Noble Earth Technologies Pty Ltd v Hampic Pty Ltd

The parties

1. The first plaintiff is Noble Earth Technologies Pty Ltd (NET). Its principal is Mr Harry Rex Pearsall. Its business involves the supply of environmentally safe products for use in cleaning and other industries.
2. The second plaintiff is Mr Barry Schwind, who has acted as a consultant in real estate and other businesses in the Middle East, including the United Arab Emirates (UAE). Mr Schwind was a close business associate of General Nasser Al Razooqi (the General), who is a prominent Dubai-based businessman.
3. The first defendant is Hampic Pty Ltd (in liquidation), which at all relevant times traded as Cyndan Chemicals (Cyndan Chemicals). That company supplied NET with certain of the products that it sold.
4. Cyndan Chemicals appeared and was represented during the initial three days of the hearing. The court was advised at the recommencement of the hearing on 11 July 2016 that Cyndan Chemicals had been placed into liquidation. Leave was not sought by the plaintiffs to continue the claim against Cyndan Chemicals, and it was not represented during the balance of the hearing.
5. The plaintiffs continued the proceedings against the second and third defendants. That may be a significant change in the constitution of the proceedings, as Cyndan Chemicals is alleged in the amended statement of claim to be primarily liable to the plaintiffs for breach of fiduciary duty, and the plaintiffs only allege ancillary liability against the other two defendants.
6. The second defendant is Mr Sami George Raheb. Mr Raheb is alleged to have been an executive director of Cyndan Chemicals. Mr Raheb was the person who generally dealt with Mr Pearsall and Mr Schwind. He was a director of the third defendant between 1 May 2009 and 4 December 2014. He is alleged to have owned 95% of the shares in a company that owned 50% of the shares in the third defendant between May 2009 and February 2015.
7. The third defendant is Loremo Pty Ltd, which has traded as Cyndan Manufacturing (Cyndan Manufacturing). The amended statement of claim does not state the nature of the business of Cyndan Manufacturing, but as its name implies, Cyndan Manufacturing manufactured the chemical products that were sold by Cyndan Chemicals to NET. The other half of the shares in Cyndan Manufacturing were held by Snounou Holdings Pty Ltd until February 2015, after which that company became the holder of all of the shares in Cyndan Manufacturing. The amended statement of claim does not make any claim against Snounou Holdings Pty Ltd.
8. Paragraph 4B of the amended statement of claim contains an allegation that, save where expressly stated or the context otherwise requires, references to "Cyndan" are references to Cyndan Chemicals and Cyndan Manufacturing collectively. That pleading device is unhelpful, as there are a substantial number of references to "Cyndan" in the amended statement of claim, and the context does not usually permit the two companies to be clearly distinguished. In the course of the preparation of the amendments to the statement of claim, a number of references to Cyndan have been amended to refer to Cyndan Chemicals. Although the manner in which the amended statement of claim has been pleaded lacks clarity, it seems that Cyndan Chemicals was the primary actor in the conduct alleged by the plaintiffs, and that Mr Raheb represented that company in its dealings with the plaintiffs.

The pleaded issues

1. In the present case it is of particular importance to identify the issues raised by the pleadings. I will summarise the allegations made in the amended statement of claim, and the principal responses set out in the further amended defence.
2. The essence of the claim made by the plaintiffs is that they entered into a joint-venture with Cyndan Chemicals to attempt to sell two products to buyers in the UAE and other parts of the Middle East. The first of the products was a chemical manufactured by "Cyndan", which was intended to be applied to the glass in buildings to make the glass resistant to liquids and easier to clean. The product was supplied to NET, which on-sold the product under the name "Vision Guard". Cyndan sold the product itself wholesale to other purchasers under the name "Vitro Glaze". The second product, called "Kristalbond", was a product manufactured for the treatment of glass to increase its resistance to heat transfer. The amended statement of claim alleged in par 6(d) that NET and "Cyndan" together held certain distribution rights from a third party for "Kristalbond".
3. While the plaintiffs allege in the amended statement of claim that the defendants had breached fiduciary duties that were owed to the plaintiffs, they do not seek a money judgment from the court, as the plaintiffs were apparently unable to allege that the defendants, or any of them, had made specific profits from the sale of either product, other than from a small number of sales referred to in the pleading, and instead they sought relief in the following terms: 1. A declaration that any profits made or received by the defendants from sales of Vitro Glaze (or of that product sold under a different name) to Emirates Glass LLC, Saudi American Glass Co Ltd or any subsidiaries or related entities thereof in the period October 2009 to date are held on trust for the plaintiffs; 1A An order that an account be taken of profits made or received by the defendants from sales of Vitro Glaze (or of that product sold under a different name) to Emirates Glass LLC, Saudi American Glass Company Ltd or any subsidiaries or related entities in the period October 2009 to date and that the defendants pay to the plaintiffs their respective proportions of the amounts so determined; 2 An order that an enquiry be held as to the loss and damage sustained by the plaintiffs otherwise and that the defendants pay the plaintiffs the amount of such loss and damage so determined; 3 In the alternative, damages…
4. The plaintiffs also claim an order for pre-judgment interest and costs.
5. It may be noted that orders 1 and 1A refer only to sales of Vitro Glaze and not to Kristalbond.
6. The declaration in par 1 is to the effect that "any profits" made or received by the defendants are held on trust for the plaintiffs, while the account sought in par 1A concerns the plaintiffs' "respective proportions". The latter expression, which acknowledges that the plaintiffs could only be entitled to part of any profits made or received by the defendants, is more in accordance with the evidence than is the former, which involves a claim that the plaintiffs were entitled to all of the profits. The formulation of the latter claim, which speaks of unidentified respective proportions, reflects the fact that the parties never reached agreement as to their respective entitlements to shares in any profits earned.
7. The amended statement of claim pleads in par 8 the making of a joint-venture between the plaintiffs and Cyndan between about July 2009 and September 2009 (called the "initial joint-venture"), and in par 11 the variation of the initial joint-venture in October 2009 (called the "joint-venture"). The reference to "Cyndan" in par 8 creates an ambiguity as to whether the alleged joint-venture party was Cyndan Chemicals or Cyndan Manufacturing. However, the plaintiffs accepted in final oral submissions that the claim is only that Cyndan Chemicals was a party to the initial joint-venture and the joint-venture, and it is only that company that owed fiduciary duties to the plaintiffs. Cyndan Manufacturing could only be liable to the plaintiffs on an ancillary basis.
8. The terms of the alleged initial joint-venture are set out in par 8 in the following terms: a) Messrs Pearsall, Raheb and Schwind would visit Dubai UAE together in late September and early October 2009 to meet with representatives of potential purchasers of NET products and of the distribution rights to Kristalbond in the UAE; b) NET would pay Mr Schwind's travel and accommodation expenses for the Dubai visit; c) NET would also pay a fee to Barry Schwind (directly or through payment to any company nominated by him) of $15,000 plus GST; d) Messrs Pearsall, Raheb and Schwind would work together during and after the Dubai visit for the parties' mutual financial advantage in promoting sales of the NET products (which it sourced from Cyndan) and sale of the Kristalbond distributorship; e) NET would supply to UAE customers, via a UAE incorporated trading vehicle, the products supplied to it by Cyndan with Messrs Pearsall and Raheb providing technical and application training and ongoing support and Mr Schwind, through General Nasser Al Razooqi, would introduce Messrs Pearsall and Raheb and the NET products to potential customers; and f) the proportions in which the parties would share financial benefits accruing from future sales of NET products and sale of the Kristalbond distributorship would be fixed at a later time.
9. The particulars given for the alleged initial joint-venture consist partially of implication from the conduct of the parties in arranging to travel to Dubai and the execution of those travel arrangements, and partly in writing from 10 specifically identified emails written between 14 July 2009 and 3 September 2009.
10. The defendants responded to this allegation by admitting in a qualified way a number of the acts that the plaintiffs claimed constituted the initial joint-venture, but they deny that those acts gave rise to any agreement, whether or not termed the initial joint-venture between the plaintiffs and either Cyndan company.
11. The amended statement of claim alleges that, at the invitation of the General, Messrs Pearsall, Raheb and Schwind visited Dubai between 28 September 2009 and 11 October 2009 to implement the initial joint-venture.
12. It is then alleged in par 11 that, following the trio's return to Australia, the initial joint-venture was varied so that the proposed UAE incorporated trading vehicle would be owned and operated by Mr Schwind and the General, and its profits shared with NET in proportions to be fixed subsequently. The particulars given for the amendment to create the joint-venture are four specified emails sent on 11 October 2009 and 12 October 2009.
13. The terms of the initial joint-venture and the joint-venture are thus pleaded consistently with the plaintiffs' claims for relief; in that it was a term of each that the respective profit shares of the parties were to be fixed at a later time. The amended statement of claim does not contain an allegation that the profit shares were ever agreed.
14. The defendants admitted that following the trio's return to Australia the plaintiffs had attempted to negotiate an agreement amongst themselves, but denied the allegation in par 11 that the joint-venture was made.
15. Following the making of the joint-venture, the amended statement of claim alleges certain communications in October 2009 with representatives of Emirates Glass LLC (Emirates Glass) for the purpose of attempting to obtain a supply order for Vision Guard.
16. The amended statement of claim then alleges that Cyndan and Mr Raheb owed fiduciary duties to the plaintiffs. Paragraph 16 does not clarify whether both Cyndan companies are alleged to have owed the duties, and if not, which company was the relevant one. Although the allegation is made that Mr Raheb personally owed fiduciary duties, the plaintiffs acknowledged during final oral submissions that they did not allege that Mr Raheb owed the duties personally, and that he could only be liable on an ancillary basis for any breach of duty committed by Cyndan Chemicals. As I have noted above, the plaintiffs also acknowledged that they only claimed that Cyndan Chemicals owed fiduciary duties to them, so that Cyndan Manufacturing could also only be liable to them on an ancillary basis.
17. The subject matter of the fiduciary duties alleged involved, in essence, duties: to act in good faith in the joint interests of the parties in pursuing or exploiting opportunities within the scope of the joint-venture; to not make profits individually without the informed consent of the other parties; and to not place themselves in a position of conflict between their own interests and those of the joint-venturers.
18. The amended statement of claim makes allegations in pars 18 to 20 of the sale of 110 litres of Vitro Glaze by Cyndan Chemicals to Emirates Glass "for and on behalf of the parties to the joint-venture" for a price of AUD $29,400 in December 2009. It is alleged in par 21 that Emirates Glass paid for this supply by cheque in favour of Mr Schwind.
19. In substance, the defendants admitted that this sale took place, and that the price was paid to Mr Schwind.
20. There is an allegation that, in about November 2010, Cyndan Chemicals entered into a written memorandum of understanding (MOU) with Emirates Glass, the principal term of which was that Cyndan Chemicals agreed in principle to supply Vitro Glaze exclusively in the UAE to Emirates Glass through a local distributor to be appointed on the basis of an approximate annual purchase of 20,000 litres.
21. In essence, the defendants' response was to admit that a draft MOU was sent to Emirates Glass, but they did not admit that Emirates Glass had ever signed the MOU, and they denied that any agreement was made between Emirates Glass and Cyndan Chemicals. The defendants also denied that the terms of the draft MOU were in substance as pleaded in par 24 of the amended statement of claim.
22. The following specific allegations are made in pars 25 to 28A of the amended statement of claim concerning sales of, or orders for, Vitro Glaze: an order for 500 litres by Saudi American Glass Co Ltd before 15 December 2010; Cyndan Chemicals supplied Emirates Glass with 1500 litres on about 7 December 2010; and on about 7 December 2010 Cyndan Chemicals supplied Saudi American Glass Company Ltd with 500 litres. It is alleged that in around April and May 2011 the proceeds of sale of the two quantities of 1500 and 500 litres were received by Cyndan Manufacturing, and that neither Cyndan company has accounted to NET or Mr Schwind for profits derived from the sales.
23. In substance, the defendants admit the fact of the specific transactions alleged in the amended statement of claim, including that Cyndan Manufacturing received the proceeds of sale into its bank account. The defendants did not admit that Emirates Glass and Saudi American Glass Company Ltd are related in the sense of having common corporate parents or mutual shareholdings. They deny that they were obliged to pay any part of the proceeds of sale to the plaintiffs.
24. The amended statement of claim then alleges that one or other of the Cyndan companies has continued to supply Vitro Glaze to Emirates Glass or subsidiaries or related entities to that company. The particulars to this allegation state that the further sales are within the knowledge of the defendants and will be provided once verified discovery has been given. The particulars also rely upon a testimonial from Emirates Glass on the Cyndan website which states that Emirates Glass has been buying Vitro Glaze from Cyndan for three years.
25. The defendants responded to the plaintiffs' allegation of continuing supply of Vitro Glaze to Emirates Glass or a related company by denying the fact of continuing supply, and saying that, to the knowledge of the plaintiffs, that supply has not been continued.
26. Breaches of the fiduciary duties pleaded earlier in the amended statement of claim are then alleged in par 32A. The allegation is that the breaches were by Cyndan Chemicals, or alternatively Cyndan Manufacturing, and Mr Raheb. As I have explained above, the plaintiffs qualified this allegation in final oral submissions to make it clear that the primary allegation of breach was made against Cyndan Chemicals, and that the other two defendants were only liable on an ancillary basis for participating in the breaches by Cyndan Chemicals.
27. Paragraph 32B contains an allegation against Mr Raheb that he was the directing mind and will of the two Cyndan companies, or alternatively a director of those companies, and, in substance, that his conduct involved his knowingly assisting in a dishonest and fraudulent design by those companies such as to make him personally liable as a constructive trustee pursuant to the second limb of Barnes v Addy (1874) LR 9 Ch App 244.
28. Then, par 32C contains a similar allegation against Mr Raheb, that he was the directing mind and will of Cyndan Manufacturing, or a director of that company, and is personally liable to the plaintiffs as a constructive trustee under the first limb of Barnes v Addy, in that it (presumably Cyndan Manufacturing) received property acquired through breaches of fiduciary duty by Cyndan Chemicals "and/or Sami Raheb with knowledge of those breaches".
29. Finally, in par 32D, the amended statement of claim makes a further similar allegation against Mr Raheb in relation to his being the directing mind and will of Cyndan Manufacturing, or a director of that company, that Cyndan Manufacturing is personally liable to the plaintiffs as a constructive trustee under the second limb of Barnes v Addy, in that it assisted in the dishonest and fraudulent breaches of fiduciary duty by Cyndan Chemicals "and/or Sami Raheb with knowledge of those breaches" by supplying, issuing invoices, and making a bank account controlled by it available in respect of the sale of Vitro Glaze to Emirates Glass or subsidiaries or related entities of that company.
30. The amended statement of claim then alleges, in par 33, that the plaintiffs have sustained loss and damage by reason of the breaches. Particulars of the loss and damage were to be provided once verified discovery had been provided by the defendants.

