CPI Group Limited v Stora Enso Australia Pty Ltd

Commercial Background 5 The facts making up the commercial background are not in dispute and are comprehensively set out in the primary judge's reasons at [4] to [15]. They are relevantly summarised below: (1) Since at least 1986, the Stora Enso group and its antecedents, through SEA, had been CPI's largest supplier of coated paper, and until December 2003, was CPI's sole supplier of carbonless paper. In 1988, CPI approached the Stora Enso group's antecedent, Feldmuehle AG, and offered it equity in CPI. Feldmuehle took up an equity share in CPI of approximately 20 per cent at that time. (2) In 1990, the Feldmuehle AG group was acquired by Stora Kopparbergs Bergslags AB of Sweden, becoming the Stora group. In 1998 the Stora group merged with the Enso group of Finland. This formed the Stora Enso group of which SEO is the ultimate parent company. By reason of share issues by CPI, rather than sales by the Stora Enso group, at the time of the proceedings below, the Stora Enso group's interest in CPI had reduced to 7.61 per cent. (3) The primary judge found that despite the Stora Enso group's interest in CPI, the relationship between CPI and SEA was not a special one but rather a normal commercial relationship between SEA and a customer. CPI was not given any preferential treatment in relation to trading terms with SEO's mills and provision of credit to CPI by the mills was governed by the credit policies of SEO. (4) In March 1993, Stora Feldmuhle Carbonless Paper GmbH operated a paper manufacturing mill in Germany ("the Mill") and entered into an agency agreement with SEA. Generally, in these reasons, as in the reasons of the primary judge below, no distinction is drawn between the owner and operator of the paper production facility and the facility itself. Under the agency agreement, SEA was to act as agent for the Mill on a commission basis for the sale in Australia and New Zealand of carbonless paper produced by the Mill. The agreement applied to all deliveries beginning 1 April 1993, was not limited in duration and could be terminated at the end of a calendar year with six months notice. (5) In March 1994, the Mill entered into a distributor agreement with SEA, in which SEA was appointed distributor for the sale of carbonless paper to the Australian company, Boomerang Trading Pty Ltd. SEA was to take all credit risks for sales and incurred a liability to the Mill. The Mill was to deliver the products directly to Boomerang Trading. The distributor agreement became effective on 1 May 1994 and was of indefinite duration. As with the agency agreement, either party could terminate the agreement at the end of a calendar year with six months notice. Under the agreement, SEA received a dealer discount of 2 per cent on the price invoiced by the Mill. (6) In June 1994, SEA, with the Mill's consent, entered into a distributor agreement with Boomerang Trading granting it non-exclusive distribution rights for the sale in Australia of carbonless paper. The agreement became effective on 1 May 1994, was not limited in duration and could be terminated at the end of a calendar year with six months prior notice. SEA's invoices to Boomerang Trading had to be paid within 75 days after the invoice dates for Giroform reels and 90 days after the bill of lading dates for Giroform sheets. (7) One of the Boomerang companies' major customers was Moore Business Systems Australia Pty Ltd ("Moore"). On 14 June 2002, the Mill and Moore entered into a supply agreement. The agreement was also signed by a representative of SEA. By that time the Mill was no longer part of the Stora Enso group and was owned and operated by Mitsubishi Hitee Paper (Bielefeld) GmbH, although SEO still retained an interest. Under the supply agreement, which was for a two year period commencing on 1 October 2002, the Mill guaranteed to supply Moore with carbonless paper on a "just in time" delivery basis. Moore agreed to purchase all its carbonless paper in Australia from the Mill's accredited merchants, Boomerang and CPI. Prices listed in an attachment to the agreement were firm for the first 12 months and prices for the second 12 months were to be negotiated and agreed before the end of May 2003.

