Gispac Pty Ltd v Michael Hill Jeweller

Background and overview of issues

1. The plaintiff, Gispac Pty Ltd (Gispac), is a supplier of paper bags and other packaging material. The defendant, Michael Hill Jeweller (Australia) Pty Ltd (Michael Hill), is a well-known retailer of jewellery and accessories. In 2015, Michael Hill had approximately 167 retail stores in Australia, 52 stores in New Zealand, 60 stores in Canada and 9 stores in the United States. There is an issue as to whether the stores in New Zealand were operated by Michael Hill or another related group company. Michael Hill also established stores trading under the name "Emma & Roe". Michael Hill International Limited, the ultimate holding company of Michael Hill, is listed on the Australian Stock Exchange. In the financial year ending 30 June 2015, the Michael Hill Group of companies had an operating revenue of about $503 million.
2. Gispac supplied wholesale packaging supplies in the form of carry bags to Michael Hill from around 2003 to May 2018. Sales agreements were entered into by the parties over this period for different types of bags, generally described as small or large bags. By 2014, the arrangement between the parties was that Gispac stored packaging bags for Michael Hill at its Australian and New Zealand warehouses and when Michael Hill required certain types of bags it would "draw down" on the stock of packaging bags held at those warehouses until that stock was depleted. Around 2014, Michael Hill undertook a major rebranding which included changing the type of packaging it was using in its retail stores. Also, in or about 2014, Michael Hill commenced a business called "Emma & Roe", and as a result required bags with "Emma & Roe" artwork.
3. At issue in these proceedings are the terms of three Sales Agreements: (1) QTE33593 entered on 5 May 2014 in respect of Michael Hill small and large paper bags for New Zealand, (2) QTE33594 also entered on 5 May 2014 in respect of Michael Hill small and large paper bags for Australia, and (3) QTE34977 entered on 8 May 2015 in respect of Emma & Roe small and large bags for Australia. Gispac sourced the bags under the first two agreements from overseas manufacturers. A sample was prepared and approved by Michael Hill.
4. It is common ground that for each of these Sales Agreements, Gispac made its "ePlus" facility for ordering products available to Michael Hill and Michael Hill used this facility. The ePlus facility allowed each individual retail store of Michael Hill and Emma & Roe to order products directly from Gispac when the store required further stock. This had advantages for Michael Hill over a head office or centralised ordering system in that Michael Hill did not need to (i) forecast the product required, (ii) deal with the manufacturers, or (iii) deal with warehousing of products. Gispac established a secure web portal to enable the customer to place orders for products, which was accessible via a website as directed by Gispac. Orders could be placed by individual stores either through Gispac's online portal, or by telephone, by facsimile or by email (and a Gispac employee would then enter the order into the portal). Gispac would arrange for those products to be delivered directly to the store, and issue invoices to the store upon the store placing an order and, at the end of each week, to Michael Hill's head office in the form of a consolidated invoice.

Gispac's claims

1. Gispac's claim against Michael Hill relies upon establishing that its standard terms and conditions of trading were incorporated into the three Sales Agreements; these terms are referred to below as the 2012 Terms. Assuming incorporation of the 2012 Terms, Gispac says that the fact that the ePlus facility was used by Michael Hill meant that clauses 17 to 21 of the 2012 Terms applied to the Sales Agreements with the consequence that: 1. Michael Hill was required to purchase an annual quantity of paper bags pursuant to cl 18.1; 2. Michael Hill was obliged pursuant to cl 18.2 to pay the amounts sought in the "Shortfall invoices" as the amount of product it purchased was less than 25 per cent of the annual quantity in each quarter ("Shortfall"); 3. Michael Hill was required pursuant to cl 17 to exclusively obtain the products specified in the Sales Agreements for its retail stores in Australia and New Zealand; 4. the term of each of the Sales Agreements was 24 months: cl 21.1; and 5. the agreements were "rolling" arrangements which automatically renewed for a further period of 24 months unless Michael Hill gave Gispac six months' written notice before the end of the 24-month term that it did not intend to renew the ePlus facility: cl 21.2.
2. In broad outline, Gispac contends that the term of the three Sales Agreements automatically renewed for a second term of 24 months, and that Michael Hill breached three obligations under the Sales Agreements: (i) the "take or pay" obligation in cl 18.2, over the second term of 24 months of the Sales Agreements, (ii) the obligation to purchase the annual quantity as required by cl 18.1 over the four years of the Sales Agreements, and (iii) the exclusivity obligation in cl 17.
3. In final submissions, Gispac put its claim for damages in the alternative. Its primary claim is for liquidated damages for breach of the take or pay provision in cl 18.2 in the amount of $2,259,971.40 (Gispac did not press its claim for GST in respect of this amount). Alternatively, Gispac claims damages for breach of the annual quantity provision in cl 18.1 during the applicable term of the Sales Agreements (either a 4-year, 2-year, or 1-year term): $2,012,545 (4-year), $1,018,932 (2-year) or $569,623 (1-year). In the further alternative to damages under cll 18.2 or 18.1, Gispac claims damages for breach of the exclusivity provision in cl 17, again depending upon the applicable term of the Sales Agreements (but there is no exclusivity claim for a 1-year term): $465,129 (4-year) or $13,206 (2-year). Gispac abandoned its claim for storage costs under cl 18.2(b) in final submissions (T112.16).

The material facts

1. Gispac commenced supplying packaging bags to Michael Hill in 2003. On or about 5 September 2003, Michael Hill signed a credit account application. Under the heading "Credit Terms", the account application specified various terms which the customer agreed with the supplier, including: 1. payment terms of within 7 days of the date on which the goods are sold or the services are provided or within such other period of time as may be notified to the customer from time to time by the supplier (pars (a), (c)); 2. the directors of the customer were personally bound by the customer's payment obligations and personally indemnified the supplier in respect of any breach by the customer liable (par (e); and 3. a retention of title clause (par (g).
2. Although not comprehensive, the following facts are agreed: … 2. From at least October 2012, Gispac had made its ePlus service available to Michael Hill, and Michael Hill used it until May 2018. 3. On or about 5 May 2014, Mr Chris Colvile of Michael Hill signed Sales Agreement QTE33593 and Sales Agreement QTE33594, both dated 28 April 2014, for the supply of wholesale packaging by Gispac to Michael Hill, and ticked the box shown on page 2 of each of those documents. 4. On or about 8 May 2015, Mr Chris Colvile of Michael Hill signed Sales Agreement QTE34977 dated 28 April 2015, and ticked the box shown on page 2 of that document. 5. Michael Hill did not provide to Gispac a notice that it did not intend to renew the Sales Agreements six months before the time that Gispac alleges was the end of the first term of those agreements. 6. In or about 2016, the Gispac Terms were updated to a new set of terms. 7. On 30 June 2017, Mr Bogatez of Gispac emailed Michael Hill a "Shortfall" calculation for May 2016 to April 2017, and a copy of the Gispac Terms. 8. Until June 2017, Gispac had not previously sent Michael Hill calculations for "Shortfall," and had not emailed or otherwise provided to Michael Hill an electronic or hard copy of the Gispac Terms. 9. In May 2018, Michael Hill placed its last order for bags with Gispac. 10. On or about 27 June 2018, Gispac requested Michael Hill to provide a nominated delivery address. 11. On 17 May 2019, Gispac issued Michael Hill with three "Debit Notes" said to be for "Shortfall" amounts being: (a) Debit Note No. INV73342 for $497,298.80 ex GST; (b) Debit Note No. INV73343 for $1,587,017.40 ex GST; (c) Debit Note No. INV73344 for $177,360 ex GST. 12. Michael Hill has not paid to Gispac any amount Gispac demanded in those Debit Notes. 13. On 17 May 2019, Gispac demanded payment from Michael Hill in respect of storage costs of $39,407.66, which Gispac said were incurred pursuant to clause 4.4 of the Gispac Terms. 14. Michael Hill has not paid Gispac the amount it has demanded in respect of storage costs. 15. As at July 2019 when Michael Hill filed its Defence, the website address was not a functioning hyperlink and did not direct someone who clicked on that website address to a copy of the Gispac Terms. (Underlining in original)

The Sales Agreements

1. In April 2014, Mr Chris Colvile, Michael Hill's group distribution manager, met with Mr Simon Cook, Gispac's sales manager, at Michael Hill's headquarters in Brisbane. In an email from Mr Cook to Mr Colvile, among others, dated 22 April 2014, Mr Cook recorded his understanding that the parties were working towards a new Michael Hill bag rollout on 1 September 2014. On 30 April 2014, Mr Neil Duff, Gispac's senior account manager, sent an email to Mr Colvile, copied to Mr Cook, attaching two quotations styled "Sales Agreement" for the "new Michael Hill Spot UV Paper Bags" - QTE33594 for Australia and QTE33593 for New Zealand, and requested "please sign and return the agreements to me".
2. The third Sales Agreement was sent by Gispac to Mr Colvile under cover of an email dated 8 May 2015 as a quotation QTE34977 for Australia, and requested that "if you wish to move forward with this I would be grateful if you could sign and return, remembering to tick the terms and conditions box".
3. Each of the Sales Agreements was in standard form. It is sufficient to refer to the terms of the second Sales Agreement. This was a 2-page document styled quotation No QTE33594 dated 28 April 2014 in respect of a specified quantity of two types of Michael Hill bags for Australia - small and large paper bags with spot UV - and it was signed on behalf of Michael Hill on 5 May 2014. On the front page of the Sales Agreement was a Schedule listing the following: Michael Hill Small Paper Bag w/Spot UV QTY UNIT PRICE TOTAL PRICE 1,050,000 $0.3900 $409,500.00

… Michael Hill Large Paper Bag w/Spot UV QTY UNIT PRICE TOTAL PRICE 800,000 $0.5600 $448,000.00

… Under each product in the Schedule appeared details of the specifications and outside print of the paper bags. It is not necessary to reproduce this detail.

1. Page 2 of the Sales Agreement included the following under the heading "Terms": Terms Art/FiIm/Plates Additional charges apply Payment Terms 30 Days from invoice date Delivery Charge EPLUS: Free In Store - Direct to Stores Lead Time Approx 8 - 10 weeks from pre-production sample approval Delivery Type EPLUS: Delivery Direct To Stores Minimum Invoice Value $400 Minimum Invoice Value

• The total price may vary; as per industry standards and subject to production the final quantity may be 10% over or under the actual ordered quantity. This Sales Agreement is valid for a period of 7 days. Sub Total $857,500.00 GST $ 85,750.00 Total Amount $943,250.00

1. The Sales Agreement also contained the following, with the box ticked in handwriting: TERMS AND CONDITIONS OF TRADING Please tick to confirm that you agree to agree to the terms and conditions that can be found at the following link: 🗹http://gispac.com/EquoteNew/docs/gispac_terms_and_conditions_Jan2012.pdf

1. Underneath this box appeared the customer's printed name, "Michael Hill Jewellers", the handwritten printed name and signature of Chris Colvile, and the date "05/05/14", together with the printed name of the supplier, "Gispac Pty Ltd" and the name "Neil Duff". Mr Colvile returned the signed Sales Agreement to Gispac under cover of an email dated 5 May 2014.
2. Mr Colvile, on behalf of Michael Hill, also signed the first Sales Agreement dated 5 May 2014 for New Zealand in respect of Michael Hill bags - 350,000 small bags and 200,000 large bags (the price was in New Zealand dollars) and returned the signed agreement to Gispac under cover of an email dated 5 May 2014. He signed the third Sales Agreement dated 8 May 2015 for Australia in respect of Emma & Roe bags - 100,000 small bags and 100,000 large bags and returned the signed agreement to Gispac under cover of an email dated 8 May 2015.
3. I find that the parties made a written contract the subject of the Sales Agreements when Mr Colvile on behalf of Michael Hill accepted Gispac's offer by returning the signed Sales Agreements to Gispac by email on 5 May 2014 in relation to the first and second Sales Agreements, and by email dated 8 May 2015 in relation to the third Sales Agreement. That is consistent with the admission on the pleadings that Michael Hill entered the three documents each entitled "Sales Agreements" for the supply of wholesale packaging by Gispac to Michael Hill (Further Amended Defence, par 10(a)).

