Plaintiff v Defendant

2 NCON has developed and markets a system for reducing power usage in commercial fluorescent lighting that it calls the Smart Power Control System for Lighting (the Smart Power control system). The central component of the system is an electrical device that NCON calls the Yes box. The box is connected to the switch board that provides power to fluorescent lights typically used in lighting retail stores. The power leads that run from the switch board to the fluorescent lights are rewired through the Yes box which is attached to the wall next to the switch board. When the lighting is switched on and the Yes box is in divert mode the power for the lights passes through a mechanism in the Yes box that reduces the voltage being drawn by the lights.

3 Fluorescent lights require 240 volts to start up, but can operate on a lesser voltage once started. The human eye automatically adjusts for changes in illumination perceived by the eye, such that a person will not perceive relatively large changes in illumination. When the Yes box is activated and the fluorescent lights have been started the Yes box reduces the voltage drawn from the power supply to operate the fluorescent lights. The fluorescent tubes will emit less light but NCON claims the human eye will not notice the reduction in light. NCON claims that Yes box is designed so that the reduction in the lighting being emitted by the fluorescent lights in the store will not be perceived by the people in the store as compared to when the Yes box is not activated. NCON says that this is achieved by the mechanism of the human eye that automatically makes adjustments for changes in illumination.

4 Spotlight conducts over 100 haberdashery and home ware stores in Australia. NCON alleges that in November 2007 Spotlight agreed to use NCON's Yes boxes in their Australian stores under an arrangement whereby NCON would install the Yes boxes and Spotlight would rent them from NCON. NCON alleges that Spotlight agreed with NCON to rent Yes boxes for 106 stores. NCON alleges that Spotlight reneged on the Rental Agreement and sues Spotlight for damages.

5 Spotlight admits that it signed a Rental Agreement, but that the agreement was incomplete and does not constitute an enforceable contract. Spotlight says that if the Rental Agreement was enforceable, Spotlight also entered into a Services Agreement as part of the agreement with NCON that entitled it to terminate the agreement on 30 days' notice. Spotlight alleges that if it breached an enforceable contract that NCON has failed to prove it suffered any quantifiable damage.

6 For the reasons set out below, I find that Spotlight made a binding agreement to rent Yes boxes for the use in 106 of its stores and has repudiated that agreement. I find that NCON accepted that repudiation and is entitled to damages. I find that NCON has not properly claimed or proved the damages it claims, and award nominal damages of $1.

The people involved in the Spotlight transaction

7 Mr Gregory Gill is a director and shareholder of NCON. He concentrates on the financial side of the business. He met with Mr Molini, the purchasing officer of Spotlight, and signed on behalf of NCON a Services Agreement with Spotlight and witnessed Mr Molini's acceptance on behalf of Spotlight of the Rental Agreement.

8 Mr Derek Barnes is another director and shareholder of NCON. He concentrates on the technical side of the Yes boxes, and was involved in demonstrating the product to Mr Jim Chisholm of Spotlight, who was employed by Spotlight to review the NCON proposal after the Rental Agreement was allegedly made.

9 Mr Alan Tobin and Mr Steve Dale are the principals of a firm known as Greenhouse Savings Group. NCON gave Greenhouse Savings Group an exclusive agency to market the Yes box in Australia. They negotiated the rental and service agreements with Mr Molini and had extensive dealings with Spotlight officers.

10 Mr Tony Reibel is employed as an independent contractor by NCON to organise the leasing finance that is used by NCON under its leasing program. He dealt with Mr Dean Berry, the Spotlight finance officer, and others.

11 Mr Tim Gill (no relation of Mr Gregory Gill) is employed by NCON to organise the installation of Yes boxes in the premises of its customers. He was present at demonstrations of the product.

13 On the Spotlight side, Mr Molini was the purchasing officer of Spotlight who negotiated the rental and service agreements with Mr Tobin and Mr Dale. Mr Molini left Spotlight soon after the agreements were made in November 2007.

14 Mr Dean Berry was a finance officer at Spotlight. He was involved in the negotiations leading up to the agreements and dealt with Mr Reibel on the NCON Rental Agreement.

15 Ms Sharp was a solicitor employed by Spotlight as corporate counsel; she assisted Mr Molini in settling the terms of the Rental Agreement.

16 Mr Ari Bergman was another corporate counsel engaged by Spotlight. He gave the NCON deal to Ms Sharp to handle and had dealings with Mr Reibel.

17 Ms Lisa McLean and Mr Aaron Hoovey were involved in organising the rollout of the Yes boxes into the Spotlight stores, and dealt with Mr Tobin and Mr Dale.

18 Mr Jim Chisholm was employed by Spotlight after the Rental Agreement was signed in November 2007. He played a central role in rejecting the installation of the Yes boxes into Spotlight stores.

19 Mr Porter was the general manager of business development and the immediate superior to Mr Jim Chisholm. He met with the NCON team and gave instructions to Mr Chisholm about the NCON proposal.

20 Mr Carter was the CEO of Spotlight and gave instructions to Mr Chisholm to cease pursuing the NCON proposal.

21 Ms Smith was a solicitor at Cornwall Stodart who was engaged by Spotlight on the NCON proposal.

22 Mr Zac Freid was a director of Spotlight who introduced Mr Molini to Mr Dale and who was involved in discussions after the agreement was reached.

23 Ms Julie Birch is an employee of the Spotlight Frankston store and was present at least one of the demonstrations of the Yes box.

24 Mr Chisholm, Ms Birch, and Mr Bergman gave evidence. The other Spotlight officers involved did not give evidence.

25 NCON alleges that on or about 27 November 2007, it and Spotlight entered into a written Rental Agreement contained in a document entitled "Lighting Systems Energy Reduction Proposal" dated 27 and 22 November 2007, whereby NCON agreed to rent to Spotlight NCON's Smart Power control system for lighting at certain Spotlight's retail store locations in consideration of monthly rental payments to be made to NCON for a period of five years upon certain terms and conditions.

26 Spotlight admits that it accepted NCON's Lighting Systems Energy Reduction Proposal Number 02001070240, bearing the date 22 November 2007 in consideration of the parties entering into the Services Agreement.[1] Spotlight calls the executed Rental Agreement document the "Proposal".

27 NCON alleges that on or about the 26 November 2007 in consideration of the parties separately entering into the Rental Agreement NCON and Spotlight entered into an agreement whereby NCON agreed to install the Smart Power control system or at Spotlight's election procure the installation of the system with Spotlight's nominated installing contractors in Spotlight's specified retail stores (the Services Agreement) subject to and upon certain further terms and conditions.

28 NCON alleges that Services Agreement is partly oral and partly in writing. In so far as it is oral, NCON alleges it is contained in a discussion on or about 19 November 2007 at Spotlight's premises in Market Street South Melbourne between Greg Gill (as agent and director for and on behalf of NCON) and Fabio Molini (Procurement Manager of Spotlight, with the actual or alternatively the ostensible authority of Spotlight), in which Molini said to Gill words to the effect that Spotlight's standard terms and conditions utilized for services supplied to Spotlight must be used in any agreement in relation to the installation of the Smart Power control system in Spotlight's retail outlets.

29 In so far as it is in writing NCON allege it is contained in a document entitled "Services Agreement" bearing the date 16 November 2007 and, on the title page, 20 November 2007, executed by NCON on the 19 November 2007 and by Spotlight on 26 November 2007.

30 Spotlight admits that on 26 November it executed the written Services Agreement. It otherwise denies NCON's allegations concerning the Services Agreement.

31 In the alternative, NCON alleges that on or about 27 November 2007, it and Spotlight agreed to vary the terms of the Services Agreement by entering into the Rental Agreement. Spotlight denies that allegation.[2]

32 In its defence, Spotlight says that the Services Agreement and the Proposal (what NCON calls the Rental Agreement) constituted an incomplete agreement which contemplated further agreement between the parties as to the number and model of items comprising the control system which Spotlight would purchase or lease and the terms of the purchase or lease, if and when NCON obtained finance for the sale or hire of such items to Spotlight.[3]

33 NCON alleges that, in breach of the Rental Agreement, Spotlight has refused, omitted, or failed to perform any terms of the Rental Agreement.

34 NCON alleges that (by letter dated 14 May 2009) Spotlight evinced an intention not to be bound by the Rental Agreement and thereby repudiated it. It alleges it suffered loss and damage.

35 Spotlight, for its part, alleges that on 17 and 18 January 2008, NCON informed Spotlight that:

(a) obtaining credit approval was subject to Spotlight executing the "Master Hiring Agreement" intended to be thereby provided, but omitted and provided later that day in the form of documents referred to above;

(b) in any event the financier and its broker would have issues with clauses of the Services Agreement which needed to be solved, and NCON proposed that either Spotlight withdraw its requirement for the Services Agreement or Spotlight enter into an agreement with NCON acknowledging that NCON would be assigning its rights to rental payments to its financier or the broker free of any other obligations and without any right of set-off, counterclaim or defence on the part of Spotlight. Spotlight rely on an email of Mr Reibel to Mr Bergman of Spotlight of 18 January 2008 and the conversation between them of 17 January 2008 of like effect.[4]

36 Spotlight alleges (in answer to the whole claim) that on 17 January 2008 Tony Reibel of NCON telephoned Ari Bergman of Spotlight and advised that NCON could not proceed with the Proposal given the Services Agreement; this position was repeated in the email of NCON to Spotlight of 18 January 2008 (referred to above). Spotlight alleges that the reason given was that NCON's financiers did not accept the Services Agreement, and in order to progress any arrangement between NCON and Spotlight the Services Agreement had to be withdrawn or further agreements entered into.[5]

37 Spotlight says that (in the circumstances) NCON evinced an intention not to be bound by the Services Agreement and repudiated it. Spotlight alleges it accepted the repudiation and relies on the fact that Spotlight took no further step in furtherance of the alleged agreement and its contention by its letter of 14 May 2009 to NCON's solicitors that the parties did not have a "deal".[6]

38 Further and alternatively, Spotlight alleges that it was a term of the agreement constituted by the Proposal and the Services Agreement that NCON's Smart Power control system would not result in any perceptible light loss.

39 Spotlight alleges that tests by NCON in Spotlights' presence at a Lincraft store in Frankston in May 2008 identified a lux level loss of approximately 25 per cent. Spotlight alleges that, accordingly, NCON was in breach of the agreement constituted by the Proposal and the Services Agreement in that it could not deliver the control system without there being an accompanying perceptible loss of light.[7]

40 Spotlight says that it was entitled to elect not to proceed with the Services Agreement.

41 Further and in the alternative, Spotlight says that clause 15 of the Services Agreement provided that Spotlight could, at its discretion, give one months' written notice to NCON to terminate the agreement and that, accordingly, if it has repudiated the Services Agreement, then NCON's damages are limited to one month period by reason of clause 15 of the Services Agreement.

42 In its reply, NCON admits that on or about 18 January 2008 Tony Reibel had a conversation with Mr Bergman, but says that it was a term of the Rental Agreement that NCON would apply for a financial facility limit of $2.5 million on behalf of Spotlight. It says it applied for such a facility and the facility was approved.

43 As to the lux level, in substance NCON alleges that the loss of lux was 4.3 per cent, which is imperceptible.

44 As to the allegation concerning clause 15 (which allowed for the Services Agreement to be terminated on one month's notice) NCON says that the clause has no effect and is severable from the Rental Agreement. Further, NCON says that to give effect to the clause would defeat the parties' contractual intentions as evidenced by the terms and conditions of the Rental Agreement, and that therefore clause 15 was severable and ought to be disregarded and is of no force or effect.

45 Further, NCON says that clause 15 was only exercisable when the Services Agreement and Rental Agreement were no longer executory. In the premises, NCON says that Spotlight is precluded from relying upon clause 15 of the Services Agreement as the Services Agreement and the Rental Agreement, by their respective terms and according to their tenor, were executory for their respective terms.

46 A detailed claim for loss and damages of $1,494,556.72 has been submitted.[8]

(a) Did the Rental Agreement constitute a binding contract between NCON and Spotlight?

(b) If so, was the Rental Agreement part of a single contract that included the Services Agreement?

(c) Was it a term of the Services Agreement that it applied to NCON's obligation to install the Yes boxes in Spotlight stores but not to the agreement of Spotlight to rent the installed Yes boxes from NCON?

(d) If there was a contract between NCON and Spotlight constituted by both the Rental Agreement and the Services Agreement, did NCON evince an intention not to be bound by the Services Agreement and thereby repudiate the agreement?

(e) Could NCON deliver its Smart Power control system without there being an accompanying perceptible loss of light?

(f) If NCON was not able to do so, was Spotlight entitled not to proceed with the agreement constituted by both the Rental Agreement and the Services Agreement?

(g) If there was a contract between NCON and Spotlight constituted by both the Rental Agreement and the Services Agreement, did clause 14 of the Services Agreement permit Spotlight to terminate the agreement on one month's notice?

The background to NCON and the Smart Power control system

48 Mr Gregory Gill, a director of NCON, gave evidence of the history of NCON and the development of the Yes box as follows. In 1996, Mr Gill took out a patent of a prototype of the Yes box that he developed with the assistance of electrical engineers. In 1998, Mr Gill formed a company called NCON Corporation to carry out research and development of the Yes box. NCON Corporation is essentially the owner of all of the technology worldwide. Patents have been granted in approximately thirty countries that account for 70 per cent of the world's electricity consumption.

49 In 2001, NCON Australia Pty Ltd, the plaintiff in this proceeding, was formed. NCON remained dormant for many years and did not start trading until many years later. Meanwhile, NCON Corporation was trialling, proving, and testing the Yes box. In particular, NCON Corporation was seeking to improve the switch in the Yes box that alters the voltage output from the Yes box to the fluorescent lights.

50 Essentially, the Yes box is installed near the switchboard. The power coming out of the switchboard for the lighting circuits goes through the Yes box before going onto the lights. The basic premise of NCON Corporation's Yes box technology is that fluorescent lamps, or in fact metal halide, which are the high bay ones that are in supermarkets and shops, all work on 240 volts. They require 240 volts to start but they don't need 240 volts to keep going. The Yes box contains a switch that switches the power going through the Yes box from 240 volts to 207 volts. NCON Corporation developed technology that allowed the switch to operate at half a millisecond rather than operating at two milliseconds (as previously). This improvement allowed NCON Corporation to take the product to the market place.

51 NCON was the entity that offered the Yes box in Australia. Initially, NCON sought to market the product itself. It had difficulty in doing so. In 2005, NCON approached two friends of Mr Gill who were experienced in marketing, Steve Dale and Alan Tobin, to assist NCON to market the product. They formed a company Greenhouse Savings Group. It became the exclusive sales agent for Australia of NCON.

52 NCON out sources engineering, manufacturing, installation and design. Everything is outsourced to minimise NCON's overheads. Many millions of dollars have been sunk into developing the technology over many years. NCON and its owners were running out of funds when NCON engaged the Greenhouse Savings Group to market the Smart Power control system.

53 As indicated above, the parties are in dispute as to whether or not one agreement or two were entered into by the parties, and whether or not the Rental Agreement constituted a binding contract. The parties agree, however, that two documents were signed. The first was a Services Agreement, prepared by Spotlight, and the second was the rental proposal, prepared by NCON, which Spotlight describes as the Proposal.

54 There is no issue that Mr Molini (the procurement manager for Spotlight) accepted the rental proposal at a meeting on 27 November 2007 between himself, Mr Tobin, and Mr Gill. I have described the rental proposal when accepted and signed by Mr Molini on behalf of Spotlight as the Rental Agreement. It is necessary to deal with the circumstances surrounding the execution of both these documents to resolve the issues concerning whether or not there were one or two agreements and the terms of the agreement(s).

55 As mentioned above, Mr Tobin and Mr Dale had taken over the exclusive right to market the Yes box in Australia. Through Zac Freid (a contact that Mr Dale had at Spotlight), Mr Tobin and Mr Dale were introduced to Mr Fabio Molini, the procurement manager or purchasing officer of Spotlight. Spotlight is a privately-owned company based in Melbourne that conducts about 160 retail stores throughout Australia selling home ware and haberdashery products.

56 On 21 June 2007, Mr Tobin and Mr Dale met with Mr Molini at Spotlight's offices. They described the Yes box and its benefits to Mr Molini and offered to do an obligation - and cost - free report for him in relation to three of Spotlight's stores . They said that they would then be able to assess what was possible to be achieved using the Yes box and be able to project the likely savings on electricity and the overall cost to Spotlight. Mr Molini agreed to NCON preparing the report and they agreed to report the Bayswater, Brunswick, and Essendon stores. Messrs Tobin and Dale also left with Mr Molini a report by Western Power and a report by Energy Australia on the performance of the Yes box.

57 About ten days later, NCON provided Mr Molini with the report on the three stores that indicated the savings that Spotlight could make over five years. A further report (dated 18 July 2007) was given to Mr Molini on the three stores that made projections of savings by Spotlight that could be made nationally if the Yes box was used in approximately 90 stores.

58 Mr Tobin said that he had about five or six meetings with Mr Molini. He said that Mr Molini was informed that Spotlight could either buy or rent the Yes box units. As to the rental option, Mr Molini was informed that Spotlight could rent under a facility that NCON could offer or Spotlight could "get their own financing." As will be discussed below, Mr Reibel, the general manager of sales and rental finance for NCON, gave evidence that NCON's rental program would be at less cost to Spotlight than what Spotlight could achieve if NCON's rental program was not utilised. Mr Tobin said that the five year rental option under the NCON rental program was discussed with Mr Molini.

59 On 8 August 2007, Mr Dale informed Mr Molini by email that NCON could do a three year rental, however, he said the cost would be higher than five years, so it would not be economically prudent for Spotlight to engage in a three year rental arrangement. On 3 September 2007, Mr Tobin informed Mr Reibel by email that Mr Molini has asked about the impact of a three year rental versus a five year rental. Later that day, Mr Tobin provided the information to Mr Molini by email.

60 Mr Tobin said that he negotiated with Mr Molini a further discount on the pricing of the boxes. On 25 September 2007, Mr Tobin supplied revised costings for Spotlight and offered a 15 per cent discount on the capital equipment based on the units being put into 88 or more Spotlight stores.

61 Mr Tobin said that a lighting systems energy reduction proposal for Spotlight stores was made to Spotlight in about early November 2007. Such a proposal (dated 26 October 2007) was produced from the files of Spotlight. It contains a note by Ms Sharp (the Spotlight in house solicitor) that Mr Molini gave it to her on 15 November 2007 and that he wanted it reviewed by mid next week. The proposal also contains Ms Sharp's comments on the terms.

62 Mr Tobin said that there then followed several phone calls and discussions. Mr Tobin said that sometime in early November, Mr Molini informed Mr Tobin on the telephone that Mr Molini had board approval on the proposal and that they should get together. Mr Tobin said that Mr Molini told Mr Tobin that there were some aspects of the proposal that Mr Molini wanted to fine-tune. Mr Tobin said that Mr Molini told him that Mr Molini wanted to deal with moving a box from one store to a new store and some "mechanics".

63 Mr Tobin said that Mr Molini also told him that because NCON was going to be controlling the electricians who would be going into their stores, NCON would be required to sign a standard Services Agreement. Mr Tobin said that Mr Molini told him that cleaners and pretty well anybody that goes into the store was required to sign a standard Services Agreement. Mr Tobin asked Mr Molini to send him the Services Agreement. Mr Tobin said that he does not recall how he received the Services Agreement, but he did. Mr Tobin identified the document Mr Molini sent him as the Services Agreement. Mr Tobin said that once he received the Services Agreement, he sent it on to NCON.

64 Mr Tobin said that he met with Mr Molini on or about 19 November 2007 to go over the rental proposal and the Services Agreement. The date of the meeting may have been after 19 November 2007, as Mr Molini refers to Mr Tobin and Mr Dale dropping off the documents on 20 November 2007 in an email Mr Molini sent to Mr Tobin and Mr Dale (with a copy to Ms Sharp, the Spotlight solicitor dealing with NCON's proposal) on 21 November 2007 (in which Mr Molini says that he has reviewed the documents and that several points that needed to be deleted or clarified).

65 On 22 November 2007, Mr Tobin responded to Mr Molini's queries raised in his email of 21 November 2007. The rental proposal of 26 October 2007 provided that "rental payments are monthly in arrears". In his email of 21 November 2007, Mr Molini said rental payments should read "30 days". Mr Tobin replied in his email of 22 November 2007: "rental payments - the authority to proceed now reads "on 30 day terms" to align itself with your service agreement." He went on to say "Please note that the monthly rental payment will, in accordance with your requirements, take effect 30 days from the signing of each agreement - which will be in stages and only after you have approved each stage as being installed and operating correctly - on a monthly basis." In my view, this and the rental proposal itself establishes that Spotlight had opted to take the Yes boxes under NCON's rental program.

66 Mr Tobin said that the meeting with Mr Molini was the penultimate meeting before the agreements were signed. Mr Tobin said that Mr Molini had some questions about the rental proposal. At the meeting, Mr Tobin said that he told Mr Molini that NCON had some concerns over the inconsistency in the terms of the Services Agreement providing for a 30 day termination period and the requirements of the rental proposal. Mr Tobin said that Mr Molini replied with words to the effect, "Don't worry about it, mate, that's not a problem, I'll fix all that and move forward". Mr Tobin was asked whether he said anything further about the issue and Mr Tobin said "it was really a side issue in - in our mind and his. And it really related to the electricians, the actual logistics of installing the equipment in the store, which was separate to the supply agreement, which was to buy and get the boxes in the first place." Mr Tobin said that he believed that Mr Dale was at the meeting. Mr Dale gave evidence that he did not recall being at the meeting.

67 Mr Tobin said that after his meeting with Mr Molini, he met with Mr Gill. Mr Tobin said that he told Mr Gill what Mr Molini had said about the supposed inconsistency between the Services Agreement and the rental proposal.

68 Mr Gill said that on about 19 November 2007, Mr Tobin brought to Mr Gill a proposed Services Agreement between NCON and Spotlight. Mr Gill said that he signed that agreement on behalf of NCON. At the time he signed the agreement, Mr Gill said that he had some concerns about its terms. Mr Gill said that the signed document was not delivered to Spotlight until Mr Gill attended the meeting on 27 November 2007 at Spotlight.

69 On or about 27 November 2007, Mr Gill (in the company of Mr Tobin) attended a meeting with Mr Molini at Spotlight's offices in Market Street, South Melbourne. At the meeting, Mr Gill asked Mr Molini why NCON was signing the Services Agreement and how that had an effect on anything at all. Mr Molini explained to Mr Gill that this was the normal, standard practice of Spotlight. Mr Gill said that Mr Molini told him at that meeting that the document (the Services Agreement) was handed out to many people who do work for Spotlight such as cleaners and other kinds of people who do work for Spotlight. Mr Molini said that "seeing as you will be installing these boxes on our premises, then we would need you to sign on behalf of all of your electricians, et cetera, will comply with our Services Agreement". Mr Gill said he told Mr Molini that he had been told that was the purpose of the Services Agreement, and that he wanted to hear what he had been told from Mr Molini.

70 Mr Gill said that he and Mr Molini had a friendly discussion about the Rental Agreement and how Mr Gill was excited that Mr Molini would be signing it. Mr Gill said that he said to Mr Molini "it's good that you've got approval to do - to sign off on this as procurement manager and he made it quite clear, he said, "Yes, I have board approval for this, which I've finally been able to get".

71 Mr Tobin said that he had bound the Services Agreement together with the rental proposal using a spiral binding and took them in that form to the meeting with Mr Molini.

72 Mr Molini informed Mr Gill and Mr Tobin that he required a couple of changes to the rental proposal. Mr Molini made the amendments and Mr Gill initialled the amendments.

73 At that meeting, Mr Molini signed Spotlight's acceptance of the rental proposal on behalf of Spotlight. The particular page that he signed was headed "Acceptance of proposal" and continues "Spotlight Group accepts this proposal Number 020010710240 for the supply of NCON's Yes boxes for the sites listed below or in the attached schedule". The rental proposal prepared on behalf of NCON did not make provision for NCON to sign. Mr Tobin witnessed Mr Molini's signature and Mr Gill signed or initialled the hand written amendments.

74 Mr Tony Reibel was also involved in the negotiations with Spotlight. He is and was at the relevant time the General Manager, Sales and Rental Finance with respect to NCON. He is and was employed on a contract basis. Mr Reibel was responsible for arranging finance to set up the Rental Agreement.

75 Mr Reibel said that in the middle of 2007, he was informed that negotiations were going on between Spotlight and NCON. Mr Reibel said that he supplied to Mr Tobin and Mr Dale the rental figures on a five year basis to use in their negotiations with Mr Molini. On 3 September 2007, Mr Tobin informed Mr Reibel by email that Mr Molini had asked about the impact of a three year rental versus a five year rental. Mr Tobin observed in the email that this would probably negate the financial benefits of the exercise but asked Mr Reibel to work out the actual figures. Mr Reibel said that he could not find any electronic record of sending the information that was sought and assumed he telephoned the figures through to Mr Dale or Mr Tobin.

76 Mr Reibel said that later in 2007, he attended a meeting at Spotlight's offices in South Melbourne with Mr Dale and Mr Tobin from NCON, and Mr Molini and an unidentified woman from Spotlight. Mr Reibel said that at that meeting Spotlight mentioned that they may look at getting or arranging their own finance. I infer, therefore, that this meeting was before the rental proposal was accepted.

77 Mr Reibel said that during the negotiations, he had made contact with Mr Dean Berry, a Spotlight employee in Spotlight's administration who handled finance. Mr Reibel said that he spoke with Mr Berry, informing him he needed certain financial information about Spotlight so that Mr Reibel would be able to apply for finance. Mr Reibel said that Mr Berry told him that Spotlight did not like giving out information to third parties. Mr Reibel said that the third party he had in mind was SME Commercial Finance (SME), who were the lending managers for Society General who were to be the ultimate financier. Mr Reibel said that he told Mr Dean that he would arrange for a non-disclosure agreement for him to sign. It is possible to generally date that discussion, as on 9 November 2007 Mr Reibel sent to Mr Berry by email "a copy of the Non Disclosure Agreement as requested".

78 Immediately after the rental proposal was accepted by Spotlight, on 28 November 2007, Mr Reibel asked Mr Berry (who he had been dealing with since at least early November) to forward to him certain financial information so he could get the appropriate approvals to establish the "Master Rental facility which will be $2.5 million as per the authority to proceed finalised yesterday with Fabio".

79 Mr Reibel said he did not recall whether at the time he had any discussions with Mr Berry about the mechanics of the payment of the rent to SME. He was shown the Master Hiring Agreement (MHA) forms and the direct debit forms sent to Mr Bergman on 18 January 2008 and asked did he know whether they were forwarded sometime in November or were they forwarded later. Mr Reibel said he could not recall exactly when they were forwarded to Spotlight but that he had sent the direct debit request form to Mr Barry. Mr Reibel said that the direct debit request form was in the name of SME and not in the name NCON. He said that to pre-empt Mr Berry asking questions about it, he told Mr Berry that Societe General was the ultimate financier. Mr Reibel was then asked: "All right. But at that stage you can't tell whether you'd sent him such a form or not?" and he replied: "I can't - I don't recall when I sent it, no".

80 Mr Reibel was asked whether he had any other discussions with Mr Barry. He replied:

Ah, the only discussions that I had with Dean Berry were basically about getting the finance organised and referring it through to Societe Generale because he didn't really want to give the information directly to me.

81 On 18 January 2008, Mr Reibel informed Mr Ari Bergman, an in-house solicitor for Spotlight, by email that he had previously provided to Spotlight a copy of the MHA. Under cross-examination, Mr Reibel admitted that he could not find any record that the documents sent to Mr Bergman on 18 January had been sent to Spotlight before they were sent to Mr Bergman on 18 January 2008.

82 It is convenient at this point to explain the NCON rental program and how it worked. The NCON rental program involved finance being approved for the rental of a certain quantum of Yes boxes. In this case the value was agreed at $2,500,000 in the accepted rental proposal. Under the accepted rental proposal, Spotlight was required to enter into an agreement called the Master Asset Finance Facility (MFFA). The MFFA is also known as the master hiring agreement; that is the MHA. The MFFA is referred to in the accepted rental proposal although the proposal did not spell out the essential elements of the NCON rental program. Under the MFFA, Spotlight agreed to sign individual Rental Agreements for the Yes boxes as they were installed. The form of the Rental Agreement was part of the MFFA. The Rental Agreement set out the location of the Yes boxes and a description of the goods. The accepted rental proposal provided that the rental payments began 30 days after installation. The agreed rental stream was assigned to Societe Generale who in exchange paid a lesser sum than the agreed price of the Yes boxes to NCON. Under the accepted proposal, the obligation imposed on Spotlight was to sign the MFFA document and the MFFA document set out the further obligations of Spotlight with respect to the installed Yes boxes. As the accepted rental proposal provided, Spotlight was to sign a direct debit form for the rental payments that were to be paid.

83 I find, on the balance of probabilities, that when Mr Molini accepted the rental proposal on 27 November 2007, Spotlight was aware of the mechanics of the NCON rental program. That is an inference that I draw from the evidence that Mr Molini signed up to the rental proposal]and that he had sought information on the difference between a five year financing and a three year term. Spotlight called no evidence from Mr Berry, Mr Molini, or Ms Sharpe to seek to rebut that inference.

84 Mr Reibel said that Spotlight, was not prepared to release its financial information directly to either NCON or SME. He said that being a private company, Spotlight was fairly sensitive about the information that went out. Mr Reibel said that Spotlight was prepared to talk to directly to Richard Hearne at Société Générale, who he believed was their general manager or manager of their credit division. Mr Reibel said that he arranged for that to be done.

85 In mid December 2007, Mr Tobin and Mr Dale met with Lisa McLean, project team leader and Aaron Hovey, project co-ordinator, of Spotlight to discuss the installation of the Yes boxes in the Spotlight stores. Mr Dale said that Mr Molini introduced Ms McLean and Mr Hovey to him. Mr Dale said that Mr Molini wanted to introduce them to him to make sure that the rollout for the following year ran smoothly, as they would be taking over his role. Mr Tobin said that Ms McLean was very enamoured with the greenhouse component of the NCON product in reducing power consumption. Mr Tobin said that Ms McLean told him that Spotlight was always trying to attract quality people to their organisation and that students had shown a lot more interest in the greenhouse responsibilities of the corporation than they had previously. He said that they also conversed about the fact that there were not any courses where you could learn about greenhouse savings and what they were, and that the tertiary institutions needed to catch up with the sentiment of the public at large. Mr Dale also referred to Ms McLean's enthusiasm for the Yes box.

86 On 17 January 2008, Mr Reibel was informed by email by Mr Trevor Phillips (who Mr Reibel said was his contact at SME) that the rental facility for Spotlight had been approved by Societe Generale. By the same email, Mr Phillips asked Mr Reibel for a copy of all documentation between Spotlight and NCON to be reviewed. On 17 January 2008 , Mr Reibel sent to Mr Phillips the signed Spotlight offer document. Mr Reibel says he subsequently received an email from Mr Phillips raising concerns about the agreements. The essential terms of the email are as follows. Mr Phillips said:

As you know, SME/SG have signed-off on the form of NCON's Proposal and this particular Spotlight Proposal conforms. However, the introduction of the umbrella Services Agreement appears to link-in the Proposal, and by extension, the Rental Agreement to the extent that they constitute one agreement.

The Services Agreement clearly places a number obligations on NCON which, if not performed, can result (amongst other things) in Spotlight:

- appointing a substitute Contractor and set-off any costs of doing so against monies payable to NCON (clause 4).

- terminating the agreement for no reason or upon breach by NCON or upon certain other events (clause 15)

- setting-off any damage or loss suffered by Spotlight due to any breach by NCON (clause 19.2).

In addition (amongst other things):

- Spotlight can assign the agreement without the consent from NCON. However, NCON cannot assign without consent from Spotlight (clause 20).

...

I can fully understand the reason for Spotlight seeking a Services Agreement but unfortunately as it stands we would not be able to proceed with any receivables purchases based on this documentation.

To get an informed opinion we would need to refer the documentation to SG's legal counsel but I have no doubt he would have the same reservations.

87 After receiving the email, Mr Reibel said that he discussed it with Mr Phillips, who repeated his reservations about the agreements. Mr Reibel said that he told Mr Phillips that he did not believe that there was a conflict between the two. Mr Reibel said that he told Mr Phillips that he did not see how a services agreement could possibly be construed to override a legal document such as a master hiring agreement Mr Reibel said that in his opinion Mr Phillips was being overly cautious, and unnecessarily so.

88 Mr Reibel said that on 17 January 2007 he took these concerns to Mr Bergman, corporate counsel of Spotlight and confirmed that finance had been approved in principle. Mr Bergman agreed that on Thursday 17th he received a telephone call from Mr Reibel, where Mr Reibel explained that Spotlight and NCON had an agreement in place, that under that agreement finance arrangements were required, and that a services agreement with Spotlight had also been entered into. Mr Bergman said that Mr Reibel told him that the financier Societe Generale had some issues with a services agreement in place with NCON. Mr Bergman said that Mr Reibel started to explain various options to resolve the issue that the financer had with the Services Agreement, and that he asked Mr Reibel to email him the information and that he would consider it. As requested by Mr Bergman, Mr Reibel expressed his concerns to Mr Bergman in an email the next day on 18 January 2008. The email refers to the earlier conversation with Mr Bergman. In the email, after explaining the Yes boxes, Mr Reibel explained to Mr Bergman the workings of the contractual relationship between Spotlight and NCON. Mr Reibel said:

The Yes boxes are to be provided under a rental contract with NCON being the owner of the assets. NCON then on sells the rental stream to SME Commercial Finance Pty Ltd (SME) which in this case is underwritten by the French Investment Bank Societe Generale (SG). The day to day management of the financing facility is handled by SME.

NCON/SME have submitted Spotlight's financials to SG and (SG did require some additional information which was provided direct to SG by Dean Berry) have obtained an in principle approval for $2.5 million line of credit which will cover current known requirements.

Credit approvals are subject to the Customer acknowledging and accepting the formal Proposal in its approved form as presented by NCON (or its representative) and obviously execution of the Master Hiring Agreement. The proposal document is contained within the attachment file.

Had Spotlight confirmed acceptance of both the Proposal and the Master Hiring Agreement (I am taking Spotlight's acceptance of the MHA as a given as we had previously provided a copy to you at your request) without the addition of an overriding Services Agreement we would be OK, unfortunately the Services Agreement contains clauses that SME and SG will have an issue with.

Mr Reibel then included an extract from Mr Phillips email quoted above. He then continued:

As is noted above SME understand the reasoning for the Services Agreement. Unfortunately in this instance its effect is to negate the formal Proposal and MHA. As you said this morning the Services Agreement is used for all suppliers and all types of services, from this I assumed you may have meant it was probably not interned to be used for this type of rental arrangement.

Given the above following are some of my thoughts as to how we can progress this with the minimum amount of time delay as well as removing the cost factor of having to get SG's legal input and potential amendments to the contract.