Background to Invoicing Agreement 6 The background to the invoicing agreement from early 2001 to April 2003, including the ongoing default of the Boomerang companies in meeting SEA's terms of trade and the resulting build up of indebtedness, the inability of SEA to secure credit insurance for Boomerang Melbourne or even increase the cover of that provided by the Stora Enso group's internal insurance company and the prospect of cutting the supply of paper to Moore, is dealt with by the primary judge at [16] - [32] of his reasons. 7 The primary judge noted an exchange of emails between Mr Fabrello, SEA's national sales manager for carbonless paper, and Mr Koeppen, international sales manager of the Mill who was based in Germany, on 2 May 2003. His Honour observed (at [33] - [36]): "… The first email, from Mr Fabrello, set out his understanding of the position in three numbered points. The first was that because of the poor payment history of Boomerang Melbourne, SEA could not get sufficient insurance cover. For reasons he detailed, he thought that the poor payment history was not likely to change in the short term under current ownership. He observed, as his second numbered point, that SEA had to reduce its exposure to Boomerang but in a way that allowed Boomerang to continue with all its existing business including Moore so that the cash flow would remain stable. He noted that if 'we' stopped supplying Moore and Boomerang were not able to replace the volume, then 'we' would have less exposure per month but would expect payments to get worse and the total debt would remain at the current level. Mr Fabrello proposed three options: 'The best options we have are: A) Boomerang find another Carbonless supplier for the Moore business - in this scenario it would then be most likely that we would lose all the reel business at Boomerang as running two stocks would be a logistic nightmare. However if this allowed Boomerang to continue to operate then we would have a very good chance of getting all our money. B) We convince Boomerang to sell and CPI to buy and takeover the outstanding debt. C) We convince CPI to invoice Boomerang for Giroform reel sales to Moore. In this case CPI would get the commission owed to Stora Enso. Both B and C would enable us to continue with Giroform at Boomerang…' He then asked Mr Koeppen: 'For these scenarios are you able to make any special extra commission offer to CPI perhaps for a fixed period as a support'. Mr Fabrello's third numbered point was: 'I have advised Boomerang that [SEA] will not support the Moore business after September and that [the Mill] will not take over the invoicing. As far as the [SEA] board is concerned I have to advise Moore of a significant price increase in May which will force a change. I have told Boomerang to find an alternative supply as per the option A) above quickly so that they will be able to offer the alternative option when I advise Moore. Despite my following this up several times with Boomerang they have yet to act seriously about an alternative and appear to be basing their future on some arrangement with CPI which could take some time to negotiate. I am having a meeting with Bernard at CPI next wednesday to get an idea of their position and will then visit Boomerang to push them along the alternative supply. We are running out of time'. Mr Koeppen responded by saying that for Giroform's long term strategy, 'we' had to continue with our reels business in Australia which meant continuing to do business with Boomerang. He preferred options B and C." Mr Fabrello's reference to "Bernard at CPI" was a reference to Mr Cassell, the chief operating officer at CPI who became its managing director in September 2003. We note that Mr Koeppen, after expressing his preference for options B and C, asked Mr Fabrello: "What costs were 'we' considering? 2, 3, 4, 5 percent?" 8 On 19 May 2003, Mr Ellenberg, the managing director of SEA, and Mr Fabrello met with Mr Cassell. Each gave their own version of what was said by each of them at the meeting. At [87] of his reasons, the primary judge identified four aspects of the conversations as warranting special consideration: "… The first is what was said by Mr Ellenberg about the reason SEA was having problems with credit insurance for Boomerang. The second is whether Mr Ellenberg said there was a credit issue with Boomerang, and the third was whether Mr Ellenberg said, in relation to Boomerang, they 'had a shaky customer here'. The last is what was said about cutting supply to Moore." 9 As to the last matter, the primary judge acknowledged that, on the pleadings, it was admitted that "on or about 19 May 2003 SEA informed CPI that SEA intended to restrict the sale and supply by it of Giroform Carbonless Paper to the Boomerang companies in respect of a particular customer, Moore Business Systems Australia Pty Ltd by 30 June 2003". But his Honour then went on to find (at [88]): "It is probable, in my view, that what Mr Ellenberg said about cutting supply to Moore was no more than an intimation that this was a course being actively considered and which would be implemented if necessary." In view of the admission, the relevance of this finding is not clear. 10 As to why there was a credit insurance issue with the Boomerang companies, the primary judge rejected Mr Cassell's version that Mr Ellenberg had explained the source of the problem as being a decision of the board of SEO that its internal credit insurance company would only cover products coming from mills owned by the Stora Enso group on the bases that - (i) it was plainly a lie; (ii) his impression of Mr Ellenberg in the witness box was not a negative one; it was not that of a dishonest person or one who gave deliberately false evidence; and (iii) Mr Cassel would have known the explanation was false because CPI was being supplied by SEA with the same paper from the same source as the Boomerang companies and if the explanation was correct it would have impacted on the credit insurance that SEA had from its internal insurer for CPI. 11 As to whether Mr Ellenberg said there was a credit issue with the Boomerang companies and that they (SEA) "have a shaky customer here", the primary judge was satisfied, on the balance of probabilities, that it was not said (at [97]). His Honour gave a number of reasons for his conclusion on this matter, including: (1) His opinion, that it is highly unlikely that Mr Cassell would have proceeded as he did after the meeting on 19 May 2003, if he knew that there was, or was likely to be, a credit problem with the Boomerang companies. (2) Mr Cassell did nothing to ascertain what the problem was or its extent by immediately questioning Mr Ellenberg. (3) His opinion, that it is highly unlikely that Mr Cassell would have volunteered, at the 19 May 2003 meeting, taking over the invoicing (which is Mr Ellenberg's version of the conversation) without asking more about what the credit problems were with the Boomerang companies, had such problems been alluded to by Mr Ellenberg. 12 Notwithstanding the extensive cross-examination of both Mr Cassell and Mr Akdogan, CPI's chief financial officer, about what they had gleaned from the financial records of the Boomerang companies provided in May and June 2003, the primary judge was satisfied that neither was aware of the significant problem concerning members of the Boomerang companies paying SEA in accordance with the terms of trade and the extent of the arrears. His Honour gave two reasons for this conclusion. (1) He accepted the evidence concerning the reaction of Mr Cassell in October 2003 when the true trading position of the Boomerang companies was revealed; one of genuine surprise and, in Mr Cassell's words, "great anger and annoyance at what had happened". That reaction was consistent with no prior knowledge of the true position and inconsistent with prior knowledge. (2) He considered it improbable that Mr Cassell would have been so committed to the transaction to have exposed CPI to a potentially significant liability by entering the invoicing agreement with the actual knowledge of the Boomerang companies' then trading position. As his Honour observed (at [95]), for a perceived possible gross annual commission income of approximately $500,000 a year, CPI was exposing itself to underwrite the payment of sales by SEA to the Boomerang companies of well over $1 million per month with a real risk that the Boomerang companies would not, in turn, pay CPI. 13 While the primary judge was not satisfied that Mr Ellenberg had said that they (SEA) had a shaky customer and that there was a credit issue with the Boomerang companies, his Honour was satisfied, on the balance of probabilities, that nothing was said by Mr Ellenberg which misled, or was intended to mislead, Mr Cassell about the reasons why Mr Ellenberg was proposing the invoicing agreement as a mechanism which would enable SEA to continue to supply the Boomerang companies, and thereby Moore, while also allowing CPI to continue pursuing its objective of acquiring the Boomerang companies (at [97]). 14 The primary judge noted an email which Mr Fabrello sent to Mr Koeppen on 27 May 2003 which was as follows: "Update Step 1. Bernard [Cassell] has the Boomerang financials and is rushing his study to be completed this week. (this is confidential - we are not suppose to have this info) We should know whether CPI has intention to proceed with offer next monday - then it depends if agreements can be reached with Boomerang. Step 2. Another attempt at getting insurance cover through alternative channels is in process. If [SEA] could get cover then there would be no problem in continuing the exposure to Boomerang. Andre believes the chances are very low of getting cover. Step 3. If CPI decide not to proceed with purchase and insurance fails then I would ask Bernard if CPI could take over the invoicing of Boomerang sales to Moore. Final Step 4. If there are no options left then [SEA] has to reduce exposure (invoicing) to Boomerang to a lower level. This means losing the Moore business for Giroform. However [SEA] needs Boomerang to remain in business to ensure that we do not end up with a bad debt. By us forcing Boomerang out of Moore we actually increase the risk of this happening so we have suggested to Boomerang that they have an alternative option to offerMoore if and when we haveto take step 4. The best solution after step 4 is for Boomerang to continue the Moore Business with an alternative so that they can maintain their cash flow and gross margin from this business. I would anticipate that [SEA] would have to take step 4 by the end of week 24." 