Gispac's 2012 Terms

1. The affidavit evidence of Mr Edwin Bogatez, the director of Gispac, established that from 2012 until sometime in 2016, Gispac's standard terms were in the form of a 5-page document containing 21 clauses with a footer on each page styled "Gispac - Terms and Conditions of Trading - 23 1 12_ reviewed (2)" (the 2012 Terms). The relevant provisions of the 2012 Terms are reproduced below. gispac Print Form TERMS AND CONDITIONS OF TRADING RELATING TO ALL SALE AGREEMENTS ENTERED INTO WITH GISPAC PTY LTD The following terms and conditions apply to Sales Agreements with Gispac Pty Ltd (ABN 30 081 934 278) (Gispac). The terms in clauses 19 to 23 inclusive apply to Sales Agreements that include any ePlus facility. 1 Definitions In these Terms and Conditions of Trading, unless the context otherwise requires: Account Application means an application made by the Customer requesting Gispac not to require immediate payment upon order or delivery of goods or the provision of services by Gispac. … Annual Quantity means the minimum amount of Product to be purchased by the Customer over a period of 12 calendar months commencing on the date of commencement of the Term. … EPlus means the ordering, storage, reporting and delivery system of Gispac, accessible via the Web Ordering Portal or by facsimile, as determined by Gispac in its absolute discretion. … Outlets means retail outlets of the Customer. … Product means the products specified on the front page of a Sales Agreement. Price means the amount payable by the Customer in respect of the Products specified in a Sales Schedule. Sales Agreement means a Sales Schedule and these Terms and Conditions of Trading. Sales Schedule means the schedule contained on the front page of the Sale Agreement setting out the Product specifications. … Term means the period set out in any Sales Agreement under an ePlus facility or otherwise in accordance with clause 23 of these Terms and Conditions of Trading. Terms and Conditions of Trading means these terms and conditions. Terms of Payment means the terms of payment of the Price (including the payment of a deposit) specified in the Sales Schedule. … Territory means Australia & New Zealand. Web Ordering Portal means the secure web portal established by Gispac to enable the Customer to place orders for Products and accessible via a website as directed by Gispac. 2 Supply and Prices 2.1 Gispac shall, subject to these Terms and Conditions of Trading, supply the Products to the Customer for the Price. The Customer shall pay Gispac the Price in accordance with the Terms of Payment. 2.2 If the Terms of Payment provide that the Customer is to pay a deposit, that deposit must be paid in full prior to production of the Products and Gispac shall be entitled to delay production until the deposit is paid by the Customer in full. If the Customer is to pay all or part of the Price on receipt of an invoice or upon delivery of the Product, the Customer shall pay that amount immediately upon receipt of an invoice or upon delivery of the Products (as the case may be) and Gispac shall be entitled to withhold delivery of the Products until the required amount is paid to Gispac in full. 2.3 The Customer shall strictly comply with the terms of credit set out in the Terms of Payment or in the Account Application entered into by the Customer and Gispac. In the case of inconsistency between the Terms of Payment and the Account Application, the Terms of Payment shall prevail. 3 Payment 3.1 Unless otherwise specified in the Sales Schedule, the Customer must pay all invoices on receipt of the invoice. … 3.3 The Customer must lodge for approval by Gispac, an Account Application governing the terms upon which credit may be provided in connection with the supply of Products. Until the Account Application has been approved, Gispac is under no obligation to supply Products. 4 Delivery 4.1 Gispac will not be liable for any loss or damage whatsoever due to the failure by Gispac to deliver the Products (or any of them) promptly or at all. Notwithstanding that Gispac may have delayed or failed to deliver the Products (or any of them) promptly, the Customer shall be bound to accept delivery and to pay for the Products in full provide that delivery shall be tendered at any time within 1 month of the expected date of delivery. … 4.3 Gispac may make part deliveries of an order and each part delivery shall constitute a separate agreement. Failure to make a delivery of the total order shall not invalidate the Sales Agreement as regards other deliveries. Where Gispac makes part delivery, Gispac may invoice the Customer for the Products delivered on each separate delivery. 4.4 Where the Customer has not specified delivery instructions at the time of placing an order for the Products, and the Customer has failed to provide such delivery instructions to Gispac within 3 days of a request by Gispac, Gispac may impose a charge on the Customer for storage of the Products at the prevailing market rate for storage or the actual cost of storage (at the election of Gispac). The parties agree that Gispac may charge for storage from the first day after Gispac has requested the Customer to provide delivery instructions until the day upon which the Products have been delivered to the Customer. Notwithstanding clause 4.1, Products stored in accordance with this clause under Gispac's possession, custody or control is completely at the Customer's risk. … 10 Termination … 10.3 The Customer has no entitlement to terminate any Sales Agreement other than in accordance with these Terms and Conditions of Trading. … 15 Amendments 15.1 Gispac may make amendments to these Terms and Conditions of Trading or any Sale Agreement from time to time if: (a) the amendments will benefit or will not permanently and adversely affect the Customer; or (b) the Customer agrees to the amendments; or (c) Gispac reasonably expects the amendments to permanently and adversely affect the Customer, and Gispac has given the Customer reasonable notice of the amendments and offering the Customer the right to terminate any Sale Agreement (without fault) within 30 days of the notice and the Customer does not terminate the Sales Agreement. 15.2 Any amendments to these Terms and Conditions of Trading or any Sales Agreement have no force or effect unless effected by Gispac in accordance with clause 15.1 or otherwise agreed in writing by Gispac. 16 Other 16.1 Gispac may without notice assign or transfer any right or liability under these Terms and Conditions of Trading or any Sales Agreement. Where required by Gispac to effect the transfer of any such rights or liabilities, the Customer will sign and enter into an agreement on substantially similar terms and conditions as these Terms and Conditions of Trading or Sales Agreement with the party to which Gispac transfers its right and liabilities. The Customer may not assign or transfer any right or liability under these terms and Conditions of Trading or any Sales Agreement without the prior written consent of Gispac. 16.2 No failure to exercise and no delay in exercising any right, power or remedy under these Terms and Conditions of Trading or any Sales Agreement will operate as a waiver. Nor will any single or partial exercise of any right, power or remedy preclude any other or further exercise of that or any other right, power or remedy. Any waiver by Gispac of any right, power or remedy under these Terms and Conditions of Trading or any Sales Agreement must be express and given in writing by Gispac. 16.3 These Terms and Conditions of Trading and any Sales Agreement shall be construed in accordance with the laws of New South Wales. Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales. 16.4 The Sales Schedule, these Terms and Conditions of Trading, the Account Application and any Disclosure Agreement, where provided, together form the agreement between the parties with respect to the supply of Products to the Customer and constitute the sole understanding with respect to its subject matter and supersedes all prior understandings, written or oral. EPlus Facility The following terms and conditions apply to Sales Agreements where Gispac has agreed to make the ePlus service available to a Customer. 17. Appointment The Customer appoints Gispac for the Term as the exclusive supplier of the Products to Outlets in the Territory. 18. Annual Quantity 18.1 The Customer agrees to purchase from Gispac an amount of each Product that is equal to or exceeds the Annual Quantity specified in the Sales Schedule for each Product. 18.2 If the amount of Product purchased by the Customer during each quarter during the Term is less than 25% of the Annual Quantity (Shortfall), Gispac may do either or both of the following things: (a) invoice the Customer for the Shortfall; and (b) charge the Customer for storage of the Shortfall at the prevailing market rate for storage or the actual cost of storage, commencing on the day immediately following the relevant quarter. 19 Orders 19.1 Each Outlet or Head Office will order its requirements for Products directly from Gispac via the Web Ordering Portal. … 19.7 Gispac reserves the right to accept or decline the Customer's order at any time and for any reason, or to require the Customer to provide additional verification or information associated with an order. Any order accepted by Gispac is on these Terms and Conditions of Trading, irrespective of any Customer terms on any order. 20 Prices Payable 20.1 The Customer must pay Gispac for the Products that Outlets or Head Office order at the current prices agreed for the Products by Gispac and the Customer. The prices applicable upon commencement of a Sales Agreement are specified in the Sales Schedule. If an order has not been invoiced before a price change in accordance with clause 20.2, the Products that comprise that order will be supplied at the new price for those Products. 20.2 If any Sales Agreement is renewed in accordance with clause 21.2, Gispac may increase the price of the Products by giving written notice to the Customer. Excluding any component of a price increase due to taxation, price increases will not exceed 15% of the Product price as agreed under clause 20.1 during the extended Term. 20.3 Gispac reserves the right, by notice to the Customer at any time before delivery of the Products, to increase the price of the Products to reflect any increase in the cost to Gispac of producing and/or delivering the Products due to any factor beyond Gispac's reasonable control. The Customer shall, by executing the Sales Schedule, accepts and will pay any such price increase as notified to the Customer by Gispac. … 21 Term 21.1 The Term is 24 months from the date of execution of the Account Application. 21.2 These Terms and Conditions of Trading will automatically renew for a period of 24 months unless the Customer gives Gispac written notice 6 months before the end of the current Term that it does not intend to renew the EPlus Facility.

ePlus facility

1. There are admissions on the pleadings (defence pars [15] and [16]), and it is also an agreed fact (par [2]) that, at least from October 2012, Gispac made its ePlus service available to Michael Hill and Michael Hill utilised Gispac's ePlus facility. The expressions "ePlus" and "Web Ordering Portal" are defined in cl 1 of the 2012 Terms (see [21] above]. As indicated, the ePlus facility offered by Gispac enabled individual Michael Hill stores to: (a) order products (subject to availability), when they required them, directly from Gispac, (b) have products delivered directly to the ordering store, and (c) have invoices provided direct to the store and to Michael Hill's head office.

Additional findings

1. It is convenient to make some additional findings at this stage.
2. I accept the evidence of Mr Edwin Bogatez, the director of Gispac, that: 1. some of the factors on which Gispac relied in determining the prices for the first and second Sales Agreements was his understanding that the duration of the 2014 agreements was a minimum commitment of two years and the quantity of bags to be purchased under the 2014 agreements, and that Gispac determined that a lower unit price for the bags could be provided because it was able to negotiate lower production prices with manufacturers based on continuity of supply of the bags (November 2020 affidavit, par 21); 2. when determining the unit prices for the 2015 Sales Agreement, Gispac considered the quantity of bags to be purchased and Mr Bogatez's understanding of the minimum 2-year duration of the arrangement (November 2020 affidavit, par 25); 3. the prices charged by Gispac to Michael Hill under the first and second Sales Agreements were subject to "rise and fall" reviews, that is, adjusted in accordance with the AUD/USD exchange rate, in circumstances where manufacturers charged Gispac in USD for product manufactured for Gispac. Those price reviews were conducted by Gispac and notified to Michael Hill effective January 2015, 1 August 2015 and 14 January 2016. The 2015 Sales Agreement was not subject to rise and fall reviews (November 2020 affidavit, par 35-42; Ex B).
3. On or about 30 June 2016, Gispac ceased to operate its New Zealand warehouse. From 1 July 2016, Gispac engaged DHL Express and TNT Express as its courier in respect of product delivered to Michael Hill and Emma & Roe stores in New Zealand. This product was delivered direct to stores in New Zealand with shorter lead times. I find that Mr Bogatez informed Mr Colvile that Gispac would start charging these orders in AUD due to the efficiency in getting orders to New Zealand. Mr Colvile agreed to this change.
4. Mr Bogatez also informed Mr Colvile in or about June 2016 that given the greater shipping costs to New Zealand, Gispac needed to increase the prices for the New Zealand bags to (i) AUD$0.57 for small Michael Hill bags, and (ii) AUD$0.83 for large Michael Hill bags. Mr Colvile acquiesced in this price increase; he did not tell Mr Bogatez that a price increase was not acceptable, and he took no step to dispute the price increase notified by Mr Bogatez. From 1 July 2016, Gispac charged prices under the first 2014 Sales Agreement (QTE33593) of (i) AUD$0.57 for small Michael Hill bags and (ii) AUD$0.83 for large Michael Hill bags.

Michael Hill's ticking of the terms and conditions box referring to the 2012 Terms

1. Prior to signing the first two Sales Agreements on 5 May 2014, Mr Colvile had signed and ticked the box referring to the 2012 Terms on several previous Sales Agreements, relevantly, on 22 January 2014 and 3 March 2014. Prior to signing the third Sales Agreement on 8 May 2015, Mr Colvile had signed and ticked the box referring to the 2012 Terms on five further occasions between 26 August 2014 and 25 March 2015.
2. Mr Colvile acknowledged in cross-examination that (i) he was aware that in ticking the box above his signature he was signing and ticking referable to Gispac's standard terms and conditions (T68.23-25), (ii) he was not forced to do so quickly by anything Gispac did or said to him, (iii) he chose not to read the 2012 Terms and he could have sought some advice if he had read them (T69.31-50, 70.1-15), (iv) he did not take any steps to satisfy himself of the content of the standard terms which Gispac expressly brought to his attention by way of the tick-box system, and (v) he understood that it was a requirement of Gispac that Michael Hill agree to those terms and conditions, prior to Gispac proceeding with the Sales Agreements (T70.23-44). Michael Hill submitted that Mr Colvile was over-agreeable to propositions put to him in cross-examination. I do not agree. By reference to my notes made at the time of cross-examination of Mr Colvile, I accept that he was a reliable witness who candidly answered the questions put to him.
3. I find that in ticking the terms and conditions box located immediately above the signature clause which he signed, Mr Colvile, on behalf of Michael Hill, knew that he was signing and ticking referable to Gispac's terms and conditions. The evidence of Mr Bogatez establishes that these terms were the 2012 Terms: see [33]-[34] below.
4. Notwithstanding that each of the Sales Agreements is a signed contract, Michael Hill put in issue whether the 2012 Terms were available for inspection on the website maintained by Gispac at the URL address stated in the Sales Agreements set out at [17] above. The defence of Michael Hill contended that at all times on and after 5 May 2014, the link to the Gispac website that appears on page two of the Sales Agreements was defective or did not exist (par [14(c)]). Michael Hill did not attempt to prove this assertion by way of evidence. Mr Colvile's evidence was that he did not go to Gispac's website looking for any terms (affidavit, par [36]), and he agreed in cross-examination that he "chose not to read them" (T69.46).

Was the link to the 2012 Terms operable in May 2014 and May 2015?

1. The relevant evidence concerning the link to the 2012 Terms was given by Mr Bogatez in pars [26] to [29] of his November 2020 affidavit as follows: [26] Each of the Sales Agreements contained a URL link to Gispac's standard terms and conditions as they existed at the time those agreements were entered (the Terms). [27] That link was: 'http://gispac.com/EquoteNew/docs/gispac_terms_and_conditionsjan2012.pdf' (the URL Terms Link). [28] Exhibited at pages 51 to 55 of EB-1 is a copy of the Terms. [29] In May 2014 and May 2015, a customer would be, by clicking on the URL Terms Link, directed to an area of the Gispac website which contained a copy of the Terms. (Emphasis in original.)
2. The evidence of Mr Bogatez in pars [26] to [28] was admitted without objection and he was not directly challenged on this evidence. I reject Michael Hill's submission that in light of the cross-examination of Mr Bogatez his evidence did not establish that a set of terms identical in all respects to the 2012 Terms existed at Gispac's office, as at 5 May 2014 and 8 May 2015. I also reject Michael Hill's submissions that Mr Bogatez was a deeply unsatisfactory witness and in effect, tailored his evidence and answered some questions "through the lens of Gispac's case". By reference to my notes made at the time of cross-examination of Mr Bogatez, I accept that he was a reliable witness, who was doing his best to give honest and accurate evidence in respect of events occurring several years earlier.
3. "URL" is a well-known acronym for a Uniform Resource Locator, which is a reference to the location of a resource on the internet. A "link" describes the function of an internet browser which takes an internet user from one place on the internet to another. Michael Hill objected to par [29] of Mr Bogatez's affidavit on two grounds: (i) competence, and (ii) that it assumed a fact not in evidence. Gispac responded that par [29] was admissible as evidence of Gispac's business practice in circumstances where Michael Hill contended that the URL link was not operational in 2014/2015. At the hearing, I rejected par [29] (T2.40). Although Gispac did not seek to be heard on that ruling, it is appropriate to briefly indicate my reasons.

Ruling on evidence

1. The admissibility of evidence is governed by the fundamental principle in s 56 of the Evidence Act 2005 (NSW) that irrelevant evidence is inadmissible, while relevant evidence is admissible except as otherwise provided by the Act. Relevant evidence is that which, if it were accepted, could rationally affect the assessment of the probability of the existence of a fact in issue in the proceeding: s 55(1).
2. To prove that an act has been done, it is admissible to prove any general course of business or office, whether public or private, according to which it would ordinarily have been done, there being a probability that the general course will be followed in the particular case: SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132 at [150]; (2017) 345 ALR 633, citing Connor v Blacktown District Hospital [1971] 1 NSWLR 713 at 721 (Asprey JA, Mason JA agreeing).
3. Although Mr Bogatez was a director of Gispac for 22 years, overseeing Gispac's day-to-day operations, his evidence in par [29] is not evidence of a routine, habitual or general practice of Gispac, relevantly, that the URL link on the Sales Agreements was operational in 2014/2015. Mr Bogatez did not depose to his usual and invariable practice of accessing the URL link or the usual and variable practice of Gispac with respect to the URL link from which the inference could be drawn that the relevant practice was followed by Gispac in May 2014 and May 2015. Further, insofar as Mr Bogatez gave evidence of what a customer of Gispac would have experienced in 2014 and 2015 by clicking on the URL terms link, his evidence in cross-examination referred to at [39] below demonstrates that the objection on the ground of competence was well-founded.