Option One: Spotlight are comfortable with and have accepted the formal Proposal and the previously supplied MHA (which is a standard rental contract) so the question is, is there really a need for the Services Contract?

If it isn't really necessary and Spotlight's requirement for the Services Agreement was withdrawn then we are approved and ready to go.

Option Two: If Spotlight believes it necessary to retain the Services Agreement, perhaps a solution would be for Spotlight to enter into an agreement with NCON acknowledging that NCON will be assigning their rights to the rental payments to SME/SG but such assignment will not include any of NCON's other obligations under the Services Agreement.

Spotlight will agree to make the rental payments to SME/SG pursuant to the requirements and conditions of the MHA and that SME/SG will not assume any of NCON's obligations. Furthermore Spotlight would acknowledge it will pursue any claims pursuant to the Services Agreement solely against NCON without any right if set-off counterclaim, defence etc.

Again, this is a non-legal suggestion however we are obligated to refer any arrangements, other than the standard approval procedures already agreed to with, to SG and their legal department,. If this was to be the case I would assume that at best we may need to have some minor amendments made to the MHA, e.g. additional clause(s) relation to payment commitments, and this will probably result in additional costs.

I trust the above gives you enough information with any additional queries you have being able to be resolved over the phone (best to contact me on mobile 0418 982 789), alternatively please let me know if you believe a face to face meeting would be more productive.

I look forward to finding a quick and mutually acceptable solution. It would also be appreciated if you could confirm receipt of this email by return, many thanks in advance and kind regards.

89 Mr Reibel said that in his conversation with Mr Bergman, Mr Bergman basically agreed with his view that a services agreement was not required with the Rental Agreement and he did not see why there would be a services agreement required to be attributed to an MHA (which was the MAAF) or a rental contract. Under cross-examination, Mr Bergman denied that he said he was surprised that the Rental Agreement required a services agreement.

90 Mr Reibel said that he did not have concerns about the matters raised by Mr Phillips as there were any number of other financiers or other alternatives they had for doing the finance on the deal. He said that he had been told by Mr Gill that Mr Molini had said NCON need not worry about the Services Agreement and he too did not see it as an impediment to the accepted rental proposal proceeding. Mr Reibel said that Mr Bergman told him he was going to refer the issue Ms Liz Sharp, corporate counsel of Spotlight, and that it would be forwarded to Cornwall Stodart for review.

91 Mr Bergman said he referred it to Ms Sharpe, who was the in house solicitor handling the accepted rental proposal. Mr Reibel said that after he sent the email of 18 January 2008 to Mr Bergman, he received no communication from him that Spotlight treated NCON as repudiating the accepted rental proposal. Mr Reibel subsequently followed up the issue with Nicole Stevens-Warton at Cornwall Stodart, asking her when they would have an answer.

92 On 13 February 2008, Mr Tobin emailed Ms Sharp thanking her for an update. She responded by saying: "As discussed, the board will have to reconsider the proposal in light of the MHA being first provided to us by Tony[9] only recently and the inconsistencies between it and our service agreement becoming apparent". On Tuesday 22 February 2008, Mr Tobin asked Ms Sharp by email whether there was any progress with regard to the NCON arrangement. Ms Sharp responded later on 22 February 2008, apologizing for not getting back to Mr Tobin and informing him that Spotlight had to get someone else on board since Mr Molini left, and she would follow up with that person today to see how he was going with it.

93 On 28 February 2008, Mr Tobin attended a further meeting this time chaired by Mr McLean in Mr Molini's office. Mr Molini was not present and had left Spotlight. Mr Reibel said that on this occasion Ms McLean was more aggressive than she had been at the previous meeting and queried why Mr Molini had not bought the units rather than rent them. Mr Tobin said that at that meeting Spotlight was given a letter of introduction for Lisa McLean and Aaron Hovey to sign, introducing NCON to the store managers. Following the meeting, Mr Tobin sent an email to Lisa McLean and Aaron Hovey reiterating what had been discussed at the meeting and elaborating on the options available of either purchasing or renting.

94 On 6 March, Messrs Tobin, Reibel, and Dale met with Mr Graham Porter of Spotlight. Mr Tobin said that Mr Porter said that Mr Molini did not have board approval to accept the rental proposal. Mr Porter said that they had employed Mr Jim Chisholm to put more order around the contracts and procurement processes that they had in place at Spotlight. After the meeting, Mr Tobin emailed Ms Sharp confirming a meeting with her and Mr Chisholm on 20 March 2008. On 17 March 2008, Mr Porter altered the meeting to 27 March 2008 in an email addressed to Ms Sharp, Mr Dale, Mr Tobin, Nicole Stevens-Warton of Cornwall Stodart, Jim Chisholm and Mr Reibel, saying this would give Mr Chisholm a chance to get up to speed with the proposal. Mr Tobin responded saying he would be interstate but that Steve Dale, Tony Reibel and Derek Barnes from NCON would attend. Mr Tobin said in the email:

Further to our last meeting - and in the interests of time - I was wondering if you had had the chance to confirm whether Spotlight can provide us with an official purchase order confirming the rollout will proceed even if the final decision on the payment method, i.e. either rental or outright purchase, hasn't been made.

95 Apart from Mr Bergman (corporate counsel for Spotlight), Mr Chisholm was the only Spotlight executive involved with the proposal who was called to give evidence. Those not called included Mr Molini, Mr Berry, Ms Sharpe, Mr Porter, Ms McLean, and Mr Hoovey. Mr Chisholm said that he was not aware that Mr Molini had accepted the rental proposal on behalf of Spotlight until after the litigation had commenced.

96 Mr Chisholm said he commenced employment with Spotlight on 17 March 2008. He said that Mr Porter (the general manager of business development) gave him the task of reviewing the Yes box proposal. Mr Chisholm said that he was to examine the viability of the rent versus buy options and to validate that the proposal actually worked.

97 Mr Dale attended the meeting with Mr Chisholm on 27 March 2008 with Mr Barnes and Mr Reibel. Mr Dale said that Mr Potter and a female Spotlight solicitor, who I take to be Ms Sharp, also attended. Mr Chisholm says that Mr Porter also attended and introduced him to the NCON people. Mr Dale says that Mr Chisholm asserted that there was no contract in place as the board had not sanctioned the contract. Mr Dale says that Mr Reibel claimed an agreement had been signed.

98 On the following day, 28 March 2008, Mr Chisholm emailed Mr Porter re NCON proposal:

Graham,

This is getting quite interesting !

I spoke to Steve Dale on several queries. He will confirm and send data on Monday on likely second 5 yr term pricing. Although on contract says subject to market interest rates he tell me prob is approx 40% less than first term rental costs. As they have recovered much of cost already. That would change the rent V buy equation.

There were some inconsistencies in data and when he can sit with same docs as me in front of him we will sort out. On Monday I will get updated spreadsheet showing for buy the ROI $ over years and the payback in years. And for rent the nett annual return. Will also have some data from independent source on actual loss of light , supposed to be 0.4%. They had quoted "imperceptible loss" but of course we never witnesses a demo.

So seems best to wait til Monday ? we will have best data to put in front of finance guys then, and with delay in board meeting takes heat off too.

99 Mr Chisholm said the reference to 0.4% might have been a typing mistake and it was supposed to be 4.3 per cent.

100 Mr Chisholm said he had received a copy of the proposal at or before the meeting on 27 March 2008. This was an amended version of the proposal dated 28 February 2008. It was unsigned. Mr Chisholm said that he had noted the reference to "imperceptible loss of light" in the technology section of the proposal and said that he needed to understand what that meant.

101 On 28 March 2008, Mr Reibel sent Mr Chisholm the reports from Western Power and Energy Australia as he had promised Mr Chisholm. On 1 April 2008, Mr Reibel sent Mr Chisholm a lease versus buy analysis as promised by Mr Reibel. On 3 April 2008, Mr Reibel sent Mr Chisholm some amended analysis as discussed. In it, he confirms the average cost of equipment capital is $19,890 and installation of $2,067 making a total average cost per store of $21, 957. For 90 stores that gives a total cost of $1,976,130. He also told Mr Chisholm that Mr Barnes would contact him to arrange a suitable date for a site visit. Shortly thereafter, on 8 April 2008, Mr Barnes spoke to Mr Chisholm about a site inspection and followed up with an email confirming a site visit in Ringwood to "cover off on lighting output and the difference between Save and Bypass readings". This referred to the second demonstration of the Yes box conducted by NCON for Spotlight (discussed below).

102 Both parties agree there were three demonstrations of the Yes box that Mr Chisholm attended. There was disagreement as to where the first two were held, but eventually Spotlight agreed with NCON that the first was held at Times Printing in Sunshine, the second at the manufacturing plant where the Yes boxes were manufactured at 15 Eugene Street, Ringwood, and the third at the Lincraft store at Frankston. Both parties agree that an employee of Spotlight, Julie Birch, conducted a fourth test at the Lincraft Store at Frankston, although there is a dispute as to who attended on behalf of NCON.

103 Mr Barnes gave evidence. He is a director and shareholder of NCON. He said that his expertise lay in the technical side of the Yes box system. He said that he attended the demonstration on behalf of NCON at the Times Printing building in Sunshine in early April 2008. He said that his diary recorded Mr Dale was present, but Mr Dale said that he did not attend the first demonstration. Mr Chisholm says that Mr Barnes and either Mr Tobin or Mr Dale attended the first demonstration he attended. Mr Barnes says that Mr Chisholm asked to give a demonstration in a more controlled environment. Mr Barnes says there was a certain level of ambient light present.

104 Mr Chisholm gave evidence that the office building at Sunshine had "open windows with a lot of natural light coming in". Mr Chisholm gave evidence that he recalled the light meter to have recorded a 20-25% loss of light and that given the "exceptional amount of natural light coming in which only favoured the product, I thought this was a very poor performance and it alarmed me". He said that he expressed his concern to the NCON people.

105 By email dated 7 April 2008, and in follow-up to a conversation earlier that day, Mr Barnes wrote to Mr Chisholm in an email:

Dear Jim

Further to our conversation this morning, I have organized a 2:00PM time in Ringwood to cover off on lighting output and the difference between Save and Bypass readings. I intend to demonstrate the absolute light drop in lumen output on individual lamps as would normally be experienced in day to day operations.

I believe that it is difficult to provide a definitive result in an uncontrolled area. Results, even across similar "areas" will yield differing outcomes. As already discussed, a trained eye will notice a >10% drop while and [sic] untrained eye >15% drop. I hope tomorrow to provide you with your comfort zone in this regard to the extent that, at the lamp, losses are not visually discernible albeit measurable with a meter.

Look forward to meeting with you tomorrow.

Address: 15 Eugene Tce Ringwood

Time 2:00PM'.

106 By email dated 8 April 2008 at 12:22pm, Chisholm wrote:

Sounds good Derek. Appreciate your cooperation and patience in this matter. I would certainly like to take the necessary reassurance away to enable further discussions. See you there!

107 Mr Barnes and Mr Dale attended on behalf of NCON at the demonstration at the factory at 15 Eugene Terrace, Ringwood on 8 April 2008. Mr Barnes said that a light meter was put below a fluorescent light. Mr Barnes said that the light was covered with a cardboard shroud light. Mr Barnes said that Mr Chisholm tended to shrug it off and wanted another demonstration.

108 When asked whether the test successful in demonstrating the YES Box, Mr Dale answered: "Absolutely."

109 Mr Chisholm gave evidence that he considered the demonstration to be a failure because:

I didn't understand what they were trying to prove to me and I didn't understand how this proves that, you know, Spotlight retail environment - that our customers would not have their - their ability to see our product compromised. It was kind of a technical and it was above my head in - in terms of being very technical.

110 Mr Chisholm said that he told Mr Dale and Mr Barnes that the demonstration did not satisfy his concerns, and:

It did not show me, um, that the naked eye could not see a perceptible loss in the change - a loss of light in the change from on and off mode using the product. It was a demonstration about science but it didn't prove to me what I needed to see.

111 Mr Chisholm gave evidence that ultimately he said to Mr Dale and Mr Barnes that he needed to see the technology operate in a retail environment similar to the Spotlight's retail stores.

112 There is a dispute as to when the third demonstration took place. Messrs Tobin, Dale and Tim Gill attended on behalf of NCON. Mr Chisholm and Ms Birch contend Ms Birch attended. All three NCON representatives deny she was present.

113 By email dated 9 April 2008 Mr Dale wrote to Mr Chisholm:

Hi Jim

Thank you for taking the time out yesterday for more technical information on the lux prepared and discussed by Derek. As mentioned we are installing the units at Lincraft, Southland next Tuesday 15th and we will keep you posted once they are operational. From that we are hoping you are totally confident in presenting to the Board this month as I gather then all the boxes will have been ticked to your satisfaction.

Speak soon...

114 By email dated 14 April 2008, Mr Chisholm wrote to Mr Dale:

Steve,

Next board meeting set for 30th April, but notes/agenda etc reqd be in place by 18th. So wont make that. I have meeting with CEO here 1:30 Thurs, so will have to take whatever time as reqd. Still shld be ok for 3pm with you guys as only ½ hr away.

115 By email dated 29 April 2008 Mr Chisholm wrote to Mr Dale:

I thought we were likely to meet up last week in Southland, is it planned for this week? I just want to plan my schedule, but pls [sic] don't rush it if compromises success of demonstration, as this is 3rd shot and must be conclusive.

116 By email dated 30 April 2008, Mr Dale provided Mr Chisholm with the address of Lincraft (Frankston), and a note "See you at 11 on Friday".

117 Spotlight contends the third demonstration took place on Friday 2 May 2008 at Lincraft in Frankston. Spotlight contends that Mr Chisholm and Julie Birch (who was the most recently employed employee of the Spotlight Frankston store) attended the demonstration with Messrs Tobin, Dale, and Gill.

118 Mr Chisholm and Ms Birch gave evidence that NCON's light meter had flat batteries, whereas Messrs Tobin, Dale, and Gill gave evidence that they did not bring the light meter.

119 Mr Tobin said that the demonstration at Lincraft was organized because Mr Chisholm wanted to see the Yes Box "in action in a - in an environment as closely as possible resembling the Spotlight shopping environment. And at that point in time the nearest that we had to qualify that brief was the Lincraft store."

120 Mr Tobin said he waited for Mr Chisholm to turn up for some two hours. While waiting for Mr Chisholm to arrive Mr Tobin noticed "the lighting itself was older or at the tail end of its lifetime."

When he [Mr Chisholm] initially arrived and walked in and had a look around, and we said that the system was on, his initial response was that, "This looks fine to me. Can we now have some testing with the unit turned off and the unit back on, off/on?" so that he could get a full understanding.

Who turned the system on and off?---Tim Gill went to the box.

When the system was turned on and off what did Jim Chisholm say, if anything?---I think he - he felt that the difference in light when it was changed over was more than he perhaps had expected. We told or I told him and others that the lamp life was a contributing factor to the fact that there was possibly discernability in terms of the difference. But you have to understand that in making that judgment we were looking at the lamps in the roof which is typically not what a shopper would do. So when I diverted my attention then to the shopping environment and the haberdashery and cottons and so forth I found that to be quite acceptable.

122 In response to a question from me, Mr Tobin gave evidence that:

When Mr Chisholm said he noticed a difference, did you observe whether he was looking up at the fluorescent lamps or was he looking at the stock on the benches?---At that stage up at the fluorescent lamps, at the lighting itself.

123 Mr Tobin said that Mr Chisholm was a little frustrated as they did not have a light meter with them. Under cross-examination, Mr Tobin agreed that in the course of the demonstration Mr Chisholm said to him something to the effect of: "Gee, that's more than I expected."

124 Mr Dale said that he attended the third demonstration with Mr Tobin and Mr Tim Gill. Mr Dale denied that a woman was present at the demonstration. He said that Mr Chisholm arrived about an hour late. Mr Dale said he noticed that the lights in the Lincraft store were fairly dark "because they were coming to the end of their life cycle, so they weren't the best of tubes that were in the store." They needed to have them replaced, and Lincraft knew about that, but they were happy in terms of the - until that actually occurred, so Mr Dale said that Mr Tim Gill pointed out to Mr Chisholm the age of the tubes and said:

That the lights needed to be replaced. They were old lights, and so the demonstration will not give you the complete satisfaction that you were probably after. However, Lincraft are quite happy with the way that the units are operational in our store.

125 Mr Dale said that before the demonstration was performed, Mr Chisholm said to Mr Dale: "I couldn't see any different in the store when he walked in."

126 Mr Dale said that Mr Tim Gill performed the demonstration and that Mr Chisholm commented "That he could see a difference in the lux levels of the lights, when they went from bypass to save, or from out of save into bypass, he could see a difference in the lux levels."

127 Mr Dale said that Mr Chisholm asked if they had a light meter and was told they did not. Mr Dale said that Mr Chisholm was quite annoyed and said: "You had three goes at this, and I think you've blown it."

128 Mr Tim Gill said he attended the demonstration at Frankston with Mr Tobin and Mr Dale. He said that he could not recall a woman being there. Mr Tim Gill manually operated the Yes boxes. He did not observe Mr Chisholm's reaction to him switching the Yes boxes off and on. He said that Mr Chisholm was "a bit annoyed" that they had not brought a light meter with them.

129 Mr Chisholm said as the lights were switched off and on he kept his eyes on product on the wall or on the shelves. He said he noticed a perceptible lightening and when it was turned off and a noticed a darkening when it was turned on.

130 By email dated 6 May 2008, Mr Tim Gill wrote to Mr Chisholm:

Hi Jim

Confirming 10:00 Thursday 8/5/08 at Lincraft Frankston. Looking forward to meeting Julie Birch. My mobile is 0418 357 210.