Observations on pleaded issues

1. In the light of this summary analysis of the principal features of the plaintiffs' claim, as pleaded in the amended statement of claim, and the defendants' response, the following observations may be made.
2. First, although the initial joint-venture and the joint-venture are alleged to have included a term requiring a later agreement as to the proportionate share of the parties in profits, there is no allegation that such an agreement was ever made.
3. Secondly, although it is alleged that the initial joint-venture and the joint-venture involved some agreement to earn a profit from some dealing with the distribution rights to Kristalbond, no facts are alleged in the amended statement of claim concerning any dealings by the defendants with the distribution rights to Kristalbond, or by the making of any unauthorised profits by the defendants in that regard. The most that is said is the statement in par 10 of the amended statement of claim that the "potential use of Kristalbond was a subject of the meetings with Emirates Glass during the initial visit to Dubai". That is consistent with the absence in the statement of the relief claimed by the plaintiff of any relief specifically associated with the distribution rights to Kristalbond. It is also consistent with evidence in the proceedings that none of the parties ever acquired any distribution rights to Kristalbond for the UAE or any other part of the Middle East. The inclusion in the amended statement of claim of allegations of fact concerning Kristalbond is accordingly pointless, and those allegations may be ignored henceforth.
4. Thirdly, the amended statement of claim gave particulars of continuing sales of Vitro Glaze by one of the Cyndan companies (par 30) partly on the basis that further particulars would be provided once verified discovery had been provided by the defendants; the particulars of the loss and damage sustained by the plaintiffs (par 33) were given on the same basis. The plaintiffs have not in fact provided any additional particulars of sales by the Cyndan companies, and have not tendered any evidence of such sales. There is some evidence that the plaintiffs sought preliminary discovery from Cyndan Chemicals, but the result of the discovery given did not disclose any additional sales. There is therefore no evidence that any additional sales were made, save for a testimonial from Emirates Glass LLC on the Cyndan website relied upon by the plaintiffs. I will return to a consideration of the evidence concerning this testimonial below.
5. Fourthly, as I have noted above, Cyndan Chemicals is in liquidation and the plaintiffs have not sought leave to continue these proceedings against that company. The proceedings against Cyndan Chemicals are accordingly stayed by operation of s 471B of the Corporations Act 2001 (Cth). Consequently, even if the plaintiffs succeed in establishing the making of the initial joint-venture and the joint-venture, and even if the plaintiffs prove that breaches of those arrangements occurred, the plaintiffs cannot succeed against the only defendant who was a party to those arrangements, and who may have owed fiduciary duties directly to the plaintiffs. The only defendants who may be liable to the plaintiffs are Mr Raheb and Cyndan Manufacturing, who can only be liable in an ancillary way for the breaches of fiduciary duty by Cyndan Chemicals.
6. Fifthly, as there is no allegation that Mr Raheb personally received any property that could be the subject of a constructive trust in favour of the plaintiffs, his only liability could be as alleged in par 32A of the amended statement of claim, for knowingly assisting in a dishonest and fraudulent design on the part of Cyndan Chemicals, pursuant to the second limb of Barnes v Addy. The plaintiffs specifically acknowledged in their final oral submissions that, consistently with their pleading, they could not succeed against Mr Raheb unless they established both the necessary knowledge on Mr Raheb's part, and that Cyndan Chemicals had a dishonest and fraudulent design in breaching its fiduciary duties to the plaintiffs.
7. Sixthly, as Cyndan Manufacturing did not owe fiduciary duties to the plaintiffs, the allegation of knowing participation made against it in par 32D of the amended statement of claim also requires proof of dishonest and fraudulent breaches of fiduciary duty by Cyndan Chemicals. As Cyndan Manufacturing was alleged to have received the proceeds of sale of Vitro Glaze as a result of breaches of fiduciary duty by Cyndan Chemicals, the plaintiffs have been able to make a claim against Cyndan Manufacturing under the first limb of Barnes v Addy, but only in respect of a relatively trivial sum.

Observations on email communications in evidence

1. This is a convenient point to make a number of observations concerning the large number of email communications between the parties that were received into evidence.
2. First, the plaintiffs specifically confirmed in final oral submissions that they relied only upon the emails identified in the particulars to the relevant paragraphs of the amended statement of claim to establish the making and terms of the initial joint-venture and the joint-venture. I have acted upon the basis of this confirmation. It may be observed, however, that there were a significant number of other emails reasonably contemporaneous with the emails relied upon by the plaintiffs that may have had a bearing on the existence and terms of the arrangements alleged by the plaintiffs.
3. Secondly, while the parties did communicate orally, particularly when they met together on the Gold Coast or in Dubai, they were largely in the habit of communicating by email. Indeed, at one point Mr Schwind stated directly to Mr Raheb that he did not want to converse by Skype, but would rather communicate by email, so that he had a record of discussions. I have taken the view that generally the contents of the emails provide the most reliable evidence of the parties' communications, and also as to the relevant events that are either discussed in, or may be inferred from, the terms of the emails. I propose in what follows to undertake an examination of the emails that were received into evidence. In my view, as a general matter, the evidence of oral discussions between the parties is of lesser significance, given the plaintiffs' claims that the initial joint-venture and the joint-venture were established by email communications in the context of the objective events. Although the cross-examination was extensive, it was largely based upon the contents of the email communications, and sought concessions as to the meaning and significance of the emails, in circumstances where the court is able to draw the necessary inferences from the terms of the emails and the objective events.
4. The parties prepared their various affidavits by annexing selections of emails from the total available emails apparently to support their forensic purposes. The court book was prepared in a manner that simply reproduced all of the affidavits and the annexed emails. The parties did not provide a court book that contained an agreed, complete set of email correspondence in chronological order.
5. Furthermore, it became apparent during the hearing that some of the emails that had been included in the court book had been cut and pasted from email chains in a manner that introduced some doubt and confusion concerning the authenticity of those emails.
6. The plaintiffs responded to this problem by preparing and providing to the court an additional folder of the emails upon which the plaintiffs relied in chronological order. I have made use of that folder, as it is the only convenient collection of the email correspondence. However, I have noted that the folder is in a number of places incomplete, as some emails refer to other emails that are apparently relevant, but not included in the folder.
7. Given the perennial problem faced by the court in dealing with significant numbers of email chains, the manner in which the parties presented the email correspondence to the court in this matter has caused exceptional difficulty, and even the risk that the court may fail to notice relevant emails because they are not contained in the additional folder prepared by the plaintiffs, but are included in the court book in some unexpected place.
8. Finally, I should record that extracts from emails have been set out verbatim and in the format and with the punctuation used by the parties, without the addition of conventional devices such as "(sic)" - essentially for the reason that the extracts would otherwise be replete with those devices.

