CONTRACT - Exclusive distributorship agreement - Repudiation - Acceptance - Loss of profit on sale of stock - Leave to appeal refused.

CONTRACT - Exclusive distributorship agreement - Repudiation - Acceptance - Loss of bargain damages - Distributor willing and able to perform but for breaches and repudiatory conduct - Leave to cross-appeal granted - Cross-appeal allowed.

CONSUMER LAW - Unconscionable conduct - Conduct involving dishonesty, bad faith, sharp practice and disregard for contractual terms against conscience and in breach of s 21(1) of the Australian Consumer Law - Leave to appeal granted - Appeal dismissed.

CONSUMER LAW - Unconscionable conduct - Causation and loss - Whether conduct caused loss - Loss directly attributable to conduct - Loss established - Leave to appeal granted - Appeal dismissed.

CONSUMER LAW - Unconscionable conduct - Whether individuals involved in relevant conduct - Individuals involved in conduct and accordingly liable - Leave to appeal granted - Appeal dismissed.

1. The first applicant ('Smash') was at all relevant times an Australian designer and manufacturer of 'Back to School' or 'BTS' products, marketed under its 'Smash' brand (the 'Smash products'). The Smash products primarily consist of insulated lunch bags, lunchboxes and drink bottles. By 2010, Smash was the market leader in BTS products in Australia.
2. The second applicant, Mr Jason Harbinson ('Mr Harbinson'), was at all relevant times the managing director of Smash. The third applicant, Mr David Malone ('Mr Malone'), was at all relevant times the international sales manager of Smash.0F[1]
3. The respondent ('Euromark') was a United Kingdom ('UK') distributor and wholesaler of houseware consumer products, baby feeding and BTS products. These were supplied as licensed products (such as Disney), retailer home brand products and products under Euromark's own brands. Euromark supplied major UK retailers such as Tesco, ASDA, Wilkinsons, Morrisons and Sainsbury's, and in particular had a 30-year relationship with Tesco, for whom it was a preferred supplier. Euromark's managing director is, and was at all relevant times, Mr Mark Harrison ('Mr Harrison').
4. In 2008, Smash appointed Recreation as its distributor of Smash products in the UK. In 2010, Tesco suggested to the parties that Euromark act as Smash's UK distributor. In December 2010, Mr Harrison contacted Mr Malone, and Euromark began to work as Smash's UK distributor on an informal basis. By mid-2011, Euromark had purchased USD450,000 worth of products from Smash for on-sale to UK retailers, of which 90% was sold to Tesco.
5. In July 2011, Euromark and Smash entered into an agreement for Euromark to be the exclusive distributor of Smash products in the UK for a three year period commencing 5 July 2011 (the 'Agreement').
6. Euromark alleged that Smash breached the Agreement by directly soliciting Euromark's customers to purchase Smash products directly from Smash without Euromark's knowledge (the 'Solicitation Conduct').
7. Euromark also alleged that Smash wrongfully purported to terminate the Agreement in October 2012. Despite withdrawing this purported notice of termination on 3 December 2012, it is alleged that in breach of the Agreement, the Solicitation Conduct continued until the Agreement was terminated by Euromark on 23 December 2012.
8. Euromark succeeded in its claim for contractual damages for breach of the Agreement comprising the loss it suffered on the sale of Tesco stock that was not taken up by Tesco (£9,877) and the loss it suffered on the sale of Wilkinsons stock that was taken up by Wilkinsons at a reduced price (£27,441). Smash seeks leave to appeal these findings.
9. Euromark also claimed contractual damages comprising expectation loss or loss of bargain for years two, three and four of the Agreement. The claim failed. The judge held that, during the period 3 to 23 December 2012, Euromark was not ready, willing and able to perform its obligations under the Agreement and as a consequence could not claim damages for expectation loss. By a notice of cross-appeal, Euromark seeks leave to appeal this finding.
10. In addition to the claim for contractual damages, Euromark claimed that the Solicitation Conduct and other conduct by Smash, as detailed below, constituted unconscionable conduct under s 21 of the _Australian Consumer Law_1F[2] ('ACL') (the 'ACL claim'). The claim was not made against Smash. The claim succeeded against Mr Harbinson and Mr Malone; Mr Harbinson as having engaged in such conduct and Mr Malone as having been relevantly involved. Damages were awarded against each of Mr Harbinson and Mr Malone in the sum of £640,000.
11. Mr Harbinson and Mr Malone seek leave to appeal the ACL claim on the basis that the conduct of Smash (and their conduct and involvement) was not unconscionable and, in any event, did not cause the loss claimed. The evidential basis for the loss is also challenged.2F[3]
12. Several other issues3F[4] were dealt with by the judge but are not relevant to the appeal or the cross-appeal.
13. The judge made numerous findings of fact that were not challenged. Rather, it was submitted by Smash that in relation to the unconscionable conduct claim, the totality of the evidence viewed in context did not support a finding of unconscionable conduct.

1. It is unnecessary to set out in detail the substantial communications between the parties and others, the substantial documentation, the oral evidence and the numerous factual findings made by the judge. A relatively short summary of the relevant background is set out below. Further detail will be referred to where relevant.

1. The Agreement is dated 5 July 2011. It was executed by Euromark on 5 July 2011 and by Smash on 20 July 2011.
2. By cl 2.1, Smash appointed Euromark as its 'exclusive distributor of the Products in the Region'. 'Products' is defined in cl 1.2 to mean 'the products designed and manufactured by [Smash] at the time of signature of, and during the term of, this Agreement'. The 'Region' is defined in cl 1.3 to mean the UK and other territories as may be agreed by Smash and Euromark in writing. No other territories were agreed.
3. Clause 4.1 provides for an initial three-year term commencing on the date of the Agreement, being 5 July 2011.
4. The Agreement did not contain any mechanism for determining prices charged by Smash to Euromark, or by Euromark to UK retailers. It imposed a first year minimum purchase level of USD1,250,000, which Euromark achieved, and USD2,000,000 was agreed for the second year.
5. Clause 7 contained the obligations of Euromark. Clause 7.1 provided, in summary, that Euromark represented that it had and would have during the term of the Agreement the capacity, facilities and personnel to carry out its obligations under the Agreement. Clause 7.2 relevantly provided that, without limiting the generality of the obligations under cl 7.1, Euromark agreed:

(i) to use its best efforts and diligence to promote the sale and use of, and to stimulate interest in, the Products in the Region; > > (ii) to conduct business in a manner that reflects favourably at all times on the Products and the good name, goodwill and reputation of [Smash]; > > (iii) to avoid deceptive, misleading or unethical practices detrimental to [Smash] or the Products, including, but not limited to, disparagement of [Smash] or the Products;

...

(ix) at all times to maintain an inventory of the Products adequate to serve the needs of customers and potential customers in the Region on a timely basis;

...

During the term of this Agreement, [Euromark] shall not, directly or indirectly, use, import, distribute, sell or manufacture in the Region any product that is identical with or so similar to any of the Products that they could be confused with any of the Products. [Smash] and [Euromark] shall not directly or indirectly employ any employee of the other for a period of up to 24 months after the expiry or termination of this agreement, unless agreed in writing by [Smash] and [Euromark]

1. The words 'confused with' in cl 11 replaced the words 'competitive with' which Smash had proposed in an earlier draft of the Agreement.

1. By October 2011, relations between the parties was under pressure mainly regarding the pricing of Smash products required in order to maximise sales in 2012. Pricing became a continuing issue with Tesco seeking price reductions from Euromark, and Smash's manufacturers seeking to impose price increases. In February 2012, the parties exchanged terse emails. From this time, the internal Smash emails were increasingly critical of Euromark and began to refer to the possibility of Smash supplying UK retailers direct, rather than via Euromark, and of Mr Malone moving to the UK.
2. Euromark continued to promote and sell Smash and non-Smash products. In the first half of 2012, without Smash's involvement, Euromark began to develop a range of 'Zoom' venture brand BTS lunch bags for Tesco. Euromark promoted its Zoom range to Tesco between June and August 2012. Tesco did not follow up the Zoom range at that time.
3. In August 2012, Mr Malone moved to London in the role of the international sales manager of Smash. On 21 August 2012, Mr Malone joined Euromark to visit retail stores in order to inspect Smash and other BTS products as displayed on retailer shelves. On 22 August 2012, Mr Malone emailed Smash stating, inter alia, that he saw 'private label' products which Euromark had supplied to retailers, which he stated was '[s]omething that wouldn't really worry me other than it is lunchbags, drink bottles, etc. our category ... Our products ...'; and concluding '[n]othing really new or interesting to report'. This led to further internal Smash emails critical of Euromark. By this time, Smash executives were discussing the possibility of terminating the Agreement.
4. During August 2012, Euromark arranged joint meetings with buyers at various UK retailers to introduce Mr Malone. By 13 September 2012, Mr Malone had attended such joint meetings with WH Smith, Lakeland and Tesco.
5. The main retail sales season for BTS products in the UK ran from June to August each year ('BTS season'), coinciding with the start of the UK school year, and represented about 85% of annual sales. In advance of the BTS season, retailers required suppliers to present product options to them in the prior year over a period starting between September and mid-October, depending on the retailer, to November.
6. On 4 October 2012, Mr Malone emailed Mr Harrison asking to 'lock down' retailer presentation meetings for the 2013 BTS season. On 8 or 9 October 2012, Mr Harrison called Mr Malone and said it was not appropriate for Mr Malone to attend 'first' retailer presentation meetings, as Euromark would often be talking about its own products, and he suggested separate 'Smash-specific' joint retailer meetings.
7. Mr Malone reported concerns to Smash about that conversation in an email dated 10 October 2012, including that he had said to Mr Harrison during the call 'i [sic] don't care as long as Smash is presented properly', and stating to Smash '[m]ay as well torch our contract now'. Following internal emails on the issue, the Smash directors endorsed a plan to terminate the Agreement, which included Mr Malone arranging direct meetings with UK retailers; Smash then informing Euromark that it was in the parties' joint best interests not to continue the Agreement; and if Euromark did not agree, Smash then asserting that Euromark had breached the Agreement.
8. On 17 or 18 October 2012, Mr Malone started calling UK retailers, stating that Smash was having difficulty with Euromark, and arranging meetings to discuss direct supply. By 25 October 2012, Mr Malone had arranged nearly 10 meetings with UK retailers to commence on 31 October 2012. The meetings were to be attended by Mr Malone and Mr Dale Harbinson, who flew to the UK for that purpose.
9. On 19 October 2012, Euromark and Mr Malone attended a joint meeting with ASDA.
10. On 22 October 2012, Mr Stephen Harrington ('Mr Harrington'), the general manager of Smash, telephoned Mr Harrison raising concerns that Mr Malone would not be accompanying Euromark to 'first' retailer presentation meetings, and stating that Smash 'was not making enough money' and wanted to bring the Agreement to an end. Mr Harrison denied Smash was entitled to terminate.

1. On 26 October 2012, Smash emailed a termination letter to Euromark (the 'Termination letter'). It stated that Smash had concluded that it was best for both parties not to continue the existing arrangements; and that Smash had not heard from Mr Harrison offering solutions to the matters raised on 22 October 2012 and took this to indicate Euromark's agreement to mutually end those arrangements. It stated that the Agreement would end on 22 November 2012.
2. From 27 October 2012 onwards, the parties exchanged correspondence regarding the termination, with Euromark denying that Smash was entitled to terminate. On 29 October 2012, Euromark wrote to Smash requesting that Smash provide undertakings by 30 October 2012, including undertakings that Smash had withdrawn the purported termination, would refrain from contacting UK retailers and would accept, process and deliver all Euromark orders.
3. On 30 October 2012, Smash responded stating that Euromark had breached the Agreement in various respects; that Smash reserved the right to contact and visit any UK retailers; and that the Agreement did not require Smash to obtain Euromark's consent before doing so. From 30 October 2012, Euromark began to inform retailers that Smash had terminated the Agreement and that it could not guarantee the supply of Smash products.
4. On 30 October 2012, Euromark informed Wilkinsons that Smash had confirmed the cancellation of the Agreement, and that it would try to get Smash's agreement to supply Euromark with the current orders that it had placed for Wilkinsons. On 31 October 2012, Wilkinsons cancelled its Euromark purchase orders for Smash products, but stated that if Euromark could get hold of the stock previously ordered, it could reinstate the purchase orders, and foreshadowed a claim for loss of profits on those orders. On the same day, Euromark informed Wilkinsons that Smash had responded overnight, and that it expected that the Smash stock, the subject of the cancelled orders, would be delivered in line with the previous timing commitment. Wilkinsons then queried whether that meant that Smash had committed to supply only outstanding orders or to supply Euromark and Wilkinsons on a long term basis. On 31 October 2012, Euromark responded that it was working with Smash to have it honour orders placed and 'in the system', being outstanding orders which Wilkinsons had placed to that time and which Wilkinsons had cancelled on 30 October 2012, and not any new orders which had not yet been placed with Smash; and that '[f]or the future and in the long term, we kindly ask that you consider the proposals sent through by Jo [Menezes of Euromark] recently, which include Zoom/Wilko product, where Euromark is in complete control of the product and so we can work with you to achieve 100% supply'.
5. On 31 October 2012, Euromark sent an email to ASDA stating that Euromark could not supply benchmark pricing for the Smash items ASDA had shortlisted, but that Euromark could offer a quote for products which it could supply.
6. On 31 October 2012, Mr Malone and Mr Dale Harbinson began a series of retailer meetings. On 1 November 2012, Mr Harrison wrote to Smash stating, inter alia, 'I understand that Smash has commenced a series of unauthorised meetings' with Euromark's customers.
7. On 1 November 2012, EKM Legal ('EKM'), the solicitors engaged by Smash around 30 October 2012, wrote to Euromark stating that it had only just received instructions and would respond to Euromark's letter dated 29 October 2012 requesting various undertakings by 7 November 2012.
8. On 1 November 2012, Ms Cigdem Hill ('Ms Hill'), a Tesco buyer, sent an email to Smash and Euromark requesting that they seek to resolve their differences amongst themselves and update Tesco how they wanted to proceed. In early November 2012, emails were exchanged between Smash, Tesco and Euromark regarding the question of whether the Smash products would be supplied to Tesco by Smash or by Euromark. On 8 November 2012, Euromark gave a presentation to Tesco entitled 'Tesco SS 2013', which included a range of Euromark BTS products, some of which were marked 'Zoom' and included owl, panda and tiger lunch bags. On 14 November 2012, Tesco informed Euromark that those products would not replace the cash and volume Smash lines would generate, and Tesco ultimately did not purchase Zoom products.
9. On 5 November 2012, EKM informed Euromark that Smash would honour the two outstanding Euromark orders totalling USD108,104.40, being for the Smash stock the subject of the cancelled Wilkinsons orders. Those orders were delivered to Euromark in January and February 2013.
10. By 7 November 2012, Smash had met with WH Smith, Sainsbury's and various Tesco buyers.
11. On 9 November 2012, Mr Malone reported to Smash that Tesco would be sending him 'new supplier' forms. On the same day, EKM wrote to Euromark stating that more time was needed and it would endeavour to respond as soon as possible.
12. The judge found that Tesco informed Smash, likely by around mid-November 2012, that it wished to buy Smash products direct from Smash, and that Smash and Tesco then proceeded on that basis. The relationship between Tesco, Smash and Euromark is dealt with in a separate section below.
13. On 16 November 2012, EKM wrote to Euromark stating that Smash accepted that the Agreement had not been terminated by mutual consent. EKM stated that Euromark had breached the Agreement, sought a statutory declaration from Euromark as to its contact with Smash manufacturers in the period July 2011 onwards, and stated that Smash would not provide the requested undertakings. No particulars of breach were provided. Euromark replied that day, denying that it had breached the Agreement and refusing to provide the statutory declaration.
14. On 21 November 2012, Mr Malone sent an internal email stating, inter alia, that Tesco's buyer had told him that she believed that Mr Harrison had been working on Euromark's alternative designs for months. On 29 November 2012, Mr Malone sent a further internal email stating, inter alia, that the Tesco buyer felt Mr Harrison had been working against Smash for months in terms of developing alternative products; and that Mr Malone could tell from the Tesco buyer's comments that she had lost trust in Mr Harrison, and that his personal opinion was that the buyer would not work with Mr Harrison should Smash continue the Agreement with Euromark.
15. On 23 November 2012, Wilkinsons emailed Euromark quantifying its loss of profit at £62,569.50.63. From mid-November to late December 2012, Euromark negotiated with Wilkinsons for it to purchase Zoom branded lunch bags comprising cat, panda, tiger, owl and butterfly designs which it supplied to Wilkinsons in 2013. Mr Harrison gave (contested) evidence at trial that Euromark took these steps in an attempt to avoid the loss of profit claim and as a contingency in case it could not re-establish supply of Smash products. On 7 and 10 December 2012, Euromark sold Smash products to Wilkinsons, with a combined invoice value of £3,427.20.
16. To supply Tesco directly, Smash needed to incorporate a UK company. On 26 November 2012, Smash Global Ltd was incorporated in the UK, with Mr Malone and Mr Dale Harbinson as directors.
17. On 27 November 2012, Mr Malone reported that he was talking with UK retailers John Lewis, WH Smith, Lakeland, Tesco and Sainsbury's, had had dialogue with Toys R Us and ASDA, had received a voicemail from Wilkinsons, and had written to Morrisons.

