(e) Although it was at least possible that any approach on price might have been by reference to the MyCo Cost Price known by Oliana, no evidence was given to this effect, and the detail of the MyCo Cost Price was not addressed in the evidence and submissions, or how and to what extent the products and prices of MyCo compared to those of Kremel.
(f) Although very brief mention was made by Mr Canzoneri of the alternate supply sourced in Belgium[545] after supply ceased through Culinary Co and Kremel,[546] this was from a different company, in a different country, and at a later time. Further, no details were provided in relation to such supply, including as to terms, products, prices or other matters — whether through oral evidence or business records of Oliana.
(g) No expert or other evidence was sought to be adduced regarding the availability of supply of the relevant products in Greece, other parts of Europe or elsewhere.
(h) No expert or other evidence was sought to be adduced regarding the prices of the relevant products in Greece, other parts of Europe or elsewhere.
(i) No documentary evidence advertising or otherwise showing the identity or potential availability of alternate sources of product (or pricing) from Kremel, other Greek suppliers, or other suppliers in Europe or elsewhere was adduced.
(j) Evidence suggestive of a (then) positive or trusting connection between Mr Floropoulos and Mr Garakis, which Mr Garakis volunteered during his evidence in chief when being asked about the exclusive distribution agreement and whether he was ever shown it or asked to sign it. After denying that he was ever asked to sign it,[547] which I accept, he said: ‘... I did business only with Mr Floropoulos. I am a producer; nothing else. I trust Mr Floropoulos. We had a very, very great relationship. I had been in his home; (indistinct) his home and, you know, additionally this play — played significant role for me. I know his family. So I have no reason to be between — ‘What are you doing? Okay, it’s your business. What you are doing with Mr [Canzoneri]? I know you. I sell — I’ll sell it to you. Nothing more’.[548]
(k) The terms of Mr Garakis’ 23 April 2018 email reflected a level of connection with Mr Floropoulos and was also suggestive of Kremel having had other options.
(l) If an approach was to be made after 1 July 2017, there was a signed agreement between Kremel and Culinary Co.[549]
793 The person best placed to give direct evidence on the topic of whether Kremel would have been willing to supply Oliana and at what price was the person who was involved at the time for Kremel, Mr Garakis.[550] He was involved throughout the relevant period and dealt extensively with Mr Floropoulos. It was apparent that he was an experienced producer in at least the Greek market and that he had been the person primarily responsible for the decisions being made for Kremel with Mr Floropoulos at the relevant time. In advance of trial an outline of evidence for Mr Garakis was filed and served by Oliana[551] and he was called as a witness by Oliana. Oral evidence was led from him in chief and he was cross–examined.[552] There was no re-examination. Oliana submitted that he was a witness of truth and his evidence ought to be accepted in its entirety.
794 Mr Garakis was not asked any questions in chief, cross-examination, or re-examination, and did not give any evidence regarding matter such as:
(i) Whether Kremel would have, would not have, might have (or he was unable to say) been willing to supply Oliana as at or after late May 2016 (or some time later) if he had been informed of the position.
(ii) Whether Kremel would have, would not have, might have (or he was unable to say) been willing to supply Oliana as at or after late May 2016 (or some later time) at the Kremel Supply Price or some different price (and if so what price) if he had been informed of the position.
(iii) How he would or might have approached the position on behalf of Kremel if Mr Canzoneri or someone else on Oliana’s behalf had approached him in late May or at any time thereafter and prior to January 2018.
(iv) Supply opportunities and availability of the relevant products in the markets in which Kremel operated, competed, and was experienced in.
(v) Pricing of the relevant products in the markets in which Kremel operated, competed, and was experienced in.
795 Having regard to the above discussion and taking all of the evidence into account, in the end, I have concluded that Oliana has not discharged the burden of proof that it acknowledged that it bore, and I am not satisfied that such evidence as there is established on the balance of probabilities that Oliana could have obtained supply from Kremel had it approached it at any relevant time from late May 2016 until January 2018, or that if it could have done, supply could have been obtained at the Kremel Supply Price.[553] As was seen earlier, the position is different in relation to the compensation claim under s 1317H of the Act and the claim for equitable compensation. This is because in these scenarios the focus is on Mr Floropoulos complying with his duties, meaning that the analysis is different and the inferences regarding supply at the Kremel Supply Price are able to be drawn.
796 That being so it is not strictly necessary to address whether Oliana would have taken advantage of such a supply arrangement at the Kremel Supply Price if Oliana had established that it could have obtained it. However, had it been so established, I would have been satisfied that Oliana would have also established on the balance of probabilities that it would have taken advantage of and acted upon that arrangement.
797 Finally, I do not accept that there is any material force in Oliana’s contention that it was for Mr Floropoulos to raise the issue of direct supply and price in cross-examination with Mr Garakis if it was to be contested, or that anything materially relevant follows from this for present purposes. The issue was not raised in chief nor addressed in cross-examination in circumstances where Oliana bore the onus of proof in relation to the counterfactual, as was properly acknowledged. There was also no shifting evidentiary burden, noting that Oliana did not seek to address the issue of supply in any relevant way with Mr Garakis.[554] In the end, having regard to the evidence I am not satisfied to the required degree that it has been shown that the contravening conduct caused the loss claimed.[555]
798 For completeness, I add that had Oliana ultimately sought to press an alternative ‘but for’ causation scenario in respect of a supplier other than Kremel, that would also not have been established in relation to either supply or price given the very brief and short statements about the Belgian supply from Mr Canzoneri, the limited evidence about MyCo supply, and the absence of any details of the alternate supply price, terms or circumstances in which it was obtained.
799 The result is that although Oliana has established that Mr Floropoulos (and as will be seen, Mr Hone) has engaged in misleading or deceptive conduct, and that it was relied upon by Oliana, it has not established that it caused the loss claimed, being an amount equal to the Oliana Loss Amount. That being so Oliana is not entitled to be awarded damages or compensation under s 236 or s 238.
Knowing involvement claims against Mr Hone
800 Having found that Mr Floropoulos engaged in contravening conduct but that the loss and damage has not been proved, it is not necessary to address the question of whether Mr Hone aided and abetted Mr Floropoulos or was knowingly involved in Mr Floropoulos’ contravention so as to make him also liable for that loss and damage. This is because the sections operate so that it is only the loss and damage suffered by the claimant as a result of the contraventions by the primary wrongdoer that is to be recovered from a ‘person involved’. They do not require a separate causation assessment in relation to the conduct of the person involved, although in this case the result would not change in any event.
Misleading or deceptive conduct in trade or commerce claims against Mr Hone and Culinary Co
801 As pleaded, and adopting a somewhat circular and overlapping structure similar to that adopted in relation to the allegations against Mr Floropoulos, Oliana alleged that by reason of certain acts and omissions of Mr Hone, including silence, Mr Hone and/or Culinary Co made particular representations to Oliana that were misleading or deceptive or likely to mislead or deceive. They were very similar to the allegations made against Mr Floropoulos. Consequently, the issues as framed by the parties were stated to be whether in or about 2016 and continuing into 2017, Mr Hone and/or Culinary Co engaged in misleading or deceptive conduct in contravention of the ACL by representing to Oliana that:
(a) Kremel had appointed Oliana as exclusive distributor for Kremel’s products pursuant to the letter dated 7 June 2016 and/or the terms of the exclusive distribution agreement (Exclusive Distributor Representation);(b) Hone and/or Culinary Co had full authority from Kremel to deal with Oliana on behalf of Kremel in relation to the supply arrangements for Kremel’s products to Australia (Authority Representation); and
(c) each of Culinary Co and Kremel were bound by the exclusive distribution agreement at least until 10 January 2018 (Binding Agreement Representation).
802 As was the case with Mr Floropoulos, the allegations were more complex, overlapping and interrelated than first appears because each of the alleged representations were in turn substantially founded upon what were defined in the amended statement of claim as the ‘7 June Representations’ said to have been made by Mr Hone and Culinary Co and upon certain conduct of Mr Hone defined in the pleading as ‘the Hone Conduct’.
803 The 7 June Representations were said to be contained in the 7 June 2016 letter and to be implied from the fact that there was no company known as Culinary Co-Greece of which Mr Garakis was a director, and that the only company capable of supplying dairy-free cheese products of which Mr Garakis was managing director was Kremel. The representations were said to be continuing representations by Mr Hone and/or Culinary Co that:
(a) Mr Hone had been retained by Kremel as its legal representative to act on its behalf.(b) Mr Hone had been instructed by Kremel’s managing director, Mr Garakis, to appoint Oliana as the exclusive distributor for Kremel’s products in Australia in New Zealand.
(c) Mr Hone and/or Culinary Co had full authority to make or enter into a supply agreement with Oliana on behalf of Mr Garakis and the company in Greece with which he was associated (which was Kremel).
804 The Hone Conduct was said to be conduct by Mr Hone and/or Culinary Co from at least November 2016 when Mr Hone and/or Culinary Co:
(a) did not qualify, withdraw or resile from the 7 June Representations;(b) corresponded with Oliana purportedly on behalf of Kremel in relation to the entry into a written exclusive distribution agreement pursuant to which Kremel and Culinary Co would appoint Oliana as exclusive distributor for Kremel’s products in Australia and New Zealand;
(c) executed a copy of the exclusive distribution agreement;
(d) at no stage informed Mr Canzoneri or Oliana that in fact:
(i) Kremel was not aware of the exclusive distribution agreement or its terms;(ii) Kremel had not in fact signed or executed the exclusive distribution agreement by any authorised officer;
(iii) Kremel had not given either Mr Hone or Culinary Co any authority to enter into supply agreements on its behalf with Oliana;
(iv) neither Mr Hone nor Culinary Co received any actual authority from Mr Garakis or any company associated with him to make any statements or enter into any agreements with Oliana on their behalf;
(e) corresponded with Oliana purportedly on behalf of Kremel in relation to the supply of products pursuant to the exclusive distribution agreement;(f) issued invoices to and sought payments from Oliana pursuant to the terms of the exclusive distribution agreement; and
(g) on or around 10 January 2018 purported to terminate the exclusive distribution agreement pursuant to clauses 10.2.1 in 10.2.4 of that agreement.
805 The plaintiff’s claim against Culinary Co was stayed by reason of Culinary Co’s liquidation and no application was made for leave to proceed against it. However, whether Culinary Co engaged in misleading conduct was said to remain relevant to the damages claims against Mr Floropoulos and Mr Hone, particularly if it was found that Mr Floropoulos or Mr Hone had not engaged in contravening conduct directly. This was because, at least in that event, it was alleged that each of Mr Floropoulos and Mr Hone were involved in such contravening conduct of Culinary Co.
806 As things have transpired, it is not necessary to determine the question of whether Culinary Co engaged in contravening conduct or whether Mr Floropoulos or Mr Hone were involved in such conduct. This is because direct contravention findings have been made against Mr Floropoulos and, as will be seen, Mr Hone. Further, the focus of the alternative accessorial claims was in reality damages if the other claims failed. Because Oliana has not made out its damages case against Mr Floropoulos or Mr Hone in relation to the misleading or deceptive conduct contraventions, it cannot claim damages from anyone ‘involved‘ in that conduct.
807 There was considerable overlap in the submissions as between the three alleged representations and therefore it is convenient to deal with all submissions in this section before turning to the consideration of each of the representations.
Oliana Submissions
808 Before separately addressing each of the representations, Oliana made some general submissions regarding the 7 June 2016 letter sent by Mr Hone, which was said to be his first contact with Oliana. It was submitted that the letter constituted a clear representation by Mr Hone that he was acting as solicitor and agent for a Greek manufacturer of cheese. Emphasis was placed on the reference to his ‘clients’ plural and not merely Culinary Co and the express instructions of ‘Mr Periandros’ (sic. Periandros Garakis) ‘to now appoint Oliana Foods to be the new distributors with exclusive rights for Culinary Co and its various products for both Australia and New Zealand’. In context, the letter on its proper construction was said to plainly refer to Kremel and Mr Garakis, which I accept. It was also said that counsel for Mr Hone conceded in opening that by this letter Mr Hone represented that he had authority to deal with Oliana in relation to the exclusive distribution agreement and that this was false.[556]
809 Oliana contended that the letter, as understood by a reasonable person in the position of Oliana’s Mr Canzoneri, also clearly represented that Kremel had appointed Oliana exclusive distributor for its products in Australia and New Zealand.
810 With respect to what was described as ‘the faintly pressed argument that any representations in the 7 June 2016 letter were somehow superseded by the negotiations in relation to the [exclusive distribution agreement] ...’, this was submitted to be without merit, and Oliana emphasised that Mr Hone continued to represent his authority to Oliana and at no stage withdrew or sought to clarify his representations. This was also said to be reflected in Mr Hone’s emails regarding the exclusive distribution agreement late in 2016 into early 2017.
811 It was further submitted in relation to all representations that at no time did Mr Hone ever indicate that Kremel would not execute, or had not executed, the exclusive distribution agreement or that he had ‘discovered’ that he lacked authority to act for Kremel. Attention was also drawn to Mr Hone’s email of 14 December 2016 making no mention of that fact but, so it was contended, necessarily implying that Kremel had signed the agreement. Mr Hone’s representation that there was a binding agreement was further said to be reflected in demands he made for payment referring to the terms of the purported exclusive distribution agreement. It was also said to be reflected in Mr Hone’s purported termination of the exclusive distribution agreement in January 2018.
Oliana submissions - Exclusive Distributor Representation
812 In addition to relying on these matters, in respect of Mr Hone’s representation that Kremel had appointed Oliana as exclusive distributor for Kremel’s products pursuant to the letter dated 7 June 2016 and/or the terms of the exclusive distribution agreement, Oliana submitted that the representation was made in the 7 June 2016 letter and that the representation was then reinforced by:
(a) the provision by Mr Hone of various versions of the draft exclusive distribution agreement, which defined both Kremel and Culinary Co as the ‘Supplier’ and on one occasion contemplated that Mr Hone would execute the agreement on behalf of Kremel;(b) emails indicating that Mr Hone had obtained instructions after ‘discussions with Greece overnight;’
(c) Mr Hone’s failure at any stage to inform Oliana that Kremel had not in fact executed the exclusive distribution agreement;[557]
(d) Mr Hone’s email of 14 December 2016 which requested Mr Canzoneri provide an original signed agreement so ‘we can complete and each have a completed signed original document on record’ in circumstances where no disclosure was made that Kremel had not signed the exclusive distribution agreement; and
(e) Mr Hone’s continued references to the terms of that purported agreement including his demands for payment on 18 January 2017, and his correspondence regarding the termination of that agreement.
Oliana submissions - Authority Representation
813 With respect to the Authority Representation that Mr Hone and/or Culinary Co had full authority from Kremel to deal with Oliana on behalf of Kremel in relation to the supply arrangements for Kremel’s products in Australia, reliance was placed upon the general submissions referred to above, the 7 June 2016 letter and the conduct of Mr Hone earlier referred to. It was also emphasised that Mr Hone’s counsel ‘... conceded in his opening that such a representation was made by the 7 June 2016 letter and that it was false ...’. The Authority Representation was also said to be reinforced by the same matters referred to in connection with the Exclusive Distributor Representation as well as:
(a) Mr Hone’s email attaching a price schedule which, in the absence of any disclosure that the price schedule had been provided by Mr Floropoulos, a person in the shoes of Mr Canzoneri would reasonably assume had come from Kremel;(b) Mr Hone issuing ‘... the baseless invoice CUL021 ...’ and the subsequent issuing of statutory demand proceedings, apparently on behalf of Kremel.
Binding Agreement Representation – further Oliana submissions
814 With respect to the Binding Agreement Representation that each of Culinary Co and Kremel were bound by the exclusive distribution agreement until at least 10 January 2018, Oliana relied upon the same matters set out above in respect of the Exclusive Distributor Representation and the Authority Representation.
815 Each of the representations were said to be false because the true position was that: at no time did Mr Hone have any such authority —and he had never met or spoken with Mr Garakis prior to September 2017;[558] at no time had Kremel appointed Oliana exclusive distributor for the Kremel products in Australia and New Zealand; and at no time was Kremel bound by the exclusive distribution agreement.
816 It was submitted that it was on the basis of Mr Hone’s representations that he had the authority of Kremel and Mr Garakis that Oliana first paid over $275,000 within a matter of weeks of the 7 June 2016 letter without any formal contract, and began and continued ordering and paying for Kremel products at a price that was substantially greater than what should have been their true cost to Oliana. It was further said that Mr Hone’s representations also enabled Mr Floropoulos to effect the interposition of Culinary Co and impose the substantial undisclosed mark-up on the Kremel Supply Price.
Mr Hone’s Submissions
817 Although aspects of the submissions made on behalf of Mr Hone were at times not easy to follow, it was sufficiently clear that the claims against him were contested, notwithstanding that Mr Hone was not called to give any evidence and no other witnesses were called in support of his defence.
818 Mr Hone’s counsel stated in opening that it was conceded that aspects of the 7 June 2016 letter contained ‘... misstatements about representing the Greek company ...’, with counsel confirming that what was being conceded as not being correct in the letter was that ‘... he [Mr Hone] represented Kremel ...’.[559] The position was then further clarified, with Mr Hone’s counsel stating that what was conveyed by the relevant part of the letter was that Mr Hone would be representing ‘... the group here in Australia ...’, and that the ‘group’ being referred to was “Kremel, the supplier’. Reference was made by counsel for Mr Hone to this concession on a number of occasions during the trial, including during closing submissions.
819 However, it was submitted that the ‘critical issue’ the court needed to consider was whether Mr Hone had an honest and reasonable belief that the statements in the letter were correct and whether such a belief on the part of Mr Hone was reasonably based.
820 It was submitted that it was open to the court to conclude that ‘... [e]ven if the statements were not correct as it was conceded ...’ Mr Hone had an honest and reasonable belief that they were correct and this belief was reasonably based on information provided by Mr Delis and Mr Floropoulos. Reference was made to Mr Floropoulos acknowledging in cross-examination that information Mr Hone included in the 7 June 2016 letter was information provided by Mr Floropoulos and Mr Delis.[560]
821 It was initially submitted that no inference based upon the principles in Jones v Dunkel could be drawn against Mr Hone in relation to this ‘critical’ issue, although counsel was unable to articulate why that was so given what he was contending needed to be established, and the fact that Mr Hone had not been called to give evidence as to those matters. However, during oral closing submissions it was later understandably conceded that it was open to the court to draw such an inference against Mr Hone. It was further conceded during closing submissions that an adverse inference of this kind could be drawn against Mr Hone in relation to other issues, including: the issuing of the invoice and statutory demand the subject of the statutory demand proceedings; the state of Mr Hone’s knowledge; and the unexplained failure of Mr Hone, a solicitor, to produce certain documents prior to trial in breach of court orders and the late production of documents during trial pursuant to a notice to produce.
822 It was submitted that Mr Hone had made all reasonable enquiries and that he was in reality no more than a ‘conduit’ conveying information, in circumstances where he had acted honestly and reasonably and had no reason to suspect that the information concerning Kremel and Mr Garakis was incorrect. It was submitted that Mr Hone had not met Mr Garakis at the time and had made all appropriate enquiries, and particularly given that, so it was said, Mr Garakis was not proficient in English.[561]
823 Mr Hone submitted that a person does not engage in a contravention by passing on information provided it is clear that this is what is being done, and reference was made to the observations of French J in Gardam v George Willis and Co Ltd.[562] Although it was submitted that Mr Hone was ‘merely a conduit’ of the 7 June 2016 letter information because it was provided by Mr Floropoulos or Mr Delis to pass on to Oliana and Mr Canzoneri, it was acknowledged that the representation that Mr Hone acted for Mr Garakis and Kremel was inaccurate and that he adopted it as his own representation.
824 Counsel for Mr Hone said it was accepted that there was a misrepresentation regarding Mr Hone and his authority to act for Kremel from the time of sending the 7 June 2016 letter until the exclusive distribution agreement was signed but that it was ‘overridden’ by the agreement, and stopped from that time. Reliance was also placed on clause 2.3 and the entire agreement clause in the exclusive distribution agreement. It was submitted that by the time Mr Canzoneri signed the exclusive distribution agreement in late 2016, Oliana could have been under no misapprehension that Mr Hone or Culinary Co was purporting to act as agent or representative of Kremel in signing the agreement, and reference was made to the run of communications and the role of Michael Canzoneri.
825 With respect to Kremel and Culinary Co being described collectively as ‘the Supplier’ in the agreement, it was submitted that this was the only part of the agreement where this was dealt with and the contra proferentem rule should apply.
826 Mr Hone submitted that none of Culinary Co, Mr Floropoulos, or he represented or advised Oliana or Mr Canzoneri that Culinary Co would be supplying product to Oliana manufactured by Kremel at prices charged by Kremel. In this context reference was made to Mr Floropoulos being a consultant of Culinary Co, the evidence regarding the prices being 20% to 30% less than the MyCo Supply Price, and the fact that the prices were known before the first two invoices were sent by Culinary Co to Oliana on 9 June 2016. Mr Hone further submitted that it should be inferred that Mr Canzoneri knew or ought to have known from the time he discovered the MyCo Cost Price that Culinary Co would be including a mark-up on the prices paid to Kremel. It was also said that Mr Canzoneri did not ask Mr Hone or Mr Floropoulos to disclose the price that was being paid by Culinary Co to Kremel because Mr Canzoneri seemed comfortable with the price Oliana was being charged.