Whether inference should be drawn that the URL "link" in the Sales Agreements was operational

1. Mr Bogatez gave evidence in cross-examination that he could not recall clicking on the link in 2014 or 2015 (T22 .27 and .30); he had no reason to click on the link in the relevant period (T23.16); he never noticed that hyperlinks in documents are "usually underlined" (T24.40); he did not make enquires whether the hyperlink did work in 2014 or 2015 (T24.44-47); nor after June 2017 did he get someone in IT at Gispac or engage a forensic expert to look for some trace of this link as at 2014 "on the internet" (T 25.19). He also said that the link was not published on the internet, rather he was told by Gispac's IT consultants, after this proceeding commenced, that "[i]t was on our internal server" (T25.20). He said that the reason the 2012 Terms were "put on a separate link, into our own server, at that particular time" is that the ePlus terms were specific to Gispac's own organisation, and Mr Bogatez did not want his competitors and "the whole world" looking at the terms and conditions (T50.35).
2. Accepting that there is no direct evidence that the URL link to the 2012 Terms referred to in par [26] of Mr Bogatez's affidavit operated as a hyperlink to Gispac's website in May 2014 or May 2015, the question is whether an inference should be drawn that it was in fact the case, given Mr Bogatez's evidence in pars [26]-[28] of his affidavit, together with his evidence in par [33] that, to the best of his knowledge, at the time the Sales Agreements were entered into, the URL terms link was effective and operational, and that he had no reason to believe that this link was not operational at that time.
3. One difficulty with drawing that inference is that the evidence of Mr Bogatez in cross-examination cast doubt on what he meant when he deposed in his affidavit to his belief that the link was effective and operational at the time the Sales Agreements were entered into. As indicated, the effect of Mr Bogatez's evidence was that the 2012 Terms were not generally available on the internet to a person, such as a competitor, accessing Gispac's website. Rather, the 2012 Terms were held on Gispac's internal server and only available to its customers. Acceptance of that proposition required an inference that Gispac's customers had access to the internal server where it was said the 2012 Terms were contained. An inference that Gispac's customers, such as Michael Hill, who utilised the portal providing the ePlus facility had some access to Gispac's internal server can be readily drawn from Mr Bogatez's evidence. However, the evidence does not reveal whether the portal providing the ePlus facility also contained the 2012 Terms.

Gispac's 2016 Terms

1. In 2016, Gispac's standard terms were updated, and a new set of terms were issued (the 2016 Terms). The 2016 Terms do not include any of the provisions which Gispac relies upon for its claim against Michael Hill, relevantly, the minimum quantity provision in cl 18.1, the take or pay provision in cl 18.2, the exclusivity provision in cl 17, or the automatic renewal for 24 months in cl 21.2.
2. I find that the 2016 Terms were issued in 2016 but am unable to be any more precise as to when in 2016 this occurred, given Mr Bogatez's evidence that the terms changed "[i]n or about 2016" (T15.5-8; November affidavit, par [32]). Michael Hill relies on this imprecision in the evidence for the submission that Gispac has not shown the duration for which the 2012 Terms applied, which is relevant to Gispac's claim that the 2012 Terms applied to the second term of the three Sales Agreements, after the expiry of the initial term of 24 months. This contention is addressed under Issue 1 at [85]f below.

Issues for determination

1. At the end of the trial, the essential issues for determination were refined as follows: Issue 1: (a) Were Gispac's 2012 Terms incorporated into each of the Sales Agreements? (b) Did the 2016 Terms apply to the Sales Agreements from about 2016 or not? Issue 2: If the Gispac 2012 Terms were incorporated, what was the "Term" of the Sales Agreements (in other words, when did each of the Sales Agreements start and end)? Issue 3: (a) What is the proper construction of clause 18 of the Gispac 2012 Terms? (b) How many bags did Michael Hill buy from Gispac from 5 May 2014 and, if that number can be ascertained, was there a "Shortfall?" (c) Is Michael Hill in breach of, and liable to pay Gispac any amount in relation to that "Shortfall", under clause 18.2 of the Gispac 2012 Terms? Issue 4: Is Michael Hill in breach of, and liable to pay Gispac any amount under, clause 18.1 of the Gispac 2012 Terms? Issue 5: Did Michael Hill breach its obligation of exclusivity under clause 17 to Gispac? Issue 6: Has Michael Hill established any of its defences based on estoppel, misleading or deceptive conduct, unconscionable conduct, the doctrine of penalties or illusory consideration? Issue 7: What is the quantum of any loss Gispac has suffered?
2. As will be seen, several sub-issues also require consideration.

Issue 1(a): Were Gispac's 2012 Terms incorporated into each of the Sales Agreements?

1. The actual terms of the contract are determined by reference to the statements the parties themselves adopted as an expression of their obligations: Cheshire & Fifoot, Law of Contract (LexisNexis Butterworths, 12th Australian Edition, 2022) at [10.19]. Here, the Sales Agreements were made when Michael Hill's representative, Mr Colvile, returned the signed document on behalf of Michael Hill, thereby accepting the offer the subject of the quotation contained in the three Sales Agreements. The relevant question is whether the contract then made included the 2012 Terms. This requires an objective ascertainment of that to which the parties agreed. The subjectively held opinions or beliefs of the parties are irrelevant to whether a term or terms have been agreed upon: Ermogenous v Greek Orthodox Community (2002) 209 CLR 95; [2002] HCA 8 at [25].

Incorporation of terms

1. Gispac has the onus of proving that the 2012 Terms were incorporated as terms of the Sales Agreements: National Australia Bank Limited v Dionys as Trustee for the Angel Family Trust [2016] NSWCA 242 at [56]-[57] (Sackville AJA, Macfarlan JA agreeing at [1], White J agreeing at [165]), citing Wallaby Grip Ltd v QBE Insurance (Australia) Ltd; Stewart v QBE Insurance (Australia) Ltd (2010) 240 CLR 444; [2010] HCA 9 at [35]-[36].
2. By reference to Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, Gispac submitted that the mode of incorporation of the 2012 Terms into the Sales Agreements was the act of Michael Hill's representative signing the Sales Agreements and ticking the box under the heading "Terms and Conditions of Trading". Alternatively, it is said that such terms were incorporated by reference.
3. Although Michael Hill accepted in closing submissions that this case is a signed document case in that the Sales Agreements had been signed on behalf of Michael Hill and are therefore within the principle in Toll (T120.35-37), Michael Hill says that this case should be treated as an unsigned document case. It is said that the contract is a "hybrid" comprising the signed Sales Agreement and the unsigned 2012 Terms referred to in that signed document and therefore the principles in the "ticket cases", not Toll, apply to the incorporation of terms into Sales Agreements.
4. Relying upon the principles in the ticket cases such as Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd [1998] 4 VR 559 at 561, 562, 567-9; Surfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd [2017] 2 Qd R 66; [2016] QCA 213 at [51]-[52], [65]-[68]; Dialogue Consulting Pty Ltd v Instagram Inc (2020) 291 FCR 155; [2020] FCA 1846 at [293]-[295], it is said that:

• terms appearing in the unsigned document are incorporated in the (written) contract only if reasonable notice has been given of them: Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 227-229; [1988] HCA 32;
• the inclusion of unusual or onerous terms in an unsigned document may require its proponent to draw those terms to the attention of the other party, and an express acceptance of an offer that incorporates other terms does not necessarily connote acceptance of all those other terms; if the person has not read the terms, their consent may be taken as being consent to the terms that are appropriate to a contract of the type in question; and

Applicable legal principles

1. Michael Hill's submission that this is an unsigned document case is bad in law. The submission conflates the mode of term incorporation by signature (and by reference in the case of written contracts), with the mode of term incorporation by notice in the case of unsigned contracts.
2. In Oceanic Sun Line v Fay, Brennan J distinguished the two types of cases - signed contracts and unsigned documents, such as a "ticket case" - stating at 228-229: If a passenger signs and thereby binds himself to the terms of a contract of carriage containing a clause exempting the carrier from liability for loss arising out of the carriage, it is immaterial that the passenger did not trouble to discover the contents of the contract. But where an exemption clause is contained in a ticket or other document intended by the carrier to contain the terms of carriage, yet the other party is not in fact aware when the contract is made that an exemption clause is intended to be a term of the contract, the carrier cannot rely on that clause unless, at the time of the contract, the carrier had done all that was reasonably necessary to bring the exemption clause to the passenger's notice. (Citations omitted; emphasis added).
3. In Carnival Plc v Karpik (Ruby Princess) (2022) 294 FCR 524; [2022] FCAFC 149 (reversed on other grounds: Karpik v Carnival Plc [2023] HCA 39; (2023) 98 ALJR 45), Derrington J (Allsop CJ agreeing) said of the ticket cases at [166]: The ticket cases are concerned with contractual formation and the scope of the terms to which the parties have agreed where an agreement has arisen orally or by conduct, and in the course of which one party seeks to introduce written terms contained on or referred to in a document passing between them.
4. That is, the ticket cases "form a particular category of cases concerned with the objective assessment of the circumstances in which parties have entered into a contractual relationship in the absence of a signed agreement": Carnival Plc v Karpik (Ruby Princess) at [206(a)]. That is not the present case.

Written contracts

1. Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [114] (Leeming JA, Ward and Emmett JJA agreeing) is authority for the proposition that, given the general rule in Toll, the "ticket cases" have no application to the circumstance where a party executes a written contract, even if it chooses to do so without reading documents to which it refers. Leeming JA said at [114]: The law here is very clear. A unanimous High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd at [57] confirmed that: "[57] … The general rule, which applies in the present case, is that where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document."
2. Incorporation of a set of terms by reference to those terms in a written contract is commonplace. J W Carter, Contract Law in Australia (J W Carter Publishing, 8th ed, 2023) at [10-19], gives several examples of incorporation in a written contract, including:

• the standard terms of the business of one of the parties: Smith v South Wales Switchgear Co Ltd [1978] 1 WLR 165, a case involving a written contract: see at 177A (Lord Keith); see also at 171E (Lord Fraser), 177B (Lord Keith), 167D (Lord Wilberforce) and 167E (Viscount Dilhorne); and
• a standard form document approved by a body such as a law society or a real estate institute: for example, Gilberto v Kenny (1983) 57 ALJR 283 at 284F.

1. Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 involved a written contract between an architect, acting for an owner, and an engineer to provide engineering services: at [56]-[57]. The owner argued that it should not be bound by the Conditions of Engagement in accordance with the engineer's letter to the architect, since it did not have actual notice of those conditions which included an onerous provision, an exclusion clause. Giles JA rejected the owner's argument relying on Maxitherm (discussed below), that the relevant question was whether it could reasonably be taken to have assented to the provisions and, on the basis of Baltic Shipping Co v Dillon "Mikhail Lermentov" (1991) 22 NSWLR 1 at 8-9 and 24-25 that, where limitation provisions are concerned, express consent or reasonable notice was required, and hence the owner should not be found to have agreed to be bound by the Conditions of Engagement. Giles JA held at [85] that "the test is objective" and that the nature of the term did not preclude the finding that it was incorporated. Rather, "it was not only a reasonable finding, but in the circumstances all but compelled".

Unsigned contracts

1. Maxitherm and Surfstone are distinguishable on their facts. Both involved whether an offeree was bound by a term set out or incorporated in an unsigned contract. In Maxitherm, the offeror's confirming fax stating that the offer was based on the offeror's standard terms and conditions "as per previous quotation" (which was identified by a document number and date) was not signed by the offeree, it was accepted orally by the offeree in a telephone call: see Buchanan JA at 564. In Surfstone, the offeror's fee proposal incorporated by reference the Guideline Terms of the Association of Consulting Engineers of Australia and there was no evidence of any formal acceptance, oral or otherwise, but it was not in dispute that the engineer was retained and did carry out the services: see Morrison JA at [17], [19].
2. That the remarks by Buchanan JA in Maxitherm at 568-569 (Ormiston JA agreeing at 561) concerned an unsigned contract is plain in the passages reproduced below: Once the conclusion has been reached that an express offer containing a party's standard terms has been accepted, there is no occasion to then consider whether sufficient steps have been taken to bring the standard terms to the attention of the other party. The ultimate question is whether the party relying upon the standard terms can properly assume that the other party has consented to those terms. … I do not intend to convey that express acceptance of an offer which incorporates other terms by reference necessarily connotes acceptance of all those terms. In a case where the person expressing consent has not read the terms, his consent may be taken to be a consent to those terms which are appropriate to a contract of the type in question. If the terms include provisions which no one would anticipate in a contract of the type in question, it would not be appropriate to assume consent to those provisions. The basic enquiry remains whether it is reasonable to assume that a contracting party has assented to the terms put forward by the other party. … As I have said, in my opinion the inclusion of an unusual term, at least in an unsigned document, may require its proponent to take special steps to bring it to the attention of the other party, for otherwise it may not be reasonable to assume consent to the term. Whether special steps are required, and what those steps must be, will depend upon the circumstances of each case. Further, I think that a term may be unusual because it is more than ordinarily onerous. However, I do not consider that the mere fact that a provision is onerous entitles a court applying the common law to reject it as a term unless special steps have been taken to draw attention to it. The relevant question is whether a contracting party can be reasonably taken to have assented to a particular term, not whether a contracting party should be subject to an unreasonable term. (Emphasis added.)

Application of principles to the facts

1. The Sales Agreements were obviously contractual, as were Gispac's "terms and conditions" referred to in the box headed "Terms and Conditions of Trading". The question of whether by signing and ticking the terms and conditions box in the Sales Agreements Mr Colvile evidenced Michael Hill's contractual intention to be bound by the 2012 Terms, is answered by asking what that conduct would have led a reasonable person in the position of the other party to believe: Toll at [40]. Here, Mr Colvile's act of signing and ticking the box referable to Gispac's standard terms and conditions indicated an intention by Michael Hill to be bound by Gispac's terms and conditions regardless of whether they have been read and considered: Oceanic Sun Line v Fay at 228. As said in Carnival Plc v Karpik (Ruby Princess) at [236]: … the affixing of a signature objectively conveys that the party signing "either has read and approved the contents of the document or is willing to take the chance of being bound by those contents … whatever they might be": L'Estrange v Graucob ; Toll v Alphapharm at 184 -186 [54]-[59]: and no question of the reasonableness of the notice of any onerous or unusual terms arises.
2. As I have found above, in ticking the terms and conditions box above his signature, Mr Colvile was aware that he was signing and ticking referrable to Gispac's standard terms and conditions. There is no suggested vitiating element to Michael Hill's agreement to the 2012 Terms. Mr Colvile was not rushed or tricked into doing so; he chose not to read the 2012 Terms and he could have sought some advice if he had read them; he did not take any steps to satisfy himself of the content of the standard terms which Gispac expressly brought to his attention by way of the tick-box system; and, importantly, he understood that it was a requirement of Gispac that Michael Hill agree to those terms and conditions, prior to Gispac proceeding with the Sales Agreements. I find that the 2012 Terms were incorporated as terms of the Sales Agreements. The question of whether Michael Hill is entitled to equitable or statutory relief is addressed below under Issue 6.

Alternative hypothesis: incorporation of terms by notice - onerous or unusual terms of an unsigned document

1. It is not necessary to address Michael Hill's submission that, treating this case as an "unsigned document", cll 17, 18 and 21.2 were onerous or unusual and should have been brought to Michael's attention, and therefore were not incorporated. Insofar as this submission is based on Maxitherm, it is contrary to (i) the High Court's later decision in Toll at [57], which governs the incorporation of terms into a signed contract, (ii) this Court's decision in Mainteck dealing with incorporation by reference in a written contract, (iii) the statement in Carnival Plc v Karpik (Ruby Princess) at [236], and (iv) the authorities dealing with signed contracts referred to at [59]-[65] above.
2. Had it been necessary to decide the question of incorporation by notice, I would have concluded that (a) the terms relied upon by Gispac, specifically cll 17, 18 and 21.2, were not unusual or onerous terms, and (b) reasonable notice of the 2012 Terms as forming part of the Sales Agreements was given by the express reference to those terms and conditions in the box in the Sales Agreements such as to cause them to be incorporated.
3. As to (a), in Toll at [54] the joint judgment observed that "the criterion by which a court might declare a contractual provision to be unusual or onerous is [not] always easy to identify". It has been said that it is not enough to simply show that a term was "onerous"; what must be shown is that the term is "more than ordinarily onerous": Maxitherm at 569 (Buchanan JA). Addressing each provision in turn.
4. Clause 17: Michael Hill submitted that the exclusivity obligation in cl 17 "shackled the purchaser to this [exclusive] arrangement" and that even if Gispac was not performing its end of the bargain, Michael Hill still had to continue to buy bags from Gispac and pay Gispac for bags that Gispac could not supply. I reject this submission. As Gispac correctly pointed out, this submission disregarded that if Gispac did not perform its obligations under the Sales Agreements, then Michael Hill would have a claim for breach and a right to terminate (depending on the seriousness of the breach), or a right to elect to accept a repudiation, thus ending the relationship and the exclusivity regime.
5. Another consideration is that the exclusivity clause is limited to the supply of the same type and style of products the subject of the Sales Agreements. It did not prevent Michael Hill stores from purchasing any other products from other suppliers, not did it extend its reach beyond the term of the Sales Agreements. I am not persuaded that the exclusivity provision was onerous.