1. On 3 December 2012, EKM wrote to Euromark stating that Smash was withdrawing its purported termination of the Agreement, and that Smash confirmed its intention to be bound by the Agreement. On that day, Mr Harbinson sent an internal Smash email stating, inter alia, that he would call Mr Harrison the next day if possible, and setting out his views as to Smash's options going forward.
2. On 11 December 2012, EKM wrote to Euromark repeating that Smash intended to be bound by the Agreement, and stating that Smash had taken a number of steps to remedy the situation, having written that day to a number of UK retailers. EKM's letter attached copies of eight Smash letters signed by Mr Malone and addressed to different retailer 'buyers' who had met with or received letters from Smash. Each letter referred to previous statements by Smash to the addressee that its relationship with Euromark was strained and experiencing difficulties, which might cause Smash to part ways with Euromark. The letters stated that Smash was working through those difficulties and that the relationship had not ceased; that Euromark remained Smash's distributor in the UK; and that retailers should continue to place orders directly with Euromark.
3. The letters to retailers were dated 10 December 2012. On 12 December 2012, Mr Harrison called one of the addressees, Ms Hill of Tesco, to discuss the letter. Ms Hill stated that she had not received the letter from Smash, and Mr Harrison emailed it to her. Later that day, Mr Malone emailed copies of the letters to the relevant buyers, stating that he would call them to discuss it (or in the case of Sainsbury's, would discuss it with the buyer at a meeting on 14 December 2012).
4. On 12 December 2012, Euromark responded to EKM's letters of 3 and 11 December 2012, stating that Smash's withdrawal of its purported termination of the Agreement was too late given the damage caused by the purported termination, that Smash had still not fulfilled the orders placed by Euromark prior to the purported termination and that Euromark reserved its rights.
5. On 13 December 2012, Mr Malone met with Ms Hill of Tesco. Mr Malone gave evidence that during the meeting Ms Hill told him that she was disappointed to receive his letter because she would not continue to work with Mr Harrison under any circumstances, and that he, that is Mr Malone, did not disclose that matter to Euromark at the time. On 14 December 2012, Mr Malone met with Ms Sarah Wang ('Ms Wang') of Sainsbury's. At this meeting, Mr Malone was arranging direct sales of non-branded Smash products to Sainsbury's. Mr Malone gave evidence that during that meeting Ms Wang told him that under no circumstances did she want to deal with Euromark.
6. Mr Malone met with Tesco on 13 December 2012 and with Sainsbury's on 14 December 2012, and exchanged emails regarding the pricing of Smash products with Tesco on 14 December 2012 and with Sainsbury's on 17 December 2012. On 21 December 2012, Mr Malone emailed Sainsbury's an incorrect version of cl 3.1 of the Agreement as providing the basis for Sainsbury's to deal with Smash directly. There is no evidence that Smash dealt with any UK retailers other than Tesco and Sainsbury's after 3 December 2012.
7. Mr Harbinson gave evidence that on 13 December 2012 he had a telephone discussion with Mr Harrison in which he stated that Smash and Euromark should work out something commercially, involving Euromark receiving a percentage of any direct sales made by Smash in the UK, and Mr Harrison said he would think about it and keep up the conversation. On 14 December 2012, Mr Michael Harrison, the chairman of Euromark, sent an email to Mr Matt Finch of Tesco stating, inter alia, that following Mr Malone's letter dated 10 December 2012 to Ms Hill, confirming that Euromark remained the exclusive distributor of Smash products in the UK, Euromark had been surprised to hear from Ms Hill on 12 December 2012 that Tesco and Smash remained in discussions and that Tesco intended to purchase directly from Smash. The email also stated that Euromark recognised the benefit of an arrangement by which Tesco purchased Smash products directly from Smash, and that Euromark had proposed to Smash yesterday a revised arrangement that enabled Smash to supply Tesco directly.
8. On 16 December 2012, Euromark wrote to EKM stating that Smash was adopting one position with Euromark and another with customers, referring to Ms Hill not having received the letter dated 10 December 2012 by 12 December 2012.
9. During December 2012, Euromark wrote a number of letters to Tesco stating that the Agreement did not permit Smash to supply Tesco directly, that Tesco could not lawfully take direct supply when on notice of Euromark's exclusive rights and that Euromark reserved the right to join Tesco to proceedings it would bring against Smash, and urged Tesco not to take supply direct from Smash. On 19 December 2012, Tesco wrote to Euromark, copied to Smash, stating that Tesco was entitled to purchase directly from Smash and confirming that Tesco would be doing so.
10. On 23 December 2012, Euromark wrote to EKM stating that it was terminating the Agreement. On 28 December 2012, EKM replied stating that Euromark's purported termination was invalid and that Smash was terminating the Agreement.

1. The orders that Euromark placed with Smash for stock for Wilkinsons referred to in EKM's letter of 5 November 2012 were delivered to Euromark in January 2013 in accordance with the original scheduled delivery date for the stock. Wilkinsons initially refused to take any of the Smash stock, but later agreed to take 50% of that stock at the agreed prices, and the remainder only at a discount (£3.50 vs £4.95). In late 2012, Tesco had refused to purchase Smash stock which Euromark had purchased in anticipation of fulfilling Tesco orders. In 2013, Tesco agreed to purchase only some of that stock, and Euromark sold the balance to third parties at reduced prices.
2. At trial, Mr Harrison gave evidence that in early 2013, Euromark's business effectively ceased, albeit that Euromark had continued to trade after that time but at greatly reduced levels of turnover.

1. Tesco was the main customer of Euromark. The loss of Tesco by Euromark was devastating. Euromark blamed Smash for this loss claiming that it effectively destroyed its business, a claim accepted by the judge and the subject of the application for leave to appeal. It is therefore necessary to set out in detail the relationship between Smash, Euromark and Tesco.

1 November 2012 meeting between Smash and Tesco

1. On 30 October 2012, four days after the Termination letter, Ms Tolu Ogunkua ('Ms Ogunkua') of Tesco cancelled their meeting with Euromark scheduled for 1 November 2012. However, there was a meeting between Smash and Tesco on 1 November 2012 attended by Mr Malone, Mr Dale Harbinson, Ms Hill and Ms Ogunkua. In an email from Ms Hill to Smash dated 1 November 2012 referring to this meeting, she suggested that the best way forward was for Euromark and Smash to discuss how they wish to work together and update Tesco accordingly. She noted that, if Smash no longer worked with Euromark going forward, it would need to set up as a new supplier and this may take some time.5F[6]
2. In an email from Mr Dale Harbinson to Smash executives dated 1 November 2012 referring to this meeting, he stated '[b]oth Tesco and WHS buyers today started meetings with "what's happening with Euromark? As they have called saying that their relationship with Smash has ended". I replied that's news to us as no final decision has been made. Both more than happy to go direct'.6F[7]
3. In an email from Mr Malone to Ms Hill dated 1 November 2012 referring to this meeting, he provided his contact details and referred to giving Tesco support in achieving 'our common goals'.7F[8]
4. Mr Malone prepared a conference report of this meeting that was sent to Smash executives on 2 November 2012. The conference report records among other things that:

(a) the objective of the meeting was '[t]o present Smash for BTS ranging 2013, discuss Euromark handover, etc'; > > (b) Tesco stated that 'we [Smash] basically need to sort things out with Euromark, doesn't want to know about it except to be sure she will get supplied'; > > (c) Tesco was 'going to work out how to get us [Smash] set up as a supplier' which could take up to three months and Tesco needed to place orders in the meantime: orders need to be raised now against an existing supplier; > > (d) it was '[u]p to us [Smash] to ensure she is supplied and in the meantime we present and follow up for future business and our own supplier number ... we need to ensure they are supplied up until we have a supplier number and have stock. This will be over the next 2-3 months'; > > (e) Smash would submit its offer for lunch bags, Nude Food Movers and drink bottles for the next year and recommend a range by bestsellers, shapes and age group; > > (f) Smash would send through the whole catalogue but needed to ensure Smash highlighted the best items to make Tesco's decision easy; and > > (g) Smash would print out a presentation and hand them to the buyer by 7 November 2012.8F[9]

5. Mr Malone said that at this meeting they discussed with Tesco how to set up Smash as a direct supplier, which could take up to three months. He accepted that the outcome of that meeting was that, until Smash was set up as a direct supplier, Euromark would have to continue to supply Tesco, after which time Mr Malone assumed Euromark would be 'dropped completely'. Mr Malone conceded that he did not tell Mr Harrison or Ms Menezes that Smash was intending to continue to use Euromark as an interim supplier at that point in time, but said that at that stage most conversations with Euromark were left to either Mr Harbinson or Mr Harrington: Mr Malone was instead told to focus on the retailers.9F[10]

1. Ms Hill sent an email to Mr Dale Harbinson and Mr Harrison dated 5 November 2012 seeking an update in relation to the issues between Smash and Euromark. She noted that the Spring/Summer 2013 season ('SS13') and BTS lines needed to be finalised that week. Mr Dale Harbinson and Mr Malone replied by email on that day. The reply was not copied to Euromark. It noted 'some areas of disagreement with Euromark' but that Smash was endeavouring to avoid any inconvenience to Tesco. It stated that Smash was and would continue 'to honour and supply all orders placed by Euromark for Tesco until such time as an orderly handover to Smash can be achieved'.10F[11] At this stage, the Termination letter had been sent by Smash to Euromark.
2. Ms Hill replied, copying the email chain to Euromark. She stated that Tesco would continue to order through Euromark until they were told otherwise. Mr Harrison replied on 6 November 2012 stating that Euromark was still waiting for Smash to reply to correspondence seeking clarification of the short-term and long-term supply of Smash products. Mr Harrison sent a further email on 8 November 2012 advising he had not received any response from Smash.11F[12]
3. Ms Hill sent a further email to Euromark and Smash on 5 November 2012 headed 'Smash Cat bag and bottle'. She asked whether it was possible for the supply of the Smash cat bag and flask at the beginning of March 2013 for the 'SS13 BTS ranges'. There was an internal Smash email from Mr Malone to Mr Stefan Kursidim ('Mr Kursidim'), the procurement and China employee of Smash, dated 7 November 2012 also headed 'Smash Cat bag and bottle'. In that email, Mr Malone suggested alternatives if the cat bag and bottle could not be provided to Tesco. The email stated '[c]an we discuss options as soon as you get to the office. This will lead to us getting a supplier number and we can move away from Euromark ASAP. He has stalled on the buyer and given us our chance to swoop. Please skype me when you get to the office'.12F[13]
4. Mr Malone sent a further email to Smash executives other than other than Mr Kursidim on 7 November 2012, stating:

(a) '[w]e prefer [EKM] to hold off until we have gone back to the buyer with solutions overnight on stock'; and > > (b) Ms Hill 'said she was confused on who to go to, so now she is likely to give me the supplier forms this week and I have advised her she can talk to me on everything, no need to talk to Euromark now'.13F[14]

5. Mr Malone prepared a presentation which was provided to Tesco on 7 November 2012.14F[15]
6. On 9 November 2012, Mr Malone wrote to Mr Kursidim, copying in Mr Dale Harbinson, noting that:

(a) Tesco had called that day (in oral evidence, Mr Malone said it was Ms Hill); > > (b) Euromark had refused to supply Tesco with Smash products and had presented alternative items; > > (c) Tesco wanted 1,500 Smash cat bags and 1,500 '3D Ladybird' in the UK by mid-December; > > (d) 'Catch is i [sic] believe we would also need to have the company set up and the EORI number registered in order to bring goods in. According to the accountants this could take 2-4 weeks'; > > (e) Ms Hill was keen on Smash for 'SS13 and BTS'; > > (f) Mr Malone would meet Ms Hill next week to discuss the presentations sent 'yesterday'; and > > (g) the new supplier forms were being sent to Smash ASAP 'which is great news'.15F[16]

7. In his evidence Mr Malone accepted that the new company was the new Smash company to be established in the UK. He also accepted that 'new supplier forms' were the forms from Tesco to enable Smash to supply Tesco directly.16F[17]
8. There is an internal Smash email dated 14 November 2012 from Mr Malone to Mr Dale Harbinson and Mr Kursidim. It records a conversation with Tesco in which he was informed that Tesco was going to pressure Euromark to deliver available Smash stock. Mr Malone said he learnt this from Ms Hill. It also records that Tesco would send to Smash the supplier set up forms in order to 'change over as soon as possible'.17F[18]
9. Tesco and Smash exchanged a series of emails on 14 and 15 November 2012, including an email from Ms Hill to Mr Malone and Mr Dale Harbinson, copied to Ms Ogunkua, dated 14 November 2012. She requested Mr Malone telephone her 'to discuss moving forward etc with you a.s.a.p'.18F[19]
10. There is a further email from Ms Hill to Mr Malone dated 14 November 2012 headed 'Smash SS13 & BTS'. She requested Smash's cost prices 'so that we can be clear on what the prices will be buying from yourselves directly'. Mr Malone replied on the same day, stating that it would be great if this could be discussed 'on Tuesday in our meeting'. He requested Ms Hill provide Tesco delivery terms, delivery method, payment rebates et cetera, and in the meantime he could work on providing the prices.19F[20]
11. Mr Malone gave evidence that he provided Smash pricing to Tesco but did not inform Euromark. He said that, at the time, Tesco and Smash had decided to move to direct supply as soon as possible and that Ms Hill 'made her decision' to do so. He gave evidence that he also did not inform Euromark of this. He said that he was told not to contact Euromark throughout this period.20F[21]
12. Further, on 14 November 2012, Tesco sent the new supplier set up forms and terms and conditions to Smash.21F[22]
13. There is an internal Smash email exchange on 14 and 15 November 2012. Mr Malone confirmed that Tesco were pressuring Euromark to supply Smash products and that Tesco knew Smash would supply Euromark so that Mr Harrison did not have a choice.22F[23]

20 November 2012 meeting between Smash and Tesco

1. On 20 November 2012 there was a meeting between Smash and Tesco. It is recorded in an email from Mr Malone to Ms Hill dated 21 November 2012.23F[24] It is also recorded in an email from Mr Malone to the Smash executives sent on 21 November 2012. The internal Smash email refers to the fact that the 'meeting today was very positive'. The email noted that time was of the essence as Tesco was behind in its BTS preparation due to the situation with Smash and Euromark. The email gave a summary of what Smash needed to provide Tesco, including generic Smash branded bags, Smash branded junior bags, Smash branded senior bags and Tesco private label bags. The attachments included Tesco football photographs and Tesco private label photographs.24F[25]
2. Mr Malone sent a further email to Smash executives on 21 November 2012, which refers to 'other Tesco opportunities discussed today'. Smash obtained a Tesco document entitled 'Design Specifications and Artwork Guidelines' at this time. It was not provided to Euromark.25F[26]
3. Mr Malone sent another email to Smash executives dated 21 November 2012, advising that Ms Hill told him 'this morning' that she believed that Euromark may have been working on its alternative designs for months.26F[27]
4. Ms Hill sent an email to Mr Malone on 23 November 2012. It recorded that Tesco would provide a response with 'a full response/action plan as to where [Tesco] would like to go with [Smash] for SS13'. She noted that the 'key thing for [Tesco] is to offer as much [Smash] product as possible'. The email also requested confirmation that, if Tesco needed some current stock topped up, Smash would be able to produce it 'even through [sic] you're not yet set up? I know we discussed this with yourself and Dale previously, I just want to make sure!'.27F[28]
5. Ms Holly Blay of Tesco also sent an email to Mr Malone on 23 November 2012 in relation to a 'clipstrip' Smash line with Euromark. The email records that she wanted to move this line over to Smash for SS13. It noted that Euromark had offered an alternative but that Tesco was reluctant to change it. She sought an urgent response.28F[29]
6. Mr Malone sent an email to Mr Dale Harbinson on 23 November 2012 advising that the setting up of the UK company 'is now past being urgent'. The email noted that Mr Malone 'desperately' needed to fill in the Tesco new supplier forms, which require a UK company registration number and a copy of the VAT application form. The email records that Mr Harrington put the UK company registration on hold. The email from Mr Malone continued that the opportunities with Tesco 'right now ... are incredible'. He noted that he could not afford to let Tesco down but 'without a company, and a supplier number I am stuck'. Mr Malone said that Smash needed to set up the UK company urgently to supply Tesco directly. He did not inform Euromark of this.29F[30]