15 The primary judge found that as early as September 2002, Mr Fabrello and Mr Cassell had discussed the possible acquisition by CPI of the businesses of the Boomerang companies. He found that in early 2003 Mr Cassell told Mr Fabrello that if CPI purchased the Boomerang companies, it would need him (Mr Fabrello) to join CPI and manage the acquisition. His Honour was satisfied that Mr Fabrello was asked to take up employment with CPI to manage the acquisition during the process of transition and that Mr Fabrello accepted the proposal at a later date. Finally his Honour found that, on what was probably 20 June 2003, Mr Fabrello telephoned Mr Cassell advising that he had decided to retire and that he would not join CPI. He further found that Mr Cassell flew to Sydney and was with Mr Fabrello on 23 June 2003 to try to convince him to change his mind but was unable to do so. 16 The primary judge additionally found that on 5 June 2003 Mr Akdogan sent Mr Cassell spreadsheets relating to the financial position of the Boomerang companies. His Honour observed (at [47]) that is was clear from this email that Mr Akdogan was proceeding on the basis that CPI was proposing to acquire the assets of the Boomerang companies, not the companies themselves, although this was a matter that needed to be confirmed. 17 The primary judge at [48] - [49] of his reasons made certain observations concerning the financial accounts of the Boomerang companies provided to CPI between 21 May 2003 and 23 June 2003 based on an "analysis contained in SEA's submissions". We do not have the benefit of those submissions. However, it appears that the table at [49] and his Honour's observations thereon, require correction or clarification in three respects. First, while the table discloses the trading position of the Boomerang companies, it does not disclose their asset/liability position. Second, the last two lines in the second column should read: "31/12/02" and "30/04/03" not "2003" and "(30/04)". And third, a number of the figures in the last column represent accumulated losses at the particular date, not profits or losses for the 12 months or lesser period then ended. 18 On 12 and 17 June 2003, Mr Fabrello met with Mr Cassell and Mr Koeppen in Melbourne. The meeting of 12 June took place over dinner. Of particular significance was the contention of CPI that at the meeting on 17 June held in CPI's boardroom, Mr Fabrello, in response to a question from Mr Cassell whether the Boomerang companies were paying their accounts on time, had said words to the effect "yes, give or take a few days". Mr Fabrello denied this in cross-examination even though he accepted that he was asked by Mr Cassell what the terms of trade were. 19 At [104] the primary judge said: "I have little hesitation in accepting that Mr Fabrello did not affirm that Boomerang was paying its accounts on time, give or take a few days even though he accepted that he was asked by Mr Cassell what the terms of trade were. In my opinion, Mr Cassell invented this conversation as a means of explaining what proved to be a gross misjudgement, at least with the benefit of hindsight, of entering the invoicing agreement with SEA in late June and early July 2003. He needed to explain to his board, as he did in his report to the November 2003 board meeting, why CPI was liable to underwrite, effectively, Boomerang's purchases of paper as a result of the operation of invoicing agreement. It was not sufficient for him to rely on what had in fact transpired, namely that he had not been told about the poor trading record of Boomerang and had not been alerted to it himself or been advised of it by Mr Akdogan when they looked at Boomerang's accounts in May and June 2003. It was necessary for him to contrive an account of events most favourable for him. This can be illustrated by his description in his report of the invoicing agreement as "in the nature of a handshake agreement" to diminish its significance and to say, wrongly, that he simply signed a letter from Mr Ellenberg for audit purposes. It can also be illustrated by what Mr Cassell said in the report about when Mr Fabrello made the representation about the trading record of the Boomerang companies …" 20 For a variety of reasons given at [105] and [106] of his reasons, the primary judge did not form a favourable impression of Mr Cassell as a witness generally. Indeed, while his Honour found that he could not say with certainty that Mr Cassell's evidence generally was deliberately false, he could not entirely discount the possibility that it was. His Honour concluded (at [106]): "… I accept his evidence concerning disputed questions of fact only in so far as it is clearly corroborated by contemporaneous documents or is consistent with what, in the circumstances, is the probable course events took having regard to the evidence of others." 21 The primary judge went on to refer to other factors supportive of Mr Fabrello's denial that he indicated that the Boomerang companies were paying their accounts on time, give or take a few days, including the presence of Mr Koeppen who would have known such a statement to be wrong and who, the primary judge found, could not have been expected to stand by and say nothing in the face of the fact that the meetings of 12 and 17 June were designed to, and did, establish a relationship between CPI and the Mill which was intended to endure. 22 On 17 June 2003, a draft memorandum of understanding between CPI and the Mill was prepared to reflect the agreement reached at the June meetings. The draft was as follows: "MEMORANDUM OF UNDERSTANDING CPI GROUP LTD AND [THE MILL] BACKGROUND a) [The Mill] is a supplier of Carbonless papers to Australia and New Zealand. b) [SEA] is the current exclusive agent for [the Mill] in Australia and New Zealand. c) The customers for [the Mill] product in Australia and New Zealand are CPI Group Ltd ('CPI') and the Boomerang Trading Group ('Boomerang'). d) [SEA] wishes to reduce its credit exposure to Boomerang and limit sales to them. e) [The Mill] wishes to maintain sales to Boomerang. f) CPI wishes to acquire the business of Boomerang. In recognition of the above [the Mill] and CPI have agreed on the following actions set out in this Memorandum of Understanding. 1. CPI confirms that it is negotiating with Boomerang for the purchase of its business and that it intends to try and conclude this acquisition as soon as possible. 2. In the meantime CPI agrees that it will be invoiced by [SEA] for all sales to Boomerang and that it will in turn invoice Boomerang for those sales, i.e. CPI will assume Boomerang's credit risk. 3. In return for CPI assuming the credit risk on Boomerang, [the Mill] agrees to pay CPI 2% rebate calculated on the invoice value of all sales to Boomerang. 4. [The Mill] agrees that it will terminate the agency for its carbonless papers in Australia and New Zealand with [SEA] to take effect 31 December 2003 (or sooner ifmutually agreed), and that it will enter into similar arrangements with CPI effective 1 January 2004 (or sooner if mutually agreed). 5. CPI agrees that it will employ Mr Nereo Fabrello once the arrangements with [the Mill] are in place (or sooner if mutually agreed). 6. [SEA] will warrant that all invoices raised to CPI in respect ofBoomerang purchases are true and correct and have been accepted by Boomerang. 7. [The Mill] agrees that in the event that CPI is successful in its acquisition of Boomerang it will extend the current payment terms on reels to 120 days from the current 60 days (CPI) and 75 days (Boomerang). This arrangement will continue for two years following which it will be further discussed between the parties." 23 By letter dated 26 June 2003, the Mill terminated the agency agreement and distributor agreement with SEA, effective at the end of 2003. Mr Ellenberg did nothing to persuade the Mill to change its mind. The primary judge accepted Mr Ellenberg's evidence to the effect that he did not seek to persuade the Mill to change its mind because it was exercising, in an unqualified way, its right to terminate the agreements in a context in which he assumed it was likely CPI would take over the Boomerang companies and it would make no real commercial sense to the Mill to maintain SEA as its agent. 24 The final memorandum of understanding between CPI and the Mill was signed on behalf of the Mill on 27 June 2003 and by CPI on 7 July 2003. The final version was identical to the draft except that clause 5 (which referred to CPI's agreement to employ Mr Fabrello) was replaced with the following clause: "5. CPI agrees that it will employ a suitable person to provide leadership for sales of carbonless papers." 25 From these events, emerged the invoicing agreement. On 25 June 2003, SEA sent an undated letter to CPI setting out the terms of the invoicing arrangement. The letter was prepared by Mr Fabrello to reflect what was decided at the meeting on 17 June 2003. The letter read: "Dear Bernard [Cassell] Re; Agreement to Invoice Boomerang Paper Companies This is to confirm the following agreement between Stora Enso Australia Pty Ltd and CPI Group Ltd. CPI Group agrees to accept Invoices from Stora Enso Australia for all Boomerang Paper Companies purchases of Giroform Carbonless Paper. The Boomerang Companies are Boomerang Paper (Aust) Pty Ltd, Boomerang Paper (Qld) Pty Ltd, Boomerang Paper (WA) Pty Ltd. Stora Enso Australia agrees to pay CPI a rebate of two percent of the invoiced sales values (excluding GST) for all Boomerang Paper companies invoices. This rebate will be paid monthly by means of a credit note. Either party can terminate this agreement by giving two months written notice. Stora Enso Australia warrants that all invoices raised to CPI in respect Boomerang Paper purchases are true and correct and have been accepted by the Boomerang Paper company concerned. This will be effective all Invoiced raised from July 1st 2003. Details of invoicing procedures are attached. Please confirm you [sic] acceptance of this agreement. Yours truly Juhani Ellenberg Managing Director Stora Enso Australia Pty Ltd" 26 The attachment to the letter was as follows: "Procedure for Boomerang Invoicing by CPI group. 1. Stora Enso will continue to raise individual invoices for the Boomerang Companies. 2. These will now be raised as pro forma invoices which will have to signed off [sic] as correct by the Boomerang companies. 3. Stora Enso will then consolidate the invoices and raise a single line invoice to CPI group for the total value of the invoices. Separate invoices will be raised for consignment reels, Indent reels and Indent sheets as payment terms are different for each category. Terms are - Consignment Reels - 75 days from end of reported sales month. - Indent Reels - 90 days from Bill of Lading Days - Indent Sheets - 120 days from Bill of Lading Date 4. CPI group will then invoice Boomerang for the same value of these invoices. 5. CPI will make payments to Stora Enso Australia Pty Ltd on the agreed terms less the value of any credit notes raised. Juhani Ellenberg Managing Director Stora Enso Australia Pty Ltd" 27 CPI replied with the following letter to SEA dated 2 July 2003: "Dear Juhani [Ellenberg] With regard to your letter of agreement between Stora Enso Australia Pty Ltd and CPI Group Ltd, CPI Group Ltd hereby confirms its acceptance of the arrangement for all invoices raised from 1 July 2003. Please direct all correspondence (including invoices) relating to the day-to-day managing of this arrangement to our Chief Financial Officer, Mr Birol Akdogan. Yours sincerely Bernard P Cassell Chief Operating Officer"

