Respondent's allegation of unjustified threats
121 In its cross-claim, the respondent contends that the applicant's solicitors' letter of 23 January 2006, to which I have referred above, contained unjustified threats of infringement proceedings under the Designs Act, for which remedies would be available under s 77(1) of that Act. The letter contains an assertion of the applicant's supposed rights under the Designs Act, and a threat to institute proceedings for infringement in the event that the respondent did not immediately (amongst other things) desist from promoting, advertising, offering for sale, selling, supplying or otherwise procuring the importation, sale, advertisement, promotion, manufacture or supply of the MC-801 vacuum cleaner which it marketed as "Onix SL-500". Assuming those threats to be unjustified (a matter to which I shall next turn), it was not submitted on behalf of the applicant that its solicitors' letter did not involve threats of the kind referred to in s 77(1) of the Designs Act.
122 By the operation of s 77(3) of the Designs Act, since a certificate of examination had not been issued in respect of the applicant's registered design at the time of its solicitors' letter of 23 January 2006, the threats contained in that letter, to which I have referred in the previous paragraph, must be treated as unjustified.
123 The remaining - and highly contentious - issue is whether the respondent has sustained damages as a result of those threats, and if so in what amount. As is apparent from my recital of the relevant facts earlier in these reasons, in January 2006 the respondent was anxious, to say the least, to purchase more units of the MC-801 vacuum cleaner to fill its order from Woolworths. It did not accept Mr Ding's rather generalised proposition that he was unable to accept an order because of the existence of an exclusive arrangement with the applicant. The position had been reached whereby, after certain adjustments in the timing of payments to be made by the respondent were agreed, Mr Ding was prepared to put his concerns about the applicant to one side and to fill the respondent's order. I can think of no reason why business would not have been transacted upon the terms thus proposed. It was only upon receipt of the applicant's solicitors' letter that the respondent withdrew from the order in question. It is clear from the evidence, and I find, that the immediate and substantial cause of the respondent discontinuing its dealing with Suzhou Fak in relation to the MC-801 vacuum cleaner was the receipt of that letter. Indeed, I do not believe that the contrary was seriously proposed on behalf of the applicant.
124 Further, on at least two subsequent occasions in 2006, Mr Ding told Mr Stergiotis that he was ready to supply the MC-801 vacuum cleaner. Mr Stergiotis replied that he could not purchase the product in the face of the applicant's registered design. Thus the applicant's threat had an effect upon the respondent which continued well into 2006. Indeed, I can think of no reason why I should not treat that threat as having a continuing impact upon the respondent's readiness to do business with Suzhou Fak down to the date when Mr Panna announced in court that the applicant would not prosecute its claim for infringement, and would not oppose the respondent's case for revocation.
125 Mr Panna made a general submission in response to the respondent's case for damages under s 77(1) of the Designs Act. It was based upon the court accepting the applicant's common law case in inducement to breach of contract. He submitted that, if, by procuring Suzhou Fak to supply vacuum cleaners to it, the respondent was unlawfully inducing that company to act in breach of its contract with the applicant, the respondent could not be heard to say that it would, even absent the applicant's threats of infringement, have purchased those vacuum cleaners from Suzhou Fak. Put another way, Mr Panna's submission amounts to saying that the respondent cannot claim damages for being prevented by the threats from dealing with Suzhou Fak, when that dealing would have been unlawful in any event and, notionally at least, subject to restraint by a court of equity.
126 Since I have found that there was not any such contract between Suzhou Fak and the applicant as the applicant alleges, this general submission cannot succeed. Even if there were a contract of the kind proposed by Mr Panna, however, it was terminable at any time without notice by Suzhou Fak. Had Suzhou Fak desired to do business with the respondent (which appears to have been the case), and assuming (as I think I must) that Suzhou Fak was competently advised as to its rights under the supposed contract, that company might have readily extricated itself from that contract at very short notice. In other words, I cannot see how such a supposed contract could have constituted any kind of practical impediment to the respondent doing business with Suzhou Fak.
127 That brings me to the question of the damages which the respondent in fact sustained by reason of its withdrawal from the trade in the MC-801 vacuum cleaner between about the end of January 2006 and about the third week of December in that year.
128 As a result of complying (in part) with the demands in the applicant's solicitors' letter of 23 January 2006, the respondent was obliged to give up an order from Homeart for 15,000 units of the Onix SL-500. Mr Joel Green, who was the respondent's accountant at the time, calculated that the gross profit which the respondent would have derived from fulfilling the Homeart order was $126,231.38. Mr Green was cross examined on that calculation, and on the assumptions which underlay it. I am satisfied that the calculation is substantially sound, and that the sum to which Mr Green referred represents damages occasioned by the respondent as a result of the applicant's unjustified threat.
129 The other order which the respondent was holding on 27 January 2006 was the order from Woolworths to which I referred in par 41 above. Although the respondent did not fill that order, it supplied an equivalent number of SL-217 vacuum cleaners as substitutes for sale in the Woolworths promotion. The respondent did not claim any loss of gross profit as a result of that substitution.
130 That leaves the question of the loss suffered by the respondent over the 11 months that it held itself out of the market for the MC-801 vacuum cleaners. Here the court enters the field of estimation: in what numbers would the respondent most probably have received orders from retailers for its SL-500 product? To the extent that it would have received such orders, it seems tolerably clear that Suzhou Fak would have been able and prepared to supply the required number of the MC-801 product.
131 The respondent attempted to establish its lost sales of SL-500 vacuum cleaners by leading evidence of its sales of SL-217 vacuum cleaners over the period September 2005 - November 2006. I was invited to infer that the SL-500 would have sold in at least the same numbers as the SL-217: indeed, it was suggested that, as the SL-500 was a more powerful cleaner than the SL-217, it would most likely have outsold the latter product by a ratio of 1.5:1.0. Further, it was submitted on behalf of the respondent that these sales of the SL-500 would have been delivered without any offsetting diminution in the sales of the SL-217 which in fact occurred.
132 The first issue which arose at trial with respect to the respondent's attempts to rely upon sales of the SL-217 product was the unsatisfactory nature of the respondent's material. Neither Mr Stergiotis nor any person employed by the respondent provided a statement of SL-217 sales by way of affidavit filed in a timely way. Neither were any business records as to such sales discovered in a timely way. Rather, in an affidavit filed at a time about which the applicant raised no issue, the respondent's accountant, Mr Green, said:
Now produced and shown to me and marked CONFIDENTIAL EXHIBIT JG-3 is a table which shows the sales by month by customer of the SL-217 bagless vacuum cleaner since September 2005. I have used this information to calculate the average number of SL-217 units sold by Tempo each month.
Mr Green did not say how he came by the table which was Exhibit JG-3. He did not seek to relate that table to any business record of the respondent. The applicant objected to the admission into evidence of the passage to which I have referred, and to Exhibit JG-3. However, in his viva voce evidence, Mr Green said that he prepared a report from the accounting software used by the respondent - MYOB - of the sales of the SL-217 product, he "exported" that report to a spreadsheet, he filtered it per month and per customer and finally "put it in an easily readable format". From this evidence, I would be prepared to hold that, by reason of the operation of s 69 of the Evidence Act, Exhibit JG-3 should not be excluded by the hearsay rule.
133 However, the underlying data, or records, of which Exhibit JG-3 is a "report" were not discovered. They were provided to the applicant only as an exhibit to an affidavit sworn by Mr Stergiotis on the day before the trial commenced, and served on the applicant late on that day. Further, the exhibit was marked as confidential, which, according to the protocol for such matters which until then had been followed by both sides, had the result, I was told, that the applicant's legal advisers could not take instructions on the document from their client. Ms Gatford informed me that the respondent had earlier indicated to the applicant that there would be no objection to the exhibit being perused by an accountant engaged by the applicant, subject always to the same confidentiality undertakings. I was not, however, persuaded that the applicant would have had any practical opportunity to engage such an accountant in the very short time which elapsed between the service of the relevant affidavit and the commencement of the trial. The respondent's position seemed to be based on assumptions about the capacity of the applicant to analyse the data in the exhibit which I did not consider to be either realistic or fair. In the circumstances, I took the view that the probative value of the exhibit was substantially outweighed by the danger that the admission of the exhibit into evidence might be unfairly prejudicial to the applicant, and ruled that the exhibit not be admitted pursuant to s 135 of the Evidence Act. Necessarily, I made the same ruling, and for the same reasons, about the substantive content of Exhibit JG-3 to Mr Green's affidavit, although I excluded that exhibit only to the extent that it purported to state facts as to the sales of the SL-217. To the extent that Mr Green gave the evidence which I have set out in par 132 above, I admitted that evidence as no more than a bare statement that he did in fact prepare a spreadsheet purporting to contain these sales.
134 In making the rulings under the Evidence Act to which I have referred, I did of course take into account more than the unsatisfactory way in which - and the lateness of the hour at which - the respondent sought to place the evidence concerned before the court. Section 135 involves a balancing exercise in which the probative value of the proposed evidence must also be placed on the scales. The "value" of evidence of the respondent's sales of SL-217 vacuum cleaners over the period in question was - arguably - that it would serve as an indicator of the sales of the SL-500 which the respondent would have achieved in the way I have described. For reasons which follow, I am bound to say that I consider that such a proposition raises more questions than it answers, and that sales data for the SL-217 would, in the result, have been of little assistance to the court.
135 In his affidavit sworn on 28 November 2006, Mr Stergiotis said:
36. Of the vacuum cleaners in Tempo's range, the SL-217 bagless vacuum cleaner most closely approximates the SL-500 in design and pricing. They are both barrel rather than upright vacuum cleaners, and are both bagless. I have seen Tempo's SL-217 product in Tempo's customers' catalogues and I know that they sell the SL-217 at retail prices of between $79-$99, which is the same price range that the SL-500 would have sold in Woolworths and Homeart. As set out above, when there was a problem with the SL-500 Tempo was able to offer the SL-217 in place of the SL-500.
37. The sales achieved by Tempo for the SL-217 product therefore provide an accurate guide to the likely sales of the SL-500. However, the SL-217 is only available in a maximum of 1600Watts, and for that reason is an inferior performance product to the SL-500. It had also been on the market for some time. I therefore believe that during 2006 if Tempo had been able to offer both the SL-217 and the SL-500 products the sales of the SL-500 would have exceeded the sales actually achieved by the SL-217 during that period, because the SL-500 was a new and more powerful product for Tempo's customers. I estimate that sales of the SL-500 would have been approximately 1.5 times the sales of the SL-217.
39. Finally, I do not believe that having both the SL-217 and the SL-500 in Tempo's range would have substantially detracted from the level of sales of the SL-217. The products were sufficiently different in design and performance for them each to achieve high levels of sales.
The applicant objected to the final sentence in par 37 of that affidavit. Ms Gatford accepted that, if the sentence were to be admitted, it would only be as an exception to the opinion rule for which s 79 of the Evidence Act provides. She submitted that Mr Stergiotis had specialised knowledge based on his experience, and that the opinion contained in the sentence in question was wholly or substantially based on that knowledge. She pointed out that Mr Stergiotis had had (since 2002) considerable experience in the wholesaling of vacuum cleaners and understood the critical elements of the retail market into which he sold such products.
136 The questions which arise under s 79 of the Evidence Act, in relation to Mr Stergiotis, are, first, what is his relevant experience, and, secondly, does he have specialised knowledge based on that experience? The evidence discloses that the respondent was established by Mr Stergiotis in 2002, prior to which he worked for about ten years in the consumer electronics industry, in which he established, and subsequently sold, two successful mobile phone retail chains, Mercury Phone Stores and the Fone Factory. In conducting those businesses, Mr Stergiotis had to find retail locations in shopping centres, had to find staff, and had to set up "the whole spectrum" (as he put it) of those retail stores. At about the same time, Mr Stergiotis was also involved in wholesaling mobile phone accessories to retailers.
137 It would appear to be since about 2002, with the establishment of the respondent, that Mr Stergiotis has been involved in the wholesaling of vacuum cleaners. In that time, the respondent has sold between about 400,000 and about 500,000 individual "floor care vacuum cleaners". When asked in chief what he knew about vacuum cleaners at the retail level, Mr Stergiotis replied:
Well, it is our job to find out what other retailers are doing, because if we go to a retailer, and don't have that information, we can't offer the best product and price to them, so we make it our aim to find out what every retailer is doing in the market in the floor care area, so we go into stores on a regular basis, sometimes weekly. We also look on the catalogue activity, what is happening in the catalogue, what they are promoting….We also subscribe to a trade magazine that gives us up-to-date information of what is happening inside those companies as well, and if there is any new developments on product, or new releases, so that is what we do on a continual basis to find out where the markets are.
Mr Stergiotis said that representatives of the respondent visited all retail purchasers of vacuum cleaners to see what their competitors were doing and what they were marketing, and to see if there were new opportunities "and just get a feel of what each shop is doing". He said that, over the last two years, Woolworths and Coles had purchased vacuum cleaners from the respondent, but not from other companies. He added: "So you would say we are the preferred supplier of vacuum cleaners in those two areas, in those two retailers."
138 From this evidence I conclude that Mr Stergiotis has had considerable experience in the retailing of mobile phones, and possibly related consumer electronic goods, but no such experience since about 2002. On the other hand, he has had extensive experience as a wholesaler of imported household electrical appliances, including vacuum cleaners, since 2002, but has had no direct experience in the retailing of vacuum cleaners. He has made many observations of the way in which retailers promote and sell vacuum cleaners, but the observation of the activities or behaviour of others does not, I consider, amount to the same thing as experience for the purposes of s 79: see Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291, 295 I do not suggest that Mr Stergiotis's experience as a wholesaler may not provide a sufficient basis for such specialised knowledge as he had: I suggest only that that experience should not be regarded as qualitatively the same as the experience of a retailer.
139 Turning to the question of Mr Stergiotis's "specialised knowledge" as such, I must say that this question was rather glossed over in the submissions of the respondent. Ms Gatford said that Mr Stergiotis's opinion as to the SL-217 sales being an accurate guide to the SL-500 sales "is based on his knowledge of his customers' behaviour, which he makes it his business to find out". She submitted also that Mr Stergiotis's evidence was that "his knowledge, by direct observation, covers the whole supply chain, from factories in China to retail stores in Australia". Each of these submissions, manifestly, makes a statement about a characteristic of the supposed body of knowledge which is held by Mr Stergiotis. What that knowledge was, however, was never satisfactorily explained. Insofar as it was said to be a knowledge of "his customers' behaviour", the respondent's customers are retailers, predominantly the larger variety and discount stores. Relevantly to the opinion expressed in the final sentence of par 37 of his affidavit, the only evidence which Mr Stergiotis gave as to his knowledge of the behaviour of retailers came in response to a series of questions in chief, the first of which invited him to state how a hypothetical retailer, having both the SL-217 and the SL-500 in its range, would have offered those products to the market. Mr Stergiotis replied:
Well, predominantly a lot of the retailers we deal with work on promotion; that is why our volumes are so high. So, obviously, the bagless vacuum is a sought after item and retailers like that product because they like something that they can put in their catalogues and bring people in. So if you had two offerings it would be even more appealing to a retailer because now he can offer - he can't offer a bagless vacuum every month of - every month, the bagless vacuum, bagless vacuum, but with two vacuums on offer he can offer the SL500 2000 watt and the following month, at a separate retail price, he can offer the SL217 at a 1600 watt. So he is taking advantage of a popular product in the market but not, I would say, tiring the - or making something look boring by having it on every month. He has got two products to make it interesting and run in tandem and then go back to the other product, so he can mix and match and…
He was then asked whether the products would be sold "in the same colours or same features" and replied:
There are different things. You can change the colour. We have done that with a few retailers. For instance, Woolworths have change the colour often on the same product or you can offer extra accessories like a turbo brush, or an extra filter or things like that, just to change it slightly and make it like a new - like re-invented, as it were, every moth. So, having two products, you have got more scope to re-invent and continue to promote the product.
He was then asked to comment on the evidence of Matthew Hardy (to which I will refer further below) that sales of the less powerful SL-217 would be likely to fall if the more powerful SL-500 were available alongside, and replied:
No, I don't because as in evidence you see comments by the Woolworths buyer saying that he sold 9000 of the SL500 in one week. That far exceeds what he sold in the first week for the SL217 and they were the same price, so you see, the power - the more powerful unit and the SL500 sells more just in that example than the SL217. So, I would think, at least one and a half times more would be the sales of the SL500.
In this respect, I should observe that the evidence was not that the Woolworths buyer said that he sold 9,000 of the SL-500 product in one week: the evidence was that Woolworths had sold 9,036 units "as at" the week ending 1 January 2006, of which 2,500 had been sold prior to the publication of the Woolworths advertisement.
140 Mr Stergiotis was asked again to comment on the suggestion (made on behalf of the applicant) that, if both the SL-217 and the SL-500 were available for sale side by side, at the same price, the sales of the former would fall. He said:
Well, in retail it is all about margins and price point. So, a customer buying a product at a certain price point brings in a certain category of people. As soon as you go up 10 or $15 it affects people's purchasing decisions. So, a person that had $60 in his pocket and went to the retailer would think twice about spending that extra 10 or $15, where a person who has $80, won't think twice. So, for instance, we would have the 217 at a lower price point where there would be a difference. So there would be one group of customer with that portion of money to spend, and because we deal in the discount variety end, people are very conscious of how much they spend. So, there would be still more sales of the SL217 because the price would still be competitive and the different market would look at - or different customer would look at the SL500 at that price.
141 In the evidence of Mr Stergiotis to which I have referred, to the extent that he deals with the behaviour of retailers, he says that they work on promotions, with high volumes. He says that retailers place the bagless vacuum cleaner in their catalogues as a promotion item in order to attract customers. He says that, with two similar bagless vacuum cleaners available, a retailer "can offer" one product one month and the other product the following month. He says, in effect, that sequential promotions would "make it interesting" for the consumer. Save for these matters, most of the evidence to which I have referred above is concerned with the behaviour of consumers, rather than with that of retailers. To the extent that the practice of the larger variety and discount retailers to sell vacuum cleaners by way of promotions is said to constitute an item of "specialised knowledge" held by Mr Stergiotis, it does not, in my view, provide a proper basis for the opinion which he expressed in the final sentence of par 37 of his affidavit. He provided no rational explanation for why that behaviour would necessarily, or even probably, produce the result that sales of the SL-500 product would be 1.5 times greater than sales achieved by the SL-217 product (in the absence of the SL-500), if both were available on the market at the same time.
142 Realistically, the last sentence in par 37 of Mr Stergiotis's affidavit is an opinion about consumer, not about retailer, behaviour. Implicitly, Mr Stergiotis accepted as much in the direction and drift of the answers which he gave in chief which I have set out above. But those answers, I consider, were based not so much on any specialised knowledge which Mr Stergiotis had as a result of his experience as a wholesaler of vacuum cleaners, as upon everyday intuitive reasoning with respect to unremarkable, and entirely natural, aspects of assumed consumer behaviour. I do not suggest that there is anything inherently wrong with Mr Stergiotis's reasoning (although, as the evidence to which I shall presently turn shows, there is ample scope for a difference of view upon the matters with which he dealt), but I find nothing in that reasoning, or elsewhere in the evidence of Mr Stergiotis, to constitute a proper basis in such knowledge as he has for the opinion expressed in the final sentence of par 37 of his affidavit.
143 For the above reasons, I ruled that Mr Stergiotis's estimate of the relationship between the actual sales of the SL-217 and the hypothetical sales of the SL-500 should not be admitted. As it happened, there was evidence from two very experienced retailers with respect to such matters, and neither of them was prepared to go further than to indicate to the court a range of considerations and circumstances that would bear upon the likely sales of the SL-500, given an environment in which the SL-217 was also being sold. Neither of them offered an opinion of the kind to which s 79 of the Evidence Act might apply. But each of them identified various characteristics of the retail market for vacuum cleaners that would permit the court to make its own estimate of what is, at base, essentially a non-technical matter.
144 Mr Matthew Hardy is the national retail manager of Godfreys. He has been employed by Godfreys for more than 18 years, for about the last five of which he was in his present position. Before that, he was Queensland state manager for about nine years. In his present role, he constantly monitors the Australian market for vacuum cleaners, and makes assessment of that market, such as by way of assessing the likely sales to be made for various models. Godfreys has 114 stores in the states and territories in which it operates. Mr Hardy said that there are about 50 different models of bagless vacuum cleaners available at retail stores throughout Australia at any one time (a figure which was common ground between the parties). Mr Hardy expressed the view (without objection) that, at the same price, it was unlikely that a consumer would purchase the less powerful SL-217 vacuum cleaner if the more powerful SL-500 model were available at the same time. Under cross examination, Mr Hardy accepted that his view was not based upon any knowledge of the actual sales achieved by the variety and discount chain stores, but made it clear that the view was not confined to a situation in which the two products were on sale side by side. He said that, generally, a consumer who was aware of a more powerful product being on sale (even elsewhere) at the same price as that for which a less powerful product was selling, would tend to purchase the former.
145 Mr Hardy's evidence was limited. Unlike Mr Stergiotis, he did not purport to make a statement about the likely relationship between the actual sales of the SL-217, in an environment in which the SL-500 was not on the market, and the likely sales of the SL-500 in a hypothetical environment in which both products were on the market. Rather, he expressed the view that, other things being equal, a consumer who was aware of a more powerful product being sold at the same price as a less powerful, but otherwise similar, product, would buy the former in preference to the latter. This strikes me as a rather unremarkable conclusion which is intuitively sound, but, if it is a conclusion which the court would be inclined to draw in any event, the fact that it is expressed by a retailer with Mr Hardy's experience provides some confirmation.
146 Mr Woodward, who visited the Canton Fair in April 2005 in company with Mr Stergiotis, also gave evidence on this subject. In his time with DVG, Mr Woodward observed that products retailing at less than $100 achieved their best sales when they were new to the market, and that after a few years the volume of sales often deceased to a level where the product was not re-ordered. He explained the way that DVG operated:
The Discount Variety Group operated as a mass market discount retailer in the Australian marketplace. Demographics were low socio-economic and therefore products that we brought to market in this sort of instance needed to be of a high desirable value at a very discounted price. A vacuum cleaner is an example of that. A DVD player is an example of that. The promotional periods that these were run - these weren't in the Discount Variety Group. These weren't a ranged item. These were used purely for a promotional basis. Generally used as, what is considered to be a loss leader in the fact that we would lose our normal margin at a - and sell the product at a lower margin to increase the traffic flow through our stores so that the higher margin merchandise would be able to be bought as well, so it was used as a promotional tool and not as an everyday line. Those promotions were run throughout the promotional calendar of the year, the example of Easter, Mothers Day, spring clean, Fathers Day, Christmas time, so on the promotional calendar, they were run in those periods, but not in that period. My understanding of the Godfreys business, as a merchant, I can see that they range vacuum cleaners and they are a vacuum cleaner specialist and they have products for sale every day of the year and that is a stark contrast to DVG, where vacuum cleaners weren't ranged and they were used for promotional purposes only.
As a buyer for vacuum cleaners and similar products, Mr Woodward was expected to have the products "cleared" within four weeks of them going into the store. He said that DVG was one of the first retailers to sell bagless vacuum cleaners at a discount price. He continued:
Then after the success of that vacuum cleaner, new models became available in the market. China had developed a lot more bagless vacuum cleaners with different designs and different features and it was a decision that we would continue with the bagless vacuum cleaner program because it was returning us a great amount of traffic driving through the business. A million catalogues would go out, the vacuum cleaner would be either on the front page or the back page and it was providing to be a great traffic flow for us.
He said that, if the SL-217 and the SL-500 had both been available at the same time while he was at DVG, he would have bought both models and advertised them at different periods. When asked what effect that would have on the total sales of the two products over a period, he said:
We would allow you to continue to sell both products for an extended period. With vacuum of this instance you have run them once, twice, maybe three times in the method I described previously, you tend to get saturation in the market and then it is time to bring a new one on board. If you have two or three different types then it allows you to spread that promotional period out and still run them three times but maybe across three products. So that the return - the net return would be increased sales across those product ranges.
He said that the availability of the two models would permit him to promote vacuum cleaners more often than would be the case if one model only were available. He said that he would run promotions six to eight times in the "promotional calendar". He said that, in the peak promotional periods of Mother's Day and Christmas time, it would not be unusual for DVG to have ordered quantities of 15,000 to 20,000 pieces. In the smaller promotional periods, such as at the time of spring cleaning, DVG might order approximately 10,000 pieces.
147 Under cross examination, Mr Woodward said that, if two vacuum cleaners were on sale side by side, one of 2200W and the other of 1500W, he would expect a consumer to prefer the higher wattage vacuum cleaner. He said that he would not sell the SL-217 within the same promotional period as the SL-500, and expect to get twice the sales. The turnover figures in the various promotional periods to which he referred were based, he said, on total sales of a single vacuum cleaner. He said that you would not expect to double those sales by introducing a second, less powerful, product. He agreed that the higher wattage product would bleed off sales from the lower wattage product. For the hypothetical circumstances put to him (comparing the SL-217 with the SL-500) he thought that a retail price differential of $20 would be required to cancel out the effect of the SL-500 being a more powerful product.
148 Relevantly to the matter with which I am presently concerned, there is little difference between the evidence of Mr Hardy and that of Mr Woodward. They each concur in the proposition that the less powerful SL-217 would not maintain the same level of sales which it might have achieved in isolation if it were sold alongside the more powerful SL-500. Mr Woodward goes so far as to say that, in the particular retail setting with which DVG was concerned, he would not include the two products within the same promotional effort. Mr Hardy was prepared to go to the extent of saying that an informed consumer would buy the SL-500 in preference to the SL-217, where the two were being offered at the same price even in different locations. Manifestly, there is nothing even approximating exactitude in this area of the evidence before the court. However, in the light of that evidence, I am not prepared to find that the respondent's sales of the SL-217 product provide some kind of guide or indication with respect to the likely sales which it would have made of the SL-500 product, in the hypothetical situation in which both products were on the market at broadly the same time, even if promoted sequentially, rather than contemporaneously, by particular retailers.
149 I accept, of course, the force in Ms Gatford's submission that, there being about 50 bagless vacuum cleaners on the market in Australia, it cannot be assumed that the introduction of a further product into the respondent's range would necessarily have a direct, and measurable, impact upon the sales by the respondent of some other product. Likewise, however, as much as anything because there are so many different products on the market, I am not prepared to conclude that the sales of one existing product would necessarily provide, of themselves, even an approximate indication as to the likely sales of an introduced product.
150 Absent the evidence which I rejected, what evidence was there which might bear on the question of the sales which the respondent would have made of the SL-500 vacuum cleaner in the period January - December 2006 (in addition to the lost Homeart order to which I have referred in par 128 above)? I was told of the various discount retail chains which the respondent would regard as constituting the cohort of its regular customers. No representative of any of those chains gave evidence. Mr Marten from Woolworths was responsible for the order placed in October 2005, and for the later order which was cancelled in late January 2006. He was not called. Mr Woodward - who was called - was senior buyer for DVG, but he left that organisation in January 2006. The respondent sought to lead evidence of an intention by him to place an order for the SL-500 product for the Christmas 2006 promotional period. I disallowed that evidence because I considered it irrelevant in the light of Mr Woodward's departure from DVG. In the period October 2005 - January 2006, the respondent was in the business of selling the SL-500 by wholesale - without any legal impediment of which it was then aware. It led no evidence from Mr Woodward as to why he did not then place an order for the SL-500, notwithstanding that it was he who had seen the product first-hand in April 2005 and had been impressed by it. No witness presently employed by DVG was called. No witness representing the Coles group was called, notwithstanding that the respondent claims to be the preferred supplier of vacuum cleaners for that group.
151 In the circumstances to which I have referred in the previous paragraph, I do not see why I should give the respondent the benefit of generous, or even generally favourable, estimates as to the probable sales by it of the SL-500 vacuum cleaner. This appears not to have been a case in which some kind of predictive accuracy on that subject was practically unachievable. The respondent's business is selling things. It will not do that unless there are retailers willing to buy. There was no explanation as to why such retailers were not called to explain what they would or might have done apropos the SL-500 had the respondent been in a position to sell.
152 As I have said, the respondent attempted to establish the proposition that its sales of SL-217 vacuum cleaners might be taken as an approximate indicator of the sales which it would have made of the SL-500 product in the corresponding period. For reasons I have stated, I rejected the respondent's evidence of SL-217 sales. However, I admitted Exhibit JG-3 for the purpose only of demonstrating the Mr Green prepared a spreadsheet which contained certain figures. The respondent relied on evidence given viva voce by Mr Stergiotis in chief that the respondent's sales of the SL-217 product were in the order of 8,000 - 10,000 units per month. If this was intended to stand as the extent of the respondent's evidence on a subject on which, presumably, it could have given greater precision (after timely discovery), I must say that I found it most unsatisfactory. As it happens, of the 15 monthly figures on Ex JG-3 purporting to show the respondent's sales of the SL-217, only one fell between 8,000 and 10,000. The figures ranged from a high of 14,392 to a low of 1,370. The average for January - November 2006 was 7,804 - outside the range of 8,000 - 10,000.
153 Comparison with sales of the SL-217 is further complicated by the demonstration in January 2006 that Woolworths, having been denied its order of the SL-500, took the SL-217 instead. The result was, I was told, a gross profit for the respondent no less than would have been derived from the original order. That demonstration justifies the inference as a matter of probability that, over the course of 2006, Woolworths would have regarded the SL-217 as a fair substitute for the SL-500, although perhaps one should give some weight to the very positive experience which Woolworths had had with its first order of the latter product. However, in the absence of evidence from Mr Marten, I am reluctant to make assumptions or estimations favourable to the respondent.
154 Ms Gatford submitted that the respondent was unable to "adduce precise evidence of what it has lost because it has been out of the market". She added that, therefore, "a level of guesswork is essential". She relied upon Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257, 266 (per Hayne J):
It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind.
Ms Gatford submitted that the present case fell within Hayne J's former category. She referred also to the judgments of Wilcox J in Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 24 IPR 461, 478 and of Finkelstein J in Axe Australasia Pty Ltd v Australume Pty Ltd (2006) 69 IPR 45, 52.
155 In Placer, Hayne J was not, I consider, concerned to propose that there were only two kinds of cases apropos the assessment of damages: those in which precise evidence was available and those in which no evidence was available. His Honour's expression "estimation, if not guesswork" conveys a meaning that, where evidence on which an estimation may be made is available, the court should not indulge in guesswork. It is also implicit in his Honour's statement that, where estimation must be resorted to, a better estimate will always, where possible, be preferable to a worse estimate. That is to say, a party who carries the onus of proof should not be heard to submit that guesswork, or even a loose kind of estimate, may be resorted to where evidence which might have been, but has not been, called might have permitted the making of an estimate with greater confidence of proximity to the actual loss suffered by that party. This is the approach which I have brought to the assessment of the respondent's damages in the present case.
156 I allow that it would manifestly be unrealistic to suppose that the respondent would have made no sales of the SL-500 beyond those ordered by Homeart and beyond any offsetting effect of SL-217 sales. I do recognise that the two vacuum cleaners were different, albeit similar, products, and probably would have sold over the same period and in the same market. I accept what Mr Woodward said, that a practice adopted by the larger variety chains was to conduct promotions of different products at different times, and to concentrate on the periods leading up to Mother's Day and to Christmas. For its promotion in the period leading to Mother's Day 2006, Woolworths took the SL-217 in substitution for the SL-500, with no loss to the respondent. I am prepared to find that Woolworths would probably have ordered a further 10,000 units in about October 2006. Despite the evidentiary shortcomings in the respondent's case, and for that reason taking a conservative approach, I think it probable that the respondent would have sold to other retailers at least as many units as I am prepared to hold it would probably have sold to Woolworths within the period in question. Thus I would add a further 10,000 units to my estimate of the respondent's lost sales. In making these estimates, I take into account the evidence that, after about a year, the consumer market for new products such as the SL-500 would tend to approach saturation point. However, I do not believe that the respondent should be given the full credit for these 20,000 units of assumed sales, since I am not persuaded that it would not have suffered some kind of reactive diminution in its sales of the SL-217. Thus I would discount the figure of 20,000 by 25%. In the result I am prepared to go no further than to hold, on the probabilities, that the respondent has suffered as a loss the gross profit equivalent of 15,000 units of SL-500 sales in the period January - December 2006.
157 Using the gross profit margin which the respondent claimed for its sales to Woolworths, I would assess its damages with respect to the 15,000 units referred to above at $86,828.58.