21 and 28 November 2012 presentations by Smash to Tesco

1. Mr Malone sent an email to Ms Hill on 21 November 2012 attaching a working document for 'SS & BTS in terms of design selection on the lunchbags'. The presentation provided is headed 'Back to School 2013'. The email notes the presentation is split into four sections: generics, Smash BTS (junior and senior) and Tesco's private label. The presentation included amongst others an owl boggle, a 3D cat bag and a 3D panda bag. The presentation also included a recon tiger bag and soccer bags. This was not provided to Euromark.30F[31] Ms Ogunkua sent an email to Mr Malone on 23 November 2012 providing the feedback from the presentation which he sent through on 21 November 2012. It requested samples and/or prices of a number of products. It requested them as soon as possible for SS13.31F[32]
2. On 28 November 2012, Mr Malone provided a further presentation of Smash products to Tesco. Once again this presentation was not provided to Euromark until 23 March 2020 when it was ultimately produced in discovery. In the judge's view, the presentations were deliberately not provided at the time because Smash was seeking to procure Tesco to obtain Smash products directly from Smash and not via Euromark. The failure of Smash to discover them before March 2020 was not adequately explained in evidence before the judge.32F[33]

1. On 3 December 2012, the day of the withdrawal of the Termination letter, Mr Malone sent an email to Wincanton, a UK third-party logistics supplier, stating that he had 'the Tesco supplier forms now that are dependent on the [electronic data interchange ('EDI')] information for supplier set up'. The email also stated that Tesco 'want to send orders to us [Smash] immediately, so the sooner the better that this is functioning. This is pretty much an ASAP timeframe'.33F[34]
2. On 11 December 2012, Mr Malone sent an email to Tesco noting that Smash was 'being set up as a new supplier at Tesco and would like the [Tesco's] EDI implementation guide'.34F[35]
3. There was a further meeting between Tesco and Smash on 14 December 2012. It is recorded in an email from Mr Malone to Tesco of that date headed 'Pricing SS & BTS13'. The email recorded that Smash was 'now set up as a supplier'. It attached a schedule of pricing - referred to as a 'first go at pricing' - for approximately 50 products. The email recorded that Smash was still working out the freight and handling charges. It noted that Smash incurring these costs was all premised on direct supply.35F[36]
4. There was a subsequent email exchange between Tesco and Smash in relation to these prices. By email dated 17 December 2012, Ms Ogunkua replied that she would come back on target costs once she confirmed initial store numbers and volumes. By email dated 18 December 2012 to Mr Malone, Ms Hill noted that Tesco was shocked and disappointed at the prices Smash were quoting as they were a lot higher than Tesco currently pay. She continued that '[w]e would have expected to see a significant saving - especially as we have also discussed working with you on [a free on board] basis and also as you will not have to pay a distribution fee to Euromark'.36F[37]
5. On 18 December 2012, Mr Harrington sent Mr Harbinson a draft email for Tesco to send to Euromark. It stated that 'we have decided that it is no longer viable for Tesco to purchase Smash products from Euromark, and we have asked Smash to supply their products to us on a direct basis'. Mr Harbinson was cross-examined about this email. He said he did not think he asked for this email to be prepared but that he thought Smash was replying to a request from Tesco. He said he did not share the idea of Tesco writing to Smash in this way. The judge did not accept this evidence. The judge considered it was more likely than not that Mr Harbinson was aware of and agreed with such an approach given his involvement with Euromark at this time.37F[38]
6. On 20 December 2012, Mr Malone sent an email to Ms Hill at 12.02 am noting that he was now working on all the pricing. In addition, Mr Malone set out Smash's version of what Tesco should advise Euromark in regards to purchasing direct from Smash. It was word for word what had been suggested in the email sent by Mr Harrington dated 18 December 2012. Further, the email continued that Smash will indemnify Tesco 'of everything so there is never a doubt that Tesco are ok to proceed how they choose. Our intention is to ensure that from this date on, the debate remains between Smash and Euromark and you don't have to deal with it any longer. Please direct any concerns from Euromark directly to Smash'.38F[39]
7. The judge said:

Even if I am wrong in my view that Tesco's decision had been made and that Smash had been informed of it in unequivocal terms prior to the December 2012 letters, I am satisfied that, at the very least, Smash firmly believed that Tesco would be unwilling to conduct business with Euromark other than in the interim term, and there was no real prospect that Tesco would change its mind.39F[40]

1. On 7 February 2013, Euromark issued proceedings against Smash in England. The case was dismissed in June 2013 on the basis that, by cl 25.1 of the Agreement, the parties had submitted to the 'exclusive jurisdiction of the courts of Australia.'
2. On 22 December 2015, Euromark commenced a proceeding against Smash seeking damages for breach of the Agreement. On 22 October 2018, Euromark commenced a separate proceeding against Smash, Mr Harbinson, Mr Dale Harbinson and Mr Malone seeking damages for contraventions of ss 18 and 21 of the ACL. On 29 November 2018, the latter proceeding was discontinued as against Smash only. In 2019, both proceedings were consolidated and a consolidated statement of claim was filed on 31 May 2019.
3. The consolidated proceeding was brought by Euromark as the plaintiff, against Smash as the first defendant, Mr Harbinson as the second defendant, Mr Dale Harbinson as the third defendant and Mr Malone as the fourth defendant.
4. In the statement of claim, Euromark alleged that Smash had breached and repudiated the Agreement by:

(a) in 2012, without informing Euromark, planning to supply Smash products to retailers in the UK from late 2012, either directly or through a Smash branch to be established in the UK, and taking active steps to develop and implement that plan (the 'Planning Conduct'); > > (b) wrongfully purporting to terminate the Agreement in October 2012; and > > (c) the Solicitation Conduct.

5. Euromark also alleged that Smash made the following representations to Euromark:

(a) on or about 3 December 2012, Smash represented to Euromark that Smash was performing and intended to be bound by the Agreement, including by a letter from Smash's solicitors to Euromark dated 3 December 2012; and > > (b) on or about 11 December 2012, Smash represented to Euromark that Smash was performing and intended to be bound by the Agreement, including by a letter from Smash's solicitors to Euromark dated 11 December 2012,

1. Euromark also alleged that Smash and Mr Harbinson engaged in unconscionable conduct in breach of s 21 of the ACL and that Mr Malone was involved in such conduct. Full details of the conduct and the claim are set out below. No relief was sought against Smash.

1. In relation to the contract claims, the judge held:

(a) That Smash was liable for loss of profits in relation to the Tesco stock. Proposed grounds of appeal (a) and (b) relate to and challenge this finding. > > (b) That Smash was liable for loss of profits in relation to the Wilkinsons stock. Proposed grounds of appeal (c) and (d) relate to and challenge this finding.

2. In relation to the unconscionable conduct claims, the judge held:

(a) That the conduct engaged in by Smash and Mr Harbinson was unconscionable. Proposed grounds of appeal (e), (f), (g) and (h) relate to and challenge this finding.40F[41] > > (b) That the unconscionable conduct caused loss. Proposed grounds of appeal (k), (l) and (m) relate to and challenge this finding. > > (c) That the evidence, including expert evidence, established such loss in the sum of £640,000. Proposed grounds of appeal (n) and (o) relate to and challenge this finding. > > (d) That Mr Malone was a person involved in such conduct. Proposed grounds of appeal (i) and (j) relate to and challenge this finding.

1. In relation to the contract claim, the judge held that Euromark was not entitled to damages for loss of bargain or expectation loss because, in breach of the Agreement, it was not, during the period of 3 December 2012 to 23 December 2012, ready, willing and able to perform its obligations under the Agreement. Proposed grounds of cross-appeal 5.1-5.4 relate to and challenge this finding. Proposed ground 5.5 relates to costs.
2. The notice of contention contends that the judge should have found:

(a) That the withdrawal on 3 December 2012 of the purported termination constituted an affirmation of the Agreement (grounds 1‑-5). > > (b) That the Zoom products promoted by Euromark were: (i) confusingly similar to Smash products so as to constitute a breach of cl 11 of the Agreement (grounds 5-12); and (ii) not offered because of uncertainty associated with Smash supply of such products (grounds 15-16). > > (c) That the obligations on the part of Euromark were not dispensed with prior to 3 December 2012 (grounds 13-14).

The approach by an appellate court to the appeal

1. There is no challenge to the primary findings of fact.41F[42]
2. The main issue in the appeal is the ACL claim. Accepting the facts, Smash contended that the finding of unconscionability was not open, that is, the conduct as found, considered in its proper context, did not offend conscience.
3. It was submitted that there were four errors that led to the (incorrect) finding of unconscionability:

(a) Overstating Smash's motivation, conduct and strategy. > > (b) Failure to take into account relevant aspects of Smash's motivation and conduct. > > (c) Failure to take into account Euromark's conduct. > > (d) Failure to take into account the uncertain landscape during December and in particular from 10 December 2012, especially in relation to Tesco.

4. The judge made an evaluative decision based on the substantial evidence, both documentary and oral, and his observations of the witnesses. Although this Court is reviewing the correctness of the evaluation, and not the exercise of a discretion, there is a need for some caution, perhaps even considerable caution.42F[43]
5. In conducting a real review in order to determine the correctness of the evaluation, that is whether on the evidence before the judge a relevant norm of behaviour was observed, an appellate court must take into account any advantage enjoyed by the trial judge, particularly in relation to the assessment of the credibility of witnesses. In such a case interference with such findings, both in relation to facts and inferences, will only take place if the findings are 'glaringly improbable' or 'contrary to compelling inferences'.43F[44]
6. As to appellate restraint with respect to factual findings, the High Court observed in Robinson Helicopter Company Inc v McDermott:

A court of appeal conducting an appeal by way of rehearing is bound to conduct a 'real review' of the evidence given at first instance and of the judge's reasons for judgment to determine whether the judge has erred in fact or law. If the court of appeal concludes that the judge has erred in fact, it is required to make its own findings of fact and to formulate its own reasoning based on those findings. But a court of appeal should not interfere with a judge's findings of fact unless they are demonstrated to be wrong by 'incontrovertible facts or uncontested testimony', or they are 'glaringly improbable' or 'contrary to compelling inferences'.44F[45]

1. In making the challenge to appropriate inferences to be drawn, the applicant accepts that the role of this Court is that which was explained by the High Court in Lee v Lee:

A court of appeal is bound to conduct a 'real review' of the evidence given at first instance and of the judge's reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge's findings unless they are 'glaringly improbable' or 'contrary to compelling inferences' is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, 'in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge'.45F[46]

1. Further, where the evaluation is such that reasonable minds might differ, it is necessary and desirable that clear error be established. Reasonable minds might differ in cases where 'a broad power is being exercised in accordance with very general factors'. In such a case 'the boundary between a discretionary and non-discretionary judgment can become blurred'.46F[47]
2. In Hashtag Burgers Pty Ltd v In-N-Out Burgers, Inc, the Full Court of the Federal Court said:47F[48]

In determining an appeal from a decision involving an evaluative process such as the present, an appellate court should be careful to distinguish between findings of error and disagreements in evaluation. As noted by Perram J in Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; 261 FCR 301 (Allsop CJ and Markovic J agreeing):

1. ...[The court] must be guided not by whether it disagrees with the finding (which would be decisive were a question of law involved) but by whether it detects error in the finding. On the one hand, error may appear syllogistically where it is apparent that the conclusion which has been reached has involved some false step; for example, where some relevant matter has been overlooked or some extraneous consideration taken into account which ought not to have been. But error, on the other hand, may also appear without any such explicitly erroneous reasoning. The result may be such as simply to bespeak error. Allsop J said in such cases an error may be manifest where the appellate court has a sufficiently clear difference of opinion: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [29].
2. There may seem an element of circularity in this, but the sufficiently clear difference of opinion bespeaks not merely that the appellate court has a different view to the trial judge but that the trial judge's view is wrong even having regard to the advantages enjoyed by the trial judge and even given the subject matter: Branir at [24].

1. Accordingly, the Court is required to determine the correctness of the decision of the trial judge and not merely whether it was open to the judge.48F[49]
2. For the reasons set out below, the finding of unconscionable conduct is in our view correct.
3. There was no dispute about the applicable legal principles, which are referred to below.

1. In our opinion, the judge was correct in awarding Euromark damages for breach of contract for the loss suffered by Euromark in relation to both the sale of the Tesco stock and the Wilkinson stock. The application by Smash for leave to appeal in relation to these grounds, that is grounds (a), (b), (c) and (d), is refused.
2. However, for reasons that follow, we consider that the judge was in error in not awarding Euromark damages for expectation loss or for loss of bargain for the remaining term of the Agreement. The application for leave to cross-appeal will be granted and the appeal allowed.

1. This was Issue 27(a) and is proposed ground of appeal (a) and (b). There is no dispute about the quantum of the loss (£9,877). Rather, Smash submitted that Tesco's unwillingness to take part of the stock it had ordered was not as a result of any breach of the Agreement by Smash. The issue is, in other words, whether the breach of the Agreement by Smash, which is not the subject of any proposed ground of appeal, caused the loss.
2. In relation to this claim, the judge said:

There was limited oral evidence about this claim from Mr Harrison, in particular, he did not give evidence as to the reason why Tesco would not agree to accept delivery of all of the stock which had been ordered. However, based on the documentary evidence referred to in section 12.2 above and, in particular, at [738], and the time at which Tesco's unwillingness to agree to accept delivery took place in light of the dealings between Smash, Euromark and Tesco, I infer that Tesco's unwillingness to take part of the stock it had ordered was a result of Smash's purported termination of the Agreement and/or its failure to guarantee ongoing supply of Smash products, i.e. to provide the requested undertakings. Both were clear breaches of the Agreement.49F[50]

1. From a review of the documentary evidence referred to in section 12.2 of the Reasons, the suggested inference was properly made and entirely open. Further, a review of the relationship between Tesco, Euromark and Smash, as referred to above, supports the finding of causation.50F[51] The loss was caused by Tesco purchasing directly from Smash, thereby excluding Euromark. Put another way, the only reason why Euromark was unable to deliver to Tesco was because of the conduct of Smash, conduct in breach of the Agreement, as found by the judge.

1. This was Issue 27(b) and is proposed grounds of appeal (c) and (d). There is no dispute about the quantum of the loss (£27,441). Rather, Smash submitted that Wilkinsons' unwillingness to take part of the stock it had ordered was not as a result of any breach of the Agreement by Smash. The issue is, in other words, whether breach of the Agreement by Smash, which is not the subject of any proposed ground of appeal, caused the loss.
2. In relation to this claim, the judge said:

On the evidence before me, I am satisfied that Wilkinsons cancelled an order for Smash products from Euromark in late October 2012 in light of Smash's purported termination of the Agreement and consequent failure to guarantee ongoing supply of Smash products, i.e. to provide the requested undertakings. I refer to my findings at [484]-[486] above. Both were clear breaches of the Agreement.51F[52]

1. From a review of the documentary evidence referred to in section 12.3 and at [484]-[486] of the Reasons, the suggested inference was properly made and entirely open. Further, a review of the relationship between Wilkinsons, Euromark and Smash as referred to above supports the finding of causation.52F[53] The loss was caused by Euromark being unable to guarantee supply because of the Termination letter.

