Consideration
25 It may be accepted that her Honour's reasons were not as clearly expressed as they could have been, had she set out separately the findings of fact, on which she based the award of $150,000, differentiating those from her critique of the parties' evidence and submissions. The primary judge referred to the evidence, and its limitations, that she had considered in the course of arriving at the ultimate award. As noted above, Mr Lopez and Imperial accepted that her Honour had set out the legal principles apposite to the assessment of damages.
26 In DL v The Queen (2018) 266 CLR 1 at 12 [32] Kiefel CJ, Keane and Edelman JJ said:
The content and detail of reasons "will vary according to the nature of the jurisdiction which the court is exercising and the particular matter the subject of the decision" (Wainohu v New South Wales (2011) 243 CLR 181 at 215 [56]). In the absence of an express statutory provision, "a judge returning a verdict following a trial without a jury is obliged to give reasons sufficient to identify the principles of law applied by the judge and the main factual findings on which the judge relied" (Douglass v The Queen (2012) 86 ALJR 1086 at 1089 [8]; 290 ALR 699 at 702). One reason for this obligation is the need for adequate reasons in order for an appellate court to discharge its statutory duty on an appeal from the decision (Here, under Criminal Law Consolidation Act 1935 (SA), s 353(1). See Douglass v The Queen (2012) 86 ALJR 1086 at 1090 [14]; 290 ALR 699 at 703; R v Keyte (2000) 78 SASR 68 at 76 [38]) and, correspondingly, for the parties to understand the basis for the decision for purposes including the exercise of any rights to appeal.
27 If a trial judge fails to give adequate reasons and the appellate court cannot decide the appeal or issue by examining the record to determine if the order in question was properly made, one course open is to remit the matter back to the judge for the purpose of formulating his or her reasons for the relevant conclusion or order: North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 at 270-271 [38]-[41] per Sundberg, Siopis and Greenwood JJ.
28 The primary judge's findings in [66]-[68] are critical to understanding whether she sufficiently identified a basis for her reasoning on damages. As her Honour acknowledged in [68], it is difficult for a person in Evagroup's position to prove a quantifiable loss resulting from a former employee's breaches of his or her obligation of confidence and contract in stealing and then using the former employer's customer list in a competing business. The primary judge recognised that two facts were important ingredients in the evaluative mix used to arrive at an assessment of such a loss, namely that:
(1) Mr Lopez and Imperial had obtained a head start in their new business by the use they made of the customer list and Evagroup "may have lost out on jobs that it otherwise might have obtained" (at [66]); and
(2) Mr Lopez's and Imperial's conduct and their purpose in engaging in that conduct, were to gain from the springboard effect in launching their business "in particular in the time frame in which [they] did" (at [67]).
29 The circumstances with which Mr Yates and Evagroup had to grapple, made precise calculation of Evagroup's loss or damage problematic, as her Honour's criticism of both sides' submissions elucidated. However, the scenario in which Evagroup was placed by Mr Lopez's dishonesty was commercially fraught. First, Mr Lopez and Mr Yates both knew that Cemimax, through Mr Titus, was increasing the cost to Evagroup of the Cemimax products it was selling. Secondly, although Mr Yates did not receive this information from Mr Titus or Cemimax, Cemimax was undercutting the costs that it charged Evagroup for its products when it sold to Imperial (and possibly to Top Level) or directly to customers on its own behalf. Thirdly, both Mr Lopez and Mr Titus knew what Evagroup had paid Cemimax. Hence, Mr Yates found that, in the new market conditions, he had to drop Evagroup's prices to cost or lower in order to sell the remaining stock and keep its customers, while Mr Lopez and Imperial could offer to sell the same products that it had acquired below the cost to Evagroup, to all of Evagroup's customers on the customer list at lower prices.