827 On another topic, Mr Hone submitted that Mr Garakis’ evidence was credible and honest and the court should rely on his account with respect to the non-execution of the distribution agreement by him or Kremel. It was submitted that this was corroborated by Mr Floropoulos and put in doubt the reliability of Mr Canzoneri’s evidence, who it was said had deposed in another proceeding to having seen an executed copy. Mr Hone submitted that an adverse inference should be drawn against Michael Canzoneri on this topic as he was the solicitor dealing with the agreements and he was not called to give evidence.
828 As to the issue of silence, it was submitted that there was no general duty of disclosure and that the court should not impose any duty of disclosure on Mr Hone arising from the circumstances of the case. It was submitted that the execution clause for Kremel speaks for itself, in that it required it to be signed by those persons authorised under Kremel’s charter documents to do so, and therefore by remaining unsigned it should have been self-evident to Mr Canzoneri and his son that Mr Hone had no authority to execute the agreement for Kremel. Further, the prices for the products were clearly outlined in the schedule and negotiated on commercial terms.
829 In the alternative it was submitted that even if Mr Hone misrepresented the position by silence, the misrepresentation was not acted upon. This, so it was said, was because Oliana took no steps to contact Kremel directly to see if it would execute the distribution agreement or to find out who was authorised to execute documents, and that this had not occurred, notwithstanding that Mr Floropoulos had told Mr Canzoneri that Kremel would not enter into the agreement.
830 With respect to Mr Hone aiding and abetting or being knowingly involved in the contravention of Mr Floropoulos or Culinary Co, this was denied. Mr Hone embraced the submissions made on behalf of Mr Floropoulos. He submitted further that Mr Hone would only be liable if he intentionally participated in misleading or deceptive conduct and to form that intent he must have had knowledge of the matters that comprised the contravention. He submitted further that the authorities establish that merely being a director of a company was insufficient to establish that Mr Hone was a person involved in any contravention of the company and that there was no evidence to show that Mr Hone intentionally participated in the alleged misleading or deceptive conduct.
831 Submissions were also made with respect to reliance, causation and loss and damage, to the same effect as those made by Mr Floropoulos. These are addressed further below.[563] Counsel for Mr Hone also adopted the submissions made by counsel for Mr Floropoulos, which have been dealt with earlier.
Mr Floropoulos’ Submissions
832 Noting that these were allegations against Mr Hone and Culinary Co, Mr Floropoulos’ submissions on the issues were limited, and dealt with the conduct somewhat collectively. To the extent the issues were engaged with, this was said to have occurred because of the allegation that Mr Floropoulos was involved with the alleged contraventions by Mr Hone and Culinary Co.
833 In substance, Mr Floropoulos relied on parallel submissions he made in relation to the contravening conduct alleged against him. As to the Authority Representation, Mr Floropoulos acknowledged that it was conceded in opening on behalf of Mr Hone that he did not have authority to represent Kremel as he claimed in his letter of 7 June 2016. However, it was contended that by the time Mr Canzoneri signed the agreement in late November 2016 he could have been under no misapprehension that Mr Hone and Culinary Co were not purporting to act as agent for Kremel in signing the exclusive distribution agreement. It was further submitted that insofar as the exclusive distribution agreement had force and effect as between Culinary Co and Oliana, it was clear on its face that Culinary Co had authority from Kremel to supply its products to Oliana and there was no misrepresentation about that matter.
834 As to the Binding Agreement Representation, it was denied that it was made by Mr Hone or Culinary Co and Mr Floropoulos referred to his previous submissions on the topic. It was submitted in the alternative that even if it was made the representations were replaced by the terms of the exclusive distribution agreement, which were said to speak for themselves as between Culinary Co and Oliana. Reference was again made to the terms of clause 2.3 and the entire agreement clause.
835 Counsel for Mr Floropoulos also made reference to the pleaded allegation that Mr Floropoulos acted as a director of Culinary Co, which was denied. Counsel for Mr Floropoulos did not make any substantive submissions on the allegation, correctly noting that it was not one of the agreed issues for determination and that the case was not conducted by Oliana on this basis.[564]
Consideration – Mr Hone misleading or deceptive conduct allegations
Exclusive Distributor Representation: Kremel had appointed Oliana as exclusive distributor for Kremel’s products pursuant to the letter dated 7 June 2016 and, later, the exclusive distribution agreement
836 The acts and omissions of Mr Hone said to give rise to the Exclusive Distributor Representation have been established on the evidence and given the extended discussion of the evidence and factual matters earlier in these reasons need not be laboured. It is sufficient to observe that Mr Hone: sent the 7 June 2016 letter to Mr Canzoneri; did not speak with Mr Garakis or Kremel and did not have instructions or authority from them; engaged with Oliana regarding the terms of the agreement in the way previously described — including stating that he had further instructions after discussions with Greece overnight which he could not have had; drafted a version of the agreement that introduced Kremel as a party and Mr Hone being authorised to execute the document on its behalf; negotiated directly with Mr Canzoneri and his son the terms of the exclusive distribution agreement which had the terms and features earlier referred to, including those relating to the ‘Supplier’, ‘Distributor’, pricing, manufacture, and Mr Hone being the authorised person for notices; executed the exclusive distribution agreement and sent agreement-related correspondence; sent the foreshadowed invoices to Oliana shortly after sending the 7 June 2016 letter and other invoices subsequently; allowed payment to be made by Oliana on the invoices; made demands and requests for payments, including by reference to the agreement; and sent documents purporting to terminate the exclusive distribution agreement.
837 In addition, Mr Hone did not at any time inform Mr Canzoneri or Oliana that neither he nor Culinary Co was not retained by Kremel, that they did not have any authority to act on behalf of or represent Kremel, or that Kremel had not signed the agreement. This occurred in circumstances where Mr Canzoneri and Oliana had a reasonable expectation of such disclosure given the circumstances, and particularly the terms of the 7 June 2016 letter from him. Further, Mr Hone was positively stating that he had such authority when he could not reasonably have concluded that this was so, noting also that there was no written or other communication between Mr Hone on the one hand and Mr Garakis or Kremel on the other in advance of Mr Hone sending the 7 June 2016 letter or at any relevant time in this context thereafter.[565]
838 It will also be recalled that Mr Hone, a solicitor, elected not to give evidence regarding the sending of the 7 June 2016 letter and subsequent events (or at all), and that his counsel properly made the concessions earlier referred to, including the concession regarding the 7 June 2016 letter conveying that Mr Hone had the authority of Kremel when that was not the case — which was well established on the evidence in any event. It may be inferred that his evidence would not have assisted him on the issue of the making of any of the representations, although even if this is put to one side, it does not alter the position or conclusions reached given the evidence (and the concessions made).
839 I am satisfied that Mr Hone did represent to Oliana that on and from 7 June 2016 Oliana had been appointed by Kremel as its new distributors with exclusive rights for its products for Australia and New Zealand and that from early December 2016 it was also appointed pursuant to the exclusive distribution agreement. It may also be observed that in that letter Mr Hone expressly referred to Mr Garakis as being of Culinary Co Greece and stated ‘... in good faith he [Mr Garakis] has commenced the preparation of your initial order you have provided as per product specification ...’, further conveying that the appointment by Kremel had occurred with immediate effect. This was further supported by Mr Hone stating that ‘we will provide you with an invoice for the deposit to be paid as per our agreement ...’. I also refer to my earlier observations regarding the terms of the 7 June 2016 letter when addressing the making of the same representation by Mr Floropoulos and the communications that followed between Mr Hone and Mr Canzoneri.
840 Mr Hone’s silence also contributed to the making of the representation in circumstances where it was reasonable for Oliana to expect disclosure of the position regarding authority — or even if there was only uncertainty about the authority, disclosure of that uncertainty. In any event, even if that was not the case or there had been no basis for a reasonable expectation on the part of Oliana of disclosure at the time of sending the 7 June 2016 letter, the representation was conveyed by the terms of the letter anyway, as was at least in part conceded on behalf of Mr Hone.
841 The representation that Oliana had been appointed exclusive distributor pursuant to the 7 June letter 2016 and (later) the exclusive distribution agreement was a continuing representation that continued until at least 10 January 2018, including by Mr Hone’s silence and him not at any relevant stage resiling from it or disclosing the true position regarding his absence of authority or instructions from Mr Garakis or Kremel, or if there was uncertainty, such uncertainty.
842 As was the case for Mr Floropoulos, I am also satisfied that from at least the time after which Mr Canzoneri and Mr Hone signed the exclusive distributor agreement in late 2016, Mr Hone represented that Oliana was appointed as exclusive distributor for Kremel products by the terms of that agreement, even though it later became apparent that this was not in fact the position. Again, this representation was a continuing one and Mr Hone did not resile from it or disclose the position in relation to his absence of authority from Kremel or Kremel not signing the agreement at any relevant time — which is not to ignore the manner in which it was signed or the email exchanges between Mr Hone and Mr Canzoneri at the time including with respect to the second signing by Mr Canzoneri and return to Mr Hone. I elaborate below.
843 The communications regarding the negotiation of the exclusive distribution agreement cannot in this context be considered in isolation from that which went before as between Oliana, Mr Hone and Culinary Co, and in particular the terms of the 7 June 2016 letter; the invoicing and payments; the contemplation of the formal agreement following the appointment referred to in the letter; Kremel and Culinary Co being named jointly as the Supplier under the agreement; Mr Hone’s ongoing silence regarding his absence of authority; and his unexplained reference in his email to Mr Canzoneri of 23 November 2016 forwarding an amended draft agreement to ‘... discussions with Greece overnight ...’, when he was not having and did not have any discussions with Greece overnight.[566] It was this draft of Mr Hone’s that recorded Kremel as a party for the first time and included an execution clause for each of Kremel and Culinary Co that expressly recorded that Ian Hone was to execute ‘for and on behalf of’ each of Culinary Co and Kremel. That this unexplained conduct was engaged in by a solicitor and officer of this Court is, to say the least, of significant concern. However, that is a different matter.
844 This and the earlier draft provided by Mr Hone was, on its face, limited and somewhat poorly drafted and it was unsurprising that its form was addressed by Oliana through Michael Canzoneri. Emails between Michael Canzoneri and Mr Hone at the relevant time recorded that the change in form of the exclusive distribution agreement was to bring it into line with Oliana’s standard terms.[567] However, the context and circumstances in which this was occurring did not evaporate. One of the changes made was to record Kremel as the ‘joint Supplier’, which was the form in which the agreement was ultimately finalised as I have said. That this occurred was unsurprising given that which preceded it. The other features I have referred to were also introduced.
845 Mr Hone did not seek to correct or qualify any of these aspects or otherwise disclose the position regarding his authority, or the earlier representation regarding the appointment of Oliana as stated in the terms of the 7 June 2016 letter. The agreement was ultimately executed in the form and with the features earlier described, and in circumstances where Mr Hone had not disclosed anything about not having authority or about there being any uncertainty on the point. Further, Mr Hone did not suggest that there was any separate need for execution by Kremel nor state that it had not or would not sign it — which with hindsight is unsurprising because he was never communicating with Mr Garakis or Kremel and was sending the various drafts to Mr Floropoulos only, as his produced documents belatedly revealed. Further, Mr Hone’s email of 14 December 2016 to Mr Canzoneri implied no further signing was required when he asked Mr Canzoneri for the original signed agreement by him ‘... so we can complete and each have a signed original document on record’.
846 Subsequent to the finalisation of the agreement, Mr Hone took other steps consistent with the agreement (with Kremel and Culinary Co as ‘Supplier’) being in place, including, for example, by sending invoices and seeking payments. Further, Mr Hone did not at any relevant time disclose the true position regarding his authority or the appointment the subject of the 7 June 2016 letter or the agreement, which in the circumstances, Oliana could have reasonably expected him to. It is also to be recalled that it was conceded that the letter conveyed that Mr Hone was representing ‘the group’, and ‘the supplier, Kremel’. This was established on the evidence anyway.
847 I refer also in this context to the features and terms of the exclusive distribution agreement which I have discussed earlier. It is to be noted in this context that not only did Mr Hone deal with the negotiations and drafting with Mr Canzoneri and his son, he signed the agreement. It is clear that by so doing he and Culinary Co were conveying that: Kremel and Culinary Co were, together, ‘the Supplier’ and the direct or indirect manufacturers of the products and that Oliana was the only distributor, with the exclusive rights being granted to it by the Supplier. The terms of the agreement cannot be put to one side in this context and are an important part of the circumstances.
848 It will be apparent from the above that I do not accept the submissions that engaging in the conduct by Mr Hone was not established.
849 As to the specific matters raised by Mr Hone and Mr Floropoulos that have not yet been directly addressed I comment further briefly as follows.
850 Even if it were to be assumed for the purpose of argument that Mr Hone having an honest and reasonable belief as to what was stated in the 7 June 2016 letter or thereafter was as central to the success of his defence, as was submitted to be the case, that is of no assistance to Mr Hone. Mr Hone elected not to give evidence and such matters were not otherwise established on the evidence. It is also the case that, as was ultimately conceded, by reason of his failure to give evidence an inference may be drawn against Mr Hone that his evidence would not have assisted on this issue, although the position remains the same whether or not such an inference is drawn.
851 Similarly, the submissions regarding Mr Hone making all reasonable enquiries does not assist him. Mr Hone did not give evidence and the nature and extent of his enquiries, as to most things, including the 7 June 2016 letter, was not apparent from the evidence. It has not been established on the evidence that all reasonable enquiries were made, nor was it identified what they were said to be. Further, and again as was ultimately conceded on behalf of Mr Hone, it may be inferred that Mr Hone’s evidence on this topic would not have assisted him, but here also the position remains the same whether or not such an inference is drawn.
852 In this context it is also to be remembered that Mr Hone was, and I was informed remains, a solicitor admitted to practice and practising in this State. No documentary evidence was produced or submitted to support the contention that Mr Hone acted honestly or reasonably when sending the letter on 7 June 2016 containing the untrue statements regarding his authority and the appointment of Oliana or, for example, when stating that the amended draft agreement was being provided to Oliana ‘after discussions with Greece overnight’. Again, it is open to infer that his evidence would not have assisted him in relation to the occurrence of any such discussions, although the position remains clear even when that is ignored or put to one side.
853 That Mr Floropoulos said that the information provided to Mr Hone was from Mr Floropoulos and Mr Delis, does not affect these conclusions. Even if that was so, it raises more relevant questions than it addresses, and does not assist in establishing whether Mr Hone acted honestly and reasonably and made any or all reasonable enquiries in the way asserted on his behalf.
854 The position is very different to a case where the evidence establishes the innocent carriage of a false representation from one person to another in circumstances where it is established that the carrier is and is seen to be a mere conduit, and does not involve him or her making the representation. The circumstances under consideration are far removed from such as case. This conclusion also sits comfortably with the express terms of the 7 June 2016 letter, the concession made about the misrepresented position as conveyed by the letter, and the terms of the exclusive distribution agreement. The ‘conduit’ authorities referred to by counsel for Mr Hone are starkly distinguishable and it is sufficient to say that they do not involve facts at all akin to those under consideration, noting also that each case must be determined on its own facts and circumstances, as has here occurred.
855 With respect to the contention that any representation stopped or was neutralised or diluted by the time the agreement was signed, I do not accept that submission. I refer generally to the observations made in this regard in relation to the parallel submission made by Mr Floropoulos in the context of the same representation being made by him — but of course not seeking to rely upon the acts and omissions of Mr Floropoulos in relation to Mr Hone. It is again to be emphasised that the execution of the agreements is not to be seen in a vacuum, but is to be looked at in the context of that which preceded it and the substantive terms and features of the agreement. Having regard to these circumstances, including the 7 June 2016 letter, that which followed it from Mr Hone’s position, and the circumstances of the execution and email exchanges thereafter, it was not the case that the representation ceased at about or from this time. Further, and as we have seen, Mr Hone’s conduct subsequently was consistent with the agreement being on foot as between Kremel and Culinary Co as joint ‘Supplier’ and Oliana as Distributor, including his silence.
856 I also do not accept that it can be inferred that Mr Canzoneri and Oliana would have known or expected a mark-up on the pricing by Culinary Co and I refer to my previous comments on this topic when addressing the claims agent Mr Floropoulos. Further, it was the only ‘Distributor’ under the exclusive distribution agreement.
857 I accept that Mr Garakis was a credible witness, as suggested by Mr Hone, but this does not assist him. Mr Garakis’ evidence stridently reinforced Mr Hone and Culinary Co’s absence of authority and that he did not sign the agreement. For the reasons earlier identified, that does not affect the existence or otherwise of Mr Hone’s contravening conduct, albeit recognizing that I have accepted that it has not been established on the evidence that Mr Canzoneri saw a copy of the agreement that had a signature on it purporting to be on behalf of Kremel.
858 For similar (but not identical) reasons to that which applied to Mr Floropoulos, the terms of Clause 2.3 and the entire agreement claims do not materially assist Mr Hone. They are but part of the overall circumstances and context which does not change the essential character, substance, nature or effect of Mr Hone’s and Culinary Co’s conduct. They are also to be looked at in the context of the substantive terms and features of the exclusive distribution agreement as earlier referred to. The reliance on the contra proferentem rule was misplaced and does not assist Mr Hone in any event.
859 As to the submission that Mr Hone and Culinary Co did not expressly inform Oliana that they were Kremel Prices, this does not assist Mr Hone in the present context even if assumed to be true. This is because it does not alter in any material way Mr Hone’s other conduct to which I have referred. Further and in any event, it pays no attention to the terms of the exclusive distribution agreement in relation to pricing, which it will be recalled dealt with one set of prices only: that was the ‘Supplier’s’ price, being Kremel and Culinary Co jointly. I refer generally to the observation made in the context of Mr Floropoulos about the agreement and pricing.
860 Even if it was the case that Mr Canzoneri could have asked about the pricing, again that does not alter the character and effect of Mr Hone and Culinary Co’s conduct. It is also to be recalled that the pricing was referred to in the invoicing Mr Hone sent, and had been conveyed by Mr Floropoulos. Further, the agreement dealt with one set of pricing only — the Supplier.
861 As to the absence of Kremel’s signature and Mr Hone’s email forwarding the document referring to him having signed on behalf of Culinary Co, this, as I have earlier observed, is to be seen in the context of the communications and circumstances concerning Mr Hone earlier referred to. Given matters such as Mr Hone’s earlier conduct, the 7 June 2016 letter, the terms of his second draft with respect to execution, the terms and features of the agreement, his email of 14 December 2016 regarding the need for the original to have completed copies, and Mr Hone and Culinary Co acting consistently with the agreement subsequent to its execution, I do not consider that the representation was neutralised or diluted from the time of execution as contended. Given the circumstances, it was not as was submitted ‘obvious’ that Mr Hone was not acting for Kremel and the post-signing conduct and ongoing silence in the face of a reasonable expectation of disclosure reinforces this conclusion. Mr Hone also pleaded (in paragraph 7(g) of his amended defence) that he had proceeded on the basis that the exclusive distribution agreement was in operation with Kremel and that this was the basis of the dealings with Oliana.
862 It was not controversial that if the Exclusive Distributor Representation was made by Mr Hone then it was misleading and deceptive and likely to mislead and deceive. As stated earlier, this was because Oliana was not in fact appointed as Kremel’s exclusive distributor of its products as reflected in the 7 June 2016 letter and the exclusive distribution agreement.
Authority Representation: Mr Hone and/or Culinary Co had full authority from Kremel to deal with Oliana on behalf of Kremel in relation to the supply arrangements for Kremel’s products in Australia
863 Given the extensive overlap of the matters relied upon by Oliana, the preceding discussion, and that which has been addressed earlier in connection with Mr Floropoulos, this Authority Representation and the following Binding Agreement Representation can be dealt with more briefly. Again, the acts and omissions relied upon that are said to give rise to the making of the authority representation by Mr Hone have been established. I refer to this in earlier discussion.
864 It was also established that: the pricing schedule was provided to Oliana by Mr Hone without him having obtained it from Kremel in circumstances where he did not say so, or say that it had been obtained through Mr Floropoulos; the $240,000 invoice for packaging was issued and pursued through a statutory demand proceeding commenced and pursued by Mr Hone and in respect of which he filed and served a supporting affidavit; and that Mr Hone sent a notice of termination of the agreement in January 2018. It may also be observed that when this was responded to by Michael Canzoneri on behalf of Oliana he stated to Mr Hone, among other things, that ‘... [a]s you are aware Culinary and Kremel SA are bound by the Agreement to deal with our client exclusively ...’, Mr Hone did not then or at any relevant subsequent time disclose that neither he nor Culinary Co had authority from Kremel or that Kremel had not been communicated with in connection with the exclusive distribution agreement during the negotiation and finalisation of any of its terms in any event.
865 I am satisfied that by his conduct Mr Hone did represent to Oliana that he had authority from Kremel to deal with Oliana on behalf of Kremel in relation to the supply arrangements for Kremel’s products in Australia. In reaching this conclusion I refer also to the acts, omissions and other matters referred to above in connection with the Exclusive Distributor Representation, including Mr Hone’s silence. I add further that even if it were to be assumed for the purpose of argument that Oliana did not have a right to reasonably expect disclosure (which is not the case), Mr Hone’s positive acts conveyed the representation in any event, noting particularly that they are to be viewed in the light of the statements made in the 7 June 2016 letter, and thereafter, his approach to and communications regarding the exclusive distribution agreement and payment of invoices. This is also consistent with the concession made on behalf of Mr Hone regarding the misleading and inaccurate nature of the statements made in the letter regarding Mr Hone’s authority and the appointment of Oliana.
866 Like the Exclusive Distributor Representation, this was a continuing representation from 7 June 2016 until at least 10 January 2018 when Mr Hone sent a notice of termination to Oliana which was said to be pursuant to aspects of clause 10 of the exclusive distribution agreement.
