The Representations - evidence
49 The evidence in support of Cryeng's claims concerning the Cessation of Business and the Successor Representations is such that the two representations must be considered together. The evidence is largely about Mr Loyola's conduct after relations within Cryeng had broken down but before he left the company as well as shortly after his employment ceased. It comes not only from Mr Gilchrist and other officers and employees of Cryeng but also from representatives of Cryeng's customers. There is documentary support for the allegations made by Cryeng, some of which was obtained on subpoena and some of which is exhibited to relevant affidavits.
50 A large part of the most telling documentary evidence consisted of records from the laptop which Mr Loyola retained when he left Cryeng. The laptop was eventually produced to Cryeng's solicitors, after considerable resistance by Mr Loyola, pursuant to subpoena served on Mr Loyola's son to whom it had been given.
51 Other evidence was given by former clients of Cryeng, in particular by Ralph Day of Cryoquip Pty Ltd and Adam Martin of Air Liquide. Cryeng served subpoenae on many of its clients and supporting documents were obtained pursuant to a subpoena served on Air Liquide. Subpoenae, in the same terms, were also served on a large number (at least 19) of other clients of Cryeng. In relation to one subpoena which was representative of all, Mr Pesman, counsel for Mr Loyola and Pioneer, made the following submission:
If your Honour looks to the documents the subject of the subpoena, your Honour will see that any possible document touching on anything that Mr Loyola said to anyone in April 2008 was the subject of this subpoena. Whatever complaints the applicant may have about what Mr Loyola did with documents, there's no complaint advanced about what any of the recipients of these documents did. One may infer very safely that the complete documentary record has been examined, because both correspondent parties of the documents have produced these documents on subpoena, and not a single document confirmatory of the cessation of business representation is tendered. I invite your Honour to draw the obvious inference, that is because there is none.
This submission is discussed below at [56].
52 Cryeng claims that both representations were made to divert business from Cryeng to Pioneer. As already noted Pioneer was incorporated on 12 March 2008 and at all times Mr Loyola was its controlling mind. Although Mr Loyola remained a director of Cryeng until about 15 April 2008 and his resignation from the company did not take effect until 30 April of that year, the evidence shows that at least from mid April 2008 he was soliciting business for Pioneer from Cryeng customers. In particular he was issuing quotations for the supply by Pioneer of a variety of cryogenic tanks and equipment.
53 During April and May 2008 Mr Loyola sent letters addressed to Cryeng's customers advising them that he was leaving Cryeng. An example is the letter dated 18 April 2008 from Mr Loyola to Mr Steve Abbott of Coregas Pty Ltd advising that he had resigned from Cryeng as from 30 April 2008. He added,
My responsibility to the company's customers has been foremost in my mind during the last couple of weeks and I am hoping your work (please see attached schedule) will be available to be picked up prior to my departure.
I have appreciated our relationship and the support you have given the company during the difficult times experienced over the past several years.
After 25 years in the industry I have made many friends with whom I hope I can maintain contact in the near future.
54 Letters in similar terms were also sent to other customers including BOC Gases Australia Ltd (Mr Greg Allen), Air Liquide Australia Ltd (Mr Paul Nield). On 4 May 2008 Mr Loyola sent an email to a large number of customers and associates of Cryeng. The email's subject line was, "Pioneer Cryogenics - Advise [sic] to Customers". Attached to the email, on the letterhead of Pioneer, was a letter from Mr Loyola addressed to "all customers" advising that he had left Cryeng and again referring to the company's customers being "foremost in my mind". The letter continued:
With the full support of our troops we have incorporated PIONEER CRYOGENICS PTY LTD and I hope we will continue to enjoy your trust and support.
55 The references to "the full support of our troops" and to continuing to enjoy the customers' trust, support the inference that Pioneer is the successor of Cryeng with the added inference that Cryeng was closing down or was no longer in the business it had carried on to that time. That this belief was in circulation is supported by a handwritten letter from Mr Camilleri dated 3 May 2008 to Mr Gilchrist, which says:
As mentioned over the phone today, I was talking with John Biddiscome of Air Liquide a couple of days ago and he was under the impression that Cryeng was closing down.