Post 1 July 2003 28 SEA supplied carbonless paper to the Boomerang companies under the invoicing agreement from 1 July 2003 to October 2003 and issued the invoices and credit notes. The invoices raised by SEA and sent to CPI for each month from July to October 2003 were in the following amounts:

29 Month (2003) 30 Total 31 July 32 $1,366,340.18 33 August 34 $1,267,448.37 35 September 36 $1,370,508.14 37 October 38 $1,801,950.45

CPI paid in full the July 2003 invoice. 28 SEA also raised and issued in favour of CPI the credit notes representing the commission payable to CPI for each of the months July to October 2003, which totalled $116,124.97. Also during the period July to October 2003, SEA allowed CPI, and CPI was entitled to, a further rebate for price support, the total amount of which was $356,237.34. SEA took into account this amount in calculating the amount owed to it by CPI. The invoiced amounts for the months August to October 2003 remain outstanding. 29 In October 2003, Mr Cassell sought to withdraw from the invoicing agreement. On 26 September 2003, he met with Mr Harrison who was an accountant from the firm Douglas and Harrison, which had been retained by CPI in early August 2003 to undertake due diligence inquiries concerning the acquisition of the Boomerang companies. Mr Cassell's evidence, which the primary judge accepted, was that this was the first occasion on which a substantial deficiency in the Boomerang companies' net assets was made known to him. Mr Cassell had a further conversation with Mr Harrison in early October 2003. 30 Mr Cassell then organised a meeting with Mr Ellenberg, Mr Fabrello, Mr Koeppen and Mr Gillman from Douglas and Harrison. They met on 22 October 2003 in Melbourne. Mr Cassell indicated that CPI did not consider itself bound by the invoicing agreement because he had been misled. He complained that "you" (probably a reference, the primary judge observed, to each of Mr Ellenberg, Mr Fabrello and Mr Koeppen) should have told him about the arrears on the Boomerang companies' account. Mr Cassell's evidence was that he asked why he had not been told. Mr Ellenberg accepted that something like that was said by Mr Cassell. Mr Fabrello's evidence was a little different. His evidence was that Mr Cassell, after referring to financial records obtained in the course of the due diligence, said SEA had been negligent in its dealings with the Boomerang companies, although he also gave evidence that Mr Cassell had earlier asked how long the Boomerang companies had been overdue in payments. The primary judge concluded that it is unlikely this question would have been asked by Mr Cassell if he had known the true position earlier. 31 The primary judge observed that while there were differences in the evidence about precisely what was said, he concluded that it was probable that Mr Cassell did complain about being misled. His Honour observed this was the import of the evidence of Mr Cassell and Mr Ellenberg and, in substance, the evidence of Mr Fabrello. His Honour noted that Mr Cassell's evidence was that, in response to his question about why he had not been told about the Boomerang companies' position, Mr Fabrello said that he was surprised Mr Cassell did not know. In cross-examination Mr Fabrello denied saying this at the meeting, although his Honour found that his denial was far from emphatic. His Honour observed that what appears to be a qualification in his answer, namely that he did not say that at the meeting, was not explored in cross-examination. His Honour concluded that it is probable that Mr Fabrello did make an observation about being surprised that Mr Cassell did not know, probably at that meeting, but in any case at about that time. His Honour accepted that Mr Fabrello genuinely did not know that Mr Cassell was unaware of the Boomerang companies' position; that Mr Cassell's statement about being surprised at the meeting is consistent with what appears to be the tenor of the conversation on the evidence of Mr Cassell, Mr Ellenberg and Mr Fabrello. 32 Finally, the primary judge at [78] of his reasons made a finding that we regard as particularly significant, namely that from about early April 2003 SEA had been requiring payments from the Boomerang companies of at least $250,000 per week to reduce existing debt. His Honour reasoned that on that basis SEA would have been expecting to receive from the Boomerang companies over the period July to October 2003 payments of about $4 million. His Honour found that in fact over this period SEA received at least $3.153 million from Boomerang Melbourne and Boomerang Brisbane paid preferentially, in reduction of pre-existing debt. 33 The primary judge made no further reference to this arrangement or to his findings in relation thereto in his process of reasoning at [135] - [139] of his reasons dealing with SEA's allegedly misleading conduct based on silence. Yet it seems clear from his Honour's other findings that this arrangement was not disclosed to CPI at any time from early April 2003 until the invoicing agreement was put in place.

