Loss of Opportunity
392 The plaintiff submitted that the parties to the Agency Agreement contemplated that the plaintiff would be on selling the international memberships as part of a travel and accommodation package to be offered for sale to up to 10,000 persons travelling to Australia for the Games. Additionally SOCOG was on notice of the fact that the plaintiff was so authorised and would lose the opportunity to profit from that opportunity if it interfered with the plaintiff's contractual rights and caused the agency to be lost.
393 SOCOG submitted that the conduct of instructing TOC to terminate the Agency Agreement did not prevent the plaintiff from selling travel and accommodation packages. It was submitted that such conduct only prevented the plaintiff from selling International Memberships of the Club. It was submitted that the only benefits that the plaintiff was entitled to receive for his customers pursuant to the Agency Agreement were those set out in clauses 7.1 and 1.1 of the Agency Agreement. They were Welcome Kits consisting of a satchel, magazine, video, CD, membership certificates, pin, Australian Souvenir and, subject to SOCOG approval, an invitation to the Opening Ceremony dress rehearsal. The further benefit was the International Membership Mailer the contents of which were at SOCOG's discretion.
394 The plaintiff submitted that on the balance of probabilities he would have sold most if not all of the available 10,000 packages. It was submitted that TOC and the plaintiff entered into the Agency Agreement with a view to exploiting the market that was seen by them to be substantial in the Mainland of the PRC that contains a substantial portion of the population of the world.
395 It was also submitted that the package possessed the unique feature of membership of the Club, which was an affiliation or loyalty Club intended to provide a marketing advantage for Club related products. Emphasis was placed on the exclusivity of the plaintiff's agency for the PRC. None of the other travel agents or persons wishing to market travel deals or packages from China to the Games had this advantage.
396 Shortly after the Agency was granted the Club budgeted for revenue from the sale of 3,300 International Memberships. In the April Club Committee Report the net contribution was fixed at $265 per member accounting for $875,000. ( Ex. A 289) which related solely to China (tr. 702). The April Club Committee report was prepared by Noble in consultation with Wyness who had considerable experience in marketing, particularly in relation to affiliation and loyalty programs. Wyness' involvement in the budgeting for 3,300 sales is relied upon by the plaintiff in support of the submission that such is the very least number of sales the Court would find the plaintiff would probably have sold, but for the wrongful termination of his Agency Agreement.
397 Reading, who was also at the April Club Committee meeting, was the Group General Manager, Commercial and Marketing, of SOCOG. There is nothing in the evidence to suggest that Reading regarded the budget estimate of 3,300 sales as unrealistic. It is submitted that the failure of SOCOG to call evidence from Reading justifies an inference that his evidence could only assist the plaintiff. It is also submitted that the minutes of the April Club Committee meeting support an inference that the market for sales in PRC had substantial prospects. In this regard reliance was placed upon the entry in paragraph 3.11.7 which recorded "revenue share arrangements expected with NOC's" and paragraph 3.11.8 in which Mr Larrum of SOCOG was recorded as saying the International Olympic Club was a "potentially good revenue generating mechanism" (Ex. A 794-795).
398 Between 15 March 1999 and 5 December 1999 the plaintiff made eight trips to China. He was in China for 138 days and made 54 domestic airline trips to various parts of the country. By the time the plaintiff accepted the repudiation and brought the Agency to an end on 22 December 1999, he had made contact with a wide range of people in China for the purpose of promoting his Agency and establishing a network of sub-agents. He had put in place contracts with China Everbright International Travel Inc., the travel agency of the government of the PRC and the Jin Xiang Entertainment Company in Zhengzhou City in the Henan Province (the JXE Co). The unchallenged evidence of Mr Gao is that the JXE Co had accepted deposits for considerably more than the initial allocation of 500 memberships. Exhibit W contains 600 receipts for deposits taken by that company.
399 The plaintiff also relied upon SOCOG's file note of the meeting on 3 December 1999 which records that "the conference in Shanghai will lead to a great number of enquiries". It is submitted that the decision recorded in the file note to "stop the conference" underscores the popularity of the plaintiff's packages. It is submitted that Reading was the person with the most pressing interest to stop a flood of inquiries because he was grappling with the problem of whether to return the money the plaintiff had paid to TOC or honour the obligation to provide the member benefits. It is submitted that the reason recorded to stop the conference evidences a fear that if it went ahead it would lead to a great number of enquiries and embarrass SOCOG.
400 SOCOG submitted that the plaintiff could have obtained souvenirs and merchandise from other sources and that the Club was "merely an add-on" to the plaintiff's packages (Tr. 624-625). It was submitted that on the plaintiff's evidence, there was a strong market in China for travel and accommodation packages to the Games. In this latter respect reliance was placed upon Mr Hu's evidence (6/2/2001. pars.12 & 13) that after the plaintiff informed him that he could not proceed with his Agency Mr Hu was able to sell "numerous travel and accommodation packages". It was submitted that this evidence demonstrated that the Club membership component would not have been material to the success of the sale of the plaintiff's packages. Reliance was also placed on the evidence of Mr Gao who agreed that anyone who had a business of selling travel packages to the Games which included airfares, accommodation and tickets to events would have a successful business in China (tr. 447-448).