867 As to the specific matters raised by Mr Hone in this context, noting the overlap with Mr Floropoulos’ submissions, I refer to the observations made above in connection with the Exclusive Distributor Representation, which reasoning applies equally given that the same submissions were relied upon in this context by Mr Hone.
868 Again, it was not controversial that if the Authority Representation was made it was misleading and deceptive and likely to mislead or deceive. This was because neither Mr Hone nor Culinary Co had any such authority from Mr Garakis or Culinary Co, as was accepted by Mr Hone in any event.
Binding Agreement Representation: each of Kremel and Culinary Co were bound by the exclusive distribution agreement until at least until 10 January 2018
869 In support of this allegation Oliana relied upon the same acts and omissions as were relied upon in connection with the Exclusive Distributor Representation and the Authority Representation, which I have referred to above. These acts and omissions were established to the extent discussed above and to which I refer.
870 Mr Hone similarly relied upon submissions made in relation to the Exclusive Distribution Representation and the Authority Representation.
871 I am satisfied that by his conduct Mr Hone did represent to Oliana that each of Culinary Co and Kremel were bound by the terms of the exclusive distribution agreement. This was a representation made from at least the time of execution of the agreement by Mr Hone and Mr Canzoneri[568] and one which continued thereafter until 10 January 2018, when notice of termination was served.
872 Given the reliance by Oliana on the matters previously addressed in the context of the Authority Representation and the Exclusive Distributor Representation, it is convenient and sufficient to refer to without repeating the above discussion of the same. I comment further as follows.
873 As to the absence of a signature for Kremel in the execution clause, this is only part of the circumstances and when viewed in that way and in context it does not in my view materially aid Mr Hone. I note also in this context Mr Hone’s silence in circumstances where it was at least reasonable for Mr Canzoneri and Oliana to expect Mr Hone and Culinary Co to disclose that they were not authorised and there was no agreement, or if the position was uncertain, that uncertainty. Again, it is also to be remembered that Mr Hone and Culinary Co acted consistently with there being in place and in operation a binding exclusive distribution agreement between Oliana as distributor on the one hand, and Kremel and Culinary Co as joint ‘Supplier’ on the other, including by purporting to terminate the agreement on 10 January 2018. This was also consistent with his amended defence as referred to above. I also refer again to Mr Hone’s email of 14 December 2016 and to the fact that Mr Hone knew that it had not been signed by Kremel and, in my view, Oliana had a reasonable expectation that Mr Hone and Culinary Co would have disclosed that they were not authorised to act on behalf of Kremel, which they did not. Rather, they acted consistently with the agreement being binding on all parties, including Kremel, and by not disclosing the position regarding their authority or the agreement allowed Oliana to proceed on the same basis.
874 With respect to the reliance on Clause 2.3 and the entire agreement clause, I refer to my earlier comments on the topic, which apply with equal force.
875 I have previously determined that I do not accept that Mr Floropoulos told Mr Canzoneri that Kremel would not sign the agreement, and no more need be said on the point other than to refer to my earlier observations.
876 That Oliana did not take steps to ascertain directly whether Kremel would sign the agreement also does not change the nature or effect of Mr Hone and Culinary Co’s conduct — noting also that it is the nature of the conduct and the terms of the agreement that appear in part to explain why they did not. Finally, and as mentioned in connection with Mr Floropoulos, whilst the absence of a signature in other circumstances might have greater significance, such a matter is to be assessed in the context of the facts and circumstances in each instance, which in this case are unusual.
877 Again it was not controversial that if the Binding Agreement Representation was made it was misleading and deceptive or likely to mislead and deceive. This was because Kremel was not bound by the exclusive distribution agreement. In fact, Kremel was never aware of its purported appointment of Oliana, the existence or terms of the exclusive distribution agreement, or the steps purportedly taken on Kremel’s behalf in relation to its negotiation and finalisation.[569]
Loss and Damage – Mr Hone
878 The loss claimed against Mr Hone was an amount equal to the Oliana Loss Amount, calculated in the way previously explained. It was claimed on the basis of the same counterfactual discussed in the context of the misleading conduct claims against Mr Floropoulos, but of course by reference to the misleading conduct of Mr Hone.
879 As was the position with the conduct of Mr Floropoulos, reliance by Oliana on the misleading conduct of Mr Hone was established, and was reflected in the manner in which Mr Canzoneri and Oliana proceeded with the orders and payment shortly after receipt of the 7 June 2016 letter and thereafter until early January 2018. Mr Canzoneri’s evidence showed that he was misled by Mr Floropoulos’ and Mr Hone’s conduct, as was also reflected in that which he did, in the communications, and that which transpired after 7 June 2016. So much was not surprising as I have said. For the reasons earlier stated I do not accept that the circumstances and communications relating to the signing of the agreement detract from such reliance or that the clauses in the agreement assist Mr Hone.
880 That said, in the context of Oliana’s damages counterfactual, I have earlier concluded that I am not satisfied that Oliana has established that it could have secured supply from Kremel, or that it could have secured such supply at the Kremel Supply Price. Consequently, in the end it has not established on the evidence that the loss and damage claimed was suffered because of Mr Hone’s contravening conduct, even accepting as I do that Mr Hone’s conduct was also[570] a contributing cause of Mr Canzoneri and Oliana acting as they did.
If Culinary Co and not Mr Hone was the sole principal responsible for the alleged contravention of the ACL, did Mr Hone aid and abet, or was he knowingly involved in, that contravention?
881 Given the findings in respect of Mr Hone, this issue does not arise. In any event, for the reasons earlier stated, it is not necessary to address this conditional accessorial liability claim.
If Mr Hone or Culinary Co engaged in contravening conduct as alleged did Mr Floropoulos aid and abet, or was he knowingly involved in, that contravention?
882 For reasons parallel to those mentioned previously in relation to the knowing involvement allegations against Mr Hone, it is not necessary to address the knowing involvement allegations against Mr Floropoulos.[571]
Breach of Warranty of Authority by Mr Hone
883 As framed by the parties, the issues regarding the breach of warranty of authority claim were said to be as follows:
(a) In or about 2016 and continuing into 2017, did Mr Hone warrant to Oliana that he had the authority to act on Kremel’s behalf in relation to any exclusive distribution agreement and/or the matters set out in his letter dated 7 June 2016?(b) Did Mr Hone have any such authority from Kremel’s at the time(s) such warranty was given?
(c) At any, and if so what time in 2016 or 2017, did Mr Hone or anyone else inform Oliana that:
(i) Mr Hone did not in fact have the authority to act on Kremel’s behalf in relation to any exclusive distribution agreement and/or the matters set out in his letter dated 7 June 2016; or(ii) Mr Hone’s authority from Kremel had been rescinded or withdrawn by Kremel in any, and if so what way?
Oliana Submissions
884 As reflected in paragraph 63 of the amended statement of claim, in this context Oliana again relied upon the acts and omissions the subject of the allegations regarding the 7 June Representations, the Hone Conduct, the Authority Representation, and the Binding Agreement Representation, also referring to and relying upon the submissions it made in relation to such conduct in connection with the misleading or deceptive conduct claims against Mr Hone.
885 Oliana submitted that where a solicitor holds him or herself out as acting for a company or individual there is an implied warranty of authority by them,[572] and that here the letter of 7 June 2016 made an express warranty to that effect. It was said that Mr Hone’s drafting of the exclusive distribution agreement and communications relating to it were calculated to maintain his earlier warranty as a continuing one, which he never corrected, qualified or withdrew.
886 It submitted that it was clear from Mr Canzoneri’s evidence that he (and through him Oliana) relied upon Mr Hone’s representation of authority and was induced by it to act as Oliana did in connection with being appointed as the exclusive distributor for Kremel’s products in Australia and New Zealand, including by ordering and paying substantial amounts for Kremel stock not long after 7 June, and thereafter by executing and entering into the exclusive distribution agreement, and by proceeding on the basis that it was so appointed.
887 Oliana submitted that the true position was that Mr Hone did not have at any time the authority represented. In so submitting reliance was placed upon Mr Hone’s concession at trial that he never had the authority that he represented that he had, and Mr Garakis’ evidence that he had not spoken to Mr Hone prior to meeting him in September 2017 and had never engaged him as Kremel’s lawyer.
888 Oliana contended that Mr Hone’s ‘half-hearted defence’ by suggesting that the 7 June 2016 letter was superseded by the exclusive distribution agreement was no defence in fact. On the contrary, it was said that what occurred in the drafting of the exclusive distribution agreement in November and December 2016 was a continuation of the warranty of authority and a manifest confirmation by Mr Hone that he then continued to have the authority represented in the 7 June 2016 letter. It was said that this was false, that Mr Hone knew it to be false, and that it affords him no defence at all.
889 Oliana submitted that it was clear on the evidence that not only did Mr Hone not have the authority but that Mr Hone never informed Oliana of that fact or withdrew or qualified its representation of authority. In this context reference was made to: the absence of any document showing any disclosure; neither Mr Hone nor Mr Delis giving evidence; the availability of an inference that any evidence Mr Hone or Mr Delis could have given on the issue would not have assisted Mr Hone; Mr Hone’s involvement with the exclusive distribution agreement and the communications regarding the same; Mr Canzoneri’s joint communication to Mr Garakis and Mr Hone on 3 January 2018; Mr Hone’s consistent position even as late as 16 January 2018 when seeking to terminate the exclusive distribution agreement; communications with Mr Garakis regarding the statutory demand prepared by Mr Hone and his supporting affidavit; and the fact that the original statement of claim in this proceeding reflected the continuing operative nature of the warranty even at that time.
890 With respect to remedy, Oliana submitted that Mr Hone was liable for its loss and damage which was to be determined on the contractual measure by considering the position Oliana would have been in had the warranty of authority been true. It was submitted that on Mr Garakis’ unchallenged evidence, had Mr Hone truly had Kremel’s authority, then the price Mr Hone would have been so instructed to insert in the initial invoices and the exclusive distribution agreement would have been the Kremel Supply Prices and not the Culinary Co Supply Price ‘crafted’ by Mr Floropoulos.
891 It was submitted that the approach of Finkelstein J in BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3)[573] (‘BHPB v Cosco’) was appropriate. It was said that had Mr Hone been acting for and had Kremel’s actual authority, then the exclusive distribution agreement would have been at the Kremel Supply Price and, further, Oliana would not have been vulnerable to the misconduct of Mr Floropoulos. Instead, so it was said, Oliana entered into an agreement which imposed falsely inflated prices, being the Culinary Co Supply Price.
892 As earlier indicated, the loss was said to be an amount equal to the Oliana Loss Amount.
Mr Hone Submissions
893 Mr Hone relied upon submissions made in relation to the misleading or deceptive conduct claim by Mr Floropoulos regarding the making of the representation, but subject to the concessions earlier referred to. Although the submissions on the breach of warranty of authority claim were not always closely focused on that topic, in substance it was submitted that:
(a) The exclusive distribution agreement was not executed by Mr Garakis or Kremel.
(b) The representation of authority was with respect to a future matter which did occur with the execution of the exclusive distribution agreement between Culinary Co and Oliana.
(c) Culinary Co had authority from Kremel to supply its products to Oliana.
(d) The second draft agreement prepared by Mr Hone recording that he was authorised to sign for and on behalf of Kremel was only a draft and superseded by that which followed.
(e) The negotiations were conducted by Mr Hone in his capacity as sole director; secretary and shareholder of Culinary Co.
(f) By the time the exclusive distribution agreement was first signed by Mr Canzoneri on about 30 November 2016 he could have been under no misapprehension that Mr Hone and Culinary Co were not purporting to act as agent or representative of Kremel in signing the agreement.
(g) Mr Canzoneri’s evidence that he saw an agreement purportedly signed by Kremel ought to be rejected.
(h) The product list and price agreed to by Oliana, and Mr Hone for Culinary Co, was ‘... freely negotiated on commercial terms ...’ and in the order of 20% to 30% cheaper than the pricing of the products purchased by Oliana from MyCo.
(i) At no stage did Mr Hone, Culinary Co, Mr Floropoulos, or Mr Delis represent or advise Oliana that the products would be supplied at the Kremel Supply Price.
(j) The ‘entire agreement’ term in clause 11.6 of the exclusive distribution agreement and the ‘status of the parties’ term in clause 2.3 were relevant.
(k) In any event, Oliana did not act on the representation of authority.
(l) Further, Oliana did not suffer loss and damage given that the vegan cheese products purchased were delivered in accordance with the orders issued and the prices in the exclusive distribution agreement resulted in an additional 20 to 30% margin for Oliana.
(m) There was no evidence from Oliana or Mr Canzoneri as to what it would have done if it had not proceeded with Culinary Co, evidence was not produced about other suppliers, and no accounting or financial evidence or tax returns were produced in support of the claimed loss and damage.
(n) Oliana’s claim was in effect a claim based on loss of opportunity in the manner earlier described in these reasons.
894 The warranty of authority issue did not directly concern Mr Floropoulos and he did not make substantive submissions about it, except to the extent the earlier submissions addressed related to the issue.[574]
Principles and Observations
895 The action for breach of warranty of authority has sometimes been described as the rule in Collen v Wright.[575] In Collen v Wright, Willes J stated:[576]
[A] person, who induces another person to contract with him as the agent of a third party by an unqualified assertion of his being authorised to act as such an agent, is answerable to the person who so contracts for any damages which he may sustain by reason of the assertion being untrue.... The obligation arising in such a case is well expressed by saying that a person, professing the contract as agent for another, impliedly, if not expressly, undertakes to or promises the person who enters into such a contract, upon the face of the professed agent being duly authorised, that the authority which he professes to have does in point of fact exist. The fact of entering into the transaction with the professed agent, as such, is good consideration for the promise.
896 In Starkey v Bank of England, Lord Davey stated that this rule ‘extends to every transaction of business into which a third party is induced to enter by a representation that the person with whom he is doing business has the authority of some other person’.[577] In relation to solicitors, it has been stated that a ‘solicitor must be held to warrant the authority which he claims as representing his client’.[578]
897 In Schlieske v Overseas Construction Pty Ltd, Sholl J stated that inducement is prima facie implied from the making of an assertion or representation of authority and subsequent entry into a relevant transaction.[579] However, this is ‘simply a rebuttable presumption or inference of fact’ which may be overcome, on the balance of probabilities.[580]
898 The three elements of a breach of warranty of authority were referred to as follows by Isaacs J in Leggo v Brown & Dureau Ltd as follows:[581]
The essentials are (1) assertion of authority; (2) inducement by asserting; (3) transaction which but for that assertion the other party would not have entered into. Where they coexist there is a warranty. There is no suggestion that there must be ‘belief’ in the truth of the assertion; there must, of course, be reliance on the assertion, for that is connoted by the ‘inducement’.
899 The plaintiff bears the onus of establishing that there has been an unqualified assertion that the defendant is authorised to act as an agent.[582] However, there is no requirement of actual intention, fraud, negligence or fault on the part of the professing agent.[583]
900 More recently, in BHPB v Cosco, Finkelstein J stated:[584]
The cases establish that where a person (the first person) falsely represents that he has authority to act on behalf of another person in a particular transaction and the person to whom the representation is made (the second person) is induced to act on the faith of the representation and suffers loss, the second person may recover the amount of the loss from the first person in an action for breach of a collateral contract. It matters not that the first person acted in good faith, believing he had the authority which he purported to have. See generally Bowstead and Reynolds on Agency (18th ed 2006) 541; Chitty on Contracts, (30th ed, 2008) vol 2 65; Dal Pont, The Law of Agency (2nd ed 2008) 697; Collen v Wright [1857] EngR 25; (1857) 8 E & B 647. The action is based on collateral contract: Penn v Bristol & West Building Society [1997] EWCA Civ 1416; [1997] 1 WLR 1356
901 His Honour further stated that:
[R]eference should be made to Firbank’s Executors v Humphreys [1886] UKLawRpKQB 155; (1886) 18 QBD 54. There lord Esher MR said (at 60):
The rule to be deduced is, that where a person by asserting that he has the authority of the principal induces another person to enter into any transaction which he would not have entered into but for that assertion, and that assertion turns out to be untrue, to the injury of the person to whom it is made, it must be taken that the person making it undertook that it was true, and he is liable personally for the damage that has occurred.
That is to say, it is not necessary for the plaintiff to enter into a transaction with the supposed principal in order to establish an action for breach of warranty of authority. The cause of action is established even if the plaintiff enters into a transaction with another person: see also Penn v Bristol & West Building Society [1997] EWCA Civ 1416; [1997] 1 WLR 1356.
902 In Permanent Custodians Ltd v Geagea,[585] Justice Rothman described Finkelstein J’s summary of the requirements of a claim for breach of warranty of authority, in BHPB v Cosco, as the accepted principle upon which the cause of action is based.[586] His Honour further expanded as follows:
The reference by Finkelstein J to Bowstead and Reynolds on Agency (18th Edition, 2006) at [541] should be expanded. Bowstead quotes the following passage from the judgment Lord Esher MR in Firbank’s Executors v Humphreys [1886] UKLawRpKQB 155; (1886) 18 QBD 54 at [60], in which the Master of the Rolls said:
[60] The rule to be deduced is, that where a person by asserting that he has the authority of the principal induces another person to enter into any transaction which he would not have entered into but for that assertion, and that assertion turns out to be untrue, to the injury of the person to whom it is made, it must be taken that the person making it undertook it was true, and he is liable personally for the damage that has occurred.
The learned authors in Bowstead go on to state:
Where a person, by words or conduct, represents that he has actual authority to act on behalf of another, and a third party is induced by such representation to act in a manner in which he would not have acted if such representation had not been made, the first-mentioned person is deemed to warrant that the representation is true, and is liable for any lose [sic] caused to such third party by a breach of that implied warranty, even if he acted in good faith, under a mistaken belief that he had such authority.
903 Damages for breach of warranty of authority are assessed contractually.[587]
904 In Leggo v Brown & Dureau,[588] Knox CJ said that a person who commits a breach of warranty of authority ‘... is bound to make good to the other contracting party what that party has lost, or failed to obtain, by reason of the non-existence of the authority.’
905 In Boulas v Angelopoulos, Kirby P (Gleeson CJ and Samuels JA agreeing) stated that ‘[a]n agent is only answerable for such damage as results to the plaintiff from the assertion of authority being untrue’. His Honour quoted Bowstead on Agency as to the measure of damages for breach of warranty of authority as follows:[589]
(1) The measure of damages for breach of warranty of authority is the loss which the parties should reasonably have contemplated as liable to result from the breach of warranty.(2) Where a contract is repudiated by the person on whose behalf it was made on the ground that it was made without authority, such loss is prima facie the amount of damages that could have been recovered from him in an action if he had duly authorised and subsequently refused to perform the contract together with the costs and expenses (if any) incurred in respect of any legal proceedings reasonably taken against him on the contract.
906 In BHPB v Cosco, Justice Finkelstein identified that ‘to make out its breach of warranty of authority claim BHPB must show it was induced to act on the assertion that Cosco represented NCI by engaging in conduct which, but for the assertion of authority by Cosco, it would not have entered into’. His Honour concluded that:[590]
As regards causation, if Cosco had actual instructions from NCI to enter into a charterparty Seawise would not have concluded the charterparty with Jacky and the vessel would not have been delivered to Nera. Cosco’s failure to hold the authority which it warranted caused the loss that BHPB has suffered. That the vessel was delivered prior to the payment of the first hire in accordance with the usual practice, does not affect this conclusion.So far as quantification of the loss is concerned, it is to be determined on the contractual measure. In a case where the plaintiff is induced to enter into some form of contract, the normal measure of damage is what the plaintiff would have recovered under that contract. That is to say, the measure of damage is arrived at by considering the difference in the position the plaintiff would have been in had the representation been true and the position he actually is in, in consequence of it being untrue: Firbank [1886] UKLawRpKQB 155; (1886) 18 QBD 54, 60. In this case the damage is the amount which BHPB has lost in being unable to recover from NCI the balance due under the charterparty.
907 In the subsequent judgment of BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 4), Finkelstein J considered whether, inter alia, the currency in which judgment should be given.[591] His Honour relevantly stated:[592]
On BHPB’ s claim for damages for breach of warranty the contractual measure of damages applies. The contractual measure entitles BHPB to be put into the position it would have been in had it entered into a charterparty with NCI. If that had happened BHPB would have obtained the hire and ballast bonus in US dollars. The contract (the charterparty) is silent on the currency in which other obligations are to be discharged. Moreover, there is no evidence about the currency in which those expenses were discharged. It is unlikely that they were paid in Australian currency. It is possible they were paid in US dollars. It is equally possible, however, that they were paid in a local currency.
908 In Permanent Custodians Ltd v Geagea, Justice Rothman considered causation for breach of warranty claim together with Permanent Custodians’ claim for misleading and deceptive conduct under the ACL. On this issue Rothman J stated that:[593]
[T]he fundamental issue to be determined is whether the representation that Mr Symonds was acting for Charbel Geagea and authorised to direct the disbursements was conduct upon which Permanent Custodians relied or was it a representation, which made little or no difference to the conduct of Permanent Custodians.
His Honour went on to conclude:[594]
The fact, if it be the fact, damage would have occurred if Mr Symonds had not represented that the mortgagors (all of them and each of them) authorised the disbursements of funds in a particular way is not to the point ......