56 In commenting on the absence of documents produced pursuant to subpoena by a large number of Cryeng clients, Mr Pesman's submission outlined at [51] above, invites me to draw an inference from the absence of evidence in circumstances where I can only speculate as to the reason for that absence. On the other hand there is evidence from which I can infer that correspondence from Mr Loyola was sent to all customers. The fact that Mr Loyola's letter attached to the email of 4 May was addressed to "all customers" suggests that it was sent to all customers. There may be many reasons that copies were not produced other than that the letter was not sent to those to whom it was addressed. In saying so I do not imply that the subpoenae were not conscientiously complied with. It may be, for instance, that copies were not retained for this length of time. In any event, I do not draw the inference suggested by Mr Pesman.
57 Further evidence of Mr Loyola's conduct was given by Mr Ralph Day, the managing director of Cryoquip. In 2007 Mr Day had dealt personally with Mr Loyola on a number of occasions including in relation to a contract with Cryeng for the manufacture of a 10,000 litre tank which it then distributed to Papua New Guinea. Mr Day deposed that in early to mid-April 2008 Mr Loyola came to see him and told him that he had left Cryeng and that "a lot of the staff from Cryeng" were joining him. Mr Day asked whether Cryeng would continue to operate. Mr Loyola said he did not know and then the following conversation ensued:
Mr Loyola: Pioneer will be building all the range of cryogenic tanks so we [being Cryoquip Pty Ltd and Pioneer] can on sell tanks together and we can get vessels from you, like we did at Cryeng.
Mr Day: How long before you will be up and running?
Mr Loyola: Straight away. I am expecting an order from Air Liquide in Melbourne. I am the only one that can build cryogenic tanks.
58 It was submitted for Mr Loyola and Pioneer that this conversation could not amount to a representation that Cryeng was going out of business. That submission cannot be accepted. The clear message from the statement that "I am the only one that can build cryogenic tanks" is only consistent with a representation that Cryeng was no longer in the business of designing, manufacturing or supplying cryogenic vessels. Mr Day was not required for cross-examination and there is no reason why his evidence should not be accepted as accurate and truthful.
59 Mr Loyola's comment that he did not know whether Cryeng would continue to operate was disingenuous and likely to mislead and deceive. Mr Loyola's position at Cryeng, where at the time he was still employed, was such that it was reasonable to expect that he would know if Cryeng was continuing in business. In determining whether conduct is contrary to s 18 and, in this case, amounts to the representation pleaded, context is crucial. The intimation that Pioneer would be replacing Cryeng as the supplier of cryogenic vessels coming, as it did, from a person in Mr Loyola's position would have considerable significance.
60 Mr Loyola's reference to an order from Air Liquide in Melbourne is also significant. The evidence shows that as early as February 2008 Air Liquide had invited Cryeng to tender for the supply of a 200,000 litre Cryogenic Vacuum Insulated Storage Vessel at Air Liquide's Botany plant. Subsequently it issued a purchase order (H955043) dated 26 March 2008 for the 200,000 litre vessel at a total costs of $620,900. The purchase order names Mr Loyola as the contact for Cryeng and includes the email address for Mr Loyola as george@cryeng.com.au. It was signed for Air Liquide by Mr Adam Martin.
61 In his affidavit sworn on 3 September 2010, Mr Martin referred to a visit Mr Loyola made to Air Liquide's Melbourne office on or about 8 April 2008. Present at that time were Mr Paul Neild and Mr Ken Palmer and "possibly some other colleagues". Mr Loyola said that he had resigned from Cryeng and had incorporated Pioneer. He also said that most of Cryeng's staff would be joining him at Pioneer "including Cryeng's vessel engineer, workshop staff/supervisor and some of its fabrication staff". He added that he was not sure what was going to happen to Cryeng's fabrication workshop at St Marys.
62 The written submissions for the first and second respondents conceded that Mr Loyola's comments may have created doubts about Cryeng's future in Mr Martin's mind. It was submitted, however, that they did not amount to a representation that Cryeng was no longer in the business of design, marketing, manufacture or supply of cryogenic vessels. This submission is contrary to the evidence given by Mr Martin.