Regards

Tim Gill.

131 By email dated 6 May 2008 at 5:05pm, Mr Chisholm wrote to the Spotlight (Frankston) store manager and Mr Tim Gill:

Alan,

Please pass this on to Julie Birch, and perhaps you could email Tim Gill to advise him of her mobile no."

Thanks

132 Mr Chisholm gave evidence that the reason he sent the email to the Spotlight (Frankston) store manager was because Mr Birch did not have an email address of her own.

133 By email dated 6 May 2008, Mr Chisholm wrote to the Frankston Store Manager:

Alan,

Could you please advise Julie of following.

Tim is from NCON, they have provided Spotlight with an energy saving proposal where we either rent or buy the equipment that will reduce electricity consumption dramatically. But this also has an impact on the light intensity. They claim it is about 4%, and that is imperceptible to naked eye if under 12% loss (i.e. darker).

So we want them to demonstrate that in a place where they have installed these lights, the Lincraft store. They will put a light meter on the floor, in a place under lights but away from the door with the natural light. Julie must see what number it registered under both 'normal' light and also when they have switched to 'save' i.e. when the electricity saving is occurring. This is to happen in at least 2 places in the store. She needs to see and verify the numbers on the light meter as it sits on the floor, and record the numbers, and advise me in an email. Would also appreciate a call while she is there and when it is done so I can quickly calculate the result!

Thanks

134 By email dated 7 May 2008, Mr Chisholm wrote to Mr Tim Gill (and copied to the Spotlight Frankston Store Manager and Graham Porter):

Hi Tim

Julie's phone number is 0409947767, she is aware of your details and will be there. I have explained what is reqd to her.

That there will be measurements in minimum two places, away from door so not compromised by natural light. Meter in fixed position, i.e. flat on ground below lights. Readings taken in normal as well as save mode. Record numbers she sees, and to advise me while still there. It need to be understood this is the 4th and last shot at this Tim.

135 The demonstration took place at 10am on 8 May 2007, as scheduled. Ms Birch and Mr Tim Gill attended the Lincraft store at Frankston. Ms Birch said that she saw the numbers on the light meter box and wrote down numbers on a piece of paper, which she has since thrown out. Mr Tim Gill said that he recalled her writing the lux measurement on a scrap of paper.

136 By email dated Thursday 8 May 2008 at 10:27am, the Spotlight Frankston Store Manager wrote to Mr Chisholm:

Jim, Julie has been across to Lincraft for the lighting test and wants to ring you with the results. What is your contact no? Alan.

137 Mr Chisholm gave evidence that he received a phone call from Ms Birch after the test, and that Ms Birch told him the light meter readings that she recorded in various places with and without the Yes box turned on. Mr Chisholm said that he was able to calculate that there was a loss of lux of around 20%.

138 In cross-examination, Mr Tim Gill accepted that the readings showed a 25% drop in lux at one of the points at which a reading was taken.

139 Mr Chisholm gave evidence that on that afternoon, or the following day (9 May 2008), he spoke to Mr Dale or Mr Tobin and reported that the results were unsatisfactory. He also said that he reported his conclusion to Stephen Carter, Spotlight's CEO, and was directed to stop pursuing the proposal because the Spotlight had lost interest in it.

140 NCON sought to provide a further demonstration to establish the effectiveness of the Yes boxes. On 12 May 2008, Mr Tobin emailed to Mr Chisholm:

Hi Jim

Steve and I have had a number of discussions and meetings with NCON since Friday to work out how we can move forward with you - quickly and simply (for all parties).

We have made them fully aware of our collective frustration in identifying a retail example of performance that would closely match the environs of a modern Spotlight retail environment.

We believe that we have come up with an excellent solution.

With your permission, NCON will, at its own risk and expense, install their equipment at your new store across the road from your existing offices in South Melbourne.

It will be installed without disruption to your retail activities - and will then be fully tested and independently measured for lux readings.

Once completed, we will notify you - and you will be able to see the results, first hand, at any time convenient to you - simply by walking across the road!

....

141 The reference to Friday was probably to Friday 9 May 2008, when Mr Chisholm said he spoke to Mr Dale of Mr Tobin.

142 In response to the proposed new demonstration, Mr Chisholm emailed Mr Tobin on 16 May 2008 as follows:

I want to carefully set out the parameters of a proposed demonstration before either party invests more time and energy. I need a little more time and will set this out next week for you..

143 This suggestion by Mr Chisholm that there might be a further demonstration does not fit easily with his evidence that he had received instructions from Mr Carter, the CEO of Spotlight, to stop pursuing the NCON proposal. Mr Tobin responded thanking Mr Chisholm for the "update."

144 Mr Dale said that he contacted Mr Zac Freid at Spotlight and informed him that NCON had a contract with Spotlight and asking how NCON could move it forward. He asked Mr Freid to get Mr Chisholm to get back to Mr Dale.

145 Apparently Mr Dale had made some calls to Mr Chisholm, as on 16 June 2008 Mr Chisholm emailed Mr Dale:

Steve

Sorry wasn't able to take either of yr [sic] recent calls. The energy reduction proposal has taken a back seat now, I have numerous projects to deal with currently, and wont [sic] be setting up an exercise in our store across the road at this time. I will contact you directly at the appropriate time.

Regds

146 On 30 June 2008 at 1.30 pm Mr Dale emailed Mr Chisholm (copied to Mr Freid and Mr Barnes):

Hi Jim

I spoke to Zac with the hope we can get together with your technical people and NCON to discuss how the Lux reading versus power saving won't effect the ambience of the Spotlight stores. We are hoping this can be done shortly, as we are very keen to move forward.

Please let me know a time that suits...

Many thanks

Regards

Hi Steve,

Yes, I have discussed this with Zac, I am seeing one of our electrical contractors this week on this matter. I will be in touch.

Regds'

148 By email dated 7 July 2008, Dale wrote to Chisholm (copied to Freid and Tobin):

Hi Jim

As always its was great having a chat with you today, unfortunately it sounded like the chip monks on crack, as I could only decipher every third or fourth word. Yes the joys of modern technology!

We are certainly hoping that you may have something for us to get out teeth into, so I will wait with enthusiasm. Just to let you know we will be announcing very shortly through most media outlets (newspapers and television) in the next two weeks, that we have secured a major shopping centre chain.

We feel that our efforts and technology within this organization has been vindicated through there extensive research which gave us the contract. As soon as we are allowed to name this publicly I shall forward this onto you.

As a footnote I have been in legal discussions with our partners as one of the competitors has stolen NCON technology. Litigation unfortunately and breach of patents is pending. We enjoy the competitive market, but not when someone else takes NCON's hard work and research over the ten year period.

Thanks Jim, I am sure we will talk soon.

Regards

149 On 21 July 2008, Mr Dale emailed Mr Chisholm (copied to Messrs Freid, Tobin, and Barnes):

Good Morning Jim

I spoke with Zac on Friday re pushing forward with the negotiations and installation of the NCON Yes Box Smart Controllers into Spotlight. Zac said Hugh was now looking at it and to speak with you about setting up a meeting with Hugh this week if possible please.

Given that Spotlight gave the green light in December 2007 to proceed, we have stepped back patiently while you tried to get your head around the technology and now we want to accelerate the process which we have proved will save Spotlight a significant amount of money and greenhouse emissions.

As a footnote we have just secured 2 major wins over our closest competitor in Australia and after exhaustive scrutiny our product, installation process and rental rates come up well ahead which should be some consolation to you. One if one of Australia's major transport and warehousing company, the other a major shopping centre group throughout Australia. This is a result in saving them millions as well as assisting them in reaching their greenhouse gas reductions as set out by the government.

We have also just completed trials with Lincraft (the store you visited) and the results have actually surpassed our conservative reporting. I must recall that although on your visit to this store you were very happy with the lighting ambience in the store, however the Lux reading based on the Lincraft's lamps being at their life's end seemed to be the stumbling block for you. As you so rightly said the light in your stores was imperative as customers were selecting material and needed to see the detail. I pointed you to and reiterate that when in your Whangarei store in New Zealand my wife commented on the very poor light in this store and on looking upward at the lights only one in three were live, so if we had done a lux reading there I am sure it would have fallen far short of your expectations.

So to move forward and save Spotlight the money we projected, I look forward to hearing from your hopefully today, in setting up a meeting...

150 Later that day at 12.21pm, Mr Chisholm emailed Mr Dale (copied to Messrs Freid and Porter):

Hi Steve,

Zac mentioned to me on Friday you had called him again. The situation is that I still need to discuss the various technologies' and proposals with Hugh, and have again requested a meeting, and that it will take place between the two of us only. Despite your view that a green light was given in December, last time we spoke I was at pains to explain that it should not be considered that Spotlight have agreed to your proposal and only issue is timing of implementation, or that we consider you as the only proposal that should be explored.

And actually I clearly remember that although I could see details of products etc in the Lincraft store, that my impression was it was still a 'dingy' effect. It is precisely because that is a subjective view that instead we must rely on validated measurements between 'normal' lighting and when your product is operative. This was the 4th opportunity we had met in attempt to verify this. I don't dispute that the lamps, if coming to an end of life, may contribute to lux loss, but there is of course no data to support to what degree that impacted on Lincraft Frankston. All I do know is that the loss was 25% as measured, and that is a failure. I don't see a purpose in setting up a Spotlight store demonstration until I have spoken to Hugh, including about controlling all the variable etc

I will of course contact you in due course.

Regards

151 Also on Monday 21 July 2008, at 1.22pm, Mr Dale emailed Mr Freid:

Hi Zac

I don't really understand his email. Suffice to say he didn't understand the lux and if that is the only criteria to hold up on the Spotlight deal, I would have thought we could have done a trial so you could see in sic.

All we are trying to do is move forward to facilitate Spotlight and help out, but if Jim's perception is the contrary there isn't much more I can do.

Maybe you can let me know if we should pursue this because I don't want to keep on calling.

Cheers

Steve

152 At 4.01pm on 21 July 2008, Mr Freid replied to Mr Dale:

He will contact you once he has completed the work.

153 Despite these emails encouraging NCON in its pursuit of Spotlight's custom, on 16 October 2008 Mr Chisholm emailed Jacqui Coombes (copying Mr Porter) saying under the subject of lighting - Spotlight - Anaconda:

My view is this is yet another in the range of energy reduction proposals that have hit my desk. The NCON one was pursued by Spotlight and was close to being signed when I arrived in March, but I wanted to see a demonstration that we were not at risk of unsatisfactory loss of light. After 4 trials they were not able to prove their claims and we have declined to take this further.

154 On 2 January 2009, Mr Tobin emailed Mr Porter (copying Messrs Dale, Freid, and Chisholm):

Hello Graham

Happy New Year to you and everybody at Spotlight.

We hope that retail trading remains brisk - despite mixed signals from the economy...

Further to our discussions and meetings from last year, we are still very keen to work with the Spotlight Group to bring you both greenhouse and economic savings - without any changes to existing work habits and activities.

We have had a couple of major 'wins' towards the end of last year - so the systems are working and performing well.

We recall your challenges with regards to the different arrangements with the retail outlets - i.e.: rental, ownership, varying leasing arrangements, etc. (FYI - we have had formal advice that the NCON equipment is considered a chattel for the purposes of rentals) and look forward to working with you to at least begin some trials (with money back guarantee).

The NCON Equipment is also works very well with warehousing and factories.

To that end, may I suggest that we prepare an obligation-free report for you for your warehouse facility in Laverton - this can be prepared and considered independently of your various retail outlets.

Please let me know your thoughts.

Kindest regards,

Alan T.

Hi Jim

Tried to call today as a follow up from last year. We have had a huge success installing the NCON Yes boxes throughout various retail, offices and warehouses.

As a footnote we are starting to install the units in the Herald and Weekly Times building, part of Murdoch approach to reducing the carbon foot print.

I would love to visit the Spotlight Group again and see if there may be an opportunity to save money! We do have an offer that would be extremely attractive, so when you get a chance I'd like to catch up and discuss in more detail.

Kindest regards

Steve

156 In response to a letter of demand from NCON dated 2 May 2009, by letter dated 14 May 2009, David Windsor, on behalf of Spotlight, wrote to NCON setting out the Spotlight's position.

Dear Peter

NCON Australia

I refer to you letter of 2 May 2009 regarding the purported "Contract" between your client and Spotlight.

Our position is as follows:

1. 1. The purported Contract was not actually fully and completely consummated due to the fact that your client's financiers, SME Commercial Finance and Societe General, had issues with some of the terms & conditions. Moreover, Spotlight never accepted your client's rental agreement or finance facility that as an essential component required for this deal to go ahead.

Accordingly, from our perspective all of the necessary legal documents required to be negotiated, approved and agreed to have no been agreed to.

1. If the Contract was in fact valid then I'd draw you attention to clause 15.1 which provides Spotlight with the right to terminate upon on months notice - which is what Spotlight has given to your client.
2. Finally, as to a reason, the main issue apart from the fact that we haven't concluded contractual negotiation, is that trials conducted by us of your client's technology revealed anything but an "imperceptible light loss", as claimed by your client.

In fact, a previously disclosed to you client, during due diligence we came to the conclusion that the use of your client's technology could result in a significant los of light, which is neither "imperceptible" nor acceptable.

At this time I would suggest that we don't yet have a deal. This is further evidenced by the fact that your client has not provided Spotlight with any "Yes Boxes". Finally, your client has never invoiced us and we have never paid for anything.

Feel free to contact me if you require further information.

Yours sincerely

Principles for ascertaining whether a contract has been concluded

157 The principles for ascertaining whether a contract has been concluded and what are its terms are well established. Spotlight sets out the basic principles as follows.

(a) In construing a written document, the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the document's language to create. The emphasis is thus on giving effect to the apparent intention of the parties, and direct evidence of the parties' actual subjective intentions and expectations is inadmissible for purposes of construction.[10]

(b) The language of a term is generally assigned its natural and ordinary meaning, read in the light of the contract as a whole but where it is ambiguous surrounding circumstances may be taken into account in assigning the presumed meaning. The surrounding circumstances include the matrix of mutually known facts, and the background, object, context and commercial purpose of the transaction, in the objective sense of what reasonable persons in the position of the parties would have had in mind.[11]

158 As indicated above, NCON contends that the accepted proposal constituted a binding contract and sues for breach of that contract. Spotlight argues that any agreement that was made was constituted as one agreement by both the Services Agreement and the accepted proposal. Spotlight further alleges that the agreement, whether it be the one agreement or merely the accepted rental proposal, was incomplete and did not constitute a binding contract.

Did the parties enter into a single agreement constituted by the Services Agreement and the Rental Agreement?

159 This question is of some importance. Spotlight alleges that there was only one agreement and that accordingly under clause 15.1 of the written Services Agreement, Spotlight was entitled to terminate the agreement on one month's notice.

160 I find that the parties entered into two separate agreements. One agreement was for the installation of the Smart Power control system in the Spotlight stores specified by Spotlight and the other agreement was for the rental by Spotlight from NCON of the Yes boxes when installed in Spotlight's stores.

161 This distinction is clearly sought to be made in NCON's pleadings. NCON alleges that on or about 19 November 2007, in consideration of the parties separately entering into the Rental Agreement, NCON and Spotlight entered into an agreement (partly oral and partly in writing), described as the Services Agreement, whereby NCON agreed to install the control system or, at Spotlight's election, procure the installation of the control system with Spotlight's nominated installing contractors in specified retail stores of Spotlight.[12]

162 NCON also alleges that on or about 27 November 2007, NCON and Spotlight entered into an agreement, described by NCON as the Rental Agreement, whereby NCON agreed to rent to Spotlight NCON's Smart Power control system for lighting at certain of Spotlight's retain store locations in consideration of monthly rental payments to be made to NCON for a period of five years upon certain terms and conditions.[13] Spotlight admits that it accepted NCON's Proposal but alleges it did so in consideration of the parties entering into the Services Agreement.[14]

163 The written Services Agreement document signed by NCON was delivered to Spotlight on the occasion of the meeting of 27 November 2007 when Spotlight signed the rental proposal after some amendments were made to it.

164 The two agreements were not the one agreement. They each could stand and fall separately. Merely because the Services Agreement was entered into in consideration of Spotlight entering into the Rental Agreement does not constitute them as one agreement. On the contrary, the fact that the entry into the Rental Agreement was the consideration for Spotlight entering into the Rental Agreement confirms their independent existence. A subsequent termination of the Services Agreement would not affect the existence of the Rental agreement.

165 NCON alleges that the Services Agreement was partially in writing and partially oral. NCON says that it was an oral term of the Services Agreement that it applied to the installation of the Yes boxes and did not apply to the agreement to rent the installed Yes boxes contained in the accepted rental proposal. On the uncontradicted evidence discussed above, I am satisfied on the balance of probabilities that Mr Molini agreed with Mr Tobin and Mr Gill that the Services Agreement would only apply to the installation of the Yes boxes and would not apply to the Rental Agreement. Mr Molini was not called by Spotlight to rebut the evidence of Mr Tobin and Mr Gill.

166 Accordingly, I find that it was a term of the Services Agreement that it did not apply to or govern the terms of the Rental Agreement. I find that the Services Agreement was distinct from and separate to the Rental Agreement and that the terms of one did not govern or alter the terms of the other.

Did the Rental Agreement constitute a binding contract between NCON and Spotlight?

167 Spotlight argues that the Rental Agreement (or the Proposal, as it calls it) did not constitute a binding contract when accepted by Spotlight as the terms of the lease of the Yes boxes dealt with in the Proposal did not sufficiently define the goods to be leased, the rent to be paid, and the commencement term of the leases. Spotlight also contends that Proposal agreed that a Master Hiring Agreement should be entered into, which itself required agreement on the goods to be leased, the rental to be paid, and the commencement date of the leases. For the reasons given below I reject each of these contentions.

