Triangle Cables (Aust) Pty Ltd v Czuchwicki

REASONS FOR JUDGMENT 1 On 13 December 2011, I gave judgment in this proceeding, consequent upon default of the respondent in complying with orders of the Court for the management of the case and its preparation for trial. My reasons for judgment given on that day are published as Triangle Cables (Aust) Pty Ltd v Czuchwicki [2011] FCA 1537. 2 The relevant paragraphs of the order that I made on that day are as follows: 1. Judgment be entered for the applicant against the respondent: (a) for damages or equitable compensation to be assessed; (b) for the injunctive relief referred to in paragraph 2 of this order; and (c) for the costs of the proceeding to date. … 3. The assessment of damages or equitable compensation be by affidavit evidence. 4. On or before 14 February 2012, the applicant file and serve any affidavit on which it may seek to rely on the assessment of damages or equitable compensation. 5. On or before 28 February 2012, the respondent file and serve any affidavit on which he may seek to rely on the assessment of damages or equitable compensation. 6. On or before 13 March 2012, the applicant file and serve any affidavit in reply on the assessment of damages or equitable compensation. 7. The assessment of damages or equitable compensation be listed for hearing on a date to be fixed after 13 March 2012. 8. Service of this order, and of any affidavit referred to in paragraph 4 or paragraph 6 of this order and any exhibit to any such affidavit, be deemed to be effective if a copy of the document is sent attached to an email addressed to the respondent at stanc@cableprojects.com.au. 3 The assessment of damages or equitable compensation was fixed for hearing on this day. Notice of the listing was forwarded to the parties by letter dated 12 April 2012. Nothing was heard from the respondent until today when my associate received an email from him at 9.25 am. The email read: I am unable to attend as I do not have the financial capability to travel to Victoria. Holding this matter in Victoria is a clear disadvantage to me, and I still do not understand why the matter was not held in Queensland. I also am unable to attend the matter by phone. Secondly, I state that Triangle Cables did not suffer any loss, and include a document stating this. I have sought legal counsel and will have my solicitors mount a defence shortly. Lack of funds has hindered me in the past and free legal counsel was not available. My preference would be to hold matters until my solicitor makes contact with the relevant parties. Several points may be made about this email. First, no document was included with the email relating to the question whether the applicant did or did not suffer any loss. Second, the respondent has had a history throughout the proceeding of failure to comply with orders of the Court and failure to maintain communication with the Court. Third, the statement that he is unable to attend the hearing by telephone is not accompanied by any reason for that inability. No reason is apparent to me. 4 To the extent to which the email to my associate might be regarded as an application for an adjournment of this hearing, that application has been opposed by counsel for the applicant. I reject any such application for an adjournment. The application was not made on sufficient material and appears to be no more than an attempt to buy time. Indeed, the respondent appears to lack any understanding of the position that he is in. Judgment has already been entered against him by the order of 13 December 2011. All that is to be done today is to determine the amount that he is obliged to pay by way of damages or equitable compensation pursuant to para 1(a) of that order. 5 In the course of the hearing this morning, I granted leave to the applicant to rely on an affidavit of Davina Calandra, affirmed on 20 June 2012. That is by way of an affidavit of service. It establishes the service of the order of 13 December 2011 on the respondent, in accordance with the terms of para 8 of that order. Similarly, it establishes the service on the respondent of the affidavit of Craig Steven Mason, affirmed on 16 February 2012, on which the applicant relied in relation to proof of damages and the exhibits to that affidavit, as well as advice to the respondent on 16 April 2012 as to the date of this hearing. 6 In one respect, there was a failure by the applicant to comply with the order of 13 December 2011. Instead of serving any affidavit on which it wished to rely on the assessment of damages or equitable compensation by 14 February 2012, the applicant served the affidavit of Mr Mason on 16 February 2012 and filed it on 20 February 2012. It is apparent to me that the respondent would have suffered no disadvantage by that relatively small lapse of time. There is certainly no indication from him that he did suffer any disadvantage. He still had ample time to file affidavit material in accordance with para 5 of the order of 13 December 2011, had he wished to do so. No such affidavit material has been received by the Court. Accordingly, it is appropriate for me to extend the time fixed by para 4 of the order of 13 December 2011 until 20 February 2012, to regularise the applicant's filing and service of the affidavit of Mr Mason. 7 In substance, the applicant's case, as revealed by the statement of claim filed on 25 March 2011, is that the respondent was employed by the applicant from 13 November 2007 until 27 January 2011. For part of that time, he occupied a position in charge of the applicant's sales in Queensland. In breach of his contract of employment with the applicant and of fiduciary duties alleged to be owed by him to the applicant, as well as statutory duties pursuant to s 182 of the Corporations Act 2001 (Cth), the respondent used his position with the applicant to gain an advantage for another party, Cable Projects Australia Pacific Pty Ltd ("Cable Projects"), and for himself. 8 The evidence in Mr Mason's affidavit includes three customer notes recorded by the respondent on the applicant's computer system during the respondent's employment with the applicant. Those three notes concerned negotiations by the respondent on behalf of the applicant with representatives of a company called Clough Engineering Ltd ("Clough Engineering"). A note of 13 October 2010 records the outcome of those negotiations. It suggests that Clough Engineering would place an order on the following morning and that all that remained to be decided were the size of the cable and the kind of the cable that was required. The note includes a statement to the effect that delivery was required in December, so materials would need to be ordered as soon as possible. 