The fact that, in the absence of conduct by a defendant, damage would have been caused by another person acting unlawfully does not negate the proposition that the damage was caused by the defendant’s conduct. In Adeels Palace Pty Ltd v Moubarak [2009] HCA 48; (2009) 239 CLR 420, the High Court discussed causation and breach of duty (albeit in the context of the Civil Liability Act) and referred to steps to be taken that may have prevented this injury but simply caused an injury to another (see Adeels Palace at [50]). The converse is also true. The fact, if it be the fact, that if the conduct by Mr Symonds did not occur, then other steps would have been taken by Permanent Custodians that, in all probability; would have led to different criminal or tortious acts for which a cause of action may arise does not mean that the conduct of Mr Symonds has not caused the disbursement of the funds and thereby the losses that can properly be calculated.
Moreover, in the context of Mr Symonds acting as the conduit for all of the documents, on behalf of each of the mortgagors, a letter instructing Permanent Custodians as to the disbursements would, reasonably and properly, be taken as a representation that Mr Symonds had authority to instruct as to the disbursement of the funds on behalf of each of the mortgagors.
It was on the basis of that instruction that Permanent Custodians acted and it was that instruction and the conduct in reliance thereon that caused the loss and damage.
909 In Cro Travel Pty Ltd v Australia Capital Financial Management Pty Ltd (‘Cro v ACFM’), Ward JA (Meagher JA and Barrett AJA agreeing) stated that:[595]
There is no dispute that the appropriate question to be postulated in assessing damages for breach of warranty of authority is to ask what would have happened if the purported agent had the authority it held itself out to have. That is, one considers an hypothetical situation and asks what would the position have been had the authority in fact existed at the relevant time.
910 Her Honour went on to quote the statements of principle of Finkelstein J in BHPB v Cosco, which the primary judge had referred to, as well as quoting with approval from Bowstead and Reynolds on Agency[596] regarding the position involving transactions that would have been unenforceable even if the warranted authority had been possessed.
Consideration
911 Noting that Oliana relied upon the acts and omissions earlier referred to in the context of the misleading or deceptive conduct claims against Mr Hone as establishing the representation and warranty of authority, it is convenient first to refer back to, without reciting or summarising them, the observations made and conclusions reached earlier regarding the said acts and omissions, the 7 June Representations, the Hone Conduct, the Exclusive Distributor Representation, the Authority Representation, and the Binding Agreement Representation.
912 In the circumstances, it is in my view plain that Oliana has established that from 7 June 2016 and continuing, Mr Hone represented and asserted that he had authority to act on Kremel’s behalf in relation to the matters set out in the 7 June 2016 letter and the exclusive distribution agreement that was formally to follow thereafter. Whilst this conclusion is at least in part supported by the concessions made on behalf of Mr Hone, given the content of the 7 June 2016 letter and that which followed, the position would remain the same whether or not such concessions had been made.
913 In this context, and as a point of emphasis, it is convenient again to highlight aspects of the 7 June 2016 letter as set out below, which it will be recalled directly and in plain terms addressed Mr Hone’s authority to act for Kremel in relation to the appointment of Oliana as Kremel’s exclusive distributor.[597]
914 That such a representation of authority was made by Mr Hone is evident from the underlined text in the letter (emphasis added):
Dear Mr CanzoneriI hereby confirm that I am the sole officeholder for Culinary Co Pty Ltd and also act as the legal representative for and on behalf of Culinary Co-Greece whose managing director is Mr Paris Periandros.[598]
As you are aware my clients have been in discussions with several other distributors throughout Australia.
I confirm that I have been instructed by Mr Periandros to cease all talks with these third party distributors and to now appoint Oliana Foods to be the new distributors with exclusive rights for Culinary Co and its various products for both Australia and New Zealand.
As per your prior discussion with Mr Paris Periandros of Culinary Co-Greece in good faith he has commenced the preparation of your initial order you have provided as per product specifications.
Within the next 24 hours we will provide you with an invoice for deposit to be paid as per our agreement.
Yours sincerely
Ian George Hone
Director
For and on behalf of Culinary Co Pty Ltd
915 It will also be recalled that by an email sent in response to the 7 June 2016 letter on the same day Mr Canzoneri responded thanking Mr Hone for his email, stating that he looked forward to a ‘... long and mutual association ...’ and asking that Mr Hone ‘... forward the agreement as soon as it is finalised ...’, which Mr Hone subsequently as the earlier discussion of these matters reveals.
916 The events then unfolded as earlier described, but again recalling they include: invoices being sent shortly after the letter and $275,000 being paid by Oliana with the first $75,000 being paid on 9 June 2016; Mr Hone’s role in connection with exclusive distribution agreement and his communications regarding the same; Mr Hone’s email of 23 November 2016 to Mr Canzoneri attaching his second draft agreement following what he described as having been revised ‘... after discussions with Greece overnight ...’; that same email referring in the same sentence to the Product/Price list still to come; the exclusive distribution agreement’s terms recording and relating to Kremel and Culinary Co being, together, the ‘Supplier’ (and ‘direct or indirect manufacturer’); Oliana being the only ’Distributor’ named in the agreement, which was consistent with the terms of the 7 June 2016 letter; Mr Hone not disclosing the true position; and Mr Hone continuing to proceed as though the exclusive distribution agreement was binding and in operation, and that he was acting on behalf of Kremel — which in part was well illustrated by the terms of his correspondence in January 2018 purporting to terminate the agreement, and the fact that he was the named person to receive notices for the ‘Supplier’ under the agreement, being Kremel and Culinary Co.
917 The required representation and assertion of authority has been established.
918 Any suggestion that Mr Canzoneri, and through him Oliana, did not rely on this representation and assertion of authority, or was not induced to transact on the basis of it, is in my view without merit. Given the earlier discussion of the background and circumstances and the misleading conduct claim against Mr Hone previously addressed, this aspect can be dealt with relatively swiftly. Given the discussion to date it is sufficient to refer to the following:[599]
(a) Oliana transacting almost immediately following the receipt of the 7 June 2016 letter in which it was informed that Mr Hone had instructions ‘to now appoint’ Oliana as the exclusive distributor for Kremel. This included proceeding with substantial orders and paying $275,000 in respect of the invoiced products in the manner earlier referred to.
(b) The terms of the 7 June 2016 letter, Mr Canzoneri’s email that followed it, and that which thereafter transpired in relation to the negotiation and execution of the exclusive distribution agreement and the orders and amounts paid by Oliana thereafter as reflected in the Oliana Payments Schedule.
(c) The terms and features of the exclusive distribution agreement earlier referred to, including, for example, Kremel being the joint ‘Supplier’, Oliana being the only ‘Distributor’ (not Culinary Co), and the price being the ‘Supplier’s’ price.
(d) Mr Canzoneri and Oliana acting consistently with, and on the basis that, Oliana had been appointed as the exclusive distributor for Kremel, as reflected in the 7 June 2016 letter and the exclusive distribution agreement.
(e) The ongoing ordering of and payment for product by Oliana and the documentary evidence regarding frustrations with supply and reconciliation by Kremel.
(f) Mr Canzoneri’s evidence as to what he would have done had he known of the true position.
(g) The fact of and terms of Mr Canzoneri’s email to Mr Garakis and Mr Hone jointly on 3 January 2018.
919 For completeness, I add that I accept that Mr Canzoneri’s, and consequently Oliana’s, position in this context is at least inferentially supported by the terms of the original statement of claim in this proceeding, in which the claim at that time included a claim against Kremel under the exclusive distribution agreement. However, resort need not be had to this matter as the positon is in my view clear without it.
920 I also accept that it was plain on the evidence that neither Mr Hone nor anyone else informed Mr Canzoneri or anyone else at Oliana of the true position regarding Mr Hone’s authority (or rather, lack of it) or sought to withdraw or qualify the representation and assertion of authority, noting also that it was not and could not have been seriously contended otherwise. Although it is open to draw an inference that any evidence that Mr Hone could have given on this issue would not have assisted him, the position is clear in any event. In these circumstances it is also unnecessary to decide whether Mr Delis should be regarded as having been in Mr Hone’s camp such that a similar inference could be drawn in respect of any evidence he might have been able to give on the topic.
921 That Mr Hone was not authorised to act on Kremel’s behalf in relation to the matters the subject of the 7 June 2016 letter or in relation to any exclusive distribution agreement was not seriously contested. It was clear that Mr Hone did not have any authority from Kremel or Mr Garakis as at 7 June 2016 or at any relevant time thereafter in relation to the appointment of Oliana as its exclusive distributor, whether pursuant to the 7 June 2016 letter, the exclusive distribution agreement or otherwise which was a point that Mr Garakis’ evidence somewhat emotionally and colourfully reinforced. As to the inferences that might be drawn in respect of any evidence of Mr Hone or Mr Delis could have given on the topic, the observations made in the previous paragraph apply equally.
922 With respect to specific matters raised on behalf of Mr Hone it will be apparent that I have not found them persuasive in relation to the matters addressed so far on this topic. Before turning to the question of the alleged loss and damage, I make the following additional comments regarding these specific matters raised.
923 That the exclusive distribution agreement was not executed by Mr Garakis or Kremel does not assist Mr Hone. The focus here is the representation and assertion of authority in circumstances where Mr Hone had none. If and to the extent this was intended to detract from Oliana’s contention that it relied on and was induced by the warranty of authority to transact and act, that submission is without merit. For the reasons earlier indicated it is clear that Oliana has established that it relied on and was induced to transact by Mr Hone’s assertion of authority. It continued to do so until at least 10 January 2018, which was also supported by the fact that it wrote jointly to Mr Hone and Garakis on 3 January 2018.[600]
924 Even assuming that Culinary Co had authority from Kremel to supply its products to Oliana,[601] that is not to the point. Kremel was not aware of what Mr Hone and Mr Floropoulos had been doing with Oliana, and we are here addressing Mr Hone’s assertion of authority to Oliana, not the position between Culinary Co and Kremel that was unknown to Oliana.
925 Whilst it is true that the second draft agreement prepared by Mr Hone was superseded by the third and later drafts, it does not change the fact that it came from Mr Hone, included Kremel as a party, and recorded in the execution block for Kremel that it was to be signed for and on behalf of Kremel by Mr Hone. This was part of Mr Hone’s conduct that was consistent with the representation and assertion regarding his authority that commenced with the 7 June 2016 letter and forms part of the relevant circumstances. It did not evaporate.
926 I have previously determined that it has not been established on the evidence that there was an agreement bearing a signature purporting to be on behalf of Kremel. However, that also changes nothing so far as the current issue is concerned. If and to the extent it was intended by Mr Hone to suggest that the absence of a signature, whether alone or in combination with one or more of the related communications between the parties in and around November and December 2016, was sufficient to put Mr Canzoneri and Oliana on notice that Mr Hone was not or no longer authorised to represent or act on behalf of Kremel, I do not accept that submission. When viewed in the run of communications, events and acts and omissions involving Mr Hone and Mr Canzoneri from 7 June 2016 until 3 January 2018 (and to some extent thereafter), it is apparent that it does no such thing. Viewed in context and in the light of all the circumstances, it does not detract in any material way, if at all, from the represented and asserted authority that Mr Hone conveyed that he had — which, as I have said, is also supported by the terms of the agreement itself and Mr Hone’s conduct thereafter. I have also explained that reliance was established.
927 Although it is said that neither Mr Hone nor anyone else represented that the price list was that of Kremel, as I have earlier addressed, that sits in tension with the terms of the exclusive distribution agreement which record Kremel as the Supplier (with Culinary Co) and only one Supplier price. But again, in relation to the matters referred to above it matters not, although the issue is further addressed when addressing loss and damage below. Further, Mr Hone’s email to Mr Canzoneri when sending the second draft of the agreement to him was at least consistent with the price list to be added being that provided by Culinary Co Greece (that is, Kremel). It will be recalled that this email to ‘Sebastian’ attached the agreement and stated: ‘after discussions with Greece overnight please find amended document, produce/price list still to be added’.
928 I also do not accept the submission that the price arrived at for Oliana was something that was ‘... freely negotiated on commercial terms ...’. Among other things, Mr Hone misrepresented his authority and the true position from the time he sent the letter of 7 June 2016 and thereafter, and this induced Mr Canzoneri and through him Oliana to transact in the way earlier described. However else the circumstances in which the price was arrived at may be described, it cannot be meritoriously contended that the arrangements in this case after 7 June 2016 (and as later recorded in the exclusive distribution agreement) reflect an agreement ‘... freely negotiated on commercial terms ...’, given that Oliana was materially misled in the way that I have determined.
929 Insofar as reliance was placed on clause 2.3 and the entire agreement clause of the exclusive distribution agreement, I refer to the earlier observations made in the context of the misleading conduct claims. In this context they also fall to be considered as part of the whole context and circumstances and do not detract from the represented and asserted authority of Mr Hone conveyed to Oliana by Mr Hone.
930 As I have said, even putting the concessions to one side, Oliana has established that from 7 June 2016 and continuing, Mr Hone represented and asserted that he had authority to act on Kremel’s behalf in relation to the matters set out in the letter of 7 June 2016 and the exclusive distribution agreement that was formally to follow thereafter. It has also established that it was induced thereby to transact in the way earlier described. Mr Hone’s warranty of authority was breached by him because he had no such authority. The remaining questions are whether Oliana has established that it has suffered loss and damage by that breach and, if so, the quantum of that loss.
Loss and damage – breach of warranty of authority
931 As was the case for the damages claimed by Oliana in respect of the other causes of action, that which was claimed by Oliana for this breach of warranty of authority claim was essentially the same and conceptually straightforward. Oliana referred to damages being assessed by reference to the contractual measure and attention was drawn to the principles and authorities earlier referred to. It was said that had Mr Hone in fact been acting for and had Kremel’s actual authority, then Oliana would have been appointed as Kremel’s exclusive distributor, initially pursuant to the 7 June 2016 letter and then pursuant to an exclusive distribution agreement reflecting Kremel Supply Prices. It was said further that Oliana would not have been vulnerable to the misconduct of Mr Floropoulos.
932 As mentioned, the loss was said to be equal to the Oliana Loss Amount earlier explained. In calculating damages in this way Oliana characterised its damages claim as ‘generous’, as elaborated on in connection with the s 1317H compensation claim.
933 Apart from the submissions made in relation to Mr Canzoneri’s counterfactual position and reliance that I have addressed, no challenge was made to the amounts or other substantive submissions made regarding loss and damage in this context.
934 I accept the substance of Oliana’s position regarding the damages it claims equal to the Oliana Loss Amount based on the differential between the Kremel Supply Price and the Culinary Co price (adjusted for freight).
935 Damages are to be assessed by reference to the contractual measure and, to adopt the language of the New South Wales Court of Appeal in Cro Travel, ‘... the appropriate question to be postulated in assessing damages for [Mr Hone’s] breach of warranty of authority is to ask what would have happened if the purported agent [Mr Hone] had the authority [he] held [himself] out to have. That is, one considers a hypothetical situation and asks what would the position have been had the authority in fact existed at the relevant time’.[602]
936 I turn to the hypothetical. Here, if Mr Hone in fact had the authority from Mr Garakis and Kremel to ‘now appoint’ Oliana as Kremel’s exclusive distributor for its products as was represented and asserted by Mr Hone and acted upon by Oliana, it can be inferred that this would have been at the Kremel Supply Prices. This is because it was Kremel who is the supplier to Oliana in that hypothetical, not Culinary Co or anyone else. It may also be noted that the Kremel Supply prices were established on the evidence and that there was no evidence of any different supply price that might have been offered by Kremel. Similarly, if Mr Hone had in fact had the authority to act for Kremel and Mr Garakis in relation to the entry into an exclusive distribution agreement in respect of such an appointment of Oliana as exclusive distributor for Kremel, it can similarly be inferred that this would have been in respect of supply at the Kremel Supply Price. Again this is because it is Kremel who is the supplier in that hypothetical. It is to be noted in this context that this contractual measure does not focus on that which Mr Canzoneri might have done if the true position was known but on what would have occurred if Mr Hone had the authority he asserted. Consequently, the submissions on the Oliana counterfactual not being established were misplaced in this context.
937 There are some parallels to the reasoning regarding the s 1317H claim against Mr Floropoulos and, as there, if and to the extent that it is necessary to further support such inferences of Kremel supply, and at the Kremel Supply Price when addressing this contractual measure, they are supported by: the asserted authority; the absence of any prior relationship between Mr Garakis and Kremel on the one hand and Mr Floropoulos on the other; Mr Garakis’ evidence about being pleased with the new supply opportunity and being very happy because Kremel was a small company looking for business opportunities, especially exports; Mr Garakis not doing Mr Floropoulos ‘any favours’ on price but trying to give the best price because it was a ‘very, very nice opportunity for us’; the Kremel Supply Price allowing a profit; and the Kremel Supply Price having been agreed before 7 June 2016.
938 It is to be remembered in this context that Mr Hone had warranted his authority from 7 June 2016 to ‘now appoint’ Oliana as exclusive distributor for Kremel, as was later reinforced. It may be asked rhetorically that if that was his asserted authority, who else’s prices could apply except for Kremel’s?
939 To the extent that it was submitted that the hypothetical in question should be assessed on the basis that the prices to be charged would have been the Culinary Co Supply Prices reflected in the Culinary Co invoices (and the exclusive distribution agreement), I do not accept that submission. The hypothetical to be considered is the position that would have prevailed if Mr Hone in fact had the asserted authority in relation to the appointment of Oliana as exclusive distributor for Kremel as supplier. There is no sound basis on the evidence for establishing or concluding that if Mr Hone had in fact had such authority on behalf of Kremel then the prices Kremel would have charged would have been prices artificially created by Mr Floropoulos unknown to Kremel that were assigned by Mr Floropoulos to an entity unrelated to Kremel (Culinary Co), and which were created as part of an undisclosed plan of Mr Floropoulos to interpose Culinary Co so as to allow for a substantial mark-up for the benefit of Mr Floropoulos and Culinary Co without Oliana’s knowledge.
940 Oliana has established that Mr Hone is liable to it for damages for breach of warranty of authority, with such amount being equal to the Oliana Loss Amount.
OTHER MATTERS
941 Subject to addressing the election issue and hearing from the parties regarding the possible impact of the date upon which Mr Floropoulos was joined as a party to this proceeding,[603] it appears that Oliana should be entitled to the statutory interest claimed against Mr Floropoulos and Mr Hone. No submissions were made to the contrary.
CONCLUSION
942 For the reasons stated above, and in summary,[604] I have concluded that:
(a) Mr Floropoulos was a de facto director and officer of Oliana after 26 February 2016 and was subject to the statutory duties imposed on such directors and officers by ss 180, 181, 182 and 183 of the Act.(b) Mr Floropoulos was a fiduciary of Oliana in his role as a de facto director and officer of Oliana by reason of which he owed fiduciary duties to it in connection with his role and responsibilities in seeking to source and secure an alternative manufacturer/supplier of vegan cheese for the benefit of Oliana.
(c) Irrespective of his position as de facto director and officer of Oliana, Mr Floropoulos was in a fiduciary relationship with Oliana and owed fiduciary duties to it by reason of his role and responsibilities in connection with the sourcing and securing of an alternative manufacturer/supplier of vegan cheese for the benefit of Oliana.
(d) Mr Floropoulos breached the statutory duties under the Act that he owed to Oliana. Even if it had not been determined that Mr Floropoulos was a director of Oliana after 26 February 2016, he would have breached his duty to Oliana under s 183(1) of the Act by reason of his improper use of information obtained because he had been a director.
(e) Mr Floropoulos breached the fiduciary duties he owed to Oliana.
(f) Subject to addressing with the parties the issue of election regarding its alternative claim for an account of profits, Oliana has established that it is entitled to:[605]
(i) an award of compensation against Mr Floropoulos pursuant to s 1317H of the Act of an amount equal to the Oliana Loss Amount in respect of the breach of statutory duty claims made against him;[606](ii) equitable compensation from Mr Floropoulos of an amount equal to the Oliana Loss Amount in respect of the breach of fiduciary duty claims made against him.
(g) In contravention of s 18 of the ACL, Mr Floropoulos engaged in misleading and deceptive conduct of the kind alleged by Oliana.(h) It is not necessary to determine whether Mr Floropoulos was a person involved in any misleading and deceptive conduct of Mr Hone or Culinary Co.
(i) Oliana did not establish that the loss and damage claimed by it in respect of Mr Floropoulos’ misleading and deceptive conduct was suffered because of that contravening conduct. Consequently, Oliana is not entitled to damages or compensation from Mr Floropoulos pursuant to s 236 or s 238 of the ACL.
(j) In contravention of s 18 of the ACL, Mr Hone engaged in misleading and deceptive conduct of the kind alleged by Oliana.
(k) It is not necessary to determine whether Mr Hone was a person involved in any misleading and deceptive conduct of Mr Floropoulos or Culinary Co.
(l) Oliana did not establish that the loss and damage claimed by it in respect of Mr Hone’s misleading and deceptive conduct was suffered because of that contravening conduct. Consequently, Oliana is not entitled to damages or compensation from Mr Hone pursuant to s 236 or s 238 of the ACL.
(m) Mr Hone is liable to Oliana for breach of warranty of authority in respect of his claimed authority to act on behalf of Kremel in connection with the appointment of Oliana as Kremel’s exclusive distributor of its vegan cheese products in Australia and New Zealand.
(n) Oliana is entitled to an award of damages from Mr Hone for breach of warranty of authority of an amount equal to the Oliana Loss Amount.[607]
943 Subject to addressing the question of election,[608] Oliana is entitled to judgment against each of Mr Floropoulos and Mr Hone for an amount equal to the Oliana Loss Amount.