Analyses and Conclusions 34 CPI alleged that SEA engaged in misleading and deceptive conduct or conduct likely to mislead or deceive. The conduct relied upon was three representations and, generally, SEA's failure to disclose the true position concerning the Boomerang companies' trading history and its then current indebtedness. That is, its silence with respect to these matters. Two of the representations were made at the meeting on 19 May 2003 and the third at the meeting on 17 June 2003.

First Representation 35 The first representation was pleaded as follows: "On or about 19 May 2003, SEA informed CPI that SEA intended to restrict the sale and supply by it of Giroform Carbonless Paper to the Boomerang Companies in respect of a particular customer, [Moore] by 30 June 2003 (First Representation)." 36 SEA admitted the above allegation. At [126] his Honour observed: "As noted earlier, it is not denied on the pleadings that the statement said to constitute this representation, was made. The issue is whether it was false, as alleged. CPI's case, as pleaded, was that SEA had no intention of restricting supply of paper to the Boomerang companies in respect of Moore. I do not accept this contention … There is no real basis for doubting that the proposal was advanced and noted and it was and would remain a course of action which SEA would embark upon if necessary." 37 As the above paragraph reveals, his Honourappears to treat the admission as an admission that a statement of uncertain intent, rather than a representation, had been made. However, SEA admitted that it informed CPI that it had a particular intention; that is, it admitted that it represented that it had that intention. Whether that representation was misleading because false depends on whether, at the time that the representation was made, SEA had the intention to restrict the sale and supply of Giroform Carbonless Paper to the Boomerang companies in respect of Moore by 30 June 2003. His Honour did not approach the issue of falsity on this basis. What his Honour did was consider the accuracy of the subsequent negative allegation pleaded by CPI, that is, that SEA had given no consideration to restricting the sale and supply by it of Giroform Carbonless Paper to the Boomerang companies in respect of Moore by 30 June 2003. His Honour did not accept that allegation for the reasons he gave. 38 The evidence demonstrates that SEA did not on or about 19 May 2003 have the intention that it then said it had. This is most clearly shown by the email from Mr Fabrello to Mr Koeppen of 27 May 2003 extracted at [14] above. This email reveals that restricting the sale and supply of Giroform Carbonless Paper to the Boomerang companies in respect of Moore was a measure of last resort for SEA which, as at May 2003, it was making serious efforts to avoid. 39 Indeed, Mr Ellenberg admitted that the first representation was false. Mr Ellenberg's cross-examination in respect of the relevant passage in his affidavit included the following: "And yet you told Mr Cassell at that meeting that you had made a final decision and you had no choice but to cut them off, didn't you? - That is how I state it in my affidavit. And that was not a truthful statement at that meeting with Cassell was it, it was a negotiating position on your part? - That's correct. Can I add …" 40 The matter which Mr Ellenberg added to his answer - namely, that SEA obtained an extension in respect of the price agreement by one month - was irrelevant to the answer that preceded it. Nor did it qualify his concession of dishonesty. In the event of any doubt, Mr Ellenberg went on to confirm that he had not told the truth: "But you did tell an untruth about Moore didn't you? - My wording was obviously wrong from that side." 41 We are of the view that CPI should succeed on this issue. However, both parties agreed that if it succeeded on this issue alone, the appeal should nevertheless be dismissed.

Second Representation 42 The second representation was pleaded as follows: "On or about 19 May 2003, SEA also informed CPI that SEA could no longer obtain credit insurance in respect of monies owing by the Boomerang Companies to SEA for paper sold and delivered by SEA to the Boomerang Companies because paper products emanating from Mitsubishi Hi Tec Paper Flensburg GmbH ('M HiTec Mill') were no longer eligible to be covered by SEA's internal credit insurance company (Second Representation)." 43 The second representation was denied by SEA. His Honour found that this representation was not made. His Honour's finding was predicated on a conclusion that he did not think it was probable that Mr Ellenberg would have resorted to lying (at [10] above). This conclusion was founded on the matters referred to at [10(ii)] and [10(iii)] above namely, his Honour's impression of Mr Ellenberg in the witness box and the fact that SEA had the same insurance arrangements for CPI as it had for the Boomerang companies and that Mr Cassell would have known the representation was false. 44 CPI sought to challenge his Honour's impression of Mr Ellenberg in the witness box by reference to inaccuracies and falsehoods, some conceded, in Mr Ellenberg's evidence and his Honour's rejection of other evidence of Mr Ellenberg including: (1) Mr Ellenberg deposed that Mr Cassell said on 19 May 2003: "We've decided to acquire Boomerang" but CPI had made no such decision by that day, a fact which Mr Ellenberg eventually conceded in cross-examination. (2) Mr Ellenberg deposed that at the meeting on 19 May 2003 Mr Cassell said: "We have started the due diligence which is ongoing" but CPI had not begun any due diligence by 19 May 2003; as at that date the confidentiality undertakings were still being signed. (3) Mr Ellenberg also deposed that Mr Cassell said on 19 May 2003: "We have received some financials" but at 19 May 2003 CPI had not received any financials from or in respect of the Boomerang companies. (4) Mr Ellenberg deposed in his affidavit, and insisted in cross-examination, that he told Mr Cassell at the meeting of 19 May 2003: "There is a credit issue with Boomerang" and, "As you know, we have a shaky customer here" but the primary judge rejected this evidence. (5) Mr Ellenberg claimed that his reason for not telling Mr Cassell about Boomerang's poor payment history was that it was "commonly known" but SEA's own documents in at least two places contradict Mr Ellenberg's evidence that Boomerang's poor payment history was commonly known. Mr Fabrello also agreed that the issue was being dealt with discreetly. It is contended that this evidence was false. 45 CPI sought to challenge what it calls the primary judge's assumption that the credit insurance arrangements for the Boomerang companies were the same as those that applied to CPI. It submitted that (a) the assumption is not supported by the evidence; (b) while his Honour dismissed this evidence as "ambiguous", it is not; (c) the documentary evidence - the credit application form and the email - relied upon by his Honour does not support the assumption; and (d) his Honour's reference to the prospect of recourse to an external insurer is also incorrect. 46 There is undoubtedly force in the appellant's arguments; perhaps not all of them but certainly some of them. Ultimately, the question is whether these arguments outweigh the primary judge's favourable impression of Mr Ellenberg in the witness box - that he would not, in all probability, resort to lying. 47 On balance, we are of the view that the primary judge's conclusion on this issue should not be disturbed. Both parties agreed that if CPI succeeded on this issue alone, the matter would have to be sent back to the primary judge. On our view, this latter question does not arise.