30 Thus, while Mr Lopez and Imperial emphasised that the only evidence in their records was that Evagroup lost the sales in the seven Imperial invoices, Evagroup had been fixed with a significant competitive disadvantage because of their conduct. That had occurred because, through the efforts of Mr Lopez and Imperial, such as sending the 9 September email, all of the businesses on the customer list knew, or would be likely to know, that Imperial was offering the same Cemimax products at substantially lower prices than Evagroup was currently offering. This is reflected in her Honour's finding at [64] that "business from some customers was affected, however, on the evidence, this was difficult to assess."
31 The impact of the conduct was also evidenced in the clear trend for Evagroup's last five months trading of 2019. This revealed a significant downturn in the net profit figures produced in its MYOB management accounts in exhibit S. That downturn occurred in connection with Evagroup having to drop its prices on sales of Cemimax stock, well before any impact of the COVID-19 pandemic in or after March 2020.
32 The decision of Hawkins J and the Court of Appeal of England and Wales in Robb v Green [1895] 2 QB 1 and Robb v Green [1895] 2 QB 315 provide the foundation for awarding damages against an employee who, in breach of his or her contract of service, uses the employer's confidential information, such as a customer list. There, Lord Esher MR (at 316-317), Kay LJ (at 319-320) and AL Smith LJ (at 320) upheld Hawkins J's award (at 20) of £150 damages and an injunction against the dishonest employee who surreptitiously copied the employer's customer list and used it to start a competing business. As Hawkins J held ([1895] 2 QB at 20), ordinarily the delinquent former employee cannot be saddled with every loss of custom. Even where the employer was only able to prove a few lost sales. Hawkins J said that "their loss does not form the limit of the injury to the plaintiff, for the wholesale canvass of his customers was likely to influence many and to diminish permanently his receipts and profits" (emphasis added). He said that consequence had to be balanced against the usual incidents of fluctuation of trade, and the Court had to guard against giving the employer a complete indemnity for any diminishment in trade.
33 Of course, an employee, ordinarily, is entitled to use information about the identity of his employer's customers that he or she remembers after leaving the employment without breaching any contractual obligation of his employment: Wessex Dairies Ltd v Smith [1935] 2 KB 80 at 89 per Maugham LJ. But, such use of one's memory is a very different thing from the employee copying the entire list of customers that the employer has built up over the years of his, her or its trade, which, usually, is a breach of the contract of employment sounding in damages: Wessex Dairies [1935] 2 KB at 85 per Greer LJ, 90 per Maugham LJ and Talbot J.
34 One factor relevant to an award of damages in a case like this is the value to the delinquent employee of the work of his or her employer in compiling over several years the pilfered customer list. The illicit possession of this information relieves the employee of doing any work or research to find a viable list of potential customers for the class of goods or services in respect of which he or she sets out to compete with his or her former master. The identification of such potential customers, comprised in the customer list, therefore, has a value in itself that can sound in general damages, quite apart from any actual loss of sales or profits. Nothing demonstrates this value more cogently than the employee's dishonesty in taking the customer list, as Mr Lopez did here, surreptitiously to use for his own benefit. That value is unsusceptible of precise proof: see Robb [1895] 2 QB at 317 per Lord Esher MR, at 320 per Kay LJ and AL Smith LJ approving Lamb v Evans [1893] 1 Ch 218 at 229 per Bowen LJ. Their Lordships upheld Hawkins J's conclusion to the above effect when he said of the copied customer list (at 19):
The collection together of these names and addresses in his order-book was the property of the plaintiff. It is the compilation which made the book and the list so valuable to the defendants, and facilitated has endeavours to entice his master's customers to the detriment of the latter.