944 I will address with the parties the matters of statutory interest, costs, form of orders,[609] and next steps.
DEFINED TERMS & NAMED PERSONS & PARAGRAPH NUMBERS WHERE FIRST INTRODUCED
|
DEFINED TERM / PERSON
|
PARAGRAPH
/ *FOOTNOTE |
|
7 June Representations
|
|
|
ACL
|
|
|
Act, the
|
|
|
ADAMS, Mr (Damien)
|
|
|
Agreed Chronology
|
|
|
ALEXOPOULOS, Theo
|
|
|
alleged Moka Pot Discussion
|
|
|
Australian Subsidiary Representation
|
|
|
Authority Representation
|
|
|
Binding Agreement Representation
|
|
|
CANZONERI, Michael
|
|
|
CANZONERI, Mr (Sebastian)
|
|
|
CCA
|
|
|
Clause 57
|
|
|
Culinary Co
|
|
|
Culinary Co Supply Price
|
|
|
DAVIS, Finlay
|
* 20
|
|
de facto director end date
|
|
|
DELIS, Peter
|
|
|
exclusive distribution agreement
|
|
|
Exclusive Distributor Representation
|
|
|
Floropoulos Conduct
|
|
|
FLOROPOULOS, Bill
|
|
|
FLOROPOULOS, Ms Nikki
|
|
|
Foods International
|
|
|
GARAKIS, Mr Paris
|
|
|
GIANFRIDDO, Vincenzo
|
|
|
Hone Conduct
|
|
|
HONE, Ian
|
|
|
ITALIA, Morris
|
|
|
KING, Charlotte
|
|
|
Kremel
|
|
|
Kremel Supply Price(s)
|
|
|
MAKRAKIS, Andreas
|
|
|
MSL Lawyers
|
|
|
MyCo
|
|
|
MyCo Cost Price
|
|
|
MyCo Supply Price
|
|
|
NOVAK, Jack
|
|
|
Oliana
|
|
|
Oliana Information
|
|
|
Oliana Loss Amount
|
|
|
Oliana Payments Schedule
|
|
|
Oliana Product Payments
|
|
|
PAPASTEFANAKIS, Nikos
|
|
|
PAULE, Terry
|
|
|
PERIANDROS, Mr (Paris)
|
* 13
|
|
Porsche
|
|
|
Price Representation
|
|
|
SCALISE, Stephanie
|
|
|
Scottish Pacific Business Finance
|
|
|
SMV Trust
|
|
|
Supply Representations
|
|
|
Telos
|
|
|
TPA
|
* 380
|
|
TRIMBOLI, Claudio
|
|
|
WYNER, Robert
|
ANNEXURE ‘A’ – Oliana Payments Schedule
|
Oliana Bank Statements - Payment to Culinary
|
Petros Ledger – Payments to Kremel
(€)
|
Actual Outgoing Payments from Culinary Co to Kremel
|
Kremel Invoices
|
Converted to $AUD
(mid-market rates xe.com historical converter) |
||||||||||
|
Date
|
Payment ($)
|
Running Total
|
Payment (€)
|
Running Total
|
Payment ($)
|
Running Total
|
Amount (€)
|
Running Total
|
Amount ($)
|
Running Total
|
||||
|
9/06/2016
|
$ 75,000.00
|
$ 75,000.00
|
||||||||||||
|
30/06/2016
|
$ 100,000.00
|
$ 175,000.00
|
||||||||||||
|
12/07/2016
|
$ 50,000.00
|
$ 225,000.00
|
||||||||||||
|
5/08/2016
|
$ 50,000.00
|
$ 275,000.00
|
||||||||||||
|
25/11/2016
|
€ 29,985.00
|
€ 29,985.00
|
$ 45,620.44
|
$ 45,620.44
|
||||||||||
|
28/11/2016
|
€ 29,985.00
|
€ 59,970.00
|
$ 45,558.09
|
$ 91,178.53
|
||||||||||
|
15/12/2016
|
$ 40,000.00
|
$ 315,000.00
|
€ 41,032.08
|
€ 41,032.08
|
$ 57,974.06
|
$ 57,974.06
|
||||||||
|
16/12/2016
|
$ 50,000.00
|
$ 365,000.00
|
€ 14,929.92
|
€ 55,962.00
|
$ 21,385.72
|
$ 79,359.78
|
||||||||
|
23/12/2016
|
$ 20,000.00
|
$ 385,000.00
|
||||||||||||
|
29/12/2016
|
€ 15,577.92
|
€ 71,539.92
|
$ 22,630.28
|
$ 101,990.06
|
||||||||||
|
3/01/2016
|
€ 45,479.04
|
€ 117,018.96
|
$ 65,510.85
|
$ 167,500.91
|
||||||||||
|
5/01/2017
|
$ 20,000.00
|
$ 405,000.00
|
||||||||||||
|
13/01/2017
|
$ 10,000.00
|
$ 415,000.00
|
||||||||||||
|
19/01/2017
|
$ 20,000.00
|
$ 435,000.00
|
||||||||||||
|
20/01/2017
|
$ 30,000.00
|
$ 465,000.00
|
||||||||||||
|
27/01/2017
|
$ 30,000.00
|
$ 495,000.00
|
||||||||||||
|
27/01/2017
|
$ 15,000.00
|
$ 510,000.00
|
||||||||||||
|
8/02/2017
|
$ 100,000.00
|
$ 610,000.00
|
||||||||||||
|
10/02/2017
|
€ 29,985.00
|
€ 89,955.00
|
$ 44,642.86
|
$ 135,821.39
|
||||||||||
|
14/02/2017
|
$ 70,000.00
|
$ 680,000.00
|
||||||||||||
|
20/02/2017
|
||||||||||||||
|
21/02/2017
|
$ 50,000.00
|
$ 730,000.00
|
||||||||||||
|
23/02/2017
|
||||||||||||||
|
2/03/2017
|
||||||||||||||
|
7/03/2017
|
$ 20,000.00
|
$ 750,000.00
|
||||||||||||
|
8/03/2017
|
$ 40,000.00
|
$ 790,000.00
|
||||||||||||
|
9/03/2017
|
$ 60,000.00
|
$ 850,000.00
|
||||||||||||
|
10/03/2017
|
€ 27,004.00
|
€ 116,959.00
|
$40,496.10
|
$ 176,317.49
|
||||||||||
|
22/03/2017
|
||||||||||||||
|
4/05/2017
|
€ 59,089.49
|
€ 176,108.45
|
$ 84,308.16
|
$ 251,809.07
|
||||||||||
|
10/05/2017
|
$ 25,000.00
|
$ 875,000.00
|
€ 21,142.66
|
€ 197,251.11
|
$ 31,330.64
|
$ 283,139.71
|
||||||||
|
16/05/2017
|
$ 15,000.00
|
$ 890,000.00
|
€ 19,985.00
|
€ 136,944.00
|
$31,491.10
|
$ 207,808.59
|
||||||||
|
18/05/2017
|
$ 15,000.00
|
$ 905,000.00
|
||||||||||||
|
25/05/2017
|
$ 83,911.92
|
$ 988,911.92
|
||||||||||||
|
2/06/2017
|
$ 65,000.00
|
$1,053,911.92
|
||||||||||||
|
13/06/2017
|
$ 35,000.00
|
$ 1,088,911.92
|
||||||||||||
|
14/06/2017
|
€ 11,907.00
|
€ 209,158.11
|
$ 17,619.39
|
$ 300,759.10
|
||||||||||
|
19/06/2017
|
$ 25,000.00
|
$ 1,113,911.92
|
||||||||||||
|
20/06/2017
|
€ 13,652.23
|
€ 222,810.34
|
$ 20,053.67
|
$ 320,812.77
|
||||||||||
|
29/06/2017
|
$ 30,000.00
|
$ 1,143,911.92
|
||||||||||||
|
20/07/2017
|
$ 25,000.00
|
$ 1,168,911.92
|
||||||||||||
|
24/07/2017
|
$ 20,000.00
|
$ 1,188,911.92
|
||||||||||||
|
1/08/2017
|
€ 26,157.60
|
€ 248,967.94
|
$ 38,707.92
|
$ 359,520.69
|
||||||||||
|
3/08/2017
|
€ 20,410.85
|
€ 269,378.79
|
$ 30,527.04
|
$ 390,047.73
|
||||||||||
|
4/08/2017
|
$ 40,000.00
|
$ 1,228,911.92
|
||||||||||||
|
10/08/2017
|
$ 20,000.00
|
$ 1,248,911.92
|
||||||||||||
|
11/08/2017
|
$ 50,000.00
|
$ 1,298,911.92
|
||||||||||||
|
31/08/2017
|
$ 50,000.00
|
$ 1,348,911.92
|
||||||||||||
|
4/09/2017
|
$ 45,000.00
|
$ 1,393,911.92
|
€ 24,985.00
|
€ 161,929.00
|
$39,815.26
|
$ 247,623.85
|
||||||||
|
5/08/2017
|
€ 61,886.42
|
€ 331,265.21
|
$ 92,023.20
|
$ 482,070.93
|
||||||||||
|
18/09/2017
|
$ 13,000.00
|
$ 1,406,911.92
|
||||||||||||
|
18/09/2017
|
$ 57,000.00
|
$ 1,463,911.92
|
||||||||||||
|
19/09/2017
|
$ 5,000.00
|
$ 1,468,911.92
|
€ 29,985.00
|
€ 191,914.00
|
$47,801.15
|
$ 295,425.00
|
€ 15,876.00
|
€ 347,141.21
|
$ 23,738.33
|
$ 505,809.26
|
||||
|
19/09/2017
|
$ 5,000.00
|
$ 1,473,911.92
|
||||||||||||
|
20/09/2017
|
€ 29,985.00
|
€ 221,899.00
|
$47,717.51
|
$ 343,142.51
|
||||||||||
|
22/09/2017
|
$ 25,000.00
|
$ 1,498,911.92
|
||||||||||||
|
25/09/2017
|
$ 9,830.42
|
$ 1,508,742.34
|
||||||||||||
|
29/09/2017
|
$ 35,000.00
|
$ 1,543,742.34
|
||||||||||||
|
6/10/2017
|
$ 35,000.00
|
$ 1,578,742.34
|
||||||||||||
|
11/10/2017
|
€ 42,746.50
|
€ 389,887.71
|
$ 65,094.01
|
$ 570,903.27
|
||||||||||
|
17/10/2017
|
$ 90,000.00
|
$ 1,668,742.34
|
||||||||||||
|
17/10/2017
|
$ 139,661.20
|
$ 1,808,403.54
|
||||||||||||
|
18/10/2017
|
€ 29,985.00
|
€ 251,884.00
|
$47,824.01
|
$ 390,966.52
|
||||||||||
|
19/10/2017
|
€ 29,985.00
|
€ 281,869.00
|
$47,877.43
|
$ 438,843.95
|
||||||||||
|
30/10/2017
|
$ 26,328.00
|
$ 1,834,731.54
|
||||||||||||
|
3/11/2017
|
€ 11,113.20
|
€ 401,000.91
|
$ 16,878.27
|
$ 587,781.54
|
||||||||||
|
6/11/2017
|
||||||||||||||
|
7/11/2017
|
€ 11,105.00
|
€ 292,974.00
|
$17,944.45
|
$ 456,788.40
|
||||||||||
|
8/11/2017
|
||||||||||||||
|
10/11/2017
|
$ 30,000.00
|
$ 1,864,731.54
|
||||||||||||
|
10/11/2017
|
$ 17,486.00
|
$ 1,882,217.54
|
||||||||||||
|
17/11/2017
|
$ 20,000.00
|
$ 1,902,217.54
|
||||||||||||
|
27/11/2017
|
$ 28,000.00
|
$ 1,930,217.54
|
||||||||||||
|
19/12/2017
|
€ 29,985.00
|
€ 322,959.00
|
$49,059.69
|
$ 505,848.09
|
||||||||||
|
21/12/2017
|
$ 37,000.00
|
$ 1,967,217.54
|
||||||||||||
|
23/02/2018
|
€ 14,985.00
|
€ 337,944.00
|
$24,937.66
|
$ 530,785.75
|
||||||||||
|
TOTALS
|
$ 1,967,217.54
|
€ 337,944.00
|
$ 530,785.75
|
€ 401,000.91
|
$587,781.54
|
SCHEDULE OF PARTIES
S ECI 2018 00116
BETWEEN:
|
OLIANA FOODS PTY LTD
(ACN 140 768 716)
|
Plaintiff
|
|
and
|
|
|
CULINARY CO PTY LTD (ACN 612 529 781)
(IN LIQUIDATION)
|
First Defendant
|
|
IAN GEORGE HONE
|
Fourth Defendant
|
|
BILL FLOROPOULOS
|
Seventh Defendant
|
[1] This brief introduction and summary is to be read and considered with the reasons that follow it. It is not intended to be a complete summary of the many factual and legal issues arising.
[2] Formerly SMV Traders Pty Ltd.
[3] Culinary Co was not represented at trial.
[4] And the operation of the principles against double recovery.
[5] But subject to clarifying a small matter of arithmetic with the parties in relation to the Oliana Loss Amount.
[6] But subject to clarifying a small matter of arithmetic with the parties in relation to the Oliana Loss Amount.
[7] Within the meaning of those expressions as used in s 9 of the Corporations Act 2001 (Cth) (the Act).
[8] Which are addressed later in these reasons.
[9] T 239:17–24.
[10] Who is also referred to as Paris Periandros in some documents. It was common ground that Paris Garakis and Paris Periandros are one and the same person.
[11] The attachment was not produced and was not in evidence.
[12] Footnote not in original.
[13] It was common ground that Mr Paris Periandros and Mr Paris Garakis are one and the same person.
[14] Which at that stage had not been provided.
[15] But noting that his signature appears in the incorrect signature block on the document, being the signature block also signed by Garakis, Periandros for Kremel.
[16] Which was not established on the evidence and was no more than an unsubstantiated assertion of Mr Floropoulos.
[17] The ‘we’ in this case being Culinary Co, not Oliana.
[18] Emphasis in original.
[19] Emphasis in original.
[20] This was also the subject of an affidavit of Mr Floropoulos’ solicitor, Mr Finlay Davis, filed on 2 March 2020 that was admitted without objection and without counsel for Oliana seeking to cross–examine Mr Davis.
[21] Mr Floropoulos submitted that the ‘preliminary view’ expressed by Mr Trimboli about Mr Floropoulos being a shadow director of Culinary Co should be afforded little or no evidentiary weight.
[22] Originally Kremel was named as the second defendant, but the plaintiff’s claims against it were wholly discontinued in October 2018.
[23] See, for example, emails from Mr Garakis to Mr Floropoulos dated 9 March and 22 and 23 April 2018.
[24] He also has an interest by reason of his ownership interest in Oliana and units in the SMV Trust.
[25] Which was of a different character and extent to the text messages late produced by Oliana.
[26] T 1176.6.
[27] T 936.26.
[28] T 900.4.
[29] T 890.22.
[30] T 812.26.
[31] T 524.13.
[32] T 514.19.
[33] T 525.29.
[34] T 909.4.
[35] T 621.24.
[36] T 902.26.
[37] T 679.17.
[38] T 720.20.
[39] T 952.7.
[40] T 814.3.
[41] T 814.25.
[42] T 640.2.
[43] T 703.25.
[44] T 572.22.
[45] T 640.2.
[46] T 605.12.
[47] T 623.22.
[48] T 848.13, 850.1.
[49] T 615.25.
[50] Noting also that Mr Floropoulos agreed that he was also in ‘regular contact’ with Mr Hone about the negotiation of the draft distribution agreement on behalf of Culinary Co at this time.
[51] T 691.29.
[52] Which is of course not apparent from the transcript but was observed during the extended period over which he gave evidence.
[53] For completeness, I add that I have taken into account Mr Floropoulos’ health issues, including those experienced during the trial, when considering these matters and reaching the conclusions I have expressed.
[54] T 466.11. See also T 320.23, 432.31.
[55] Mondous v Canzoneri [2018] VSC 194 and Modeca Investments Pty Ltd v Commonwealth Bank of Australia [2017] VSC 119.
[57] Oliana did not press the contention that Mr Floropoulos was an employee of Oliana, properly accepting that it was not raised on the pleadings.
[58] [1967] 2 AC 134 (‘Regal (Hastings)’).
[59] See sub-para (a) of the definition of ‘officer’ in s 9 of the Act.
[60] See sub-para (b)(i) of the definition of ‘officer’ in s 9 of the Act and the discussion below.
[61] See sub-para (b)(ii) of the definition of ‘officer’ in s 9 of the Act and the discussion below.
[62] [1998] FCA 1034; (1998) 28 ACSR 565 (‘Austin’).
[63] [2012] FCAFC 6; (2012) 200 FCR 296 (‘Grimaldi’).
[64] Austin and Ramsay, Ford, Austin and Ramsay’s Principles of Corporations Law (LexisNexis, 17th ed, 2018).
[65] [2012] HCA 18; (2012) 247 CLR 465 (‘Shafron v ASIC’).
[66] Which is what Oliana’s submissions in this context were focussed upon.
[67] Oliana written submissions [118].
[68] Mr Floropoulos denied he had access to the banking password.
[69] Nor an employee nor fiduciary, although Oliana did not press a claim that he was an employee, properly acknowledging that this was not an issue raised on the pleadings.
[70] [1998] FCA 1034; [1998] 28 ACSR 565, 571.
[71] Referring also to Buzzle Operations Pty Ltd v Apple Computer Australia Pty Ltd [2010] NSWSC 233; (2010) 77 ACSR 410, 436–7 [122]–[129] which was upheld on appeal but this point was not discussed: Buzzle Operations Pty Ltd v Apple Computer Australia Pty Ltd [2011] NSWCA 109; (2011) 81 NSWLR 47.
[72] Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 323 [69] (Finn, Stone and Perram JJ); Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340; (2014) 98 ACSR 347, 442 [557]–[558] (Yates J).
[73] See, for example, Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 321 [60] (Finn, Stone and Perram JJ).
[74] See, for example, Williams v Bearing Traders Pty Ltd [2008] NSWSC 1358; (2008) 69 ACSR 334.
[75] Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 321 [60] (Finn, Stone and Perram JJ).
[76] Ibid 322 [65].
[77] Ibid 322 [66].
[78] Ibid 322 [67].
[79] Ibid 322 [67].
[80] Ibid 325 [74].
[81] Ibid 325 [75].
[82] Austin [1998] FCA 1034; (1998) 28 ACSR 565, 569.
[83] Ibid 570.
[84] Ibid.
[85] Ibid. See also Natcomp Technology Australia Pty Ltd v Gaiche [2001] NSWCA 120, [13] (Stein JA, Spigelman CJ and Heydon JJA agreeing).
[86] Although such a claim was not pressed it is informative and relevant to understand the position when considering the meaning of ‘de facto’ directors.
[87] Re Akron Roads Pty Ltd (in liq) (No 3) [2016] VSC 657; (2016) 348 ALR 704, 743–6 [255]–[270].
[88] Re Akron Roads Pty Ltd (in liq) (No 3) [2016] VSC 657; (2016) 348 ALR 704, 746–7 [271]. On appeal the parties accepted this recitation of the principles was correct and the Court of Appeal agreed with the Robson J’s conclusion on the issue of whether a particular management consultant company was, in the circumstances of that case, a shadow director of another company (Blakely v Insurance Australia Ltd [2017] VSCA 378; (2017) 53 VR 733, 751 [84], 776 [204]).
[89] Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180, 183 (Millett J) (‘Re Hydrodam’); Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2010] NSWSC 233; (2010) 77 ACSR 410, 461 [241] (‘Buzzle v Apple (trial)’); Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109; (2011) 81 NSWLR 47, [191] (Young JA) (‘Buzzle v Apple (appeal)’).
[90] Re Hydrodam, 183 (Millett J); Buzzle v Apple (trial), 461 [241]; Buzzle v Apple (appeal), [191] (Young JA).
[91] Buzzle v Apple (trial), 461 [241]; Buzzle v Apple (appeal), [191] (Young JA).
[92] ASIC v AS Nominees Ltd [1995] FCA 1663; (1995) 62 FCR 504 (‘AS Nominees’); Buzzle v Apple (appeal), [208] (Young JA).
[93] Buzzle v Apple (trial), 461–2 [242]; Buzzle v Apple (appeal), [191] (Young JA).
[94] Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638, [1273] (Lewison J); Buzzle v Apple (trial), 465 [248]; Buzzle v Apple (appeal), [196].
[95] Buzzle v Apple (trial), [235], [250]; Buzzle v Apple (appeal), [196] (Young JA).
[96] Buzzle v Apple (trial), 465 [247]; Buzzle v Apple (appeal), [196].
[97] Buzzle v Apple (appeal), [229].
[98] Buzzle v Apple (appeal), [228] (Young JA).
[99] Buzzle v Apple (appeal), [10] (Hodgson JA).
[100] Secretary of State for Trade and Industry v Deverell [2000] 2 All ER 365; [2001] Ch 340, [35] (Morritt LJ); Buzzle v Apple (appeal), [212].
[101] Australian Securities and Investments Commission v King [2020] HCA 4, [24], [28] (Kiefel CJ, Gageler and Keane JJ), [185] (Nettle and Gordon JJ) (‘ASIC v King’).
[102] Shafron v ASIC [2012] HCA 18; (2012) 247 CLR 465, 478 [25] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ); ASIC v King [2020] HCA 4, [87], [186] (Nettle and Gordon JJ).
[103] Shafron v ASIC [2012] HCA 18; (2012) 247 CLR 465, 478 [23] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).
[104] Ibid 479–80 (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).
[105] ASIC v King [2020] HCA 4 [91] – [93] (Nettle and Gordon JJ).