1. This was Issue 26 and is proposed grounds of cross-appeal 5.1-5.5. The judge said:

In light of my conclusions in respect of Issues 1 to 15, it is not necessary for me to determine Issue 26. I do not intend to do so.53F[54]

1. The relevant conclusions arise out of findings to the effect that during the period 3 to 23 December 2012 (when the Agreement was back on foot), Euromark was, because of its own breach during this limited period, not ready, willing and able to fulfill its part of the bargain and as a consequence was not entitled to damages for loss of bargain.
2. The relevant principle was stated by the judge and not disputed before us.54F[55] That is to say, where Party A gives an intimation to Party B of non-performance, Party B is then dispensed of performing its obligations (and as such, from the point of the intimation, no longer has to be ready and willing to perform). However, for proof of breach by Party A, up until that point, Party B must have been ready and willing to perform its obligations.55F[56]
3. The relevant conclusions were expressed by the judge as follows:

I have formed the view that the obligation to comply with each of cl 11 and cl 7.2(i) were dependent upon and concurrent with Smash's obligations under the Agreement, in particular, to supply Smash products to Euromark in accordance with the terms of the Agreement. This conclusion is easy to reach in the case of cl 7.2(i). Euromark's obligation under cl 7.2(i) to use its best endeavours to promote the sale of Smash products in the Region was clearly dependent upon Smash's obligation and willingness to supply Smash products to Euromark in accordance with the terms of the Agreement. For the avoidance of doubt, I consider that Euromark was dispensed from its obligation to use its best efforts to sell Smash products during the period between 26 October 2012 and 3 December 2012, when Smash maintained that the Agreement had been terminated and refused to undertake to accept orders received from Euromark and supply Smash products.

As to cl 11, on balance, I have also formed the view that Euromark's obligation to comply with this clause was also dependent upon Smash's obligation to supply Smash products to Euromark in accordance with the terms of the Agreement. I am conscious that the obligation in cl 11 is different from the best efforts obligation in cl 7.2(i). However, cl 11 restricts Euromark's ability, relevantly, to offer for sale or sell products which could be confusingly similar with Smash Products during the term of the Agreement. However, that obligation was granted in return for, and in my view an integral part of, Smash's obligation to supply Smash products to Euromark under the Agreement. As a result, I have concluded that Euromark's obligations under cl 11 were dependent upon and concurrent with Smash's obligation to supply Smash products to Euromark in accordance with the terms of the Agreement.

Further, on the evidence before me, I have concluded that Euromark's conduct from 26 October 2012 to 3 December 2012 in seeking to offer alternative products to Tesco and Wilkinsons, was made in reliance upon Smash's purported termination of the Agreement and failure to give the requested undertakings. In this regard, I accept the evidence of Mr Harrison that the products offered to these UK retailers were offered as alternative products, given that Euromark had no assurance of the continued supply of Smash products in light of the purported termination. I refer to my findings at [541] above.

As a consequence, I have concluded that the conduct of Smash during the period 26 October to 3 December 2012 results in Euromark being dispensed of any requirement to comply with cls 11 and 7.2(i) of the Agreement. Further, and as a consequence, I have concluded that the time at which Euromark's readiness and willingness is to be assessed, is from the period 3 December 2012 (when Smash withdrew its purported termination and advised of its intention to comply with its obligations under the Agreement) until 23 December 2012 (when Euromark terminated the Agreement).

As a result of this conclusion, it is not necessary to determine whether Euromark breached cl 11 or cl 7.2(i) of the Agreement between 26 October 2012 and 3 December 2012. However, in the event that I am wrong that Euromark's obligations under cl 11 were dependent upon and concurrent with Smash's obligation to supply Smash products to Euromark in accordance with the terms of the Agreement, for the reasons set out in sections 18.5 and 18.6 above, I do not consider that Euromark has breached cl 11 of the Agreement in its dealings with Tesco and Wilkinsons between 26 October 2012 and 3 December 2012.

It is now necessary to consider whether Euromark breached cl 11 and/or cl 7.2(i) between 3 December 2012 and 23 December 2012, when Euromark terminated the Agreement.

...

As is evident from section 11.6 above, Euromark took a number of steps after 3 December 2012 in order to secure orders of Euromark products to Wilkinsons as alternatives to Smash products. This included:

(1) the receipt of the Proforma Invoice dated 13 December 2012;

(2) the email exchange between Euromark and J&P dated 17 December 2012, attaching images of the Panda bag, the Tiger bag, the New Owl bag and the Butterfly bag. It also attached the image of a cat[']s face for a Cat bag; and

(3) the email from Ms Menezes to Wilkinsons dated 18 December 2012, which recorded that red seal samples were due to arrive 'yesterday' but would not now be expected until 19 December 2012.

...

For the reasons set out in section 18.6 above, I am not satisfied on the basis of the evidence before me that the products attached to the 17 December 2012 email were so similar to Smash [p]roducts so as to meet the similarity requirement in cl 11.

However, it is significant that there is no evidence before me that Euromark attempted to sell any Smash products to Wilkinsons during this period from 3 December to 23 December 2012, when it was still seeking to secure orders from Wilkinsons by designing Euromark products and offering those products to Wilkinsons. In my view, that is a breach of Euromark's obligation in cl 7.2(i) to use its best efforts and diligence to promote the sale of Smash products in the Region. As set out at [1120] above, while I consider that Euromark is at liberty to offer for sale products which may seem similar to Smash products but which do not contravene cl 11, cl 7.2(i) provides that nevertheless Euromark must use its best efforts to facilitate the sale of Smash products.

Given that I have formed the view that cl 7.2(i) is an essential term, I have therefore concluded that, at the time of Euromark's termination of the Agreement on 23 December 2012, Euromark was not ready, willing and able to perform its obligations under the Agreement.

It might be thought that this conclusion is odd or perverse given the apparent breakdown of the relationship between Euromark and Smash by this time, and my finding that the 3 December 2012 letter did not operate as a full retraction of Smash's breaches of the Agreement to that time. However, by the 3 December 2012 letter, Smash withdrew any intimation that it would not comply with the Agreement by refusing to guarantee supply. To the contrary, Smash stated its intention that it would comply with the terms of the Agreement, including to supply goods to Euromark. Euromark did not terminate the Agreement at that time. Rather, it waited until 23 December 2012. In this context, I have concluded that Smash's breaches of the Agreement after 3 December 2012 which I have found are not relevant to this issue. That is to say, they do not constitute a relevant intimation of non-performance relied upon by Euromark, which might give rise to a dispensation of the willingness requirement in respect of Euromark's obligation under cl 7.2(i) to promote Smash products relevantly to Wilkinsons.

As a result, in my view, during this period between 3 December and 23 December 2012 while the Agreement remained on foot, Euromark was obliged to comply with the essential terms of the Agreement, including cl 7.2(i). It did not do so. In these circumstances, I am compelled to the conclusion that it was not ready, willing and able to comply with its obligations under the Agreement at the time of termination on 23 December 2012. The consequence is that Euromark is not entitled to make a claim for contractual damages for expectation loss or loss of bargain.56F[57]

1. Accordingly, it is clear that the critical finding and reason for rejecting this claim is that for a very short period (20 days), Euromark breached cl 7.2(i) of the Agreement (an essential term) by not using its best endeavours to promote Smash products. This is self-evidently a very narrow finding of breach. There is no finding of any breach of cl 11, the similarity of product provision. There is no finding of any breach of any provision during the period before 3 December 2012. The practical (and legal) effect of the finding is that notwithstanding the circumstances and context, and in particular the Solicitation Conduct and the unconscionable conduct that continued to take place during the 20 day period, Euromark was nonetheless obliged to remain loyal to and actively promote Smash products. The judge was correct to find this 'odd or perverse'.57F[58]
2. Smash submitted that the judge's analysis was thorough and correct.
3. Euromark submitted that like the period 26 October to 3 December 2012, compliance by it with cl 7.2(i) was dispensed with because of Smash's ongoing breach during the period 3 to 23 December 2012. It was submitted further that, in any event, it was not in breach of cl 7.2(i) during this period and further was ready, willing and able to comply with its obligations under the Agreement, which of course assumed and was predicated on compliance by the other party, that is Smash. There is substance in each of these points.
4. It is useful at this point to refer again to some of the events that occurred in the 20 day period from 3 to 23 December 2012,58F[59] bearing in mind that they followed immediately upon the six weeks when Smash reneged on the Agreement, dealt directly with Euromark's customers and worked to establish its own direct supply chain to retailers in England. In other words, what occurs in this 20 day period happens against a very recent background when Smash unequivocally communicated its intention not to be bound by the Agreement, and which can only have justifiably engendered in Euromark an intense suspicion as to Smash's integrity and trustworthiness.
5. Against that background the following events occurred:

(a) On the same day that EKM sent Euromark the 3 December 2012 letter withdrawing the Termination letter, Mr Malone emailed a logistics supplier to set up direct supply to Tesco - at this point, as the judge found, Smash's professed intention to be bound by the Agreement was untrue and, in fact, it intended to continue to pursue Euromark's customers;59F[60] > > (b) EKM did not send the 10 December 2012 letters to retailers until 12 December 2012 when Euromark reported that Tesco had not received one, reasonably confirming existing cynicism and suspicion about Smash's true intentions;60F[61] > > (c) After EKM's 11 December 2012 letter to Euromark confirming the withdrawal of the Termination letter, Smash (through Mr Malone) in fact continued to deal directly with Tesco and Sainsbury's about pricing, took steps to set up facilities to enable direct supply to Tesco and drafted an email for Tesco to inform Euromark it would deal directly with Smash; > > (d) As of 12 December 2012, Euromark knew that EKM's letters changed nothing so far as Tesco was concerned, and it took the view that Smash 'materially and repeatedly abused the terms of that [A]greement, and it continues to do so', whilst still stating to Smash that it would continue to comply with the terms of the Agreement 'so long as it remained in force';61F[62] > > (e) Smash proposed to pay Euromark a percentage of sales Smash made directly with retailers, in substitution for Euromark making the sales itself; and > > (f) Smash continued to fail to supply product which Euromark had previously ordered.

6. The 3 December 2012 letter was effectively a sham. Smash had no intention to and did not comply with its obligations under the Agreement by allowing its exclusive distributor to perform its obligations under the Agreement. Rather, Smash took over this role in complete disregard of the terms and intent of the Agreement. Despite the withdrawal in the letter, the evidence is clear that Smash was back to its old tricks. In those circumstances, despite the letters of 3 and 11 December 2012, we do not consider that there was any effective break in the 'intimation' which Smash conveyed to Euromark from 26 October 2012 onwards that it would not perform the Agreement. Nor did Euromark see it that way. It follows that Euromark was entitled to remain unpersuaded that Smash would guarantee continuity of supply and perform the Agreement.
7. This phase of conduct was not only unconscionable conduct, but it also constituted a breach of the Agreement.
8. The related point is that it cannot be said in the circumstances that Euromark was not ready, willing and able to perform or comply with its obligations. Euromark was ready, willing and able, but needed and was dependent on compliance by Smash, particularly in relation to continuity of supply. Smash was not willing to provide such continuity of supply. Further, the unilateral offer by Smash to supply retailers directly and pay Euromark a commission, unless agreed, would be a breach of the Agreement. We, respectfully, take a different view to that of the trial judge. Smash's breaches after 3 December 2012 were relevant to the question of its intimation of non-performance to Euromark which, in turn, relieved Euromark of the 'ready and willing' requirement. In our respectful opinion, the supposed dichotomy between pre and post 3 December 2012 does not bear the weight that the judge ascribed to it. The purported affirmation that Smash would honour the contract was not backed up by action and was given in a context where significant distrust had arisen. The performance by Euromark of its obligations has to be seen in the light of Smash's conduct, known to Euromark in the period of November and early December. It was not unreasonable, nor a breach of the agreement for Euromark to take a cautious approach. The judge proceeded on the basis that Smash's conduct, no matter how poor, was irrelevant to the issue unless it was known to Euromark. However, the conduct before 3 December 2012 was sufficiently known to Euromark to make it reasonable for Euromark to be suspicious of the genuineness of Smash's assertion that it would honour the Agreement. Given the context and short period of time involved, it could not fairly be said that Euromark was not ready and willing to perform its obligations.
9. Accordingly, Euromark was not in breach of cl 7.2(i) because any obligation to comply with the terms of the Agreement depended on the supply of product by Smash. As there was uncertainty in relation to such supply, Euromark was, in our view, not required to continue promoting the Smash products.
10. Euromark submitted that no finding was made that it was in breach of cl 11 and that the breach relied on by Smash and found by the judge, that is a breach by Euromark of cl 7.2(i), was not pleaded, although found by the judge. As we have found that there was no breach of this clause, it is unnecessary to decide the pleading issue.
11. We consider that in all of the circumstances, and in particular Smash's breach of the Agreement during this period and blatant disregard of Euromark's rights, compliance with its obligations and in particular cl 7.2(i), was (as was the position prior to 3 December 2012) effectively dispensed with. Accordingly, in our opinion, Euromark is entitled to damages comprising the loss of its bargain. Such damages flow naturally from the breach and consequent termination by Euromark of the Agreement.

1. We do not consider that there is any merit in the grounds set out in the notice of contention directed to this point. The grounds do not provide additional or further reasons why the judge's decision on this point should be upheld.
2. Grounds 1-5 contend that the withdrawal of the purported termination on 3 December 2012 constituted an affirmation of the Agreement. However, the conduct of Smash after 3 December 2012, as detailed above and below, evidence an intention to continue to breach the Agreement by engaging, in particular, in the Solicitation Conduct.
3. Grounds 5‑-12 contend that the Zoom products promoted by Euromark were confusingly similar to Smash products and in breach of cl 11 of the Agreement. Further, by grounds 15-16, it is contended that it was not correct that Smash products were not offered because of the uncertainty regarding the supply by Smash.
4. The conduct of Euromark after receipt of the Termination letter, in seeking to promote its Zoom range in preference to the Smash range, was entirely justified, both during the period 26 October to 3 December 2012 and after 3 December 2012.
5. The finding by the judge that Euromark failed to promote Smash products during the period 3 to 23 December 2012, in breach of cl 7.2(i), with the consequence that it was not ready, willing and able to perform its obligations under the 'revived' Agreement is not supported by the evidence and the judge's own findings. We do not accept that the breach as found is made out, nor do we accept that the active promotion of Zoom products constituted a breach of cl 7.2(i) or cl 11 of the Agreement.
6. Several matters are relevant.

(a) First, as found by the judge, there was no restriction on Euromark promoting similar products provided they were not confusingly so. > > (b) Second, as found by the judge, the Zoom products were not confusingly similar. Having compared the products for ourselves, we are not persuaded that the judge was in error. > > (c) Third, from 26 October 2012, the date of the Termination letter, supply by Smash could not be guaranteed and Euromark was entitled to endeavour to keep its retailers satisfied by promoting its own - not confusingly similar - range. The judge said: > > * I have difficulty accepting all his evidence about these issues. I have concluded that Euromark was seeking to sell Zoom bags at this time or bags based on the work done in respect of the development of the Zoom products set out in section 8. However, I have formed the view that the reason why Euromark offered these products to Tesco at this time was because of Smash'[s] purported termination and Smash's failure to give the requested undertakings, in particular, for future supply for new orders. As a result, I generally accept the evidence of Mr Harrison that these products were being offered as an alternative to Smash products.62F[63] > > (d) Fourth, Euromark's position was not affected by the withdrawal of the Termination letter, for the reasons set out. > > (e) Fifth, the promotion by Euromark of its Zoom range earlier in 2012 does not affect the position.

7. The short point is that in all of the circumstances, Euromark was entitled to promote its Zoom products at a time when it could not rely on Smash to provide continuous supply, in circumstances where Smash was engaging in the Solicitation Conduct and otherwise acting unconscionably.
8. Grounds 13-14 contend that the obligations on the part of Euromark were not dispensed with prior to 3 December 2012. However, the conduct of Smash before 3 December 2012, as detailed above and below, clearly evidence an intention to breach the Agreement by engaging in particular in the Solicitation Conduct as found by the judge.
9. Accordingly, we will grant leave to appeal in relation to the cross-appeal and allow the cross-appeal.
10. We will hear from the parties as to the appropriate way forward in relation to the assessment of damages in relation to this claim.