Conclusion on incorporation of 2012 Terms

1. I find that the three Sales Agreements signed by Mr Colvile on behalf of Michael Hill incorporated the 2012 Terms. Contrary to Michael Hill's submission, this case is not to be treated as an "unsigned document" case, nor is it necessary for Gispac to establish that reasonable steps were taken to bring the 2012 Terms to the attention of Michael Hill.

Issue 1(b): Were the 2012 Terms were replaced by the 2016 Terms?

1. Michael Hill says that the 2012 Terms were replaced in about 2016, given the amendment power in cl 15.1(a) of the 2012 Terms and the evidence of Mr Bogatez referred to at [46] above. It is said that (i) Gispac had the ability under cl 15.1(a) to amend the 2012 Terms unilaterally and was not required to notify Michael Hill of the change, and (ii) Gispac cannot rely upon the 2012 Terms from the time the 2016 Terms came into effect because the 2016 Terms were "undoubtedly more favourable to Michael Hill" for the purposes of cl 15.1(a), as they did not include cll 17, 18 and 21.2.
2. Gispac says that the amendment power in cl 15 of the 2012 Terms was not engaged because the 2016 Terms were not "undoubtedly more favourable to Michael Hill" since Michael Hill continued to use the ePlus facility in 2016 and later years. It was said that there were benefits obtained by Michael Hill using the ePlus facility which it had agreed to in the 2012 Terms, which were not available under the 2016 Terms.

Decision

1. A contract may confer a unilateral power of amendment on a party: In the matter of Gelpack Enterprises Pty Ltd (in liq) [2015] NSWSC 1558 at [19]-[23] (Brereton J). Here, cl 15.1(a) of the 2012 Terms gave Gispac a contractual power to change those terms, within certain parameters, relevantly, to make amendments to the 2012 Terms from time to time if "the amendments will benefit or will not permanently and adversely affect" the customer.
2. It is common ground that Gispac agreed to make the ePlus service available to Michael Hill for each of the Sales Agreements. So much is admitted by Michael Hill in its defence, par [15]. This admission is consistent with the reference to "Delivery Type" - "EPLUS: Delivery Direct To Stores" on page 2 of the Sales Agreements: see [16] above. The benefits conferred by the 2012 Terms, which were not available under the 2016 Terms, included that the ePlus facility: 1. provided the Michael Hill stores with direct access to stock as and when they needed it, as Mr Bogatez said in his November 2020 affidavit at pars [46]-[49], and Mr Colvile confirmed in cross-examination was an advantage because the stores knew what stock they needed at any given time (T67.8, 72.20); 2. usually provided better pricing for customers, as Mr Bogatez said in his November 2020 affidavit at par [15] and adhered to in cross-examination (T30.7-11); 3. afforded Michael Hill the administrative benefit of weekly invoices issued to its head office which facilitated all invoices being collected and paid by Michael Hill at one time and rolling stock coming in and out of Gispac's warehouse and delivered all around Australia (T32.39-44); and 4. afforded Michael Hill the commercial benefit of not having to forecast supply, deal with manufacturers or be responsible for warehousing the product (T72.25-49). The effect of the arrangement was that Gispac took on the commercial risk of holding stock for Michael Hill's pending ePlus orders (T33.1-4, 72.45-49).
3. Given that the benefits conferred by the ePlus facility were not available to Michael Hill under the 2016 Terms, I find that the 2016 Terms were not "undoubtedly more favourable to Michael Hill" as Michael Hill continued to use the ePlus facility in 2016 and later years until it first gave six months' notice to Gispac by letters dated 23 August 2017 that it "will not renew the Eplus facility pursuant to the sales agreement", noting that the first and second sales Agreements expired on 5 May 2018 and the third Sales Agreement expired on 5 May 2019.

Issue 2: What is the "term" of the Sales Agreements?

1. On the basis that the 2012 Terms were incorporated into the Sales Agreements, the parties diverged as to the term of the Sales Agreements. Gispac says that the Sales Agreements applied for either a 4-year period, or a 2-year period, or a 1 year period from the date of each Sales Agreement, thereby requiring Michael Hill to purchase the Annual Quantity each year within the applicable period. Michael Hill says that the Sales Agreements were open ended. This issue of construction is anterior to Issue 3 which concerns whether the Sales Agreements state any "Annual Quantity" for the purposes of cll 18.1 and 18.2 of the 2012 Terms.
2. The starting point is whether cl 21.1 was engaged such that the "Term" of the Sales Agreements was initially 24 months. "Term" was defined to mean "the period set out in any Sales Agreement under an ePlus facility or otherwise in accordance with cl 23 of these Terms and Conditions of Trading": cl 1. It is common ground that there was no period set out in the Sales Agreements and no cl 23 existed in the 2012 Terms. Nevertheless, the reference to cl 23 in the definition of "Term" is plainly a drafting error which error can be resolved as a matter of construction: Fitzgerald v Masters (1956) 95 CLR 420 at 426-428; [1956] HCA 53; Westpac Banking Corporation v Tanzone Pty Ltd [2000] NSWCA 25; (2000) 9 BPR 17,521 at [34]-[37]. I find that the reference to cl 23 is to be read as a reference to cl 21. Michael Hill did not argue to the contrary.
3. Accepting that Gispac agreed to make the ePlus service available to Michael Hill in relation to the three Sales Agreements, the parties diverged as to whether there was any operative "Term" of the Sales Agreements for the purposes of cl 21.1 given that it referred to an "Account Application". Clause 21.1 provided that "[t]he Term is 24 months from the date of execution of the Account Application". The defined term "Account Application" means "an application by the Customer requesting Gispac not to require immediate payment upon order or delivery of goods or the provision of services by Gispac": cl 1.
4. Gispac says that the second page of the Sales Agreements meets the description of an "Account Application". It is said that the "Payment Terms" in the Sales Agreements record that Michael Hill requested and Gispac agreed not to require immediate payment but rather to allow payment to be made "30 Days from invoice date" (see [16] above).

Gispac's alternative 1 year term argument

1. It is not strictly necessary to consider Gispac's alternative submission that if there existed no "Term" as defined in the Sales Agreements, then the Sales Agreements operated for a 1-year term. Nevertheless, against the possibility that my conclusion that the Sales Agreements operated for a 4-year term is wrong, I will address this alternative argument. It should be noted that this argument is only relevant to Gispac's claim for damages for breach of cl 18.1 (and as a further alternative to its claim for damages under cl 18.1 for 4 years, or alternatively 2 years).
2. The word "Term" is used in the definition of "Annual Quantity" which means "the minimum amount of Product to be purchased by the Customer over a period of 12 calendar months commencing on the date of commencement of the Term": cl 1. If there is no "Term" as defined in the Sales Agreements, then the defined term "Annual Quantity" becomes silent as to the time from which the "12 calendar months" is to commence for the purpose of the definition when read into cl 18.1.
3. Definitions are first read into the operative clause before construing the clause: Segelov v Ernst & Young Services Pty Ltd (2015) 89 NSWLR 431; [2015] NSWCA 156 at [88], referring to Halford v Price (1960) 105 CLR 23; [1960] HCA 38 at 26-27 (Dixon CJ); Gibb v Commissioner of Taxation (Cth) (1966) 118 CLR 628; [1966] HCA 74 at 635 (Barwick CJ, McTiernan and Taylor JJ); Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 at [103] (McHugh J). When the definition of "Annual Quantity" in cl 1 is read into cl 18.1 of the 2012 Terms, the provision reads: 18.1 The Customer agrees to purchase from Gispac an amount of each Product that is equal to or exceeds the [minimum amount of Product to be purchased by the Customer over a period of 12 calendar months commencing on the date of commencement of the Term] specified in the Sales Schedule for each Product.
4. Gispac accepts that reading the definition of "Annual Quantity" into the operative clause before construing the clause does not assist the construction of cl 18.1, if the definition of "Annual Quantity" is silent as to the time from which the "12 calendar months" is to commence.
5. However, Gispac pointed to two contextual matters in support of its alternative construction. First, the label "Annual Quantity" given to the defined term is relevant to construing cl 18: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [121] (Bell and Gageler JJ); Segelov v Ernst & Young at [86]. Second, the expression "Annual Quantity" used in the heading to cl 18 can be taken into account in construing cl 18 as there is no provision in the Sales Agreements including the 2012 Terms which says that headings are for convenience only and do not affect the interpretation of the agreement: cf Franklins Pty Ltd v Metcash Trading Ltd; Metcash Trading Ltd v Franklins Pty Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [348] (Campbell JA).

Issue 3(a): Construction of cl 18

1. The parties diverged as to whether the Sales Agreements state any "Annual Quantity" for the purposes of cll 18.1 and 18.2 of the 2012 Terms. The context of this dispute is whether the obligation in cl 18.1 to purchase at least the "Annual Quantity" of bags and the take or pay obligation in cl 18.2 in respect of any Shortfall for any quarter were engaged.

Meaning of "Annual Quantity" in cl 18

1. Clause 18 uses the defined words "Annual Quantity" and "Sales Schedule" (see [21] above). The Sales Schedule is the schedule contained on the front page of the Sales Agreement. The Sales Schedule lists the product and a number next to the expression "QTY": see, for example, the extract from the first Sales Agreement reproduced at [15] above.
2. Gispac says that the "QTY" referred to on the front page of the Sales Schedule of each Sales Agreement is the minimum amount of product to be purchased over a period of 12 calendar months, that is, picking up the definition of "Annual Quantity".
3. Taking the first Sales Agreement in relation to large (QTY - 200,000) and small (QTY - 350,000) bags ordered by Michael Hill for its New Zealand stores, of which there around 52 in 2015 (T65.05), Gispac says that assuming each store used an equal number of bags this works out to be around 6,700 small bags and some 3,846 large bags per store annually. Similarly for the second Sales Agreement for large (QTY - 800,000) and small (QTY - 1,050,000) bags for its Australian stores of which there were 167 in 2015, Gispac says that this works out to be around 6,287 small bags and some 4,700 large bags per store annually.
4. Michael Hill says that cl 18 is not engaged because the Sales Agreements do not disclose any "annual" commitment, rather the Sales Agreements provide for a one-off quantity or "QTY". According to the submission, the parties' obligations under the Sales Agreements came to an end once Michael Hill had ordered, and paid for, the "QTY" stated on the front page of the Sales Agreements, which "could happen in one month, or it could happen in one year, or even longer". I reject this proposed construction. In the context of Gispac agreeing to provide the benefits of the ePlus facility to Michael Hill, this is not a sensible business-like construction. It involves the most unlikely view that Gispac would be committed to supply bags at a fixed price up to the QTY for so long as Michael Hill determined, subject to Gispac's limited right under cl 20.3 to increase the price in the specified circumstances.
5. Michael Hill also says that the reference to "Annual Quantity" in the 2012 Terms, but to "QTY" in the Sales Agreements is an important inconsistency and does not import an obligation to order and pay for that "QTY" within a year, and in following years. It is said that as the document is specific to the particular customer, the reference to "QTY" in the Sales Agreements takes precedence over the 2012 Terms where there is inconsistency, with the result that the "QTY" was the figure for the whole 24 months (if it is possible to ascertain its commencement and expiry - which I have concluded is the position under Issue 2 above).

Issue 3(b): Whether there was a "Shortfall" under cl 18.2

Issue 3(c): Whether Michael Hill breached cl 18.2 and is liable to pay any amount in relation to that "Shortfall"

1. As these two issues are related, it is convenient to deal with them together.
2. Gispac's primary claim is that Michael Hill breached the take or pay provision in cl 18.2 which provided that if the bags purchased by Michael Hill in each quarter during the Term is less than 25 per cent of the Annual Quantity, Gispac is entitled to either invoice Michael Hill for the shortfall or charge storage costs or do both.
3. The relevant facts are as follows. On 17 May 2019, Gispac sent three invoices to Michael Hill each dated 28 September 2018, claiming pursuant to cl 18.2 on account of the alleged "Shortfall": 1. $547,028.68 relating to the first Sales Agreement (INV 73342); 2. $1,745,719.14 relating to the second Sales Agreement (INV 73343); and 3. $195,085 relating to the third Sales Agreement (INV 73344) (together, the Shortfall Invoices).
4. Although the Shortfall Invoices describe the shortfall period as 5 May 2014 to 4 May 2018 (in the case of the first and second Sales Agreements) and the period 5 May 2015 to 4 May 2019 (in the case of the third Sales Agreement), I accept the evidence of Mr Bogatez that this was an error (November affidavit, par [74(c)-(e)]). Contrary to Michael Hill's submission, I find that the Shortfall Invoices relate to stock not purchased by Michael Hill in the second 24-month term of each of the Sales Agreements, being 5 May 2016 to 4 May 2018 for the first and second Sales Agreements, and 5 May 2017 to 4 May 2019 for the third Sales Agreement. The Shortfall Invoices did not include storage costs. As indicated, Gispac did not press its claim for storage costs. The amounts claimed in the Shortfall Invoices have not been paid.
5. Michael Hill relies on several defences to the shortfall claim: (i) the evidence of the shortfall is unreliable and incomplete, (ii) a different construction argument in relation to cl 18.2 to the construction argument which has been addressed and rejected at [79]-[80] above, (iii) the Sales Agreements are unenforceable for illusory consideration, (iv) conventional estoppel, (v) misleading or deceptive conduct, (vi) unconscionable conduct, and/or (vii) that cl 18.2 operates as a penalty and is unenforceable.