401 The comparison with Messrs Hu and Gao may have been more apt had they too been arrested and been the subject of press coverage in the Chinese newspapers reporting that they had been arrested and charged with substantial fraud charges as was the plaintiff (Ex D 87-103). SOCOG's evidence demonstrates the importance of having "face" to do business in China (tr. 600). Once the plaintiff could no longer proceed with his Agency he had to inform those with whom he had dealt in China that he could not continue with the proposed arrangements. This alone caused a loss of "face" which was compounded by the press reports, which I am satisfied would have identified the plaintiff in the minds of those who read the reports with whom the plaintiff had dealt. I am satisfied that such loss of "face" would have impacted adversely on the plaintiff's capacity to do business in China in particular to market the packages that were the subject of the press reports. In these circumstances the comparisons with Messrs Hu and Gao is not apt or helpful to SOCOG's case.
402 The benefit for which the plaintiff bargained was the exclusive right to market the total package of which the Club membership was a component. I am satisfied that the other component parts of the package were all the more attractive because of the connection to what was seen as an Olympic entity, in this instance the Club. This is what the SOCOG and TOC representatives at the April Club Committee were predicting and I am satisfied on the evidence (e.g .Ex W) they had some justification for doing so.
403 The plaintiff and SOCOG each relied on the evidence of expert accountants. The plaintiff relied upon the evidence of Goodwin Cullimore Allen Gower (Mr Gower) of GCA Gower & Co and SOCOG relied upon the evidence of John Henry Banks (Mr Banks) of KPMG.
404 In his original report (9 June 2000) Mr Gower refers to the projection of the fixed/flexible cost expenses document prepared by the plaintiff in which the expenses were projected to be $58,460,000. In addition to those expenses was the US $1 million the plaintiff promised to the Chinese government as well as US $50,000 per gold medal winner. Mr Gower considered that it was reasonable to expect that the packages would have been sold at an average price of AUS $8,000. This opinion was based upon the evidence of the plaintiff in his affidavit of 13 March 2000 par 28, the plaintiff's letter to his sub-agents advising that the cost of children under 12 years of age would be AUS$5,400 and a number of other documents. The other documents included the agreement with the Wuliangye Group in which it was agreed to pay $8,700 per package, the agreement with the Everbright travel company in which a converted Australian dollar amount of $7,385 is mentioned and a letter from the plaintiff to the Chinese Consul in which mention is made of a converted Australian dollar amount of $9,000 per package.
405 Mr Gower has assumed that 10,000 packages would be sold thus giving a revenue of $80 million. He then subtracted the projected expenses of $58,460,000 and a figure of $3 million for payment to the Chinese government to reach a total cost figure of $61,460,000. Mr Gower then subtracted that figure from $80 million to reach the figure for lost profit of $18,540,000.
406 In his first report (7 December 2000) Mr Banks reviewed Mr Gower's first report and concluded that it was generally understood that the Club was not a success because the benefits it provided were considered poor value. He expressed the view that the plaintiff could have provided equivalent benefits at a cost of no more than membership of the Club. He concluded that the Agency Agreement had no value to the plaintiff. Mr Banks was also critical of the plaintiff's projected expenses. He required more information in relation to return air tickets and suggested that the concept of paying for what he described as a "premium travel package" which required four persons in one room was questionable.
407 Mr Banks suggested that the tour would incur a loss if the tickets provided for in the agreement with the Wuliangye Group were provided to all purchasers of the packages. These extra tickets were only for the initial members as part of the proposed presentation ceremony in Shanghai on 6 December 1999. Mr Banks' concern is therefore without foundation. There were a number of other areas of projected expenses upon which Mr Banks did not reach a conclusion because he suggested he had not seen "adequate information" in relation to them.
408 Mr Gower produced a second report (7 August 2001) in which he reviewed documents produced under subpoena by Mr Hu and responded to Mr Banks first report. Mr Gower used Mr Hu's documents that disclosed costs of hotel accommodation, events and bus charter to effectively check the reasonableness of the plaintiff's projected expenses. It is apparent from the documents that the plaintiff's projected expenses for accommodation of $150 per person per night was significantly higher than the cost of the accommodation Mr Hu was able to secure. Mr Gower concluded that the accommodation expense allowance that he had adopted was adequate and likely to be conservative.
409 Mr Gower also reviewed Mr Hu's documents relating to the cost of tickets for various events and concluded that the plaintiff's projected expenses of $250 per person for tickets to events was reasonable. After reviewing Mr Hu's documents in relation to bus charter costs Mr Gower was satisfied that the plaintiff's projected expenses were too low in respect of this item. He concluded that the expenses should be increased by $60 per person amounting to $600,000 for 10,000 packages. This reduced the loss of profit calculation from $18.54 million to $17.94 million.