1. In our opinion, for the reasons set out below, the conduct of Smash and Mr Harbinson, as found by the judge, was unconscionable and in breach of s 21 of the ACL. The conduct, which was sufficiently pleaded, was effectively a cause of the loss of Euromark's business and there was a sufficient evidential basis for the calculation of the damages comprising loss of goodwill.
2. These were Issues 24 and 25 and proposed grounds of appeal (e), (f), (g) and (h). The finding of unconscionable conduct was informed by the Planning Conduct (in part), the Solicitation Conduct and the Affirmation Representations. The finding was correct. Accordingly, grounds (e), (f), (g) and (h) must be rejected.

1. Section 21(1) of the ACL is in the following terms:

A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply of goods or services to a person; or

(b) the acquisition or possible acquisition of goods or services from a person;

engage in conduct that is, in all the circumstances, unconscionable.

1. Section 22(1) of the ACL is in the following terms:

Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to:

(a) the relative strengths of the bargaining positions of the supplier and the customer; and

(b) whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and

(c) whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and

(e) the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and

(f) the extent to which the supplier's conduct towards the customer was consistent with the supplier's conduct in similar transactions between the supplier and other like customers; and

(g) the requirements of any applicable industry code; and

(h) the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and

(i) the extent to which the supplier unreasonably failed to disclose to the customer:

(i) any intended conduct of the supplier that might affect the interests of the customer; and

(ii) any risks to the customer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and

(j) if there is a contract between the supplier and the customer for the supply of the goods or services:

(i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and

(ii) the terms and conditions of the contract; and

(iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and

(iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and

(k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and

(l) the extent to which the supplier and the customer acted in good faith.

1. The prevailing authority is that s 21 does not require a party to suffer from any special disadvantage of which unconscientious advantage is taken by the other party.63F[64] The conduct that is prohibited and the subject of s 21 extends to egregious transactional behaviour more generally.
2. The key issues are honesty, fair dealing and conduct offensive to conscience. It involves unacceptable behaviour going beyond a breach of contract.
3. Although there is no dispute as to the applicable legal principles, it is useful to set out a statement from a leading case describing the normative standard of business conscience.
4. In Paciocco v Australia and New Zealand Banking Group Ltd, Allsop CJ said:

The working through of what a modern Australian commercial, business or trade conscience contains and requires, in both consumer and business contexts, will take its inspiration and formative direction from the nation's legal heritage in Equity and the common law, and from modern social and commercial legal values identified by Australian Parliaments and courts. The evaluation of conduct will be made by the judicial technique referred to in Jenyns. It does not involve personal intuitive assertion. It is an evaluation which must be reasoned and enunciated by reference to the values and norms recognised by the text, structure and context of the legislation, and made against an assessment of all connected circumstances. The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; and the conduct of an equitable and certain judicial system that is not a harbour for idiosyncratic or personal moral judgment and exercise of power and discretion based thereon.

...

In any given case, the conclusion as to what is, or is not, against conscience may be contestable. That is inevitable given that the standard is based on a broad expression of values and norms. Thus, any agonised search for definition, for distilled epitomes or for shorthands of broad social norms and general principles will lead to disappointment, to a sense of futility, and to the likelihood of error. The evaluation is not a process of deductive reasoning predicated upon the presence or absence of fixed elements or fixed rules. It is an evaluation of business behaviour (conduct in trade or commerce) as to whether it warrants the characterisation of unconscionable, in the light of the values and norms recognised by the statute.64F[65]

1. In ACCC v Quantum Housing, the joint judgment of Allsop CJ, Besanko and McKerracher JJ speaks of 'the language of business morality' underlying the statutory prohibition on unconscionable conduct in these terms:

Predation on vulnerability, taking advantage of disability or disadvantage and victimisation may be found in business, as in other fields of human life. Such behaviour does not, however, exhaust the meaning of against conscience. The kinds of consideration in s 22 and the kinds of circumstance to which the Chief Justice referred in Paciocco 236 FCR 199 at [296]-[298] are apt to inform evaluations about business standards that the courts are required by Parliament to make. They may be contestable judgments; they may be by reference to a standard that is not definable; but they are evaluative judgments that Parliament commands be made. That they are the subject of a civil penalty requires that the boundary of impugned conduct be reasonably known to the subject. This last factor reinforces the proposition that it is no light matter, indeed it is a serious matter, to have one's conduct impugned as against or as offending conscience. Business people understand such things, as do ordinary people. They need no definition to assist them. 'Unconscionable' is the language of business morality and unconscionable conduct is referable to considerations expressed and recognised by the statute. The word is not limited to one kind of conduct that is against or offends conscience. Surely to predate on vulnerable consumers or small business people is unconscionable. But why is it not also unconscionable to act in a way that is systematically dishonest, entirely in bad faith in undermining a bargain, involving misrepresentation, commercial bullying or pressure and sharp practice, using a superior bargaining position, behaving contrary to an industry code, using significant market power in a way to extract an undisclosed benefit that will harm others who are commercially related to the counterparty? The proposition that such conduct (not all of which might be seen to be present here) is not unconscionable by an Australian statutory business standard of conscience because the counterparty to the business transaction suffered from no relevant pre-existing disadvantage, disability or vulnerability (other than, perhaps, having a decent degree of trust and faith in its business counterparty's honesty and good faith) is difficult to accept, unless one posits a narrow defined meaning of 'unconscionable' that remains hinged in some way to the structural form of the equitable doctrine as expressed in cases such as Kakavas [2013] HCA 25; 250 CLR 392 at [161]. The history, text and structure of the Act is contrary to such a conclusion. It is not to be derived from the meaning of the word 'unconscionable'.65F[66]

1. After setting out the relevant law, the judge said:

In the present case, it is necessary to apply these principles in respect of my findings in these reasons. Relevantly, I have concluded that:

(1) Smash engaged in the Solicitation Conduct until 3 December 2012 without informing Euromark;

(2) after 3 December 2012, Smash continued to take steps to distribute Smash products to Tesco and Sainsbury's by seeking to secure the direct supply of Smash products to them without informing or consulting Euromark, including by soliciting or encouraging them to place orders for direct supply; and

(3) Smash made the Affirmation Representations by sending the December 2012 letters, which were false and misleading.

There are a number of factors to take into account in relation to these findings relevant to the determination of Issue 24.

First, I have concluded that Smash decided to unilaterally terminate the Agreement from about mid-October 2012. It knew on 22 October 2012 that Euromark did not agree to a mutual termination of the Agreement. It nevertheless sent the 26 October 2012 letter purporting to terminate the Agreement unilaterally. I refer to my comments at [446]-[449] above. In these circumstances, I have concluded that Smash purported to terminate the Agreement without regard to Euromark's contractual rights.

Second, and related to the first point, Smash's purported termination was not withdrawn until 3 December 2012. While the 11 December 2012 letter stated that Smash believed that it was 'legally able to terminate the Agreement' in October 2012, the basis for that belief was not made plain in that letter or in the evidence before me. Further, as set out at [450]-[451] above, I have concluded that a motivating factor in Smash's purported termination was that Smash thought it could make more money from its own direct sales of Smash products in the UK.

Third, and as a consequence of the purported termination, Smash asserted to Euromark's customers from late October 2012 that its Agreement and relationship with Euromark was at end. This gave Smash the opportunity to encourage or procure them to deal directly with Smash, i.e. to engage in the Solicitation Conduct. Smash continued to do so at least until the 3 December 2012 letter. Smash did so notwithstanding the requested undertakings until at least 3 December 2012.

Fourth, there is the nature and extent of the direct contact with Euromark's UK customers. That contact was extensive. I refer to sections 10.2, 10.4, 10.6, 10.9 and 15.2.1 above. As summarised in section 15.2.1, Smash contacted many UK customers of Euromark during the period to 3 December 2012, including Tesco, ASDA, Sainsbury's, Wilkinsons, Morrisons and others, asserting that the relationship with Euromark was at an end and took steps to secure direct supply from them.

In particular, Smash pursued Tesco. Tesco was, to Smash's knowledge, the major customer at the time of both Euromark and of Smash products in the UK. Indeed, the significance of the Tesco account to Smash is evident from the number and nature of the communications between Smash and Tesco in late October and November 2012. I refer by way of example to the preparation and provision of the three November 2012 presentations provided by Smash to Tesco in November 2012. This is quite apart from the internal Smash communications during this period seeking to secure the supply of products directly to Tesco. In addition, there was the desire of Smash to obtain the new supplier form details from Tesco and related information to become a direct supplier to Tesco.

Fifth, Smash did inform Euromark in late October 2012 that it would be 'taking steps to make our own appointments with customers' in light of its purported termination. Indeed, in his 29 October 2012 email referred to at [457]-[458] above, Mr Harbinson made plain that, regardless how the Agreement was to be terminated, Smash would be contacting customers direct and that 'Euromark can no longer sell the Smash or related Brands'.

However, Smash did not disclose the nature and extent of its direct contacts to Euromark in November 2012, or at the time of the December 2012 letters when it withdrew its purported termination of the Agreement (including its dealings at that time with Tesco and Sainsbury's as set out at [893]-[894]). Further, as set out in section 15.2.2, I have formed the viewed that, as a result of the dealings between Smash and Tesco in November 2012, Smash was informed of Tesco's decision before the December 2012 letters were sent, and most likely by mid-November 2012. Indeed, as set out at [906] above, I have formed the view that Smash's withdrawal of its purported termination was likely to have been a result of Tesco's decision. On the evidence before me, the failure to disclose the nature and extent of these contacts was a deliberate and conscious decision on the part of Smash. I refer to my comments at [1049] and [1053] above.

Sixth, and related to the fifth point, by the December 2012 letters, Smash conveyed that it was performing and intended to be bound by the Agreement. For the reasons set out at [1287], to the knowledge of Smash that was false. Further, by the 11 December 2012 letter, Smash enclosed the 10 December 2012 customer letters (including to Tesco) and noted, consistent with the Affirmation Representations, that the 10 December 2012 customer letters 'confirms that Euromark remains the exclusive UK distributor of Smash products' and that those customers were directed 'to ensure that future orders of Smash products are placed directly with Euromark'. I have concluded that these statements, relevantly in the context of the 10 December 2012 customer letter to Tesco, conveyed that Tesco would continue to place orders with Euromark. To Smash's knowledge, based on Tesco's decision, that was not true or at the very least was deliberately misleading.

Even if Smash was not informed of Tesco's decision in unequivocal terms by this time, Smash firmly believed before sending the December 2012 letters that Tesco would be unwilling to conduct business with Euromark and there was no real prospect that Tesco would change its mind. Nevertheless, Smash sent the December 2012 letters without disclosing this belief or the full nature and extent of its direct contacts with Euromark's customers (including Tesco and Sainsbury's) up to the time those letters were sent.

Seventh, Smash was aware of the consequence and impact of Smash making direct approaches to UK retail accounts and, in particular, Euromark customers. As Mr Harbinson conceded, Smash's conduct put Euromark in an impossible situation where it could not arrange Smash sales for the 2013 BTS season. Further, he conceded that direct approaches would have the effect of cementing Smash's relationship with UK retailers so that there was no way for Euromark to recover. I refer to [459]-[460] and [958]-[959] above. Indeed, I have concluded that this result was the intended consequence of Smash's conduct. Further, and in any event, it was a foreseeable consequence of that conduct.

Of course, the intended consequence in fact materialised, at least in the case of Tesco and Sainsbury's.

The conduct of Smash that I have referred to in this section in contacting customers directly from late October to 3 December 2012, and after 3 December 2012 in the case of Tesco, is also conduct which constituted a breach of cl 3.1 and/or the good faith obligation in cl 8.2 of the Agreement. I refer to section 16.3 above.

In all these circumstances, I have formed the view that Smash engaged in unconscionable conduct within s 21 of the ACL. In short, I consider the conduct of Smash was against conscience: it was 'far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience'.

This is because both the purported termination and the plan for direct contact by means of the Solicitation Conduct was undertaken intentionally and without regard to Euromark's rights. This conduct was undertaken with the intended consequence that the customers Smash had contacted directly would not return to Euromark. It was deliberately not disclosed by Smash to Euromark at the time.

Further, when Smash withdrew its purported termination, it failed to disclose the full nature and extent of its direct dealings with Euromark's customers, in particular Tesco's decision. I have concluded that it did so deliberately, consistent with its attitude since late October 2012. Further, and in this context, Smash sent the 11 December 2012 letter attaching the 10 December 2012 customer letters which, at least in the case of Tesco, conveyed that Tesco would continue to place orders with Euromark. To Smash's knowledge, based on Tesco's decision, that was not true or at the very least was deliberately misleading.

I wish to emphasise the significant disadvantage under which Euromark was labouring during this period because Smash did not disclose the full nature and extent of Smash's dealing with its customers, coupled with representations that Smash would perform its obligations under the Agreement and that it was directing Euromark's customers to order direct from Smash. I acknowledge that it is not generally unconscionable for a party not to disclose the full extent of its breaches of contract. However, it is a different matter when there is non-disclosure of key matters and positive statements are made regarding present or future conduct under the contract which are knowingly false or deliberately misleading. In this case, Smash's conduct deliberately affected Euromark's ability to make informed decisions about its contractual rights.

In my view, this conduct was not consistent with the requirements of honest and fair dealing: it was unethical and fell outside societal norms of acceptable commercial behaviour.

Further, I have concluded that Smash's conduct after the 11 December 2012 letter was sent, in failing to disclose the full nature and extent of its continued dealings with Tesco and Sainsbury's, was also not consistent with the requirements of honest and fair dealing. For the reasons set out at [1288], I consider it is appropriate to have regard to Smash's dealings with Sainsbury's in my consideration of whether Smash contravened s 21 of the ACL notwithstanding that I have found this conduct not to be in breach of the Agreement. In this regard, I have concluded that Smash continued to contact Tesco and Sainsbury's, taking steps to secure orders for Smash products directly from Smash without informing Euromark, including by offering an indemnity to each of Tesco and Sainsbury's. I refer to my comments in section 15.2.2 above, in particular at [893]-[894]. This conduct is particularly egregious in light of the Affirmation Representations in the December 2012 letters.66F[67]

1. Smash submitted repeatedly and forcefully that when viewed in context and in light of Euromark's actual and perceived conduct, Smash, although it might have done things differently, was doing no more than protecting its own legitimate commercial interests. The relevant context, circumstances and conduct will be referred to where necessary.
2. Euromark submitted that the evaluative decision of the judge was entirely open and that this Court should be slow to interfere. In any event, it was submitted that the relevant conduct, examined below, went beyond breach of contract and fell well outside the norms of acceptable commercial behaviour in significant respects involving deceptive and deceitful tactics and strategies, including, as found by the judge, the Planning Conduct (in part), the Solicitation Conduct and the Affirmation Representations. It is to these matters and this conduct that we now turn.

1. On 12 October 2012, Mr Harrington sent an email to Mr Kursidim, Mr Malone, Mr Dale Harbinson and Mr Harbinson recommending the following course of action:
   1. David [Mr Malone] immediately contacts customers - both existing and prospective to make appointments for him and Dale. Dale needs to let David know that he will be available from say 21st to 31st October and when David contacts the customers he can let the[m] know that he and the CEO/Founder (Mr Smash!) are available together during these dates, and so secure meetings during this period.
   2. We try and find out who the customers are for the 2 orders we are about to action from Euromark. This way, [if] things go badly with Euromark, we can get in contact with these customers to re-assure them that the orders will be fulfilled, and we will put in place arrangements for them to be 'cross dock' supplied if this is what they require.
   3. I will prepare a letter of notification to Euromark advising that it is in our joint best interests that we no longer continue our agreement, and will give him the required period of notice. He will be asked to contact the Melb management (and not David so as to not be a distraction to David) on this, and if he tries to come back hard, we will point out to him in writing all his breaches of the agreement. Hopefully he will just (reluctantly) accept that it is over and we can get on doing what we want/need.

Guys, unless you disagree with any of the above, we need to launch.

1. Smash did not refer to any breaches of the Agreement until much later and after the Termination letter. At this stage, although Smash was concerned with not being invited to initial meetings and the contact by Euromark with its factories, there was no basis to terminate the Agreement. Further, Smash did not at this stage obtain any legal advice in relation to any of these matters.
2. The judge regarded this email as significant and said:

Mr Kursidim replied b[y] email stating only '100% agree'. Mr Harbinson gave evidence that each of the Smash directors endorsed this strategy and by this time Smash no longer planned to use Euromark in the UK and planned to meet retailers to establish direct supply relationships.