(emphasis added)
35 The evaluation of damages and compensation under s 236 of the Australian Consumer Law in a case like the present may attract an approach similar to that for a claim for a general loss of business or custom in an action in tort, for defamation or injurious falsehood adopted in Ratcliffe v Evans [1892] 2 QB 524 at 532-533. There, Bowen LJ gave the reasons for Lord Esher MR, Fry LJ and himself saying:
In all actions accordingly on the case where the damage actually done is the gist of the action, the character of the acts themselves which produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry. The rule to be laid down with regard to malicious falsehoods affecting property or trade is only an instance of the doctrines of good sense applicable to all that branch of actions on the case to which the class under discussion belongs. The nature and circumstances of the publication of the falsehood may accordingly require the admission of evidence of general loss of business as the natural and direct result produced, and perhaps intended to be produced.
(emphasis added)
36 Bowen LJ explained (at 533) that conduct that, in its very nature is intended or is reasonably likely to produce damage to a person's trade or business, and which, in the ordinary course of things, does produce a general loss of business, as distinct from a loss of one or more particular customers, makes evidence of a general decline in business admissible to establish loss flowing from the impugned conduct.
37 Mere difficulty in estimating damages does not relieve a tribunal or court from the responsibility of assessing them as best it can: McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411-412 per Dixon and Fullagar JJ, with whom McTiernan J agreed at 419. The innocent party is entitled to recover whatever damages naturally result from the other's breach of contract: Fink v Fink (1946) 74 CLR 127 at 143 per Dixon and McTiernan JJ.
38 In essence, her Honour was determining a claim for damages for loss of a commercial opportunity of Evagroup to make more sales to, and or enter into additional contracts with, customers caused by the conduct of Mr Lopez and Imperial. Her Honour found, correctly, that Evagroup had sustained some loss or damage. She then had to find a value for that loss or damage by reference to the degree of probabilities or possibilities: Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 354-355 per Mason CJ, Dawson, Toohey and Gaudron JJ. That was the context in which the primary judge had to do the best she could because precision was not possible. As Menzies J said in Jones v Schiffmann (1971) 124 CLR 303 at 308 in an observation that has been applied often, as Bell P, with whom Bathurst CJ at 58 [1] and Basten JA at 106 [246] agreed, noted in Searle v Commonwealth of Australia (2019) 100 NSWLR 55 at 99 [203]-[205]:
The assessment of damages, whether by a judge or a jury, does sometimes, of necessity, involve what is guess work rather than estimation.
39 Bell P held that it is not necessary for a judge, when assessing damages for loss of a chance, to nominate a particular percentage of probability to the potential for realisation of the chance. He said "to insist on this would be prone to artificiality" and that a global approach may be used. That can involve a measure of guesswork when there are too many uncertainties in play, such as working through what contracts may have been made and what profits would have been earned, as Sheller, Stein and Giles JJA held in Fightvision Pty Ltd v Onisorou (1999) 47 NSWLR 473 at 507 [147] (see Searle 100 NSWLR at 99-100 [205]-[208]).
40 Moreover, as Stewart J, with whom Besanko and Banks-Smith JJ agreed on this issue (at 57 [1]), held in PKT Technologies (formerly known as Fairlight.AU Pty Ltd) v Peter Vogel Instruments Pty Ltd (2020) 376 ALR 55 at 82-83 [148]-[155], a judge's assessment of damages for loss of a commercial opportunity can be set aside for an identifiable error in the approach that he or she took, but mere sparseness of reasoning in arriving at the assessment will not necessarily warrant appellate interference. That is because the judicial evaluation is one arrived at by "informed estimation" as Brennan J said in Sellars 179 CLR at 368: see too Generic Health Pty Ltd v Bayer Pharma Aktiengessellschaft (2018) 267 FCR 428 at 472 [182]-[184] per Allsop CJ, Yates and Beach JJ.