[106] Shafron v ASIC [2012] HCA 18; (2012) 247 CLR 465, 478 [23] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).
[107] Cf ibid 480 [27].
[108] Austin and Ramsay, Ford, Austin and Ramsay’s Principles of Corporations Law (LexisNexis, 17th ed, 2018) 241 [7.050].
[109] ASIC v King [2020] HCA 4, [39] (Kiefel CJ, Gageler and Keane JJ).
[110] Ibid.
[111] Discussed further below in the context of Mr Floropoulos being a de facto director.
[112] Discussed further below in the context of Mr Floropoulos being a de facto director.
[113] T 577.28ff; 579.18ff; 607.26–608.5.
[114] Referred to earlier in the Witness section above and below in the context of the de facto director findings.
[115] And neither does his trips to America, noting Mr Floropoulos had always travelled a lot, that his health challenges existed for some time and that how he acted after February 2016 was inconsistent with slowing down and taking it easy.
[116] See, for example, paragraphs 66AB of the further amended defence filed 19 February 2020.
[117] See, for example, T 577.28ff; 579.18ff.
[118] See T 579.25 and following.
[119] However, even if Mr Canzoneri had been silent or unsure about the positon, the result would not have been different given the matters referred to above.
[120] Which I elaborate on below.
[121] See, for example, T 577, 579, 589, 606.
[122] See, for example, T 248ff, 414, 419ff, 450.
[123] T 1127, 1132. It was also put to Mr Canzoneri as being the critical meeting at T 414.2. See also closing submissions at T 1132.
[124] T 1133.28.
[125] See T 589, 606, 717, 812.
[126] T 812ff.
[127] T 589.26.
[128] See T 579.25ff regarding the earlier discussion.
[129] It is a separate question as to whether Oliana conducted itself in a manner consistent with its obligations as trustee of the SMV Trust, but that was not a matter in issue in the proceeding and is not further considered.
[130] For completeness, I add that this is not to ignore the FaceTime call that Mr Canzoneri was involved with in late 2016, in which Mr Floropoulos and Mr Garakis spoke Greek, and the meeting that Mr Canzoneri participated in with Mr Garakis on 8 April 2017 at which Mr Garakis only spoke Greek (as Mr Garakis said he was requested to by Mr Floropoulos).
[131] A position which Mr Floropoulos subsequently retracted when faced with evidence during cross-examination demonstrating that Mr Floropoulos had worked closely with Mr Wyner in connection with Oliana’s business in seeking to introduce its products into Coles and Woolworths in 2014 and subsequently.
[132] T 928.14–31.
[133] Which, as I have said previously, Mr Floropoulos has not established occurred.
[134] See T 577.28ff, T 579–580.
[135] United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347; (2018) 128 ACSR 324 (Elliott J). No criticism was made of Elliott J’s exposition of these principles in a subsequent appeal. United Petroleum Australia Pty Ltd v Hudson [2020] VSCA 14, [60] (Whelan, McLeish and Niall JJA).
[136] Section 182 also applies to a secretary or employee.
[137] Noting also that the breach allegations involve civil penalty provisions. See also Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 361–2.
[138] Noting also that it was not established that the resignation discussions and the alleged Moka Pot Discussions occurred as alleged.
[139] T 791.10–14.
[140] Which is not to ignore that Mr Floropoulos had already arranged the trip to Greece to attend to a personal matter.
[141] T 791.21–30. See also T 792.
[142] See T 607.8–22.
[143] T 901.25–902.27.
[144] I add that for the purpose of this proceeding I do not place any weight on the preliminary observations of Culinary Co’s liquidator in his report regarding his opinion about Mr Floropoulos likely being a shadow or de facto director or officer of Culinary Co. That, however, is not intended to convey a criticism of the liquidator or the report, which was prepared in a different context for a different purpose.
[145] See T 661.3-670.13, 672.29–680.9.
[146] United Petroleum [2018] VSC 347; (2018) 128 ACSR 324, 450–451.
[147] Huang v Wang [2015] NSWSC 510, [41] (Black J); Forkserve Pty Ltd v Jack and Aussie Forklift Repairs Pty Ltd [2000] NSWSC 1064; (2001) 19 ACLC 299, 322 [114] (Santow J); Commissioner for Corporate Affairs v Green [1978] VicRp 48; [1978] VR 505, 510.7 (McInerney J).
[148] Discussed below.
[149] Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 73 IPR 326, 339 [60] (Hodgson JA, with whom McColl JA agreed).
[150] ASIC v Somerville [2009] NSWSC 934; (2009) 77 NSWLR 110, 124 [39] (Windeyer AJ); McNamara v Flavel (1988) 13 ACLR 619, 625.1 (Millhouse J, with whom King CJ agreed).
[151] See MG Corrosion Consultants Pty Ltd v Gilmour [2014] FCA 990 [5541]; Dais Studio Pty Ltd v Bullet Creative Pty Ltd [2007] FCA 2054; (2007) 165 FCR 92 [107]; R v Byrnes [1995] HCA 1; 183 CLR 501 at [25]; AG Australia Holdings Ltd v Burton [2002] NSWSC 170; (2002) 58 NSWLR 464 [125].
[152] Doyle v ASIC [2005] HCA 78; (2005) 227 CLR 18, 28 [35] (Gleeson CJ, Gummow, Kirby, Hayne and Callinan JJ).
[153] See, for example, CellOS Software Ltd v Huber [2018] FCA 2069; (2018) 132 ACSR 468; DTM Constructions Pty Ltd (t/as QA Developments) v Poole (2017) 123 ACSR 171; Investa Properties Pty Ltd v Nankervis (No 7) [2015] FCA 1004; (2015) 333 ALR 193.
[154] Mr Floropoulos’ written closing submission [56].
[155] As is also the case with improper use of position under s 182(1).
[156] See, for example, Woolworths Ltd v Kelly (1991) 22 NSWLR 189 at 206 (per Samuels JA in the context of s 123 of the Companies Act 1961 which, as was submitted, is more onerous in some respects than (relevantly) s 191 of the Act. See also Centofanti v Eekimitor Pty Ltd (1995) SASR 31; Camelot Resources Ltd v MacDonald (1994) 14 ACSR 437; Sali v SPC Ltd (1991) 9 ACLC 1511; Dunn v CTK Engineering Pty Ltd [2002] ACL Rep 120 NSW 61; St Michael’s Golf Club v Bell [2002] NSWSC 61. See also Gray v New Augarita Porcupine Mines Ltd [1952] 3 DLR 1 at 14.
[157] (1991) 22 NSW LR 189 at 228.
[158] As to fully informed consent in the context of the fiduciary obligations, this is addressed later in these reasons when dealing with the breach of fiduciary duty claim.
[159] See, for example, ASIC v Somerville [2009] NSWSC 934; [2009] 77 NSWLR 110; 74 ACSR 89; Macks v Viscariello [2017] SASCFC 172 [616].
[160] United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347; (2018) 128 ACSR 324, 450 (Elliott J).
[161] R v Byrnes [1995] HCA 1; (1995) 183 CLR 501, 512.2 (Brennan, Deane, Toohey and Gaudron JJ).
[162] Ibid; Chew v The Queen [1992] HCA 18; (1992) 173 CLR 626, 633.6 (Mason CJ, Brennan, Gaudron and McHugh JJ).
[163] R v Byrnes [1995] HCA 1; (1995) 183 CLR 501, 512.3, 514.3, citing Grove v Flavel (1986) 43 SASR 410, 416.9–417.1 (Jacobs J).
[164] Doyle v ASIC [2005] HCA 78; (2005) 227 CLR 18, 28 [35] (Gleeson CJ, Gummow, Kirby, Hayne and Callinan JJ).
[165] Ibid; R v Byrnes [1995] HCA 1; (1995) 183 CLR 501, 512.3, 515.3.
[166] Griffiths v Beerens Pty Ltd [2008] VSC 201; (2008) 66 ACSR 472, 489 [54] (Pagone J).
[167] Doyle v ASIC [2005] HCA 78; (2005) 227 CLR 18, 28 [35] (Gleeson CJ, Gummow, Kirby, Hayne and Callinan JJ).
[168] [2008] VSC 201; (2008) 66 ACSR 472, 489 [54].
[169] Noting also his acknowledgment of Mr Canzoneri’s likely response.
[170] See, for example, CellOS Software Ltd v Huber [2018] FCA 2069; (2018) 132 ACSR 468; DTM Constructions Pty Ltd (t/as QA Developments) v Poole (2017) 123 ACSR 171; Investa Properties Pty Ltd v Nankervis (No 7) [2015] FCA 1004; (2015) 333 ALR 193.
[171] United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347; (2018) 128 ACSR 324 (Elliott J).
[172] United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347; (2018) 128 ACSR 324, 443, 444 (Elliott J).
[173] Shafron v ASIC [2012] HCA 18; (2012) 247 CLR 465, 476 [18]–[19] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ); Morley v ASIC [2010] NSWCA 331; (2010) 274 ALR 205, 355 [807] (Spigelman CJ, Beazley and Giles JJA).
[174] ASIC v Adler [2002] NSWSC 171; (2002) 168 FLR 253, 347 [372(4)] (Santow J); Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187, 239.5–240.2 (Ipp J, with whom Malcolm CJ and Seaman J agreed).
[175] ASIC v Healey [2011] FCA 717; (2011) 196 FCR 291, 320 [121] (Middleton J), citing Deputy Commissioner of Taxation v Clark [2003] NSWCA 91; (2003) 57 NSWLR 113, 140 [108]–[109] (Spigelman CJ, with whom Handley and Hodgson JJA agreed).
[176] Ibid.
[177] ASIC v MacDonald [2009] NSWSC 287; (2009) 256 ALR 199, 245–247 [236] (Gzell J), citing ASIC v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373, 398 [99]–[102] (Brereton J); Vrisakis v ASC (1993) 9 WAR 395, 449.5–450.1 (Ipp J).
[178] ASIC v Rich [2009] NSWSC 1229; (2009) 75 ACSR 1, 611 [7191], 613 [7199]–[7200] (Austin J); Vines v ASIC [2007] NSWCA 75; (2007) 73 NSWLR 451, 459 [63], 472–473 [137], 475 [142], 476 [145], 477 [152] (Spigelman CJ), 554 [587] (Santow JA).
[179] ASIC v Rich [2009] NSWSC 1229; (2009) 75 ACSR 1, 623 [7239], [7242].
[180] Ibid 623 [7241].
[181] Ibid 623–624 [7242].
[182] Ibid 627–628 [7254].
[183] ASIC v Rich [2003] NSWSC 85; (2003) 174 FLR 128, 137 [35] (Austin J); Deputy Commissioner of Taxation v Clark [2003] NSWCA 91; (2003) 57 NSWLR 113, 140 [108] (Spigelman CJ, with whom Handley and Hodgson JJA agreed).
[184] ASIC v Rich [2009] NSWSC 1229; (2009) 75 ACSR 1, 614 [7201].
[185] Adler v ASIC (2003) 179 FLR 1, 101 [458] (Giles JA).
[186] ASIC v Rich [2003] NSWSC 85; (2003) 174 FLR 128, 140 [49].
[187] Ibid 140 [50]. Mr Floropoulos has not sought to invoke the business judgment rule in s 180(2) of the Act and it is therefore not addressed here. See, however, United Petroleum at [620]–[626] (Elliott J).
[188] ASIC v Adler [2002] NSWSC 171; (2002) 168 FLR 253, 348–9 [372(14)] (Santow J); ASIC v Australian Property Custodian Holdings Ltd (rec and mgr apptd) (in liq) (controllers apptd) (No 3) [2013] FCA 1342, [600] (Murphy J). See also Strategic Management Australia AFL Pty Ltd v Precision Sports & Entertainment Group Pty Ltd [2016] VSC 303; (2016) 114 ACSR 1, 18 [79] (Sifris J).
[189] As the authors of Ford, Austin and Ramsay’s Principles of Corporations Law have observed (at 8.305.12), a failure to exercise reasonable care can take many forms, and can and does overlap with other breaches of statutory duty by a director. See, for example, Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261; Re HIH Insurance Ltd; ASIC v Adler [2002] NSWSC 171; (2002) 168 FLR 253.
[190] United Petroleum Australia Pty Ltd v Hudson [2020] VSCA 14, [90] (Whelan, McLeish and Niall JJA).
[191] United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347; (2018) 128 ACSR 324, 447–449 (Elliott J).
[192] [1991] 2 Qd R 360, 367.1 (McPherson J, Lee and Mackenzie JJ agreeing).
[193] (1996) 20 ACSR 182, 188.7.
[194] Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Company NL [1968] HCA 37; (1968) 121 CLR 483, 493.6 (Barwick CJ, McTiernan and Kitto JJ). See also Bell IXL Investments Ltd v Life Therapeutics Ltd [2008] FCA 1457; (2008) 68 ACSR 154, 164 [32]–[37] (Middleton J).
[195] ASIC v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373, 402 [109] (Brereton J).
[196] Ibid. This view was applied in ASIC v Warrenmang Ltd [2007] FCA 973; (2007) 63 ACSR 623, 629 [26], 630 [28] (Gordon J).
[197] ASIC v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224; (2008) 69 ACSR 1, 14 [43] (Hamilton J). See also Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187, 218.5 (Ipp J).
[198] [2009] NSWSC 287; (2009) 256 ALR 199, 304–305 [659], [662]–[663] (Gzell J), following Marchesi v Barnes [1970] VicRp 56; [1970] VR 434, 438.1 (Gowans J). See also Duncan v Independent Commission Against Corruption [2016] NSWCA 143, [428]–[429] (Bathurst CJ, dissenting in part).
[199] Ibid.
[200] [2011] VSCA 392; (2011) 86 ACSR 277 (Warren CJ, Mandie JA and Judd AJA). See also ASIC v Flugge [2016] VSC 779, [1977], [1991] (Robson J).
[201] There was no appearance on behalf of the respondents.
[202] At [33]. It appears that the Court of Appeal may not have been taken to all the relevant authorities: see fn 8 which does not include any of the authorities referred to above (fn 8 refers to Linton v Telnet Pty Ltd [1999] NSWCA 33; (1999) 30 ACSR 465, 472; Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) (1997) 26 ACSR 544, 581 (Hansen J, Supreme Court of Victoria); Equitycorp Finance Ltd (in Liq) v Bank of New Zealand (1993) 32 NSWLR 50; 11 ACLC 952, 1019).
[203] Environinvest Ltd (receivers and managers appointed) (in liq) v Pescott (No 2) [2012] VSC 151, [13] (Ferguson J), considering s 181(1)(a); Mills Oakley Lawyers Pty Ltd v Huon Property Holdings Pty Ltd [2012] VSC 39, [70] (Hargrave J), considering ss 181(1) and 182(1); Macralink Pty Ltd v Saris [2011] VSC 665, [22] (Ferguson J), considering s 237(2)(b) and (c) of the Act. [See also Cellos Software Ltd v Huber [2018] FCA 2069; 132 ACSR 468 [758] (Beach J) (‘Cellos v Huber’)].
[205] At [1990], though, in doing so, Robson J referred to s 181(1)(b) rather than s 181(1)(a): at [1979].
[206] At [1991]. By this passage, Robson J was not suggesting Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1, itself, was approved by the Court of Appeal, as it was not referred to in Mernda Developments Pty Ltd (in liq) v Alamanda Property Investments No 2 Pty Ltd (in liq) [2011] VSCA 392; (2011) 86 ACSR 277.
[207] See at [1981].
[208] Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1, 583–584 [4619].
[209] Ibid.
[210] ASIC v Geary [2018] VSCA 103 (Ferguson CJ, Weinberg JA and Sifris AJA).
[211] At [339], but in so doing only referred to [945]–[955] of Robson J’s judgment, and made no reference to the paragraphs referred to in 212–214 above.
[212] [2011] VSCA 392; (2011) 86 ACSR 277.
[213] [2018] VSCA 103, [336].
[214] The United Parties made no submissions on this issue.
[215] United Petroleum Australia Pty Ltd v Hudson [2020] VSCA 14, [91] (Whelan, McLeish and Niall JJA).
[216] United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2018] VSC 347; (2018) 128 ACSR 324, 449–450 (Elliott J).
[217] Bell Group Ltd v Westpac Banking Corporation (No 9) (2008) 39 WAR 1, 548 [4458] (Owen J); ASIC v Doyle [2001] WASC 187; (2001) 38 ACSR 606, 638–639 [194]–[200] (Roberts-Smith J); Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187, 218.3 (Ipp J, with whom Malcolm CJ and Seaman J agreed).
[218] Howard Smith Ltd v Ampol Petroleum Ltd [1974] UKPC 3; [1974] AC 821, 835 (Lord Wilberforce).
[219] Residues Treatment and Trading Co Ltd v Southern Resources Ltd (1989) 15 ACLR 770, 788.2 (Perry J).
[220] Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187, 218.5; Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 293.3 (Mason, Deane and Dawson JJ).
[221] Mills v Mills [1938] HCA 4; (1938) 60 CLR 150, 186.1 (Dixon J). See also Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425, 440.3 (Williams ACJ, Fullagar and Kitto JJ).
[222] Permanent Building Society v Wheeler (1994) 11 WAR 187, 218.4.
[223] Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 294.5. See also Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187, 218.6; Mills v Mills [1938] HCA 4; (1938) 60 CLR 150, 186.2.
[224] Which is not to ignore the brief observations identifying the issue in the written submissions of Oliana at [173]–[176] or the reference to Beach J’s decision in CellOS Software Ltd v Huber [2018] FCA 2069; (2018) 132 ACSR 468 (‘CellOS’).
[226] Ibid [707]–[710].
[227] [2014] WASC 102; (2014) 48 WAR 1.
[228] Ibid [451]–[452] (citations omitted).
[229] [2018] NSWSC 314; (2018) 354 ALR 711.
[230] Ibid 761 [164].
[231] [2019] FCA 354; (2019) 370 ALR 191.
[232] Ibid 328 [727].
[233] [2012] FCAFC 6; (2012) 200 FCR 296.
[234] Ibid 433 [630].
[235] Ibid 433 [626].
[236] Ibid 433 [631].
[237] Ibid 435 [641].
[238] [2005] NSWSC 1198; (2005) 56 ACSR 204.
[239] Ibid [64].
[241] Sullivan v Trilogy Funds Management Limited [2017] FCAFC 153; (2017) 255 FCR 503.
[242] (2009) 75ACSR 1, [7311]–[7312] (Austin J).
[243] There was no issue between the parties about exchange rates applicable.
[244] Subject to the position regarding its election in relation to an account of profits in connection with Mr Floropoulos’ breach of fiduciary duty claims, which is addressed later in these reasons. Although reference had been made to claiming ‘profits’ under s 1317H, this was not articulated or pressed in closing submissions or the amounts claimed identified. This was understandable given the manner in which the Oliana Loss Amount was calculated and double recovery principles.
[245] Counsel for Mr Hone generally adopted all of the submissions of Mr Floropoulos even though a number of the claims did not relate to Mr Hone.
[248] BHP v Steuler [2014] VSCA 338, [675].
[249] Relying on O’Halloran v RT Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262 and Target Holdings Ltd v Redferns [1995] UKHL 10; [1996] 1 AC 421, 434.
[250] This aspect is addressed in greater detail in connection with the misleading and deceptive conduct claims.
[251] Subject to clarifying a small arithmetical matter with the parties.
[252] Except insofar as non-disclosure was a breach, but given the other breaches this does not affect the result. In relation to this non-disclosure aspect I refer to the discussion of loss and damage below when dealing with the misleading and deceptive conduct claims against Mr Floropoulos.
[253] That is not to ignore that these matters have greater relevance to the misleading and deceptive conduct claims, which is discussed in more detail later in the reasons.
[254] T 343.11.
[255] T 342.19.
[256] T 342.20.
[257] T 342.19–21. The transcript inaccurately spelt ‘seeking’ as ‘sitting’ and ‘especially exports’ as ‘especially experts’. In any event, the position remains the same even if this evidence is put to one side.
[258] T 346.27.
[259] See, for example, his email of 21 October 2016 at 11:25pm.
[260] Noting also that Mr Floropoulos responded saying the correct details for the invoice were the Culinary Co details (‘Attention: Ian Hone’) and again requesting that ‘All correspondence will only be e mailed to me’ (sic).
[261] This is discussed further in connection with the misleading conduct claims.
[262] Which is not to ignore that he was not asked by Oliana’s counsel about the issue, but this aspect has greater significance in the context of whether Kremel would have supplied Mr Canzoneri for Oliana given the different position of Mr Floropoulos and Mr Garakis and the fact that he was willing and did in fact supply Mr Floropoulos for Culinary Co.
[263] As will be seen, although this was addressed by the parties as though it was a separate cause of action, I have concluded that it is more accurately characterised as an illustration of the established principles in respect of fiduciaries to the particular facts in question in that case. That this is so is of no relevant consequence.
[264] During closing submissions the parties properly recognised and accepted that the question of Mr Floropoulos being an employee was not raised on the pleadings and was not an issue for determination in the proceeding. It is not addressed further in these reasons.
[265] [2012] FCAFC 6; (2012) 200 FCR 296.
[266] Being the second amended statement of claim filed 18 March 2019, which is referred to in these reasons as the amended statement of claim.
[267] See, for example, Regal (Hastings) [1967] 2 AC 134.
[268] [1984] HCA 64; (1984) 156 CLR 41 (‘Hospital Products’).
[269] Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 96–7.
[270] [2020] VSCA 193 (Kyrou, Hargrave and Emerton JJA). See also the recent observations of Beach J in CellOS v Huber [2018] FCA 2069; (2018) 132 ACSR 468, [776]–[807].