By contrast, Mr Harrington gave evidence that it was not his intention that Smash would contact retailers directly at this time in breach of the Agreement. I do not accept that evidence. It is inconsistent with the evidence of Mr Harbinson. In my view, at this time Smash had determined upon a strategy that Dale Harbinson and Mr Malone would meet UK retailers directly to arrange direct supply. This is evident from Mr Harrington's 12 October 2012 email set out above. Mr Harrington said he could not recall if it was not part of his three point plan to inform Euromark of the approaches to customers set out in the first two points of his plan. As I set out below, the details of Smash's direct contacts with UK retailers was not made known to Euromark. In my view, Mr Harrington's 12 October 2012 email and the strategy agreed upon by the Smash directors is consistent with a plan within Smash at this time to cease using Euromark as its distributor in the UK, and to meet retailers to establish direct supply relationships without informing Euromark.

Mr Malone replied by email dated 15 October 2012. He stated that he was in complete agreement with Mr Harrington's email. He requested details of Dale Harbinson's dates in order to try and lock in meetings. He stated 'I think it is best for us to deal directly with the retailers now. There are not that many carrying Smash now anyway, so the changeover should not be a huge process, we just need them to agree'. He concluded:

• Regardless of this BTS size, doing this means no turning back.
• I'm ready to hit the phones as soon as you guys give the green light!67F[68]

1. The judge then referred to the evidence of Smash executives in relation to the agreed strategy. The judge said:

Mr Malone gave evidence that he did not tell Euromark that he was contacting retailers. Mr Harbinson said that it was agreed at about this time to no longer use Euromark and that Mr Malone would meet directly with UK retailers. He said that Mr Malone would try and get their business but it was up to each customer. It was put to him that the customer would choose Smash because it is cheaper for a customer to deal directly with the supplier rather than though a middle man like a distributor. Mr Harbinson did not agree: it depended on whether the price offered by Smash matched the landed cost.

Mr Harbinson gave evidence that the decision to no longer use Euromark and for Mr Malone to contact UK retailers direct was deliberately not disclosed to Euromark at the time. He gave evidence that he only wanted to inform Euromark after the direct approaches had been made to UK retailers 'to get the information we needed'. In my view, the purpose of the approaches was to secure direct contracts with UK retailers then Smash would present that to Euromark as a fait accompli.

By contrast, Mr Harrington gave evidence that it was not Smash's intention to contact retailers directly in breach of the Agreement at this time. He also denied that Smash was making preparations to supply goods directly to customers at this time, notwithstanding Smash's requests for retailers standard form documentation for domestic supply. He said it might be necessary if Smash wanted to go through another distributor. I found this evidence implausible and I do not accept it.68F[69]

1. At this time Smash was taking steps to set up a company in the UK.
2. In an email dated 19 October 2012 to Smash executives, Mr Harrington said:

(a) he would not call Mr Harrison that night as Mr Harrington was out, but he would call Mr Harrison on Monday night 22 October 2012 Australian time; > > (b) two orders had been placed by Euromark due for shipment on 30 November 2012, and if Mr Harrington's conversation with Mr Harrison did not go well 'we may need to think about taking delivery of these shipments ourselves'; > > (c) he had re-checked the Agreement and was confident Smash had fulfilled its obligations. However, if Mr Harrison 'wants to play hard ball and does not agree to terminating by mutual consent, we can give him immediate notice as per [cl 14] ... referring to when he contacted one of our factories'; > > (d) he could also refer to Euromark 'offering customers his "generic" alternatives of Smash products as being a breach of the non-competition requirements' in cl 11 of the Agreement; and > > (e) he had checked the Agreement to confirm that it was subject to Australian law and Euromark would need Australian lawyers and Mr Harrington was 'confident that he will not go down this path'.69F[70]

Each of Mr Kursidim and Mr Malone replied and agreed with this proposal. Mr Harrington gave evidence that he was not referring to the termination of the Agreement in this email. Once again, I consider that the purpose of his call was to discuss termination by mutual agreement. Regardless of any consent of Euromark, I formed the clear view that Smash had decided by this time to end the Agreement in any event.70F[71]

1. It is therefore tolerably clear, as found by the judge, that prior to the intended conversation with Mr Harrison on 22 October 2012, as referred to in the email of 19 October 2012, Smash had decided to terminate the Agreement without any legal advice or proper consideration of any grounds that it may have been entitled to rely on. As subsequent events referred to below demonstrate, Smash wanted to terminate the Agreement because it did not suit Smash. This was to be achieved by a strategy irrespective of any entitlement so to do and without any regard to the rights of Euromark. Following termination of the Agreement, Smash would make more money by using the newly incorporated UK company as a direct supplier. The evidence is clear and unequivocal, and is not justified or excused by the actual or perceived conduct of Euromark as submitted by senior counsel for Smash. Well may Smash have intended to protect its position, but not as a result of anything done by Euromark, certainly not at this point in time.
2. In the telephone conversation between Mr Harrington and Mr Harrison on 22 October 2012, Mr Harrington told Mr Harrison that Smash had decided to terminate the Agreement as it was not working for Smash and Smash was not making enough money.71F[72] Mr Harrington said that it was best if the parties came to an amicable agreement on how to separate. Mr Harrison said things were going well and Euromark wanted to continue working with Smash. Mr Harrington said that Smash's decision was based on dissatisfaction with the way Euromark was representing Smash. The judge found that, contrary to a note made by Mr Harrington, he did not raise or refer to any breaches of the Agreement by Euromark.
3. The suggested dissatisfaction with Euromark was not explained by Mr Harrington.
4. On 25 October 2012, Mr Malone sent an email to Smash executives following his conversation with Mr Harrison that day. The email included the following:

(a) Mr Harrison is 'desperate to fix things and keep working together ... He believes that going separate ways is actually not an option, not possible, even if we wanted to'; > > (b) Mr Malone told him that 'the business has made the decision, and that if he wants to meet to talk about it then I can be available'; > > (c) Mr Malone advised Mr Harrison that he should also phone Mr Harrington 'to talk through what he is doing in order to fix it however the business has made a decision and we are moving on so he would want to be quick'; and > > (d) Mr Malone suggested that the letter to Euromark be sent as soon as possible. He continued '[i]f we give him time he will mess everything up for us. Right now we are in the box seat with nearly 10 meetings booked and he hasn't planned for his meetings without Smash. I feel the official letter needs to be issued before our meetings. And then we are in the meetings and moving on'.72F[73]

In his evidence Mr Malone said that the 10 meetings were scheduled for late October and early November. He said that the meetings were to present Smash's products for BTS 2013 and he believed Smash was in a good position because no presentations for Smash BTS products had yet been made. He said that these meetings were arranged without Mr Harrison's knowledge. He accepted that he did not tell Euromark of these meetings so that they would have no time to interfere with Smash's arrangements for direct supply. He agreed that these meetings were able to take place without a Smash UK company being established, without registering for VAT, without hiring sales personnel in the UK and without arranging third-party logistics.73F[74]

1. In evidence Mr Malone agreed that he was going behind Euromark's back in approaching retailers. He agreed that retailers would be under the impression that they no longer needed to buy products from Euromark. He agreed that approaching ASDA directly without consulting Euromark was contrary to the Agreement. He had earlier denied that there was any breach. The judge said:

In my view, Mr Malone's evidence about this email and about the rights of Smash to contact customers directly under the Agreement was unsatisfactory. His initial evidence about this direct approach not being completely contrary to the Agreement is an example of Mr Malone giving evidence which he considered supported his case rather than honestly answering the question. In my view, his subsequent concession reflected his true opinion.74F[75]

1. This conceded breach of the Agreement is significant. Viewed in context, it is not simply breach of the Agreement simpliciter, but part of a broader strategy to exclude Euromark and use its contacts with retailers to establish direct relations with Smash.
2. We now turn to the 26 October 2012 letter. The letter provided:

Further to your telephone conversation on 22nd October with Stephen Harrington, General Manager we confirm that we have reviewed the existing arrangements between Smash and Euromark and we have come to the conclusion that it is best for both parties that we no longer continue these arrangements.

Whilst we are appreciative of the efforts that you and the Euromark team have made to date, we have not heard from you since the conversation offering any solution to the issues raised in the phone conversation. Accordingly we take this to indicate your agreement that Euromark and Smash should mutually end our arrangement.

While we are somewhat disappointed that it has become necessary to make this decision, we feel that it is in the long term interest of both parties so as to provide Smash with every opportunity to gain a significant foothold with the major retailers. Currently too many opportunities are lost due to the layers of pricing involved, further making it unviable to continue.

I personally want to wish you all the best for the future success of the Euromark business. Our agreement will lapse effective from 22nd November being 30 days notice from the conversation with Stephen Harrington. I will ask David Malone to contact you to arrange for an orderly transition and handover so as to not disadvantage any of the existing retail customers.

1. There is no reference to any breach by Euromark. An earlier draft of the letter referred to four matters which allegedly constituted breaches of the Agreement. The four factors were removed from the final draft.75F[76]
2. As noted by the judge, a number of statements were not true. The termination was not mutual. It was a unilateral decision by Smash that it was best for both parties that they no longer continue with the Agreement. Further, the statement that the Agreement would effectively lapse on 22 November 2012 was not only unilateral but, as found by the judge, 'not consistent with any relevant provision of the Agreement'.76F[77]
3. The judge said that the letter was sent without any regard to Smash's contractual obligations or Euromark's rights under the Agreement. The judge said:

I note in passing that Mr Harbinson denied that the real reason Smash wanted to end the Agreement was that it no longer suited Smash commercially and Smash was concerned about its profit margin. In my view, however, this was a significant factor in Smash's decision to terminate the Agreement. This is consistent with the terms of the 26 October 2012 letter which refer to 'too many opportunities are lost due to the layers of pricing involved, further making it unviable to continue'.

I have formed the view that by mid-October 2012 Smash had determined to end its relationship with Euromark and a motivating factor was that Euromark did not suit Smash commercially: Smash thought it could do a better job itself and thus make more money from sales in the UK.77F[78]

1. These findings are significant and entirely consistent with the evidence.
2. On 3 December 2012, the purported Termination letter of 26 October 2012 was withdrawn by Smash. Smash's conduct in withdrawing the purported notice of termination, and its conduct between 26 October and 3 December 2012 and after 3 December 2012, all provide strong support for the conclusion that its conduct, consistent with its actions and strategy, was unacceptable and against conscience and business morality. It was unconscionable within the meaning of s 21 of the ACL.
3. It is unnecessary to rehearse the substantive correspondence between the parties and their legal advisers during the period 26 October to 3 December 2012. The details and comprehensive summary by the judge enables the following inferences and conclusions to be drawn:

(a) Not only did Smash fail to give any of the undertakings requested by Euromark - directed to compliance with the Agreement - but it rejected any breach and proceeded on the basis that the termination was valid. Retailers were contacted directly and to the exclusion and for the most part lack of knowledge of Euromark. Many were Euromark's customers and introduced by Euromark. > > (b) The retailers were told or assumed that the Agreement between Smash and Euromark was at an end and that they were free to deal with Smash, which they did. > > (c) This enabled Smash to penetrate the market without the need for a middleman and potentially make more money, consistent with its aim and strategy. It was a bold strategy in blatant disregard of the contractual rights of Euromark.78F[79] > > (d) Euromark offered its Zoom products as a contingency because it could not rely on continuity of supply by Smash.

4. Some parts of the evidence are worth emphasising in order to demonstrate that the conduct of Smash went well beyond a mere breach of contract.
5. In a telephone conversation after receipt of the 26 October 2012 letter, Mr Harrington said there was no room for discussion, Smash would not supply current outstanding orders because Euromark was no longer Smash's distributor and Smash was not making enough money. The conversation recorded in a diary note made by Mr Harrison was accepted by the judge.
6. In response to an email by Mr Harrison requesting that Smash withdraw its 'purported unilateral termination of the Agreement', Mr Harbinson said:

Mark,

Can I start by saying that our initial termination letter of our agreement was an attempt to work thru [sic] this separation in an amicable and orderly fashion, that gives each of us and our customers a way forward.

If you are now insisting on some plane that you don't want this method of separation, that you would prefer us to list all of your discretions causing angst and hostility then I am happy to do so albeit I still believe that by moving away with mutual consent makes better business sense.

We will be taking steps to make our own appointments with customers so can I reiterate as per our our [sic] initial letter that Euromark is no longer our Smash distributor and Euromark can no longer sell the Smash or related Brands.

We are more than happy in the current mutual environment to work thru [sic] either current orders or current Smash stock holdings to ensure Euromark is not inconvenienced.

Can you please contact David with regard to these outstanding orders so we can plan in advance how they are to be processed.

1. The judge regarded this email of 29 October 2012 as significant and said:

This email is significant. Regardless of how the Agreement was to be terminated, Smash expressly stated that Smash will be making its own appointments with customers and that 'Euromark is no longer our Smash distributor and Euromark can no longer sell the Smash or related Brands'. It was statements to this effect which Mr Harrison wanted withdrawn in light of the fact that they were then in the middle of the SS 2013 and 2013 BTS seasons.

In cross-examination, Mr Harbinson accepted that this left Euromark in an impossible situation where it could not arrange Smash sales for that BTS season. He acknowledged that at this time it was Smash that was preventing Euromark from doing so. He agreed that he did not subsequently retract the statement in the email that Euromark is no longer Smash's distributor until the letters to customers on 10 December 2012. Further, in cross-examination, Mr Harbinson agreed that in his email he was only suggesting that Smash would continue working with Euromark in the short term. He also agreed that in the meantime Smash would cement its relationships with all retailers and that there would be no way for Euromark ever to recover its exclusive distributorship which he acknowledged was Euromark's prized asset.

He also conceded that he knew at the time the prices that Smash was able to offer retailers directly could never be realistically matched by Euromark. He agreed that once retailers saw an opportunity to purchase directly from Smash there was no way that they would ever want to go back to dealing via a distributor such as Euromark or any other intermediary. He agreed that assisting Euromark to get rid of existing stock would not assist Euromark in terms of retaining its exclusive distribution rights.79F[80]

1. The request by Euromark for Smash to provide written undertakings by 30 October 2012 to the effect that Smash would withdraw the 'notice of early termination with immediate effect' is dated 29 October 2012. As noted, undertakings were not forthcoming. In fact Smash responded by letter dated 30 October 2012 alleging, for the first time, a number of breaches of the Agreement by Euromark. The alleged breaches were general and refer to the failure by Euromark to include Mr Malone's attendance at initial meetings, Euromark offering its products in competition with Smash products and Euromark making contact with known manufacturers of Smash products. The formal letter refusing to provide the undertakings is dated 16 November 2012.
2. None of these suggested breaches were established.
3. Legal correspondence followed in November 2012.
4. The judge referred to a series of internal Smash emails in early November 2012, reflecting Smash's strategy to 'up the ante' and make 'baseless threats'.80F[81] The judge said:

As set out above, I have formed the view that Mr Harbinson's intention at this time was to seek to obtain a commercial advantage over Euromark, including by threatening doubtful claims for breaches of IP rights.81F[82]

1. On 20 November 2012, there was a meeting between Euromark and Tesco to discuss the resolution of long-term supply issues. It is recorded in an email from Mr Harrison to Tesco on 22 November 2012. The email notes that Tesco asked Euromark to confirm it could supply Tesco with Smash products and that Euromark said that Smash was not willing to confirm it would supply Euromark with Smash products. On 20 November 2012, there was a meeting between Smash and Tesco. On 21 November 2012, Smash sent an email to Tesco attaching a BTS products presentation that was not provided to Euromark. In late November, there was a series of emails between Smash and Tesco, and internal Smash emails, relating to Smash directly supplying products to Tesco and incorporating a UK company to do so.
2. The letter dated 3 December 2012 from EKM to Euromark is in the following terms:

We have been instructed that our client withdraws all statements made by it in the above correspondence purporting to terminate, or otherwise bring to an end, the [Agreement].

Our client confirms its intention to be bound by the Agreement, and, accordingly, looks forward to an ongoing relationship with your company with both parties complying with their respective obligations under the Agreement.

1. The judge did not accept that Smash intended to be bound by the Agreement. The withdrawal of the Termination letter by Smash, as communicated in the letter, was at variance not only with its internal dialogue and strategy, but also with its conduct after the letter. This strategy and conduct, accepted by the judge, compellingly supports the inescapable conclusion that Smash had not changed its position and the withdrawal of the Termination letter was entirely tactical.
2. In relation to Smash's intention at the time, the judge said:

Mr Harbinson denied that the last paragraph of the 3 December 2012 letter did not reflect his intentions at the time. However, he did agree that he did not intend to stop making arrangements for direct supply with retailers and that arrangements for the direct supply to UK retailers were being made at the very time this letter was being sent to Euromark by Mr Malone under Mr Harbinson's direction. In my view, this evidence is inconsistent with the statements contained in the last paragraph of the 3 December 2012 letter.