Evidence relevant to initial joint-venture

1. First, in relation to the initial joint-venture, it may be accepted that the evidence establishes that the plaintiffs and Mr Raheb made arrangements for their travel to Dubai, and they did undertake that travel for the purpose of exploring the potential to market NET's products, manufactured by Cyndan Chemicals, in the UAE. Those events by themselves do little to establish the existence of the initial joint-venture or its terms.
2. It will be necessary to consider each of the 10 emails listed in the particulars in the amended statement of claim, upon which the plaintiffs rely to establish the existence and terms of the initial joint-venture.
3. The first is an email sent by Mr Pearsall to Mr Schwind on 14 July 2009 on the subject of Kristalbond. The email merely discusses the practical arrangements necessary to enable Mr Pearsall and Mr Raheb to meet with Mr Schwind and his "friends" on the Gold Coast on Thursday and Friday of the following week, to introduce Kristalbond and have an informal discussion.
4. The second is an email sent by Mr Pearsall, on behalf of NET, to Mr Raheb, on 31 July 2009, again dealing with the subject of Kristalbond. Mr Pearsall described a "deal" that he put to Mr Schwind. The deal was put in very general terms and suggested that Mr Schwind and his brother, Geoff, would take an offer to "the sheik" which would involve the receipt of 3½ million US dollars. The email noted that it would be necessary for Mr Pearsall and Mr Raheb to work out how to divide the amount received by them. The email said in relation to Mr Schwind: "…Then he wants to see in an email the business proposal; and pricing levels ETC. the General leaves on 14-16th; Barry wants us to see him before he leaves. They want as much of a proposal and terms of agreement as possible in email form". Mr Pearsall said that Mr Schwind understood that he would buy from NET, and that Mr Raheb's profit margin would be built into NET's prices.
5. The third is an email sent by Mr Raheb to Mr Schwind, with a copy to Mr Pearsall, on 4 August 2009. The subject is "KB", which refers to Kristalbond. The email set out some of Mr Raheb's "thoughts after todays conversations". Mr Raheb described Mr Pearsall as "a friend and loyal business associate and will always be included in whatever deal we may make as i know you concur with". The email contained "a summary of where we are at the moment". It said: I have placed my cards on the table from minute one, in terms of collaboration and what i am looking for. That is we have the products that can be supplied on an exclusive basis to a suitable partner / distributor within Dubai that can commercialize our products within that reason. This person / company would have to lay down an initial commitment fee to be negotiated on for Kristalbond only, the other products such as soil stabilizer, paver sealer, glass sealer and rust product they would buy at wholesale price through Harrys company Noble Earth, to which i am his supplier (and manufacturer) Mine and Harry's role is to supply the products at an agreed wholesale price, offer full technical and applicational training and ongoing tech support. This would include travelling to the region at our expense to support this distributor in demonstrating to potential clients, contacts to which you and your group would introduce. Your role in this is to facilitate the above either through your own contacts or contacts of your contacts. You would receive expenses for your travel and accommodation as well as an equity position in all sales or commitment fees that are paid for KB. Furthermore you would receive a commission on sales of Noble Earth products to be negotiated and decided on with Harry.
6. The email invited Mr Schwind to suggest different terms, and then said: "The way forward is to finalize an MoU from the above…"
7. The fourth is an email sent by Mr Schwind to Mr Raheb, with a copy to Mr Pearsall, on 4 August 2009. Mr Schwind thanked Mr Raheb for his "informative E-Mail" and said "I think we both now have a clearer understanding of how we can as a united front move forward". He then discussed possible arrangements for meetings with potential purchasers of the products to be held in Dubai, which Mr Schwind had discussed with the General. Mr Schwind said: To establish and move forward and establish an MoU I propose the following……… Barry Priority to find a suitable partner/distributor in Dubai. Arange as many high level meetings with decision making people for possible September visit. September visit. Sami/Harry The supply of products, full technical support as required, training and ongoing support as required.
8. The fifth is an email sent by Mr Schwind to Mr Raheb and to Mr Pearsall on 14 August 2009, on the subject of "Possible Dubai Visit". He suggested that the best dates for the trip to Dubai were from Friday, 25 September 2009 to Saturday, 10 October 2009. He described in general terms what Mr Raheb and Mr Pearsall should do while they were in Dubai meeting with possible distributors and end users, and carrying out demonstrations, and then said: 4. Sami & Harry to have full business plan as to how you envisage we can proceed should we advance to MoU. 5. Sami & Harry to have available all documentation that would be required to sell products in U.A.E.
9. Mr Schwind then required that the sum of $15,000 plus GST be transferred to his company's bank account by 10 September 2009.
10. The sixth is an email sent by Mr Pearsall to Mr Schwind and Mr Raheb on 28 August 2009. Mr Pearsall dealt separately with NET's "technologies products and applications", and said that Kristalbond was a separate issue. He said that he would pay Mr Schwind's fee of $15,000 plus GST. He outlined a number of requirements that he had in relation to practical aspects of the visit to Dubai. He then said: I am proposing a ongoing fee to Barry of all net profits as a ongoing royalty of 5% of any Business that noble earth technologies does in Dubai.
11. Mr Pearsall then referred to Kristalbond in the email. The observations that he made concerning how the parties might earn a profit from the distribution of Kristalbond are not clear. Mr Pearsall said: "I also propose a split of any sales of Kristalbond as such. Barry 10% sami and myself split the rest evenly..this is after all costs are recovered". Mr Pearsall asked for the others' "thoughts and ideas".
12. The seventh is an email sent by Mr Schwind to Mr Pearsall, with a copy to Mr Raheb, on 29 August 2009. He confirmed that he had received his fee. He confirmed his arrangements for being in Dubai for the 14 day period discussed in his earlier email. He asked how long it would take to make proper presentations, and as to what facilities would be required. He set out a list of proposed appointments he would make with various persons in Dubai.
13. The eighth is an email sent by Mr Schwind to Mr Pearsall on 2 September 2009. He observed that it would be necessary for Mr Pearsall to "dress … up with the correct terminology" an email containing a slideshow on a product described as earth stabiliser, he commented on the times during the day when government officers would be available for meetings, and admonished Mr Pearsall that people who did not do their homework were likely to leave Dubai "brokenhearted".
14. The ninth is a further email sent by Mr Schwind on 3 September 2009. The amended statement of claim describes this email as an email to Mr Raheb, which seems to be confirmed by Mr Raheb's reply to the email, which Mr Raheb copied to Mr Pearsall. The salutation in Mr Schwind's email is in fact blank as to the name of the addressee. It appears from the text of Mr Schwind's email that it was probably a circular email sent by Mr Schwind to a number of contacts in Dubai, which may explain the absence of the name in the salutation. Mr Schwind said: "The purpose of my visit this time is to introduce Australian industrial chemical company that is looking to enter the Middle East market." The email then described the names and purposes of a number of products that would be available. Mr Schwind then described the operation of Kristalbond.
15. The final email relied upon by the plaintiffs is Mr Raheb's 3 September 2009 response to Mr Schwind's 3 September 2009 email, which was copied to Mr Pearsall, and in which Mr Raheb said: "fine doc mate".

Existence and nature of initial joint-venture

1. The terms of the alleged initial joint-venture pleaded by the plaintiffs in par 8 of the amended statement of claim, putting aside practical matters concerning the visit to Dubai and Mr Schwind's payments, are contained in sub-pars (d) to (f), which are set out in par 19 above. As I have noted, the defendants have denied that any initial joint-venture was made as alleged by the plaintiffs.
2. It should be deduced from the email correspondence relied upon by the plaintiffs that Mr Pearsall, Mr Raheb and Mr Schwind did make practical arrangements for all three to visit Dubai for a two week period to demonstrate to potential purchasers products manufactured by Cyndan Chemicals. There was a provisional intention that any sales would be made through NET, which would purchase the products from Cyndan Chemicals. It was Mr Schwind's role to introduce Mr Pearsall and Mr Raheb to his contacts and other persons in Dubai who had been arranged by the General. Mr Schwind was paid an initial fee of $15,000, plus GST. There was no agreement as to Mr Schwind's ongoing remuneration, or as to how any profits would be split between NET and Cyndan Chemicals.
3. In relation to the term of the initial joint-venture alleged in par 11(d), it was agreed, as part of a relatively informal arrangement, that Mr Pearsall, Mr Raheb and Mr Schwind would work together during the Dubai visit in promoting sales of NET products sourced from Cyndan Chemicals, and the arrangement that was made also included an inchoate proposal to achieve some reward from obtaining a Kristalbond distributor. The question is whether the arrangement extended to the parties working together after the Dubai visit. In my view it was implied in the email correspondence that the parties would in fact continue to work together, if the outcome of the meetings that were to be held in Dubai was sufficiently encouraging to warrant follow-up work. That is obvious, as it was the purpose for the parties going to Dubai in the first place. The arrangement was, however, completely indefinite as to what results from the visit to Dubai would be sufficient to justify follow-up work. There was nothing in the arrangement that bound any of the parties to continue. There was also no agreement as to the products that would be offered to the Dubai market. There was no agreement as to Mr Schwind's ongoing recompense. There was no agreement as to the prices at which Cyndan Chemicals would supply products to NET for on-sale to purchasers in Dubai.
4. The arrangement contemplated that sales by NET to UAE customers might need to be made via "a UAE incorporated trading vehicle", as alleged in par 11(e), but any arrangement to that effect was nebulous and not agreed in any specific way. The arrangement did not address who would own the trading vehicle, and in particular it did not address whether the trading vehicle would be owned by the parties, or whether it would be necessary to deal through some local UAE company. It was contemplated, as alleged in par 11(e), that Mr Pearsall and Mr Raheb would provide technical and application training and ongoing support to any purchasers who could be found, and that Mr Schwind, through the General, would introduce the products to potential customers.
5. The allegation in par 11(f) that the proportions in which the parties would share financial benefits would be fixed at a later time is established by the email correspondence.
6. The email correspondence relied upon by the plaintiffs does establish that the parties made an arrangement (where Mr Raheb acted as agent for Cyndan Chemicals) for the practical steps necessary to be arranged and implemented for Mr Pearsall and Mr Raheb to be able to demonstrate products manufactured by Cyndan Chemicals to potential purchasers in Dubai, with a view to sales of product through NET in the UAE and the wider Middle East. However, there was no real agreement as to how the parties would take advantage of any leads obtained as a result of the meetings with potential customers that were arranged by Mr Schwind and the General. Nothing bound the parties to continue with the proposal, and they were free to decline to do so, if they thought the leads were not sufficiently worthwhile. As the parties had made no agreement as to how any potential profits would be shared between them, what the plaintiffs have described as the initial joint-venture was not contractually enforceable.

Further communications before making of alleged joint-venture

1. Between the end of the series of emails that the plaintiffs say gave rise to the initial joint-venture and the variation that led to the alleged joint-venture, Mr Pearsall, Mr Schwind and Mr Raheb travelled to Dubai, had meetings with the General, potential purchasers of Cyndan Chemical's products, and distributors of Kristalbond, and gave demonstrations of the products and provided technical information in relation to them.
2. In an email dated 30 September 2009 from Mr Raheb to a Mr Shahul Hameed, Mr Raheb referred to a recent meeting in the General's office in which Cyndan's chemical products were discussed, and among other things, described how Mr Raheb understood the proposed business venture in the UAE would go ahead.
3. Mr Raheb explained that he owned a chemical manufacturing company in Australia called Cyndan Chemicals, and that Mr Pearsall from NET was his agent in the UAE. Mr Raheb then discussed the various products in which Mr Hameed had expressed an interest. He said that the parties were seeking to find an exclusive distributor for Kristalbond in the UAE.
4. On 8 October 2009, Mr Pearsall sent NET's basic price list to Mr Schwind, with a copy to Mr Raheb. Of the many products listed, one was Vitro Glaze, for which the price stated was $65 per litre.
5. It appears that, by email dated 9 October 2009, Mr Raheb provided a draft of a distributorship agreement to Mr Pearsall and Mr Schwind. The draft itself was called "Agency & Exclusive Distribution International Agreement". It contained terms for an agreement between NET and a presently unidentified distributor in the UAE.
6. Mr Pearsall sent an email to Mr Raheb on 11 October 2009, with the subject heading "barry's deal". It concerned the percentage that Mr Pearsall and Mr Raheb had offered Mr Schwind. Mr Pearsall suggested that the parties should "look at a 3 way split". Mr Pearsall suggested that the General would consider the existing percentage offered to Mr Schwind to be very unfair.

Evidence relevant to joint-venture

1. Without further apparent response from Mr Raheb, on 11 October 2009, Mr Pearsall sent an email to Mr Schwind in which he said: "I am prepared to sacrifice shares in emirates glass to bring everyone into equal proportion of % we all earn…". This is the second of the emails identified by the plaintiffs as giving rise to the joint-venture, although it was sent before the first email that the plaintiffs identified.
2. The two emails sent by Mr Pearsall concerning the percentage of the venture that Mr Schwind should be given demonstrate how fluid the proposed terms were on such a fundamental issue as the respective shares of the parties.
3. On 11 October 2009, Mr Schwind sent an email to Mr Raheb and Mr Pearsall concerning the recent visit to Dubai, which is the first of the emails relied upon by the plaintiffs to constitute the variation that led to the alleged joint-venture. Mr Schwind and said, among other things : My understanding was that Harry through his company Noble Earth were trying to establish an agent in Dubai with Sami to be supplier and manufacture also offering backup and technical support. Very early during our visit I realised that Noble Earth through Harry would not be able to establish on their own a working business venture in Dubai and Sami has neither the time or inclination to set up himself after many times of trying. As to the above I propose the following: Barry Schwind to set up company with General Nasser to distribute products demonstrated on exclusive basis. Sami Raheb the supplier, manufacture and technical adviser of products. Harry Pearsall to be paid 25% of Net profits from Dubai Company and also introduce any companies he may see fit. Gentleman this is a brief overall of my thoughts and would appreciate input from your side as to how you see the best way forward.
4. The particulars to par 11 of the amended statement of claim identify an email sent by Mr Schwind to Mr Pearsall on 12 October 2009 at 1:16 AM. The folder of emails prepared by the plaintiffs does not appear to contain this email and I have not noticed it elsewhere in the court book.
5. On 12 October 2009, Mr Raheb sent an email to Mr Schwind and Mr Pearsall replying to Mr Schwind's email. Mr Raheb said: Yes i agree with this summary As a way forward as discussed you are seeking an initial order from Hammed and EG, possibly even Mr Sultan if that product i gave you works on his plane duco, he may decide to order some. I believe medium term, in getting these orders, we shouldn't wait on EG to test the Kristalbond and then try getting an order for that and Vitro Glaze, this will complicate things on several fronts, firstly my plan is for them to get you the order, we deliver to them and when it arrives there I have to go back and teach them the application. This will give you time i believe to contact others such as Dr Khalid and any others (now that you have an idea what we sell) so when i am back i can assist your business activity by doing taking further meetings and demos. Also if it works out with the General and our company there ,you will have all our stock so we will have all types of products handy to do all types of demos without the need for FedEx.
6. A fundamental aspect of the initial joint-venture was that NET would be the distributor in the UAE of products manufactured by Cyndan Chemicals, and that Mr Schwind would be entitled to a percentage of the profits in recompense for the introductions he provided. Mr Schwind suggested a fundamental change to this arrangement, because he apparently took the view that NET would not be able to establish a distribution business in the UAE. He therefore suggested that the distributor should be a UAE company established by himself and the General. Mr Pearsall would be paid 25% of the net profits. Mr Raheb appears to have agreed with this proposal, but the plaintiffs have not identified any evidence whereby Mr Pearsall agreed to this fundamental change.
7. For reasons that I have set out above, the evidence shows that the alleged initial joint-venture was both fluid and inchoate. The evidence relied upon by the plaintiffs to prove the variation that gave rise to the joint-venture shows that two of the parties accepted the need for a fundamental change to the initial joint-venture, whatever effect it may have had, but Mr Pearsall did not agree to the change.