168 For the following reasons, I find that the NCON rental program included the Master Asset Finance Facility and the Direct Debit Request Service Agreement.

169 When the proposal was initially put to Spotlight, Spotlight was offered the option of accepting either the purchase option or the rental option. The proposal as signed by Spotlight provided that all Yes boxes were to be supplied under NCON's rental program. The rental option was accepted and the purchase option rejected.

170 The accepted proposal states that the rental payments, which were defined by the model of the Yes box, were payable on a monthly basis. The proposal states the rental payments were on 30 day terms, were to be made by direct debit, and did not include GST or contract stamp duty (where applicable). The term of the rental was for five years. At the end of the first term, the rental could be extended for a further period of up to five years.

171 The accepted proposal provided under the heading of Proposal Pricing:

The pricing quoted as "Equipment Cost" and "Monthly Rental" within this proposal is valid for thirty days only.

Rental prices are based on current interest rates and Equipment Cost and are subject to rise and fall in line with market interest rates. NB: Rental costs remain fixed for the period of the rental once the Rental Agreement, or the Annexure A Rental Agreement in the case of a Master Asset Finance Facility, is accepted by NCONA.

172 NCON contends that the reference to the "Rental Agreement" in this provision is a reference to the accepted rental proposal. The proposal did not have attached an "Annexure A Rental Agreement."

173 The initial draft of the rental proposal was put forward as an offer to Spotlight. It would therefore be logical and reasonable to provide that the rental costs remain fixed once the rental proposal was accepted.

174 In my opinion, the reference to "Rental Agreement" refers to the accepted rental proposal. The reference to the Rental Agreement means the proposal as accepted by Spotlight. The acceptance of the rental option offered by NCON in the proposal gave rise to an agreement between NCON and Spotlight to rent the Yes boxes.

175 The accepted rental proposal said that the rental option was subject to formal credit approval from NCON, and that a pre-approved finance limit (adequate to cover all recommended installation) would be obtained on behalf of Spotlight. The accepted rental proposal provided that a facility limit of $2,500,000 would be obtained. Mr Reibel explained that the measure of the facility limit was the cost price of the equipment rented. Accordingly, the facility would allow Spotlight to rent Yes boxes to the value of $2,500,000. The accepted rental proposal provided: "It is anticipated a pre-approved finance limit, adequate to cover all recommended installations, will be obtained on behalf of Spotlight".

176 Under the NCON rental program, NCON was to enter into an agreement with a financier to obtain finance. Spotlight was not to be a party to this agreement. Under the agreement between NCON and the financier, NCON was to assign to the financier the rental stream that NCON was to receive from Spotlight under the Rental Agreement. In consideration of the assignment, the financier was to pay to NCON a lump sum calculated as the present value of the rental stream at the market discount rate plus 1.5 per cent. Thus, by paying rent Spotlight would obtain the use of the Yes boxes for five years in the identified stores. NCON would receive a lump sum. The financier would receive the rental stream.

177 Spotlight's credit standing was important to the NCON rental program as Spotlight's contractual obligation to pay the rents was assigned by NCON to the financier and then discounted by the financier to a present value and the discounted sum paid to NCON.

Spotlight's knowledge of and acceptance of the NCON rental program

178 Spotlight contends that NCON did not supply a copy of the MFFA to it until 18 January 2008 when Mr Reibel emailed a copy to Mr Bergman. Spotlight says that Mr Reibel's assertion in his email of 18 January 2008 that NCON had "previously provided a copy [of the Master Hiring Agreement] to you at your request" was not correct. Spotlight contends that Mr Reibel conceded in cross-examination that he did not provide a copy to anyone on behalf of Spotlight. Mr Bergman gave evidence that he had never requested to see the Master Hiring Agreement, nor had he previously been provided with it. Spotlight argues there is no evidence that anyone on behalf of NCON provided it to anyone on behalf of Spotlight.

179 I understand that Spotlight contends by this issue that although Spotlight agreed to rent the Yes boxes under the NCON rental program it did not know what it was agreeing to as it did not know what the rental program entailed. I find this a difficult argument to follow, as I do not accept that Spotlight agreed to rent the Yes boxes under a program it did not know about. And even if Spotlight did not know, this is not relevant, given it agreed to the rental program . In any event, for the reasons that follows, I am satisfied that Spotlight was aware of the details of the rental program.

180 The program involved a financier providing finance for $2.5 million under an agreement with NCON, as explained above. The program also involved Spotlight signing a Master Finance Facility Agreement and individual Rental Agreements and the Direct Debit Request Services Agreement once the Yes boxes were installed.

181 What was Spotlight's knowledge of the NCON's rental program and the Master Finance Facility Agreement ("MFFA") (or as it is alternatively referred, the Master Hiring Agreement or the Master Rental Agreement)?

182 Much of the evidence on this issue was given by Mr Reibel. In my opinion, Mr Reibel gave his evidence honestly. Mr Reibel was open and frank about the failure of his memory. He readily accepted that he could not remember matters which may have assisted NCON's case. If he could not recall, he said so, and was not prepared to speculate on matters. In some instances, the contemporaneous documents fill in gaps where Mr Reibel was unable to remember. Unless the evidence establishes to the contrary, I proceed on the basis that the contemporaneous documents provide reliable evidence of what took place.

183 In his email of 18 January 2008, to Mr Ari Bergman (the in-house solicitor for Spotlight) Mr Reibel states that he had previously provided a copy of the Master Hiring Agreement to Spotlight. Mr Reibel had no recollection of providing a copy of the Master Hiring Agreement to Spotlight beforehand, as he said he had done in his email. Mr Reibel said in cross-examination that he had seen nothing (meaning any other written documents) to indicate that he had sent the Master Hiring Agreement to Spotlight on an earlier occasion. On the other hand, I formed the view that Mr Reibel was not the sort of person who would said that he had provided the Master Hiring Agreement previously to Spotlight if he had not.

184 There is evidence, however, to suggest that Mr Reibel provided the Master Hiring Agreement to Mr Berry (the Spotlight employee who handled finance), or at least explained it to him prior to Spotlight accepting the Proposal.

185 Mr Reibel could not recall when he dealt with Mr Berry, but the contemporaneous documents establish he was discussing the NCON rental program with Mr Berry in early November 2007. Mr Reibel gave evidence of a conversation he had with Mr Berry, during which he informed him that he needed certain financial information about Spotlight so that NCON could apply for finance. Mr Reibel said that Mr Berry told him that Spotlight did not like giving out information to third parties. Mr Reibel said that he told Mr Berry that the third party he had in mind was SME, who were the lending managers for Society Generale (the ultimate financier). Mr Reibel said that he told Mr Berry that he would arrange for a non-disclosure agreement for Mr Berry to sign. On 9 November 2007, Mr Reibel sent to Mr Berry the non-disclosure agreement as requested by Mr Berry.

186 Although Mr Reibel could not recall doing so, I find that it is likely that Mr Reibel explained to Mr Berry the NCON rental program in order to justify the need for Spotlight to provide financial information to the financier. It is therefore likely that he discussed with Mr Berry the need for Spotlight to provide financial information to the financier so that the financier could provide finance to NCON through the assignment of the rental stream to the financier. Spotlight did not call Mr Berry to rebut the inference.

187 Mr Reibel also discussed the direct debit form with Mr Berry and explained why it nominated the payments should be made to SME. In view of the fact that after 18 January 2008, when Mr Reibel sent the Master Hiring Agreement and direct debit forms to Mr Bergman, nothing further occurred to advance the financing, it is likely the discussion with Mr Berry about the direct debit form took place before then. It is also likely that Mr Reibel discussed the direct debit facility when he was explaining the NCON rental program to Mr Barry.

188 The fact that Mr Reibel discussed the NCON rental program with Mr Berry before the 28 November 2007 is supported by his reference to the Master Rental facility in his email of 28 November 2007 to Mr Berry. The email treats the Master Rental facility as something known to Mr Barry.

189 The likelihood that Spotlight was aware of the terms of the NCON rental program is supported by the fact that Spotlight itself was not obtaining finance but nevertheless was expected to provide information relating to its credit standing to a third party financier. It knew that that it was leasing the Yes boxes under NCON's rental program and the program allowed NCON to provide low rental rates to its customers. It is unlikely that Mr Molini would have formally accepted the NCON Proposal after it had been reviewed by Spotlight's in-house counsel, Ms Sharp, and approved by the Spotlight board without being aware of the substance of the NCON rental program. Mr Molini also saw fit to expressly refer to the NCON rental program in the Services Agreement that he had prepared well before the 27 November 2007 and given to NCON to sign. The proposal itself referred to the Master Asset Finance Facility. Spotlight had the proposal vetted by its in-house solicitor. It is unlikely that Spotlight would have accepted the proposal for such a significant contract without understanding what it was agreeing to and without understanding the content of the Master Asset Finance Facility.

190 The inference is open from the evidence that Spotlight understood that the NCON Rental program involved Spotlight signing a Master Hiring Agreement and individual Rental Agreements once the Yes boxes were installed. Spotlight could have called Mr Molini, Mr Berry, and Ms Sharpe to rebut that inference but failed to do so. I am therefore in a position to more readily draw this inference than I otherwise might.

191 Accordingly, I find on the balance of probabilities that that Spotlight understood before it accepted the proposal that the rental option included agreeing to the NCON Rental Program; that the program involved a financier (Societe Generale), that finance for $2.5 million would be applied for by NCON, and that Spotlight was required to sign a Master Hiring Agreement and individual Rental Agreements and the Direct Debit Request Services Agreement once the Yes boxes were installed.

192 Spotlight contends that the Proposal was incomplete and lacked agreement on essential terms of a chattel lease. In particular, the Amended Defence alleges that the Services Agreement and the Proposal constituted an incomplete agreement which contemplated further agreement between the parties as to the number and model of items comprising NCON's control system which Spotlight would purchase or lease, and the terms of purchase or lease, if and when NCON obtained finance for the sale or hire of such items to Spotlight.[15]

[Spotlight] refers to the terms of the Proposal, including the statement therein that [NCON] would apply for a Facility Limit of $2.5 million on behalf of the Spotlight Group;

its references to the rental 'option' and equipment cost;

its provision that the rental option is subject to formal credit approval from [NCON];

its stipulation in respect of the pricing in the Proposal that rental costs remain fixed 'once the Rental Agreement, or the Annexure A Rental Agreement in the case of a Master Asset Finance Facility, is accepted' by [NCON];

and the absence in the Proposal of any form of Rental Agreement or of terms of sale or hire (such as those contained in the Master Asset Finance Facility referred to below), or identified numbers of items and models to be hired or purchased, or of a total rental figure.

On 18 January 2008 [NCON] provided [Spotlight] (for the first time) with a proposed Master Asset Finance Facility between the parties to which were annexed an "Authorized Signatory Notice", a "Guarantor's Certificate" and a "Rental Agreement" (attaching terms and conditions), as well as Direct Debit authorities.

194 In its written final submissions, Spotlight says the agreement does not contain identifiable subject matter. Spotlight says the Proposal identifies three out of a range of four models of the NCON's technology, but does not identify which models are the subject of the agreement or how many of each model is required or a process for their identification.

195 I do not accept this submission. The Proposal offers three units for lease. The survey of the three Spotlight stores of small, medium, and large size only proposed the use of the three models specified in the Proposal. The Proposal identifies the units to be leased.

196 Spotlight contends that the Proposal does not specify the actual rent for the term, either classified per store or as an overall figure. Under the accepted proposal the stores to be fitted with the Yes boxes were identified in Appendix 1. The agreement provided for each of these stores to be fitted with Yes boxes. The Services Agreement provided for "standard installation only and is subject to site inspection." I find that it is implicit that the store would be fitted with such number and type of Yes boxes that were necessary to implement the system in the store after site inspection. The rental for each type of Yes box was agreed.

197 Spotlight contends that the Proposal failed to identify the term of the lease of the Yes boxes. Spotlight submits that the Proposal states that "the initial rental term is for a maximum period of five (5) years..." but other than stating the maximum period it fails to identify an actual duration.

198 I reject this submission. The Proposal speaks of a first term. The Proposal goes on to state, "At the end of the first term the rental can be extended for a further period of up to five (5) years." The Proposal includes a table under the heading of "Monthly Payments" The table lists three models of the Yes box, the equipment cost and the monthly rental for each model. Above the table is another heading of "five year term". The individual Rental Agreements attached to the MAFF provided for a term of 60 months commencing on the commencement date. The Services Agreement provides the initial rental program is for five years.

199 I find that the agreement provides that the initial term is for five years despite the reference to 'a maximum period of (5) years." In my opinion, that statement merely meant that Spotlight could not have more than five years on the "first term". The factual matrix makes it clear that the NCON rental program relied on a five year term being fixed. The Proposal does not permit the hirer to terminate the lease for a shorter period.

200 Spotlight submits that the Proposal does not identify a starting date for the term. Spotlight says that it is not possible from the Proposal to spell out an obligation on Spotlight to pay any amount on any particular date for any particular thing.

201 The resolution of this issue requires the determination of what the parties apparently agreed where they agreed that the Yes boxes would be supplied under the NCON rental program.

202 The material to be inserted in the MAFF had been agreed on in the Rental Agreement. There was nothing further to agree. The execution of the MAFF required no further agreement. It merely required the mechanical function of being signed by Spotlight.

Each time you want to rent Goods, you or your Authorised Signatories must sign a Rental Agreement substantially in the form annexed to this Agreement as Annexure C (each an "Asset Finance Agreement", together with the supporting documentation we send you (including a direct debit request and a business purpose declaration) and deliver these to us for acceptance.

204 The Rental Agreement in Annexure C provides for the location and description of the goods to be inserted. The rental payments are to be inserted. These were agreed in the Rental Agreement. The Rental Agreement provided that the rental payments were on 30 day terms. According to the Annexure C Rental Agreement, the customer was required to pay the rental payments at the times referred to in the schedule. The agreement is silent as to when the obligation to pay rent would arise. In my view, it is implicit that Spotlight would not be bound pay the rental payment until the Yes boxes were installed and working and then Spotlight would have 30 days terms to do so.

205 I find that the Rental Agreement did determine the commencement of the leases of the Yes boxes.

206 Spotlight contends that Annexure C to the Master Asset Finance Facility is entitled 'Rental Agreement'. Spotlight says that it contains blank space to insert the location of goods or delivery address, and blank space to insert a description of the goods.

207 Spotlight contends that the document also contains blank space to insert the amount of each rental payment, the GST component per payment, the date on which the first rental payment is due and the day of the month that each subsequent rental payment is due. Spotlight argues that it also contains an identifiable term of 60 months.

208 Spotlight says that these are the missing elements which prevent the Proposal being constitutive of a legal obligation. Spotlight also contends that the Terms and Conditions attached to the Rental Agreement include obligations on Spotlight in respect of payment, NCON's right to terminate the agreement, indemnities and releases.

209 I reject these submissions. For the reasons expressed above, I find that agreement was reached on these terms by the Rental Agreement. The terms included the NCON rental program which included, as Spotlight knew and agreed to, the terms of the MFFA.

210 In my opinion, the Rental Agreement constituted a complete and binding contract subject to NCON obtaining finance.

Did NCON evince an intention to repudiate the agreement?

211 If the there was a concluded agreement, Spotlight alleges that NCON evinced an intention to repudiate the agreement on 17 or 18 January 2008 by reason of the following conduct:

(a) a telephone conversation from Anthony Reibel to Ari Bergman on 17 January 2008, during which Anthony Reibel informed Ari Bergman that NCON could not proceed with the arrangement in its current form due to the requirements of its financiers; and

(b) the emails from Mr Reibel to Mr Bergman on 18 January 2008.

212 Spotlight contends that NCON was keen to do a deal with Spotlight, but not on the terms of the Services Agreement to which NCON committed itself on 27 November 2007 and which was the basis of dealing required by Spotlight (as NCON pleads). Spotlight says that the reason is clear: on that basis NCON would not be able to sell the rental stream.

213 Spotlight says that come 17 January 2008, NCON was simply not prepared to proceed on the basis of the signed Services Agreement and Proposal. It argues that the fact that Mr Reibel did not use words like 'repudiated' or 'terminated', 'discharged', 'abandoned' or any other like word or words is not to the point. Spotlight contends that the intention of NCON not to proceed with the signed agreement according to its terms was crystal clear. It says that NCON did not subsequently withdraw its requests made to Mr Bergman and instead put up a fresh Proposal and fresh buy and rental calculations.

214 The letter of 18 January 2008 is referred to above. I do not construe it as evincing an intention not to be bound by the Rental Agreement or an intention to fulfil the contract only in a manner substantially inconsistent with its obligations. Mr Phillips raised what he considered to be a problem with the Services Agreement having clauses inconsistent with the accepted rental proposal. I consider that any fair reading of the email would not conclude that NCON did not intend to be bound by the existing agreement. Rather, Mr Reibel was seeking a solution to the problem by suggesting changes to the agreement. If Spotlight refused to accept the proposed changes, there is nothing in the letter to suggest NCON did not intend to proceed with the agreement. Mr Reibel said there were alternative financiers available. At that stage, Mr Reibel had not sought legal advice. He had formed the view that the Services Agreement did not govern the rental aspect of the accepted Rental Agreement. As it turns out, he was right in his view. In any event, I find that NCON did not repudiate the accepted rental proposal and Spotlight were not entitled to terminate the agreement.