63 Mr Martin said he believed that when Mr Loyola gave him the information about Cryeng he did so as a representative of Cryeng and consequently believed that Cryeng would not be in a position to build the 200,000 litre vessel which Air Liquide had ordered. Moreover he had the impression that Cryeng would not be in the business of supplying cryogenic vessels in the future. Accordingly, after speaking to his supervisor and other colleagues, he told Mr Loyola that he would cancel the purchase order. This was subsequently confirmed in a letter to Cryeng dated 13 May 2008.
64 Meanwhile on 11 April 2008 Mr Loyola sent an email to Mr Martin thanking him for "the time you and Paul [Neild] took last Tuesday to discuss your requirements". Mr Loyola attached a quotation on Pioneer letterhead for the same 200,000 litre cryogenic storage vessel for a total price of $602,500. He also recorded his appreciation for Mr Martin's support "on behalf of Pioneer Cryogenics" and said "I look forward to a long and mutually beneficial relationship".
65 Paul Nield was the Procurement Manager at Air Liquide. His position was senior to that of Mr Martin. Although Mr Martin did not report to Mr Nield they frequently worked together. Mr Nield was one of the recipients of the letter advising of Mr Loyola's resignation from Cryeng; see [53] above. It was sent to Mr Nield by email on 18 April. Attached to the letter was a list of 7 vessels for Air Liquide then stored at Cryeng's premises at Charles Street, St Marys. Mr Nield responded to Mr Loyola on the same day saying,
I have given our people a rev up about getting the vessels out of the Cryeng facility.
Please let me know what is going to happen about vessel warranty.
Mr Loyola replied:
We would certainly feel more comfortable if we see the vessels leaving before the 30/04.
In regards to warranty, Cryeng I believe will continue to operate (probably on structural work) but in any case Cryeng is now a subsidiary of an unlisted public company which will be responsible for any in warranty work.
We'll keep you posted on this.
66 On 22 April Mr Nield again asked for a contact in relation to warranty work to which Mr Loyola replied "since 21/02/08" manufacturing had been taken over by Maxcon and gave the contact details for Mr Peter Grbin. It may be accepted that this statement was true. The evidence shows that, as a result of Mr Gilchrist's restructure, manufacturing had moved to Maxcon since late February. However, that does not preclude the statement, taken in context, being misleading. The restructure envisaged that Cryeng would continue to take orders for cryogenic vessels and would be responsible for their supply. Without that elaboration, the statement though true was capable of misleading as a result of what was left unsaid.
67 On 2 May 2008 Mr Martin sent to Mr Loyola a revised purchase order (H955043A) addressed to Pioneer. Although it bears the same date as original purchase order sent to Cryeng, (26 March 2008), the email address is gloyola@bigpond.net.au and the telephone and fax numbers are different. On 9 May 2008, by email, Mr Loyola asked Mr Martin to reissue the purchase order dated, at the earliest, 1 May 2008. He explained that "for legal reasons Pioneer was not able to trade or operate" before that date.
68 As it happened, Pioneer's premises were not large enough for the manufacture of a 200,000 litre vessel. Mr Loyola proposed that it be built in Thailand with the support and supervision of Pioneer however Air Liquide was adamant that the vessel be built in Australia. Eventually it cancelled the purchase order and the vessel was built by another manufacturer.
69 In opening Mr Lee commented that the size problems affecting Pioneer were not shared by Cryeng. Mr Lee's comment is consistent with the statement in the Cryeng Chairman's Report for 2005-2006 that:
A significant achievement during the year was the completion of four 260,000 litre vessels for Linde Engineering won by St Marys against Chinese competition and completed in leased premises and at Ipswich to the satisfaction of Linde with which company we maintain a good working relationship.