410 In reviewing Mr Banks report Mr Gower opined that Mr Banks had failed to recognise that the plaintiff had an agreement to bring 10,000 Chinese visitors to the Games and provide all the necessary accommodation and services during the visit. Mr Gower disagreed with Mr Banks' valuation of the Agency Agreement at nil and stated that the opportunity provided to the plaintiff as the exclusive agent to sell travel and accommodation packages of which Club membership was a component could not reasonably be equated to Club membership only, which is what Mr Gower suggested Mr Banks had done.
411 Mr Banks' second report (20 August 2001) also reviewed the documents produced on subpoena by Mr Hu. By comparison with the accommodation and event cost Mr Banks reached a conclusion that the plaintiff's projected expenses were "inadequate" by at least an amount of approximately $400. He agreed with Mr Gower that the plaintiff's projected expenses in relation to bus charter were $60 per person too low. He also expressed a lack of understanding of what the packages intended to provide on certain days of the itinerary and highlighted the fact that the plaintiff's projected expenses did not include any cost for inbound trips.
412 Mr Banks also reviewed the reasonableness of the plaintiff's claim that it was more probable than not that he could have sold 10,000 packages. In this review Mr Banks once again relied upon the documents produced by Mr Hu and concluded that he had sold "no more than 1000". Mr Banks relied upon a document from the Australian Bureau of Statistics (ABS) relating to overseas arrivals and departures in the period July 2000 to December 2000. The monthly arrivals from China ranged from 7,600 in June 2000 to 15,100 in December 2000. Mr Banks noted that the number of visitors from China increased in each of the months from June to December between 1999 and the year 2000, except September 2000, the month of the Olympics. In his first report Mr Banks referred to an article "Sydney sales of admission tickets to go to Olympics sluggish in China" from the website Chinaonline.com. That article referred to a number of reasons why the sales of tickets in China were sluggish. These included the fact that the Olympics were to take place before the long holiday celebrating China's National Day on 1 October, a claim that the tickets were expensive, a suggestion that the Olympics had been poorly publicised in China, a reference to travel restrictions for top-level executives and a claim that illegal tickets had been available in China at a low price.
413 Mr Banks' opinion based on the documents reviewed by KPMG was that the assumption that 10,000 packages would have been sold at an average of $8,000 each was "grossly overstated" (Ex. 30). Mr Banks did not review the evidence of Mr Gao in respect of the actual sales or the deposits which were held by Everbright or the JXE Co (Ex W).
414 The plaintiff relies upon one aspect of Mr Banks' evidence relating to his analysis of visitor figures produced by the ABS. which shows that the number of visitors from Australia to China in September in the Olympic year was down by approximately 4,100 from the previous year. It is submitted that 4,100 visitors would not therefore be out of the ordinary and up to 10,000 would be within the bounds of probability.
415 The plaintiff submitted that the Court could be confident that the net profit before tax the plaintiff would have made from each package, but for the intentional interference with his contractual rights, is in the order of $1,794, being the net profit before tax, expressed on a profit per package basis.
416 Mr Pembroke SC emphasised that the plaintiff had not provided any evidence in relation to the working capital available to him to finance the project. It was submitted that at the very least the plaintiff would have been required to pay deposits in relation to their tickets and accommodation well in advance of the Games. It was also submitted that the plaintiff has not proved the size of the deposits or when they would be payable.
417 Mr Pembroke also attacked the figure of $8,000. He submitted that Mr Gower did not perform any independent function or check the $8,000, but merely adopted that figure. He also submitted that there was an almost complete absence of supporting evidence as to the cost of implementing the plaintiff scheme.
418 In reaching a reasonable and fair figure for the opportunity I am satisfied the plaintiff lost by reference to the degree of probability and possibility: Poseidon Ltd & Sellars v Adelaide Petroleum N.L.(1994) 179 CLR 332, I have had regard to all the evidence and in particular to the expert opinions expressed by Mr Gower and Mr Banks. The actual contracts that were entered into are of assistance as are receipts for deposits that were received for the packages (Ex. W).
419 I am satisfied that the $1,794 extrapolated from the figure reached by Mr Gower should be reduced to an amount $1,200 as a fair and reasonable figure at which to assess the plaintiff's loss in respect of each package. I am also satisfied that having regard to the budgeted sales of packages, the possible difficulties that may have been encountered by the plaintiff, both in respect of the controversies surrounding SOCOG itself and the possible difficulties obtaining visas and/or tickets together with the date of the Olympics clashing with the Chinese holiday, the actual number of deposits that had been taken by the end of 1999 and the actual sales made by Mr Hu, a reasonable and fair number of sales that the plaintiff could have expected to have sold and for which he could have obtained a Visa is 2500.