Third Representation The third representation was pleaded as follows:

"On or about 17 June 2003, SEA represented to CPI that the Boomerang Companies were and had been making payments to SEA for Giroform Carbonless Paper supplied to the Boomerang Companies by SEA wholly or substantially as and when such payments were due and payable pursuant to the trading terms between the Boomerang Companies and SEA (Third Representation)."

48 CPI pleaded that by reason of the matters pleaded in paras 11, 12 and 13 of its further amended cross-claim, this third representation was misleading and deceptive and likely to mislead and deceive. The matters pleaded at paras 11, 12 and 13 were: "[11] Between at least 1 January 2001 and 30 June 2003: (a) The Boomerang Companies were: (i) experiencing serious cash flow and other financial difficulties; and, or in the alternative (ii) insolvent; and (b) the Boomerang Companies failed to pay SEA for Giroform Carbonless Paper supplied to it by SEA as and when payments for such supply were due and payable pursuant to the trading terms between the Boomerang Companies and SEA. [12] As at 31 May 2003 the Boomerang Companies owed SEA $6,493,891.09. [13] At all material times the Boomerang Companies' account with SEA was: (a) significantly in arrears; and (b) outside the credit limit that SEA had approved in respect of the Boomerang Companies."

49 The third representation was denied by SEA. The primary judge found that this representation was not, as a matter of fact, made. 50 His Honour's reasons for making this finding are summarised in [19] to [21] above. 51 His Honour accepted Mr Fabrello's evidence that he believed, at this time, Mr Cassell would have known the true trading position of the Boomerang companies. 52 CPI sought to challenge his Honour's finding in relation to this third representation by assailing his Honour's preference for Mr Fabrello's evidence on the basis that his Honour did not take any or significant account of other difficulties with Mr Fabrello's evidence, including some that went directly to his credibility. 53 Significantly in this regard CPI points to Mr Fabrello's evidence that at the 19 May 2003 meeting, Mr Cassell stated that he had the Boomerang companies' figures. Mr Fabrello (and Mr Ellenberg) knew that they had not given CPI any information concerning the Boomerang companies' financial position and Mr Fabrello conceded that he realised there would be a problem for CPI if CPI took up a credit risk through the invoicing agreement without knowing that Boomerang's payment history was so bad. CPI submitted that SEA's case theory therefore depended on proffering a (false) explanation for not revealing that history, namely, that on 19 May 2003, CPI had the Boomerang companies' financials. Both Mr Ellenberg and Mr Fabrello claimed in their evidence that at the 19 May 2003 meeting, Mr Cassell stated that he had the Boomerang companies' figures, but those figures were not received by CPI until at least 21 May 2003. Further, when Mr Ellenberg appreciated this difficulty, he sought to overcome it by saying in a later affidavit that the meeting took place on 22 May 2003, a matter he was later forced to concede was wrong. 54 Further difficulties pointed to by CPI include: (1) Mr Fabrello's claim that on 19 May 2003 Mr Ellenberg said: "We will have to cut supply to Moores"; but no such decision had been taken as at 19 May 2003; (2) Mr Fabrello told Mr Akdogan that the change in the Boomerang companies' trading terms for consignment reels, from 75 days to 90 days, was by reason of a "clerical error"; in fact it was because Boomerang could not meet 75 day terms. The primary judge did not accept that this was "a deliberate attempt by Mr Fabrello to conceal the true position concerning the Boomerang's trading position"; CPI submits that it is hard to know what else it was; (3) Mr Fabrello denied in cross-examination that he raised the matter of CPI's acquisition of the Boomerang companies with Mr Jolly in September 2002, or at all during 2002. This was inconsistent with Mr Jolly's evidence, who was not cross-examined on the point, and with his Honour's findings at [42] and [43] of his reasons. 55 On the face of it, his Honour's adverse findings concerning the credibility of Mr Cassell's evidence seem harsh; as CPI points out there are aspects of Mr Fabrello's evidence which cast doubt on his credibility. Nevertheless, his Honour had the advantage of seeing both witnesses in the witness box and his Honour was impressed with Mr Fabrello as an honest and thoughtful person. His Honour accepted a number of aspects of his evidence which were challenged by counsel for CPI including that he believed Mr Fabrello when he said that by the time of the 12 and 17 June 2003 meetings he (Mr Fabrello) believed that Mr Cassell would have known the true trading position of the Boomerang companies. 56 Again, on balance our view is not to disturb his Honour's conclusion that no positive representation on this issue was made on or about 17 June 2003. CPI was of the view that if it succeeded on this issue alone, its appeal must be upheld. SEA was of the view that such an outcome should lead to the matter being sent back to the primary judge. On our view, this latter question does not arise but if it did, we incline to CPI's view.