[271] Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 96–7; [1984] HCA 64.
[272] Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 68; [1984] HCA 64.
[273] John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1, 21 [44]; [2010] HCA 19.
[274] Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 102; [1984] HCA 64.
[275] Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 102; [1984] HCA 64.
[276] Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, 408; [1929] HCA 24.
[277] Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 67; [1984] HCA 64.
[278] Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 199; [1984] HCA 36.
[279] Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, 15, 17.
[280] Adventure Golf Systems Australia v Belgravia Health & Leisure [2017] VSCA 326; (2017) 54 VR 625, 671.
[281] Birtchnell v Equity Trustees Executors & Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, 408–9 (Dixon J); Breen v Williams (1996) 186 CLR 71, 82 (Brennan CJ). See also Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, 15–6 (Bryson J).
[282] Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 98 (Mason J).
[283] See, for example, Howard v FCT [2014] HCA 21; (2014) 253 CLR 83, 98–9 [31]–[33] (French CJ and Keane J), 106 [56] (Hayne and Crennan JJ), 118 [108] (Gageler J).
[284] Howard v FCT [2014] HCA 21; (2014) 253 CLR 83, 107 (Hayne and Crennan JJ).
[285] Bray v Ford [1895] UKLawRpAC 54; [1896] AC 44, 51.
[286] [2001] HCA 31; (2001) 207 CLR 165, 199 [78].
[287] Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 103 (Mason J); [1984] HCA 64. See also Clay v Clay (2001) 202 CLR 410, 432–433 [46]–[47]; [2001] HCA 9.
[288] [2001] HCA 31; (2001) 207 CLR 165 at 199 [79].
[289] Phelan v Middle States Oil Corporation [1955] USCA2 324; 220 F 2d 593, 602 (1955) per Judge Learned Hand, cited by Mason J in Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 104 and the majority in Pilmer [2001] HCA 31; (2001) 207 CLR 165, 199 [79].
[290] Howard v FCT [2014] HCA 21; (2014) 253 CLR 83, 107–8 (Hayne and Crennan JJ) (emphasis in original).
[291] [1967] 2 AC 134. See, also, Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 558 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
[292] Although that was not the case here.
[293] Counsel for Mr Floropoulos drew attention to the decision in Vivendi SA v Richards [2013] EWHC 3006 [133]–[145]. See also The Hancock Family Memorial Foundation Ltd v Porteous [1999] WASC 55; (1999) 32 ACSR 124 [29] (Anderson J); Porteous v Donnelly [2002] FCA 862 [1], [57] (Stone J); Chameleon Mining NL v Murchison Metals Limited [2010] FCA 1129 [85], [116]–[118], [211], [311], [394], [528], [543], [550], [689] (Jacobson J); In the matter of Idylic Solutions Pty Ltd-ASIC v Hobbs [2017] NSWC 241 [31]–[33]; [116]–[124] (Barrett J); and Fairfield Services Pty Ltd (In liq) v Leggett [2020] QSC 183, [32]–[34] (Bond J). See also Austin, Ford and Ramsay Company Directors Principles of Law & Governance (2005) [8.9].
[294] But of course excluding those related to being a director and officer.
[295] The content of any duty owed was said on behalf of Mr Floropoulos to be shaped (relevantly) by the alleged Moka Pot Discussion, the terms of Clause 57, and the issue of informed consent, which is addressed further below.
[296] See Austin, Ford and Ramsay Company Directors Principles of Law & Governance (2005) [8.5]. See also Ford Austin and Ramsay’s Principles of Corporation Law (17th Edn) [8.010]–[8.020], [8.040]–[8.055]. See also the above extracted observations of Hayne and Crennan JJ in Howard v FCT.
[297] See generally Austin, Ford and Ramsay Company Directors Principles of Law & Governance (2005) [7.4]–[7.17] and Ford Austin and Ramsay’s Principles of Corporation Law (17th Edn) [8.010.3] and [8.070]–[8.090].
[298] As was similarly observed by Beach J in relation to the company’s constitution in CellOS v Huber at [782].
[299] CellOS v Huber [2018] FCA 2069; (2018) 132 ACSR 468, [786] (Beach J).
[300] And diverting the opportunity that was in Oliana’s line of business.
[301] I refer in this regard to the earlier discussion in the context of the statutory duty to act in good faith in the best interests of Oliana (noting that the fiduciary duty of this character is generally described as being a duty to act in the ‘interests’ rather than ‘best interests’ of a company, although for present purposes that is a distinction without a difference).
[302] [2018] FCA 2069; (2018) 132 ACSR 468.
[303] [2012] FCAFC 6; (2012) 200 FCR 296, 345 [177].
[304] Ibid; see also CellOS [2018] FCA 2069; (2018) 132 ACSR 468, 606 [781]–[786].
[305] Hart Publishing (2012) ch 17 at 499.
[306] LexisNexis, Ford, Austin & Ramsay’s Principles of Corporations Law, The profit rule and corporate opportunities, ‘Diversion of corporate opportunities’ [9.230].
[307] [2014] HCA 21; (2014) 253 CLR 83.
[308] [1997] HCA 23; (1997) 188 CLR 449.
[310] Heydon, Leeming and Turner, Equity Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015), 165–166 [5-130].
[311] But did make reference to the need for a sufficient causal connection and a number of the authorities referred to below.
[312] Schmidt [2020] VSCA 193 [181]–[189] (citations as in original).
[313] Nocton v Lord Ashburton [1914] UKLawRpAC 31; [1914] AC 932, 956–7 (‘Nocton’); McKenzie v McDonald [1926] VicLawRp 74; [1927] VLR 134, 146–7 (‘McKenzie’).
[314] Nocton [1914] UKLawRpAC 31; [1914] AC 932, 952; Hill v Rose [1990] VicRp 13; [1990] VR 129, 143–4 (‘Hill’); GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers Pty Ltd [2005] VSCA 113, [53], [65] (‘Australian Tallow Producers’); Talacko v Talacko [2009] VSC 533, [119] (‘Talacko’); O’Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262, 272 (‘O’Halloran’); Edmonds [2005] VSCA 27; (2005) 12 VR 513, 544 [78], 545 [81]; [2005] VSCA 27.
[315] Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 559; [1995] HCA 18 (‘Warman’).
[316] Hill [1990] VicRp 13; [1990] VR 129, 144; Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211, 214–6 (‘Re Dawson’).
[317] [2018] HCA 43; (2018) 265 CLR 1, 37 [88]; [2018] HCA 43 (‘Ancient Order’) citing Re Dawson [1966] 2 NSWR 211, 215; Maguire [1997] HCA 23; (1997) 188 CLR 449, 469–70; [1997] HCA 23; O’Halloran [1998] NSWSC 596; (1998) 45 NSWLR 262, 272–8; McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579, 588–9 [21], 621–2 [135]; [2000] HCA 65; Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484, 504 [51]; [2013] HCA 15 (‘Youyang’).
[318] Youyang [2003] HCA 15; (2003) 212 CLR 484, 499 [35]; [2013] HCA 15; Ancient Order [2018] HCA 43; (2018) 265 CLR 1, 37 [89]; [2018] HCA 43; Australian Tallow Producers [2005] VSCA 113, [65]; Re Dawson [1966] 2 NSWR 211, 216; Talacko [2009] VSC 533, [120].
[319] Talacko [2009] VSC 533, [143]; Maguire [1997] HCA 23; (1997) 188 CLR 449, 470; [1997] HCA 23.
[320] Warman [1995] HCA 18; (1995) 182 CLR 544, 559; [1995] HCA 18.
[321] Hill [1990] VicRp 13; [1990] VR 129, 143.
[322] Talacko [2009] VSC 533, [124].
[323] Hill [1990] VicRp 13; [1990] VR 129, 143; Ferrari Investment (Townsville) Pty Ltd (in liq) v Ferrari [1999] QCA 230; [2000] 2 Qd R 359, 370 [39]; [1999] QCA 230; McKenzie [1926] VicLawRp 74; [1927] VLR 134, 147; Edmonds [2005] VSCA 27; (2005) 12 VR 513, 544 [78]; [2005] VSCA 27.
[324] See, for example, Eiszele v Hurburgh [2011] TASSC 65, [69]; Barescape Pty Ltd v Bacchus Holdings Pty Ltd [No 9] [2012] NSWSC 984, [254]–[256]; Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; (2014) 87 NSWLR 609, 641 [151]; [2014] NSWCA 266.
[325] Warman [1995] HCA 18; (1995) 182 CLR 544, 558; [1995] HCA 18.
[326] Ancient Order [2018] HCA 43; (2018) 265 CLR 1, 39 [94]; [2018] HCA 43.
[327] Ancient Order [2018] HCA 43; (2018) 265 CLR 1, 38–9 [92]–[94]; [2018] HCA 43; Warman [1995] HCA 18; (1995) 182 CLR 544, 561; [1995] HCA 18.
[328] Ancient Order [2018] HCA 43; (2018) 265 CLR 1, 15 [15]; [2018] HCA 43.
[329] See Warman [1995] HCA 18; (1995) 182 CLR 544, 561; [1995] HCA 18; Ancient Order [2018] HCA 43; (2018) 265 CLR 1, 14 [13]; [2018] HCA 43, in the context of an account of profits.
[330] Warman [1995] HCA 18; (1995) 182 CLR 544, 562; [1995] HCA 18; Talacko [2009] VSC 579, [130].
[331] Warman [1995] HCA 18; (1995) 182 CLR 544, 561–2; [1995] HCA 18.
[332] [1995] HCA 18; (1995) 182 CLR 544, 560–1; [1995] HCA 18. Warman makes it clear that, in assessing the compensation to be awarded on the basis of an account of profits, various contingencies, including the likelihood of the continuation of a given agreement or business, should necessarily be taken into account: Warman [1995] HCA 18; (1995) 182 CLR 544, 565–6; [1995] HCA 18. See also Nicholls [2012] NSWCA 383, [181].
[333] Ancient Order [2018] HCA 43; (2018) 265 CLR 1, 40 [96] (citations omitted).
[334] [1997] HCA 23; (1997) 188 CLR 449, 474 (Brennan CJ, Gaudron, McHugh and Gummow JJ).
[335] Heydon, Leeming and Turner, Equity Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) [23-425].
[336] AHRkalimpa Pty Ltd v Schmidt (No 3) [2019] VSC 197, [34] and the cases there cited (Elliott J).
[337] Ibid [35], citing AMP Services Ltd v Manning [2006] FCA 256, [69] (Finkelstein J) and Ramsay v BigTin Can Pty Ltd [2014] NSWCA 324; (2014) 101 ACSR 415, [123] (Gleeson JA).
[338] [2005] VSCA 113. I refer also to the succinct and helpful summary of Croft J in Li v So [2019] VSC 515, [28]–[30].
[339] Ibid (footnotes as in original).
[340] Consul Development v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373 at 393; Queensland Mines v Hudson [1911] ArgusLawRp 95; (1978) 18 ALR 1, 4; 52 ALJR 399, 401.
[341] Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41.
[342] Colbeam Palmer Ltd v Stock Affiliates Pty Ltd [1968] HCA 50; (1968) 122 CLR 25, 32, (Windeyer J).
[343] Nocton v Lord Ashburton [1914] UKLawRpAC 31; [1914] AC 932; Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co [1966] 2 NSWLR 211.
[344] Pearce [2005] VSCA 113, [56] (footnotes as in original).
[345] Tang Man Sit v Capacious Investments [1995] UKPC 54; [1996] AC 514.
[346] Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544.
[347] Tang Man Sit v Capacious Investments [1995] UKPC 54; [1996] AC 514, 521.
[348] Ibid; see also Island Records Ltd v Tring International Plc [1995] 3 All ER 444.
[349] [2018] HCA 43; (2018) 265 CLR 1.
[350] Ibid 37 [88] (footnotes as in original). Emphasis added.
[351] Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211, 215; Maguire [1997] HCA 23; (1997) 188 CLR 449, 469–470; O’Halloran v RT Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262, 272–278; McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579, 588–589 [21], 621–622 [135]; Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484, 504 [51].
[352] [1995] HCA 18; (1995) 182 CLR 544, 560–1.
[353] [2018] HCA 43; (2018) 265 CLR 1, 40 [96] (Gageler J).
[354] Groeneveld Australia Pty Ltd v Wouter Nolten (No 3) [2010] VSC 533; (2010) 80 ACSR 562, [37], citing Dart Industries Inc v Décor Corporation Pty Ltd [1993] HCA 54; (1993) 179 CLR 101, 114–15; [1993] HCA 54; 116 ALR 385, 389–90.
[355] Warman [1995] HCA 18; (1995) 182 CLR 544, 561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
[356] Ibid 561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
[357] [1934] UKPC 25; [1934] 3 DLR 465.
[358] [1934] UKPC 25; [1934] 3 DLR 465, 469.
[359] Heydon, Leeming and Turner, Equity Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) [23-475] and the authorities and other references there cited.
[360] [2020] NSWSC 254, [148]–[167] (Rein J).
[361] Including Maguire [1997] HCA 23; (1997) 188 CLR 449, 470–474 (Brennan CJ and Gaudron, McHugh, Gummow JJ). See also the helpful discussion of Kirby J at 488–494.
[362] [2020] NSWSC 254, [155] (Rein J).
[363] And diverting the opportunity that was in Oliana’s line of business.
[364] See the reasoning in connection with the s 1317H claim above.
[365] See, for example, Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1, [105]–[109] (Besanko J, with whom Finkelstein and Jacobson JJ agreed); Maguire [1997] HCA 23; (1997) 188 CLR 449, 467.
[366] Being a transaction involving the Culinary Co Supply Price rather than one involving the Kremel Supply Price.
[367] [2020] NSWSC 254, [155] (Rein J).
[368] Which the parties contemplated and suggested should take place before a Judicial Registrar or Associate Justice.
[369] Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640, 651–2 [39] (French CJ, Crennan, Bell and Keane JJ); Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304, 319 [25] (French CJ); Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357, [15] (French CJ and Kiefel J).
[370] Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191, 197–9 (Gibbs CJ); Skinner v Redmond Family Holdings Pty Ltd [2017] NSWCA 329; (2017) 123 ACSR 593, 609 [85] (Gleeson JA, Macfarlan JA and Barrett AJA agreeing).
[371] [2015] FCA 1110; (2015) 330 ALR 67, 104 (Beach J).
[372] [2016] FCA 857 (Wigney J). The appeal was dismissed and the Full Court noted that the parties had not submitted that the summary was defective in any way and the Full Court was content to proceed upon the basis that the summary was correct. See Australian Olympic Committee Inc v Telstra Corporation Limited( [2017] FCAFC 165; 2017) 258 FCR 104 [73]). The summary and this observation was made by Foster J in GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser (Australia) Pty Limited (No 2) [2018] FCA 1, [46].
[373] Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76; (2017) 348 ALR 1, 119 [482] (Gilmour and White JJ, Dowsett J agreeing at [280]); Barport Pty Ltd v Baum [2019] VSCA 167, [194] (Kyrou, McLeish and Niall JJA).
[374] Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76, 119 [482(e)] (Gilmour and White JJ, Dowsett J agreeing at [280]).
[375] Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76, 119–20 [483] (Gilmour and White JJ, Dowsett J agreeing at [280]) citing Clifford v Vegas Enterprises Pty Ltd [2011] FCAFC 135, [198].
[376] See, for example, Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357 (French CJ and Kiefel J) citing Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31, 41.
[377] See generally Butcher v Laughlan Elder Realty Proprietary Limited [2004] HCA 60; (2004) 218 CLR 592; Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304; Sutton v AJ Thompson Pty Ltd (1987) 73 ALR 233.
[378] See generally Miller’s Australian Competition and Consumer Law Annotated (2019) at [18.20].
[379] See, for example, Neilsen v Hermiston Holdings Pty Ltd (1986) 65 ALR 302, 309; Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601, 612-613 — upheld on appeal Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) [1988] FCA 40; (1988) 39 FCR 546. Note, however, the operation of s 137B of the CCA, although noting that neither Mr Floropoulos nor Mr Hone raised or sought to rely upon it.
[380] [1988] FCA 289; (1988) 82 ALR 415, 427 when dealing with the case under former s 53 of the Trade Practices Act 1975 (Cth) (TPA).
[381] Jafari v 23 Developments Pty Ltd [2019] VSCA 201 (Whelan and Niall JJA and Sifris AJA).
[382] See Re HIH Insurance Ltd [2016] NSWSC 482; (2016) 335 ALR 320, 334 [42], 338 [50] (Brereton J).
[383] [2009] HCA 25; (2009) 238 CLR 304, 351 [143] (Gummow, Hayne, Heydon and Kiefel JJ).
[384] The court then takes into account various normative considerations (the purpose of the statute, remoteness, intervening cause and the like) in the second stage inquiry into the attribution of legal responsibility: see, eg, Westpac Banking Co v Jamieson [2015] QCA 50; [2016] 1 Qd R 495 [99]–[103] (Applegarth J).
[385] [2006] NSWCA 37 [26]–[27] (Giles JA) (emphasis added).
[386] [2020] VSCA 149. It appears s 137B of the CCA was not raised in that case.
[387] [2020] VSCA 149, [98] (Tate, Kyrou and McLeish JJA).
[388] Keys Consulting Pty Ltd v Cat Enterprises Pty Ltd [2019] VSCA 136, [68] (Maxwell ACJ, Niall JA and Macaulay AJA).
[389] Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 6–7 (Gibbs CJ), 12, 14 (Mason, Wilson and Dawson JJ) (‘Gates’); Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281, 290 (Brennan, Deane, Dawson, Gaudron and McHugh JJ); HTW Valuers v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640, 656 [35]; Keys Consulting Pty Ltd v Cat Enterprises Pty Ltd [2019] VSCA 136, [76] (Maxwell ACJ, Niall JA and Macaulay AJA).
[390] Keys Consulting Pty Ltd v Cat Enterprises Pty Ltd [2019] VSCA 136, [77] (Maxwell ACJ, Niall JA and Macaulay AJA) citing Potts v Miller [1940] HCA 43; (1940) 64 CLR 282, 289 (Starke J), 297 (Dixon J) (‘Potts’); Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647, 650–1 (Dixon J), 654 (Williams J). Loss and damage is dealt with in more detail later in these reasons.
[391] That which is raised or dealt with has also in part been shaped and calibrated by reference to the particular matters relied upon by the parties.
[392] T 791.15–30.
[393] See T 249.7ff.
[394] T 249.12.
[395] T 249–50.
[396] It appears Mr Floropoulos returned to Australia on 1 or 2 June 2016.
[397] T 332.8.
[398] It was common ground that Mr Paris Periandros and Mr Paris Garakis are one and the same person.
[399] Although the result does not change even if that is not so.
[400] T 513–514.
[401] T 514.
[402] T 514.
[403] T 526.1.
[404] Except for the one text message with Mr Delis and the email he sent on 12 April 2017, to which he did not receive a response. T 533.24.
[405] T 257.13.
[406] However, Mr Canzoneri’s evidence was to the effect that he had seen the document not his son.
[407] T 270.
[408] T 270.
[409] T 270–271.
[410] T 328.19.
[411] T 328.1 – 328.13.
[412] Emphasis added.
[413] T 270.14 – 271.10. Mr Floropoulos, in his evidence on this point initially said he had asked Mr Garakis for a discount. He then conceded that in fact he may only have said that Culinary Co proposed to give a 7% discount to Oliana and that Mr Garakis did not object to their doing so: T 892.2–23.
[414] T 290.4–10. As submitted, whilst Mr Floropoulos gave evidence that he said something to Mr Canzoneri to the effect that ‘they [Kremel] don’t want to sign it’ it was not put to Mr Garakis that Mr Floropoulos had asked him to sign the agreement and he had refused, and it was not put to Mr Canzoneri that Mr Floropoulos had told him that Kremel had not signed it.
[415] For example, at T 899.28–900.4 — Mr Floropoulos accepted that the message he sent in relation to Greece was simply a lie on his part.
[416] Mr Canzoneri described his relationship with Mr Floropoulos at that time at and stated that he ‘trusted him 100 percent without doubt’. T 252.8–18.
[417] T 525.30 – 526.10.
[418] Given the context and circumstances no defence was pleaded or submission made that the circumstances were akin to the cases that have dealt with director deliberations that are to be seen as not being in trade or commerce. Here the position was quite different in any event. (A submission was made that knowing involvement in contravening conduct is not established by reason only of being a director of a company, but that is a different matter.)
[419] Additional general submissions were made regarding reliance and the nature of the alleged damage, which are addressed when dealing with these topics later in these reasons. It was common ground that Briginshaw considerations were relevant in relation to the statutory duty breaches, although given the nature of the allegations and aspects of their gravity I have also regard to them and the matters in s 140(2) in the context of the other matters alleged against Mr Floropoulos and Mr Hone.
[420] See Mr Floropoulos’ closing submissions [176] and oral closing submissions.
[421] Including the Supply Representations and Floropoulos Conduct earlier referred to.
[422] Which were also relied on in a similar way for each of the other collectively described representations addressed in this part of the reasons.
[423] With Mr Delis.
[424] See sub-paragraph (d) of the preceding paragraph.
[425] It will be apparent that these representations involve a combination of the Supply Representations, the Floropoulos Conduct and the Exclusive Distributor Representation.
[426] Emphasis added.
[427] Which in fact Mr Canzoneri had not had with Mr Garakis as the only communication at that point had been between Mr Floropoulos and Mr Canzoneri.
[428] Which were two of the Supply Representations.
[429] Described in that draft as ‘Granter’.
[430] See paragraph 622 above.
[431] As is the case for all findings in these reasons and having taken into account the matters in s 140(2) of the Evidence Act 2008 and Briginshaw considerations.