70 The same report also refers to "substantial improvements of the facilities at St Marys since the acquisition of the property at Charles St". This evidence and the fact that Air Liquide originally sent the purchase order to Cryeng support the inference that Cryeng would have been able to meet the order. There is nothing in the evidence to suggest otherwise. Similarly there is no indication that Air Liquide would have had a problem with the actual manufacture being carried out by Maxcon. It is clear from an email sent by Mr Martin to Mr Loyola on 28 April 2008, that Air Liquide's concern was with its ability to inspect the vessel during the manufacturing process. Mr Martin said:
As explained during our meeting in Melbourne you were awarded contract due to vessel fabrication being local so progress inspections could be made quite easily by ALA even though you were certainly not the cheapest supplier.
We maintain the vessel to be fabricated locally, please confirm.
71 In April 2008 Mr Loyola also sent additional quotations for Pioneer to provide goods to Air Liquide. Two quotations were sent on 12 April and on 14 April Mr Loyola provided a quotation for 6 cryogenic customer stations to Air Liquide.
72 On 12 April 2008 Mr Loyola, on the letterhead of Pioneer, sent a quotation to Mr Sukhdev Singh of BOC Australia Limited for 3 vertical buffer tanks, two being for gaseous helium and one for nitrogen gas storage. On the same day he also sent to BOC a quotation for a vertical cryogenic customer station priced at $280,000. A further quotation was sent to BOC on 24 April 2008.
73 Mr Gilchrist testified that after Mr Loyola resigned he arranged to have all emails sent to Mr Loyola at Cryeng diverted to his email account. It was in this way that Mr Gilchrist first learnt of the purchase order to Pioneer for the 200,000 litre Cryogenic Vacuum Insulated Storage Vessel referred to above. Mr Gilchrist said that this was the first time that he became aware that Mr Loyola had set up a rival company. Mr Gilchrist also referred to evidence of other quotations and correspondence with Cryeng customers which was obtained from Mr Loyola's laptop and of which there was no record in Cryeng's files.
74 Mr Gilchrist also described conversations he had with Mr Singh of BOC Australia in which Mr Singh expressed concerns about Cryeng's continuing commitment to manufacturing cryogenic vessels. He described a visit that Mr Singh and another senior executive of BOC made to Cryeng's premises in late May or early June 2008. Mr Gilchrist assured them that Cryeng was still manufacturing cryogenic vessels and took them on a tour of the factory floor.
75 Evidence given by Mr Greg Johnston and Mr Camilleri supports Cryeng's submissions that in late April and early May 2008 Cryeng customers were seeking reassurance as to Cryeng's continuing in business. In addition to those already mentioned, Mr Camilleri referred to an enquiry from Reed Constructions.
76 Mr Johnston referred to a conversation with Mr Singh of BOC in early May 2008. Mr Singh asked if Cryeng was still in business and did it intend to continue in the cryogenics business. Mr Johnston said, "We definitely are" to which Mr Singh responded "I was told you weren't".
77 Mr Loyola's diary entry for 22 April 2008 records at 9.00 am "Ring S. Singh/Greg Allen" Mr Johnston deposed that at that time he had been receiving telephone messages to call clients such as BOC and that he tried to get more information before calling back. On 22 April at 1:28 pm he sent an email to Mr Loyola as follows:
Please email me a copy of the advice sent out to clients about the changes at Cryeng. Please also advise the list of recipients.
I am receiving queries from clients like BOC and would like to be in a position to properly respond.
I would appreciate this by return.
78 Mr Johnston received no response to this email from Mr Loyola. It was submitted for Cryeng that evidence from Mr Loyola's diary supports the inference that Mr Loyola had contacted Mr Singh on 22 April 2008 and that he was responsible for Mr Singh's impression that Cryeng was not continuing in business. I accept that the inference is available and that, in the absence of evidence from Mr Loyola, that it should be accepted.
79 At about that time Mr Gilchrist and Mr Camilleri embarked on a tour of Cryeng's customers. They visited Supagas NSW, Supagas Victoria, Air Liquide Australia's headquarters in Melbourne and Cryoquip. Mr Gilchrist also referred to a conversation he had with Mr Chris Day of Coregas in which Mr Day said that Coregas was unsure about Cryeng's capabilities. Mr Gilchrist took Mr Day to Cryeng's workshop in Sydney to show him the ongoing manufacture of cryogenic vessels.