Quality of the evidence concerning the Shortfall claim

1. It is of assistance first to summarise the evidence concerning the Gispac invoices.
2. Mr Bogatez gave evidence in his November affidavit that Gispac changed its operating system on 1 December 2015 from Great Plains to MYOB Advance and later discovered that the server had been corrupted and attempts to recover data from the Great Plains system, specifically invoices prior to 1 December 2015, were unsuccessful. In his third affidavit of March 2021, Mr Bogatez explained that Gispac had managed to locate some invoices for the pre-1 December 2015 period (par [21]), which were exhibited in Ex EB2 at pp 5-247.
3. Gispac sought to address the lacuna in the evidence by issuing a notice to produce to Michael Hill for all invoices in respect of the Sales Agreements, and also made a request to Michael Hill for the invoices which it had given to its expert, Mr John Temple-Cole. The notice to produce dated 29 October 2021 required production by Michael Hill of all invoices dated within the period 5 May 2014 to 31 August 2018 recording the purchase or prospective purchase of the products specified in the three Sales Agreements by Michael Hill, its related entities, or the retail outlets of Michael Hill (CB2/197-198). In his fourth affidavit of December 2021, Mr Bogatez exhibited in Ex EB3 the documents produced by Michael Hill in answer to the notice to produce (at pp 5-2644), and the "bundle of invoices" supplied by Michael Hill to its expert (at pp 2646-3363).
4. Michael Hill says that the documents it produced in response to Gispac's notice do not match the Gispac invoices or what are referred to as the "Product Tables", and hence it cannot be a complete set of all invoices that were issued to it. Gispac responds that it relies upon the combination of the invoices located by both Gispac and Michael Hill as the best evidence of the shortfall under cl 18.2. The "located invoices" comprised the invoices from three sources: 1. invoices located by Gispac, which were exhibited to the affidavit of Mr Bogatez of November 2020, being 2,207 invoices in Ex EB1 (for the period after 1 December 2015), and his affidavit of March 2021, being 242 invoices in Ex EB2 (for the period prior to 1 December 2015); 2. the bundle of Gispac invoices supplied by Michael Hill to its expert, Mr Temple-Cole, as referred to in his first report at par 25 and Appendix D, par D1.1(c); and 3. the Gispac invoices produced by Michael Hill in answer to the notice to produce issued by Gispac, which were exhibited to the December 2021 affidavit of Mr Bogatez in Ex EB3.

Construction of cl 18.2

1. In written closing submissions (pars 66 and 67), Michael Hill advanced a different construction of cl 18.2 to its argument, which I have rejected at [79]-[80] above that cl 18.2 permits recovery greater than the contract price in respect of the acquisition of the Annual Quantity.
2. Under the alternative construction, it is said that there must be a "Shortfall" in all quarters for Gispac to claim a shortfall under cl 18.2 because the words "each quarter" denote "each" in the sense of all or every single quarter in a year; that is, "each" should be read as "every single quarter in a twelve month period" before the shortfall obligation under cl 18.2 is engaged.
3. According to the submission, reading cl 18.2 this way (i) largely avoids the problems with the clause if the "Shortfall" is calculated on a quarterly basis; namely, Michael Hill receives no credit for any extra bags bought in any quarter, ie more than 25 per cent of the Annual Quantity in any quarter, and (ii) results in less of a windfall for Gispac if there is a "Shortfall" during a 12-month period when calculated on a quarterly basis.
4. There are several difficulties with this proposed construction of cl 18.2. First, contrary to Michael Hill's submission, the word "each" in cl 18.2 should be treated as singular when it comes before a singular noun "quarter". Second, the proposed construction involves reading additional words ("every single quarter in a twelve month period") into cl 18.2, such that "each" denotes "absolutely all". Third, the argument based on business efficacy is not persuasive. The commercial justification given for reading cl 18.2 in the way suggested by Michael Hill is really no more than an attempt to rewrite the commercial bargain in a manner more favourably to it. That is not the task of construction.

Other defences to cl 18.2

1. For the reasons given under Issue 6 below, I find that cl 18.2 is not a penalty and none of the other defences advanced by Michael Hill are made out.
2. I find that Michael Hill is liable to Gispac for the shortfall under cl 18.2. The quantum of Gispac's claim under cl 18.2 is addressed under Issue 7 below.

Issue 4: Whether Michael Hill breached cl 18.1

1. In the alternative to its claim under cl 18.2, Gispac claims damages under cl 18.1 for Michael Hill's failure to purchase the Annual Quantity of bags each year during the terms of the Sales Agreements.
2. Michael Hill relies on two defences. First, it is said that as a matter of construction, cl 18 does not confer on Gispac two independent rights. Second, it is said that Gispac has not established that Michael Hill failed to purchase the minimum Annual Quantity.

Does cl 18 contain two independent rights

1. Gispac says that cl 18 confers two distinct rights, one under cl 18.1 and one under cl 18.2. Michael Hill says that this is not a sensible commercial interpretation of cl 18 because the clause says essentially that the customer must buy whatever the annual quantity is and, if it does not do that, then Gispac's remedy is as set out in cl 18.2. For the following reasons, I reject Michael Hill's submission.
2. The customer's obligation under cl 18.1 is to purchase the annual quantity of bags each year during the 24-month term of the Sales Agreements. The customer's take or pay obligation in cl 18.2 is a separate and independent obligation which requires the purchase of that product to be spread evenly across the calendar year at the rate of 25 per cent per quarter. Clause 18 operates to provide Gispac with independent remedies for breach of cll 18.1 or 18.2. If the customer breaches the obligation in cl 18.1 to purchase the annual quantity of bags, Gispac has a claim for loss of bargain damages in respect of the profits it would have earned on the shortfall amounts.
3. By contrast, if the customer fails to purchase 25 per cent of the product in a particular quarter, Gispac is entitled to issue an invoice for that product, which is a liquidated claim, and the customer is taken to have purchased 25 per cent in that quarter. As indicated at [80] above, the consequence is that the customer is then only obligated to purchase the remaining 75 per cent in the other quarters of the year. Read this way, cll 18.1 and 18.2 operate so that the customer has a fixed obligation under the Sales Agreements across the year of the contract.
4. Further, the language of cl 18.2 ("may") is permissive. If the customer breaches the take or pay obligation in any quarter, Gispac "may" take either or both of the specified actions: (a) invoice the customer for the shortfall, and (b) charge the customer for storage of the shortfall product. However, Gispac is not required to take either or any of those actions, if there is a breach of the take or pay obligation.
5. Instead, Gispac can claim damages for breach of the obligation in cl 18.1 to purchase the annual quantity in the year which, as indicated, is to be calculated on the basis that to the extent that the customer has failed to purchase 25 per cent in a particular quarter, and Gispac has issued an invoice for that product, the customer is taken to have purchased 25 per cent in that quarter thus reducing the extent of its obligation under cl 18.1 to purchase the annual quantity of bags each year.

Whether Michael Hill failed to purchase minimum Annual Quantity

1. Accepting that the minimum Annual Quantity is the "QTY" amount set out on the front page of the Sales Agreements, Gispac says that it is not seriously in dispute that in each year the Sales Agreements were on foot, Michael Hill did not purchase the minimum annual quantity. Gispac relies on the experts' Joint Report at appendix 2.1. Gispac says that Mr Mullins' loss of profits calculations in appendix 2 to the Joint Report are based on the invoices tendered in evidence, and not the documents called "Product Tables", as to the quantity of bags purchased and not purchased. Gispac says that since the number of bags purchased by Michael Hill is established by the invoices tendered in evidence, any criticism of the Product Tables is irrelevant.
2. Again, Michael Hill challenges the quality of the evidence relied upon by Gispac to establish the breach of cl 18.1. For the reasons given at [127]-[138] above, I reject Michael Hill's criticism of Gispac's claim under cl 18.1, based on the located invoices. The quantum of this claim is addressed under Issue 7 below.

Issue 5: Exclusivity - breach of cl 17

1. In the further alternative to its claims under cl 18.2 or cl 18.1, Gispac claims damages for breach of the exclusivity provision in cl 17 pursuant to which Michael Hill appointed Gispac for the "Term" as the exclusive supplier of the Products to Outlets in the Territory. "Outlets" is defined in cl 1 to mean retail outlets of the Customer. "Territory" is defined in cl 1 to mean Australia and New Zealand. Whilst there is no definition of "Customer" in the 2012 Terms it is common ground that this expression is a reference to Michael Hill.
2. Gispac says that Michael Hill "Outlets" were supplied with products of the same kind as those the subject of the three Sales Agreements during the second 24-month term of the Sales Agreements from a supplier other than Gispac, and that this supply amounts to a breach by Michael Hill of the exclusivity obligation in cl 17.
3. There is documentary evidence of (i) purchase orders by Michael Hill Wholesale Pty Ltd (MHW) covering the period November 2016 to August 2018, and (ii) invoices issued by Jewel Pak International (Jewel Pak) to "Michael Hill Jewellers" or, in the case of four invoices, to "MHW" (CB3/811, 813, 814, 815) (the third-party supplier invoices) covering the period October 2016 to December 2018. I find that Jewel Pak supplied products to Michael Hill retail stores in Australia and New Zealand described as "MH - SBAG, MH - LBAG, ER - SBAG, ER - LBAG". Mr Colvile accepted in cross-examination that these abbreviations are references to Michael Hill and Emma & Rowe small and large bags respectively, being the same products that were being supplied by Gispac to Michael Hill (T75.42-50, 76.1-7).
4. Michael Hill relies on three defences to the exclusivity claim: (i) another group entity, not Michael Hill, was the purchaser of products from third-party suppliers, (ii) the proper construction of the term "Outlets" in cl 17 does not include the New Zealand stores, and (iii) Gispac did not suffer any loss due to the Jewel Pak purchases.

Purchases by MHW

1. It is said that Michael Hill cannot be liable for a breach of cl 17 because another group entity, MHW, contracted with the third-party supplier. I reject this submission. As Gispac correctly responded, this is irrelevant since the exclusivity obligation is directed to supply to "Outlets", not to the entity within the Michael Hill group that happened to issue the third-party purchase orders for the supply of bags to those outlets.

New Zealand Outlets

1. Michael Hill says that it did not have "Outlets" in New Zealand because the outlets in New Zealand were operated by Michael Hill New Zealand Limited (MHNZ), a New Zealand incorporated entity, which is not within the reference to "outlets … of the customer" for the purpose of cl 17.
2. Michael Hill relied on the evidence of Mr Joel Watson, the Deputy Chief Financial Officer of Michael Hill, who commenced employment with Michael Hill in January 2019. He gave unchallenged affidavit evidence that (a) the retail stores in New Zealand that sell Michael Hill branded products are run by MHNZ, (b) to the best of his knowledge, that was also the case in the period 2014 to 2019, and (c) MHNZ is the lessee of each of the New Zealand stores' premises. Documentary evidence confirms that MHNZ was incorporated on 12 May 1987. The ultimate holding company of MHNZ is Michael Hill International Limited, which is also the ultimate holding company of Michael Hill.
3. Gispac bears the onus of establishing that the retail stores in New Zealand answer the description "outlets … of the customer" for the purpose of cl 17. Gispac says that (i) the 2012 Terms refer to New Zealand expressly, (ii) the New Zealand outlets took the benefit of the ePlus Facility to order their relevant stock, and (iii) the fact that another Michael Hill entity was the operating entity of the New Zealand outlets does not affect whether the New Zealand based outlets were "outlets of the customer" for the purpose of cl 17.
4. Contrary to Gispac's submissions, it is not to the point that the New Zealand outlets took the benefit of the ePlus Facility. First, only Michael Hill made the appointment of Gispac as the exclusive supplier to the designated "outlets of the customer", that is, Michael Hill. Second, Gispac did not attempt to make out its claim for breach of the exclusivity obligation based upon agency principles, conventional estoppel, or seek rectification of the Sales Agreements. Third, I accept Michael Hill's submission that in the absence of specific agreement with the relevant entity conducting the New Zealand retail stores, namely MHNZ, Gispac is not entitled to constrain the commercial activities of other members of the corporate group.
5. I find that the retail stores in New Zealand were not an "outlet" of Michael Hill for the purpose of cl 17. Hence, insofar as Gispac's exclusivity claim relates to the New Zealand outlets, the claim fails, albeit the monetary consequence of this finding is relatively small: see Issue 7 below.

Alleged delivery failures

1. It is said that Gispac cannot prove it would have been able to supply the bags which the Michael Hill retail stores in Australia acquired from third-party suppliers from 2016 onwards. In support of this contention, Michael Hill points to alleged delivery failures by Gispac to Michael Hill during successive Christmas trading periods, relevantly, 2014, 2015 and 2016.
2. Michael Hill acknowledged that there is no evidence of the number of bags ordered that Gispac did not deliver. Nevertheless, it is said that it may be inferred from the correspondence that it was not negligible. The relevant correspondence is as follows.
3. First, in December 2014, Michael Hill made an enquiry about whether Gispac's Web Ordering Portal was accepting orders. In an email of 4 December 2014 at 2:18 pm to Ms Christie Andronas and Mr Cook of Gispac, Mr Colvile said that (a) he was "still getting numerous complaints from stores not receiving there (sic) stock or issues on line", (b) "I tried yesterday and it said that the small bags were out of stock", and (c) "Shannon from Tamworth has formally complained after numerous phone calls to Christie" (CB2/405). Ms Andronas, Gispac's sales account manager, replied to Mr Colvile by email at 3:11 pm the same day apologising for any inconvenience, and said: I can assure you we have taken another look at the system, which is working, and I can confirm that the paper bags are in stock and ready for ordering from your team. (CB2/404)
4. Ms Andronas gave a detailed explanation in her email concerning the Tamworth orders, relevantly, (a) the first order placed online had not come through the system, (b) Ms Andronas had assisted with the replacement order and referred to an apparent failure by TNT to deliver a consignment of stock to Tamworth, after investigations, and (c) when advised the previous day that the parcel had not yet arrived, she had organised for this order to be dispatched urgently.
5. Second, in December 2015, the parties exchanged emails in relation to asserted delays with some specific orders, placed on 17 November 2015. Ms Andronas advised Mr Colvile by email of 3 December 2015 at 8.05 am that the relevant order by Michael Hill was delivered by Gispac on 2 December 2015, and that all previous orders "have been fulfilled for head office for both Emma and Roe and Michael Hill" (CB2/507). The latter was not disputed by Michael Hill; however, Mr Colvile complained by email of 3 December 2015 at 2.14 pm that only one of three boxes was delivered (CB2/507-508). The evidence is silent as to any further complaint by Michael Hill in relation to this particular order. The parties exchanged further email correspondence between 11 and 23 December 2015 concerning complaints by particular New Zealand stores of bag supply issues. Ms Andronas advised by email of 11 December 2015 that of 20 orders sent from Sydney, 8 had been delivered and 12 were in transit, apparently due to customs delay. Emails between Mr Bogatez and Mr Colvile on 22 and 23 December 2015 record that Mr Bogatez informed Mr Colvile that he "[w]ill get POD as they confirmed they had been delivered today" (CB2/512).

Issue 6: Michael Hill's defences

1. Michael Hill relies on five general defences to Gispac's claims. Before addressing these defences, it is convenient to make some additional findings to those set out at [24]-[27] above.

Additional findings

1. I accept Mr Colvile's unchallenged affidavit evidence that: 1. at no time in his dealings with Gispac, which commenced in October 2012, did anyone at Gispac indicate to him that the ePlus service was associated with a separate set of terms; 2. at his meeting with Mr Cook of Gispac in April 2014, Mr Cook did not suggest to him that (a) they needed to agree new terms for the supply of Gispac's bags, (b) Gispac was to be the exclusive supplier to Michael Hill, (c) any product ordered from Gispac at any time, but not purchased by Michael Hill, would be Michael Hill's responsibility to pay for, and (d) Gispac wanted Michael Hill to pay the difference between a "minimum quantity" and the number of bags it actually ordered; 3. no one at Gispac ever suggested to him that Michael Hill had a "deadline" for using up or "drawing down" or a time limit on the quantity of bags that had been purchased or that Michael Hill would be charged for shortfall; and 4. no one at Gispac ever suggested or asked that Michael Hill buy bags exclusively from Gispac or mentioned that Sales Agreements would automatically renew unless Michael Hill gave six-months' notice.

Illusory consideration

1. Michael Hill contends that due to cl 19.7, read in conjunction with cl 4.1, the contract is for illusory consideration and therefore the Sales Agreements are unenforceable. It is said that when read as a whole, Gispac has no obligation to actually deliver the products that it has agreed to supply, and that Michael Hill agreed to pay for.
2. The relevant principle is stated by Kitto J in Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 356; [1969] HCA 29: It is that wherever words which by themselves constitute a promise are accompanied by words showing that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought at all. The succinct statement of the principle in Leake on Contracts, 3rd cd., p. 3: "Promissory expressions reserving an option as to the performance do not create a contract" was approved by the Lord Justice, as it was later by Lord Wright in Hillas and Co. Ltd. v. Arcos Ltd.
3. Gispac's obligation in cl 2.1 to "supply the Products" is an executory promise to supply the Products to the Customer for the Price, "subject to the Terms and Conditions of Trading". Those terms and conditions include cll 4.1 and 19.7 which are each concerned with a different subject.
4. The subject matter of cl 4.1 (no liability for failure to deliver) is Gispac's delivery obligations and the allocation of risk if Gispac fails to deliver the Products, or any of them, on time or at all, in which event, (i) the first sentence of cl 4.1 exempts Gispac from liability for any loss or damage for failure to deliver on time or at all, and (ii) the second sentence of cl 4.1 addresses the consequence of delayed or failed delivery of product on time. In that circumstance, Michael Hill is bound to accept late delivery and pay for the products in full provided delivery occurs at any time within one month of the expected date of delivery.
5. The subject matter of cl 19.7 is the placement of orders via Gispac's Web Ordering Portal. The clause provides that the depiction of products on the portal, whether visual or textual, is not to be taken as an obligation to sell but merely an invitation to treat (cl 19.2). That is the limited context in which cl 19.7 reserves to Gispac the right to accept or decline the customer's order at any time and for any reason, or to require the customer to provide additional verification or information associated with an order.

Conventional estoppel

1. Michael Hill contends that cll 17 (exclusivity), 18 (shortfall) and 21 (automatic renewal) represented a departure from the way the parties had been doing business for over a decade previously and as these specific terms were not drawn to Michael Hill's attention, Gispac is bound by a conventional estoppel as to the parties' relationship which prevents Gispac from insisting on compliance with those clauses. Although the pleaded defence contained some elements of a promissory estoppel claim, such as inducement, the estoppel claim was put as a conventional estoppel, which is a common law defence.

Relevant legal principles

1. The elements of a conventional estoppel differ from an equitable estoppel. A conventional estoppel operates when both parties have adopted the same assumption as the conventional basis of their relationship: Ryledar Pty Ltd v Europhic Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 at [199]-[200], referring with approval to the statement of principles by Brereton J in Moratic Pty Ltd v Gordon [2007] NSWSC 5 at [32]-[33], where his Honour stated (at [32]) the matters necessary to establish conventional estoppel as being that: (a) the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant; (b) the defendant has adopted the same assumption; (c) both parties have conducted their relationship on the basis of that mutual assumption; (d) each party knew or intended that the other act on that basis; and (e) departure from the assumption will occasion detriment to the plaintiff.
2. In Ryledar at [201], Tobias JA remarked that in noting the differences between promissory estoppel and conventional estoppel, Brereton J observed in Moratic Pty Ltd v Gordon with respect to the latter (at [33]) that it: "[33] … is focussed on the consensual basis of the parties' relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved so as to hold both parties to their common understanding."

The pleaded claim

1. Ignoring the infelicities of the pleaded defence (pars 55-65) which suggested a claim of promissory estoppel, the pleaded claim by Michael Hill relevantly alleged that: 1. both parties had at no time conducted their commercial relationship on the basis that Michael Hill bore any obligation: 1. to buy a fixed quantity of Gispac's products each year, 2. to pay any "shortfall" amount to Gispac if it purchased less than such a fixed quantity in any 12-month period, and 3. to give six months' notice, or some other period of notice of its intention to terminate its arrangements with Gispac, failing which notice the arrangement would automatically renew for another fixed term (the "New Obligations"); 1. the New Obligations were exceptional in character and highly disadvantageous to Michael Hill; 2. Gispac did not communicate to Michael Hill that it wished the Sales Agreements to contain the New Obligations or draw to its attention the presence of cll 1, 17, 18 or 21 of the 2012 Terms (ignoring the obvious slips in par [58] of the defence with respect to incorrect references to the plaintiff and defendant); 3. Gispac did not issue any invoices to Michael Hill for the "Shortfall", or otherwise assert an entitlement to any amount alleged to be owing by way of "Shortfall" between May 2014 and May 2018; 4. Michael Hill assumed that the parties' legal relationship was not restricted by terms in the nature of the "New Obligations", and expected that their future legal relationship would not be subject to them; 5. Michael Hill acted in reliance on its assumption or expectation in May 2014 and again in May 2015, by not informing Gispac that it was not prepared to enter into an agreement containing the 2012 Terms, or alternatively, by not giving notice of its intention to terminate before 23 August 2017; and 6. Michael Hill will suffer detriment if its assumption or expectation is not fulfilled, and it is unconscionable for Gispac to depart from the assumption or expectation of Michael Hill referred to in (5) above.

Application of principles to the facts

1. A major difficulty with the conventional estoppel defence is the lack of mutuality. Accepting that the subjective beliefs of the parties are relevant to an estoppel by convention (Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [27]), Mr Bogatez on behalf of Gispac did not adopt the pleaded assumption that the terms of the parties' legal relationship did not include the New Obligations. Mr Bogatez understood that the first and second Sales Agreements were rolling contracts and that all Sales Agreements were for a minimum two-year duration (November affidavit, at pars [15], [19] and [25]). He adhered to his affidavit evidence in cross-examination; he said that the parties were operating on the basis of a minimum term with a shortfall payable (T42.46-T43.5). He was not challenged as to his understanding. Nor was it put to him that his evidence was incorrect or false. I accept his evidence.
2. Michael Hill says that Gispac must have intended Michael Hill to operate on the basis that "Shortfall" formed no part of their arrangement, because it did not raise the matter with Michael Hill. I reject this submission. It ignored two matters: (i) the evidence of Mr Bogatez as to his understanding of the transactions contradicts the asserted assumption, and (ii) Gispac specifically drew the 2012 Terms to Michael Hill's attention in early 2014 when requesting that it tick the terms and conditions box on other sales agreements and repeated that request throughout 2014 and 2015.
3. Michael Hill also says that there was a common assumption that "Shortfall" formed no part of the parties' arrangement given the course of dealing before 5 May 2014. It is said that it may be inferred from the evidence on the fluctuating nature of sales and bag use, that Michael Hill did not make regular and uniform purchases of products pursuant to the earlier agreements, and therefore, there were "Shortfalls" for earlier sales agreements before 5 May 2014. The submission continued that "if the existence of a 'Shortfall' in one or more of quarters before 5 May 2014 is a given, then the fact that Gispac made no claim in respect of earlier sales agreements is an objective indication that it did not understand that the parties were operating under a regime in which a 'Shortfall' was payable, and it also reflected the way the parties did business" (emphasis added).

Statutory defences: Australian Consumer Law, ss 18 and 21

1. Michael Hill contends that Gispac engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law (ACL) by silence, or otherwise by the failure to communicate that Gispac was aware that the 2012 Terms contained cll 1, 17, 18 and 21 (referred to in the par [66] of the defence as the "Relevant Facts").
2. Alternatively, Michael Hill contends that Gispac's failure to communicate the Relevant Facts to Michael Hill was conduct engaged in trade or commerce in connection with the supply of goods or services to Michael Hill and, in all the circumstances, was unconscionable within the meaning of s 21 of the ACL.
3. In each case, the relief sought by Michael Hill in its defence is either an order under ss 237 and 243(a) of the ACL that cll 17, 18 and 21 of the 2012 Terms are void, or alternatively, under ss 237 and 243(c) of the ACL that cll 17, 18 and 21 of the 2012 Terms not be enforced against it. No pleading point was taken by Gispac that Michael Hill had not sought such relief way of cross-claim.
4. In closing submissions, Michael Hill said of both claims: For a party, even a commercial party, to then include such onerous terms in a contract and not inform the counterparty specifically about terms that may be significantly detrimental to the counterparty, is not conduct which should be countenanced in the 21st century business landscape in Australia. It is conduct that should not stand. It is conduct which offends against conscience and ethical and moral principles of fair dealing; principles upon which the law has been constructed. Gispac's silence as to, and otherwise failure to bring to Michael Hill's specific attention clauses 1, 17, 18 and 21 of the 2012 Terms was, in all of the circumstances, misleading or deceptive or likely to mislead or deceive within the meaning of s 18 ACL, and/or unconscionable within the meaning of s 21 ACL.

Misleading or deceptive conduct

1. The applicable principles are not in dispute. Conduct will be misleading or deceptive if, viewed as a whole, it leads or is likely to lead into error: Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357; [2010] HCA 31 (Miller) at [15]; Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [39].
2. The required analysis is objective in the sense that it looks to what the conduct would reasonably have conveyed to the person or audience to which it was directed, requiring analysis of all the circumstances: Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592; [2004] HCA 60 at [109], [111] (McHugh J); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [102]. Further, where alleged misleading and deceptive conduct relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole: Campbell v Backoffice at [102].

The pleaded claim

1. The defence relevantly alleged in par [68] that, in the circumstances pleaded in pars [55]-[57], Michael Hill had a reasonable expectation that the Relevant Facts would be communicated to it, or alternatively, Gispac owed Michael Hill a duty to communicate those facts to it.
2. No submission was advanced by Michael Hill in support of the asserted "duty" case. Given that the parties were counterparties to a contract, there was no occasion to imply a relevant duty in the circumstances of this case. Nor did Michael Hill press its contention in par [69] of its defence that Gispac refrained (otherwise than inadvertently) from communicating the Relevant Facts to Michael Hill on or at any time before 18 August 2017.
3. The circumstances pleaded in pars [55]-[57] of the defence were: (i) the parties had conducted their business relationship from about 2003 on a particular basis, namely, Michael Hill placed orders with Gispac for particular quantities of bags, as and when employees at its stores determined that the store needed them, and Gispac supplied the particular quantities of bags as and when its received those orders from individual stores, which was defined in par [55] of the defence as the "Parties' History", (ii) at no time before 5 May 2014 had the parties conducted their commercial relationship on the basis that Michael Hill was subject to the New Obligations, and (iii) the New Obligations were exceptional in character and highly disadvantageous to Michael Hill.
4. It is said that, assessed objectively, Michael Hill would have been entitled to expect or infer (that is, have a reasonable expectation) that the New Obligations would be disclosed, and since they were not, Gispac engaged in misleading conduct. The circumstances giving rise to an expectation of disclosure were said to be that (a) those clauses were thoroughly unsuited to a retail entity that did not have uniform sales, and (b) the size of Gispac's claim.

Application of principles to the facts

1. A major premise of the pleaded circumstances (the Parties' History) relied upon by Michael Hill for a reasonable expectation of disclosure is that at no time before 5 May 2014 had the parties conducted their commercial relationship on the basis that Michael Hill was subject to the New Obligations.
2. The language of "reasonable expectation" is not statutory. In Miller at [20], French CJ and Kiefel J said of the characterisation of conduct in a commercial context: In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52 [of the Trade Practices Act 1974 (Cth), the equivalent here being s 18 of the Australian Consumer Law]. (Footnotes omitted.)
3. In United Resource Management Pty Ltd v Par Recycling Services Pty Ltd [2023] NSWCA 236 at [49], the Court of Appeal said of this passage in Miller: In this passage, their Honours make clear that references to "a reasonable expectation of disclosure" should be understood as a mere "aid to characterising non-disclosure as misleading or deceptive", and noted at [21]: To invoke the existence of a reasonable expectation that if a fact exists it will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations held by one person of another which exceed the requirements of the general law and the prohibition imposed by the statute.
4. The premise of Michael Hill's submissions is unfounded for several reasons.
5. First, it conflated Mr Colvile's uncommunicated subjective understanding of the arrangements between the parties with the objective circumstances in which the parties entered into sales agreements, at least from 2014 incorporating the 2012 Terms. Contrary to Michael Hill's submission, the Sales Agreements were not the first occasion that the 2012 Terms were introduced. Mr Colvile on behalf of Michael Hill had signed and ticked the terms and conditions box referring to the 2012 Terms on a number of other sales agreements earlier in 2014 before he signed the three Sales Agreements in issue. Mr Dennis of Michael Hill had also signed and ticked the terms and conditions box referring to the 2012 Terms on a sales agreement in early 2014: see [189(2)] above. The objective circumstances were that the parties had entered sales agreements earlier in 2014 incorporating the 2012 Terms.

Unconscionable conduct

1. Section 21 of the Australian Consumer Law provides that a person must not, in trade or commerce, in connection with, relevantly, the supply or possible supply of goods or services to a person, engage in conduct that is in all the circumstances unconscionable. In making the assessment, the Court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention: s 21(3)(a). The prohibition in s 21 is not limited by the unwritten law relating to unconscionable conduct: s 21(4)(a).
2. Section 22 contains a non-exhaustive list of matters to which the Court may have regard for the purposes of determining whether a person has contravened s 21 in connection with the supply or possible supply of goods or services to a person. Michael Hill draws attention to the following matters referred to in s 22(1): … (e) the amount for which, in circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; (f) the extent to which the supplier's conduct towards the customer was consistent with the supplier's conduct in similar transactions between the supplier and other like customers; … (i) the extent to which the supplier unreasonably failed to disclose to the customer any intended conduct of the supplier that might affect the interests of the customer and any risks to the customer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); (j) where there is a contract between the supplier and the customer: (i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; (ii) the terms and conditions of the contract; (iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; (iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship all, after they entered into the contract; (v) whether the supplier has a contractual right to unilaterally vary a term or condition of the contract; … (l) the extent to which the supplier and the customer acted in good faith.

Relevant legal principles

1. The leading authorities on unconscionability include Paciocco v Australia and New Zealand Banking Group Ltd 236 FCR 199; [2015] FCAFC 50; Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18; Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40; and Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 96 ALJR 271.
2. The seminal analysis of the content and requirement of modern Australian "business" conscience is contained in the judgment of Allsop CJ in Paciocco v ANZ Banking Group at [284]-[303], especially the values identified at [296]. After describing the judicial technique to be applied in an assessment of unconscionable conduct (at [271]-[273] and [281]), drawing upon the technique in equity discussed in Jenyns v Public Curator(Q) (1953) 90 CLR 113 at 118-119, Allsop CJ said (at [304]) of the evaluative judgment required by the normative standard of statutory conduct: In any given case, the conclusion as to what is, or is not, against conscience may be contestable. That is inevitable given that the standard is based on a broad expression of values and norms. Thus, any agonised search for definition, for distilled epitomes or for shorthands of broad social norms and general principles will lead to disappointment, to a sense of futility, and to the likelihood of error. The evaluation is not a process of deductive reasoning predicated upon the presence or absence of fixed elements or fixed rules. It is an evaluation of business behaviour (conduct in trade or commerce) as to whether it warrants the characterisation of unconscionable, in the light of the values and norms recognised by the statute.
3. Unconscionable conduct within s 21 of the ACL does not require some form of pre-existing disability, vulnerability or disadvantage of which advantage has been taken: Quantum Housing Group at [78] (Allsop CJ, Besanko and McKerracher JJ); cf Keane J in Kobelt at [121]. In Quantum Housing Group, the joint judgment spoke of "the language of business morality" which underlies the statutory prohibition on unconscionable conduct and said (at [91]): ... The kinds of consideration in s 22 and the kinds of circumstance to which the Chief Justice referred in Paciocco 236 FCR at 274-75 [296]-[298] are apt to inform evaluations about business standards that the courts are required by Parliament to make. They may be contestable judgments; they may be by reference to a standard that is not definable; but they are evaluative judgments that Parliament commands be made. That they are the subject of a civil penalty requires that the boundary of impugned conduct be reasonably known to the subject. This last factor reinforces the proposition that it is no light matter, indeed it is a serious matter, to have one's conduct impugned as against or as offending conscience. Business people understand such things, as do ordinary people. They need no definition to assist them. "Unconscionable" is the language of business morality and unconscionable conduct is referable to considerations expressed and recognised by the statute. The word is not limited to one kind of conduct that is against or offends conscience. (Emphasis added.)