215 Spotlight contends that it was a condition (or an essential term) of any agreement that the Yes box would not result in any perceptible light loss. Spotlight argues that the condition (or essential term) was set out in the Proposal,[16] it was displayed on NCON's website,[17] it was relied upon in NCON's scientific reports which were provided to Spotlight at the meeting of 21 July 2007, and it was orally given by Mr Dale. NCON conceded the term in its opening.

216 Spotlight contends that NCON breached the condition (or essential term) of the agreement in that it was unable to provide imperceptible light loss. Spotlight argues that this was evident from the four unsuccessful demonstrations attempted by NCON to show imperceptible light loss if the technology were deployed by Spotlight.

217 It is first necessary to construe the meaning of the contractual condition. The reference to "imperceptible light loss" appears in the accepted Rental Agreement under the heading ABOUT NCONA as follows:

Reduced consumption translates to savings on lighting costs of around 30% per annum, with imperceptible light loss, while increasing lamp life. There are a number of Yes box models available covering from 100 to 600.

218 This and the evidence discloses that the installed Yes box is activated when the lights are switched on. In a store, the Yes box would be activated typically at the beginning of the day. The Yes box would remain in operation until the lights were switched off in the evening. The Yes box was to be used in retail stores. The "imperceptible light loss" did not refer to any mechanical tests. Rather, in my opinion, it referred to human perception by a customer.

219 The evidence of Mr Chisholm was that at the third demonstration he noticed a drop in the light when the Yes box was switched on. In my opinion, that is not the relevant issue. He also said that on the fourth test the lux dropped 25 per cent when the Yes box was switched on.

220 I find that the warranty was not whether there was an imperceptible light loss observable when the Yes box was being switched on. Rather, the warranty was that there was an imperceptible light loss as between the time when the Yes box was being used as compared to when it was not being used.

221 This construction is supported by the expert evidence about the human eye. Dr Paneta said that the human eye adjusts to a reduction in illumination so that small reductions in illumination are not perceived by the viewer. It is this characteristic of the human eye that is exploited by the Yes box. The Yes box reduces the light emitting from the light fitting as the voltage is reduced, as one would expect. The Yes box takes advantage of the characteristic of the human eye that small reductions in illumination are imperceptible to the viewer through compensating adjustments made by the human eye.

222 None of the tests conducted sought to ascertain whether or not the decline in illumination by the Yes box led to a perception of light loss by the customer in the retail store. Both the experts who gave evidence opined that on the basis of the reduction in light loss achieved by the Yes box, a human being with normal eyes would not perceive a loss of light.

223 Spotlight conceded that it bore the onus of establishing the use of the Yes box would lead not lead to imperceptible light loss. I find that Spotlight has not satisfied me on the balance of probabilities of that fact. Accordingly, Spotlight were not entitled to terminate the agreement on the grounds of anticipatory breach.

224 Clause 15 of the Services Agreement provides that:

15.1 In its complete and unfettered discretion and without being obliged to give any reason for doing so, the Operator may, on one month's written notice to the Contractor_,_ terminate this Agreement in whole or in part.

225 Spotlight contends that given that NCON could not satisfy Spotlight that the technology was useful, notice would have been given instead of any purchase order. Mr Chisholm had explained the outcome of his investigations to Mr Carter, his CEO, who had told him not to persist with the matter.

226 Spotlight contends that as NCON was not prepared to proceed with the Rental Agreement on the basis of NCON's entitlement to terminate on one month's notice, and did not proceed, NCON has suffered no loss. Spotlight argues that NCON did not attempt to show any loss if Spotlight had the rights which it has under clause 15 of the Services Agreement.

227 For the reasons given above, I find that the Services Agreement did not apply to the rental of the chattels under the accepted rental proposal. Rather, the Services Agreement applied only to the installation of the Yes boxes.

228 I find that NCON had a binding agreement with Spotlight for the rental of Yes boxes for a five year term, subject to NCON obtaining finance of $2.5 million. There is no dispute that Spotlight has refused to observe the agreement and that NCON has accepted Spotlight's repudiation of the binding agreement. I now turn to the damages claim.

229 NCON claims loss and damages for the loss of profits from Spotlight's repudiation of the Rental Agreement. The 23 February particulars of Loss and Damage claims damages arising from the loss of the initial five year term of the Rental Agreement of $2,027,078.71, and further or alternatively, damages arising from the loss of the five year term and a further five year term under an option to renew of $2,890,251.60.

230 Spotlight contends that NCON has not made a claim for loss of profits but rather a claim for loss of revenue. Spotlight contends that NCON is not entitled to be compensated for damage for the loss of the rental revenue. Spotlight submits that as NCON has not sought to or otherwise proved its loss of profits, NCON is only entitled to nominal damages.

231 In summary, I find that NCON has not sought to calculate its loss of profits. NCON has not sought to identify all the costs and expenses it would incur in meeting its obligations under the Rental Agreement. Witnesses for NCON have either in evidence-in-chief, under cross-examination or re-examination, identified categories of expense that it would have incurred in meeting its obligations under the Rental Agreement. No one was called for NCON to pull these various pieces of evidence together and put forward a calculation of the loss of profit suffered by NCON. Accordingly there is no evidence that these are an exhaustive list of the various categories of expense that NCON would have been obliged to meet. In many categories of expense, despite being able to do so, NCON has failed to lead any evidence to establish the quantum of expenses that would have been met in carrying out its obligations under the Rental Agreement. I find that it in those circumstances, the court is not entitled to speculate or make a guess at the lost profits.

232 For the reasons amplified below, I find that NCON has not established a claim for damages other than nominal damages.

233 NCON's claim for damages was amended during the trial. Alternative ways of calculating the claim were also canvassed. Spotlight, as it was entitled to, insisted that the claim to be limited to that formally pleaded. It is therefore necessary to trace the various claims and their status.

234 The statement of claim annexed to NCON's writ of summons alleged that as a result of Spotlight's breach of the Rental Agreement and its repudiation by Spotlight, NCON claimed loss and damages for the loss of profits from Spotlight's repudiation of the Rental Agreement. The particulars provided alleged that NCON had suffered loss of profits and stated NCON had supplied particulars. Subsequently, on 4 September 2009, NCON supplied particulars of loss and damage, claiming damages of $1,494,556.70.

235 The claim was made on a loss of profits basis. The loss of profit was calculated by deducting from the revenue to be received by NCON the cost of manufacturing the Yes boxes and installing the Yes boxes in Spotlight's stores. Also added to the revenue was the value of the Yes boxes at the end of the five year rental period. The moneys to be received were described as the present value of the rental stream. As discussed above, NCON proposed assigning the rental payments to a financier who would in exchange pay NCON a lump sum described as the present value of the rental stream. NCON's claim could be summarised as follows:

The present value of the Rental Stream $2,027,078.71

Total value of the transaction to the plaintiff $2,514,216.72

Less the value of manufacture and installation $1,019,660.00

Accordingly the plaintiff claims the sum of $1,494,556.72

236 Accordingly, at that stage the claim for loss and damage was a loss of profits claim and took into account the cost of the manufacture and installation of the Yes boxes. Shortly before the trial began, Mr Richards (the solicitor for NCON) informed Cornwall Stodart (the solicitors for Spotlight) that NCON wished to amend its particulars of loss and damage to those set out in an amended witness statement of Mr Anthony Reibel.[18]

237 Mr Richards explained to Ms Forde of Cornwall Stodart that there were two changes, which he said were simple, namely, allowing for tax offsets which had been omitted, and, secondly, taking account that, on the balance of probabilities, the five year lease would have been extended for a further term of five years (to a total of ten years).

238 Mr Richards told Ms Forde that Mr Reibel was concerned about disclosing in his supplementary witness statement information and material which he considered constituted valuable intellectual property owned by himself. Mr Richards told Ms Forde that Mr Reibel requested that the statement be given to counsel briefed on behalf of Spotlight, Ms Forde and Cornwall Stodart, on the basis that they give undertakings as to confidentiality. Although these amended particulars were not in evidence, the amendments proposed do not suggest that the nature of the claim was changed from a loss of profits claim.

239 In a follow-up letter, Mr Richards informed Cornwall Stodart that NCON's damages claim was now $2,292,558.32 on the basis that, on the balance of probabilities, the five year lease would have been extended to ten years and that this amount is the loss of profit for a lease comprising two periods of five years. Alternatively, he said that if the court finds on the balance of probabilities that the lease was confined to five years only, the damages claim was now $1,789,205.70. Mr Richards said that the difference between this amount and the amount shown in the original particulars of loss and damage already served was the tax offset. He said that this offset had initially been omitted but that it should have been included.

240 Soon after, Mr Richards sent to Cornwall Stodart the supplementary witness statement of Mr Reibel incorporating the amended claim for loss and damage. Mr Richards informed Cornwall Stodart that unless Spotlight was prepared to give the undertakings sought as to confidentiality they should return Mr Reibel's supplementary witness statement and the amended claim for loss and damage without making copies of them.

241 On 10 February 2011, Cornwall Stodart responded to Mr Richards by letter and informed him that Spotlight was not prepared to agree to the confidentiality undertakings sought in relation to Mr Reibel's supplementary witness statement, and the statement was subsequently returned to Mr Richards and the trial commenced with the damages claim being unamended.

242 During the trial, NCON called Mr Reibel to give evidence. Before Mr Reibel was sworn in as a witness, Dr Dean (senior counsel for NCON) applied for a confidentiality order on Mr Reibel's evidence. Dr Dean said that Mr Reibel wished to give evidence of a secret method he used to allow customers of NCON to pay "lower rent than they would if they were financing on interest." Dr Dean said this was done by "smoke and mirrors" and that Mr Reibel would explain this.

243 Mr Garratt (senior counsel for Spotlight) said that he could not address on the matter until he knew what the evidence was. I deferred consideration of this application and Mr Reibel began his evidence on other matters. His evidence was stood over to the next day. Before Mr Reibel continued his evidence-in-chief the next day, counsel for NCON informed the Court that Mr Reibel would no longer be giving evidence of his confidential model. Rather, NCON would rely on the particulars of loss and damage of 4 September 2009. As noted above, this claim was the then particulars of loss and damage claimed on the pleadings and was based on loss of profits that took into account the manufacturing and installation costs of the Yes boxes.

244 Mr Reibel was taken to these particulars and asked questions about how each line was calculated. When he was taken to the value of the Yes boxes as shown on these particulars he said that he did not know how that figure was arrived at. He was taken to the cost of manufacture and installation. He said he assumed the cost of manufacture was a correct figure, but he could not determine the cost of manufacture or any other figures. He said those were for NCON to determine.

245 Despite NCON stating that it would rely on the particulars of 4 September 2009, Counsel for NCON sought to lead from Mr Reibel evidence of additional damage arising from the alleged probability that the lease of the Yes boxes would have been extended for another five years.

246 Spotlight objected to that evidence being led. After argument, on the morning of 23 February 2011, I ruled that I would entertain an application to amend. Dr Dean (senior counsel for NCON) thereupon said NCON made application to amend their particulars of damage as had been filed on 4 September 2009. I ruled that the particulars should be writing.

247 After my ruling and before NCON delivered the proposed amended particulars of loss and damage, Dr Dean said that NCON was abandoning any reference to tax offsets and was maintaining the original 4 September 2009 particulars, but transposing the document into a ten year document.

248 Thus at that stage (the morning of 23 February 2011), the only change to the particulars of damage sought to be made by NCON was to extend the loss of profits claim for another five years on the basis that the option to renew the Rental Agreement was exercised by Spotlight.

249 As events happened, NCON prepared amended particulars and gave them to Spotlight's solicitors at the end of the day on 23 February2011. Despite the proposed particulars being reduced to writing and being given to Spotlight, NCON made no formal application to amend the particulars of NCON's claim, nor was the document with the 23 February particulars of loss and damage filed as the amended particulars of NCON's claim for damages.

250 Further, the 23 February particulars document claimed loss and damages of $2,890,251.60 based on a loss of revenue calculation. Although the 23 February particulars was said by NCON to only relate to claiming damages in respect of a second five year term lease of the Yes boxes, in fact, the 23 February particulars of loss and damage were significantly different to the existing 9 September particulars of loss and damage. The 23 February particulars omitted the explanation of the amount financed that had been included in the 9 September particulars, omitted any reference to the value of the Yes boxes at the end of the lease (which previously had been specified in the 9 September particulars at $487,138.01), and removed the deduction for the cost of manufacture and installation of the Yes boxes (which had been particularised in the 9 September particulars as $1,019,660.00). No explanation was given by NCON for these omissions.

251 Despite this, the parties proceeded on the assumption that the 23 February particulars constituted the pleaded claim of NCON.

252 As indicated above, NCON had given notice of a proposed amended claim for loss and damage of $2,292,558.32 in January 2011. NCON's 23 February particulars increased NCON's claim to $2,890,251.60.

253 In summary, at that stage, the various claims for loss and damage by NCON were:

1. 1. RENTAL BASED ON 5 YEAR RENTAL AGREEMENT

[1] Rental rates quoted to the Defendant in the Plaintiff's proposal for the Plaintiff's Smart Power Control System referred to in paragraph 3 of the Statement of Claim herein ("the Yes Box") were:

[2] The weighted average of the above cost of supply and installation of Yes Boxes in the three surveyed sites was $21,957.

[3] The weighted average of the above rentals, based on the weighted average store cost, was $396.97 per month per store.

[4] For the 106 stores this rental then equated to $42,078.82 p.m. which then equates to total payments of $2,524,729,20 of the 60 month term .

Income Stream due to Plaintiff

[5] The monthly payments of $42,078.82 have a present value of $2,027,078.71 when the commercially acceptable rate, applicable at the time, of 9.0% is used.

[6] The Plaintiff also retains ownership of the Yes Boxes.

[7] Accordingly the Plaintiff claims the sum, for a five year rental period, of $2,027,078.71

1. 2. FURTHER AND ALTERNATIVE CLAIM BASED ON ADDITIONAL 5 YEA RENTAL RENEWAL

[9] It was agreed with the Plaintiff that should they wish to extend the rental for a further period of five years the monthly payment would be calculated at 66.67% of the original rental figure.

[10] The original rental cost was $396.97 per month per store. Therefore the extension rental price at 66.67% of this figure would be $264.66 per month per store.

[11] For the 106 stores this rental then equated to $28,053.95 p.m which then equates to total payments of $1,683,236.96 over the further 60 month term.

[12] The present value of $1,683,237.00 is $1,351,453.41. Note: this is the present value of the second term payments IN FIVE YEARS TIME.

[13] Converted to today's present value this figure becomes $863,172.89.

[14] The Total Loss for two five year terms is thus $2,890,251.60

[15] This figure is made up of the present value of the first term of payments being $2,027,078.71

[16] And the present value of the second term payments, being

$ 863,172.89

[17] In the alternative Total Loss and Damage claimed is $2,890,251.60

Mr Reibel's evidence in support of the 23 February 2011 particulars of damage

255 After my ruling on morning of 23 February 2011, Mr Reibel stood down and he was recalled first thing the next day (on 24 February 2011), when he was taken through the 23 February particulars which had been served on Spotlight the previous afternoon.

256 During his evidence-in-chief, Mr Reibel was asked why there were no subtractions in the 23 February particulars of costs that may have to come off the rental income. He said that at the end of the rental term the boxes would have the same value as at the beginning and could be rented again like a plant hire company and thus there was no need to deduct their cost of manufacture.

257 Mr Reibel conceded that NCON's 23 February particulars of loss and damage was not calculated on the basis of loss of profits, but calculated on the basis of loss of revenue. Mr Reibel acknowledged that NCON's damages claim did not make any allowances for costs and expenses that may have being incurred to earn the rental. He said, however, that the 23 February damages claim was for a lesser sum than a damages claim that was calculated on a loss of profits basis.

258 In support of that contention, Mr Reibel produced a document, Exhibit P50, which showed his calculations in support of the 23 February particulars. Exhibit P50 also gave a calculation of the loss of profit. Mr Reibel said that the calculations on Exhibit P50 demonstrated that a claim for loss of profit would be for more than the NCON's claim for loss of revenue as made in the 23 February particulars.

259 Exhibit P50 repeats the 23 February particulars for the first term of the Rental Agreement as $2,027,078.71. The document also includes a calculation for the second term that differs slightly from the 23 February particulars in calculating the present value of the second term revenue and reaches a figure of $2,905,430.68, as compared to $2,890,251.60 in the 23 February particulars.

260 Mr Reibel's calculation for the five year term loss of profits to NCON (PV of net value in deal to NCON) was $2,643,364.76 and it was more than the claim made by NCON based on lost revenues of $2,027,078.71.

261 I understood from Mr Reibel's evidence that, taking the five year term, NCON were content to claim a lesser sum as calculated from the loss rental stream of $2,027,078.71 than its loss of profit (which he calculated at $2,643,364.76).

262 The loss of profit calculation for the first term in Exhibit P50 of $2,643,364.76 was as follows:

PV of goods to NCON at 60 months equals PV of

Re-lease revenue in open market for a further 60 months

at end of 60 months (i.e. 61 to 120 months) $1,317,462.08

PV of Revenue First 60 Months $2,027,078.71

Tax Depreciation Offsets Five Years $ 364,344.46

Value in deal to NCON $3,713,885.25

Less Cost of Goods Sold $1,070,520.50

263 NCON (through Mr Reibel) made it clear, therefore, that NCON omitted from the 23 February particulars of loss and damage the deduction for the expenses of manufacturing and installation that was contained in the original particulars of loss and damage. NCON submitted through Mr Reibel's evidence that the correct method of calculating the loss to NCON was through the lost revenue approach that NCON said delivered a lesser loss than that achieved through an approach that took into account expenses incurred by NCON.

264 As indicated above, Mr Reibel put forward a calculation of the loss of profit suffered by NCON to establish that the claimed damages of NCON (based on the loss of the rental stream) were less than its actual loss of profit.

265 Mr Reibel includes as a credit the tax depreciation offset of five years. Mr Reibel said that NCON had tax offsets for depreciating the Yes boxes over five years of $369,344.46. No evidence was given why that should be taken into account when the calculation he performed made no provision for the payment of tax (in which case, no tax may be saved). Further evidence would be required to justify this deduction. This sum was not included in NCON's 23 February particulars of loss and damage in any event.

266 In his calculation for the five year period, Mr Reibel took into account as part of the value to NCON of the Rental Agreement that NCON would have an asset (being the Yes boxes) which would have a present value of $1,317,492.08 based on the assumption that they could be re-let in five years time at the same rate as they were let to Spotlight. He calculated their current value on the basis of a discounted cash flow as $1,317,492.08.

267 Mr Reibel deducts $1,070,520.50 as the cost of the Yes boxes. Thus, on this calculation, by spending this amount, NCON creates an asset worth $1,317,492.08, as well as earning the revenue stream for the first five months.

268 One would expect that the Yes Boxes would have a finite life, so that some deprecation should be thrown against the moneys received under the Rental Agreement. No evidence was led on this. The arguments by Mr Reibel that they could be re-let for the same value was not supported by the NCON officers in charge of marketing. Mr Reibel's role was limited to organising the rental finance and providing rental figures based on the rental program, and (in my opinion) he was unable to give evidence on the life of the Yes boxes or the likelihood that they could be removed from the Spotlight stores and relet to another customer at the same rate.

269 The Rental Agreement said the Yes box "has an assessed mean time before failure in excess of 14 years". Mr Barnes gave evidence that the technology behind the Yes boxes was improving. This would suggest that the existing boxes may have a lesser rental value in five years time than a new box.

Loss of opportunity in relation to the Yes boxes.

270 Mr Reibel assumes that a market would exist in five years time to lease the Yes boxes at the same rental as that being charged to Spotlight. On that assumption, Mr Reibel values the Yes boxes on the basis of the opportunity they provide to earn further income over and above that earned from Spotlight.

271 I am not convinced that a loss of that kind can be attributed to the Rental Agreement not proceeding. On Mr Reibel's assumption, that market would exist whether or not the Spotlight Rental Agreement was carried out. If the market exists to receive $1,317,462.08 for the lease of Yes boxes that cost $1,070, 520.50, then the loss of the Spotlight contract would not deprive NCON of the opportunity to take advantage of that market. On the assumptions made by Mr Reibel, even if the Spotlight contract did not proceed, NCON still had the opportunity to earn $1,317,462.08 from the market that he assumes exists.

272 Unassisted by any expert evidence on this issue, in my opinion, the loss to NCON arising from the loss of the Spotlight contract is that NCON would avoid the cost of manufacturing new Yes boxes in five years time to satisfy a new lease that it was able to obtain then. However, as mentioned above, such a calculation may have to take into account the shorter life expectancy of the retained Yes boxes.

273 The proper approach may be to merely value the Yes boxes at their depreciated value in five years time, with an appropriate discount applied to that depreciated value to reach their present value. Evidence may be required as to the appropriate treatment of the installed Yes boxes.

274 After this evidence from Mr Reibel, the trial continued with the claim for NCON's claim for damages in the form of the 23 February particulars. Spotlight did not lead any evidence on NCON's damages claim.

275 During final submissions, Spotlight contended both in writing and orally that NCON's damages claim was bad at law as it was based on the loss of revenue and not the loss of the anticipated profit.

276 At the conclusion of NCON's counsel's final address, I indicated that I had certain questions concerning the damages claim, including whether proper allowance had been made for any expenses that NCON might have incurred in generating the rental income. I asked where the evidence was which supported the claim that NCON would receive $2,027,078.71 for the first rental period. I suggested to Dr Dean that he should address the issue of why NCON's claim for loss and damages is a claim for loss of revenue. Dr Dean offered to supply the Court the answers in writing, but I asked that he return the next day to provide the information to me in Court.

277 Despite my asking why NCON's claim was for loss of revenue, on the next day (1 March 2011), NCON produced a written calculation of damages calculated on a loss of profits basis. No further explanation was provided of the loss of revenue-based claim in the 23 February particulars. The calculation produced by NCON took into account the cost of manufacturing and installing the Yes boxes and other expenses that NCON would incur in supplying the Yes boxes to Spotlight.

278 NCON did not seek to replace its 23 February particulars with this document. The document also contained several expenses about which there was little or no evidence. I will describe this document as the Damages Submission.

1. Go to CB 85
2. Number of Yes Boxes of different types for three stores.
3. Total price of Boxes: (Equipment for three stores)

1. $59,670.00 ÷ 3 = $19,890.00 (average cost per store)
2. Average cost of installation per store:

1. Rental has five parameters worked out on a financial calculator.
   • (a) Capital cost $21,957.00
   • (b) Term 60 months
   • (c) Nominal interest rate 3.25%
   • (d) Original value Future value 0
2. Average rent per month per site $396.67
3. Total monthly rent for all sites:

1. Present value of monthly payment:
   • (a) Term 60 months
   • (b) Monthly payment for

• (c) Net future value 0
  • (d) Interest rate 9% (commercial interest rate)
  • (e) Total future value which

1. Discounted rate of 66.67%
2. Average monthly rental: $28,053.95
3. Total rental for 5 years (average

4. Present value of 5 years income: $1,351,453.38
5. Today's present value of 10 year income: $878,351.97
6. Therefore, 1st and 2nd term rentals: $2,027,078.71

7. Tax office deductions: + $453,391.00
8. Total value of deal $3,360,477.75
9. Less cost of goods: $851,418.50

1. Office $30,000.00 2. Maintenance $50,000.00

280 During those submissions, NCON did not apply to amend its loss and damage claim back to a loss of profit claim. Accordingly, I understood the Damages Submission to be an explanation of how the existing damages claim was calculated and to provide me with further information on the questions I had asked. As a result, as the issues stood at the conclusion of the hearing on 2 March 2011, NCON maintained its claim for loss and damage as appearing in the 23 February particulars.

The relevant legal principles in calculating damages for breach of contract

281 The High Court of Australia held in Commonwealth v Amann Aviation Pty Ltd[19] that the general rule at common law for the assessment of damages for breach of contract is as stated by Parke B in Robinson v Harman:[20]

...that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same position with respect to damages, as if the contract had been performed.

282 In Amann Aviation, Mason CJ and Dawson J explained that those damages include the profits that the plaintiff expects from the performance of the contract as well as costs incurred in reliance on the contract. Only the former is relevant to this case. Relevantly their Honours said:

[24] The award of damages for breach of contract protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as "expectation damages". The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.

[25] In the ordinary course of commercial dealings, a party supplying goods or rendering services will enter into a contract with a view to securing a profit, that is to say, that party will expect a certain margin of gain to be achieved in addition to the recouping of any expenses reasonably incurred by it in the discharge of its contractual obligations. It is for this reason that expectation damages are often described as damages for loss of profits. Damages recoverable as lost profits are constituted by the combination of expenses justifiably incurred by a plaintiff in the discharge of contractual obligations and any amount by which gross receipts would have exceeded those expenses. This second amount is the net profit.

....

[28] The corollary of the principle in Robinson v. Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed. In L. Albert and Son v. Armstrong Rubber Co Learned Hand C.J. said:

"(O)n those occasions in which the performance would not have covered the promisee's outlay, such a result imposes the risk of the promisee's contract upon the promisor. We cannot agree that the promisor's default in performance should under this guise make him an insurer of the promisee's venture".

Learned Hand C.J. went on to approve the statement made by Fuller and Perdue in their celebrated article, "The Reliance Interest in Contract Damages":

"We will not in a suit for reimbursement for losses incurred

in reliance on a contract knowingly put the plaintiff in a

better position than he would have occupied had the contract

been fully performed." [21]

283 It is a well established principle of law that the mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best they can.[22] In Fink v Fink,[23] Dixon J and McTiernam J said:

Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages. [24]

284 Their Honours cited with approval Vaughan Williams LJ in Chaplin v Hicks,[25] where his Honour said:

In early days when it was necessary to assess damages, no rules were laid down by the Courts to guide juries in the assessment of damages for breach of contract; it was left to the jury absolutely. But in the course of time judges began to give advice to juries; as the stress of commerce increased, let us say between the reigns of Queen Elizabeth and Queen Victoria, rule after rule was suggested by way of advice to juries by the judges when damages for breach of contract had to be assessed. But from first to last there were, as there are now, many cases in which it was difficult to apply definite rules. In the case of a breach of a contract for the delivery of goods the damages are usually supplied by the fact of there being a market in which similar goods can be immediately bought, and the difference between the contract price and the price given for the substituted goods in the open market is the measure of damages; that rule has been always recognised. Sometimes, however, there is no market for the particular class of goods; but no one has ever suggested that, because there is no market, there are no damages. In such a case the jury must do the best they can, and it may be that the amount of their verdict will really be a matter of guesswork. But the fact that damages cannot be assessed with certainty does not relive the wrong-doer of the necessity of paying damages for his breach of contract. [26]

285 In McRae v Commonwealth Disposals Commission,[27] Dixon J and Fullagar J cited with approval Vaughan Williams LJ in Chaplin,[28] and also the statement of Street CJ in Howe v Teefy,[29] where his Honour said:

The question in every case is: has there been any assessable loss resulting from the breach of contract complained of? There may be cases where it would be impossible to say that any assessable loss had resulted from a breach of contract, but, short of that, if a plaintiff has been deprived of something which has a monetary value, a jury is not relieved from the duty of assessing the loss merely because the calculation is a difficult one or because the circumstances do not admit of the damages being assessed with certainty.[30]

286 Nevertheless, the difficulty referred to must be one presented by the facts of the case and not by the failure of the plaintiff to call evidence that was otherwise reasonably available. As was stated by Street CJ, the circumstances must be such as they do not admit of the damages being assessed with certainty.

287 This view has been long established. In Ratcliffe v Evans,[31] Bowen LJ said:

In all actions accordingly on the case where the damage actually done is the fist of the action, the character of the acts themselves which produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry.[32]

288 Justice Gaudron, in Amann Aviation, identified as a relevant factor the ability of the contracting party seeking damage to establish the precise measure. Her Honour spoke of a plaintiff "who is unable" to establish the measure of his or her loss. Her Honour said:

A contracting party who is unable to establish the precise measure of his loss or her loss is not thereby deprived of his or her right to recover damages. In some cases the court will make the best estimate it can.[33]

289 The distinction between the circumstances where a plaintiff cannot adduce precise evidence and where the plaintiff has not produced evidence was highlighted by Hayne J in Placer v Thiess,[34] where his Honour said:

[37] Placer undoubtedly bore the burden of proving not only that it had suffered damage as a result of Thiess Contractors' breach of contract, but also the amount of the loss it had sustained. It goes without saying that it had to prove these matters on the balance of probabilities and with as much precision as the subject matter reasonably permitted.

[38] It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind. This case did not invite attention to such questions. Placer sought to calculate its damages precisely. (references omitted) [35]

290 In Biggin v Permanite,[36] Devlin J said:

Where precise evidence is obtainable, the court naturally expects to have it, [but] where it is not, the court must do the best it can.

291 Where damages are uncertain for lack of evidence, difficulties of assessment are in general resolved against the party who could or should have provided the evidence.[37]

292 In Oran Park Motor Sport Pty Ltd v Fleissig,[38]Hodgson JA identified the obligation on a plaintiff to produce evidence which it can in support of a damages claim. His Honour said:

In my opinion, this required him to assess damages with careful regard to the principle that "evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted": Blatch v. Archer per Lord Mansfield. This principle is applied where one party fails to calls evidence which it could have called: Armory v. Delamirie; Jones v. Dunkel; Ho v. Powell. In my opinion it applies at least equally where the absence of evidence arises from deliberate lies told by a party who is in a position to tell the truth about the matter: I do not think such a party should be in a better position than one who refrains from giving the evidence. Indeed, the principle may operate more strongly in the case of deliberately false evidence than in the case of mere failure to lead evidence: see Wigmore on Evidence (Third Edition) Moriarty v. London Chatham & Dover Railway Co.[39]

293 In JLW (Vic) Pty Ltd v Tsiloglou,[40] Brooking J examined these principles as a member of the Full Court (Brooking, Tadgell and JD Phillips JJ). His Honour said:

A plaintiff cannot recover substantial as opposed to nominal damages unless he proves both the fact and the amount of damage: The Commonwealth v Amann Aviation Pty Ltd. If he proves the fact of the loss but does not call the necessary evidence as to its amount he cannot be awarded substantial damages (McGregor on Damages, 14th ed., at 190 and 222): he must put the tribunal in the position of being able to quantify in money the damage he has suffered: Watts v Rake per Dixon CJ. So juries in personal injuries cases are often directed that the plaintiff must prove to their satisfaction what he has suffered and will suffer and what is fair and reasonable compensation in respect of that. It is often said that the amount of the damage must be proved with certainty, but this only means as much "certainty" as is reasonable in the circumstances: Ratcliffe v Evans. Where precise evidence is obtainable, the court naturally expects to have it; where it is not, the court must do the best it can: Biggin and Co Ltd v Permanite Ltd; The Commonwealth v Arnann Aviation Pty Ltd, per Mason CJ and Dawson J.[41]

294 After reviewing many other cases on the issue, his Honour said:

There is no rigid dividing line between cases in which guesswork is permissible in assessing damages and cases in which it is not. The borderline between guesswork and rational assessment is itself indistinct, as is the line between evidence that is "precise" (the Permanite Case dictum) and evidence that is not. In Enzed Holdings Ltd v Wynthea Pty Ltd, (to which Tadgell J. has drawn my attention) the Full Federal Court thought the case to be one in which precise evidence of the loss was not obtainable, so that if the trial judge found that the plaintiffs had suffered some loss he must do his best to quantify the loss even if "a degree of speculation and guesswork" was involved.

Where the action is for damages for breach of contract and the plaintiff fails to prove any actual loss he may fall back on an award of nominal damages. (The plaintiff fails to prove actual loss for this purpose if he shows that he has suffered loss but fails to furnish material from which its amount may be arrived at.)[42]

295 In my opinion, these authorities establish that the plaintiff is obliged to call such evidence as can be reasonably expected in the circumstances to establish the damages which the plaintiff claims. The Court's obligation to estimate damage as best it can is only triggered where the circumstances are such that the plaintiff is unable to reasonably establish the damage. McGregor on Damages states that the word "reasonable" is the controlling one, and the standard of proof only demands evidence from which the existence of damage can be reasonably inferred and which provides adequate data.[43]

(a) in a breach of contract case, the plaintiff bears the onus of proving the loss and damage it suffers;

(b) where the plaintiff is able to reasonably prove the quantity of the loss and damage suffered the plaintiff must do so on the balance of probabilities and with as much precision as the subject matter permits; and

(c) if the circumstances of the plaintiff's loss and damage are such that the plaintiff is unable to prove the quantity of its loss and damage, it will not be deprived of an award of damages as the court must do its best to fairly estimate the loss and damage suffered by the plaintiff.

297 Spotlight contends that in this case, NCON has sought to recover the profit it expected to make from the contract. Spotlight submits NCON purported to claim loss of profits but refrained from presenting a loss of profits claim. Spotlight argues that the 23 February particulars are a claim for lost gross revenue and not a loss of profit.

298 Spotlight contends that NCON has not presented evidence-in-chief to sustain a loss of profit claim. Spotlight says no evidence was given of NCON's costs, and (in particular) of the cost of purchasing and installing the Yes boxes. Spotlight says that Mr Reibel did not know if any royalty was payable for the use of the technology. Spotlight says Mr Gill did not know what the cost the Yes boxes was. Spotlight contends that there were other costs to be borne, such as payments to Greenhouse Savings Group, to Mr Reibel's company Ankara Pty Ltd, and to SME, but no calculation was made as to those costs.

299 Spotlight contends that there is no basis for assuming there was any loss of profit. Spotlight argues that NCON has not done what conceptually must be done to quantify damages for a breach of contract.

300 Spotlight argues that Mr Reibel conceded that NCON's claim was for loss of revenue not for loss of profit. He calculated that the loss of profit would in fact be greater as shown in his Exhibit P50. Spotlight point out that the loss of profit calculation made by Mr Reibel includes a cost of goods of $1,070,520.50. Spotlight contends Mr Reibel conceded that he was not involved in assessing the costs of installing the Yes boxes. He said he was given those costs by Mr Greg Gill.

301 Spotlight objects to NCON seeking to convert the rental stream to a current value. Spotlight argues that there should be an allowance for vicissitudes, such as political and economic uncertainty.

302 Spotlight contends that a plaintiff claiming substantial damages for breach of contract will only recover them if precise evidence is available to be adduced, conformably with such evidence. Spotlight argues that if precise evidence is available but is not adduced the court does not conjecture.

303 Assuming that NCON is entitled to damages calculated on a loss of profit basis (despite its 23 February Particulars claim), the evidence establishes several categories of expense that would have been incurred, but no direct evidence was given that these were in fact all the categories of expense that would have been incurred, and in many respects insufficient evidence was led to prove the expense that would have been incurred in each category that was in fact identified.

304 Mr Greg Gill was the first witness for NCON. He gave evidence that his responsibilities included the financial affairs of NCON. The only other officer of NCON to give evidence was Mr Barnes. He gave evidence chiefly of a technical nature on the aspects of the Yes box. Mr Reibel gave evidence to establish the value of the lost rental stream. He was not an officer of the company, but was retained to handle the financing transactions relating to the assignment of the leasing payments, and was not aware of the costs that would have been incurred in carrying out the Rental Agreement.