He also gave evidence that he did not deliberately conceal the arrangements that were being made for direct supply between retailers and Smash from Euromark from 3 December 2012. I do not accept this evidence. Euromark was not informed at this time of the nature and extent of Smash's dealing with Tesco up to this time including that on 3 December 2012 Smash was taking steps to obtain EDI details for the purpose of supplying products to Tesco directly at this time. I note in passing that there is little correspondence of the dealings between Smash and Tesco between late November 2012 and 14 December 2012.82F[83]

1. Mr Harbinson sent an email to Mr Kursidim and Mr Harrington in respect of this letter dated 3 December 2012. The email records:

Euromark:

Latest strategy

Letter sent to Euromark saying all is forgotten we are back together. Sent tonight.

Whether he says yes or no the more likely no, we still go with the following:

1. We still push for the 'like' products to be handed over to us or we are to be paid a commission

2. Even together we have some customers including Tesco that want to deal direct. Put it back on him.

No matter where negotiations take us, paying Euromark a commission is still a reality as long as we have orders from the customers!

I will make telephone contact with Mark tomorrow night if possible to at least get some healthy discussions either way and to avoid any further costs.

If he pushes back and says no deal (which EKM says he can't) then we push forward with option B, direct supply with Euromark the offenders in breaking the deal.

...

David aware of Euromark strategy and like us not happy but also like us will do it for Smash and understands probably best outcome.

David is to push forward with Smash Global set up as we will require account in any case for the direct customers and having an operation helps with his expenses as well as future plans for UK.

Mr Harbinson was questioned about this email. Both the email and his evidence about it were far from clear. He said he was trying to reach an agreement with Mr Harrison (option A), but that if no agreement could be reached he would proceed with supplying UK retailers directly (option B). I am unsure what the nature of the agreement was to be. This was not explained in oral evidence.

The email notes that '[n]o matter where negotiations take us, paying Euromark is still a reality as long as we have orders from customers.' This appears to suggest that Smash was going to supply Euromark's customers directly and pay a commission to Euromark even without consultation with Euromark. Mr Harbinson gave evidence that 'we were going to work out a commercial outcome regardless of Option A or B'. When it was put to him this was inconsistent with the exclusive distributorship rights of Euromark under the Agreement, he agreed but stated 'if that's what the customers wanted, that's what we would have to supply'.

...

It was suggested to Mr Harbinson that, in light of his evidence, neither option provided for Euromark to continue as the exclusive distributor of Smash products in the UK. He did not agree. However, it seems clear that Smash intended to supply some of Euromark's customers and, in particular Tesco, directly at this time. This is in a context where Mr Harbinson acknowledged that he was aware by this stage that Mr Malone had meetings with about 10 retailers who had been offered direct supply and that he received reports of those meetings from Mr Malone. Further, the email refers to the fact that Tesco 'want to deal with us direct'. It also refers to setting up Smash Global 'as we will require an account in any case for the direct customers'.83F[84]

1. By letter to Euromark dated 11 December 2012, EKM noted:

(a) Smash's withdrawal of all statements purporting to terminate the Agreement was not an admission of any liability to Euromark in respect of claims made by Euromark for loss and damage; > > (b) Smash believed at the time of making the statements that it was 'legally able to terminate the Agreement' and that Smash only sought advice from lawyers after the statements were made; > > (c) Smash now understood it was not legally able to terminate the Agreement in the manner attempted; and > > (d) Smash had 'today [on 11 December 2012] sent letters to a number of UK retailers' confirming that Euromark remains the exclusive UK distributor of Smash products and that future orders of Smash products are to be placed directly with Euromark. The letters were attached bearing the date 10 December 2012 (collectively the '10 December 2012 customer letters' or individually the '10 December 2012 customer letter').84F[85]

2. The judge did not accept that Smash intended that Euromark remain its exclusive UK distributor. The judge said:

In cross-examination, counsel for Euromark contended that this letter did not express the honest intention of Smash at the time. This was denied by Mr Harbinson. When asked whether he intended that Smash would supply directly to UK retailers at this time, he replied that this was 'an option we had that would work in conjunction with Euromark, yes, correct'. When it was put to him that he had no intention of Euromark continuing as the exclusive distributor of Smash in the UK, he said he 'had every intention of Euromark continuing as a distributor in [the] UK for Smash'. I found this evidence disingenuous. He could not agree that Euromark would continue as the exclusive distributor as he knew at this time that customers, including Tesco, wanted to deal directly with Smash.85F[86]

1. The 10 December 2012 customer letters were to Ms Hill of Tesco cookshop, Ms Upshall of Tesco luggage, Ms Purmessur of Tesco stationery, Ms Town of ASDA, Ms Wang of Sainsbury's, Ms Smith of Toys 'R' Us, Ms Clarke of WH Smith and WM Morrisons' BTS department. The substance of each letter was for the most part the same, namely:

(a) the customer was told by Mr Malone or Mr Dale Harbinson that the relationship with Euromark was 'strained and experiencing difficulties' and that it was likely that if not resolved both companies would part ways; and > > (b) Smash confirmed that Euromark remained its exclusive UK distributor of Smash products and all orders should be placed directly with Euromark.86F[87]

2. The judge formed the view that, most likely from mid-November 2012, Mr Malone did not believe that there was any real prospect that Tesco would work with Euromark and that he and Smash proceeded on that basis since that time. The judge regarded this view to be consistent with the course of dealings between Smash and Tesco, in particular from mid-November 2012, including the meetings between Smash and Tesco without Euromark, Smash providing Tesco with BTS presentations not provided to Euromark and incorporating a UK company required to supply Smash products to Tesco directly.87F[88]
3. Mr Harbinson sent an email to Mr Harrison, copied to Tesco, on 21 December 2012. Mr Harbinson noted that Mr Harrison had sent him a copy of Mr Harrison's letter to Tesco on 20 December 2012. Mr Harbinson expressed his surprise at Euromark's letter in response to Tesco. The email continued:

we wrote to Tesco on 10 December 2012 confirming that Euromark is our UK distributor and requesting that Tesco deal directly with you. Tesco, has, however, made it clear to us that it wants to deal directly with Smash in relation to the supply of our products. There was no collusion with Smash in making this decision - it was made by Tesco on its own.

That being the case, clause 3.1 of our Distribution Agreement applies to our ongoing relationship with Tesco. Smash and Euromark now have to discuss what percentage of our sales to Tesco we will pay for the duration of the Distribution Agreement.

The 21 December 2012 Harbinson email is significant. On the evidence before me, it is the first occasion upon which Smash advised Euromark that Tesco wanted to deal directly with Smash in relation to the future supply of Smash products, and sought to engage cl 3.1 of the Agreement.

Both Mr Harbinson and Mr Malone were cross-examined on the 21 December 2012 Harbinson email. Mr Harbinson denied that the decision to supply Tesco directly was made unilaterally by Smash without consulting Euromark. However, Mr Harbinson acknowledged that he was aware at this time that Smash had had multiple direct contacts with Tesco since October 2012. Further, he ultimately agreed that he was aware at this time that Euromark had been insisting that Smash must not supply its customers directly and that it had written to Tesco to this effect. However, he reiterated that it was not Smash's decision: it was the customer's decision. He said that Tesco had made the decision 'unilaterally'. I do not accept that this decision was made by Tesco 'unilaterally' as characterised by Mr Harbinson. It was made in a context where Smash had been seeking to encourage or persuade Tesco to make such a decision since late October 2012, including the 20 December 2012 Tesco email where Smash offered to indemnify Tesco for any loss they may suffer as a result. Further, I have concluded that Mr Harbinson knew that Tesco's decision had not been made 'unilaterally' when he gave this evidence. It is of Mr Harbinson being prepared to lie to obtain what he perceived to be a better outcome for Smash.88F[89]

1. Euromark terminated the Agreement on 23 December 2012. Smash denied that Euromark was entitled to terminate the Agreement and, accepting Euromark's repudiation of the Agreement, terminated the Agreement on 28 December 2012.

1. Having reviewed the relevant evidence, both documentary and oral, the finding of unconscionability by the judge based on the seven factors referred to (see [159] above) is compelling and not infected by the four errors referred to by senior counsel for Smash. We agree with the judge.
2. Smash decided in about mid-October to unilaterally terminate the Agreement. No endeavour was made to identify and obtain legal advice about any breach by Euromark, because this was not relevant to Smash's strategy and there was no breach. Smash wanted Euromark out of the picture so that it could make more money. In devising and implementing its strategy, Smash had little or no regard for Euromark's contractual rights. As part of the strategy, Smash told the various retailers that the relationship with Euromark was at an end, thereby enabling Smash, surreptitiously and in breach of the Agreement, to engage in the Solicitation Conduct, including, and most importantly, cementing its relationship with Tesco.
3. The unilateral termination was only purportedly withdrawn on 3 December 2012 and well after Tesco had effectively agreed to purchase directly from Smash.
4. We now turn to each of the four suggested errors.
5. First, it was submitted that the judge overstated Smash's conduct and motivations, in particular in finding that Smash embarked upon a deliberate strategy to exclude Euromark.
6. Second, and related to the first point, the judge did not take into account relevant aspects of the motivation of Smash and its in effect mitigating conduct.
7. Third, the judge ignored Euromark's conduct in endeavouring to sell its own products.
8. Fourth, the judge ignored the uncertain landscape in late 2012, particularly in relation to Tesco.
9. We do not accept that the judge made the suggested errors in assessing the totality of the evidence and making an evaluation of the relevant conduct.
10. In relation to the first and second suggested errors, Smash's conduct was clearly deliberate and unilateral. It had a clear strategy, from October 2012, to exclude Euromark and entirely disregard the Agreement. It did not have any grounds to do so. Euromark was not in breach of the Agreement and nor was a breach alleged (until much later). The evidence does not support a finding that Smash was protecting its commercial interest because Euromark was selling similar products and not acting in good faith as the exclusive distributor of Smash products. This breach was not established. Rather, it was motivated by a desire to make more money. Having engaged in direct negotiations with retailers, Smash was in a position to, and did, set up a UK operation with direct supply to retailers. Direct supply would, and did, have a devastating effect on Euromark, a position either intended by Smash or foreseen by Smash in total disregard of the rights of Euromark. There is no evidential basis to conclude that Smash engaged in the Solicitation Conduct as a protective measure.
11. As submitted by Euromark, the conduct of Smash, particularly around December 2012, went far beyond a decision to repudiate the Agreement and risk a claim for damages. It was intentional, deceptive and calculating.
12. The decision to withdraw the Termination letter on 3 December 2012 was made in bad faith and solely in order to protect the interests of Smash and its strategy to engage in direct sales and exclude Euromark. However, Smash needed the services or distribution channel of Euromark in December and January until it had set up its UK company and was then able to engage in direct supply. This conduct, engaged in to bridge the period when it could not supply itself, was not only cynical and calculating, but 'so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience'.89F[90] Our conclusion is further supported by some of the matters referred to in s 22(1) of the ACL.90F[91]
13. In relation to the third suggested error, the judge did not criticise Euromark's conduct in selling its own products. The judge found that the Zoom products were not confusingly similar and Euromark's decision to promote its products arose out of the failure by Smash to guarantee supply.
14. In relation to the fourth suggested error, the uncertain landscape was created for the most part, if not entirely, by Smash.
15. We were taken at great length to the documentation and transcript of the trial in an endeavour to demonstrate that the judge did not weigh the evidence properly and that the inferences made by the judge in the evaluative process were not available. For the reasons given, we do not agree.
16. The inferences made by the judge, based on facts that are not contested, were open and compelling and with which, having conducted a real review of the evidence, we agree, notwithstanding that we did not have the considerable advantage of observing the witness give this evidence. The findings are not glaringly improbable. We do not detect any error in the findings of the judge. It is tolerably clear that the conduct, based on the available inferences, was unconscionable. The conduct was unfair, involved bad faith, dishonesty, sharp practice and disregard for the bargain and promises freely made. The finding based on the seven factors referred to was compelling.

1. In our opinion, there is no substance in this ground. The case and the issue of unconscionability was properly decided in accordance with the agreed issues and the substantial body of evidence - both documentary and oral - tendered during the trial as well as the submissions made by the parties.

1. It is tolerably clear from the Reasons that the Solicitation Conduct, the Affirmation Representations and part of the Planning Conduct, as found by the judge, had a significant and profound effect on the business of Euromark. There is no doubt that such conduct caused loss to Euromark, quantification of such loss being a different and subsequent matter.
2. By its conduct, Smash, at the very least but of great significance and detriment to Euromark, caused Euromark to lose Tesco as a customer, both in relation to Smash and non-Smash products. The conduct had a flow on effect to other Euromark customers. The judge put it this way:

In these circumstances, had the contravention I have found not occurred, I am satisfied that Euromark's long standing major customer, Tesco, would have continued to deal with, and purchase products from, Euromark. Further, I am satisfied that, had the unconscionable conduct not occurred, the business of Euromark would not have ceased.

As a result, I am satisfied on the balance of probabilities that:

(1) Euromark would have terminated the Agreement if it had been informed of the unconscionable conduct in contravention of s 21 the ACL;

(2) it would not have been realistically possible for Euromark to have done anything different for FY 2013 if it had been informed of the unconscionable conduct in early to mid-December 2012; and

(3) as a result of the unconscionable conduct, including the loss of its major customer Tesco, the business of Euromark ceased.91F[92]

1. We do not consider that the conduct of Smash was justified because of the suggested Euromark competitive product, for the reasons set out above.
2. The evidence of Mr Harrison was, in this regard, compelling and uncontradicted. In the circumstances referred to above, it is clear that there was a direct causal nexus between the unconscionable conduct of Smash and the loss of the Euromark business. There is no gap in the evidence.
3. Accordingly, we reject grounds (k), (l) and (m).

1. Having reviewed the conduct of Mr Harbinson and observed him giving evidence the judge concluded:

In all these circumstances, I am satisfied that Mr Harbinson engaged in unconscionable conduct. For completeness, in all these circumstances, I have formed the view that his conduct was against conscience: it was 'far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience'. Further, I am satisfied that Mr Harbinson was also relevantly involved in Smash's unconscionable conduct in section 22.3 above.92F[93]

1. The conduct referred to in section 22.3 comprised the seven factors identified by the judge as constituting unconscionable conduct.
2. The circumstances referred to by the judge are the following:

(a) Mr Harbinson was one of the controlling minds of Smash and was responsible for Smash's decision to unilaterally terminate the Agreement, without regard to Euromark's contractual rights. > > (b) Mr Harbinson was aware that Smash's purported termination was not withdrawn until 3 December 2012 and he was aware that there was no basis to terminate the Agreement. > > (c) Mr Harbinson was aware that as a consequence of the termination, Smash asserted to Euromark customers from late October 2012 that the Agreement with Euromark was at an end and that supply should be obtained directly from Smash. He was directly involved in planning and implementing the Solicitation Conduct at a very early stage. > > (d) Mr Harbinson was aware of the nature and extent of the direct contact made by Smash to Euromark's UK customers after 26 October 2012 and in particular Tesco. He was aware that Tesco was a major customer of Euromark at the time. He gave evidence to such effect. He was copied into relevant emails and was integral to the Solicitation Conduct. > > (e) Mr Harbinson was aware that Smash did not disclose the nature and extent of its direct dealings with Euromark's customers and in particular Tesco. > > (f) By the December 2012 letters, Smash conveyed that it was performing and intended to be bound by the Agreement. The judge concluded that, to the knowledge of Mr Harbinson, that was false. Further, the judge concluded that the statements in the 11 December 2012 letter, relevantly in the context of the 10 December 2012 customer letter to Tesco, conveyed that Tesco would continue to place orders with Euromark. To Mr Harbinson's knowledge, in light of his knowledge of Tesco's decision, that was not true or at the very least was deliberately misleading.93F[94] > > (g) Mr Harbinson was aware of the consequences of Smash making direct approaches to the UK retail customers of Euromark. Despite this knowledge he intended that further direct contact take place.