Application of principles to the facts

1. In opening written submissions, Michael Hill said that the unconscionability claim rests on "what is right and acceptable commercial behaviour". Expressed at such a high level of generality, that is not the applicable test. In closing written submissions, Michael Hill said that Gispac's conduct "offends against conscience and ethical and moral principles of fair dealing". Again, that broad submission is not the applicable test. Further, its conclusionary terms failed to grapple with the facts and ignored the caution expressed in Quantum Housing Group at [78] that "it is no light matter, indeed it is a serious matter", to have one's conduct impugned as against or as offending conscience.
2. Addressing the specific matters in s 22 of the ACL identified by Michael Hill (see [213] above), I make the following findings.
3. First, as to the matter referred to in s 22(1)(e), there is unchallenged evidence of Mr Bogatez that Gispac determined that a lower unit price for the bags could be provided under the ePlus facility because it was able to negotiate lower production prices with manufacturers based on continuity of supply of the bags. Further, there is no evidence of the amount for which Michael Hill could have acquired identical or equivalent goods with an ePlus service from another supplier.
4. Second, as to the matter referred to in s 22(1)(f), the evidence of Mr Bogatez, which I accept, establishes that the 2012 Terms were Gispac's standard terms on which Gispac supplied paper bag products in similar transactions between it and 15 to 20 of its other customers (T18.14-18). It was not put to Mr Bogatez in cross-examination that Gispac's conduct in similar transactions was any different to its conduct towards Michael Hill; relevantly, it was not suggested that Gispac specifically informed other counter-parties in like transactions about the content of cll 17, 18 and 21.2, which Michael Hill now complains were onerous.
5. Third, Gispac did not unreasonably fail to disclose the 2012 Terms: cf s 22(1)(i). The existence of the 2012 Terms was expressly brought to the attention of Michael Hill before it signed the Sales Agreements.
6. Fourth, there is no evidence that Gispac did not act in good faith: s 22(1)(l).
7. Fifth, as to the matters referred to in s 22(1)(j), I accept Mr Colvile's evidence that he did not expect to see cll 17 or 18 of the 2012 Terms in an agreement with Gispac because in 2014 and 2015 he had not seen clauses like cll 17 or 18 in packaging contracts or contracts for the sale of other goods (second affidavit, par [21]), and that no one at Gispac ever mentioned to him any "shortfall" or exclusivity requirement. Nevertheless, Michael Hill is a commercial entity with significant resources and access to legal advice. Mr Colvile was not tricked into signing any of the Sales Agreements or agreeing to any of the 2012 Terms by ticking the terms and conditions box above the signature clause. He accepted in cross-examination that he understood that Gispac required the 2012 Terms to be agreed before it would proceed with the order of bags. As indicated, Mr Colvile chose not to take steps to satisfy himself of Michael Hill's obligations under the Sales Agreements and he could have but did not seek legal advice.

Is clause 18.2 a penalty?

1. Michael Hill contends that cl 18.2 is a penalty because it (a) permits Gispac to recover from Michael Hill each year a sum that exceeds the amount that would be payable for purchase of the annual quantity, (b) does not represent a genuine pre-estimate of loss Gispac would suffer for non-compliance with cl 18.1, and (c) provided for a payment of an amount that was extravagant and unconscionable in comparison with the greatest loss that Gispac could conceivably suffer under cl 18.1.

Legal principles: penalties

1. In Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30 at [10], French CJ, Gummow, Crennan, Kiefel and Bell JJ described the "settled aspects" of the penalty doctrine as including: In general terms, a stipulation prima facie imposes a penalty on a party ("the first party") if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.
2. The primary stipulation to which the penalty doctrine applies may be the occurrence or non-occurrence of an event which is neither a breach of contract, nor an event the party subject to the penalty has the obligation to perform: Andrews at [12], [45], [46], [47]; Paciocco v Australia and New Zealand Banking Group Limited (2016) 258 CLR 525; [2016] HCA 28 (Paciocco) at [118], [119] (Gageler J), [253] (Keane J).
3. As the party resisting enforcement of a contractual provision on the ground that it is a penalty, Michael Hill has the onus of proving, on the balance of probabilities, it is a penalty: Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504 at 527 (Cole J); Paciocco at [167] (Gageler J). If the provision is a penalty, the onus shifts to Gispac as the party seeking to enforce the provision to justify it: Arab Bank Australia Ltd v Sayed Developments Pty Ltd (2016) 93 NSWLR 231; [2016] NSWCA 328 at [111].
4. The principles emerging from the majority decision in the High Court in Paciocco are relevantly summarised in Arab Bank v Sayde Developments at 243: … (2) The essence of a penalty is that it is a collateral stipulation, the (or a predominant) purpose of which is to punish the borrower for breach, and thus to compel performance (Kiefel J at [29]; Gageler J at [127], [159], [166]; Keane J at [254], [259], [273]). (3) One way of testing whether the impugned stipulation is penal - intended to punish - is to inquire whether the sum that it stipulates to be payable on breach (as I have indicated, the equitable origins and continuing equitable operation of the principle have no present relevance) is to ask whether the stipulated sum is extravagant or out of all proportion to, or unconscionable in comparison with, the maximum amount of damage that might be anticipated to follow from the breach (Kiefel J at [29], [54]; Gageler J at [158] to [162]; Keane J at [221]). (4) "Damage" in this sense is not limited to damages recoverable upon breach of contract, but may extend to damage, or losses, caused by the impairment of other legitimate commercial interests that were intended to be protected by the stipulation (Kiefel J at [33], [42] to [47]; Gageler J at [145], [160] to [162]; Keane J at [216], [283]). (5) The analysis is to be made at the time, and taking into account the circumstances applicable, when the contract was made; not at the time of breach; the analysis is prospective, not retrospective (or as is said in some judgments, is ex ante, not ex post) (Kiefel J at [62]; Gageler J at [169]). (6) Mere disproportion between the stipulated sum and the possible damage is not enough to indicate "penalty"; the disproportion must be such that it is unconscionable for the lender to rely on the stipulation (Kiefel J at [54], Gageler J at [164]; Keane J at [221], [240, [279]).

Application of principles to the facts

1. It is said that cl 18.2 is a collateral stipulation for breach of cl 18.1. This premise of Michael Hill's argument that cl 18.2 is a penalty is unsound.
2. Clause 18.2 does not operate as a remedy for failure to comply with, nor to secure compliance with, cl 18.1. The opening words of cl 18.2 make clear that its operation is contingent upon a failure by the customer to purchase 25 per cent of the Annual Quantity "each quarter", not a failure under cl 18.1 to acquire the entire Annual Quantity. By cl 18.2 Michael Hill promised to provide Gispac with an annual revenue stream calculated by reference to a fixed number of bags each quarter. The obligation on Michael Hill under cl 18.2 is therefore not a secondary obligation that is triggered by a breach of the Sales Agreement but is itself a primary obligation given in exchange for Gispac's promise to provide the ePlus service for a minimum term of 24 months: Andrews at [10]; Aquamore Credit Equity Pty Ltd v Hung [2021] NSWSC 1681 at [119] (Meagher JA), appeal dismissed: Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 272.
3. Nor does cl 18.2 permit Gispac to recover from Michael Hill each year a sum that exceeds the amount that would be payable for purchase of the Annual Quantity. As already explained, the failure by Michael Hill to purchase 25 per cent of the Annual Quantity in a particular quarter, results in Gispac being entitled to issue an invoice for that stock, and Michael Hill is therefore taken to have purchased 25 per cent in that quarter. The consequence is that Michael Hill is then only obligated to purchase the remaining 75 per cent in the later quarters of the year. Read that way, cll 18.1 and 18.2 simply operate so that Michael Hill has a fixed liability under the Sales Agreements across the year of the contract. Nothing in cl 18.2 seeks to penalise Michael Hill for failing to comply with cl 18.1; it therefore cannot be a penalty in the manner contended by Michael Hill.
4. Further, as Gispac correctly submitted, as events transpired this is exactly what occurred. The Shortfall Invoices for the second term of the Sales Agreements took into account stock purchased across the second of the 24-month term of the Sales Agreements, and only claimed payment from Michael Hill for the balance of the bags not purchased. Further, Gispac's shortfall claim under cl 18.2 has been amended to take into account the variances between the Product Tables and the located invoices. Gispac has only claimed payment from Michael Hill under cl 18.2 for the balance of the bags not purchased.

Issue 7: Quantum of loss

1. In closing submissions, Gispac put its damages claim in the alternative under cl 18.2 - Shortfall Invoices, or cl 18.1 - annual quantity, or cl 17 - exclusivity claim.
2. Both parties relied upon expert accounting reports: Mr Mullins for Gispac gave three reports dated 30 November 2020, 25 August 2021, and 6 December 2021; and Mr Temple-Cole for Michael Hill gave three reports dated 1 October 2021, 28 February 2022 and 27 October 2022. The experts' Joint Report dated 19 May 2022 essentially confirmed the mathematical accuracy of each other's calculations, whilst adhering to their different calculations of loss given the different assumptions they were instructed to make.
3. A major assumption underlying the experts' reports is whether the loss is calculated by reference to the Product Tables or the "located invoices". As indicated, Mr Mullins was initially instructed to calculate Gispac's loss by reference to the "invoiced units" appearing in the Product Tables that were prepared by Ms Kjaergaard in April 2018.
4. Mr Temple-Cole was instructed to review and comment on Mr Mullins' calculations and to prepare loss calculations based on seven alternative scenarios (with two alternative assumptions as to annual quantity for each scenario - 100% or 90%) that reflected a range of findings Michael Hill anticipated the Court might make.
5. In the Joint Report, Mr Mullins recalculated Gispac's loss by reference to the "located invoices". In his third report Mr Temple-Cole recalculated the loss scenarios he had been instructed to assume for his earlier reports, using data from the located invoices instead of the Product Tables.
6. Given that the experts were instructed with different assumptions, it is not possible to readily identify an equivalent figure for each expert. The assessment of loss is further complicated by the seven alternative loss calculations undertaken by Mr Temple-Cole based upon different factual assumptions and the multiple grounds on which Michael Hill seeks a reduction in the amount of any damages awarded to Gispac. There was no cross-examination of the experts. This was largely explicable on the basis that the experts were instructed with different assumptions and there was no real dispute as to the mathematical accuracy of the other expert's calculations.
7. It is common ground that the only issues explicitly identified in the Joint Report as being in dispute are (i) the appropriate gross margin, and (ii) the appropriate units for measuring loss. In written closing submissions (par 21), Michael Hill acknowledged that the gross margin issue can be disregarded.

Shortfall claim: cl 18.2

1. The critical integer in Gispac's claim under cl 18.2 for the "shortfall" is the number of bags that Michael Hill bought from Gispac each quarter in the periods the subject of this claim. In closing submissions dated 16 November 2022, Gispac claimed the amount of the Shortfall Invoices sent to Michael Hill on 17 May 2019 under cl 18.2 of the 2012 Terms in the amount of $2,487,832.82 (including GST).
2. The shortfall quantities were (a) for the second 24-month term of the Sales Agreements, and (b) taken from documents referred to as "Product Tables" prepared by an employee of Gispac, Ms Kjaergaard, in April 2018. Although the Shortfall Invoices record that they relate to both the first and second terms of the Sales Agreement, I have found that the explanation given by Mr Bogatez should be accepted; this was an error, and the quantum relates only to the second 24-month term of the Sales Agreements.
3. Alternatively, Gispac claimed the amount of $2,485,968.55 (including GST) having recalculated its claim based on the Shortfall Invoices taking into account the variances identified by Mr Temple-Cole between the Product Tables and the located invoices in respect of product supplied by Gispac to Michael Hill that were in evidence.
4. In updated closing submissions dated 22 November 2022, Gispac did not press its claim for GST, and in oral closing submissions, Gispac did not press its claim based on the Product Tables. Gispac relied solely on the located invoices, which gave a slightly lower Shortfall figure compared to the Product Tables. Based on the invoices, and adopting the variances identified by Mr Temple-Cole, Gispac claimed the amount of $2,259,971.40 plus interest.
5. Michael Hill's responses to the Shortfall claim are as follows.
6. First, it is said that Gispac has no separate claim for the face value of the Shortfall Invoices because, properly construed, cl 18 is a single regime that does not permit Gispac to bring two separate claims; rather, it has one claim, being a claim for lost profits. For the reasons given above at [148]f, I have rejected Michael Hill's submission that cl 18 does not permit Gispac to bring a separate claim for a liquidated sum under cl 18.2.
7. Second, accepting that Gispac has a separate claim under cl 18.2, it is said that Gispac cannot recover the full amount of the Shortfall Invoices because the relief claimed in the amended statement of claim (ASOC) for damages, not a debt due under the Sales Agreements. It is said that Gispac is limited to claiming loss of profits resulting from non-payment of the amount of the Shortfall Invoices. I reject the pleading point. Whilst it is correct that Gispac's pleaded claim alleged that it had suffered loss and damage by reason of Michael Hill's failure to pay the Shortfall Invoices, the particulars given included a claim for a liquidated sum under cl 18.2 (ASOC, par 34(a)). Moreover, (i) the case was run on that basis, and (ii) the defence by Michael Hill that cl 18.2 was a penalty also proceeded on the basis that the claim for the "shortfall" payment (as Michael Hill referred to this claim in its written submissions) was for a liquidated sum, not a claim for loss of profits.