Silence 57 The primary judge concluded from the evidence as a whole that neither Mr Ellenberg nor Mr Fabrello told Mr Cassell, in a way which would have been readily and clearly understood, that the Boomerang companies were seriously in arrears and owed SEA over $6 million at the time CPI entered into the invoicing agreement (at [129]). His Honour therefore proceeded on the basis that CPI's cross-claim would succeed if Mr Ellenberg or Mr Fabrello should in all the circumstances have declared the true position (at [129]). 58 CPI pleaded in its further amended cross-claim that at all material times SEA: (1) knew or ought reasonably to have known of, but (2) failed to advise or warn CPI of, or otherwise communicate to CPI, the matters pleaded in paras 11, 12 and 13 and such silence was conduct, in all the circumstances, misleading and deceptive or likely to mislead and deceive. Paragraphs 11, 12 and 13 of the further amended cross-claim are set out in [48] above. 59 The primary judge dealt with this issue at [135] - [139] of his reasons. He posed for himself the question: were the circumstances such that before 3 July 2003 when CPI agreed to the invoicing agreement, CPI could have reasonably expected to have been told of the poor trading history of the Boomerang companies and the level of indebtedness to SEA? His Honour observed that a number of matters supported an affirmative answer. They include: (1) The invoicing agreement was proposed by SEA and proposed for its benefit. (2) SEA would no longer carry the risk of the Boomerang companies' accounts not being paid on time or even not being paid at all. (3) SEA would no longer have to worry about the vexed and long-standing question of credit insurance. (4) The invoicing agreement was being proposed by SEA to a company with which it had enjoyed a long trading relationship and with whom it had corporate connections of some longevity and significance. (5) The personal relationships between the principal actors, Mr Ellenberg, Mr Fabrello and Mr Cassell, were comparatively warm or at least attended by a measure of comfort from regular contact. (6) While CPI would receive a commission under the agreement, it was modest having regard to the potential liability it was assuming under the invoicing agreement. 60 Notwithstanding these matters, the primary judge was not satisfied that CPI could reasonably have expected to be told of the problems with the Boomerang companies and his Honour was not satisfied that SEA engaged in conduct proscribed by s 52. His Honour's reasons for not being so satisfied are set out at [136] and may be summarised as follows: (1) The rationale for CPI's participation in the invoicing arrangements embodied in the invoicing agreement was to facilitate its purchase of the Boomerang companies by preserving their trading status quo. These were matters known to both Mr Ellenberg and Mr Fabrello and that fact was known by Mr Cassell. (2) On any version of the conversation of 19 May 2003, the proposal for the invoicing agreement was linked to CPI's purchase of the Boomerang companies. (3) Since May 2003 CPI had been in contact either directly or through its accountants with the Boomerang companies and had been analysing the financial position of the companies. This was also known by Mr Fabrello, probably Mr Ellenberg and again that fact was known by Mr Cassell. 61 His Honour reasoned ([137]) that in these circumstances CPI could have, but did not, seek even preliminary information from the Boomerang companies about their trading history and the level of indebtedness before assuming the liability it did under the invoicing agreement. His Honour reasoned that with this ready access to information, it is difficult to conceive of why CPI could reasonably have expected to be told of something which it could have readily ascertained itself. The matters underlying his Honour's process of reasoning were: (1) Mr Cassell deputed to Mr Akdogan the task of analysing the financial accounts of the Boomerang companies without any particular and urgent focus on their payment history in settling accounts with SEA. (2) CPI had received no assurances that the Boomerang companies' trading history and current level of indebtedness were entirely regular and no risks attended entering the invoicing agreement. (3) Were it not for CPI's need to move with considerable haste, acting through Mr Cassell, to consummate its plan to acquire the agency and the income stream it would produce as soon as practicable as part of an overall stratagem which involved the acquisition of the business of the Boomerang companies, it may well have made these enquiries. (4) Neither Mr Ellenberg nor Mr Fabrello were in a position where it could be said that they should have believed it was necessary for them to tell Mr Cassell about the Boomerang companies' trading history and level of indebtedness. Nor, objectively, were they in that position. Similarly Mr Cassell was not in a position where he could reasonably have expected to have been told of the Boomerang companies' circumstances. 62 CPI accepted that the primary judge correctly identified that the question of whether SEA engaged in misleading and deceptive conduct in relation to the entry into the invoicing agreement was dependent upon a consideration of the whole of the circumstances leading up to the entry into that agreement. It submitted that, having regard to the facts as found by the primary judge and other matters not in dispute, his Honour should have concluded that the failure to disclose the actual state of trading between the Boomerang companies and SEA was misleading and deceptive within the meaning of s 52 of the TP Act. 63 CPI placed particular weight on his Honour's finding that Mr Fabrello, in response to an enquiry as to the trading terms between SEA and the Boomerang companies, said that they were 75 days. It argued that Mr Fabrello thereby concealed the true trading position between SEA and the Boomerang companies. It also stressed the following matters as found by the primary judge: "(a) Companies associated with the Respondents had had a trading relationship with CPI for a period of 17 years prior to the events complained of. (b) Companies associated with the Respondents were substantial shareholders in CPI and had had a representative on the board of CPI since 1988. (c) The Boomerang Companies over a period of time consistently defaulted in their obligation to pay SEA for paper imported from Germany from a mill operated by Mitsubishi HiTec Bielefeld GmbH (the Mill). SEA, as agent for the Mill, was primarily liable to pay for paper so imported. It invoiced the Boomerang Companies for such paper. (d) SEA was unable to obtain adequate credit insurance for monies due to it from time to time by the Boomerang Companies either from its internal insurer or from Australian insurers because of the poor payment history of Boomerang Melbourne. (e) In these circumstances the Respondents resolved that the exposure of SEA to the Boomerang Companies had to be reduced. In correspondence with the Mill it was resolved that the preferred course of action would be either to convince CPI to acquire the Boomerang Companies and assume the outstanding debt or to convince CPI to invoice Boomerang for the paper supplied from the Mill and assume liability to SEA. (f) The Respondents actively promoted proposals that CPI acquire Boomerang or take over the outstanding debt. (g) As at May 2003 the amount due by the Boomerang Companies to SEA was approximately $6 million of which approximately $2 million was overdue. (h) As at the date of the entry into the Invoicing Agreement the Boomerang Companies were seriously in arrears and owed SEA over $6 million." 