305 I have already set out the substance of Mr Gill's evidence above. In his evidence-in-chief, Mr Gill did not seek to give any evidence of the loss and damage suffered by NCON. He gave no evidence of the expenses to be incurred by NCON in meeting its obligations under the Rental Agreement. He did, however, identify several categories of expense that might be incurred by NCON under the Rental Agreement. Importantly, he did not give evidence that these were an exhaustive list of categories of expense. It is, however, possible to infer from his evidence that other categories of expense may have been incurred. I now turn to these categories of expense.

306 I have set out Mr Gill's evidence on this issue above. In substance, each store would be inspected and the load sizes and existing circuits established. NCON would determine what size boxes were needed and identify for the manufacturer the required models and the configuration within each model. The details would be prepared on paper and the order dispatched to the manufacturer. No estimate was made of these costs by NCON, unless they are in the installation costs.

307 No evidence was given of the cost of installing the Yes boxes in the stores. NCON's Damages Submission states the amount was estimated to be $2,067 on average per store. Mr Gill did not give evidence of the installation costs themselves. Subsequently, during Mr Reibel's evidence, Mr Reibel sought to verify NCON's damages claim. Mr Reibel included a loss of profit calculation which was not part of NCON's particulars of loss and damage. Mr Reibel included in that calculation the cost of installation and the cost of supplying the Yes boxes. Mr Reibel said in cross-examination that he got those figures from a document given to him by Mr Greg Gill. Mr Gill, however, did not refer to this document during his evidence and it was not produced or proved.

308 Mr Gill said that once the Yes boxes were installed they had to be commissioned and a certificate of safety issued and measurement of verification and savings performed in accordance with the International Protocol of Measurement Verification Performance. No estimate of these costs were given by NCON, unless these were included in the installation costs.

309 Mr Gill said that the manufacturing of the Yes boxes would be contracted out to a manufacturer. Evidence concerning the demonstrations of the Yes boxes indicated that the manufacturer was in Ringwood. Mr Gill said that the manufacturer would give two months credit for the manufacture of the Yes boxes.

310 As canvassed above, Mr Gill was unable to say what the cost of manufacturing the Yes boxes would have been. He said that to the best of his knowledge the average of the four different models was $2,000, although later he said $2,200. He said that on average 1.7 boxes would be required per store. Using his figures the cost of manufacturing would be 1.7 x 106 x $2,200 = $396,440. Mr Reibel's Exhibit P50 gives the cost as $1,070,520.50. NCON's Damages Submissions gives the same figure. I am unable to reconcile the two.

311 Mr Gill confirmed that NCON did have a written record which showed "the cost of goods, cost of manufacture, rollout schedule, et cetera", but it was not tendered in evidence.

312 Mr Gill explained the outsourcing of the marketing to the Greenhouse Savings Group. I have already dealt with the lack of evidence on this issue.

313 I have already dealt with the inadequacy of the evidence on this issue (including the evidence of Mr Gill and Mr Reibel) and how I am unable to find how much commission would have been deducted.

314 I have already dealt with the inadequacy of the evidence on the commission payable to Mr Reibel or his company Akranda Pty Ltd.

Payments mentioned in NCON's Damages Submissions

315 The Damages Submissions refers to the costs of office, maintenance, vicissitudes and the costs of the roll out by Mr Tim Gill. No evidence was given of these expenses.

316 Spotlight contends that no evidence was led by NCON on whether a royalty was payable for use of the Yes box patented material. Mr Gill said that the intellectual property relating to the Yes box was held by NCON Incorporated. As canvassed above, he said many millions of dollars had been sunk into developing the technology over many years. He said "they" were running out of funds when NCON was incorporated. He referred to an investor in NCON Incorporated. The evidence suggests that royalties might have been paid. As mentioned above, NCON did not seek to prove the expenses it would incur under the Rental Agreement. There was no evidence either way about royalties.

317 Mr Gill said that NCON did not have any arrangements with a financier to provide the capital needed for the rollout of the Yes boxes in Spotlight stores in the first quarter of 2008. He said that NCON had arrangements with various friends, including himself, to provide loans into the company to support cash flow to carry the low points of the cash flow. He said none of these arrangements were documented, as they did not happen. Mr Gill said that he had sounded out possible sources of funds and had verbal arrangements. Under re-examination, Mr Gill said that there were several people involved one of whom was an original investor in NCON Incorporated. Mr Gill said one person had agreed with him that they would invest up to $250,000 on the back of any signed contract, and the other person had agreed up to $1 million on the back of any signed contract.

318 I can only infer from this that interest fees may have been payable for the loans Mr Gill. The balance sheet of NCON indicated that it did not have financial resources of its own to raise sums such as the $250,000 referred to by Mr Gill. No evidence was given of the financing costs, if any.

Evidence in support of the 23 February particulars of loss and damage

319 I now turn to the evidence in support of that claim. The damages claim was explained in part by Mr Reibel. Neither Mr Gill or Mr Barnes (the two officers of NCON who gave evidence) sought to explain the damages claim in any detail. As discussed, in his evidence Mr Reibel produced a document explaining the damages claim which was marked as Exhibit P50. Under cross-examination, Mr Reibel said that he had been given a document by Mr Greg Gill from which he was able to calculate the costs of the goods, including installation in the three nominated sites.

320 I shall deal with each paragraph of the 23 February Particulars.

321 NCON took the agreed rental rates from the Rental Agreement for three of the Yes boxes. These were the Yes boxes that NCON had recommended be used in the three Spotlight stores they had analysed and reported on in their presentation report to Spotlight of 18 July 2007. In that report, NCON sets out the Yes boxes required for each of the Bayswater, Brunswick and Essendon stores. Only the boxes 1210, 3420, and 3630 were used.

322 The 23 February particulars allege the weighted average cost of supply and installation of Yes boxes in the three surveyed stores was $21,957. What was called the cost of supply was made up of two figures: the cost of equipment per store of $19,890 and the cost of installation per store of $2067, making a total of $21,957. This calculation is given in paragraphs 1-5 of the Damages Submission, but was not given in evidence.

323 The damages submission refers to CB85. This page was not tendered but the page also appears as part of exhibit P18 at p 65 of the Court Book. The table shows 11 Yes boxes were required for the three sample stores at Bayswater, Essendon and Brunswick that were used in the written presentation given to Mr Molini in September 2007. The average number of Yes boxes using this sample was 3.7 per store.

324 Paragraph 3 of the Damages Submission refers to the "Total price of the Boxes (Equipment for three stores)". The figures then given for each of Bayswater, Brunswick and Essendon is calculated by multiplying the number and type of Yes boxes required by the relevant price of the Yes box provided in the proposal as the price for which Spotlight could buy the Yes box or the price that would be used in calculating the rental to be paid by Spotlight if it chose the rental option.

325 The Damage Submission refers to "cost of installation". NCON says that the "cost of equipment" was calculated on the weighted average of the equipment values set out in the Rental Agreement, that is the cost of the Yes box to Spotlight, not the cost to NCON to supply the Yes box. No evidence was given as to the cost of installation, said to be $2,067 on average per store.[44]

326 This paragraph alleges that the weighted average of the above rentals, based on the weighted average store cost, was $396.97 per month.

327 The explanation of this calculation is in paragraphs 7 and 8 of the Damages Submission. As can be seen, the calculation is based on a 3.25% interest rate. Mr Reibel says that was the rate told to Spotlight. The calculation gives the monthly payments on total capital of $2,237,442 reducing to zero over 60 months at a rate of 3.25%.

328 This paragraph alleges total repayments over 60 months of $2,2524,729.20. The calculation is explained in paragraphs 8 and 9 of the Damages Submission.

329 This paragraph gives the calculation of the present value of the rental stream. The calculation is explained in paragraph 11 of the Damages Submission. In substance the present value of the rental stream is discounted to its present value using a rate of 9% to give what NCON would receive from Societie Generale, being $2,027,078.71.

330 This paragraph alleges that NCON retains ownership of the Yes boxes.

331 It alleges that NCON claims the sum for a five year rental period of $2,027,078.71. This corresponds with paragraph 11 of the Damages Submissions.

332 Assuming for present purposes that the 23 February particulars provide the correct formula for calculating NCON's loss and damage (an assumption Spotlight disputes) there are certain costs and commissions payable from the rental which have not been included in the calculation, nor has their absence been explained.

333 Mr Reibel's Exhibit P50 states that the costs of goods sold would have been $1,070,520.50. He said he was told by NCON that that would be the cost. The cost of goods sold includes the cost of installation. This is asserted to be $2,067 on average per store. I accept the installation would have cost something. The raw material may be in the tables supplied to Spotlight by NCON, however, no witness explained to me how that sum was calculated. Accordingly, I have no evidence to enable me to make a proper allowance for the cost of installing the Yes boxes.

334 NCON's case is that it would have received the present value of the rental stream. In his evidence, Mr Reibel said that NCON would receive the discounted sum under the rental program.

335 As to the calculation of the sum, Mr Reibel gave evidence that Societe General had approved the finance for the Spotlight rental at a margin of 1.5%. He said this meant a margin of 1.5% over Societe General's cost of funds. Mr Reibel said that 9% was the market rate at the time for a commercial loan. This would imply Societe General's cost of funds was 7.5% at the time. There was no evidence that Societe General's costs of funds were 7.5% at the time the Rental Agreement was made or during the time the Yes boxes would be installed in Spotlight's stores.

336 Under cross-examination, Mr Gill gave evidence that if the rental stream was assigned to Societe General, Societe General would pay SME as the broker and then SME would in turn pay NCON a lesser figure than was paid by Societe General to SME. Mr Gill did not give evidence of how much would be deducted. Mr Reibel said that he could not say exactly how much commission SME was to receive, but it was 3 or 4% of the moneys "received on a discounted - the amount of moneys banked by NCON". Accordingly, I am unable to find how much commission would have been deducted.

337 Mr Gill said in evidence-in-chief that the Greenhouse Marketing Group (GSG) had exclusive marketing rights of the Yes box in Australia. He said the company was entitled to 10% of the sale price of the goods whether the goods were sold or rented. Under cross-examination, Mr Tobin said that GSG received a commission based on the cost of the units but not on the installation costs. I understand the reference to cost of the units is the cost to Spotlight, in other words the sale price. Mr Tobin said the commission was never paid. NCON did not calculate this sum or take it into account in its particulars of damage. The Damages Submission makes certain deductions and additions to the damages calculation for cost of goods installed, fees payable to GSG, Mr Reibel, and SME but does not identify the amount payable to GSG.

338 Evidence was given that payments would be due to Mr Reibel of 2% commission. Mr Reibel says it was 2% commission of the total rent. Mr Gill says it was 2% of the amount of money raised in finance. These may be different amounts as the total rent of $2,524, 729.20 exceeds the finance if the finance is the $2.5 million said to be raised as finance less the commission payable to SME. No evidence was given of the actual amount that would have been payable to Mr Reibel or his company Akranda Pty Ltd.

339 As discussed above, NCON did not obtain financing for the leasing. Mr Reibel accepted that the obstacles raised by Mr Phillips and relayed by Mr Reibel to Spotlight were never removed. He said twice that "we never got a chance to finalise negotiations". Accordingly, any assessment of damages should take into account that the finance condition may not have been satisfied by NCON and the Rental Agreement may not have proceeded.

Further and alternative claim based on additional 5 year rental renewal

340 I will now deal with the further and alternate claim based on a further five year rental.

341 This paragraph claims under the above heading that it was agreed with NCON that, should Spotlight wish to extend the rental for a further period of five years, the monthly payment would be calculated at 66.7% of the original rental figure.

Paragraphs 10, 11 and 12 of the 23 February particulars

342 These paragraphs calculate the total rentals received over 60 months at $1,683,236.96. Paragraph 12 of the 23 February particulars alleges that this figure equates to a present value of $1,351,453.41 in five years time. I take this is the amount NCON would receive if it "sold" the rental stream to Societe General.

343 This paragraph alleges that converted to today's present value the figure becomes $863,172.89.[45]

344 This paragraph asserts that the total loss for two five year terms is thus $2,890,251.60.[46]

Paragraphs 15 and 16 of the 23 February particulars

345 These paragraphs explain that $2,890,251,60 is made up of the first five year loss income figure of $2,027,078.71 and $863,172.89.

346 This paragraph claims in the alternative loss and damage of $2,890,251.60.

347 In its final submissions, NCON did not identify where the evidence was to support the assertion Spotlight and NCON had agreed to a rate of 66.7%. Mr Reibel states that it was agreed with Spotlight that should Spotlight wish to extend the rental (which he said was highly probable), NCON would reduce the second term rental to being two thirds (or 66.7%) of the original rental figure. Mr Reibel did not give evidence that he negotiated this term. The Rental Agreement said the option was at market interest rates. Mr Jim Chisholm reported to Mr Porter in an email of 28 March 2008 that Mr Dale had told him in relation to the second five year term that, although the contract says subject to market interest rates, the rate probably is approximately 40% less than the first term rental costs.

348 Assertions were made from the Bar Table and by Mr Reibel that it would prove attractive to Spotlight to exercise an option for a further five years. The 23 February particulars assumed there was a 100% chance of renewal for a further term of five years.

349 There was some evidence that it was in the interests of Spotlight to renew the lease of the Yes boxes. No evidence was given of any person actually exercising an option to re-lease the Yes boxes.

350 Spotlight were not satisfied with the product. Mr Chisholm was of the view that the Yes box did not perform as was claimed by NCON. Thus it is possible that the lease would not have been renewed. On the other hand, once it was installed, the evidence suggests that it would have saved considerable electricity costs and Spotlight may well have decided to exercise the option.

351 I have reached the unfortunate conclusion that NCON has not properly proved its loss and damages. An estimate by me would be only a guess. The law does not permit me to make a guess where, as here, evidence could have been given of the anticipated costs that NCON would have incurred in meeting its obligations under the Rental Agreement. I accept that the evidence would only have been an estimate as the costs were not in fact incurred. For the reasons given above, I find that a reasonably precise estimate of the loss and damage suffered by NCON could have been given and proved. It was not.

352 When my concerns about the damages claim by NCON were raised with NCON, it provided the Damages Submission but did not seek to amend its 23 February particulars or lead further evidence in support of the Damages Submission. Whether or not NCON would have been permitted to do so is another matter.

353 A subsequent application by NCON to reopen the case and tender further evidence on damages was allowed by me but disallowed by the Court of Appeal. In September 2012, the Court of Appeal ordered that matter be decided where the evidence stood when the trial concluded on 2 March 2011.

354 Accordingly, there will be judgment for the plaintiff. I award nominal damages of $1. I will hear the parties on costs.

[1] 'Amended Defence to Amended Statement of Claim of 5 February 2011, [2B].

[8] Particulars of Loss and Damage of 4 September 2009.

[10] Codelfa Construction Pty Ltd v State Pail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 (Codelfa) at 348 and 352; Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VicRp 74; [1990] VR 834 (Schenker) at 840.

[11] Codelfa [1982] HCA 24; (1982) 149 CLR 337 at 347-352; Schenker [1990] VicRp 74; [1990] VR 834 at 844-850; Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Insurance Cases 60-853 at 75,343.

[14] Amended Defence to Amended Statement of Claim' of 15 February 2011, [2B].

[15] Amended Defence to Amended Statement of Claim of 15 February 2011, [2B].

[16] 'Reduced consumption translates to savings on lighting costs of around 30% per annum, with imperceptible light loss, while increasing lamp life...'.

[17] 'The product is designed to automatically manage the voltage level supplied to lamps, within predefined limits, always "starting" lights at full nominal voltage supply and thereafter maintaining the lighting, without discernable light loss, at a reduced voltage").

[18] The particulars in the amended witness statement were not tendered into evidence.

[19] [1991] HCA 54; (1991) 174 CLR 64 (Amann Aviation) at 80 per Mason CJ and Dawson J.

[20] [1848] EngR 135; (1848) 154 ER 363 at 365.

[21] Amann Aviation [1991] HCA 54; (1991) 174 CLR 64 at 80-82 per Mason CJ and Dawson J (citations omitted)

[22] Ibid at 83 per Mason CJ and Dawson J.

[23] Fink v Fink [1946] HCA 54; (1946) 74 CLR 127.

[25] [1911] 2 KB 786 (Chaplin).

[27] [1951] HCA 79; (1951) 84 CLR 377.

[28] Chaplin [1911] 2 KB 786 at 792.

[29] [1927] NSWStRp 41; (1927) 27 SR (NSW) 301 at 305-306.

[31] [1892] 2 QB 524.

[32] Ibid at 532-533; cited with approval by Toohey J in Amann Aviation [1991] HCA 54; (1991) 174 CLR 64 at 138, and by Hayne J in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768.

[33] Amann Aviation [1991] HCA 54; (1991) 174 CLR 64 at 153.

[35] Ibid at [37]-[38]; see also Alpha Centauri Enterprises Pty Ltd v Mortgage House of Australia Pty Ltd [2009] NSWSC 333 at [362] per Hammerschlag J.

[36] [1951] 1 KB 422 at 438.

[37] Adams v Morellini [2010] WASC 61 at 109 per Blaxell J.

[38] [2002] NSWCA 371.

[39] Ibid at [66]; Beazley JA agreed with Hodgson JA's statement of principle in this paragraph, [50].

[40] [1994] VicRp 16; [1994] 1 VR 237.

[45] This figure does not correspond to the figure in exhibit P50 and the Damages Submissions which is $878,351.97.

[46] Exhibit P50 and the Damages Submission give the equivalent figure as $2,905,430.68.