Communications after making of alleged joint-venture

1. In the period immediately following 12 October 2009, Mr Raheb engaged in email correspondence with Maya Zouein, who was the marketing director of Emirates Glass, concerning arrangements to carry out a test application of Cyndan Chemicals' products on samples of glass manufactured by Emirates Glass.
2. At Mr Raheb's suggestion, on 15 October 2009 Mr Pearsall emailed to Ms Zouein a quotation for Vision Guard. He offered that either Mr Raheb or he would fly to Dubai to assist in training Emirates Glass' staff to apply the product. The NET order form that was attached offered a price of US$100 per litre for Vision Guard.
3. Ms Zouein sent an email to Mr Raheb on 18 October 2009, in which she advised that the samples that had been received were damaged, in that the coating applied to the glass by Emirates Glass contained silver, which must have been touched in the process of applying the Vision Guard.
4. Mr Pearsall sent an email to Mr Raheb on 19 October 2009, in which he suggested that Ms Zouein might think that Mr Raheb was now trying to sell to Emirates Glass LLC directly.
5. Mr Raheb replied on 19 October 2009, by saying: "as far as she is concerned we are one company".
6. Also on 19 October 2009, Mr Pearsall said in an email to Mr Raheb, with a copy to Mr Schwind, on the subject of "communicatios", that Mr Pearsall would like to be more involved in the communications via email.
7. Mr Raheb replied by email on the same day, to say that at the moment he was handling the communications because technical matters were involved. He noted that when it came to purchasing he had asked Mr Pearsall to send Emirates Glass the pricing through NET. He said: "At the end of the day they are NET customer but i would suggest you let me handle it till it becomes a servicing matter then i presume Barry is going to take over".
8. This response by Mr Raheb is inconsistent with his earlier agreement with Mr Schwind's suggestion that a company established by he and the General should be the distributor.
9. Ms Zouein advised Mr Raheb on 26 October 2009 that it was unlikely that Kristalbond would be a useful product for Emirates Glass.
10. Mr Raheb replied to Ms Zouein on the same day by email, with copies to Mr Schwind and Mr Pearsall, to suggest that the parties should concentrate on Vision Guard.
11. Ms Zouein advised Mr Raheb by email dated 28 October 2009, with copies to Mr Schwind and Mr Pearsall, that the relevant executive of Emirates Glass had given approval to go ahead with the first trial of Vision Guard on one of the company's projects.
12. On 29 October, Mr Raheb replied to Ms Zouein, with a copy to Mr Schwind and Mr Pearsall, in which he indicated that 110 litres of Vision Guard would be required to coat the 11,000 m² of glass that would need to be coated in Emirates Glass' first project. Mr Raheb suggested that 200 litres of product should be acquired. He asked to be given a purchase order.
13. Following an email request from Mr Pearsall on 29 October 2009 to Mr Raheb, as to whether Mr Raheb could deal with the first order without Mr Pearsall, Mr Raheb responded on the same day, with a copy to Mr Schwind, suggesting that Mr Pearsall should let Mr Raheb do the first one "so we don't make any amateur mistakes until your comfortable with doing it in the future". Mr Raheb asked to be provided with a NET letterhead in Word format. He suggested that NET should set up a US dollar bank account with an Australian bank. Mr Raheb said that from his end the purchase would be on Mr Pearsall's account with Cyndan Chemicals, which would enable Mr Pearsall to take advantage of his existing terms with Cyndan Chemicals. Mr Raheb added : thinking about this, if barry is going to be the principal and is actually making the sale, and you the commission then barry will have to open an account with cyndan and do the necessary as above so u guys will have to sort out the above as per your agreements and let me know the information i need
14. This last comment by Mr Raheb is consistent with his acceptance of the change in the venture suggested by Mr Schwind.
15. On 2 November 2009 Mr Raheb, in an email in the name of Cyndan, sent a pro forma invoice to Ms Zouein. A copy of the email was sent to Mr Schwind and Mr Pearsall. The attached pro forma invoice was on the letterhead of NET. It was for 200 litres of Vision Guard at US$100 per litre. The remittance advice required payment to NET to an account with the Commonwealth Bank of Australia.
16. Email correspondence then ensued between Mr Raheb and representatives of Emirates Glass concerning the appropriate quantity of product and price.
17. On 5 November 2009, Mr Raheb sent a further email to Emirates Glass attaching an amended pro forma invoice. The amended pro forma invoice was also on the letterhead of NET, and contained the same remittance advice. The quantity of Vision Guard was reduced to 110 litres, but the unit price was the same.
18. On 19 November 2009, Mr Schwind sent an email to Mr Pearsall in which he said: "Now I have confirmed order from Emirates Glass I have attached MOU. Please feel free in writing to make changes or comments".
19. The attached MOU was described as a "draft proposal". It suggested that the agreement would be between Mr Schwind and an unnamed new Dubai company (called "DC") and NET. It listed companies in Dubai that would be supplied by the new company. It suggested terms that included the following: 3 NET will not be involved in any contact with above companies. NET wet website and or labels or contact details are not required. NET will not make any contact by any form with said companies. 4 DC will pay all outgoing costs involved with proposed Dubai company. DC will deal direct with Cyndan for supply of all chemicals.
20. Clause 6 suggested that the Dubai company would pay a flat rate commission of 25% of the net profit to NET. Clause 7 provided that, in relation to product sold to Emirates Glass, the commission payable to NET would be a flat rate of 20% of the net profit.
21. Clause 9 provided that the duration of the agreement would be one year, initially renewable with the consent of both parties one month before maturity.
22. Mr Pearsall responded to Mr Schwind's email on 19 November 2009 in strong terms. He sent a copy of his email to Mr Raheb. He said: I am putting everyone on notice; I am seeking full legal advice on this matter. There is no deal between Barry Schwind and myself or cyndan at this time. Barry was paid as an introductory agent; he was given a commission and he accepted this; Barry was paid and accepted payment with the terms of the proposal out; Barry himself laid out the terms he wanted. All Barry Schwind terms were met.
23. Mr Raheb responded to Mr Pearsall's email on 19 November 2009, by sending his own email to Mr Pearsall and Mr Schwind. Mr Raheb started by saying: If I can comment even though its not my place to do so on matters between barry and yourself, in my capacity as a supplier, however I did also spend time and money going to Dubai and would like to see a return on that as we all do. From an arms length perspective without vested interests to either side:
24. This response introduced an aspect of the venture, to which Mr Raheb strongly adhered in his oral evidence, that Cyndan Chemicals' only role in the venture was as a supplier of chemicals, whether the supply be to NET or to a company established in the UAE.
25. The balance of Mr Raheb's email was written in a conciliatory tone, and tried to persuade Mr Pearsall to respond positively to the proposal that Mr Schwind had made.
26. Mr Pearsall in turn responded to Mr Raheb on 19 November 2009 by saying: We had a verbal agreement for 25% of a company in Dubai; since then he has changed all the goal posts. Now he has added all these other restraints'. I will put injunctions on him within the week, I will not let him cut me out like this. He can get fucked;
27. Nine minutes after Mr Pearsall sent that email to Mr Raheb, he sent a further email to Mr Raheb which stated: Please remember i withdrew my acceptance of any deal; because Barry changed all the rules. Before that he actually withdrew the deal to me.
28. Mr Raheb's response to this email on 19 November 2009 was to ask Mr Pearsall to "handle this with professionally with a view to a good result". Mr Raheb added: I reakon barry can be a reasonable guy if you approach it in the right spirit. Frankly he is holding the cards there now, he could kill the deal easy then we all lose. I don't want that to happen as EG deal is worth millions a year in profit and much more will come from the region.
29. Mr Pearsall's response to this email on 19 November 2009 was to say: "I am going to get legal advice and then I will sue him for any future losses".
30. Mr Pearsall sent an email to Mr Schwind on 19 November 2009, with a copy to Mr Schwind's brother, Geoff. The email said: I am completely insulted and second; you want it all. You also want to be able to hide all the books from me.i am going to seek to take out injunctions on you and cyndan, you will not stand over me and bully me.you abused me so many times and then when i put you in touch with all the right people you demand i stay away from them.
31. Mr Pearsall's responses to Mr Schwind's suggestion that the new company in the UAE enter into a MOU with NET constituted an absolute rejection of the suggestion. The joint-venture alleged by the plaintiffs in par 11 of the amended statement of claim is not established by the evidence, even if it is accepted as being no more than an inchoate and incomplete proposal. Fundamental aspects of the proposal were rejected by Mr Pearsall on behalf of NET.
32. Mr Raheb sent a further pro forma invoice to Emirates Glass dated 20 November 2009. The pro forma invoice was on the letterhead of Cyndan Chemicals. It related to 110 litres of Vitro Glaze. The price was AU$250 per litre. The remittance advice now required payment by letter of credit to Mr Schwind at Mr Schwind's bank, described as ADCB. The currency of payment was to be the currency of the UAE.
33. It is not clear whether Mr Raheb's decision to use Cyndan Chemicals' letterhead, rather than that of NET, was influenced by Mr Pearsall's rejection of Mr Schwind's proposal, or by Mr Raheb's agreement with Mr Schwind's proposal, which would have the result that NET would no longer be the seller in the UAE.
34. Mr Pearsall then sent an email to Mr Schwind on 22 November 2009. He began by saying: "I have not heard anything from you. I would like you to respond to my emails asap. I also feel that as far as any business in Dubai goes at the moment. We need to sort this out". Mr Pearsall made a number of observations concerning the prospects of doing business in Dubai and concluded: I find it very difficult to understand why the ground rules are constantly changing; are you serious. Then the silent treatment I get from you only reassures me something is amiss. I am looking at my position and I will need to get legal advice on several matters. I am speaking with my Barrister on Monday. Please do not take this as a threat or in any way disrespectful. I have had enough threats from you both legally and physically. I need to understand my obligations and my position in these dealings. I hope you can contact me before Monday, with anything that may expand on where we are heading with the Dubai deal.
35. Mr Schwind responded to Mr Pearsall's email on the same day. Mr Schwind explained his view of his importance in introducing the possibility of doing business in Dubai and said: 5. In my opinion neither Noble Earth nor Cyndan is capable to establish company in Dubai and if left alone nothing would have proceeded without my input.
36. Mr Pearsall sent an email to Mr Schwind on 7 December 2009, in which he made a number of counter-proposals concerning the terms of the MOU prepared earlier by Mr Schwind. The email ended: This is the last time I will enter into any correspondence with you on the MOU. I have told my Brother tonight I do not wish him to be involved in this matter also.
37. On the same day, slightly less than three hours later, Mr Pearsall sent a further email to Mr Schwind in which he said: "I respect your thoughts and input; Please allow me some time to consider all the information you have supplied to me".
38. Also on 7 December 2009, Mr Raheb had sent an email to Emirates Glass to ask when a purchase order would be received. Emirates Glass sent a purchase order addressed to Cyndan Chemicals dated 3 December 2009. It related to 110 litres of Vitro Glaze at the unit price of $250.
39. This is the purchase order referred to by the plaintiffs in par 19 of the amended statement of claim.
40. On 8 December 2009, Mr Raheb informed Mr Pearsall by email that the purchase order from Emirates Glass for 110 litres had been received. He advised Mr Pearsall that he had made arrangements to travel to Dubai in early February to demonstrate the product. He then said: i would hope that you reconcile with barry this week, and accept the 25% share for doing very little, let me continue on in all our interest, get on with local progress and we will grow. i dont believe barry will budge with the 1 year at the moment, however as discussed I believe in a years time the extension of this to an ongoing period will be given to you. understand I am also working in your interest if i wasn't i would have stopped taking your calls and emails long ago as i have never worked or been involved with such a work ethic as we have seen here from all involved. anyhow mate, have a good sleep and just finish off with barry please let me know for my info what is the deal and look forward to an awesome 2010
41. Mr Pearsall responded on 8 December 2009, by telling Mr Raheb that he would seek a five-year agreement with Mr Schwind.
42. There was then email correspondence between Mr Raheb and Emirates Glass concerning how the latter would pay for the initial order. That led to Mr Raheb sending a new commercial invoice to Emirates Glass on Cyndan letterhead, which provided for the sale of 110 litres of Vitro Glaze at US$68 per litre.
43. This was the first invoice alleged by the plaintiffs in par 20 of the amended statement of claim.
44. There were then email communications between Mr Raheb and Emirates Glass and Mr Schwind about a number of practical matters concerning the furtherance of the business. Mr Schwind observed in an email of 18 January 2010 that: "This setting up of Company has become a real pain with all the new rules and regulations in Dubai since the fire in Sharijah".
45. On 19 January 2010, Mr Schwind sent an email to Mr Raheb concerning arrangements for Mr Raheb's time in Dubai. Mr Schwind advised that his number one priority at the time was to get the company KangaCamel LLC in place.
46. On 8 February 2010, Mr Raheb sent an email to the general manager of Emirates Glass in which he said: Also an important topic that I had overlooked in taking up with you earlier is that I was hoping that prior to our arrival there on the 14th Feb, we could exchange perspectives so as to reach a workable MoUs.