Annual quantity claim: cl 18.1

1. Alternatively, Gispac claimed damages under cl 18.1 for the loss of profits arising from Michael Hill's failure to purchase the "Annual Quantity" of bags during the applicable term of the Sales Agreements being either $2,012,545 (4-year), $1,018,932 (2-year) or $569,623 (1-year).
2. Michael Hill's primary position adopted Mr Temple-Cole's scenario A2 or alternatively scenario A1. Scenario A2 assumes no incorporation of the 2012 Terms, no time period or limit to purchase the stated quantity ("QTY") in the Sales Agreements, and the relevant quantity ("QTY") stated in the Sales Agreements is subject to a 90 per cent limitation. Scenario A1 adopts the same assumptions subject to the relevant quantity being the stated figure "QTY" in the Sales Agreements. Michael Hill says that Gispac's loss of profit is $4,562 (scenario A2) or alternatively, $19,451 (scenario A1).
3. These scenarios can be put aside as they are based upon assumptions, which are contrary to my findings, namely, that (i) the 2012 Terms are not incorporated into the Sales Agreements, and (ii) the annual quantity obligation under cl 18.1 should be reduced to 90 per cent of the stated "QTY" in the Sales Agreements. Contrary to Michael Hill's submission, the notation in the Sales Agreements referred to at [16] above, that "[t]he total price may vary; as per industry standards and subject to production the final quantity may be 10% over or under the actual ordered quantity", does not negate or undermine Michael Hill's obligation to purchase the stated quantity ("QTY") in the Sales Agreements. In addition, there is no evidence that the final production was 10 per cent less than the stated quantity ("QTY") in the Sales Agreements.
4. Michael Hill advanced two fallback positions. First, the "QTY" figure in each Sales Agreement is treated as a fixed, one-off, figure and the "Unit Price" considered as static (not the price paid by Michael Hill from time to time, which, in fact, increased given the price reviews by Gispac). On this approach (ignoring the adjustments which Michael Hill otherwise seeks), the loss under cl 18.1 is calculated by Michael Hill as $52,830.40. This scenario was not considered by Mr Temple-Cole nor Mr Mullins. The assumptions on which this submission was made were not made out.
5. The second fallback position assumes incorporation of the 2012 Terms, no extension of the two-year term of the Sales Agreements (because the 2016 Terms replaced the 2012 Terms), and the stated quantity in the Sales Agreements applied over 24 months, not 12 months, or alternatively, the stated quantity applied over 24 months minus 10 per cent. Applying Mr Temple-Cole's scenarios B1 and B2, Michael Hill says that this gives a lost profit after tax of $229,665 (Scenario B1) or $193,495 (Scenario B2 - 90 per cent limitation). Whilst disputing that either of these scenarios was applicable, Gispac did not dispute the Michael Hill's calculations relying upon Mr Temple-Cole's scenarios B1 and B2. Again, the assumptions on which this submission was made were not made out.

First and second quarters of the first and second Sales Agreements

1. It is said that no damages should be awarded for the first two quarters of the first and second Sales Agreements for both small and large bags, being 5 May 2014 to 4 August 2014 (Q1) and 5 August 2014 to 4 November 2014 (Q2), in circumstances where both the Product Tables and the located invoices showed no records of invoicing or purchasing of bags by Michael Hill in those quarters.
2. Michael Hill says that removing the claim for these quarters from Gispac's lost profit calculation under cl 18.1 reduces any damages by $240,961. (It should be observed that Michael Hill did not argue for any larger reduction in damages under cl 18.1, based on the asserted inability of Gispac to supply bags in Q1 and Q2 of the first and second Sales Agreements.)
3. Gispac says that the proposed reduction in the claim under cl 18.1 is unjustified for three reasons: (i) the point was not pleaded, nor mentioned in Michael Hill's opening, (ii) the point was not explored in the cross-examination of Mr Bogatez, and (iii) the suggested inference that Gispac did not have available stock for supply in Q1 and Q2 must be based on evidence rather than speculation, and no evidence has been identified as supporting such an inference.
4. As to the pleading objection, the relevant principles are summarised in Harris v Harris [2021] NSWCA 326 at [71]-[74], principally by reference to Banque Commerciale SA (In Liq) v Akhil Holdings Limited (1990) 169 CLR 279 at 286-287 (Mason CJ and Gaudron J), and 293, 296-297 (Dawson J); [1990] HCA 11.
5. Gispac submitted that Michael Hill's pleaded defence (par 32(b)) only raised the issue of alleged delivery failures in respect of three specific periods: December 2015 to January 2016, December 2016 to January 2017, and "at other times during high volume trading periods for [Michael Hill], particulars of which will be provided". However, this ignored that in addition to putting in issue specific alleged delivery failures, Michael Hill also put in issue the wider issue of whether Gispac was ready, willing and able to supply the products the subject of the three Sales Agreements: see ASOC, par 46; amended defence, par 46(a).
6. The essential question is whether Gispac knew the nature of the case it had to meet. In my view, Gispac was on notice of the case it had to meet by Michael Hill's amended defence (par 46(a)) and the expert report served by Michael Hill when calculating Gispac's loss which put in issue whether Gispac held inventory for certain quarters of the Sales Agreements: see Mr Temple-Cole's first report at pars 167 and 168, replying to Mr Mullins' first report at sections 6.3 and 7, and Appendix F, to which Mr Mullins' responded in his third report at pars 2.2.20 - 2.2 22. It is no answer that the experts did not address this issue in their Joint Report.

Product Tables

1. Michael Hill puts in issue Gispac's proof of the number of bags that Michael Hill bought from Gispac. It is said that where the Product Tables show more bags than the located invoices for 25 quarters across the Sales Agreements and bag sizes, this is probative evidence that the located invoices for those quarters do not capture all bags Michael Hill purchased. If the shortfall for all such quarters is removed, Michael Hill says that Gispac's damages claim is reduced by $587,368 on its four-year claim.
2. Alternatively, it is said that if the lower Product Table shortfall figure is used instead of the higher located invoices' shortfall for the quarters where the Product Tables show more bags purchased than the located invoices, Gispac's four-year claim is reduced by $28,036.
3. This contention has been addressed and rejected at [127]f above.

Stock issue

1. It is said by Michael Hill that Gispac's records indicate that it did not have enough stock to supply to Michael Hill for Q1 and Q2 of the first and second Sales Agreements, and for Q1 of the third Sales Agreement, and any damages awarded for breach of cl 18.1 should be reduced by $247,974. Gispac did not dispute the calculation of this deduction in Annexure G to Michael Hill's closing submissions dated 21 November 2022.
2. Insofar as this deduction relates to Q1 and Q2 of the first and second Sales Agreements, it overlaps with the deduction addressed at [275]f above, which I have already found is appropriate and should be made. No further deduction is required.
3. Insofar as this deduction relates to Q1 of the third Sales Agreement, the analysis by Mr Mullins in Appendix H.2 (Tables 51 and 52), establishes that Gispac did not hold any inventory of Emma & Roe bags for Q1 of the third Sales Agreement, being 5 May 2015 to 4 August 2015 (CB3/876). Accordingly, the suggested deduction of $7,013 is appropriate and should be made.
4. I find that Gispac's claim under cl 18.1 of $2,102,545 should be reduced in total by $247,974: see [292] and [298] above. Gispac's loss of profits in relation to the annual quantity claim under cl 18.1 is assessed as $1,764,571 plus interest.

Exclusivity claim: cl 17.1

1. In the further alternative to the claim for damages under either cll 18.2 or 18.1, Gispac claimed damages for breach of the exclusivity obligation in cl 17. I have found that Michael Hill breached the exclusivity obligation in cl 17 in relation to the Australian outlets: see [172] above.
2. The quantum of this claim depends upon whether the Sales Agreements operated for a 4-year or a 2-year term (there being no exclusivity loss for a 1-year term). In writing, Gispac claimed damages before tax of $465,129 (4 years) or $13,206 (2 years). I have concluded that the Sales Agreements were automatically renewed. Accordingly, Gispac's claim is to be assessed by reference to a 4-year term. The breach of the exclusivity obligation relates to the period after 5 May 2016, specifically purchases by MHW from Jewel Pak between August 2016 and May 2018 (Ex WNM2, Annexure G, CB3/855-857).
3. Mr Mullins quantified Gispac's loss of profit in respect of the exclusivity claim as its expected net cashflow had Michael Hill purchased from Gispac the replacement products which it ordered from Jewel Pak instead. He applied the same methodology which he used to calculate the cl 18.1 damages, namely, revenue less supply, freight and delivery costs.
4. Mr Mullins undertook two loss calculations: (i) replacement products ordered by Michael Hill (scenario A), and (ii) replacement products invoiced to Michael Hill (scenario B). It is common ground that the loss should be calculated by reference to the quantity of replacement products invoiced to Michael Hill the subject of the third-party invoices. Mr Mullins calculated the quantum of the loss on scenario B as $442,434 before tax, assuming a 4-year term of the Sales Agreements.
5. Mr Temple-Cole's scenario D2 calculated the quantum of Gispac's loss as $281,809 after tax; he assessed the loss as $402,585 before tax: see Ex J, being the table in Mr Temple-Cole's report dated 1 October 2021 headed "Scenario B - Replacement Products (Invoiced excluding New Zealand)".
6. Michael Hill said that Mr Mullins' calculation of exclusivity loss should be reduced for two reasons: one temporal and the other geographical, relating to New Zealand outlets. This reflected the assumptions for Mr Temple-Cole's scenario D2, namely, (i) excluding replacement product supplied to New Zealand outlets, and (ii) including replacement product for which Michael Hill received an invoice from an alternative supplier (Jewel Pak) in respect of a purchase order made during the terms of the Sales Agreements (see par 2.1.7 of the Joint Report).

Third-party purchases after the expiry of the first and second Sales Agreements

1. The temporal reduction in the exclusivity loss sought by Michael Hill concerns five third party invoices issued by Jewel Pak to Michael Hill after the second term of the first and second Sales Agreements. The question is whether the relevant purchase orders by Michael Hill for the replacement product the subject of the five invoices from Jewel Pak were issued by Michael Hill prior to 5 May 2018, in which case there was a breach of the exclusivity obligation.
2. The five invoices for replacement product fall into two categories. One concerns invoices issued by Jewel Pak dated 20 November 2018 and 19 December 2018 (CB3/814-815) in respect of purchase orders by MHW both dated 13 August 2018 (CB3/820-821). Prima facie, these invoices were not a breach of the exclusivity obligation under cl 17 as they were issued after the end of the second 24-month term of the first and second Sales Agreements.
3. Gispac says that an inference should be drawn from (i) the fact that these purchase orders were produced by Michael Hill in response to a notice to produce issued by Gispac, and (ii) the orders contain the word "Revised" next to the reference "P.O." on these purchase orders, that an earlier purchase order had been issued by Michael Hill during the second 24-month term of the first and second Sales Agreements, that is, before 5 May 2018. I reject this submission. It is speculative. The evidence does not permit an inference to be drawn from the use of the word "Revised" on the relevant purchase orders issued by Michael Hill that the date(s) on which any earlier purchase order was issued by Michael Hill were before 5 May 2018.
4. The second category of invoices issued by Jewel Pak were dated 11, 23 and 26 July 2018 (CB3/81-813). The date of the three matching purchase orders by MHW for this replacement product was in each case 11 April 2018 (CB3/817-819). I find that the purchase of this replacement product from Jewel Pak was a breach of Michael Hill's exclusivity obligation under cl 17. The breach occurred within the second 24-month term of the first and second Sales Agreements, and the evidence established that this replacement product was invoiced to Michael Hill. It is not to the point that the date of third-party supplier's invoice was after 5 May 2018; the breach by Michael Hill of cl 17 had already occurred before this date.

New Zealand Outlets

1. The geographical reduction in the exclusivity loss concerns purchases by MHNZ from third-party suppliers for its New Zealand stores. For the reasons given under Issue 5 above, Michael Hill is not liable to Gispac for purchases by MHNZ from third-party suppliers for its New Zealand stores.

Quantum of exclusivity claim

1. In oral closing submissions, Gispac accepted that Mr Temple-Cole's scenario D2, and Ex J containing Mr Temple-Cole's before tax calculation of the exclusivity loss, correctly assessed its exclusivity loss as $402,585 before tax, taking into account the deduction by Mr Temple-Cole for (a) the New Zealand outlets, and (b) the two Jewel Pak invoices the subject of Michael Hill purchase orders dated 13 August 2018 (T195.12-15). Michael Hill did not argue to the contrary.
2. I reject Michael Hill's submission that, by reference to Mr Mullins' scenario B, the appropriate deduction in the exclusivity loss is $95,413 before tax. This submission ignored two matters. First, Mr Mullins' scenario B correctly included the three invoices for replacement product issued by Jewel Pak to Michael Hill dated 11, 23 and 28 July 2018. Second, the appropriate deduction for the two Jewel Pak invoices dated 13 August 2018 was addressed in Mr Temple-Cole's scenario D2, given the assumptions for this scenario recorded in par 2.1.7 of the Joint Report.
3. I find that when the appropriate temporal and geographical deductions are made, Gispac's exclusivity loss under cl 17 is assessed as $402,585 plus interest.

Interest

1. Gispac claimed prejudgment interest on any award of damages. There was significant agreement between the parties as to the date on which interest should run under s 100 of the Civil Procedure Act 2005 (NSW).
2. As to the Shortfall claim under cl 18.2, it is common ground that the cause of action accrued on 17 June 2019, being 30 days from the date of the shortfall invoices issued by Gispac to Michael Hill dated 17 May 2019. Interest should therefore be calculated from 17 June 2019 (T188.13, 200.1-3).
3. As to the alternative claim under cl 18.1 (Annual Quantity), it is common ground that the cause of action accrued at the end of each 12-month period in which Michael Hill failed to purchase the relevant annual quantity. Thus, for example, in relation to the first and second Sales Agreements, interest would run from 5 May 2015 in respect of the first 12-month period commencing on 5 May 2014, from 5 May 2016 in respect of the subsequent 12-month period commencing on 5 May 2015, and so on. The same approach applies to the third Sales Agreement.
4. As to the further alternative claim under cl 17 (Exclusivity Loss), the parties diverged as to whether the cause of action accrued on the date MHW placed purchase orders with Jewel Pak, or the date on which Jewel Pak invoiced Michael Hill Jewellers or MHW in respect of such purchase orders. In terms of quantum, the timing difference is likely to be immaterial.
5. As a matter of principle, the cause of action for breach of cl 17 accrued on the date Michael Hill placed purchase orders with Jewel Pak and prejudgment interest would run from those dates. However, in circumstances where it is common ground that the loss is to be calculated by reference to the replacement products invoiced to Michael Hill Jewellers or MHW by Jewel Pak there is a compelling reason to award interest from the later date by reference to the quantity of replacement products invoiced by Jewel Pak.

Summary of conclusions on quantum

1. My conclusions on quantum may be summarised as follows: 1. Shortfall claim - cl 18.2: Gispac is entitled to judgment for breach of cl 18.2 in the amount of $2,259,971.40, plus prejudgment interest under s 100 of the Civil Procedure Act from 17 June 2019. 2. Annual Quantity claim - cl 18.1: alternatively, if I am wrong in finding that Michael Hill breached cl 18.2, Michael Hill is liable to Gispac for damages for breach of cl 18.1 in the amount of $1,764,571, plus prejudgment interest under s 100 of the Civil Procedure Act calculated at the end of each 12-month period in the manner referred to at [317] above. 3. Exclusivity claim - cl 17: in the further alternative, if I am wrong in finding that Michael Hill breached either cll 18.2 or 18.1, Michael Hill is liable to Gispac for damages for breach of cl 17 in the amount of $402,585, plus prejudgment interest under s 100 of the Civil Procedure Act from the date of each invoice issued by Jewel Pak as referred to at [319] above.

Costs

1. There is no reason why costs should not follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

Orders

1. I make the following orders: 1. Judgment for the plaintiff against the defendant in the amount of $2,259,971.40. 2. The defendant to pay the plaintiff interest on the amount of the judgment referred to in Order 1 above pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 19 June 2019 to the date of judgment. 3. The defendant to pay the plaintiff's costs of the proceedings. 4. Direct that the Exhibits be returned after 28 days.

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