41 In patent cases, the patentee can elect to seek damages or an account of profits, as can a person in Evagroup's position who is entitled to equitable relief for misuse of confidential information. In General Tire and Rubber Company v Firestone Tyre and Rubber Company Ltd (1976) 93 RPC 197 at 212, Lord Wilberforce (with whom Viscount Dilhorne, Lord Diplock and Lord Kibrandon agreed at 225) said that where the patentee elects for damages, the Court applies the tortious measure. He said that two principles applied to the valuation of such damages, namely, first, the applicant for relief has the burden of proving its loss and, secondly, as against the "wrongdoers, damages should be liberally assessed", but the object of the award is compensation; not punishment. The Full Court applied this reasoning in Generic Health 267 FCR at 472-473 [187] saying:
To say that damages should be liberally assessed in no way cuts across what we have just said: that, in estimating or valuing a lost opportunity or in assessing a hypothetical counterfactual for any scenario short of certainty, some discount must be made to reflect that less than certain position, even if the discount is very modest indeed.
(emphasis added)
42 In this context, the submission of Mr Lopez and Imperial that Evagroup had the ability, but had failed, to adduce precise, or better evidence, of its claimed loss, does not bear scrutiny, unlike the situation that Hayne J described in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 at 266 [38].
43 Nor was the issue of the press release a bright line. By then much of the damage had been done: Mr Lopez had made Imperial and its cheaper products known to those on the customer list and the market had changed.
44 Evagroup had claimed that it suffered loss and damage flowing from Mr Lopez's breaches of contract and his obligation of confidence, together with his and Imperial's conduct both in exploiting that breach and in contravention of s 18 of the Australian Consumer Law giving rise to rights to recover damages at common law and statutory compensation under s 236, in respect of:
(a) the value of the customer list itself (which may have been what the primary judge described as damage to Evagroup's goodwill);
(b) the damage caused directly by the loss of customers' orders the subject of the seven Imperial invoices;
(c) the springboard or head start that Imperial obtained from its access to and use of the customer list;
(d) the impact on the market price for Cemimax products caused by Mr Lopez's and Imperial's communications to Evagroup's customers of Imperial's existence and the availability of those products at prices lower than those previously offered by Evagroup, some of which occurred in combination with Cemimax and Mr Titus's strategy to supply Imperial and the market at those lower prices. This conduct included, but was not confined to, the 9 September email;
(e) Evagroup's actual or potential loss of the chance to make sales to ongoing customers to which Mr Yates referred and as reflected in the general decline in net profit evidenced in exhibit S: Sellars 179 CLR 332; Ratcliffe [1892] 2 QB at 532-533; and
(f) the misrepresentations on Imperial's website of its history of supply (which was non-existent) and its use of Evagroup's customers' successful works as examples of the use of Cemimax products that Imperial had supplied.
45 Here, the primary judge's approach to the Court assessing "the question of compensation on a liberal basis and do[ing] the best it can on the evidence available" was capable of being in accordance with principle: General Tire 93 RPC at 212; Generic Health 267 FCR at 472-473 [187]. This was not a case where the loss could be assessed with any precision. First, Mr Lopez and Imperial had access to all of Evagroup's clients on the customer list, and secondly, they and Cemimax were able to and did undercut the prices that Evagroup had offered its clients previously, simultaneously with Cemimax having increased the cost of the products to Evagroup. Thus, Evagroup had to drop its prices because Mr Lopez and Imperial had told the persons on the customer list of the lower prices for which they were selling the same products. This changed the market in which Evagroup was competing (albeit, as her Honour observed, it was difficult to segregate the impact of the wrongful conduct of Mr Lopez and Imperial from that of the "innocent" conduct of Cemimax and Top Level).
46 However, not without some hesitation, I have concluded, like Stewart and Goodman JJ, that her Honour did not give sufficient reasons to explain why she awarded $150,000 in damages. As I have discussed above, there was a substantial body of material before her Honour that may well have supported her decision. But, she failed to identify in her reasons the facts that she found based on that material or to link those findings to a sufficient reasoning process. Accordingly, the appropriate course is to remit the matter to the primary judge so that she can make findings and give reasons as to how she arrived at the award she made: North East Equity 269 ALR at 270-271 [38]-[41].