47. On 19 February 2010, Mr Raheb sent a draft MOU to the general manager of Emirates Glass. The draft was expressed to be between Emirates Glass and Cyndan Chemicals. It related to the supply of Vitro Glaze. However, clause (B) contemplated an agreement that Cyndan Chemicals would supply the product "exclusively in the UAE to Emirates Glass LLC, through its local distributor who is to be appointed". By clause (D) Cyndan Chemicals would agree to have a representative attend Emirates Glass' Dubai facility at least two times a year "through their distributor". The draft provided for a protocol for Emirates Glass to test the effectiveness of the sample of Vitro Glaze that Mr Raheb had trained the company's employees to apply while Mr Raheb was in Dubai. Clause (G) provided: In the event that Emirates Glass LLC is satisfied with the results of the DIP glass treated section, it will contact Cyndan Chemicals with a view to entering into a supply agreement and implementing the Vitro Glaze product within their Dubai operations within a period of one month. Cyndan Chemicals also recognises that Emirates Glass LLC has factories and partnership activities in other regions, such as Saudia Arabia and that this agreement would be extended to encompass that those regions as well.
48. Although this draft MOU would, if signed, be between Cyndan Chemicals and Emirates Glass, it specifically provided that the former would deal with the latter "through its local distributor who is to be appointed". Accordingly, the draft MOU was not necessarily inconsistent with the furtherance of the arrangement suggested by Mr Schwind on 11 October 2009.
49. There is then evidence in the form of emails that show that Mr Schwind attempted to follow up business leads for the sale of chemicals manufactured by Cyndan Chemicals under the business name "KangaCamel Chemicals".
50. Mr Raheb sent an email to Mr Schwind on 23 March 2010, which suggested that the test with Emirates Glass had been successful, but that the company was procrastinating. The email shows that Mr Raheb was still pursuing the business opportunity with Mr Schwind.
51. Mr Raheb said in an email to Mr Schwind and Mr Pearsall on 13 April 2010, that he was hoping to have a written commitment and a deal with Emirates Glass very soon.
52. Mr Raheb was therefore being relatively open with Mr Schwind and Mr Pearsall by informing them of what was happening.
53. On 3 May 2010, Mr Raheb sent an email to Mr Schwind in which he said that he had just called Ms Zouein and voiced his concerns regarding the time delay in proceeding with the MOU. He advised that Ms Zouein said that Emirates Glass' lawyers were looking at the MOU, and the company could not move forward until the MOU was legally approved. That was estimated to take around two weeks.
54. Mr Pearsall then sent an email to Mr Raheb on 26 July 2010, on the subject: "solution to this nonsense". The content of the email is somewhat garbled. Mr Pearsall suggested that Mr Raheb and Cyndan had control of the Emirates Glass deal. Mr Pearsall suggested that Mr Raheb should explain to Mr Schwind that he did not need to set up any warehouse or company, and that Emirates Glass could be dealt with directly from Australia. The thrust of Mr Pearsall's suggestion seems to be that Mr Raheb should take the stance that there was no future in both Mr Schwind and Mr Pearsall trying to start a new business in the UAE, that Mr Raheb should say that he was not prepared to deal with "this nonsense any more" and make sure that Mr Schwind and Mr Pearsall "split the remainder 50-50". Mr Pearsall suggested that Mr Raheb should provide receipts to the other two quarterly or half yearly.
55. The meaning of Mr Pearsall's email is quite unclear, but it appears that he made a suggestion to Mr Raheb that Mr Raheb should decline to continue with the arrangements that had been negotiated up to that point, that Cyndan Chemicals should deal directly with Emirates Glass, and that Cyndan Chemicals should pay some undefined amount to Mr Schwind and Mr Pearsall, which they could split equally between them.
56. It is significant that Mr Pearsall's email ends with the following statement: "… Then say, I (you) will need to get harry to agree or there is no fair and reasonable way to finish this deal. The other option is the 2 of you go ahead and fu;;;k it up and no one wins".
57. This statement appears clearly to recognise that the parties' deal was not finished, in the sense that there remained essential matters that were yet to be agreed, and none of the parties were obliged to go forward to make any particular agreement.
58. There were then a number of emails between Mr Raheb and Mr Pearsall concerning efforts by Mr Raheb to persuade Mr Schwind to pay to Mr Pearsall a proportion of the price for the initial sale of Vitro Glaze to Emirates Glass.
59. It is apparent from subsequent email correspondence that Mr Raheb made an offer to provide Mr Pearsall a share of the profits from the proposed venture out of his own pocket. I have not noticed any such offer in any email correspondence. No email on this subject is included in the plaintiff's folder of relevant emails.
60. On 28 July 2010, Mr Pearsall sent the following email to Mr Raheb: Thank you for a very generous offer of looking after me from your own pocket; the issue is you took enormous risks in this yourself at a time when you already where under extreme stress. You work your way through dealing with 2 very difficult people and their personalities. Your end of this deal belongs to you. It is what you achieved through your time and efforts. Barry is solely responsible for dealing with me. From this point I will only be expecting any rewards from Barry. Not you, I am very happy you have made this offer and I thank you very much. Bit on principle i will decline your extraordinary gesture with respect and good faith.
61. The effect of this email is inconsistent with the joint-venture alleged by the plaintiffs at least to the extent that Mr Pearsall said that he would only expect to receive payments from Mr Schwind.
62. On 31 July 2010, Mr Pearsall asked Mr Raheb by email to tell him the amount of money that Mr Schwind was holding, and to verify that Mr Raheb had repeatedly advised Mr Schwind to pay to NET the money to which it was entitled.
63. Mr Raheb replied on the same day to confirm that he had made several requests to Mr Schwind that he pay to NET a share of the profit from the sale. Mr Raheb continued: On the basis that there was no agreement in place between you guys he refused to do so as according to him there was no negotiated rate. In his perspective he believes he is correct that payment is pending until an agreement has been reached. The exact amount I would have to check my records as there was an exchange rate fluctuation at the time.
64. If Mr Schwind adopted the position related by Mr Raheb, that would be consistent with Mr Pearsall having rejected Mr Schwind's offer that he receive 20% of the profit from sales to Emirates Glass.
65. There were then further email communications between Mr Pearsall and Mr Raheb in which the former complained about the conduct of Mr Schwind.
66. Mr Raheb sent an email to Mr Schwind on 3 August 2010, in which he said in part, referring to his relationship to Mr Pearsall: I then told him I have had enough and wont reply to his emails or messages, as they are non constructive and create angst for all involved, and that he just continues to draw Geoff into the discussions which is working against his interests in his attempts to open communication with you and come to some agreement. I even told him I would look after him from my side so as to alleviate this bombardment of negativity, he makes it sound like we did the deal and are now millionaires from it and he has been left in the cold Barry I simply can't deal with him anymore. He said he is coming to the Gold Coast to see u and discuss his part of the deal in a professional manner as u wont communicate with him otherwise. This is what frustrates him the most the fact that he has no line of comm. With you and feels that he is absolutely missing from the deal and constantly mentions his involvement from the start was what got this deal going in the first place. My problem is I can't be rude to him, I feel sorry for him even though his ways so totally rubb me the wrong way. Do you have any ideas on how he should be handled from both our sides or is it just to ignore him totally.
67. Mr Schwind sent an email to Mr Raheb on 29 September 2010, to give him an "update" on Emirates Glass and the contract. He said that he and the General would be using an existing company owned by the General for the contract with Emirates Glass. He said that he hoped that the arrangements would be done by mid to late October 2010, and that Cyndan Chemicals would be invited to supply shortly afterwards. He then asked for information about how much Vitro Glaze Emirates Glass would require for six months' supply based upon an annual production of 3.5 m². He ended by saying: "Hang in there that we are almost done…"
68. Mr Raheb and Mr Schwind then exchanged emails, culminating in Mr Raheb, on 5 October 2010, asking Mr Schwind for a response to an earlier request for a conversation. Mr Raheb said: i am now starting to wonder what's going on i hope i am either being a little too sensitive or jumping to conclusions…
69. Mr Schwind responded by email on the same day, to explain the difficulties that he had faced in Dubai promoting the contract. He ended by saying: I have now spent 1 year trying to put this deal together and all I have coped is crap from all involved. Only I am capable of putting it together with all this goings on and are most determined to do so. As Nasser said to me last week and I complained about how hard and unprofessional it is to do business in Dubai he replied "well get used to it". I can't, I won't but I will try.
70. Mr Schwind advised Mr Raheb on 7 October 2010 that the General had told him that he expected to sign a contract with Emirates Glass on either the following Sunday or Monday.
71. Mr Schwind and Mr Raheb then exchanged emails in an attempt to monitor the General's progress, as Mr Raheb had not heard anything directly from Emirates Glass concerning the execution of the contract. He said in an email to Mr Schwind on 11 October 2010: "In any event im waiting with cigar in hand for your notification".
72. Then, on 1 November 2010, Mr Pearsall sent an email to Mr Raheb on the subject "%". He said: After some consideration I am a little disappointed at your offer with the EG deal; given that it is less than what Barry was offering me. I thought we had a deal at 25% and you were happy with this outcome. Plus there is the Kristalbond part to be involved. Apart from that anything else you do with them is entirely your companies windfall, including the paint. I have mentioned several times about the waterproofing applications I would like to do with you also. It is a very good order and there is a massive upside to this deal. I just hope there is never another Barry scenario, (I know there won't be we are a little more human than him) I already have dropped from 35% to 25% because of the price drop from EG. I expect you have also dropped projected margins for the same reasons. Please give this more consideration; remembering Barry will be getting zero from this now.
73. This email underscores the fact that the parties had not yet come to any agreement about how they would share the profit from any sales to Emirates Glass.
74. A series of email exchanges then occurred between Mr Raheb and Mr Pearsall. Mr Raheb complained to Mr Pearsall that Cyndan Chemicals had been required by Emirates Glass to reduce the sale price for Vitro Glaze, because Emirates Glass had said that it was going to give the product away for the first year. Cyndan Chemicals would make little margin on any sales. Mr Raheb also stated his concern that the General would ask for money on the side, which Cyndan Chemicals could not afford to pay. Mr Raheb said to Mr Pearsall on 2 November 2010: So I have put to you below a scenario, not ideal for both of us as we would like to make more money, agreed, which we would have no arguments about (and wontin a year hopefully when we get full margins, then you get what you are asking for, for sure as its what we agreed on given the sell price) but where we are at is tight and difficult. Already we are lower than what we agreed to receive for the product per litre but we have to look at the big picture. For doing relatively little now we get to packet a decent sum we can build on other stuff. Okay 70k-100k is not what we expected but what do I do, I negotiated the best I could and offered you absolutely open books for you to see it all If you're not happy with that then what do I do? In any event its between us now and I just hope they order regularly and market it well so we get increased volume, [illegible] is minimum, they reakon it could be double in first year but I doubt it as it will take time, so it only goes up from there
75. Later on 2 November 2010, Mr Raheb responded to Mr Pearsall's "%" email by saying: Firstly they signed the MoU and we should have an initial order from them within 2 weeks. I'm really surprised to get this email from you after all that's happened, especially that it's apparent you haven't done the mats or have misunderstood something along the way. For the record and for you to consider before we meet to finalise, below are the details Initial sale price negotiated $ 67 per litre. Cyndan was charging $52 per litre for the product the balance was supposed to be barry/harry cut which is $15 per litre Harry accepted to receive 25% of the $15 margin from Barry for doing nothing further = $3.75 per litre Based on 20k litres per year = $75k (all in USD). Sami mentioned to harry up around the 100k a year for his side, so let's just set it to noble earth receives $3.75 per litre The amount of 20k was supposed to be introductory, (more volume to come) Note: Cyndan sells this product to EGL for $50.50. This is the only way it was to work with them for them to take it on, they came back with $46.15, then calculated marketing and other things in that to bring them to $67 in effect. Yes I'ts a low sell price, but frankly I felt it was all they were going for as our relationship was such that they said later when they stop giving the product away for free and charging they will go back to the original price All this is covered in the contract so you can verify its correct
76. Although Mr Raheb stated that Emirates Glass had signed the MOU, a signed copy of that document is not in evidence.
77. Mr Pearsall replied 3 November 2010, by an email which included: As is ay what you are offering is as written below. Barry is not in the picture anymore so why am i splitting anything with him?
78. Mr Pearsall therefore adopted the position that Mr Schwind had no continuing role in the proposed venture.
79. Later, on 3 November 2010, Mr Raheb said in an email to Mr Pearsall: … Harry, I mentioned barry's deal as a guideline only because it is relevant as prices were based on that deal. Now we are getting much less, the pie has shrunk, hence a further negotiation has to take place. I have used the prior as a model, to try and maintain the same margin for yourself. EG was never going to do that deal as is obvious now as they need to see our facilities and deal with the manufacturer, so it was flawed to start with, I have endeavoured to protect you despite all of this. In fact EG decided not to take the offer that was initially put to them and the deal was dead. I brought them back and through persistence got the deal nailed, now to do that as you know they decided to deal with Cyndan and not barry or NET, I still after that maintained you as part of the deal, and you could view it that I am taking from my margin where I only now receive under 50 bucks minus what the general may request, and maintain for you an ongoing 'commission' and part of the business. I didn't have to do that Harry, the old deal was dead as it was based on a wrong assumption that they would deal with NET as an agent. You know I never purposefully designed it to happen like this but did so for reasons discussed, which ended up being the only reason they went ahead in the last chance we had. Now in the interest of being fair to you for your efforts and expense, I made sure to get you included. The pie is smaller now and I am accepting much less that my previously accepted price for the product cause I have to do so that you are happy and don't have any hard feelings. Before it was always that at 67 bucks a litre there was around 300 grand in it for the harry / barry side, now there is nothing of that extra money on top of my cost price left so im taking a portion from that as said to you, I will pay you from my pocket if I have too. The guys negotiated hard and we had no choice fadi even told you that and I offered to show you the books and all also so you can see its truth. Now what do you propose then given the situation we are in? Forget the barry % but say it did go ahead on that basis and price, you would have ended up with zero, or as discussed at cocos, 25% of 15 bucks, leading to the same amount I have offered you which comes out of my margin. Who is losing here? This si a time for happiness and I understand you may feel you want more money out of this, so do I, but the main thing is we got there despite all the resistance which is quite an amazing feat trust me especially give n all the other stuff I had to endure with work and barry. So rather than argue about this please propose something or consider the above deeply and comment on that please I don't have the energy left to fight and I know your not fighting, but you know what I mean
80. It is to be inferred from this email that continuing negotiations between Emirates Glass and Cyndan Chemicals, which are not the subject of any evidence, had the effect that Cyndan Chemicals was required to reduce its price for the supply of Vitro Glaze, at least for the first year of supply, and the consequence was to shrink Cyndan Chemicals' margin and make it difficult for the company to provide any share of profit to Mr Pearsall and Mr Schwind in the manner that had initially been contemplated, even if not actually agreed.
81. Mr Pearsall responded on 4 November 2010. The subject of his email was "harry confused". The email included: … As for the old deal being dead, it was clear they were given an invoice from cyndan and for the first trial order and not Noble earth as we had agreed; this is supported by the dates that i was emailing Maya and the dates on your invoicing. This was I believe under advice from Barry, but none the less unfair to me. I don't believe the deal was ever dead as they had the WFC and internal issues with the board. In the past I have requested to see anything to support this claim the deal was dead. As it stands now Noble earth was never notified of any of these changes; but the deal has gone through; I can understand the reasoning behind this shift but I was disappointed about the way it happened, I was kept out of all things for a time and this was a very bad experience. I do not Believe anything Barry said about the deal was dead, He was a liar with all his information and even if Nasser was involved it was only to update Barry. I also believe this was how Barry managed to enhance his reputation with you about his strength in Dubai; which we now know is [illegible]. So after much stone throwing (all involved)from my perspective it may very well be the better option and I hope we all prosper from this deal. Eliminating Barry has also been a godsend to all of us.
82. Towards the end of the email Mr Pearsall said: "As there was never adeal with Barry why don't I get all the money?" This statement is, again, inconsistent with the allegation that the three parties had made the joint-venture as alleged.
83. In an email dated 9 November 2010 to Mr Pearsall, Mr Raheb again asserted: Realistically Harry, the deal was lost in terms of the old arrangement, in other words, I agree nothing of the old should have been taken into account. The deal was rejected by EG. They entered into a new arrangement finally on the basis of lets get real, and as you know everything changed. I could regard this new deal to be totally new, if I was a prick or tough business man, and offer you were spotters fee and cover your expenses, if I wante do be nice to you, but I didn't I offered you a part of it.
84. Mr Raheb ended his email by saying: "Please lets make this easy and fun, theres lot to grow on, we got an order for 2000 litres today pending email, and its just the start".
85. Mr Raheb and Mr Pearsall continued to exchange positions concerning Mr Pearsall's entitlement. Mr Raheb's position was that the initial deal was dead, that Cyndan Chemicals had been able to retrieve a position of selling directly to Emirates Glass at a price which left Cyndan Chemicals initially with very little margin, and in any event insufficient to pay Mr Pearsall and Mr Schwind the amounts originally expected. Mr Pearsall's position was, in broad terms, that the initial deal had not ended, and as Mr Pearsall said in an email dated 14 November 2010: "You agreed to pay me several times 25% of this deal…"
86. In an email dated 29 November 2010, Mr Pearsall commented to Mr Raheb: Again the answer to my questions are being referred to Barry / Harry deal and this is unacceptable to me. This deal does not exist in any capacity. Now to make my point clear,. So nothing about Barry holds true with me; as nothing about Barry holds true with you.
87. It is difficult to understand how the plaintiffs can maintain their allegation that a joint-venture existed between the plaintiffs and Cyndan Chemicals, when one of the plaintiffs states on the subject of whether he was a party to third joint-venture alleged with the other plaintiff: "This deal does not exist in any capacity".
88. Mr Raheb reiterated his position in an email to Mr Pearsall on 30 November 2010: … Why is this difficult or needs analysis? If we sell for $68 p/l in time or if manufacturing costs come down then as you are entitled to 25% of the gross margin this gets calculated. This payment is structured as a royalty to the deal and a contract will be drawn up that has further details between us, its not a complicated arrangement but its purpose is to give you comfort and know what to expect for the years to come.
89. There was then a series of email communications between Mr Raheb and Mr Pearsall concerning whether a mediator could be appointed to resolve their differences.
90. In an email dated 5 December 2010, Mr Pearsall said that Mr Raheb was: "… Basing your figures on ( a totally fictional agreement between Barry / Harry))"
91. Again, in a later email on 5 December 2010, Mr Pearsall said to Mr Raheb: "… The reason is you have Barry's name and this term [illegible] this deal in every email almost so it is not easy to find anything without the Barry / harry so called agreement ( that never took place)…"
92. On 6 December 2010 Mr Raheb offered to Mr Pearsall to enter into a new arrangement, which was to supersede all previous offers. The offer was in the following terms: NET is being offered up a % of the gross profit from selling Vitro Glaze to EG and SAG as well is an agency cpmpany based in dubai, NET will not have an active executive role in the business. NET will enter an agreement with Cyndan which details are to come but essentially terms and conditions are limited to privacy requirements, and the term of the contract will be the same as the one Cyndan has with the buyers. The % will be calculated on gross margins, given the current cost of manufacture of the product is $35-$36 (depending on packaging). Cost of production has also to incorporate freight which Cyndan pays for but is being dismissed as an expense and saying cost of man is $36. Cyndan makes available the purchase orders to NET when they receive them to confirm sell price.
93. Later, the email continued: EG signed mou with Cyndan. Even though the mou has nothing to do with NET and info in it has nothing to do with our arrangement, I enclose copy here attached.
94. The MOU that was apparently attached to the email is not in evidence.
95. The email continued: EG is finalising the supply contract with Cyndan that will be signed soon (likely in Jan when I am there) the period is for 10 years and to be extended. It will list sale price of $54.50 to EG and SAG and $68 to the agency that will have rights to product that will on sell to others for higher than that. Four dollars of the $54.50 goes to the agent so Cyndan ends up with $50.50. Nothing f the $68 goes to the agent formally.
96. On 1 May 2011, Mr Pearsall sent an email to a person called Fadi Michael, in which he said: I am not sure what to do with this current situation, last Friday General Nasser has called me, it seems he also called Sami and Barry ; he is very unhappy with some issues, he is still in Germany and on his return he is inviting all of us to Dubai to see why there are so many problems. I have no interest in talking to Sami or Barry about this, Sami has told General Nasser it is all my fault, General Nasser cannot understand how this can be when I have got no money and neither has Barry…
97. Apparently Fadi sent the email to Mr Raheb, as it prompted Mr Raheb to send an email to Mr Pearsall on 9 May 2011. Mr Raheb said in part: As Cyndan has entered into an agreement with Emirates Glass it is not appropriate for you to contact any Emirates Glass personnel by email or phone and discuss any issues relating to that agreement. I did email you previously advising you of that.
98. Apparently, a call from the General to Mr Raheb prompted Mr Raheb to send an email to Mr Schwind on 9 June 2011, which included the following: … I outlined the agreement that you and i were working from and that I felt we were on the same team working toward a common objective, one that was larger than just the Emirates Glass opportunity, but that toward the end of last year, the period in which you were trying to finalise the deal itself, we had lost communication between us despite attempts from me to communicate with you by email and by phone, that which in the last phone conversation I had with you, you requested that I don't call but email so as to keep everything in writing, to which I obliged. The purpose of this email is to settle the matter. At the moment Emirates Glass has taken on Vitro Glaze as a trial and to test the acceptance in the marketplace, has launched a marketing plan on same. If they find that the product will add value to their product and bottom line, they will then take it on to the full extent. They have only purchased another relatively small amount of product from Cyndan at a hugely discounted rate, and at their own expense (not charging for it to the customer) applying it to a select choice of projects to get the feedback and assess the opportunity it may bring them. They are playing it very cautiously, however have spent money on marketing (hence the need to buy initially at a discount rate) and I have travelled there to again train their salespeople and marketing dept, to assist with same. General has asked me to contact you to try and resolve any issues there may be between us, and as you may feel I have 'taken' this opportunity from you. I have mentioned to him as I am mentioning to you here, that I am willing to discuss all details regarding the deal with you without prejudice at a time and place that's convenient to the both of us or on the phone or Skype. I have nothing to hide, despite Harry's accusations to the contrary. Furthermore the plans that we discussed between us, of yourself distributing a range of our products in the UAE, through Al Razooqi or KangaCamel or otherwise, as far as im concerned is still available to you. I don't know what changed or even happen toward the end of last year to break down our connection and objectives. If you would like to discuss this please let me know and I can call you sometime soon initially, and planned to meet with you in person if you prefer sometime at the earliest. For your information, Harry has decided to take legal action against my company, which means I cannot discuss any details pertaining to Noble Earth, which is a relief in any event.
99. Mr Schwind responded to Mr Raheb on 14 June 2011 in a relatively conciliatory tone. He said that the General had proposed a meeting between Mr Schwind, Mr Raheb, employees of Emirates Glass, and a member of the board of that company, and asked when Mr Raheb would be available.
100. Mr Raheb responded to Mr Schwind on 14 June 2011, by offering to speak to Mr Schwind, or see him, or Skype. He did not mention attending a meeting with representatives of Emirates Glass. He also sent the response to the General.
101. A dispute then arose between Mr Schwind and Mr Raheb as to whether communications had broken down between Mr Schwind and Mr Raheb, as the latter claimed, at the end of 2010. On 15 June 2011, Mr Schwind noted that Mr Raheb had not responded concerning the meeting with Emirates Glass. Mr Schwind asked for copies of any contracts and relevant documents.
102. On 15 June 2011, Mr Raheb admitted in an email to Mr Schwind that he had "avoided" responding to the suggestion of a meeting with representatives of Emirates Glass LLC "for what I thought were obvious reasons". He also said that he was not at liberty to comply with Mr Schwind's request for documents "for obvious fiduciary reasons".
103. On 17 June 2011, Mr Schwind asked a number of specific questions of Mr Raheb, including details of the date of the contract for the sale of Vitro Glaze to Emirates Glass, the price per litre, and the date the MOU was signed.
104. Mr Schwind said in his primary affidavit that the General informed him on about 17 August 2011 that he had been advised by a member of the board of directors of Emirates Glass that all orders for Cyndan products must be made through the General's Al Razooqi Trading Company.
105. On 6 September 2011, Mr Raheb sent an email to the General, with a copy to Mr Schwind. The email said: I have been advised that Emirates Glass Dubai are wanting to purchase our Vitro Glaze product via your Al Razooqi company, and that all orders and financial transactions will then be going through that company. With all due respect, our company will not operate on that basis. I will not deal through Al Razooqi company or via yourself personally to supply them with our product. Frankly I am fed up with the whole deal which is taken up excessive amounts of my time and resources in travelling there, constant emails and being away from my business here, with the date very little orders coming forth anyhow which has not even covered costs. I have a growing business that requires my time in China and the USA and have no further time for Emirates Glass wanting to change the supply structure via your involvement, nor for their constant high maintenance demands and no warders forthcoming so I am pulling out of the deal altogether. I will formally advise them in writing shortly that they can look for a new supplier. I hope we can remain acquaintances despite this, please understand this is business and I won't be coerced into a position I am not comfortable with and honestly don't have any more time to waste on this matter.
106. So far as the evidence discloses, this was the end of Cyndan Chemicals' attempt to sell its products to any purchaser in the UAE or the wider Middle East. Cyndan Chemicals' attempt to pursue what the plaintiffs have called the joint-venture was over, with no subsequent sales of Vitro Glaze being made.

No evidence of subsequent sales

1. Mr Pearsall gave evidence that, before these proceedings were commenced, the court made the following order on 7 August 2012, in separate proceedings by NET against Cyndan Chemicals for preliminary discovery: The Defendant to provide copies of documents, that are or have been in the Defendant's possession which are, or are styled as (whether signed or unsigned, or draft or non-draft) either: contracts, memoranda of understanding, purchase orders, invoices concerning the sale or purchase of the products known as "Visionguard", "Vitroglass" or "Vitroglaze", to which the parties are, or include, Hampic Pty Ltd and Emirates Glass LLC or Emirates Glass Ltd, from the date 19 October 2009
2. He also gave evidence that Cyndan Chemicals produced the following documents in response to the order (as listed in Cyndan Chemicals' solicitors' letter dated 6 September 2012): 1 Emirates Glass purchase order no 8938 dated 3 December 2009; 2 Cyndan invoice to Emirates Glass stated 9 December 2009 in relation to purchase order no 8938. 3 an unexecuted memorandum of understanding; 4 Emirates Glass purchase order no 10652 dated 24 November 2010; 5 Cyndan invoice to Emirates Glass dated 7 December 2010 in relation to purchase order 10652. We are instructed that payment of the amount in the invoice has not been received.
3. The sale referred to in pars 1 and a 2 of the letter is the sale alleged in pars 19 and 20 of the amended statement of claim. The sale referred to in pars 4 and 5 is pleaded in pars 25 and 26.
4. The present question is whether the proof tendered by the plaintiffs is sufficient to justify the court making an order against any of the defendants for the accounting sought by the plaintiffs in their amended statement of claim.
5. In Hancock v Rinehart [2015] NSWSC 646; (2015) 106 ACSR 207, Brereton J set out the essential requirements that must be satisfied by a plaintiff before the court will make an order for accounts on the common basis, as follows: [338] The plaintiffs seek orders for the taking of an account of the trust, in common form. A plaintiff who seeks the remedy of an account must prove that the defendant is an accounting party, and that the plaintiff is entitled to some (uncertain) sum from the defendant: Juul v Northey [2010] NSWCA 211 at [185] ; Mulherin v Quinn Villages Pty Ltd [2007] QSC 231 ; Re Sharpe (unreported, FCA, Drummond J, 11 December 1992) , [5]; R P Meagher, W M C Gummow and J R F Lehane, Equity Doctrines and Remedies, 4th ed, LexisNexis, 2002, at [25-025], citing Doss v Doss (1843) 3 Moo Ind App 175 at 196-7 ; 18 ER 464 at 472 per Dr Lushington.
6. The passage from Juul v Northey [2010] NSWCA 211 upon which his Honour relied is taken from the judgment of McColl JA (with whom Basten and Campbell JJA agreed), in which her Honour said: [185] The authors of Meagher, Gummow & Lehane, Equity Doctrines and Remedies 4th ed (2002) LexisNexis ("MGL") (at [25-025]) describe the matters the applicant for an order for accounts must establish as follows: In any case where a plaintiff seeks the remedy of an account, he must prove, inter alia, that the defendant is an accounting party, and that he, the plaintiff, is entitled to some sum from the defendant, although he is uncertain what is the quantum of that sum. He must do more than demonstrate that he might be owed some money, or that he wants, as it were, to have a kind of general discovery. The locus classicus in this regard is the judgment in Doss v Doss (1843) 3 Moo Ind App 175 at 196-7; 18 ER 464 at 472 by Dr Lushington, who said: It is also fit to state, that in the course of these proceedings, issues were asked for on the part of the Appellants to try the validity of the Will and the Deeds. Again, it must be remembered that the Decree cannot stand unless it be first clearly proved that the Appellants are, if anything should be found due to the Respondents arising from the acts and dealings of Ramchund, liable to answer that demand; we cannot make a Decree, ordering them to account, without first determining that they are liable to pay if anything be found due. A Decree for an account is not, as appears to have been assumed, a mere direction to inquire and report. It proceeds, and must always proceed, upon the assumption that the party calling for it is entitled to the sum found due. It is a Decree affirming his rights, only leaving it to be inquired into, how much is due to him from the party accounting. (emphasis added) The primary judge quoted this passage in the accounting judgment (at [58]), in considering the proper characterisation of the hearing in which a plaintiff obtains an order for inquiries or account.
7. The issue that is relevant to the evidence now being considered is whether the plaintiffs have done enough to establish that they are entitled to some sum from the defendants, although they are uncertain as to the quantum. The court will not order an accounting, which is likely to be an expensive exercise, if the accounting is likely to be futile because the claimant has not established that it is entitled to be paid some unquantifiable amount that is sufficient to justify the exercise.
8. The evidence does not establish whether or not any of the defendants were required to give the plaintiffs discovery during the present proceedings, or whether the plaintiffs used the powers of the court to obtain documentary proof that Cyndan Chemicals had made sales of Vitro Glaze in addition to those identified in the amended statement of claim. It does not appear that the plaintiffs caused a subpoena to be issued to the liquidator of Cyndan Chemicals.
9. Given the terms of Mr Raheb's letter to the General dated 6 September 2011, that is set out above, it is self-evident that the court was likely to find that no sales had been made after that date, unless the plaintiffs undertook the forensic exercise of demonstrating by tendering evidence of further sales that Mr Raheb's statements were not the last word.
10. As I have noted above, the plaintiffs relied on the following undated testimonial written by a senior vice president of sales and marketing of Emirates Glass, that was posted by Cyndan Manufacturing on its website, and left there during the continuation of the proceedings: To whom it may concern, Emirates Glass has been purchasing Cyndan's Vitroglaze for more than 3 years to apply to our glass before it is sold to the construction companies who use it to build residential and office towers and shopping centres. We also have a team that applies Vitroglaze to existing buildings where customers would like their buildings coated to protect against sand and salt. This makes keeping the buildings glass clean very simple and gives Emirates Class an added benefit when promoting our glass to customers. We did not face any problems with Vitroglaze when applied per instructions and we strongly recommend it to other glass manufacturers because of the benefits it gives to the customers.
11. On the face of this testimonial, it would appear that Emirates Glass may have been purchasing Vitro Glaze in greater quantities than would otherwise be suggested by the evidence.
12. Mr Michael Snounou, who is the principal of Cyndan Manufacturing, said in his affidavit that the testimonial was drafted by himself, and posted online in around April 2013. He said that in fact Emirates Glass had not purchased any additional stocks of Vitro Glaze, and "to that extent the reference is, I accept, inaccurate". Mr Snounou maintained his position in cross-examination that Emirates Glass had not purchased any additional stocks of the product, and the plaintiffs were not able to put to him any evidence that contradicted his claim. I accept Mr Snounou's evidence that the testimonial should at best be regarded as puffery, as it contains an element of truth but wrongly suggests that Emirates Glass made additional purchases over the period
13. The fact is that the plaintiffs have not proved that further sales were made by Cyndan Chemicals that gave the plaintiffs an unquantified entitlement to be paid monies by any of the defendants (assuming that the plaintiffs established that the defendants were accounting parties by reason of breaches of primary or ancillary duties to the plaintiffs based on Cyndan Chemicals being a defaulting fiduciary).
14. Counsel for the plaintiffs explained to the court that the plaintiffs wanted an order from the court for an accounting against the defendants, because in some unexplained way that would arm the plaintiffs with a basis for obtaining evidence of additional sales by Cyndan Chemicals from the UAE. It was not established how the courts or authorities of the UAE would lend their aid to an order from this court that the defendants account to the plaintiffs. If further sales by Cyndan Chemicals were made, it is inevitable that those sales would have been documented by purchase orders and invoices, which should have remained in the possession of Cyndan Chemicals, and ultimately the control of its liquidator. Realistically, if the plaintiffs were to prove that additional sales were made, that would be by means of the plaintiffs using the ordinary processes of the court to obtain relevant documentation from one or other of the defendants. That is something that the plaintiffs did not do.

Consideration

1. As I have observed at pars 72 to 77 above, the plaintiffs have established in a broad and inchoate way that they and Cyndan Chemicals made an arrangement that they would cooperate to visit the UAE in order to establish a market for chemical products manufactured by Cyndan Chemicals from which they could all share in the profits. In particular, the arrangement had the characteristics set out by the plaintiffs at par 8(d) and (e) of the amended statement of claim.
2. The plaintiffs did not, however, allege that as part of what they described as the initial joint-venture the parties agreed, expressly or by implication, that they would each act only in the interests of the parties as a whole, and not in their own commercial self-interest. The evidence would not justify a finding that the parties had agreed to put the collective interests ahead of their personal interests.
3. As pleaded by the plaintiffs in par 8(f), the parties did not agree before they left for Dubai as to how they would share in any profits, and they never did so. Perhaps more importantly, although the initial joint-venture, as alleged, involved the supply by Cyndan Chemicals of chemical products manufactured by it to NET, to enable that company to on-sell to buyers in the Middle East through a trading vehicle incorporated in the UAE, there was no agreement at all as to the prices at which Cyndan Chemicals would sell to NET. That is an issue that was left to be resolved following the parties gaining an appreciation of achievable selling prices in the UAE, which would enable the negotiation of sale prices as between Cyndan Chemicals and NET. Given that, when the parties went to Dubai, and during their time in the UAE, the basis of possible sales was completely indefinite, it would be difficult if not impossible for the court to conclude that Cyndan Chemicals had become disentitled by the existence of the alleged initial joint-venture to decide in its own interests the price at which it could profitably sell its chemical products to NET.
4. The modification alleged by the plaintiffs to the initial joint-venture, whereby it became the joint-venture, was ultimately no more than a suggestion by Mr Schwind that, because Mr Pearsall and NET would not be able to set up an effective trading vehicle incorporated in the UAE, Cyndan Chemicals should sell directly to a UAE company established by Mr Schwind and the General. Mr Schwind suggested that the UAE company would pay a percentage of profit on sales to Emirates Glass of 20% to NET, and 30% on other sales in the Middle East.
5. While there is some evidence, of an inconclusive and non-binding nature, that Mr Raheb on behalf of Cyndan Chemicals accepted the necessity for this change, Mr Pearsall on behalf of NET consistently rejected it in the most forthright terms. The plaintiffs cannot succeed on an argument that Cyndan Chemicals entered into the joint-venture, when the plaintiffs' own evidence proves absolutely that one of the plaintiffs refused to proceed upon that basis.
6. Although Mr Raheb was trenchantly criticised in the plaintiffs' submissions for having taken the position that Cyndan Chemicals' role in the proposed venture was solely to be a supplier of chemicals to some trading vehicle in the UAE, in which Mr Schwind and Mr Pearsall had interests, and to supply services such as training and education that would ordinarily be supplied by a manufacturer, the evidence establishes that that was Cyndan Chemicals' role.
7. After the verbal warfare broke out between the plaintiffs that has been examined in detail above, Cyndan Chemicals, through the efforts of Mr Raheb, persisted with the attempt to establish a market for its chemical products in the Middle East, primarily the UAE.
8. Mr Raheb continued to explore with Mr Schwind and Mr Pearsall arrangements that might be agreed whereby they could share in any profits from sales made by Cyndan Chemicals. In fact, Mr Raheb continued to try to mediate an armistice between Mr Schwind and Mr Pearsall, and as the latter was the most consistent antagonist, Mr Raheb continually tried to sooth him and to broker some rapprochement with Mr Schwind.
9. Mr Raheb continued to provide information to Mr Schwind and Mr Pearsall concerning his efforts to win sales in the UAE (although there appears to have been a breakdown in communications between Mr Raheb and Mr Schwind in the first half of 2011). The information that Mr Raheb provided to the plaintiffs may not have been complete, but it was sufficient to dispel any argument that in some unconscientious way Mr Raheb caused Cyndan Chemicals to surreptitiously hide its dealings with potential buyers in the Middle East from the plaintiffs.
10. It is not clear whether Emirates Glass ever signed the MOU requested by Mr Raheb. As I have noted, the evidence does not include a signed MOU. (The copy of the MOU provided by Cyndan Chemicals' solicitors on 6 September 2012, referred to in par 197 above, was unexecuted). It was a term of the draft MOU that sales would be made by Cyndan Chemicals "through a local distributor to be appointed". That is consistent with Cyndan Chemicals continuing to leave open the possibility that the sales would be made in a way that was consistent with the initial joint-venture or the joint-venture.
11. Mr Raheb did not keep the possibility that a MOU would be signed with Emirates Glass a secret. He discussed delays in Emirates Glass proceeding to execute the document with Mr Schwind in an email dated 3 May 2010, and the only evidence that Emirates Glass signed the MOU is to be found in the disclosure to that effect in an email dated 2 November 2010 from Mr Raheb to Mr Pearsall.
12. Sight should not be lost of the fact that about one year elapsed between Emirates Glass' initial purchase order dated 3 December 2009, and its second dated 24 November 2010. A further period of almost a year elapsed, with no additional purchase orders shown by the evidence, until Mr Raheb wrote his withdrawal letter to the General on 6 September 2011. The elapse of such long periods with no real success in penetrating the Middle East market is itself significant to the question of whether Cyndan Chemicals was bound to adhere to the alleged initial joint-venture or the joint-venture. The efforts of the parties had not succeeded to any significant degree, the cooperation between Mr Schwind and Mr Pearsall was moribund, and no good reason has been shown by the plaintiffs as to why Cyndan Chemicals was not free to pursue its own commercial interests.
13. This conclusion is reinforced by the evidence that exists concerning the proposed sale prices to Emirates Glass. The evidence is not extensive, but it shows that on 15 October 2009 and 2 November 2009 the suggested price was US$100 per litre. On 20 November 2009 and 3 December 2009, the price quoted was AU$250 per litre. By 9 December 2009, the price quoted by Cyndan Chemicals was US$68 per litre. By emails that Mr Raheb sent to Mr Pearsall on 2 November 2010, Mr Raheb explained in some detail what the effect was of reductions in the sale price that Cyndan Chemicals had to accept from Emirates Glass on the company's margins, and its ability to share profits with Mr Schwind and Mr Pearsall. In one email Mr Raheb explained that the sale price to Emirates Glass was $50.50 per litre. The plaintiffs' case entirely ignored the effect of the price reductions that Cyndan Chemicals would have been required to accept on the ability of that company to implement the initial joint-venture or the joint-venture.
14. Although the plaintiffs complain that Cyndan Chemicals did not comply with the joint-venture, there is no evidence that the UAE company controlled by Mr Schwind and the General ever made any sales in the UAE, or submitted purchase orders to Cyndan Chemicals.
15. If the joint-venture failed, it was not on the evidence because of any inadequate effort by Mr Raheb or Cyndan Chemicals. In different ways, the plaintiffs failed to carry through the proposed venture.
16. The plaintiffs have not established in fact that the initial joint-venture or the joint-venture was made on any basis that obliged Mr Raheb or Cyndan Chemicals to act other than in their own commercial interests, and whatever legal or equitable effect or significance may be given to those inchoate and incomplete arrangements, the plaintiffs have not established that the arrangements were breached by Cyndan Chemicals.
17. There is no basis at all for characterising any of Cyndan Chemicals' conduct as involving some dishonest and fraudulent design.
18. Accordingly, there is no basis for any liability on the part of Mr Raheb or Cyndan Manufacturing under the second limb of Barnes v Addy.
19. Cyndan Manufacturing did admit receiving payment for two sales of product to Emirates Glass and Saudi American Glass Company Ltd: see par 33 above. However, those receipts did not involve Cyndan Manufacturing in any liability to the plaintiffs under the first limb of Barnes v Addy, as Cyndan Chemicals' conduct did not involve any breach of duty owed to the plaintiffs.
20. There is no basis in any event for the court to order Cyndan Manufacturing to pay any part of those receipts to the plaintiffs, as the parties did not ever with sufficient certainty make an agreement as to the commercial structure by which sales of Cyndan Chemicals' products would be made to the Middle East, or how any profits earned would be shared. It is not simply a matter of there being no agreement concerning the amount of the respective profit shares. The joint-venture as pleaded contemplated that Cyndan Chemicals would sell product to the UAE company controlled by Mr Schwind and the General, but the price was never agreed. The plaintiffs' profits were to come from the UAE company's profit margin, which was to be shared between that company and NET, on a basis which Mr Pearsall completely rejected.
21. The plaintiffs put their case on the basis of the principles laid down by the High Court in United Dominions Corporations Ltd v Brian Pty Ltd (1984-1985) 157 CLR 1 at 11-12, to the effect that the relationship between prospective joint venturers may be a fiduciary one, notwithstanding that a formal agreement has not yet been executed. While I, of course, accept that principle, I have rejected the plaintiffs' claim that the evidence in the present case justifies a finding that the prospective venture between the plaintiffs and Cyndan Chemicals had reached the point where the parties became obliged to act in the joint interests of the parties rather than their own commercial interests: see the observations by Finn J (with whom Sundberg and Emmett JJ agreed) in Gibson Motor Sport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569; [2006] FCAFC 44: [16] The short point to be made is that cooperative action, the pooling or sharing of resources (human and otherwise), or multiple, interlocking or interdependent contracts are characteristic of many types of business arrangements which only in a colloquial sense could be described as a "joint venture". Such arrangements may highlight the importance in a given instance of such implied duties as the duty to cooperate (cf Butt v M'Donald (1896) 7 QLJ 68). Rarely, though, will there be anything fiduciary about the arrangements themselves as they will not envisage a form or forms of cooperation which is or are potentially fiduciary in character (e.g. the sharing of control or of profits and losses; the creation of a commonly owned vehicle to effectuate what is agreed; the assumption of similar rights and obligations etc.).
22. Further, in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 Finn, Stone and Perram JJ said at [177]: A person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest.
23. Finally, I respectfully adopt the following statement of principle by Barrett JA (with whom Meagher and Ward JJA agreed) in Streetscape Projects (Australia) Pty Ltd v City of Sydney (2013) 85 NSWLR 196; [2013] NSWCA 2 at [121]: …a fact-based fiduciary duty cannot arise unless one party undertakes, expressly or impliedly, to act in the particular factual context solely in the interests of the other.
24. In my view, the plaintiffs' claim that Cyndan Chemicals breached fiduciary duties that it owed to the plaintiffs, and that Mr Raheb and Cyndan Manufacturing are liable on an ancillary basis, fails totally on the facts for the reasons that I have set out above.
25. As a separate matter, the plaintiffs have also failed to establish a right to an order for an accounting, for the reasons that I have also given above.
26. Consequently, the order that should be made is that the plaintiffs' claim is dismissed with costs.
27. Those costs should be payable on the ordinary basis, unless the defendants inform the court that they have an argument that the cost should be payable on some different basis. The defendants should advise my associate within seven days if they wish to argue for a different basis. If that happens, I will then make directions to enable that issue to be determined.

A coda

1. As I have explained above, I have not found the evidence given by the primary witnesses in their affidavits, or in cross-examination, to be of great significance or assistance in determining the issues in these proceedings. The affidavits provide a relevant context to the emails and other communications, but generally concern communications and events that are of background significance. The lengthy cross-examination of the witnesses did not yield significant evidence that would justify a comprehensive analysis of the cross-examination.
2. In case it should be of importance in the future, I propose to make the following brief comments concerning my view of the credibility of Messrs Pearsall, Schwind and Raheb. I accept that each of the witnesses attempted to give truthful and candid evidence. Mr Pearsall had some difficulties that were ultimately realised to be caused by his difficulty in hearing questions, particularly early in the hearing. With respect, Mr Pearsall appeared to have some difficulty comprehending certain questions put to him in cross-examination, in a way that would enable him to respond in a conventional way. I have had no difficulty in generally accepting the evidence given by Mr Schwind. The same is true for Mr Raheb's evidence. The plaintiffs attacked Mr Raheb's credibility in their final submissions, but in my view that attack was misconceived. Mr Raheb responded to his cross-examination in somewhat difficult circumstances, and I am satisfied that he made his best attempt to do so in a truthful and straightforward way. He may at times have experienced some difficulties in responding to questions, which largely took the form of requiring relatively detailed responses to a long series of emails that had been produced many years before the cross-examination, and it seemed to me that sometimes Mr Raheb had an understandable difficulty in mentally retrieving the context so that he could respond adequately to the questions. I do not think that these difficulties were to Mr Raheb's discredit.

Amendments 05 May 2017 - par 232 format change to quoted portion DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 May 2017