9 A note of 19 October 2010 records negotiations with a different representative of Clough Engineering that concerned the specifications of the cable concerned. This note includes the proposition that the respondent was "Pretty certain of securing order" on behalf of the applicant, but that the representative of Clough Engineering wanted a cheaper cable. The respondent apparently attempted to persuade him as to why cheaper cables would be unsuitable. Further negotiations are noted in an entry made on 25 October 2010. This recorded that Clough Engineering had done everything it could to expedite the order and that various matters were being finalised. Once they were approved, the order would be placed. The note also records that the window for December delivery would close if the order was not placed that week. 10 On 28 October 2010, the respondent prepared a quotation for Clough Engineering on the applicant's letterhead. The quotation was for the supply of cables that were specified, for a total price of $370,875. This price was expressed to be exclusive of GST. The quote was said to be valid until 4 November 2010. The terms of the quote included the statement that the cable would be manufactured in the week commencing 6 December if the purchase order was received during the current week. Payment terms were 30 days from the end of the month. I take that to be a reference to the month of delivery. 11 The statement of claim contains allegations that, on a date unknown to the applicant, but prior to his termination of employment with the applicant, the respondent commenced working for Cable Projects as its business development manager. He misused his knowledge of the applicant's quote for Clough Engineering to prepare and assist in the preparation of a quote from Cable Projects for the sale and delivery of electrical cables by Cable Projects to Clough Engineering, undercutting the price quoted in the applicant's quote, and which was accepted by Clough Engineering in preference to the applicant's quote. Those allegations have not been the subject of denial in any pleading by the respondent. Accordingly, the effect of r 16.07(2) of the Federal Court Rules 2011 is that those allegations are deemed to have been admitted by the respondent. On the basis of those admissions, I conclude, as alleged in the statement of claim, that the respondent acted in breach of his contract of employment with the applicant by diverting what would have been the applicant's business to Cable Projects. Further, there is evidence that the respondent, by his family trust company, received remuneration from Cable Projects in respect of that transaction. 12 The applicant claims through Mr Mason's affidavit that, if the respondent had not acted as he did, Clough Engineering would have accepted the quote from the applicant and have entered into a contract for the supply of the cables specified in that quote. The evidence is somewhat scanty, but I am able to find, on the balance of probabilities, that that is what would have occurred. Absent the respondent diverting business from the applicant, it is more likely than not that Clough Engineering, which can be presumed to have required the cable that it sought to purchase, would have purchased from the applicant in accordance with the quote. 13 Exactly when the acceptance would have taken place is, of course, difficult to determine. As a consequence of that, it is difficult to determine precisely when delivery would have occurred, and therefore precisely when payment would have been due. Having regard to the concession that counsel for the applicant has made as to the date from which interest should be calculated, however, I am not required to make specific findings as to those dates. 14 Mr Mason says in his affidavit that, if the contract with Clough Engineering had gone ahead, the gross profit of the applicant would have been $217,600. That amount is calculated by deducting from the price in the quotation the sum of $153,275, which Mr Mason says is the cost of the raw materials. According to his affidavit, all other expenses that would have been incurred by the applicant in relation to the transaction were incurred by the applicant whether or not the order from Clough Engineering was received. I infer from that that any expenses that the applicant would have incurred in relation to the Clough Engineering notional contract would have involved actions by people employed by the applicant and the use of resources for which the applicant was paying in any event. 15 Accordingly, I find that the applicant's loss from the loss of the opportunity to enter into a contract with Clough Engineering, in accordance with the quotation of 28 October 2010, was $217,600. It is appropriate to assess the damages of the applicant pursuant to para 1(a) of the order of 13 December 2011 in that sum, and not to discount that sum by reference to the possibility that, in any event, Clough Engineering would not have entered into the contract. It should also be pointed out that counsel for the applicant was content that the loss be characterised as damages for breach of contract. It is therefore unnecessary to determine whether it also amounted to loss for which the applicant would have been entitled to be compensated for breach of fiduciary duty, or by way of compensation or damages for breach of statutory duties. An order will be made that the respondent pay the applicant $217,600. 16 By s 51A of the Federal Court of Australia Act 1976 (Cth), the Court is required, unless good cause is shown to the contrary, to award interest at such rate as the Court thinks fit on a judgment for the recovery of money, including a judgment for damages. Counsel for the applicant has been content to accept that interest should be paid from the date of the statement of claim. It is that concession which obviates any necessity to attempt to determine a starting date by reference to a notional date of delivery and a notional lapse of 30 days after the end of the month in which such delivery might have occurred. 17 Interest has been calculated pursuant to the Court's practice note CM16, and I am content to accept that calculation. The result of the applicant's calculation is an amount of interest of $23,009.39. The applicant also seeks its costs incurred since the order of 13 December 2011, which made provision for costs up to the date of that order. In the affidavit of Mr Mason, there was a claim for indemnity costs, but counsel for the applicant did not press that claim. 18 The orders that I make are as follows: