Plaintiff v Defendant

Supreme Court of Victoria|2008-05-06|Before: ROBSON J

CONTRACT - Amendment - Contract requires amendments to be in writing - Purported oral amendment - Amendment to contract constitutes a contract - Amendment by conduct - Intention to enter contract - Objective test of a reasonable person in the position of the other contracting party - Burden of proof - Whether defendant who alleges amendment to agreement bears evidentiary or legal burden of proof

CONTRACT - Repudiation - Acceptance of repudiation - Election to retain contract on foot

CONTRACT - Option to renew contract - Whether option must be exercised in good faith

CONTRACT - Agency agreement - Wrongful termination of authority of agent - Whether agency agreement otherwise remains on foot

CONTRACT - Damages on breach - Damages for repudiation - Liquidated damages clause - Whether a penalty - Interest above rate set by the Penalty Interest Rates Act 1983 - Whether a penalty

Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441

Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Australian Broadcasting Corp v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

Automatic Fires Sprinklers Pty Ltd v Watson [1946] HCA 25; (1946) 72 CLR 435

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153

Brogden v Metropolitan Railway Co. (1887) 2 App Cas 666

Carr v J A Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327

Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520

Commonwealth of Australia v Crothall Hospital Services (Aust) Ltd [1981] FCA 117; (1981) 54 FLR 439

Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

Dockside Holdings Pty Ltd v Rakio Pty Ltd [2001] SASC 78; (2001) 79 SASR 374

DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423

Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79

GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2008) 128 FCR 1

Gordon v Australasian & New Zealand Theatres Ltd (1940) 40 NSWSR 512

Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341

McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 176 ALR 711

Murray Irrigation ltd v Balsdon [2006] NSWCA 253

Pacific Carriers Ltd v BNP Paribas [1982] HCA 24; (1982) 149 CLR 337

Pico Holdings Inc v Wave Vistas Pty Ltd [2005] HCA 13; (2005) 214 ALR 392

Ringrow Pty Ltd v BP Aust Pty Ltd [2005] HCA 71; (2005) 224 CLR 656

Robinson v Harman [1848] EngR 135; (1848) 1 Ex 850

Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332

Thomas Marshall (Exports) Ltd v Guinle (1979) Ch 227

Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 154

Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17

Willfa & Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426

Willis v The Commonwealth [1946] HCA 22; (1946) 73 CLR 105

1 GT Corporation Pty Ltd ("GT") claims damages against Amare Pty Ltd ("Amare") for several breaches of an agency agreement under which GT acted as an agent for Amare from 2001 to 2005.

2 Amare is a small Melbourne based company that sells and distributes personal protective equipment. Currently, it has about twenty eight employees. Amare's sole shareholder and managing director is Mr Geoff Pizzey.

3 GT's sole shareholder and director is Mr Grant Tuckett. He uses the company to offer his services and, relevantly to the agency agreement in dispute, he used the company to offer his services as a salesman for Amare.

4 Prior to GT entering into the agency agreement with Amare, Mr Tuckett worked for Alsafe Safety Industries Limited ("Alsafe") another business selling personal protective equipment. At one stage, Mr Tuckett was working on commission but after Alsafe was taken over by a large public company Alsafe ceased to employ Mr Tuckett on a commission basis and employed him on a salary. Whilst working at Alsafe, Mr Tuckett worked with Mr Ron Williams as his immediate superior.

5 In 1997, Mr Pizzey ceased to manage Amare on a day to day basis and employed a general manger to do so. In June 2001, the then general manager Mr Ross Kinsman was replaced as general manager by Mr Ron Williams. Mr Williams considered Mr Tuckett to be a good salesman and sounded out Mr Tuckett about moving to Amare. Mr Tuckett said that he would be willing to do so if he could use his company GT as the contracting party and that GT be paid commission on the margin earned on sales.

6 Mr Williams introduced Mr Tuckett to Mr Pizzey prior to Mr Pizzey leaving overseas for a holiday at the end of September 2001. There is some dispute about the timing and circumstances in which Mr Tuckett was introduced to Mr Pizzey.

7 Whilst Mr Pizzey was overseas on his holiday, Mr Williams and Mr Tuckett finalised negotiations for the agency agreement between GT and Amare. Mr Pizzey gave evidence that he expressly instructed Mr Williams not to enter into an agreement with GT whilst Mr Pizzey was away on holidays.

8 In any event on 10 October 2001, the agency agreement was entered into. Mr Tuckett prepared the contract with the help of a solicitor friend and used as a precedent a contract that he had considered putting to Alsafe.[1] Mr Williams and Mr Tuckett made some hand written amendments and signed the contract.

9 Mr Pizzey gave evidence that he did not become aware of the contract until late January 2002 some two months after he returned from his holiday. He did not like the contract. In 2005, he informed Mr Tuckett that he thought the contract was a fraud and that Mr Tuckett and Mr Williams were in "cahoots" in entering into the contract. Be that as it may, Amare does not dispute the validity of the contract.

10 It will be necessary to go to the detail of the contract in due course. At this stage it is sufficient to describe it in general terms. GT was appointed the sole and exclusive agent to act for Amare in three Victorian geographical areas and in respect of other nominated customers. The three areas were part of several areas that Amare divided its Victorian market into. The areas were then known as areas 1, 1A and 2. These subsequently became areas 210, 140 and 220. Speaking generally, area 1 covered the western suburbs of Melbourne and the area down to Geelong. Area 1A was the area beyond Geelong in the Western District to the South Australian border and south of the Ballarat Highway. Area 2 included the CBD of Melbourne and its northern suburbs.

11 Although not specified in the contract, Mr Tuckett had informed Mr Williams that GT intended to employ Mr Chris Littler, another Alsafe employee to handle area 220.

12 The contract provided that each month GT would be paid commission of 60 per cent of the gross margin or profit on the first $20,000 of sales and 40 per cent of the balance.

13 The agency agreement was to last for five years with GT having the option to extend the agreement for three further five year terms. There is a dispute as to whether or not GT required the consent of Amare to extend the term.

14 As mentioned above, GT was to have the exclusive right to sell Amare's product to the customers in the designated areas so that Amare could not engage any one else to sell products in those areas. Amare disputes that the agency was exclusive. It submits that Amare could sell its products in the areas allocated to GT so long as it credited GT for the sales for the purposes of its commission entitlements. Amare did not say what affect such sales would have on GT's performance under the automatic termination clause which I discuss below.

15 The agency agreement provided for automatic termination. In particular, it provided that the contract would be terminated if a defined "Minimum Performance" was not achieved for three consecutive months irrespective of the wishes of the parties. The construction of the terms governing this automatic termination is a matter in issue.

16 The "yearly budget" was used in calculating whether the Minimum Performance had been achieved. What constituted the "yearly budget" is one of the matters in dispute. Suffice it to say that for the first year of the contract the level of sales of Goods to be achieved as "the Budget" was set at $1,420,000 (including GST) at a 24.72% trading margin. One of the issues in the case is whether or not the inclusion of GST was a common mistake that ought to be rectified by amending "including" to "excluding" GST.

17 In October 2001, GT commenced to act as agent. GT signed an employment agreement with Mr Littler on 11 October 2001, the day after the agency agreement was signed.[2] The actual costs to GT of employing Mr Littler was estimated by Mr Tuckett in February 2002 at $9,000 per month or $108,000 per annum[3].

18 Mr Pizzey gave evidence that he first discovered the existence of the agency agreement in late January 2002 when he had occasion to go into the office of the general manager Mr Williams and located the agreement on his desk. He said that he read it and was concerned to see that the commission was 60 per cent on the first $20,000 of gross profit per month and the balance at 40 per cent. Mr Pizzey said that he discussed the agency agreement with Mr Williams. Mr Williams says Mr Tuckett had informed him that if Mr Pizzey was unhappy with any aspects of the agency agreement he would discuss them with Mr Pizzey and resolve them. Mr Pizzey also said that Mr Williams told him that GT was employing Mr Chris Littler to look after area 220 and that Mr Tuckett had said that GT needed the extra 20 per cent commission rate over 40 per cent to meet the extra costs of employing Mr Littler until sales had been built up in area 220. After that happened, GT would be happy to reduce the commission rate of 60 per cent on the first $20,000 of gross profit per month back to 40 per cent. Mr Tuckett disputes this.

19 Mr Pizzey says that prior to his departing for his overseas holiday at the end of September 2001 he had been shown a copy of an agreement between GT and Alsafe and his recollection was that a commission of 34 per cent was being paid by Alsafe. An unexecuted copy of an agreement between GT and Alsafe tendered into evidence uses a commission rate of 38 per cent on gross margins.[4] In any event, Mr Pizzey had in his mind that 34 per cent was the rate paid by Alsafe. At that time, Mr Pizzey had no experience of paying commission rather than a salary and all salespeople working for Amare were on a salary with the possibility of bonuses if budgets were reached.

20 As mentioned above, Mr Pizzey gave evidence that he found out about the contract in late January 2002 and was none too pleased about it. He says he was especially unhappy about the commission structure of 60 per cent on the first $20,000 of gross profit on orders received and 40 per cent on the balance. He was also particularly concerned about the term of the agency agreement and that if extensions were exercised it could run for twenty years.

21 As a consequence of discovering the agency agreement, Mr Pizzey had a meeting with Mr Tuckett on 21 February 2002. Mr Williams was present as well.

22 Mr Tuckett prepared discussion points for the meeting. After the meeting, Mr Tuckett added notes about matters arising out of the meeting and gave a copy to Mr Pizzey. The notes recorded that Mr Pizzey was to put forward new commissions presumably for GT to consider.

23 Mr Pizzey says that at the meeting he discussed with Mr Tuckett the commission rate and suggested a flat rate of 34 per cent should be payable. He says that he could not budge Mr Tuckett one per cent. Mr Pizzey and Mr Tuckett also discussed the allocation of customers to GT and sought to correct what Mr Tuckett said were incorrect allocations.

24 On 14 March 2002, a second meeting was held between Mr Pizzey, Mr Williams and Mr Tuckett. Again allocations were discussed. Mr Pizzey did not put forward any new commission rates. He said he did not do so as it would have been a waste of time. On 11 April 2002, a third meeting was held between Mr Pizzey, Mr Williams and Mr Tuckett. Mr Pizzey says he again raised the issue of commissions being too high but that Mr Tuckett would not change GT's commission arrangements. On 16 May 2002, a fourth meeting was held between Mr Pizzey, Mr Williams and Mr Tuckett and it was agreed to discuss in October 2002 the commission splits between GT and Amare.

25 It is common ground that, due to personal problems, Mr Littler did not perform. In July or August 2002, Mr Pizzey raised his concerns with Mr Tuckett concerning Mr Littler's performance[5]. Prior to 9 September 2002, Mr Williams and Mr Tuckett discussed Mr Littler's performance[6].

26 At Mr Tuckett's request, Mr Williams drafted a letter from Amare to GT[7] of 9 September 2002 as follows:

The results from your (Tuckett's) direct area of activity (Area 210 - western and south west suburbs) are strong and growing ... unfortunately the results out of Area 220 are headed in the opposite direction. Chris has failed to achieve his monthly budgeted sales in every month since November (2001) with the exception of February (2002) ... he is struggling to even maintain a turnover value of the territory as it was when allocated to GT Corporation back in November 2001 which is approximately $45,000 per month. ... Geoff and I have both expressed our concerns to you verbally on several occasions over the past couple of months. ... If Chris again fails to achieve his sales budget for September we will have no choice but to provide GT Corporation with 30 days formal notice of our intent to withdraw the allocated territory 220 (north western city) from Chris' control.

Amare Safety will look to other options to manage and develop this territory. We would be prepared to discuss with you specific customers or parts of the territory 220 that you may wish to retain under your direct responsibility, however, we must firstly resolve this over-riding issue.[8]

27 On 17 September 2002, GT terminated Mr Littler's employment. The letter from Mr Tuckett noted:

GT Corporation's sole area of business is the sale of Amare Safety's products to their customers in Amare Safety's defined areas 140, 210 and 220 (approximately 50 per cent by area of Amare Safety's Melbourne metropolitan business). You are directly responsible for area 220.

I have been concerned about your poor performance shortly after commencement of your employment in November last year ... I have continuously warned you that you need to improve your performance, specifically at your performance review on 2 May and again in July.

Pursuant to your employment contract, you are required to achieve your contribution budget for allocated area each month. ... You have failed to achieve your contribution budget 6 times, including each of the last 3 months and are unlikely to achieve it for the current month ... [9]

28 On 16 October 2002, Mr Tuckett and Mr Pizzey met again. After the meeting the commission paid to GT was reduced from 60 per cent of gross profit to 40 per cent as from 1 November 2002. The parties are in dispute as to whether or not that reduction was done with the agreement of GT in accordance with the agency agreement or merely unilaterally imposed by Amare. GT describes this as the First Commission Breach.

29 In October 2002, Mr Littler left the employ of GT and on 31 October 2002 Mr Tuckett, Mr Pizzey and Mr Williams met to discuss the future of area 220 that had been serviced by Mr Littler. After that meeting, area 220 was allocated by Amare to one of its employees, Mr Michael Smith. The parties are in dispute as to whether or not Amare breached the agency agreement by giving area 220 to Mr Smith and effectively denying GT the right to service area 220. GT describes this as the Territory Breach.

30 In December 2002, Mr Tuckett telephoned Mr Smith and acknowledged Mr Smith was taking over area 220.

31 In about April 2003, Mr Williams left the employ of Amare and in about June 2003 was replaced by Mr Tony Riddell as general manager.

32 On 21 September 2003, Mr Tuckett emailed Mr Riddell in which Mr Tuckett confirmed the accounts that GT retained despite the accounts being in area 220 and confirmed that area 220 was Amare's territory.

33 On 4 December 2003, Mr Pizzey and Mr Tuckett had further discussions about amending the agency agreement. Mr Pizzey was still unhappy about its terms.

34 On 16 December 2003, Mr Tuckett sent to Mr Riddell a proposed new agency agreement with the amendments discussed, particularly the commission payable. The proposed agreement included a budget of $1,772,000 exclusive of GST on a margin of 22.368%.[10] Earlier in about July 2003, Mr Williams had put forward a budget for GT for 2003-2004 which included budget sales of $1,772,000 and a budget margin of $396,690.[11] GT denies that it agreed to that budget despite recording those sales as the budget for 2003-2004 in its budget proposal of 8 June 2004 for the year 2004-2005.

35 The commission put forward in the proposed new agency agreement of 16 December 2003 was 40 per cent and Amare relies on the email and attached agency agreement in establishing the agreement of GT to a reduction of commission to 40 per cent.

36 On 18 December 2003, Mr Tuckett, Mr Pizzey and Mr Riddell met again to discuss the proposed new agency agreement.

37 On 19 December 2003, Mr Riddell emailed Mr Tuckett the agency agreement that was discussed on 18 December with suggested tracked amendments. Mr Riddell confirmed Mr Pizzey was to seek advice on the indemnity and related clauses as well as considering the compensation for termination clause. Mr Riddell added that he would like to think they would have this matter resolved by the end of January.[12]

38 On 21 January 2004, GT sought a response from Amare to the draft agency agreement it had proposed in December but received no response.[13] The negotiations ceased at this point.

39 Early in 2004, GT sought to approach customers in area 220 that Mr Smith was then looking after. On 13 April 2004, Mr Tuckett emailed Mr Smith, with a copy to Mr Riddell, a list of customers that GT was working on in area 220.

40 In May 2004, Mr Riddell requested from GT, and Amare's other salesmen, a proposed budget for 2004-2005 and provided GT with information on its performance for the year to date.

41 On 1 June 2004, Mr Tuckett met with Mr Riddell to discuss the budget for GT for 2004-2005. On 8 June 2004, Mr Tuckett faxed to Mr Riddell a hand written proposed budget for 2004-2005. It included sales of $2,000,000 and a gross margin of 23 per cent.[14] The budget dealt with areas 210 and 140 only. It did not deal with area 220.

42 On 8 June 2004, Mr Riddell responded to Mr Tuckett. He returned a copy of the budget Mr Tuckett had sent to Mr Riddell noting in handwriting on the document that the proposed sales were a 13 per cent reduction on the sales actually achieved. Mr Tuckett had noted on his budget that the proposed sales were a 10 per cent increase on those budgeted by Amare the previous year. After a further exchange of emails, Mr Riddell advised Mr Tuckett he was happy to meet with him to discuss the budget.

43 No such meeting took place and on 24 August 2004 Mr Riddell sent to Mr Tuckett "your 2004-2005 budget" fixing both budget sales and budget margins for both area 210 and 140.[15] Mr Riddell informed Mr Tuckett that if he had any queries "refer to me." No further discussion took place on the budget. The parties are in dispute as to whether or not this particular document constitutes the budget for GT under clause 3.2 and if so for what period.

44 In the mean time on 11 August 2004, Mr Riddell had emailed Mr Tuckett to arrange a meeting to discuss the possible appointment of a business development manager ("BDM") to areas 210 and 140.

45 On 12 August 2004, a meeting took place in the board room of Amare at Mulgrave between Mr Pizzey, Mr Riddell and Mr Tuckett to discuss the appointment of Mr Armstrong as a BDM to boost sales in area 210 and 140. There is a dispute as to what actually transpired at the meeting.

46 There is no dispute, however, that following the meeting an exchange of emails took place between Mr Riddell and Mr Tuckett which concluded with GT agreeing to the appointment of the business development manager to areas 210 and 140. In substance, GT agreed that certain customers could be approached where sales had been below $10,000. A list was agreed on specifying those customers that could be approached by Mr Armstrong and those that could not be approached. The agreement provided for GT to be credited with the sales to any new customer gained after twelve months. There is a dispute as to whether or not this agreement was breached and whether or not the agency agreement was amended in terms of this agreement. GT describe this as the Exclusivity Breach.

47 On 13 August 2004, Mr Tuckett emailed Mr Riddell. Mr Tuckett said that he agreed to allow the BDM access to GT's contracted areas.[16]

48 On 27 August 2004, Mr Riddell emailed Mr Tuckett confirming the agreement for the BDM to operate in GT's areas including that Amare would provide GT with a list of accounts that Amare wanted the BDM to manage, any account activity by the BDM in areas 140 and 210 would not occur without consultation by both parties and the BDM list of accounts would be reviewed periodically by agreement of both parties.[17]

49 On 29 August 2004, Mr Tuckett emailed Mr Riddell stating that he agreed with Mr Riddell's email and waited for Amare's list of target accounts for the BDM that Amare wished GT to consider.[18]

50 On 1 September 2004, Mr Armstrong commenced his role as BDM.

51 On 1 September 2004, Mr Tuckett emailed Mr Riddell to inform him about a potential tender and said that "if we are successful...I will be paid at the normal rate of 40%." Amare rely on this email to establish GT's agreement to the reduction in commission to 40 per cent.

52 On 2 and 3 September 2004, Mr Riddell emailed Mr Tuckett including a list of target accounts applicable "to your area."[19] Mr Tuckett responded wishing Mr Riddell good luck.

53 On 6 September 2004, Mr Tuckett emailed Mr Riddell a list of accounts that GT would like to keep and also the accounts that GT allowed the BDM pursue.[20]

54 On 8 September 2004, Mr Riddell responded saying there were a couple of accounts that he would like to discuss in more detail on Friday 10 September. Messrs Riddell, Tuckett and Armstrong met on 10 September and following which Mr Armstrong started pursuing customers.

55 In early December 2004, Mr Tuckett was informed that GT would no longer be credited with sales made to President Safety. Earlier in August 2003, Amare had agreed in a formal "outsider agreement" that GT could service President Safety and it would be credited with sales to President Safety. President Safety had "ship to" addresses outside areas 210 and 140 and in the normal course these would not have been covered by the agency agreement. On the "outsider agreement" Mr Pizzey had stipulated six months as the period after which the status of the account would be removed.[21]

56 GT claims that President Safety should have been credited to GT in December 2004. Amare denies this, saying that the agreement was not to be reviewed after six months but rather it was only to last for six months. Amare relies on a notation on the form recording the opening of an account for President Safety. The form provides "Review Required (Yes/No)." That is not filled in. Next it provides "Date of Review." That is not filled in. Next it provides "Purpose of Review." In that section Mr Pizzey wrote "6 months."

57 On 17 December 2004, Mr Tuckett gave a power point presentation to the sales staff at Amare using the 2004-2005 budget sent to GT in August by Mr Riddell as GT's budget for that financial year. The presentation included Mr Tuckett comparing actual performance to the budget. Amare rely on this presentation as evidence that GT had accepted Mr Riddell's budget as the budget under clause 3.2 of the agency agreement. GT disputes this.

58 In December 2004, Amare sought advice from its solicitors on the agency agreement without the knowledge of GT. At some time in early 2005, Amare was advised on the automatic termination clause of the agreement.

59 On 7 March 2005, Mr Riddell emailed Mr Tuckett and asked him to meet on 18 March 2005 to discuss sales performance. On 17 March 2005, Mr Tuckett emailed Mr Riddell to inform Mr Riddell that he was attending a funeral and could not make the meeting the next day. On 30 March 2005, Mr Riddell asked Mr Tuckett to meet with him on Friday 15 April "for the territory review."[22] No mention was made of any proposal to discuss the termination of the agency agreement.

60 On 15 April 2005, Mr Tuckett met with Mr Pizzey and Mr Riddell in Amare's board room. The meeting was brief. Mr Tuckett was informed GT's agency agreement had automatically terminated through its failure to achieve Minimum Performance. Mr Riddell had with him a calculation that purported to show as much. He says he may have shown it to Mr Tuckett. Mr Tuckett denies this.[23] He did not give Mr Tuckett a copy nor did he seek to explain the figures or give Mr Tuckett any opportunity to query or dispute the assertion that the agency agreement was terminated.

61 At the meeting, Mr Tuckett was given a letter from Amare's solicitors Davies Elliott addressed to GT informing GT the agency agreement was terminated pursuant to clause 5.2 of the agreement.[24]

62 Mr Tuckett was given another letter from Davies Elliott to GT of 15 April 2005, which enclosed a proposed new agency agreement and gave Mr Tuckett fourteen days to respond to the offer.[25] The new agreement proposed a reduction in commission from 40 per cent to 30 per cent, a 25 per cent reduction in commission. Mr Tuckett was informed he should consult a solicitor. There is a dispute as to whether or not the agency agreement had automatically terminated.

63 As indicated, Mr Tuckett had no warning of what Amare was about to do and was stunned by Amare's actions. GT was highly critical of the manner in which Amare went about asserting the agency agreement was at an end. No issue has arisen, however, in the case which turns on the manner in which Amare went about terminating the agreement. Nevertheless, I think it is proper to say that I found Amare's conduct, in purporting to terminate the agency agreement in the manner it did, shifty and underhanded. Effectively, Mr Tuckett had worked loyally for Amare for three years and one would have expected a more sensitive and tolerant approach to the termination issue than the deceptive and underhanded tactics of Mr Pizzey and Mr Riddell. I have put that conduct to one side in considering the issues in the case, save that it has influenced my thinking to a slight degree in assessing the reliability of the evidence given by Mr Pizzey and Mr Riddell.

64 Mr Tuckett consulted a solicitor. On 20 April 2005, Norton White on GT's behalf responded to Davies Elliott's letter of 15 April 2005 referring to Amare's purporting to terminate the agency agreement and disputing that the agency agreement had automatically terminated under the Minimum Performance provision.[26] Norton White rejected Amare's repudiation of the agreement and advised that the agreement remained in full force. Norton White reserved GT's rights in respect to Amare's breaches of the agency agreement in relation to the first commission breach, the territory breach and the exclusivity breach.

65 On 22 April 2005, Mr Tuckett met alone with Mr Pizzey in the Amare board room. Mr Tuckett says he asked Mr Pizzey to leave arrangements as they were until 1 July 2005 and Mr Pizzey agreed. Amare alleges that in fact an interim agreement was reached by which GT accepted the agency agreement was at an end and accepted that it would only be entitled to 30 per cent commission on gross margins from 1 July 2005 unless otherwise agreed. GT denies any such agreement was made.

66 Mr Tuckett made a diary entry of the meeting.[27] There is no note or reference to any interim agreement. The note records that Mr Pizzey refused to give Mr Tuckett the figures behind the termination. The note also records that Mr Tuckett informed Mr Pizzey that he wanted to stay with Amare but only if things change. The note records he informed Mr Pizzey he would not be signing the new contract.

67 On 28 April 2005, Mr Tuckett again met with Mr Pizzey in the Amare board room. After the meeting, Mr Tuckett made notes of what transpired most of which is disputed by Mr Pizzey. The notes are in the form of an agenda and topics which were discussed.[28] There is no mention of any interim agreement. Rather the note canvasses things that ought to be attended to by Amare to get better value from the services of GT. The note assumes that GT will be continuing to act as an agent for Amare.

68 On 16 May 2005, Mr Tuckett put forward two proposals in relation to "a proposed change of commission rate."[29] Mr Tuckett said that he thought that these would assist Amare in reducing overheads while giving incentive to GT to increase profit. Under option one GT put forward a range of commissions from 34% to 50%. Under option two, GT would receive 40% but would employ an additional person to assist. These were not proceeded with. Meanwhile, GT continued to act as the sole agent in areas 210 and 140 under the agency agreement.

69 On 13 July 2005, Mr Tuckett emailed Michael Smith with a copy to Mr Riddell confirming Mr Smith's acknowledgement to allow Mr Tuckett to approach the Department of Human Services in an attempt to gain their custom for Amare under area 220.[30]

70 On 27 July 2005, Mr Tuckett emailed Mr Riddell informing him that Mr Tuckett was taking leave from 15 September 2005 to 27 September 2005 and advising of arrangements he had put in place to service accounts in his absence.[31] Mr Tuckett's fiancé had sold the lease to the Bridge Hotel at Echuca and settlement was anticipated on 1 September. At one stage the affairs of the Bridge Hotel and Mr Tuckett's involvement with it were the subject of pleadings by Amare. Mr Williams had left the employ of Amare to take over as manager of the hotel. The issues arising out of the hotel were not pursued by Amare.

71 On 18 August 2005, Mr Tuckett telephoned Mr Pizzey to bitterly complain about the reduction of GT's commission from 40 per cent to 30 per cent which was shown on the commission report for July 2005 that GT had recently received. The discussion was very heated. Mr Tuckett made a diary note of the conversation.[32] His note records that Mr Pizzey informed him that he thought the original offer of 30% was too low. Mr Tuckett told him that he had never agreed to such a thing. Mr Pizzey told Mr Tuckett he could not afford GT and alleged that Mr Williams and Mr Tuckett were in cahoots when the agency agreement was made and the agreement was a fraud. Mr Tuckett denied this. As mentioned above, Amare has not made that allegation in the proceeding. On the contrary it has accepted the agreement was valid and binding on Amare. GT describe the payment of the reduced commission as the Second Commission Breach.

72 On 12 September 2005, Norton White wrote a further letter this time alleging breach of the agency agreement in respect of the first commission breach, the territory breach, the exclusivity breach and the second commission breach in July 2005. While reserving all GT's other rights, Norton White demanded payment of the loss calculated at $168,112.87, failing which GT would take such action as it may be advised.[33]

73 On 14 September 2005, Davies Elliott replied to Norton White's letter of 12 September 2005. As to the first three breaches, Davies Elliott alleges that they were each subject of agreement. In relation to the second commission breach, Davies Elliott says the matters referred to reflected negotiation between the parties in relation to the commencement of a fresh agreement.[34] There is no suggestion of any interim agreement in Amare's solicitor's letter.

74 On 20 September 2005 while Mr Tuckett was on leave, Mr Riddell left a voice mail message for Mr Tuckett informing Mr Tuckett that "as negotiation for our new agreement has not satisfactorily concluded there is to be no further sales marketing activity by GT Corporation on behalf of Amare Safety." [35]

75 On 27 September 2005, Mr Tuckett had returned from his holiday and received the voice mail message from Mr Riddell.

76 Despite the direction not to undertake any further sales marketing activity, on 27 September 2005 at 8.44 a.m., Mr Riddell emailed Mr Tuckett and asked him to confirm urgently by the close of business that day, his position regarding "our un-resolved negotiations on your new employment agreement."[36]

77 In response, on 27 September 2005 at 12.28 pm, Mr Tuckett emailed Mr Riddell and informed him that he had no intention of negotiating any new agreement. He also informed Mr Riddell that he was relying on the agency agreement and he intended to enforce it. He also advised that he was in the process of instituting legal action seeking compensation for Amare's repeated breaches of the agreement as detailed in his solicitor's letter of 12 September 2005.[37]

78 On 28 September 2005, Mr Tuckett met with Mr Pizzey to seek to resolve the dispute. He kept a diary note of the meeting. Much of what Mr Tuckett recorded as taking place is disputed by Mr Pizzey.

79 On the next day, 29 September 2005, Mr Tuckett emailed Mr Riddell disputing the effectiveness of Mr Riddell's voice mail message left on Mr Tuckett's mobile phone instructing GT not to perform sales and marketing activities on behalf of Amare.[38] GT advised that it did not accept the purported termination and the agency agreement was ongoing.

80 GT purported to exercise the option to extend the agency agreement under clause 3.10 for a further five year period commencing on 11 October 2006.

81 The letter further says that GT enforces the agreement in particular but not restricted to clauses 3.5 (commission to be paid at the rate of 60%), clause 3.1 (to be the sole agent for clause 2.16 schedule 1 (territory)) and clause 2.6 schedule 2 (customers) 1A (140), 1 (210) and 2 (220) and clause 2.7 (excluded customers).

82 It says that GT will require the removal of any representatives that currently engage in activity with schedule 1 (territory) and schedule 2 (customers) of the agreement.

83 GT asserts it had never been consulted on the sales/margin budgets for all the agreement customers and territories. GT says it did not accept such budgets.

84 GT says that these and any future budgets would need to be agreed upon by both parties and signed off as such as per clause 3.4.

85 Mr Tuckett concluded the letter by saying that GT would continue to perform under the agreement.

86 At 5.32 p.m. on 29 September 2005, Mr Riddell replied to Mr Tuckett by email saying that Mr Tuckett had left Mr Pizzey with no alternative as per his voice mail message and repeated "As negotiations for our new agreement have not reached a satisfactory conclusion there is to be no further sales and marketing activity undertaken by GT Corporation on behalf of Amare Safety."[39]

87 At 10.33 a.m. the next day, 30 September 2005, Mr Tuckett emailed Mr Riddell disputing there was another agreement. He said that Amare had not effectively provided the required notice of termination, that he would continue to fulfil his obligations under the agency agreement and he reiterated the notice provided under clause 3.10 extending the terms for five years.[40]

88 On 30 September 2005 at 11.26 a.m., Mr Tuckett complained to Mr Riddell by email that a client of his had been told GT would not be looking after its account in future. Mr Tuckett said that this was a blatant violation of the agency agreement and he reserved his rights.[41]

89 On 30 September 2005 at 12.44 p.m., Mr Riddell emailed Mr Tuckett referring him to Amare's solicitor's letter of 15 April 2005. Mr Riddell referred to Mr Tuckett's letter saying there would be no discussion entered into with Mr Pizzey. He reiterated the instruction not to undertake further sales and marketing activities on behalf of GT.[42]

90 On 30 September 2005 at 2.15 p.m., Mr Tuckett replied by email to Mr Riddell asserting that Amare was not entitled to cancel the agency agreement. He said that in future all legal issues were to be directed through his solicitors.[43]

91 Thereafter until 20 October 2005, GT procured many orders for Amare and emailed them through to Amare. On other occasions he advised of business that could be tendered for. On one occasion, Mr Riddell replied seeking some information from GT.

92 On 20 October 2005, Mr Pizzey emailed a letter to Mr Tuckett reiterating that the agency agreement was at an end and saying that any payment due to GT arises from "an interim agreement while we negotiated a further agreement." This was the first occasion an interim agreement had been mentioned in the correspondence.

93 The attached commission statement indicated that GT had made sales of $72,151.43 in October 2005.

94 On 21 October, Mr Tuckett emailed GT's customers informing them that GT was no longer acting for Amare and was ceasing to carry out its duties under the agency agreement. At that stage Amare had refused to accept any orders taken by GT.

95 On 2 November 2005, Mr Tuckett took a position with McKnight's Retravision. He made a diary note of this matter. The note recorded that Mr Tuckett expected to be back at Amare shortly. He said he envisaged that he would earn between $60,000 and $70,000 per annum.

96 GT complains of five breaches of its agency agreement with Amare under the headings of the First Commission Breach, the Territory Breach, the Exclusivity Breach, and the Second Commission Breach and complains that Amare wrongly terminated GT's engagement as agent denying it the fruits of the agency agreement.

97 For its part, Amare disputes the extension of the term of the agreement, claims the agreement was terminated in April 2005 and seeks rectification of the agency agreement. It also claims the liquidated damages clause and the interest clause are unenforceable as penalties.

98 I find for the plaintiff in respect of the First and Second Commission Breaches. I find against the plaintiff on the Territory Breach and the Exclusivity Breach.

99 I find that Amare repudiated the agreement and wrongfully terminated GT's authority as agent for Amare.

100 I find that the agency agreement was not automatically terminated in April 2005.

102 I find that the term of the agency agreement was validly extended for five years on 29 September 2005.

104 I will hear further submissions but not receive any further evidence on damages and interest. I have formed the preliminary view that the liquidated damages clause is not a penalty but the interest clause is.

107 GT alleges that on or about 1 November 2002 Amare breached the agency agreement ("The First Commission Breach") by purporting to reduce the commission to which GT was entitled on the first $20,000 of gross profit per month from 60 per cent to 40 per cent.[44] Particulars are given which allege that at Amare's Blackburn offices on or about 16 October 2002, Geoff Pizzey and Ron Williams on behalf of Amare orally told Grant Tuckett on behalf of GT that Amare was going to reduce the commissions payable on the first $20,000 from 1 November 2002 and that Mr Tuckett objected to the purported variation. The particulars conclude that notwithstanding Mr Tuckett's objection, Amare thereafter paid only the reduced commission to GT.

108 GT pleads that GT received no consideration under this alleged agreement.[45] It is not necessary that the consideration given by Amare move to GT. It is sufficient if good consideration moves from the promisee, it need not move to the promisor.[46]

109 In its further amended defence Amare denies the allegation and alleges that in October 2002 GT agreed with Amare to reduce GT's commission from 60 per cent to 40 per cent of gross profit on the first $20,000 in November 2002. Amare give particulars of the agreement as follows. The agreement was partly oral, partly in writing and partly to be implied. Insofar as it was oral, Amare alleges it consisted of conversations the substance of which was as follows. In or about September 2001, Mr Tuckett told Mr Williams that GT intended to employ Mr Littler to manage area 220 and therefore needed 60 per cent of gross profit on the first $20,000 in order to pay Mr Littler's salary. On or about 31 October 2002, Mr Tuckett told Mr Williams and Mr Pizzey of Amare that Mr Littler had been terminated. Amare alleges it proposed and Mr Tuckett agreed to reduce the commission rate to 40 per cent of gross profit accordingly. Insofar as it was in writing, Amare alleges it relied upon emails from Mr Tuckett to Mr Riddell of Amare of 16 December 2003 and 1 September 2004. Insofar as the agreement was implied, Amare alleges it is to be implied from the conversations and documents and from the fact that from 1 November 2002 the commission was calculated and paid accordingly without demur on the part of GT until 20 April 2005. Amare merely denies the allegation that there was no consideration.

110 In its amended reply, GT puts in issue the alleged agreement and says that the proper characterisation of the communication by GT was not that it was consenting to the variation but that GT was attempting to mitigate its loss. It is not clear which of the communications referred to is being pleaded to.

111 As discussed below, Amare relies on an estoppel defence to the alleged territory breach. It alleges that GT agreed to the excision of area 220 from the agency agreement and also pleads that from October and or December 220 and thereafter Amare and GT adopted and acted upon the common assumption that area 220 had been excised. It alleges that pursuant to the common assumption, it appointed Michael Smith as area manager of area 220 and in the circumstances would be unjust if GT was allowed to resile from the assumed common basis of dealing and it is estopped from so doing. An estoppel defence is not relied in defence to the first commission breach. No submissions were made on the failure to plead an estoppel to the first commission breach but it does tend to highlight the absence of consideration on the part of Amare to its alleged contract to reduce the commission payable to GT.

112 Amare submits but does not plead, however, that if the Court finds that what occurred in relation to the "variations" falls short of an agreement, then, nevertheless, GT is estopped from denying that such matters were agreed by reason of the fact there was no written agreement signed by the parties to be bound.[47] In view of the pleadings and the absence of the pleading of reliance and detriment by Amare, it appears that this submission relates to the variation relating to the alleged territory breach and not the variation relating to the first commission breach.

113 The principles of law relevant to amending contracts are well settled. Cheshire and Fiftoot express the position as follows:

"A contract cannot be varied unilaterally, but only by a further contract. Ex hypothese, variation by contract involves two contracts, the existing one (which may or may not continue to exist...) and the new one (the contract of variation)."[48]

See also Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd.[49]

114 In GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd[50] Finn J sets out principles that he says are relevant to variations of contracts which warrant repetition in this case:

(1) Parties to an existing agreement may vary or extinguish some of its terms by a subsequent agreement: Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [(1957) [1957] HCA 10; 98 CLR 93]. In so doing the parties will have made "two contracts": Commissioner of Taxation v Sara Lee Household & Body Care [2000] HCA 35; (2000) 201 CLR 520 at 533; with the latter, no less than the former being subject to the ordinary rules governing contract formation: for example, BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 286; Tekmat Pty Ltd v Dosto Pty Ltd (1990) 102 FLR 240 at 248.

(2) Conduct engaged in for the purposes of ongoing commercial arrangements is not always readily susceptible to the traditional forms of analysis employed by common lawyers for the purposes of determining whether a contract has been formed: Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117. This can be particularly the case when dealings are analysed on an offer and acceptance basis. So in Vroon BV v Foster's Brewing Group Ltd [1994] VicRp 53; [1994] 2 VR 32 at 81, Ormiston J was prepared to accept:

"... that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances."

Likewise in Integrated Computer Services Pty Ltd at 11,118 McHugh JA observed that:

"... in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed."

(3) In determining whether the communications between the parties constitute a contract the court is not confined to a consideration of the terms or manner in which the communications were made: they must be interpreted by reference to the subject matter and the surrounding circumstances including, inter alia, the nature of, and the relationship between, the parties, and previous communications between them, as well as to standards of reasonable conduct in the known circumstances: Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9255. See also Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550.

(4) Post-contractual conduct is admissible on the question whether a contract was formed though it is not admissible on the question of what that contract, if formed, means: Brambles Holdings Ltd v Bathurst City Council [(2001) [2001] NSWCA 61; 53 NSWLR 153] at 163 - 164; Lord Steyn, "The Intractable Problem of The Interpretation of Legal Texts", p 9 ff, The John Lehane Memorial Lecture (2002).

(5) The need frequently arises in relational contracts of significant duration to adjust terms to accommodate changed or unforeseen circumstances. For that reason it is common for such contracts to make express provision for variation. Nonetheless, and notwithstanding their contract, parties in an ongoing business relationship equally commonly "regulate their relationships in accordance with what they consider is fair and reasonable or commercially necessary at particular points in time rather than by reference to a priori rights and duties arising under a contract:" Integrated Computer Services Pty Ltd at 11,117.

115 Amare places reliance on these principles and especially to the principle referred to in paragraph (5).

116 A variation is a second contract and consideration must be established.[51] As discussed above, Amare has not pleaded any consideration for the contract to amend the agency agreement with GT. Further, the absence of consideration may be relevant to the issue of whether GT and Amare intended to enter into a legally binding contract to amend the commission payable.

117 In its outline of closing submissions GT relies on two points. First, that the variation was not in writing signed by the parties and secondly that on the facts GT expressly rejected Amare's suggestion that it would reduce the commissions on the first $20,000.

118 As to the first point, the agency agreement provides as follows:

(1) An amendment or variation to this Agreement is not effective unless it is in writing and signed by the parties.

(1) A party's failure or delay to exercise a power or right does not operate as a waiver of that power or right.

(2) The exercise of a power or right does not preclude either its exercise in the future or the exercise of any other power or right.

119 GT submitted that clause 7.19 is in the contract to avoid the very mischief that the court finds before it in this case. It quotes Cheshire and Fifoot:

Although commercial contracts often contain stipulations that they can only be varied in writing ("no oral modification clauses"), such stipulations are ineffective, except as evidence relevant to the question of whether a variation was in fact agreed.[52]

120 Cheshire and Fifoot cite as authority many cases but draw special attention to the decision of Finn J of the Federal Court of Australia in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd.[53] Finn J said specifically on this issue:

Though lacking legal effect in the face of a subsequent oral or implied agreement, it seems to be accepted that a no oral modification clause can have significant evidentiary effect. As Holmes J commented in Barlett v Stanchfield "The [clause] is a fact to be taken into account interpreting the subsequent conduct of the plaintiff and defendants"; see also Principles of European Contract Law, Art 2: 106.[54]

121 Amare submits that at the end of October 2002, Mr Pizzey, Mr Williams and Mr Tuckett met to discuss Mr Littler and how to grow the business in Area 220. Mr Littler had either gone or had been given notice by this time. Amare submits that Mr Tuckett was asked whether he intended to take on a new employee to manage Area 220. Amare submits he said that he did not.[55] Amare submits he said he wanted to retain the territory and service selected accounts so that he would keep drawing commission from the sales made in that area, consistent with the 9 September 2004 Amare letter. Amare submits that at the meeting, Mr Tuckett acknowledged that GT could not perform that which it had contracted to do and, further, that it did not propose to employ a replacement for Mr Littler.

122 Amare submits that given the size of area 220, more than one person was reasonably required to service the territory, including territory 220. Amare submits that is what had been agreed in 2001. Amare submits that at that time, it was agreed that Mr Littler would service that territory and, after he left, Mr Smith did so. Amare submits that, as Mr Williams said in oral evidence, the size of the area that had to be managed required two persons and the rationale for the 60/40 commission split was that GT required an income to support the employment of Mr Littler[56] in an area which, at the time, was not generating enough income in its current format.[57]

123 Amare submits that it was in this context that the rate of commission was agreed between Mr Pizzey and Mr Tuckett to be reduced to a flat 40 per cent. Amare submits that it was no secret that Mr Pizzey had ever been happy about a 40 per cent rate of commission, let alone 60 per cent on the first $20,000 gross profit.[58] Amare submits that Mr Pizzey's recollection that Mr Tuckett had been on 34 per cent commission at Alsafe coincides with Williams' internal note made shortly prior to the entry into the agency agreement[59] and also with Mr Tuckett's proposal to Mr Pizzey after the 15 April 2005 automatic termination.[60]

124 In fact Mr Williams's internal note also states "consider tiered levels of percentage to compensate for low GP (gross profit) base." This note tends to support Mr Tuckett's contention that the 60 per cent commission was not related to the employment of Mr Littler.

125 Amare submits that Mr Pizzey made his discontent, as to the level of commission, known to Mr Tuckett and Mr Williams in no uncertain terms at the meeting in February 2002 at which time, (as Amare submits) Mr Tuckett and Mr Williams assured Mr Pizzey that the 60 per cent rate of commission was a temporary measure and to "help start up" or finance Mr Littler, and once the area was up and running, the commission would drop back to the flat 40 per cent.[61]

126 Amare submits the issue was raised by Mr Pizzey at subsequent meetings with Mr Tuckett whilst Mr Littler continued to be employed[62] and confirmed by Mr Tuckett's note which referred to "commission split".[63]

127 Amare submits that when Mr Pizzey expressed concern about the rate of commission, as at the first meeting, whilst Mr Tuckett said he would talk about changes,[64] Mr Tuckett never agreed to move one per cent.[65]

128 Amare submits that after Mr Littler left, Mr Pizzey, Mr Williams and Mr Tuckett met to discuss area 220 and Mr Smith.

129 Amare submits that separately, Mr Pizzey met with Mr Tuckett and said that the commission should be reduced to a flat 40 per cent because there was now no need for 60 per cent to cover Mr Littler. Amare submits that in substance, Mr Tuckett said that he "supposed this was right" and that GT could do quite well on 40 per cent.[66] Amare submits that objectively, the rationale by which Mr Pizzey preferred the reduction makes commercial sense; it also fits with the common facts known to those who negotiated the agency agreement in 2001.

130 Amare submits that to the extent Mr Tuckett's witness statement and oral evidence conflict on this issue, the evidence of Mr Pizzey on what was to occur and as to what was agreed should be preferred. Amare submits that is so for the following reasons:

That there was an agreement is confirmed by Mr Williams' evidence concerning the phone call he received from Mr Tuckett after the meeting[67];
that 40 per cent was agreed is consistent with the absence of any email or demand by Mr Tuckett on behalf of GT for the commission at the higher rate of 60 per cent;

it is consistent with the fact that thereafter, once commission reduced to 40 per cent from 1 November 2002, GT generated tax invoices at the flat rate of 40 per cent in lieu of those which had previously been generated based on 60 per cent of the first $20,000 gross profit and 40 per cent thereafter[68];

the first occasion on which GT made any complaint of the commission being reduced to a flat 40 per cent was in September 2005 by its solicitor's letter[69];
in the meantime, there was no demand for commission at the higher rate in relation to territories 140 and 210. Further, when Mr Tuckett, on behalf of GT, claimed commission in relation to particular transactions, those claims, after November 2002, were all expressed on the basis of an entitlement to a flat 40 per cent commission[70]. In September 2004, Mr Tuckett emailed Mr Riddell and described 40 per cent as GT's "normal rate"[71]. That it was in fact so and accepted to be so by GT appears from that email and the other communications mentioned.

131 Amare submits that applying the criteria referred to by Finn J in GEC Marconi that there was an express agreement to vary or extinguish one of the terms of the agency agreement:

even if there is doubt as to an express agreement, the "manifestation of mutual assent is to be implied from the circumstances" set out above;
the informality and frequency of dealings and content show the contract was not required to be formally varied or recorded in writing[72];

subsequent conduct is all one way, confirming that a contract variation occurred. Just as Mr Tuckett did not seek to sell or claim commission or set budgets for area 220, similarly he did not seek to claim a 60/40 basis for commission at any time from late 2002 until September 2005;

this variation, like the excision of area 220 by agreement, was an example of the parties regulating their relationship in accordance with what they considered fair and reasonable at the time.

132 Amare submits that it was consistent with what Mr Tuckett told Mr Pizzey would occur once Mr Littler got "up and running and making a profit in his area."[73] That when Mr Littler left and was not replaced and area 220 was not being served by Mr Littler the basis for the 60/40 split and for area 220 had both disappeared. Amare submits the parties proceeded accordingly by agreement.

133 I shall now return to my analysis of the relevant events surrounding the alleged agreement to reduce the commission. As contemplated at the meeting in May 2005, a further meeting was held regarding commission. Mr Tuckett says that it was on 16 October 2002 and refers to a diary note entered at 16 October 2002 recording; "5.00pm Ron and Geoff." Mr Pizzey did not know the date but said the meeting was after a meeting with Mr Littler and probably after the meeting that excised area 220 from GT's territory.

134 Mr Tuckett says that Mr Williams was also at the meeting with Mr Pizzey. Both Mr Williams and Mr Pizzey said they do not recall Mr Williams being present. Who was at that meeting and what happened is a matter of dispute.

135 Mr Tuckett says that Mr Pizzey opened a copy of the agency agreement and pointing to the commission term told him that GT's commission was being reduced to a flat 40 per cent on 1 November 2002. According to Mr Tuckett, Mr Pizzey said that he should not have to pay a higher rate than Mr Tuckett received when he was at Alsafe.[74] As indicated earlier Mr Pizzey believed the Alsafe rate was 34 per cent. Mr Tuckett says there was no mention of Mr Littler no longer working for GT and that Mr Pizzey did not seek to justify the reduction on the basis that Mr Littler was no longer working for GT.[75] This is important, as Mr Pizzey's version, which I will come to in a moment, submits that he sought to justify the reduction on the fact that Mr Littler had left.

136 Mr Tuckett says he strongly objected to Mr Pizzey's decision pointing out that he had incurred expenses in moving into the city to be closer to his territories, had car commitments and mobile phone plans. Nevertheless, he maintains, Mr Pizzey was adamant. Mr Tuckett says he did not agree to the reduction and made that quite clear to Mr Pizzey.

137 Under cross examination, Mr Tuckett agreed that Mr Pizzey sought to justify the reduction in commission on the basis that Mr Tuckett was no longer employing Mr Littler, GT was no longer covering area 220 and there was no need to cover Mr Littler.[76] This concession was inconsistent with his witness statement. The concession also does not fit easily with the date of the meeting suggested by Mr Tuckett. He says that the commission reduction was discussed on 16 October 2002 and the loss of area 220 subsequently on 31 October 2002. Mr Pizzey did not put a time on the meeting to discuss the commission reduction but he did say in his witness statement that he sought to justify the reduction on the basis that GT was no longer servicing area 220 or employing Mr Littler.

138 Mr Tuckett was not prepared to deny that Mr Pizzey may have referred back to the earlier meetings when they had discussed reducing the commission. He only went as far as saying he would be surprised if he did.[77] He did concede in cross examination that he would be saving about $100,000 in the interim by no longer employing Mr Littler and that he was not proposing to put on someone else.[78]

139 Mr Tuckett agreed that he telephoned Mr Williams but said that he told Mr Williams that he was not happy about the commission reduction and "didn't agree with it and it was just basically done." He said that Mr Williams asked him what he was going to do about it and he replied that he did not know.

140 Mr Tuckett agreed in cross examination that thereafter he prepared his tax invoices to reflect the reduction and never complained about the reduction after the meeting with Mr Pizzey until September 2005 when legal threats were being made.[79]

141 On the other hand, Mr Pizzey says that Mr Tuckett accepted and agreed to the reduction in commission. Mr Pizzey says that Mr Williams was not present. He says that he sought to justify the reduction as Mr Littler would no longer be looking after area 220 and GT would no longer need the increased commission of 60 per cent to pay Mr Littler's wages. He claimed that Mr Tuckett had previously given GT's employment of Mr Littler as the reason for the 60 per cent commission. Mr Pizzey says that Mr Tuckett "said that he supposed this was right, that Chris Littler was no longer employed by him and that he could do quite well on 40 per cent."[80]

At a glance

Court

Decision date

Before

Source

Judgment (737 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (28)