[432] See paragraph 622 above.
[433] See paragraph 524 above.
[434] T 250.31 – 251.2.
[435] T 250.24–26.
[436] T 251.7–9.
[437] T 251.30 – 252.3, noting also Mr Floropoulos’ later evidence that he was involved in the preparation of the 7 June 2016 letter at T 952.1–13.
[438] T 252.3–7.
[439] T 290.4–10.
[440] Mr Floropoulos’ evidence about the text messages at (T 865.26 – 866.3), (T 884.23–27), (T 888.7–22, 888.28–889.4), (T 889.7 – 892.23), (T 893.6–16), (895.19–21, 896.6–12), (898.22 – 899.12), (899.28 – 900.4 — Mr Floropoulos accepted that the message he sent in relation to Greece was a lie on his part).
[441] See paragraph 524 above.
[442] Which was one of the Supply Representations.
[443] Noting in this regard my finding that I do not accept that Mr Floropoulos told Mr Canzoneri that Kremel would not sign the agreement.
[444] See paragraph 620 above, and below.
[445] With Mr Delis.
[446] Although, for completeness, I add that the overall position and conclusion would not change even if that had not been so.
[447] Although for the purpose of the issues in the proceeding it was the express position of all parties that this was not an issue that needed to be considered or determined and no substantive submissions were made on the topic.
[448] Clause 2.3 and the entire agreement clause.
[449] Which it was evident was referring to the second signing by Mr Canzoneri which addressed the handwritten amendments included by Mr Hone, as reflected in Mr Hone’s emails of 30 November and 6 December 2016 and Ms King’s email of that date forwarding the agreement to Mr Hone.
[450] It may also be noted that, as senior counsel for Oliana expressly noted in closing submissions, no allegation of contributory negligence or proportionate liability was pleaded, and this was not contested in relation to this or any of the other representations. Section 137B of the CCA was also not pleaded, raised, or sought to be relied upon for this or any of the other representations or conduct.
[451] Given that it was expressed to be a tripartite agreement there is a question as to whether it was binding on Oliana and Culinary Co. However, it was not necessary for this issue to be addressed given the issues in this case, as the parties also expressly stated.
[452] Which was again part of the Supply Representations and alleged Floropoulos Conduct.
[453] T 250.8–12.
[454] T 250.24–26.
[455] T 251.4.
[456] T 251.7–9.
[457] T 251.30 – 252.3.
[458] T 252.3–7.
[459] Mr Floropoulos was not re-examined at all on the detail or extent of his contribution to the 7 June 2016 letter.
[460] T 290.4–10.
[461] See the text messages and Mr Floropoulos’ evidence at T 865.26 – 866.3, T 884.23–27, T 888.7–22, T 888.28 – 889.4, T 889.7 – 892.23, T 893.6–16, T 895.19–21, T 896.6–12, T 898.22 – 899.12, T 899.28 – 900.4.
[462] T 513.28 – 514.12.
[463] Although even if the letter is considered in isolation it reflects and is consistent with such a position.
[464] Which remains the position even if an adverse inference was to be drawn on the point with respect to Michael Canzoneri. This is because such an inference would not stand as positive evidence on the issue and could rise no higher than an inference that his evidence would not have assisted Oliana.
[465] Which is not to overlook that they are recorded in the extract as being beneficially owned.
[466] T 249.14–27.
[467] T 271.8–16.
[468] See the text messages and Mr Floropoulos’ evidence about them at (T 865.26 – 866.3), (T 884.23–27), (T 888.7–22, 888.28 – 889.4), (T 889.7 – 892.23), (T 893.6–16), (T 895.19–21, 896.6–12), (T 898.22 – 899.12), (T 899.28 – 900.4 — Mr Floropoulos accepted that the message he sent in relation to Greece was a lie on his part).
[469] T 795.9–23.
[470] T 249.
[471] T 249.
[472] T 270.
[473] T 271.
[474] ‘Would be’.
[475] And ss 237 and 239 of the ACL.
[476] See, for example, Lucas Earthmovers Pty Limited v Anglogold Ashanti Australia Limited [2019] FCA 1049, [805]–[807]; Miller’s Australian Competition and Consumer Law Annotated [ACL.236.20].
[477] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 525.
[478] Ibid.
[480] Ibid [540]–[541] (citations as in original).
[481] Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647, 650 (Dixon J) (‘Toteff’). Although Toteff was a case in deceit, the principles have been applied to proceedings under s 52 of the TPA.
[482] Wardley [1992] HCA 55; (1992) 175 CLR 514, 525 (Mason CJ, Dawson, Gaudron and McHugh JJ), referring to March v Stramare (E & MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506.
[483] Toteff [1952] HCA 16; (1952) 87 CLR 647, 650; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 12 (Mason, Wilson and Dawson JJ) (‘Gates’); Marks [1998] HCA 69; (1998) 196 CLR 494, 512–3 [41]–[42], 514–15 [48]–[52]; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, 470–1 [19]–[21] (Gleeson CJ), 509 [162] (Hayne J).
[484] Marks [1998] HCA 69; (1998) 196 CLR 494, 512–13 [41]–[42] (McHugh, Hayne and Callinan JJ).
[485] Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627, 639 [30] (Gleeson CJ).
[486] Gates (1986) 160 CLR 1, 14–15 (Mason, Wilson and Dawson JJ).
[487] Marks [1998] HCA 69; (1998) 196 CLR 494, 512 [41]–[42]; Wardley [1992] HCA 55; (1992) 175 CLR 514, 533; Chappel v Hart (1998) 195 CLR 232, 255–6 [62]; Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627, 642–3 [45]; Abigroup Contractors Pty Ltd v Sydney Catchment Authority [No 3] [2006] NSWCA 282; (2006) 67 NSWLR 341 (‘Abigroup’).
[488] Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, 509 [163] (Hayne J).
[489] Gates (1986) 160 CLR 1, 13 (Mason, Wilson and Dawson JJ).
[490] See [591] below.
[491] Henville v Walker [2001] HCA 52; (2001) 206 CLR 459; Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413.
[492] Gates (1986) 160 CLR 1; Marks [1998] HCA 69; (1998) 196 CLR 494.
[493] Marks [1998] HCA 69; (1998) 196 CLR 494, 514 [48]–[49].
[494] Abigroup [2006] NSWCA 282; (2006) 67 NSWLR 341, 354–5 [59]–[61].
[495] Marks [1998] HCA 69; (1998) 196 CLR 494, 503 [15] (Gaudron J), 510 [38] (McHugh, Hayne and Callinan JJ), 529 [102]–[103] (Gummow J).
[496] Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, 493 [105]–[106] (McHugh J).
[497] Ibid.
[499] Ibid [76]–[77] (citations as in original).
[500] Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 12, 14 (Mason, Wilson and Dawson JJ) (‘Gates’); Kizbeau [1995] HCA 4; (1995) 184 CLR 281, 290 (Brennan, Deane, Dawson, Gaudron and McHugh JJ); HTW Valuers v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640, 656 [35].
[501] Potts v Miller [1940] HCA 43; (1940) 64 CLR 282, 289 (Starke J), 297 (Dixon J) (‘Potts’); Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647, 650–1 (Dixon J), 654 (Williams J).
[502] Potts [1940] HCA 43; (1940) 64 CLR 282, 297; Gould v Vaggelas (1985) 157 CLR 215, 220 (Gibbs CJ), 242 (Wilson J), 254 (Brennan J) (‘Gould’); Gates (1986) 160 CLR 1, 12 (Mason, Wilson and Dawson JJ).
[503] Keys Consulting Pty Ltd v Cat Enterprises Pty Ltd [2019] VSCA 136, [68]–[71].
[504] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80 (Mason CJ and Dawson J), 99 (Brennan J), 118 (Deane J), 137–8 (Toohey J); JLW (Vic) Pty Ltd v Tsiloglou [1994] VicRp 16; [1994] 1 VR 237, 241 (Brooking J) (‘JLW’).
[505] JLW [1994] VicRp 16; [1994] 1 VR 237, 241 (Brooking J).
[506] Chaplin v Hicks [1911] UKLawRpKQB 104; [1911] 2 KB 786, 792 (Vaughan Williams LJ); Fink v Fink [1946] HCA 54; (1946) 74 CLR 127, 143 (Dixon and McTiernan JJ); McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377, 411–12 (Dixon and Fullagar JJ) (‘McRae’).
[507] Ratcliffe v Evans [1892] UKLawRpKQB 131; [1892] 2 QB 524, 532–3. See the very helpful analysis of this topic in NCON Australia Ltd v Spotlight Pty Ltd [No 5] [2012] VSC 604, [281]–[295] (Robson J).
[509] Ibid 438.
[511] Ibid 352.
[513] [2020] HCA 27, [32] (citations as in original).
[514] (1990) 169 CLR 638 at 639–640 per Brennan and Dawson JJ, 642–643 per Deane, Gaudron and McHugh JJ. See also Badenach v Calvert [2016] HCA 18; (2016) 257 CLR 440 at 454 [39]–[40] per French CJ, Kiefel and Keane JJ.
[515] [1991] HCA 54; (1991) 174 CLR 64 at 92 per Mason CJ and Dawson J, 102–104 per Brennan J, 118–119 per Deane J.
[516] (1994) 179 CLR 332 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ, 368 per Brennan J.
[517] (2019) 271 FCR 392 (Allsop CJ, Yates and O’Bryan JJ).
[518] Berry [2020] HCA 27 [34] and [35] (citations omitted). By operation of s 137B of the Competition and Consumer Act, damages awarded under s 236 for a breach of s 18 of the ACL may be reduced to the extent the court considers just and equitable if the claimant’s loss or damage is in part due to their failure to take reasonable care although, as mentioned, this was not pleaded or relied on here and no submissions were made on the topic.
[519] Lockhart, Law of Misleading or Deceptive Conduct in Australia (5th ed), [11.52].
[520] Ibid [11.63].
[521] Ibid [11.53].
[522] Which s 236 of the ACL does not allow.
[523] Based on the Culinary Co Supply Price not the Kremel Supply Price that it was unaware of.
[524] And Mr Hone.
[525] As opposed to going to an alternate supplier.
[526] Or ‘loss of a chance’ case.
[527] For example, Reply Aide Memoire, [20].
[528] Understandably, it was not contended in the circumstances of this case that the issue of loss should be looked at any differently as between ss 236 and 238 of the ACL.
[529] To which I refer without setting out again.
[530] Or the MyCo Cost Price.
[531] See also the helpful discussion of Brennan J regarding causation in Sellars and the observations of the plurality taking care to distinguish between causation and ascertainment of the value of lost opportunities, and the observations in Berry earlier referred to.
[532] Of course that is not to suggest that there was reliance on any misleading conduct before it occurred.
[533] The date of the last payment to Culinary Co.
[534] T 247.29.
[535] T 249.7–14.
[536] See T 253, 262–3, 271, 439.
[537] T 251.18–29.
[538] But after Kremel was identified by Mr Floropoulos and Mr Canzoneri was told about it in late May 2016.
[539] See also the observations in Sellars distinguishing causation from ascertainment of value and the observations of Brennan J at 364–368 on the need to establish causation on the balance of probabilities even where that involves past hypotheses, and the observations in Berry regarding causation.
[540] But also noting that different causation considerations arise when considering loss and damage under ss 236 and 238 of the ACL than when considering breach of fiduciary duty claims where equitable compensation or an account of profits is sought.
[541] Mr Garakis’ evidence about visiting Mr Floropoulos’ family and knowing them was a reference to a visit and knowledge subsequent to Mr Floropoulos first meeting Mr Garakis in May 2016.
[542] As numerous documents also evidenced, including the invoice emails and related documents referred to by Oliana.
[543] Which is not to overlook Mr Canzoneri’s evidence about the debt with Epirus. See, for example, T 379.
[544] Which is not to ignore the position of the sales manager Mr Alexopoulos, but his evidence was very short and no evidence was given in relation to such an issue and he was not asked about obtaining supply in Greece or elsewhere or any related matter.
[545] At what were said to be better prices than Culinary Co. Although Culinary Co was not mentioned by name it was apparent from the evidence when given (and the transcript) that it was to the Culinary Co Supply Prices to which reference was being made – although it would make no difference were it otherwise. There was some limited cross-examination on this topic of ability to source product at T 439.
[546] Even though Mr Canzoneri referred to doing what he did a year later (which was a loose time reference period) and there was no other evidence to suggest the supply was sourced during the supply from Kremel/Culinary Co. If there had been this would have further detracted from establishing the counterfactual.
[547] T 329.26, ‘... no, no, no, no. No, because, look I – I didn’t – I did business only with Mr Floropoulos ...’.
[548] T 329–330. It was elsewhere apparent from the evidence that the meeting Mr Floropoulos’ family and going to his home was a reference to events that had occurred since the commencement of the supply arrangements and not prior to May 2016.
[549] Noting, however, that I am satisfied that the approach would have been made much earlier.
[550] But also recognising that such evidence would be in respect of a past hypothetical that would fall to be weighed with the other evidence.
[551] Outlines of evidence were ordered to be filed for all lay witnesses rather than witness statements.
[552] It was during cross-examination that Mr Garakis also mentioned about being pleased about the business opportunity gained through Mr Floropoulos and related matters and making a profit.
[553] That remains the position even if one takes a robust approach of the kind addressed in Pitcher Partners regarding the tort of deceit (but noting that no submission was made on this topic and, for completeness, also noting the recent observations of the High Court in Berry regarding the position under the ACL). Further, this conclusion has been reached without drawing any inference against Oliana under the so-called rule in Jones v Dunkel. See generally in this regard Heydon JD Cross on Evidence (LexisNexis, 11th Ed, 2017) at [1215] and, particularly, the ninth factor mentioned at p 44 and the cases there cited. Although it is possible that such an inference may be open it has not been necessary to consider this issue given my conclusion that Oliana has not discharged its burden of proof on these aspects of its counterfactual in any event. Further, it is possible that submissions might have been made that Mr Garakis ought not properly be regarded as a witness in Oliana’s camp given that Kremel was initially a defendant, which may in part explain why a Jones v Dunkel submission was not made on this issue by Mr Floropoulos or Mr Hone.
It may also be noted that, it was not contended by Oliana or the defendants that the question of price would be an aspect to be dealt with on probabilities and possibilities in line with the approach in Sellars if it had otherwise been established that a willingness to supply had been established in any event. As earlier noted, Oliana expressly did not put its case this way given its limited damages claim which in my view with respect was the correct approach.
[554] As earlier addressed, different considerations arise in the context of breaches of fiduciary duty and equitable compensation.
[555] For the avoidance of doubt, I do not regard Briginshaw considerations to be relevant to this issue, although the result is the same whether or not they are taken into account.
[556] T 185.16 – 186.9.
[557] T 290.4–10.
[558] T 327.25.
[559] See T 185 – 186.
[560] T 952.
[561] Which was submitted to be obvious to the court when Mr Garakis gave evidence, and is a submission I do not accept for the reasons previously stated.
[562] [1988] FCA 289; (1988) 82 ALR 415.
[563] Counsel for Mr Hone made some submissions regarding vulnerability and bargaining power, however, because there was no breach of fiduciary duty or unconscionability claim against Mr Hone it was not altogether clear why these matters were raised. However, they have been taken into account and do not alter the conclusions reached.
[564] Which is not to ignore the observations of Mr Trimboli in his report on the topic, but which were of little or no weight in any event. This is not a criticism of Mr Trimboli or his report, which was prepared in a different context and for a different purpose.
[565] This is not to ignore the communications in which he became involved when the issues arose in January 2018 after Mr Canzoneri wrote jointly to Mr Garakis and Mr Kremel.
[566] It may also be observed that the evidence showed that Mr Floropoulos was not said to be in Greece or overseas at that time either and Mr Garakis’ evidence was that he had not spoken to Mr Hone.
[567] And which included alterations to the execution clauses for Kremel and Culinary Co.
[568] The second time in early December 2016.
[569] The parties were in agreement that for the purpose of this proceeding it was not necessary for the court to determine the validity and status of the agreement as between Culinary Co and Oliana and did not address submissions on the issue. It is therefore not addressed in these reasons.
[570] Together with the contravening conduct of Mr Floropoulos.
[571] See paragraph 800 above.
[572] Citing Schlieske v Overseas Construction Co Pty Ltd [1960] VicRp 33; [1960] VR 195, 197 and P & P Property v Owen White & Caitlin LLP [2018] EWCA Civ 1082 [35]–[40].
[574] See written submissions at [142].
[575] Collen v Wright [1857] EngR 25; (1857) 8 El & Bl 647, 657–8; [1857] EngR 25; 120 ER 241.
[576] Collen v Wright [1857] EngR 25; (1857) 8 El & Bl 647, 657–8; [1857] EngR 25; 120 ER 241, 245 (Willes J).
[577] Starkey v Bank of England [1903] UKLawRpAC 9; [1903] AC 114, 119. See also Black v Smallwood [1966] HCA 2; (1966) 117 CLR 52, 64 (Windeyer J); Commonwealth Bank of Australia v Hamilton [2012] NSWSC 242, [291], [294]–[296] (Price J).
[578] Simmons v Liberal Opinion Ltd [1911] UKLawRpKQB 36; [1911] 1 KB 966,971 (Cozens-Hardy MR).
[579] Schlieske v Overseas Construction Co Pty Ltd [1960] VicRp 33; [1960] VR 195, 198 (Sholl J).
[580] Schlieske v Overseas Construction Co Pty Ltd [1960] VicRp 33; [1960] VR 195, 198 (Sholl J).
[581] Leggo v Brown & Dureau Ltd [1923] HCA 19; (1923) 32 CLR 95,106 (Isaacs J).
[582] Hearse v Staunton [2010] NSWSC 954, [96] (Hall J).
[583] Permanent Custodians Ltd v Geagea (No 4) [2016] NSWSC 934, [41] (Rothman J).
[584] BHPB v Cosco [2009] FCA 1087 [40] and [49] (Finkelstein J). See also, generally, G E Dal Pont Law of Agency (LexisNexis Butterworths, 3rd ed, 2014) [23.80]–[23.93].
[585] Permanent Custodians Ltd v Geagea [2014] NSWSC 562 (Rothman J).
[586] Ibid [78]–[79] (Rothman J).
[587] Cro Travel Pty Ltd v Australian Capital Financial Management Pty Ltd [2018] NSWCA 153, [168] (Ward JA, Meagher JA and Barrett AJA agreeing); BHPB v Cosco [2009] FCA 1087 [40], [51] (Finkelstein J).
[588] (1923) CLR 95, 99.
[589] Boulas v Angelopoulos (1991) 5 BPR 11,477, 11,491 (Kirby P, Glesson CJ and Samuels JA agreeing) quoting Bowstead et el, Bowstead on Agency (Sweet & Maxwell, 15th ed, 1985) 465–6. President Kirby went on to hold that if the primary contract is unenforceable there is no loss entitling a plaintiff to damages. This was said to be because ‘the relevant cause of action is’ based on the implied promise that the agent had authority to enter into the relevant transaction, not that the transaction will be enforceable.’ See also Sinclair v Hudson (1995) 9 BPR 16.259, 16,263 (Windeyer J).
[590] BHPB v Cosco [2009] FCA 1087 [50] and [51].
[591] BHPB Freight Pty Ltd v Casco Oceania Chartering Pty Ltd (No 4) [2009] FCA 1448; (2009) 263 ALR 63.
[592] Ibid 65, [6].
[593] Permanent Custodians Ltd v Geagea [2014] NSWSC 562 [104].
[594] Ibid [107]–[109].
[595] Cro Travel Pty Ltd v Australian Capital Financial Management Pty Ltd [2018] NSWCA 153, [162] (Ward JA, Meagher JA and Barrett AJA agreeing) (citations omitted). See also Leggo v Brown & Dureau Ltd [1923] HCA 19; (1923) 32 CLR 95,99 (Knox CJ); McIntosh v Linke Nominees Pty Ltd [2008] QCA 275, [13] (Muir JA, Cullinane and Douglas JJ agreeing).
[596] Ibid [164] quoting FMB Reynolds, Bowstead and Reynolds on Agency (18th ed, 2006, Sweet & Maxwell) [9-077]:
Transaction unenforceable against principal. Where no redress could be obtained from the principal even if the agent had been authorised, there is again no loss. Thus in Heskell v Continental Express Ltd ... even express authorisation of the signature by the principal would not have created a contract with the principal, since no goods had ever been shipped. The same result could follow where the contract is unenforceable against the principal because the principal is a company not yet formed or for lack of writing under the Statute of Frauds.
[597] As the concessions made by Mr Hone’s counsel acknowledged.
[598] It was common ground that Mr Paris Periandros and Mr Paris Garakis are one and the same person.
[599] Noting that this also reflects reliance upon Mr Hone’s misleading conduct, as previously mentioned.
[600] And the content of that email.
[601] Pursuant to a different arrangement unknown to Oliana and to that which Mr Hone was conveying he was authorised to act in respect of for Kremel.
[602] [2018] NSWCA 153, [162] (Ward JA, Meagher and Barrett AJA agreeing).
[603] And any other matters the parties may wish to raise in relation to interest.
[604] This summary is to be read in the light of the detailed reasoning that precedes it.
[605] And the operation of the principles against double recovery.
[606] But subject to clarifying a small matter of arithmetic with the parties in relation to the Oliana Loss Amount.
[607] Subject to clarifying a small matter of arithmetic with the parties in relation to the Oliana Loss Amount.
[608] And the small arithmetical matter referred to.
[609] Including any declarations.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/vic/VSC/2020/693.html