64 This is an appeal by way of rehearing on the evidence adduced before the primary judge (Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 at 533). Nonetheless, the role of this Court is to correct error, not to consider the matter de novo (S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424). The approach to be adopted by the Full Court on appeal from a judgment concerning an alleged contravention of s 52 of the TP Act was restated in Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (2005) 220 ALR 211 at 220 at [46] in the following way: "Where the determination of whether particular conduct was misleading or deceptive is not straight-forward, but rather involves elements of degree, opinion or judgment, a simple preference in the appellate court for a view different from that taken by the trial judge may not carry with it the conclusion of error. The appeal court might conclude either that there could not be said to be only one possible correct determination or that the trial judge had a particular advantage, not shared by the appellate court, in assessing critical matters of nuance and judgment. In such a case, in determining whether or not the trial judge fell into appealable error, the appeal court should not proceed as though on a hearing de novo in which the views of the trial judge carry no weight. Rather the appeal court must give appropriate weight to the views of the trial judge and set aside his or her finding only if persuaded that the finding is wrong. However, if an appellate court is persuaded that particular conduct, found by the trial judge to be misleading or deceptive, was not in fact misleading or deceptive, it thereby identifies error in the decision of the primary judge. Similarly where an appellate court is persuaded that conduct which the trial judge did not consider misleading or deceptive is in fact misleading or deceptive." 65 This is a case in which the determination of whether SEA engaged in conduct that was misleading or deceptive is not entirely straightforward but rather involves an element of judgment. However, after giving anxious consideration to the reasons for judgment of the primary judge, and taking into account his views and the advantages that he enjoyed as trial judge, we have concluded that, in all the circumstances, the failure of SEA to disclose the actual state of its trading with the Boomerang companies, resulted in its contravening s 52 of the TP Act. 66 Section 52 is not confined to conduct that is intended to mislead or deceive; whether conduct is misleading or deceptive is an objective question to be answered by reference to all of the relevant circumstances. 67 In reaching the conclusion that SEA's conduct breached the norm of corporate conduct established by s 52 of the TP Act we have taken into account the above matters identified by CPI. We agree that an important feature of the circumstances in which CPI entered into the invoicing agreement was that Mr Fabrello, in response to an inquiry as to the trading terms between SEA and the Boomerang companies, gave the formal terms of trade but made no reference to the true trading position which departed dramatically from the formal terms of trade. 68 We have additionally taken into account the following matters: (1) His Honour placed weight on the fact that CPI could have, but did not, seek even preliminary information from the Boomerang companies about their recent trading history and level of indebtedness. His Honour observed: "It might be thought that, in the circumstances, CPI had no reason to believe it should make enquiries. But CPI had received no assurances that the Boomerang companies' trading history and current level of indebtedness were entirely regular and no risks attended entering the invoicing agreement. Mr Ellenberg and Mr Fabrello knew they had not given such assurances." However, his Honour correctly characterised the invoicing agreement, which was proposed by SEA, as making 'limited commercial sense' from CPI's point of view because - "For a perceived possible gross annual commission income of approximately $500,000 a year, CPI was exposing itself to liability to underwrite the payment of sales by SEA to the Boomerang companies of well over $1 million per month with a real risk that the Boomerang companies would not, in turn, pay CPI." Mr Koepell's response to Mr Fabrello's email of 2 May (see [7] above) reflects an appreciation of the true commercial position which was that a rebate of 2% was an exceedingly modest price for SEA to pay for the invoicing agreement having regard to the risk that would be undertaken by CPI. (2) Even if the financial records that were seen by Mr Cassell and Mr Akdogan had alerted them to make further inquiry, there is authority in this Court - Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 at 558 - that it is no answer to a claim of misleading and deceptive conduct by silence to say that the person misled should have made his or her own inquiries and that had they done so, it would have revealed the true position. (3) Mr Fabrello accepted that Mr Cassell said to him words to the effect: "I am only going to pay when I get paid by Boomerang" and that he (Mr Fabrello) acknowledged this. It seems to us that Mr Cassell thereby made it plain that CPI did not appreciate the risks inherent in the proposed invoicing agreement. (4) Not only did Mr Fabrello not make any reference to the arrears when he was asked about the trading terms he did not make any reference to the arrangements referred to by his Honour at [78] of his reasons - that SEA had been requiring payments from the Boomerang companies of at least $250,000 per week from about early April 2003 to reduce existing debt. It is notable that his Honour made no reference to SEA's silence on this arrangement in the course of his reasoning process at [135] - [139]. Indeed, that arrangement exemplifies that the actual or real terms of trade that were operating in the context of the business were not "75 days"; arguably that answer itself was false and misleading, but this was not pleaded. (5) His Honour's process of reasoning at [136] and [137] fails to distinguish between CPI's proposal to purchase the businesses of the Boomerang companies and SEA's proposal for CPI to enter into the invoicing agreement. His Honour seems to have regarded them as inter-dependent transactions; they were not. Had CPI known of the Boomerang companies' trading history and the agreement in place for the payment of their outstanding trading indebtedness to SEA, there seems little doubt that it would not have entered into the invoicing arrangement with SEA. His Honour so found at [93] and [95] of his reasons. On the other hand, it may nevertheless have proceeded to purchase the businesses of the Boomerang companies which need not include their liabilities, trading or otherwise; only their assets. Indeed, that is what subsequently occurred. (6) Moreover, the financial information concerning the Boomerang companies provided to CPI was provided by the Boomerang companies. There is no evidence to suggest that SEA ever saw that information and any belief on the part of Mr Fabrello, and/or Mr Ellenberg, that Mr Cassell would be aware of the Boomerang companies' trading history, a matter, in respect of Mr Fabrello, on which his Honour made an express finding (at [109] of his reasons), must have been entirely speculative on his (their) part. 69 As indicated above, we have come to the view that before CPI entered into the invoicing agreement with SEA, the relevant circumstances, including those matters referred to by his Honour at [135] of his reasons (see [59] above), were such that CPI could have reasonably expected to have been told of the poor trading history of the Boomerang companies and of the arrangements in place for the discharge of trading indebtedness which was clearly outside the terms of 75 days. On this view, the primary judge indicated that he would have concluded that CPI should succeed in its cross-claim (see [57] above) and so do we. 70 The appeal should be allowed. The parties will be given the opportunity of considering the other orders appropriate to be made having regard to these reasons for judgment. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Counsel for the Appellant: Mr T F Bathurst QC with Mr J Stoljar

Solicitor for the Appellant: Corrs Chambers Westgarth

Counsel for the First and Second Respondents: Mr I Barker QC with Mr J Van Aalst

Solicitor for the First and Second Respondents: Hardings