3. Each of the findings of knowledge and intention is properly supported by the substantial documentary evidence referred to and the oral evidence of Mr Harbinson which the judge regarded as 'willing to withhold the whole truth - or even to provide false information'.94F[95] The judge further formed the view that Mr Harbinson 'was prepared to lie to obtain a better outcome for Smash'.95F[96]
4. There is no separate ground of appeal in relation to Mr Harbinson. Proposed appeal grounds (g) and (h) challenge the unconscionable conduct findings in relation to both Smash and Mr Harbinson.
5. Accordingly, we reject grounds (g) and (h).

1. In relation to the conduct of Mr Malone, the judge said:

In considering any liability of Mr Malone on the basis that he either engaged in unconscionable conduct under s 21 of the ACL or was relevantly involved in Smash's unconscionable conduct, I am conscious that he was not a director of Smash and did not hold a senior executive position like Mr Harbinson or Mr Kursidim. As a result, he was not in a position to make decisions relating to Euromark or Smash's presence in the UK market. However, I am also conscious that he was a senior employee in his role as Smash's International Sales and Marketing Manager. As a consequence, he had some input in relation to the decisions of Smash and was involved in his capacity as an employee in their implementation.

...

In summary, I have concluded that Mr Malone has not himself engaged in conduct that was, in all the circumstances, unconscionable under s 21 of the ACL. This is due primarily to the fact that he himself did not engage in each element of the relevant conduct which I have identified in section 22.3 as unconscionable. However, I have concluded that he was relevantly involved in Smash's unconscionable conduct. This is because he engaged in many elements of Smash's unconscionable conduct, and had actual knowledge of all elements of Smash's unconscionable conduct.96F[97]

1. The judge then set out Mr Malone's knowledge and conduct in relation to the unconscionable conduct. The following matters were referred to:

(a) First, there is the decision of Smash to unilaterally terminate the Agreement from about mid-October 2012. This decision was a decision of the controlling minds of Smash at the time. It was not Mr Malone's decision. However, Mr Malone was aware of this decision and had input in relation to it. For example, he was copied in on the 12 October 2012 email from Mr Harrington, and responded on 15 October 2012 stating that he was in complete agreement with it. In addition, in his email to Mr Harbinson dated 16 October 2012, he said he would 'hit the phones' on 17 October 2012 as part of the plan to contact Euromark's customers directly.97F[98] > > (b) Second, there is the fact that Smash's purported termination was not withdrawn until 3 December 2012. The decision not to withdraw the purported termination until that time was a decision made by the controlling minds of Smash, who were also responsible for engaging EKM to advise Smash in relation to these issues. However, it is clear that Mr Malone was aware that Smash's purported termination was not withdrawn until 3 December 2012.98F[99] > > (c) Third, there is the Solicitation Conduct from late October 2012. Once again, the decision to engage in the Solicitation Conduct from late October 2012 was a decision made by the controlling minds of Smash. However, it is clear that Mr Malone was aware of the Solicitation Conduct and the continuing direct approaches to Euromark's customers between 3 and 11 December 2012. Indeed, he was the person within Smash who engaged in the direct dealings with Euromark customers and made the statements which constitute the Solicitation Conduct.99F[100] > > (d) Fourth, and as a consequence of the third point, Mr Malone was aware of the full nature and extent of Smash's direct contacts with Euromark's UK customers during this period. In addition, he was aware that Tesco was the major customer at the time of both Smash products and Euromark in the UK. For example, in his email dated 11 October 2012 to Mr Kursidim, he estimated that Tesco would be '80%' of Euromark's business. Further, he received Mr Harbinson's email dated 22 August 2012 noting that Tesco was still 'the key and it pays [Euromark's] bills'.100F[101] > > (e) Fifth, Smash did not disclose the nature and extent of the direct contact with Euromark's UK customers to Euromark in October or November 2012, or at the time that the December 2012 letters were sent. Once again, that was a decision for the controlling minds of Smash. As a result, Mr Malone was not responsible for that decision. In this regard the judge accepted that Mr Malone was told not to contact Euromark in October and November 2012, but rather to focus on his dealings with UK retailers (ie the Solicitation Conduct).101F[102] > > (f) Sixth and related to the fifth point, Mr Malone was aware of the December 2012 letters at the time they were sent and that they conveyed that Smash was performing and intended to be bound by the Agreement. The judge concluded that, to the knowledge of Mr Malone, that was false.102F[103] > > (g) Seventh and related to the sixth point, in all these circumstances, the judge had concluded that Mr Malone was aware of the consequence and impact of Smash making direct approaches to UK retail accounts and, in particular, Euromark's customers. Indeed, this was the intended consequence and impact of such approaches.103F[104]

In all these circumstances, I have concluded that he participated in some elements of Smash's unconscionable conduct and was aware of all the elements of it, with the result that he was involved in Smash's contravention for the purpose of s 236(1) of the [ACL].

Further, as noted at [1350], I have also concluded that Smash also contravened s 21 of the ACL after the 11 December 2012 letter was sent by failing to disclose the full nature and extent of its continued dealings with Tesco and Sainsbury's. As a result, it is necessary to consider whether Mr Malone was also involved in this contravention.104F[105]

1. Each of the findings of knowledge and conduct is properly supported by the substantial documentary evidence and the oral evidence of Mr Malone. In relation to the evidence of Mr Malone, the judge said:

I found that, in giving his evidence, Mr Malone seemed to have clearer recollection of events that were helpful to Smash's defence, but could not recall matters that may have been detrimental to Smash. Further, Mr Malone often proffered answers which he considered advanced his case, rather than responding to the questions asked or, at times, telling the truth. I have taken all these matters into account in considering his evidence.105F[106]

1. We have carefully reviewed the conduct of Mr Malone and agree with the judge's findings and conclusions. In particular, we have had regard to the following:

(a) Mr Malone was very bullish about 'torching' the Agreement from an early stage. Closer to 26 October 2012, he actively urged the Smash directors not to change their minds now that they were 'in the box seat' as a result of his direct negotiations with the retailers. Mr Malone was front and centre of setting up direct supply and he was most familiar with the Agreement terms having negotiated them. > > (b) As December 2012 approached, Mr Malone, as UK representative, negotiator with retailers and the person setting up the UK company, well appreciated that Smash would need continuity of supply to retailers through to January 2013, during which time Smash itself would not have the UK company yet set up, and thus would need Euromark's distribution channel for an 'interim' period to be able to placate retailers' concerns. This formed the background to the sham withdrawal of the Termination letter on 3 December 2012. > > (c) Again, Mr Malone was in the thick of things in the period after 3 December 2012, with sufficient knowledge of the relevant acts and legal context for him to be 'involved'. Part of the his conduct consisted of misrepresenting cl 3.1 of the Agreement to Sainsbury's as a basis for it to 'legitimately' deal directly with Smash.

2. Proposed appeal grounds (i) and (j) challenge the finding that Mr Malone was involved in the unconscionable conduct of Smash. The contention that he was not involved because he was an employee, not a decision-maker and not part of the controlling mind of Smash cannot be maintained. Rather, the contention that he had a genuine belief that Smash's conduct was legally justified is not legally relevant and is in any event not supported by the evidence.
3. Accordingly, we reject grounds (i) and (j).

1. The judge held that Euromark's damages comprised the loss of its business as a result of which it was entitled to loss of goodwill. The judge accepted Mr Harrison's evidence that 'Tesco's unwillingness to buy from Euromark was catastrophic' and that such unwillingness 'undermined its credibility with its other major customers as a result of which the business of Euromark was wound up'.106F[107]
2. The judge accepted the expert evidence of Mr Gregory Blashki ('Mr Blashki') to the effect that the loss of goodwill was to be determined as equal to the value of the business less the value of its net tangible assets.
3. The methodology involved estimating the future maintainable earnings of the business and applying an appropriate multiplier to those earnings to reflect the business value. The value of the goodwill of the business of Euromark is then calculated by deducting the net tangible assets of the business of Euromark. The judge held that the appropriate figure was £640,000.
4. The methodology is not challenged. Rather, Smash challenges the evidential basis for the various calculations required according to the accepted methodology in order to determine the value of the lost goodwill. In our view, the evidential basis was sufficient.
5. In order to determine the future maintainable earnings of Euromark, Mr Blashki calculated the adjusted earnings before income tax for FY 2013 and FY 2014. This involved a consideration of the projected sales for each financial year, a projected margin on those sales and finally adjustments to the projected costs in light of the proposed sales. The approach is not challenged. However, it was submitted that the figures that informed this calculation were derived from the projections provided by Mr Harrison to Mr Blashki, such projections having been prepared after the event specifically for the purpose of the litigation and not independently verified. Mr Blashki also expressed his dissatisfaction with relying on the accuracy of such projections.
6. However, the judge accepted that in making the relevant calculations the projections were fairly based on the financial statements of Euromark and in particular the actual figures for FY 2011. This was the basis of Mr Blashki's relevant calculation in his third report.
7. In relation to projected sales revenue, Mr Harrison used the actual FY 2011 sales revenue as the base case for his FY 2013 and FY 2014 projected sales. His projections contemplated a base case, a mid case and a best case scenario. The best case for FY 2013 was the actual FY 2011 sales. The mid case comprised the base case plus 10% and the best case comprised the base case plus 20%. In relation to FY 2014, he used as his base case the 2013 base case and increased it by 10%. The mid case comprised the projected FY 2013 mid case plus 10%. The best case scenario comprised the FY 2013 best case plus 20%.
8. The judge proceeded on the basis of the base case only and rejected 'the assumed improvement which forms the basis of the mid case and the best case' scenarios. The judge noted and accepted that the base case for FY 2013 was based on actual figures for FY 2011 and the base case for FY 2014, involving an increase of 10%, was based on Mr Harrison's expertise and skill in marketing and sale of BTS and related products. The judge said:

I am satisfied that there is a proper basis for this conservative increase, notwithstanding that Mr Harrison did not give detailed evidence of the steps Euromark would have taken to achieve the projected increases. I am prepared to infer that steps would have been taken by Euromark to re-focus its business, which would result in a projected increase of at least 10%.107F[108]

1. Mr Blashki's third report contains calculations based on the base case for each of FY 2013 and FY 2014. These projections are properly anchored and underpinned by 'information ... fairly drawn from the financial statements of Euromark'.108F[109] The relevant financial statements were in evidence.
2. In relation to the gross margin to be applied for FY 2013 and FY 2014, Mr Harrison used, as a base, the actual gross margin for FY 2012 and adjusted it for foreign currency movement in FY 2013 and FY 2014. In the result the gross profit margin for FY 2013 was 31.7% and FY 2014, 32.9%. In his third report, Mr Blashki accepted that the gross profit margins calculated by Mr Harrison were reasonable. His evidence was accepted.
3. The basis of the calculation was derived from actual figures which were in evidence.
4. The projected adjustments, reviewed - not simply accepted - by Mr Blashki, were based on the actual costs for FY 2011 as a base. Most of the costs were increased by CPI. Other costs were increased in proportion to projected sales increases. The judge accepted that this was 'an appropriate basis upon which to calculate these expenses'.109F[110]
5. Accepting Mr Blashki's evidence the judge concluded as follows:

In light of the projected sales revenue, projected gross profit margins and projected adjusted costs for FY 2103 and FY 2104, Mr Blashki calculated the adjusted [earnings before income tax] for the base case as £379,000 for FY 2013 and £451,000 for FY 2014.110F[111]

1. All calculations were supported by actual figures, in evidence, together with the expert evidence of Mr Blashki and the uncontested evidence of Mr Harrison.
2. There was no challenge to either the multiple of 2.5 or the value of the net tangible assets.
3. Accordingly, we reject grounds (n) and (o).

1. In the result, we will grant leave to appeal in relation to grounds (e), (f), (g), (h), (i), (j), (k), (l), (m), (n) and (o), which we have found to be arguable, but dismiss the appeal. We will refuse leave to appeal on grounds (a), (b), (c) and (d).
2. In relation to the cross-appeal, we will grant leave to cross-appeal and allow the cross-appeal. We will remit the assessment of damages in relation to the loss of bargain claim to the trial judge.
3. We will hear from the parties in relation to the precise form of orders, the terms of the remittal and costs.

[1] Mr Harbinson's brother, Mr Dale Harbinson, was a director of Smash at relevant times, and was its chief executive officer until his employment was terminated on 28 November 2012. Dale was a defendant to the proceeding below.

[2] Competition and Consumer Act 2010 (Cth) sch 2.

[3] It is also submitted that the claim was not adequately pleaded.

[4] An agreed list of 28 issues was submitted to the judge for determination.

[5] Much of the background is taken from the agreed summary.

[6] Euromark Ltd v Smash Enterprises Pty Ltd [2021] VSC 97, [509]‑-[510] ('Reasons').

[41] The proposed grounds include grounds to the effect that the findings were not based on the pleaded case (proposed grounds (e) and (f)).

[42] Other than an irrelevant factual finding based on an internal email dated 3 December 2012.

[43] Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51, 111 [167] (Callinan J), 85-6 [81]-[82] (Kirby J); [2003] HCA 18 (citations omitted) ('ACCC v Berbatis').

[44] Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee [2019] HCA 28; (2019) 266 CLR 129, 148-49 [55] (Bell, Gageler, Nettle and Edelman JJ); [2019] HCA 28 (citations omitted).

[45] [2016] HCA 22; (2016) 331 ALR 550, 558-59 [43] (French CJ, Bell, Keane, Nettle and Gordon JJ); [2016] HCA 22 (citations omitted).

[46] [2019] HCA 28; (2019) 266 CLR 129, 148-49 [55] (Bell, Gageler, Nettle and Edelman JJ); [2019] HCA 28 (citations omitted).

[47] Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545, 551-52 [23] (Besanko, Middleton and Beach JJ); [2015] FCAFC 137.

[48] [2020] FCAFC 235; (2020) 385 ALR 514, 517 [8] (Nicholas, Yates and Burley JJ); [2020] FCAFC 235.

[49] ACCC v Berbatis (2003) 214 CLR 51; [2003] HCA 18.

[51] Of particular relevance is the correspondence and conduct referred to at [53], [55], [57], [88]-[93] above.

[53] Of particular relevance is the correspondence and conduct referred to at [35], [46], [59] above.

[55] Ibid [1083]-[1086], citing Foran v Wight (1989) 168 CLR 385; [1989] HCA 51 ('Foran').

[56] Foran [1989] HCA 51; (1989) 168 CLR 385, 426-27, 430-31 (Brennan J).

[57] Reasons, [1199]-[1204], [1206], [1208]-[1212].

[59] Above at [49]-[58], [88]-[94].

[60] Reasons, [621], [627], [628].

[62] Euromark's letter to Smash, referred to in the Reasons at [644].

[64] Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40 ('ACCC v Quantum Housing'); Good Living Company Pty Ltd v Kingsmede Pty Ltd (2021) 284 FCR 424; [2021] FCAFC 33.

[65] (2015) 236 FCR 199, 274-75 [296], 276 [304] (Besanko J agreeing at 289 [371], Middleton J agreeing at 295 [398]); [2015] FCAFC 50. This passage was approved by Kiefel CJ and Bell J in Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1, 17 [14]; [2019] HCA 18 ('ASIC v Kobelt').

[66] [2021] FCAFC 40; (2021) 285 FCR 133, 155 [91]; [2021] FCAFC 40.

[69] Ibid [407]-[409] (citations omitted).

[70] As summarised by the judge in the Reasons at [411].

[72] This was denied by Mr Harrington but the judge held it was said.

[73] As summarised by the judge in the Reasons at [431].

[76] The four factors were: (1) Mr Malone being excluded from initial meetings with retailer target accounts; (2) Euromark offering retailer target accounts private label or generic products as an alternative to Smash branded products; (3) lack of confidence in Euromark's commitment to promoting Smash in the UK to the extent and in the manner necessary to achieve the market position expected; and (4) contact made by Euromark with one of the factories used by Smash for the manufacture of products sold to Euromark.

[79] It was only on 30 October 2012 that Smash alleged for the first time that Euromark was in breach of the Agreement.

[84] Ibid [613]-[614], [616] (citations omitted).

[85] As summarised by the judge in the Reasons at [624].

[86] Reasons, [627] (citations omitted).

[90] ASIC v Kobelt (2019) 267 CLR 1, 40 [92] (Gageler J); [2019] HCA 18.

[91] We refer in particular to ss 22(1)(d), (j), (k), (l) of the ACL.